A West Vancouver developer has been ordered to pay a former business partner more than $1.8 million after a B.C. Supreme Court judge found numerous instances of civil fraud underpinning their collapsed plans to build homes in the British Properties.
According to the ruling published on Oct. 20, Phil Garrow and his companies ADC Projects and ADC Holdings agreed to purchase 1449 Sandhurst Place and 1103 Gilston Road with Les Sallay’s company, Jeana Ventures Ltd., to redevelop them with luxury homes.
The relationship soured, however, and “both lost portions of their investments and any hope of realizing the anticipated profits from the projects,” B.C. Supreme Court Justice Janet Winteringham noted at the outset of her 76-page ruling.
Sallay became suspicious he had been “duped” and, after investigating the financial documents related to their business venture, sued in 2020, alleging Garrow had lied about his and his companies’ contractual performance.
Garrow countersued, however, alleging Sallay failed to make good on a shotgun buy/sell clause in their shareholder agreement, asking the court to award more than $4 million in damages.
A home was eventually built on the Gilston Road property but it sold in receivership. The Sandhurst Place property did not have a home built on it, the ruling states.
Evidence of civil fraud
In early 2019, Sallay and Garrow agreed that Garrow’s company ADC Holdings would pay down $400,000 on the Gilston mortgage before Sallay would contribute more funds to the Sandhurst project. Garrow emailed Sallay to say a certified cheque had been sent to the mortgage holder by courier and enclosed a copy of the cheque as proof.
“Despite the cheque, it is clear on the evidence that the amount of $400,000 was never credited to the Wealth One Mortgage,” Winteringham wrote.
At trial, Garrow claimed he did not know the cheque was never deposited and attributed it to an oversight, which Winteringham rejected.
“I do not believe him,” she wrote.
A similar issue arose in July 2019, as the parties were planning the redevelopment of the Sandhurst property. Garrow sent a screengrab of banking information to Sallay showing a pending ADC Holdings transfer of $765,000 into their account for the project. But the bank’s branch manager testified the money never did go through because “there was no balance available for that transfer to happen.”
Again, Garrow testified he only found out about the missed payment after Jeana’s civil claim was filed and said in court it would have made little difference as expenses for the project were being paid out of ADC’s account. Winteringham rejected Garrow’s version of events again.
“On this point, I accept the plaintiff’s submission that Mr. Garrow knew full well that this payment of $765,000 had never been paid because he never intended to pay it,” Winteringham wrote.
A third civil fraud accusation stemmed from the purchase of the Sandhurst property. Garrow received word it would be going to a court-ordered sale and quickly organized his company’s successful bid that came in $300,000 below the appraised value of the lot.
Believing he was entitled to that extra equity, he added an addendum to the contract of purchase and sale, creating a $300,000 assignment fee, which he intended to use as a portion of his contribution to the deal with Sallay, the decision states.
“Mr. Sallay was adamant that he was not provided this addendum until he was conducting his investigation in late 2020. Importantly, he testified that he was never told that this $300,000 was to form part of ADC Holding’s equity contribution from the outset,” the ruling notes, adding later that “The funds themselves were never contributed. Mr. Garrow knew the funds were never contributed and made efforts to obscure this fact.”
When the business relationship failed, Garrow sought to trigger a shotgun clause in the shareholder agreements that would have given Jeana the option to sell its shares in the projects back to Garrow at Garrow’s chosen price, or to buy out Garrow’s shares for the same price.
But Sallay argued the clause should be null and void, given Garrow’s fraudulent dealings making it impossible to determine the true value of the venture, and the disproportionate sums of money they’d contributed to the projects.
Also at issue for the court was the letter Garrow sent triggering the shotgun clause, which was addressed from ADC Holdings, not ADC Projects, the company that was the signatory to the shareholder agreement. As the counterclaim process was going badly for Garrow in court, he produced a trust document making it look like ADC Projects was holding the interest in the Gilston company for the benefit of ADC Holdings. which would have assisted his case, but Winteringham determined it too was faked.
When it came to determining who was more credible through the civil suit, Winteringham sided with Sallay.
“Mr. Garrow’s testimony was flawed in many respects. He was quarrelsome and antagonistic in his responses during cross‑examination and his demeanour, generally, was poor. And while I appreciate the frailties of assessing credibility by demeanour, my concerns with Mr. Garrow’s testimony went far beyond that. His testimony often evolved and changed as different documents were presented to him and he tended to obfuscate his responses to avoid providing an answer to the question asked,” she wrote.
“First, I have found Mr. Garrow blatantly lied about the production of a document critical to this litigation. Second, Mr. Garrow repeatedly relied on having provided proof of contractual adherence where, in reality, he engaged in no such adherence. And third, Mr. Garrow relied repeatedly – and caused Mr. Sallay to rely on – faulty accounting information that was faulty due to his own method of accounting.”
In the suit Jeana Ventures sought return of the money sunk into the projects, plus interest, which Winteringham granted – a little more than $1.83 million.
Sallay and Jeana also said Garrow and his companies should be made to pay aggravated and punitive damages but they made no submissions to the court on the specifics. Winteringham gave Sallay 30 days to give notice if they will be pursuing further damages.