Resort lawsuit claims province made illegal changes to land agreements

Gary Kean
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Graham Watton says the provincial government taking back expansion lands that had been committed to Humber Valley Resort isn’t the only reason the resort’s owners are suing the province.

As reported in Friday’s edition of The Western Star, the numbered company that took ownership of the bankrupted resort in 2010 — 61839 Newfoundland and Labrador Limited, of which Watton’s wife Kathleen is part owner — has filed a $170-million lawsuit against the provincial government in the Supreme Court of Newfoundland and Labrador.

In the statement of claim filed with the court, Watton alleges the province defied a Supreme Court order since it terminated the lease purchase agreement for the expansion lands in December 2008, while there was a stay of proceedings in effect with any dealings with the resort.

Once the lease agreement had been terminated, said Watton, the province had a problem on its hands because the province then had no public access to that Crown land via the resort.

The resort is currently accessible by road only, but requires crossing the private bridge built over the mouth of the Lower Humber River. That bridge is considered an asset of the resort and the portion of land immediately accessible on the resort side of the bridge was private land sold to the original resort developers.

The builders of the resort had purchased 83 hectares of private land and 162 hectares of Crown land on which construction of the initial resort began in the early 2000s. The agreement to purchase an additional 635 hectares of adjacent Crown land for future expansion was reached in 2005.

 The 162 hectares of Crown land in the initial stages of the development were acquired via a series of Crown land grant lease agreements in 2003 and 2004.

On Dec. 17, 2010 — six and seven years after the original Crown land grants and nine months after 61839 Newfoundland and Labrador Limited had taken over the resort — the provincial government issued four replacement grants for the acquired Crown land to the new owners.

Those replacement grants contained amendments with regard to how the acquired land could be used. The replacement grant amendments included a stipulation the land could be used for a “golf practice range, a nine-hole golf course, chalet units and resort related facilities.”

It also was amended so the land owner “shall provide and ensure unencumbered public access to the main road and bridge” at the resort.

Neither of those conditions had existed in the original Crown land grants that got the resort up and running.

Watton’s claim is the provincial government had no legal authority to make such changes to the grants and that issuing them was unlawful and fraudulent. He said the province explained its actions by saying it had accidentally omitted the land use conditions in the original lease documents.

The amendments, according to Watton, have also rendered the resort’s marketable exclusivity non-existent.

“I understand that one of the main reasons why many of the foreign owners purchased in the resort and paid the prices that they did pay for the vacant lots was because it was in a private, gated community,” said Watton.

The replacement grants could be interpreted as meaning the resort is only permitted to operate a nine-hole golf course. However, Watton said all 18 holes are open to golfers and the resort continues to be accessible to the public.

Since the resort began running into financial troubles and, ultimately, bankruptcy in 2008, the price for property there has dropped. These days, many homes there are owned by local people local. With the allegations outlined in the statement of claim filed with the court, Watton said the province has damaged the reputation of its tourism industry and tarnished its name in the international investment community.

“Hopefully, the matters in dispute can be resolved with the province without too much damage having been caused to the reputation of our province and without the substantial cost and expense to the taxpayers, which may occur if the issues in dispute have to be determined (in court),” said Watton.

The lawsuit is seeking $125 million for the fair market value of the purchase agreement and the ungranted expansion land, $40 million for the alleged decrease in value of the resort’s existing assets and another $5 million in punitive and exemplary damages the owners claim have resulted from the provincial government allegedly acting in bad faith.

The provincial government won’t comment on the allegations made in the statement of claim and is preparing to file a defence to it in the Supreme Court of Newfoundland and Labrador.

Organizations: Supreme Court, Newfoundland and Labrador, Humber Valley Resort

Geographic location: Western Star, Lower Humber River, Newfoundland and Labrador

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Recent comments

  • A Disappointed Observer
    June 12, 2014 - 09:16

    Why did the politicians in 2010 illegally issue replacement grants requiring the new resort owners to provide public access over their private bridge, through the resort to the crown lands and beyond? To accommodate and keep happy some of the local voting residents and a few of their “PC drinking buddies” and cabin owners in the Humber Valley-Boom Siding-Deer Lake area. Right from the outset back as early as 2005 there were individuals upset with the government of the day and frowned upon permission being granted for the creation of a private gated playground-community in their backyard where land was accessible only to the rich foreign property owners by a privately owned bridge. Over the years these individuals voiced their complaints to the politicians that they should be able to have access to these lands and beyond through the private bridge to enable them to participate in recreational activities, off road activities, fishing and hunting, and access to the crown lands, lakes and cabin country. When Humber Valley Resort went bankrupt and with all of the negativity created at the time the politicians felt that the time was ripe to ignore their legal obligations and legal rights of the resort owners and the foreign property owners in the resort (the politicians were aware that 90%-95% of the property owners resided in the UK or Europe and had no voting rights in NL). The province also had a negative attitude and showed antagonism towards the foreign property owners which have had repercussions such as the property owners, their families and guests feeling unwelcome, resulting in less desire to visit, less visitation and many owners eventually selling their chalets. What the politicians didn't care to appreciate is that tourism is the engine that drives growth and development in the Humber Valley region.

  • Avid Golfer
    June 09, 2014 - 14:36

    Newfoundland is now the laughing stock of the golfing community in Atlantic Canada. The Humber Valley Resort Golf Course is now one of the most popular tourist attractions in Western Newfoundland and has been voted on numerous occasions as one of the top 18 hole golf courses in Canada. Yet the government has now imposed a restriction that the golf course can only be operated as a 9 hole golf course. If it wasn't so serious and sad, I 'd consider it a Newfie joke.

  • LocalGirl
    June 08, 2014 - 16:29

    Let be absolutely clear if this is lost it is not the Government who will pay for this. It is you, me and every tax payer in Newfoundland. About 400 dollars for every man, woman and child that you know who resides on the island

    • LocalBoy
      June 09, 2014 - 14:46

      Local Girl, I agree with your comments. Remember this on Election Day. Any monies paid out will be as a result of the negligent and fraudulent actions of the politicians. Maybe we as taxpayers should get the politicians who were involved to pay this money out of their own pockets.

  • Inadequate
    June 08, 2014 - 06:11

    The fact the Humber Valley Resort has failed is because if the inadequate business plan of the existing owners. If the land was give the the resort then for what benefit? Land prices are about a tenth of what they were prior to the resort went into bankruptcy meaning that the true victims are those that purchased during the boom. What would you do with the land anyway? If you can't sell land at these low prices then what's a huge glut of more land going to do? Over supply will reduce prices even more. It's worthless while the existing owners lack any business ethics or direction. If the resort was owned by a group that actually had a positive business plan then prices will rise. This business plan is negative to reduce prices, to create distressed sellers, then HVR picks any foreclosures and then owns a large number of properties. Here's a good idea. Now you have done your land grab, why don't you sell the resort on to someone who knows what they are doing, let them implement a positive business plan and the all the land and properties that you own will appreciate in value. They can add value for you more then. Why is a lawyer speaking in the press anyway? Don't Directors run businesses?

  • Jim
    June 07, 2014 - 12:08

    Why would the Province impose a condition in the Replacement Crown Grants that the Humber Valley Resort lands could only be used as a 9-hole golf course? Who put pressure on the politicians and why would the politicians do this? Why was it not done until December 17, 2010? a) Is it because the owners of the 18-hole golf courses in St. John’s are upset because too many golfers who are visiting the province to play golf are going to Humber Valley Resort? b) Is it because certain politicians want to decrease the market value of the golf course to enable the Province or some other party to be able to pick up the golf course cheap? c) Or is there some other ulterior motive? Please tell us government. It doesn’t make sense. I’m glad the Resort Owners are taking the province to court to set aside the replacement grants on the grounds that it is unlawful and fraudulent. This government is one big fraud. Our politicians are destroying the tourism industry and any desire for people to invest in the tourism industry in Western Newfoundland.