It is the biggest transit project being built in Canada, promised for years and slowly taking shape in Toronto, but how soon the $5.4-billion Eglinton Crosstown light-rail line can be ready has been thrown into doubt by a looming court showdown between manufacturing giant Bombardier Inc. and Ontario transit agency Metrolinx.
Bombardier has gone to court to preserve its $770-million contract to provide transit vehicles in Toronto, arguing that Metrolinx is trying to wiggle out of the deal.
Lawyers for the manufacturing giant argued Tuesday that they have fallen victim to changing transit politics in Toronto, which result in Metrolinx no longer needing all of the vehicles it ordered.
John Callaghan, acting for Bombardier, told Ontario Superior Court that there is a "great suspicion on our side ... that this is all a matter of leverage."
But Metrolinx counsel Chris Paliare said that the history lesson offered by Bombardier's lawyers was not relevant to the case. The agency has argued that they have other uses for the surplus vehicles. The key issue was the company's ability to produce vehicles on time, said Mr. Paliare, noting that "the slippage is enormous."
Metrolinx filed a formal notice of intent to terminate the contract in October, alleging chronic delays and poor quality work.
Bombardier argued at length Tuesday morning that issues with its performance are based on the assessment of a biased official and that it is fully capable of delivering the vehicles it pledged to build. They say that a new and slower delivery schedule had been accepted by Metrolinx, the regional transit agency that is the arm of the Ontario government.
But Mr. Paliare said there were "never any changes" in writing to the agreed-upon delivery schedule.
Both sides allege they risk major financial and reputation losses. Both argue the other is whining about a contract signed freely and willingly. And both raise the prospect of broader harm if the court rules against them. Another 155 pages of legal documents were released over the weekend, buttressing the few thousand pages already made public. No fewer than 11 lawyers are listed on the latest court documents.
The crux of it
The legal dispute flows from an assessment last July by Jeffrey Rankin, an official associated with the project, that Bombardier was in default of its contract obligations – alleging chronic delays and poor work. He later said the company did not respond in time to his findings.
Bombardier alleges Mr. Rankin was biased and that his assessment was in error, claiming a new and slower delivery schedule had been agreed on. It argues that it had only seven days to address Mr. Rankin's concerns, as specified by the contract, and so it "did what it could do in the circumstances."
In his own legal filing, Mr. Rankin rejects the allegation of bias, noting that Bombardier knew when it signed the contract about the dual nature of his role – at times representing Metrolinx and at times an impartial decision-maker.
Metrolinx says the claim that it agreed to a slower delivery schedule is "false." The agency also notes it has the absolute right to cancel the contract "for convenience," as long as it provides specified compensation. Given that Bombardier signed a contract allowing that, the agency says, the company cannot say it faces irreparable harm if it is turned down for an injunction.
What this means for long-suffering transit riders in Toronto remains to be seen.
Metrolinx says it had to go to court to protect the Crosstown project. The agency says it still has time to get another vehicle supplier and open the line as scheduled in 2021. It says the dispute-resolution process could take about eight months and, with another court hearing possible after that, it would be impossible to get another supplier and open on time.
Bombardier notes the agency has made positive noises publicly about progress on the project. And it argues there is no evidence another supplier could provide the vehicles in time. "In contrast, [Bombardier] has testified that it will meet those dates," the company states in its factum.
Who will pay the price?
In its own factum, Metrolinx noted that Bombardier had pegged its damages in the event the contract is cancelled at "over $70-million." But the agency would not comment on Monday on how much of the public money earmarked for the vehicle contract – about $870-million once taxes are added – might be available if the agency gets another supplier.
And that money is only part of the costs related to this dispute.
The transit agency has pledged to deliver vehicles to Crosslinx, the consortium building the Crosstown, and says it must pay up to $500,000 a day if they are late. If those delays are the fault of Bombardier, the company must pay the agency only $1,500 per day per vehicle. This raises the prospect that even if Bombardier delivered no vehicles, their penalties would be much smaller than those of Metrolinx.
Bombardier has its own financial concerns. Noting that "public transit in Toronto is a highly political issue," Bombardier alleges Metrolinx, fearing scandal over use of taxpayer funds, has tried to offload its financial risk onto the company. The company states in its legal filing that it has given Metrolinx "two irrevocable standby letters of credit totalling $153-million, which [the agency] may seek to draw on."
The company is also concerned about its intellectual property and worried the end of this contract might hurt future business and its reputation. But Metrolinx, which says Bombardier has a record of failure, quoted Bombardier executive Benoit Brossoit to argue that losing this contract would not hurt the firm.
"In view of Mr. Brossoit's own testimony that the 'terrible press' associated with other high-profile Bombardier failures has not affected the company's 'tremendous global reputation,' there is no evidence, or reason to believe, that Metrolinx's termination of the contract for cause will undo the ongoing 'tremendous global reputation,'" the agency's factum states.