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.
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 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.
Defied a stay of proceedings
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 manoeuver on the part of the province,” said Watton.
The provincial government, in its defence to the statement of claim filed against it, has denied all of the allegations being 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.