Province denies wrongdoing in taking back resort’s expansion lands

Gary Kean
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The provincial government has admitted it had meetings with the former operators of Humber Valley Resort in the months leading up to terminating an agreement to expand the property to adjacent Crown land in 2008.

The entrance to Humber Valley Resort.

Still, the province denies all allegations by the resort’s current owners that it was negligent, breached contracts or committed any other wrongdoing as outlined in a statement of claim filed by the current owners in the Supreme Court of Newfoundland and Labrador earlier this year.

The legal action was filed by 61839 Newfoundland and Labrador Ltd. in April. The numbered company is owned by Noton Enterprises Ltd. — a Corner Brook company registered in the name of Katie Watton and Gary Oke.

They purchased the bankrupt resort in March 2010.

The statement of claim filed by Graham Watton, Katie Watton’s husband and the numbered company’s legal counsel, alleges the provincial government defied an order of the Supreme Court by terminating the lease-purchase agreement for the expansion lands Dec. 1, 2008.

At that time, there was a stay of proceedings in effect for any dealings with the resort, which was under creditor protection and went bankrupt four days later.

The province and the former owners of the resort had reached an agreement in 2005 for the purchase of about 2,000 acres of adjacent Crown land to expand the existing resort.

The deal was that the resort would pay the province nearly $6.4 million in the following five years. 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.

Money owed

Just before the resort was declared bankrupt, the province submitted a proof of claim with trustees Ernst and Young which stated the resort owed $210,082 under the expansion lease purchase agreement for the period between Aug. 1, 2008 and Oct. 1, 2008.

Graham Watton says the termination of the expansion and agreement at the same time is proof the province didn’t want any of that additional Crown land to be part of what would happen with the resort assets after the declaration of bankruptcy.

After 61839 Newfoundland and Labrador Ltd. took control of the resort, the provincial government issued four replacement grants for the Crown lands that were part of the original resort.

The new grants given to the new owners contained amendments that were not part of the original grants, including conditions on how the land could be used and a requirement to allow public access to the resort’s privately owned bridge over the Humber River and main road.

The statement of claim charges the province had no legal authority to change the conditions of the grants.

Since Watton filed the statement of claim in April, several more court documents were filed regarding the matter.

The province filed a demand for more particular details regarding the claim June 12. Watton filed a response to that, as well as an amended version of the statement of claim June 30.

The province filed its defence to the statement of claim July 7. Watton then filed a demand for particulars with regard to the defence July 21, which was answered by the province July 31.

While the province insisted in its defence that it did nothing wrong, Watton said the province filing the proof of claim and stating that the expansion lease purchase agreement was “null and void for non-payment of annual rent” at that point is acknowledgement of its defiance of the stay of proceedings.

Meetings held

Part of the government’s defence admitted that three meetings referred to in the statement of claim filed by Watton did occur. Those meetings were held in July, August and September 2008 and involved representatives of the former resort operator meeting with various provincial government officials, including now-Premier Tom Marshall, who was finance minister at that time.

The first of these meetings, according to the statement of claim, involved discussions of the resort’s financial situation and operations. At the second meeting, the owners informed the government they had contacted insolvency specialists and had concluded that reorganizing and restructuring the enterprise under the Companies Creditor Arrangement Act would be its best option to try to deal with its financial woes.

The third meeting involved discussions with resort stakeholders, including the provincial government, about finding measures that would be “palatable to all creditors and shareholders.”

Watton believes these discussions paved the way for the termination of the expansion land lease agreement so the land would not be assigned into bankruptcy with all the other assets of the resort.

“If you’ve got nothing to hide, why not discuss it?” Watton asked Monday in an interview about the latest developments. “Why drag it through the courts if it’s going to take years and years and years?”

Watton said the new owners aren’t interested in getting the expansion lands back, but the resort is seeking $170 million in relief and damages from the province in the statement of claim.

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 bad faith of the provincial government.

The Western Star

Organizations: Newfoundland and Labrador, Supreme Court, Noton Enterprises Ernst and Young Humber Valley Resort

Geographic location: Corner Brook, Humber River, Western Star

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