Kalum River: two float-plane sales below the 2023 appraisals

The letter of offer that Business Development Bank of Canada sent Kalum River Contracting Ltd. on April 2, 2024 itemizes what the money was for: the assets of Ocean Pacific Air Services Ltd., including a 1958 de Havilland DHC-2 Beaver registered C-FAOP, for $553,140; a 1951 Beaver, C-FIAX, for $400,000; a 1979 Cessna A185F Skywagon, C-GDIR, from an individual seller for $300,000; $75,000 of working capital for AC Airways Ltd.; and the shares of R.J. Hills Engineering Ltd. BDC would lend $1,100,000 and the shareholders would put in $228,200. Kalum also had to lease a hangar at 477 Seal Cove Road in Prince Rupert, per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, Ex. "A".

Kalum would own the planes and AC Airways would fly them: the respondents represented, BDC's affiant Lawrence Lee deposes, that they intended AC Airways to operate the aircraft "for the purpose of an air charter service," per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, para. 4. Kalum leased each plane to AC Airways and assigned the leases to BDC, which also took general security from Kalum, AC Airways and R.J. Hills and a purchase-money security interest in each aircraft. By July 24, 2026, in a receivership over those three planes, the Supreme Court of British Columbia had approved the sale of two. The third, the 1958 Beaver, was confirmed after the receiver's appointment to be in the possession of another air service, per the Receiver's First Report, May 19, 2026, paras. 2–3, 13, 18.

An offer, a forbearance and a Beaver in other hands

Kalum's June 2025 loan payment was returned NSF, and on July 17 the file passed to Mr. Lee in Special Accounts. On July 29, Kirby Braun, one of two personal guarantors, told him that AC Airways had not yet received Transport Canada approval to operate the three float planes; a Transport Canada search BDC put in evidence showed the aircraft were not on AC Airways' air operator certificate. BDC demanded payment on August 18, 2025, and nothing was paid: $1,094,398.53 was owing from Kalum, R.J. Hills and AC Airways, and $437,759.60 from Kirby and Riley Braun under their joint and several guarantee of 40 per cent of the balance at demand, per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, paras. 12–14, 18–19, Ex. "A".

On August 25, Mr. Braun told Mr. Lee he had an offer for the aircraft that would be enough to pay out the loan. The next day he sent a mostly non-binding letter of intent, dated August 15, under which a prospective buyer would acquire all the shares of AC Airways and R.J. Hills for $1,225,000 in aggregate, closing by September 29, 2025. "Proceeds from this sale will be sufficient to fully discharge the outstanding loan currently held with BDC," Mr. Braun wrote. BDC agreed to forbear until then. The date passed, and "I did not hear any further from the Respondents," Mr. Lee deposes, per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, paras. 22–24, Ex. "O".

By then the bank's bailiff, Peter Powers of Accurate Effective Bailiffs Ltd., had traced one of the planes. Registration searches put C-FAOP under the control of an air service based in Dease Lake, and in September a person there told him the company had bought it from Kalum, per the Affidavit #1 of Peter Powers, Oct. 17, 2025, paras. 5–6. The receiver's reports style the company B.C. Yukon Air Service Limited. Its lawyer told BDC's counsel, Douglas B. Hyndman, that his client "paid about $500,000 for the float plane on the understanding that the monies would be used to retire the Petitioner's registered interest in the float plane," per the Affidavit #1 of Douglas B. Hyndman, Oct. 16, 2025, paras. 14–16. Mr. Lee's evidence is that no respondent contacted him to seek BDC's consent to a sale or told him a plane had left their possession, and that "The Petitioner did not receive any funds from the sale of C-FAOP," per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, paras. 25–26. The register history the receiver later filed shows BC Yukon registered for C-FAOP from October 21, 2024, the day AC Airways' certificate of registration for the plane was cancelled, and still registered in May 2026; Transport Canada's registered owner, the receiver notes, is the party with custody and control and not necessarily the legal owner, per the Receiver's First Report, May 19, 2026, paras. 13–14, App. "B".

"The Respondents' conduct, in an unauthorized sale of one of the Aircraft, without the Petitioner's knowledge and consent, and without payment to the Petitioner of the proceeds of sale, is of significant concern," BDC argued, adding that the two remaining planes "may or may not have sufficient value to fully repay the outstanding balance owing on the Loan," per the Ex Parte Notice of Application, Oct. 20, 2025, Part 3, paras. 12(k), 15. The hangar's landlord, Storey's Excavating Ltd., had written on October 3 that AC Airways had not been operating for several months or able to pay rent since the previous winter. "I would think the bank would have some kind of plan by now," the email says, per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, para. 27, Ex. "Q". The application was heard without notice to the respondents, and nothing filed by the Brauns or their companies is in the record read for this piece.

On October 20, 2025, Justice Morellato appointed Crowe MacKay & Company Ltd. receiver and manager, without security, of the three aircraft and Kalum's three lease assignments, under s. 243(1) of the Bankruptcy and Insolvency Act and s. 39 of the Law and Equity Act. The respondents could apply to set the order aside on seven clear business days' notice, and any sale over $150,000 needed the court's approval, per the Order Made After Application, Oct. 20, 2025, paras. 1–3.

Lakelse Lake

The two planes understood to be with management were initially believed to be in a Prince Rupert hangar. The receiver found they had been moved shortly before its appointment to Lakelse Lake, near Terrace, onto private property of an individual the report describes only as known to management. The bailiff confirmed them there and retrieved their logs. Transport Canada then cancelled the planes' certificates of registration, over the receiver's concern that the insurance would lapse with them; interim and formal certificates in the receiver's name followed on November 17 and December 4, 2025. The delay, the receiver reports, hurt its ability to market the planes, and with the lake about to freeze it could not move them beforehand, per the Receiver's First Report, May 19, 2026, paras. 18–28.

Management initially told the receiver both planes were airworthy. The receiver then learned that Transport Canada had been investigating them: as of June 6, 2025, it believed C-FIAX's journey log was missing 85.8 flight hours and C-GDIR's 24.05, figures expected to rise on a full review. With mandatory inspections also coming due, the receiver writes, "the Subject Aircraft were effectively grounded by Transport Canada." One maintenance organization the receiver consulted, Inland Air Charters, said they should not be flown under any circumstances; the other, Fraser Lake Aviation Maintenance Ltd., believed both could return to flight once inspected, and the receiver hired it, per the Receiver's First Report, May 19, 2026, paras. 29–37.

On December 23, 2025, Transport Canada wrote that for each plane "a significant number of flight hours were not recorded in the aircraft journey log as required by Canadian Aviation Regulations part 605," and that it was satisfied with Fraser Lake's proposed corrective actions, among them a correction of +100 hours to each plane's cumulative air time. C-GDIR was deemed airworthy on or about February 2, 2026 and C-FIAX on or about March 16, and on April 22 both went to a hangar Fraser Lake leases in Williams Lake, per the Receiver's First Report, May 19, 2026, paras. 38–39, Apps. "I", "J".

The Skywagon and the 1951 Beaver

The receiver, whose reports are signed by Crowe MacKay's president, Derek Lai, and Tetsu Takagaki, engaged Terry Forsyth of Island Aero Services with the support of the bank and management; his letter of November 6, 2025 put C-FIAX at US$325,000 and C-GDIR at US$200,000. The Skywagon was listed at US$200,000 in February 2026. Three informal offers of US$160,000 to US$170,000 never became formal ones, and Bamaji Air Inc. offered US$175,000 and rejected a counter at US$195,000. On April 13, Wildwaters Nature Tours and Expeditions Ltd. offered C$276,500, with a C$41,475 deposit, and on May 5 it confirmed that it had completed its inspection and would proceed, per the Receiver's First Report, May 19, 2026, paras. 40–42, 50–54, App. "M". Converted to U.S. dollars, the broker said, the offer was slightly over the full list price, per the Affidavit #1 of Terry Forsyth, May 19, 2026, para. 12.

Justice Underhill approved the sale on June 9, 2026, in an order that states the sale "is commercially reasonable." The order and the form of receiver's certificate attached to it, which gives the price as $276,500 Canadian dollars, name the buyer as Whitewater Nature Tours and Expeditions Ltd.; the offer, the broker's affidavit and both of the receiver's reports call it Wildwaters, per the Order Made After Application (Approval of Sale of C-GDIR), June 9, 2026, para. 1, Sch. "A". The Second Report says the sale has closed and that the receiver received the C$276,500, plus C$13,825 of GST, into its trust account, per the Receiver's Second Report, July 9, 2026, para. 11.

The 1951 Beaver was listed at US$325,000 on or about December 28, 2025 and came down to US$300,000 on or about January 12 after the receiver's maintenance engineer found it had no wheel gear, which the broker could buy for about US$25,000. Two individual buyers offered the full US$300,000 on February 2, then withdrew because they and the receiver could not agree where the plane would be inspected; the receiver wanted a facility within its own maintenance organization's control, and the buyers wanted it moved to one in Campbell River. Tsayta Air made a verbal offer of US$265,000 that was not pursued, and Westfall Aviation LLC offered US$275,000 and did not respond to a counter at US$300,000. An individual offered US$217,000 on June 19 and US$240,000 on July 6, by which time the receiver had accepted another offer, per the Receiver's Second Report, July 9, 2026, paras. 18, 28 and the Affidavit #2 of Terry Forsyth, July 8, 2026, para. 9.

That offer came on June 30 from Bilton Holding Corporation, an Alberta company, at the full US$300,000, with a US$45,000 deposit held in trust by Kornfeld LLP, counsel to both the receiver and the bank. The offer named the buyer "Bilton Holdings Ltd.", which Bilton corrected by letter on July 5, per the Receiver's Second Report, July 9, 2026, paras. 28(e), 30–31 and the Affidavit #2 of Derek Lai, July 9, 2026, para. 9. "Under all the circumstances, Bilton's offer is a very good offer," Mr. Forsyth deposes, per the Affidavit #2 of Terry Forsyth, July 8, 2026, paras. 11, 13.

On July 24, 2026, Justice Morishita approved the sale to Bilton, as amended by the name correction, in an order that also states the sale "is commercially reasonable." The debtors' interest in the plane vests in Bilton, free and clear of claims, when the receiver delivers its certificate, and the net proceeds stand in the plane's place for ranking those claims, per the Order Made After Application (Approval of Sale of C-FIAX), July 24, 2026, paras. 1–4. The receiver's summary of the agreement puts completion seven days after court approval, per the Receiver's Second Report, July 9, 2026, para. 30.

Against the 2023 appraisals

When BDC applied, it held appraisals dated November 30, 2023 valuing C-FAOP at C$538,450, C-FIAX at C$506,985 and C-GDIR at C$359,032, per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, para. 30. In each of its reports the receiver says it is satisfied that the accepted price "represents fair market value at this given moment," and that the appraisals "pre-date the receivership and do not fully reflect current market conditions and buyer behavior observed during this proceeding," per the Receiver's First Report, May 19, 2026, paras. 16, 57 and the Receiver's Second Report, July 9, 2026, para. 34.

Some of the broker's explanations were about the planes: the Skywagon's floats are of lesser value than the models the appraisal referenced, and the Beaver lacks the wheel gear it had when Mr. Forsyth appraised it for its previous owner on May 24, 2023, at US$350,000. The others were about the buyers: "[T]he prevailing political environment has reduced demand from U.S.-based buyers, which historically represented a significant market for Canadian-registered aircraft," and higher operating costs, particularly fuel, have reduced demand from commercial purchasers, per the Receiver's First Report, May 19, 2026, para. 58 and the Receiver's Second Report, July 9, 2026, para. 35. The broker also counted a Canadian buyer in each offer's favour, per the Affidavit #1 of Terry Forsyth, May 19, 2026, para. 12 and the Affidavit #2 of Terry Forsyth, July 8, 2026, para. 11.

The 1958 Beaver

C-FAOP is the one aircraft the receiver has not reported selling. In May, Mr. Lai deposed that it "has been disassembled for maintenance," and that the receiver understands most of its components to be secured with Rodan Air Maintenance in Whitehorse while the engine is being serviced at Tulsa Aircraft Engines in Oklahoma, per the Affidavit #1 of Derek Lai, May 19, 2026, para. 6. The receiver's notice of application that month said it had "now located and secured all three of the Aircraft," per the Notice of Application, May 22, 2026, Part 2, para. 2.

When BDC applied, Mr. Lee said a receiver "may also be able to investigate the sale of the C-FAOP and determine any priority disputes, subject to the court's approval," per the Affidavit #1 of Lawrence Lee, Oct. 16, 2025, para. 28. Neither report takes that up. Each confines itself to one sale and promises a detailed report on the administration later, per the Receiver's First Report, May 19, 2026, para. 10 and the Receiver's Second Report, July 9, 2026, para. 13.

BDC set its own petition down for June 9, asking for a declaration of default, a one-day redemption period, judgment against Kalum, R.J. Hills and AC Airways on the $1,094,398.53 owing at August 18, 2025, plus interest, and judgment against Kirby and Riley Braun, jointly and severally, for $437,759.60, per the Requisition (General Statement of Relief Sought), May 22, 2026, paras. 1–7. The order entered on June 9 deals with the Skywagon; no order on the petition's relief is in the record read for this piece.