Executive Summary: Key Legal and Evidentiary Issues

• Sunterra entities engaged in cheque kiting on an "astonishing scale," cycling intercompany cheques between Canadian and U.S. accounts totaling almost $6.3 billion in 2024 alone.

• Canadian Sunterra entities fraudulently misrepresented that south-going cheques were anchored by sufficient funds when they were backed only by conditional credit from return cheques.

• Compeer suffered approximately $35 million USD in losses when NBC declared the end-stage cheques NSF after intercompany chequing privileges were terminated.

• Ray Price, as president and a director, was found personally liable as the "chief architect" of the account management practice who ensured it was implemented and maintained.

• The Court granted CCAA declarations under s.19(2)(d) and s.5.1(2), confirming Compeer's claim qualifies as a non-compromisable claim without its assent.

• Sunterra Enterprises Inc. was held liable under contractual guarantees for $29,132,187.91 USD.

The parties and their banking relationship

This case arose within Companies' Creditors Arrangement Act (CCAA) proceedings involving the Sunterra Group, a collection of interrelated Canadian and U.S. companies operating in the agricultural sector. Compeer Financial, PCA served as the U.S. lender to Sunterra's American entities, while National Bank of Canada (NBC) served as Sunterra's primary Canadian lender. The Sunterra Group maintained complex commercial arrangements between its entities, including the flow of funds in payment for the flow of piglets, pig management operations covering rent, feed, medications, plant and equipment, employees, and third party suppliers, as well as accounting, insurance and other business requirements.

The account coverage practice and cheque kiting scheme

Sunterra implemented what it termed an "Account Coverage Practice," whereby cheques were sent back and forth across the border daily to ostensibly cover account shortfalls and prevent overdrafts. The company explained this practice was used to manage the cash flow needs between the Canadian Hog Farm entities and the US Hog Farm Entities arising from the differences between cash accounting used in respect of taxation of the Canadian Hog farm entities, and accrual accounting which is required to be used in the US for the US Hog Farm Entities.

However, the Court found this practice constituted cheque kiting—the act of abusing the float by cycling cheques between two or more accounts under common control to use funds made conditionally available when a cheque is deposited even though funds are not actually available to honour the cheque. The scheme operated by issuing cheques from accounts with insufficient balances, obtaining conditional credit from the receiving bank, and then "covering" the original cheques with return cheques that were themselves unsupported by actual funds.

Discovery and collapse of the scheme

The intercompany transactions grew astronomically over the years, from $14,252,840.36 in 2005 to $6,297,525,136.98 in 2024. Between January 27 and February 10, 2025, Compeer received cheques that amounted to $80,904,000 from Sunterra Canada payable to Compeer for deposit into the Compeer Account of Sunterra U.S. and cheques that amounted to $67,200,000 from Sunwold Canada payable to Compeer for deposit into the Compeer Account of Sunwold U.S. These amounts are significantly more than the stated annual revenues of the U.S. Sunterra Entities.

On February 11, 2025, Compeer terminated the cheque-writing privileges of the U.S. Sunterra Entities after identifying concerns with the volume of apparently offsetting cheques. This action broke the cheque kiting cycle, as there would be no new cheques from the U.S. Sunterra Entities available to deposit to the Canadian Sunterra Entities to fund earlier cheques. Ultimately, $59,900,000 in cheques which had been issued by either Sunterra Canada or Sunwold Canada were dishonoured because Sunterra Canada and Sunwold Canada did not have sufficient funds in their accounts.

Fraudulent misrepresentation findings

The Court applied the test for fraudulent misrepresentation from Alberta Securities Commission v Hennig, 2021 ABCA 411: a representation was made; the representation was false; the representation was made knowingly, without belief in, or with indifference to, its truth; and the representation was relied on by the creditor.

The Court determined that issuing a cheque carries an implied representation that the cheque will be honoured when presented. The Canadian Sunterra entities breached this representation because covering a cheque by depositing another cheque based on only a mirage of value breaches the representation that sufficient funds will exist to cover the cheque when presented for clearance.

Evidence from Ray Price's cross-examination confirmed Sunterra's knowledge. Mr. Price acknowledged: "Yes, we would use the conditional credit until we generated enough cash to not have what happened." He further stated: "Our experience was that we knew we had Trochu fire insurance [proceeds] coming, that we had some other asset sale coming, and that that would increase our working capital. And with that increased working capital, the amount of cheques that we would have to move back and forth would reduce."

Personal liability determinations

The Court found Ray Price personally liable alongside the Canadian Sunterra entities. At the material times, Mr. Price was a director and the president of the Sunterra Canada entities, Ms. Uffelman was the vice-president of corporate finance for those entities, and Mr. Thompson was a member of their accounting staff. The Court applied the principle that when a director and officer of a corporation acts in a fraudulent manner, that individual is no longer acting in the best interests of the corporation and is personally liable for their tortious actions.

Given his role as president and a director of the Canadian Sunterra entities, Mr. Price is fairly characterized as the or at least a critical segment of the "directing mind" of those entities. The Court found that Mr. Price was the chief architect of the account management practice, he ensured that it was put into, and kept, in practice until the very end, and he was ultimately responsible for the issuance of the approximately $59,000,000 cheques from the north.

However, the Court declined to impose personal liability on Debbie Uffelman and Craig Thompson. As for Ms. Uffelman and Mr. Thompson, neither was a director. Neither was the prime mover or a critical contributor to the conception of the account management practice or the corporate decisions to launch it and continue it. Rather, they were "implementers."

Ruling and outcome

Justice Michael J. Lema granted summary judgment in favour of Compeer Financial PCA against Sunterra Farms Ltd, Sunwold Farms Limited, and Ray Price in the amount of $35,330,968.94, plus interest in accordance with the Judgment Interest Act. The Court also found no basis for declining to award Compeer judgment against Sunterra Enterprises Inc. in the requested guarantee amount of $29,132,187.91 USD.

The Court granted CCAA declarations confirming that Compeer's claim arising from the cheque-kiting fraud falls squarely within s.19(2)(d) CCAA, which addresses any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation. A declaration under s.5.1(2) CCAA was also granted in respect of Ray Price, narrowed to the "allegations of misrepresentations" branch. Given the fraudulent misrepresentations at the heart of this proceeding and the resulting massive losses to Compeer, the Court awarded costs to Compeer on a solicitor-client basis, with any dispute on the reasonableness of the fees claimed to be heard and decided by an assessment officer.