B.C. shipyard embroiled in legal battle over New Zealand warship upgrades

Royal New Zealand Navy frigate Te Mana transits the Pacific Ocean on July 24, 2018. (U.S. Navy photo by Mass Communication Specialist 2nd Class Devin M. Langer)

Victoria -

A legal battle is brewing between two of Canada's largest defence contractors over upgrades to a pair of New Zealand navy warships in British Columbia.

The companies, Lockheed Martin Canada and Seaspan Shipyards, were contracted by the New Zealand government to install new combat and surveillance systems aboard Her Majesty's New Zealand ships Te Mana and Te Kaha.

The ships comprise the entirety of New Zealand's frigate fleet and the upgrades are intended to extend the life of the warships into the mid-2030s.

But last year, Seaspan's Victoria Shipyards, which was subcontracted by Lockheed to perform the work, filed a civil claim in B.C. Supreme Court alleging that problems with the Lockheed designs were costing the shipyard more than $20 million in delays and workarounds on the first ship alone.

Lockheed Martin Canada responded with a counterclaim, saying the project delays were due to negligence, understaffing and mismanagement at the shipyard. Lockheed said the issues had set the company back more than $10 million per ship as of last July.

"The plaintiff [Victoria Shipyards] has acted in bad faith, comes to the court with unclean hands and is not entitled to an equitable remedy," lawyer Neil Abbott wrote in response to the shipyard's claim.

Lockheed Martin Canada also disputed Seaspan's claim that the Victoria shipyard was selected for the project because of its previous success in upgrading the combat systems on Canada's warships under the domestic frigate modernization and life-extension program.

"Rather, New Zealand knew that LMC [Lockheed Martin Canada] was the leading provider of vessel weapons upgrade systems," Abbott wrote. "LMC felt that New Zealand would more likely award the ANZAC project to LMC if the work would be carried out at a shipyard in another Commonwealth country."

Both ships were due to return to New Zealand from Victoria last year.

The upgraded Te Kaha was to be returned by the end of March 2020 but delays prolonged its handover until December. The Te Mana remains in Victoria and is now expected to return to New Zealand in April 2022, exactly eight years after the contract was awarded.

A spokesperson for the New Zealand Defence Force declined to comment on the force's confidence in the upgrades or the effects of the program's delays on naval operations, citing the ongoing court proceedings.

Lockheed Martin Canada declined to comment on the case, citing the ongoing litigation. Seaspan did not respond to a request for comment. 

According to Seaspan, the New Zealand frigate program marks the first time a foreign warship has undergone modernization in Canada since the Second World War.

The matter is set to go to a hearing in mid-November.