Divisions emerge over process for selling Catholic church properties
Judge to rule next month on whether to extend creditor protection for St. John's archdiocese
The unprecedented process by which a Catholic archdiocese in St. John's is selling off its properties in order to compensate abuse victims was back before a judge on Friday, with differing opinions on what should happen next.
Lawyers for the archdiocese and its trustee, Ernst & Young, have asked to have the process transition to the Companies' Creditors Arrangement Act, commonly known as the CCAA, to allow more time for an orderly liquidation of assets.
Lawyers for the victims are petitioning against the move, however, saying the current process should continue.
After more than two hours of debate, Justice Garrett A. Handrigan of the Supreme Court of Newfoundland and Labrador ordered that the proposal process under the Bankruptcy and Insolvency Act remain in place until he can make a ruling in late May.
It's the latest chapter of a painful and ground-shaking time for the Roman Catholic Archdiocese of St. John's and the roughly 100 claimants who were abused during their time at the Mount Cashel orphanage more than a half-century ago.
Some properties have been sold
The archdiocese has been found vicariously liable for the abuse and has been granted creditor protection by the courts while it sells off properties, including churches, to compensate the victims. While the amount of money needed to settle the claims is expected to be in the millions, the process of finalizing those claims is still in the early phase, the court was told Friday.
The archdiocese announced on Dec. 21 that it was seeking bankruptcy protection under the Bankruptcy and Insolvency Act in order to determine the value of its assets and liabilities, and to develop a proposal for settling victims' claims, a process that typically lasts six months.
Since then, with the approval of the court, the archdiocese has sold several residential properties, and is seeking bids on a range of assets in the St. John's area, including the Basilica of St. John the Baptist. The deadline for bids is June 2.
In many cases, it's expected that congregation members will buy back their churches, though in some cases it's likely that churches that are no longer viable will close and be sold to private interests.
Archdiocese suing its insurance provider
A tender package is expected to follow soon on church properties in other areas of the Avalon and Burin peninsulas.
The archdiocese is also suing its insurance provider, which is refusing to indemnify or defend the archdiocese, with a trial scheduled for November.
The lawyer for the archdiocese's land-holding arm, the Roman Catholic Episcopal Corporation of St. John's, Geoffrey Spencer, told Handrigan that the proposal process will not be completed in the time allotted under the Bankruptcy and Insolvency Act.
As such, he said the restructuring should continue under the CCAA process.
"No one can question the fact that the RCEC has been acting in good faith," said Spencer. "The applicant has been working hard to move forward to address the liabilities it is facing."
If CCAA protection is not granted, he added, the archdiocese will face bankruptcy, "which would not be in anyone's interest."
If the archdiocese becomes bankrupt or goes into receivership, he said, the locks will be changed on the properties, the church community will stop maintaining the properties, and the value of those assets will diminish.
"It's in everyone's interest to have an orderly sales process to maximize the return for creditors," he said.
Spencer said the CCAA process will also give church communities more time to fundraise in order to buy back their churches.
Spencer said there's "no chance" that a proposal will be completed before the June 21 deadline. He said it's not wise to wait for the last minute to apply for CCAA protection because the archdiocese would risk "stumbling into bankruptcy."
Lawyers for the victims, however, argued against the application.
Clifton Prophet said the current process should play out, after which a broader range of options, including receivership, can be considered.
He said the outcome of the current tender process will help set a path forward, and if the CCAA transition is approved, it will limit options.
"The sale of these properties … if turns out to be attractive, that's fair enough. If not, I want a fair chance to put this to a creditor-driven process, rather than debtor-driven process," he said.