Shuswap Lake

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A group of more than 20 motorhome owners who invested $50,000 each 15 years ago to own lakeside RV sites have lost a long-running court battle in which a judge ruled they did not own the pads and the bank had every right to foreclose on the bankrupt company that does own the land.

Justice Trevor Armstrong ruled in a Kamloops courtroom Nov. 22, that the 22 plaintiffs in the case did not own the RV pads, even though they believed they did, and the RV owners' $50,000 investments had gone into a company that had since gone bust. The justice's ruling now gives the green light to the bank to try and recoup some of the millions in mortgage debt lost in the investment.

The suit was launched in B.C. Supreme Court by the 22 plaintiffs against Shuswap Lake Resort, its four directors and Interior Savings Credit Union, Romspen Investment Corporation and the Royal Bank of Canada.

The case dates back 15 years when Eugene Chartier, Rene Gladu, Douglas Ruemper and Richard Windjack decided to buy a parcel of land in Scotch Creek and set up the Shuswap Lake Resort. The intention was to develop the current campground and cabins into an RV Park and condo development.

In late 2004 the four developers approached many of the current RV clientele at the site and offered them a $50,000 buy-in for preferred shares and a specified RV lot on the redeveloped land. The developers formed the Shuswap Lake Resort, bought the land in 2005, and promised investors a 12 per cent dividend rate on their shares.

Through a lengthy and complex court judgement, the plaintiffs argued their investment into a preferred share scheme with the Shuswap Lake Resort was structured in such a way that they became owners of their individual pieces of land.

The Shuswap Lake Resort went bankrupt after securing multi-million dollar mortgages on the lakeside property. Romspen Investment Corporation, which now owns all the debt, wanted to move forward and foreclose on the land.

The plaintiffs argued the bank can't foreclose on their individual RV lots, because they own them, and the sites are exempt from any dealing the bank may have with the bankrupt company.

In the decision, Justice Trevor Armstrong states the "plaintiffs rely on pre-contractual oral representations and correspondence received by them from the individual directors" prior to buying the shares. The justice goes on to say it's "obvious" no one "took legal advice" before handing over their $50,000 payments.

The judge says the only written contracts between the Shuswap Lake Resort and the 22 plaintiffs do not contain details of a "licence to occupy" an RV pad.

Court documents show an early letter from the resort company states that a plaintiff will have a "right" to a specified RV pad upon payment of $50,000 for preferred shares which will remain "irrevocably" in force as long as you own the shares.

Justice Armstrong describes the sentence as "clearly untrue."

The court documents show that many of the plaintiffs had different ideas of what they were actually investing in. Armstrong then says "any confusion or uncertainty... was likely generated by the inconsistent and inaccurate information communicated" by the company.

However, the judge said information about the type of preferred shares they were offered is "readily available" and none of the plaintiffs asked the original lawyer dealing with the sales about the restrictions attached to their shares.

The judge says "it is not clear" if the law company who dealt with the original transaction "understood the promises made" by the Shuswap Lake Resort when it received the $50,000 investments.

The case has been in court before in 2012, although the judgement doesn't say what has taken place over the last seven years.

The plaintiffs also accuse the three banks involved of equitable fraud because they were aware that the RV lots had been sold to the plaintiffs and the money was spent.

The plaintiffs claim the lenders should not have used the land as security for loans to Shuswap Lake Resort as the RV pads were owned by the plaintiffs.

Justice Armstrong disagrees saying the mortgages from all three lenders were "not out of the ordinary" and they did not breach their duties in accepting the site as mortgage security.

Ultimately the judge dismissed all the plaintiff's claims which leaves them $50,000 out of pocket and without ownership of a lakeside RV site — and likely court costs as well.

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