Go-To Developments: a $20.95 million assignment fee heads to mediation

In the first week of April 2019, two lots at the corner of Adelaide Street West and Charlotte Street in downtown Toronto, 355 Adelaide Street West and 46 Charlotte Street, passed to a limited partnership called Go-To Spadina Adelaide Square LP. Adelaide Square Developments Inc., known in the pleadings as ASD, held the agreements to buy them, at $36.8 million and $16.5 million. It assigned both to the partnership, which agreed to pay it an assignment fee of $20.95 million on top, for a total of $74.25 million. The partnership's receiver says the fee "was a critical step in the Scheme," per the Fresh as Amended Statement of Claim, Aug. 2, 2024, paras. 25, 32–35, 37. ASD, which calls it a "lift," says it was the profit on a land assembly it had put together and sold to the highest of five bidders, and that the partnership still owes it on a loan it made to get the deal closed, per its Statement of Defence and Counterclaim, Mar. 8, 2024, paras. 3–4, 50, 66 (Pleadings Brief, Tab 2).

The receiver's lawsuit over that difference was before Justice W.D. Black of the Commercial List on August 31, 2026, at a case conference he had booked in May to take stock of discoveries. The receiver's counsel told him that a mediation with ASD and two of its co-defendants will proceed before the end of November, and the parties have set aside the week of February 15, 2027 for the examinations that remain, per the Endorsement of Black J., Aug. 31, 2026, paras. 1, 3–4.

A regulator's receivership and $14.7 million in the bank

The receivership predates the lawsuit by two years. On December 6, 2021, the Ontario Securities Commission issued freeze directions and applied under s. 129 of the Securities Act for a receiver over Go-To Developments Holdings Inc. and its project companies and partnerships, stating that Oscar Furtado, their principal, appeared to have defrauded investors and engaged in undisclosed self-dealing. Justice Pattillo appointed KSV Restructuring Inc. as receiver and manager on December 10, 2021, and the Court of Appeal dismissed the appeal from that order on April 28, 2022, per 2022 ONCA 328, paras. 1–2, 5, 8; the Supreme Court of Canada dismissed leave on February 16, 2023, per its Judgment, Feb. 16, 2023, p. 2. By June 2023 the receiver had sold every Go-To property but one in Vaughan, per the Seventh Report, June 6, 2023, s. 5.0, para. 4.

The Adelaide lots went to Fengate Capital Management Ltd. for $90 million, with a potential density bonus of up to $3 million, and the first and second mortgagees were paid about $55.6 million and $18.0 million on closing, per the Sixth Report, Nov. 14, 2022, s. 5.4, paras. 1–2. By June 2023 the Go-To Adelaide account held about $14.7 million, with two disputed secured claims against it. ASD claimed $11.1 million, being $7.8 million of principal and $3.3 million of interest, under a mortgage registered June 29, 2021, and the receiver disallowed it in full on March 20, 2023; a $5.2 million claim by FAAN Mortgage Administrators Inc., as a court-appointed trustee, was also disallowed and set aside until ASD's is resolved. Because the two together exceed the cash, the receiver said it would not begin reviewing the partnership's other unsecured claims, about $8.6 million, or investor claims of about $24.3 million, until ASD's claim had been determined, per the Seventh Report, s. 4.0, paras. 21–25, 29. It called that determination "a gating issue to resolution of all matters in these proceedings," per the Seventh Report, s. 7.0, para. 8.

What the receiver alleges

The receiver issued its statement of claim on December 4, 2023, in the names of the partnership and its general partner, Go-To Spadina Adelaide Square Inc., and amended it on August 2, 2024. It sues ASD; Alfredo Italo Malanca, also known as Alfredo Palmeri, whom it calls the directing mind of ASD and of Goldmount Financial Group Corporation; Goldmount; Mr. Furtado, sole officer and director of the general partner; Concorde Law Professional Corporation and Louis Raffaghello, a lawyer and one of its two officers; Montana Management Inc., his company; and AKM Holdings Corp. and its sole officer and director, Katarzyna Pikula. Jointly and severally, it seeks $15,300,000 for funds paid "during the course of the Scheme," further damages for a project that "was unable to proceed," $1,000,000 in punitive damages, an oppression remedy under s. 248 of the Business Corporations Act, tracing and a constructive trust, per the Fresh as Amended Statement of Claim, paras. 1, 4, 6–14.

On March 17, 2019, according to the claim, an investor and his companies paid $16.8 million for units in the partnership. The receiver alleges that money funded the assignment fee, and that ASD then "loaned" $19.8 million of the fee back under an April 4, 2019 loan agreement so the partnership could redeem the investor's units with a $2.7 million return. By the claim's count the $20.95 million went $18.15 million to West Maroak Developments Inc., one of the investor's companies; $1.35 million to Montana; $115,500 to Concorde; $300,000 to Goldmount; $446,413 to AKM; $388,087 to Furtado Holdings Inc.; and $200,000 to RAR Litigation Lawyers, per the Fresh as Amended Statement of Claim, paras. 38, 43–45.

In September 2019, the claim continues, Mr. Furtado solicited $12 million more from the same investors with a deck that described the $19.8 million as equity from ASD and Atria Developments. The $12 million went to ASD as a loan repayment, and within days ASD paid it out as dividends of $6 million each to Furtado Holdings and AKM. The receiver also alleges that ASD's $19.8 million charge, registered in June 2021, rests on a revised loan agreement made long after the loan was supposedly advanced, and that the executed agreement given to the partnership's auditor, PwC, granted no such security, per the Fresh as Amended Statement of Claim, paras. 52, 60–62, 66–70, 87. ASD denies the veracity of the version the claim relies on, per its Statement of Defence, para. 122 (Pleadings Brief, Tab 2).

Five defences and two counterclaims

Every defendant denies that there was a scheme. ASD, Mr. Malanca and Goldmount describe an assembly that began in November 2017, when Mr. Malanca took the opportunity to Scott Corbett, named as ASD's principal, and that used nominee buyers so the vendors would not price in an assembly. ASD says it approached thirteen developers, Fengate among them, received five bids, and signed with Go-To on December 21, 2018 at $74.25 million, about $5.5 million above the next offer; Colliers had appraised the lots at $82.34 million to $83.9 million. When Go-To's equity partner, Atria Development, failed to deliver $16.8 million of equity and a $10 million second mortgage, the investor's money filled the gap, and Mr. Furtado then, in ASD's account, pleaded with it to replace the investor as lender. ASD did so, at interest it puts at about 3% and then 6% a year, per the ASD Statement of Defence, paras. 8–14, 44–58, 69–74 (Pleadings Brief, Tab 2).

ASD's explanation for the $6 million is that Mr. Furtado negotiated a density bonus owed to FAAN down to a $1.95 million minimum from as much as $7.15 million, on terms that he would receive $6 million out of which the minimum would be paid, taken as a dividend on tax advice. It counterclaims $13,850,000 as of March 1, 2024, being $7.8 million of principal and $6.05 million of interest, or in the alternative the properties or their sale proceeds if the assignments fail for want of consideration, and says the receiver should have held the lots until site plan approval, per the ASD Statement of Defence, paras. 94, 97–101, 133, 137–138 (Pleadings Brief, Tab 2).