Golden Oaks mortgages challenged

Unsecured creditors question validity of some secured loans

Unsecured creditors owed millions by Jean- Claude Lacasse and his failed real estate investment company Golden Oaks Enterprises are challenging the validity of the second and third mortgages Lacasse handed out in the months before he went bankrupt — including some Lacasse alleges he signed off on after being physically threatened and extorted.

The lawyer for the unsecured creditors said a trial may be necessary to determine whether some investors received the secured second mortgages once it became clear that Golden Oaks was in deep financial trouble. A secured creditor is more likely to be paid back, and the second mortgage holders would be ahead of unsecured creditors.

The question is whether the recipients of the second mortgages “knew that they were going to be receiving some form of a preference over the other creditors.” said Justin Fogarty, the lawyer for the unsecured creditors.

“Certainly, on the face of the timing of some of these mortgages, it raises a genuine question on the validity of the mortgages,” said Fogarty.

If the second mortgages in question are voided, “it could open up a pool of equity,” said Fogarty.

That could mean as much as $2 million more that could be used to pay back some of the estimated $12.4 million Lacasse owed the unsecured investors, according to Fogarty.

In total, Lacasse owes more than 100 investors, mortgage holders, contractors and others more than $28 million following the collapse of Golden Oaks Enterprises and its subsidiary, Rent 2 Own Canada.

But the lawyer for the Ottawa real estate agent who holds the majority of the second mortgages likened the situation to a sinking ship where some passengers are “trying to get people who found a lifeboat and put them into the water as well.”

“We have some people who went out and got a mortgage to protect themselves and paid attention to what was going on and the other people didn’t, and so now you have people who basically find themselves thrown into the water,” said David Debenham, who represents real estate agent and Golden Oaks investor Christopher Steeves.

According to the receiver’s report, Steeves holds 18 second mortgages. 17 of them were agreed to between April 3 and April 15 of this year and are worth $645,450, according to the receiver’s report.

Steeves and another real estate agent, Lorne Scott, worked with Lacasse locating properties for him to purchase.

Scott, along with two other men, is named on five of the second mortgages.

Court-appointed receiver Brian Doyle said in his report that more investigation was needed into the second mortgages.

The report contains allegations by Lacasse that he was “pressured” by “various means” — including extortion and physical threats — into providing the preferential security.

The unnamed investors who received the second mortgages were “knowledgeable of the ongoing failure of Golden Oaks to meet its obligations,” according to the report.

Doyle said in his report that Steeves and Scott were within the “inner circle” of Lacasse and “provided ‘deals’ in housing for Golden Oaks’ inventories of real estate for which each were paid commissions.”

According to the report, Steeves and Scott were also paid five-per-cent commissions for finding and introducing investors to Lacasse.

Debenham said his client had invested about $800,000 with Lacasse so it only made sense he was closely monitoring his investment.

Steeves is currently working with the receiver selling some of Lacasse’s properties, Debenham added.

“People who have a lot of money riding like to know what is going on in the business,” said Debenham.

Debenham said it should be determined whether the second mortgages are even worth a cent “before we all decide to have a set-to and cannibalize each other.”

Debenham said more worrisome is the escalating number of lawyers involved and legal fees being generated as a result of the infighting.

Fogarty said he hopes to reach an agreement with the holders of the second mortgages to avoid what could be a costly and time-consuming process.

The parties who received second mortgages “shouldn’t get to jump the line,” Fogarty said, adding that unsecured creditors should not lose out “by virtue of someone getting the inside track.”

In the meantime, the receiver hopes to have some more answers soon about $3 million in missing money from the accounts of Golden Oaks.

Lacasse himself is expected to be examined under oath by Doyle and his firm sometime in the next two weeks.