Province taking back resort expansion lands underhanded: lawyer

Gary Kean
Published on June 6, 2014
The entrance to Humber Valley Resort is seen in this file photo.
Star 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.”