Mallard Cottage, BDC make first court appearance
Lawyers for the Business Development Bank of Canada (BDC) and Mallard Cottage Inc. appeared in Newfoundland and Labrador Supreme Court in St. John’s on Wednesday, April 24.
BDC is asking the court to declare Mallard bankrupt, saying it is owed more than $500,000 related to the nowdefunct Water West restaurant, which was also owned by the owners of Mallard Cottage. BDC alleges that the owner, Blair Mcintosh, sold the building to a numbered company belonging to him without paying off the outstanding loans owed to BDC.
BDC also claims that the loans for the Water West property were backstopped by a corporate guarantee from Mallard Cottage Inc. and the property at 8 Barrows Road was the only significant tangible asset of the company.
Darren O’keefe and John Taylor-hood, who represent BDC and Mallard Cottage respectively, told Justice Peter Browne they would seek an adjournment in the case to further discuss the issues and give BDC an opportunity to supply Mallard Cottage Inc.’s lawyer with documents referenced in the case.
Browne put the case over until 9:30 a.m. on May 9, but before he did, he identified what he saw as the three issues in the case.
Browne said the issues involved are whether Mallard meets the criteria for bankruptcy, whether the trustee whom BDC is asking to be appointed is in conflict, and whether the sale of the 18thcentury building violates the Fraudulent Conveyance Act.
BDC alleges in its application that the sale of the building without making payments to the BDC violates that act.
Mallard Cottage Inc.’s response, filed on April 19, says the act “has no application to the within matter and puts the petitioner (BDC) to the strict proof thereof.”
In its response, Mallard Cottage Inc. also states that BDC must strictly prove each of the elements of Section 42 of the Bankruptcy and Insolvency Act (BIA), which defines acts of bankruptcy, “namely that the debtor owes its creditors at least $1,000 and that the debtor has committed an act of bankruptcy within the six months preceding the filing of the application,” and challenges BDC to provide that proof.
Mallard Cottage Inc. is also asking for copies of other documents referenced in the petition, including loan agreements, the corporate guarantee and a demand letter.
“It also purports to quote from a 'Liquidity Memo' and a disbursement of the proceeds of a sale,” the response reads. “None of these documents are before the court and, as such, there is no evidentiary basis upon which the respondent (Mallard) can evaluate the case against it, or for the court to adjudicate upon it.
Mallard Cottage Inc.’s lawyer also takes issues with BDC asking the court to appoint Ian Penney of Janes and Noseworthy Ltd. as the bankruptcy trustee, saying Penney is also the private receiver appointed by BDC over Water West Inc., and that Penney’s duty to BDC as a private receiver “are in conflict with the duties he would owe to the court and the stakeholders as a trustee in bankruptcy.”