City follows through with Suit
Ron Bolin – June 18, 2010
On Tuesday, June 15, the City Of Nanaimo filed a claim in the Supreme Court of British Columbia against Millennium Nanaimo Properties Ltd. and Suro Development Company (what ever happened to Triarc?) for the recovery of $3,045,058.02 in fees, cost charges and expenses provided to them by the city under the amended partnering agreement. A copy of the filing is here: [Court Filing No. Nan-S-S-60133]
It now remains to be seen when and how this suit proceeds. At best we recover our money. At worst we should learn a lot about the level of due diligence performed by our representatives in City Hall. Pay attention folks. We are talking a whole lot of money and a whole lot of responsibility.
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There are variations on this quote, but they all say the same thing: “The wheels of justice grind slowly but exceedingly fine.” We are, I suspect, about to begin a multi-year costly demonstration of the truth of that quotation. First, the statement of defence, then perhaps a counter-filing by the City. Then more of the same. Possible offers to settle, rejections, counter-offers. Lawyers’ billable hours mounting up. Costs for every document filed.
Does anyone know anything about the firm representing the City, Staples McDannold Stewart? Have they acted for the City before? Could they be the firm which originally represented the City at the beginning of this whole affair?
Information please, since I am a newcomer to this blog. At this point, exactly which corporation owns the property in question? The City or some incarnation of Millenium/Suro? I, too, wonder what happened to Triarc.
If the City still *is* the registered owner of the property and the air space above it, I question whether the financial return to be gained from this action may really be worth it. It’s possible that the best that may be gained from it is a settlement which represents cents on the dollar. If that were to be the case, the City may gain so little that initiating this action is, realistically, simply not worth it. Not only are there the legal costs to be considered, but also the salaried time of City employees spent on this issue which might better be spent on other issues.
Wendy, the suit doesn’t concern the properties involved directly but the contractual relationship between the City and these corporate entities Millennium Nanaimo Properties Ltd. and Suro Development Company. If memory serves Suro was a Canadian incorporation under which American-based Triarc would enter into agreements with the City of Nanaimo. The City holds title to the properties — the Port of Nanaimo Centre which includes the Museum and Shaw Auditorium and the Conference Centre (exclusive of the street level retail space which is strata-owned by First Capital Realty Inc) and the vacant Gordon Street site where the hotel was to go.
Frank, the reason I asked the question was to find out whether or not there was any legal way for the City to prevent the various defendants from divesting themselves of assets in the face of the suit. For example, a caveat or lien placed on the title to the property if the answer had been “Yes, Millenium etc. is the owner of the property.” I’d imagine that the defendants are prepared to use any and all legal means to avoid payment. A move towards a declaration of bankruptcy would not surprise me. Between the City of Vancouver – Olympics – Athletes’ Village situation and this situation in Nanaimo, it’s possible that they believe any possibilities of further income in Canada, at least in western Canada, are drying up.
Understood, Wendy. It will be very interesting to learn whether these legal entities have left any assets exposed that could be claimed if a judgment went against them. Millennium’s Athlete’s Village project has come up in these threads. My understanding is that any equity they might have there is held as security by the City of Vancouver and it’s very unlikely they’d come away with profits from the project. On the contrary, the Vancouver taxpayer is expected to have to make up a sizeable shortfall. And in any case that would be an entirely separate incorporation shielded from any Nanaimo liabilities.
Frank, I understand that the various corporations are separate legal entities and that one corporation’s assets could not be seized and liquidated to satisfy a judgment against another corporation which may have the same owners. What I believe might happen, ‘tho, is that if there is sufficient publicity about the City of Nanaimo’s suit, combined with the Vancouver debacle, any companies owned or believed to be owned by these particular parties simply will not be awarded contracts. Therefore–further income possibilities dry up.
I understand that the former Athletes’ Village, now refurbished where required, will be released into the real estate market in stages, to avoid flooding the market and depressing the prices. I’ve seen TV reports of the first day line-up of prospective buyers, but as I understand it, many of the units are not yet being offered for sale.
Hi Wendy: Staples, McDannold, Stewart have been the city’s legal eagles for some years (I do not know how many). One of their specialties is in municipal law and I believe that they drew up the various agreements associated with this mess. They are located in Victoria. The monies requested to be returned represent payment received for services which were not rendered. Title to the hotel site itself was returned over a year ago. The Maffeo-Sutton properties were always contingent on the hotel and so title has always been with the city. But the city did, on the basis of the agreement, destroy a couple of heritage buildings, at least one of which was perfectly sound (The Civic Arena) and the other which was arguably so (The Foundry). We acted in haste and are now left to repent at leisure with the costs of the demolitions and soil remediation.
While I understand where you are coming from regarding litigation, we are already seen as wimps given what has happened and what we offered to get hotel. It is unlikely that anything substantial will be built in Nanaimo in the future without a large public subsidy. Take for instance the Multiplex issue. The city was first advised that it would be undertaken privately, but this soon became another public boondoggle. Make no mistake, it will return and they will want land and money. (It still shows up on the city’s web site for no official reason that I can find.) We need to show some backbone. If we demonstrate our willingness to fore-go all consequences of failure to perform, what happens with others who deal with us. How about taxpayers, for example. Why should we pay our obligations to the city if others do not? After all if money owed to the city is not paid by those responsible, it must be paid by us. I think it would set a very bad example. And I look forward to learning whether proper due diligence in this affair was performed on my -and our- behalf.
Hello Ron. I still have not found the clause which says all funds paid to Millennium are forfeit if the hotel deal collapses. Can you direct?
Some of the money paid them was to manage the construction of the conference centre, which they could easily argue they did complete.
I would be amazed if there is anything near $3 million awarded, and even more amazed if there is ANY assets to satisfy the debt.
It will be interesting to see how well this phase of this exercise is being managed by all our high-priced help.
If memory serves both Suro and Millennium NANAIMO properties are limited corporations set up to deal with Nanaimo only. There is little chance that satisfying any judgment would go beyond these companies assets……. which are???????
Good morning Jim: Many of the documents, including the original and previously amended agreements, which are antecedent and discuss default are missing from the city’s web site at:
http://www.nanaimo.ca/EN/main/municipal/PortOfNanaimoCentre.html
I have contacted the web master in this regard and he has indicated that he is looking for them. But I am sure the appropriate clauses will come out in the suit.
I stick by the comments I made to Wendy, about why I do not feel it is appropriate to second guess the legal system. I do recall with a chuckle when, a couple of years ago, I raised the question of Millennium’s financial state as they were unable to secure financing. I was mocked by Mr. Berry, who ventured that he wished he had their money. Now he has our money and they have our money too.
To Ron: You wrote “I do recall with a chuckle when, a couple of years ago, I raised the question of Millennium’s financial state as they were unable to secure financing. I was mocked by Mr. Berry, who ventured that he wished he had their money. Now he has our money and they have our money too.” Your comment is deserving of a “Nanaimo Civic Guffaw Award.” Very well said! Congratulations!
The following is an exchange with our former mayor who responded to my request for comment on the law suit against Millennium and Suro. As the statement was provided to the media, I publish it here.
—————————————————————-
“Good morning Ron
I am in the non-practising legal ranks so cannot
comment “as a lawyer”. However, as former mayor I provided the
following to the media (but haven’t seen it published so far):
“When the City of Nanaimo was doing its due diligence
on the private hotel partner(s) we were widely advised
by banks, institutions, and public officials that Shahram Malek,
the Malek family, and their company, the Millennium Group,
were most reputable and highly regarded for their honourable
business and personal dealings.
I find it very hard to believe Mr. Malek would jeopardize
their international reputation by reneging on their commitments
to Nanaimo taxpayers. It is inconceivable he would do
anything to dishonour his family and company.
Gary Korpan
Mayor 1993-2008
—–Original Message—–
From: Ron Bolin [mailto:rlbolin@telus.net]
Sent: June-19-10 7:45 AM
To: Gary Korpan
Subject: Suit
Hi Gary:
As a lawyer, I wonder if you have any comments on the suit which the City recently filed against Millennium and Suro (copy attached).
Ron”
—————————————————————
I have to wonder how many times this company has already ‘reneged’ on their commitments.
How many times did they assure the city the hotel would be built? How many times did they put up a deposit to insure it would be done by a certain date, which simply came and went with nothing happening?
I submit they have already reneged and not honored their commitments.
Such an interesting comment from Gary Korpan. I would sincerely like to think there’s some truth in it.
“I find it very hard to believe Mr. Malek would jeopardize
their international reputation by reneging on their commitments
to Nanaimo taxpayers. It is inconceivable he would do
anything to dishonour his family and company.”
Here’s a profile of Shahram and Peter Malek by Vancouver journalist Frances Bula in Vancouver Magazine from April 2009.
http://www.vanmag.com/News_and_Features/Up_False_Creek?page=0%2C0
Having read Frances Bula’s excellent article, I may (with heavy emphasis on “may”) understand a little more about the problems we face. A corporate structure established, originally controlled, and most probably still influenced by a father whose influence may now simply be the code of behaviour and attitudes toward life instilled by the father into the sons. Or not. Reference is made in the Bula article to an attitude of the Spartan “Return home carrying your shield, or on it.”
However, personal relationships within the Malek family notwithstanding, reading the Bula article has convinced me that it is time we send the sons back to their father on their shields. If there has to be a one-time additional levy on Nanaimo citizens to take this case as far as it needs to go, I’ll pay it willingly. If there are some who are unwilling or unable to pay the levy, I’ll pick up the tab for a couple of them, too.
We are not, should not, never should have been, a business and financial laboratory Petri dish for a Malek family experiment.
“We are not, should not, never should have been, a business and financial laboratory Petri dish for a Malek family experiment.”
The IQ of the contents of a Petri dish is ???????
This is a sequence of emails with the City regarding our suit with Millennium/Suro. To follow, it must be read from the bottom message up to the last which was sent today.
————————————————————-
Mr. Holmes:
While your response was not unanticipated, I am surprised that it should take nearly a week to send a response which could have been generated by any secretary in minutes.
I am also puzzled to learn that not only would it be improper to discuss the merits of the case, but that the City feels itself unable even to discuss its anticipated schedule of events with the citizens who are supposedly being represented in this case.
I am further perplexed regarding your uncertainty about which office take precedence in such a matter.
I would also like to know if we are being represented in this matter by the same legal firm that advised us in the preparation of the agreement(s) which are now being contested?
Thanks,
Ron Bolin
—– Original Message —–
From: Douglas Holmes
To: ‘Ron Bolin’
Cc: Mayor&Council ; Jan Kemp
Sent: Tuesday, July 20, 2010 4:58 PM
Subject: RE: Millennium Suit
Hello, Mr. Bolin.
Thank you for your enquiry.
As this matter is before the Courts, we cannot comment on any part of it.
With respect to whom might you direct your enquiry, you can certainly contact either the Mayor or City Manager. However, for the time, neither will be able to comment.
Regards,
Douglas Holmes
Assistant City Manager/
General Manager, Corporate Services
City of Nanaimo
From: Ron Bolin [mailto:rlbolin@telus.net]
Sent: Wednesday, July 14, 2010 2:12 PM
To: Douglas Holmes
Cc: Mayor&Council
Subject: Millennium Suit
Mr. Holmes:
I would appreciate being brought up to speed regarding the recovery on behalf of the citizens of Nanaimo of some $3.1 million from Millennium/Suro. I am aware that a Statement of Claim and a Writ of Summons were served on June 15 and that an “Appearance” was filed by the defendants on June 16.
It was my opinion that under BC Supreme Court rules, the time to enter a Statement of Defence has passed, though I could not find one at the Registry in the stated time frame.
Can you please indicate what has happened in this matter to date. I note that the mayor who indicated that there should be some word on this matter by the end of last week has, to the best of my knowledge, been silent to date.
I would also appreciate being informed, in a legal matter such as this, who is the ultimate recognized agent of the city, is it the City Manager or the Mayor? That is, am I correct in sending this request to you with cc: to Mayor and Council or should it be the other way round?
Thanks for your consideration.
Ron Bolin
Here is a link to a most informative report regarding Millennium in The Vancouver Sun –
“Why Vancouver is demanding $561 million from its Olympic village builder”
http://communities.canada.com/vancouversun/blogs/civiclee/archive/2010/10/01/why-vancouver-is-demanding-561-million-from-its-olympic-village-builder.aspx
Re: Millennium’s ASSETS, note that the reporter says, “ … you have the city now telling reporters it is moving aggressively to secure the assets of Millennium’s owners worldwide as security against the outstanding balance.”
In the PowerPoint presentation link in the above report, the City of Vancouver discloses particulars about the high ongoing carrying costs for developer:
• Millennium interest payments (as of 30/09/10) ~$4.4M/ mo
• Strata fees, Maintenance, security, etc: ~ $400,000/mo
Regarding Nanaimo’s dilemma with Millennium, note that according to an agreement in 2009, between the City of Nanaimo and Millennium, (which may have been the “last” agreement), the developer was to deposit with the City “a letter of Credit in the amount of $100,000 to secure a deferral of the date for commencement of construction of the Hotel to March 31, 2010.”
I recall that at the time that Millennium became the City’s private partner to develop the private component (hotel) of the “Nanaimo Centre”, (as it was then referred to in the Partnering Agreement of October, 2004 between the City of Nanaimo and Triarc International Inc.), it was public knowledge that Millennium was under the gun to complete a development of 1,000+ units, which would initially be used to house the athletes during the 2010 Winter Olympics.
I think that the taxpayers of Nanaimo are still waiting to hear what the City did over the years to protect the interests of its taxpayers after the City narrowly won a referendum to borrow up to $30M to carry out the terms of the Partnering Agreement of October 25, 2004.
Right on Janet… We should hear about our claim on Millennium’s assets and our place in line. Barring unknown others, should we not be ahead of Vancouver given our filing date?
A further question involves the liability of any and all who knowingly -or who should as professionally responsible have known- signed or recommended to be signed, agreements involving public money with shell or technically bankrupt companies. I recall Mr. Berry vigourously defending Millenniums assets, even as they were unable to find financing. I wonder if Mr. Berry would still like to change places with Millennium.
A complete aside and a ramble, so prefaced with an apology.
A couple of nights ago, CTV Vancouver ran a news item dealing with sales and occupancy of the former Olympic athletes’ village, including interviews with some of the purchasers of units who are living there. Most telling was a night-time drive-through, when a very rough poll could be taken by looking at the number of units that were lighted, indicating occupancy. Very, very few. I’d bet that there are entire floors on which perhaps two or three units are occupied. Also interesting was an interview with someone living there who praised the laid-back, lack of traffic, “village” atmosphere, since there are so few people living there. However, the same person said that he wouldn’t consider an evening walk because if he ran into difficulties (my example: “Gimme your wallet.”) there would be few, if any, people around to help.
One of the responding commenters to the Vancouver Sun story on Millenium cited by Janet Irvine suggested that part of the project should be turned into seniors’ housing, and I assume the commenter meant seniors’ housing for those able to live independently. A good idea, and makes so much sense that I’m sure it won’t be considered.
On the Nanaimo scene, I am angry and flabbergasted at the level of incompetence, the lack of foresight, and the lack of contingency planning by all involved in the conference centre hotel situation. My only consolation is that the City of Vancouver may very well have been “taken” to a much larger degree than the City of Nanaimo. That’s pretty cold comfort.
And now, in her most recent weekly column in The Nanaimo Daily News, Diane Brennan proposes a mostly City-funded foot passenger ferry service to Vancouver. I can only consider this to be a left-over reflection of the prevailing “group think” at City Hall. If private enterprise has failed twice (as I recall, but Brennan says three times), and BC Ferries won’t consider it, how or why should a City-financed service succeed? Has *our* money been given a sprinkling of Lucky Charms cereal, and it will work where others’ hasn’t?
From this blog and from comments in response to NDN stories, I detect a taxpayers’ revolt aborning. Sign me up. The Brennan column, which I believe is a reflection of an attitude picked up at Nanaimo’s City Hall, was the straw that broke my back. Enough. No more.
In regard to the fast ferries, there has been a success out of the failures. Royal Sealink went out of business due to the failure of the Victoria run. The owners were often quoted that if they had shut down the Victoria run earlier than they did, the Nanaimo run would have paid for itself within the year, especially with two ships on the route.
The THREE previous enterprises were a hovercraft by a forgotten company, the Royal Sealink (Nanaimo Express) and of course the most recent, HarbourLynx