17260 28, day 04-18-2013 - ministry of the attorney general · · 2014-11-1812· · --- this is...
TRANSCRIPT
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·4· · · · · · ELLIOT LAKE COMMISSION OF INQUIRY
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12· · --- This is Day 28 in the Inquiry proceedings held
13· ·before the Honourable Justice P.R. Bélanger,
14· ·Commissioner, taken at the White Mountain Academy
15· ·of the Arts, 99 Spine Road, Elliot Lake, Ontario,
16· ·on the 18th day of April, 2013, commencing at 9:00
17· ·a.m.
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22· · · · · · ·REPORTED BY:· Deana Santedicola
23· · · · · · · · · · · CSR, CRR, RPR
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·1· ·A P P E A R A N C E S:
·2· ·Peter Doody, Esq.,
·3· ·Nadia Authier, Ms.,· · · · · Commission Counsel
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·5· ·Douglas Elliott, Esq.,· · · ·ELMAC/SAGE
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·7· ·Alexandra Carr, Ms.,· · · · ·ELMAC
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·9· ·Joseph Bisceglia, Esq.,· · · Gregory Saunders
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11· ·Robert MacRae, Esq.,· · · · ·Robert Wood
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13· ·Paul Cassan, Esq.,· · · · · ·City of Elliot Lake
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15· ·Douglas Kearns, Esq.,· · · · Retirement Living and
16· · · · · · · · · · · · · · · · NorDev
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18· ·John Picone, Esq.· · · · · · Halsall Associates
19· · · · · · · · · · · · · · · · Limited
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21· ·Michael Title, Esq.· · · · · Eastwood Mall Inc.
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·1· · · · · · · · · · · · I N D E X
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·3· ·WITNESS:· RICHARD KENNEALY· · · · · · · · PAGES
·4· ·EXAMINATION IN-CHIEF BY MR. DOODY
·5· ·(CONT'D)...............................5554 - 5687
·6· ·CROSS-EXAMINATION BY MR. ELLIOTT.......5702 - 5729
·7· ·CROSS-EXAMINATION BY MR. TITLE.........5730 - 5768
·8· ·CROSS-EXAMINATION BY PICONE............5768 - 5770
·9· ·CROSS-EXAMINATION BY BISCEGLIA.........5770 - 5777
10· ·CROSS-EXAMINATION BY CASSAN............5778 - 5787
11· ·RE-EXAMINATION BY KEARNS...............5787 - 5802
12· ·RE-EXAMINATION BY MR. DOODY............5802 - 5806
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14· ·SUBMISSIONS RE APPLICATION FOR
15· ·FUNDING................................5688 - 5701
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·1· · · · · · · · · · INDEX OF EXHIBITS
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·3· ·NUMBER· · · DESCRIPTION· · · · · · · · · ·PAGE NO.
·4· ·(No Exhibits Marked)
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·1· ·-- Upon commencing at 9:00 a.m.
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·3· · · · · · · ·THE COMMISSIONER:· Good morning,
·4· ·everybody.
·5· · · · · · · ·Just so everybody knows where we are
·6· ·going this morning, after we have completed Mr.
·7· ·Doody's examination in-chief of Mr. Kennealy, I'll
·8· ·hear from the representatives of ELMAC or SAGE in
·9· ·relation to their application for further funding.
10· ·I don't think it would be necessary to hear from
11· ·the City of Elliot Lake orally or indeed for
12· ·counsel for Mr. Thomas Derreck.
13· · · · · · · ·Thank you.
14· · · · · · · ·Go ahead, Mr. Doody.
15· · · · · · · ·MR. DOODY:· Thank you,
16· ·Mr. Commissioner, and I should indicate for the
17· ·benefit of my friends that in the event that
18· ·Mr. Kennealy's evidence is completed today, that
19· ·is, both the chief and the cross-examination, then
20· ·we -- our intention is, if there is time, to
21· ·commence the evidence of Ms. Guertin, and
22· ·Mr. Kearns advises me she is available to do that.
23· · · · · · · ·THE COMMISSIONER:· Thank you very much.
24· · · · · · · ·EXAMINATION IN-CHIEF BY MR. DOODY
25· · · · · · · ·(CONT'D):
·1· · · · · · · ·Q.· ·Good morning, Mr. Kennealy.
·2· · · · · · · ·A.· ·Good morning, Mr. Doody.
·3· · · · · · · ·Q.· ·You gave evidence yesterday as to
·4· ·what was done on the roof during the ownership by
·5· ·Retirement Living.· Do I understand correctly, sir,
·6· ·that insofar as what was done on the roof was
·7· ·concerned, you delegated that matter to Mr. Quinn?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And you relied entirely on him to
10· ·ensure that it was carried out appropriately?
11· · · · · · · ·A.· ·Yes, I would.
12· · · · · · · ·Q.· ·Thank you.· And if I could ask
13· ·you, sir, to turn up Exhibit No. 2194, and that is
14· ·tab 158 in Volume 4, sir.
15· · · · · · · ·A.· ·I do not have Volume 4.
16· · · · · · · ·Q.· ·You don't have Volume 4?
17· · · · · · · ·A.· ·No.
18· · · · · · · ·Thank you.· Maybe I'll try the screen.
19· · · · · · · ·Q.· ·And, sir, this is, as you can see
20· ·from the bound volume in front of you, this is a
21· ·lengthy document which, as the cover e-mail, or the
22· ·cover memo, rather, from Ms. Guertin to the Finance
23· ·Committee dated May 17th, 1999 indicates, it is a
24· ·binder containing, as she says, "much of the due
25· ·diligence completed on the Algo Centre to date",
·1· ·and she goes on to say that:
·2· · · · · · · · · "We will be discussing the
·3· · · · · · · ·information in greater detail on
·4· · · · · · · ·Thursday May 20, 1999."
·5· · · · · · · ·And if you go over, sir, to the page
·6· ·that ends 09 in the bottom right-hand corner, it is
·7· ·about five pages or six pages on, there is a table
·8· ·of contents of the binder that Ms. Guertin referred
·9· ·to in the memorandum, and you will see that at tab
10· ·6 is -- there is a reference to the Building
11· ·Condition Assessment of NYB, which I take it is
12· ·Nicholls Yallowega Bélanger, and at tab 7 is a
13· ·reference to the structural report of Halsall.
14· · · · · · · ·But, sir, those documents are not
15· ·contained in the documents that are in this
16· ·exhibit.· And my question to you, sir, is do you
17· ·know, were the Nicholls Yallowega Bélanger
18· ·assessment, which would have been the November 1998
19· ·and either of the Halsall structural reports,
20· ·either the November 1998 or the May 1999, were they
21· ·provided to the Finance Committee?
22· · · · · · · ·A.· ·Yes, I believe they were, yes.
23· · · · · · · ·Q.· ·Okay, did you instruct Ms. Guertin
24· ·to do that?
25· · · · · · · ·A.· ·I believe that they were included,
·1· ·yes, it would have been automatic.
·2· · · · · · · ·Q.· ·And were you at that meeting of
·3· ·the Finance Committee?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And do you know which structural
·6· ·report of Halsall was provided to them, the 1998
·7· ·one or the 1999 one?
·8· · · · · · · ·A.· ·I believe both because I believe
·9· ·we provided the Nicholls Yallowega and the
10· ·Halsall -- or the two, I believe both of them were
11· ·included.
12· · · · · · · ·Q.· ·Okay.· And were the members of the
13· ·committee, were they able to take those documents
14· ·with them at the end of the meeting?
15· · · · · · · ·A.· ·Yes.
16· · · · · · · ·Q.· ·And if I could ask you --
17· · · · · · · ·A.· ·Just to clarify --
18· · · · · · · ·Q.· ·Sure.
19· · · · · · · ·A.· ·I believe we sent them to them.
20· · · · · · · ·Q.· ·Oh, I understand, of course, that
21· ·is what the memo said.
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And the memo is dated -- the memo
24· ·is dated, just for the record, May 17th and the
25· ·meeting was three days later on the 20th.· So that
·1· ·was your intention, was that it be distributed
·2· ·ahead of time?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·So they could read and review the
·5· ·material before the meeting?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·Because it was a lengthy document?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And if I could ask you to turn two
10· ·pages on from the index there, sir, to the page
11· ·ending in .11 in the right-hand corner, this
12· ·document is entitled "Executive Summary".· Sir, do
13· ·you know who wrote this document?
14· · · · · · · ·A.· ·It would either have been myself
15· ·or Ms. Guertin.
16· · · · · · · ·Q.· ·And did you review it, if
17· ·Ms. Guertin wrote it?
18· · · · · · · ·A.· ·I would imagine if -- yes, I would
19· ·have reviewed it.
20· · · · · · · ·Q.· ·If you go down to the item number
21· ·5 in the bottom of the page, the document states --
22· ·if I could have the document brought up a bit, Ms.
23· ·Kuka, thank you.
24· · · · · · · · · "The building condition
25· · · · · · · ·assessment compiled by Nicholls
·1· · · · · · · ·Yallowega Bélanger architects
·2· · · · · · · ·indicates that the building appears
·3· · · · · · · ·to be structurally sound, but that
·4· · · · · · · ·certain aspects of the building
·5· · · · · · · ·requires ongoing maintenance as
·6· · · · · · · ·apparent with the" -- and turn the
·7· · · · · · · ·page -- "roof top parking deck.· The
·8· · · · · · · ·report also suggests replacement of
·9· · · · · · · ·various mechanical and electrical
10· · · · · · · ·components over time."
11· · · · · · · ·Sir, we spent some time yesterday
12· ·looking at documents in which it was stated that
13· ·the assessment of Nicholls Yallowega Bélanger
14· ·indicated that the building was structurally sound.
15· ·The wording has changed somewhat in this document
16· ·from "was structurally sound" to "appears to be
17· ·structurally sound".
18· · · · · · · ·Can you give us any assistance with why
19· ·that wording was changed or why this -- let me put
20· ·it this way, why this wording was chosen rather
21· ·than the wording used previously?
22· · · · · · · ·A.· ·No, I could not, no.· I think it
23· ·is just -- it looks like it is just a selection of
24· ·words to -- no, I could not.
25· · · · · · · ·Q.· ·The next paragraph in the
·1· ·"Executive Summary" states:
·2· · · · · · · · · "An in-depth analysis of the
·3· · · · · · · ·structure indicates minimal
·4· · · · · · · ·deterioration of the steel structure
·5· · · · · · · ·due primarily to leakage from the
·6· · · · · · · ·parking deck structure.· The
·7· · · · · · · ·analysis and report prepared by
·8· · · · · · · ·Halsall indicates two options for
·9· · · · · · · ·dealing with the parking deck, the
10· · · · · · · ·first is a program similar to that
11· · · · · · · ·employed by ACP in which joints and
12· · · · · · · ·cracks are routed and resealed
13· · · · · · · ·($433,000), the second option would
14· · · · · · · ·require a bonded membrane topped
15· · · · · · · ·with asphalt ($776,000).· The first
16· · · · · · · ·option is similar to ACP's current
17· · · · · · · ·program of maintaining the parking
18· · · · · · · ·deck."
19· · · · · · · ·Sir, can you indicate to me why you
20· ·thought it appropriate to provide this summary of
21· ·what the report said to the members of the Finance
22· ·Committee?
23· · · · · · · ·A.· ·I think we were summarizing --
24· ·attempting to summarize and give them an overview
25· ·of the information we had received.
·1· · · · · · · ·Q.· ·And would I be correct in assuming
·2· ·that you were doing that so that they would
·3· ·understand the financial ramifications facing the
·4· ·Corporation should they decide to close the
·5· ·transaction?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·Thank you.· If I could ask you,
·8· ·sir, to turn to tab 168, and this is Exhibit No.
·9· ·11-79 -- oh, sorry, let me back up, I missed a
10· ·point here.
11· · · · · · · ·Turn to tab 160, which is Exhibit No.
12· ·3251.· And, sir, just before I get to this, with
13· ·respect to the financial information that we just
14· ·went through in the "Executive Summary", did you
15· ·tell the members of the Finance Committee that the
16· ·Corporation did not intend to spend that money in
17· ·the short term?
18· · · · · · · ·A.· ·Can you reference which money you
19· ·are speaking of, Mr. Doody?
20· · · · · · · ·Q.· ·Well, there is another copy of the
21· ·executive summary in the document --
22· · · · · · · ·A.· ·Oh, I see, okay.
23· · · · · · · ·Q.· ·-- I have just taken you to, so
24· ·we'll just go there.· It is starting at page --
25· ·well, the excerpt is at the page ending .18.· It is
·1· ·about six pages in.· And this is the paragraph I
·2· ·just read where you indicated that there were two
·3· ·options set out by Halsall, one at a cost of
·4· ·$433,000 and one at a cost of $776,000, with the
·5· ·first one being similar to Algoma's then current
·6· ·program of maintaining the parking deck.
·7· · · · · · · ·Did you advise the Finance Committee,
·8· ·sir, that it was management's intention to not
·9· ·spend any -- or not spend those sums of money in
10· ·the near term?
11· · · · · · · ·A.· ·Yeah, I can't recall if we
12· ·specifically mentioned these items.· We would have
13· ·gone to the financial projections, and whatever we
14· ·put in there would be what we would be representing
15· ·we would be spending.
16· · · · · · · ·Q.· ·And it was clear from that that
17· ·there was no intention to spend that amount of
18· ·money in the near term?
19· · · · · · · ·A.· ·I think in -- I think what I was
20· ·trying to explain yesterday and I probably didn't
21· ·do a very good job of was that we would have done
22· ·what we call the business plan and the operating
23· ·plan.
24· · · · · · · ·Q.· ·And we looked at those yesterday.
25· · · · · · · ·A.· ·Yes, yeah, and as I tried to
·1· ·explain yesterday, they would be evolving as we
·2· ·learned more, so the numbers that we would have
·3· ·used in there would be what we would be
·4· ·communicating that we would be projecting at that
·5· ·time.
·6· · · · · · · ·Q.· ·And those documents did not
·7· ·include an expenditure in the near term of the
·8· ·amount set out, either of the amounts set out in
·9· ·this paragraph numbered 6; correct?
10· · · · · · · ·A.· ·In that sense, yes, I understand
11· ·exactly what you are saying.
12· · · · · · · ·Q.· ·You are agreeing with me?· Sorry,
13· ·when you say "yes" --
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·-- sometimes the transcript is
16· ·unclear.
17· · · · · · · ·A.· ·Yes, we would have reflected it,
18· ·and I believe, as you know, those numbers reflected
19· ·an approach to gradually doing -- we would have
20· ·been using the old ACP numbers for maintenance of
21· ·the deck and made any alterations to them to
22· ·reflect sort of ongoing costs, yes.
23· · · · · · · ·Q.· ·And in particular, there was no
24· ·intention to, and this was reflected in the
25· ·documents you have described, there was no
·1· ·intention to make a capital expenditure with
·2· ·respect to the roof?
·3· · · · · · · ·A.· ·Yes, and I can't remember when we
·4· ·actually sort of sat down and decided how to
·5· ·implement, but yes, you are correct.
·6· · · · · · · ·Q.· ·Okay.· Sir, what I was going to
·7· ·direct you to in this document, Exhibit No. 3251,
·8· ·is the second page, and that is the minutes of the
·9· ·meeting of the Finance Committee on May 20th.
10· · · · · · · ·A.· ·That is document 08?
11· · · · · · · ·Q.· ·That's right, yes, the page ending
12· ·.08.· Thank you.
13· · · · · · · ·And so these minutes, they are brief
14· ·and they show that there was a motion moved by
15· ·Mr. Speck and seconded by Mr. or Ms. Brown, is
16· ·that --
17· · · · · · · ·A.· ·Mr. Brown, yes.
18· · · · · · · ·Q.· ·Mr. Brown, that the Corporation
19· ·waived the financing condition in the agreement to
20· ·purchase the Algo Centre Mall and Hotel, and that
21· ·was carried; correct?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And since at the last meeting of
24· ·the Board the Board had delegated to the Finance
25· ·Committee the right to waive the financing
·1· ·condition, and once that was waived, the agreement
·2· ·was firm, right?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·And the agreement --
·5· · · · · · · ·A.· ·Well, I --
·6· · · · · · · ·MR. KEARNS:· Well, that is wrong.
·7· · · · · · · ·THE WITNESS:· Yes, I'll --
·8· · · · · · · ·MR. DOODY:· That is my mistake.
·9· · · · · · · ·THE WITNESS:· Yeah, my error in not
10· ·listening properly.· They waived the financing but
11· ·there were still conditions on the deal that we had
12· ·not -- that the Board would have to waive all of
13· ·the conditions.
14· · · · · · · ·BY MR. DOODY:
15· · · · · · · ·Q.· ·The due diligence conditions?
16· · · · · · · ·A.· ·Yes, at a later date.
17· · · · · · · ·Q.· ·Okay, I'm sorry.
18· · · · · · · ·A.· ·In this meeting too -- if it is
19· ·okay, Mr. Doody?
20· · · · · · · ·Q.· ·Certainly.
21· · · · · · · ·A.· ·We spent -- this was a fairly
22· ·lengthy meeting.· I mean, the Finance Committee, we
23· ·had a number -- you know, particularly Mr. Carter.
24· ·Mr. Carter was an experienced financial person, was
25· ·a senior manager with Denison in finance and
·1· ·accounting, and he probably knew the numbers better
·2· ·than I did.· And we went through a lot.· When they
·3· ·were actually looking at this, and I recall -- I'm
·4· ·only saying it because I recall in the meeting his
·5· ·view was that they were trying to look at -- they
·6· ·waived the financing, but that we spent a lot of
·7· ·time talking I remember sort of going into a lot of
·8· ·other areas in terms of all the way through to, you
·9· ·know, is this a kind of right decision thing
10· ·generally.
11· · · · · · · ·It was a fairly lengthy meeting, and we
12· ·spent quite a bit of time on it.
13· · · · · · · ·Q.· ·And was there discussion at that
14· ·meeting of the two reports, the report from
15· ·Nicholls Yallowega Bélanger and the Halsall Report?
16· · · · · · · ·A.· ·I think there was, just generally,
17· ·not in terms of sort of the, you know, down to the
18· ·nitty-nitty-gritty, but in terms of comparing the
19· ·costs and what was involved and that type of
20· ·discussion, just general discussion, because I
21· ·remember it was a lengthy meeting.
22· · · · · · · ·Q.· ·And do you recall Mr. Speck taking
23· ·part in the discussion particularly relating to the
24· ·reports from Nicholls Yallowega Bélanger and
25· ·Halsall?
·1· · · · · · · ·A.· ·Not individually or specifically,
·2· ·no.
·3· · · · · · · ·Q.· ·But he was there obviously because
·4· ·he moved the motion to waive the financing
·5· ·condition?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·Okay.· Now, if I could take you
·8· ·back to tab 168, and this is Exhibit No. 11-79,
·9· ·this is a letter, sir, of June 3, 1999, from Ms.
10· ·Kiviaho, K-i-v-i-a-h-o, the Chair of the Public
11· ·Library Board, to Algoma Central Properties, and in
12· ·the letter she wrote in the second paragraph, and
13· ·this was in response to a request that she -- that
14· ·the library sign an Estoppel Certificate, which
15· ·would have been part of the closing requirements,
16· ·correct, the Estoppel Certificate?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And she writes that she doesn't
19· ·have the authority to sign it before a full meeting
20· ·of the Board.· But then she wrote in the second
21· ·paragraph:
22· · · · · · · · · "The Library has been a tenant in
23· · · · · · · ·the mall for ten years.· During this
24· · · · · · · ·time, there have been severe
25· · · · · · · ·problems with the leaky roof and
·1· · · · · · · ·faulty air conditioning units which
·2· · · · · · · ·have also resulted in water damage."
·3· · · · · · · ·And she goes on to say that:
·4· · · · · · · · · "The Library Board does not feel
·5· · · · · · · ·that this damage to the ceiling in
·6· · · · · · · ·the library location is within
·7· · · · · · · ·'reasonable' limits."
·8· · · · · · · ·And she enclosed a report that went to
·9· ·City Council in January of 1999, and that is not in
10· ·the material before you, but did you ever see this
11· ·letter, sir, before preparing for this Commission?
12· · · · · · · ·A.· ·I don't believe so, no.
13· · · · · · · ·Q.· ·Did anybody from Algoma tell you
14· ·about the problems with leaks in the mall and
15· ·particularly problems with leaks at the library
16· ·before you closed?
17· · · · · · · ·A.· ·I'm just trying to recall if I
18· ·ever had a specific discussion.· You are asking for
19· ·a very specific discussion.· I don't have a memory
20· ·of a specific discussion.
21· · · · · · · ·Q.· ·But do you have a general memory
22· ·then of knowing as a result of speaking with
23· ·somebody from Algoma that there were problems with
24· ·leaks, and particularly with the library?
25· · · · · · · ·A.· ·In particular with the library,
·1· ·no.
·2· · · · · · · ·Q.· ·What about leaks generally?
·3· · · · · · · ·A.· ·I cannot remember a specific
·4· ·discussion.· I keep going back to my -- what I said
·5· ·yesterday or the day before, that I had perceptions
·6· ·of what I knew just by being there, I think.
·7· · · · · · · ·Q.· ·Okay.· If I could ask you to turn
·8· ·to tab 169, and this is Exhibit No. 3252.· And this
·9· ·is the minutes of a meeting of the Elliot Lake
10· ·Retirement Living Board on June 3, 1999, and I see
11· ·that both Mr. Speck and Mr. Croteau were present?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·And at this meeting, the
14· ·recommendations of the Finance Committee were
15· ·accepted by the Board and the necessary resolutions
16· ·were passed to assign the Agreement of Purchase and
17· ·Sale to the new corporation, the for-profit
18· ·corporation, 1309900 Ontario Limited, so that the
19· ·title could be taken in the name of that
20· ·corporation; correct?
21· · · · · · · ·A.· ·Yes.
22· · · · · · · ·Q.· ·And the other necessary
23· ·resolutions were passed with respect to the
24· ·financing by Retirement Living of the purchase and
25· ·of the ongoing requirements of that numbered
·1· ·corporation which trades under the name of NorDev,
·2· ·right?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·And if you turn to two pages on
·5· ·from this page that is before you, that is the page
·6· ·that ends .04, you will see an excerpt from your
·7· ·report to that meeting, sir, and at the bottom of
·8· ·the page, under the heading "Building Condition
·9· ·Assessment" you wrote:
10· · · · · · · · · "An engineering firm from Toronto
11· · · · · · · ·was engaged to do a detailed review
12· · · · · · · ·of the physical structure.· If you
13· · · · · · · ·recall, we did have a preliminary
14· · · · · · · ·review completed in the fall.· This
15· · · · · · · ·review was much more intensive with
16· · · · · · · ·substantial structural testing
17· · · · · · · ·completed.· In summary, there were
18· · · · · · · ·no surprises, just a more detailed
19· · · · · · · ·understanding of some of the items
20· · · · · · · ·raised in the first report.· As an
21· · · · · · · ·example, this company did core
22· · · · · · · ·testing of the parking lot where the
23· · · · · · · ·first review only did a visual
24· · · · · · · ·inspection."
25· · · · · · · ·Sir, in addition to this summary, did
·1· ·you provide the members of the Board at this
·2· ·meeting or any other time with a complete copy of
·3· ·the Halsall Report of May 1999?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And when did you do that?
·6· · · · · · · ·A.· ·We did that at this meeting.
·7· · · · · · · ·Q.· ·Okay, and were they allowed to
·8· ·keep those?
·9· · · · · · · ·A.· ·I think that they could take --
10· ·they could take it or leave it, whatever they
11· ·wanted to do.
12· · · · · · · ·Q.· ·And was there discussion at this
13· ·meeting of the two options set out in the Halsall
14· ·Report?
15· · · · · · · ·A.· ·We went through virtually
16· ·everything in that meeting in different physical
17· ·manners.· I'm sure we used -- you know, overhead
18· ·transparencies at the time; we would have used
19· ·handouts; we would have had them go through the
20· ·reports where it was appropriate.
21· · · · · · · ·My belief is we covered everything that
22· ·we felt was pertinent to go through all the
23· ·information --
24· · · · · · · ·Q.· ·And do you --
25· · · · · · · ·A.· ·-- and took our time.
·1· · · · · · · ·Q.· ·And did you go through the two
·2· ·options that Halsall proposed and the costing of
·3· ·both of them and the explanation provided by them
·4· ·for each?
·5· · · · · · · ·A.· ·We would have done that, yes.
·6· · · · · · · ·Q.· ·Okay.· And do you recall the
·7· ·discussion about that item?
·8· · · · · · · ·A.· ·Not -- no, not in particular.
·9· · · · · · · ·Q.· ·Do you recall whether Mr. Speck or
10· ·Mr. Croteau took part in that discussion?
11· · · · · · · ·A.· ·I don't, no.· I know they partook
12· ·in the whole discussion, but specifically there,
13· ·no, I can't recall.
14· · · · · · · ·Q.· ·Okay.· If I could take you to tab
15· ·182, sir, which is Exhibit No. 8-4, and this is the
16· ·deed whereby the property was transferred from
17· ·Algoma Central Properties to NorDev, and I see it
18· ·closed on June the 18th of 1999; correct?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·Okay, and just for clarity's sake,
21· ·sir, the price, the consideration set out on the
22· ·deed is $3,750,000, and the agreed price in the
23· ·Purchase and Sale Agreement was $4,000,000, but the
24· ·difference is -- the difference of $250,000 was
25· ·simply the allocation as between the real property
·1· ·and the chattels; correct?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·Thank you.· If I could ask you to
·4· ·turn to tab 186, sir, and this is Exhibit No. 909.
·5· ·This is an inter-office memorandum from Ms.
·6· ·Sprague, who was then the Deputy Clerk of the City,
·7· ·to Mr. Bauthus, and the subject is "Committee of
·8· ·the Whole Directives - August 16, 1999", and the
·9· ·memorandum says that:
10· · · · · · · · · "At a regular meeting of the
11· · · · · · · ·Committee of the Whole" -- and that
12· · · · · · · ·would be a Committee of the Whole of
13· · · · · · · ·City Council -- "held Monday, August
14· · · · · · · ·16, 1999 [...] the following
15· · · · · · · ·requests were directed to your
16· · · · · · · ·department", being Mr. Bauthus's
17· · · · · · · ·department.
18· · · · · · · ·And the second bullet says:
19· · · · · · · · · "Council requested that
20· · · · · · · ·Mr. Kennealy provide an update on
21· · · · · · · ·the state of affairs on the Algo
22· · · · · · · ·Centre Mall."
23· · · · · · · ·Do you recall receiving that request,
24· ·sir?
25· · · · · · · ·A.· ·No, I don't, no.
·1· · · · · · · ·Q.· ·Did you provide an update to
·2· ·Council in August or around that time on the state
·3· ·of affairs of the mall?
·4· · · · · · · ·A.· ·I can't recall.
·5· · · · · · · ·Q.· ·Okay.· Do you recall reporting to
·6· ·Mayor Farkouh about the state of affairs at the
·7· ·mall at or around the time of the closing?· He
·8· ·wasn't on the Board anymore, but did you talk to
·9· ·him about what was going on?
10· · · · · · · ·A.· ·I can't recall specifically.· You
11· ·are asking about specific time frames, and I
12· ·can't --
13· · · · · · · ·Q.· ·Let me ask a specific question.
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·Did you give a copy of -- I think
16· ·you have already answered this, and if so, I
17· ·apologize.· Did you give a copy of the Halsall
18· ·Report of May 1999 to anybody from the City other
19· ·than Councillors Croteau and Speck?
20· · · · · · · ·A.· ·I can't recall.
21· · · · · · · ·Q.· ·Did you give it to Mr. Bauthus?
22· · · · · · · ·A.· ·I don't have any recollection of
23· ·it occurring.
24· · · · · · · ·Q.· ·Did you discuss the contents of
25· ·either the Nicholls Yallowega Bélanger report of
·1· ·November 1998 or either of the Halsall Reports of
·2· ·the fall -- of November 1998 or May 1999 with
·3· ·anybody from the City, including Mr. Bauthus or the
·4· ·Mayor, other than Messrs. Croteau and Speck?
·5· · · · · · · ·A.· ·I cannot recall.
·6· · · · · · · ·Q.· ·Okay.· If I could ask you to turn
·7· ·to tab 190, sir, and this is Exhibit No. 2212 and
·8· ·this is a letter to -- a letter from Ms. Guertin to
·9· ·the Ontario Property Assessment Corporation dated
10· ·October 4th, 1999.
11· · · · · · · ·Now, sir, the Ontario Property
12· ·Assessment Corporation, which is now called the
13· ·Ontario Municipal Assessment Corporation, is the
14· ·body entrusted or assigned the responsibility by
15· ·statute of setting the value for property tax
16· ·purposes of real property in the province; you
17· ·understand that, correct?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And this is a letter from
20· ·Ms. Guertin to the Ontario Property Assessment
21· ·Corporation in which she says:
22· · · · · · · · · "As per our telephone
23· · · · · · · ·conversation, please find attached
24· · · · · · · ·information which may be useful in
25· · · · · · · ·your re-assessment of the Algo
·1· · · · · · · ·Centre Mall in Elliot Lake."
·2· · · · · · · ·I'll stop there.· It seems from this
·3· ·letter, sir, that NorDev was applying to have the
·4· ·property tax assessment reduced; correct?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·Because the assessment was at 8.2
·7· ·million dollars when you bought it, right?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And you were looking to have that
10· ·reduced so that you would pay less taxes?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·And in the third paragraph on the
13· ·first page, the paragraph numbered 3, Ms. Guertin
14· ·writes:
15· · · · · · · · · "When determining a reasonable
16· · · · · · · ·capitalization rate [...]" --
17· · · · · · · ·Under the heading "Building Condition
18· ·Assessment" she writes:
19· · · · · · · · · "When determining a reasonable
20· · · · · · · ·capitalization rate, we had to take
21· · · · · · · ·into account risk associated with
22· · · · · · · ·the capital aspect of the property,
23· · · · · · · ·not just the economic and leasing
24· · · · · · · ·risks.· Attached is a document
25· · · · · · · ·prepared by Nicholls Yallowega
·1· · · · · · · ·Bélanger, Architects from Sudbury."
·2· · · · · · · ·Sir, Ms. Guertin is stating in this
·3· ·letter that the risks described in the Nicholls
·4· ·Yallowega Bélanger report of November 1998 were
·5· ·negative risks which ought to be taken into account
·6· ·when the property tax assessment was determined;
·7· ·correct?
·8· · · · · · · ·A.· ·She is attempting to paint a
·9· ·picture to get the taxes down, yes.
10· · · · · · · ·Q.· ·Were you aware of this, sir?
11· · · · · · · ·A.· ·I don't recall specifically.
12· ·Well, I knew -- I know that we were trying to get a
13· ·re-assessment.· I was aware of that process.
14· · · · · · · ·Q.· ·What I am trying to understand,
15· ·sir, is why the document you submit to -- or the
16· ·Corporation submits to the property tax assessment
17· ·corporation characterizes the Nicholls Yallowega
18· ·Bélanger report as negative with respect to the
19· ·capital aspect of the property, whereas in all the
20· ·other documents that we have gone through yesterday
21· ·and today there is no such suggestion?· Can you
22· ·tell me, can you explain that apparent discrepancy?
23· · · · · · · ·A.· ·The best I can explain it at is
24· ·that we were attempting to put together a case to
25· ·get them to reconsider our taxes.
·1· · · · · · · ·Q.· ·And putting it as best you could?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·If you turn over to the second
·4· ·page, sir, of this letter, you can see in the
·5· ·third-last paragraph Ms. Guertin writes -- in the
·6· ·previous paragraph she says that the Corporation,
·7· ·NorDev, had come to the conclusion that you should
·8· ·have paid about 3 million dollars for the -- let me
·9· ·read it, starting in the second line of this page:
10· · · · · · · · · "At this rate" -- this being a
11· · · · · · · ·capitalization rate of 13 percent to
12· · · · · · · ·15 percent because of the risk.
13· · · · · · · · · ·"At this rate, we should have
14· · · · · · · ·paid approximately $3.0 million for
15· · · · · · · ·the property.· However, because our
16· · · · · · · ·motive is economic development and
17· · · · · · · ·the long term viability of the
18· · · · · · · ·retirement living program we were
19· · · · · · · ·willing to pay a premium to get the
20· · · · · · · ·property into the hands of the
21· · · · · · · ·community in a way in which the
22· · · · · · · ·profits the property does earn goes
23· · · · · · · ·back into developing the property.
24· · · · · · · ·For your information, the opening
25· · · · · · · ·purchase price was $2.5 million
·1· · · · · · · ·(Elliot Lake Retirement Living) and
·2· · · · · · · ·the opening selling price was $6.0
·3· · · · · · · ·million (Algoma Central Properties)
·4· · · · · · · ·signifying that an assessment of
·5· · · · · · · ·$8.2 million was considerably higher
·6· · · · · · · ·than either party thought was
·7· · · · · · · ·reasonable."
·8· · · · · · · ·Stop there, sir.· Is that, what she
·9· ·describes in this paragraph as what the Corporation
10· ·thought they ought to have paid, that is, the 3.0
11· ·million dollars, is that accurate?
12· · · · · · · ·A.· ·In terms of what we should have
13· ·paid?
14· · · · · · · ·Q.· ·Right.
15· · · · · · · ·A.· ·I don't think I can give you a
16· ·direct answer.· You know, you go back to the
17· ·negotiating process, the discussions Bob and I had,
18· ·and I couldn't tell you what we should have paid
19· ·until we arrived at a sort of a final number.· I
20· ·believe we --
21· · · · · · · ·Q.· ·That is because you can't -- if I
22· ·understand your evidence, that is because you don't
23· ·know what fair market value is until you have got a
24· ·willing buyer and a willing seller operating
25· ·without any unusual influences; that is the
·1· ·definition, right?
·2· · · · · · · ·A.· ·Yes, yes, and so we are back and
·3· ·forth on it and --
·4· · · · · · · ·Q.· ·Well --
·5· · · · · · · ·A.· ·-- she is -- I can see what, you
·6· ·know, we are attempting to do everything possible
·7· ·to get our operating costs down on our taxes.· That
·8· ·is --
·9· · · · · · · ·Q.· ·Right, and --
10· · · · · · · ·A.· ·And she is presenting that case.
11· · · · · · · ·Q.· ·But what Ms. Guertin is saying
12· ·here is that if you tried to determine the value of
13· ·the property on a cost -- discounted cash flow
14· ·basis using an appropriate capitalization rate,
15· ·which she said should have been 13 to 15 percent,
16· ·the value produced would have been 3 million
17· ·dollars.· I recall Mr. Shamess came up with a value
18· ·of about 5.4 using a discounted cash flow analysis.
19· · · · · · · ·So given that, is she stating it
20· ·accurately when she writes what is in this
21· ·paragraph?
22· · · · · · · ·A.· ·Well, I think she is doing her
23· ·best to represent a position to get the taxes down.
24· · · · · · · ·Q.· ·Sir, that wasn't my question.· My
25· ·question was, was she being accurate in what she
·1· ·wrote about what the Corporation, and by that, that
·2· ·would mean you and her and the Board --
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·-- what the Corporation felt at
·5· ·the time?
·6· · · · · · · ·A.· ·That it was worth 3 million?
·7· · · · · · · ·Q.· ·Yes.
·8· · · · · · · ·A.· ·We paid 4 million it.· That is the
·9· ·answer.· We must have felt that is what it was
10· ·worth.
11· · · · · · · ·Q.· ·So therefore, this is inaccurate?
12· · · · · · · ·A.· ·It is a -- it is a representation
13· ·to attempt to get our taxes lower.
14· · · · · · · ·Q.· ·Okay.
15· · · · · · · ·A.· ·And I don't know how to say it
16· ·otherwise.
17· · · · · · · ·Q.· ·In the next paragraph Ms. Guertin
18· ·writes this:
19· · · · · · · · · "I can appreciate your concern
20· · · · · · · ·regarding the impact of a major
21· · · · · · · ·re-assessment on the tax base of the
22· · · · · · · ·City of Elliot Lake.· However, the
23· · · · · · · ·tax savings that would be realized
24· · · · · · · ·by this re-assessment will flow
25· · · · · · · ·directly through to 40 tenants and
·1· · · · · · · ·allow NorDev Group to improve the
·2· · · · · · · ·property without overburdening the
·3· · · · · · · ·tenants with common area charges."
·4· · · · · · · ·Stop there.· We had a discussion
·5· ·yesterday, sir, about the common area charges and
·6· ·the ability to flow through those charges to the
·7· ·tenants.· Do you recall that?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And your evidence was yesterday
10· ·that you could flow through common area charges to
11· ·some of the tenants but not all of them?
12· · · · · · · ·A.· ·I believe the leases were
13· ·structured that way, yeah.
14· · · · · · · ·Q.· ·Right, so -- and furthermore, as I
15· ·understand it, there would be an element of the
16· ·property tax which would not be directly
17· ·attributable to any particular tenant in the areas
18· ·such as the hallways, et cetera.· So there would be
19· ·some portion of the property tax, whether by
20· ·inability to pass it on through a particular lease
21· ·or otherwise, that the Corporation would still have
22· ·to pay without recompense, right?
23· · · · · · · ·A.· ·I should be -- yeah, I should be
24· ·careful there.· I'm trying to think back to the
25· ·leases.· Some of the leases we were unable to flow
·1· ·through the common area charges.· I believe some of
·2· ·the leases we could flow through the taxes, but not
·3· ·the common area charges.
·4· · · · · · · ·Q.· ·Right.
·5· · · · · · · ·A.· ·So I'm just trying -- I cannot
·6· ·remember about all of the leases.
·7· · · · · · · ·Q.· ·And I am not asking for --
·8· · · · · · · ·A.· ·Okay.
·9· · · · · · · ·Q.· ·-- an answer with respect to all.
10· ·But is it correct that you could flow through some
11· ·of the property tax but not all of it?
12· · · · · · · ·A.· ·I believe so, but I'm not one
13· ·hundred percent sure.
14· · · · · · · ·Q.· ·Okay.· And then in the last
15· ·sentence Ms. Guertin wrote:
16· · · · · · · · · "The City is well aware of our
17· · · · · · · ·desire and need to reduce the
18· · · · · · · ·assessment of this property and will
19· · · · · · · ·fully agree that we purchased the
20· · · · · · · ·property on the community's behalf."
21· · · · · · · ·Do you agree with that sentence, sir?
22· · · · · · · ·A.· ·That would have been -- well, "The
23· ·City is well aware of our desire and need to reduce
24· ·the assessment of this property", I'm not sure
25· ·about that.
·1· · · · · · · · · "[...] and will fully agree that
·2· · · · · · · ·we purchased the property on the
·3· · · · · · · ·community's behalf."
·4· · · · · · · ·I'm comfortable with the second part of
·5· ·it.
·6· · · · · · · ·I think what she was probably trying to
·7· ·say in the first part is we probably talked to the
·8· ·City that we are making an application for a
·9· ·reduction.
10· · · · · · · ·Q.· ·Had you told the Mayor that you
11· ·were doing that?
12· · · · · · · ·A.· ·I can't remember specifically, but
13· ·it wouldn't surprise me that it would come up in
14· ·discussions with a number of folks.
15· · · · · · · ·Q.· ·Was the Board aware at this time?
16· · · · · · · ·A.· ·That we were applying for a
17· ·re-assessment?
18· · · · · · · ·Q.· ·Yes.
19· · · · · · · ·A.· ·I don't know the answer.· It may
20· ·be in one of my notes somewhere, and when I say
21· ·"notes", my General Manager's Reports.
22· · · · · · · ·Q.· ·Okay, do you recall discussing
23· ·this with Mr. Bauthus?
24· · · · · · · ·A.· ·Not specifically, no.
25· · · · · · · ·Q.· ·If I could ask you to turn to tab
·1· ·194, sir, this is Exhibit No. 3254.· This is
·2· ·another excerpt from the City's resolution
·3· ·database, and it shows that on December the 20th,
·4· ·1999, City Council made a number of appointments.
·5· ·And if you go to the end of the second line, you
·6· ·can see that with respect to the Elliot Lake
·7· ·Retirement Living Board, the City appointed
·8· ·Mr. Farkouh and Mr. Croteau, so that after January
·9· ·1 of 1999 the City's representatives were those two
10· ·gentlemen; correct?
11· · · · · · · ·A.· ·I'm sorry, I'm a little out of
12· ·sequence.
13· · · · · · · ·Q.· ·Okay, if you go to the second
14· ·line, right at the end, the last four words, it
15· ·says:
16· · · · · · · · · "Elliot Lake Retirement Living
17· · · · · · · ·Board".
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And "G. Farkouh and T. Croteau"?
20· · · · · · · ·A.· ·1999?
21· · · · · · · ·Q.· ·At the end, this is December 20,
22· ·1999, so for 2000.· So starting January 1, 2000,
23· ·that is the --
24· · · · · · · ·A.· ·Okay, yes, okay.
25· · · · · · · ·Q.· ·-- the reps were Mr. Farkouh
·1· ·and --
·2· · · · · · · ·A.· ·Okay, yes, yes.· I'm mixed up in
·3· ·the years.· Yes, okay, yes.
·4· · · · · · · ·Q.· ·Thank you.· And if I could ask
·5· ·you, sir, to turn to tab 201, Exhibit No. 2215,
·6· ·this is minutes of a meeting of the Board of
·7· ·1309900 Ontario Limited, that is, NorDev, of
·8· ·February 18th, 2000, and resolution number 3 was,
·9· ·and I quote:
10· · · · · · · · · "That the Corporation negotiate a
11· · · · · · · ·market value of the mall to a
12· · · · · · · ·maximum of 4.6 Million for municipal
13· · · · · · · ·tax purposes with the City of Elliot
14· · · · · · · ·Lake."
15· · · · · · · ·MR. KEARNS:· Mr. Commissioner, an
16· ·objection on the grounds of relevance.· I don't
17· ·know how this information assists you in
18· ·determining the issue that is before you, which is
19· ·obviously the collapse of the mall.
20· · · · · · · ·We are now a year into our ownership,
21· ·and we are talking about municipal taxes.· I just
22· ·don't see how that helps you, neither did I see how
23· ·the last document helped you, but I just thought it
24· ·best to bring it up now because relevance is really
25· ·important.· We are a day and a half in now, and we
·1· ·just barely got the mall.
·2· · · · · · · ·THE COMMISSIONER:· Well, Mr. Doody will
·3· ·tell us, I am sure.
·4· · · · · · · ·MR. DOODY:· Mr. Commissioner, there are
·5· ·two issues to which this is relevant.
·6· · · · · · · ·The first is the information that the
·7· ·City had before it when it was negotiating with the
·8· ·mall -- sorry, with NorDev on the appropriate value
·9· ·for tax purposes of the mall.· And we have seen
10· ·that the City gave to -- sorry, we have seen that
11· ·NorDev gave to the property tax assessment
12· ·corporation a copy of the Nicholls Yallowega
13· ·Bélanger report and pointed out that that showed a
14· ·negative risk in terms of capital investment
15· ·required because of the parking deck issues.
16· · · · · · · ·And I'm interested in whether or not
17· ·the same report was provided to the City during the
18· ·negotiations over the appropriate value for
19· ·municipal tax purposes, and I am also interested in
20· ·this issue because it relates directly to the
21· ·amount of money that NorDev had available to it to
22· ·spend on capital improvements to the roof deck
23· ·which it chose not to do.
24· · · · · · · ·So for both those reasons, in my
25· ·respectful submission, this issue is relevant.
·1· · · · · · · ·THE COMMISSIONER:· Mr. Kearns, any
·2· ·reply?
·3· · · · · · · ·MR. KEARNS:· Well, certainly it would
·4· ·be of interest to the Commission if Retirement
·5· ·Living had provided or NorDev had provided to the
·6· ·City the NYB report or the Halsall Report.· I think
·7· ·that is something that you are interested in and
·8· ·that is an easy question that could be asked and
·9· ·answered.
10· · · · · · · ·With respect to the second one about
11· ·this connection, I have lost my track of what that
12· ·second one was --
13· · · · · · · ·THE COMMISSIONER:· The amount of money
14· ·available.
15· · · · · · · ·MR. KEARNS:· The amount of money
16· ·available, thank you, Mr. Commissioner.· We have
17· ·provided the consolidated financial reports and my
18· ·friend is going to be referring Mr. Kennealy and
19· ·Ms. Guertin to them, I'm sure, full financial
20· ·reports from both corporations for the entire
21· ·period of time that they owned the mall.
22· · · · · · · ·So I don't know that it is fair to say
23· ·that what Mr. Doody is after here is that
24· ·information.· I think he has just found a bone he
25· ·wants to chew on.
·1· · · · · · · ·THE COMMISSIONER:· Well, I can't see
·2· ·Mr. Doody going after a bone he wants to chew on
·3· ·strictly for his own personal purposes.
·4· · · · · · · ·I think that what he advances has at
·5· ·the very least marginal relevance to the issues
·6· ·being pursued by the Commission, and I am going to
·7· ·allow Mr. Doody to continue.· It may be a
·8· ·roundabout way of doing it, but nevertheless, I
·9· ·cannot at this juncture say with any definitive
10· ·certainty that this is not relevant and so I'm
11· ·going to allow him to continue.
12· · · · · · · ·BY MR. DOODY:
13· · · · · · · ·Q.· ·Okay, thank you, Mr. Commissioner.
14· · · · · · · ·Mr. Kennealy, this resolution was
15· ·passed; correct?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·And I see Mr. -- Mayor Farkouh and
18· ·Mr. Croteau abstained I assume because of the
19· ·potential conflict of interest, right?
20· · · · · · · ·A.· ·Hang on, does it actually state
21· ·that anywhere?
22· · · · · · · ·Q.· ·Well, it says they abstained --
23· · · · · · · ·A.· ·Okay.
24· · · · · · · ·Q.· ·-- at the bottom of the page?
25· · · · · · · ·A.· ·Okay, sorry, yes.
·1· · · · · · · ·Q.· ·In any event, who handled the
·2· ·negotiations with the City?
·3· · · · · · · ·A.· ·I'm just trying to think.
·4· ·Whenever you re-assessed your -- when we attempt to
·5· ·get re-assessment, I mean, the primary contact is
·6· ·always MPAC.
·7· · · · · · · ·Q.· ·And MPAC is --
·8· · · · · · · ·A.· ·I'm sorry --
·9· · · · · · · ·Q.· ·Just so we are clear --
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·-- MPAC is the present name of the
12· ·Ontario Property Assessment Corporation?· They
13· ·changed their name to the --
14· · · · · · · ·A.· ·The same folks, yes.
15· · · · · · · ·Q.· ·-- Ontario Municipal Assessment
16· ·Corporation?
17· · · · · · · ·A.· ·Yes, that's right, yes.· I'm just
18· ·bringing back to mind any time we go through a
19· ·process with them, you deal with them sort of
20· ·initially.· Sometimes they -- you know, I'm
21· ·thinking of what I have seen them do.· Sometimes
22· ·they try and bring the three parties together.
23· · · · · · · ·Q.· ·The three parties being?
24· · · · · · · ·A.· ·The municipality themselves and
25· ·the applicant.
·1· · · · · · · ·Q.· ·The property owner?
·2· · · · · · · ·A.· ·Yeah, sometimes they encourage
·3· ·transactional stuff or discussions, but sort of it
·4· ·is a three-way discussion.
·5· · · · · · · ·Could you ask me your question again,
·6· ·sir?
·7· · · · · · · ·Q.· ·Who handled the negotiations with
·8· ·the City?
·9· · · · · · · ·A.· ·Yeah, it would have -- well, if
10· ·there were discussions with the City, and you know,
11· ·I just can't recall, there must have been, but it
12· ·would either be myself or Ms. Guertin would have
13· ·had discussions, or both of us.
14· · · · · · · ·Q.· ·Do you recall those discussions?
15· · · · · · · ·A.· ·No.
16· · · · · · · ·Q.· ·Did you provide the Nicholls
17· ·Yallowega Bélanger report or either of the Halsall
18· ·Reports to the City in the course of negotiations?
19· ·Did you either do that directly or direct
20· ·Ms. Guertin or somebody else to do that?
21· · · · · · · ·A.· ·Not that I recall, no.
22· · · · · · · ·Q.· ·Okay.· Can you tell me why, if the
23· ·Nicholls Yallowega Bélanger report was thought
24· ·relevant to the initial application to the property
25· ·assessment corporation, it would not have been part
·1· ·of the discussions and negotiations with the City?
·2· · · · · · · ·A.· ·I can't -- I mean, I just cannot
·3· ·recall.
·4· · · · · · · ·Q.· ·Sir, obviously the question of the
·5· ·people to whom these reports were shown is of
·6· ·interest in these proceedings, and I'm going to ask
·7· ·you this question because I think it needs to be
·8· ·asked.· To your knowledge, was there any concern on
·9· ·the part of you or anybody else at Retirement
10· ·Living or NorDev about the risk of an order being
11· ·issued by the City under the Property Standards
12· ·By-Law if they saw these reports?
13· · · · · · · ·A.· ·No, that would not have crossed --
14· ·no, absolutely not.
15· · · · · · · ·Q.· ·Was there ever any discussion
16· ·about that --
17· · · · · · · ·A.· ·No.
18· · · · · · · ·Q.· ·-- to which you are aware?
19· · · · · · · ·A.· ·No, absolutely not.
20· · · · · · · ·Q.· ·If I could take you to the page
21· ·that ends 020 in this Exhibit No. 2215 at tab 201,
22· ·and this is the financial statements for NorDev
23· ·Group for the year ending December 31, 1999, and
24· ·that is a stub year, right?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·Because you started operations
·2· ·when you bought the mall, which would have been --
·3· ·well, it was June, so this is about half a year,
·4· ·right?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·And it shows actual, and this is
·7· ·subject to audit, but actual net income of $147,000
·8· ·as compared to budget or what you had predicted of
·9· ·$100,000, right?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·So you had had a good start to the
12· ·business?
13· · · · · · · ·A.· ·Yes, based on what we had thought,
14· ·yes.
15· · · · · · · ·Q.· ·If I could ask you to turn to tab
16· ·213, sir, Exhibit No. 2221, and these are the
17· ·minutes of a meeting of the Board of Directors of
18· ·NorDev of May 29th, 2000, and under the -- on the
19· ·next page is your report, sir, under the heading
20· ·"General Manager's Comments".· And first of all,
21· ·with respect to the issue of taxes, under the
22· ·heading "Taxes" two-thirds of the way down the page
23· ·it says:
24· · · · · · · · · "We and the City have signed
25· · · · · · · ·minutes of settlement on the
·1· · · · · · · ·appraised value of the Mall/Hotel.
·2· · · · · · · ·The value will be dropped from 8.2
·3· · · · · · · ·million to 4.3 million."
·4· · · · · · · ·Does this refresh your memory with
·5· ·respect to the negotiations with the City which
·6· ·took place over the intervening four months and
·7· ·resulted in these minutes of settlement?
·8· · · · · · · ·A.· ·Not -- no.
·9· · · · · · · ·Q.· ·Do you --
10· · · · · · · ·A.· ·We obviously were successful in
11· ·working through getting the assessment down.
12· · · · · · · ·Q.· ·And this minutes of settlement
13· ·would have had to then be approved by MPAC, right?
14· · · · · · · ·A.· ·I believe -- yes, I believe so,
15· ·yeah.
16· · · · · · · ·Q.· ·And were you involved in that at
17· ·all?
18· · · · · · · ·A.· ·I can't remember, sir --
19· · · · · · · ·Q.· ·Okay.
20· · · · · · · ·A.· ·-- in terms of specific.
21· · · · · · · ·Q.· ·Did you -- you had received the
22· ·appraisal from Mr. Shamess of a 5.8 million dollar
23· ·market value.· Did you disclose this to the City
24· ·during the course of these negotiations?
25· · · · · · · ·A.· ·I can't remember.
·1· · · · · · · ·Q.· ·There is a significant difference,
·2· ·you'll agree, between that appraisal and the
·3· ·signed --
·4· · · · · · · ·A.· ·The purchase price.
·5· · · · · · · ·Q.· ·And between the minutes of
·6· ·settlement with the City?
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·Did you have any discussion with
·9· ·Ms. Guertin or with anybody else about whether the
10· ·market value appraisal ought to be provided to the
11· ·City?
12· · · · · · · ·A.· ·I can't recall any discussion.
13· · · · · · · ·Q.· ·And, sir, if I could ask you to
14· ·turn to tab 362, and this is in Volume 7, I
15· ·believe.
16· · · · · · · ·A.· ·You said Volume 7?
17· · · · · · · ·Q.· ·Volume 7.· Do you have Volume 7?
18· ·I think you do.
19· · · · · · · ·A.· ·No, I do not.
20· · · · · · · ·THE COMMISSIONER:· Mr. Registrar, can
21· ·you put that over on the --
22· · · · · · · ·THE WITNESS:· That is okay.
23· · · · · · · ·MR. DOODY:· And it is Exhibit No. 2305.
24· · · · · · · ·THE COMMISSIONER:· I'm sorry, do you
25· ·have it, sir?
·1· · · · · · · ·THE WITNESS:· Yes, thank you.· It was
·2· ·which number again?
·3· · · · · · · ·BY MR. DOODY:
·4· · · · · · · ·Q.· ·362.
·5· · · · · · · ·A.· ·Okay, yes.
·6· · · · · · · ·Q.· ·And if you turn in to the page
·7· ·that ends .0040, we have a document which says "As
·8· ·provided by the City of Elliot Lake" showing the
·9· ·1997 property taxes of Algo Centre and they show
10· ·total taxes for 1997 of $458,000, correct, in the
11· ·bottom right-hand corner?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·And if you turn to the next page,
14· ·page 0041, you can see this document shows the
15· ·original market value assessment of $8,425,000 and
16· ·the 2003 market value assessment of 4.48 million
17· ·dollars, a reduction of 47 percent, right?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And if you turn to the next page,
20· ·you can see then the calculation of the maximum
21· ·property taxes in 2003, after the reduction of the
22· ·bottom right-hand corner, $253,000, right?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·So this negotiated reduction in
25· ·the assessment resulted in a savings of about
·1· ·$200,000 a year in property taxes?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·Returning to tab 213, that is
·4· ·Exhibit No. 2221, at the bottom of the page that we
·5· ·are looking at, the one that ends .055, under the
·6· ·heading "Capital Investment", and this would be as
·7· ·at May 29th, 2000, you report to the Board that to
·8· ·that date the Corporation had made capital
·9· ·expenditures and commitments valued at $173,000,
10· ·and those are outlined in the document as $73,000
11· ·in planning work, $40,000 to replace the cooling
12· ·tower, work on the front entrance for IGA, which
13· ·would be split with IGA, and $50,000 for a new
14· ·floor in IGA.
15· · · · · · · ·And if you turn the page, you can see
16· ·that the other items to come in respect of capital
17· ·expenditures were the balance of the cooling tower
18· ·of $25,000, expenditures related to the move of the
19· ·dentist's office and a contribution to ADSAB -- and
20· ·that is the Algoma District Social Assistance
21· ·Board?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·The move and the lease of
24· ·$120,000.· So those were the capital expenditures
25· ·which were made and planned as at this stage, which
·1· ·was a year after you had owned the mall, right?
·2· · · · · · · ·A.· ·Yes, they would be a
·3· ·representation, yes.
·4· · · · · · · ·Q.· ·And if you turn to the first -- to
·5· ·the page prior to the one ending in .055 again,
·6· ·flip back one page -- no, the next page, Ms. Kuka,
·7· ·thank you.· Under the heading "Financial
·8· ·Performance" you reported to the Board that:
·9· · · · · · · · · "To the end of April of 2000,
10· · · · · · · ·NorDev has achieved $127,116 in
11· · · · · · · ·operating profit versus our business
12· · · · · · · ·plan projection of $101,801.
13· · · · · · · ·Revenues were $79,000 better than
14· · · · · · · ·plan."
15· · · · · · · ·So you were continuing to do well?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·If I could ask you to, sir, move
18· ·to Volume 5 and Exhibit No. 680 at tab 239, and
19· ·these are the financial statements of NorDev for
20· ·the year ending December 31, 2000.
21· · · · · · · ·If you turn to the page which ends
22· ·1451 -- and it is two more pages on, Ms. Kuka,
23· ·thank you -- this shows the net earnings before
24· ·taxes but after interest and amortization, net
25· ·earnings of $233,000; correct?
·1· · · · · · · ·A.· ·Which year are you looking at?
·2· · · · · · · ·Q.· ·2000.· So it is the last line --
·3· ·it is the second-last line on the screen, and it
·4· ·says "Net earnings before undernoted", $233,000 --
·5· · · · · · · ·A.· ·And what is the undernoted again?
·6· · · · · · · ·Q.· ·The undernoted, if you could bring
·7· ·that up, is a proportionate share of loss in equity
·8· ·investment.
·9· · · · · · · ·A.· ·Okay.
10· · · · · · · ·Q.· ·It looks like you had made an
11· ·investment in something that had not turned out
12· ·well.· But for operating purposes, your net
13· ·earnings before taxes were $233,000, right?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·And your retained earnings, if you
16· ·go to the very bottom of the page of that column
17· ·2000, your retained earnings in NorDev at the end
18· ·of 2000 were $322,000?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·If you could turn to tab 241,
21· ·which is Exhibit No. 2243?
22· · · · · · · ·A.· ·Which tab did you say it was?
23· · · · · · · ·Q.· ·241.
24· · · · · · · ·A.· ·Okay.
25· · · · · · · ·Q.· ·Exhibit No. 2243.· This is a
·1· ·meeting of the Board of Directors of Retirement
·2· ·Living and NorDev, a joint meeting.· The Boards
·3· ·were the same, right?
·4· · · · · · · ·A.· ·The same individuals, yes.
·5· · · · · · · ·Q.· ·Yes, on February 13th, 2001, and
·6· ·if you turn to the page that ends 029, that is at
·7· ·the fifth page of the document, there is a
·8· ·resolution which was moved by Mr. Farkouh and
·9· ·carried:
10· · · · · · · · · "That the General Manager proceed
11· · · · · · · ·with a proposal to Zellers,
12· · · · · · · ·including a $900,000.00 incentive,
13· · · · · · · ·conditional upon negotiating a
14· · · · · · · ·settlement with Saans, satisfactory
15· · · · · · · ·to the Board."
16· · · · · · · ·And that was passed, right?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And I understand what that was
19· ·about was NorDev wanted to move Zellers in and that
20· ·required moving the SAANs store, and what you were
21· ·proposing was that you provide Zellers with an
22· ·inducement to pay for the cost of the tenant
23· ·fit-ups which would have been a capital
24· ·expenditure; correct?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And that was approved by the
·2· ·Board, right?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·THE COMMISSIONER:· What is the date of
·5· ·that?
·6· · · · · · · ·BY MR. DOODY:
·7· · · · · · · ·Q.· ·That was February 2001.
·8· · · · · · · ·And ultimately, that capital investment
·9· ·was made; correct?
10· · · · · · · ·A.· ·Yes, it was.
11· · · · · · · ·Q.· ·And was it 900 or a million?
12· · · · · · · ·A.· ·It was -- god, I remember it took
13· ·us a year, almost two years to get it done.· It was
14· ·$900,000 was the incentive.· We also had to I
15· ·believe help them out on an elevator they wanted to
16· ·put in, and then we had to separately negotiate
17· ·with SAAN, which was Gendis, an arrangement to move
18· ·them out of the space and put them into another
19· ·space and --
20· · · · · · · ·Q.· ·Which required another capital
21· ·expenditure?
22· · · · · · · ·A.· ·It was a very difficult process,
23· ·yes.
24· · · · · · · ·Q.· ·And the million dollars -- sorry,
25· ·Retirement Living loaned Devco -- sorry, NorDev a
·1· ·million dollars and took back a second mortgage for
·2· ·that, right?
·3· · · · · · · ·A.· ·Yes --
·4· · · · · · · ·Q.· ·Well, not a second mortgage --
·5· · · · · · · ·A.· ·We added on to the mortgage, and I
·6· ·believe at that time we also took in another
·7· ·million from RBC --
·8· · · · · · · ·Q.· ·Right.
·9· · · · · · · ·A.· ·-- at the same period, yes, took
10· ·on another million from them in debt.
11· · · · · · · ·Q.· ·If I could ask you to turn to tab
12· ·243, sorry, and this is Exhibit No. 1613, and this
13· ·is the consolidated financial statements of both --
14· ·that is consolidated both Retirement Living and
15· ·NorDev for the year ended December 31, 2000.· And
16· ·if you go to -- if you go to the fifth page, sir,
17· ·it is the page numbered -- the number at the bottom
18· ·of the page is 1, but it is headed -- that's it.
19· · · · · · · ·If you look at the very top, there
20· ·are -- these are the consolidated assets of both
21· ·corporations; correct?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And there are current assets of
24· ·2.7 million at the end of 2000, right?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And that those current assets were
·2· ·almost entirely, at least 2.4 million of them, cash
·3· ·and liquidable investments?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And if you turn to tab 246,
·6· ·Exhibit No. 2246, this is a Board of Directors
·7· ·meeting of NorDev of April 26, 2001.· And if you
·8· ·turn to the page which ends .034, that is about
·9· ·three pages in, under "General Manager's
10· ·Comments" -- no, the page prior, Ms. Kuka -- that
11· ·is it.· Under the heading "Zellers/SAAN Deals" you
12· ·outline what you have been doing with the
13· ·Zellers/SAAN and the structure of the deal is
14· ·outlined, that is, that there will be a lump sum
15· ·allowance of $900,000 and some obligations on
16· ·Zellers with respect to staying and paying back
17· ·some portion of the allowance if they move early.
18· · · · · · · ·And then on the last -- on the second
19· ·page -- sorry, the next page under the heading
20· ·"SAAN" you outline the negotiations you were having
21· ·with SAAN and they involved the lump sum payment of
22· ·$400,000 and relocation; correct?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And so this is the capital
25· ·expenditures that the Board had decided to make and
·1· ·you were proceeding with at that time?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·THE COMMISSIONER:· Just as a matter of
·4· ·interest, sir, what was SAAN?· I have no idea what
·5· ·that is.
·6· · · · · · · ·THE WITNESS:· SAAN were owned by a
·7· ·company called Gendis, Mr. Commissioner, out of
·8· ·Winnipeg.· They were a -- the best way to describe
·9· ·them was a junior department store, and the reason
10· ·we were so keen to get Zellers is the best way I
11· ·can describe it is that SAAN was in a 55,000 square
12· ·foot area in the store, but they were more
13· ·accustomed to a 15 to 20,000 square foot.· They
14· ·were a smaller operator.· They had very limited
15· ·selection, and one of the problems we had in the
16· ·community was that people wanted more options and
17· ·Zellers was the best one by far.
18· · · · · · · ·THE COMMISSIONER:· All right, thank
19· ·you.
20· · · · · · · ·BY MR. DOODY:
21· · · · · · · ·Q.· ·If I could ask you to turn to tab
22· ·257, Exhibit No. 2253.· This is the minutes of a
23· ·Board of Directors meeting of NorDev of October the
24· ·18th, 2001, and on the next page, the page ending
25· ·.040, your report under the heading "Financial
·1· ·Results, Operating", you wrote:
·2· · · · · · · · · "As of September 30th, we have
·3· · · · · · · ·achieved $422,541.00 in operating
·4· · · · · · · ·profit versus our Business Plan
·5· · · · · · · ·projection of $289,651.00.· These
·6· · · · · · · ·results are driven by higher than
·7· · · · · · · ·forecast revenues from the Mall and
·8· · · · · · · ·Hotel/Lodge."
·9· · · · · · · ·And so you were continuing to do well
10· ·in 2001?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·And under the heading "Capital"
13· ·you outline the investments which NorDev had made
14· ·in capital projects, and you indicate that you had
15· ·invested $691,000 into capital projects, including
16· ·the food court at $81,000 and the SAAN buy-out at
17· ·$475,000, and that that includes physical work and
18· ·new seating in the food court and tables for 100
19· ·individuals and that, in addition to that, you
20· ·still had to pay out $945,000 to Zellers which
21· ·includes your portion of the elevator.· And you
22· ·note, quote:
23· · · · · · · · · "The only project not yet
24· · · · · · · ·implemented which was in our
25· · · · · · · ·original Business Plan and cash flow
·1· · · · · · · ·is the remodelling of one floor of
·2· · · · · · · ·the Hotel.· I have deliberately
·3· · · · · · · ·delayed on this action to allow some
·4· · · · · · · ·time to pass, in case of any
·5· · · · · · · ·unforeseen occurrences."
·6· · · · · · · ·So that was the capital expenditures
·7· ·which you had made in comparison to what you had
·8· ·predicted when you bought the mall, right?
·9· · · · · · · ·A.· ·Yes.
10· · · · · · · ·Q.· ·And, sir, would I be correct in
11· ·concluding that at least at this stage NorDev had
12· ·made decisions as to where it would spend its
13· ·capital and it had decided to spend what capital it
14· ·had available to it in the areas we have seen,
15· ·rather than spend them in making capital
16· ·improvements on the roof deck?· That was a decision
17· ·that the company made?
18· · · · · · · ·A.· ·We had made a decision to manage
19· ·it in the manner we did, yes.
20· · · · · · · ·Q.· ·Thank you.· If I could take you to
21· ·tab 262, which is Exhibit No. 2257.· This is the
22· ·annual meeting of both NorDev and Retirement Living
23· ·on February 7th, 2002, and if I could take you to
24· ·the page which ends in .014, this is your report to
25· ·the Corporations in respect of NorDev Group and
·1· ·2001 in review and under the heading "Operating
·2· ·Profit" you reported that NorDev had achieved
·3· ·$442,199 in operating profit versus the business
·4· ·plan forecast of $362,477, and again, you were
·5· ·continuing to do well?
·6· · · · · · · ·A.· ·We were ahead of our plan, yes.
·7· · · · · · · ·Q.· ·And if you go down to the bottom
·8· ·of the page under "Capital Investment", you write:
·9· · · · · · · · · "You will recall, we estimated
10· · · · · · · ·that NorDev would require 2 million
11· · · · · · · ·in additional financing to complete
12· · · · · · · ·all development activities through
13· · · · · · · ·the course of 2001.· Of these
14· · · · · · · ·required funds, we have used
15· · · · · · · ·$1,720,117.· Details of these
16· · · · · · · ·investments is included in this
17· · · · · · · ·package.· The balance of these funds
18· · · · · · · ·will be used in the following areas
19· · · · · · · ·in 2002:
20· · · · · · · · · "Rehab of Hotel.
21· · · · · · · · · ·Other capital projects including
22· · · · · · · ·possible new tenants."
23· · · · · · · ·And that was what you had recommended
24· ·to the Board, and that was what in fact happened;
25· ·correct?
·1· · · · · · · ·A.· ·I am assuming that that's what we
·2· ·ended up doing, yes.
·3· · · · · · · ·Q.· ·And if you turn to the page that
·4· ·ends in .034, under the heading "Action Plan,
·5· ·Leasing" you then have a list of ten steps which
·6· ·you intended to take with respect to the NorDev
·7· ·business over the next ten years -- sorry, the next
·8· ·year particularly related to leasing, and there is
·9· ·no suggestion in there that any monies be spent
10· ·with respect to the roof; correct?
11· · · · · · · ·A.· ·There is nothing listed there,
12· ·yes.
13· · · · · · · ·Q.· ·And if I could take you back to
14· ·the page that ends .006, under the heading "2002
15· ·NorDev Business Plan" it says this:
16· · · · · · · · · "Mr. Farkouh presented the City's
17· · · · · · · ·plans for a golf course, and
18· · · · · · · ·requested that Elliot Lake
19· · · · · · · ·Retirement Living/NorDev make a
20· · · · · · · ·commitment in principal towards
21· · · · · · · ·support of the initiative.· The
22· · · · · · · ·amount being requested was $1.1M of
23· · · · · · · ·the $3.5M estimated costs, and also
24· · · · · · · ·a commitment to NorDev's management
25· · · · · · · ·of the facility once built.· After
·1· · · · · · · ·full discussion" and then the
·2· · · · · · · ·resolution was:
·3· · · · · · · · · "That the Board supports in
·4· · · · · · · ·principal, a significant
·5· · · · · · · ·contribution in 2004/2005 to the
·6· · · · · · · ·construction of a municipal golf
·7· · · · · · · ·course, provided that projected
·8· · · · · · · ·surplus funds exist, and that a
·9· · · · · · · ·viable business plan is in place for
10· · · · · · · ·the project, and therefore instructs
11· · · · · · · ·the General Manager and staff to
12· · · · · · · ·report back with recommendations for
13· · · · · · · ·action at the next meeting or
14· · · · · · · ·earlier if necessary for direction."
15· · · · · · · ·And that was carried; correct?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·And how much ultimately was
18· ·invested by way of capital investment, not a loan
19· ·but a capital investment in the golf course?
20· · · · · · · ·A.· ·I believe until opening in the 1.4
21· ·to 1.5 range.
22· · · · · · · ·Q.· ·Okay.
23· · · · · · · ·A.· ·Million.
24· · · · · · · ·Q.· ·Thank you.· If I could ask you to
25· ·turn to tab 267, this is Exhibit No. 2259.· These
·1· ·are the minutes of a Board meeting of September
·2· ·26th, 2002, of the Boards of both companies.· And
·3· ·at the page that ends .064 we have your report
·4· ·which was that under the heading "Operating":
·5· · · · · · · · · "As of August 31st NorDev is ahead
·6· · · · · · · ·of plan from an operating
·7· · · · · · · ·perspective.· The $24,000 better
·8· · · · · · · ·than plan performance [year to date]
·9· · · · · · · ·is driven by lower than plan
10· · · · · · · ·expenditures with slightly lower
11· · · · · · · ·than anticipated revenues."
12· · · · · · · ·So the company continued to out-perform
13· ·expectations?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·And under the heading "Capital
16· ·Investment" you outline the capital investments
17· ·which were being made in 2002, and you indicate
18· ·that you had completed the renovation of the
19· ·hotel's third floor, including the new Retirement
20· ·Living customer lounge, and you indicate that you
21· ·had begun to make investments into the cosmetic
22· ·appearance of Denison House.· And Denison House is
23· ·a lodge just north of town which NorDev had
24· ·purchased; correct?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And those were the capital
·2· ·investments which had been made and were underway
·3· ·at that time?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·Sir, in 2002 how were the leaks?
·6· · · · · · · ·A.· ·In 2002?· I'm just trying to
·7· ·recall.· I don't recall any major issues.· I
·8· ·believe we were doing quite well with the
·9· ·maintenance of the deck.
10· · · · · · · ·Q.· ·And --
11· · · · · · · ·A.· ·We might have some issues, but
12· ·generally it was going quite well, I believed.
13· · · · · · · ·Q.· ·If I could take you to tab 269,
14· ·which is Exhibit No. 11-13, this is a letter dated
15· ·November 22, 2002, to you from Ms. Fazekas, the
16· ·librarian?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And she wrote, and I quote:
19· · · · · · · · · "The Library Board has asked me to
20· · · · · · · ·write another letter of complaint
21· · · · · · · ·regarding the deplorable condition
22· · · · · · · ·of the ceiling over the Library
23· · · · · · · ·space.
24· · · · · · · · · ·Considerable money and effort
25· · · · · · · ·were expended to paint our premises
·1· ·in September.· However, our site can
·2· ·never look attractive given the
·3· ·state of the ceiling and
·4· ·concomitantly, the look of the
·5· ·library with plastic covering over
·6· ·the book shelves, drip buckets in
·7· ·the aisles to protect the rug and
·8· ·gaps in the ceiling where tiles have
·9· ·become so water laden that they have
10· ·fallen on the floor.· Fortunately,
11· ·no patron or staff member has been
12· ·hit by one of these yet!
13· · · ·You may not be aware that many of
14· ·your potential clients often come to
15· ·the Library while waiting for
16· ·Retirement Living tours, or before
17· ·or after visiting your office.· Is
18· ·this the impression of your values
19· ·as a landlord that you want these
20· ·people to have?
21· · · ·As I sit at my computer to write
22· ·this letter, I am listening to the
23· ·drips in the ceiling, wondering when
24· ·the ceiling tile will fall on my
25· ·head."
·1· · · · · · · ·Do you recall getting this letter, sir?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·Was it a surprise to you that the
·4· ·library was complaining of constant leaks?
·5· · · · · · · ·A.· ·Was it a surprise?· The library
·6· ·was a frustrating problem.· It was one that came up
·7· ·a number of times.· It was a tough one to solve
·8· ·partially I think because of where it was located
·9· ·and it was on the -- just off the North Hillside
10· ·ramp.· This particular one, I think it was, it was
11· ·in the fall, and if we had a problem with the
12· ·library, it was more common that we would have a
13· ·problem with it in the spring after the snow melt.
14· · · · · · · ·But we would have dealt with this as
15· ·best we could at that time and --
16· · · · · · · ·Q.· ·Did you --
17· · · · · · · ·A.· ·And we would have -- I passed
18· ·it -- I notice there is a note, I would have passed
19· ·it on and I know Mr. Quinn would have been involved
20· ·in getting on top of it and understanding what was
21· ·going on and trying to rectify it as quickly as we
22· ·could.
23· · · · · · · ·Q.· ·Did you know that there was
24· ·plastic covering over the bookshelves and drip
25· ·buckets in the aisles to protect the rug and gaps
·1· ·in the ceiling where tiles had become so
·2· ·water-laden that they had fallen on the floor?· Did
·3· ·you know that?
·4· · · · · · · ·A.· ·If Ms. Fazekas was saying that,
·5· ·then that is what happened.
·6· · · · · · · ·Q.· ·Did you know that at the time
·7· ·before you got the letter?
·8· · · · · · · ·A.· ·Before I got the letter?
·9· · · · · · · ·Q.· ·Yes.
10· · · · · · · ·A.· ·Not in this particular situation,
11· ·no.· She brought it to my attention.
12· · · · · · · ·Q.· ·You said that the library was a
13· ·particular problem.· At this stage, sir, you had
14· ·owned the mall for three and a half years.· Did you
15· ·at any time consider going back to the advice you
16· ·had received from Halsall and Nicholls Yallowega
17· ·Bélanger in considering whether, since there were
18· ·continuing problems, you ought to revisit the idea
19· ·of putting a membrane in place?
20· · · · · · · ·A.· ·No, we did not.· We actually
21· ·believed we were doing quite well with maintaining
22· ·the deck.· That was our perception at the time.
23· · · · · · · ·Q.· ·Did that continue to be your
24· ·perception after you got this letter?
25· · · · · · · ·A.· ·Well, in the sense that maybe --
·1· ·and I did not a very good job yesterday of trying
·2· ·to express something, and I am going to try it
·3· ·again, maybe to express it better.
·4· · · · · · · ·The business that I am in on call it
·5· ·the residential side of our business, and it is not
·6· ·that dissimilar, you know, in this situation, one
·7· ·of the measures is how your customers communicate
·8· ·with you.· It tells you something about how you are
·9· ·doing.
10· · · · · · · ·Over the years, in the mall I got to
11· ·know many of the business operators, the people
12· ·that managed the businesses, the people that owned
13· ·the businesses.· And you know, over the period that
14· ·we owned the mall, there are only two or three
15· ·times that one of those managers of a business or
16· ·an owner of a business actually sent me something
17· ·in writing to my attention.
18· · · · · · · ·And the reason I was trying to
19· ·communicate that yesterday is that they knew me.· I
20· ·talked to a number of those folks on a regular
21· ·basis.· And a good example of that, to try and make
22· ·the point and try and give you an understanding, is
23· ·the fellow that ran Zellers, Mr. Wake, Roger Wake.
24· ·We were quite anxious always to know how the
25· ·Zellers store was doing and he would -- and they
·1· ·were not allowed to share their information as
·2· ·smaller retailers could.· And he would come and see
·3· ·me pretty much on a monthly basis and let me
·4· ·quietly know how he was doing in terms of his sales
·5· ·volume.· And we had a good relationship, and over
·6· ·all the years that I met with him, Roger never
·7· ·really raised anything with me of any significance
·8· ·in terms of any kind of leak problems.
·9· · · · · · · ·So it wasn't many times that a customer
10· ·would come directly to me.· They knew I was there.
11· ·They knew I was involved in the business, and if
12· ·they felt strongly -- now, that may be a statement
13· ·of how well Mr. Quinn responded to any issues that
14· ·they had, okay, but it was also an indicator to me.
15· ·And I tried to mention earlier that the library was
16· ·a difficult one for us.· It was a very frustrating
17· ·one, and we responded as quickly and as well as we
18· ·could.
19· · · · · · · ·But it was a tough one, and I just
20· ·wanted to try and get across the point that the
21· ·customers were not coming to me directly telling me
22· ·that they had a lot of difficulty with leaks.· And
23· ·again, that could be a reflection of the kind of
24· ·job that Mr. Quinn and his crew were doing and that
25· ·they were dealing with them promptly and quickly.
·1· ·But my sense of how we were doing and I know
·2· ·Mr. Quinn's sense of how we were doing was that we
·3· ·were doing a good job in managing and responding to
·4· ·what the customers were asking us to do.
·5· · · · · · · ·Q.· ·Were you doing a good job in
·6· ·keeping the library dry?
·7· · · · · · · ·A.· ·I tried to indicate earlier it was
·8· ·a frustrating one; it was a hard one.
·9· · · · · · · ·Q.· ·It wasn't working, was it?
10· · · · · · · ·A.· ·It was tough.
11· · · · · · · ·Q.· ·It wasn't working, was it?
12· · · · · · · ·A.· ·Most of the problems with the
13· ·library would occur in the spring if they were
14· ·going to happen.· You know, there is a -- you know,
15· ·I'm sure you are going to get to it, but there was
16· ·a problem later on in '05, that was raised in the
17· ·June '05 time frame, and you know, apparently, you
18· ·know, there were some meetings that occurred.· But
19· ·I know in that case we dealt with the problem, the
20· ·immediate problem fairly quickly, and by the time
21· ·that the meetings occurred, things were on -- I
22· ·think on the right track.
23· · · · · · · ·And I am trying to answer your question
24· ·in terms of what my perception was of how we were
25· ·doing with the leaks, with the leaks and the
·1· ·parking deck, and I believe we were doing very,
·2· ·very well.
·3· · · · · · · ·Q.· ·Mr. --
·4· · · · · · · ·A.· ·And I would use my customers as a
·5· ·measure and will -- you know, it was never a
·6· ·hundred percent.· Will we -- would we have problems
·7· ·like this?· Yes.
·8· · · · · · · ·Q.· ·But the library was not one of
·9· ·those customers that told you you were doing very,
10· ·very well?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·Can we agree on that?
13· · · · · · · ·A.· ·Yes, we can, yes.
14· · · · · · · ·Q.· ·Okay.· Sir, you were in the
15· ·residential housing rental market, right?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·That is the mainstay of your
18· ·business?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·You have been doing that for now
21· ·nigh on 20 years?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And you have done very, very well
24· ·in that business; correct?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And if one of your residential
·2· ·tenants was telling you that they had to
·3· ·continually put tarp over their furniture and
·4· ·buckets in the house because it continually leaked,
·5· ·would you not, sir, fix it?
·6· · · · · · · ·A.· ·We would do everything in our
·7· ·power to fix it.
·8· · · · · · · ·Q.· ·And if it continued to leak when
·9· ·you were simply trying -- when you were attempting
10· ·to merely patch the leaks, would you not go to a
11· ·professional and ask for advice on how to change
12· ·what you had been doing so that tarps were no
13· ·longer and buckets were no longer required?
14· · · · · · · ·A.· ·We thought we were doing quite
15· ·well, Mr. Doody.· I understand you --
16· · · · · · · ·Q.· ·No, but listen, sir, with respect
17· ·the question was --
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·-- would you not, if you had a
20· ·similar situation with one of your residential
21· ·housing units where the tenant was making similar
22· ·complaints that over a number of years they had had
23· ·to have tarps and buckets, would you not seek
24· ·advice as to how to change what you had been doing
25· ·to try and stop the leaks?
·1· · · · · · · ·A.· ·If I was unable to satisfy the
·2· ·customer, I would try and do whatever I could to
·3· ·satisfy them.
·4· · · · · · · ·Q.· ·And you never satisfied Ms.
·5· ·Fazekas, did you?
·6· · · · · · · ·A.· ·It would appear not.
·7· · · · · · · ·Q.· ·Did you seek advice from a
·8· ·professional as to how to do something different
·9· ·than what you had been doing?
10· · · · · · · ·A.· ·At that point, no, we did not.
11· · · · · · · ·Q.· ·Did you ever?
12· · · · · · · ·A.· ·I'm trying to think if we ever.· I
13· ·believe we just continued to work very hard at
14· ·doing what we were doing.
15· · · · · · · ·Q.· ·If I could ask you to turn to tab
16· ·273, sir, and this is Exhibit No. 2262, and it is
17· ·the Retirement Living non-consolidated financial
18· ·statements for the year ended December 31, 2002, so
19· ·in other words, just Retirement Living, not NorDev?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And if you turn to the page that
22· ·ends .006, you can see the profit, although it is
23· ·not called profit because it is a not-for-profit,
24· ·the excess of revenue over expenses.· In 2002
25· ·Retirement Living had an excess of revenue over
·1· ·expenses of $612,000 and in 2001 an excess of
·2· ·revenue over expenses of $1,002,830; correct?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·And if you go back to the page
·5· ·ending 004, you can see that the current assets as
·6· ·at the end of 2002, that is almost entirely cash
·7· ·and investments, 2.4 million dollars and the
·8· ·previous year just slightly less; correct?
·9· · · · · · · ·A.· ·Yes.
10· · · · · · · ·Q.· ·If I could ask you to turn to tab
11· ·276, sir, and this is Exhibit No. 2265, and this is
12· ·an e-mail, sir, to Troy Speck who at that time was
13· ·the Chief Administrative Officer of the City;
14· ·correct?
15· · · · · · · ·A.· ·Yes.
16· · · · · · · ·Q.· ·And copied to Mayor Farkouh dated
17· ·February 24th, 2003, and the subject line is
18· ·"Financial Status of ELRL and NorDev", and
19· ·Mr. Kukoraitis, the author -- and am I pronouncing
20· ·his name correctly?
21· · · · · · · ·A.· ·Kukoraitis.
22· · · · · · · ·Q.· ·Kukoraitis, Mr. Kukoraitis was the
23· ·Treasurer, right, City Treasurer?
24· · · · · · · ·A.· ·Yes.
25· · · · · · · ·Q.· ·He writes:
·1· · · · · · · · · "After taking some time to think
·2· · · · · · · ·about the Thursday presentation by
·3· · · · · · · ·ELRL in regards to their and
·4· · · · · · · ·NorDev's financial picture [...]"
·5· · · · · · · ·And I stop there.· Do you recall making
·6· ·a financial presentation in February of '03 to the
·7· ·City about the financial situation at your
·8· ·companies?
·9· · · · · · · ·A.· ·I don't recall it specifically,
10· ·but it would not be that uncommon a practice.
11· · · · · · · ·Q.· ·It is something that you did from
12· ·time to time?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·Mr. Kukoraitis goes on to say:
15· · · · · · · · · "[...] it would be my strong
16· · · · · · · ·suggestion that we ask these
17· · · · · · · ·organizations to provide us with
18· · · · · · · ·financial statements on a
19· · · · · · · ·consolidated basis, if they do so.
20· · · · · · · ·If not, separate statements but with
21· · · · · · · ·identified intercompany
22· · · · · · · ·transactions.· This could possibly
23· · · · · · · ·assist us in finding out the true
24· · · · · · · ·financial picture of both ELRL and
25· · · · · · · ·NorDev since every presentation is
·1· · · · · · · ·about cash flow/working capital and
·2· · · · · · · ·funding is dependent upon this
·3· · · · · · · ·factor."
·4· · · · · · · ·End there.· Were your companies,
·5· ·Retirement Living and NorDev, seeking and obtaining
·6· ·funding from the City?
·7· · · · · · · ·A.· ·Not that I am aware of, no.
·8· · · · · · · ·Q.· ·And do you know why -- what
·9· ·Mr. Kukoraitis would be talking about?
10· · · · · · · ·A.· ·No, I don't.
11· · · · · · · ·Q.· ·He goes on to write:
12· · · · · · · · · "The only trouble I see is whether
13· · · · · · · ·or not the Board wants to part with
14· · · · · · · ·such information.· Given the
15· · · · · · · ·extensive financial commitment the
16· · · · · · · ·City is about to embark on, it would
17· · · · · · · ·be prudent to truly know the
18· · · · · · · ·financial status of one, if not the
19· · · · · · · ·biggest, outside contributor,
20· · · · · · · ·excluding other government sources,
21· · · · · · · ·to the project."
22· · · · · · · ·A.· ·Okay.
23· · · · · · · ·Q.· ·Was this the golf course?
24· · · · · · · ·A.· ·Yes, it must -- I'm assuming it
25· ·must be, yes.
·1· · · · · · · ·Q.· ·Okay.· He goes on to say:
·2· · · · · · · · · "[Retirement Living] is constantly
·3· · · · · · · ·presenting us a financial update and
·4· · · · · · · ·the City should put the organization
·5· · · · · · · ·to task to provide the information
·6· · · · · · · ·as it seems to be a major concern
·7· · · · · · · ·with them and rightly it should be a
·8· · · · · · · ·major concern for the City."
·9· · · · · · · ·Sir, were you ever told by anybody from
10· ·the City that they were concerned about the flow of
11· ·information from Retirement Living/NorDev to the
12· ·City?
13· · · · · · · ·A.· ·No.
14· · · · · · · ·Q.· ·Okay.· If I could ask you to turn
15· ·to tab 279, sir, this is Exhibit No. 677.
16· · · · · · · ·Actually, I see it is half past 10:00,
17· ·Mr. Commissioner.· I had hoped to finish by now,
18· ·but I'm not.
19· · · · · · · ·THE COMMISSIONER:· Okay, let us take
20· ·our morning break at this point, Mr. Doody.
21· · · · · · · ·MR. DOODY:· Thank you.
22· · · · · · · ·-- RECESSED AT 10:38 A.M.
23· · · · · · · ·-- RESUMED AT 10:55 P.M.
24· · · · · · · ·BY MR. DOODY:
25· · · · · · · ·Q.· ·Thank you, Mr. Commissioner.
·1· · · · · · · ·If we could have Exhibit No. 677, that
·2· ·is tab 279, Mr. Kennealy.· Sir, this is a fax to
·3· ·Mr. Kearns from Mr. Quinn, and on the cover page
·4· ·Mr. Quinn writes:
·5· · · · · · · · · "Doug, I received this letter June
·6· · · · · · · ·30/03.· Today a gentleman in the
·7· · · · · · · ·mall gave a copy of it to [Roy], our
·8· · · · · · · ·maintenance man, to give to me."
·9· · · · · · · ·I think that is Ray, actually, not Roy.
10· ·Ray, it's probably Ray Leblanc.
11· · · · · · · · · "He said that someone was
12· · · · · · · ·distributing this to mall
13· · · · · · · ·customers."
14· · · · · · · ·And then if you go over two pages, you
15· ·will see a letter dated June 30th, 2003, addressed
16· ·to Mr. Quinn from a woman by the name of Eva
17· ·Guissios, G-u-i-s-s-i-o-s, who appears to be a
18· ·lawyer, at least the Director of Legal Services for
19· ·a corporation which seems to have been operating
20· ·the Buck or Two Store at the mall.
21· · · · · · · ·And she starts off the letter by saying
22· ·that she is responding to Mr. Quinn's letter of
23· ·April 4th, 2003, which was responding to a letter
24· ·about the roof leaks, and in the second-last
25· ·paragraph the author of the letter writes:
·1· · · "We have been advising you about
·2· ·this ongoing problem regarding the
·3· ·roof leaks for several years now,
·4· ·both verbally and in writing.· Now,
·5· ·not only has your lack of action had
·6· ·an impact on the sales of the store
·7· ·(as customers don't like water
·8· ·dripping on their heads while they
·9· ·shop), this has also destroyed
10· ·inventory in the store, as well as
11· ·the ceiling tiles and now the
12· ·electrical system.· Moreover,
13· ·further complications will arise if
14· ·a customer slips and falls as a
15· ·result of the water on the floor
16· ·from the leaking roof.
17· · · ·This situation has become
18· ·intolerable.· The Landlord's lack of
19· ·action is bordering on gross
20· ·negligence.· Should this situation
21· ·not be resolved by July 7, 2003, we
22· ·will pursue all our legal remedies
23· ·available at law."
24· ·Do you recall this letter, sir?
25· ·A.· ·I believe it was shown to me, yes.
·1· · · · · · · ·Q.· ·And is the letter accurate in
·2· ·describing the ongoing problem of leaks at the Buck
·3· ·or Two Store?
·4· · · · · · · ·A.· ·In my discussions with Mr. Quinn,
·5· ·he was involved in it and was taking care of it.
·6· ·This particular year I remember there was a
·7· ·specific problem with one location where one of the
·8· ·expansion joints was, that there was some leaking
·9· ·and there was some small amount of merchandise that
10· ·had gotten wet and that he had checked it out and
11· ·informed me about it.· They tracked down the
12· ·problem and corrected it.· That was pretty much my
13· ·memory of it.
14· · · · · · · ·Q.· ·The letter speaks to an ongoing
15· ·problem for several years.· Did you conduct
16· ·inquiries to determine whether there had been an
17· ·ongoing problem regarding the leaks for several
18· ·years?
19· · · · · · · ·A.· ·I would have spoken to Mr. Quinn
20· ·about it, and I'm just trying to recall what he had
21· ·said to me.· I believe he said to me that they had
22· ·not had a lot of difficulty.
23· · · · · · · ·This particular situation, I remember
24· ·this particular business eventually closed and
25· ·there were difficulties in terms of the parent
·1· ·company as well, and that happened in -- I believe
·2· ·in the same year, in 2003.· I believe we ended up
·3· ·having to take legal action and lock down the
·4· ·business at one point.
·5· · · · · · · ·Q.· ·Did the --
·6· · · · · · · ·A.· ·But I don't know if that came into
·7· ·the discussion, but --
·8· · · · · · · ·Q.· ·Did the letter complaining about
·9· ·an ongoing problem for several years cause you to
10· ·consider whether you ought to change your approach
11· ·to dealing with the leaks?
12· · · · · · · ·A.· ·No, it did not, because I do
13· ·remember the conversation -- a conversation with
14· ·Mr. Quinn, him explaining to me that he felt we had
15· ·it under control.
16· · · · · · · ·Q.· ·Okay.· If I could ask you to turn
17· ·up the next tab, sir, and that is Exhibit No. 2269,
18· ·that's a Retirement Living Board meeting of
19· ·December 18th, 2003.
20· · · · · · · ·A.· ·Which tab would that be?
21· · · · · · · ·Q.· ·288.
22· · · · · · · ·A.· ·288.
23· · · · · · · ·Q.· ·And if you turn to the page that
24· ·ends 032, and I think it is the fifth page of the
25· ·document, yes, under the heading "General Manager's
·1· ·Report", at the top of the page it says:
·2· · · · · · · · · "Mr. Kennealy presented his report
·3· · · · · · · ·and mentioned that ELRL's financial
·4· · · · · · · ·position at year end will finish
·5· · · · · · · ·$450K - $500K above plan.
·6· · · · · · · ·Mr. Kennealy also spoke on the
·7· · · · · · · ·occupancy level and noted the effect
·8· · · · · · · ·of work on 1 Washington versus
·9· · · · · · · ·occupancy level at 3 Washington.· He
10· · · · · · · ·then provided the board with an
11· · · · · · · ·update on the golf course project."
12· · · · · · · ·So Retirement Living was itself having
13· ·a good year that year, right?
14· · · · · · · ·A.· ·In terms of plan, yes.
15· · · · · · · ·Q.· ·The next tab, sir, is tab 289,
16· ·Exhibit No. 708.· And this is a chart of the
17· ·capital expenditures for the years -- at the Algo
18· ·Centre for the years 2000 to 2004.· And the only
19· ·capital expenditure in those five years, sir, if
20· ·I'm reading this correctly, was to erect a steel
21· ·barricade on the roof at a capital cost of $2,676;
22· ·correct?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And the total capital expenditures
25· ·for each year are set out in the chart at the
·1· ·bottom, and after significant expenditures of
·2· ·$788,000 and 1.5 million in 2000 and 2001, capital
·3· ·expenditures then reduced to $25,000 in 2002,
·4· ·100,000 in '03 and 40,000 in '04; correct?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·If I could ask you to turn to tab
·7· ·290, Exhibit No. 1599.· This is the financial
·8· ·statements of Retirement Living on a
·9· ·non-consolidated basis for the year ended December
10· ·31st, 2003, and if you turn to the page that is
11· ·numbered 679 at the bottom of the page, you can see
12· ·that the current assets as at the end of '03 were
13· ·3.4 million dollars, an increase from 2.4 million
14· ·dollars in the previous year; correct?
15· · · · · · · ·A.· ·Yes.
16· · · · · · · ·Q.· ·And on the next page, at page 2,
17· ·the excess of revenue over expenses for Retirement
18· ·Living in 2003 were $999,000, an increase of
19· ·approximately $300,000 from the previous year?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And moving on to the next volume,
22· ·sir, Volume 6, tab 293, Exhibit No. 2271.
23· · · · · · · ·A.· ·293?
24· · · · · · · ·Q.· ·293.
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And this is minutes of the annual
·2· ·meeting of the NorDev Group on February 9th, 2004,
·3· ·and at page -- the page that ends 008, your report,
·4· ·sir, to the Board in terms of the financial results
·5· ·for 2003, you note that:
·6· · · · · · · · · "In terms of overall performance,
·7· · · · · · · ·NorDev achieved an operating profit
·8· · · · · · · ·of $479,043 versus our Business Plan
·9· · · · · · · ·objective of $474,369."
10· · · · · · · ·And that this result was achieved while
11· ·in accordance with your accountant's advice you had
12· ·written off some $219,000 in bad debt, although you
13· ·had hoped to recover 27 percent of those funds in
14· ·2004.
15· · · · · · · ·So that NorDev continued to do well in
16· ·2003; correct?
17· · · · · · · ·A.· ·We met our plan objectives, yes.
18· · · · · · · ·Q.· ·And if I could take you back to
19· ·the page that ends in .02, you indicate under the
20· ·heading "NorDev Business Plan", you wrote -- sorry,
21· ·the minutes indicate that:
22· · · · · · · · · "He", that is you, "outlined that
23· · · · · · · ·the strategy for NorDev in the
24· · · · · · · ·months ahead was to reduce expenses,
25· · · · · · · ·eliminate debt, pursue new tenants
·1· · · · · · · ·and optimize the hospitality portion
·2· · · · · · · ·of the building."
·3· · · · · · · ·And in accordance with that, sir, am I
·4· ·correct that you were -- you did not propose a
·5· ·capital expenditure in respect of the roof?
·6· · · · · · · ·A.· ·That is correct.
·7· · · · · · · ·Q.· ·If I could ask you to turn to tab
·8· ·297, Exhibit No. 2275, this is minutes of a Board
·9· ·meeting of both companies of June 9th, 2004, and on
10· ·the second page of the minutes, the page ending
11· ·.003, under the heading "Golf Course Financial
12· ·Status" the resolution which was carried was that:
13· · · · · · · · · "The Board authorizes an
14· · · · · · · ·additional capital investment in the
15· · · · · · · ·golf course project up to 300K with
16· · · · · · · ·said funds to be directed towards
17· · · · · · · ·the construction of a clubhouse,
18· · · · · · · ·with the terms thereof to be left to
19· · · · · · · ·the approval of the General
20· · · · · · · ·Manager."
21· · · · · · · ·So that the decision was made to expend
22· ·those funds; correct?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And at page 013 there is a chart,
25· ·a chart of the capital expenditures of both NorDev
·1· ·and Elliot Lake Retirement Living as forecast for
·2· ·the future, and that showed forecast capital
·3· ·expenditures in respect of Retirement Living for
·4· ·the golf course of $750,000 in '04 and $250,000 in
·5· ·'05; correct?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·And for NorDev the forecast was
·8· ·for capital expenditures of $100,000 in '04 and
·9· ·$500,000 in '05.· Do you know, did that forecast
10· ·include any expenditure in respect of the roof?
11· · · · · · · ·A.· ·Not that I am aware of.
12· · · · · · · ·Q.· ·If I could ask you to turn to tab
13· ·300, sir, and that is Exhibit No. 2277.· This is
14· ·the minutes of a Board meeting of NorDev on
15· ·September 29th, 2004, and if you go to the page
16· ·that ends .032, there is an executive summary of
17· ·your report, and under the heading "Operating
18· ·Profit" you reported:
19· · · · · · · · · "As of August 31st, NorDev
20· · · · · · · ·achieved an operating profit of
21· · · · · · · ·$500,699 versus our Business Plan
22· · · · · · · ·forecast of $297,663."
23· · · · · · · ·And you wrote:
24· · · · · · · · · "This substantially better than
25· · · · · · · ·plan performance has been driven
·1· · · · · · · ·equally by revenue generated
·2· · · · · · · ·($102,000 over plan) and expense
·3· · · · · · · ·control ($101,000 under plan)."
·4· · · · · · · ·So NorDev continued to do well, sir,
·5· ·and one of the ways in which the financial success
·6· ·was achieved was by reducing the expenses, as you
·7· ·had planned to do, as we saw in the last report?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·Tab 305, sir, Exhibit No. 2280,
10· ·these are the minutes of a Board meeting of NorDev
11· ·on December 21st, 2004, and if you go to the page
12· ·that ends .054, you have your report, sir, in
13· ·respect of operating profit and you reported:
14· · · · · · · · · "To November 30th, we have
15· · · · · · · ·achieved $654,987 in operating
16· · · · · · · ·profit versus our business plan
17· · · · · · · ·objective of $454,323.· This
18· · · · · · · ·$200,000 better than plan
19· · · · · · · ·performance is driven by positive
20· · · · · · · ·results on both sides of the ledger,
21· · · · · · · ·revenue and expenses."
22· · · · · · · ·And then under the heading "Capital
23· ·Investment and Cash Position" you wrote:
24· · · · · · · · · "As of the end of November, our
25· · · · · · · ·cash position has risen to $108,365,
·1· · · · · · · ·which is quite good.· As a reminder
·2· · · · · · · ·to board members, we paid down
·3· · · · · · · ·$465,000 in June to eliminate our
·4· · · · · · · ·mortgage with ACP.· In terms of
·5· · · · · · · ·capital, we have completed our 2004
·6· · · · · · · ·work and expect no further
·7· · · · · · · ·significant expenditures in 2004."
·8· · · · · · · ·So NorDev continued to do well, in
·9· ·fact, better than planned, and you used your
10· ·available cash to eliminate the $465,000 mortgage?
11· · · · · · · ·A.· ·The debt, yes.
12· · · · · · · ·Q.· ·I would ask you to turn to tab
13· ·306, sir -- oh, we just looked at this, it is
14· ·another copy.
15· · · · · · · ·Tab 316, sir, which is Exhibit No. 688.
16· ·This is the non-consolidated financial statements
17· ·for Retirement Living for the year ended December
18· ·31, 2004, and on the second page -- sorry, the page
19· ·numbered 2, it is about four pages in and it ends
20· ·1848, we have the operating -- statement of
21· ·operations, and we see that at the end of '04
22· ·Retirement Living brought in $1,084,668 more
23· ·revenue than expenses, an improvement of some
24· ·$85,000 from 2003; correct?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And if I could ask you to turn to
·2· ·tab 317, sir, that is Exhibit No. 13-5.· Now, this
·3· ·is an e-mail from a gentleman at Scotiabank by the
·4· ·name of Robert Jurmalietis, J-u-r-m-a-l-i-e-t-i-s,
·5· ·to somebody at Retirement Living, and
·6· ·Mr. Jurmalietis writes -- and the date is February
·7· ·15th, 2005.· Mr. Jurmalietis writes:
·8· · · · · · · · · "You may recall that a few days
·9· · · · · · · ·ago a ceiling tile collapsed in the
10· · · · · · · ·Bank, from the weight of water
11· · · · · · · ·stemming from a leak in our roof.
12· · · · · · · ·This damaged tile remains in place,
13· · · · · · · ·and creates an unsightly and
14· · · · · · · ·un-professional image for us.
15· · · · · · · · · ·Would you kindly have your
16· · · · · · · ·[maintenance] people attend the
17· · · · · · · ·branch and replace the destroyed
18· · · · · · · ·tile, as well as have them replace
19· · · · · · · ·the numerous water damaged tiles
20· · · · · · · ·previously reported to you."
21· · · · · · · ·And Mr. Quinn has written on this
22· ·document:
23· · · · · · · · · "When do we tell him that we have
24· · · · · · · ·already gone above and beyond the
25· · · · · · · ·service we need to give?"
·1· · · · · · · ·Do you recall this incident, sir?
·2· · · · · · · ·A.· ·I recall something about BNS, yes.
·3· · · · · · · ·Q.· ·Do you know what Mr. Quinn is
·4· ·talking about when he says that Retirement Living
·5· ·had already gone above and beyond the service they
·6· ·need to give?
·7· · · · · · · ·A.· ·No, I don't.· It sounds like he
·8· ·was a little frustrated that day.
·9· · · · · · · ·Q.· ·All right.· You'll agree with me
10· ·that it would be wrong to say that a landlord has
11· ·gone above and beyond the service they need to give
12· ·if there was water damage of the kind described
13· ·which was not repaired?
14· · · · · · · ·A.· ·We should be trying to do
15· ·everything to make sure the customers are getting
16· ·what they want.
17· · · · · · · ·Q.· ·If you could turn to tab 320, sir,
18· ·and this is Exhibit No. 2286.· And if you turn to
19· ·the page that ends in .006, these are minutes of
20· ·the annual general meeting of the NorDev Group on
21· ·March 4th, 2005 -- sorry, March 3, 2005.· And under
22· ·your report, sir, on the first page after outlining
23· ·the hard results, which was continued good
24· ·financial performance both in the hotel and the
25· ·mall, you wrote:
·1· · · · · · · · · "In addition to the hard results
·2· · · · · · · ·outlined, we also made progress in
·3· · · · · · · ·other areas:"
·4· · · · · · · ·And item number 3 you write:
·5· · · · · · · · · "We are now moving forward and
·6· · · · · · · ·exploring the possibilities of
·7· · · · · · · ·selling retail mall portion of
·8· · · · · · · ·NorDev's assets."
·9· · · · · · · ·And on the next page, sir, under the
10· ·heading "2005 Business Objectives", in the fourth
11· ·bullet you wrote:
12· · · · · · · · · "As the board knows, we are
13· · · · · · · ·exploring opportunities for the sale
14· · · · · · · ·of the mall not including the hotel.
15· · · · · · · ·We have had a strong expression
16· · · · · · · ·[...]" -- or maybe that is "one".
17· · · · · · · · · "We have had [one] strong
18· · · · · · · ·expression of interest and we
19· · · · · · · ·anticipate a formal offer to be made
20· · · · · · · ·in the near future.· As with any
21· · · · · · · ·sale, this offer may not result in
22· · · · · · · ·an outcome satisfactory to both
23· · · · · · · ·parties.· We therefore will be going
24· · · · · · · ·to market aggressively in Mid-March.
25· · · · · · · ·For your review, I have included a
·1· · · · · · · ·copy of the package we will use.
·2· · · · · · · ·Please hang on to these, as we would
·3· · · · · · · ·like them back unmarked."
·4· · · · · · · ·Sir, was that expression of interest
·5· ·from Mr. Nazarian?
·6· · · · · · · ·A.· ·I'm just looking at the date.· I
·7· ·believe we had -- Mr. Nazarian was one of two folks
·8· ·that had expressed an interest, and I think it may
·9· ·have been in that time frame.· And this is March,
10· ·so it may have been, yes.
11· · · · · · · ·Q.· ·Okay.· Well, in fact, if you turn
12· ·to the next tab, sir, which is Exhibit No. 2287.
13· · · · · · · ·A.· ·321?
14· · · · · · · ·Q.· ·Yes, 321.· This is a
15· ·non-disclosure covenant, and if you go to the
16· ·second page of it, you will see it is signed by
17· ·Mr. Nazarian on March 31st, 2005?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And so that was about the time
20· ·that Mr. Nazarian was communicating about
21· ·potentially buying the property?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And, sir, tell me, we have seen no
24· ·mention of this in the Board minutes to date.· Was
25· ·this consideration of selling something that arose
·1· ·as a result of your own considerations or was it a
·2· ·result of inquiries from Mr. Nazarian and this
·3· ·other gentleman you have told us about?
·4· · · · · · · ·A.· ·I think it came out originally as
·5· ·our own considerations.· If I remember, somewhere
·6· ·there is a presentation.
·7· · · · · · · ·Q.· ·Okay.
·8· · · · · · · ·A.· ·And I think it was in the fall of
·9· ·'04 partially due to, you know, the exercise we
10· ·were going through on looking at different options
11· ·for where we would go in the future, and we came to
12· ·the realization that we felt it would be
13· ·appropriate to take a look at putting the mall
14· ·portion on the market, and the rationale behind
15· ·that I think we talked about in the fall of '04
16· ·with the Board at some point.· You know, you can
17· ·see as you go through the minutes of some of my --
18· ·or the minutes of the Board meeting and my General
19· ·Manager's Reports, if you actually looked from 1999
20· ·or 1998 and you follow the flow of it all the way
21· ·through to 2005, we were involved in a lot of
22· ·different things in the community.· We had taken on
23· ·the golf course.· We had taken on quite a bit of
24· ·work on the lakefront, waterfront development
25· ·project with and for the municipality.· We had
·1· ·gotten ourselves involved in the nursing home
·2· ·process.
·3· · · · · · · ·The actual implementation of the hotel
·4· ·was a huge resource consumer and it took an awful
·5· ·lot of manpower to do it.
·6· · · · · · · ·Q.· ·The Algo Inn you are talking
·7· ·about?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·Yes.
10· · · · · · · ·A.· ·Yeah, it took a tremendous amount
11· ·of manpower to do it because, you know, if you
12· ·remember the discussions I think yesterday, and you
13· ·will see it in my General Manager's Reports, the
14· ·only way we could do that was to increase the
15· ·people coming into the community.· So we were
16· ·involved in everything from trying to get drag
17· ·races off the ground to dog-sled races, to Ontario
18· ·provincial bicycle championships, and the list just
19· ·went on and on.
20· · · · · · · ·So really -- it was really
21· ·resource-heavy.· In terms of my staff, it was --
22· ·you know, there were only really three managers
23· ·other than myself.· And Mr. Quinn was very busy
24· ·working on a variety of things.· Ms. Guertin spent
25· ·a tremendous amount of time working on the mall
·1· ·component.· It was very -- the reason it was
·2· ·different, we were different than I think other
·3· ·landlords in that area is there is the whole
·4· ·leasing component which takes a lot of time, but
·5· ·even more than that we had invested a tremendous
·6· ·amount of time in our smaller, local businesses.
·7· ·And if you read again my General Manager's Reports,
·8· ·as I'm sure you have, Mr. Doody, you can see that
·9· ·we would have put a lot of time into helping a lot
10· ·of those smaller businesses, right down to the
11· ·let's look at your business plan and see whether
12· ·you can succeed or not.
13· · · · · · · ·And so it was very, very
14· ·resource-heavy.· We were trying to move on to other
15· ·things.· It sort of wasn't our goal to be in the
16· ·retail mall business forever.· Many things that we
17· ·have gotten involved with with the community over
18· ·the, you know, 20 years that I have been here, we
19· ·would get involved in something, try and call it
20· ·fix it, try and get it back on track, try to get it
21· ·moving in a positive direction, and then if things
22· ·are going well, then move on.
23· · · · · · · ·And the mall was very much that type of
24· ·a situation.· And so it was resource consumption in
25· ·terms of human resources.· We felt it an
·1· ·appropriate time to recapture some of the financial
·2· ·resources.
·3· · · · · · · ·In addition to that, we could see that
·4· ·there were things going on in the market.· There
·5· ·were a lot of transactions going on.· We felt we
·6· ·had done a pretty good darn job in terms of moving
·7· ·the mall forward as a product.· We had fixed the
·8· ·original problems we had identified, which were the
·9· ·leases.· We had taken it from, gosh, you know, 40,
10· ·50 percent of the leases coming up in two years to
11· ·the vast majority of the leases extended out over a
12· ·five-year period, beyond a five-year period, which
13· ·is important in the commercial property area.
14· · · · · · · ·One of the problems we identified in
15· ·the beginning was the retail mix, the mix that was
16· ·available to people in the community.· We had done
17· ·an awful lot in that area trying to bring in much
18· ·better department stores, like Zellers, like a Buck
19· ·or Two, the clothing store, so a whole series of
20· ·things we did to try and improve the product mix.
21· · · · · · · ·So we felt we had made tremendous
22· ·headway with the product.· We felt it was a stable
23· ·product in terms of the overall.· We wanted to free
24· ·up the human resources and the financial resources
25· ·to look at other things.
·1· · · · · · · ·And we also saw that in the environment
·2· ·it looked like the market, it was a good time to do
·3· ·that.
·4· · · · · · · ·So those were some of the motivations
·5· ·that were involved in making a decision to move in
·6· ·that direction.
·7· · · · · · · ·Q.· ·And if I could take you, sir, to
·8· ·tab 324, which is Exhibit No. 706, and this
·9· ·document, the first document, in any event, is
10· ·the -- it is an Agreement of Purchase and Sale with
11· ·the buyer, being Bob Nazarian in trust, and the
12· ·sellers being NorDev for the mall.
13· · · · · · · ·And if you go to the third page of the
14· ·document, sir, it ends 2325, you will see that
15· ·Mr. Nazarian signed it on April the 1st, 2005, and
16· ·you signed it on April the 7th, 2005, right?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And so I take it from that that
19· ·this started out as an offer?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And the price, if you go back to
22· ·the first page, was 8.2 million dollars?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And this was an offer subject to a
25· ·number of conditions, including financing and due
·1· ·diligence, right?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·And if I could take you then, sir,
·4· ·to tab 323, which is Exhibit No. 2288.
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·These are the minutes of a special
·7· ·Board meeting April the 5th, 2005, of NorDev, and
·8· ·it results in a resolution, according to the
·9· ·minutes, that you and the Chair -- Mr. Berthelot?
10· · · · · · · ·A.· ·Berthelot.
11· · · · · · · ·Q.· ·-- Mr. Berthelot were authorized
12· ·to contract for the sale of the Algo Centre with
13· ·the reservation of a lease for the hotel and your
14· ·offices on terms satisfactory to you under
15· ·Mr. Kearns for the amount of $8.2 million, and you
16· ·were given authority to discount it by a further --
17· ·by up to $700,000 if you thought it appropriate,
18· ·right?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·And so armed with that authority,
21· ·you went back, and if I could go back to Exhibit
22· ·No. 324 -- sorry, Exhibit No. 706, tab 324, the
23· ·third page, that is at the signing page.· Armed
24· ·with the authority from the Board meeting of the
25· ·5th of April, you signed the Agreement of Purchase
·1· ·and Sale on the 7th of April, right?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·And I take it that the signing of
·4· ·the purchase agreement, the Agreement of Purchase
·5· ·and Sale was with respect to when you bought it
·6· ·simply the first step, because due diligence was an
·7· ·important issue?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And Mr. Nazarian, did you have
10· ·discussions with Mr. Nazarian in respect of his due
11· ·diligence?
12· · · · · · · ·A.· ·Yes, I think he instructed us --
13· ·I'm thinking of sort of the process.· He instructed
14· ·us that his due diligence would be carried out by
15· ·folks at the Royal Bank in terms of the process
16· ·itself or some of the process, yes.
17· · · · · · · ·Q.· ·Did you tell -- sorry, back up.
18· ·He told you that his due diligence would be carried
19· ·out by folks from the Royal Bank?
20· · · · · · · ·A.· ·Yes, that part of his due
21· ·diligence would be done by -- yes.
22· · · · · · · ·Q.· ·And the Royal Bank was going to be
23· ·his financer?
24· · · · · · · ·A.· ·Yes.
25· · · · · · · ·Q.· ·And did he tell you why -- well,
·1· ·what portion of the due diligence did he tell you
·2· ·was going to be done by the Royal Bank?
·3· · · · · · · ·A.· ·The Royal Bank folks were the
·4· ·folks that were interacting with our folks to make
·5· ·sure all of his due diligence got done.
·6· · · · · · · ·Q.· ·Okay.· So did you have discussions
·7· ·with Mr. Nazarian about the condition of the
·8· ·building?
·9· · · · · · · ·A.· ·Yes, we talked generally.· Over
10· ·the course of the number of months that we went
11· ·through the process, Mr. Nazarian came to Elliot
12· ·Lake several times.· We went to Toronto once and
13· ·met with him there.· We had a number of
14· ·conversations with him, and we also -- I had phone
15· ·conversations with him, as did Ms. Guertin as we
16· ·went through the process.
17· · · · · · · ·Q.· ·And you said "we" went to Toronto
18· ·and met with him there.· Who did you go with?
19· · · · · · · ·A.· ·Ms. Guertin and Ms. Brown was with
20· ·us, I believe.
21· · · · · · · ·Q.· ·Ms. Brown was your economic --
22· ·sorry --
23· · · · · · · ·A.· ·Marketing.
24· · · · · · · ·Q.· ·Marketing person.· Did you tell
25· ·Mr. Nazarian about the leaks?
·1· · · · · · · ·A.· ·Yes, yeah, we talked -- during the
·2· ·course of those four or whatever number of months
·3· ·it was until completion, we had a number of
·4· ·discussions.· We talked about -- we talked quite
·5· ·openly about the fact that there were leaks in the
·6· ·parking deck.· We talked about the maintenance
·7· ·program that we had implemented.· In fact, I recall
·8· ·speaking with him in terms of when we bought the
·9· ·mall, we had someone come in and do an assessment
10· ·and they gave us two options and we selected one of
11· ·those patterns to move forward with the maintenance
12· ·of the mall, the parking deck.
13· · · · · · · ·We talked about a variety of things in
14· ·relation to the different things that we did in
15· ·terms of, you know, using sand and using the light
16· ·snow trucks or trucks for plowing and the -- what
17· ·else did we -- gosh, we talked about a lot of
18· ·things.· We talked about the fact that it had been
19· ·sort of a continual problem since construction or
20· ·design, whatever you want to call it.
21· · · · · · · ·We talked about -- I remember speaking
22· ·about the -- that our guys would use the traffic
23· ·flow things, which was a habit ACP used to try and
24· ·make sure traffic was travelling over the concourse
25· ·in a distributed manner.
·1· · · · · · · ·What else did we talk about?· We talked
·2· ·about -- I can remember having a specific
·3· ·conversation about saying it is a lot of work, that
·4· ·you have to -- it is very -- you have to be very
·5· ·focussed on it.· It is quite labour-intensive in
·6· ·the sense that, you know, you really have to focus
·7· ·on that part.· We talked about -- I did speak about
·8· ·our employees, that our employees were important
·9· ·and that they knew what had to be done on the deck
10· ·and that it was important to hang on to those
11· ·folks, that they were an important component of
12· ·what you were trying to do.
13· · · · · · · ·So it was a fairly open dialogue in
14· ·terms of the fact that there were leaks there.
15· · · · · · · ·Q.· ·And from your side of the table,
16· ·who other than you took part in these discussions?
17· · · · · · · ·A.· ·Ms. Guertin was at pretty much all
18· ·of our face-to-face meetings, was at all of our
19· ·face-to-face meetings with Mr. Nazarian.
20· · · · · · · ·Q.· ·So she heard these discussions
21· ·that you have described?
22· · · · · · · ·A.· ·Yes, yes, they were open
23· ·discussions.
24· · · · · · · ·Q.· ·Anybody else on your side present
25· ·at these discussions?
·1· · · · · · · ·A.· ·I think at one discussion Ms.
·2· ·Brown was present, that is it.
·3· · · · · · · ·Q.· ·Was there discussion about the
·4· ·leaks in that meeting that Ms. Brown was at?
·5· · · · · · · ·A.· ·I can't recall specifically if it
·6· ·was at which particular meeting, but we had a
·7· ·number of discussions as we went along.
·8· · · · · · · ·Q.· ·And were these discussions here in
·9· ·Elliot Lake and in Toronto?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·How many times did you go to
12· ·Toronto?
13· · · · · · · ·A.· ·Once.
14· · · · · · · ·Q.· ·How many times did Mr. Nazarian
15· ·come up to Elliot Lake?
16· · · · · · · ·A.· ·I'm going to say three.· I mean,
17· ·it is tough to remember exactly, but I believe
18· ·three.· I believe I met with him in Elliot Lake at
19· ·least three times, and I know he came up on his own
20· ·at least -- well, he came up when I was not here at
21· ·least once.
22· · · · · · · ·Q.· ·Did you put any of these facts
23· ·about the issues relating to the leaks in writing
24· ·to Mr. Nazarian?
25· · · · · · · ·A.· ·No, I don't believe so, no.
·1· · · · · · · ·Q.· ·From his side of the table, who
·2· ·else other than him was present at these
·3· ·discussions?
·4· · · · · · · ·A.· ·I remember Mr. Sobhi at a number
·5· ·of the meetings.
·6· · · · · · · ·Q.· ·He was his real estate agent?
·7· · · · · · · ·A.· ·He was a real estate agent that
·8· ·was involved in the transactions, yes.
·9· · · · · · · ·Q.· ·Anybody else from his side?· Was
10· ·his son Levon involved?
11· · · · · · · ·A.· ·No.
12· · · · · · · ·Q.· ·Was his wife Irene involved?
13· · · · · · · ·A.· ·No.
14· · · · · · · ·Q.· ·Did you give Mr. Nazarian or
15· ·anybody in his group copies of the Halsall Reports?
16· · · · · · · ·A.· ·No, we did not, and at no time did
17· ·Bob ever ask me for them.· At one point, though,
18· ·our -- Ms. Guertin was dealing, as I said, with the
19· ·RBC folks who seemed to be implementing the due
20· ·diligence process for him in terms of the -- what
21· ·you would normally go through in terms of assessing
22· ·the physical building condition and all of that
23· ·type of stuff, the environmental studies.
24· · · · · · · ·And I think you'll hear from
25· ·Ms. Guertin that she spoke with the gentleman.
·1· · · · · · · ·Q.· ·You --
·2· · · · · · · ·A.· ·I did not, no.
·3· · · · · · · ·Q.· ·You did not speak with anybody --
·4· · · · · · · ·A.· ·No, no, no, Ms. Guertin would
·5· ·have -- so I should keep that to myself.
·6· · · · · · · ·Q.· ·Well, no, it is not --
·7· · · · · · · ·A.· ·That is okay.
·8· · · · · · · ·Q.· ·No, no, it is my fault, because I
·9· ·was looking at Madam Reporter.· I interrupted you
10· ·and I shouldn't have.
11· · · · · · · ·Just so the record is clear, you
12· ·yourself did not have any direct communications
13· ·with anybody from the Royal Bank; is that right?
14· · · · · · · ·A.· ·No, I did not, no.
15· · · · · · · ·Q.· ·Okay.
16· · · · · · · ·A.· ·Would you like me to finish that
17· ·statement or I shouldn't?
18· · · · · · · ·Q.· ·Sure, yeah, no, go ahead.
19· · · · · · · ·A.· ·Well, I just wanted to say that
20· ·Ms. Guertin, in talking with her, she was dealing
21· ·with the Royal Bank person who was coordinating all
22· ·of his activities, and I think in the course of her
23· ·discussions, she had discussions about all of the
24· ·reports.· She let them know that we did in fact
25· ·have those reports.· The reaction she got from them
·1· ·was that they didn't want it, they wanted to do
·2· ·their own assessment.
·3· · · · · · · ·Q.· ·And what you just told me is what
·4· ·she reported to you?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·And did you give her any
·7· ·instructions with respect to the Halsall Reports?
·8· · · · · · · ·A.· ·No, other than that the
·9· ·instruction at that time, and I remember talking
10· ·with Bob, that Bob was anxious to move things along
11· ·and the only instructions I would have given
12· ·Ms. Guertin was that, you know, move it along and
13· ·give them whatever they want and let's move it
14· ·along.
15· · · · · · · ·Q.· ·I asked you about the Halsall
16· ·Reports.
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·For the record, I think I have to
19· ·ask you, did you give them the Nicholls Yallowega
20· ·Bélanger Report?
21· · · · · · · ·A.· ·No, we did not.
22· · · · · · · ·Q.· ·Nor did they ask?
23· · · · · · · ·A.· ·No.
24· · · · · · · ·Q.· ·If I could take you in this
25· ·exhibit that we are looking at, which is Exhibit
·1· ·No. 706, if I could take you to the document which
·2· ·is at the page that ends 2335.
·3· · · · · · · ·A.· ·2335?
·4· · · · · · · ·Q.· ·Yes.· And this is called Schedule
·5· ·"C" to the Agreement of Purchase and Sale, and it
·6· ·looks to me like this is a counteroffer by the
·7· ·vendor, that is, by NorDev, which was made to
·8· ·incorporate certain conditions into the Agreement
·9· ·of Purchase and Sale before you signed it; is that
10· ·your understanding?· It is signed by you, sir?· At
11· ·least it is initialled by you in several places,
12· ·right?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·And there is a number of
15· ·conditions, and if I could ask you to turn to the
16· ·page which is 2338, there is a condition number 8
17· ·which is that:
18· · · · · · · · · "The Purchased Assets will be
19· · · · · · · ·purchased and assumed by the
20· · · · · · · ·Purchaser 'As Is' and on Closing,
21· · · · · · · ·the Purchaser shall assume
22· · · · · · · ·responsibility for the physical
23· · · · · · · ·condition of the Purchased Assets
24· · · · · · · ·and the Vendor shall have no
25· · · · · · · ·obligations or responsibility to the
·1· · · · · · · ·Purchaser after Closing with respect
·2· · · · · · · ·to the Purchased Assets or the
·3· · · · · · · ·condition thereof."
·4· · · · · · · ·And was that one of the conditions
·5· ·which you required to be inserted before you signed
·6· ·the agreement?
·7· · · · · · · ·A.· ·It would -- I don't know that --
·8· ·it was a condition of the agreement, yes.
·9· · · · · · · ·Q.· ·And was it a condition that was
10· ·inserted at your -- at NorDev's suggestion?
11· · · · · · · ·A.· ·I can't answer that.
12· · · · · · · ·Q.· ·Did you know that that was a
13· ·condition?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·Do you know why that was in there?
16· · · · · · · ·A.· ·No.
17· · · · · · · ·Q.· ·You have no recollection of
18· ·discussing this?
19· · · · · · · ·A.· ·No, I would not have had.
20· · · · · · · ·Q.· ·Okay.· If I could ask you, sir, to
21· ·turn to tab 337, which is Exhibit No. 2296.· And
22· ·this is a letter which is undated, but it is a
23· ·letter to you from Mr. Sobhi, and that is
24· ·S-o-b-h-i, the realtor, and he writes:
25· · · · · · · · · "As per our telephone conversation
·1· · · · · · · ·on Wednesday June 1, 2005, please be
·2· · · · · · · ·advised that the purchaser is asking
·3· · · · · · · ·to reduce the price of the above
·4· · · · · · · ·noted property to $7,200,000.00.· If
·5· · · · · · · ·accepted, the purchaser will remove
·6· · · · · · · ·all the conditions within the
·7· · · · · · · ·Agreement of Purchase and Sale
·8· · · · · · · ·leaving only the financing condition
·9· · · · · · · ·in place.· The purchaser intends to
10· · · · · · · ·improve the condition of the
11· · · · · · · ·property and the parking lot in due
12· · · · · · · ·time.· The enhanced appearance of
13· · · · · · · ·the mall and the hotel will be an
14· · · · · · · ·asset for the community, not to
15· · · · · · · ·mention the property itself."
16· · · · · · · ·Do you recall getting this letter, sir?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And what was your reaction to it?
19· · · · · · · ·A.· ·I believe what I -- I mean, that
20· ·comes back to the alteration of the price.· I would
21· ·have -- I'm just telling you what I did -- would
22· ·have done with it.
23· · · · · · · ·Q.· ·Right.
24· · · · · · · ·A.· ·And what I would have done with it
25· ·is taken it and I would have taken it back to the
·1· ·Board and had a general discussion to see if they
·2· ·were comfortable with that, and they obviously
·3· ·were, and then we went forward and agreed to it.
·4· · · · · · · ·Q.· ·Okay.
·5· · · · · · · ·A.· ·And my reaction was he wanted to
·6· ·take the price down and he believed it was
·7· ·appropriate in that he wanted to do it because he
·8· ·wanted to do some improvements to the property.
·9· · · · · · · ·Q.· ·And do you recall the discussions
10· ·about the parking lot that are referred to in that
11· ·Exhibit No. 2296?
12· · · · · · · ·A.· ·Not specifically at this time, not
13· ·at the drop from 8.2 to -- no, not that drop.
14· · · · · · · ·Q.· ·And if I could take you then, sir,
15· ·back to tab 324, Exhibit No. 706.
16· · · · · · · ·A.· ·324?
17· · · · · · · ·Q.· ·Yes.· And so after the drop to 7.2
18· ·from 8.2, there was still the financing condition
19· ·in place; correct?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And if I could take you to the
22· ·page that ends 2351 in this exhibit, this is a
23· ·letter to Mr. Kearns from Mr. Jeffrey Silver,
24· ·Mr. Nazarian's lawyer, and in it he waives all of
25· ·the conditions but reduces the purchase price from
·1· ·7.2 to 6.2?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·And seeks to extend the closing
·4· ·date until August the 5th.· Do you recall getting
·5· ·this?
·6· · · · · · · ·A.· ·Yes, that was -- yes, I remember
·7· ·having a phone conversation with Mr. Nazarian about
·8· ·this particular drop, yes.
·9· · · · · · · ·Q.· ·And did this surprise you?
10· · · · · · · ·A.· ·It was -- if I remember, it was
11· ·very close to the last minute.
12· · · · · · · ·Q.· ·You were supposed to close I think
13· ·on the 4th or something like that?
14· · · · · · · ·A.· ·Yes, it was close to the last
15· ·minute, so I believe my reaction would have been I
16· ·was caught off guard in terms of just the sense
17· ·that I guess I was a bit surprised that it was so
18· ·close to the end, yes.
19· · · · · · · ·Q.· ·It is quite a drop from --
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·By a million dollars?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And what was your reaction?
24· · · · · · · ·A.· ·As I say, I think I was caught off
25· ·guard a bit.· I would have taken this to the Board
·1· ·and had a discussion and walked them through.· I
·2· ·mean, if you go back -- well, no, that is -- I have
·3· ·completed the answer I think.
·4· · · · · · · ·Q.· ·Did you talk to Mr. Nazarian and
·5· ·say, Why are you doing this two days before
·6· ·closing, dropping the price by a million dollars?
·7· · · · · · · ·A.· ·Yes, on this one we had a
·8· ·discussion, and I can't remember if it was after he
·9· ·had sent it or before.· I got a message to give him
10· ·a call and I called him and we had a chat about it,
11· ·And what he related to me was sort of in a general
12· ·sense was he had gotten his financing all lined up.
13· ·I think he told me what the rough amount of it was.
14· ·He had more than enough of his own free capital to
15· ·complete the deal, but he wanted to hang on to the
16· ·cash because he wanted to do additional work on the
17· ·property and fix a bunch of things up.· He did
18· ·mention specifically the parking deck.
19· · · · · · · ·And the other thing I didn't mention
20· ·earlier, we had had a number -- as I say, we talked
21· ·a number of times over the time period and, you
22· ·know, we talked about all kinds of different things
23· ·in terms of, you know, what he might want to do or
24· ·might not what to do with the property.· But on
25· ·this occasion, he specifically mentioned that he
·1· ·wanted to look at doing some things on the parking
·2· ·deck, and I would have taken that to the Board and
·3· ·asked them what they wanted to do.
·4· · · · · · · ·Q.· ·Okay, and so just -- and they
·5· ·agreed to accept it?
·6· · · · · · · ·A.· ·They did, yes.
·7· · · · · · · ·Q.· ·So just to recap, you got the
·8· ·offer or the offer was initially signed at 8.2
·9· ·million dollars on April the 7th.· On the 1st of
10· ·June Mr. Nazarian's agent indicated he was waiving
11· ·all of the conditions except financing but dropping
12· ·the price to 7.2 million, right?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·And that was accepted by NorDev?
15· · · · · · · ·A.· ·The Board accepted that, yes.
16· · · · · · · ·Q.· ·And then on August the 2nd he
17· ·reduced the price by a further million to 6.2
18· ·million dollars, right?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·And then it closed on -- and there
21· ·is a document, but it closed on I believe August
22· ·the 5th of 2005?
23· · · · · · · ·A.· ·I'm assuming so, yes.
24· · · · · · · ·Q.· ·All right.· So if I could ask you,
25· ·sir, to go to tab 335, this is Exhibit No. 2295,
·1· ·and this is a Board of Directors meeting of May
·2· ·26th, 2005.· And if you go to the page that ends
·3· ·016, this is an excerpt from your report to the
·4· ·Board, sir, and under the heading "Library Problem"
·5· ·you wrote this:
·6· · · · · · · · · "Given the recent newspaper
·7· · · · · · · ·article and several discussions I
·8· · · · · · · ·have had with various individuals, I
·9· · · · · · · ·anticipate some difficulties with
10· · · · · · · ·this tenant.· I believe this problem
11· · · · · · · ·will be solved and I will provide an
12· · · · · · · ·update during our meeting."
13· · · · · · · ·What was this about, sir?
14· · · · · · · ·A.· ·This was a problem with the leak
15· ·in the library.
16· · · · · · · ·Q.· ·A leak or leaks?
17· · · · · · · ·A.· ·Well, the article was probably
18· ·about leaks.
19· · · · · · · ·Q.· ·Okay.
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And what were the discussions you
22· ·had with -- first of all, who were the individuals
23· ·with whom you had discussions?
24· · · · · · · ·A.· ·It probably would have been with
25· ·Mr. Quinn, Ms. Guertin, our own staff, to just
·1· ·understand what had gone on.
·2· · · · · · · ·Q.· ·Nobody outside your staff?
·3· · · · · · · ·A.· ·I don't think so, no.
·4· · · · · · · ·Q.· ·And what were the difficulties you
·5· ·anticipated with this tenant?
·6· · · · · · · ·A.· ·They were upset.
·7· · · · · · · ·Q.· ·You wrote:
·8· · · · · · · · · "I believe this problem will be
·9· · · · · · · ·solved [...]"
10· · · · · · · ·How did you believe it would be solved?
11· · · · · · · ·A.· ·I believed that we were going to
12· ·do everything in our power to try and resolve the
13· ·problem for them and see if we could do anything to
14· ·get them in a position where they were content.
15· · · · · · · ·Q.· ·And do you recall what update you
16· ·provided during the meeting?
17· · · · · · · ·A.· ·During -- oh, during my Board
18· ·meeting?
19· · · · · · · ·Q.· ·Yes.
20· · · · · · · ·A.· ·I don't, no.
21· · · · · · · ·Q.· ·And if you go back to the first
22· ·page, you will see that the Mayor, Mayor Farkouh
23· ·was present at this meeting?
24· · · · · · · ·A.· ·Yes.
25· · · · · · · ·Q.· ·And I see Al Collett was
·1· ·present --
·2· · · · · · · ·MR. KEARNS:· Those are not the --
·3· · · · · · · ·BY MR. DOODY:
·4· · · · · · · ·Q.· ·Oh, I'm sorry, I'm reading the
·5· ·agenda, not the minutes.
·6· · · · · · · ·The minutes on page 2, which is on the
·7· ·screen, show that Mr. --
·8· · · · · · · ·A.· ·Oh, I'm sorry, yeah, I was doing
·9· ·the same as you are.· Yes, thank you, Mr. Kearns.
10· · · · · · · ·Q.· ·Both Mr. Hamilton and Mr. Farkouh,
11· ·who were the representatives of the City, were
12· ·absent from that meeting?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·And if I could ask you then, sir,
15· ·to go to tab 336, which is Exhibit No. 11-100.
16· ·This is a letter to you, sir, dated June 1st, 2005,
17· ·from Mr. Speck, who at that time was the Chief
18· ·Administrative Officer of the City, and in the
19· ·first paragraph he wrote:
20· · · · · · · · · "As you know, the Elliot Lake
21· · · · · · · ·Library has been experiencing
22· · · · · · · ·ongoing problems with severe leaks
23· · · · · · · ·from the roof since it relocated to
24· · · · · · · ·the Algo Mall in the early 1990s.
25· · · · · · · ·Until recently, the problem with the
·1· · · · · · · ·leaks was thought to be largely the
·2· · · · · · · ·damage to the books, the inability
·3· · · · · · · ·to use certain areas of the library
·4· · · · · · · ·while the water was dried out and
·5· · · · · · · ·the staff time involved in the
·6· · · · · · · ·clean-up."
·7· · · · · · · ·I'll stop there.
·8· · · · · · · ·Sir, do you agree with what Mr. Speck
·9· ·wrote, which was that you knew that the library had
10· ·been experiencing ongoing problems with severe
11· ·leaks from the roof since it relocated to the mall
12· ·in the early 1990s?
13· · · · · · · ·A.· ·I'm just trying to remember if I
14· ·saw any documentation that talked about that
15· ·before, and I can't.· But I certainly knew they had
16· ·problems and they had some issues while we were the
17· ·landlord.
18· · · · · · · ·Q.· ·He then went on to write:
19· · · · · · · · · "While those inconveniences and
20· · · · · · · ·difficulties continue and must be
21· · · · · · · ·addressed, a larger issue has arisen
22· · · · · · · ·that required our immediate
23· · · · · · · ·attention as an employer and manager
24· · · · · · · ·of the public facility."
25· · · · · · · ·And he went on to talk about potential
·1· ·health and safety hazards arising from the damp,
·2· ·the mold, and what the library had done about it.
·3· · · · · · · ·And then in the last paragraph he
·4· ·wrote:
·5· · · · · · · · · "Richard, all these problems are
·6· · · · · · · ·clearly caused by the roof leaks and
·7· · · · · · · ·unless something can be done will
·8· · · · · · · ·only continue in the future.· We
·9· · · · · · · ·would like to meet to discuss the
10· · · · · · · ·problem and review the feasibility
11· · · · · · · ·of resolving the roof leaks as soon
12· · · · · · · ·as possible.· Our main interests
13· · · · · · · ·include:· 1) Ensuring the library
14· · · · · · · ·environment is safe for occupation
15· · · · · · · ·and use by staff and members of the
16· · · · · · · ·public; 2) Eliminating damage to
17· · · · · · · ·municipal property; and 3) Avoiding
18· · · · · · · ·restrictions on and interruptions to
19· · · · · · · ·library services."
20· · · · · · · ·Do you recall getting this letter, sir?
21· · · · · · · ·A.· ·Yes.
22· · · · · · · ·Q.· ·And he proposed a meeting and I
23· ·understand that there was a meeting on June 15th,
24· ·2005, right?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And that meeting was just days
·2· ·after all of the conditions except financing had
·3· ·been waived by Mr. Nazarian and that NorDev had
·4· ·agreed to the reduction in price, right?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·And if I could take you, sir, to
·7· ·the next book, Volume 7, and to tab 343, which is
·8· ·Exhibit No. 11-18.
·9· · · · · · · ·A.· ·I don't have Volume 7.
10· · · · · · · ·Q.· ·Oh, I'm sure it is -- perhaps --
11· · · · · · · ·A.· ·You can tell I'm a paper person.
12· ·Oh, I'm sorry, I do, I do.· My apologies.· Which
13· ·tab, sir?
14· · · · · · · ·Q.· ·Tab 343.
15· · · · · · · ·A.· ·Yes.
16· · · · · · · ·Q.· ·And this is -- if you go to the
17· ·third page, these are notes taken by Ms. Fazekas,
18· ·the librarian, and she says it is a report on the
19· ·meeting with the landlord, the Mayor, the Library
20· ·Board and the CAO on June the 15th.· And she notes
21· ·that present were you, Mr. Speck, Mayor Farkouh,
22· ·Ms. Menzies, who was the Chair of the Library
23· ·Board, Ms. Croxson, who was the Vice-Chair of the
24· ·Library Board, Mr. Southorn and Ms. Tapp, who were
25· ·members of the Library Board, and Ms. Fazekas.
·1· · · · · · · ·Do you recall this meeting, sir?
·2· · · · · · · ·A.· ·I don't actually recall.· You and
·3· ·I have spoken about it before.· I just can't
·4· ·visualize the meeting, but --
·5· · · · · · · ·Q.· ·Okay, so the notes indicate that
·6· ·you Chaired the meeting?
·7· · · · · · · ·A.· ·Yeah, yes.
·8· · · · · · · ·Q.· ·But you don't recollect that?
·9· · · · · · · ·A.· ·I don't, I actually don't.
10· · · · · · · ·Q.· ·In the next paragraph Ms. Fazekas
11· ·writes:
12· · · · · · · · · "Having distributed copies of the
13· · · · · · · ·lease to the Board members the
14· · · · · · · ·previous day, he", that is you,
15· · · · · · · ·"stressed the importance of written
16· · · · · · · ·communication with the landlord in
17· · · · · · · ·the future, especially prior to any
18· · · · · · · ·action being taken in the way of
19· · · · · · · ·maintenance repairs.· He also drew
20· · · · · · · ·attention to Clause 6 on page 13 of
21· · · · · · · ·the lease that protects the landlord
22· · · · · · · ·against claims from the tenants
23· · · · · · · ·regarding compensation for water
24· · · · · · · ·damage to their property."
25· · · · · · · ·Do you recall taking the position, sir,
·1· ·that the landlord -- that the landlord need not
·2· ·recompense tenants for damage caused by water?
·3· · · · · · · ·A.· ·I'm hoping that I actually
·4· ·explained that for the benefit of folks of knowing
·5· ·what was there and was not actually taking a harsh
·6· ·position on it, because it would be inappropriate.
·7· · · · · · · ·Q.· ·And the notes of Ms. Fazekas go on
·8· ·to say:
·9· · · · · · · · · "He", that is you, "outlined the
10· · · · · · · ·structural challenges faced by the
11· · · · · · · ·flat roof of the mall and the
12· · · · · · · ·attempts at ameliorating the problem
13· · · · · · · ·over the past 5 years.· The
14· · · · · · · ·structure of the parking roof is two
15· · · · · · · ·layers of cement slabs approximately
16· · · · · · · ·4 to 5 feet apart.· Solutions
17· · · · · · · ·proffered by the experts include the
18· · · · · · · ·insertion of a rubber membrane
19· · · · · · · ·between the two layers, involving
20· · · · · · · ·the removal of the top cement layer
21· · · · · · · ·or the construction of a structure
22· · · · · · · ·over the roof that would necessitate
23· · · · · · · ·increased structural support.· This
24· · · · · · · ·latter option would cost
25· · · · · · · ·approximately $1.5 million."
·1· · · · · · · ·Do you recall telling the people at the
·2· ·library and the Mayor that at that time?
·3· · · · · · · ·A.· ·I don't actually recall doing it,
·4· ·but if that is what I said, I said that.
·5· · · · · · · ·Q.· ·Sir, can you help us out --
·6· · · · · · · ·A.· ·Yeah.
·7· · · · · · · ·Q.· ·-- with where you would have
·8· ·learned that a solution proffered by experts
·9· ·included the construction of a structure over the
10· ·roof that would necessitate increased structural
11· ·support?· That was not proposed in the Halsall
12· ·Reports, right?
13· · · · · · · ·A.· ·No, it wasn't.
14· · · · · · · ·Q.· ·The only document I have seen that
15· ·proposed a roof, at least in part, to any owner was
16· ·the Trow Report?
17· · · · · · · ·A.· ·The only thing I can think of, I
18· ·mean, we had been in the process with Mr. Nazarian
19· ·and I know at one point we had talked about just
20· ·notions and ideas and I know that came up as a
21· ·notion or a chat, a discussion, whatever you want
22· ·to call it.
23· · · · · · · ·That is the only thing I could -- and
24· ·again, I'm trying to do it -- I'm trying to -- I'm
25· ·no different than you in that I'm trying to figure
·1· ·out how would I come to 1.5 and how would I have
·2· ·come to a roof cover.· And I cannot tell you.
·3· · · · · · · ·Q.· ·It is not only a roof cover, but
·4· ·it is a roof cover that would necessitate increased
·5· ·structural support?
·6· · · · · · · ·A.· ·Yeah.
·7· · · · · · · ·Q.· ·Had Mr. Nazarian told you that he
·8· ·had engineering reports that suggested a necessity
·9· ·for increased structural support for --
10· · · · · · · ·A.· ·No.
11· · · · · · · ·Q.· ·-- a structure over the roof?
12· · · · · · · ·A.· ·No, but we had just generally
13· ·talked about different kinds of notions and ideas.
14· ·Like, I cannot tell you where that came from.· I
15· ·mean, I tried to think through where would the 1.5
16· ·come from.
17· · · · · · · ·Q.· ·That was my next question.
18· · · · · · · ·A.· ·Yeah, I was trying to think
19· ·through how would I come up with a number like
20· ·that?· I mean, could I pull something like that out
21· ·of the air?· I mean, not uncommon for me.· I mean,
22· ·you know, my entire background is in sales and
23· ·dealing with that kind of situation.· I don't -- I
24· ·honestly do not know where I would come up with the
25· ·number, Mr. Doody.· Like it must have been a
·1· ·collage of NY, of Nicholls Yallowega, of Halsall.
·2· ·I must have been just randomly picking stuff in my
·3· ·mind to come up with something like that.
·4· · · · · · · ·Q.· ·Well, the Nicholls Yallowega --
·5· · · · · · · ·A.· ·The point -- I think the point I
·6· ·was trying to probably make and, I mean, and that
·7· ·may be -- I mean, you know, I may have picked
·8· ·something for the exercise of making a point, and
·9· ·the point that I was probably trying to make is
10· ·that to do other than we are doing might be a very
11· ·expensive exercise.· That is the best I can tell
12· ·you.
13· · · · · · · ·Q.· ·And the Nicholls Yallowega report
14· ·was in the neighbourhood of a million and a half,
15· ·right?
16· · · · · · · ·A.· ·It was 1.7 or something, I mean,
17· ·only because I have refreshed myself from the last
18· ·time we were -- weeks.
19· · · · · · · ·Q.· ·So could we conclude, would it be
20· ·fair to conclude from the reference to 1.5 million
21· ·that the Nicholls Yallowega report was probably
22· ·still in your consciousness at the time?
23· · · · · · · ·A.· ·That is about the only thing I can
24· ·think of.· Like I certainly have never seen the
25· ·Trow Reports or any of the other reports, so it
·1· ·didn't come from there.· I have never had any
·2· ·discussions with anybody about the Trow Reports.· I
·3· ·didn't even know that they existed.· So it didn't
·4· ·come from that place, but I can't tell you what
·5· ·place it came from.
·6· · · · · · · ·Q.· ·In the next paragraph Ms. Fazekas
·7· ·writes that you said:
·8· · · · · · · · · "The preferred option is to find a
·9· · · · · · · ·substance that seals the leaks.
10· · · · · · · ·This has been done in the more
11· · · · · · · ·passive areas; however, in the areas
12· · · · · · · ·of higher traffic in the line
13· · · · · · · ·between the two access ramps, the
14· · · · · · · ·seals can not be kept intact what
15· · · · · · · ·with the temperature changes, cars
16· · · · · · · ·and snowplows, etc."
17· · · · · · · ·Is that consistent with what your
18· ·understanding was of the situation at that time,
19· ·sir?
20· · · · · · · ·A.· ·Because of the location of the
21· ·library, and you know, just it was a heavy traffic
22· ·area, it was where everybody came -- the majority
23· ·of the traffic came off that side when they came up
24· ·the ramps.· If you looked at sort of the south and
25· ·the north side, that is where the most traffic
·1· ·would come.· Your snowplows would be pulling stuff
·2· ·over there all the time to get it off.· So I'm
·3· ·assuming that is where I sort of came with that
·4· ·logic.
·5· · · · · · · ·Q.· ·And particularly what I was asking
·6· ·was that --
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·-- essentially what is written
·9· ·there is what your understanding was?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·And in the next paragraph Ms.
12· ·Fazekas writes:
13· · · · · · · · · "A solution which will be
14· · · · · · · ·investigated this summer is the
15· · · · · · · ·insertion of a trough wider than the
16· · · · · · · ·I beam (along which the water flows
17· · · · · · · ·to leak below, i.e., the seam where
18· · · · · · · ·historically most of the leaks have
19· · · · · · · ·occurred) to catch the water and
20· · · · · · · ·drain it to an outside spot.· A
21· · · · · · · ·speed bump may be added over this
22· · · · · · · ·trough to slow down the traffic over
23· · · · · · · ·it."
24· · · · · · · ·Sir, can you assist us with what you
25· ·were talking about in that paragraph?
·1· · · · · · · ·A.· ·I -- you know, and this will tell
·2· ·you how funny memory is.· I cannot visualize that
·3· ·meeting.· But I have this burning feeling that this
·4· ·concept of a trough, because it just wasn't
·5· ·something that I would pick up on, was something
·6· ·that may have been stated by somebody at the
·7· ·meeting.· So then, you know, so it is crazy on the
·8· ·one hand I'm saying I can't remember the meeting,
·9· ·but it just doesn't seem like a solution I would
10· ·mentally think of.· But I know what they are
11· ·saying -- what the concept is, is to put something
12· ·underneath and catch it and move it off.
13· · · · · · · ·Q.· ·Well, did you have plans on June
14· ·15th, 2005, did you have plans to investigate
15· ·solutions that summer?
16· · · · · · · ·A.· ·Yes, I think we were -- you know,
17· ·if I met with them and we were sitting there
18· ·looking at it trying to figure out what could we
19· ·do, the speed bump, that must have been something
20· ·that either I threw out or someone else threw out.
21· · · · · · · ·Q.· ·But, sir, you had sold the mall by
22· ·then.
23· · · · · · · ·A.· ·This meeting was in --
24· · · · · · · ·Q.· ·It was five days after you had
25· ·accepted the reduction in price to 7.2 million and
·1· ·the purchaser had waived all of the conditions
·2· ·except financing.
·3· · · · · · · ·A.· ·Hang on, just bear with me a
·4· ·second.· What were the dates you just went through,
·5· ·sir, please?
·6· · · · · · · ·Q.· ·This is June 15th.
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·And on June the 10th you had
·9· ·accepted the reduction of the price to 7.2 million.
10· · · · · · · ·A.· ·Yeah.
11· · · · · · · ·Q.· ·And all conditions except
12· ·financing had been waived.
13· · · · · · · ·A.· ·Yeah, no different than when we
14· ·would have gone through it the first time, until,
15· ·you know, until it is done, it is not done, and I
16· ·believe I would be attempting to approach this
17· ·customer on the basis that we would be doing
18· ·business with them long term.
19· · · · · · · ·Q.· ·Well, sir, with respect --
20· · · · · · · ·A.· ·I was trying to --
21· · · · · · · ·Q.· ·-- was it your understanding that
22· ·if you had a signed Agreement of Purchase and Sale
23· ·which had only a condition in respect of financing,
24· ·that the purchaser could walk away even if he could
25· ·have got financing?
·1· · · · · · · ·A.· ·I guess that would have been my
·2· ·perception, yes.
·3· · · · · · · ·Q.· ·Okay, so you thought -- is your
·4· ·evidence that you thought Mr. Nazarian, even though
·5· ·he had waived all of his due diligence conditions,
·6· ·could still walk away from the deal?
·7· · · · · · · ·A.· ·My view would be that until it is
·8· ·done, it is not done.
·9· · · · · · · ·Q.· ·And so you were continuing to
10· ·carry on with your plans as if you had no deal, is
11· ·that it?
12· · · · · · · ·A.· ·I would hope that is the way I
13· ·would be approaching the customer, yes.
14· · · · · · · ·Q.· ·Do you recall, sir, it may assist
15· ·you in this, in your memory of this meeting, Ms.
16· ·Fazekas has testified that during the meeting,
17· ·Mr. Speck apologized to her for demeaning comments
18· ·he had made about her in e-mails and that he did so
19· ·in front of everybody at the meeting?
20· · · · · · · ·A.· ·I don't --
21· · · · · · · ·Q.· ·It doesn't help?
22· · · · · · · ·A.· ·No, it doesn't help at all.
23· · · · · · · ·Q.· ·If I could ask you, sir, to turn
24· ·to tab 342, Exhibit No. 11-103.· Now, sir, these
25· ·are Mr. Speck's meeting -- sorry, Mr. Speck's notes
·1· ·of the same meeting, and you can see that he has
·2· ·got the date of June 15th/05 and then he writes:
·3· · · · · · · · · "RK", which must mean you, "the
·4· · · · · · · ·Board is the customer, the legal
·5· · · · · · · ·entity.
·6· · · · · · · · · ·Proper way to communicate is in
·7· · · · · · · ·writing."
·8· · · · · · · ·And then it says:
·9· · · · · · · · · "RK's solution.
10· · · · · · · · · ·Surface material solution.
11· · · · · · · · · ·Under roof troughs as well."
12· · · · · · · ·And that is consistent with Ms.
13· ·Fazekas' notes.
14· · · · · · · ·Does this assist you with recalling
15· ·that?
16· · · · · · · ·A.· ·It doesn't assist with recalling,
17· ·but it is a confirmation that obviously it was
18· ·discussed.
19· · · · · · · ·Q.· ·And then moving down two bullets,
20· ·he writes:
21· · · · · · · · · "July-August - RK will get
22· · · · · · · ·engineer in to determine if his
23· · · · · · · ·solutions are do-able
24· · · · · · · ·(eavestroughing)."
25· · · · · · · ·Did you have a plan to get an engineer
·1· ·in in July and August, sir?
·2· · · · · · · ·A.· ·If -- I don't know that it was
·3· ·implemented, but if we talked about it, I must have
·4· ·been thinking about it.
·5· · · · · · · ·Q.· ·I take it you did not tell the
·6· ·people at the meeting that you had the mall sold,
·7· ·or at least you had an Agreement of Purchase and
·8· ·Sale?
·9· · · · · · · ·A.· ·No.
10· · · · · · · ·Q.· ·And I take it that that was a
11· ·secret kept confined within Retirement Living and
12· ·NorDev?
13· · · · · · · ·A.· ·I would assume so, yes.
14· · · · · · · ·Q.· ·And then it says in the next
15· ·bullet:
16· · · · · · · · · "Will do.
17· · · · · · · · · ·Repairs.
18· · · · · · · · · ·Some work.
19· · · · · · · · · ·Will not do huge outlays of
20· · · · · · · ·cash".
21· · · · · · · ·Is that consistent with your position
22· ·at that time, sir?
23· · · · · · · ·A.· ·If he has it in the notes, I don't
24· ·believe Troy would write it unless something was
25· ·said.
·1· · · · · · · ·Q.· ·And the concept that you would do
·2· ·some work but you would not do huge outlays of
·3· ·cash, was that consistent with your position, sir?
·4· · · · · · · ·A.· ·When you say "consistent", do you
·5· ·mean on everything?
·6· · · · · · · ·Q.· ·Well --
·7· · · · · · · ·A.· ·You are relating it to this
·8· ·problem?
·9· · · · · · · ·Q.· ·The leaks.
10· · · · · · · ·A.· ·Okay, to this specific situation.
11· ·I obviously must have said something about it.· He
12· ·would have recorded it as that, so I have to assume
13· ·that that is what was said and that was my position
14· ·with them.
15· · · · · · · ·Q.· ·Sir, if you could turn to tab 344,
16· ·Exhibit No. 315.
17· · · · · · · ·A.· ·I'm sorry, 344?
18· · · · · · · ·Q.· ·344, Exhibit No. 315.· Now, this
19· ·is a letter which was not sent to you, so you may
20· ·well not have seen it, but it is a letter from
21· ·Mr. Nazarian's lawyer to the City and it is a
22· ·standard solicitor's purchase -- purchaser's
23· ·solicitor's letter asking for confirmation of a
24· ·number of items, and on the second page, item
25· ·number 4, the lawyer writes:
·1· · · · · · · · · "Do your records indicate any
·2· · · · · · · ·outstanding work orders, deficiency
·3· · · · · · · ·notices, demands or other violations
·4· · · · · · · ·of the applicable by-laws and
·5· · · · · · · ·regulations with respect to the
·6· · · · · · · ·subject property?"
·7· · · · · · · ·Sir, you'll agree with me that such a
·8· ·request is a common feature of every real estate
·9· ·transaction?
10· · · · · · · ·A.· ·I believe so, yes.
11· · · · · · · ·Q.· ·Did your concern -- did a --
12· ·sorry, did a concern about the potential orders
13· ·from the City under the Property Standards By-Law
14· ·have anything to do with your failure to provide
15· ·the engineering reports and the architectural
16· ·report you had to the City during your ownership?
17· · · · · · · ·A.· ·Absolutely not.
18· · · · · · · ·Q.· ·If I could ask you to turn to tab
19· ·348, Exhibit No. 844.· Now, this is the report
20· ·prepared by a firm called Construction Control for
21· ·the Royal Bank as part of its due diligence, and I
22· ·understand that we will hear evidence or may hear
23· ·evidence that this was provided to Mr. Nazarian and
24· ·used by him as part of the due diligence of him.
25· · · · · · · ·Sir, prior to preparing for this
·1· ·Commission, had you ever seen this?
·2· · · · · · · ·A.· ·No.
·3· · · · · · · ·Q.· ·Sir, if I could ask you to turn to
·4· ·Exhibit No. 2300, tab 354, and this is a series of
·5· ·documents about the closing of the sale
·6· ·transaction, and if you turn to the page that ends
·7· ·2481, this is a letter to Ms. Guertin from
·8· ·Mr. Kearns and he is writing about an e-mail from
·9· ·the Royal Bank, and in item number 3 he writes:
10· · · · · · · · · "Article 11 of the Zellers lease
11· · · · · · · ·contains some unnecessary boiler
12· · · · · · · ·plate, such as this concept of the
13· · · · · · · ·'completion date' which is when 'the
14· · · · · · · ·demised premises and the remaining
15· · · · · · · ·buildings of the Shopping Centre, of
16· · · · · · · ·which the demised premises form a
17· · · · · · · ·part, are fully enclosed and
18· · · · · · · ·substantially complete.'· This is
19· · · · · · · ·not a matter of determination by
20· · · · · · · ·Zellers, it is a question of fact.
21· · · · · · · ·As the Bank's appraisal will show,
22· · · · · · · ·the construction of our entire
23· · · · · · · ·premises is complete."
24· · · · · · · ·Does that assist you in any way in
25· ·recollecting whether you actually saw the bank's
·1· ·appraisal, because that is what the document was we
·2· ·just looked at?
·3· · · · · · · ·A.· ·No.
·4· · · · · · · ·Q.· ·Okay.· Did you give -- I have
·5· ·already asked you whether you gave to
·6· ·Mr. Nazarian -- and I think I asked you this about
·7· ·the Royal Bank, but just to ensure this, did you
·8· ·give the Halsall Reports and the Nicholls Yallowega
·9· ·Bélanger Report to the Royal Bank?
10· · · · · · · ·A.· ·No.
11· · · · · · · ·Q.· ·If I could ask you to turn up
12· ·Exhibit No. 675, this is tab 366.· This is a letter
13· ·from Mr. Speck to you dated September 1st, 2005.
14· ·By this time you had already sold and transferred
15· ·title to the land, but Mr. Speck writes:
16· · · · · · · · · "Further to my letter dated June
17· · · · · · · ·13th, 2005 [...] I was mistaken
18· · · · · · · ·about the carpet cleaning [...] as
19· · · · · · · ·such, the only costs outstanding are
20· · · · · · · ·those presented with my letter."
21· · · · · · · ·And he is asking to be reimbursed for
22· ·the costs incurred by the library in dealing with
23· ·the leaks.
24· · · · · · · ·And is that your handwriting, sir?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·And it says:
·2· · · · · · · · · "Troy, I have reviewed your
·3· · · · · · · ·request and material provided.
·4· · · · · · · ·Given that 85% of the cost is
·5· · · · · · · ·related to testing that we were
·6· · · · · · · ·never notified about prior to it
·7· · · · · · · ·being implemented I have a
·8· · · · · · · ·[different] time [...]" --
·9· · · · · · · ·A.· ·"Difficult".
10· · · · · · · ·Q.· ·Sorry:
11· · · · · · · · · "[...] I have a difficult time
12· · · · · · · ·understanding why the library would
13· · · · · · · ·expect us to pay for it.· As to the
14· · · · · · · ·work that was performed, even though
15· · · · · · · ·our lease clearly states that it is
16· · · · · · · ·the responsibility of the tenant I
17· · · · · · · ·will agree to pay 50% of this cost.
18· · · · · · · ·Should you have any questions please
19· · · · · · · ·let me know."
20· · · · · · · ·Was that practice, sir, a consistent
21· ·practice with you of responding to complaints about
22· ·leaks and damage caused by it during your ownership
23· ·of the mall?
24· · · · · · · ·A.· ·No, I don't think so, no.
25· · · · · · · ·Q.· ·Can you explain it?
·1· · · · · · · ·A.· ·The only way I can explain it is
·2· ·Troy and I had a back-and-forth relationship
·3· ·sometimes, and I think this was one of those
·4· ·back-and-forths in the sense that we were going
·5· ·back and forth working through something.
·6· · · · · · · ·Q.· ·Okay.· Sir, just if I could
·7· ·conclude by going to Exhibit No. 2334.
·8· · · · · · · ·A.· ·23 --
·9· · · · · · · ·Q.· ·These were sheets that I gave to
10· ·your lawyer yesterday.· They are simply -- they are
11· ·cleaned up versions of -- if I may have a moment,
12· ·Mr. Commissioner.
13· · · · · · · ·MS. KUKA:· No, wait, that is my fault.
14· ·That is my fault, my bad.
15· · · · · · · ·MR. DOODY:· That is completely untrue.
16· ·Whatever errors that were made, they were mine, not
17· ·Ms. Kuka's.
18· · · · · · · ·MS. KUKA:· There you go.
19· · · · · · · ·BY MR. DOODY:
20· · · · · · · ·Q.· ·Sir, just to conclude, if I could
21· ·just review the financial information in respect of
22· ·the mall and the first slide that you have there,
23· ·and this is part of Exhibit No. 2334.· The
24· ·financial performance of NorDev over the years, the
25· ·earnings after interest and before amortization and
·1· ·expenses went from a low of $247,000 in 1999, which
·2· ·was a stub year, to $585,000 in 2004, and generally
·3· ·were in the ballpark of $450,000 a year; correct?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And the retained earnings by the
·6· ·end of 2004 were $601,000; correct?
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·And the current assets varied from
·9· ·year to year, but generally the spread was between
10· ·$200,000 and somewhere in the 3 to $400,000 area;
11· ·correct?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·Turning to the next slide, this
14· ·reflects payments made between NorDev and
15· ·Retirement Living over the period of time that
16· ·NorDev owned the mall.· Each year management fees
17· ·were paid by NorDev to Retirement Living; correct?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And the total, those fees were
20· ·$60,000 a year, except during 1999 when there was a
21· ·prorated portion; correct?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·So the total revenue in terms of
24· ·management fees over the six years that the mall
25· ·was owned by NorDev were $392,000?
·1· · · · · · · ·A.· ·Correct.
·2· · · · · · · ·Q.· ·And every year NorDev paid
·3· ·interest to Retirement Living on the loan that
·4· ·Retirement Living had advanced for the capital
·5· ·costs, and those interest payments totalled
·6· ·$698,000 over the six years?
·7· · · · · · · ·A.· ·Yes, sir.
·8· · · · · · · ·Q.· ·At the end of -- after the mall
·9· ·was sold, NorDev paid a dividend to Retirement
10· ·Living in the amount of a million dollars?
11· · · · · · · ·A.· ·That is correct.
12· · · · · · · ·Q.· ·And when the mall was sold, NorDev
13· ·paid a commission to Retirement Living in the
14· ·amount of $186,000, right?
15· · · · · · · ·A.· ·That is correct.
16· · · · · · · ·Q.· ·So at the end of the day,
17· ·Retirement Living received revenue from NorDev in
18· ·the amount of, or at least received payments from
19· ·NorDev in the amount of $2,276,565; correct?
20· · · · · · · ·A.· ·That is correct.
21· · · · · · · ·Q.· ·And on the next slide, which
22· ·relates -- which shows Retirement Living's
23· ·financial performance, Retirement Living had an
24· ·excess of revenue over expenses ranging from a low
25· ·of $612,000 in '02 to a high of 2.2 million in '05,
·1· ·but an average of about 1.1 million over the six
·2· ·years that it owned the mall; correct?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·And its current assets went from
·5· ·2.4 million dollars in 1999 to 6.5 million dollars
·6· ·in '05?
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·And, sir, am I correct that, as we
·9· ·can see from this financial information, it would
10· ·be accurate to say that Retirement Living and
11· ·NorDev have between them made a conscious decision
12· ·not to expend the monies that they had to fix the
13· ·roof in any way other than what you did?
14· · · · · · · ·A.· ·You would be correct in saying
15· ·that we chose a plan with the deck and we stuck
16· ·with it, yes, and we chose not to spend the funds
17· ·as you have described.
18· · · · · · · ·MR. DOODY:· Thank you.
19· · · · · · · ·Thank you, sir, those are my questions.
20· · · · · · · ·Mr. Commissioner, the plan was to have
21· ·had Mr. Elliott at this stage make oral submissions
22· ·in respect of his application for funding, and
23· ·given that it is just about 10 after 12:00, this
24· ·may be an opportune time.
25· · · · · · · ·THE COMMISSIONER:· Thank you.· It is a
·1· ·quarter after.· Are you ready to go, Mr. Elliott?
·2· · · · · · · ·Thank you, sir, you can step down if
·3· ·you wish.
·4· · · · · · · ·MR. KEARNS:· Could we presume,
·5· ·Mr. Commissioner, that this will take us to our
·6· ·lunch break?
·7· · · · · · · ·THE COMMISSIONER:· This will take you
·8· ·to the lunch break.
·9· · · · · · · ·MR. KEARNS:· May I be excused?
10· · · · · · · ·THE COMMISSIONER:· Yes.
11· · · · · · · ·MR. KEARNS:· Thank you.
12· · · · · · · ·THE COMMISSIONER:· The only matter we
13· ·are going to deal with between now and the lunch
14· ·break is Mr. Elliott's application.
15· · · · · · · ·MR. ELLIOTT:· Mr. Commissioner, we did
16· ·earlier submit a written application.· I don't know
17· ·if you have it with you, but I have an extra copy.
18· · · · · · · ·Oh, you have yours, thank you.
19· · · · · · · ·I also want to extend regrets on the
20· ·part of Mr. Aubé, who had actually planned to be
21· ·here to make these submissions, but he is
22· ·fulfilling his duties as a Deputy Judge today in
23· ·Espanola, so he is unable to be here.
24· · · · · · · ·Mr. Commissioner, you have had an
25· ·opportunity I hope to read our written submissions.
·1· ·I don't propose to read them out to you, but simply
·2· ·to highlight and explain them and to deal with any
·3· ·questions that you may have about our request.
·4· · · · · · · ·In essence, our request is to increase
·5· ·the recommended funding to add one senior counsel
·6· ·and one junior counsel.
·7· · · · · · · ·With respect to one junior counsel, it
·8· ·is our intention to add to our forces so that Ms.
·9· ·Carr can be relieved every two weeks and we will be
10· ·adding a new junior counsel to our team.· We have
11· ·already identified an appropriate young counsel,
12· ·Mr. Sean Richard, formerly of Adair Morse.
13· · · · · · · ·With respect to the senior counsel, the
14· ·issue there really, Mr. Commissioner, is not a
15· ·question of adding personnel but simply of
16· ·expanding the available budget.· We did make
17· ·inquiries of the province about the possibility of
18· ·an increase to the ten-hour daily limit that is
19· ·specified, and we were told that that was not
20· ·possible, that the only way that we could get an
21· ·increased budget for senior counsel was to seek a
22· ·recommendation from you, Mr. Commissioner, for an
23· ·increase in the senior counsel allocation.
24· · · · · · · ·So I want to make it clear we are not
25· ·trying to expand the complement of senior counsel
·1· ·we have at our disposal.· There is myself,
·2· ·Mr. Aubé, Mr. Broadbent, and we have recently been
·3· ·assisted on an occasional basis by my partner Peter
·4· ·Roy.· We are not seeking to bring in new senior
·5· ·counsel.· We are simply seeking an increase in the
·6· ·allocation so that those senior counsel can
·7· ·actually get paid for their time.
·8· · · · · · · ·We intend generally to have a maximum
·9· ·of two counsel in the room.· As you will have
10· ·witnessed, Mr. Commissioner, with the exception of
11· ·the opening submissions, generally speaking, that
12· ·has meant a senior counsel and a junior counsel
13· ·most of the time, and that is going to continue.
14· · · · · · · ·But the issue really, Mr. Commissioner,
15· ·is keeping up with the pace that has been
16· ·established by your large and very talented team.
17· ·We need to -- in order to keep up with their pace
18· ·and the volume of material that they are producing,
19· ·we really need to be able to do as they do, and
20· ·that is to have a team in the room dealing with the
21· ·witness who is presenting and to have another team
22· ·out of the room getting ready for future witnesses,
23· ·so that we are able to participate effectively in
24· ·the entire proceedings.
25· · · · · · · ·Mr. Commissioner, you are aware, of
·1· ·course, that our clients lack the resources to pay
·2· ·counsel directly, and indeed, now that we are
·3· ·receiving funding from the province, even if they
·4· ·did have resources or could generate them, we are
·5· ·forbidden from taking any extra funds to support
·6· ·our activities.· That is one of the conditions of
·7· ·the financing that is provided by the province.
·8· · · · · · · ·I would also like to highlight,
·9· ·Mr. Commissioner, that our groups, the City of
10· ·Elliot Lake and the Province of Ontario, are the
11· ·only participants, to my knowledge, who are going
12· ·to be participating and have standing throughout
13· ·the Inquiry, right from the beginning to the end.
14· · · · · · · ·Our client, of course, we are the only
15· ·community-based organizations with standing, and of
16· ·course, it is very common for such commissions of
17· ·inquiry to have community-based organizations
18· ·participating.· It is important to the community
19· ·and it is important to the legitimacy and integrity
20· ·of the Commission process.· We represent people, of
21· ·course, who are directly impacted by the mall
22· ·collapse, including the daughter of the late
23· ·Mrs. Perizzolo.
24· · · · · · · ·Mr. Commissioner, you will recall that
25· ·originally we were going to be representing ELMAC,
·1· ·but it was suggested that we also take on SAGE who
·2· ·are really interested primarily in the second phase
·3· ·of the Inquiry, that is, the emergency response
·4· ·issues.
·5· · · · · · · ·We agreed to do that, to assist them by
·6· ·giving them access to counsel, and also to assist
·7· ·the Commission because we felt that the
·8· ·Commission's work would be more effective and they
·9· ·could benefit from the contribution of SAGE if that
10· ·contribution was made through counsel.
11· · · · · · · ·I will say, Mr. Commissioner, however,
12· ·that it is very challenging, even for our very good
13· ·team of counsel, to represent over 100 lay people
14· ·with little or no appreciation of the legal
15· ·process.· Unlike my friend, Mr. Cassan, or my
16· ·friends who are representing the Province, our
17· ·clients do not have any employees to assist them.
18· ·There is no paid staff who can help organize things
19· ·or look for documents.· It all has to be done by
20· ·volunteers within our organizations or by we
21· ·lawyers on the counsel team.
22· · · · · · · ·The demand -- the pace of the Inquiry
23· ·and the organization of the Inquiry has been much
24· ·more rigorous and demanding than we had anticipated
25· ·when we formulated our original request for
·1· ·funding, notwithstanding that I had some previous
·2· ·experience.
·3· · · · · · · ·Now that we have that experience and we
·4· ·look back on it, I know that throughout my time
·5· ·alone has regularly exceeded the ten-hour daily
·6· ·limit, which leaves my colleagues, Mr. Aubé,
·7· ·Mr. Roy and Mr. Broadbent, any time they have spent
·8· ·clearly outside the maximum limit.· And so what we
·9· ·would be faced with at this point is a proportional
10· ·allocation with all of us having to write off some
11· ·of our time.
12· · · · · · · ·It is -- the other point that I wanted
13· ·to make about this, of course, is that we have a
14· ·keen interest in all of the witnesses that are
15· ·appearing before you, Mr. Commissioner, and you
16· ·will have observed that unlike with some other
17· ·counsel who absent themselves, I notice today there
18· ·is no one here, for example, from the Province of
19· ·Ontario, that our team has been present throughout.
20· ·We have been following the evidence closely.· I
21· ·think we have asked questions of pretty much every
22· ·witness.· We have also suggested evidence to your
23· ·counsel and have, I hope, been of assistance to
24· ·you, Mr. Commissioner.
25· · · · · · · ·But what we have found is that in order
·1· ·to keep up, we are in fact doing what the other
·2· ·team is doing for the Commission, and that is, as
·3· ·I'm speaking here today, my colleague Mr. Aubé and
·4· ·my colleague Mr. Broadbent are looking at other
·5· ·witnesses to prepare for future attendances, but we
·6· ·will burn through the limit without any difficulty.
·7· · · · · · · ·And it looks, based -- as I look back
·8· ·on what has happened over the past month,
·9· ·Mr. Commissioner, it does appear that we are going
10· ·to have to -- and based on the current limits, we
11· ·are going to have to write over -- write off over
12· ·100 hours of senior counsel time.· And in my
13· ·respectful submission, although there is always a
14· ·certain public service contribution that one
15· ·expects with a commission of inquiry, that level of
16· ·write-off is, in my view, unreasonable and
17· ·unacceptably high.
18· · · · · · · ·I would like to point out in terms of
19· ·the public service component, Mr. Commissioner,
20· ·that our senior counsel have already agreed to
21· ·accept a maximum rate that is set by the Province
22· ·for our time that is much lower than our normal
23· ·hourly rates, particularly for Toronto counsel, and
24· ·indeed they are lower than the rates that according
25· ·to media reports are being paid to our counterparts
·1· ·among the Commission senior counsel.· I don't
·2· ·begrudge them those rates, and we do know that
·3· ·we -- we knew what we were getting into with
·4· ·respect to the rates, but in my respectful
·5· ·submission, to accept those low rates and then have
·6· ·to write time off on top of that is unreasonable.
·7· · · · · · · ·THE COMMISSIONER:· And what is that
·8· ·rate?
·9· · · · · · · ·MR. ELLIOTT:· It is $192 an hour.
10· · · · · · · ·THE COMMISSIONER:· 192.
11· · · · · · · ·MR. ELLIOTT:· My normal hourly rate in
12· ·Toronto is $800 an hour.
13· · · · · · · ·THE COMMISSIONER:· And the junior
14· ·counsel?
15· · · · · · · ·MR. ELLIOTT:· The junior counsel rate
16· ·is 100 and --
17· · · · · · · ·MS. CARR:· 132, I believe.
18· · · · · · · ·THE COMMISSIONER:· 132?
19· · · · · · · ·MR. ELLIOTT:· Yes.· And I am not sure
20· ·what we charge for Ms. Carr's time, but it is
21· ·considerably more than that on other files.· It is
22· ·at least a hundred dollars an hour more than that.
23· · · · · · · ·Finally, Mr. Commissioner, although
24· ·this is not your responsibility, I should point out
25· ·that the government was very slow in establishing
·1· ·the fee approval mechanism and the payment process,
·2· ·and the result is that as of today we still have
·3· ·not been paid one penny for all of the work that we
·4· ·have done.· We have actually been working for free
·5· ·since the Commission started last July.
·6· · · · · · · ·This has placed a very terrible burden
·7· ·on three small firms.· We have been doing our best,
·8· ·but we really do need some assistance if we are
·9· ·going to be able to carry on.
10· · · · · · · ·So we respectfully request the addition
11· ·of one junior and one senior counsel.· This will
12· ·give us an additional body to help out and an
13· ·additional budget for a senior counsel to come in,
14· ·and I certainly hope that the cheque will arrive
15· ·sometime soon.· I don't know that there is anything
16· ·that you are in a position to do about that,
17· ·Mr. Commissioner, but it is a source of concern.
18· ·We --
19· · · · · · · ·THE COMMISSIONER:· Well, I can tell
20· ·you, and I think without speaking out of school,
21· ·that it is a concern not only for you but for
22· ·Commission Counsel and others as well.· It is a
23· ·laborious and slow process.
24· · · · · · · ·MR. ELLIOTT:· Right.· Well, it is
25· ·something that I have experienced in the past, and
·1· ·I don't like to send the sheriff in to Queen's
·2· ·Park, but perhaps I might have to give some thought
·3· ·to that.
·4· · · · · · · ·Anyway, I also wanted to bring up --
·5· · · · · · · ·THE COMMISSIONER:· Could I just raise
·6· ·with you, you have spoken at some length about
·7· ·senior counsel and the requirement for two, but in
·8· ·relation to junior counsel, I think all that you
·9· ·have told me is that you need to spell off Ms. Carr
10· ·every couple of weeks.
11· · · · · · · ·MR. ELLIOTT:· Right, and they --
12· · · · · · · ·THE COMMISSIONER:· And so won't one
13· ·just compensate for the other?
14· · · · · · · ·MR. ELLIOTT:· No, not really,
15· ·Mr. Commissioner, because what is going to be
16· ·happening is that it is the in-the-room and the
17· ·out-of-the-room point, it is that while the one
18· ·lawyer, junior lawyer will be in the room assisting
19· ·the lawyer who is working on a particular witness,
20· ·the other junior lawyer will be back in the office
21· ·getting ready for the future witnesses.· So they
22· ·will both be working at the same time; it is just
23· ·that one will be visible in the room and the other
24· ·will be invisible going through the documents and
25· ·getting ready.
·1· · · · · · · ·I should point out, for example,
·2· ·Mr. Commissioner, that I was very alive to not
·3· ·falling into the trap that I did in a previous
·4· ·Commission of Inquiry of waiting until the end to
·5· ·draft my closing submissions, and Ms. Carr and I
·6· ·were alive to that going in and she was intending
·7· ·to have a first draft of the closing submissions
·8· ·underway and keeping it up to date as we went
·9· ·along.· And she simply has had -- she is an
10· ·excellent young junior, but she has simply not had
11· ·the time to do it.
12· · · · · · · ·So even though it may be invisible to
13· ·those in the room, we are actually falling very far
14· ·behind and we need assistance in order to keep up
15· ·and make sure that we assist you in the best way we
16· ·can, Mr. Commissioner, and also ensure that your
17· ·task is completed as soon and as efficiently as
18· ·possible.
19· · · · · · · ·THE COMMISSIONER:· All right.
20· · · · · · · ·As you are speaking, I'm just going
21· ·through your application.
22· · · · · · · ·MR. ELLIOTT:· I should also mention,
23· ·Mr. Commissioner, with respect to the junior
24· ·counsel, Mr. Richard, there is also a possibility
25· ·that that team may be assisted by a backup team of
·1· ·people like Mr. Roy who might step in from time to
·2· ·time.· And we are not asking for any extra budget
·3· ·for them, but just in terms of the cast of
·4· ·characters who may appear before you, you will be
·5· ·meeting our current articling student Carolyn
·6· ·Filgiano soon.· She is going to be doing the
·7· ·examination of Mr. Cuthbertson, and it is possible
·8· ·that next year's articling student may spell off
·9· ·Ms. Carr and Mr. Richard during the course of the
10· ·year as well.
11· · · · · · · ·And I think -- I want to commend you,
12· ·Mr. Commissioner, for giving articling students an
13· ·opportunity to have this experience because I think
14· ·in this day and age they rarely get the opportunity
15· ·to get on their feet in this kind of setting and I
16· ·think that is something to be encouraged.
17· · · · · · · ·THE COMMISSIONER:· Okay, there was one
18· ·comment, and I think it is at paragraph 17 of your
19· ·written application.
20· · · · · · · ·MR. ELLIOTT:· Yes.
21· · · · · · · ·THE COMMISSIONER:· Which in the last
22· ·four lines it says:
23· · · · · · · · · "Often, because we receive the
24· · · · · · · ·will-say statements and the relevant
25· · · · · · · ·documents just on the eve of a
·1· · · · · · · ·witness's evidence, the changes at
·2· · · · · · · ·our end have to be made very hastily
·3· · · · · · · ·and in difficult circumstances."
·4· · · · · · · ·MR. ELLIOTT:· Right.
·5· · · · · · · ·THE COMMISSIONER:· Is that an accurate
·6· ·statement, sir?
·7· · · · · · · ·MR. ELLIOTT:· Well, for example --
·8· · · · · · · ·THE COMMISSIONER:· And I am sorry, I
·9· ·should go beyond that.· I was concerned by that
10· ·statement and I had conversations with Commission
11· ·Counsel, and they assure me that that is not the
12· ·situation.
13· · · · · · · ·MR. ELLIOTT:· Well, they come on
14· ·relatively -- things have improved.· They come on
15· ·relatively short notice.· We received today
16· ·Mr. Officer's documents, or yesterday Mr. Officer's
17· ·documents for Monday.· It is not a lot of time to
18· ·get ready.
19· · · · · · · ·When I say "eve", I'm not using it in
20· ·the literal sense.· There is not a lot of lead time
21· ·to prepare.· In the past, we did have this problem,
22· ·Mr. Commissioner, that we didn't know who the
23· ·witnesses were going to be.
24· · · · · · · ·There has been much improvement in
25· ·that, for which I commend Commission Counsel, but
·1· ·we do sometimes get surprises like we did this week
·2· ·when Mr. Nicholls was ill and suddenly Mr. Kennealy
·3· ·advanced.· And that is no one's fault.· It is just
·4· ·one of the things that places additional strain on
·5· ·our team.
·6· · · · · · · ·THE COMMISSIONER:· Okay.
·7· · · · · · · ·Are those all of your oral submissions?
·8· · · · · · · ·MR. ELLIOTT:· Those are all of my oral
·9· ·submissions, subject to any further questions you
10· ·may have, Mr. Commissioner.
11· · · · · · · ·THE COMMISSIONER:· Thank you.
12· · · · · · · ·Do Commission Counsel wish to make
13· ·submissions on this issue?
14· · · · · · · ·MR. DOODY:· No, Mr. Commissioner.
15· · · · · · · ·THE COMMISSIONER:· No.
16· · · · · · · ·Thank you.· I'll take your submissions
17· ·under advisement.· I have two other decisions to
18· ·make.· As I have indicated, I have the City's
19· ·application for additional funding and I have the
20· ·application of Mr. Derreck, Mr. Thomas Derreck, to
21· ·consider as well.
22· · · · · · · ·These applications obviously have --
23· ·albeit, the money is not coming from the
24· ·Commission, it will come from the government, but
25· ·through a process these are all matters that impact
·1· ·upon the Commission's overall budget, for which I'm
·2· ·ultimately responsible.
·3· · · · · · · ·So I want to give your submissions some
·4· ·careful consideration.· I would propose to do that
·5· ·over the weekend and to have a decision for you by
·6· ·Monday next.
·7· · · · · · · ·Okay, that being said, unless there is
·8· ·anything to be added, we'll rise until 2 o'clock
·9· ·this afternoon.
10· · · · · · · ·-- RECESSED AT 12:38 P.M.
11· · · · · · · ·-- RESUMED AT 2:00 P.M.
12· · · · · · · ·THE COMMISSIONER:· Mr. Kearns.
13· · · · · · · ·MR. KEARNS:· I don't have any questions
14· ·until the end.
15· · · · · · · ·Thank you, Mr. Commissioner.
16· · · · · · · ·THE COMMISSIONER:· Thank you.· Mr.
17· ·Elliott.
18· · · · · · · ·MR. ELLIOTT:· Yes, Mr. Commissioner,
19· ·and I should indicate I have an engagement at 3
20· ·o'clock, so if I may be excused after completing my
21· ·cross-examination.
22· · · · · · · ·THE COMMISSIONER:· Thank you.
23· · · · · · · ·CROSS-EXAMINATION BY MR. ELLIOTT:
24· · · · · · · ·Q.· ·Mr. Kennealy, my name is Douglas
25· ·Elliot, and I represent two community-based groups,
·1· ·the Elliot Lake Mall Action Committee and the
·2· ·Seniors Action Group of Elliot Lake, at this
·3· ·Commission of Inquiry.
·4· · · · · · · ·Mr. Kennealy, in your testimony
·5· ·in-chief, you said in the period prior to the
·6· ·purchase you never noticed any buckets collecting
·7· ·water from leaks.· The Elliot Lake Retirement
·8· ·Living offices were located across from the
·9· ·library; am I correct?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·Did you ever go into the library?
12· · · · · · · ·A.· ·Not very often, no.
13· · · · · · · ·Q.· ·All right, but you would agree
14· ·with me that the library had glass along the front
15· ·of the library so you could look into the library
16· ·from the mall area; correct?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·All right.· Ms. Kuka, could we
19· ·have Exhibit No. 11-46, please.
20· · · · · · · ·MS. KUKA:· That is 11-46?
21· · · · · · · ·MR. ELLIOTT:· 11-46, yes, it is a
22· ·library video, and then I'll be going to 11-47, Ms.
23· ·Kuka.
24· · · · · · · ·THE COMMISSIONER:· Yes, the
25· ·interpreters are also asking that you slow down.
·1· · · · · · · ·MR. ELLIOTT:· Please excuse me.
·2· · · · · · · ·MR. KEARNS:· Mr. Commissioner, I
·3· ·understand that Mr. Elliott is now going to show
·4· ·the video and obviously he can do that, but I think
·5· ·it should be important to note what the date is of
·6· ·this video and how it relates to Retirement
·7· ·Living's ownership.
·8· · · · · · · ·THE COMMISSIONER:· Okay.· Are you
·9· ·prepared to specify that for the record, Mr.
10· ·Elliott?
11· · · · · · · ·MR. ELLIOTT:· Yes, I will indicate I
12· ·have reviewed the transcript in this regard, and
13· ·Ms. Fazekas -- the evidence is that it is not known
14· ·when this occurred.
15· · · · · · · ·Ms. Fazekas' evidence was that it
16· ·was -- that the conditions shown in the video
17· ·reflected the conditions that existed in the
18· ·library on rainy days, and she said, it was her
19· ·evidence that the conditions were pretty much the
20· ·same under Algoma Central Properties, Retirement
21· ·Living and Mr. Nazarian's ownership.
22· · · · · · · ·So we don't know the precise time, but
23· ·I think Ms. Fazekas' evidence was that this is
24· ·typical of the conditions in the library throughout
25· ·the period that the library occupied the mall, on a
·1· ·rainy day, I should specify because, of course, it
·2· ·was worse on rainy days.
·3· · · · · · · ·Go ahead.
·4· · · · · · · ·[REPORTER'S NOTE:· Video played.]
·5· · · · · · · ·MR. ELLIOTT:· And the next video,
·6· ·please.
·7· · · · · · · ·MS. KUKA:· And that is?
·8· · · · · · · ·MR. ELLIOTT:· Exhibit No. 11-47 I
·9· ·believe it is, Ms. Kuka.
10· · · · · · · ·[REPORTER'S NOTE:· Video played.]
11· · · · · · · ·MR. ELLIOTT:· You will notice there are
12· ·buckets right on top of the shelves, on top of the
13· ·tarps.
14· · · · · · · ·[REPORTER'S NOTE:· Video played.]
15· · · · · · · ·BY MR. ELLIOTT:
16· · · · · · · ·Q.· ·So my question for you,
17· ·Mr. Kennealy, is does it remain your evidence that
18· ·you never noticed anything like that in the library
19· ·in the period prior to your purchase of the mall?
20· · · · · · · ·A.· ·Prior to our purchase of the mall?
21· · · · · · · ·Q.· ·Yes.
22· · · · · · · ·A.· ·No, sir, I did not.
23· · · · · · · ·Q.· ·And you describe the conditions in
24· ·the library as that there were some issues in the
25· ·library.· Ms. Fazekas, in contrast, described them
·1· ·as deplorable conditions, the worst in any library
·2· ·in Ontario.· Wouldn't you agree with me, having
·3· ·seen that video, that Ms. Fazekas' description is
·4· ·more accurate than your own?
·5· · · · · · · ·A.· ·What you showed there is not very
·6· ·good.
·7· · · · · · · ·Q.· ·Deplorable?
·8· · · · · · · ·A.· ·Not good.
·9· · · · · · · ·Q.· ·Do you think it is -- well, there
10· ·was an indication in one of the exhibits that you
11· ·were making some capital expenditures, planning to
12· ·make some capital expenditures on the hotel.· My
13· ·understanding is that all that was done with
14· ·respect to the hotel is that some of the rooms were
15· ·refurbished; is that correct?
16· · · · · · · ·A.· ·Yes, that included work in the
17· ·bathrooms; it included stripping out the --
18· ·virtually stripping them down and redoing them.· It
19· ·wasn't just -- it wasn't just replacing furnishing.
20· ·It was everything.
21· · · · · · · ·Q.· ·But they were cosmetic changes
22· ·rather than structural changes?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·Aesthetics?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·All right.· Now, if I understood
·2· ·the evidence correctly, in Exhibit No. 2275 at page
·3· ·13, the golf course, you spent something like a
·4· ·million and a half dollars on the golf course; is
·5· ·that right?
·6· · · · · · · ·A.· ·Over the term, yes, we spent about
·7· ·I believe about a-million-four in total.
·8· · · · · · · ·Q.· ·And how much was it that you gave
·9· ·to Zellers as incentives?· It was about $900,000?
10· · · · · · · ·A.· ·It was $900,000.
11· · · · · · · ·Q.· ·$900,000.· And yet you'll recall
12· ·that option number one in the Halsall Report was
13· ·just about the same amount that you spent on the
14· ·golf course, and so you chose to spend money on a
15· ·golf course rather than spending the money on
16· ·option number one of Halsall; correct?
17· · · · · · · ·A.· ·That is what occurred.
18· · · · · · · ·Q.· ·And option number two, which
19· ·involved less serious renovations or repairs to the
20· ·roof, you chose to -- that would have cost you less
21· ·than the money that you gave to Zellers; it was
22· ·about a half a million dollars.· And you chose to
23· ·give money to the Hudson's Bay Company, one of the
24· ·oldest and most prosperous companies in this
25· ·country, rather than spend that money repairing the
·1· ·roof according to option number two; correct?
·2· · · · · · · ·A.· ·That was a decision we made, yes.
·3· · · · · · · ·Q.· ·Why?
·4· · · · · · · ·A.· ·That is a valid question.· In
·5· ·terms of, you know, the larger context of what we
·6· ·were trying to do, you go back to where we started
·7· ·the whole thing in December of '97 and you look at
·8· ·that and you say, well, what were you trying to do
·9· ·in the larger sense?· We were trying to take what
10· ·we thought was a physical asset that wasn't doing
11· ·well and was not providing folks in the community
12· ·with what they wanted and needed and that was our
13· ·start point.
14· · · · · · · ·From there over the years what evolved
15· ·was basically a process that said our focus was in
16· ·these -- were in these areas.· We wanted to improve
17· ·the alternatives for folks in this community so
18· ·they didn't have to get in a car and drive two and
19· ·a half hours to get basic things that they had to
20· ·get.· You could not buy household goods in this
21· ·community prior to Zellers coming in.· You couldn't
22· ·go in and find pots and pans.· You couldn't go in
23· ·and find bedding stuff.
24· · · · · · · ·The option did not exist --
25· · · · · · · ·Q.· ·Well, Mr. -- I'm sorry, I don't
·1· ·mean to cut you off.
·2· · · · · · · ·A.· ·That is okay.· So that was
·3· ·extremely important.· The folks in the community
·4· ·were telling us that.· That is where we felt we
·5· ·needed to go.
·6· · · · · · · ·And we also worked on the assumption
·7· ·that we felt that we had a viable method for
·8· ·maintaining the physical structure.· I mean, that
·9· ·is why we brought the Halsall folks in in terms of
10· ·looking at it and the original Nicholls Yallowega.
11· · · · · · · ·Our experience was -- and I know what
12· ·you are presenting, Mr. Elliott, in the library and
13· ·the library was a stubborn, stubborn problem.· I
14· ·have tried to communicate what I saw during the
15· ·time that we owned the mall, and we felt we were
16· ·making very good progress on managing the leaks.
17· ·And I -- it is hard to get that across, I know.
18· · · · · · · ·Q.· ·Well, in fact, wouldn't you agree
19· ·with me, Mr. Kennealy, that Ms. Fazekas working in
20· ·the library would be in a far better position than
21· ·you to judge, you who say you never noticed any
22· ·leaks in the library prior to coming along, so
23· ·therefore, you would have no point of comparison.
24· ·But she worked in the library.· Wouldn't you agree
25· ·with me that she would be in a much better position
·1· ·than you to judge whether you were doing better
·2· ·with respect to the leaks in the library than you
·3· ·are?
·4· · · · · · · ·A.· ·In her circumstance, I'm not going
·5· ·to dispute that at all.
·6· · · · · · · ·Q.· ·All right, so then if she says
·7· ·that you didn't do any better, don't you accept the
·8· ·fact that even though you may have been trying hard
·9· ·and you may have wished to do better, that in fact
10· ·you didn't do any better than Algoma Central
11· ·Properties with respect to the library?
12· · · · · · · ·A.· ·In the case of the library, yes,
13· ·in respect of the library, I can't dispute that
14· ·because I can't measure how Algoma did and
15· ·Mrs. Fazekas would be in a better position to
16· ·assess that.
17· · · · · · · ·In terms of how I perceived we did with
18· ·the general mall, my perception was we did a good
19· ·job.· The folks worked very hard at it and
20· ·diligently, and I believe we were making good
21· ·progress.
22· · · · · · · ·Q.· ·Well, I will just tell you,
23· ·Mr. Kennealy, that the evidence from your tenants
24· ·will be that you did do a better job on the
25· ·aesthetics of the mall but that with respect to the
·1· ·leaks you didn't do any better than Algoma Central
·2· ·Properties.· That will be their evidence.
·3· · · · · · · ·And indeed, Scotiabank was a tenant of
·4· ·yours in the mall, was it not?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·And isn't it true that there were
·7· ·no leaks in the Scotiabank in the period when it
·8· ·was under the administration of Algoma Central
·9· ·Properties?
10· · · · · · · ·A.· ·I don't know that, sir.
11· · · · · · · ·Q.· ·Well, assuming that that's the
12· ·evidence, you do know that leaks developed under
13· ·your regime, that is, the Elliot Lake Retirement
14· ·Living regime?
15· · · · · · · ·A.· ·We did have some leak issues with
16· ·the Bank of Nova Scotia.
17· · · · · · · ·Q.· ·And you were never able to stop
18· ·the leaks in the Bank of Nova Scotia, were you?
19· · · · · · · ·A.· ·I don't know that we ever stopped
20· ·it.· We had some difficulty with the leaks there,
21· ·yes.
22· · · · · · · ·Q.· ·Well, and in fact, the situation
23· ·deteriorated to the point that after your regime,
24· ·this Bank of Nova Scotia moved out because of the
25· ·leak problem.· So I'm going to suggest to you that
·1· ·with respect to the Bank of Nova Scotia that the
·2· ·situation was, again, worse under the Elliot Lake
·3· ·Retirement Living regime than it was under the
·4· ·Algoma Central Properties regime.· Are you
·5· ·disputing that?
·6· · · · · · · ·A.· ·I'm not trying to dispute it.· It
·7· ·is I don't know all of the detail in terms of the
·8· ·history of Algoma Central, so I can't --
·9· · · · · · · ·Q.· ·All right, Mr. Kennealy, are you
10· ·familiar with the concept of scheduled maintenance?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·All right.· Did you ever have a
13· ·written program of scheduled maintenance for the
14· ·parking deck of this mall?
15· · · · · · · ·A.· ·A written schedule?· I know the
16· ·fellows and Mr. Quinn kept an eye on things.· I
17· ·know that they would walk the deck regularly.· I
18· ·know that they would keep an eye out to make sure
19· ·that, you know, there was --
20· · · · · · · ·THE COMMISSIONER:· That is not the
21· ·question, sir.
22· · · · · · · ·THE WITNESS:· Okay.
23· · · · · · · ·THE COMMISSIONER:· Were you aware of
24· ·one in writing?
25· · · · · · · ·THE WITNESS:· We did not have a written
·1· ·schedule.
·2· · · · · · · ·BY MR. ELLIOTT:
·3· · · · · · · ·Q.· ·And doesn't that make it very
·4· ·difficult for you as the Chief Executive Officer to
·5· ·monitor compliance with the program of maintenance
·6· ·if there is nothing in writing, no auditing done of
·7· ·the program of maintenance?· You just have to trust
·8· ·your guys to do the right thing; isn't that right?
·9· · · · · · · ·A.· ·That would be correct.
10· · · · · · · ·Q.· ·Do you now know, Mr. Kennealy,
11· ·that one of the reasons that the parking deck
12· ·leaked is because it was defectively designed in
13· ·the first place?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·And when did you reach that
16· ·conclusion?
17· · · · · · · ·A.· ·After reading the NORR Report.
18· · · · · · · ·Q.· ·All right, so no one had shared
19· ·that information with you prior to that time?
20· · · · · · · ·A.· ·No, sir.
21· · · · · · · ·Q.· ·All right.· So Mr. Leistner in his
22· ·confidential discussions with you had never shared
23· ·with you that it was his opinion and the opinion of
24· ·Mr. Caughill that the roof could not be repaired
25· ·except at an exorbitant cost because it had been
·1· ·defectively designed?
·2· · · · · · · ·A.· ·No, sir.
·3· · · · · · · ·Q.· ·Would you have expected Algoma
·4· ·Central Properties to convey that information to
·5· ·you after you had signed that non-disclosure
·6· ·agreement?
·7· · · · · · · ·A.· ·I would have thought they might
·8· ·have, yes.
·9· · · · · · · ·Q.· ·Would that information have
10· ·changed your decision-making with respect to
11· ·purchasing the mall?
12· · · · · · · ·A.· ·I believe the NORR Report would
13· ·have -- if I had read it, it would have a huge
14· ·effect.
15· · · · · · · ·Q.· ·All right.· Did you know that --
16· ·do you now know that the engineer who designed the
17· ·roof, Mr. John Kadlec, had lost his licence to
18· ·practice engineering on March 16th, 1994, and that
19· ·subsequently a warning had been issued by the
20· ·Professional Engineers of Ontario to owners of
21· ·buildings he had designed, including Algoma Central
22· ·Properties?
23· · · · · · · ·A.· ·Yes, sir, I'm aware.
24· · · · · · · ·Q.· ·When did you first become aware of
25· ·that, Mr. Kennealy?
·1· · · · · · · ·A.· ·I believe it was in the course of
·2· ·preparing for this Commission.
·3· · · · · · · ·Q.· ·So Mr. Leistner, after you signed
·4· ·a non-disclosure agreement, never shared that
·5· ·information with you, even though he clearly knew
·6· ·about it?
·7· · · · · · · ·A.· ·No, sir.
·8· · · · · · · ·Q.· ·Would you have expected that was
·9· ·the kind of thing that Mr. Leistner would have told
10· ·you in connection with your purchase of this mall?
11· · · · · · · ·A.· ·It would have been helpful.
12· · · · · · · ·Q.· ·And would that have affected your
13· ·decision-making about completing the purchase, if
14· ·you knew that the engineer, the structural engineer
15· ·who had designed that parking deck had had his
16· ·licence revoked and had been the subject of a
17· ·warning to owners of buildings that he had designed
18· ·that they may have been potentially dangerous?
19· · · · · · · ·A.· ·Well, I'm just trying to think in
20· ·terms of that, just that in isolation.· You are
21· ·referring to that fact --
22· · · · · · · ·Q.· ·That fact.
23· · · · · · · ·A.· ·-- just in isolation?
24· · · · · · · ·Q.· ·Would that have affected your
25· ·decision-making?
·1· · · · · · · ·A.· ·It would have caused some anxiety,
·2· ·yes.
·3· · · · · · · ·Q.· ·Would you have -- for example,
·4· ·would you have passed that information along to
·5· ·your consultants?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·Were you aware of the name of the
·8· ·company -- at the time you did the purchase, did
·9· ·you know the name of the company who had designed
10· ·and sold the waterproofing system on the parking
11· ·deck?
12· · · · · · · ·A.· ·No, sir.
13· · · · · · · ·Q.· ·Were you told that?· It was the
14· ·Peterson Company.· Mr. Monroe of the Peterson
15· ·Company has given evidence at this Commission of
16· ·Inquiry that he had formed the opinion by 1984 that
17· ·their waterproofing system was defectively
18· ·designed, that it was unsuitable for the conditions
19· ·in Elliot Lake because of the heavy snowfalls and
20· ·the damage done by snowplows and that, in his
21· ·opinion, it could not be repaired.
22· · · · · · · ·If that information had been conveyed
23· ·to you, would it have affected your decision-making
24· ·regarding the purchase?
25· · · · · · · ·A.· ·Yes, sir.
·1· · · · · · · ·Q.· ·Did Mr. Rod Caughill, either
·2· ·directly or through his brother Bruce Caughill,
·3· ·ever share with you his opinion that the leaks in
·4· ·the roof could only be fixed by extensive
·5· ·retrofitting that he considered was not
·6· ·economically feasible, at least for the budget of
·7· ·Algoma Central Properties?
·8· · · · · · · ·A.· ·No, sir.
·9· · · · · · · ·Q.· ·Did you have any information as to
10· ·what the expected life -- what the expected life,
11· ·useful life of the roof and the waterproofing
12· ·system was?· Did you ever get that information from
13· ·Algoma Central Properties or anyone else?
14· · · · · · · ·A.· ·No, sir.
15· · · · · · · ·Q.· ·Mr. Monroe gave evidence that the
16· ·expected -- the reasonable life expectancy for
17· ·their waterproofing system was five to ten years
18· ·from the date of its installation in 1980.· What
19· ·impact, if any, would that information have had on
20· ·your decision-making process about purchasing the
21· ·mall?
22· · · · · · · ·A.· ·It would have caused more
23· ·investigation.
24· · · · · · · ·Q.· ·Were you aware, Mr. Kennealy, that
25· ·when the building was constructed, that the
·1· ·structural steel was out of plumb and that anchor
·2· ·wires were affixed to the structure and tension
·3· ·applied to the structure to pull it into plumb, and
·4· ·then these wires were then bolted into the bedrock
·5· ·in order to keep the building in plumb?· Were you
·6· ·aware of that?
·7· · · · · · · ·A.· ·No, sir.
·8· · · · · · · ·Q.· ·If you had been aware of that,
·9· ·would that have affected either your
10· ·decision-making process around the purchase or your
11· ·decisions about maintenance of the property?
12· · · · · · · ·A.· ·Yes, sir.
13· · · · · · · ·Q.· ·You have indicated that the
14· ·library problems existed in large part because of
15· ·the Hillside Drive North exit and traffic over it.
16· ·Would you agree with me there was also a problem of
17· ·people driving across the roof of the mall to avoid
18· ·the stoplight at the corner of Hillside Drive North
19· ·and Ontario and effectively using the mall roof as
20· ·a highway bypass?
21· · · · · · · ·A.· ·I wasn't aware of that.· It never
22· ·dawned on me.
23· · · · · · · ·Q.· ·All right.· Was any consideration
24· ·given to simply closing the Hillside Drive North
25· ·entrance and sealing it off so that you could seal
·1· ·off that area completely and stop the leaks and
·2· ·just force consumers to use the one ramp from the
·3· ·other direction?
·4· · · · · · · ·A.· ·No, we did not consider that.
·5· · · · · · · ·Q.· ·Why not?
·6· · · · · · · ·A.· ·I don't think it crossed our
·7· ·minds, to be quite honest with you.· I don't recall
·8· ·any discussion on that or any consideration given
·9· ·to it.
10· · · · · · · ·Q.· ·All right.· Were you aware as an
11· ·employer that you were responsible for the safety
12· ·of your employees working in the mall?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·Were you aware that as a landlord
15· ·owning a building that you were responsible for the
16· ·safety of the patrons that were invited to shop in
17· ·your shopping centre?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·All right.· Were you aware of any
20· ·of the Ministry of Labour inspections that had
21· ·taken place at the mall over the years?
22· · · · · · · ·A.· ·Not that I can recall, no.
23· · · · · · · ·Q.· ·All right.· And were you aware of
24· ·any City of Elliot Lake inspections taking place?
25· · · · · · · ·A.· ·I was aware that the fire
·1· ·inspecting folks would come through regularly.
·2· · · · · · · ·Q.· ·And did you ever get any reports,
·3· ·work orders or complaints from the Fire Department
·4· ·of the City of Elliot Lake?
·5· · · · · · · ·A.· ·Yes, I believe we got one for some
·6· ·clutter in the back hallway.
·7· · · · · · · ·Q.· ·Nothing to do with the structure
·8· ·of the roof?
·9· · · · · · · ·A.· ·No, sir.
10· · · · · · · ·Q.· ·And in particular, we know that
11· ·there were quite a few areas where the fireproofing
12· ·had fallen off the beams because they had become
13· ·soaked with water that had infiltrated from the
14· ·leaks, right?· Yes?
15· · · · · · · ·A.· ·Yes.
16· · · · · · · ·Q.· ·And did you ever give Mr. Quinn or
17· ·anyone else instructions about reinstating that
18· ·spray-applied fireproofing that had fallen off the
19· ·steel due to water infiltration?
20· · · · · · · ·A.· ·I know we talked about it, but I
21· ·just can't recall if we gave -- I don't believe so,
22· ·no.
23· · · · · · · ·Q.· ·And the Fire Department never
24· ·ordered you to do it?
25· · · · · · · ·A.· ·No, sir.
·1· · · · · · · ·Q.· ·Now, you engaged Nicholls
·2· ·Yallowega Bélanger, whom I shall refer to as NYB,
·3· ·and their engineers Halsall to advise you with
·4· ·respect to this building at the time that you
·5· ·purchased it; correct?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·And you are not a professional
·8· ·architect yourself?
·9· · · · · · · ·A.· ·No, sir.
10· · · · · · · ·Q.· ·And you have no training in
11· ·building design or waterproofing systems?
12· · · · · · · ·A.· ·No, sir.
13· · · · · · · ·Q.· ·You are not an engineer?
14· · · · · · · ·A.· ·No, sir.
15· · · · · · · ·Q.· ·And your training and experience
16· ·is in sales and marketing; correct?
17· · · · · · · ·A.· ·Yes, sir.
18· · · · · · · ·Q.· ·And you didn't have an architect
19· ·or a professional engineer on staff, did you?
20· · · · · · · ·A.· ·No, sir.
21· · · · · · · ·Q.· ·All right.· So can you explain to
22· ·me then why, after you get advice from your
23· ·professionals and you have no similarly qualified
24· ·professionals working for you and you are not
25· ·similarly a qualified professional yourself, why
·1· ·you would choose to disregard their advice and
·2· ·devise a third option that they had not recommended
·3· ·to follow with respect to the parking deck?
·4· · · · · · · ·A.· ·I had discussions with my property
·5· ·manager, Mr. Quinn.· We had a number of things we
·6· ·went through, and we made the decision to rout and
·7· ·seal as we did.
·8· · · · · · · ·Q.· ·Which is exactly what Algoma
·9· ·Central Properties had been doing without any
10· ·success for many years before?
11· · · · · · · ·A.· ·Yes, we believed that we were
12· ·doing it somewhat different in that we had taken
13· ·the advice of the Halsall folks in terms of the way
14· ·we were doing the profile and we followed that very
15· ·strictly.
16· · · · · · · ·Q.· ·But you did not follow their
17· ·advice, did you?· I mean, their advice was not to
18· ·continue doing what Algoma Central Properties said.
19· ·You paid them good money to give you professional
20· ·advice, and you did exactly what Algoma Central
21· ·Properties did; you disregarded the professional
22· ·advice you paid for and did your own do-it-yourself
23· ·solution, isn't that right?
24· · · · · · · ·A.· ·We did not engage their services.
25· ·We elected to do it with our own staff.
·1· · · · · · · ·Q.· ·Well, you didn't follow the advice
·2· ·that you had paid for?· You thought you knew better
·3· ·than the professionals?
·4· · · · · · · ·A.· ·We --
·5· · · · · · · ·THE COMMISSIONER:· Well, there is two
·6· ·questions there.· One at a time.
·7· · · · · · · ·THE WITNESS:· Would you repeat the
·8· ·first question, Mr. Elliott?
·9· · · · · · · ·BY MR. ELLIOTT:
10· · · · · · · ·Q.· ·I said you didn't actually follow
11· ·their advice.· They gave you two options --
12· · · · · · · ·A.· ·We did not choose one of the two
13· ·options, that is correct.
14· · · · · · · ·Q.· ·So you didn't follow their advice,
15· ·all right.· So isn't it true that you didn't follow
16· ·their advice because you were going to pursue the
17· ·same course that Algoma Central Properties had
18· ·done, and that is spend the bare minimum in order
19· ·to keep the costs as low as possible and then just
20· ·hope for the best, hope that you would get a better
21· ·outcome than you had in the past?
22· · · · · · · ·A.· ·We perceived that we were doing it
23· ·somewhat differently because of the profile
24· ·exercise.· We did not perceive that we were just
25· ·continuing what ACP had done, because what we got
·1· ·from the engineers was that, you know, they were
·2· ·not satisfied with the way the joint was being
·3· ·prepared, and then the actual profile, they gave
·4· ·instructions on that and we implemented as per
·5· ·that.
·6· · · · · · · ·So the only thing I'm -- I guess I'm
·7· ·not agreeing with you with is on the issue of, you
·8· ·know, did we do exactly what ACP was doing.
·9· · · · · · · ·Q.· ·Now, with respect to this
10· ·non-disclosure agreement that you entered into, you
11· ·do understand, Mr. Kennealy, that you are legally
12· ·accountable to the Board and not the Board to you;
13· ·correct?
14· · · · · · · ·A.· ·Absolutely.
15· · · · · · · ·Q.· ·All right.· And did you not think
16· ·that this agreement might not -- didn't you think
17· ·that this agreement might put you into a serious
18· ·potential conflict of interest, if you learned
19· ·something from Mr. Leistner and Algoma Central
20· ·Properties that could be damaging to the interests
21· ·of Elliot Lake Retirement Living and Mr. Leistner
22· ·refused to waive his right to object?
23· · · · · · · ·A.· ·I did not think that that would
24· ·occur when I engaged -- when we engaged into the
25· ·process.
·1· · · · · · · ·Q.· ·Did you seek any legal advice
·2· ·before entering into that agreement?
·3· · · · · · · ·A.· ·I did have our corporate solicitor
·4· ·involved in the process, yes.
·5· · · · · · · ·Q.· ·All right.· And we saw that there
·6· ·were some large amounts of money that were received
·7· ·by Retirement Living following the sale of the
·8· ·mall.· Were there any bonuses paid to yourself or
·9· ·other employees of Elliot Lake Retirement Living in
10· ·connection with the monies received in connection
11· ·with that sale?
12· · · · · · · ·A.· ·I received --
13· · · · · · · ·Q.· ·Either Christmas bonuses or
14· ·otherwise?
15· · · · · · · ·A.· ·I received no incentive
16· ·whatsoever.· I believe my managers would have made
17· ·in total on everything that we did with the mall
18· ·about $1,000 a year.
19· · · · · · · ·Q.· ·But there was no special bonuses
20· ·whatsoever with respect to following the collection
21· ·of that large sum of money or in expectation of the
22· ·collection of that large sum of money --
23· · · · · · · ·A.· ·No, sir.
24· · · · · · · ·Q.· ·-- from the sale?
25· · · · · · · ·A.· ·No, sir.
·1· · · · · · · ·Q.· ·All right.· I want to come back to
·2· ·some of your original testimony, Mr. Kennealy.· You
·3· ·said that when it became known that Algoma Central
·4· ·Properties was going to be shutting down the mall,
·5· ·that it alarmed the people of Elliot Lake?
·6· · · · · · · ·A.· ·You are referring to the hotel?
·7· · · · · · · ·Q.· ·The hotel.· Well, the whole -- you
·8· ·expressed that there was a lot of unhappiness about
·9· ·the way Algoma Central Properties had managed it,
10· ·that they were essentially milking it for all it
11· ·was worth, that they were not spending any money on
12· ·it; they were just trying to squeeze every last
13· ·penny of revenue; they weren't putting any effort
14· ·into keeping up the appearances of the mall, and
15· ·now it looked like the whole thing was going to go
16· ·downhill, particularly with the loss of the hotel.
17· ·That was the concern that Mayor Farkouh and other
18· ·people in the community were expressing and a
19· ·concern that was shared by you as well; isn't that
20· ·so?· That was what was motivating it?
21· · · · · · · ·A.· ·Yes.
22· · · · · · · ·Q.· ·Yes, and so what it was thought at
23· ·the time, if I understand it correctly, that these
24· ·corporate guys in the Sault didn't really care
25· ·about Elliot Lake, but if Elliot Lakers stepped in
·1· ·and took over the situation, they would care and
·2· ·they would keep the mall going and they would do a
·3· ·better job than Algoma Central Properties; isn't
·4· ·that the thinking?
·5· · · · · · · ·A.· ·In general, sir, yes.
·6· · · · · · · ·Q.· ·Okay.· Well, I'm going to suggest
·7· ·to you, Mr. Kennealy, that in fact you really
·8· ·didn't do anything different than Algoma Central
·9· ·Properties except maybe improve the aesthetics a
10· ·little bit.· We know you hired professionals and
11· ·they gave you options that you ignored, right?· You
12· ·did something different?
13· · · · · · · ·A.· ·We did do something slightly
14· ·different.
15· · · · · · · ·Q.· ·Right, and that is exactly the
16· ·same as Algoma Central Properties.· And you decided
17· ·to patch the repairs, patch the cracks with your
18· ·own employees instead of going to qualified outside
19· ·contractors, to keep the costs down, right?
20· · · · · · · ·A.· ·We went to our own employees and
21· ·the consideration was we felt we could do it, yes.
22· · · · · · · ·Q.· ·Right, and in fact, it was the
23· ·very same people that Algoma Central Properties had
24· ·been using, so you weren't doing anything different
25· ·there.· And Algoma Central Properties never stopped
·1· ·the leaks altogether, and you never stopped the
·2· ·leaks altogether; correct?
·3· · · · · · · ·A.· ·Not altogether, but we did feel
·4· ·that we were making good progress.· I --
·5· · · · · · · ·Q.· ·Well, I understand your
·6· ·feelings --
·7· · · · · · · ·A.· ·I understand --
·8· · · · · · · ·Q.· ·-- but we have already heard
·9· ·evidence to the contrary, and I suspect we'll hear
10· ·more.
11· · · · · · · ·A.· ·Okay.
12· · · · · · · ·Q.· ·And it appears from the figures we
13· ·have heard this morning that you generated
14· ·considerable revenue from the mall as long as you
15· ·owned it and you invested very little in it and you
16· ·invested no capital in the roof, just like Algoma
17· ·Central Properties; isn't that right?
18· · · · · · · ·A.· ·We did not invest a great deal of
19· ·capital in the roof, that is correct.
20· · · · · · · ·Q.· ·You didn't invest any, as far as I
21· ·can see.· In fact, isn't it true that you actually
22· ·didn't invest any of your money in the roof at all
23· ·because the maintenance costs, once it was
24· ·characterized as maintenance, you passed those
25· ·costs on to your tenants, and so it was your
·1· ·tenants who paid for whatever was done to the roof,
·2· ·not you?
·3· · · · · · · ·A.· ·Some portion of it, yes.
·4· · · · · · · ·Q.· ·All of it?· Most of it?· Most of
·5· ·it, at least?
·6· · · · · · · ·A.· ·I can't recall exactly how much
·7· ·the common area charges were, but there was a
·8· ·portion of it, yes.
·9· · · · · · · ·Q.· ·So you actually were spending
10· ·virtually nothing on that roof; it was your tenants
11· ·that were paying for it?
12· · · · · · · ·A.· ·Part of it, yes.
13· · · · · · · ·Q.· ·And then just like Algoma Central
14· ·Properties, having not repaired the leaks, you
15· ·decide -- and made lots of money over the years,
16· ·after spending very little, you decided that the
17· ·best solution was to turn around and sell it to
18· ·someone else; isn't that right?
19· · · · · · · ·A.· ·Well, we did decide that it was an
20· ·appropriate thing at the point we did to look at
21· ·selling the mall, yes.
22· · · · · · · ·MR. ELLIOTT:· Those are my questions.
23· ·Thank you, Mr. Kennealy.
24· · · · · · · ·THE WITNESS:· Thank you, sir.
25· · · · · · · ·THE COMMISSIONER:· Who is going next?
·1· · · · · · · ·Mr. Little [sic].
·2· · · · · · · ·CROSS-EXAMINATION BY MR. TITLE:
·3· · · · · · · ·Q.· ·Mr. Kennealy, my name is Michael
·4· ·Title.· I'm general counsel to Eastwood Mall Inc.
·5· · · · · · · ·THE COMMISSIONER:· I'm sorry, I said
·6· ·"Little" and I meant "Title".· I'm sorry, sir.
·7· · · · · · · ·MR. TITLE:· Thank you.
·8· · · · · · · ·THE COMMISSIONER:· I mis-identified you
·9· ·for the record.· My mistake.
10· · · · · · · ·BY MR. TITLE:
11· · · · · · · ·Q.· ·Very good.
12· · · · · · · ·I would like to take you to Exhibit No.
13· ·397 and go through a brief chronology with regard
14· ·to the engineering work that was done by Halsall,
15· ·Exhibit No. 397, tab 51.
16· · · · · · · ·We see from this, sir, that this begins
17· ·the engineering process that Retirement Living
18· ·initiated.
19· · · · · · · ·A.· ·Did you say 397?
20· · · · · · · ·Q.· ·Tab 51.
21· · · · · · · ·A.· ·Oh, I'm sorry.
22· · · · · · · ·THE COMMISSIONER:· Tab 351 or 51?
23· · · · · · · ·MR. TITLE:· Exhibit No. 397.
24· · · · · · · ·THE COMMISSIONER:· Okay, well, the
25· ·record is wrong.· It is Exhibit No. 397?
·1· · · · · · · ·MR. TITLE:· That is correct.
·2· · · · · · · ·THE COMMISSIONER:· Thank you.· And it
·3· ·is tab?
·4· · · · · · · ·MR. TITLE:· 51.
·5· · · · · · · ·THE COMMISSIONER:· 50 or 51?
·6· · · · · · · ·BY MR. TITLE:
·7· · · · · · · ·Q.· ·51, sir.
·8· · · · · · · ·So just to refresh your memory on the
·9· ·chronology, this began the exercise of conducting
10· ·an engineering analysis of the building; is that
11· ·correct?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·And at that time the building was
14· ·approximately 19 years old and had been constructed
15· ·in 1979; were you aware of that?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·You were hired by Retirement
18· ·Living in 1993; is that correct?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·And accordingly, over the five
21· ·years prior to commissioning Halsall, is it your
22· ·evidence that you were not aware of any leaking,
23· ·any deficiencies in the structure or any complaints
24· ·in the community regarding the condition of the
25· ·mall?
·1· · · · · · · ·A.· ·I think what I said is that my
·2· ·only exposure really was just sort of, and I will
·3· ·get the word wrong, people just mentioning
·4· ·anecdotal type of things where people would tell
·5· ·you that there were leaks.· I didn't see a lot.· It
·6· ·wasn't visual.· I worked in the mall.· The way I
·7· ·went in and out of the mall I would not be walking
·8· ·through the main section of the mall all the time,
·9· ·so I mean, that may be one of the reasons.· I would
10· ·spend time in the mall, but in any of the time I
11· ·spent in the mall I didn't see any --
12· · · · · · · ·Q.· ·You say you worked in the mall?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·In your work with Retirement
15· ·Living you worked in the mall?
16· · · · · · · ·A.· ·Yes.
17· · · · · · · ·Q.· ·In what respect?· Did you have an
18· ·office?
19· · · · · · · ·A.· ·Yes, our office was there, yes.
20· · · · · · · ·Q.· ·When you considered the need for a
21· ·Building Condition Assessment, you were not aware
22· ·of any building deficiencies whatsoever?
23· · · · · · · ·A.· ·Not that -- no, nothing of any
24· ·significance, no, that I am aware of.
25· · · · · · · ·Q.· ·In this regard, sir, we see that
·1· ·you decided to commission a Building Condition
·2· ·Assessment, and this assessment was to have two
·3· ·phases and Phase 2 was to be far more detailed.
·4· ·Did you understand that?
·5· · · · · · · ·A.· ·Just bear with me a second.
·6· · · · · · · ·(Witness reviews document.)
·7· · · · · · · ·I'm reading Phase 2, yes.
·8· · · · · · · ·Q.· ·Yes, so when we look at that, you
·9· ·can see that a Phase 2 report is very detailed
10· ·relative to a Phase 1 report; isn't that correct?
11· · · · · · · ·A.· ·Yes, I guess, yes.
12· · · · · · · ·Q.· ·Now, at this time you were
13· ·obviously considering the potential for a purchase
14· ·of the complex by Retirement Living; correct?
15· · · · · · · ·A.· ·Not in January of '98, no.
16· · · · · · · ·Q.· ·Well, I'll take you to the next
17· ·exhibit, Exhibit No. 390, so tab 62.
18· · · · · · · ·A.· ·390?
19· · · · · · · ·Q.· ·Exhibit No. 390, tab 62.
20· · · · · · · ·A.· ·Tab 62, okay.· I'm sorry, the date
21· ·on the first one we looked at was?
22· · · · · · · ·Q.· ·January 30th, 1998.
23· · · · · · · ·A.· ·'98, okay, yes.
24· · · · · · · ·Q.· ·I have the date of the
25· ·non-disclosure agreement as May 12th, 1998.
·1· · · · · · · ·A.· ·Yes.
·2· · · · · · · ·Q.· ·So certainly by that date, you
·3· ·were contemplating pursuing an acquisition of the
·4· ·complex, isn't that correct, because you entered
·5· ·into a non-disclosure agreement with the owner?
·6· · · · · · · ·A.· ·I was not contemplating an
·7· ·acquisition.· The exercise was being done to gain
·8· ·an understanding of as part of a broader study that
·9· ·we had -- we were going to undertake for the
10· ·Municipality of Elliot Lake, on behalf of.
11· · · · · · · ·Q.· ·Well, this is a customary document
12· ·in the course of making inquiries, is the financial
13· ·condition and the leases and other features of a
14· ·commercial property, and it is normally done in
15· ·pursuit of a potential acquisition.· You are saying
16· ·that is not the case?
17· · · · · · · ·A.· ·Not at this time, no.· No.
18· · · · · · · ·Q.· ·So, sir, when you did form, along
19· ·with your Board, an intention to proceed with a
20· ·pursuit of the acquisition, is that when you went
21· ·ahead with the engineering study Phase 1?
22· · · · · · · ·A.· ·No, we did Phase 1, I believe it
23· ·was implemented in -- I think it was sometime
24· ·after -- sometime after August I think that they
25· ·actually did the physical work, August, September,
·1· ·I believe.
·2· · · · · · · ·Q.· ·But you were very interested in
·3· ·understanding everything you could find out about
·4· ·the condition of the structure; is that correct?
·5· · · · · · · ·A.· ·That's correct.
·6· · · · · · · ·Q.· ·And you needed to report to your
·7· ·Board and the Board also communicated some facts to
·8· ·the City, and there were a lot of people that you
·9· ·were accountable to and you had to have a very full
10· ·understanding?· That is what you indicated earlier;
11· ·is that correct?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·And I gather your company had not
14· ·entered into a transaction of this type in the
15· ·past, that is, a large commercial property
16· ·transaction, or had it?
17· · · · · · · ·A.· ·I don't believe we had, no.
18· · · · · · · ·Q.· ·So this investigation was quite
19· ·important to you then?
20· · · · · · · ·A.· ·Yes, it was important.
21· · · · · · · ·Q.· ·I'll take you to tab 92, Exhibit
22· ·No. 66, page 28.
23· · · · · · · ·A.· ·Tab 92?
24· · · · · · · ·Q.· ·Tab 92.
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·MS. KUKA:· This page?
·2· · · · · · · ·BY MR. TITLE:
·3· · · · · · · ·Q.· ·Yes.· You indicated that at least
·4· ·by August 1998 the Halsall investigation had gone
·5· ·forward with the Phase 1 investigation; is that
·6· ·correct?
·7· · · · · · · ·A.· ·Nicholls Yallowega went forward
·8· ·and Halsall went forward, yes.
·9· · · · · · · ·Q.· ·Yes, and it included an
10· ·engineering study and a mechanical study and it was
11· ·very thorough, was it not?
12· · · · · · · ·A.· ·Yes.
13· · · · · · · ·Q.· ·Now, when we look at page 28, we
14· ·see some rather impressive potential costs in
15· ·relation to this building that an owner would have
16· ·to consider, in particular -- well, a possible
17· ·grand total of $3,596,000, but in particular, in
18· ·looking at the parking deck Option A at that time
19· ·was considered to involve a cost of $2,144,200 and
20· ·Option B was to involve a cost of $3,596,000, very
21· ·substantial costs indeed.
22· · · · · · · ·Did these not give you concern and
23· ·pause regarding proceeding at all with this
24· ·purchase?
25· · · · · · · ·A.· ·We did further investigation.
·1· · · · · · · ·Q.· ·Further investigation?
·2· · · · · · · ·A.· ·Yes.
·3· · · · · · · ·Q.· ·Did it not give you concern that
·4· ·this may not be a viable transaction at all for
·5· ·your company?
·6· · · · · · · ·A.· ·The report told us that we needed
·7· ·to do more investigation.
·8· · · · · · · ·Q.· ·Did this report in regard to the
·9· ·costs, the potential costs involved impact on your
10· ·thinking regarding the potential purchase price
11· ·that you would pay for this property?
12· · · · · · · ·A.· ·Yes, it would have had an effect,
13· ·but it also stated clearly that they needed to do
14· ·more work to be sure of exactly what the cost might
15· ·be.
16· · · · · · · ·Q.· ·Did you have any opinion that this
17· ·was something to disregard, that is, that since
18· ·there was more study involved, that this didn't
19· ·mean very much?
20· · · · · · · ·A.· ·Are you suggesting that we would
21· ·have given consideration to stop at this point?
22· · · · · · · ·Q.· ·Well, either that -- well, what
23· ·was your consideration?· Did you say that all that
24· ·was involved was further study and that these large
25· ·costs were not a concern at the time?
·1· · · · · · · ·A.· ·The large costs would have gotten
·2· ·our attention and have been a concern, but we knew
·3· ·based on what they told us in the report that we
·4· ·should continue along and get more information,
·5· ·that they could not -- and if you read the report,
·6· ·they basically say, you know, we don't have total
·7· ·confidence in what we are giving you here, and you
·8· ·need to do more work before you can really
·9· ·understand.
10· · · · · · · ·Q.· ·Now, at the time of this report,
11· ·and this is November 1998, November 12th, 1998,
12· ·were you aware that Algoma was seeking 6 million
13· ·dollars for the property?
14· · · · · · · ·A.· ·At this point?· No.
15· · · · · · · ·Q.· ·When were you aware that the
16· ·property was priced at 6 million dollars?
17· · · · · · · ·A.· ·Yeah, we got into discussions
18· ·sometime after the -- towards the end of September.
19· · · · · · · ·Q.· ·Well, this is November 12th, 1998,
20· ·that these numbers came in --
21· · · · · · · ·A.· ·Hang on, yeah, my timing is wrong.
22· ·We had our Board meeting in September.· After the
23· ·September meeting, I started speaking with Algoma
24· ·Central about the possibility of looking at
25· ·acquisition.· I don't know if we got to that point
·1· ·of discussion when we received this.· We received
·2· ·this somewhere around November.· We would have been
·3· ·in discussions with them in the October -- sometime
·4· ·in the October time frame, yes.
·5· · · · · · · ·Q.· ·Did you ever say to Mr. Leistner
·6· ·that we have a report that says we might have to
·7· ·spend 3 million dollars on this project?
·8· · · · · · · ·A.· ·I don't know that we got into that
·9· ·discussion.· We might have.
10· · · · · · · ·Q.· ·Did you say to Ms. Guertin or
11· ·Mr. Quinn that you might have to spend 3 million
12· ·dollars on this project?
13· · · · · · · ·A.· ·We had the report.
14· · · · · · · ·Q.· ·Did you discuss these figures in
15· ·any detail?
16· · · · · · · ·A.· ·Yes, we would have talked about
17· ·the numbers, yes.
18· · · · · · · ·Q.· ·Was Ms. Guertin concerned about
19· ·these high potential costs?
20· · · · · · · ·A.· ·I think all of us were.
21· · · · · · · ·Q.· ·Did it also give you concern that
22· ·if the parking deck required this extent of repair,
23· ·that it may well be unsafe or may become unsafe?
24· ·Did that form part of your consideration?
25· · · · · · · ·A.· ·I don't believe that came to our
·1· ·attention.· The top -- it did not come to the top
·2· ·of our mind.· We were still focussing on we need to
·3· ·have further work done to understand what the state
·4· ·of this mall is and what might or might not be done
·5· ·with it.
·6· · · · · · · ·Q.· ·Did you personally have
·7· ·discussions with Mr. Nicholls concerning his
·8· ·report?
·9· · · · · · · ·A.· ·Did I personally?· I believe we
10· ·had discussions, yes, yes.
11· · · · · · · ·Q.· ·And he talked to you about his
12· ·findings and so forth?
13· · · · · · · ·A.· ·Yeah, I'm trying to remember the
14· ·meetings.· I can't actually recall.· I cannot
15· ·recall.· I'm sure I had meetings with Ms. Guertin
16· ·and Mr. Nicholls, but I just can't recall
17· ·specifically.
18· · · · · · · ·Q.· ·And do you know that Mr. Quinn was
19· ·involved in providing inspections to the Halsall
20· ·engineers of the property?
21· · · · · · · ·A.· ·I'm sorry, I --
22· · · · · · · ·Q.· ·Did you know that Mr. Quinn at
23· ·this date or a later date was assisting with
24· ·inspections of the property?
25· · · · · · · ·A.· ·I believe he participated in the
·1· ·tour that this group did --
·2· · · · · · · ·Q.· ·Yes.
·3· · · · · · · ·A.· ·-- I believe.
·4· · · · · · · ·Q.· ·Yes.· And he discussed that with
·5· ·you, did he?
·6· · · · · · · ·A.· ·I believe we would have talked
·7· ·about it a bit, yes.
·8· · · · · · · ·Q.· ·Did Mr. Quinn tell you his opinion
·9· ·of what this property needed in terms of repair and
10· ·maintenance from time to time?
11· · · · · · · ·A.· ·During this period?
12· · · · · · · ·Q.· ·Well, from and after November
13· ·1998, yes.
14· · · · · · · ·A.· ·Once we took ownership, yes.
15· · · · · · · ·Q.· ·After you took ownership?
16· · · · · · · ·A.· ·Well, we probably had
17· ·conversations before we took ownership too in terms
18· ·of what we decided to do.
19· · · · · · · ·Q.· ·Did Mr. Quinn express any
20· ·skepticism toward this report?
21· · · · · · · ·A.· ·Towards this report?
22· · · · · · · ·Q.· ·Yes.
23· · · · · · · ·A.· ·Not that I can recall, but we
24· ·weren't viewing it from a skeptical point of view.
25· ·We were -- we viewed it as one step along the way.
·1· · · · · · · ·Q.· ·And then in regard to the
·2· ·decision-making, the decision-making part was
·3· ·yours, not his; is that correct?
·4· · · · · · · ·A.· ·The ultimate decision, yes.· Are
·5· ·you -- but when you ask that question, are you
·6· ·talking about ultimate decision in terms of what?
·7· · · · · · · ·Q.· ·In terms of the measures to be
·8· ·taken as a result of the Halsall and Nicholls
·9· ·Reports.
10· · · · · · · ·A.· ·This report?
11· · · · · · · ·Q.· ·And this report in particular.
12· · · · · · · ·A.· ·Yes, it would be -- we would talk
13· ·about it, and then the decision would be mine, I
14· ·guess, yes.
15· · · · · · · ·Q.· ·All right.· So certainly,
16· ·therefore, by the fall 1998 you had a good idea
17· ·that Algoma was looking for approximately 6 million
18· ·dollars for the property?
19· · · · · · · ·A.· ·It is possible sometime in -- yes.
20· · · · · · · ·Q.· ·So with figures such as these set
21· ·out by Halsall in November 1998, we are talking
22· ·about potential costs of anywhere up to 50 percent
23· ·of that price.· That is a very substantial
24· ·proportion of the price, is it not?
25· · · · · · · ·A.· ·Yes.
·1· · · · · · · ·Q.· ·Is it as a result of this report
·2· ·that you found it necessary to reduce your initial
·3· ·price to Algoma?
·4· · · · · · · ·A.· ·I think it was more a function of
·5· ·getting through the second stage of the review and
·6· ·then beginning a negotiation with Algoma.
·7· · · · · · · ·Q.· ·Well, you didn't have the Phase 2
·8· ·yet, but you had this in your hands when you made
·9· ·your first offer to Algoma?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·Did you have this calculation in
12· ·hand when you prepared your first offer price to
13· ·Algoma?
14· · · · · · · ·A.· ·Oh, I see, okay.· Yes, we did our
15· ·first offer in early January, yes.
16· · · · · · · ·Q.· ·So this was in hand and this was
17· ·in mind, was it not?
18· · · · · · · ·A.· ·Yes.· Yes.
19· · · · · · · ·Q.· ·I'll take you to tab 114, Exhibit
20· ·No. 1525.
21· · · · · · · ·A.· ·Yes.
22· · · · · · · ·Q.· ·Sir, this is your letter dated
23· ·January 5th, 1999?
24· · · · · · · ·A.· ·Yes.
25· · · · · · · ·Q.· ·To Mr. Leistner at Algoma Central
·1· ·Properties indicating that you were authorized per
·2· ·your Board to offer 2.5 million dollars for the
·3· ·property in Elliot Lake known as the Algo Centre,
·4· ·et cetera?
·5· · · · · · · ·A.· ·Yes.
·6· · · · · · · ·Q.· ·And it indicates that the
·7· ·purchaser would be a for-profit corporation; is
·8· ·that correct?· And is that referring to NorDev as
·9· ·opposed to --
10· · · · · · · ·A.· ·Just bear with me a second.
11· · · · · · · ·Q.· ·-- ELRL?
12· · · · · · · ·A.· ·(Witness reviews document.)
13· · · · · · · ·Yes.
14· · · · · · · ·Q.· ·And is that actually what
15· ·occurred, that is, NorDev proceeded with this
16· ·purchase ultimately on a for-profit basis?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And the same Board of Directors
19· ·that governs ELRL, does it govern NorDev?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And what was the reason for
22· ·setting this up as a for-profit corporation?
23· · · · · · · ·A.· ·We had gotten -- eventually we got
24· ·advice from our accountants, KPMG.· We asked them
25· ·to provide a report for our Board to review in
·1· ·terms of what the appropriate way to make the
·2· ·acquisition would be in terms of our not-for-profit
·3· ·status.· It was on their advice.· That was one
·4· ·component.
·5· · · · · · · ·The second component, our Board of
·6· ·Directors wanted to ensure that if we took on a
·7· ·retail operation where we would be competing with
·8· ·local landlords, that it would be subject to the
·9· ·same taxes as a normal commercial landlord.
10· · · · · · · ·Q.· ·And therefore, it was operated on
11· ·a for-profit basis from the date of its
12· ·acquisition; is that correct?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·With regard to your offer price of
15· ·2.5 million dollars, I believe you already
16· ·indicated that with the Halsall Report in hand
17· ·showing very substantial potential expenses, that
18· ·would have played a role in discounting any price
19· ·that Algoma wanted for the property; is that
20· ·correct?
21· · · · · · · ·A.· ·Yeah, and I think it was also by
22· ·then, by the time we made this offer, I would have
23· ·had some discussions with Mr. Leistner to get to
24· ·the point where I would get some understanding of
25· ·where he would be in terms of pricing.· So it was
·1· ·an offer to start a discussion, I guess.
·2· · · · · · · ·Q.· ·But it was also an offer that bore
·3· ·in mind the potentially high expenses that were --
·4· ·that lay ahead if you went ahead with the
·5· ·acquisition; is that correct?
·6· · · · · · · ·A.· ·It could be, yes.
·7· · · · · · · ·Q.· ·I'll take you to tab 120, Exhibit
·8· ·No. 2173.· This is the first page I guess of the
·9· ·Agreement of Purchase and Sale between NorDev and
10· ·Algoma dated February 26, 1999.· Now, this
11· ·agreement was at a purchase price of 4 million
12· ·dollars.· Was that a price that you had agreed to
13· ·in advance with Mr. Leistner as the ultimate
14· ·negotiated price?
15· · · · · · · ·A.· ·Yes, we went through a process of
16· ·back and forth, and I think at some point he said
17· ·my bottom line is 4 million dollars, and I in turn
18· ·took that back to our Board for their review and
19· ·consideration.
20· · · · · · · ·Q.· ·So 4 million dollars was a price
21· ·for the hotel, the 12-acre site and the entire
22· ·200,000 square foot complex; is that correct?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·That was a rather low price, was
25· ·it not?
·1· · · · · · · ·A.· ·I don't know.· For -- in reference
·2· ·to what?
·3· · · · · · · ·Q.· ·In reference to the assets being
·4· ·acquired.
·5· · · · · · · ·A.· ·To construct those assets?· Yes,
·6· ·absolutely.
·7· · · · · · · ·Q.· ·Well, even in a resale situation,
·8· ·it is a good price, is it not?
·9· · · · · · · ·A.· ·Yes, it is a -- I would say it is
10· ·a low price --
11· · · · · · · ·Q.· ·Yes.
12· · · · · · · ·A.· ·-- when you look at the physical
13· ·sort of asset, yes.
14· · · · · · · ·Q.· ·And even that price would reflect
15· ·or provide sufficient allowance for significant
16· ·capital expenditures to be made, would it not?
17· · · · · · · ·A.· ·Depending on the operating flow,
18· ·yes.
19· · · · · · · ·Q.· ·Was it your intention when you
20· ·acquired the property to keep it in the short term
21· ·or in the long term?
22· · · · · · · ·A.· ·I don't know that we really knew.
23· ·I know that our goal was to try to improve the
24· ·property.
25· · · · · · · ·Q.· ·Yes, there was no plan as to how
·1· ·long you would hold the property?
·2· · · · · · · ·A.· ·There was no defined definition of
·3· ·timeline, no.
·4· · · · · · · ·Q.· ·Was it intended that you would
·5· ·sell it for a profit?
·6· · · · · · · ·A.· ·When we went in?· I don't know
·7· ·that a lot of thought was given to that, sir.
·8· · · · · · · ·Q.· ·I'll take you to Exhibit No. 141,
·9· ·tab 129.· Or it could be 741.· I believe it is
10· ·Exhibit No. 741 we need.
11· · · · · · · ·MS. KUKA:· This is 741.
12· · · · · · · ·BY MR. TITLE:
13· · · · · · · ·Q.· ·Okay.
14· · · · · · · ·A.· ·Is that tab 129?
15· · · · · · · ·Q.· ·Yes.· Now, just to remind you,
16· ·sir, the Agreement of Purchase and Sale was
17· ·February 26th, 1999, and it didn't close until June
18· ·18th, 1999, and this, therefore, falls during that
19· ·period of time before closing and indicates -- it
20· ·is a letter from Halsall to Nicholls reiterating
21· ·that:
22· · · · · · · · · "[...] further studies needed to
23· · · · · · · ·be carried out to finalize a work
24· · · · · · · ·plan associated with repair to the
25· · · · · · · ·parking deck.· The details of the
·1· ·study were outlined in the Report,
·2· ·but were as follows:"
·3· ·And they included:
·4· · · "Drill and obtain powder samples
·5· ·at the underside of the precast
·6· ·concrete slabs at selective
·7· ·locations.· The extent of chloride
·8· ·contamination will be determined by
·9· ·lab tests;
10· · · ·Expose and visually inspect the
11· ·precast concrete slab prestressing
12· ·strands at selective locations;
13· · · ·Expose the topside of the precast
14· ·concrete panels by removing the
15· ·concrete topping and rigid
16· ·insulation to assess leakage along
17· ·expansion joints, longitudinal
18· ·joints, the structural steel girders
19· ·and at previous concrete repairs;
20· · · ·Obtain samples of the concrete
21· ·topping to determine the depth of
22· ·chloride contamination;
23· · · ·Inspect condition of the
24· ·supporting structural steel beam
25· ·lateral restraint connections to the
·1· · · · · · · ·precast slabs; and
·2· · · · · · · · · ·Inspect condition of beam and
·3· · · · · · · ·bracing connections.
·4· · · · · · · · · ·Costs to undertake this study are
·5· · · · · · · ·estimated to be $12,000 to $15,000
·6· · · · · · · ·plus GST."
·7· · · · · · · ·Plus an engineering fee of $10,000.
·8· · · · · · · · · "The contractors are required to:
·9· · · · · · · ·chip and remove and reinstate
10· · · · · · · ·toppings where designated, drill
11· · · · · · · ·core samples, as well as chip and
12· · · · · · · ·expose prestressing strands for
13· · · · · · · ·visual observation, as well as to
14· · · · · · · ·remove and replace insulation on the
15· · · · · · · ·underside of the structure."
16· · · · · · · ·Now, sir, do you remember being told
17· ·about this letter?
18· · · · · · · ·A.· ·I don't know.· Told about the
19· ·letter?
20· · · · · · · ·Q.· ·Yes, that Halsall Associates had
21· ·written to Nicholls recommending detailed testing?
22· · · · · · · ·A.· ·I don't know if I was told about
23· ·the letter.· I can't recall.· I don't know.· I just
24· ·can't recall.
25· · · · · · · ·Q.· ·This is March 9th, 1999, before
·1· ·you closed your transaction.· You don't recall?
·2· · · · · · · ·A.· ·No.· You are asking me, and I just
·3· ·can't recall.· Did I see the letter, or you are
·4· ·asking me was I aware of the letter?
·5· · · · · · · ·Q.· ·Did you see the letter or were you
·6· ·told of the letter or was there any discussion
·7· ·surrounding this letter?
·8· · · · · · · ·A.· ·I can't -- I just can't recall.· I
·9· ·don't know if we got this or not.· I'm trying to
10· ·remember even through the process of going through
11· ·all the material, and I just cannot recall.· I know
12· ·we got the final report.· I just can't recall if we
13· ·got this letter.
14· · · · · · · ·Q.· ·Do you know if any of these tests
15· ·were actually carried out?
16· · · · · · · ·A.· ·I believe so.
17· · · · · · · ·Q.· ·Now, you indicated in your
18· ·testimony that you had approached your own bank,
19· ·that is, Bank of Montreal, with regard to the
20· ·financing portion of the purchase price?
21· · · · · · · ·A.· ·Yes, we did.
22· · · · · · · ·Q.· ·On the 4 million dollar price.
23· ·And what amount of financing were you seeking?
24· · · · · · · ·A.· ·I'm trying to think when we sent
25· ·the financing packages out.· At the end of the day,
·1· ·we ended up taking 2.6 from the Royal Bank, I
·2· ·believe.
·3· · · · · · · ·Q.· ·And you said that your bank, Bank
·4· ·of Montreal, had been doing business with
·5· ·Retirement Living for some years; is that correct?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·Do you know for how long that went
·8· ·on?
·9· · · · · · · ·A.· ·Oh, gosh, certainly the length of
10· ·time I had been there, so I'm assuming almost from
11· ·the beginning, for eight or nine years.
12· · · · · · · ·Q.· ·And they were presented with your
13· ·financing package, and they turned it down; is that
14· ·correct?
15· · · · · · · ·A.· ·Yeah, I didn't say that quite
16· ·properly I believe yesterday.· They didn't turn it
17· ·down.· They just presented us an offer that was so
18· ·unacceptable that they might as well have turned us
19· ·down.· They did not have any interest.
20· · · · · · · ·Q.· ·In other words, they saw risk in
21· ·the transaction?
22· · · · · · · ·A.· ·I don't know, but they just
23· ·elected to present an offer that was not good.· And
24· ·I am not sure -- at that particular time when we
25· ·went out to the banks, we really weren't -- I know
·1· ·before we actually sent the packages out, we
·2· ·weren't sure if anybody would respond.· You know,
·3· ·the lenders in -- the traditional lenders in
·4· ·Ontario, the big six banks, were not exactly
·5· ·jumping up and down to do business in Elliot Lake.
·6· ·There was a real reluctance.
·7· · · · · · · ·Q.· ·I'll take you to the next exhibit,
·8· ·Exhibit No. 1466, tab 141.· If we could go to the
·9· ·fifth page, do you recall reading through this
10· ·report when it was prepared?
11· · · · · · · ·A.· ·This is the draft report?· I'm
12· ·not --
13· · · · · · · ·Q.· ·This is the draft report in or
14· ·about April of 1999.
15· · · · · · · ·A.· ·Yes, I'm not sure that I went
16· ·through it.· I may have.· I can't remember what I
17· ·said earlier, but possibly, yes.
18· · · · · · · ·Q.· ·And it appears this was prior to
19· ·closing your transaction that you received this?
20· · · · · · · ·A.· ·Yes.
21· · · · · · · ·Q.· ·And do you recall any discussion
22· ·surrounding these amounts that were now estimated
23· ·for two separate options for repair of the parking
24· ·roof deck; do you recall discussions surrounding
25· ·this?
·1· · · · · · · ·A.· ·Yes, we would have had internal
·2· ·discussions.
·3· · · · · · · ·Q.· ·With Ms. Guertin and Mr. Quinn?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And you will see from Option 1
·6· ·that it is broken down into several components,
·7· ·including engineering design and project
·8· ·management, construction contingencies, permit and
·9· ·testing allowances, contractor's mobilization and
10· ·site protection; you do see that?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·And, sir, we heard from Mr.
13· ·Elliott and your testimony to the effect that you
14· ·did not carry out Option 1 in the manner in which
15· ·it was recommended, did you?
16· · · · · · · ·A.· ·We elected to implement it on our
17· ·own, yes.
18· · · · · · · ·Q.· ·And the reason -- the difference
19· ·is that you did not obtain project supervision by
20· ·an engineer for any of your repair work; is that
21· ·correct?
22· · · · · · · ·A.· ·That is correct.
23· · · · · · · ·Q.· ·You did not obtain any consultant
24· ·to monitor moisture content or joint profiles; is
25· ·that correct?
·1· · · · · · · ·A.· ·I guess that would be correct,
·2· ·yes.
·3· · · · · · · ·Q.· ·And you did not engage a
·4· ·pre-qualified specialty contractor in the field of
·5· ·concrete restoration or waterproofing; is that
·6· ·correct?
·7· · · · · · · ·A.· ·That is correct.
·8· · · · · · · ·Q.· ·And as you pointed out earlier,
·9· ·you therefore did not carry out either Option 1 or
10· ·Option 2 at any of the time that NorDev owned the
11· ·property from 1999 to 2005; is that correct?
12· · · · · · · ·A.· ·As outlined here, yes.
13· · · · · · · ·Q.· ·Did you obtain any other
14· ·engineering reports or recommendations other than
15· ·the Halsall Reports?
16· · · · · · · ·A.· ·We obtained an environmental
17· ·assessment, I believe.
18· · · · · · · ·Q.· ·Yes.
19· · · · · · · ·A.· ·And a mechanical and I think fire
20· ·system.
21· · · · · · · ·Q.· ·And my question relates to
22· ·engineering reports --
23· · · · · · · ·A.· ·Oh, sorry.
24· · · · · · · ·Q.· ·-- to do with the repair and
25· ·restoration of the roof.
·1· · · · · · · ·A.· ·During the course of our
·2· ·ownership?
·3· · · · · · · ·Q.· ·During the course of your
·4· ·ownership over six years.
·5· · · · · · · ·A.· ·I know we would have used -- we
·6· ·used some engineers on different work on the roof.
·7· · · · · · · ·Q.· ·Did you receive any reports or
·8· ·recommendations with respect to any other advice or
·9· ·methods of repairing the roof from engineers?
10· · · · · · · ·A.· ·Of dealing with the joints?
11· · · · · · · ·Q.· ·Of dealing with the joints and
12· ·dealing with the leak and dealing with any of those
13· ·issues.
14· · · · · · · ·A.· ·No, we engaged Mr. Caughill to do
15· ·some work and another -- no, not -- I think I'm
16· ·answering correctly.
17· · · · · · · ·Q.· ·I'll take you to Exhibit No. 83.
18· · · · · · · ·A.· ·83?· Tab 83?
19· · · · · · · ·Q.· ·I don't have the tab number.
20· ·You'll have to look at the screen.
21· · · · · · · ·A.· ·Okay.
22· · · · · · · ·Q.· ·You mentioned Mr. Caughill?
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And this is now July 2nd, 2003,
25· ·and your fourth year of ownership of the property,
·1· ·and you indicated that you had engaged
·2· ·Mr. Caughill; is that correct?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·And was he to provide advice in
·5· ·connection with the work being done by your crews?
·6· · · · · · · ·A.· ·On?
·7· · · · · · · ·Q.· ·On the deck, on the roof deck.
·8· · · · · · · ·A.· ·I don't know that -- I know we
·9· ·used him on specific instances or occurrences.
10· · · · · · · ·Q.· ·All right.· And does this appear
11· ·to be one of those instances?
12· · · · · · · ·A.· ·I'm just trying to -- yes.
13· · · · · · · ·Q.· ·It indicates:
14· · · · · · · · · "This will summarize our
15· · · · · · · ·discussions today."
16· · · · · · · ·And it is written to Mr. Quinn of your
17· ·office at NorDev Group.
18· · · · · · · · · "You called to describe a
19· · · · · · · ·condition found by your maintenance
20· · · · · · · ·people.
21· · · · · · · · · ·The deck/wall joint on Line A
22· · · · · · · ·between 17 and 18 (a distance of 35
23· · · · · · · ·feet) was found to be open in the
24· · · · · · · ·centre by as much as 2 [inches].
25· · · · · · · · · ·You sent 6 photos to show the
·1· · · · · · · ·condition.
·2· · · · · · · · · ·Your men say that in ten years of
·3· · · · · · · ·maintenance, this is a first and
·4· · · · · · · ·also that this is a recent
·5· · · · · · · ·occurrence.
·6· · · · · · · · · ·You report that the wall is
·7· · · · · · · ·tipped out by about 1/2 [inch] in 2
·8· · · · · · · ·feet (about 1 [inch] total.
·9· · · · · · · ·Adjacent similar slabs are tipped by
10· · · · · · · ·1/4 [inch] in 2 feet.
11· · · · · · · · · ·You report that there is no
12· · · · · · · ·visible signs of impact on the wall
13· · · · · · · ·and no cracks.
14· · · · · · · · · ·I reviewed our copy of the
15· · · · · · · ·original architectural and
16· · · · · · · ·structural drawings to try and
17· · · · · · · ·determine what may be happening
18· · · · · · · ·here."
19· · · · · · · ·If you could move it up a bit?· Could
20· ·you move it up a bit more, Ms. Kuka?
21· · · · · · · ·MS. KUKA:· That is the highest that it
22· ·goes.· Do you want the next page?
23· · · · · · · ·MR. TITLE:· All right.
24· · · · · · · ·MS. KUKA:· It is cut off at the bottom.
25· · · · · · · ·MR. TITLE:· Okay, well, that is fine
·1· ·where it starts with "My advice [...]"
·2· · · · · · · ·MS. KUKA:· Yes, but at the bottom at
·3· ·"My advice [...]" it is completely cut off.
·4· · · · · · · ·BY MR. TITLE:
·5· · · · · · · ·Q.· ·Well, we just saw it a minute ago.
·6· ·There it is.
·7· · · · · · · ·All right, sir, so we have the bottom
·8· ·of the page:
·9· · · · · · · · · "My advice on this is as follows:
10· · · · · · · · · ·This is a serious matter and must
11· · · · · · · ·be corrected.
12· · · · · · · · · ·The concrete wall panel (44
13· · · · · · · ·[inch] wide x 35 [feet] long) has
14· · · · · · · ·probably been damaged due to
15· · · · · · · ·failure.· In its present deflected
16· · · · · · · ·shape, you would see cracks on the
17· · · · · · · ·backside behind the metal panels but
18· · · · · · · ·not on the front.· This panel will
19· · · · · · · ·likely have to be replaced.
20· · · · · · · · · ·If the panel has to be replaced,
21· · · · · · · ·there is a significant issue with
22· · · · · · · ·the existing siding [...]"
23· · · · · · · ·He suspects that the deflection is
24· ·impact, and he has other concerns about the
25· ·stability of the wall.
·1· · · · · · · ·Do you recall this incident regarding
·2· ·the buckling wall?
·3· · · · · · · ·A.· ·I remember my property manager,
·4· ·Mr. Quinn, speaking to me and just saying that
·5· ·there had been -- that someone had bumped into the
·6· ·wall and he was working through it with
·7· ·Mr. Caughill, yes.
·8· · · · · · · ·Q.· ·So this is one of those instances
·9· ·where he used Mr. Caughill?
10· · · · · · · ·A.· ·Yes.
11· · · · · · · ·Q.· ·But what we don't see is an
12· ·instance where he was consulted on the matter of
13· ·the leaking joints, the expansion joints and the
14· ·leaks through the roof into the interior of the
15· ·mall, do we?
16· · · · · · · ·A.· ·Yeah, I don't know if Mr. Quinn
17· ·would have used them on that specific -- I'm not
18· ·aware of anything where that comes up, but --
19· · · · · · · ·Q.· ·All right, and Mr. Quinn, when he
20· ·testified, he was quite confident that he knew how
21· ·to repair the leaking roof slabs.· He expressed a
22· ·great deal of skepticism toward the Halsall
23· ·Reports.· And did he state to you that it wasn't
24· ·necessary to carry out the recommendations of the
25· ·Halsall Reports?
·1· · · · · · · ·A.· ·He and I had a discussion, and I
·2· ·can't tell you exactly when, but we had discussions
·3· ·on it in terms of what should we do from here.· And
·4· ·I would ask him the question, you know, What do you
·5· ·suggest we do?· And he believed that we could
·6· ·handle the work with our own staff.· He had a very
·7· ·high level of confidence that we could do that.· He
·8· ·felt very comfortable with the explanations he had
·9· ·gotten from Halsall in terms of how to do the joint
10· ·profiling, and he felt quite comfortable going
11· ·forward.
12· · · · · · · ·Q.· ·Do you know if he had direct
13· ·discussions with Mr. Celli of Halsall?
14· · · · · · · ·A.· ·I don't know, sir.
15· · · · · · · ·Q.· ·Because Mr. Celli was quite
16· ·adamant that this required engineering supervision
17· ·and testing as the ceiling project went forward.
18· ·You don't know about that?
19· · · · · · · ·A.· ·I don't know if he had
20· ·conversations with Mr. Celli after receiving the
21· ·Halsall Report.
22· · · · · · · ·Q.· ·Do you have any information that
23· ·Mr. Quinn had received copies of the Trow Reports?
24· · · · · · · ·A.· ·No.
25· · · · · · · ·Q.· ·Do you know if he had spoken to
·1· ·Algoma about the reports and their experience with
·2· ·the mall?
·3· · · · · · · ·A.· ·Not that I am aware of, no.
·4· · · · · · · ·Q.· ·I'll take you now to tab 182,
·5· ·Exhibit No. 8-4.· This was the formal transfer
·6· ·regarding the purchase by your company on June
·7· ·18th, 1999, indicating that the purchaser was a
·8· ·company seen as 1309900 Ontario Limited.· Can you
·9· ·explain whether that is a subsidiary of NorDev or
10· ·is that an affiliate of NorDev?
11· · · · · · · ·A.· ·I believe that is what we call
12· ·NorDev, I believe.
13· · · · · · · ·Q.· ·All right, that is NorDev?
14· · · · · · · ·A.· ·I believe so, yes.
15· · · · · · · ·THE COMMISSIONER:· The company carries
16· ·on business as NorDev?
17· · · · · · · ·THE WITNESS:· Yes.
18· · · · · · · ·THE COMMISSIONER:· Under the name
19· ·NorDev, is that what you are saying?
20· · · · · · · ·THE WITNESS:· Yes.
21· · · · · · · ·BY MR. TITLE:
22· · · · · · · ·Q.· ·All right.· I'll take you now to
23· ·Exhibit No. 706.
24· · · · · · · ·A.· ·Tab?
25· · · · · · · ·Q.· ·Tab 324, page 6.· That's right.
·1· ·Do you recall dealing with this Agreement of
·2· ·Purchase and Sale?· It is dated April 7th, 2005,
·3· ·and Mr. Doody brought it to your attention, and it
·4· ·indicated a purchase or sale price of 8.2 million
·5· ·dollars; is that correct?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·And your evidence is, as you
·8· ·indicated to Mr. Elliott, that from 1999 when you
·9· ·purchased the property until 2005 when you sold it,
10· ·you had not entered into any major capital
11· ·expenditures in relation to the roof whatsoever; is
12· ·that correct?
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·And you had been advised by
15· ·Halsall that -- well, various things, that further
16· ·studies were required and that a supervised
17· ·engineering project was required for a full
18· ·restoration of the roof deck; isn't that correct?
19· · · · · · · ·A.· ·I don't recall the further studies
20· ·part.· I do -- I know what you are saying when you
21· ·say supervised work by an engineer on the
22· ·maintenance of the deck.
23· · · · · · · ·Q.· ·That is what was recommended, yes,
24· ·right.· Now, do you understand that structural
25· ·engineers are responsible for public safety?
·1· · · · · · · ·A.· ·Yes.
·2· · · · · · · ·Q.· ·And that when they make
·3· ·recommendations, they do so not just as a matter of
·4· ·maintenance, but as a matter of public safety;
·5· ·isn't that correct?
·6· · · · · · · ·A.· ·I would assume so, yes.
·7· · · · · · · ·Q.· ·And I think you acknowledged
·8· ·earlier that as a responsible property owner, as
·9· ·NorDev was to be, that you would take care to
10· ·ensure that public safety was considered and dealt
11· ·with to the extent possible; isn't that correct?
12· · · · · · · ·A.· ·That is what we attempted to do,
13· ·yes.
14· · · · · · · ·Q.· ·And yet you have seen a video
15· ·indicating water leakage into the library to a very
16· ·great extent, that you had difficulty or couldn't
17· ·correct; isn't that right?
18· · · · · · · ·A.· ·I don't know when that footage
19· ·was.· Definitely we had some difficulty with the
20· ·library.
21· · · · · · · ·Q.· ·Yes.· And you would know, even not
22· ·being an engineer, that water penetration has a
23· ·deleterious effect on a structure; isn't that
24· ·correct?· You would know that?
25· · · · · · · ·A.· ·We would do everything possible to
·1· ·make sure the water wasn't getting through, which
·2· ·we did.
·3· · · · · · · ·Q.· ·And in this Schedule "A" it
·4· ·indicates that your company as vendor represented
·5· ·that it is not aware of any major defect in the
·6· ·structure of the building; do you see that?
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·Was that statement true in 2005?
·9· · · · · · · ·A.· ·Yes.
10· · · · · · · ·Q.· ·Do you consider that water
11· ·infiltration is a major defect in the building?
12· · · · · · · ·A.· ·I think it is something that you
13· ·want to manage and control as much as possible.
14· ·You work very hard to make sure it doesn't get
15· ·through.
16· · · · · · · ·Q.· ·Now, in your discussions leading
17· ·up to this agreement of April 7th, 2005, did you
18· ·meet with Mr. Nazarian at any time, or was it only
19· ·after that time that you met with him?
20· · · · · · · ·A.· ·I'm sorry, say --
21· · · · · · · ·Q.· ·Did you meet with Mr. Nazarian
22· ·prior to April 7th, 2005, or only afterward?
23· · · · · · · ·A.· ·To the original offer?
24· · · · · · · ·Q.· ·Yes.
25· · · · · · · ·A.· ·I'm actually not sure.· I know I
·1· ·met with him three or four times, but I can't give
·2· ·you the dates.· I don't know if he came up before
·3· ·making the initial offer or if the initial offer
·4· ·was just sent up by Mr. Sobhi.
·5· · · · · · · ·Q.· ·And from what I understood of your
·6· ·evidence, you and Ms. Guertin were involved in
·7· ·answering questions for purposes of the due
·8· ·diligence phase of the agreement; is that correct?
·9· · · · · · · ·A.· ·Yes.
10· · · · · · · ·Q.· ·Do you know what firm was retained
11· ·by Royal Bank to conduct the building condition
12· ·survey?
13· · · · · · · ·A.· ·I don't recall the name.· I saw it
14· ·on the report.
15· · · · · · · ·Q.· ·You were aware that Mr. Nazarian
16· ·and his lender were conducting a building survey?
17· · · · · · · ·A.· ·Yes.
18· · · · · · · ·Q.· ·And did you indicate to
19· ·Mr. Nazarian that you had received estimates of
20· ·$433,000 or possibly over $700,000 to conduct
21· ·concrete restoration and waterproof repairs to the
22· ·roof?
23· · · · · · · ·A.· ·I don't think we actually said a
24· ·number.· Like we told him of the maintenance
25· ·program we had, and we told him we had had folks
·1· ·come in and look at it when we purchased it.· I do
·2· ·not believe we gave him a number.
·3· · · · · · · ·Q.· ·Did you tell him that you had
·4· ·engineers who had looked at it before?
·5· · · · · · · ·A.· ·I believe we told him we did have
·6· ·folks come in and look at it, yes.
·7· · · · · · · ·Q.· ·Did you tell him that your
·8· ·engineers made two recommendations but you didn't
·9· ·perform the work in accordance with those
10· ·recommendations?
11· · · · · · · ·A.· ·We told him that we had the folks
12· ·come in and look and what sort of the general
13· ·options were and that we had elected to go with the
14· ·maintenance option.· That is what we would have
15· ·told him.
16· · · · · · · ·Q.· ·And Mr. Nazarian indicated that he
17· ·wanted to upgrade the building; is that correct?
18· · · · · · · ·A.· ·Yes, he mentioned a few times that
19· ·he would like to do things with the property, yes.
20· · · · · · · ·Q.· ·Including making major capital
21· ·expenditures, was that your understanding?
22· · · · · · · ·A.· ·I believe he talked about that,
23· ·yes, yes.
24· · · · · · · ·Q.· ·Did you give Mr. Nazarian the
25· ·impression that your maintenance was costing
·1· ·approximately 50,000 a year?
·2· · · · · · · ·A.· ·We gave him -- I believe we gave
·3· ·him our detailed financials which would show that,
·4· ·I think.
·5· · · · · · · ·Q.· ·And that was the approximate
·6· ·number, wasn't it?
·7· · · · · · · ·A.· ·I think it worked out to about
·8· ·60,000, yes, on average I would say about 60 on the
·9· ·deck, about 60,000, yes.
10· · · · · · · ·MR. TITLE:· Yes.
11· · · · · · · ·Those are my questions, thank you.
12· · · · · · · ·THE COMMISSIONER:· Thank you very much.
13· ·We might as well take our afternoon break at this
14· ·point.
15· · · · · · · ·-- RECESSED AT 3:25 P.M.
16· · · · · · · ·-- RESUMED AT 3:48 P.M.
17· · · · · · · ·THE COMMISSIONER:· Mr. Picone.· Is
18· ·it -- I'm sorry, sir, is it Picone or Picone?
19· · · · · · · ·MR. PICONE:· It is Picone, Mr.
20· ·Commissioner, thank you.
21· · · · · · · ·CROSS-EXAMINATION BY MR. PICONE:
22· · · · · · · ·Q.· ·Good afternoon, Mr. Kennealy.
23· · · · · · · ·A.· ·Good afternoon, Mr. Picone.
24· · · · · · · ·Q.· ·My name is John Picone, and I am
25· ·the lawyer for Halsall.· And I only have a few
·1· ·questions for you today, and I'll try to be quick.
·2· · · · · · · ·You do know that when steel is exposed
·3· ·to water, it corrodes, do you not?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·And that is fairly obvious, I
·6· ·suppose, is it not?
·7· · · · · · · ·A.· ·Yes.
·8· · · · · · · ·Q.· ·It is.· And when steel is
·9· ·continuously exposed to water, it continues to
10· ·corrode; correct?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·And that is also fairly obvious,
13· ·is it not?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·And you knew that the leaks which
16· ·you have testified that you knew existed in the
17· ·mall during Elliot Lake Retirement Living's
18· ·ownership of the mall were the source of the water
19· ·causing corrosion on the steel structure of the
20· ·mall, didn't you?
21· · · · · · · ·A.· ·I knew that water coming through
22· ·was not good.
23· · · · · · · ·Q.· ·Well, but that is not my question.
24· · · · · · · ·A.· ·Okay.
25· · · · · · · ·Q.· ·I'm asking you if you knew that,
·1· ·if you knew or not that the leaks were the source
·2· ·of the water that was causing corrosion of the
·3· ·steel structure?
·4· · · · · · · ·A.· ·Yes.
·5· · · · · · · ·Q.· ·You did know that?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·MR. PICONE:· Okay.· Those are all my
·8· ·questions, sir.· Thank you.
·9· · · · · · · ·THE COMMISSIONER:· Thank you.
10· · · · · · · ·Mr. Bisceglia.· Did Mr. Cassan indicate
11· ·an intention to --
12· · · · · · · ·MR. KEARNS:· Yes, he did,
13· ·Mr. Commissioner.
14· · · · · · · ·THE COMMISSIONER:· He is just not here.
15· ·Okay, thank you.
16· · · · · · · ·CROSS-EXAMINATION BY MR. BISCEGLIA:
17· · · · · · · ·Q.· ·Thank you, Mr. Commissioner.
18· · · · · · · ·Mr. Kennealy, I know that we have met
19· ·before, and you know that I am here on behalf of
20· ·Mr. Saunders.· And I told you I didn't have any
21· ·questions, but as a result of some of the other
22· ·questions that other counsel have asked, I have got
23· ·a couple of things that I would like to deal with.
24· · · · · · · ·Firstly, my friend asked you with
25· ·respect to the costs associated with the roof
·1· ·repairs and he was referring you to the financial
·2· ·statements that were attached to the Agreement of
·3· ·Purchase and Sale between NorDev and Mr. Nazarian's
·4· ·corporation, and that was Exhibit No. 706 and I
·5· ·wonder if we could go to that.
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·Q.· ·The figure that was put to you in
·8· ·questioning was the cost of repairs being $50,000;
·9· ·do you recall that question and you giving the
10· ·answer that you thought that that was the cost for
11· ·the roof repairs or maintenance?
12· · · · · · · ·A.· ·I'm sorry, was there a document
13· ·that you wanted --
14· · · · · · · ·Q.· ·Yes, it is going to come up on the
15· ·screen.
16· · · · · · · ·A.· ·Oh, okay.
17· · · · · · · ·Q.· ·It is up there now.· And if we
18· ·could go to the attachments, which is the document,
19· ·the financial statement showing the expenses for
20· ·the years 2002, 2003, 2004 -- and, Ms. Kuka,
21· ·unfortunately, I don't have -- there we are.· And
22· ·keep going.
23· · · · · · · ·Under the subtitle "Maintenance
24· ·Expenses Exterior", there we go.· You see under --
25· ·thank you -- you see under "Repairs, Roofing" for
·1· ·2004, if we can bring that down a bit so we can see
·2· ·the year, Ms. Kuka, please, yes; $55 for 2004, for
·3· ·2003 $43 and in 2002 $758.· Can you assist this
·4· ·Commission in explaining to us how you would have
·5· ·these financial statements reflecting those
·6· ·expenses for Mr. Nazarian unless they were correct?
·7· ·I'm sure you don't want to mislead him, so I'm
·8· ·assuming the numbers that you show as being the
·9· ·expenses associated with the roof repairs in 2004
10· ·of $55 and 2003 $43 and $758 are accurate; is that
11· ·correct?
12· · · · · · · ·A.· ·I better be careful here.· It -- I
13· ·believe you have to look at our labour.· We lumped
14· ·the labour together; all of the labour was in
15· ·wages.
16· · · · · · · ·Q.· ·Is your answer then that those
17· ·numbers represent the material that was purchased
18· ·for the roof repairs?
19· · · · · · · ·A.· ·I'm not one hundred percent sure.
20· ·It would show -- we changed the way we did the
21· ·financials in '99, and then we went into 2000 and
22· ·we displayed it differently than how Algoma Central
23· ·had displayed it.· And I believe a lot of the -- we
24· ·split the numbers out and we showed the labour
25· ·component would show under wages.
·1· · · · · · · ·So I'm not sure.· I know Ms. Guertin is
·2· ·coming up next, and she could explain it probably
·3· ·better than I could.· But I'm not putting it off.
·4· ·I'm just not one hundred percent sure, and I don't
·5· ·want to get it wrong.
·6· · · · · · · ·Q.· ·So just to be clear then, your
·7· ·answer at this point is that as the Chief Operating
·8· ·Officer of this company, you have no knowledge or
·9· ·information as to the approximate range that was
10· ·spent for the purposes of maintaining this proof
11· ·structure in any given year; is that correct?
12· · · · · · · ·A.· ·No, I know what it was, and there
13· ·is actually another document in here that reflects
14· ·it and over the -- between '99 and the end of 2004
15· ·it was about $323,000 that was spent on the roof
16· ·structure.
17· · · · · · · ·Q.· ·But in any event, with respect to
18· ·the transaction involving your -- or NorDev and
19· ·Mr. Nazarian's corporation, the document or the
20· ·information that you say reflected the actual
21· ·costs, was that given to him or can you show me
22· ·where that is?
23· · · · · · · ·A.· ·I can't.
24· · · · · · · ·Q.· ·No?
25· · · · · · · ·A.· ·No.
·1· · · · · · · ·Q.· ·Perhaps we can get that from
·2· ·Ms. Guertin.
·3· · · · · · · ·A.· ·I think you can get it from
·4· ·Ms. Guertin much more than you would from me.
·5· · · · · · · ·Q.· ·Thank you.
·6· · · · · · · ·A.· ·I'm afraid to give you the
·7· ·wrong --
·8· · · · · · · ·Q.· ·Now, my friend brought you to
·9· ·Exhibit No. 83, which was the e-mail from
10· ·Mr. Caughill to you -- or to Richard Quinn, I
11· ·should say.· If we could bring that up, please.· If
12· ·you can just look at the screen.· You have already
13· ·looked at this document.
14· · · · · · · ·A.· ·Okay, yes.· Yes.
15· · · · · · · ·Q.· ·This is with respect to the
16· ·repairs of the parapet wall of the parking
17· ·structure; is that fair?
18· · · · · · · ·A.· ·Yes.
19· · · · · · · ·Q.· ·And the recommendation that was
20· ·made by Mr. Caughill was that you should retain
21· ·STEM Engineering; do you recall that?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And as a consequence and in the
24· ·fullness of time, STEM Engineering was retained; is
25· ·that correct?
·1· · · · · · · ·A.· ·Yes.
·2· · · · · · · ·Q.· ·And did you speak or meet with
·3· ·Mr. Randy Beltramin of STEM Engineering?
·4· · · · · · · ·A.· ·No.
·5· · · · · · · ·Q.· ·There is another e-mail, Exhibit
·6· ·No. 85 in this proceeding that I would take you to.
·7· ·Now, that was -- Exhibit No. 83 was on July 2nd of
·8· ·2003.· Exhibit No. 85 is September the 8th of 2003,
·9· ·and this is an e-mail that was shared between
10· ·Mr. Randy Beltramin of STEM Engineering, the
11· ·consultant that was referred -- or that
12· ·Mr. Caughill referred you to or NorDev to, and have
13· ·you seen this before today?
14· · · · · · · ·A.· ·Not before the inquiry process.
15· · · · · · · ·Q.· ·But you have seen it since?
16· · · · · · · ·A.· ·I have seen it going through the
17· ·materials, yes.
18· · · · · · · ·Q.· ·Right, and I suspect you were also
19· ·made aware of it during the course of the testimony
20· ·of other witnesses, because you appeared to have
21· ·either listened to or read transcripts and so on.
22· ·Did you refer to this at all in the course of
23· ·preparing yourself?
24· · · · · · · ·A.· ·I remember seeing the document,
25· ·yes.
·1· · · · · · · ·Q.· ·Could you scroll that down a bit,
·2· ·please?· There is some writing at the bottom of it,
·3· ·Ms. Kuka.· There is a note there.· We may find out
·4· ·later whose handwriting that is.· I suspect it is
·5· ·Mr. Caughill's.· It says, "Randy spoke to Richard
·6· ·today", and there is a date.· Do you know anything
·7· ·about that?
·8· · · · · · · ·A.· ·No.
·9· · · · · · · ·Q.· ·Were you ever advised by
10· ·Mr. Caughill of the conversation he had had with
11· ·Mr. Beltramin?
12· · · · · · · ·A.· ·No.
13· · · · · · · ·Q.· ·In that e-mail -- and could we go
14· ·to the body of the e-mail, Ms. Kuka, please --
15· ·there is a reference, and perhaps you can assist us
16· ·with this, in the second line in the second
17· ·paragraph starting with the word "some":
18· · · · · · · · · "Some of the structural repairs
19· · · · · · · ·that you have already done and other
20· · · · · · · ·visible areas of concern (precast
21· · · · · · · ·cracks) will be an ongoing issue."
22· · · · · · · ·I asked Mr. Quinn if in fact
23· ·Mr. Caughill was ever retained by NorDev or
24· ·Retirement Living to do any consulting work with
25· ·respect to this mall complex, and he responded
·1· ·saying no, that that didn't happen.
·2· · · · · · · ·Do you have any recollection of
·3· ·retaining Mr. Caughill to do any consulting for the
·4· ·structural repairs to this facility?
·5· · · · · · · ·A.· ·I remember Mr. Quinn engaging him
·6· ·to help us on the cooling tower, when we installed
·7· ·the cooling tower.
·8· · · · · · · ·Q.· ·Anything else that you know of?
·9· · · · · · · ·A.· ·I remember we retained his
10· ·services in '07 when we were looking at doing some
11· ·stuff with the hotel lobby.· He did some drawing --
12· ·he did some investigating or drawings or something,
13· ·Mr. Quinn had him do that.· I am assuming he used
14· ·them on this particular problem.· I'm just trying
15· ·to think if there was anything else.
16· · · · · · · ·Q.· ·My question to you, sir, is do you
17· ·have any knowledge, information or belief as to
18· ·what Mr. Beltramin is referring to when he says
19· ·that "some of the structural repairs that you",
20· ·meaning Caughill "has already done"?· Do you have
21· ·any knowledge of what he is talking about?
22· · · · · · · ·A.· ·I don't know, no.
23· · · · · · · ·MR. BISCEGLIA:· Thank you very much,
24· ·sir.· Those are my questions.
25· · · · · · · ·Thank you, sir.
·1· · · · · · · ·MR. MacRAE:· I have no questions,
·2· ·Mr. Commissioner.
·3· · · · · · · ·THE COMMISSIONER:· Thank you,
·4· ·Mr. MacRae.
·5· · · · · · · ·Mr. Cassan?
·6· · · · · · · ·CROSS-EXAMINATION BY MR. CASSAN:
·7· · · · · · · ·Q.· ·Thank you, Mr. Commissioner.
·8· · · · · · · ·Mr. Kennealy, we have met, but my name
·9· ·is Paul Cassan.· I'm counsel for the City of Elliot
10· ·Lake, and I have some questions about discussions
11· ·that you had with Mr. Doody this morning.
12· · · · · · · ·This morning, Mr. Doody led you to say
13· ·when you were discussing the assessment appeal that
14· ·the mall underwent that you negotiated the
15· ·assessment with the City and advised OPAC about the
16· ·resolution, and further he had you say that you
17· ·provided the Nicholls Yallowega Bélanger report to
18· ·the City in the process of the assessment appeal.
19· · · · · · · ·So I want to take you through the
20· ·assessment appeal process to discuss that.
21· · · · · · · ·A.· ·Oh, I see, yes.
22· · · · · · · ·Q.· ·First of all, were you involved
23· ·with Rhona in the assessment appeal process in
24· ·1999?
25· · · · · · · ·A.· ·We would have talked about it, but
·1· ·Rhona would have implemented the vast majority of
·2· ·it, yes.
·3· · · · · · · ·Q.· ·Okay.· So this assessment appeal
·4· ·would have been started by you as the owner
·5· ·pursuant to section 40 of the Assessment Act by
·6· ·filing an assessment appeal saying the assessment
·7· ·was too high, right?
·8· · · · · · · ·A.· ·Yes.
·9· · · · · · · ·Q.· ·And that assessment appeal
10· ·document gets filed with what was then OPAC, right?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·Now, at the point that you were
13· ·working on the assessment appeal, did you hire a
14· ·tax assessment agent to assist you, a company like
15· ·Altus or Cushman Wakefield or --
16· · · · · · · ·A.· ·I don't believe so.
17· · · · · · · ·Q.· ·No?
18· · · · · · · ·A.· ·No.
19· · · · · · · ·Q.· ·Okay.· So after the assessment
20· ·appeal itself gets filed, I understand then you are
21· ·dealing with a gentleman by the name of Mr. Vance
22· ·from the OPAC office in Sault Ste. Marie, Steve
23· ·Vance; does that sound correct?
24· · · · · · · ·A.· ·Yes.
25· · · · · · · ·Q.· ·Now, typically at the initial
·1· ·stages of the assessment appeal process
·2· ·municipalities don't get involved in the valuation
·3· ·exercise.· In fact, the municipalities actually pay
·4· ·OPAC or now MPAC for their valuation services.· So
·5· ·usually what happens is that entity provides the
·6· ·municipality with the value that is put on the roll
·7· ·to generate your tax bill.· So was that true in
·8· ·this case?
·9· · · · · · · ·A.· ·Actually, I checked with
10· ·Ms. Guertin actually at the lunch break, and yes,
11· ·we went directly to you call it MPAC, OPAC, yes.
12· · · · · · · ·Q.· ·Right, that is what I would
13· ·expect.· And so then in the process, after the
14· ·assessment appeal is filed and after it comes to
15· ·Mr. Vance's attention, typically he and maybe some
16· ·of his helpers would come to the property, meet
17· ·with you and discuss what your issues were, look
18· ·around the property, have an inspection.· Did that
19· ·happen in this case?
20· · · · · · · ·A.· ·I can't tell you.· I don't recall.
21· · · · · · · ·Q.· ·Okay, I can ask Rhona about that
22· ·tomorrow.· Oftentimes the City doesn't attend an
23· ·inspection like that, and I just wonder if you have
24· ·any knowledge about whether or not --
25· · · · · · · ·A.· ·I don't, no.
·1· · · · · · · ·Q.· ·-- the City did in this case.
·2· · · · · · · ·I would like you to turn up your tab
·3· ·190, that is Exhibit No. 2212, Ms. Kuka, and Mr.
·4· ·Doody took you to this this morning.
·5· · · · · · · ·Now, as we can see from the salutation,
·6· ·this is a letter to Steve Vance at the OPAC office
·7· ·in Sault Ste. Marie, and if we flip over to the
·8· ·bottom of the second page, it is not copied to the
·9· ·City and I would expect that means that it was not
10· ·provided to the City.· Would you agree with that,
11· ·or do you know?
12· · · · · · · ·A.· ·It is possible.· I don't actually
13· ·know.
14· · · · · · · ·Q.· ·Mr. Doody asked you if you
15· ·provided Mr. Shamess' appraisal to OPAC, and I
16· ·think that your answer was no, but if I can draw
17· ·your attention to paragraph number 2 on the first
18· ·page, it looks like at least part of that appraisal
19· ·was provided to OPAC, and I don't have the
20· ·attachment so I don't know what part of it.· Do
21· ·you?
22· · · · · · · ·A.· ·No, I do not.
23· · · · · · · ·Q.· ·Now, an assessment appeal process
24· ·is an administrative tribunal process, sort of like
25· ·going to court, and one of the steps after filing
·1· ·an assessment appeal is discoveries where a
·2· ·representative of your company and a representative
·3· ·of OPAC would be examined under oath.· Do you know
·4· ·if that happened in this case?
·5· · · · · · · ·A.· ·I don't believe so, but I can't
·6· ·really recall.· I don't recall that at all.
·7· · · · · · · ·Q.· ·So you wouldn't have been the one
·8· ·that was examined then --
·9· · · · · · · ·A.· ·No.
10· · · · · · · ·Q.· ·-- because you probably would
11· ·recall that?
12· · · · · · · ·A.· ·No.
13· · · · · · · ·Q.· ·Perhaps Rhona would have been.
14· · · · · · · ·With respect to Mr. Shamess' appraisal
15· ·and the issue of providing it to OPAC, certainly
16· ·that would have been something that OPAC asked for
17· ·on discoveries and would have been entitled to be
18· ·produced.
19· · · · · · · ·But do you know whether that appraisal
20· ·was done for the purposes of the assessment appeal?
21· ·In other words, the Assessment Act lays out what
22· ·portions of your property are assessable and what
23· ·portions are not, and it is not quite the same
24· ·thing as looking at a property to value it for
25· ·financing or for a purchase.· Do you know if --
·1· · · · · · · ·A.· ·It was definitely done for
·2· ·purchase purposes.
·3· · · · · · · ·Q.· ·Right, and I didn't see anything
·4· ·in it that indicated that he was looking at the
·5· ·Assessment Act or what portions were assessable or
·6· ·not.· Did you have any discussions with him about
·7· ·that?
·8· · · · · · · ·A.· ·No.
·9· · · · · · · ·Q.· ·No.· And so certainly the purchase
10· ·price that you paid would be an indication of the
11· ·value, but that would have included chattels; it
12· ·would have included equipment; it would have
13· ·included supplies, I presume?
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·And so those items would not have
16· ·been assessable?
17· · · · · · · ·A.· ·That's correct.
18· · · · · · · ·Q.· ·And so the number that Mr. Shamess
19· ·came up with wouldn't have been necessarily
20· ·governing anyway an assessment appeal, right?
21· · · · · · · ·A.· ·Yes.
22· · · · · · · ·Q.· ·Now --
23· · · · · · · ·THE COMMISSIONER:· Were you represented
24· ·by counsel in that appeal process?
25· · · · · · · ·THE WITNESS:· Not by counsel,
·1· ·Mr. Commissioner, no.· We would have handled it on
·2· ·our own.
·3· · · · · · · ·THE COMMISSIONER:· Thank you.
·4· · · · · · · ·BY MR. CASSAN:
·5· · · · · · · ·Q.· ·I know that Mr. Doody brought you
·6· ·to the second page of the letter and was asking you
·7· ·about the suggestion that you should have paid 3
·8· ·million dollars.
·9· · · · · · · ·Now, a property like the mall would be
10· ·assessed I understand on an income approach which
11· ·values the income stream and applies a gross income
12· ·multiplier or looks at the expenses and risks that
13· ·you have to come up with an appropriate
14· ·capitalization rate.· Is that how your assessment
15· ·was done in this case?
16· · · · · · · ·A.· ·I don't know for sure, but that
17· ·would make sense.· It would be similar to the
18· ·multi-res properties.
19· · · · · · · ·Q.· ·And so the exercise in this case
20· ·is one of trying to determine what value should be
21· ·put on the assessment, and the fact that she is
22· ·suggesting here that you should have paid 3 million
23· ·dollars --
24· · · · · · · ·A.· ·In --
25· · · · · · · ·Q.· ·-- is there anything untoward in
·1· ·that?
·2· · · · · · · ·A.· ·It is using every tool you have to
·3· ·try and convince someone that you are correct.
·4· · · · · · · ·Q.· ·Now, I have not been able to find
·5· ·in the documents produced to the Commission any
·6· ·minutes of settlement that would have resolved this
·7· ·assessment appeal.
·8· · · · · · · ·Do you know how the assessment appeal
·9· ·ended?· I do know that there was a substantial
10· ·reduction in your assessment.
11· · · · · · · ·A.· ·You are asking how it was achieved
12· ·mechanically?
13· · · · · · · ·Q.· ·Yes.
14· · · · · · · ·A.· ·I don't have a clear memory of it,
15· ·no.
16· · · · · · · ·Q.· ·Because one way to resolve it
17· ·would be by a settlement agreed between the
18· ·parties.· Another way to resolve it is with an
19· ·order from the Assessment Review Board at the end
20· ·of a hearing.· Do you know if you went to a
21· ·hearing?
22· · · · · · · ·A.· ·No, no, we -- no, I do know we did
23· ·not go to a hearing.
24· · · · · · · ·Q.· ·Okay.· So then I would expect that
25· ·minutes of settlement would have had to have been
·1· ·produced and executed.· Now, typically OPAC, and
·2· ·now MPAC, would produce those minutes of settlement
·3· ·because you have to apply the agreed-upon current
·4· ·value to various tax classifications of components
·5· ·of your property to make sure that you have got the
·6· ·right roll numbers, things like that.
·7· · · · · · · ·Do you know if the typical position
·8· ·would have applied in your case, or do you think
·9· ·that you or another entity prepared the minutes of
10· ·settlement?
11· · · · · · · ·A.· ·I cannot give you the answer on
12· ·that.
13· · · · · · · ·Q.· ·Do you have any reason to believe
14· ·it would have been somebody apart from OPAC because
15· ·of the --
16· · · · · · · ·A.· ·No, we did not engage anybody that
17· ·I am aware of, no.
18· · · · · · · ·Q.· ·In the typical process, the
19· ·property owner would negotiate with MPAC, share
20· ·information, and if minutes of settlement are
21· ·resolved -- are arrived at, there would be an
22· ·agreement between the owner and OPAC generally, and
23· ·then those would get signed off and then OPAC would
24· ·take it to the City.· Do you have any reason to
25· ·believe that is not the case that happened here?
·1· · · · · · · ·A.· ·I can't actually recall.· I don't
·2· ·think there was anything unusual about what we were
·3· ·doing, so I'm assuming we would have followed the
·4· ·normal course of action.
·5· · · · · · · ·Q.· ·So although the municipality may
·6· ·very well be interested in supporting the taxpayer,
·7· ·it is not typical that the municipality would get
·8· ·into the valuation or the negotiations, and I am
·9· ·just wondering if that is what happened in this
10· ·case or if you can tell me?
11· · · · · · · ·A.· ·Yeah, I can't tell you.
12· · · · · · · ·Q.· ·So after you have gone through all
13· ·of that, would you agree with me that it is most
14· ·likely, as this letter indicates, that the Nicholls
15· ·Yallowega report and the Shamess appraisal were
16· ·provided to OPAC, as the letter indicates, but not
17· ·provided to the City in that process?
18· · · · · · · ·A.· ·I can agree with you that it is
19· ·possible, but because I can't tell you
20· ·definitively, I don't know.
21· · · · · · · ·MR. CASSAN:· Okay, thank you.· Those
22· ·are my questions, sir.
23· · · · · · · ·THE WITNESS:· Okay.
24· · · · · · · ·THE COMMISSIONER:· Re-examination?
25· · · · · · · ·RE-EXAMINATION BY MR. KEARNS:
·1· · · · · · · ·Q.· ·Mr. Kennealy, I just have a few
·2· ·questions for you.· I would like to take you to the
·3· ·October meeting, and that was the afternoon meeting
·4· ·that Retirement Living had with the retail study.
·5· ·It also was the update on the Algo Hotel.· And you
·6· ·told us a bit about your conversation with City
·7· ·Councillors as a result of the resolution that your
·8· ·Board had made in September.
·9· · · · · · · ·What response did you get from the City
10· ·Councillors to the prospect of Retirement Living
11· ·taking over the mall and hotel?
12· · · · · · · ·A.· ·We got a very, very positive
13· ·response.· I mean, it was positive.· It was
14· ·encouraging.· I think they viewed it as a very good
15· ·thing for the community.
16· · · · · · · ·You know, if you go back in time, back
17· ·in the first three, four months of 1998, we were
18· ·all trying to -- we knew we had a problem and we
19· ·knew we had to try and understand the problem, and
20· ·I think we had made tremendous progress in doing
21· ·that.
22· · · · · · · ·But although we understood the problem,
23· ·we still didn't have a solution to it until, you
24· ·know, we could do something about it, and that was
25· ·starting to form in the mid-fall of 1998.· And by
·1· ·telling the Council and the Mayor at that point
·2· ·that we were taking -- going to take a serious look
·3· ·at the actual acquisition of the whole property,
·4· ·you can see that there would be I think a level of
·5· ·relief that we were going to take the project on
·6· ·and see if there was anything we could do with it
·7· ·over the next period of time.
·8· · · · · · · ·I think that took a substantial
·9· ·concern, burden, whatever you want to call it, off
10· ·the shoulders of the Councillors because I know
11· ·they would get hit a lot in the community in terms
12· ·of what are you doing about getting better
13· ·shopping; what are you doing about this; what are
14· ·you doing about that?· I mean, if you talk to any
15· ·Councillor that has worked in this town as a
16· ·Councillor and you will find that they get -- that
17· ·people have tremendous expectations of our
18· ·Councillors in terms of what they want them to
19· ·deliver, and the Mayor.· It is quite amazing.
20· · · · · · · ·So I think that it was a tremendous
21· ·relief for them, and they were quite positive and
22· ·encouraging and very supportive.
23· · · · · · · ·Q.· ·Do you remember any discussion at
24· ·that meeting about the money that the City had
25· ·committed to pay to Retirement Living for the
·1· ·studies and the deliverables?· Was that something
·2· ·that came up?
·3· · · · · · · ·A.· ·No, there was nothing that came up
·4· ·during the course of that meeting about it.· I
·5· ·suspect what occurred with that, which was not an
·6· ·uncommon phenomena -- I mean, the first day I was
·7· ·speaking here, I talked about the informal
·8· ·relationships that would go on in a small
·9· ·community, especially one that is in a very
10· ·distressed position and everybody is trying to work
11· ·to get to a common goal.
12· · · · · · · ·I believe we billed sometime in
13· ·December or January for that.· It would not
14· ·surprise me in the least that somewhere along the
15· ·way I would have had a conversation with
16· ·Mr. Bauthus or somebody and it was just decided
17· ·that, yeah, that would be fine and let's move
18· ·forward.
19· · · · · · · ·My sense was that they saw -- you know,
20· ·again, if I take you back to the beginning of '98,
21· ·where they were and where they thought they were
22· ·going in the beginning of '99, it was night and
23· ·day.· It was really a very positive experience and
24· ·activity for them.
25· · · · · · · ·Q.· ·Okay, I want to take you to the
·1· ·meetings of the Retirement Living Board in
·2· ·December.· There is the meeting I think on December
·3· ·the 3rd and then there are committee meetings
·4· ·followed up by a final meeting on December the
·5· ·30th, a fair amount of activity for the Board
·6· ·during the Christmas season.
·7· · · · · · · ·Can you tell me what issues the Board
·8· ·was dealing with particularly during these
·9· ·meetings?
10· · · · · · · ·A.· ·The December -- that was the third
11· ·meeting and then the committee meetings and the
12· ·Board meeting?
13· · · · · · · ·I think probably the biggest issue for
14· ·them was trying to strike a balance.· If you look
15· ·at, you know, the folks we had on that Board at
16· ·that time, someone like Sister Sarah Quackenbush
17· ·who is a good, effective manager and
18· ·well-respected, like George Farkouh who had a
19· ·strong business background but also had a
20· ·tremendous sense of the community, you know, and
21· ·Mr. Carter and some of the other people, what they
22· ·would be struggling with is they know that the
23· ·community has some difficulty with the hotel.· They
24· ·know there is some difficulty with the mall
25· ·structure.· They knew they had a management group
·1· ·that although they were hardworking and keen as
·2· ·heck, we had no experience whatsoever in retail.
·3· ·Not one of us knew anything about retail.· None of
·4· ·us had any experience in running a hotel,
·5· ·absolutely none.· So that must have been weighing
·6· ·on their minds.· It was a big project for them to
·7· ·take on.
·8· · · · · · · ·You know, on the other side of the
·9· ·coin, they knew that when they looked around, the
10· ·problem was there and how was it going to get
11· ·solved?· Okay, could they find a solution that they
12· ·were comfortable with to say we are going to make
13· ·the decision and move forward and take the risk on
14· ·these three or four folks that are trying to run
15· ·the business, could they achieve positive outcomes.
16· ·If they didn't do that, what would be sort of the
17· ·implication for the community as we moved forward
18· ·and were trying to move forward.
19· · · · · · · ·You know, and you look back, I look
20· ·back to those times and I think we were still
21· ·looking at numbers where you bought houses for
22· ·incredibly cheap amounts of money.· We watched our
23· ·annual employment income drop by another 30 percent
24· ·between '96 and '99.· We were still on the edge in
25· ·terms of was this community going to be able to
·1· ·move forward or not move forward.
·2· · · · · · · ·So I take my hat off to those Board
·3· ·members because that was not easy.· They took a
·4· ·chance and they knew the risk.· They also knew that
·5· ·if we failed, there would be a risk not only to the
·6· ·mall itself but there would be a risk to Retirement
·7· ·Living, which at that point was pretty much the
·8· ·only thing that was really working effectively in
·9· ·terms of trying to move the community forward.
10· · · · · · · ·THE COMMISSIONER:· This Sister
11· ·Quackenbush, and I see her name, she was secretary
12· ·on occasion I think?
13· · · · · · · ·THE WITNESS:· She was the Chairperson.
14· · · · · · · ·THE COMMISSIONER:· She was Chair.
15· · · · · · · ·THE WITNESS:· Yes.
16· · · · · · · ·THE COMMISSIONER:· Did she represent
17· ·the hospital?
18· · · · · · · ·THE WITNESS:· Yes, she did.
19· · · · · · · ·THE COMMISSIONER:· Okay, she was CEO of
20· ·the hospital?
21· · · · · · · ·THE WITNESS:· Yes, she was, and now she
22· ·heads up the Catholic Health Organization, a very
23· ·wonderful person.
24· · · · · · · ·THE COMMISSIONER:· All right, thank
25· ·you.
·1· · · · · · · ·BY MR. KEARNS:
·2· · · · · · · ·Q.· ·What is the main thing that you
·3· ·took from the Nicholls Yallowega Bélanger report?
·4· · · · · · · ·A.· ·The main thing from Nicholls
·5· ·Yallowega?· That the building was in -- you know, I
·6· ·remember the comment that the building was
·7· ·generally in good condition given its age and, you
·8· ·know, the amount of money that had been spent on
·9· ·it.
10· · · · · · · ·The other thing I took away from
11· ·Nicholls Yallowega was that they couldn't give us
12· ·the answer that we needed, okay.· We needed to know
13· ·that the building was okay, it was safe, and we
14· ·could move forward with it.
15· · · · · · · ·The advice they gave -- you know, they
16· ·told us it was generally okay, but I can't give you
17· ·the answer, and you need to do additional work to
18· ·really understand it.· And that is -- you know,
19· ·once we made the decision, that is why we decided
20· ·to bring in Halsall and try and understand what is
21· ·it, what was it that we were working with, okay,
22· ·what was our start point and were we going to be
23· ·okay in taking this substantial risk, which it was.
24· ·It was a very substantial risk for the company.
25· · · · · · · ·Q.· ·What was the main thing that you
·1· ·took from the Halsall Report, '99?
·2· · · · · · · ·A.· ·Yeah, the two things that, you
·3· ·know, that -- as Mr. Doody said, they were the two
·4· ·things in the report that made me happy.· One, that
·5· ·we -- that the structure, the steel structure was
·6· ·okay and that, you know, the level of corrosion and
·7· ·all of that, it was structurally sound, and that
·8· ·there was not a problem with the concrete slabs
·9· ·with the chloride content.
10· · · · · · · ·Those are the two things, and that is
11· ·what we really wanted more than anything.· That is
12· ·what we were asking Halsall to tell us.· You know,
13· ·is this physical asset okay?· And they pretty much
14· ·told us that.
15· · · · · · · ·In addition to that, they gave us some
16· ·methods for dealing with the structure on a
17· ·go-forward basis, and we made decisions based on
18· ·that to go forward with the grout and seal type of
19· ·process.
20· · · · · · · ·That is pretty much what I got out of
21· ·Halsall.
22· · · · · · · ·Q.· ·I think some people would be
23· ·surprised at the numbers that were floated around
24· ·about how much money it cost you to get Zellers to
25· ·come to the mall.
·1· · · · · · · ·A.· ·Yeah.
·2· · · · · · · ·Q.· ·That $900,000, a little more than
·3· ·that for them, and 400-and-some-odd-thousand for
·4· ·SAAN.
·5· · · · · · · ·A.· ·Yeah.
·6· · · · · · · ·Q.· ·Could you explain to me how that
·7· ·makes sense to a commercial landlord to be paying
·8· ·money to tenants to move in?
·9· · · · · · · ·A.· ·Yeah, I mean, it is not -- in our
10· ·case, it is not just the commercial landlord; it is
11· ·the other thing you are trying to fill.
12· · · · · · · ·Zellers represented, you know, from
13· ·your traditional commercial landlord, it was an
14· ·anchor tenant.· It was sort of the anchor tenant.
15· · · · · · · ·And I remember the process we went
16· ·through when we made a decision.· You know, after
17· ·we took the place over, we put a lot of thought
18· ·into, well, where do we go on the retail side?
19· ·What do we do?· We knew we had to get some kind of
20· ·a department store.· We really investigated that
21· ·thoroughly, and what we discovered is that at the
22· ·end of the day, in the Canadian market at that time
23· ·there were only really two.· There were only really
24· ·two department stores that were potential for this
25· ·market.
·1· · · · · · · ·Q.· ·And who were they?
·2· · · · · · · ·A.· ·They were --
·3· · · · · · · ·Q.· ·Sorry, you were going to tell me.
·4· · · · · · · ·A.· ·Wal-Mart was one, and Zellers was
·5· ·the other.· We made a conscious decision not to
·6· ·pursue Wal-Mart.· It would have been as tough a
·7· ·sell as was a Zellers, but the decision we decided
·8· ·not to pursue Zellers is we didn't believe -- or
·9· ·not to pursue Wal-Mart is that, sorry, we didn't
10· ·believe that it would be a good thing for the
11· ·community.
12· · · · · · · ·The unique thing about Zellers is that
13· ·it had a set of products that it offered that
14· ·filled a whole bunch of the gaps that existed in
15· ·our community, and we learned that through the
16· ·retail study.· You know, and I mentioned it
17· ·earlier.· You could not go and buy pillow cases
18· ·somewhere; you could not go and buy a fry pan
19· ·somewhere; you could not go and buy kids' toys
20· ·somewhere; you couldn't buy the most fundamental
21· ·things in the community.
22· · · · · · · ·THE COMMISSIONER:· But Wal-Mart would
23· ·have been too competitive with other aspects of the
24· ·business in the community?
25· · · · · · · ·THE WITNESS:· Yes, that's right.· If we
·1· ·brought Wal-Mart in, it would be automotive,
·2· ·sporting, and we had a lot of small businesses,
·3· ·that is exactly right, sir.
·4· · · · · · · ·So the other thing it did, you know,
·5· ·not only did it service the gaps in the community,
·6· ·it also provided encouragement to the other
·7· ·retailers, okay, and the people it counted to the
·8· ·most were people -- it counted to all of them.· It
·9· ·counted particularly to the grocery store, which
10· ·was the Sobeys, the IGA, the Shoppers Drug Mart,
11· ·the smaller businesses.· And the reason it is so
12· ·important to all of those other businesses is it
13· ·creates traffic.· It created a tremendous amount of
14· ·traffic.
15· · · · · · · ·You know, over the course of the time
16· ·we had the mall, after getting Zellers in, we drove
17· ·up -- we drove up -- we didn't, the people working
18· ·in the stores drove it up.· The total sales in the
19· ·mall went from 23 million to close to 33, 34
20· ·million dollars.· That is an incredible increase in
21· ·sales volume.· You know, that actually drove 70
22· ·jobs in the community, and to us 70 jobs was, wow,
23· ·in terms of what we were trying to do on a daily
24· ·basis.· That is what we got up in the morning to
25· ·do.
·1· · · · · · · ·So it drove the traffic to the other
·2· ·smaller vendors.· It increased traffic in the mall.
·3· ·It meant that people didn't have to jump in the car
·4· ·and drive two, three hours to Sudbury or the Sault
·5· ·to get basic requirements, not fancy stuff but
·6· ·basic requirements.
·7· · · · · · · ·So that the need to do that was very,
·8· ·very significant, and I think it is probably one of
·9· ·the smartest things we did in terms of turning the
10· ·whole retail picture around.
11· · · · · · · ·The other thing it did is it -- when
12· ·you get -- when you got an anchor like that, other
13· ·national tenants believed that you might be worth
14· ·looking at.
15· · · · · · · ·And I really learned that lesson
16· ·because before we got Zellers for, you know, '99,
17· ·2000, and I think we signed them up sort of late
18· ·2000, we banged on every door, phoned every darn
19· ·retail chain we could, and it was tough slugging.
20· ·Nobody was -- there wasn't a long lineup to come up
21· ·Highway 108, let's put it that way.· And the
22· ·difficulty was that as you were competing with --
23· ·you were trying to convince a chain, you know, like
24· ·a Dollarama to come to Elliot Lake, and their
25· ·choice is to come to a market of, you know, 11,
·1· ·12,000 people with not a great profile for what
·2· ·they believed they need to make money versus
·3· ·opening up four more new stores in the GTA.· Not a
·4· ·tough contest.
·5· · · · · · · ·Once we got the Zellers, that is
·6· ·actually when we had more success with other
·7· ·retailers coming in.
·8· · · · · · · ·So it was extremely important for us to
·9· ·get that done.
10· · · · · · · ·BY MR. KEARNS:
11· · · · · · · ·Q.· ·Okay, the last question I have for
12· ·you is you have described what the Board was
13· ·looking at in December of 1998 with the threat of
14· ·the hotel failing and the mall bleeding down.· My
15· ·friend Mr. Doody showed you the numbers for NorDev
16· ·from '99 I think to 2004 and 2005.· They appear to
17· ·have been positive and healthy.· And can you tell
18· ·me what is it that was -- that allowed Retirement
19· ·Living to make a success out of the mall in the
20· ·years that you owned it?
21· · · · · · · ·A.· ·Yeah, what you are saying is how
22· ·did we get it from one place and turn it around the
23· ·other way?
24· · · · · · · ·I believe it comes down to just the
25· ·people.· It is that simple.· It is people and will.
·1· ·It was the folks that, in our business, that worked
·2· ·on it at every level, whether it was the manager or
·3· ·the maintenance people or anyone.· It was the folks
·4· ·in the businesses.· It was the people that ran the
·5· ·businesses in the mall.· It was the Pierre
·6· ·Vallaincourts; it was the Roger Wakes, the fellow I
·7· ·talked about at Zellers; it was the folks at
·8· ·Northern Reflection.· I mean, those people all came
·9· ·together to really make it work.
10· · · · · · · ·One of the things we did when we first
11· ·took over the mall is we re-invigorated their
12· ·Merchants Association, which had been virtually
13· ·dormant for God knows how long, ten, fifteen years.
14· ·And I would attend some of the meetings that they
15· ·would have, and you could see that they got
16· ·enthused.· The more we could do with the building,
17· ·the more we could do with making it a more pleasant
18· ·place, the more we could add, the more enthused
19· ·they got and the more positive they got and the
20· ·more energy they put into their own businesses.
21· · · · · · · ·And that was the nationals and the
22· ·small local businesses, which was quite interesting
23· ·to watch.· You had a Zellers manager beside, you
24· ·know, Luc Morrissette who had a small flower shop
25· ·and they are figuring out ways to get more people
·1· ·to come in.
·2· · · · · · · ·You know, so I believe it was the folks
·3· ·in the mall, the folks that work for us, the
·4· ·community being the municipality was very
·5· ·supportive, they helped us on a lot of stuff,
·6· ·especially as it related to the hotel to make the
·7· ·hotel a busier place and a more -- a better place
·8· ·in terms of events and everything else, and then
·9· ·just the folks in the community.· Everybody was
10· ·moving in -- we were moving in the right direction.
11· · · · · · · ·MR. KEARNS:· Okay, thank you.· Those
12· ·are my questions.
13· · · · · · · ·My friend may have some, Mr. Doody.
14· · · · · · · ·RE-EXAMINATION BY MR. DOODY:
15· · · · · · · ·Q.· ·Just three points,
16· ·Mr. Commissioner, if I may.
17· · · · · · · ·Mr. Kennealy, you were asked by my
18· ·friend Mr. Kearns about delivering the physical
19· ·condition assessment that was obtained pursuant to
20· ·the March 23, 1998 contract with the City and
21· ·delivering it to the City and the fact that you had
22· ·not done so.
23· · · · · · · ·A.· ·Yes.
24· · · · · · · ·Q.· ·And you told Mr. Kearns that you
25· ·probably had a conversation with the Mayor or
·1· ·Mr. Bauthus sometime around December of '98; is
·2· ·that what you said?
·3· · · · · · · ·A.· ·I said it was possible that that
·4· ·is what could have occurred.· I don't actually --
·5· · · · · · · ·Q.· ·You don't have a recollection of
·6· ·that happening, sir?
·7· · · · · · · ·A.· ·No, I don't have a specific
·8· ·recollection.
·9· · · · · · · ·Q.· ·Okay, thank you.· So my second
10· ·point, Mr. Cassan asked you about the property tax
11· ·appeal and whether there were minutes of settlement
12· ·signed.· And I just wonder if you could turn up tab
13· ·213, sir, which is in Volume 4, and it is Exhibit
14· ·No. 2221.
15· · · · · · · ·A.· ·Yes, you mentioned it.
16· · · · · · · ·Q.· ·And this is the minutes of a Board
17· ·of Directors meeting of NorDev on May 29th, 2000,
18· ·and on the second page there is your report and it
19· ·says under the heading "Taxes":
20· · · · · · · · · "We and the City have signed
21· · · · · · · ·minutes of settlement on the
22· · · · · · · ·appraised value of the Mall/Hotel.
23· · · · · · · ·The value will be dropped from 8.2
24· · · · · · · ·million to 4.3 million."
25· · · · · · · ·I take it that was correct, sir?
·1· · · · · · · ·A.· ·I'm assuming -- I'm getting a
·2· ·little bit confused, but I believe what Mr. -- what
·3· ·the other gentleman's question was about -- well, I
·4· ·shouldn't be saying that.
·5· · · · · · · ·We came to -- our taxes were lowered
·6· ·to, you know, reflect the lower sale price.· The
·7· ·actual vehicle, call it the document, I'm assuming
·8· ·that is what a minutes of settlement is --
·9· · · · · · · ·Q.· ·Yeah, well, just let -- I'll tell
10· ·you what minutes of settlement are.· Minutes of
11· ·settlement are a formal document; it is a formal
12· ·document --
13· · · · · · · ·A.· ·Yes.
14· · · · · · · ·Q.· ·-- signed by two or more parties
15· ·to a litigious proceeding whereby they agree on how
16· ·they are going to settle the proceeding.· That is
17· ·what minutes of settlement are.
18· · · · · · · ·A.· ·Okay.
19· · · · · · · ·Q.· ·And so what my question to you
20· ·was, sir, it says in your report here that NorDev
21· ·and the City had signed minutes of settlement.· I
22· ·take it that that's what happened?
23· · · · · · · ·A.· ·If I said it, that is what I
24· ·believe happened.· Now, did we -- that is what I
25· ·believe happened.· I think I was confused in --
·1· · · · · · · ·Q.· ·I think as you told my friend, you
·2· ·simply are unclear on the process that led to that?
·3· · · · · · · ·A.· ·Yes.
·4· · · · · · · ·Q.· ·Okay.· And then finally,
·5· ·Mr. Bisceglia was asking you questions about the
·6· ·expenditures on the maintenance of the roof, and
·7· ·you told Mr. Bisceglia that you understood that in
·8· ·excess of $300,000 had been spent on that
·9· ·maintenance and that there was a document to that
10· ·effect; correct?
11· · · · · · · ·A.· ·Yes.
12· · · · · · · ·Q.· ·And if you could turn up tab 310,
13· ·which is Exhibit No. 2282.
14· · · · · · · ·A.· ·Yes.
15· · · · · · · ·Q.· ·This is -- well, I'll wait until
16· ·it comes up.
17· · · · · · · ·This is the document you are talking
18· ·about?
19· · · · · · · ·A.· ·Yes.
20· · · · · · · ·Q.· ·And as I understand it, sir, this
21· ·document was prepared by Ms. Guertin?
22· · · · · · · ·A.· ·Yes.
23· · · · · · · ·Q.· ·And when you told Mr. Bisceglia
24· ·that you understood that in excess of $300,000 had
25· ·been spent, that you were repeating what
·1· ·Ms. Guertin had told you was her calculation as
·2· ·reflected in this document?
·3· · · · · · · ·A.· ·That is correct.
·4· · · · · · · ·Q.· ·And so if we had questions about
·5· ·that, they would best be directed to Ms. Guertin?
·6· · · · · · · ·A.· ·Yes.
·7· · · · · · · ·MR. DOODY:· Thank you, sir.· Those are
·8· ·my questions.
·9· · · · · · · ·THE COMMISSIONER:· Mr. Cassan, were you
10· ·questioning about minutes of settlement with the
11· ·City or with MPAC?· I just can't recall.
12· · · · · · · ·MR. CASSAN:· Well, I would have been
13· ·questioning with respect to both, Mr. Commissioner.
14· ·It is a tripartite minutes of settlement is how
15· ·they get resolved, so --
16· · · · · · · ·THE COMMISSIONER:· And you are -- you
17· ·know, I am certainly not.· You are the expert on
18· ·municipal law.· Are these minutes of settlement
19· ·normally executed between the taxpayer, the
20· ·municipality and MPAC?
21· · · · · · · ·MR. CASSAN:· Yes, but not in that
22· ·order.· They are typically executed --
23· · · · · · · ·THE COMMISSIONER:· Not in that order,
24· ·but --
25· · · · · · · ·MR. CASSAN:· -- between the taxpayer,
·1· ·MPAC, and then MPAC presents them to the City.
·2· · · · · · · ·The City does have to sign minutes of
·3· ·settlement if the minutes of settlement are the way
·4· ·that the assessment appeal is going to resolve.
·5· ·They are a statutory party, and if they withheld
·6· ·their consent, then it would have to go to a
·7· ·hearing.
·8· · · · · · · ·THE COMMISSIONER:· Okay, thank you.· I
·9· ·just wanted to clarify that.
10· · · · · · · ·Thank you very much, Mr. Kennealy.
11· ·That is the end of your ordeal.· You have been very
12· ·patient, sir, and I appreciate your evidence.
13· · · · · · · ·THE WITNESS:· Thank you, sir.
14· · · · · · · ·THE COMMISSIONER:· Thank you.
15· · · · · · · ·And that is all I think that we are
16· ·going to do today.· I don't think you are asking me
17· ·to commence with Ms. Guertin this afternoon?
18· · · · · · · ·MR. DOODY:· I'm not, Mr. Commissioner.
19· · · · · · · ·THE COMMISSIONER:· Thank you.· Anybody
20· ·object to that?
21· · · · · · · ·And if you don't, then we'll start
22· ·tomorrow morning at 9 o'clock.
23· · · · · · · ·Thank you.
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25· ·-- Adjourned at 4:35 p.m.
·1· · · · · · · · · REPORTER'S CERTIFICATE
·2
·3· · · · · · · · · ·I, DEANA SANTEDICOLA, RPR, CRR,
·4· ·CSR, Certified Shorthand Reporter, certify:
·5· · · · · · · · · ·That the foregoing proceedings were
·6· ·taken before me at the time and place therein set
·7· ·forth;
·8· · · · · · · · · ·That the testimony of the witness
·9· ·and all objections made at the time of the
10· ·examination were recorded stenographically by me
11· ·and were thereafter transcribed;
12· · · · · · · · · ·That the foregoing is a true and
13· ·correct transcript of my shorthand notes so taken.
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17· · · · · · · ·Dated this 18th day of April, 2013.
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20· · · · · · · ·___________________________________
21· · · · · · · ·NEESON & ASSOCIATES
22· · · · · · · ·COURT REPORTING AND CAPTIONING INC.
23· · · · · · · ·PER:· ·DEANA SANTEDICOLA, RPR, CRR, CSR
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