A BC Supreme Court Justice has sided with the plaintiff in foreclosure proceedings involving The Royal.
Royal Nelson Holdings Ltd. sued Royal Nelson Investments Ltd., whose principals are Poul Henriksen and Luke Menkes respectively.
According to Justice Neena Sharma’s ruling, Henriksen bought the Baker Street building in 1994. Various people operated the bar and upstairs rooms.
Menkes took over the bar in 2009 and the following year agreed to buy the building for $1.1 million. He paid $230,000 up front while the rest was to be paid on a three-year vendor take-back mortgage.
Menkes failed to meet his obligations early on, so the mortgage was modified to cover interest payments only. However, Menkes still missed numerous payments and in September 2013, with about $963,000 still owing, foreclosure proceedings began.
In response to the civil claim, Menkes said Henriksen misrepresented the building’s condition at the time of its sale, both verbally and in a disclosure document. He claimed a variety of structural, electrical, and plumbing deficiencies as well as fire and building code violations.
However, Henriksen received nothing in writing from Menkes about the supposed problems until legal proceedings began.
Although the mortgage’s particulars weren’t in dispute, the parties had “markedly different” versions about the property’s condition and what Henriksen told Menkes, according to the judge.
They disagreed on the “the existence, significance, and magnitude of alleged deficiencies” and at trial, there were “significant contradictions among witnesses on many items.”
The judge also noted inconsistencies between Menkes’ testimony that he was unaware of the state of The Royal before buying it and a series of emails he sent Henriksen about investments required to bring the building up to code.
Justice Sharma said assessing Henriksen and Menkes’ credibility was “key to my conclusions.” She found the inconsistencies in Menkes’ evidence enough “to seriously erode the confidence I can have in Mr. Menkes’ testimony … I find Mr. Menkes is not a credible nor reliable witness. I can place virtually no weight on any of his testimony. I find that he has grossly exaggerated the condition of The Royal, and that it is likely he has fabricated some events for the purpose of propping up his lawsuit.”
She also found two witnesses who testified on Menkes’ behalf were unreliable.
By contrast, “I have no hesitation in concluding Mr. Henriksen was honest in his testimony. I find he is a credible and reliable witness … Mr. Henriksen was constantly challenged during cross-examination, and his evidence did not waver and rarely, if ever, was he inconsistent.”
Henriksen said the allegations of fraud were groundless and a “fabricated strategy” to force a trial, ensuring a delay. He also said Menkes’ defence was “frivolous” because of a “startling lack of credible evidence” to support his allegations and amounted to an abuse of the court process.
While she wouldn’t go that far, the judge agree Henriksen’s reasoning was sound and was backed up with some evidence.
She granted an order that possession of the building revert to Henriksen if the outstanding mortgage wasn’t paid off within one day.
The building had an appraised value of $1.5 million and assessed value of $1.3 million but for the trial’s purposes, the judge pegged its value at $1.1 million. It has been for sale since March 2013 with no offers. It was originally listed for $1.9 million and then reduced to $1.5 million.
Menkes took out a second mortgage on the building for $347,750 that was a breach of terms of the first mortgage. While the judge said there was no reliable evidence to show how much he invested in renovations, Menkes claimed it was over $57,000.