Sunterra's Appeal Denied in $35M Cheque Kiting Case

An Alberta judge has firmly upheld a previous civil court decision, denying Sunterra businesses an appeal. The ruling confirms their liability to U.S. lender Compeer Financial for $35 million due to "cheque kiting." This decision was made on April 21 by Justice Michelle Crighton at the Court of Appeal of Alberta.

Previously, in January, Justice Michael Lema had detailed how Sunterra's Canadian and U.S. entities engaged in a vast cheque-sending scheme across the border. These transactions, involving large sums and high volumes, were designed to cover account shortfalls rather than reflect actual business. Justice Lema concluded this constituted "cheque kiting, on an astonishing scale."

Sunterra had argued that the lenders understood their cheque-based system. However, their appeal, citing alleged errors of law and fact, was deemed to lack prima facie merit by Justice Crighton. The original ruling also holds Sunterra's president, Ray Price, personally liable for the substantial debt.

Compeer Financial also sought to appeal parts of the January ruling regarding personal liability for two employees, but this request was also denied. Sunterra has been operating under the Companies' Creditors Arrangement Act since last year, a process for companies seeking to restructure while protected from creditors.