Court File and Parties

CITATION: Sorel v. North American Development Group, 2009 ONCA 126

DATE: 20090210

DOCKET: C49045

COURT OF APPEAL FOR ONTARIO

O’Connor A.C.J.O., Goudge and Epstein JJ.A.

BETWEEN:

LINE MARIE ANNE CLAIRE SOREL

Applicant (Respondent)

And

NORTH AMERICAN DEVELOPMENT GROUP and NORTH AMERICAN ACQUISITION CORP.

Respondents (Appellants)

A. Irvin Schein for the appellants

Douglas Langley for the respondent

Heard: January 19, 2009

On appeal from the judgment of Justice R. Boyko of the Superior Court of Justice dated June 11, 2008.

Reasons for Decision

By the Court:

[1] The appellants are in the land development business. They are presently engaged in a land development project near Barrie, Ontario. Up until August 16, 2007, Gordon Cobb, the common law husband of the respondent, held a 10% interest in the appellants’ interest in the project.

[2] On that date, an order made in the matrimonial proceedings between Mr. Cobb and the respondent transferred that 10% interest to the respondent, subject to the appellants’ security interest in it. That security arose when Mr. Cobb signed over his 10% interest to the appellants as security for a loan he obtained from them, for which he also signed a promissory note.

[3] Payment on the note was due on August 21, 2007, but Mr. Cobb defaulted. The appellants then enforced their security interest in the 10% interest, but were required by the court order in the matrimonial proceedings to hold it until September 13, to give the respondent an opportunity to make submissions with respect to priorities.

[4] Once the respondent knew she was acquiring the 10% interest, she asked for an extension of the August 21 date but was refused. She then requested financial information with respect to the project, which was provided by September 6. The respondent then determined that the 10% interest held as security was sound, and raised the necessary funds to repay in full the loan for which it was security. The respondent tendered payment on September 21, 2007. She then successfully applied for relief from forfeiture of the 10% security interest.

[5] The appellants appeal from that order.

[6] In our opinion the appeal must be dismissed.

[7] The application judge correctly set out the three part legal test for relief from forfeiture and found that the respondent satisfied all three criteria. This conclusion is not displaced by the fact that she also considered the facts and circumstances of the matrimonial litigation to be a factor that would justify relief.

[8] The appellants concede that the second criterion is met, namely that the right of forfeiture was to secure the payment of money.

[9] The application judge found that the respondent’s conduct was reasonable in the circumstances thus meeting the first criterion. There is no basis to interfere with that finding. The respondent moved expeditiously to gather the necessary financial information, make the necessary judgment, and then gather the necessary funds to repay the loan.

[10] Finally, the application judge determined that the respondent satisfied the third criterion as well, namely that there was a substantial disparity between the value of the property forfeited and the damage caused by the breach of Mr. Cobb’s obligation to repay the loan. In our view, there was evidence sufficient to sustain this finding. On the one hand the damage caused by the breach is the value of the loan, for which the respondent has now tendered full repayment. On the other hand, there was evidence that a senior manager of the appellants considered that once the project “got through”, the value of the 10% interest would be worth a lot of money over and above the value of the loan. Moreover, the actions of the appellants, who are experienced land developers, in paying a substantial sum to acquire the land for the project, and in continuing to invest the time and money since then to pursue its development, are supportive of this conclusion. We would not interfere with this finding.

[11] The appeal must therefore be dismissed, with costs to the respondent in the amount of $6,300 inclusive of disbursements and GST.

RELEASED: February 10, 2009 “DO”

“D. O’Connor A.C.J.O.”

“Goudge J.A.”

“G. Epstein J.A.”