A trial surrounding the liability for a stalled Richmond city centre development will take place next month.
The three-week insolvency trial for the Atmosphere project, whose owners are currently under creditor protection, will start on April 29, according to a judgment issued by 小蓝视频 Supreme Court Justice Shelley Fitzpatrick on March 5.
The judgment was issued after a case management hearing.
According to the latest report from the court-appointed monitor, released on Feb. 21, MNP Ltd., an application for the new building permit was submitted to the City of Richmond on Nov. 1, 2023. It expects to hear from the city by mid-March.
The building permit will be valid for six months with a potential six-month extension to be granted by the city at its discretion.
If they receive the building permit, they will have to make a further application to reinstate the sales and investment solicitation process and address funding for the city's costs currently estimated at $18 million.
"Therefore, assuming that the permit is issued in mid-March 2024, the sales process would have to be completed and the new purchaser would have to commence construction activity by mid-September 2024," wrote Fitzpatrick.
According to the list of creditors as of April 1, 2022, Romspen Investment Corporation is owed about $176 million and ranks first in the list of security creditors, followed by a group of lenders owed about $76 million.
GEC Education City (Richmond) Limited Partnership ranks third with a $94-million debt from purchasing towers in the development.
Expiry of new building permit can 'severely depress' value of development
The owners, 0989705 小蓝视频 Ltd., Alderbridge Way GP Ltd., and Alderbridge Way Limited Partnership, and Atmosphere's guarantors argued there is "no genuine urgency" to have the matter heard, but Fitzpatrick disagreed.
If the anticipated building permit expires, a new application will have to comply with the city's new building code, meaning it will need a new development permit, she wrote.
This could cause delays of up to four years, MNP told the court, and could result in loss of density, more money owed to the city and forfeiture of amounts already paid to the city.
"Needless to say, the value of the development would be severely depressed as a result," Fitzpatrick wrote.
She added holding costs for Atmosphere, funded by Romspen, cost more than $200,000 per month, excluding interest. The costs cover the maintenance of the shoring system for the excavation, which experienced difficulties in July 2023.
"More to the point, the parties do not have luxury of waiting for a trial sometime in summer 2024, as suggested by the (owners and guarantors)," she wrote.
Considerations include the time it would take for the court to prepare its reasons for judgment after the trial, and a potential appeal launched by the losing party.
This meant the expected permit would be pointless in terms of giving stakeholders time to address the results and "commence the project by mid-September 2024, as is critical," she added.
Fitzpatrick referred to her previous procedural decision in October 2023, where she concluded it was urgent to resolve the issues in the related legal actions to advance the restructuring, which would benefit "all of stakeholders in this proceeding."
"These same dynamics remain present now but with increasing urgency to resolve the issues in the very near future," she wrote.
Creditor applied to deal with related lawsuits in insolvency proceedings
In August 2023, Romspen asked for a court order to deal with related civil claims at the same time as the insolvency proceedings.
Civil claims were filed both by owners and creditors in relation to the Atmosphere development.
While the owners, guarantors and GEC alleged Romspen caused the owners' insolvency and later losses by failing to advance money to allow the Atmosphere development to be completed, Romspen sought to recover outstanding debt from the owners.
"The well-spring from which all claims in the related actions arose was Romspen’s decision, in March 2020, to suspend all further draws and advances under its construction lending facility," wrote Fitzpatrick in her Oct. 3, 2023 decision in favour of Romspen's application.
GEC and the owners objected to Romspen's application, arguing the related legal proceedings were inter-creditor disputes or disputes about determining the amount of debt, "matters that are not central to the (insolvency) proceedings at all, which is simply (focused) on a sales or liquidating process."
Fitzpatrick disagreed, finding there is "considerable interconnection" between the related legal actions and the insolvency proceedings.
She ultimately ruled the related legal actions should be tried together.
'Paramount' for liability issues to be decided quickly, says 小蓝视频 Supreme Court justice
Under Fitzpatrick's directions issued last week, the trial will be divided into two parts, first to address liability issues.
Rather than prejudicing the parties, "a bifurcated trial will have the immediate effect of allowing the liability issues to be decided more quickly, a paramount consideration here," she explained.
Liability issues to be determined include whether Romspen was entitled to terminate its funding for the development in March 2020 and whether it conducted itself in good faith.
The trial for damages in each of the related legal cases will heard after the judgment on liabilities has been issued and all appeals have been exhausted.
"I wish to stress that, in light of the need to proceed expeditiously in these circumstances, I fully expect that all counsel will show a high degree of cooperation and flexibility in terms of the trial preparation," Fitzpatrick concluded.
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