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ALBERTA SECURITIES COMMISSION
DECISION
Citation: Westside Land Corporation, Re, 2012 ABASC 486 Date: 20121120
Westside Land Corporation, West Pointe Park Ltd., Avion Park Ltd.,
Eastridge Park Ltd., Eastridge Park II Ltd., Tovero Ridge Park Ltd.,
Foxcreek Park Ltd. and David Brezsnyak
Panel: Glenda A. Campbell, QC
Maureen McCaw
Fred R.N. Snell, FCA
Appearing: Robert Stack
for Commission Staff
Steven Leitl and Marlene Stewart
for the Respondents
Dates of Submissions: 3, 19, 26 and 31 October 2012
Date of Decision: 20 November 2012
#4366673 v1
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I. INTRODUCTION
[1] In a 4 April 2012 notice of hearing (the "Notice of Hearing"), Staff ("Staff") of the
Alberta Securities Commission (the "Commission") made allegations against Westside Land
Corporation ("Westside"), West Pointe Park Ltd., Avion Park Ltd., Eastridge Park Ltd.,
Eastridge Park II Ltd., Tovero Ridge Park Ltd., Foxcreek Park Ltd. and David Brezsnyak
("Brezsnyak") (collectively, the "Respondents"). The allegations related to the Respondents'
sales of securities to finance the purchase of real estate in southern Alberta and develop those
lands for subsequent resale.
[2] Attached to the Notice of Hearing was a statement of agreed facts (the "Agreed Facts")
signed on 30 March 2012 and 2 April 2012 by the Respondents and Staff, respectively. (The
Agreed Facts are attached as Appendix A to this decision.) The Respondents admitted that they
sold securities without registration or a prospectus and without taking steps to determine if the
purchasers met the criteria for relevant exemptions. The Respondents also admitted that in so
acting they violated sections 75 and 110 of the Securities Act, R.S.A. 2000, c. S-4 (the "Act").
There was no allegation or admission that the Respondents engaged in conduct contrary to the
public interest.
[3] In addition to the Agreed Facts, we received other documentary evidence, heard the
testimony of an investor and of Brezsnyak, and received written submissions from counsel for
Staff and for Brezsnyak and Westside.
II. BACKGROUND
A. The Respondents
[4] Westside is an Alberta corporation formed on 25 October 2000 and has never been a
reporting issuer in Alberta. Its business is "real estate acquisition, management, development
and sales". Its sole shareholder is currently a numbered Alberta company wholly controlled by
Brezsnyak.
[5] Brezsnyak, a high-school graduate with some post-high-school business administration
courses, has no securities-related training or experience. He has been a shareholder, director and
officer of Westside since incorporation. At all relevant times, Brezsnyak was a guiding or
directing mind of Westside.
[6] West Pointe Park Ltd., Avion Park Ltd., Eastridge Park Ltd., Eastridge Park II Ltd.,
Tovero Ridge Park Ltd. and Foxcreek Park Ltd. (the "Project Companies") were incorporated by
Westside "to facilitate certain kinds of real estate transactions and projects". Staff did not seek
any sanctions against the Project Companies.
[7] None of Westside or the Project Companies has ever filed a prospectus with the
Commission. None of Westside, the Project Companies or Brezsnyak was ever registered with
the Commission to trade in securities (neither was another individual formerly involved).
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B. Westside Projects
[8] Westside projects involved Westside purchasing farmland near Calgary, and then taking
"steps to bring the land closer to urban residential, country residential or commercial use". The
land could then be sold to a developer or other purchaser, with surplus money paid to the
investors (the "Westside Investors") as a dividend. Westside would sell undivided interests in
land ("Westside UDIs") directly or use a special purpose company (a "Park Company") in which
investors would purchase shares funded through registered tax-sheltered plans. The Project
Companies acted as the Park Companies for the Westside Projects, thus the shares were "Project
Company Shares".
[9] Approximately 1500 Westside Investors purchased Westside UDIs or Project Company
Shares. Westside Investors received title to the lands as tenants in common. Westside UDI-
holders with at least a 60% interest in a particular project could terminate Westside as operator of
that project (the evidence indicated that Westside Investors have never taken this step); 60% was
also the percentage required to approve a development plan or sales proposal.
[10] Westside was compensated in three ways, including becoming a Westside UDI-holder
itself by retaining a 10% interest in lands sold to investors. Brezsnyak personally sold Westside
UDIs, as did "finders" who were paid a fee. Brezsnyak earned approximately $3.5 million in
wages and dividends between 2002 and 2011; $2.4 million of that between 2007 and 2011.
[11] Westside did not advertise but used personal contacts to promote its projects. Westside
brochures given to prospective investors frequently mentioned an estimated three-to-five-year
development period.
[12] Westside has been involved in 11 land projects, with the first purchased in February
2002. The first three resulted in invested funds totalling $10 492 924, with lands sold in April,
July and August 2006, respectively, for an average annual return to the participating Westside
Investors of 24.5%, 43.5% and 58.2%, respectively.
[13] Westside has seven outstanding projects, with land purchase dates ranging from March
2006 through December 2008, and with money received from Westside Investors totalling
$66 499 374. The first six of these projects have not been completed within the three-to-five
year project period mentioned in Westside's literature to potential investors; the last of the seven
is still within that period.
[14] Westside UDI sales for a late 2010 project were not successful. Westside returned to
those Westside Investors their money; almost $230 000 had been raised.
[15] Westside Investor PD testified that he invested approximately $500 000 in various
Westside projects, some of which are still outstanding. He has no concerns with the
development of the projects, never understood there to be any promised or guaranteed returns,
and believes that Brezsnyak's continued involvement is "critical" for investors. PD fears that
"any disruption" in Brezsnyak's involvement "would adversely affect . . . the well-being of our
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investments". PD also noted that Brezsnyak circulates regular publications updating Westside
Investors and is always easy to contact.
[16] We did not hear evidence that any Westside Investors were concerned with the
information they were given when investing in Westside UDIs or Project Company Shares, or
were concerned with the way Westside and Brezsnyak were operating the business.
C. Cooperation and Compliance Efforts
[17] Brezsnyak received, as director of Westside, a 25 October 2010 letter from a Staff
investigative counsel requesting information about Westside's fund-raising, projects and
operations. Brezsnyak testified that he immediately contacted legal counsel and worked
diligently to gather all requested information, which was provided in a letter to the Commission
dated 8 November 2010. The parties eventually prepared and agreed to provide a hearing panel
with the Agreed Facts, leaving the panel to determine a limitation issue and what, if any,
sanction orders are appropriate to make in the public interest against the Respondents.
[18] The evidence is clear that the Respondents were extremely cooperative with the
Commission throughout the investigation and enforcement hearing process. It is also clear that
once the Respondents were alerted to the Commission's concerns and realized they were engaged
in illegal activities, they took immediate steps to comply with Alberta securities laws, including
retention of legal counsel with securities law experience and filing required documentation with
the Commission.
III. ANALYSIS
A. Alberta Securities Laws Contravened
1. Illegal Trades and Distributions
[19] To find a contravention of section 75 of the Act, there must be a finding that a "security"
and "trade" were involved, with section 110 having the additional prerequisite of finding a
"distribution" within the meaning of the Act. The Respondents admitted to engaging in illegal
trades and distributions respecting the Westside UDIs and Project Company Shares, subject to
limitation period arguments they might raise (invoking section 201).
[20] It is clear that the Westside UDIs and Project Company Shares sold to Westside Investors
were "securities" within the meaning of sections 1(ggg) (v) and (xiv) of the Act, respectively, as
admitted by the Respondents. We so find. We also find that the sales of Westside UDIs and
Project Company Shares were "trades" and "distributions" within the meaning of sections 1(jjj)
and 1(p), respectively. The Respondents acknowledged that they were not "registered to trade in
securities" during the relevant times, there was no filed or receipted prospectus for Westside or
any of the Project Companies, and they had not taken steps to determine if any of the exemptions
from the prospectus and registration requirements of the Act were available. We so find.
[21] Based on those admissions and our conclusions, we find that the Respondents
contravened sections 75 and 110 of the Act.
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2. Limitation Period
[22] Section 201 of the Act provides:
No proceedings under this Part shall be commenced in a court or before the Commission more
than 6 years from the day of the occurrence of the event that gave rise to the proceedings.
[23] Westside and Brezsnyak contended that Westside projects purchased before 4 April 2006
should not be considered for sanction purposes, as that was six years before the 4 April 2012
Notice of Hearing commenced these proceedings. Further, they submitted that even if Westside
projects invested in before that date could properly be considered, three of those four projects are
completed and thus no longer exist.
[24] Staff submitted that any activity before 4 April 2006 was captured by the Notice of
Hearing as part of a "continuing course of conduct" or, alternatively, could be considered in the
sense of past conduct indicating that additional specific or general deterrence may be required.
[25] This situation is unusual because the Notice of Hearing was issued with admissions
attached and sought a determination on sanction only, not on the merits of allegations. There
may have been some trades and distributions of securities by the Respondents that occurred
outside of the six-year limitation period, but no evidence of the specifics of any such trades or
distributions was provided. For example, we do not know how many investors purchased
Westside UDIs or Project Company Shares before 4 April 2006 or the amount of money they
invested. In any event, in light of the sanctioning principles and factors discussed below and
given the extent of the admitted illegal activity occurring after 4 April 2006 – the number of
investors and money raised – the Respondents' activities before 4 April 2006 would have little or
no effect on the magnitude or type of the sanctioning orders we would make.
B. Sanction
[26] We next consider whether it is in the public interest to make an order with respect to
sanction against the Respondents under sections 198 and 199 of the Act.
1. Parties' Positions
(a) Staff
[27] Staff submitted that the circumstances in this case require orders that will serve as a
strong general deterrent with some measure of specific deterrence. In this regard, Staff
contended that a very substantial amount of money – over $66 million relating to the seven
outstanding projects – was raised from Westside Investors with no adherence to Alberta
securities laws, although Staff acknowledged measures taken by the Respondents to comply with
Alberta securities laws once alerted of their non-compliant activities by Staff. While Staff
conceded that there appeared to be a low risk of future "wholesale non-compliance with Alberta
securities laws" by Brezsnyak, they were concerned that his inexperience with securities
regulatory requirements might give rise to a risk of some future non-compliance. Staff also
noted that Brezsnyak made a large amount of money from his illegal activity. Staff submitted
that although some Westside Investors had received return of their investment with a profit, other
Westside Investors' invested money remains at risk of not being returned and some Westside
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Investors may not have invested had they been given full disclosure of the risks involved,
including the risks inherent in real estate development.
[28] For those reasons, Staff submitted that the following sanctions would provide appropriate
specific and general deterrence:
an administrative penalty "in the range of $300,000", payable jointly and
severally by Westside and Brezsnyak;
a two-year trading ban on Westside and Brezsnyak to prevent them from raising
money in the exempt market, with a carve-out for Brezsnyak's personal trading in
his own account; and
a ban on Brezsnyak acting as a director for an unspecified time, with Brezsnyak
continuing "in an officer-like role" for "technical and business matters relating to
land development".
[29] Staff did not seek sanctions against any of the Project Companies.
(b) Westside and Brezsnyak
[30] Westside and Brezsnyak submitted that there is no need for specific deterrence in these
circumstances. They contended that there is no risk that they will in future contravene Alberta
securities laws, meaning there are no accompanying risks to investors or the Alberta capital
market. In support of their contention, they pointed to the remedial steps taken to date and their
commitment to use experienced legal counsel to guide them in all future business endeavours.
Westside and Brezsnyak emphasized that the Respondents acted in good faith, operated an
"honest, rational, open and successful" business, did not cause financial harm or any real risk of
such harm, present no risk of future harm, fully cooperated with Staff, and "admitted their
violation and have taken all reasonable steps to ensure compliance going forward". They also
noted the critical role played by Brezsnyak in completing the Westside projects, and that the
Westside Investors believe the continued engagement of Brezsnyak in his role as a director and
officer of the Project Companies is critical to the success of their real estate development
projects. Accordingly, Westside and Brezsnyak submitted that the appropriate sanction would be
a "modest" administrative penalty with no public interest need for a trading ban on Westside and
Brezsnyak or a director ban on Brezsnyak.
2. The Law
(a) Principles and Factors
[31] The parties agreed on the applicable sanctioning factors. This Commission set out those
factors in Re Lamoureux, [2002] A.S.C.D. No. 125 at para. 11, as restated in Re Workum and
Hennig, 2008 ABASC 719 (affirmed 2010 ABCA 405) at para. 43:
the seriousness of the findings against the respondent and the respondent's recognition of
that seriousness;
characteristics of the respondent, including capital market experience and activity and
any prior sanctions;
any benefits received by the respondent and any harm to which investors or the capital
market generally were exposed by the misconduct found;
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the risk to investors and the capital market if the respondent were to continue to operate
unimpeded in the capital market or if others were to emulate the respondent's conduct;
decisions or outcomes in other matters; and
any mitigating considerations.
[32] In applying these factors we look to the underlying legal principles, as defined by our
public interest mandate: sanctions are to be protective and preventative, not punitive or
remedial. In protecting the public interest, we determine the appropriate levels of specific
deterrence (preventing future harm caused by a particular respondent) and general deterrence
(preventing future harm caused by others who may be tempted to engage in similar behaviour).
These principles have been confirmed as appropriate by the Supreme Court of Canada:
Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities
Commission), 2001 SCC 37 at paras. 39-45; and Re Cartaway Resources Corp., 2004 SCC 26 at
paras. 52-62. These sanctioning factors and principles have been applied in many decisions of
this Commission, including Workum and Re Arbour Energy Inc., 2012 ABASC 416.
(b) Principles and Factors Applied
[33] In determining appropriate sanction in particular circumstances, we examine the
misconduct as a whole, the need (and relative need) for specific and general deterrence, and the
combined effect of different sanction orders.
(i) Relevant Factors
[34] Based on their admissions and the evidence before us, Westside and Brezsnyak engaged
in serious capital-market misconduct. Illegal trades and distributions of securities are of great
concern because they deprive investors of the protections provided by Alberta securities laws
and thereby impair investor confidence in the fairness and efficiency of our capital market. The
Respondents, under the stewardship of Westside and Brezsnyak, raised approximately
$77 million (over 80% of that connected to projects purchased after April 2006) through their
illegal trades and distributions of Westside UDIs and Project Company Shares. However, the
evidence was that Westside's business and that of the Project Companies is legitimate and the
money raised from Westside Investors has been used as intended. There was no evidence of
undue pressure, misrepresentations or other such dishonest and reprehensible conduct.
Moreover, Westside and Brezsnyak clearly recognize the seriousness of their contraventions, as
shown by their cooperation from the outset, their admissions, Brezsnyak's testimony, and the
Respondents' continuing work with legal counsel to ensure compliance since becoming aware of
their obligations under Alberta securities laws.
[35] Westside and Brezsnyak have not previously been sanctioned by the Commission. They
did not have any prior securities knowledge or experience. We accept their contentions that
Westside and Brezsnyak were unaware Alberta securities laws applied to their fund-raising
activities and that they did not intend to breach securities laws. We do note, however, that there
has been a general awareness in Alberta that certain investments in real estate may be subject to
securities laws since this Commission's decision in Re Land Development Co., [2002] A.S.C.D.
No. 468. We also emphasize, as discussed below, that ignorance of the law – including Alberta
securities laws – will not excuse unlawful conduct.
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[36] As noted, Westside and Brezsnyak received significant financial remuneration in
connection with their illegal trades and distributions of securities, and stand to receive further
remuneration if the outstanding projects are completed as planned. However, we find no actual
financial harm to any specific investors; the evidence indicates that Westside Investors were not
misled in any way and they appear to have received what they intended to buy – raw land
purchased with hopes of eventual development and resale. We also noted that Westside Investor
PD expressed no dissatisfaction with the Respondents, but remained supportive of them and of
their land development projects.
[37] However, despite the specifics of this case, we do find that the Respondents' activities
caused overriding reputational harm to the Alberta capital market. Illegal trades and
distributions, being by their nature illegal activities, jeopardize investor confidence in the
fairness and efficiency of the Alberta capital market and may well threaten the future ability of
law-abiding market participants to successfully raise money in the exempt capital market.
[38] We agree with Staff that there are no helpful previous decisions. We did not find useful
the cases referred to by Westside and Brezsnyak.
[39] The preceding analysis addressees the mitigating factors relevant in these circumstances.
(ii) Specific and General Deterrence
[40] All of the Respondents admitted to contravening sections 75 and 110 of the Act. We
accept that those contraventions were unintentional and not dishonest. We were impressed with
the efforts the Respondents made to address Staff's concerns as soon as those concerns were
raised with them. We also find significant the Respondents' ongoing commitment to ensure
compliance with Alberta securities laws in the future, including their efforts in working with
counsel to address compliance concerns raised by Staff. We are of the view that it is in the
public interest to encourage those who inadvertently breach securities laws to take responsibility
for their misconduct, remedy wrongdoings, cooperate with Staff, and self-impose measures to
prevent any future contraventions. We conclude, in these circumstances, that Westside and
Brezsnyak pose little risk to investors and the Alberta capital market in the future. Accordingly,
we find little need here for specific deterrence.
[41] That said, ignorance of the law is no excuse. Operating in the Alberta business climate
for many years, raising money from others, Westside and Brezsnyak should at some point have
become aware that securities laws may be applicable to their activities or, at the least, become
aware of the need to explore whether any such legal requirements may apply. Such lack of
attention to legal requirements is concerning. As mentioned, we have no doubt that the
Respondents are now well aware of their legal obligations in this regard. We must, however,
ensure that others operating businesses in Alberta and who seek to raise money from Alberta
investors be made aware that they are expected to learn of, and comply with, all legal
requirements, including Alberta securities laws. We also need to demonstrate that the
Commission treats illegal trades and distributions of securities as serious misconduct that will be
dealt with firmly.
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(iii) Conclusion on Sanction
[42] We conclude that the public interest favours sanctioning Westside and Brezsnyak in these
circumstances. They – and others – must be reminded that certain activities are subject to
Alberta securities laws and to the Commission's oversight, and that the Commission's mandate is
to protect investors and promote the efficiency of our capital market.
[43] In our view, it is in the public interest to order an administrative penalty of $100 000
against Westside and Brezsnyak, payable jointly and severally. Such an administrative penalty
will communicate to other market participants that failure to register and use a prospectus, or to
use exemptions, when selling securities to the public – however inadvertent or unintentional – is
a serious matter.
[44] It is also in the public interest to deny Westside and Brezsnyak the use of all of the
exemptions under Alberta securities laws for a period of one year. This will further the goals of
both specific and general deterrence by denying them the privilege of raising further money
through the exempt market for that period, while allowing them time to ensure compliance with
all securities regulatory requirements.
[45] We do not consider it necessary to prevent Brezsnyak from acting as a director of any
issuer. We are satisfied that Brezsnyak's misconduct did not involve an abuse of his position as a
director of an issuer. We do not believe that permitting him to continue as a director of issuers
would present a threat to investors or the Alberta capital market. Further, and most compelling,
the evidence convinces us that the Westside Investors would benefit from Brezsnyak continuing
on in his position as a director of Westside and as its guiding and directing mind.
C. Deemed Distribution
[46] Staff submitted that there is a chance of possible future sales of these securities by
Westside Investors to others, which "would effectively perpetuate the harm of the original illegal
distribution", unless appropriate measures are imposed to prevent subsequent resales. Therefore,
Staff contended that it would be appropriate in the circumstances for the Commission to deem to
be a distribution, under section 144(2) of the Act, any trade or intended trade in the Westside
UDIs or Project Company Shares outstanding. This would oblige the seller "to comply with the
ordinary requirements regarding disclosure or to limit its trades to cases where an exemption is
available".
[47] The Respondents agreed with Staff's suggestion that an order under section 144(2) of the
Act would be appropriate to restrict resales by Westside Investors.
[48] In these circumstances, Westside UDIs or Project Company Shares were issued without a
prospectus or an exemption, with the result that the market does not have the disclosure and
protections mandated under Alberta securities laws. With a view to protecting potential other
investors, we think it appropriate that no further resales of these securities occur until such time
as a prospectus is filed in respect of the relevant securities or the resale is effected in compliance
with an exemption provided for under Alberta securities laws.
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[49] We therefore conclude that it would be appropriate and not prejudicial to the public
interest to order under section 144(2) of the Act that any trade of an already-issued Westside
UDI or Project Company Share be deemed to be a distribution under the Act.
D. Costs
[50] Although Staff pointed to investigation and hearing costs of approximately $12 000, they
submitted that this is an appropriate case for no costs award or a low costs award. Westside and
Brezsnyak likewise contended that only a modest, if any, costs award would be appropriate in
the circumstances here.
[51] After considering the parties' positions on costs, we conclude that this is an appropriate
case in which to order modest costs of $6000 against the Respondents jointly and severally.
IV. CONCLUSION AND ORDERS
[52] For the reasons expressed above, we find it in the public interest to make the following
sanction orders:
Westside
under section 198(1)(c) of the Act, all of the exemptions contained in Alberta
securities laws do not apply to Westside, until (and including) 20 November
2013; and
under section 199, Westside pay, jointly and severally with Brezsnyak, an
administrative penalty of $100 000; and
Brezsnyak
under section 198(1)(c), all of the exemptions contained in Alberta securities laws
do not apply to Brezsnyak, until (and including) 20 November 2013, except that
this order does not preclude Brezsnyak from trading in or purchasing securities
through a registrant (who has first been given a copy of this decision) in:
trading accounts for Brezsnyak's benefit;
registered retirement savings plans, registered retirement income funds,
registered education savings plans or tax-free savings accounts (each as
defined in the Income Tax Act (Canada)) or locked-in retirement accounts
for the benefit of one or more of Brezsnyak, his spouse and his dependent
children, if any; or
both; and
under section 199, Brezsnyak pay, jointly and severally with Westside, an
administrative penalty of $100 000.
[53] In addition, we find it appropriate to order under section 202 of the Act that Westside and
Brezsnyak pay, jointly and severally, $6000 of the costs of the investigation and hearing.
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[54] For the reasons expressed above, and considering that it would not be prejudicial to the
public interest to do so, we order, under section 144(2) of the Act, that any trade of an already-
issued Westside UDI or Project Company Share be deemed to be a distribution.
[55] This proceeding is now concluded.
20 November 2012
For the Commission:
"original signed by"
Glenda A. Campbell, QC
"original signed by"
Maureen McCaw
"original signed by"
Fred R. N. Snell, FCA
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APPENDIX “A”
ALBERTA SECURITIES COMMISSION
AGREED STATEMENT OF FACT
Date: 20120402
Docket: ENF-007477
Securities Act, R.S.A. 2000, c. S-4 (Act)
Westside Land Corporation, West Pointe Park Ltd., Avion Park Ltd., Eastridge Park Ltd.,
Eastridge Park II Ltd., Tovero Ridge Park Ltd., Foxcreek Park Ltd., and David Brezsnyak
Introduction
1 Staff of the Alberta Securities Commission (Staff and Commission, respectively)
conducted an investigation into the affairs of Westside Land Corporation (Westside),
West Pointe Park Ltd., Avion Park Ltd., Eastridge Park Ltd., Eastridge Park II Ltd.,
Tovero Ridge Park Ltd., Foxcreek Park Ltd., and David Brezsnyak (Brezsnyak)
(collectively the Respondents). The investigation indicated to Staff that the Respondents
had violated certain Alberta securities laws through their participation in an illegal
distribution of securities.
2 Solely for the purpose of regulating securities in Alberta, Canada, and elsewhere, and as
the basis for a hearing by the Commission regarding what sanctions, if any, the
Respondents should receive under Sections 198 and 199 of the Act, the Respondents
make the admissions set out below.
Parties
3 At all material times, Westside was a corporation formed pursuant to the laws of Alberta.
It was incorporated on October 25, 2000. Since incorporation, Westside has been
involved in the business of real estate acquisition, management, development and sales.
Westside has never been a reporting issuer in Alberta.
4 West Pointe Park Ltd., Avion Park Ltd., Eastridge Park Ltd., Eastridge Park II Ltd.,
Tovero Ridge Park Ltd., Foxcreek Park Ltd. (Project Companies) were all entities that
Westside incorporated to facilitate certain kinds of real estate transactions and projects.
5 Brezsnyak has been a shareholder, director and officer of Westside since the
incorporation. Presently, a corporation that Brezsnyak wholly controls, 1153647 Alberta
Ltd., is the sole shareholder of Westside. At all times Brezsnyak was a directing or
guiding mind of Westside.
6 Brezsnyak originally shared the ownership, direction and daily control and operation of
Westside with another individual, Mariano Serpico (Serpico). Serpico was a director of
Westside and owned 50% of Westside shares (either directly or through a company he
2
controlled). Serpico ceased to be a director of Westside in December 2009 and his equity
interest terminated at the same time.
7 Brezsnyak is a high school graduate. He studied business administration for under one
year each at SAIT Polytechnic and Mount Royal College. He has never taken any
securities-related training.
The Business of Westside
8 Westside is involved in the real estate business. It purchases lands that it later seeks to
sell at a profit. In particular, Westside targets for purchase farm land in rural
municipalities near Calgary, Alberta, or near the urban communities that surround
Calgary, such as Airdrie, Springbank and Okotoks. Once Westside has purchased
undeveloped land, it takes steps to bring the land closer to urban residential, country
residential or commercial use. The land may then may be sold to a developer or other
purchaser.
9 In order to purchase these lands, Westside has raised money from investors. It has done
so by selling undivided interests (UDI(s)) in the lands. Westside’s land acquisitions have
typically involved the following steps:
9.1 Westside would identify farm land that it determined to have potential for
development and resale;
9.2 Westside, either directly or through a company incorporated for the purpose,
would enter into an agreement to acquire the property; Westside would pay any
deposit with its own funds;
9.3 Westside would then sell UDIs in the land to investors, who would sign Sale and
Purchase and Joint Venture Agreements and advance funds to Westside; [Tabs A
and B]
9.4 Westside would hold investor funds in a separate account; once it had sold
sufficient UDIs to close the land purchase, it would release funds to the
landowner and title would transfer to Westside; Westside would then transfer title
to the UDI-holders, who then received land titles certificates reflecting their
interest in the land.
10 Westside also offered a system for buying UDIs with funds held in registered, tax-
sheltered accounts or plans. The following additional steps were necessary in those cases:
10.1 Westside would incorporate a special purpose company for the project (a Park
Company);
10.2 the investors would pay a nominal amount to acquire 100 shares of the Park
Company for each UDI financed by the registered plan;
10.3 the investor’s registered plan would loan the Park Company the price Westside set
for the UDI; the loaned funds were held in trust by legal counsel pending transfer
of title to the Park Company;
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10.4 on the closing of the land purchase agreement, Westside would obtain title and
then have the UDIs registered in the name of the Park Company;
10.5 a mortgage in the name of the registered plan would be registered against title;
10.6 the Park Company would annually repay the registered plan a nominal amount of
the mortgage sum;
10.7 upon sale of the project, the Park Company would first pay off the mortgages
owed to the registered plans and then pay any surplus to the investors as a
dividend.
11 The Project Companies acted as the Park Company for particular projects. Each of the
Project Companies issued shares and holds investor UDIs.
12 Westside UDI-holders were tenants in common. According to Alberta land law, each
investor owned an interest in the entire property, but none had rights of exclusive
possession or enjoyment to any part of the property and most decisions about the land
had to be made collectively. The Purchase and Sale and JVC agreements detailed how
such decisions would be made in the case of the Westside lands.
13 The Purchase and Sale Agreement and Joint Venture Agreement contained the following
terms:
13.1 the purchaser desired to acquire a UDI in the real property for the purpose of
deriving revenue by way of sale, lease or similar arrangement;
13.2 the purchaser acknowledged that the unit for sale constituted an undivided interest
in property held in common with all other owners of the property;
13.3 the UDI-holder indicated a wish to contribute their undivided interests to a joint
venture, which would “operate and manage” the lands, develop the lands “by way
of subdivision” and arrange the sale of the joint venture lands;
13.4 Westside would be the operator of the UDI and joint venture;
13.5 UDI owners holding, in aggregate, at least 60% interest in the real property had
the right to terminate Westside’s status as operator at any time and for any reason;
13.6 a development plan or proposal to sell the property would require at least 60%
approval of the UDI owners;
13.7 in addition to the purchase price, the purchaser would contribute between $500
and $1,500 (depending on the project) for each UDI to a development fund held
in a separate bank account established for each project;
13.8 Westside would apply the development funds to: the costs incurred for planning,
engineering and development; the costs of subdivision and services; and
Westside's management of the project (capped at 15% of the money spent from
the fund). [Tabs A and B]
4
14 Westside created value in its projects first by identifying undeveloped property and
arranging for its purchase. After acquisition, it added value to the joint ventures by taking
steps to encourage annexation, subdivision, development and sale of the lands.
15 Westside was compensated for these contributions in three ways: first, the price of its
UDIs included a mark up above the amount Westside agreed to pay for the property;
second, Westside could receive up to 15% of project development funds as an operator
management fee; third, Westside retained a 10% interest in the lands it otherwise sold to
investors. Westside was therefore a UDI-holder like all other owners in the joint ventures.
16 Brezsnyak was personally involved in selling UDIs to investors. Westside also used
“consultants” and a referral network to market its UDI product, paying a fee to “finders”.
It did not advertise in any public media, but used personal contacts to promote its
projects.
17 Prospective investors would receive a Westside brochure describing the investment
opportunity. Brochures would usually state in general terms steps Westside would take
to add value to the land. Westside marketing material frequently mentioned an estimated
3-5 year timeline for development.
18 Westside marketed each of the lands as a specific project. Westside has been involved in
the following projects:1
Name Location Purchase
Date
Aggregate
Funds
Received
Status
Montebello Spring Bank
area
February 2002 $4,217,505 Land sold April
2006 and
investors paid
out (24.5%
average annual
return)
West Pointe I Airdrie Area May 2004 $2,064,735 Land sold July
2006 and
investors paid
out (43.5%
average annual
return)
West Pointe II Airdrie Area February 2005 $4,210,684 Land sold
August 2006
and investors
paid out (58.2%
average annual
return)
1 Westside and Brezsnyak reserve the right to assert that any activity before 2006 was subject to the
limitation set out in Section 201 of the Act.
5
Avion Spring Bank
Area
March 2006 $4,225,380 Still holding
land
Eastridge I Airdrie Area July 2006 $10,125,410 Still holding
land
Eastridge II Airdrie Area July 2007 $11,017,000 Still holding
land
West Pointe III Airdrie Area July 2007 $9,105,450 Still holding
land
West Pointe IV Airdrie Area July 2007 $13,300,684 Still holding
land
Tovero Ridge Okotoks Area July 2007 $8,393,500 Still holding
land
Foxcreek Spring Bank
Area
December
2008
$10,331,950 Still holding
land
West Pointe V Airdrie Area $229,348 The land
purchase did
not close and
all investors
received a
refund
19 Westside’s last proposed project was West Pointe V. Sales to investors occurred in
September and October 2010. However, UDI sales did not meet expectations and
Westside was not able to negotiate an extension to the purchase agreement for the land.
Westside returned all funds to those who did invest.
20 Approximately 1,500 investors have purchased Westside UDI’s or Westside Park
Company shares.
6
21 Brezsnyak’s personal earnings from the Westside business are as follows:2
Wages Dividends
2002 147,500.00
2003 61,249.98
2004 108,435.69 92,000.00
2005 135,133.32 100,000.00
2006 415,000.00 90,000.00
2007 - 400,000.00
2008 1,940,000.00 -
2009 - -
2010 - -
2011 60,000.00
Total 2,867,318.99 682,000.00 3,549,318.99
Non-Compliance with Alberta Securities Laws
22 The Respondents admit that the Project Company or Park Company shares were
“securities” under Section 1(ggg)(v) Act.
23 The Respondents further admit that Westside’s sale of UDIs involved the following
elements:
23.1 an investment of money by individuals or entities seeking a profit;
23.2 the investment was in a common enterprise of many investors; and
23.3 the profitability of the enterprise was in a significant way reliant on the efforts of
Westside and Brezsnyak and not the investors.
24 The Respondents admit that Westside’s UDIs therefore fall within the definition of an
“investment contract” and were thus a “security” under Section 1(ggg)(xiv) of the Act.
25 Neither Westside nor the Project Companies ever filed a draft prospectus or prospectus
with the Commission and neither received a receipt for a prospectus. Nor did Brezsnyak,
Serpico or anyone else file a prospectus on behalf of either Westside or any of the Project
Companies. None of Westside, the Project Companies and Brezsnyak or Serpico were
ever registered to trade in securities.
26 None of Westside, the Project Companies or Brezsnyak took steps to determine whether
any of the purchasers of Westside UDIs or Westside Project Company shares met the
criteria for exemptions to registration and prospectus requirements. Some investors might
2 Westside and Brezsnyak reserve the right to assert that any activity before 2006 was subject to the
limitation set out in Section 201 of the Act.
7
have met the requirements for exemptions under National Instrument 45-106 had the
Respondents taken steps to qualify them.
27 Subject to arguments they may raise in relation to s. 201 of the Act, the Respondents
admit that they have violated Section 75 of the Act by unregistered trading in securities
and that they violated Section 110 of the Act through the distribution of securities that
had not yet been issued and in relation to which no prospectus had been filed with the
Commission.
Timing of Certain Events
28 On October 25th
, 2010, a member of the Case Assessment Department of the Commission
wrote to Westside to ask, among other things, that Westside provide details of all
investment funds received by Westside or its related entities since January 1, 2008.
Westside responded promptly through counsel to this request for information.
29 On January 4th
, 2011, the Director, Enforcement, of the Commission signed an order
under Section 41(1) of the Act appointing certain individuals to investigate into any and
all matters relating to Brezsnyak, Westside and other related entities and individuals
subsequent to January 1, 2006 (the “Order”). Under this Order, ASC Investigation Staff
gathered further information regarding Westside, the Project Companies and Brezsnyak.
Other Matters
30 The Respondents state that they were neither aware of nor intended to breach the above-
noted Alberta securities laws.
31 The Respondents have cooperated with the ASC investigation and prosecution and were
forthcoming with information.
32 The Respondents have not been sanctioned by the Commission before.
33 This Agreement has saved the Commission the time and expense associated with а
contested hearing regarding whether there had been violations of Sections 75 and 110 of
the Act.
8
34 Westside undertakes to have legal counsel review all future trades and market materials
to ensure compliance with Alberta securities laws.
Signed by the duly authorized signatory
of WESTSIDE LAND CORPORATION
at Calgary, Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”__________
SIGNATURE
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WESTSIDE LAND CORPORATION
PER: “Original Signed By”
DAVID BREZSNYAK
Signed by the duly authorized signatory
of WEST POINTE PARK LTD. at
Calgary, Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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WEST POINTE PARK LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
Signed by the duly authorized signatory
of AVION PARK LTD. at Calgary,
Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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AVION PARK LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
9
Signed by the duly authorized signatory
of EASTRIDGE PARK LTD. at Calgary,
Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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EASTRIDGE PARK LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
Signed by the duly authorized signatory
of EASTRIDGE PARK II LTD. at
Calgary, Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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EASTRIDGE PARK II LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
Signed by the duly authorized signatory
of TOVERO RIDGE PARK LTD. at
Calgary, Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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TOVERO RIDGE PARK LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
Signed by the duly authorized signatory
of FOXCREEK PARK LTD. at Calgary,
Alberta this
30 day of March 2012, in the
presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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FOXCREEK PARK LTD.
PER: “Original Signed By”
DAVID BREZSNYAK
10
Signed by DAVID BREZSNYAK at
Calgary, Alberta this 30 day of
March, 2012 in the presence of:
Marlene G. Stewart
WITNESS NAME
“Original Signed By”
SIGNATURE
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“Original Signed By”
DAVID BREZSNYAK
Calgary, Alberta, this 2nd
day of
April 2012.
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ALBERTA SECURITIES COMMISSION
PER: “Original Signed By”
ROBERT STACK
#4131690v2