Alberta-based Sunterra seeks appeal of cheque-kiting decision
REGINA — Sunterra Farms has asked to appeal the court decision finding the company and principal Ray Price guilty of fraud against an American lender.
Documents seeking leave to appeal say justice Michael Lema erred in his written decision of Jan. 27.
These include finding that cheque kiting had occurred “in absence of any expert opinion evidence on cheque kiting” and finding a $35 million loss, although there was no evidence as to the cause.
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WHY IT MATTERS: Sunterra Farms has been in the hog business for more than 50 years and operates several retail food locations and a greenhouse. The family-owned operation is considered an Alberta value-added success story.
Compeer Financial froze the accounts of Sunterra’s U.S. companies a year ago after noticing large transactions moving back and forth between the company’s Canadian and American operations. Court documents in South Dakota said about $431 million moved back and forth in a six-week period.
Compeer asked the court to appoint a receiver to finish about 110,000 hogs that formed part of Sunterra’s loan security. That application was successful, and eventually three Sunterra companies operating south of the border were sold to Tyson Foods.
Once Compeer acted, the kiting scheme collapsed, said court documents, and the lender said it was out about $36 million as a result.
Meanwhile in Canada, the Sunterra companies filed notice to creditors for bankruptcy protection and later were granted protection under the Companies’ Creditors Arrangement Act.
Compeer took legal action and Lema ruled in the lender’s favour, noting the “astonishing scale” of the transfers between Sunterra companies. In 2024 alone, they totaled almost $6.3 billion.
He wrote that the Canadian lender, National Bank of Canada, did not lose any money.
Sunterra counsel argued that the cheque-writing system was accepted by lenders and ensured no overdrafts at either end.
“I find that Sunterra Canada made false representations knowingly, intending that they be relied on, which Compeer did rely on, suffering the noted losses,” Lema wrote.
Price and two other employees had been named in the suit, but Lema found only the president liable, saying he directed and oversaw the fraud.
The appeal documents note that Lema found Price liable without finding evidence of personal gain.
They say that conclusion was based on common sense inference rather than the legal test for fraudulent misrepresentation.
As well, the documents suggest the cause of Compeer’s loss was the wrongful retraction of cheques between the lenders.
Sunterra remains in CCAA proceedings.
Source: producer.com