CASP's lawyers allege the group lost millions when CIDA stopped payments for the development projects. (CBC)

A group of P.E.I. companies is in the province's Supreme Court suing the Canadian International Development Agency over an overseas contract worth millions of dollars to Island companies.

The contracts were to help rebuild Sri Lanka after the devastating 2004 tsunami.

The Canadian Agro Sustainable Partnership (CASP) is headed up by Doug MacArthur and includes other prominent Islanders such as seed potato grower Alan Parker and O'Leary veterinarian Dr. Gary Morgan. CASP is an umbrella group that includes more than 45 companies in food production and waste management, as well as the P.E.I. government and the Atlantic Veterinary College.

In 2006, CASP was awarded a contract from CIDA worth $2.5 million to help rebuild Sri Lanka.

CASP's claims of losses are not supported by the facts, says government lawyer James Klaassen. (CBC)

"There was all kinds of really great opportunities that would be available for CASP members," said CASP lawyer George MacDonald.

"[We] put a minimum value on that of about $10 million over the period of time that the implementation would take place."

The projects came to a halt, however, following an audit of CASP's books by CIDA. The audit determined CIDA had been overbilled by $245,000.

CIDA stopped payment to CASP, and is now suing to get its money back.

"Certain things that were charged for were not permitted under the agreement," said federal government lawyer James Klaassen.

"That's what this case is about."

'CASP's hands were tied'

CASP has countersued over the allegation that it overbilled, and its lawyers are claiming $6.3 million in damages against CIDA for the loss of the Sri Lanka contracts.

"The consequences of that audit, which included freezing payments to CASP and, we understand, a letter being circulated among departments of the federal government that basically advised them of the monies that CIDA alleged CASP owed," said CASP lawyer Michele Awad.

"CASP's hands were tied. It really couldn't proceed with the projects."

"As far as the amounts claimed, we would consider those to be too high," said Klaassen of the countersuit.

"We don't think that those are supported by the law or by the facts of this case."

Testimony has already begun in the case. Malpeque MP Wayne Easter has given evidence. Federal Revenue Minister Gail Shea was also asked to appear, but declined citing ministerial privilege.