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Laurentian intends to sell Bell Mansion as it settles up with creditors: report

Information is included in the 11th monitor’s report, which focuses on a dispute between Laurentian and the Art Gallery of Sudbury
The Bell Mansion is owned by Laurentian University but operated by the Art Gallery of Sudbury as an art gallery. The property has become caught up in the Laurentian insolvency situation.

Laurentian University intends on selling the Bell Mansion as it attempts to settle up with its creditors.

This information is included in a April 13 report by Ernst & Young, the firm that’s acting as the court-appointed monitor of Laurentian’s insolvency restructuring.

The 11th report of the monitor focuses on a dispute between Laurentian University and the Art Gallery of Sudbury, which occupies the Bell Mansion. The matter will be heard in court next month.

Laurentian University has been undergoing insolvency restructuring for more than a year after declaring insolvency under the Companies’ Creditors Arrangement Act (or CCAA).

Yet to come is a plan of arrangement in which Laurentian comes up with a plan to pay off its creditors.

“The monitor understands that LU intends on selling the Bell Mansion and may include it, or the proceeds of its sale(s), in the plan it will be presenting to its creditors,” said the report by Ernst & Young.

“The monitor also understands that LU is considering all of its options with respect to the assets of the art collection. LU is at a critical stage in its restructuring and is in the process of formulating a plan to present to its creditors.

“LU cannot do that unless it has certainty with respect to the quantum and nature of the claims against LU, and with respect to the property that is available for distribution to creditors.”

The Art Gallery of Sudbury says it mistakenly made a claim of nearly $6.4 million against Laurentian University with regards to a number of assets due to a misunderstanding of the CCAA process.

Those assets include the Bell Mansion and its grounds, funds bequeathed to support the gallery, and the art collection and library.

However, the art gallery said it only recently retained legal counsel, and now recognizes it should not have submitted a proof of claim last summer, as Laurentian doesn’t actually owe it money.

An affidavit from Art Gallery of Sudbury executive director Demetra Christakos said she is concerned that the gallery will lose “all of its property rights” if the AGS withdraws its claim against LU.

The art gallery’s claim against Laurentian was denied by the monitor this past winter. The art gallery, in turn, issued a dispute notice, and the matter was referred to a claims officer for adjudication.

“The disallowance not only disallowed our monetary claim in full, but also included the statement in each case that the AGS had no rights to the assets,” Christakos said, in the affidavit.

“However, I noted that in the monitor’s reasons for denying the claim that it did not provide any supporting documentation or direct evidence to support its position. The monitor also made no finding as to who owned the assets in question.”

The AGS is asking that it be allowed to withdraw its proof of claim from the CCAA process “without prejudice to the AGS asserting rights to any of the assets described in the proof of claim.”

Christakos said Laurentian has yet to contest the art gallery’s rights to the aforementioned assets.

But the Ernst & Young report provides evidence that Laurentian owns the Bell Mansion and other assets tied to the art gallery.

The monitor’s report said that the Bell Mansion was transferred to LU from the Sudbury Centennial Museum Society in 1967.

Following the transfer, Laurentian operated a Museum and Art Centre (LUMAC, now known as the Art Gallery of Sudbury) from the Bell Mansion. 

Then, in 1996, Laurentian’s board of governors approved a resolution to transfer operation of LUMAC from LU to a community-based organization, and eventually to transfer the assets (including the building and art collection) to the new corporation “upon satisfactory evidence that the new entity is able to ensure the continuing operation of the facility.”

In 1999, a five-year agreement was entered into between LU and the Art Gallery of Sudbury, whereby AGS was retained by LU to manage and operate the LUMAC. The agreement was renewed in 2004, but the monitor says it is unaware of any further renewal.

The monitor says that the memorandum of understanding between the two bodies “expressly provides for the retention of ownership of the assets by LU.”

In addition, the memorandum of understanding states that if the agreement is terminated “AGS is obligated to account for, return and deliver possession of the Bell Mansion and all related assets, including all works of art, to LU,” said the monitor’s report.

“No documentation has been provided by AGS to support its claim to ownership of the Bell Mansion,” added Ernst & Young.

“The documentation provided suggests that there was an intention by AGS to acquire the Bell Mansion. However, there is no documentation provided which suggests that LU agreed to this, and no documentation has been provided evidencing a transfer of the property.

“LU is the registered owner on title to the Bell Mansion and the MOU is clear that LU retains ownership of the Bell Mansion.”

In her affidavit, Christakos said she is “deeply troubled by the assertion that a public art gallery, which operates for the public good, can suddenly and permanently lose rights, including property, it has held and provided care for for over 25 years because of a misunderstanding in the operation of the CCAA process without the opposing party having to even explain or assert their rights to those assets.”

Ernst & Young, however, said if the Art Gallery of Sudbury’s court motion is granted, “it would have the effect of treating the AGS claim differently from claims filed by other parties in the claims process, including other trust or property claims.”

The monitor also said it strongly refutes the suggestion in the Christakos affidavit “that the application of the claims process to the AGS claim would somehow create a windfall for LU or that AGS has somehow compromised its rights (if any) to the assets by filing a proof of claim in the claims process. 

“No claimant loses its rights simply by filing a proof of claim. On the contrary, the claims process provides a forum for parties who are of the view that they have a claim to assert it and have it determined in an efficient and effective fashion.”

Ernst & Young said it is their position that ”the relief sought by AGS in the within motion should be denied,” and that the matter instead be referred to a claims officer for adjudication.