The longtime president of the East End Hells Angels has lost a court challenge over an investment gone bad.
John Peter Bryce, 57, had argued that a mortgage broker deceived him about the value of a Chilliwack property before he agreed to loan cash to the owners for a second and third mortgage. Bryce claimed that broker Allan Sadler was professionally negligent by giving him copies of various appraisals in 2010 and 2012 that all overestimated the value of the 25-acre tree farm.
The property was eventually foreclosed upon, with Bryce losing $202,000 on his investment, he said.
But B.C. Supreme Court Justice Gordon Weatherill rejected Bryce’s claim that his losses were the fault of Sadler or his company, Rala Investments Ltd. Weatherill said Bryce should have done his own due-diligence before agreeing to lend $750,000, with interest rates ranging from 14-to-18 per cent a year, for the two mortgages he secured.
“I accept Sadler’s evidence that he pointed out to the plaintiff at the outset of their relationship, or close to it, that the plaintiff was free to obtain his own appraisal of the properties he was obtaining mortgage security over,” Weatherill said in a ruling released this week. “I find that the plaintiff likely ignored that advice because of the cost, and because the transactions he engaged in with Sadler had all gone smoothly.”
Weatherill laid out the history between Sadler and Bryce, which began after the former businessman and longshoreman retired in 2008 and was looking for investments. Sadler told Weatherill that a broker “finds borrowers in need of mortgage loans and presents mortgage opportunities to lenders.” Sometimes he acted for the borrower, sometimes for the lender.
“Most of his deals involved higher-risk, second- and third-mortgage transactions.”
Sadler also told Weatherill that “it was his standard practice to advise and recommend to all lenders that he acts for to obtain their own appraisal of the property that is to be used as security for the loan.”
Bryce and Sadler completed several other deals before the ill-fated Chilliwack investment arose in 2010.
“All of the investments made by the plaintiff were successful, with the full investment repaid to him together with interest. The maximum investment made by the plaintiff during this period was $350,000,” Weatherill noted.
Sadler raised the prospect of Bryce financing the $500,000 second mortgage on the Chilliwack acreage in May 2010. He gave Bryce a copy of a 2008 appraisal done for the owners’ broker, which valued the property at $2.1 million. The appraisal contained disclaimer clauses, Weatherill said, which Bryce admitted in court that he didn’t read.
Bryce and his sister visited the property, then agreed to loan $500,000, secured by a second mortgage with an interest rate of 14 per cent per year. A year later after seeing another appraisal valuing the property at more than $2.5 million, Bryce and his sister agreed to renew the second mortgage for another one-year term increasing the interest rate from 14-to-18 per cent, with the interest paid in advance.
In April 2012, the homeowners were looking for more cash.
Sadler testified that he told Bryce, “These people are coming back to the well too often” and the investment was “getting risky,” but Bryce denied in court that he had been warned about the borrowers’ money troubles.
Bryce and his sister made the loan, secured by a third mortgage, at an even higher interest rate.
Weatherill said “the plaintiff was blinded by the success of those previous investments, as well as by the prospect of an 18 per cent return in 14 months, paid in advance.”
He dismissed Bryce’s claim that the investments were only made because of the appraisals provided by Sadler.
“Sadler’s conduct was not the cause of the plaintiff’s loss,” Weatherill said.
Bryce is one of the defendants in the long-running B.C. Civil Forfeiture lawsuit over three of the bikers’ clubhouses in East Vancouver, Kelowna and Nanaimo. Closing arguments in that case, which began in November 2007, finally concluded last year and a ruling is expected in the coming months.