TCC Mortgage Holdings Inc. v. Pilot Pacific Developments Inc.

2014 BCSC 1376 TCC Mortgage Holdings Inc. v. Pilot Pacific Developments Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: TCC Mortgage Holdings Inc. v. Pilot Pacific Developments Inc., 2014 BCSC 1376 Date: 20140722 Docket: H110050 Registry: Vancouver Between: TCC Mortgage Holdings Inc. Plaintiff And Pilot Pacific Developments Inc. and Jacob Bergen also known as Jacob Elias Bergen Defendants And TCC Mortgage Holdings Inc., Trez Capital Corporation and Morley Greene Defendants by counterclaim - and - Docket: S114173 Registry: Vancouver Between: TCC Mortgage Holdings Inc. Plaintiff And The Bergen Family Trust, Katherine Bergen and Joshua Hauser as Trustees of The Bergen Family Trust, and Pilot Pacific Developments Inc. Defendants Before: The Honourable Mr. Justice Williams Reasons for Judgment Counsel for Plaintiff in both actions and Defendants by Counterclaim: D.B. Kirkham, Q.C. and J.L. Williams Counsel for Defendants in both actions: Jacob Bergen, representative Place and Dates of Trial: Vancouver, B.C. November 18-22, 2013 and November 25-28, 2013 Place and Date of Judgment: Vancouver, B.C. July 22, 2014 [1] These reasons are rendered in respect of two trials which were, by consent, tried together. The actions involve the same or similar parties and concern the same general commercial transaction. [2] The essence of the actions is that the plaintiff TCC Mortgage Holdings Inc. seeks to enforce certain security instruments which were granted by

the defendants and seeks orders of the Court requiring payment of sums owing on account of loans made. Background circumstances [3] The plaintiff in each of the actions is TCC Mortgage Holdings Inc. ("TCC"). TCC is an entity which is wholly owned by a commercial lending corporation, Trez Capital Corporation ("Trez") and which acted as the nominee of Trez for the transactions which are the subject of this litigation. Morley Greene is the principal of Trez and played a directing role in the transactions at issue. In the discussion that follows, I will at times refer to steps taken and things done by Trez and Mr. Greene. They were, in fact, the parties who were actively engaged in the dealings with the defendants. TCC was, as noted, simply a nominee corporation whose only function was to hold the security instruments arising from the deals. [4] Pilot Pacific Developments Inc. ("Pilot") is a corporation in the business of property development. Its principal is Jacob E. Bergen ("Mr. Bergen"). [5] In 2005, Mr. Bergen and Pilot set out to develop a residential real estate project on property located in Penticton, BC (the "Penticton project"). [6] Alysen Place Developments Inc. ("Alysen") was a company incorporated by Mr. Bergen for the purpose of owning the site and developing the project. [7] The Bergen Family trust ("BFT") is a family trust which owns the residence of Mr. Bergen in

Delta, BC. The trustees of the BFT at the relevant time were Katherine Bergen, Mr. Bergen's daughter, and Joshua Hauser, a solicitor who was extensively involved in Mr. Bergen's commercial activities. [8] Between 2005 and 2008, Trez made a number of loans to Pilot and Alysen in order that the project could be developed. The loans were secured in a variety of ways, including guarantees provided by Mr. Bergen and Pilot, together with mortgages granted by Alysen over the subject property and by the BFT over the residence located in Delta. Additionally, the BFT guaranteed advances made by the plaintiff to Alysen. [9] The Penticton project ultimately failed. In March of 2009, a receiver manager was appointed by court order. All of the recoverable equity was claimed by the first mortgagee. The plaintiff, TCC, stood in second position. In the final analysis, any recovery it made was minimal. Its investment was substantially lost. [10] For clarity, I will set out the essential elements of these two actions. [11] In action H110050, TCC seeks judgment against Pilot and Mr. Bergen. The basis of liability is the guarantees made by Pilot and Mr. Bergen, the first dated December 13, 2005, and similar instruments that were executed subsequently, guaranteeing all Alysen debt arising under certain mortgages. [12] The defence asserted by the defendants in that action is that Trez and TCC in fact

wanted to make an equity investment in the Penticton project but, because they believed it would be of greater assistance in raising the necessary funding, they recorded the transaction as a loan. The defendants say that Trez and TCC represented to them that the debt would be converted to an equity investment and that the security instruments would be allowed to expire and would not be enforced. [13] Pilot and Mr. Bergen have also filed a counterclaim in the action. Simply stated, they allege that there were representations made by Trez, TCC and Mr. Greene such that there was a collateral oral agreement to the effect that the funds that were advanced would be an equity investment and that the security instruments would not be enforced. In addition, Mr. Bergen and Pilot allege that Trez and TCC failed to fulfill their funding commitment in respect of the project and caused it to fail. In that counterclaim, they seek monetary damages arising from losses they say were incurred in the Alysen project failure. The quantum of that claim is in the order of $6.5 million. [14] In action S114173, TCC brings suit against the BFT, Katherine Bergen (as trustee), Joshua Hauser (as trustee), Pilot and Mr. Bergen. The plaintiff seeks a declaration that the mortgage granted by BFT charges the subject property, that it is in default, and that the full balance is owing. [15] The defence asserted

by the defendant Pilot is similar to the defence asserted in the other action, namely that there were misrepresentations as to the nature of the transaction and there was an assurance that the security instruments would not be enforced. The Response to Civil Claim filed by Mr. Bergen, the BFT and the trustees is of a similar tenor. Discussion [16] At its basic level, this case is straightforward. The plaintiff has adduced evidence which establishes the elements of the transactions. It is clear that there were agreements for loans. Pursuant to those, security arrangements were made, security instruments were executed and funds were advanced. There is no dispute that the funds have not been repaid. [17] Thus, on the face of the evidence, the plaintiff's claim is made out. [18] Notwithstanding that, the defendants dispute their liability. They say the plaintiff is not entitled to the remedies it seeks. The basis of their position is that there were, in fact, other arrangements flowing from discussions between Mr. Bergen and the principal of the lender, Mr. Greene, the effect of which was an assurance by the lender that the guarantees and mortgages would not be enforced or acted upon. They contend that Mr. Greene and Mr. Bergen had an agreement that the lender would be an equity partner and participant in the project, and in exchange for that status, the promise was made that no

steps would be taken to realize upon the rights provided by the security instruments. [19] The plaintiff quite resolutely denies that proposition. In the plaintiff's submission, the deal was exactly as reflected in the documents. [20] On the basis of the evidence which has been adduced, I have no hesitation in concluding that the loan agreements were made as detailed in the relevant documents. Similarly, all of the security instruments and related documentation which were prepared were in fact duly and properly executed. [21] It is plain that Mr. Bergen was the directing mind for the Penticton project, and that he was the principal, actually or effectively, who agreed to the borrowing transactions. Where he has executed personal guarantees, his involvement is obvious. Where the contracting parties were corporations, namely Pilot or Alysen, I am satisfied that he was the directing mind and that the commitments that were made in those instruments were made in an informed way and without their being any question as to the obligation that the instruments imposed. As regards the involvement of the BFT, again, I am satisfied that for all intents and purposes the directing mind behind those aspects of the transactions was Mr. Bergen. Although the trustees executed the documents, the obvious conclusion is that Mr. Bergen was directing the transactions. [22] The trial of these actions

took nine court days. [23] The plaintiff's case relied on two viva voce witnesses, Mr. Greene and Mr. Lai, a chartered accountant who is the vice president of Trez. The plaintiff adduced a relatively limited number of documents. They are contained in exhibit number one. In addition, the plaintiff read in evidence from the examination of discovery of two parties, Mr. Bergen and his daughter Katherine. [24] None of the defendants were represented by legal counsel. Mr. Bergen acted in person and took conduct of the entire defence and prosecution of the counterclaim. The evidence adduced by the defendants consisted of the testimony of Mr. Bergen, plus that of another witness Mr. Thom, a mortgage broker who had acted for Mr. Bergen and the relevant corporate entities in this matter. [25] Mr. Bergen conducted an extensive and thorough cross-examination of Mr. Greene. As well, in the course of making the defence case, in his testimony in chief, he took some considerable time and covered the subject matters in great detail. It was apparent that he had spent a tremendous amount of time and energy to prepare the case. He had a large volume of documents at hand for the trial; many of those became exhibits. [26] In my view, there is no real purpose or value for this Court in the course of this judgment to discuss every nook, cranny and detail of the case that Mr. Bergen has adduced, nor to

delve into the extensive minutiae of meetings, emails and discussions that transpired. That is not to say that I have elected to ignore the issues that properly arise or give short shrift to Mr. Bergen's case. Rather, I intend to deal with the issues in something of a broad-brush fashion. Although I take that approach, I wish it to be perfectly clear that I have examined the trial evidence carefully and that the substantive matters raised by the defendants have been considered. [27] The format of this portion of these reasons will be as follows: a) A brief summary of the transactions and the relevant documents. b) The Court's conclusions with respect to the plaintiff's claim. c) An examination of the position of the defendants by which they deny liability and a discussion of that position. d) A discussion of the counterclaim. Transactions and related documentation [28] The transactions and relevant documents are set out chronologically, as follows: A. In March 2005, Mr. Bergen, through Pilot, secured the right to acquire land for a substantial development to be built in Penticton. In the course of the dealings which followed, Graham Thom of Gatland Capital Corporation was retained to arrange the necessary financing. B. In June 2005, TCC advised Pilot through Mr. Thom that it stood prepared to provide funding for the project in the amount of $3,450,000. The loan was to be

secured, prior to the closing of the Penticton purchase, by a mortgage in the amount of $3,500,000 over the Bergen residence and the guarantee of Mr. Bergen. The documents in evidence indicate that the offer as proposed in a letter sent by TCC was quite carefully reviewed and a number of its conditions were modified by Mr. Bergen, together with, as I understand, Mr. Thom and Mr. Hauser, Mr. Bergen's solicitor. Ultimately, the letter was returned and the offer, as modified, was accepted. The security instruments, namely the mortgage over the Bergen residence and Mr. Bergen's guarantee, were executed. The expectation of all was that once the Penticton property purchase had been completed, TCC would register a mortgage over that property. At the same time, negotiations were being conducted with a major commercial lender for a loan to provide the funds necessary for construction. Ultimately, such a loan was finalized and a first mortgage was registered in favour of that lender, People's Trust. C. In December 2005, TCC approved a further loan for the Penticton project. The loan was in the amount of $4,110,000. The borrower was Alysen; the security was a second mortgage over the Penticton property and the guarantee of Mr. Bergen and Pilot. The existing security over the Bergen residence that had been granted by BFT was released. This loan "superseded" the earlier loan in that it (the

June loan) was paid out from the proceeds of this loan. All of the relevant documents are in evidence; they were duly executed and registered. D. In November 2006, TCC approved a further loan for the project. It was in the amount of $2,000,000, to be borrowed by Alysen and secured by a third mortgage over the Penticton property. As well, the guarantees of Mr. Bergen and Pilot were required. The mortgage was duly registered and the guarantees were executed. E. In April 2007, TCC agreed to make a further loan to Alysen; that was to be an expansion of the November 2006 loan, increasing it to $5,000,000. In fact, around the same time, it became apparent that there would be a need for further funding for the project. A request was made for a further loan of $7,000,000, to fund construction. F. In December 2007, TCC agreed to commit to a further expanded loan with a global maximum of $25,000,000; that sum included advances that had already been made previously. The loan was to be secured by a third mortgage granted by Alysen. That mortgage was duly registered. As well, the loan was guaranteed by Mr. Bergen and by Pilot. Those guarantees were executed in the usual way. G. In July 2008, TCC was concerned that Mr. Bergen had not made what it considered to be a sufficient contribution to the project and called upon him to make an injection of funding. As he claimed not to have funds

available, it was agreed that he would provide further security in order to assuage the lender's concern and ensure that advances would continue to be made. To that end, BFT provided a mortgage in the amount of $2 million over the Bergen residence and also executed a guarantee with respect to the Alysen indebtedness. Those documents were duly executed and the mortgage was registered. Conclusions with respect to the plaintiff's claims [29] Based upon the totality of the evidence and with specific reference to the security instruments as described above, I am satisfied that the rights sought to be enforced by the plaintiff, namely foreclosure upon the BFT mortgage and enforcement of the guarantees, is established. Furthermore, I am satisfied on the evidence that the obligations have not been paid and that the sums, as well as interest, are due and owing. The specific sums will be discussed later in these reasons. The defendants' position [30] Earlier in these reasons, I set out in essence the basis of the position which the defendants say disentitles the plaintiff from having the remedy it seeks. [31] Speaking globally, Mr. Bergen contends that the agreements are, in fact, something of a sham. He says that at all times throughout the negotiations and the dealings, he was assured by Mr. Greene that the true structure of the relationship between the parties (Alysen and the lender)

would be that of partners. According to Mr. Bergen, Mr. Greene wanted the transactions documented as loans as that would be of assistance to him in his efforts to raise funding from his various investors. In the result, says Mr. Bergen, the security instruments should not be given effect as they do not reflect the actual agreement. [32] Before dealing with the specifics of that argument, it is useful to examine two concepts that seem relatively central to the defendants' position. [33] The first is the use of the term partner or partnership. Mr. Bergen insists that he and TCC (and Trez), through Mr. Greene, were partners. In support of that, he makes reference to different occasions upon which that term was used in the course of correspondence between the parties, and specifically where Mr. Greene has made reference to both Mr. Bergen and to Mr. Bergen's corporate entities as his partners. [34] In response to that, Mr. Greene says that at all times the relationship between the parties was that of lender and borrower. At the same time, he observes that the magnitude of the financial commitment that TCC had made to the project put it in a position of having a very significant interest in the success of the venture. To that extent, he says that he considered that TCC was very much in a "partnership" with Mr. Bergen and his corporate entities. As well, there was a fairly long

history of dealings between the two men (Mr. Greene and Mr. Bergen) and Trez had loaned money to Mr. Bergen on a number of prior occasions for development projects. However, Mr. Greene disputes adamantly the suggestion that the use of that expression from time to time in describing the relationship of the parties should be taken as having any formal or legal meaning that would materially alter or affect the obligations of the defendants in the project at bar. [35] Another expression used in the context of these transactions and the evidence is that of equity financing. In some circumstances, that expression could be understood to describe a situation where a party, by providing funds for a project, takes an equity or ownership interest. An implication of such a relationship might be that there is in fact a partnership, as opposed to a pure lender/borrower relationship. [36] In the course of the litigation at hand, the expression equity financing was used from time to time. [37] Based upon my understanding of the evidence, including the explanations provided by persons with relevant expertise and familiarity with practices in the industry, I am satisfied that the term equity investment as it has application to the transactions at hand means a situation where a developer undertakes a significant project with virtually no money of his own in the project. That is different than the

more usual situation, where a developer who intends to construct a project will have a meaningful amount of his own money in the project. Often, it might be, for example, the value of or substantially the value of the land involved. The developer then goes on to borrow the funds necessary to execute the development. [38] In the matter of the present project, it is apparent that Mr. Bergen had virtually no capital of any magnitude in the project; he had paid the initial $100,000 deposit on the land purchase. Effectively, he acquired the right to acquire the property. He then arranged to borrow funds from the plaintiff in order to complete the purchase of the land and to be able to pay for the many other associated costs that were involved in getting this project underway. He subsequently went on to secure other funds from another lender for the purpose of actually constructing the development. [39] In the result, TCC was, from the outset, in a position of significant risk. It had a substantial amount of money invested in the project; certainly a great deal more than did Mr. Bergen and Pilot. Its security was secondary to the first mortgage lender. The equity to support its involvement was thin. [40] Accordingly, the description of equity financing has application here. It means, in effect, that the funding being put forward by the plaintiff was in lieu of the usual equity that

the developer would have had. [41] Based upon my understanding of the evidence, that is an appropriate use of the expression; it is descriptive and not to be construed as meaning that the equity-funding lender, the plaintiff, was in some relationship different than a pure lender. [42] Another point to be addressed is the matter of Mr. Bergen's sophistication. From his testimony, it is evident that he has been involved in the development business for a long time and could fairly be described as a seasoned and experienced developer. [43] In the course of the trial, he raised the proposition that he is unable to read. As I understand, that was in the context of suggesting that he was an unsophisticated person who had been, to some extent at least, taken advantage of by craftier and smarter people, namely Mr. Greene and his associates at Trez. [44] Frankly, that does not seem to be a tenable claim. [45] Mr. Bergen has suggested that he suffers from some form of dyslexia or a related condition and that makes it difficult for him to read. That may be so. However, I am simply unable to accede to any suggestion that he is functionally illiterate or otherwise lacking in an ability to comprehend in any way that impacts upon the transactions at issue here. [46] Based upon all of the evidence in this trial and taking into account the manner in which he was able to competently conduct a

fairly complex piece of litigation, I reject any suggestion that he is a man who is unable to understand what he was doing. The evidence is replete with documents that he has executed and messages that he has sent; the overwhelming conclusion that emerges is that he was a knowledgeable, capable and engaged business person throughout the dealings involved. [47] I have adverted to the core of Mr. Bergen's position - that there was in fact an arrangement between himself and Mr. Greene. The essence of that agreement is that the plaintiff and Mr. Bergen (and his companies) were in a partnership and that the security instruments would not be acted upon. [48] Central to the matters I have to decide is the allegation that the written agreements are not to be interpreted according to their wording; rather, the Court must take into account other agreements that were made orally and not reduced to writing. [49] That engages the application of the parol evidence rule. [50] There are a host of authorities which articulate, explain and to some extent qualify the rule. For the purpose of the present discussion, I will proceed on the basis that the rule is essentially this: When the terms of a contract have been embodied in a writing to which both parties have assented as the definite and complete statements thereof, parol evidence of antecedent agreements, negotiations and understandings is

not admissible for the purpose of varying or contradicting the contract so embodied. [51] There are exceptions to the rule. I do not intend to engage in a lengthy discussion of them, nor do I find a need to make any definite holding in respect of the issue. [52] Rather, for the purpose of the present analysis, I am prepared to consider whether there is evidence of such collateral terms or agreements in order to decide whether or not the contract at hand is actually to be considered the entire contract and whether representations were made which could be seen as fraudulent and which were capable of inducing Mr. Bergen and the other defendants to enter into the agreements that the documents evidence. [53] At the outset, it is to be noted that each of the loan agreements contains a "whole agreement" provision. Accordingly, the rule is, prima facie, applicable and it is not open to the defendants to interpret the contract other than in accordance with its clear terms. [54] As an aside, I discerned from Mr. Bergen's submissions that he considered that the whole agreement limitation does not apply because it is not contained within the wording of the actual security instruments that are being relied on by the plaintiff. In my view, that position is without merit. The agreement is set out in the various offers of financing, as signed and accepted by the borrowers. The whole limitation

clause is clearly and plainly part of that agreement. The security instruments, whether guarantees or mortgages, are specific mechanisms whereby the agreement is put into effect. The provision in the actual agreement establishes the condition, and it is of no consequence that it is not reiterated in the security document. [55] Nevertheless, I will proceed to examine the evidence to see whether there is some basis to support the defendants' position. [56] There is no question that, from time to time, there was some thought given to the arrangement between the plaintiff and the borrower corporation taking the form of a joint venture or a partnership of some sort. There are mentions of that in the documents in evidence. However, when some hint or suggestion of that is seen in the material, it is clearly evident that while the idea may have been considered, it never came to fruition. In fact, when it was raised in the early stages, the material suggests that it was Trez who was interested in such an arrangement, but Mr. Bergen was not minded to commit to such a structure. Later, as the winds shifted and matters became more dire, any overture by Mr. Bergen to convert the project to such a footing was rejected by the plaintiff. However, there is no evidence to indicate that there was ever such an agreement reached by the parties or that it was meaningfully discussed. [57] In the

course of the trial, because Mr. Bergen acted for himself, I made clear to him that, given the line of defence being advanced, there was an obligation upon him, when cross-examining the plaintiff's witnesses, and particularly Mr. Greene, to put to them plainly and squarely the proposition that Mr. Greene had made these offers and held out this arrangement. In fact, Mr. Bergen never did so. At times, he seemed to "nibble around the edges", but at no time did he put to Mr. Greene this central theory of the defence. [58] His explanation, as provided in his final submissions, was to the effect that in cross-examination, Mr. Greene appeared to be denying clear recollection of specific meetings and what transpired there, and so there seemed to be no real reason to put to him the details of the discussions where he alleged those representations had been made. [59] Notwithstanding that there was no confrontation of Mr. Greene, on the basis of his testimony at trial, I am soundly convinced that Mr. Greene did not make the representations that Mr. Bergen alleges or that he conducted himself to the effect the defence asserts. Mr. Greene is a sophisticated businessman; he is a lawyer of many years' experience; and he was well aware of the thrust of the defence. The clear tenor of his evidence, both in chief and, where the proposition was suggested or hinted at in cross-examination, was an

adamant and stout denial that there had been any such agreement or proposal held out by him. [60] In dealing with this aspect of the defence case, there are three observations that warrant mention. The first is that Mr. Bergen was unable to point to any other witness that might afford some support for his allegation. One such person who springs to mind is Mr. Thom, the man who worked most closely with Mr. Bergen throughout the entire process of arranging all the funding and who was intimately involved in many dealings with the Trez people. It would seem logical that he might have had some knowledge of such an important aspect of the deal. He testified at trial and said nothing to suggest that he knew anything of the sort. Similarly, it would seem logical to expect that Mr. Hauser, who was Mr. Bergen's solicitor in these matters, would have been made aware of that very important condition. It was never suggested that he was, and he was not called as a witness. [61] The second point to note is that there is in evidence some material relating to a proposed deal between Mr. Bergen and Trez in Fort St. John. Although the matter didn't progress to fruition, it was apparently being discussed as a partnership or joint venture type of arrangement. Among the materials which were made exhibits at trial is a preliminary deal sheet. Its format is markedly different than the documents

relating to the Penticton project; the content makes apparent the nature of the arrangement. [62] Finally, it is telling that there is nothing in the evidence that suggests that, at any time in the long and complicated course of the dealings between Mr. Bergen and the Trez people, in the many, many communications, as matter wound their way to their disastrous conclusion, did Mr. Bergen ever put to Mr. Greene or to anyone at Trez that the transaction was not a loan and that the security agreements were of no force. In fact, there are suggestions that, late in the day, he made mention of restructuring the arrangement. If there had in fact been the agreement he now claims, to raise it later and characterize it as a restructuring is curious indeed. [63] Each of these elements is consistent with and supportive of my finding that the defence which the defendants assert has no foundation in fact. [64] To conclude, I reject the contention that the loan guarantees are unenforceable because there was some collateral agreement which affected their terms. Furthermore, addressing the matter in the terms of Mr. Bergen's closing submissions, I reject the defendants' contention that the guarantees are unenforceable because the defendants were induced to sign them on the basis of fraudulent misrepresentations made by Mr. Greene. I reject as well the defence contention that the plaintiff is

estopped from enforcing the guarantees because it repeatedly assured Mr. Bergen that it would not attempt to enforce the guarantees. Finally, I reject the defence contention that there was a failure of consideration because, when the guarantees were given, the plaintiff made Mr. Bergen a number of promises - with respect to bridge financing, the repayment of other loans, the repayment of the initial equity that Mr. Bergen had put into the project, that the equity partnership would be formally documented and that the plaintiff would provide funding required for draws until construction financing was in place - and those promises were not honoured. Counterclaim [65] In their counterclaim, Mr. Bergen and Pilot allege that, in 2005, Mr. Greene and others at Trez knowingly made false representations for the purpose of inducing Mr. Bergen and his affiliated entities to enter into a funding agreement; they also allege a collateral agreement in 2005. The counterclaim makes similar allegations for transactions in 2007, that is, misrepresentations and a collateral agreement. Additionally, the counterclaim alleges that Mr. Greene and his associates at Trez failed to make construction draws available in a timely way, thus causing Mr. Bergen and the Penticton project to encounter difficulties with respect to contractors and also causing purchasers to back out of their commitments. [66] Mr.

Bergen says that, as a consequence, he sustained loss and damage, both directly and indirectly through Pilot, including a loss of funds advanced by him and Pilot to Alysen. [67] As the foregoing discussion makes clear, I have concluded that the alleged misrepresentations and collateral agreements were not made. In addition, the allegation that Trez improperly failed to make draws in a timely way has not been proven. [68] The loan agreements at issue clearly provide that the decision to advance funds is "in the Lender's sole, unfettered and absolute discretion." On the evidence, it is apparent that in the more advanced stages of the project, tensions between the lender and Mr. Bergen were escalating. Increasingly, Trez had grave reservations as to the manner in which the project was being conducted and how the funds were being spent. Evidently there was reason for those concerns. A practical consequence of the situation was that the relationship became more dysfunctional. Ultimately, the project failed. [69] No doubt there were other factors that contributed to the demise of the project as well. Certainly the financial crisis of 2008 was a contributor, as was a requirement that materialized during the course of the project that required the filing of a new prospectus and enabled a number of persons who had committed to purchasing units to avoid that commitment. [70] Those,

however, are incidental observations. The issues at hand are the claims that the parties have made in these actions. The Court's decisions with regard to those are as set out above. [71] Furthermore, I conclude that, on the totality of the evidence, Mr. Bergen has not proven the allegation that he or Pilot sustained any loss with respect to funds advanced to Alysen. In fact, to the contrary, the evidence indicates a substantial flow of funds from Alysen. [72] Accordingly, the counterclaim stands dismissed. Remedy [73] With respect to action H110050, the plaintiff is granted judgment against Pilot Pacific Developments Inc. and Jacob Bergen: (a) Pursuant to the joint guarantee of December 13, 2005, in the amount of $25,833,872.85 as of November 18, 2013, plus per diem interest; (b) Pursuant to the guarantee of December 13, 2007, in the amount of $51,687,522.09, as at November 18, 2013, plus per diem interest. [74] I will leave it to the parties to make the necessary calculations and adjustments with respect to interest. If agreement cannot be reached, there will be an accounting conducted by a registrar of the court to determine the sums owing. The registrar is directed to provide a report and recommendation to the court. If there is to be a registrar's hearing, I direct that there will be a pre-hearing conference convened. [75] With respect to action S114173, the Court orders

and declares that: a) The plaintiff shall have judgment against the Bergen Family Trust, Katherine Bergen and Joshua Hauser as trustees of the Bergen Family Trust, pursuant to the guarantee of July 25, 2008, in the amount of $10,351,172.78, as of July 16, 2013, plus per diem interest. b) The mortgage dated July 25, 2008 made between the defendants, Katherine Bergen and Joshua Brook Hauser, in trust, as mortgagors, and Jacob Bergen, as covenantor, and TCC Mortgage Holdings Inc., as mortgagee, and registered in the Lower Mainland Land title Office, in the Province of British Columbia, on July 28, 2008 under Number CA864614 (the "Family Trust Mortgage"), is a mortgage charging the following lands: Municipality of Delta Parcel Identifier: 001-029-282 Lot 425 Section 4 Township 5 NWD Plan 31449 (the "Lands") in priority to the interests therein or claims thereto of the defendants and their respective heirs, executors, administrators, successors and assigns, and any persons claiming by, through or under them. c) Katherine Bergen and Joshua Brook Hauser, in trust, and Jacob Bergen have made default under the Family Trust Mortgage and that as a result, the full balance due and owing thereunder is now due and payable to TCC Mortgage Holdings Inc. d) The amount of money due and owing under the Family Trust Mortgage and the amount of money required to redeem the Lands is the sum of

$10,351,172.78 as of July 15, 2013, plus per diem interest at the rate of 20.00% per annum, compounded monthly, from and including July 15, 2013. e) The rate of interest chargeable pursuant to the Family Trust Mortgage is 20% per annum, compounded monthly, not in advance. f) The last date for redemption be one day after the date of pronouncement of any Order made herein, or such other period of time as this Court may order. g) Upon the defendants, or any of them, paying into Court to the credit of this proceeding at the Court Registry, Courthouse, 800 Smithe Street, Vancouver, British Columbia, or paying to the solicitor of record for TCC Mortgage Holdings Inc. the amount required to redeem the Lands as aforesaid, together with the costs of this proceeding before pronouncement of either an Order Absolute of Foreclosure or an Order confirming the sale of the Lands, TCC Mortgage Holdings Inc. shall reconvey the Lands free and clear of all encumbrances in favour of it or any person claiming by, through or under it and shall deliver up, upon oath if required, all deeds, titles and documents in its custody, possession or power relating thereto to the defendant(s) so paying or to whom they shall appoint. h) If the Lands are not redeemed, TCC Mortgage Holdings Inc. shall be at liberty to apply for an Order Absolute of Foreclosure and upon pronouncement of the Order Absolute of

Foreclosure the defendants and all persons claiming by, through or under them shall henceforth stand absolutely debarred and foreclosed of and from all right, title, interest and equity of redemption in and to the Lands and all monies paid under the Family Trust Mortgage shall become the property of TCC Mortgage Holdings Inc. free from any right of the defendants and that thereupon TCC Mortgage Holdings Inc. shall recover vacant possession of the Lands. i) An Order for Sale of the Lands subject to the approval of this Honourable Court and for TCC Mortgage Holdings Inc. to have exclusive conduct of such sale. j) TCC Mortgage Holdings Inc. may apply to this Court for a further summary accounting of any amounts which become due to it for interest, taxes, arrears of taxes, insurance premiums, costs, charges, expenses or otherwise since the date of the pronouncement of this Order. k) All funds transferred from Alysen Place Developments Inc. to the Bergen Family Trust and to Pilot Pacific Developments Inc. are impressed with a trust in favour of the estate in bankruptcy of Alysen Place Developments Inc. and/or the Plaintiff. l) Judgment against the Bergen Family Trust for $4,530,144.46, plus interest pursuant to the Court Order Interest Act, R.S.B.C. 1996, c. 79. m) Judgement against Pilot Pacific Developments Inc. for $2,232,184.49 plus interest pursuant to the Court Order Interest

Act. n) An accounting of all monies transferred from Alysen Place Developments Inc. to the Bergen Family Trust and Pilot Pacific Developments Inc. [76] The same direction will apply, namely that, if the parties are unable to agree as to the specific sums, there will be an order that they appear before a registrar of the court. The registrar is directed to provide a report and recommendation. Costs [77] The plaintiff seeks an order for special costs on the basis of the defendants' plea of fraud. [78] Special costs are awarded pursuant to R. 14-1(3) of the Supreme Court Civil Rules and are typically made when a party's conduct is reprehensible. Justice Lambert, for the Court of Appeal, explained the meaning of "reprehensible" in Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 720, 9 B.C.L.R. (3d) 242 (C.A.) at 249: the word "reprehensible" is a word of wide meaning. It encompasses scandalous or outrageous conduct but it also encompasses milder forms of misconduct deserving of reproof or rebuke. Accordingly, the standard represented by the word "reprehensible", taken in that sense, must represent a general and all encompassing expression of the applicable standard for the award of special costs. [79] Lambert J.A. further clarified at 250-251: the fact that an action or an appeal "has little merit" is not in itself a reason for awarding special costs Something

more is required, such as improper allegations of fraud, or an improper motive for bringing the proceedings, or improper conduct of the proceedings themselves, before the conduct becomes sufficiently reprehensible to require an award of special costs. [80] Justice Walker in Mayer v. Osborne Contracting Ltd., 2011 BCSC 914 further noted, at para. 8, that "In determining whether the conduct of a party is reprehensible, courts may consider whether the conduct complained of is a type from which it should seek to dissociate itself". Justice Pearlman reviewed this passage in Leger v. Metro Vancouver YWCA, 2013 BCSC 2021 and then said, at paras. 74 and 77: Special costs will be awarded in a range of circumstances. They will be awarded where a party makes resolution of an issue more difficult than it should have been, where a party pursues a meritless claim and is reckless with regard to the truth, or where a party makes unfounded allegations of fraud or dishonesty. I take into account the fact that the plaintiff is not represented by counsel and that her experience in the conduct of litigation is limited. However, the plaintiff's status as a self-represented litigant is not a licence to conduct herself as she sees fit or without regard to the Rules of Court or to make unfounded allegations of misconduct against opposing counsel. [81] In my view, the relevant considerations are the

allegations made by the defendants, that the plaintiff and its executive officer deliberately and repeatedly made false representations for the purpose of inducing the defendants to enter into security agreements that the plaintiff then disavowed, and the implicit suggestion that the plaintiff's case was based on a perpetuation of that dishonest conduct. That conduct, if proven, would reasonably be seen as serious, improper and with a clear tenor of dishonesty and fraud. It would properly attract a significant measure of judicial censure. In this case, while those allegations were made, they were not proven. In fact, there was simply no meaningful proof adduced by the defendants at all to make that case, other than the testimony of Mr. Bergen. I am satisfied that a fair-minded and objective observer would conclude that there was no merit to the defence position. The concern that I noted earlier, that Mr. Bergen was not prepared to confront the plaintiff's principal witness with those allegations, is a consideration as well. [82] The fact that Mr. Bergen is a self-represented litigant might be seen as a factor favouring a less strict view of the matter. With respect, while the court will, in the usual course, necessarily make allowance for that fact, it is also important that standards of proper conduct be maintained. Surely it cannot be that a whole different standard will

apply for in person litigants who elect to conduct their own case. In the present matter, while Mr. Bergen was never rude or obnoxious in his conduct in the courtroom, the case as he conducted it was quite bereft of merit and, as I have observed, was based on serious allegations of misconduct for which no worthwhile proof was offered. [83] Those factors considered, it is my conclusion that the principles that warrant an award of special costs have application in the case at bar. Accordingly, the plaintiff is entitled to special costs. "The Honourable Mr. Justice Williams"