Navy’s new supply ship caught in legal row over allegedly unpaid bills

Open this photo in gallery:

A marine-engineering firm is suing Quebec shipbuilder Chantier Davie Canada Inc. over allegedly unpaid bills, and asking the Federal Court to seize a supply vessel the company is leasing to the Canadian military, documents show.

The $2.66-million lawsuit by Navtech Inc., which was filed in Federal Court last month, is the latest controversy to hit the MV Asterix and the Davie shipyard. Under a five-year, $667-million contract with the federal government, Davie refitted the former cargo vessel as a supply ship.

Navtech says in its statement of claim that it came up with the concept for the refitting and provided the initial designs.

The contract for the Asterix has been dogged by allegations of political favoritism and interference, and led to a breach-of-trust charge against the former second-in-command of the Canadian Armed Forces, Vice-Admiral Mark Norman.

Military ships are usually exempt from seizure under admiralty law, but the Asterix is in a different category because its private-sector owner leases it to the Royal Canadian Navy.

In its filing to the Federal Court, Navtech is demanding full payment of $2.26-million in royalties and $400,000 in damages, with a request to the Federal Court to force the seizure and sale of the Asterix to pay these amounts.

The court has yet to hear Navtech‘s lawsuit, and Davie is expected to oppose the seizure of the ship vigorously . In a statement, the shipyard denied having failed to pay its subcontractor for all of its work.

The navy needs supply vessels to replenish its fleet with fuel and other goods. Its two previous supply ships ceased operations in 2014, forcing Canada to rely on allies until the Asterix came into service. The navy is scheduled to receive a new military support ship in 2022 or 2023.

Navtech’s legal action came shortly before the federal government announced its intention to award an untendered contract to Davie to acquire and convert three medium commercial icebreakers for the Coast Guard while it waits for new ones. The government has yet to indicate the value of the deal, which fulfills Prime Minister Justin Trudeau’s promise last January to sign a contract for icebreakers with Davie.

The large shipyard across the St. Lawrence from Quebec City depends heavily on government contracts.

Davie and the union that represents its employees are known to exert political pressure on governments to keep the shipyard in business, and the surrounding ridings are expected to be an intense battleground in the 2019 election.

The contract for the Asterix was awarded in August, 2015, just before a federal election. The deal announced by the government of prime minister Stephen Harper was seen as crucial for Conservative hopes in the Quebec City area.

Soon after taking power in November, 2015, the Trudeau Liberals put the supply-ship project on hold after receiving a complaint from Irving Shipbuilding, which already had a multibillion-dollar contract to build warships for the navy.

At that point, Vice-Adm. Norman urged the Liberals to stick with the Davie contract. In 2017, Vice-Adm. Norman was removed from his duties as vice-chief of the defence staff because he was under RCMP investigation over alleged leaks of confidential information related to the Davie contract. He is awaiting trial on the breach-of-trust charge.

The federal government proceeded with the Davie contract, and the Asterix went into service earlier this year.

Navtech alleged in its lawsuit that Davie and related companies never fully recognized its contribution to the project or its intellectual property over the design, and did not remunerate the company for all of its work.

The lawsuit says the firm “developed the concept and engineering design and naval architecture” for the vessel. None of the allegations in Navtech’s lawsuit have been proven in court.

Davie, which has yet to file its response with the Federal Court, called the matter a contractual dispute.

“As you can appreciate, as Canada’s largest shipyard, Davie has over 1,000 Canadian suppliers and subcontractors,” Frederik Boisvert, Davie’s vice-president of public affairs, said in a prepared statement. “Navtech was paid in full for the engineering work they performed prior to their contract being terminated. We cannot comment further on a matter which is before the courts.”

The company also rejected the notion it has any trouble gaining access to cash.

“Davie has never been in a stronger financial position,” Mr. Boisvert said.

Public Services and Procurement Canada did not comment on the matter, calling it a dispute between two private entities.

Last month, the government announced it intends to enter into an agreement with Davie to furnish the Coast Guard with three icebreakers to provide interim capability while new vessels are built under the National Shipbuilding Strategy.

If the deal is secured, the Canadian government would buy three used Norwegian-built icebreakers and Davie would refit them.

The deal would mean more work for Davie in the year before an expected federal election. The company estimates the icebreaker job would support 200 to 400 jobs over two years.

The company laid off 157 people last week. Davie is bidding to supply frigates to Peru, and, according to the company, several North Atlantic Treaty Organization allies are interested in buying a supply ship such as the Asterix.