Sea Smoke: a busy restaurant, and the ventures its trustee says it paid for

Sea Smoke is a seafood and Atlantic cuisine restaurant at 1477 Lower Water Street on the Halifax waterfront, run by a numbered company, 3344150 Nova Scotia Limited, that was incorporated on January 8, 2021; its lease from the landlord, Southwest Properties Limited, is dated a week later. It employs approximately 69 people, per the First Report of the Proposal Trustee, Sept. 4, 2026, paras. 16, 18, 37(a). Its internal statements put restaurant sales for June 2026 at $606,757.96, against $601,951.25 in June 2025, and for the first six months of the year at $1,660,634.84, up from $1,561,750.76, with the half-year loss narrowing to $15,376.12 from $138,731.22, per the First Report, Sept. 4, 2026, App. F. Having reviewed those numbers, the proposal trustee wrote that "The Company appears to be able to generate positive cashflow from operations" (First Report, para. 23(a)).

The company is part of Beyond Hospitality Group, which its counsel describes as "a restaurant collective operating in Halifax, Nova Scotia," and the causes its trustee reports begin with the group's other restaurants (Motion Brief, Sept. 3, 2026, para. 1). On August 12, 2026 it filed a notice of intention to make a proposal under s. 50.4(1) of the Bankruptcy and Insolvency Act, Estate No. 51-3409794, with Grant Thornton Limited as proposal trustee, per the Certificate of Filing of a Notice of Intention to Make a Proposal, Aug. 13, 2026; the notice itself is dated August 6 (Form 33, Notice of Intention to Make a Proposal, Aug. 6, 2026). A related company, Vandal Doughnuts Inc., filed its own notice the same day with the same trustee under Estate No. 51-3409840. That estate is not part of the motion now before the Supreme Court of Nova Scotia in Bankruptcy and Insolvency, which asks for 45 more days of stay, to October 26, 2026, per the Motion Brief, Sept. 3, 2026, paras. 5–7, 12. Phil Clarke, a senior vice president, signed the trustee's First Report on September 4.

Crème, Asia, a doughnut shop and a pub

The trustee took the causes from management and the company's financial advisors. First, the company "was assisting with the funding of the expansion of the Beyond Hospitality Group's restaurants in Halifax which turned out to be costly and unsuccessful": the company, its ownership and its management helped open Crème on the waterfront, a business run inside Vandal Doughnuts Inc.; helped fund part of the wind-down of the Vandal Doughnuts shop, which has closed; and helped open Asia, also on the waterfront and also closed, each of which the trustee says "drained resources from the Company," per the First Report, para. 19(a). Second, the shareholders and directors "experienced, and continue to experience numerous disagreements related to the expansion of the Beyond Hospitality Group, its operation, and how it is funded" (First Report, para. 19(b)). The last two causes are a fraud on the company's Bank of Nova Scotia account that cost it approximately $100,000, and collection action by the Canada Revenue Agency, including garnishment of its bank accounts, over what the trustee calls significant outstanding balances (First Report, paras. 19(c)–(d)).

The trustee's review of the historical financial information puts figures on the first cause. 100318 PEI Inc., which the trustee describes as controlled by Kent Scales, the company's president and one of its two directors, invested approximately $2,132,920 in the company. The company "has in turn funded" $1,352,307 for Asia; $813,663 toward replacing Asia with a proposed British pub-style restaurant; $518,367 for Vandal Doughnuts; and $724,454 for 4558666, "a non arms length construction company," per the First Report, paras. 17, 23(b)–(c). Vandal Doughnuts' own creditor list, attached to the report, shows 3344150 Nova Scotia Limited as a creditor for $518,366.84, alongside the Bank of Montreal as secured creditor for $500,447.84 and 100318 P.E.I. Inc. for $2,090,148.75, in total creditors of $4,029,678.96 (First Report, App. B).

Zoey Boosey is the company's other director and its secretary. The two directors met on April 22, 2026, when, according to the minutes, the chairman reported that the company "was no longer able to meet its obligations generally as they became due," and the board resolved that it file a notice of intention with Grant Thornton as trustee (First Report, App. D).

The Crown & Anchor

The proposed pub had a name and an address. By a second lease dated May 2, 2024, Southwest leased the company premises at 1475 Lower Water Street, where it intended to open a British-style pub and restaurant under the proposed name Crown & Anchor; Southwest has told the trustee that lease was terminated following the tenant's default (First Report, para. 37(b)).

Southwest has sued the company and both directors, as indemnitors, in the Supreme Court of Nova Scotia, by a notice of action signed July 16, 2026. Its statement of claim alleges that the lease ran ten years and six months after a fixturing period, came with a $300,000 leasehold allowance from the landlord, and was backed by a joint and several indemnity from Ms. Boosey and Mr. Scales, unconditional for the first five lease years to a maximum of $500,000. The landlord says it paid a broker's commission of $75,251.40 plus HST and spent approximately $208,000 on landlord's work; that the fixturing period ended on January 31, 2026 with no fixturing work done; that the company missed its first rent payment on February 1, along with $9,725.33 plus HST in operating costs and taxes, and told Southwest it intended to abandon its plans for the pub; and that Southwest terminated the lease a short time after a default notice given on or around February 4. It claims special damages under the lease and its indemnity, costs and prejudgment interest, per the First Report, App. J, Statement of Claim, paras. 5–12. The trustee's schedule of liabilities carries two entries for Southwest, of $9,179.13 and $950,000.00, and reports that the Sea Smoke lease remains in effect and current apart from an invoice for propane used before the filing (First Report, paras. 24, 37(a)).

What the Crown says it is owed

The creditor list that went out with the notice named one secured creditor, Scotiabank, at $245,721.19, and put the largest unsecured claims at $2,132,919.78 for 100318 P.E.I. Inc. and $796,792.41 for CRA, in total creditors of $3,252,209.76, per the Creditor Listing as at August 13, 2026, p. 1.

The trustee faxed the creditors' package to CRA on Friday, August 14, asking that the garnishment be lifted. That same day CRA's account manager told the trustee he was moving to a new role and a new manager would be appointed, and the trustee's repeated attempts to reach CRA about the garnishment and the proceeding were without success until September 1. On that date CRA told the trustee it had issued notices lifting the garnishments on August 20, and re-sent them. The company, which had moved its point-of-sale system to another bank account when the garnishment issued, has since redirected it to its Scotiabank account (First Report, paras. 25–29, 35, 43).

Also on or around September 1, the trustee received CRA's proof of claim, dated August 20, for $1,954,179.46. Its Schedule A splits the debt in two. As an unsecured claim it lists $821,524.85: $62,606.21 in payroll deductions described as "non deemed trust," assessed for 2024 to 2026, and $758,918.64 under the Excise Tax Act, $708,800.93 of it principal, for periods from September 30, 2024 to June 30, 2026. As a claim under s. 60(1.1) of the BIA it lists $1,132,654.61, made up of $889,686.82 in principal and $242,967.79 in penalty and interest, on the account numbered RP0001, per the First Report, para. 30 and App. H, Sched. A. The trustee reads that account reference as indicating a payroll claim, and is seeking clarification of the claim.

The second figure carries a statutory condition. Section 60(1.1), as the trustee sets it out, bars the court from approving any proposal, unless the Crown consents, that does not provide for payment in full within six months of approval of amounts outstanding at the filing of the notice of intention that could be the subject of a demand under the source-deduction provisions of the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act and their provincial equivalents (First Report, paras. 31–33).

The trustee's own schedule of known liabilities, at $5,357,133.21 in total, now carries CRA at both of the proof of claim's figures, 100318 PEI Inc. at $2,132,919.79 and the Bank of Nova Scotia at $245,721.19 (First Report, para. 24). There are few other trade creditors on it; before the filing, the trustee reports, "the vast majority of suppliers had put the Company on COD payment terms, or had the Company credit card on file to pay for purchases." The trustee understands that nothing is outstanding to employees, and that the company gave the Bank of Montreal an unsecured guarantee connected with Vandal Doughnuts in an amount not yet known, carried in the schedule at $1.00 (First Report, paras. 24, 39–41).

Four weeks ahead of forecast, and a slower fall

The first four weeks of the proceeding, August 3 to August 28, ran ahead of the cash-flow forecast the company filed. Receipts were $868,932 against $864,870 budgeted, operating disbursements $729,028 against $752,380, and restructuring fees $22,560 against $100,000, a gap management attributes to the timing of professionals' invoices. The company closed the period with $223,766, having opened it with $106,422 rather than the $150,000 the forecast assumed, per the First Report, para. 48 and App. O. Two of the overruns involved the group's other companies: miscellaneous disbursements ran $45,785 over budget, mainly because of $21,368 in advances to Vandal Doughnuts and a garnishment of the company's account for the Asia restaurant's indebtedness to CRA, which management's commentary puts at $26,000 (First Report, para. 50(b)(iv) and App. O). Under the trustee's supervision, the report says, the company has stopped transferring resources to other entities. It has made all its source deduction remittances and three weekly HST instalments since the filing (First Report, paras. 51–52, 66).

The extended projection, prepared by the company and reviewed by the trustee, runs from August 31 to November 22, 2026, four weeks past the stay now sought, and follows the season down. Weekly receipts of $181,610 through September fall to $94,234 from the week of September 28 and to $48,260 in November, a decline the trustee attributes to "a slowdown of business from the tourism sector and patio service given the colder months." Over the twelve weeks the company forecasts $1,342,390 in receipts, $1,483,742 in operating disbursements and $157,500 in fees for the trustee, its own counsel and its financial advisor, and it counts on $90,000 in DIP financing, $25,000 in the week of October 19 and $65,000 in the week of November 9, to finish with $14,914 in cash, per the First Report, paras. 53, 58–59 and App. P. In the trustee's view the projection "shows sufficient liquidity to October 26, 2026" (First Report, para. 67).

Counsel's brief says where that financing is being discussed. It anticipates the trustee advising that, as the busy summer season winds down, "it is likely that the Company will require an injection of capital to continue to fund its operations and meet its obligations to creditors," and that "discussions around interim financing continue with the shareholders"; any relief will come in a later application (Motion Brief, Sept. 3, 2026, para. 36). No administration charge is sought on this motion. Whether one will be is still under discussion (First Report, para. 65).

A payment plan or a sale

The trustee sets out the company's options in three sentences. The company "is exploring operational changes that could increase cashflow generated from operations"; it "intends to enter discussions with CRA as to what, if any, repayment plan could be agreed and that could form the foundation for a proposal"; and "Alternatively, the restaurant could be sold for the general benefit of creditors" (First Report, paras. 62–64). Counsel's brief lists discussions between the two shareholders "to confirm interest and ability to provide future funding for the operation of Sea Smoke and to address existing liabilities to creditors, including the CRA," and the development of "a process leading to the possible sale of Sea Smoke," and anticipates the trustee reporting "significant disagreements between the two shareholders of the Company as to a number of operational and financial issues" (Motion Brief, paras. 8(d)–(e), 9).

On the s. 50.4(9) test the brief relies on Re Convergix Inc., 2006 NBQB 288, among other authorities, and on Re Cosgrove-Moore Bindery Services Ltd. for the point that a debtor need not show positive cash flow to show that no creditor is materially prejudiced (Motion Brief, paras. 21, 35). The trustee supports the extension on each branch. The company, it says, continues to act in good faith and with due diligence "with its continued efforts to maintain operations." On viability, it notes that the company could not engage with CRA "until such time as it appointed a contact for the account, which just recently occurred," that it is also considering a sales process, and that "Either option could provide for some recovery to creditors." No creditor is materially prejudiced, in its view, because the company is meeting its post-filing obligations, per the First Report, paras. 66, 68. The trustee is not of the view that a deemed bankruptcy would be more beneficial to creditors, and knows of no material adverse change (First Report, para. 69).

The motion is set before the Registrar in Bankruptcy at 1:30 p.m. on Friday, September 11, 2026, at the Law Courts, 1815 Upper Water Street in Halifax, the last day of the initial stay (Notice of Motion, Sept. 3, 2026, p. 1). The proposed order would extend the stay to October 26, 2026, effective 12:01 a.m. Atlantic Daylight Time on September 11 (draft Stay Extension Order, paras. 2–3). As of September 3, counsel had not been told of any party taking a contrary position (Motion Brief, para. 29).