Unpaid invoices are at the centre of two lawsuits seeking damages totalling $1.29 million from a once-prominent Saskatoon landlord that went into creditor protection late last year after telling a British Columbia court that it could not continue operating and pay its debts.
The landlord is a group of 45 closely-related companies represented in Saskatchewan by Block 1 Management Ltd., which is not named as a defendant. The granting of creditor protection left dozens of local companies out a total of $12.7 million, and ultimately resulted in the group’s 15 apartment complexes being sold and its roughly 70 employees laid off.
Although the creditor protection court ruled that the group’s outstanding unsecured debts at the time of filing will not be paid, the lawsuits, filed separately by Penner Doors and Hardware and AODBT Architects Ltd. aim to find ways around it — in the former case by using contract law, in the latter by alleging breach of trust and misuse of funds.
Statements of claim contain allegations that have not been proven in court. As of Monday morning, none of the defendants named in either of the lawsuits had filed statements of defence.
Penner Doors and Hardware said in its claim — filed earlier this year against one of the companies and Timothy Clark, the sole director of all 45 corporations in the group — that it was not paid after issuing invoices for $163,862 worth of construction materials delivered to a Stonebridge apartment building plus $273,610 for construction materials that were ordered but not delivered.
“The plaintiff invoiced (the company) for the construction and supply of the materials. Notwithstanding the rendering of invoices by the plaintiff to the (company, it) refused and/or neglected to make all of the required payments,” Penner Doors and Hardware alleges in the claim, which argues that it should be paid “on a quantum meruit basis” — meaning what one has earned.
AODBT Architects Ltd. said in its claim, which was filed last month, that some of the companies did not pay a total of $685,086 for architectural design and consulting work on several properties in Saskatoon and Regina. According to the claim, the bulk of that — $571,148 — involved the landlord group’s signature property on Idylwyld Drive, called The Crossing.
The architectural firm argued in its claim that while debts left outstanding when the group was granted creditor protection are void, its invoices should be paid in full because funds supplied to the companies and earmarked for construction work were used for purposes other than paying for AODBT’s services.
“Despite knowing that AODBT remained unpaid for above mentioned work at the properties, (the companies) and Clark used some or all of the trust funds for their own use and/or purposes inconsistent with the trust,” the architectural company said in the claim, which states that the debts arose out of “fraud, embezzlement, misappropriation and/or defalcation.”
The landlord group began buying property in Saskatoon in 2010. Six of its apartment complexes were sold — the price being the assumption of debt owing on them — to a Toronto-based real estate investment corporation in July. Less than a month later, its remaining nine properties were acquired by the same investment company.