Timothy Durkin defrauded a would-be immigrant from China of $1 million by lying about the ownership of the Sooke Harbour House hotel and restaurant, a B.C. Securities Commission panel says.
Durkin, a Sooke resident and a director of SHH Holdings Ltd., raised the money from an investor through a distribution of securities between December 2015 and March 2016, the panel said in a ruling released Tuesday.
He told the woman, a Chinese citizen who was not named in the ruling, that SHH owned all the shares in the hotel through a subsidiary, the panel said.
Durkin said that by buying 40 per cent ownership of its shares, the woman would receive 40 per cent ownership of the hotel.
In fact, SHH did not own any shares in the company that owned the hotel, the panel said.
At that time, the hotel was owned by a corporation whose shares were held by the Philip family, which bought the waterfront property in 1976 and expanded it. The hotel won international accolades and was renowned for using local ingredients.
But the hotel ran into financial difficulties and found new investors, including Durkin, leading to additional problems when a share-purchase agreement failed to complete.
A court case ensued and in 2020, Frederique and Sinclair Philip were awarded $4 million in damages following a B.C. Supreme Court trial. (Frederique Philip said Tuesday that they never received the $4 million.)
Damages were to be paid by SSH Holdings and SSH Management, a management company operating the hotel. Durkin was the director of those companies, the B.C. Supreme Court judge said in his decision.
A foreclosure resulted in the hotel going on the market. It changed hands in a court-ordered sale in 2020 for $5.6 million to IAG Enterprises, a real estate company based in North Vancouver.
Renovations were carried out at the hotel, but now IAG has it listed for sale at $13.3 million.
The investor at the heart of the B.C. Securities Commission panel’s decision was trying to immigrate to Canada. She had already put money into a spa business in the Sooke area and was thinking of adding to her local investments to bolster her immigration application.
In the panel’s decision, it said that in emails with the investor’s accountant, Durkin chose not to correct erroneous information and misunderstandings about the ownership of the hotel’s shares.
Based on misleading or false information, the woman’s company signed an agreement with SHH and provided $1 million to buy the shares, the commission said.
The woman’s company provided $250,000 in a bank draft on Dec. 12, 2015, another $250,000 by cheque on
Dec. 18, 2015, and $500,000 by cheque on March 1, 2016.
The money was spent and has not been recovered, the panel said.
It decided that SHH and Durkin made false statements about the hotel’s ownership, knowing they would be considered an accurate representation of its current financial situation but not of its status once the transaction closed.
“We conclude that Durkin misled the investor through her advisor and he intended to do so expecting that his representations would lead the investor to place her invested funds at risk as he knew that (SHH) Holdings did not have any ownership shares in the hotel,” the panel said.
The panel determined Durkin’s conduct was deceitful.
Durkin could not be reached Tuesday.
Each party can make submissions to the commission this month regarding sanctions. The decision is anticipated March 6.