Watton releases ‘smoking gun’ in lawsuit against government

Gary Kean
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The owners of Humber Valley Resort have released an internal memo that allegedly indicates the provincial government initially had no intention of taking back expansion lands committed to the resort in 2008.

A security guard at the entrance of Humber Valley Resort lets a vehicle through in this file photo. — TC Media file photo

The internal memo was written by Derrick White, who was president of Newfound Canada and a representative of the former owners of the residential and golf course development at the time. The memo was prepared for shareholders in Newfound Canada and contained details of a meeting held with the government on Sept. 16, 2008 to discuss the dire financial straits Humber Valley Resort was in at the time.

The former owners of the resort had filed for protection under the Companies Creditors Arrangement Act at that point and had defaulted on their latest payment.

By early December 2008, and at least five days prior to the resort being declared bankrupt, the province terminated the expansion land lease agreement.

The current owners of the resort, Katie Watton and Gary Oke, have launched a lawsuit against the provincial government alleging the province defied a stay of proceedings ordered by the Supreme Court of Newfoundland and Labrador by terminating the lease. The stay of proceedings had effectively frozen the rights of any creditors — which included the province — or shareholders involved with the resort.

The current owners also allege the province had no right, after Watton and Oke took over in 2010, to issue replacement grants for the Crown land that had been used to start up the resort. Those replacement grants contained amendments to the conditions on how the land could be used.

Graham Watton, the resort’s legal counsel and Katie Watton’s husband, has taken out several newspaper advertisements recently to explain the argument the owners are making through the legal action.

In the latest advertisement, Watton references the internal memo. In it, White stated that the provincial cabinet minister who was present at the meeting (Tom Marshall as former Finance minister)‚ “agreed to issue a letter confirming that (government) will forbear from pursuing their rights under the lease during the (Companies Creditors Arrangement Act) process for our failure to make the payment on August 1.”

The advertisement also references a letter from former deputy finance minister Terry Paddon, who is now the province’s auditor general, which indicated the province had no intentions of terminating the expansion lease agreement at the time. That correspondence is dated Sept. 30, 2008.

Watton said these documents are “the smoking gun” which show the province had deliberate intentions of taking back the expansion lands before those properties were assigned into bankruptcy along with the resort’s other assets.

“It was not a simple mistake — it was a calculated, planned, deliberate and precise manoeuvre on the part of the province,” said Watton.

The provincial government, in its defence to the statement of claim filed against it, denied all of the allegations made by Watton and Humber Valley Resort.

When asked about the lawsuit recently, Marshall said the province took the expansion lands back from the resort because it was an asset that still belonged to the people of the province, and the former owners had defaulted on the payment agreement that was in place.

The current owners are suing the province for $170 million. They offered a settlement for less than that this summer, but the provincial government rejected it.


The Western Star

Organizations: Newfound Canada, Supreme Court

Geographic location: Humber Valley, Newfoundland and Labrador, Western Star

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Recent comments

  • Smoking Something Alright
    August 30, 2014 - 08:28

    Some businesses can only make money by suing and hooing for an out of court settlement.

  • RU Kidding
    August 29, 2014 - 11:52

    Nothing to see here , JUST a desperate attempt to rip off the people of the province to yet again "subsidize" another failed enterprise. The gov't should tell Graham he can have the land as outlined in the original "HVR" agreement. With one requirement " Fill Up And Make a Success Of What You Have FIRST " Then and ONLY then should access be given to the "Over Flow" for expansion , the last crowd went belly up because they bit off more than they could chew. This would leave no reason why the resort could not advertize that there are future expansions planned , that is reasonable and equitable and everyone gets what they want. Well except Graham's free $ 100,000,000.00 ++ cash infusion to the existing "Failed" enterprise off OUR backs. This past spring they were looking for volunteers to help mow the grass on the Golf course , you can't maintain what you have and we can't afford to throw away money that should go towards the mythical New HOSPITAL we keep hearing announcements on. It's crap like this why we can't get ahead , I hope they tie you up in court for years to come and that your fairways wither and die just like our health care system is.

    • Don II
      August 29, 2014 - 14:58

      It appears that the Government of Newfoundland did not give Danny Williams any problems when it sold over 2000 acres of Crown land to him "for a song". It appears that the Government of Newfoundland can cause some people to suffer financially while clearing the tracks for others to make a big profits from the development of Crown land. Why is that? The Government of Newfoundland is currently in Court asking for relief from the Churchill Falls electric contract on the basis of a "good faith" plea despite the fact that it clearly shows no good faith to anyone except for its few chosen friends. It appears that the Government of Newfoundland can be extremely biased, unfair, punitive and prejudiced against certain people in its dealings and therefore there should be no surprise to anyone that the Government is regularly the subject of lawsuits.

  • John Q Public
    August 29, 2014 - 09:49

    Could this be yet another example of the totally careless manner in which the Williams/Dunderdale/Marshall regimes managed provincial affairs? Could this be another Abitibi Price fiasco?