A receiver has been appointed for Spirit Bay Developments, the First Nation company building a community of brightly coloured homes on Beecher Bay (Sc’ianew) waterfront land in East Sooke.
The Spirit Bay project, first announced in 2013, was intended to foster business opportunities and jobs for Sc’ianew members and establish a tax base. But money problems soon arose.
Langford-based Scala Development Consultant Ltd. is owed $1.86 million for construction work — an amount confirmed in an earlier court judgment — and had asked the B.C. Supreme Court in Victoria to appoint a receiver.
Court documents say the company twice sought the funds without success, although a $450,000 payment was made.
B.C. Supreme Court Justice Margot Fleming has appointed Mark Wentzell of Grant Thornton LLP Canada as receiver for Spirit Bay.
Fleming said in her decision this week that Spirit Bay has valuable assets that could cover funds owed to Scala.
Spirit Bay was initially a partnership between the nation and developer David Butterfield’s company Trust for Sustainable Development. Plans called for a multi-stage project with about 500 homes based on sustainable principles.
The nation brought in Butterfield, who died in 2017, to provide his development experience. The Butterfield family is no longer involved in the project.
The Sc’ianew Nation said in statement Thursday that it did not want to “comment extensively on this matter,” citing “respect for the ongoing court proceedings and the receiver.”
“We remain optimistic that this matter will be resolved in the near future. Sc’ianew remains committed to the success of the Spirit Bay community and the well being of our members and residents,” the nation said.
Receiver Wentzell was not available for comment on Thursday.
Court documents say financial woes arose early on in the project. Only about 50 homes have been built and none since 2020, they say.
A planned sewage-treatment plant has not been built because of cash-flow problems. Sewage is pumped out and taken to the nation’s own plant, the documents say, and the water system is not sufficient to meet the needs of the Spirit Bay community, especially in the event of a fire.
Built on reserve land, the Spirit Bay community has been operated through long-term leases granted to Spirit Bay Developments, which, in turn, sold sub-leases to the public, the decision says.
The ownership structure is complex. Sc’ianew First Nation is a limited partner in Spirit Bay Developments and the sole shareholder of its general partner Beecher Bay GP Ltd.
Sc’ianew Nation is also the only shareholder of Spirit Bay Developments’ other limited partner: 1334314, which wholly owns the other general partner, TSD General Partners Inc. Spirit Bay Developments, Beecher Bay GP and TSD General Partners are all named in the documents.
The nation told the court that Spirit Bay is “financially and operationally doomed,” the decision says.
Scala, owned by Aristides Cota and Doug Makaroff, was hired to build houses, but Spirit Bay failed to pay Scala for its work and “significant arrears” developed, the decision says.
Cota said that since 2018, Scala has paid $478,000 to its material suppliers and sub-trades, despite not being paid by Spirit Bay.
Scala had to sell its equipment and spend effectively all of its working capital, affecting its ability to take on new projects, the court documents say. As of April 2023, Scala still owed suppliers and sub-trades about $458,000 for their work and materials, the decision says.
As of spring 2023, about 50 single-family homes had been built, with 86 registered sub-leases and about 15 vacant serviced lots, Cota told the court.
Scala noted that an appraisal of the site valued a portion of undeveloped lots at $19 million.
Sc’ianew Chief Russell Chipps says in the court documents that the limited partnership had financial problems from the beginning, which became more pronounced when Butterfield became ill and then died.
Ruth Sauder, who provides management services for Spirit Bay, said she talked to four prospective developers in the wake of Butterfield’s death, but none were willing to take over the project. She said the current partnership has no revenue stream to address problems such as the money owed to Scala and building necessary infrastructure.
An engineer estimated that a new sewage-treatment plant for both Spirit Bay and the nation would cost $16.9 million, she says in the documents.
In 2018, the federal government announced a $2.9-million grant to help develop 50,000 square feet of commercial space for a Spirit Bay town centre.
Then last November, the federal government announced another $5.4 million in funding for the Sc’ianew Nation to build a community cultural centre.
Fleming said in her decision that there was only “brief and vague” evidence from the nation of how the interests of residents, tenants and creditors will be addressed.
Chipps said that “Sc’ianew is committed to ensuring the non-disturbance of the sub-tenants’ interests in the Spirit Bay lots,” the decision said.
Western Canada Marine Response Corporation is a tenant with vessels at the bay. The organization is an industry funded body set up to to tackle West Coast oil spills.
The corporation has spent $9 million building the base and expects to spend another $11 million finishing construction. It has “expressed concern that it faces serious uncertainty about continuing to occupy the base,” the decision said.
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