T.M. Thorpe Holdings Ltd. v. Sooke Harbour House Inc.

2020 BCSC 1081 T.M. Thorpe Holdings v. Sooke Harbour House Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: T.M. Thorpe Holdings v. Sooke Harbour House Inc., 2020 BCSC 1081 Date: 20200625 Docket: H-192039 Registry: Victoria Between: T.M. Thorpe Holdings Ltd., Cathedral Capital Ltd. Petitioners And: 1068921 Alberta Ltd., Mark Joseph Carter, Tim Durkin, Nancy Fogliato, Steven Fogliato, Rodger Gregory, Her Majesty the Queen in Right of Canada, Ian James Rayner, SHH Holdings Limited, SHH Management Limited, Sooke Harbour House Inc., Carrie Van Dyck Respondents Before: The Honourable Mr. Justice Basran Oral Reasons for Judgment In Chambers Counsel for Petitioners: No Appearance Counsel for 1068921 Alberta Ltd., Nancy Fogliato and Steven Fogliato: B.J. Promislow Counsel for HMTQ in Right of Canada appearing by teleconference: J. Paoletti Counsel for Sooke Harbour House Inc.: P. Klassen J. Bloomenthal Appearing on his own behalf and Rodger Gregory and for SHH Management and Holdings Limited Tim Durkin Place and Date of Trial/Hearing: Victoria, B.C. June 25, 2020 Place and Date of Judgment: Victoria, B.C. June 25, 2020 [1] THE COURT: This is an application for the approval of sale of the Sooke Harbour House Hotel and Restaurant, which consists of two properties identified as PID 004-068-432 and PID 002-472-503. These are 1528 and 1529 Whiffin Spit Road in Sooke, B.C., hereinafter (the "SHH Properties"). [2] On March 12th, 2020, I granted an

order nisi and an order for conduct of sale of the SHH Properties to the applicants, who hold a second mortgage over these properties. [3] The applicants retained NAI Commercial ("NAI") to act as realtors for the sale of the SHH Properties. NAI marketed the properties and received two offers, one on April 21, 2020, for $4.5 million with conditions, and a second on April 29, 2020, for the full asking price of $5.632 million made by IAG Enterprises Ltd ("IAG"). IAG removed their conditions on May 7, 2020. The applicants are seeking court approval for this offer of purchase and sale of the SHH Properties. [4] It is calculated that the proceeds of sale will be sufficient to satisfy all of the charges on the SHH Properties as of the date the conduct of sale was ordered, with the surplus to be paid into court. There is an ongoing dispute over the ownership of the hotel that is the subject of SCBC File Number VI S173277, between SHH Management et al and Phillip et al. [5] On May 11, 2020, the Phillips, as the directors of SHH Inc., granted a fourth mortgage over the assets of SHH Inc. in favour of Hailey Management Ltd. for $900,000. This is an associate company of Crease Harman LLP, counsel for the Phillips, the Phillip Family Trust, and SHH Inc. This amount is for outstanding legal fees for services rendered by Crease Harman LLP to these clients. It is on this basis SHH Inc. is

seeking the payment of $900,000 to Hailey Management Ltd. in trust. [6] In the application response for SHH Inc., dated June 22, 2020, counsel for SHH Inc. indicated that he consented to the order sought for the approval of sale of the SHH properties, as proposed by the applicant, but added that it wanted the fourth mortgage paid out in trust to Hailey Management Ltd. [7] However, during the hearing of this approval of sale application, Mr. Klassen, counsel for SHH Inc., partially resiled from this position, and is instead seeking a three‑week adjournment of this application. This is on the basis that last night a prospective purchaser notified him of its potential interest in purchasing the SHH Properties. Mr. Klassen spoke to the principal of this interested party, who is apparently an experienced hotel operator of 15 properties. This entity owns a hotel property in Sooke, and it is apparently interested in the SHH Properties with a view to operating both hotels together. The principal indicated that it would provide a so‑called "letter of commitment" within two to three weeks. There is no indication of the price that this prospective purchaser will offer. [8] Mr. Durkin is not opposed to the sale of the property. However, he wants $973,000 to be paid to him and/or the corporate entities he controls in respect of an alleged constructive trust he asserts the existence of based

on purported cash assets contributed to the Sooke Harbour House Hotel and assets he purports to own that are at or part of the SHH Properties. He is opposed to Mr. Klassen's adjournment application, and supports the application for the approval of the sale of the SHH Properties to IAG for $5.632 million. [9] The applicants oppose the adjournment request on the basis that there has been sufficient time for other interested parties to make an offer on the properties. They note that if IAG's full price offer to purchase the SHH Properties for $5.632 million is not approved today, it will be withdrawn. Given the uncertainty caused by COVID‑19, and the lack of competing offers, they believe that the court should approve the IAG offer. [10] I am not granting the adjournment requested by counsel for SHH Inc. The property was listed in March 2020, two offers were received in April 2020, and the subjects were removed on the full price offer made by IAG in early May 2020. I note that there were not any competing bids submitted for consideration. [11] The entity that contacted Mr. Klassen last night to express interest in purchasing the SHH Properties has not committed to making an offer, let alone one that is higher than the one made by IAG. In my view, the interest of this party is too vague, too little, and too late. The adjournment application is dismissed. [12] On the substantive

application for the approval of the sale of the SHH Properties to IAG, I note that IAG made a full price offer of $5.632 million, and there are, of course, no subjects or conditions on this offer. [13] None of the parties involved in this matter have provided the court with an up to date appraisal of the property. I am mindful that any valuations completed before March of 2020 must be considered cautiously given the significant impact of the global pandemic on the international economy generally, and the tourism and hospitality sector in particular. [14] I am satisfied that reasonable efforts were made by NAI to market the SHH Properties, and the sale of them to IAG for the full sale price is provident. [15] On this basis, I am approving the application for the sale of the SHH Properties to IAG for $5.632 million. However, I am not ordering that $900,000 be paid to Hailey Management Ltd. in trust. I cannot determine if Crease Harman LLP is entitled to $900,000 to be held in trust, because I have no information before me in respect of the fees owed to them by SHH Inc. [16] I am also not approving the payment of $973,000 requested by Mr. Durkin. In the context of this application, he has not established that he is entitled to this amount. I note parenthetically that this amount is the same amount that is in issue in the litigation between SHH Management et al and Phillip et al.

The validity of this claim will be decided in that matter. [17] The $900,000 mortgage placed on the SHH Properties in favour of Hailey Management Ltd. shall be removed. The established claims payable to the Government of Canada, Province of British Columbia., Municipality of Sooke shall be paid, as will the secured lenders who hold the first, second, and third mortgages over the SHH properties. [18] I am going to issue an order restraining all parties from removing anything from the hotel pending the completion of the sale. The lone exception shall be that the Phillips, Sinclair Phillip and Fredrique Phillip, may meet with the representatives of IAG to remove their personal assets from the SHH Properties to the extent that they are listed on Schedule F, the excluded asset list that was part of the October 2014 share purchase agreement, or Schedule J of the offer to purchase executed by IAG. To be clear, this order restrains Mr. Durkin, Mr. Gregory, their relations, and anyone they direct from removing anything from the SHH Properties. [19] Given the overlap between some of the issues raised by Mr. Durkin in this application and the ongoing litigation involving SHH Management et al and Phillip et al, I am dispensing with the signature of both Mr. Durkin and Mr. Gregory on the condition that Mr. Promislow provide them with copies of the entered order. This is because Mr. Durkin

has previously expressed an unwillingness to sign a court order so that he may protect his legal rights. [20] The applicants are entitled to their costs of this application on a party and party basis. [21] The amount that is surplus after all the entities have been paid out, as I have described, will be paid into court on the main action, the main action being SCBC File Number VI S173277 between SHH Management et al and Phillip et al. That is something that all the parties agree to? Mr. Durkin, I assume you agree to that as well? [22] TIM DURKIN: Yes, My Lord. [23] THE COURT: Thank you. [24] MR. BLOOMENTHAL: That is acceptable, My Lord, thanks. [25] THE COURT: Anything further, Mr. Promislow? Oh, and you ‑‑ Mr. Durkin, do you have any comments with respect to this request of Mr. Promislow for costs in the amount of $2500 all in? [26] MR. PROMISLOW: Is it all in or plus disbursements and taxes? [27] THE COURT: It is plus disbursements and taxes, you're right. [28] TIM DURKIN: Sounds like a deal, My Lord. [29] THE COURT: All right. So ordered, Mr. Promislow, you ‑‑ [30] MR. PROMISLOW: Thank you. [31] THE COURT: ‑‑ may include that. "Basran J."