Province denies wrongdoing in taking back Humber Valley Resort’s expansion lands

Gary Kean
Published on August 19, 2014
The entrance to Humber Valley Resort is seen in this file photo.
Star file photo

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

Still, the province denies 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 owners in the Supreme Court of Newfoundland and Labrador earlier this year.

The legal action was first filed by 61839 Newfoundland and Labrador Limited 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, who purchased the bankrupted 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 just four days later.

The province has insisted in its defence filed with the court that it did nothing wrong. In the document, the province admitted that, on Dec. 1, 2008, it filed a proof of claim for the $210,082 the former owners of the resort owed government, pursuant to the Expansion Lease Purchase Agreement. It also stated the expansion lease agreement was “null and void for nonpayment of annual rent” at that time.

Watton said the province’s admission on this point actually acknowledges government’s defiance of the stay of proceedings.

“If you’ve got nothing to hide, why not discuss it?” Watton asked Monday during an interview about the latest developments in the case.

“Why drag it through the courts if it’s going to take years and years and years?”

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 of 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 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 and 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 that the land would not be assigned into bankruptcy with all the other assets of the resort.

The attorney 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 alleged bad faith of the provincial government.

Reached and agreement

The province and the former owners of the resort had reached an agreement in 2005 for the purchase of around 2,000 acres of adjacent Crown land to be used to further 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.

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 Limited 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.

Watton’s statement of claim charges that the province had no legal authority to change the conditions of the grants.

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