Province taking back resort expansion lands underhanded: lawyer

Gary
Gary Kean
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The entrance to Humber Valley Resort is seen in this file photo.

The lawyer who represents Humber Valley Resort says what the provincial government did when it took back Crown land initially meant to expand the resort is worse than the province’s expropriation of the former Abitibi paper mill in Grand Falls-Windsor.

In April, Graham Watton, the resort's legal counsel whose wife is one of the resort’s owners, filed a statement of claim against the province in the Supreme Court of Newfoundland and Labrador on behalf of 61839 Newfoundland and Labrador Ltd., the numbered company which now operates the resort on the north side of the Lower Humber River.

The resort was purchased by the company in March 2010 after the original owner — Humber Valley Resort Corporation — had gone bankrupt in December 2008.

The purchase did not only include the physical assets of the resort property, said Watton, but also the less tangible aspects such as outstanding claims, demands, contractual rights or any causes of action associated with the property sale.

Prior to being declared bankrupt, the resort’s former owners had been granted protection under the Companies Creditors Arrangement Act by the Supreme Court of Newfoundland and Labrador.

This involved the court issuing a stay of proceedings order, effectively freezing any rights of any creditors and shareholders involved with the resort.

 

Stay of proceedings extended

The stay of proceedings was initially in effect from Sept. 5, 2008 to Oct. 6, 2008, but was later extended by the court to Dec. 5, 2008.

The provincial government filed a proof of claim against the bankrupt Humber Valley Resort Corporation on Dec. 1, 2008. In that, the government said it was owed $210,082 under the Expansion Lease Purchase Agreement for the period between Aug. 1, 2008 and Oct. 1, 2008.

The Expansion Lease Purchase Agreement was the deal formally entered into by the province and the resort in 2005. Its terms and conditions were that the resort would pay the province nearly $6.4 million in the next five years for the purchase of around 2,000 acres of adjacent Crown land to be used to further expand the resort.

In addition to the purchase price, which was considered to be fair market value for the land at the time, the resort also agreed to pay the province a six per cent premium on the future sale of lots within the expanded resort.

In the proof of claim filed Dec. 1, 2008, the province also terminated the Expansion Lease Purchase Agreement.

Watton said the provincial government’s actions amount to defiance of the Supreme Court’s order for a stay of proceedings. In the statement of claim Watton has filed with the court, he said government’s actions were “political, punitive and self-serving.

“To me, it’s slimy and sleazy ... I think somebody should be made accountable,” he said.

Watton said what the province is alleged to have done is worse than the mistake government admitted it made when it expropriated the Abitibi paper mill property in Grand Falls-Windsor in 2008, which has since left the province with a legal and environmental cleanup bill in the vicinity of $140 million.

“There’s no mistake made by government here,” said Watton. “It’s not like the Abitibi situation where government admitted they made a mistake. This was planned. This was premeditated. This was deliberate. This was calculated.”

Defying a court order to get the land back, added Watton, is a serious matter.

“The provincial government is just another creditor in all of this, so why should they rank in priority over any of the other creditors?”

Watton said the new owners of the resort have no interest in getting the land back and expanding the resort further, but have launched the lawsuit to point out what it feels was an unethical and illegal decision to ensure no one got their hands on the undeveloped property or unsold lots adjacent to the resort.

As of Dec. 5, 2008, 71 lots had been sold on the expansion property. There are still 575 hectares left in the ungranted expansion land.

The resort is seeking $170 million in relief and damages from the province. That number includes $125 million for the fair market value of the purchase agreement and the ungranted lands, $40 million for the alleged decreased value of the assets existing at Humber Valley Resort and an additional $5 million in punitive and exemplary damages the resort claims have resulted from the alleged bad faith of the provincial government.

The Western Star requested an interview with officials from the provincial government regarding the lawsuit. No interview was granted, but an emailed response attributed to Attorney General Felix Collins was sent. The message acknowledged the government had been served with a copy of the statement of claim April 25.

“Solicitors with the Department of Justice are currently assessing the claim and a statement of defence will be prepared,” read the email. “None of the allegations in the statement of claim have been proven in court.

 “I am unable to comment any further at this time as this issue moves its way through the legal process.”

Organizations: Supreme Court, Humber Valley Resort, Department of Justice

Geographic location: Abitibi, Newfoundland and Labrador, Humber Valley Grand Falls-Windsor.In April Grand Falls Western Star

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Comments

Comments

Recent comments

  • Chalet Owner
    June 07, 2014 - 13:08

    I am an owner of a chalet at the resort. There are over 350 properties sold in the resort and at least 90% of the original owners who have invested in excess of 200 million dollars are from the U.K. and Europe. As a result of the issuance of the replacement grants on December 17, 2010 with the public now having unrestricted and unencumbered access to the resort, exclusivity no longer exists. This is one of the major factors why properties in the resort have decreased in value over the last four years and why I and many of the foreign owners no longer have any desire to live or build in the resort. Is the province going to compensate the owners?

    • InCB
      June 11, 2014 - 10:43

      The loss of 'exclusivity' is not a major factor why property values fell in the resort over the last four years. They were artificially over valued in the first place by the former owners as a sales pitch in order to sell them. Also the quality of the later stage chalets have come into question along with the all the foreclosures have been a biggest cause of the decrease in values.

    • Chalet Owner
      June 11, 2014 - 14:00

      Throughout North America and Europe residential lots in gated resort communities are always much more valuable and expensive then lots in areas in close proximity to the gated resort communities. The taking away of this exclusivity in Humber Valley Resort is the main reason why the value of properties has substantially decreased in value. It is acknowledged that foreclosure of a large number of properties in any specific location can be one of the factors to be taken in consideration in the completion of an appraisal and/or valuation. However, we must not lose sight of the fact that many of the foreclosures and sales by foreign owners in the resort have resulted from the owners having concluded that enough is enough as to how the government has been treating them, and have decided to walk away from their property. Stating that the prices were artificially overvalued shows you obviously have no appreciation of the value for properties in gated resort destinations.

    • Jim
      June 12, 2014 - 07:49

      Do you know who benefits the most from the politicians taking away the exclusivity at the Humber Valley Resort? It is all the local property owners on the other side of the bridge – in the Boom Siding, Humber River and Steady Brook area, where their properties have greatly increased in value over the last five years. Maybe that what the politicians intended.

  • Joan Kirkland
    June 07, 2014 - 02:54

    Why would the resort want more land? Since Watton et al took over no properties are being built and land prices are dire. Land that was once purchased for $300,000 is now being sold for $30,000 and property prices have fallen significantly with many distressed sellers. Maybe that is the plan. To get as many properties as possible then flip it to someone who knows what they are doing and then the prices goes up tenfold. Problem with that is the damage done to the resort up to that point. Maybe this resort is now just and other sub division anywhere in the world. The number of bank repossessions is extremely high as a result of their failed business plan. I suggest the chalet owners take a joint action against the resort owners for significant losses on their properties !The real losers here are those that invested 10 years ago in property at the resort and now have an asset that is worth half what was paid. This resort is a sad legacy and anyone in this position has my every sympathy

  • Edward Smith
    June 06, 2014 - 20:37

    ....And I guess Oprah will definitely not be buying a lot now...right?

  • Wannabee Bankruptcy Expert
    June 06, 2014 - 14:55

    In the article in The Western Star it said that the province claimed on December 1, 2008 little over $200,000 for monies owed and that is when the province took back the expansion lands. I am somewhat familiar with the bankruptcy process and when a debtor is under creditor-court protection none of the debts are allowed to be paid and none of the debtor’s assets are allowed to be seized. Your article said the former resort owner was under court protection from September 5, 2008 to December 5, 2008. If this is correct obviously something was seriously done wrong. There needs to be a further investigation and disclosure. Hopefully we will discover further information over the next couple of weeks.

    • Matt
      June 06, 2014 - 18:51

      I work for a law firm and my understanding of the project was that HVR aged to pay a fee for the expansion lands in stage payments. Part of the agreement stated that if HVR failed to make the payments then the land would revert back to the crown. HVR failed to make those payments. Game over. It was only ever leasehold anyway and not freehold. A complete and utter farce and try on.

    • Wannabee Bankruptcy Expert
      June 07, 2014 - 09:38

      In response to Matt's comment, I disagree. You said you work for a law firm, however you didn't inform us if you were practicing law with this law firm. If you are, then it is obvious you don't have very much expertise in Bankruptcy and Insolvency law. It is also apparent that Matt is not very familiar with the facts and circumstances surrounding the Expansion Lease Purchase Agreement, the terms and conditions, and the termination of this agreement on the part of the province on December 1, 2008 while HVR was still under court protection.

  • A Resort Property Owner
    June 06, 2014 - 14:42

    I am replying to Reality Check’s comments about the “bloated valuation” of the Expansion Lands. I am quite familiar with the expansion lands and their value back in 2008. There were 2 valuations completed back then. (a) In one of the valuation reports it stated that over a 10 year period after the deduction of the government’s commissions, sale commissions and infrastructure cost the expansion lands would yield a net present value of 246 million dollars at a 10% discount rate. (b) Another written appraisal of the expansion lands was completed in the summer of 2007 where it was determined that the market value of the expansion lands was One Hundred and Twenty Four Million Five Hundred Thousand Dollars ($124,500,000.00).

    • Reality Cheque
      June 08, 2014 - 07:56

      The current valuation is the prorated value/multiple/discount from the current price of the current resort paid by the current owner not some arbitrary DCF model.

  • Justice for All
    June 06, 2014 - 14:08

    I was only a small local creditor of Humber Valley Resort amongst the millions that was owed. I wasn’t paid for the supplies I provided. What would have happened if I went and took back my supplies while Humber Valley Resort was under court protection or in bankruptcy? I believe in all probability I would have criminal charges laid against me.

  • dogman
    June 06, 2014 - 13:54

    Watton you deserve all the rubbish that comes your way, you are the most unpleasant of people and deserve little. You have reduced the name of fellow Newfie to an all time low. You should be walked out of the province on a long plank, going east. The resort could have gone places, but you have ensured it is not. No sympathy at all for you and your colleagues.

  • Angry Taxpayer
    June 06, 2014 - 13:52

    This boondoggle appears to be even worse than the Abitibi mess. If what is claimed is correct is this another case that the taxpayers may have to pay another 150-200 million dollars because of the actions, arrogance and attitude problem of the politicians? The provincial government won’t have the federal government to bail them out this time. It is time for the voters of this province to give the government a wake-up call in the next election.

  • Upset Unsecured Creditor
    June 06, 2014 - 11:40

    I am a property owner in the resort and an upset unsecured creditor. In the Western Star article it was mentioned that the former resort owner was under court protection from September 5, 2008 to December 5, 2008. During this period of time none of the assets could be seized by any of the creditors, which would include termination of leases and taking back of the expansion lands. If the province on December 1, 2008 did disobey the court order and terminated the lease and took back the expansion lands then I agree that they should be accountable. The province had no greater right than I and the other unsecured creditors and they had the same obligations. The province was claiming just over $200,000.00 and I understand there was over 100 million dollars owed to all of the creditors.

  • Steven
    June 06, 2014 - 10:06

    The Western Star requested an interview from the province which was refused. The Attorney General, Felix Collins, said “I am unable to comment any further at this time as this issue moves its way through the legal process”, which we all know will take years. What are the politicians trying to do, hide from the truth - why won’t they comment about this case? The politicians had no problem mouthing off in the media about this case back in December 2008.

  • Mexeman
    June 06, 2014 - 05:21

    Good luck with this spurious claim Graham! Taxpayers should not be on the hook for any of this despite what you may think is legally persuable. This PRIVATE company went bust, and I am sure that the Crown land reverted back to the Crown when it did so. Just when locals were starting to buy up property on the 'Resort', you now expect them and others to stump up money to you and your fellow investors? Dream on.