ACOA Tees Up a Lawsuit in Ben Eoin

There’s been a development in Ben Eoin and it’s a doozy: the Atlantic Canada Opportunities Agency (ACOA) is suing Ben Eoin Golf Club Limited and 3324714 Nova Scotia Limited, a company connected to Ben Eoin Development Group Inc (BEDGInc), for $3.5 million.

Why?

Well, according to ACOA’s Notice of Action, filed with the Supreme Court of Nova Scotia in Halifax on June 2 (and included below), it’s because the agency never approved the sale of The Lakes Golf Club to BEDGInc and, as a result, is entitled to redeem its equity investment in the club.

I’ll add the usual caveats here about ACOA’s allegations not having been tested in court but…actually, I’ll stop there.

 

I’ve covered what I’ve dubbed “the Ben Eoin Shuffle” in ridiculous detail, but the short version is that a lot of public money has been spent over the years in an attempt to turn Ben Eoin into a “four seasons” recreation area. The results have been, shall we say, mixed. The not-for-profit Ben Eoin Ski Hill is an obvious success and a community asset but the other developments—including the golf course, the marina, the “country inn” and the hilltop “subdivision” (read: the $1.1 million road) constitute more dubious achievements.

Enterprise Cape Breton Corporation (ECBC) was the driving force behind the “four seasons” concept, funding the inn and the marina and the subdivision and, in 2006, through a subsidiary called  the Cape Breton Growth Fund Corporation (CBGFC), the golf course. Ben Eoin Golf Club Limited was formed that year to establish “an 18-hole golf course” and the CBGFC agreed to invest $3 million in Class “A” Preference Shares. CBGFC was dissolved in 2008 and its assets and liabilities taken over by ECBC which added another $500,000 to the golf course investment.

When ECBC imploded in 2014, its properties went to Public Services and Procurement Canada (PSPC) to be sold and its $3.5 million stake in The Lakes Golf Club went to ACOA.

 

Buying Ben Eoin

Fast forward to November 2017 and the formation of the Ben Eoin Development Group Inc (BEDGInc) under the following board of directors:

  • Rodney Colbourne (President, Secretary)
  • Mike Kenny
  • Siva Thanamayooran
  • Glen Brann
  • Troy Wilson
  • Steve MacDougall

Kenny and Brann were also co-vice presidents of the board of Ben Eoin Golf Club Limited at that time. They left the board effective 11 December 2018.

BEDGInc went on a shopping spree in Ben Eoin, buying:

  • the land beneath the Ben Eoin Marina ($150,000)
  • the Aerie Estates subdivision ($445,000)
  • the lot intended for a hotel in the Aerie Estates subdivision ($65,000)
  • The Birches at Ben Eoin Country Inn ($675,000; then in March 2019, ACOA provided an unconditionally repayable contribution of $500,000 to the group for upgrades to the inn.)

And in December 2018, according to the Notice of Action, which refers to Ben Eoin Golf Club Limited as “Ben Eoin,” and the $3.5 million investment as “the Agreement”:

…ACOA became aware that Ben Eoin was seeking to enter into an Asset Purchase Agreement with 3324714 (as nominee of Ben Eoin Development Group Incorporated) for the transfer of all of Ben Eoin’s assets related to the 18-hole golf course…

BEDGInc made an offer that was first rejected then, during a special meeting of Ben Eoin Golf Club Limited shareholders on 5 February 2019, approved by 97% of those voting. According to Jerry Redmond, the treasurer of Ben Eoin Golf Club Limited (who also did “external accounting” for “several” of the BEDGInc investors and who was a vocal supporter of the sale), the deal involved no cash. Instead, BEDGInc would take over the golf club’s assets and its debt which, according to Redmond:

…was approximately $5 Million, and included both our Mortgage with Atlantic Central (Credit Union) plus the ACOA Preferred Shares.

According to the Notice of Action, the Asset Purchase Agreement between Ben Eoin and 3324714 was dated 26 February 2019.

But—and this is a huge “but”—ACOA says that to sell The Lakes to BEDGInc, Ben Eoin Golf Club Limited required “prior written consent from ACOA” and:

On or about July 8, 2019, ACOA informed Ben Eoin that ACOA did not consent to Ben Eoin’s proposed transfer of assets to 3324714.

In other words, ACOA said no.

 

Waivers

By 20 March 2020, changes to the board of Ben Eoin Golf Club Limited meant it was now identical to that of 3324714 Nova Scotia Limited. Both looked like this:

  • Rodney Colbourne (President, Secretary)
  • Mike Kenny
  • Siva Thanamayooran
  • Troy Wilson
  • Steve MacDougall

According to ACOA:

On or about May 20, 2020, 3324714 provided a waiver of conditions to Ben Eoin, waiving Ben Eoin’s obligation to obtain prior approval of certain liabilities, including the assumption of debt from ACOA.

Roughly nine days later:

ACOA sent a letter to Ben Eoin indicating that moving forward with the proposed transfer of assets without ACOA’s consent would constitute default under the Agreement which would trigger the redemption of all of ACOA’s Class “A” Preference Shares in Ben Eoin.

But despite the warning and the “failure to obtain ACOA’s consent”:

…on or about June 3, 2020, ACOA became aware that Ben Eoin had proceeded to transfer its assets to 3324714 in default of its obligations under the Agreement.

As a result, on 12 June 2020, ACOA demanded full redemption of its remaining  Class “A” preference shares as well as arrears worth $61,077.86 for “overdue redemption and dividend amounts based on the distributable income for 2016 and 2018,” bringing the total sought to $3,494,972.66.

Remember, those redemption and dividend payments that came due in 2016 were described by Redmond as the final straw for the financially struggling golf club; the reason why the sale to BEDGInc was the answer to their prayers. He told the CBC’s Tom Ayers in February 2019:

What really hurts is ACOA … finally came back and said, ‘There is a repayment schedule. Here it is. Here’s your first invoice.’ And that’s when it really hit home that, OK, we could be in trouble.

And yet, the debt is apparently still outstanding.

Also worth remembering, Redmond suggested strongly that ACOA would be prepared to revisit the terms of its investment with the new owners. In the same February 2019 interview with Tom Ayers (which is no longer available on the CBC website or I’d link to it) he said:

Tell you the truth, ACOA has said to me, and I’m sure they’ve said to other groups that may or may not have spoken to them, they would say that they’ll start talks over again with any party that is able to take over the golf course or thinks they can take over the golf course.

So they’re quite able and willing to talk to this particular group about…those preferred shares.

Which was technically true, I guess, except that the conversation involved ACOA demanding repayment from both Ben Eoin Golf Club Limited and 3324714 Nova Scotia Limited and getting Canada Revenue Agency to deduct monies owed ACOA from their respective business tax accounts.

The demand was made two years ago but ACOA says neither party has complied, hence the lawsuit.

There’s a lot more that could be said about this, but I will settle for two things:

One, apparently, I owe ACOA an apology: I had assumed it had approved the sale of The Lakes Golf Club to BEDGInc. Mind you, if this agency were a little less tight-lipped about what it is doing with our money, I would have known better.

And two, I was right when I concluded, back in February 2019, that it all sounded like “matters for lawyers.” It will be interesting to see what the lawyers make of it.

 

SH-515244 - Notice of Action