One Step Forward? BDO Canada Appointed as Administrator of Carriage Hills & Carriage Ridge
By Karen Levins and Julie Forestell
On Friday May 15, 2020, Applications submitted by legal counsel for Carriage Hills Vacation Owners Association (CHVOA) and Carriage Ridge Owners Association (CROA) were reviewed by Justice Barbara Conway of the Ontario Superior Court of Justice (Commercial List). These applications were approved to make BDO Canada Inc. the Administrator of both Carriage Hills and Carriage Ridge Resorts. While these sentences are completely factual, they do not reveal the difficult journey to get to this state, nor do they touch on the anxious anticipation owners have for resolution to their long-standing timeshare woes.
Carriage Hills (CH) and Carriage Ridge (CR) Resorts are two sister properties in the Horseshoe Valley area of Central Ontario, Canada. The Developer of these resorts was parent company Shell Vacations Club, who sold off their assets to Wyndham Worldwide, now Wyndham Destinations. These resorts have over 13,000 owners between them representing over 17,000 intervals.
In February 2018, a small group of CH and CR Owners gathered in a new Facebook group to exchange information and advice on how best to use their timeshare and vacation exchange program. Owners posted many stories of great memories at both resorts and at exchanges around the globe. As the number of Facebook group members grew, the sentiments shifted to express growing concerns over rising fees, the lack of transparency from the Boards on many matters including financial disclosures, and the inability of Owners to be released from their contracts, especially elderly Owners with failing health and financial hardship. These issues grew from concern to alarm, anxiety and agitation, precipitating in an unprecedented turnout at the CH and CR Annual General Meetings (AGM) in the Fall of 2019. One key issue that drove attendance was the Boards’ announcements a month earlier that they had set aside a combined $200K budget to retain the services of a both a law firm Goldman Sloan Nash and Haber (GSNH) and BDO to develop “…a legal proposal that will hopefully result in an exit strategy for owners wishing to exit and a restructuring of the resort that will allow owners that wish to keep their timeshare…”.
The desperation of Owners seeking updates was palpable at the CR AGM and anger surfaced when the CR Board announced that no details about the $200K GSNH/BDO initiative would be discussed on the advice of counsel. The outrage was even more evident at the much larger CH AGM, when Owners at the scheduled event attended in overwhelmingly high numbers, such that the routine banquet hall location was deemed far too small and the meeting was adjourned and held a month later in a 5000-seat concert hall. To say that the rescheduled meeting was contentious would be an understatement. Nothing was truly resolved at either the CH or CR AGM and it remained clear that owners were unhappy that fees were continuing to rise exponentially, no information about the GSNH/BDO consultation was being provided, and no exit plan was on the horizon, despite a vote at the CH AGM indicating that ~80% of voters in attendance wanted the resort declared obsolete (an insufficient number of voters dictated the voting invalid).
For the next few months, the occasional faint glimmers of hope were routinely dashed when both the CH and CR Boards continued to postpone the release of any information on the $200K GSNH/BDO initiative, again on the continuing advice of counsel. Even when the Boards were presented with an update directly from GSNH/BDO a few hours before CH’s February Board Meeting, Owners who attended the afternoon Board Meeting were told that no information about the morning’s meeting with GSNH/BDO would be shared, but that an update would be forthcoming by the end of March. On March 19th, the CH and CR Boards issued statements indicating that “…progress on the BDO GSNH engagement has been suspended due to circumstances related to the COVID 19 pandemic. Progress will resume on this engagement when it is practical to do so as we are anxious to complete this project as soon as possible.” And then everything returned to radio silence.
The silence continued for 6 more weeks until the President of the CH Board of Directors posted a notice in the Facebook group on April 30th indicating that the CH and CR Boards had replaced GSNH with a new law firm Thornton Grout Finnigan (TGF) and had filed Applications asking the Ontario Superior Court to appoint BDO as “Administrator” over the CH and CR Owners Associations. Poof! Out-of-the-blue. No prior notice to Owners. Owners were simply told that copies of the Court filings would be accessible via a BDO website the next day (May 1st) and that the Court Hearing would be taking place on May 7th.
With very little time to review and respond, a quick scan of the CH and CR Applications revealed that they were complex and contained some provisions that would not sit well many owners. Of greatest concern were provisions that removed the Board’s obligations to hold Annual General Meetings and Board elections and removed a number of Owners’ rights including the ability to call Special Meetings, take any action by written ballot, or remove any Director. Also disconcerting was that there were essentially no provisions to address the Owners’ repeated requests for the prioritized development of an exit strategy for those who wanted to end their timeshare relationship with the resorts. Rather, the CH and CR Applications appeared to emphasize the need to preserve the Resorts by specifically requiring that BDO explore the potential to market, redevelop or restructure the two resorts. There was also concern that the vast majority of communications would take place between the “Administrator” (i.e., BDO) and each “Applicant” (i.e., CHVOA and CROA), which Owners feared would mean that information provided by BDO to the “Applicant” would end up being restricted by the Boards of Directors. Essentially, that the information would be for their eyes only.
Given the number and nature of concerns, a trio of owners, supported by many in the Facebook group, quickly organized to hire its own legal counsel in order to conduct a thorough review of the Applications. Their goal was to negotiate changes to the Applications, and to support the need to represent the voices of ~1800 concerned Owners who wanted their concerns heard at the Court Hearing. A GoFundMe (GFM) campaign successfully generated the funds needed to cover these legal costs. Because of the number of concerns voiced through this new legal counsel, the Applications’ author agreed that more time would be needed for negotiation and reworking of the Proposed Administrator Order. As such, the May 7th Court Hearing was postponed with consent to May 15th. During the extended period, the parties worked diligently and cooperatively to reach consensus on the revised Applications, and these were submitted to the Court a mere 2 hours before the rescheduled hearing.
To adhere to Justice Conway’s commitment to public access to the Court Hearing, the revised Applications were reviewed in Court via video conference due to the COVID-19 pandemic. More than 1000 owners logged into the Zoom conference to attend the Hearing. There were points of contention raised, and points of clarification discussed, but what was overwhelmingly apparent was this was a collaborative approach to resolution. By appointing BDO as Administrator to both CH and CR resorts, Owners are now represented by a 3rd-party company who specializes in accountancy, taxation and consultancy on bankruptcy, insolvency and restructuring. The Orders that were approved by the Court set out specific direction to address Owners’ concerns and in so doing, set an optimistic path forward. There is a mandate to get in touch with ALL Owners. There is a mandate to, as a starting point, determine how many Owners want to exit immediately versus stay in their timeshare relationship. There is a mandate to identify the terms and conditions under which Owners who wish to exit can do so. There is a mandate to determine if and how restructuring might be able to save all or part of the resorts so that those Owners who wish to continue with their timeshare relationship can do so.
As Administrator and an Officer of the Court, BDO is now specifically tasked with the following responsibilities:
(a) make reasonable best efforts to create an updated Members Contact List for each of the two resorts;
(b) plan and propose a procedure to ascertain the interests of the Members going forward with respect to the Resort…whether they wish to terminate their relationship with the Resort or continue their relationship with the Resort if a satisfactory restructuring solution can be developed;
(c) subject to Court approval for implementation, develop an exit strategy for those Members that wish to relinquish their membership with the Applicant and obtain a release of all future obligations.
The Orders assigning BDO as Administrator of CH and CR establish two key points – accountability and transparency. With the Court now overseeing all actions going forward, and the creation of a Consultative Committee that reflects both exit and restructure interests, there are procedures in place to ensure that all Owners will be heard.
With all change comes speculation and this change is no different. The Court Hearing had barely concluded and the conversation in the Facebook group immediately shifted to questions about next steps: what will the treatment be for delinquent owners, will Owners have to pay maintenance fees this year, are current weeks protected, what will it cost to exit, who will bear the cost of any property improvements, restructuring, or redevelopment, who will receive any proceeds of a sale (if, in fact, there are any proceeds after the long list of financial commitments is met)?
There is a great deal of anticipation for answers. It is good that more and more owners are becoming engaged and informed. What started out as a grassroots group of less than a dozen Facebook members has now grown to a population of almost 2800. However, the total number of Owners at CH and CR is ~13,000, and with ~22% having defaulted on their payments, it is feared that many Owners may avoid or ignore all correspondence from CHVOA and CROA. At this point, the best course of action is to keep Owners connected and engaged, sharing factual information about what has recently transpired and being ready for next steps. The answers will come, but it will take time.
For more information about the plight and progress of this group of “Concerned CHCR Owners”, please visit www.chcrowners.org and sign up to receive important updates