David Morgan of the Port Hastings-based companies Celtic Air and AxAir Aviation, is suing Halifax-based Gateway Facilities and Sydney businessman Christopher Neville, owner of Ava K Holdings, over what I would call a train wreck of a business deal were that not so obviously the wrong metaphor for a fight over a 1979 Cessna 411 Conquest II aircraft.
Morgan and Neville are co-owners of AxAir, the small, Quebec-based airplane charter service Morgan bought during the pandemic. AxAir came with a single airplane — a twin-engine, five-seater Cessna 421. According to documents filed with the court, Neville became a 50% shareholder in AxAir in January 2022 after his company, Ava K Holdings, made Morgan a shareholder loan worth just over $1 million to buy a bigger aircraft.
Although their stories are very different, both parties agree that the deal went south very quickly — they signed their official agreement in January and by February, Neville had asked Gateway, the fixed-base operator (FBO) handling private aircraft at Halifax’s Stanfield Airport, to deny Morgan access to the new Cessna (which is actually a 43-year-old Cessna, one of the many things I learned from this story was that aircraft have much longer lifespan’s than I’d realized.)
Cessna 441 Conquest II (Source: AxAir website )
Morgan accuses Neville of interfering with his business operations, attempting to take over AxAir and attempting to “seize all of the assets owned by Morgan personally, and the assets owned by both Celtic Air, and AxAir.” But Neville’s allegations, contained in an affidavit filed with the court, are equally damning — he accuses Morgan of charging unauthorized purchases worth over $150,000 to Neville’s American Express charge card.
Proceedings began in Halifax Supreme Court on Monday. Morgan’s lawyers were seeking an injunction against Neville, AKA Holdings and Gateway, but at counsel request, Justice Ann Smith granted an adjournment to April 14 and set new filing deadlines, meaning new or additional documents related to the case will be filed within the next week or so. In the meantime, the documents already filed give a pretty good notion of the nature of the dispute with the obvious caveat that none of this has been proven in a court of law.
Both sides (meaning Morgan and Neville, the main combatants) have brought out the big guns — Morgan is represented by Halifax-based McInnes Cooper and Neville by Halifax-based Cox & Palmer — so it looks set to be something of a battle. All I can say with certainty at this point, though, is that the two parties have very different versions of what has happened since they first met — in fact, they can’t even agree on when they first met.
He said
Morgan’s version of events is that he met Neville in late fall 2021 when Neville was “seeking access to private charter air services” of the type AxAir provided. Morgan says Neville texted him in September 2021 to suggest that AxAir required a “larger and faster airplane” than the one it had. According to Morgan, Neville also offered to “make an investment” in AxAir to allow the company to purchase such a plane.
Morgan says he sourced the Cessna and in November 2021, Neville lent him $1.13 million to purchase it. In recognition of this “investment,” they agreed Neville would receive 50% of AxAir’s shares but in certain matters, according to Morgan’s lawyer, Gavin Giles, Neville was to have a “tie-breaking” vote.
One of the strangest things about this case is how seemingly loosey-goosey Morgan and Neville — two people who apparently barely knew each other — were about this million-dollar deal. As Giles (quoting Morgan’s previous lawyer) put it, the transactions between the two “did not unfold in any kind of manner which could be described as ‘traditional.'”
Morgan says that having completed the purchase of the Cessna in November he:
…began the process of importing the aircraft and beginning efforts to add it to its chartered fleet, and in fact provided private air services using the Cessna to Neville himself, but for which Neville has refused to pay.
(Morgan says Neville ran up a bill of $171,000, including a “family trip” to Costa Rica, with AxAir, but Neville says this doesn’t represent the “market value” of his flights.)
It wasn’t until 14 January 2022 that the two parties actually signed their agreement, which stipulated that Morgan was to pay back the loan at the rate of $6,900 plus interest per month, beginning in February 2022. The two also signed a number of “ancillary” documents at this time, including guarantees with respect to the repayment of the loan.
But the ink was barely dry on the contracts before everything went south and Neville was demanding full payment on the loan in what Giles’ termed a:
…clear and bad faith attempt from day one to seize AxAir and Celtic Air, all of its assets, and anything else which might be available to him by way of security, for himself.
This included, according to Morgan (and I feel the need to reiterate that none of this has been proven in court) Neville turning up at the AxAir/Celtic Air offices with “bolt cutters” and having to be told to leave by the RCMP; Neville turning up at a pilot’s home, harassing his pregnant wife and seizing the Cessna logbook; and Neville asking Gateway to deny Morgan access to the Cessna, which Gateway did. According to Morgan, he has not had access to the Cessna since February:
Since that time, Gateway, unilaterally, and without any colour of right, has detained the Cessna, this [sic] denying [AxAir]’s revenue generation potential through its access to and use of the Cessna, and bringing to a halt efforts to add the airplane to the charter fleet.
He said
Neville, in his affidavit, says that in the fall of 2021, he “heard from some business associates” that Morgan (whom he says he had met previously through the Young President’s Organization, which seems to have pulled a KFC and now goes simply by YPO) was “seeking additional investment in Celtic.”
They met for lunch (at Morgan’s request) and though Neville “had some reservations about the financial difficulties the business seemed to be experiencing,” Morgan was “persistent.” Neville’s version of the story is that Morgan was actively looking for an investment to buy a bigger plane and had already sourced the Cessna 421 at the time of their lunch.
Neville says Morgan “persuaded” him to lend him $1.13 million for the purchase of the Cessna and that he also paid all applicable taxes, bringing the total to $1.17 million.
Neville says that according to the terms of their unwritten agreement, he and Morgan were to be partners in the operation of AxAir and Celtic Air but Neville would “ultimately have a controlling interest due to the major investment” he had made. Neville says he had no desire to push Morgan out of the business, but wanted it to succeed and was encouraged by Morgan’s plans to up his game by hiring a chief financial officer.
In December 2021, after he’d paid for the plane but before their agreements were signed, Neville says his bookkeeper alerted him to “numerous aviation-related charges” on his American Express card. The card, he explains, is a charge card, not a credit card, so the balance must be paid each month.
Neville says he phoned all the suppliers whose invoices had been paid and was told that Morgan had texted them Neville’s card number and told them to take payments dating back to June 2021.
Neville says he confronted Morgan, who agreed to pay back $70,000 of the approximately $130,000 charged to the card immediately “using the full amount of a loan he anticipated receiving from ACOA.” (Celtic Air received a $200,000 unconditionally repayable contribution from ACOA in December 2021 to “help offset operational challenges associated with Covid-19.”)
Neville claims there were further “unauthorized charges” after this, but Morgan’s lawyer, Gavin Giles, rejects what he calls this accusation of “theft,” saying Neville had “pledged the credit card’s use for the very purposes it was being accessed” by AxAir and that both the Share Purchase Agreement and the Shareholders’ Agreement drafted by Neville’s own lawyer, Anna Manley, “explicitly contemplate and acknowledge that any charges to Mr. Neville’s personal credit card shall be deemed, or are, part of the outstanding shareholder loan to Mr. Neville.”
Giles points out that the Promissory Note drafted and issued on January 14 added $128,000 to the initial principal amount which “clearly demonstrates Mr. Neville’s consent and acknowledgement of such charges (all, or most of which, he subsequently cancelled/reversed…).”
“Self-help”
In February, Neville concluded that the agreement he’d signed with Morgan three weeks previously had been breached — he cites a number of reasons for this in his affidavit, including the charges on his American Express card, documents he says Morgan had failed to provide him, news of an Ontario court case involving Morgan (about which, more below) and Morgan’s missing his February loan payment. (Morgan says he made the payment on time, Neville says he was told Morgan would deduct the value of the payment from Neville’s outstanding travel bill.)
Having come to the conclusion that he “could not trust” Morgan, Neville decided to call in his loan and “seek to enforce on the collateral which secured the loan,” including the Cessna. He then pursued “self-help remedies,” which included asking Gateway to deny Morgan access to the airplane.
Neville denies showing up at the AxAir/Celtic Air’s offices with “bolt cutters,” he says he had equipment for changing locks. He also denies threatening anyone or acting aggressively and says, with reference to the Cessna logbook, that the pilot should not have taken it home.
But Morgan’s lawyer says there was “not so much as the hint of a default” on the shareholder loan, that Neville had been paid what was due him and that Neville’s “remaining default contentions were pretextual and contrived.”
I should also note that on 2 March 2022, Morgan delivered a “buy/sell (shotgun)” notice to Neville, offering to either purchase Neville’s AxAir shares, or sell his own shares to Neville. Under the terms of their agreement, the Shareholder Loan (plus a 20% interest charge on the balance of the loan) would be paid within 30 days of the offer being accepted. Morgan’s lawyer says Neville has yet to respond to this offer.
Neville says their agreement does not require him to respond to the offer, that Morgan is offering to pay him “significantly less” than he has invested at this point, and that he doubts Morgan’s ability to buy him out. Neville says he believes he is “in a position to try and recoup [his losses] from the collateral and the business operations.”
Miscellanea
Christopher Neville describes himself as a “businessman based in Sydney, Cape Breton,” but offers no details about the nature of his business. When I tried to find out something more about him, all I turned up was this Cape Breton Post story that identifies his company, Ava K Holdings, as the owner of the Rockcliffe Apartments in Sydney. It seems that around the time Neville was entering into business with Morgan, he was also ordering the doors on a tenant’s apartment boarded shut because she was behind on her rent.
Weirdly, the court case involving David Morgan cited earlier also relates to housing (and again a reminder that none of this has actually been proven in court).
According to documents filed with the Ontario Superior Court of Justice in September 2020, Cat Lake First Nation (CLFN), an Ojibway First Nation Reserve in Northwestern Ontario, is claiming general and special damages worth $3 million from a group of defendants that includes Morgan and two of his companies, DC Aviation Canada (about which I can find no information) and Celtic Air Services.
His co-defendants are Windsun Energy Corp and its owner, Gerald Paulin and Raindancer North Inc and its owner, Patricia Magiskan.
CLFN claims that Magiskan, hired by the band as an advisor in 2016, “took charge of most financial activities in the Band Office.” She then “delegated financial control and management of some aspects of CFLN’s finances” to Paulin who, in turn, involved his company, Windsun, in the band’s finances. Magiskan and Paulin are accused of “completely mismanaging” funds intended for the construction of a much-needed housing project.
The alleged mismanagement included contracting David Morgan to contract with North Start Inc — the company CLFN had been using for all incoming and outgoing flights since 2014 — to fly in construction materials. The band claims Morgan had “previous business relationships with Gerald Paulin and Windsun.”
The statement of claim says that between December 2016 and March 2019, the band paid Morgan $892,310.02 for the work, which was actually carried out by North Star Air, to whom Morgan paid $409,538.41.
CLFN states that David Morgan, DC Aviation/Celtic Air received a windfall of $482,771.00 on the fly in costs.
CLFN says that, given its existing relationship with North Star, it had “no need for DC Aviation/Celtic Air.”
By 5 March 2021, the time for filing statements of defense had expired without any of the defendants filing. This means the court may rule in favor of the plaintiff by default, but I can’t find any record of the court having rendered a judgement in this case.
Interestingly, in January 2019, before the suit was filed, CLFN declared a state of emergency over “dangerously inadequate, mould-infested housing” and in February, federal Indigenous Services Minister Seamus O’Regan announced the federal government would provides $12.8 million for immediate action to address the community’s housing crisis. That includes, as the CBC reported, “$5 million to build 15 new homes, $2.1 million to repair and renovate 21 units and $3.1 million for new prefabricated modular housing units.”
In April 2019, the CBC reported that a consultant named Gerald Paulin was claiming he was owed $1.2 million for having brokered the deal with the federal government:
Gerald Paulin signed a contract with Cat Lake in November 2017 for 10 per cent of any new money the community received. He says that entitles him and his company, Windsun Energy Corp., to $1.2 million after the federal government recently pledged $12.8 million for emergency housing.
The story says the band agreed to pay Paulin his money over several months but quotes an anonymous federal official who said “the department had heard concerns from members of the community and “other partners” about the role of consultants in the negotiation.”
