The CEO of a development partnership claims a major shareholder is trying to thwart plans to establish a resort community on Vancouver Island.
Sanovest Holdings Ltd. and 599315 ÎÚÑ»´«Ã½ Ltd. are equal partners in Ecoasis Developments LLP, which was formed in September 2013 to build a ÎÚÑ»´«Ã½ resort community under the company name Ecoasis Bear Mountain Developments Ltd. (EBMD).
The Bear Mountain project operated without significant hitches until June 2021, according to a recent lawsuit filed by 599315 and the LLP against Sanovest and Tian Kusumoto, a representative of Sanovest.
In a petition to the court, filed on the same day as the lawsuit, Matthews and 599315 claim Tian Kusumoto sought to advance a new goal for the Bear Mountain development that runs contrary to the original goal.
“Kusumoto has sought to radically alter the business objectives by seeking to involve EBMD and the partnership in vertical building partnerships with developers rather than pursue the established plan of bulk sales of multi-family sites and single-family residential lots,” the petition claims.
“In order to further this plan, or otherwise to force the sale of 599315’s interest in EBMD and the partnership on a distressed and devalued basis, Kusumoto and Sanovest have improperly withheld funding and prevented sales to deliberately place financial and operational pressure on Matthews and 599315.”
Sanovest had appointed Tom Kusumoto as its representative in EBMD to act as secretary, while Daniel Matthews was 599315’s appointee, serving as president and CEO, according to the lawsuit.
The lawsuit notes Sanovest agreed to provide a loan of up to $35 million at an annual interest rate of eight per cent, with a November 2017 maturity date. That loan agreement was amended in June 2016 to a limit of $70 million and to extend the loan to November 2021, a date that was further extended at a later point to May 2024, according to the lawsuit.
Tom Kusumoto was replaced in June 2021 as Sanovest’s appointee to EBMD by Tian Kusumoto, according to the legal filings, which claim that was when things turned sour.
The lawsuit lists 11 particular breaches of the partnership agreement.
Specifically, it claims Tian Kusumoto prevented Matthews from carrying out his role as CEO and president of EBMD, “attempting to seize control” of EBMD’s bank accounts and claiming a $100,000 fee on the loan agreement.
That loan agreement fee, the plaintiffs argue, was improper and concealed from 599315 and Matthews.
The plaintiffs also claim Tian Kusumoto and Sanovest impeded EBMD’s business, including blocking “commercially reasonable bulk sales and, indeed, sales for unprecedented value” attached to the project. In all, the lawsuit claims EBMD lost $164 million in sales in 2022 alone.
The lawsuit claims blocking those sales were part of an attempt “to improperly entrench Sanovest’s position as lender,” which also allegedly included refusing to allow EBMD to refinance on terms more commercially advantageous to the partnership.
At the same time, the lawsuit alleges Sanovest and Tian Kusumoto prevented EBMD from building up cash reserves, and that they refused to advance funds under the loan agreement.
The plaintiffs are seeking damages for breach of the partnership agreements and for breach of fiduciary duty to the partnership.
The allegations have not been proven in court. A response had not been filed as of press time.
