A Nova Scotia home heating fuel company that filed for bankruptcy last week has accused an accounting firm of negligence, saying it was hit with a “crippling shortfall” of nearly $10 million after being led to believe it was making money.
Maritime Fuels Ltd. declared bankruptcy last week, leaving in the lurch an unknown number of customers who had prepaid for their winter home heating fuel.
Court documents filed in the bankruptcy case don’t reveal any details of the company’s financial situation, but records filed last month in Nova Scotia Supreme Court in a separate civil suit suggest Maritime Fuels faced significant pressures.
In the lawsuit, Maritime Fuels alleges the Dartmouth, N.S., firm Baker Tilly Nova Scotia Inc. reviewed and signed off on its 2019 and 2020 annual financial statements, which showed the company was profitable, earning $2.8 million and $1 million in net income respectively.
But after Maritime Fuels began facing cash shortfalls, it hired a different firm in 2022 to review its financial statements. Instead of profit, according to the statement of claim, that firm found a shortfall of $9.5 million in 2020.
Accounting firm denies allegations
Maritime Fuels’s president, Newfoundland businessman Ivan Cassell, did not respond to a request for comment.
Baker Tilly has not yet filed a defence. James Boudreau, a lawyer representing the firm, said in an email that one would be filed in the coming weeks.
“Baker Tilly categorically denies all of the allegations against it and maintains that it met or exceeded the requisite professional standard of care in carrying out its mandate on behalf of Maritime Fuels,” he said.
Steve Williams, the former owner of Halifax-area home heating company Affordable Fuels, which he sold to Maritime Fuels in 2018, said he’s not surprised by the bankruptcy.
The market for home heating oil is shrinking, he said, given the rising number of homeowners moving to heat pumps and unfavourable federal regulations.
He joined Maritime Fuels under a management agreement following the sale, he said, but left after becoming dismayed at the big-company management style it used to operate the business. He said he believes many of his former customers left Maritime Fuels for other companies.
“I was a more hands on, small business, local community, family guy. So I did things differently. That’s why we grew and they shrunk,” he said.
It’s not clear how many Maritime Fuels customers were on prepayment plans. Nova Scotia Opposition Leader Zach Churchill said the provincial government should extend its home heating assistance program to all prepaid customers affected by the bankruptcy.
“One way the government can help is by making these folks eligible for the heating assistance rebate program, which will at least get some money back in their pockets that they spent already and help them make sure they get their oil tanks filled up this winter,” Churchill said.
The program currently provides $600 rebates to individuals or households who fall under certain income thresholds.
A spokesperson for Service Nova Scotia, the department that administers the program, did not indicate whether the province is considering extending the program to all Maritimes Fuels customers, regardless of income.
The department urged customers to cancel their prepayment arrangements with Maritime Fuels, and said they should register with the insolvency trustee, PricewaterhouseCoopers, so they can be listed as a creditor.
Newfoundland company owed $19M
Maritime Fuels was created in 2018 after Cassell and another man, Charles Higgins, purchased the Atlantic region heating operations of Pepco, where Higgins had been an executive. Court records note a $10-million bank loan to finance the purchase was guaranteed by the two businessmen.
Maritime Fuels then expanded through acquisitions, and was a distributor of home heating oil and equipment in Nova Scotia and New Brunswick. Higgins left the company in 2021.
After the shortfalls emerged, court records said another company controlled by Cassell and his family, Western Petroleum Newfoundland Limited, began advancing millions of dollars to Maritime Fuels.
The statement of claim said Western Petroleum did so because it believed Maritime Fuels was in good financial health, and that the cash shortfall was because it had expanded its business and needed to cover growing payments to suppliers. Western Petroleum is now owed $19 million.
In its lawsuit, Maritime Fuels said Baker Tilly’s negligence meant the “failing financial position” of the company was “concealed.”
“Maritime Fuels was deprived of the opportunity to mitigate their losses by, among other things, changing management, changing business strategy, and/or taking steps to liquidate or dismantle unprofitable operations,” said the statement of claim.