Kelowna 'Crown Jewel' latest battlefield for Callahan brothers in $300 million family feud | iNFOnews | Thompson-Okanagan's News Source

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Kelowna 'Crown Jewel' latest battlefield for Callahan brothers in $300 million family feud

The Shasta mobile home park on Lakeshore Road is the subject of infighting between four Callahan brothers.
Image Credit: Google Earth

- This story was originally published Jan. 25, 2022.

Lloyd Callahan started building a real estate and land development empire in Kelowna in 1964 but his sons have spent the last 20 years fighting over it.

During those two decades, control of more than $300 million in property has been contested.

The latest battle is over control of the Shasta mobile home park on Lakeshore Road, described by the family as the “Crown Jewel” of their holdings. Since it’s across the road from Rotary Beach, the 18-acre property is a valuable development site.

Ted Callahan, the owner of Argus Properties, took his three brothers, Bob, Bruce and Doug, to court over their efforts to force him out of Shasta, a company that owns a number of properties, including the mobile home park.

B.C. Supreme Court Justice Heather MacNaughton ruled in his favour in a decision released earlier this week.

The story, as outlined in MacNaughton’s ruling, starts in Fort St. John in the late 1950s when Lloyd and his wife, Marjorie, started a trucking company and, later, a family with their four sons, Ted being the second oldest.

In about 1964, they sold the trucking company and moved to Kelowna where Lloyd worked in real estate and started buying and developing land.

In 1968 he bought the Shasta, in partnership with the owners at the time, and set up four separate trusts, giving equal shares to each of his sons.

In the 1980s, as his father faced financial ruin, Ted quit law school, came back to Kelowna to not only save the companies but build them up, MacNaughton explained in her ruling.

Ted now owns Argus Properties which has a number of commercial, residential and hotel interests in the city, including the Hotel Eldorado and Manteo Beach, that he bought in 2014 and 2015, respectively.

The other brothers got involved in the family businesses later on.

It seems the brothers never got along.

“There is a long history of disputes and litigation involving Ted, his brothers, and Lloyd,” MacNaughton wrote. “For the most part, Bob, Bruce, and Doug aligned with Lloyd, and Ted was the outlier. Accusations of self-dealing and breach of trust have been made by Bob, Bruce, Doug and Lloyd against Ted and he has made similar accusations against them.”

Starting in 2004, they went into mediation then arbitration to separate out Ted’s ownership and entitlement to most of the Callahan family companies that Doug did not have an interest in. Those properties were valued at more than $300 million, MacNaughton wrote.

Given Ted’s role in building the companies, he was granted a 38% share of the companies while his father shared the other 62% with Bob and Bruce.

“As none of the family members wanted cash because of the undisputed family credo that ‘land is king,’ the arbitrators allocated the various properties between the parties, in accordance with the 38/62 split,” MacNaughton wrote in her ruling. “The Arbitrators also considered each side’s preference for certain properties over others. Where subdivision was possible, properties that were highly desirable to both sides were subdivided. None of the properties were sold to third parties.”

The family’s “land is king” philosophy also means they don’t have to pay expensive capital gains taxes when the land is split.

The Shasta properties were not part of that settlement because Doug is an equal shareholder in Shasta.

Shasta was dubbed the Crown Jewel early on and has sentimental value for all four brothers since they’ve had ownership shares since they were children.

It’s in an area of the city that is rapidly redeveloping. Next door is the former Hiawatha campground and mobile home park that is being redeveloped by Westcorp into highrises and townhouses.

READ MORE: Major redevelopment of Hiawatha RV Park in Kelowna set to begin this summer

Not far away and across Lakeshore Road is the Aqua that the Mission Group plans to develop with highrises.

READ MORE: iN VIDEO: Three waterfront towers planned for Kelowna’s South Mission

While the Callahans didn’t indicate to the court that they had any intention of developing the Shasta site in the near future, MacNaughton noted that its development potential is worth a lot more than its assessed value of $14.3 million.

The mobile home park generates about $1 million in annual revenues with expenses of just under $500,000. In fiscal 2020 it had net earnings of $470,721 and assets of $1 million. The company also owns some of the units onsite, MacNaughton wrote.

Ted started as a director for Shasta in 1985 and for a brief time between 2008 and 2009 and all four brothers were directors of the company until Bob, Bruce and Doug voted Ted out on June 30, 2009.

Despite Ted’s efforts to get back on the board, the others always voted against him.

The court ruling says the only business at the annual general meeting is for Bob, Bruce and Doug to re-elect themselves as directors. Lloyd died last spring.

The mobile home park is run by a manager so there is little for the directors to do. Despite that, from 2009 to 2018, Shasta paid $859,697 in director’s fees to Bob, $859,697 to Bruce, and $1,130,597 to Doug. Ted objected to that but that’s the subject of a different court filing.

READ MORE: With demise of mobile home parks in Kelowna, affordable home ownership slips away for many

What triggered this court case were resolutions passed at the Nov. 6, 2020 annual general meeting where the brothers did more than re-elect themselves. They also passed motions to appoint a liquidator to, essentially, sell off the property.

Ted had offered, in 2017, to have Argus subdivide the Shasta property at no cost to Shasta in order to settle their differences. The brothers refused.

When Ted got the notice of the 2020 annual general meeting and the intent to liquidate he wrote to the brothers, asking for an explanation.

“If you have reasons why the shareholders should vote in a particular way, then you will have an opportunity to express your opinion at the shareholder’s meeting,” was the written response he got the day before the meeting.

Ted showed up at the meeting and asked his questions. The brothers gave no answers.

“Because of ongoing litigation, it has been the directors’ practice for many years to engage with Ted in writing where possible,” Bob wrote in his deposition to the court. “Where not possible, it has been the directors’ practice to engage with Ted minimally in our capacity as directors, for example, at meetings.”

Essentially, that means the three brothers are not on speaking terms with Ted.

While Bob told the court, in his affidavit, that liquidation was the best way to split the land rather that dealing in cash, Justice MacNaughton disagreed.

“Frankly, his affidavit does not make sense in the context of this case,” MacNaughton wrote. “The auction process will result in one or more of the current shareholders in Shasta losing the opportunity to hold and develop the Crown Jewel, and in light of the history of cooperation between Bob, Bruce, and Doug, it is likely that they will collectively outbid Ted in any closed auction process.”

That meant Ted would get cash and not be able to share in the development of the land or leave his share of the property to his own sons, as he had planned.

Ted’s claim was that the actions of his brothers were “oppressive or unfairly prejudicial” to him.

Justice MacNaughton ruled that, in fact, was the case.

“I accept that Ted is not interested in the cash value of the Crown Jewel or in receiving cash in lieu of his interest,” he wrote. “To Ted, ‘land is king,’ and he has a legitimate expectation that he will receive his interest in the Crown Jewel in land, not cash.”

MacNaughton restored the status quo by setting aside the resolutions passed at the November 2020 annual general meeting.

Not that this will likely be the end of the story.

In a 2015 court ruling on an earlier dispute between the brothers, Justice Ronald Skolrood described the one thing that was not in dispute between the parties, the "significant rift in the family and a high degree of animosity and distrust,’” MacNaughton wrote.

— This story was originally published at 7:35 a.m. Monday, Jan. 24, 2022.

To contact a reporter for this story, email Rob Munro or call 250-808-0143 or email the editor. You can also submit photos, videos or news tips to the newsroom and be entered to win a monthly prize draw.

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