By Gagandeep Ghuman
Published: Sept 15, 2014
A BC Supreme Court judge has ruled in favour of Bank of Montreal (BMO) and ordered the Aqua developer to pay the bank $24 million, as well as interest owing from March 2013.
The respondents before court were Aqua developers: Pointe of View, a joint venture between Calgary-based Pointe of View Developments and Bel-Tar Holdings Ltd., and BC developer, Thomas Ivanore.
The project, condos and town homes along the Squamish estuary, went into receivership after the bank pulled financing in 2009 on a $22 million construction loan. The project broke ground in 2007, but BMO pulled financing in 2009. The properties went into receivership, and court ordered foreclosure sales commenced in January 2010.
The developer’s argued they had no liability to the bank because the bank breached its contractual obligations and acted in bad faith and materially altered the risk of their obligations.
The bank told the judge that it found “irregularities with how the construction draws were applied and whether there was sufficient credit to enable completion.”
The bank told the court the shortfall happened because there were increased costs that only came to light later or the funds were not being used for the project it was intended.
Brian Stoddard, CEO of Pointe of View, told the bank the construction budget had to be increased by $2,500,000 to cover “settlement with unpaid trades, past due trade payables and interest charges.”
The bank’s surveyor, while doing an audit, found out the construction shortfall wasn’t $2.5MM as reported, but could be as high as $5.2 million.
As bank started to demand payments, the developers applied for a DIP (debtor in possession) financing to complete the project. The bank was willing to lend more money but on certain conditions that the proponents were not willing to accept.
The judge didn’t agree that the bank’s desire to negotiate the funding was in any way breach of contract. Honourable Justice Burnyeat stated that BMO acted in good faith and ruled BMO entitled to their Judgment for the balance owing under the Guarantees sighed February, 2008, including interest calculated at the rate of Prime plus 1 per cent.
“I find that there was no misrepresentation so that I could conclude that the Bank and CMHC did not act in good faith,” the judge remarked.
Aqua project was finally constructed by the Bowra group, who built the second and third phase of the project. The subcontractors who worked at the project were worst affected and may not ever see any payment.
Darren Pelling worked as a contractor for Renaissance Retirement Residence and as a sub-contractor for Coastal Village homes. He has given up all hopes for receiving any payment on any of the development.
“They both owed me $930,000, but I didn’t see any money,” says Darren Pelling, the owner of Alpine Pacific Group Construction.
Pelling says he lost everything.
“We just sold any equipment we had, and had a garage sale and pretty much walked away,” he said.
“It effectively wiped us out.”
Pelling said developers didn’t follow Builders Lien Act protocols which mandate they establish proper lien holdback accounts, which protect workers if the developer declares bankruptcy.
Tradespeople need to be aware that they have the right to ensure the lien holdback accounts are in place for every project, he added.
“The little guy that is actually doing the work carries the risk all along,” says Pelling.