Executive Summary: Key Legal and Evidentiary Issues

• Millgate Limited and Penrose Properties Limited brought a debt claim against Plaza 500 Hotels Ltd. to recover funds advanced under loan agreements signed in 2004 and 2012, secured by a registered mortgage over a Vancouver property.
• Central to the dispute was whether those funds constituted a repayable debt or an inter vivos gift from the late Abdul Karim Popat (AKC) to his son Azim.
• Despite signing the loan and mortgage documents, Plaza 500 argued the documentation was merely an administrative structure created for tax advantages and creditor protection, not a genuine debt obligation.
• Burden of proof fell on Plaza 500, as the party seeking to depart from the express terms of executed loan and mortgage documents.
• Witness credibility was assessed but ultimately not determinative, as the case turned on documentary evidence rather than conflicting oral testimony.
• No evidence established that AKC ever agreed the funds would not be repaid or that they were intended as a gift to Azim.

Facts of the case

Millgate Limited and Penrose Properties Limited are companies incorporated in the British Virgin Islands, forming part of a wealth structure established by the late Abdul Karim Popat — known as AKC — a wealthy businessman based in Nairobi, Kenya. The defendant, Plaza 500 Hotels Ltd., is a British Columbia company whose shareholders include KBK No. 85 Ventures (the controlling shareholder) and the plaintiffs, who each hold non-voting shares. AKC's son Azim and his wife are the directors of Plaza 500. The plaintiffs' claim arose from funds provided to Plaza 500 to facilitate the acquisition and development of a Vancouver property — originally a hotel, later converted to rental accommodations.

The proceeding originated as a foreclosure petition commenced in 2019 by Institutional Mortgage Capital Canada Inc. (IMC), the primary lender holding a first-priority mortgage. The plaintiffs held a second-priority mortgage, and Leo Montis Ventures Inc. held a third-priority mortgage. In 2020, Madam Justice Fitzpatrick ordered the sale of the property. IMC's mortgage and other priority claims were paid from the sale proceeds, leaving approximately $8.17 million paid into court. Millgate and Penrose, as respondents to the foreclosure petition, applied for an order paying those remaining proceeds to them. Plaza 500 opposed, and the matter was converted to an action to determine whether a repayable debt existed: Institutional Mortgage Capital Canada Inc. v. Plaza 500 Hotels Ltd., 2021 BCSC 582. A subsequent summary trial application by the plaintiffs was dismissed as unsuitable for summary determination: Millgate Limited v. Plaza 500 Hotels Ltd., 2023 BCSC 1808.

Contractual terms at issue

The plaintiffs relied on loan agreements and a registered mortgage executed in 2004 and 2012. The 2004 loan agreement — the first and most comprehensive — recorded that Plaza 500 had received $6,391,544.24 CAD and $3,500,000 CAD from the plaintiffs, obligated Plaza 500 to repay those amounts, and required Plaza 500 to provide security. The mortgage executed pursuant to that agreement included Plaza 500's promise to pay the amounts specified, a grant of security over the property, and a warranty that the statements in the mortgage were true. Between approximately 2009 and 2011, additional funds were advanced, each accompanied by what the plaintiffs described as "bare bones" repayment agreements. In 2012, the parties signed loan consolidation agreements setting out the total principal amounts owed: $6,391,544.24 CAD and $324,952.04 USD to Millgate, and $5,900,000 CAD and $1,020,000 USD to Penrose. A modification to the mortgage was subsequently registered to secure the increased totals.

Plaza 500 did not deny signing these documents. Instead, it argued the documentation was merely an administrative structure — put in place, on Azim's instructions, to gain tax advantages and protect family equity from creditors — and did not reflect any genuine repayment obligation. Plaza 500 further alleged that AKC, as the originating source of the funds, never intended repayment and that the funds were an inter vivos gift to Azim.

Reasoning and analysis

The court found that this case did not turn on credibility or the reliability of witness testimony, but rather on the documentary record. Three witnesses testified: the plaintiffs' director, Jonathan Bachelet, whose evidence was found credible and reliable; Adil Popat (AKC's son), whose testimony was assessed as often vague and strategically evasive; and Azim, whose evidence on the characterization of the funds was described as general, largely based on unproven assumptions, and influenced by his desired outcome.

Justice Ramsay held that because Plaza 500 had received the funds, signed loan agreements, and granted mortgage security, the plaintiffs had discharged their burden of proof. The burden then shifted to Plaza 500, as the party seeking to depart from the express terms of the formal documentation, to prove the funds were something other than a repayable debt — a burden Plaza 500 failed to meet.

On the source of funds argument, the court accepted that AKC was the originating source of the funds and that the plaintiffs had no independent money to lend. However, the court found no legal impediment to AKC structuring his affairs so that the plaintiffs were the named parties to the loan agreements, and no authority supported Plaza 500's assertion that the plaintiffs could not be parties to a loan agreement in those circumstances.

On the "substance over form" argument, the court distinguished the cases Plaza 500 relied upon — including Tudor Sales Ltd. (Re), 2017 BCSC 119 — as arising under the Bankruptcy and Insolvency Act or the Companies' Creditors Arrangement Act, and therefore inapplicable to the present circumstances. Even applying the substance over form analysis, the court found no basis to conclude the funds were equity rather than debt. The non-commercial terms of the loans — no interest, no maturity date, subordination to senior secured lenders — were not surprising given the non-arm's length relationship between the parties and did not preclude the existence of a debt.

On the gift allegation, the court found no evidence that AKC ever communicated to anyone that the funds were not to be repaid. While evidence showed that AKC expressed an intention around 2010 to transfer Plaza 500 to Azim, the court inferred this was more likely motivated by a desire to sever ties with Plaza 500 given its dire financial situation, rather than a desire to make a gift. Critically, no one ever discussed how the funds would be treated as part of any contemplated transfer, and the loan agreements and mortgage were never discussed in the relevant meetings. After the 2010 meeting, additional funds were advanced and further loan agreements were signed. Plaza 500's own audited financial statements consistently described the funds as loans secured by a mortgage from 2004 through 2020, and no documents referred to the funds as equity until that characterization became advantageous to Azim around the time of foreclosure.

The court also noted that Plaza 500's reliance on resulting trust principles was misplaced, as that doctrine would only benefit the plaintiffs, who neither pleaded nor relied on it.

Ruling and overall outcome

Justice Ramsay found that Plaza 500 had not discharged its burden of proving the funds were anything other than a repayable debt. Judgment was granted in favor of the plaintiffs — Millgate Limited and Penrose Properties Limited — in the total amount of $12,291,544.24 CAD and $1,344,952.04 USD, with no interest sought by the plaintiffs. The court further ordered that the funds held in court to the credit of the proceeding — recorded as $8,286,917.87 CAD plus accrued interest of $1,302,931.48 CAD as of December 2025 — be paid to the plaintiffs in partial satisfaction of judgment. As the successful party, the plaintiffs were held presumptively entitled to costs at Scale B, with leave granted to either party to seek an alternative costs order within 30 days of the date of judgment.