Trio files defence in biodigester suit

By Mike Williscraft

The three men named in the $18.5 million dollar biodigester-related civil suit by Town of Grimsby et al have filed their defence.
In the defence, filed Oct. 31, it is stated at several points that the trio acted in good faith throughout the biodigester project’s development and the plaintiffs were aware of all aspects of the operation.

In the suit filed in July in Ontario Superior Court by the Town of Grimsby, Niagara Power Inc. (NPI), Grimsby Energy Inc. (GEI), Grimsby Hydro Inc. (GHI), and 1938427 Ontario Inc. (HoldCo.2), three claims are made citing former Mayor Bob Bentley, James Detenbeck and Joe Panetta as defendants.

The claims, in part, allege Bentley, Detenbeck and Panetta were negligent, breached their duty of care and breached their fiduciary duty through their dealings regarding a “failed waste-to-energy project”.

The defence document contends the plaintiffs in the case are acting in bad faith in filing the claim.

“All of the Plaintiffs were fully aware of, and supported, the assignment of Detenbeck and Panetta to management functions, with appropriate compensation, to carry out Biodigester Project,” states the defence filing.

“The Plaintiffs were fully informed of, and participated in, all major decisions in respect of the Biodigester Project. Town councillors or other independent directors were appointed to the boards of the corporate Plaintiffs and had full access to all relevant information. All financing arrangements were put in place with the full knowledge of, and often at the request of, the Town.”

What played out in the council chambers over a period of years seemed to contradict that position, including one instance when Ald. Dave Kadwell asked about an annual general meeting which was being discussed.

Then Mayor Bob Bentley said members of council, in general, were not notified of the meeting – although council is the shareholder of the hydro companies – since then CAO Derik Brandt had been called on to represent the Town’s interests at the AGM.

This was news to Kadwell and Ald. Joanne Johnston at the time. It was noted at the time that council did not pass any motion designating Brandt as its representative for this purpose.

The extended delays and cost-overruns on the project, the defence claims, were attributable to “unavoidable delays and other events beyond the Defendants’ control”.

Simply, the defendants state the case should be dismissed.

“The Town, however, for political or other reasons only known to it, wishes to disassociate itself from, and contend it had no role in, a project that it now wishes to disavow,” states the defence document.”

“In order to do so, the Plaintiffs have commenced this action against selected directors only, making allegations of conflicts of interest and breaches of fiduciary duty, amongst other allegations, which they know to be false. The action should be dismissed with costs on a full indemnity basis.”

In refuting other aspects of the claim, it is stated the biodigester project would have eventually brought in a positive return on its investment had the Town opted to hold onto the facility as opposed to selling it off.

The Town sold the biodigester this fall for just over $8 million. It was noted at the time the amount it was sold for would be deducted from the initial claim which was cited in the civil action.

“Had the Biodigester Project been retained by the Town, the Town would have been able to recoup its investment and earn a return,” states the defence.

“The Defendants also presented the Town with a refinancing option and at least one opportunity to lease the Biodigester Project to an experienced operator on a basis which would have been financially sustainable, and ultimately beneficial, for the Town.”

“For political or other reasons unknown to the Defendants, the Town determined instead to disown and sell the Biodigester Project. It did so on a basis that left it in a worse financial position than it would have been in had it retained ownership.”

In presentations to council, Grimsby Energy chair Delight Davoli detailed a much more bleak financial position for the project including ongoing operating losses of well over $1 million per year.

In defending the portion of the claim regarding NPI, the defence document states, “It is not a conflict of interest for management of GEI, who were being compensated for their work, to continue to implement the business plans approved by the GEI board of directors, NPI and the Town,” also adding, “It was at all times open to any of the plaintiffs to request further independent oversight, but they elected not to do so.”

Again, at several points, Kadwell and Johnston asked that an independent, third party be brought in to review the budget and business case for the project. This did not happen.

An additional submission from the plaintiffs is the next step before a judge determines if the case will proceed to Discovery.

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