The B.C. Securities Commission says a Vancouver Island man defrauded an investor of $1 million by lying about the ownership of a legendary hotel.
A BCSC panel found that Timothy Craig Durkin deceived an investor by falsely representing that SHH Holdings, through a subsidiary, owned all of the shares of the Sooke Harbour House hotel.
In a decision released Tuesday, the panel said Durkin raised $1 million from an investor between December 2015 and March 2016, promising them a 40 per cent share in the hotel by purchasing 40 per cent of the shares in SHH Holdings.
The investor, a Chinese citizen looking to immigrate to Canada, had already invested in a spa business in the Sooke area and was considering broadening her investments in the region.
The investor's company advanced $1 million between December 2015 and March 2016 to buy the shares. The money was spent and not recovered by the investor or her company, the ruling says.
According to the ruling, Durkin, a director of SHH Holdings, argued that the investor was not misled and he had no intent to mislead her.
Durkin said he made it clear to the investor, especially through the delivery of an unsigned memorandum of agreement sent to the investor's advisers, that SHH Holdings did not yet own the hotel shares.
The BCSC panel concluded that SHH Holdings and Durkin made false statements about the hotel's ownership on three occasions.
The ruling included a 2015 email to the investor's lawyer that read that SHH Holdings "owns 100 per cent of the outstanding and issued share capital of Sooke Harbour House Inc., the operating company."
In response to a question about whether SHH Holdings was the sole shareholder of the hotel or whether it will be acquiring shares at a later time, Durkin told the investor's lawyer in a 2015 email that the shares were "already acquired."
"This exchange of question and answer is very clear," the ruling says. "It contradicts all of Durkin's evidence and submissions to the effect that he believed the investor understood that Holdings did not then own the hotel shares."
The panel has directed the parties to make submissions regarding sanctions.
Legal battle for control of hotel
Durkin spent years battling the hotel's founders, Sinclair and Frederique Philip, for control of Sooke Harbour House, the legendary tourist destination that has hosted Hollywood stars and royalty.
In 2020, Justice Jasvinder Basran awarded the Philips $4 million in relation to a deal they struck with Durkin and a partner in a failed 2014 share purchase agreement for the hotel.
The Philips reached a share purchase agreement in 2014 that would have seen Durkin and a partner purchase their interest in the hotel for $6 million.
The Philips believed they were going to get $2 million, and according to the judgment, Durkin assured them that SHH Holdings had the resources to cover the existing mortgage and interest owed to the Business Development Bank of Canada.
In fact, Basran found that despite promises of a "syndicate" or "posse" of investors from Tehran to Zurich, SHH Holdings never raised more than $54,000.
"[Durkin's] view of the truth is whatever will serve his interests in the moment. He is entirely unencumbered by ordinary norms of morality, integrity and decency," Basran wrote.
"He is a garden-variety bully who preys upon those whom he perceives to be weaker than himself and vulnerable to his mistruths and manipulation."
In 2020, North Vancouver-based IAG Enterprises purchased the land, the Sooke Harbour House building and its associated assets in a court-ordered foreclosure sale for $5.62 million.
The hotel is closed for renovations and a re-opening date has not been set.
The hotel was listed for sale last year at $13.3 million.