HomeMy WebLinkAbout10 - Report CAO 19-19 - Project Ojibwa
REPORT
CAO
TO: Mayor & Members of Council
FROM: Paul Shipway, CAO|Clerk
DATE: March 21, 2019
REPORT: CAO-19/19 SUBJECT: PROJECT OJIBWA
SECTION 1 - BACKGROUND
On April 5, 2012, the Council of the Corporation of the Municipality of Bayham passed By-law No.
2012-037, being a by-law pursuant to Section 107 of the Municipal Act, 2001, to authorize a municipal
guarantee for borrowing by the Elgin Military Museum. A copy of By-law No. 2012-037 is attached
hereto as Appendix ‘A’.
On August 2, 2012, the Council of the Corporation of the Municipality of Bayham passed By-law No.
2012-089, being a by-law to authorize an irrevocable standby letter of credit facility with the Royal
Bank of Canada, to guarantee borrowing by the Elgin Military Museum to the maximum amount of six
million dollars ($6,000,000.00). A copy of By-law No. 2012-089 is attached hereto as Appendix ‘B’.
On March 10, 2015 the Royal Bank of Canada served the Elgin Military Museum with a demand for
payment of the indebtedness. On March 20, 2015 when the Elgin Military Museum was not able to
make the demanded payment the Municipality of Bayham letter of credit was called on by the Royal
Bank of Canada pursuant By-law No. 2012-089.
On March 12, 2015 the Council of the Corporation of the Municipality of Bayham passed By-law No.
2015-027, being a by-law to authorize the external borrowing upon debentures in the amount of six
million dollars ($6,000,000) from the Toronto Dominion Bank for the purposes of the Municipality of
Bayham. A copy of By-law No. 2015-027 is attached hereto as Appendix ‘C’.
By-law No. 2015-027 authorized debt financing in the amount of six million dollars ($6,000,000) from
the Toronto-Dominion Bank for a ten (10) year term loan, twenty-five year (25) amortization period, in
the amount of six million dollars ($6,000,000.00), at a rate of interest of 2.71 % per annum. The
Municipality of Bayham pays $330,671.40 annually until 2025 at which time the subject term loan
expires and a new term and interest rate will be required to be obtained for the remaining principle of
$4,073,431.49.
SECTION 2 - STATEMENT OF CLAIM – MAMMOET CANADA EASTERN LTD. & HEDDLE MARINE SERVICE INC.
On October 17th, 2014 the Municipality of Bayham was served with a Statement of Claim by
Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. in which Mammoet Canada Eastern
Ltd. and Heddle Marine Service Inc. claimed that they were owed a cumulative amount of one million,
one hundred thirty one thousand, and eight dollars and ninety-two cents ($1,131,008.92) by the Elgin
Military Museum and the Municipality of Bayham.
Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. named the Municipality of Bayham
as a defendant concerning the debt of the Elgin Military Museum, on the theory that the Municipality
of Bayham was a proponent, rather than a supporter, of the financial model and because the Elgin
Military Museum had allegedly not paid them in full. The Municipality of Bayham was required to
defend this action on its own behalf.
On June 27, 2018 the Municipality of Bayham settled with Mammoet Canada Eastern Ltd. and
Heddle Marine Service Inc. in the amount of $200,000. The June 27, 2018 settlement, attached
hereto as Appendix ‘D’, includes the following provisions:
• Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. execute a Full and Final
Release of the Municipality of Bayham in the form agreed upon by the Municipal Solicitor.
• The parties agreed that settlement did not, nor was it intended to, affect the rights of
Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. to pursue their action against
the Elgin Military Museum.
• The settlement specifically indicated that the payment by the Municipality of Bayham was in
no way an admission of any liability by the Municipality of Bayham, who in fact denied any
liability.
The June 27, 2018 Municipality of Bayham settlement with Mammoet Canada Eastern Ltd. and
Heddle Marine Service Inc. ended the Municipality of Bayham involvement and liabilities associated
with the subject Statement of Claim by Mammoet Canada Eastern Ltd. and Heddle Marine Service
Inc.
On December 21, 2018 Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. received
judgment against the Elgin Military Museum as follows:
• Elgin Military Museum to pay Mammoet Canada Eastern Ltd. the sum of $410,529.50.
• Elgin Military Museum to pay Heddle Marine Service Inc. the sum of $420,416.42.
SECTION 3 - STATEMENT OF CLAIM – MUNICIPALITY OF BAYHAM
On May 17, 2016 the Municipality of Bayham received judgement in the amount of six million dollars
($6,000,000) against the Elgin Military Museum. The judgement was registered on May 31, 2016 as
a Writ of Seizure & Sale, a copy is attached hereto as Appendix ‘E’.
The Municipality of Bayham subsequently commenced exploring legal options to seek to enforce and
collect upon the judgement against the Elgin Military Museum. Enforcement of collection was
ultimately deferred until the conclusion of the Mammoet Canada Eastern Ltd. and Heddle Marine
Service Inc. Statement of Claim against the Elgin Military Museum. Deferral of enforcement actions
was conducted as the Elgin Military Museum had filed a cross-claim against Mammoet Canada
Eastern Ltd. and Heddle Marine Service Inc. in the combined amount of $1 million (Mammoet
Canada Eastern Ltd. ($800,000) and Heddle Marine Service Inc. ($200,000)) which had the
possibility to produce funds that the Municipality of Bayham may have been able to obtain as a
Creditor. The Elgin Military Museum cross-claim was dismissed on December 21, 2018.
Due to the number and type of Creditors of the Elgin Military Museum it is highly unlikely the
Municipality of Bayham will ever be able to recover the monies owed to it. The liabilities of the Elgin
Military Museum significantly exceed the value of the assets of the Elgin Military Museum. At this
time Municipality of Bayham Writ of Seizure & Sale enforcement options are likely to result in a net of
additional expenses and liabilities incurred by the Municipality of Bayham.
SECTION 4 – MUNICIPALITY OF BAYHAM FINANCIAL INFORMATION
In addition to the financial requirements of By-law No. 2015-027 (debt financing six million dollars
($6,000,000) from The Toronto-Dominion Bank) that requires the Municipality of Bayham to pay
$330,671.40 annually until 2025 at which time the subject term loan expires and a new term and
interest rate will be required to be obtained for the remaining principle of $4,073,431.49, the
Municipality of Bayham has incurred the following legal costs associated with Project Ojibwa:
Municipality of Bayham Legal Expense
YEAR AMOUNT NOTES
2012 $4,649.24
2013 $6,659.23
2014 $33,850.27
2015 $193,724.52 *Includes $100,545.19 Guarantorship Fees
2016 $73,990.88
2017 $48,721.80
2018 $245,712.50
*Includes $200,000 Mammoet Canada Eastern
Ltd. and Heddle Marine Service Inc. settlement
TOTAL $607,308.44
At this time no additional legal expenses are anticipated in association with Project Ojibwa beyond
the financial requirements of By-law No. 2015-027.
SECTION 5 – MUNICIPALITY OF BAYHAM – FUTURE ACTIONS
At this time, subject to change, the Municipality of Bayham will take the following actions in regards to
the Elgin Military Museum and Project Ojibwa:
1. Retain the Writ of Seizure & Sale registered on title indefinitely.
2. Take no further legal action at this time. Due to the number and type of Creditors of the Elgin
Military Museum it is highly unlikely the Municipality of Bayham will ever be able to recover the
monies owed to it. The liabilities of the Elgin Military Museum significantly exceed the value of
the assets of the Elgin Military Museum. Writ of Seizure & Sale enforcement options are likely
to result in a net of additional expenses and liabilities incurred by the Municipality of Bayham.
3. Take absolutely no involvement with the ownership or operation of the HMCS Ojibwa, or
subject lands.
4. Consider, in the 2020 Budget, funding a $50,000-$100,000 annual financial allocation to the
Liability Reserve so the Municipality of Bayham has funds allocated to make a lump sum
payment in 2025 when the term loan expires to reduce the remaining principle amount of
$4,073,431.49 prior to obtaining a new term and interest rate for the remaining principle.
SECTION 6 – ADDITIONAL INFORMATION
1) Why did the Municipality of Bayham have to pay the six million dollars ($6,000,000)?
On August 2, 2012 the Council of the Corporation of the Municipality of Bayham passed By-
law No. 2012-089 being a by-law to authorize an irrevocable standby letter of credit facility
with the Royal Bank of Canada, to guarantee borrowing by the Elgin Military Museum to the
maximum amount of six million dollars ($6,000,000.00). The Elgin Military Museum borrowed
money through a credit facility with the Royal Bank of Canada, against the six million dollar
letter of credit. The Elgin Military Museum failed to make payments on the loan and the Royal
Bank of Canada called upon the Municipality of Bayham irrevocable letter of credit in the
amount of six million dollars ($6,000,000.00).
2) Where does the money to pay the six million dollar ($6,000,000) letter of credit come
from?
The Council of the Corporation of the Municipality of Bayham approved a plan where the
Municipality debt financed the six million dollars ($6,000,000) from the Toronto-Dominion
Bank for a ten (10) year term loan, twenty-five year (25) amortization period, in the amount of
six million dollars ($6,000,000.00), at a rate of interest of 2.71% per annum. This requires
loan payments of $27,555.95/month. In 2015 from March – December (ten (10) months) the
Municipality utilized reserves to pay the amount required ($275,559.50). In 2016-2025, the
Mun icipality of Bayham incorporates $330,671.40 into the tax levy in the Operating Budget
under the General Government section. In 2025 when the subject term loan expires a new
term and interest rate will be required to be obtained for the remaining principle of
$4,073,431.49.
3) Has the Municipality of Bayham approached upper levels of government for financial
assistance and/or support?
The Municipality of Bayham has, at this time, exhausted all possibilities for financial
assistance or general assistance, including from upper levels of government.
Ultimately, as a result of By-law No. 2012-037, being a by-law pursuant to Section 107 of the
Municipal Act, 2001, to authorize a municipal guarantee for borrowing by the Elgin Military
Museum, the Municipality of Bayham is responsible for the debt. No federal, provincial or
private sector organization provides municipal financial support for debt reduction purposes.
4) Who is now responsible for the HMCS Ojibwa?
As of the date of this report the HMCS Ojibwa is under the ownership and control of the Elgin
Military Museum.
5) Does the Municipality of Bayham paying the six million dollar letter of credit leave the
Elgin Military Museum with no responsibility for its actions, specifically financial
responsibility?
As a result of the Municipality of Bayham Writ of Seizure & Sale the Municipality of Bayham is
a Judgement Creditor of the Elgin Military Museum.
Although numerous possibilities exist pertaining to future consequences for the Elgin Military
Museum it seems likely that the Elgin Military Museum will be stripped of its assets by
Creditors through the legal system and/or declare bankruptcy.
6)Will the Municipality of Bayham ever get the money for the six million dollar
($6,000,000) letter of credit back?
On May 17, 2016 the Municipality received judgement in the amount of six million dollars
($6,000,000) against the Elgin Military Museum. The judgement was registered on May 20,
2016 as a Writ of Seizure & Sale.
Due to the number and type of Creditors of the Elgin Military Museum it is highly unlikely the
Municipality of Bayham will ever be able to recover the monies owed to it. The liabilities of the
Elgin Military Museum significantly exceed the value of the assets of the Elgin Military
Museum. At this time Municipality of Bayham Writ of Seizure & Sale enforcement options are
likely to result in a net of additional expenses and liabilities incurred by the Municipality of
Bayham.
7)What did the Municipality of Bayham get out of paying the six million dollar ($6,000,000)
letter of credit?
As a result of By-law No. 2012-089, passed on August 2, 2012, being a by-law to authorize an
irrevocable standby letter of credit facility with the Royal Bank of Canada, to guarantee
borrowing by the Elgin Military Museum to the maximum amount of six million dollars
($6,000,000.00) the Municipality of Bayham had a contractual requirement to the Royal Bank
of Canada to pay the six million dollars ($6,000,000). The Municipality did not get anything
tangible from paying the amount. The Municipality of Bayham paid its debt to the Royal Bank
pursuant to By-law No. 2012-089.
RECOMMENDATION
1.THAT Report CAO-19/19 re Project Ojibwa be received for information;
2.AND THAT the Council of the Corporation of the Municipality of Bayham direct Report CAO-
19/19 re Project Ojibwa be posted on the municipal website.
Respectfully Submitted by:
Paul Shipway
CAO|Clerk
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officer duly authorized in that regard, as of the
Ontario.
day of July, 2018, at
Mammoet Canada Eastern Ltd.
IN WITNESS WHEREOF, Heddie Marine Service Inc. has hereto set it
respective hand and seal as witnessed, where required, by the hand of its officer
duly authorized in that regard, as of the day of July, 2018, at
Ontario.
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Heddie Marine Service Inc.
IN WITNESS WHEREOF, The Corporation of the Municipality of Bayham
has hereto set it respective hand and seal as witnessed, where required, by the
hand of its officer duly authorized in that regard, as of the day of July, 2018,
at Ontario.
The Corporation of the Municipality of Bayham