IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Forjay Management Ltd. v. 0981478 B.C. Ltd.,

 

2018 BCSC 2020

Date: 20181022

Docket: H170498

Registry: Vancouver

Between:

Forjay Management Ltd.

Petitioner

And

0981478 B.C. Ltd., Mark Chandler, Canadian Western Trust Company in trust, HMF Home Mortgage Fund Corporation, 625536 B.C. Ltd., James Mercier, Morris Kadylo, Urszula Piaseczna, U.S. Bank National Association,

Baramundi Investments Ltd., Charanjit Kaur, Simrat Virdi,

Mukhtiar Singh Nijar, Mohan Vilkhu, Jaspreet Singh Khatra,

Amandeep Singh Dhaliwal, Nirmal Singh Chohan, Sajal Jain, Suparna Jain, Babal Rani Bansal, Satpal Bansal, Parminder K. Mann, Leena Jain,

Vasant Patel, 1074936 B.C. Ltd., 1084165 B.C. Ltd., 1084164 B.C. Ltd.,

1084322 B.C. Ltd., Surjit Kaur Parmar, Harbhajan Singh Parmar,

Daljeet Kaur Gill, Bhasham Kaur Gill, 812 Capital Holdings Ltd.,

Catalyst Assets Corp., 0951019 B.C. Ltd., Wonder Marble & Stone Inc.,

Intech Pay Ltd., 1086286 B.C. Ltd., 1085537 B.C. Ltd. and 1083516 B.C. Ltd.

Respondents

Before: The Honourable Madam Justice Fitzpatrick

Oral Ruling Re Granting of Consent Orders

In Chambers

Counsel for the Kaur Group:

K. Robertson

Counsel for 0981478 B.C. Ltd. and Mark Chandler:

R. Cooper, Q.C.

N. Hooge

Counsel for 625536 B.C. Ltd.:

J. Shragge

M. Nied

Counsel for HMF Home Mortgage Fund Corporation and Canadian Western Trust Company, in trust:

G. Plottel

Counsel for the Petitioner and Reliable Mortgages Investment Corp.:

K. Jackson

L.M. Hellrung

Counsel for 1003961 B.C. Ltd., Pacific Oriental Financial Corporation, A Poet’s Wynd Developments Ltd. and 0966015 B.C. Ltd.:

R.B. Fraser

O.C. Hanson

Place and Date of Hearing:

Vancouver, B.C.

October 22, 2018

Place and Date of Ruling:

Vancouver, B.C.

October 22, 2018


 

[1]            THE COURT: Over the course of last week, and continuing into this week, I have been hearing a summary trial application in this action. The hearing was intended to proceed as a hybrid trial, with both affidavit and viva voce evidence.

[2]            The planning for this summary trial has been ongoing for some time now. All parties involved have had the common intention of working towards a determination of many issues, so as to allow the flow of funds from the substantial sale proceeds that the Receiver either now has or will shortly have, arising from the monetization of the Murrayville development.

[3]            I have been case managing the action and the procedures in advance of the summary trial for some time now. The parties participating in this application have all worked hard to ensure that the necessary evidence is before me in order to deal with the matters over the hearing dates scheduled during last week and this week.

[4]            In the middle of last week, it became apparent that some of the parties were discussing potential settlement of some, if not all, of the issues to be decided. The hearing was adjourned over Wednesday, Thursday, Friday of last week in order to allow that those discussions to occur. Last Thursday, October 18, 2018, I was advised that some of the parties had settled many issues. I was also advised that the parties wished to further adjourn the hearing so as to allow time to formalize the terms of the settlement and also, allow further discussions with the “non‑settling parties”.

[5]            Today, October 22, 2018, the matter did proceed since there was no agreement with the “non‑settling parties”. Cross‑examinations were completed this morning.

[6]            The parties who have settled certain issues between themselves are 0981478 B.C. Ltd. (“098”), Mark Chandler, Forjay Management Ltd. (“Forjay”), Reliable Mortgages Investment Corp. (“RMIC”), the “Kaur Group” and Baramundi Investments Ltd. (“Baramundi”). Toward finalizing the settlement, those parties presented certain consent orders in two other actions that were begun some time ago, namely in Action Nos. S1711845 and S183601.

[7]            Those two actions (the “CPL Actions”), arose from the Kaur Group and Forjay/RMIC's allegations concerning another property, namely the “208 Property”, which was held by 208th Street Yorkson re Ventures Ltd., (“208”), one of Mr. Chandler’s companies. The Kaur Group and Forjay/RMIC alleged that their funds ended up in Mr. Chandler’s hands and had been used to benefit the 208 Property in some manner. Substantial funds of approximately $5.1 million were held in the CPL Actions relating to the 208 Property arising from my previous court orders: see Kaur v. Chandler, 2018 BCSC 1283 at paras. 39-40, 104 (the “CPL Reasons”).

[8]            The purpose of having the two consent orders granted was to free up the monies held in respect of the 208 Property, being net sale proceeds from the sale of the 208 Property. The settlement as between 098, Mr. Chandler, Forjay/RMIC, the Kaur Group and Baramundi provided that, from those funds, $4.5 million would be paid to Lawson Lundell LLP in trust for the Kaur Group and Baramundi. The consent orders also provided that the remaining monies held, which might otherwise have gone to Mr. Chandler's companies, would be paid to Fraser Litigation Group in trust in accordance with an irrevocable direction dated March 23, 2018 (the “Direction”).

[9]            Very late in the day, Mr. Fraser attended at this hearing on behalf of his clients to object to the payment of these funds in respect of the settlement in accordance with the consent orders. All of the parties who have participated in the settlement vigorously object to Mr. Fraser appearing very late in the day and upsetting the results of the extensive negotiations that I have already referenced and which led to the settlement agreement that will resolve many of the issues arising in this action.

[10]        The background of this matter is somewhat complicated, but I will attempt to deal it with briefly.

[11]        In the CPL Actions, the Kaur Group and Forjay/RMIC were asserting that their moneys had ended up benefitting the 208 Property owned by 208. Both the Kaur Group and Forjay/RMIC had filed CPLs against the 208 Property. Eventually, 208 brought an application to have the CPLs released. The rationale was to allow a sale of the 208 Property.

[12]        On March 15, 2018, I granted an order by which the CPLs were to be cancelled upon placement of the net sale proceeds in trust. Paragraph 3 of the order provided that the proceeds were to be held in the trust account of 208’s lawyers, Gowlings, pursuant to the terms of the order. Paragraph 4 of the order provided:

The Net Sale Proceeds shall be held by the Applicant’s Solicitors in the Gowlings Trust Account and not released except by written agreement amongst the parties in the within proceeding and the plaintiffs in Action No. S-183601, or further order of this Honourable Court.

[13]        That sale did complete in March 2018. Most relevant to today's dispute, the two mortgagees having registered charges against the 208 Property, who are now represented by Mr. Fraser, participated in the sale. They are 1003961 B.C. Ltd. (“1003961”) and 1124325 B.C. Ltd. The lawyer acting for the two mortgagees provided pay‑out statements indicating what was outstanding. Arising from the sale and as anticipated by my court order, the two mortgagees were paid exactly what they said was owing under the mortgages and those mortgages were discharged against the 208 Property.

[14]        Further background to this issue relates in part to the Sagebrush Property, which was also one of the subject properties defined in and dealt with in the CPL Reasons at paras. 61-76. Another of Mr. Chandler’s companies, Newmark Sagebrush Holdings Inc. (“Newmark Sagebrush”) owned that property and similar allegations were made by the Kaur Group and Forjay/RMIC concerning the Sagebrush Property. In addition, Newmark Sagebrush similarly sought to have CPLs removed.

[15]        As noted in the CPL Reasons at paras. 64-67, Mr. Fraser’s clients, Pacific Oriental Financial Corporation (“POFC”) and 1003961 held mortgages against the Sagebrush Property and foreclosure proceedings were pending at that time.

[16]        On March 23, 2018, 208 and another of Mr. Chandler’s companies executed the Direction in favour of Gowlings. The Direction reflects an agreement between 208 (a “Vendor”) and Mr. Chandler and Mr. Fraser’s clients, including the first mortgagee, 1003961. The Direction includes the following:

a)             Recital C refers to my March 15, 2018 order by which the sale of the 208 Property is allowed to proceed and the net sale proceeds are to be held in trust;

b)             Recital E confirms that 1003961 holds a first mortgage over the 208 Property;

c)             Recital E also confirms that POFC holds a mortgage over the Sagebrush Property and that another client of Mr. Fraser, A Poet’s Wynd Developments Ltd. (“Poet’s”), owns certain lands acquired from another of Mr. Chandler’s companies; and

d)             Recital F states that 1003961, POFC and Poet’s have “agreed to accept the payments from the sale proceeds of the [208] Property provided for in this Direction for the purposes stated herein, and this Direction is made by the Vendors and Chandler in reliance thereon”.

[17]        Paragraph 1 of the Direction provides:

1.         The Vendors and Chandler hereby Irrevocably Direct the Vendors’ Solicitors that upon any portion of the Net Sale Proceeds received and held by the Vendors’ Solicitors from sale of the Property pursuant to the Orders becoming available for release by the Vendors’ Solicitors to the Vendors, Chandler, or any of them, such funds (or such portion of them as there are funds available to pay) shall be paid by the Vendor’s Solicitors firstly to Fraser Litigation Group in the amount and for the purposes set forth herein, as follows:

(a) $183,618 to 1003961 B.C. Ltd. for offsite servicing charges;

(b) $1,800,000 to [POFC] to be applied to the POFC first mortgage over the  Sagebrush Lands, in consideration for which, provided the $1,800,000 is paid to POFC by April 5, 2018, POFC agrees to forbear from taking any further steps to enforce the POFC first mortgage over the Sagebrush Lands until June 30, 2018; and

(c) $95,000 to [Poet’s] for amounts claimed by Mission Ridge Aggregates (1997) Ltd. in the Supreme Court of British Columbia, Vancouver Registry No. S-1710352 inclusive of interest and costs,

Until such amounts have been paid in full.

[18]        It is clear enough that the intention behind the Direction was that Mr. Chandler would make attempts to have the net sale proceeds from the 208 Property released to him so that the monies referred to in paragraph 1 could be paid.

[19]        Mr. Chandler did just that in bringing his applications in late May/early June 2018 for an order that the net sale proceeds (approximately $5.1 million) be released to him. As noted above, he was unsuccessful in that respect and I ordered that these funds would continue to be held in trust by Gowlings and stand as security for the claims advanced in the CPL Actions by the Kaur Group and Forjay/RMIC: see the CPL Reasons at para. 114.

[20]        That is the status quo at this time. In addition, it is worth noting that Mr. Reardon, who acted for the persons who are now Mr. Fraser's clients (including the first mortgagee 1003961) was well aware of Mr. Chandler’s applications to have the funds released. Mr. Reardon specifically said that his clients were taking no position on Mr. Chandler/208’s applications and that his clients intended not to participate.

[21]        Accordingly, arising from the CPL Reasons, the sale proceeds arising from the 208 Property continued to be held in trust in accordance with my March 15, 2018 order such that a release of those monies was possible if agreement was reached between the parties to the CPL Actions or they were released pursuant to a further court order.

[22]        I have already described that 098, Mr. Chandler, Forjay/RMIC, the Kaur Group and Baramundi intend to use part of the 208 Property proceeds to fund the settlement. This settlement will resolve many issues in this litigation.

[23]        Mr. Fraser's clients, including 1003961, POFC and Poet’s, oppose the payment of the funds on the basis of their contention that 1003961 has a “valid secured interest” in the net sale proceeds “which stands in substitution” for its first mortgage which had been registered against the 208 Property. In the alternative, they seek a declaration that the net sale proceeds are impressed with a trust in favour of 1003961, POFC and Poet’s.

[24]        This claim has manifested itself in a notice of civil claim that was filed in Action No. S1811368 just this very day. Paragraph 19 of the claim refers to a “Servicing Agreement” dated August 31, 2017, by which 0966015 B.C. Ltd. (“096”) and 1003961 were to provide off-site servicing to 208 with respect to the 208 Property. It is alleged that 208 agreed to amend the first mortgage in favour of 1003961 in order to include the costs of the off-site servicing.

[25]        Paragraph 20 of the claim refers to a dispute arising between 1003961 and 208 concerning the amount owing under the first mortgage in relation to the off-site servicing costs of $1,900,000. Paragraph 30 of the claim contends that 208 agreed that the mortgage secured these off-site servicing costs but that 1003961 agreed to discharge its mortgage without payment of that amount. There is also a reference to the Direction.

[26]        In paragraph 31 of the claim, 1003961 contends:

31.       1003[961] agreed to the distributions of the funds in satisfaction of amounts which were owed to it for providing site services for the [208 Property], to POFC and [Poet’s], for administrative and accounting reasons.

[27]        Presumably, the reason for this allegation is that, in fact, the site servicing agreement is only between 1003961, 096 and 208. In any event, there is a serious disconnect in the evidence that has been put before me. The evidence indicates that most of the invoices are dated well before August 31, 2017, being the date of the servicing agreement. Further, receipts for various disbursements indicate that the funds were not expended by either 096 or 1003961, but by Poet’s. Poet’s did not hold a mortgage on the 208 Property. Mr. Fraser’s allegation that amounts spent by Poet’s are in some way also secured by 1003961’s mortgage simply by reason of 1003961 and Poet’s being “associated” is extremely tenable in my view.

[28]        Returning to the notice of civil claim, again, the relief claimed is that 1003961 has a valid secured interest in the net sale proceeds, which stands in substitution for the first mortgage on the 208 Property. As an over‑arching statement, I completely agree with the submissions of Mr. Cooper, Mr. Jackson and Ms. Robertson in terms of their opposition to this contention. 1003961 has been formally involved in proceedings relation to the 208 Property. It provided a payout statement as to what was said to be owing under that security. 1003961 was paid exactly what it said was owing. At no time through that process was there any allegation by 1003961 that further funds needed to be set aside under the mortgage security. 1003961 agreed to a complete discharge of its mortgage in consideration of receiving certain amounts, which it received. Accordingly, while it is not my role at this time to determine issues under the notice of civil claim, I see the claim that further funds for the off-site servicing costs are secured under the first mortgage as being extremely dubious.

[29]        That leads me back to the Direction, which is the governing document as between Mr. Chandler and his companies and Mr. Fraser's clients. The Direction is also the basis upon which a trust claim has been asserted against the net sale proceeds from the 208 Property. The Direction sets out specifically that off‑site servicing charges of $183,618 are payable to 1003961. This is the amount that will be paid to Fraser Litigation Group in accordance with the settlement.

[30]        In the above circumstances, I question the lateness and the unsubstantiated basis for a claim of now over $2 million for off-site servicing charges. It is inexplicable that in March 2018, only some months ago, Mr. Fraser’s clients confirmed a considerably smaller amount as being owed in that respect.

[31]        Mr. Fraser also refers to the $1.8 million which was to be paid in accordance with the Direction. However, the Direction confirms that this amount was not in respect of off‑site servicing charges; rather, it was intended to be paid to POFC in reduction of its mortgage on the Sagebrush Property. In other words, this amount has nothing to do with 208 in terms of any claims that might relate to the net sale proceeds from the 208 Property or any off-site servicing costs.

[32]        Mr. Fraser also argues that Mr. Chandler is essentially breaching the terms of the Direction. I am in no position to decide whether that is, in fact, the case and I specifically make no decision in that respect. The Direction stands as evidence of the agreement between his clients and Mr. Chandler. If Mr. Chandler is off side in terms of his obligations under the Direction, Mr. Fraser's clients will the ability to advance their claim against him and assert the right to a remedy. That said, that issue does not support any trust claim with respect to the net sale proceeds from the 208 Property.

[33]        Mr. Fraser also advances an argument on the basis of paragraph 2 of the Direction. Paragraph 2 provides that the Vendors and Mr. Chandler will not assign, encumber, pledge or grant security over their interests in the net sale  proceeds from the 208 Property and that the Vendors’ Solicitors shall not release any net sale proceeds to any party holding an assignment or pledge, save with the consent or the Vendors, Mr. Chandler and 1003961.

[34]        Mr. Fraser argues that Mr. Chandler is assigning or encumbering or pledging or granting security over his interest in the net sale proceeds. This argument is without merit. Mr. Chandler is simply agreeing to a release of some of those funds to the other parties involved in the CPL Actions. I see no provision in the Direction that would prevent Mr. Chandler from doing so.

[35]        At bottom, the opposition from Mr. Fraser’s clients appears to be an ex post facto attempt to amend the terms of the Direction to give them greater control over the release of the trust funds by Mr. Chandler beyond what they bargained for in March of 2018 when the Direction was given.

[36]        Accordingly, I see no basis upon which to refuse to grant the consent orders sought in the CPL Actions. I decline to do so based on the very recent assertions of Mr. Fraser’s clients. I acknowledge that there are facts set out in the filed materials that I have not yet recounted in these reasons. However, I want to assure all counsel that I have listening carefully to their entirety of their submissions in terms of the materials that were put before me this afternoon.

[37]        Accordingly, the consent orders are granted as sought.

“Fitzpatrick, J.”