Several years after the operator of the Trump International Hotel and Tower Vancouver assigned itself into bankruptcy, the Supreme Court of British Columbia is allowing the owners of the hotel to pursue a portion of their claims against Grant Thornton, the bankruptcy trustee whom the owners claim deliberately prolonged the case to increase its fees and enrich itself.
In 2021, after a creditor vote, Grant Thornton was replaced by Bowra Group, which was acquired by MNP in December 2022. Because the bankruptcy proceedings were ongoing, the owners needed permission from the court to temporarily leave the proceedings to pursue the claims.
The owners sought out that permission in a February 2023 application. The application was not heard until this past January, when a portion of the application was dismissed while another portion was allowed. A Reasons For Judgment was then not published until May 29.
The Trump Hotel Vancouver
The 60-storey tower formerly known as the Trump Hotel Vancouver and now known as the Paradox Hotel Vancouver sits 1161 W Georgia Street in downtown Vancouver and is legally owned under West Georgia Holdings Inc.
Also relevant to the case is the 24-storey office building next door, known as the FortisBC Centre, at 1111 W Georgia Street, which is legally owned under under TA Properties (Canada) Ltd.
Both properties are beneficially owned, through multiple layers of corporate entities, by Malaysia-based real estate company TA Global, which was founded by Datuk "Tony" Tiah Thee Kian and Datin "Alicia" Tiah in 1989. Their son, Joo Kim Tiah, is currently the CEO of TA Global as well as the CEO of its Vancouver arm, Holborn Properties, the developer of the controversial Little Mountain development that is ongoing and whose offices are within the FortisBC Centre.
The Trump International Hotel and Tower Vancouver was operated by TA Hotel Management Limited Partnership (TAHMLP), with the hotel portion of the hotel-and-residential tower managed by a locally-incorporated affiliate of Trump Hotels International, which is owned by former US President Donald Trump.
Holborn Properties CEO Joo Kim Tiah (left), Ivanka Trump (centre), and Donald Trump Jr. in Vancouver.(Holborn Properties)
Over $1M In Fees For Grant Thornton
TA Hotel Management Limited Partnership assigned itself into bankruptcy on August 27, 2020, listing approximately $4.8M in liabilities and citing the pandemic-induced closure of the hotel as the main reason for its financial difficulties. They interviewed several potential bankruptcy trustees and wanted a bankruptcy proceeding that was "simple and efficient."
They ultimately selected Grant Thornton, which provided an estimate of their fees that was approximately $150,000. Core to the claim of the owners against Grant Thornton now is that the fees ultimately totalled to $1,025,409.30 before Grant Thornton was replaced on March 4, 2021.
In its February 2023 Notice of Application, the owners of the two properties said that Grant Thornton had agreed that the bankruptcy proceedings were "uncomplicated and straightforward" and that the estimate provided was an informed one. However, in the Reasons published last month, the Justice said that Grant Thornton informed CEO Joo Kim Tiah that the estimate was based on incomplete information and that the costs could potentially be increased if there were any complications.
The owners say that had Grant Thornton conducted the bankruptcy appropriately and kept to the fee estimate, they would have been able to realize $400K on the debts they were owed as the landlords.
Meanwhile, Grant Thornton said that their fees were justified because it was relatively early on in the pandemic when people were still figuring out remote meetings, because access to the network where the TA Hotel Management's books and records were stored was remotely cut off by the Trump Organization, and that once it obtained access to the financial records, it "became apparent that the affairs and financial reporting of TA Hotel Management had been mismanaged," according to Justice Matthews.
The Justice also noted that fees higher than an estimate are not in and of itself evidence that a trustee sought to enrich itself.
The Storage Agreement and Credit Bids
As part of the bankruptcy proceedings, Grant Thornton and the owners reached a storage agreement that allowed the trustee to store the property of the bankrupt within the Trump Hotel. No storage agreement was reached for the building next door, but Grant Thornton later became aware that some of the bankrupt's property was being stored there as well.
This resulted in a conflict between the two sides after Grant Thornton sought out access to the other building, with the property owners claiming that Grant Thornton did this in an attempt to get the owners to improve their credit bids, so their fees would be secured.
A credit bid occurs when a secured creditor bids its secured debt against the purchase price to acquire secured collateral, and prior to this conflict, the owners had submitted two credit bids in December 2020 that were rejected by Grant Thornton on the basis that they did not also include cash to cover Grant Thornton's fees and other charges that typically rank before all others in insolvency proceedings.
The owners also allege that when Grant Thornton was removing furniture, furnishings, and equipment, it did so in a "destructive fashion" and a "careless and highly improper manner, and in breach of its duty to minimize damage to the equipment and the premises," contributing to the increased fees for Grant Thornton.
"This removal by the Trustee caused substantial damages to the Landlords," the owners said in their application. "Various equipment was severely damanged. Fixtures were cut out from the walls, creating damage to the premises. Electrical and plumbing connections were damaged. The premises were left in utter disarray."
In the Reasons For Judgment, Justice Matthews noted that the owners provided pictures, estimates, and invoices to support this particular claim.
The Paradox Hotel Vancouver at 1161 W Georgia Street.(TA Global)
Claims Allowed and Claims Dismissed
Legally, the owners are claiming breach of fiduciary duty and other duties, breach of trust, breach of contract, negligence, and conflict of interest and wilful misconduct. They are seeking damages for breach of fiduciary duty, breach of statutory duties, damages for negligence, as well as special damages, interest, and punitive damages.
The court ultimately drew a line between the various allegations, allowing one while dismissing the others, but leaving room for the owners to amend their proposed claim in order to meet the legal thresholds required to take legal actions against trustees, who are protected from "frivolous or vexatious suits" under Section 215 of the Bankruptcy and Insolvency Act.
"The application of [the owners] to bring a civil claim against Grant Thornton is allowed with regard to the proposed claim for negligent damage to property and consequential damages as set out above," said Justice Matthews. "The application is dismissed in all other regards, with leave to re-apply based on a revised proposed notice of civil claim pertaining to breach of contract, damages for pure economic loss arising from negligence and trespass."
