Court documents filed by the Watson Island Development Corporation allege the City of Prince Rupert broke a verbal agreement with the company by seeking another purchaser for the site.
Worse yet, the filing claims, is the decision was made after WatCo had paid the city approximately $2 million for exclusivity rights in relation to the purchase of the former pulp mill site, including a $90,000 payment in the previous month, and paid legal and other expenses in reaching a settlement with Sun Wave Forest Products “as part of their agreement for sale for Watson Island”.
“The defendant Prince Rupert unlawfully interfered with the economic interests of the plaintiff WatCo by intentionally inducing WatCo to make payments to provide continued exclusivity to the defendant Prince Rupert when the defendant Prince Rupert had determined that they would breach their agreement with the Plaintiff WatCo in order to seek other purchasers who might be willing to pay a higher price than the plaintiff WatCo, none of whom were entitled to deal with the defendant Prince Rupert by virtue of the terms of the oral exclusivity agreement,” wrote WatCo in the filing, which also claims the city increased the sale price of the site from the agreed upon $5 million to $5.7 million.
The issue surrounding the agreement first arose on Feb. 12 when WatCo alleges the city told them, retroactive to Feb. 1, any negotiations would be continuing on a non-exclusive basis and that the term sheet both had previously agreed to would no longer be acceptable.
That same day the city offered the company terms by which it was prepared to conclude a deal with WatCo, terms WatCo accepted and used to form a new term sheet that was delivered to the city. However, WatCo alleges the city “has failed or refused to execute the term sheet”. On Feb. 25, WatCo said it provided an executed copy of an option agreement on the site, but the city has failed or refused to execute the option agreement.
“WatCo remains ready, willing and able to complete the purchase of the Watson Island property … the Plaintiff WatCo demanded that the Defendant Prince Rupert complete the purchase and sale of the Watson Island property. The Defendant has refused or neglected to do so,” reads the filing.
“The acts of the Defendant Prince Rupert were deliberate, with the knowledge that they were inconsistent with its contractual obligations, and with knowledge of reckless indifference to the fact that its conduct would injure the Plaintiff WatCo.”
WatCo is now seeking “performance of the option agreement to obtain the conveyance of the Watson Island property” to the company. If that is not accepted, the company is seeking damages in lieu or a ruling that “the Watson Island property is held in trust by the Defendant Prince Rupert for the benefit of the Plaintiff WatCo”.
As well, WatCo has filed a Certificate of Pending Litigation on the site and is seeking an injunction to prevent the city from entering into any agreements with other parties or otherwise disposing of Watson Island.
Prince Rupert Mayor Jack Mussallem said he would not comment on the filing, as the city has yet to receive a copy and he does not comment on matters before the court, but said Watson Island is very much top of mind for the city.
“It is city council’s number one priority for the strategic plan for 2014 to get Watson Island back on the tax roll and creating employment for people in the region,” he said.
The City of Prince Rupert will once again be heading to court over Watson Island, but this time it is Watson Island Development Corporation (WatCo) that has filed suit against the city.
According to WatCo, the city and the company had been negotiating the terms of a definitive agreement following the city’s acceptance of a $5 million offer to purchase the site and payments from the company of between $75,000 and $90,000 per month under the terms of an exclusivity agreement. Those negotiations took place between August, 2013 and February, but WatCo claims they agreed to the terms of the agreement only to have the city advise them it would not proceed with the sale of Watson Island.
“We did not take the step of commencing litigation lightly, but we decided we needed to do so to protect our right to complete this transaction … WatCo continues to be committed to the people of Prince Rupert, and to the purchase of Watson Island and the significant remediation and redevelopment work required to ensure that this important local asset is productive again and contributing to local employment and the tax base in Prince Rupert,” said WatCo president David Austin, who expressed his disappointment with the decision.
“WatCo has paid in good faith millions of dollars to the city over the past two years and now we must take legal steps to protect our shareholder’s interests,” added WatCo cheif executive officer Perry Braun, who declined to provide any further details on the suit or the negotiations.
As well as beginning litigation, a Certificate of Pending litigation has also been filed to prevent the land from being sold to others while the litigation is outstanding.
Prince Rupert Mayor Jack Mussallem was not immediately available for comment.
Look for more on this story as it becomes available.