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Application to have BDO installed as "Administrator"

Updated: May 13

By Karen Levins


Did you receive a notice that the Carriage Hills (CH) and Carriage Ridge (CR) Boards of Directors have filed a Motion in Court to have BDO Canada installed as Administrator, to help the Boards with a number of financial and restructuring matters?


Here’s a top-level summary:

On April 30th, CH and CR Boards made an announcement in a 2-page letter, posted in the owners Facebook group and in the members-only portal of the Board-controlled website, that they had replaced their longstanding legal counsel (Goldman Sloan Nash & Haber LLP) with a new law firm, Thornton Grout Finnigan LLP (“TGF”).


Effective that day, TGF had submitted two Applications (one for CH and one for CR) to have BDO Canada Limited installed as an "Administrator" for each resort. BDO’s purpose was to oversee a broad range of financial and non-financial matters, including the exploration of exit strategies and restructuring. This was done under urgent notice to the Ontario Superior Court of Justice, with an incredibly short turnaround on the Court hearing, May 7th.


The documents filed with the Court on April 30th are available here [http://www.bdo.ca/en-ca/extranets/carriage]. If you’re an owner at either CH or CR or both, it’s highly recommended that Owners read all of this documentation relevant to your resort. Yes, it’s a lot to absorb, but it’s important.


Most of the big-picture information is good news. I believe BDO has the skills and experience necessary to (a) work through the series of steps to find an exit strategy for those owners who want to leave their timeshare; and (b) if sufficient owners want to remain and the resort is sufficiently solvent, identify a restructuring proposal for those who wish to stay. The silence over the past 10 months has been disconcerting; but, aside from the “false start” and “frustrations” described below, the news is a welcome change to the paralysis that Owners have felt for a long time.


What’s the false start?

The 2-page letter issued on April 30th was neither emailed nor post-mailed to all Owners.

A link to it was uploaded to the owner-controlled Facebook page, and the source letter was quietly uploaded to the intermittently used members-only portal of both Board-managed websites. The 2-page letter made reference to the availability of the Court documents on the BDO extranet website, but that was not yet active. It took another ~24 hours after the letter had been issued before that was operational.


The volume of information released through the BDO extranet site on Friday afternoon of May 1st was overwhelming. It clearly required legal help if one was to fully understand the implications of the document intended to be blessed by the Court a mere six days later.


On Tuesday, May 5th, ~36 hours before the scheduled Court Hearing, the Boards broadcasted an email to all owners (at least all owners in their email contact list). That carried an embedded digitized copy of the earlier 2-page letter (which included the image, not hyperlinked, of the URL for the BDO extranet site), a note containing a link to the Board-controlled website, a link to an FAQ with information about the purpose of the BDO Court notice, and a link to the Zoom meeting for folks who want to attend the public Court hearing, taking place ~36 hours later at 10am on May 7th.


For the frustrating reasons described below, the May 7th meeting ended up being rescheduled to 2pm on May 15th.


What’s the frustration?

1. When the CH Board President posted notice of the 2-page letter (on the owner-controlled Facebook) announcing that documents had been filed with the Ontario Court regarding installation of BDO as “Administrator” for both CR and CH resorts, there was a scramble to get access to the Court records.

After much confusion as a result of the referenced BDO site not being up-and-running, and then eventually getting our hand on the documents, a quick scan revealed a few confusing, misleading, or absent pieces of information in the virtually identical affidavits from each Board President.


Most disconcerting, two provisions in the Proposed Order would have eliminated important corporate governance responsibilities and Owner engagement rights if approved as written. For example, the two provisions, if approved, would have eliminated the Boards’ requirement to call annual meetings and hold Board elections, as well as eliminating Owners’ rights to call special meetings and take any action by written ballot.


2. Owners had been waiting for 10 months to get an update on “the BDO Report”, after having made multiple requests to see it. Then out of the blue we got detailed, signed documents already submitted to the Courts with no advance notice to Owners, no opportunity for prior review or comment, and containing provisions that would muzzle Owners and lock in the current Boards’ tenure. And all of this was made known to only the Facebook population of Owners four days before the Court’s cut-off date for submitting any notice of their own appearance. Even worse, it was only made known to the broader email-contact list of members ~36 hours before the Hearing itself.


So how did the false start and frustrations get resolved?

Because of the frightening provisions in the Proposed Order and the compressed timeline for seeking resolution before the May 7th Hearing, a small group of Facebook members quickly banded together on Friday May 1st, as soon as the scope and volume of Court documents was identified from the BDO extranet site. They organized a GoFundMe campaign to retain a suitable lawyer for education and representation purposes.


After a weekend of vetting several qualified attorneys via emails and telephone calls, the best-fit candidate was identified on Sunday afternoon. He is a partner at Blaney McMurtry with 30 years experience handling insolvency, etc. He was provided with all of the Court documents plus additional background materials for consideration and reference purposes.


By Monday afternoon, he and his junior partner were ready to discuss the recommended next steps. By early the next morning, Blaney McMurtry had prepared a Notice of Appearance for submission to the Court and a letter for submission to TGF (Boards’ counsel) and BDO’s counsel, including copies to three representatives from Wyndham Worldwide Corporation in Orlando (because they are named on the service list). That detailed the worries and wishes of our quickly growing “band of concerned owners”, and a request for an adjournment. The reason for an adjournment was to allow time for a more careful review of the surprise documents, so comments could be issued for consideration and, if necessary cross-examination of the Presidents’ for the purposes of clarifying their affidavits.


Realizing the source of funding was from a GoFundMe effort, The Blaney McMurtry letter also outlined a proposal that would have seen their fees covered by the Owners Association, as part of the significant budget set aside for the BDO retainer. A few short hours after the letter was sent to all who had standing in the matter, the Boards’ lawyer from TGF (who authored and submitted the urgent Applications to the Court) responded to the letter, seeking an opportunity to discuss the concerns laid out there. The call took place, without prejudice, between those two sets of lawyers.


Blaney McMurtry reported back with the good news that the parties had agreed a revised Order would be prepared. That Order would remove the Owner “muzzling” provisions, and reinstate Owner voting rights along with AGMs and Board elections. The lawyers also agreed that the Proposed Order would be modified to provide greater certainty of the priority need for BDO to improve the reliability and robustness of the members contact list, for both email and regular post communications. (Sadly, while this is a task assigned to the resort’s Manager, they have put the onus back on Members rather than tackling it.)


Also, in consultation with Owners, there was a commitment to develop a follow-up Court Order that would seek relief from the unwieldy and impracticable “Obsolescence Poll” provisions contained in the Timesharing Agreement. This would permit consideration of a number of important exit strategy topics such as:

- developing and disseminating appropriate prior background information so that all Owners will have the ability to make an informed vote about the fate of each resort;.

- if/how defaulted Owners have voting rights;

- how the Developer's Class B preferential voter weighting may need to be adjusted;

- what a more meaningful Obsolescence declaration threshold might be, aside from the impracticable 75% benchmark that is currently present (see section.11.05 of the current Timesharing Agreement for both resorts).


Did everything get resolved?

Sort of...


Regarding the proposal that Blaney McMurtry’s fees be covered by the Associations’ bloated budget for this BDO initiative? Well that turned out to be a thorny subject.


Several owners expressed concern that general Association funds were already paying for the Boards’ lawyer, and that having the general fund also cover fees for a second lawyer was insufficiently warranted. We could have debated the merits on both sides of this.


But Blaney McMurtry was successful, in such a short time. We got all that we were seeking, including a greater reassurance that we would likely have fewer surprises and greater collaboration with BDO and the Boards’ lawyers in the future. Thus, the small group of three who led the way in vetting, retaining, and managing the lawyer’s efforts to help us manage our false starts and frustrations elected to stick with the GoFundMe approach for legal fundraising campaigns.


Despite this pushback from some, I’m taking solace in the overwhelming amount of positive feedback from 100s of Owners who saw the value in what we were able to accomplish in such a short time. But don’t get me wrong, this is still just the beginning of a long road ahead


What can you do to help?

If you’ve got a Facebook account, please come join the conversation at https://www.facebook.com/groups/chcrowners


And, forgive this shameless request for support, but if you are successfully working from home and saving a ton of money on commuting, childcare, eating in, filling the gas tank, and not getting your hair and nails done, please consider tossing a few bucks into our GoFundMe campaign.


That is needed to cover whatever legal fees come up as we continue to advocate for all Owners who want transparency and a voice in the decisions that are being made about their vacation resort.


Here is that URL: https://bit.ly/chcrlegal-2


So what’s next?

The first step will be taken at the May 15th Court Hearing to install BDO as Administrator, and then the harder work begins.


It will be important to work cooperatively with BDO as they attempt to solve our many problems. These include our woes of crushing levels of debt, skyrocketing maintenance fees, rising numbers of defaulting Owners (which will surely rise even further due to the devastating effects that the COVID-19 pandemic is having on job security and household incomes), deteriorating property conditions, rapidly-depleting Reserve funds, aging Owners, no secondary re-sale market, and a Timesharing Agreement that doesn’t support quick and easy fixes. Underpinning much of this, we must consider our contract with a for-profit Property Management company and for-profit Developer which has shareholder expectations for profitable performance.


But that, my friends, is a story for another day. Stay tuned and Stay safe.


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