Spirit Bay: a $1.4 million First Nation loan to end the receivership

The houses on Lot 30 of Becher Bay Indian Reserve No. 1 drain by gravity to a holding tank in an unpaved parking lot beside the First Nation's marina, the lowest point on the site. A contractor empties the tank at least once a day and trucks the sewage about 1.6 kilometres to the First Nation's treatment plant on Lot 29, which is more than 25 years old, was sized for 18 member lots and 18 more to come, and now serves the original 18 and the development's houses too. The arrangement dates from 2017, per the First Report of the Receiver, Mar. 5, 2026, paras. 14–16. Of the 96 sublots on Lot 30, 73 had been subleased, most with a house on them, when Grant Thornton Limited became receiver of Spirit Bay Developments Limited Partnership on September 24, 2024; 22 more were unsold and marketable, per the First Report, paras. 1, 6–7.

Some of those houses were built by Scala Development Consultant Ltd., whose effort to be paid for them produced the receivership. On August 24, 2026, the receiver applied to end it, with a settlement among Spirit Bay, Scala and Beecher Bay First Nation: Spirit Bay would pay Scala $1,400,000, with the money lent by the First Nation, per the Notice of Application (Settlement Approval and Discharge Order), Aug. 24, 2026, Part 2, para. 7. The First Nation is the lessor of the land and, in the receivership judge's words, the owner "both directly and indirectly" of every other partner in Spirit Bay, per the Reasons for Judgment, 2024 BCSC 1755, Sept. 24, 2024, para. 15. It opposed the receivership, and in May 2026 filed its factum in an appeal from it, per the Appellant's Factum, May 1, 2026, paras. 23, 110.

A $10 lease on a campsite

The development began with a 2013 agreement between the First Nation, Sc'ianew, and the Trust for Sustainable Development, the company of the developer David Butterfield. Sc'ianew amended its Land Code that August to let it lease land in an Economic Development Zone to a "Band Owned Entity" for up to 149 years, and to let that entity grant subleases and mortgages of up to 99 years exempt from several of the code's consent requirements. In the partnership that became the tenant, Sc'ianew held 51% of the units and a Butterfield company, Omnibus Land & Cattle Ltd., 49%. In 2014 the partnership took four 149-year headleases from Sc'ianew on Lots 29 to 32 of Becher Bay 1, a reserve of almost 203 hectares of oceanfront in East Sooke. Rent was $10 for each term. The lots had been a campsite that brought Sc'ianew about $20,000 a month, and Spirit Bay was to pay at least that much monthly, until at least August 30, 2022, as an advance distribution, per the Reasons for Judgment, paras. 13, 16, 37, 42, 45, 72–74, 100.

Scala built houses on sublease lots from November 2015 to December 2018. Spirit Bay's payments fell into arrears, Mr. Butterfield died in 2017, and in December 2018, after a promised payment did not arrive, Scala stopped work. An arbitrator awarded it $1,769,787 plus costs in February 2020, and after a round of appeals the Court of Appeal restored the award on December 7, 2022. By then Sc'ianew's administrator had been seconded in May 2020 to provide "basic caretaker management services," and in February 2022 a company wholly owned by Sc'ianew, 1334314 B.C. Ltd., had bought out the Butterfield interests, per the Reasons for Judgment, paras. 84–88, 92–94, 99, 102.

The Land Code has no mechanism for enforcing a judgment, and when Scala asked the Beecher Bay Lands Register in August 2023 to register its judgment against the headleases and nine subleases, it was not registered, per the Reasons for Judgment, paras. 154, 309. Scala's amended petition was filed on May 2, 2023. On July 21, 2023, Sc'ianew petitioned to dissolve Spirit Bay and terminate the headleases, alleging material breaches based most significantly, the judge wrote, on the failure to build sewage and water infrastructure, per the Reasons for Judgment, paras. 137, 139–140. The petition says the pump-and-dump costs the First Nation between $160,000 and $200,000 a year, and that "At no time has Spirit Bay turned a profit," per the Affidavit #4 of Jordanna Littau, Apr. 24, 2026, Ex. "A" (Petition of Beecher Bay First Nation), Part 2, paras. 35, 49.

What a limited partner owns

Justice Fleming heard both petitions in April 2024. Sc'ianew's principal objection rested on s. 89(1) of the Indian Act, which shields the real and personal property of an Indian or a band situated on a reserve from "charge, pledge, mortgage, attachment, levy, seizure, distress or execution" at the instance of others, as quoted in the Appellant's Factum, para. 32. As a limited partner, Sc'ianew argued, it held an interest in the headleases that was its personal property. The judge held that a limited partnership is not a legal entity, that only its general partners can hold its property, and that a limited partner's personal property is its interest in the partnership, including its units. "It is Spirit Bay's assets, namely the leasehold interests, owned by the general partners, each of which is a corporation, that would be subject to the receivership order. Accordingly, the prohibition contained in s. 89 of the Indian Act barring seizure of Sc'ianew's personal property is not engaged," per the Reasons for Judgment, paras. 9, 226, 235–236, 241.

Sc'ianew said a non-Indigenous receiver was inconsistent with s. 30.4 of the Land Code, which in its reading puts control of the development in an entity representing the First Nation. Scala answered with s. 9.1 of the headleases, under which, on a mortgage default, a receiver may take possession and sell or sublet without notice to Sc'ianew. The judge agreed with Scala: the amendments were made to draw investors and builders, and "enforcement, and the security it provides, is a necessary element of the framework Sc'ianew created." The constitutional arguments failed too, per the Reasons for Judgment, paras. 247, 256, 259–262, 279, 292.

On whether a receiver was just and convenient, she accepted that enforcing the judgment was "all but impossible absent appointing a receiver," and that Spirit Bay "faces serious challenges." "What is not clear is that Spirit Bay's continuation is necessarily futile." She noted "the troubling timing of Sc'ianew's petition relative to the amended receivership petition," and what seemed to her "a very real risk to future development projects for Sc'ianew, which to be economically viable will always require the ability to provide security to investors and a collection remedy for service contractors," per the Reasons for Judgment, paras. 308, 315, 328–329.

With the dissolution petition unresolved, and the headleases requiring "currency" or compliance before assignment, she was "inclined not to grant the receiver the power to assign the headleases," and adjourned the dissolution petition generally, per the Reasons for Judgment, paras. 339–341. The order, entered October 30, 2024, says the receiver "is not empowered to market, sell, transfer or assign the Head Leases," per the Receivership Order, pronounced Sept. 24, 2024, para. 2.

Twenty-two lots and the First Nation's claim

The First Report found 15 of the 22 unsold subleases on sublots connected to BC Hydro and regional water and seven not; seven on Ridgeline Road have no hydro, water or sewer service. A new treatment plant, on a new site, would cost about $11.0 million for the First Nation's own needs and up to $16.9 million to serve both, in 2022 dollars, on the latest estimate the receiver had seen, per the First Report, paras. 7, 17, 26. The receiver's appraisal of the 22 subleases went into a confidential supplement it said it would ask the court to seal, on the ground that disclosure would prejudice their sale, per the First Report, paras. 12, 19–21.