I realize that there are a couple of other ventures. We are waiting for investors within them to contact us, to determine if someone invested, has losses and wishes to proceed.
We have filed an Action in the Court of Queen’s Bench of Alberta to advance a claim on behalf of all investors in Lakehouse. We have pleadings prepared for Venu and we are waiting on a representative plaintiff to come forward as they are ready to file. So far, investors in Venu have not come up with one investor to do so. We have pleadings on PIC and we will be reviewing them with a designated representative plaintiff who has come forward, and those will be filed week of April 22, 2013.
I will discuss the general issues on each of the above noted projects below. I am providing this for you to assist investors with understanding the risks and benefits of class action, and how participation works in these actions.
We are able to sue for each project in a separate action. There is some obvious comingling and issues between Venu and PIC, when you look at legal title for the property involved in the Venu project. Venu investors were subordinated to PIC investors. However, each investment stands alone and has distinct issues related to each investment that lends itself to resolution by way of class certification.
Class actions are proceedings under the Class Proceedings Act (CPA) in Alberta. The CPA is intended to be a tool used for the Court to assess the efficiencies of having facts and issues common to many different investors, or plaintiffs, tried together. This allows for efficiencies in determination of facts and issues, and economies of scale and economic savings for both investors and court resources. This is called judicial economy. An easy way to put it is, the Courts would much rather certify 1000 investors to deal with common facts and issues, than have 1000 different trials. You also get judicial certainty and consistency when everyone knows that facts and issues will be consistently determined for all investors – as that is a risk with different actions.
Each project has a separate law suit. There does not appear to be evidence of comingling of funds here. While there is an issue between Venu and PIC about how the defendants subordinated Venu investors to PIC, in the Venu project, that has more to do with priority to collection against the asset itself, and less to do with proving claims. As we said above, each investment has distinct facts and issues, common to all investors.
You will have to fill out an investor form for each investment.
UPDATE: JULY 15, 2015
Previously, we were asking investors to contribute $100.00 for each investment, to be used toward disbursements.
As we are now moving towards settlement in this matter, with a Settlement Approval Hearing to be heard on September 9th, 2015 for all three projects, we are no longer seeking contributions from investors.
Please note that investors who have not contributed $100.00 to participate in the lawsuit are still able to be part of the settlement. We ask that when you receive any notices from the CBI Group, that you carefully review them.
Our legal fees are based on contingency, which means we get a percentage of what we can collect, if we succeed here. Our account has to be approved by the court in the certification process.
You do not pay legal costs to us if we lose, while we work on a contingency fee basis.
Any plaintiff or investors participating in this action, could face a claim for costs if we lose at certification application or trial. That is always a risk of suing someone. However, we would not be interested in pursuing this claim on a contingency fee basis if we thought that risk was very high. We strongly believe the facts here demonstrate a justification for both certification and establishment of liability at trial.
If you do not sue, you are not exposed to risks of trial, and either winning and recouping something, or potentially losing, which we believe is a low risk. However, doing nothing, your investment will eventually be a total loss. So, if you invested $10,000.00, you have to consider the value of investing $100.00 now toward disbursements, in order to potentially receive something back. Or you can write the investment off in your own mind and consider the entire $10,000.00 a loss.
You can send us your information by completing the questionnaire form on this website for your project and mailing it to us along with a cheque for $100.00 made payable to “McGuigan Nelson in trust” We will then respond to you as quickly as possible.
You can opt out. In the normal course, if you would prefer to run your own claim, you can opt out of our proceeding. Once we are certified, all investors are notified of our certification and they can decide to opt out. You are automatically included with us in our claim, unless you opt out. We will still be advancing a claim on behalf of investors in your class, but you do not have to share legal costs and advance with us, as you can opt out and do it yourself, at your own cost.
We believe that working together will enable us to pool the evidence we have, to prove liability and to justify damages, at shared cost. We urge you to consider joining our claim.
We are asking for people to retain us for $100.00 toward disbursements. This is regardless of how much you invested in each project. It is to simply the participation process, so we can focus on the litigation, instead of administering the claim.
You can wait and opt out if you want to do so, if and when we are certified.
We would like parties to make a decision by May 30, 2013, however this is not a firm deadline for participation in this class suit. We will be filed and served within that time, for each project. However, we want to have a certain number of investors at that point for each project, as we have to identify that for the courts, in our documents. To be clear, as long as 2 or more people seek certification on facts or issues that they argue are common to both investors, this is the process.
We have a large number of participants in Lakehouse, Venu and PIC, so we believe we are already well over the threshold. However, the more investors we have, the stronger our arguments, given the test under the CPA.
Our web link www.mnllp.ca provides regular updates on the CBI Group Projects. PLEASE DO NOT SEND US INDIVIDUAL QUESTIONS. It is impossible for us to answer individuals when we are looking at 1100 or more investors in this group of investments. We ask people to review the website and the information we provide, to answer your questions.
We want your email address, as we communicate with investors on it. This will not be a quick process. It will take time. And it will depend on the position taken by the Defendants.
It would appear that the defendants agreed to sell the property to investors with a disclosed lift of $700,000.00. They acquired the lands for $2,200,000.00 and disclosed they were selling it for $2,900,000.00 to investors. Financials are not complete, but demonstrate that what actually occurred was sale at $5,100,000.00. No authorization for this additional lift was sought or provided. There also appears to be roughly $3,000,000.00 in soft costs, or expenditure, without accounting. It was supposed to be for things like architectural fees, yet the architect sued for non-payment, as disclosed on title. And all of this occurred in the face of an ASC sanction against these defendants.
When they could not deliver on due date, they sought extension of time, while under ASC sanction. It would appear that such was done in contravention of the ASC undertaking. No more work is taking place on the Lakehouse investment because there is no more money to do so. Investors are left with a real concern that they will never see return of their investment.
This was supposed to be a short term investment, with a certain yield on bonds. The funds were to develop the Venu project. Investors expected to be taken out on sale revenues from selling units. In the face of ASC sanction and undertaking, they closed this investment and the allegation is this was closed in contravention of those undertakings. There are some undisclosed related party transactions and a lack of accounting. The Venu investors’ interests were not registered on title for a number of years, and subordinated to both construction financing with Royal Bank and second mortgage financing given at a later time from PIC. No authorization or disclosure to investors of this. Failure to account for usage of funds from the construction financing and from sales of units. Investors were not repaid by their promise dates. The Venu project does not appear to be advancing further and investors are behind the large construction financing. As a result, they appear to have limited ability to realize on their investment.
This was supposed to be investment with a set return date and investment was supposed to be made into diverse projects to spread risk. Instead, all of the monies were lent to related parties of the Defendants. The Defendants have not repaid the monies to PIC. Investors appear to have no prospects of collection and no efforts to progress projects is taking place.
We look forward to working with you.