Hearts and Hands fires back in court response

Habitat for Humanity Canada is taking advantage of minor discrepancies to seize the assets of its former Prince George affiliate in order to tackle its own financial woes, Hearts and Hands for Homes Society says in a response to a civil claim brought by the national organization.

"Facing a declining financial situation," Habitat for Humanity Canada and its American parent embarked on a plan to disaffiliate locally-based societies "with a view to liquidating substantial assets" of the affiliates to reduce their own deficits.

The allegation is the latest salvo in a battle that dates back to September 2012 when Habitat for Humanity Canada says it uncovered a "multitude of problems and issues" while conducting a routine assessment of Hearts and Hands - then known as Habitat for Humanity Prince George.

Saying the local organization refused to live up to Habitat for Humanity standards, it was disaffiliated a year later and, on Nov. 4, the national organization filed a notice of claim seeking ownership of Hearts and Hands assets.

The claim lists as assets six "partner family mortgages" for homes built in Prince George, the Hearts and Hands' Salvage Store on Queensway near First Avenue, formerly known as the ReStore, and two other "future duplex" properties, along with various bank accounts, equipment and inventory.

But in the response, filed Wednesday in B.C. Supreme Court in Vancouver, Hearts and Hands dismissed the concerns as "sylistic, methodological and minor, in essence not adhering to [Habitat for Humanity Canada's] protocol in the maintenance of accounting records."

The concerns were a "pretext" to initiate disaffiliation proceedings and "seize control and ultimately liquidate" all of Hearts and Hands assets, most of which were acquired before 2006 when it affiliated with the national organization.

It further states that, from 2010 to 2012, Habitat for Humanity Canada and the American parent, saw expenses rise by $27 million and contributions decline by $22 million, and from 2010 to 2011, saw assets fall by $21 million, liabilities rise by $10 million and losses rise by $50 million, all in U.S. dollars.

Hearts and Hands also said that from 2003 to 2013 the affiliation fee varied, often in the course of a single year, and escalated from $500 to $2,500 per year. It also paid the national organization a 3.5-per-cent commission on gross receipts from the ReStore, a further 10 per cent for "undesignated donations" and paid the full cost of any materials received by Habitat for Humanity Canada, although the national organization "expended nothing after issuing a tax receipt to the supplier."

None of those fees and charges were part of any agreement between the two, Hearts and Hands claims, but rather had been "induced" by Habitat for Humanity Canada as being owed "as part of the so-called 'tithe.'"

Despite being registered with Canada Revenue Agency as a charity, Habitat for Humanity is a "profitable business corporation" with assets, expenses and revenues in the tens of millions of dollars and whose U.S.-based executive are paid salaries and bonuses "exceeding those paid for large publicly traded corporations" while its Canadian office receives similar entitlements, Hearts and Hands further alleges.

Hearts and Hands also filed a counterclaim seeking in part $60,000 plus legal costs from Habitat for Humanity Canada, alleging breach of the affiliation agreement, breach of trust and wrongful dismissal of two Habitat for Humanity Prince George employees.

Additionally, Hearts and Hands says Habitat for Humanity Canada's conduct "has been not just wrongful, but high-handed and arbitrary and as such ought to attract an award of punitive and exemplary damages."

Hearts and Hands said its success is due to the long-standing roots its directors and members have in Prince George. They "have excellent reputations for integrity and contributors receive their personal assurance that all of the contributions received locally will be expended locally with [Habitat for Humanity Canada] providing no or minimal assistance."

In its notice of claim, Habitat for Humanity Canada said an independent organization valued the Habitat for Humanity brand at $3.1 billion.

"This positive association and brand value predisposes members of local communities to support their local affiliate by reason of the larger organization's reputation and proven record of success," Habitat for Humanity Canada said.

As of 2012, seven homes for needy families have been built in Prince George through the groups' efforts.

None of the allegations have yet been proven in court.