Westin Grand Hotel

The Westin Grand Hotel, on the corner of Robson and Homer Streets in downt,own Vancouver, has been the subject of some interesting litigation over the last few years. The battle culminated in a trial as to whether the developers, and their directors, were liable for various misrepresentations made to investors. The Court found the directors personally liable, a relatively rare occurrence in B.C. law.

In 2005, the Honourable Mr. Justice Truscott ordered that issues pertaining to the defendants' liability were be tried separately from the issue of damages, including "whether there was a negligent misrepresentation by one or more of the defendants in the projections for inclusion in the disclosure statement", and over the course of 2007, there was a nine-week trial into the matter.

In August, 2008, the B.C. Supreme Court found, on behalf of about half the investors in the Westin Grand Hotel, against the hotel's developers and their directors personally, which included well-known Vancouver developer, Cressey Development and its directors, Norman, Scott and Joan Cressey, John Evans, Jonathan Wener and Douglas Pascal.

Investors question validity of projections

In 1996, the directors of the corporate defendants issued a disclosure statement to potential investors. The disclosure statement included projections for the occupancy percentages of the hotel over the course of five years. The disclosure statement used projections as set out in a report authored by a valuation company, MM&R Valuation Services, Inc. Subsequent to the hotel's opening, the investors, who questioned the validity of the projections, commenced a lawsuit.

In the Courts' Reasons for Judgment, the Honourable Mr. Justice Truscott found the developers and their directors made two material false statements in the disclosure statements. The first related to hotel occupancy projections, and the second related to a statement claiming that tourism is the number one growth industry in Vancouver, which the developers wrongly attributed to MM&R Valuation Services, Inc.

The plaintiffs relied on section 59 of the Real Estate Act (then the governing legislation — which has since been replaced by the Real Estate Development and Marketing Act) which stated that "if any material false statement is contained in the disclosure statement or prospectus, the developer, its directors and any person who has authorized the issue of this disclosure statement is liable to make compensation to the purchaser, subject to any defences available under s. 59 of the Real Estate Act".

Court rejects developers' defense

The Court concluded that the hotel occupancy projections in the disclosure statement were well above projected occupancy rates for hotels of similar quality throughout the five-year period and therefore constituted material false statements.

The Court rejected the defences available to the developers, including the developers' reasonable belief that the statements in the disclosure statement were true, and said: "I have no doubt that a reasonable investor would have considered it very material to know that the occupancy rates for the Westin Grand for 1999-2003 were in fact all projected to be higher than the projected average occupancy rates for downtown Vancouver hotels of similar quality for those years."

Although the trial now ought to proceed to the issue of damages and compensation, the defendants made an application to the Court Nov. 17, 2008 asking the Honourable Mr. Justice Truscott to pronounce judgment on the determinations of liability made in the August decision pursuant to Supreme Court Rule 39(29). The Court did so and, as a result, the defendants were free to appeal the Court's decision, so stay tuned.

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