Resort lawsuit claims province made illegal changes to land agreements

Gary Kean
Published on June 7, 2014

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.