The New Brunswick government is going to court to get its hands on almost $1 million in insurance money for a fire that destroyed the Miramichi Lumber Products sawmill a year ago.
Opportunities New Brunswick has filed a lawsuit demanding that Lloyd’s Underwriters pay it $992,559.70 — money the company says it wants to restart operations.
But the province’s lawsuit says the company’s bank has agreed to sign over the money to the province under the terms of a 2009 loan guarantee.
Lloyd’s has not yet filed a statement of defence in the case. The statement of claim was filed on Jan. 5.
But Lloyd’s is also filing its own motion in court, saying it planned to pay Opportunities New Brunswick until Miramichi Lumber threatened to sue to stop it from doing so.
Now Lloyd’s wants to wash its hands of the dispute and is asking permission to pay the money to the Court of Queen’s Bench to hold until there’s a ruling on whether it should go to the province or the company.
140 jobs at stake
The province and Miramichi Lumber are already battling in court in a separate lawsuit over $1 million in logging royalties and $3.3 million in government loans and loan guarantees.
Miramichi Lumber’s chief financial officer, Hal Raper, says Miramichi Lumber could have restarted the fire-damaged mill last year if it had received the insurance money.
“The insurance money needs to be reinvested in the [electrical] equipment to turn the equipment to an operable position,” he said..
That in turn would have allowed the province to gets its royalty money. “This was the only way we could see that the province was going to be paid,” said Raper.
Running the mill and other operations could also create jobs for 140 people, he said.
Prior lawsuit still pending
The dispute dates back to 2009, when the province agreed to lend Miramichi Lumber $1.5 million for upgrades, and to guarantee loans worth another $1.5 million from the Bank of Montreal.
The company got the money after taking over the former Newcastle Lumber Company.
Miramichi Lumber says it expanded in 2011 based on promises that the province would increase its allocation of Crown wood, but the province started shifting that allocation to other mills.
Miramichi Lumber Products sued the province in 2014 over the allocation. The province says it never guaranteed the allocation to Miramichi Lumber, and didn’t increase it because it was “contingent upon the plaintiff implementing its business plan, which to date the plaintiff has failed to do.”
The dispute centres on two different interpretations of what kind of wood was promised to Miramichi Lumber.
The province also counter sued Miramichi Lumber for what it says is the $1 million in unpaid royalties and more than $3 million from the loan and the loan guarantee.
Miramichi Lumber says it agreed to a repayment plan in 2012, but wasn’t able to follow it because of “unfavourable market conditions,” and that it couldn’t pay royalties it owed because the province didn’t keep its word on wood allocations.
A fire destroyed the mill’s electrical system in January 2015, forcing it to shut down. Because the province has paid the Bank of Montreal under the terms of 2009 loan guarantee, it now claims the approximately $1 million insurance payout from Lloyd’s that would otherwise go to the bank.
Two months after the fire, general manager Danny Anderson said the mill would reopen in July 2015, once the insurance money came through.
But that was dependent on the province, the company’s secured creditor, releasing its claim to the money — the same money the province is now trying to get in the new court action, which was filed one day before the one-year anniversary of the fire.
Raper and Anderson have also proposed starting a new mill in Blackville, using the equipment from Miramichi Lumber and the wood allocation.
But Raper says Opportunities New Brunswick, as Miramichi Lumber’s secured creditor, has to agree to release the mill equipment, and the Department of Natural Resources has to agree to move the wood allocation. Both have refused, he said.
The lawsuit over the allocation and royalties is still before the courts.
No one from Opportunities New Brunswick would comment on the lawsuits.