Settlements

JAMES R. K. COLLEDGE, et. al. [Sec. 161 & Agreed Stmnt.]

BCSECCOM #:
Document Type:
Sec. 161 & Agreed Stmnt.
Published Date:
1999-03-05
Effective Date:
1999-02-25
Details:


IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF JAMES R. K. COLLEDGE

AND

IN THE MATTER OF WAVERLY VENTURES LTD.,
WAVERLY U.S. EQUITIES LTD., WAVERLY U.S. LIMITED PARTNERSHIP,
BUCKINGHAM SQUARE APARTMENTS-OKLAHOMA LIMITED PARTNERSHIP,
BELLE ISLE TERRACE APARTMENTS LIMITED PARTNERSHIP,
CHURCHILL SQUARE APARTMENTS LIMITED PARTNERSHIP,
HUNTER’S GLEN APARTMENTS LIMITED PARTNERSHIP,
WESTON ARMS LIMITED PARTNERSHIP,
APPLE PLACE LIMITED PARTNERSHIP,
WALNUT CREEK APARTMENTS LIMITED PARTNERSHIP,
SUMMERWOOD PROPERTIES LIMITED PARTNERSHIP,
LAKESIDE VILLAGE PROPERTIES LIMITED PARTNERSHIP,
WALNUT CREEK EQUITIES LTD., SUMMERWOOD EQUITIES LTD. AND
LAKESIDE VILLAGE EQUITIES LTD.


Order Under Section 161


WHEREAS an Agreed Statement of Facts and Undertaking has been executed by James R.K. Colledge (“Colledge”) and the Executive Director, a copy of which is attached hereto as Schedule “A” (the “Agreement”);

NOW THEREFORE the Executive Director, considering that it would be in the public interest to do so, orders, BY CONSENT, that:

1. under section 161(1)(c) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to Colledge for a period of two years from the date of this Order, provided that this Order does not preclude Colledge from trading in securities for his own account or for the account of his wife and children; and

2. under section 161(1)(d) of the Act, Colledge is prohibited from becoming or acting as a director or officer of any issuer having a head office in British Columbia for a period of two years from the date of this Order.


DATED at Vancouver, British Columbia, on February 25, 1999.




Michael J. Watson
Executive Director





Schedule “A”
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF JAMES R. K. COLLEDGE

AND

IN THE MATTER OF WAVERLY VENTURES LTD.,
WAVERLY U.S. EQUITIES LTD., WAVERLY U.S. LIMITED PARTNERSHIP,
BUCKINGHAM SQUARE APARTMENTS-OKLAHOMA LIMITED PARTNERSHIP,
BELLE ISLE TERRACE APARTMENTS LIMITED PARTNERSHIP,
CHURCHILL SQUARE APARTMENTS LIMITED PARTNERSHIP,
HUNTER’S GLEN APARTMENTS LIMITED PARTNERSHIP,
WESTON ARMS LIMITED PARTNERSHIP,
APPLE PLACE LIMITED PARTNERSHIP,
WALNUT CREEK APARTMENTS LIMITED PARTNERSHIP,
SUMMERWOOD PROPERTIES LIMITED PARTNERSHIP,
LAKESIDE VILLAGE PROPERTIES LIMITED PARTNERSHIP,
WALNUT CREEK EQUITIES LTD., SUMMERWOOD EQUITIES LTD. AND LAKESIDE VILLAGE EQUITIES LTD.
(collectively, the “Waverly Group”)

Agreed Statement of Facts and Undertaking

      The following agreement has been reached between James R.K. Colledge (“Colledge”) and the Executive Director:

1. As the basis for the orders and undertakings referred to below, Colledge acknowledges the following facts to be correct:
      1.1 Colledge is a resident of Alberta, is a chartered accountant by profession and was at all material times, until April 1993, a shareholder, vice-president, director and chief financial officer of all the corporate entities of the Waverly Group. He resigned these positions and relinquished his shareholding interest in April 1993, but continued to provide the Waverly Group, on a consultancy basis, with financial, accounting and supervisory services until June 1995. These services included the supervision of the Waverly Group’s accounting staff, structuring of equity offerings and debt proposals, cash flow planning and control, assistance with investor reporting, supervision of tax filings and general business advisory services. As such he was responsible for the administration and day-to-day management of the Waverly Group’s accounting functions from its head office in Vancouver. In this capacity, Colledge was responsible for ensuring that the Waverly Group’s financial records were accurate;

      1.2 until April 1993, Colledge, Ralph A. Sivertson (“Sivertson”) and Douglas W. Robinson (“Robinson”) were in control of the entire shareholding of the Waverly Group. Thereafter, Sivertson and Robinson controlled the Waverly Group until June 1995, when they were divested of their powers and replaced at the insistence of PlanVest Financial Corporation;

      1.3 all the entities in the Waverly Group are either British Columbia limited partnerships or British Columbia incorporated non-reporting issuers. The limited partnerships have non-reporting issuers as general partners and investors as limited partners. Waverly Ventures Ltd., with registered offices in Vancouver, was at all material times, until June 1995, the main operating company of the Waverly Group and disclosed as the promoter of the limited partnerships in the Waverly Group;

      1.4 the various general partners owed a fiduciary duty to the limited partnerships and the limited partners in respect of which they were general partners;

      1.5 since August 1991, the Waverly Group raised approximately US$34,085,421 from investors in British Columbia and elsewhere in Canada. These funds were raised to pay part of the purchase prices of the apartment complexes procured, effect renovations to these properties and pay miscellaneous fees and commissions. The following 10 limited partnerships were syndicated to raise the funds:
          (i)Waverly U.S. L P (“WUSLP”)US$2,117,500;
          (ii)Buckingham Square Apartments - Oklahoma L PUS$864,000;
          (iii)Belle Isle Terrace Apartments L PUS$780,000;
          (iv)Churchill Square Apartments L PUS$626,040;
          (v)Hunter’s Glen Apartments L PUS$856,550;
          (vi)Weston Arms L PUS$475,300;
          (vii)Apple Place L PUS$3,841,000;
          (viii)Walnut Creek Apartments L P (“Walnut Creek”)US$4,328,000;
          (ix)Summerwood Properties L P (“Summerwood”)
          and          		US$9,282,000;
          (x)Lakeside Village Properties L P (“Lakeside”)US$10,924,731;
      1.6 WUSLP, formed on August 1, 1991, with Waverly U.S. Equities Ltd. as general partner, was the first limited partnership in the Waverly Group. The main business of WUSLP was intended to be real estate investment. It was not designed to own property, but to provide financing for subsequent limited partnerships in the Waverly Group to identify and procure property. It started out as a lender, but during 1994 WUSLP also started borrowing money from new limited partnerships;

      1.7 subsequent to WUSLP the limited partnerships in the Waverly Group were created along the following time frame:
          (i)Buckingham Square Apartments - Oklahoma L POctober 1991;
          (ii)Belle Isle Terrace Apartments L PMarch 1992;
          (iii)Churchill Square Apartments L PMay 1992;
          (iv)Hunter’s Glen Apartments L PNovember 1992;
          (v)Weston Arms L PMay 1993;
          (vi)Apple Place L PAugust 1993;
          (vii)Walnut CreekJanuary 1994;
          (viii)SummerwoodJune 1994; and
          (ix)LakesideOctober 1994;
      1.8 the limited partnerships suffered the following accumulated net losses:
          (i)1992US$188,368;
          (ii)1993US$1,581,840;
          (iii)1994US$4,766,271;
          (iv)1995US$11,065,519;
          Total Accumulated Net LossUS$17,601,998
      1.9 according to the audited financial statements for the year ending December 31, 1993, the three limited partnerships mentioned in subparagraphs 1.7(i), (ii) and (iii) were operating as going concerns depending on the continuing financial support of WUSLP, Waverly Ventures Ltd. and investors. Total losses of US$ 923,858 were reported in these financial statements for the three limited partnerships. Total reported losses for the three for 1994 were US$1,592,191 (audited);

      1.10 WUSLP reported US$209,852 (audited) profits for 1993, US$178,904 (audited) losses for 1994 and US$4,022,775 (unaudited) losses for 1995;
      UNAUTHORIZED LOANS - WALNUT CREEK

      1.11 Walnut Creek was formed on December 17, 1993, with Walnut Creek Equities Ltd., as general partner. Units in the limited partnership were offered to the public in British Columbia and Alberta under an offering memorandum dated January 31, 1994 (the “Walnut Creek OM”). A total amount of US$4,328,000 was raised, US$2,128, 000 in cash, and the balance by way of pro rata assumption of the liability for the first mortgage of the limited partnership;

      1.12 according to the unaudited financial statements of Walnut Creek for the year ending December 31, 1995, Walnut Creek Equities Ltd. lent the amount of US$ 171,609 to WUSLP. No date was determined for repayment. This loan was written off due to uncertainty of collectibility in the same year. These financial statements also report that continuation of the Walnut Creek limited partnership would be dependent on financial support from lenders and limited partners. Losses of US$422,458 (audited) and US$453,584 (unaudited) in 1994 and 1995, respectively, were reported;

      1.13 article 8.6 of the agreement of limited partnership of Walnut Creek, (the “Agreement”) the general partner may invest “…funds of the Partnership not immediately required for the business of the Partnership provided such investment is a short term investment.” On the other hand, article 8.10 prohibits commingling of the funds of Walnut Creek with that of any other person and specifically stipulates, “…(the funds and assets of the Partnership) will not be lent to the General Partner or any of its Affiliates…” ;

      1.14 “Affiliate” is defined in article 1.1(d) of the Agreement as an associate or a relationship as defined in terms of section 1.(1) of the Company Act, R.S.B.C. 1979, c. 59 (the “Former Company Act”) [now section 1(1) of the Company Act, R.S.B.C. 1996, c. 62]. In terms of the Former Company Act corporations are affiliated where they are subsidiaries of each other, subsidiaries of the same corporation or controlled by the same person. Waverly U.S. Equities Ltd., the general partner of WUSLP, and Walnut Creek Equities Ltd., the general partner of Walnut Creek, are both wholly owned subsidiaries of Waverly Ventures Ltd. The financial statements identify WUSLP as an affiliate of the general partner of Walnut Creek;

      1.15 Walnut Creek Equities Ltd., in causing Walnut Creek to make the loan, acted in breach of the Agreement as such loan is prohibited by article 8.10 thereof in that it constitutes commingling of the funds of Walnut Creek with that of the rest of the Waverly Group as well as being a loan to an affiliate of Walnut Creek Equities Ltd. The intention to make the loan was not disclosed in the Walnut Creek OM;

      1.16 Colledge acted under the directions of Sivertson and Robinson in effecting the loans and recording them in the relevant accounting records. Colledge mistakenly relied on the representations of Sivertson and Robinson that they had the authority to make the loans and acknowledges that he ought to have known that these loans constituted a breach of the Agreement. He also acknowledges that he was mistaken in cooperating with Sivertson and Robinson in causing Walnut Creek Equities Ltd. to make the loans. In doing so he acted contrary to the public interest;

      UNAUTHORIZED LOANS - SUMMERWOOD

      1.17 Summerwood was formed on June 20, 1993, with Summerwood Equities Ltd. as general partner. Units in the limited partnership were offered to the public in British Columbia and Alberta under an offering memorandum dated June 23, 1994 (the “Summerwood OM”). A total amount of US$9,282,000 was raised, US$5,562,000 in cash, and the balance by way of pro rata assumption of the liability for the first mortgage of the limited partnership. According to the Summerwood OM the offering closed on February 28, 1995, and the Forms 20 filed reflect that the last date of distribution of units is November 14, 1994;

      1.18 according to the audited financial statements of Summerwood for the year ending December 31, 1994, Summerwood lent the amount of US$1,278,479 to WUSLP in 1994. No date for repayment was determined. US$360, 413 of this loan was repaid. The balance (US$918,066) was written off due to uncertainty of collectibility in 1995. Losses of US$761,634 and US$1,995,131 (both audited) in 1994 and 1995, respectively, were reported. The 1995 financial statements also report that continuation of the limited partnership would be dependent on financial support from lenders and limited partners;

      1.19 the funds were lent, in part, to WUSLP before the closing of the offering under the Summerwood OM. The intention to make the loan was not disclosed in the Summerwood OM;

      1.20 article 8.6 of the agreement of limited partnership of Summerwood, (the “Agreement”) provides that the general partner may invest “…funds of the Partnership not immediately required for the business of the Partnership provided such investment is a short term investment.” Article 8.8 authorizes specific transactions with affiliated entities. Article 8.10 of the Agreement prohibits commingling of the funds of Summerwood with that of any other person and specifically stipulates, “…(the funds and assets of the Partnership) will not be lent to the General Partner or any of its Affiliates…”;

      1.21 Summerwood Equities Ltd., in causing Summerwood to make the loan, acted in breach of the Agreement as such loan is prohibited by article 8.10 thereof in that it constitutes commingling of the funds of Summerwood with that of the rest of the Waverly Group as well as being a loan to an affiliate of Summerwood Equities Ltd.

      1.22 Colledge acted under the directions of Sivertson and Robinson in effecting the loans and recording them in the relevant accounting records. Colledge mistakenly relied on the representations of Sivertson and Robinson that they had the authority to make the loans and acknowledges that he ought to have known that these loans constituted a breach of the Agreement. He also acknowledges that he was mistaken in cooperating with Sivertson and Robinson in causing Summerwood Equities Ltd. to make the loans. In doing so he acted contrary to the public interest;

      UNAUTHORIZED LOANS - LAKESIDE

      1.23 Lakeside was formed on August 12, 1994, with Lakeside Village Equities Ltd. as general partner. Units in the limited partnership were offered to the public in British Columbia and Alberta under an offering memorandum dated October 5, 1994 (the “Lakeside OM”). A total amount of US$11,216,400 was raised, US$5,216,400 in cash, and the balance by way of pro rata assumption of the liability for the first mortgage of the limited partnership. According to the Lakeside OM the offering closed on May 31, 1995 and the Forms 20 filed reflect that the last date of distribution of units was April 28, 1995;

      1.24 according to the audited financial statements of Lakeside for the year ending December 31, 1994, Lakeside lent the amount of US$431,886 to WUSLP in 1994. An additional US$1,336,148 was lent in the beginning of 1995. No date for repayment of the money was determined. The total loan (US$1,768,034) was written off due to uncertainty of collectibility in 1995. Losses of US$523,317 (audited) and US$2,585,490 (unaudited) in 1994 and 1995, respectively, were reported. The 1995 unaudited financial statements also report that continuation of the limited partnership would be dependent on financial support from lenders and limited partners;

      1.25 the funds were lent before the offering under the Lakeside OM closed. The intention to make the loan was not disclosed in the Lakeside OM;

      1.26 article 8.2(h) of the agreement of limited partnership of Lakeside (the “Agreement”) provides that the general partner may invest “…in loans on a short term basis of available Partnership funds at commercially reasonable rates to WUSLP and/or to other limited partnerships related to the Waverly group, provided that the General Partner is reasonably assured that the borrower will have the resources to repay such loans on their respective due dates.” Article 8.10 of the Agreement prohibits commingling of the funds of Lakeside with that of any other person;

      1.27 Lakeside Village Equities Ltd., in causing Lakeside to make these loans, acted in breach of the Agreement as:
          1.27.1 the loans did not constitute short term loans;

          1.27.2 it was not, or could not have been, reasonably assured that WUSLP would have the resources to repay the money; and

          1.27.3 the funds of Lakeside were commingled with that of the rest of the Waverly Group;
      1.28 Colledge acted under the directions of Sivertson and Robinson in effecting the loans and recording them in the relevant accounting records. Colledge mistakenly relied on the representations of Sivertson and Robinson that they had the authority to make the loans and acknowledges that he ought to have known that these loans constituted a breach of the Agreement. He also acknowledges that he was mistaken in cooperating with Sivertson and Robinson in causing Lakeside Village Equities Ltd. to make the loans. In doing so he acted contrary to the public interest;

      COOPERATION AND ASSISTANCE OF COLLEDGE

      1.29 Colledge has fully cooperated with staff of the British Columbia Securities Commission (the “Commission”) during the investigation of these matters. He has also, after the management of the Waverly Group was replaced in June 1995, assisted the new management in attempting to turn the project around and save the investors’ investments; and

      1.30 as a result of the accounting work which Colledge performed while acting as a consultant to the Waverly Group, the financial records accurately depict the nature and substance of the transactions which are the subject of this Agreed Statement of Facts and Undertaking.

2. Colledge consents to an order of the Executive Director (the “Order”):

      2.1 under section 161(1)(c) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to Colledge for a period of two years from the date of this Order, provided that this Order does not preclude Colledge from trading in securities for his own account or for the account of his wife and children; and

      2.2 under section 161(1)(d) of the Act, that Colledge is prohibited from becoming or acting as a director or officer of any issuer having a head office in British Columbia for a period of two years from the date of this Order.
3. Colledge agrees to pay $5,000 to the Commission as a penalty and a further $5,000 towards the costs of the investigation incurred by the Commission, which sums shall be payable in equal monthly installments of $250 commencing on the first day of the month following the date of this Order.

4. Colledge waives any right he may have, under the Act or otherwise, to a hearing, hearing and review, judicial review, or appeal related to, in connection with, or incidental to this agreement and the Order.


DATED at Calgary, Alberta, on February 12, 1999.



“J.P. Cashion”___________)
Witness Signature)
)
J. Patrick Cashion_______)
Witness Name (please print))“James R.K. Colledge”
1322 Montreal Ave. S.W.__)
Address)
Calgary, AB T2T 0Z5____)
Chartered Accountant____)
Occupation)
DATED at Vancouver, British Columbia, on February 25, 1999.




                          Michael J. Watson
                          Executive Director
©2024 British Columbia Securities Commission