COURT FILE NO.: CV-19-614363 DATE: 2020/03/11

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MARSHALLZEHR GROUP INC. Plaintiff (Defendant by Counterclaim) - and - IDEAL (BC) DEVELOPMENTS INC., IDEAL (BC2) DEVELOPMENTS INC., 2490568 ONTARIO INC., 2490564 ONTARIO INC., IDEAL DEVELOPMENTS INC. and SHAJIRAJ NADARAJALINGAM Defendants (Plaintiffs by Counterclaim)

Stephen Schwartz and Aryan Ziaie for the Plaintiff (Defendant by Counterclaim) Mark A. Russell for the Defendants (Plaintiffs by Counterclaim)

HEARD: February 20, 2020

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Plaintiff, MarshallZehr Group Inc., (“MZ”) signed a Commitment Letter to lend $15.2 million to the Defendants, Ideal (BC) Developments Inc., Ideal (BC2) Developments Inc., 2490568 Ontario Inc., 2490564 Ontario Inc., Ideal Developments Inc., and Shajiri Danarajalingam (collectively “Ideal”).

[2] MZ cancelled or terminated the loan commitment and demanded that Ideal pay the certain charges. When Ideal refused to pay, MZ sued. Ideal counterclaimed for $1.3 million plus interest as damages for the alleged wrongful termination of the loan commitment.

[3] MZ now brings a summary judgment motion. It seeks: (a) a judgment for $508,071.09: (b) a declaration that it is entitled to an equitable mortgage to be registered against the title to the lands that were to be mortgaged; and, (c) the dismissal of Ideal’s counterclaim.

[4] For its part, on the summary judgment motion, Ideal seeks an Order that: (a) MZ’s action be dismissed; (b) MZ refund Ideal’s deposits; (c) MZ pay damages for legal costs with respect to legal costs incurred in relation to the Commitment Letter; and (d) the balance of the counterclaim for special damages proceed to trial.

[5] For the reasons that follow, I dismiss Ideal’s counterclaim and I grant MZ a summary judgment for $508,071.09.

B. Facts

[6] On October 31, 2018, MZ and Ideal signed a Commitment Letter for a $15.2 million loan. The purpose of the loan was to finance Ideal’s project to build 71 townhouses on lands (3.56 acres) municipally known as 8, 10, 12, 14, 16 and 18 Bostwick Crescent, Richmond Hill, Ontario, and 2, 6, 8 Bond Crescent, Richmond Hill. The Defendants Ideal Developments Inc. and Shajiraj Nadarajalingam signed the Commitment Letters as guarantors of the loan.

[7] The loan was to replace, First Source Financial Management Inc.’s first mortgage loan on the properties, which was scheduled to mature in January 2019.

[8] For present purposes the following terms of the Commitment Letter are pertinent:

This commitment letter confirms that MarshallZehr Group Inc. (the "Lender") is prepared to provide financing (the "Loan") for the Project conditional on the terms and conditions contained in this letter agreement (the "Commitment '' ).

1. LOAN

Borrower: Ideal (BC) Developments Inc., Ideal (BC2) Developments Inc., 2490568 Ontario Inc., and 2490564 Ontario Inc. (the "Borrower")

Guarantors: Ideal Developments Inc. and Shajiraj Nadarajalingam together with such other related parties as the Lender may deem advisable (the "Guarantors").

Obligors: Means, collectively, the Borrower and the Guarantors and the "Obligor(s)" means any one of them.

Lender: MarshallZehr Group Inc. (the "Lender") and/or such other assignee or lenders as MarshallZehr Group Inc. may arrange to participate in the Loan.

Project: Those lands and premises described municipally as 8, 10, 12,14, 16, 18 Bostwick Crescent and 2, 6, 8 Bond Crescent, Richmond Hill, ON and legally as shown in Schedule 1.

Loan Amount: LOAN Amount: $15,200,000 (the "Loan") to be advanced through multiple Facilities as follows:

Facility A: $10,750,000

Facility 1B: $ 3,000,000

Facility 2: $1,450,000

Total Loan Amount: $15,200,000

Facility 2 shall be fully subordinate and postponed to Facility 1B and Facility A. Facility 1B shall be fully subordinate and postponed to Facility 1 A.

Initial Advance: The Loan shall be advanced in one draw:

The first draw ("Draw 1" or the "Initial Advance") is anticipated to be in the principal amount of $15,200,000 and advanced upon satisfaction of the conditions contained herein and by the applicable Notices (see Appendix A, B, C and D). The Initial Advance is expected to be as follows:

Land Debt Refinancing $13,000,000 Lender Fee $396,000 Lender's Legal and Admin $25,000 Working Capital $329,000 Interest Reserve $1,450,000 Initial Advance Total $15,200,000

Lender Advance: A Lender Advance is defined as the transfer of funds from the participating Lender(s) to MarshallZehr's Trust account. Interest shall become payable on these funds from the date of the deposit of the funds into the MarshallZehr Trust account, regardless of whether the funds are used in the project immediately, or later returned to the Lender without ever having been drawn by the Borrower. Refer to Appendix C.

Borrower Draw: A Borrower Draw is defined as the request of funds from MarshallZehr's Trust account to fund the Project bank account or to be directly applied against project expenses. A Borrower Draw will not be processed until such time as all the conditions related to the Draw are met, as outlined in Section 2.1and 2.2. Refer to Appendix D.

Term: Thirteen (13) months (commencing from the Interest Adjustment Date or IAD). Interest from the date of the Initial Advance to the IAD shall be deducted by the Lender from the Initial Advance.

Interest Rate: Interest Rate:

Facility lA: Prime + 5.3% per annum (floor rate of 9.25%) Facility 1B: 13.25% per annum Facility 2: 14.0% per annum

Standby Interest: In the event that the Loan has not been fully advanced by December 5, 2018 or for any reason other than a default by the Lender, interest will commence on the advance date established herein for such advance, in the form of standby interest ("Standby Interest") on any unadvanced portion of the Loan and will become due and payable on the date the Loan is advanced or upon the termination of this Commitment Letter without any advances having been made.

A standby fee shall be calculated from the date of the expected advance as mentioned herein to the IAD and shall be payable at the time of the advance and deducted from the advance.

Cancellation: The Lender may on demand require immediate payment of all amounts outstanding or accrued in connection with this Commitment. The Lender may at any time for any reason and without notice, cancel the undrawn portion of the Loan Advance.

Fees: The Borrower shall pay the following Lender fees to the transaction mortgage broker, MarshallZehr Group Inc.:

Good Faith Deposit: $50,000 non-refundable if Borrower fails to proceed based on the terms of this Commitment Letter and is full compensation to the Lender for its work and efforts in preparation of this Commitment Letter. The Borrower shall also be responsible for the Lender’s legal and other, professional fees and out of pocket expenses if the Borrower fails to proceed with the Loan. This fee is accepted upon signing of the Commitment Letter and is payable for "MarshallZehr Group Inc. in Trust". The Good Faith Deposit will be credited to the Borrower against the Lender Fee payable on closing. (Received)

Lender Fee: $396,000, the Lender Fee, less the Good Faith Deposit shall be deducted from the Initial Advance.

Expenses: All reasonable expenses of the Lender and the Borrower shall be paid by the Borrower including (but not limited to), the cost of any third-party reports and all legal costs regardless of whether the Borrower proceeds with the transaction and any costs of recovery of unpaid amounts should that be necessary. Upon request the Lender shall provide an estimate of the legal fees to be incurred by the Lender. Regardless, the Borrower is responsible for all reasonable legal fees incurred by the Lender.

Subordinate Financings: No additional financing will be permitted without the prior written consent of the Lender and in the event of a default under this restriction, the entire principal,interest, fees and all other amounts under the Commitment and security issued pursuant thereto shall become immediately due and payable.

Should additional subordinate financing be placed by the Borrower on the consent of the Lender, such consent will be conditional upon the secondary lender entering into a postponement, subordination and standstill agreement that requires the secondary lender to issue zero dollar discharges to the Lender and Borrower within 2 business days of being requested and requires complete cooperation in executing all postponements and consents as may be required to advance the development of the Project. Any discharge greater than zero shall require prior consent from the Lender. Failure to comply shall be considered a default by the Borrower.

II TERMS AND CONDITIONS

The Loan terms and conditions shall be such terms and conditions as the Lender may from time to time require and shall include, but not be limited to the following:

2.1 Initial Funding Conditions

The Lender shall not be required to advance any funds prior to the Borrower having fulfilled to the Lender's satisfaction the following conditions:

(a) All the Security and ancillary loan agreements and documents and opinions shall have been executed and delivered to the Lender or its solicitors and registered where and as required. Please refer to Section III. SECURITY TO BE DELIVERED for a complete listing.

(b) The Lender shall have satisfied itself with the financial performance and condition of the Borrower and each of the Guarantors in the Lender's sole discretion. Each of the Obligors shall provide within ten (10) business days of the date of execution of this Commitment, at a minimum, the following deliverables:

(vi) All Obligors shall complete the Lender's form of Mortgage Application. To facilitate the Lender's due diligence regarding the creditworthiness of the Obligors, each of the Obligors shall authorize the Lender to conduct credit checks and authorize each of the financial institutions with which the Obligors deal to release any and all information reasonably required. and requested by the Lender to adequately assess the credit worthiness of each respectively.

(c) The Borrower shall deliver to the Lender within ten (10) business days of the acceptance of this Commitment for the Lender's satisfactory review and acceptance the following:

(x) A detailed project schedule outlining the time to complete the various stages and phases of the Project, acceptable to the Lender.

(d) The initial Loan to Value ratio at the time of the Initial Advance, as determined in the Lender's sole discretion, shall not be greater than 80%. For the purpose of calculating the Loan to Value ratio in the absence of current market values;

(i) The Loan amount shall include all debt obligations including all senior ranking and unapproved subordinate debt and outstanding Project accounts payable.

(ii) Value, for purposes of the Initial Advance only, shall be calculated by utilizing the As­Is Appraised Value as per the Appraisal dated February 5, 2018 unless otherwise agreed to by the Lender.

(e) The initial Loan to Cost ratio at the time of the Initial Advance, as determined in the Lender's sole discretion, shall not be greater than 80%. For the purpose of calculating the Loan to Cost ratio in the absence of current market values;

(i) The Loan amount shall include all debt obligations including senior ranking and unapproved subordinate debt and outstanding Project accounts payable.

(ii) Cost shall be determined by utilizing the Net Cost to Date as agreed to by the Lender.

(i) Such other matters as the Lender may deem appropriate and necessary to satisfy itself of the Project's viability, the Borrower's creditworthiness and the ability of the Borrower and Guarantors to fulfil their obligations herein.

V. DEFAULT PROVISIONS

The content of this Default Provisions section shall be subject to the restrictions of any priority agreement between the Lender and any other permitted encumbrance holders.

5.1 Events of Default

The occurrence of any one or more of the following events (each such event being herein referred to as an “Event of Default”) shall constitute an Event of Default under this Agreement:

(c) Covenants or Obligations – if any Obligor [i.e. the Defendants] neglects to observe or perform any covenant or obligation contained in any Document on its part to be observed or performed (other than a covenant or condition whose breach or default in performance is specifically dealt with elsewhere in this Section 5.0) and, such Obligor shall fail (in the case of those defaults which can be rectified by such Obligor) to remedy such default within a period of thirty (30) days after giving of notice, unless the Lender (having regard to the subject matter of the default) shall have agreed to a longer period and, in such event, within the period agreed to by the Lender;

For greater certainty, none of the foregoing events shall constitute an Event of Default hereunder if the default is cured or remedied within the time limited therefor pursuant to the applicable provision of this Section 5.1.

5.2 Acceleration and Demand

Upon the occurrence of any Event of Default that has not been cured within the timelines set out herein, the Lender by written notice to the Borrower shall be entitled to:

(a) declare the Loan and the right of the Borrower to apply for further advances to be terminated; and

(b) declare all Obligations (whether matured or unmatured, drawn or undrawn) of the Borrower to the Lender (including, without limitation, the all unpaid fees whether or not deemed earned) to be immediately due and payable (or to be due and payable at such later time as may be stated in such notice) without further demand, presentation, protest or other notice of any kind, all of which are expressly waived by Borrower;

but upon the occurrence of an Event of Default specified in Section 5.l(a),the Loan shall automatically terminate and all Obligations specified in Section Ishall automatically become due and payable, in each case without any requirement that notice be given to the Borrower. Immediately upon the occurrence of an Event of Default specified in Section 5.1or at the time stated in an Acceleration Notice, the Borrower shall pay to the Lender all amounts owing or payable in respect of all Obligations of such Borrower specified in Section I, failing which all rights and remedies of the Lender under the Documents, at law, in equity or otherwise shall thereupon become enforceable and shall be enforced by the Lender.

VI. GENERAL PROVISIONS

(a) The Lender shall have no obligation to advance funds unless and until all of the above terms and conditions have been deemed by the Lender to be complete, true and otherwise in all respects satisfactory, in the Lender's sole discretion.

(c) The Lenders solicitors shall be: Chaitons LLP …

(d) The Borrower's solicitor shall be: Friedman Law Professional Corporation …

The Borrower shall bear any and all reasonable legal costs of the Lender.

(e) Time is of the essence in this Commitment.

[9] Ideal paid the $50,000 deposit required by the Commitment Letter. It made no other payments to MZ.

[10] In Early December 2018, the lawyers for the parties began preparing the closing documents.

[11] Under the Commitment Letter, Standby Interest would be charged if the loan had not been advanced by December 5, 2018, which was the Closing Date. The Standby Interest was payable on any unadvanced portion of the loan. The Standby Interest was due and payable on the date the loan is advanced or upon the termination of the Commitment Letter without any advances having been made.

[12] MZ raised the funds for the loan. The loan was syndicated, and two third-party lenders provided the funds to MZ. Then, MZ advanced the funds to its counsel, Chaitons LLP to be held in trust pending satisfaction of the Initial Funding Conditions. $9,340,000 was transferred on December 27, 2018. $4,310,000 was transferred on January 4, 2019, and $1,550,000 was transferred on January 15, 2019.

[13] Under the Commitment Letter, a “Lender Advance” was defined as the transfer of funds to MZ's Trust account, in this case the trust account of Chaitons LLP. Under the Commitment Letter interest become payable on the funds from the date of the deposit of the funds regardless of whether the funds are used in the project immediately, or later returned without ever having been drawn by the Borrower.

[14] Under the Initial Funding Conditions of the loan, the loan-to-value ratio (the "LTV Ratio") of the loan was to be capped at 80%. Ideal, however, had a working capital deficit that brought its LTV Ratio below 80%. MZ requested that Ideal inject additional capital to comply with the LTV Ratio. Ideal, however, did not do so.

[15] Under the Commitment Letter, there was to be no additional financing of the property without MZ’s consent. There was an existing mortgage to Feature Corp. registered against the title to the property.

[16] Under the Commitment Letter, if MZ consented to additional financing, then the consent was conditional on the additional lender entering into a postponement, subordination and standstill agreement.

[17] Ideal wished to keep in place the additional financing, and it requested MZ to accept a postponement, subordination and standstill agreement from Feature Corp. with a 90-day standstill period. This proposal, however, was unacceptable to MZ, which required an absolute not a temporary standstill, which, in turn, was unacceptable to Feature Corp. The negotiations for a standstill agreement were never resolved.

[18] Meanwhile, MZ had information requests that remained outstanding. It had asked but not received: (a) the notices of assessment required by the Initial Funding Conditions; (b) a corporate opinion; (c) a detailed project schedule to demonstrate the viability of the project; and (d) details on a construction lien registered by one of Ideal’s companies.

[19] On January 18, 2019, Ideal threatened to pursue its rights and remedies in law and equity against MZ, if MZ did not agree to amend the postponement, subordination and standstill agreement in accordance with Ideal's requests.

[20] On January 22, 2019, Ideal advised that it would pay the lender fee if among other things: (a) interest accrued from the date of the loan; and (ii) MZ provided its written consent to the $2.0 million increase of the mortgage that was to be the subject of the subordination agreement.

[21] On January 23, 2019, MZ’s counsel sent the Ideal Developments’ lawyers a letter. The letter states in part:

…the Lender is hereby terminating the Commitment Letter effective immediately and in accordance with the terms thereof …. we have been advised by our client that the [Defendants] have not met the Initial Funding Conditions set out in Part II, Section 2.1 therein.

[22] It is Ideal’s position that MZ’s termination of the Commitment Letter was unlawful. In particular MZ submits that section 5 of the Commitment Letter required MZ to give Ideal: (a) written notice of the alleged defaults as well as, (b) a 30-day cure-period to cure the defaults

[23] On January 24, 2019, the First Source mortgage went into default. First Source appointed a Receiver to sell the mortgaged property.

[24] Ideal regarded the termination of the Commitment Letter as a repudiation or fundamental breach of contract, and on January 23, 2019, Ideal wrote MZ and advised it that Ideal was treating the agreement at an end and would sue MZ for damages. The letter to MZ’s lawyer stated:

As a result of your client’s wrongful termination of the Commitment Letter, our clients elect to disaffirm the Commitment Letter and pursue their claims against your client for all damages arising from your client’s wrongful termination of the Commitment Letter.

[25] Ideal ultimately secured replacement financing from Romspen Investment Corp. and Amercan Corp. Ideal was then able to discharge the First Source receivership.

[26] In its claim, MZ seeks $508,071.09 in damages comprised by:

a. Standby Interest $101,958.82 b. Lender's Fee less $50,000 Good Faith Deposit $346,000.00 c. Robert Harder Consulting Inc. (Invoice No. 1404) $3,107.50 d. CTR Invoices $7,728.30 e. Cassels Brock & Blackwell LLP, $2,000.00 f. Chaitons LLP, $47,112.27

[27] In its counterclaim, Ideal alleges that it incurred expenses as a result of MZ’s wrong full termination of the Commitment Letter. It says there were significant costs incurred because of the receivership and in securing the new replacement financing. Ideal claims that its damages total $1,280,453.56 plus interest and legal costs.

C. Is the Case Appropriate for a Summary Judgment?

[28] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: “the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.” With amendments to Rule 20 introduced in 2010, the powers of the court to grant summary judgment have been enhanced. Rule 20.04 (2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[29] In Hryniak v. Mauldin [1] and Bruno Appliance and Furniture, Inc. v. Hryniak [2], the Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record, without using the fact-finding powers introduced when Rule 20 was amended in 2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting a summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[30] If, however, there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the powers under rules 20.04 (2.1) and (2.2). As a matter of discretion, the motions judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use will lead to a fair and just result and will serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole. To grant summary judgment, on a review of the record, the motions judge must be of the view that sufficient evidence has been presented on all relevant points to allow him or her to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the issues in the case. [3]

[31] Although in Hryniak v. Mauldin, the Supreme Court of Canada commanded a very robust summary judgment procedure, it did not foreclose lower courts from simply dismissing the summary judgment motion and ordering that the action be tried in the normal course. [4]

[32] Where there are genuine issues for trial and the lower court concludes that employing the enhanced forensic tools of the summary judgment procedure would not lead to a fair and just determination of the merits, the court should not decide the matter summarily. [5]

[33] In Baywood Homes Partnership v. Haditaghi [6] and Trotter v. Trotter [7], the Court of Appeal stated that when conflicting evidence is presented on factual matters, a motions judge is required to articulate the specific findings that support a conclusion that a trial is not required.

[34] In Baywood Homes Partnership v. Haditaghi and in other cases, courts have held that although a court on a summary judgment motion is empowered to make credibility findings, the court should be cautious in exercising that power to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all. [8]

[35] In 1615540 Ontario Inc. (c.o.b. Healing Hands Massage Therapy Clinic) v. Simon [9], the Court of Appeal stated that where the evidence in the record establishes a clear conflict, it is incumbent on a summary judgment motions judge to consider expressly whether the powers provided under the summary judgment rules are to be deployed in resolving the conflict. Judges deciding summary judgment motions must provide meaningful reasons capable of appellate review explaining their decision and providing some insight into how the legal conclusion was reached and what facts were relied upon in reaching that conclusion. [10]

[36] Thus, to grant a summary judgment, the motions judge must do all of: (1) determine whether there is a genuine issue requiring a trial; (2) determine whether he or she can decide the genuine issues using the fact-finding resources of the summary judgment rule; (3) employ the fact-finding resources to decide the genuine issues; (4) identify and explain the specific findings that support the conclusion that a trial is not required; and, finally, (5) provide meaningful reasons capable of appellate review explaining the decision and providing some insight into how the legal conclusion was reached and what facts were relied upon in reaching that conclusion. Which is all to say that to grant a summary judgment, a judge must not only decide the matter summarily but also justify and explain to the losing party in some detail why it was appropriate to decide the factual and credibility issues summarily.

[37] A cross-motion for summary judgment is not required when the court can decide the issue that is the subject matter of the motion for summary judgment. [11] On a summary judgment motion, a successful respondent cannot choose to have a trial; where a motion for a summary judgment leads to the conclusion there is no genuine issue for trial, the adverse party should be granted judgment [12]

[38] In the immediate case, there was no meaningful dispute that the case was not appropriate for a summary judgment about whether or not there had been a proper termination of the Commitment Letter. MZ sought such a judgment, and Ideal’s position was that it should be granted a partial summary judgment on this issue

[39] Thus, the genuine issue that both parties thought suitable for a summary judgment was whether: (a) MZ’s termination of the Commitment Letter was lawful, in which case it would be entitled to certain payments under the Commitment Letter; or (b) an unlawful termination, in which case, Ideal would have a claim for breach of contract, for which it sought a partial summary judgment. I have more than an adequate evidentiary record to decide this issue and it is a fair and proportionate way to proceed.

[40] Ideal submitted, however, that should I decide the termination issue in MZ’s favour, I should not decide summarily the amount of MZ’s damages. Ideal submitted that there were genuine issues requiring a trial in this regard. I disagree, once again, there is an adequate evidentiary record and quantifying MZ’s damages is, like the issue associated with the termination of the Letter Agreement, largely a matter of interpreting the Commitment Letter.

[41] In short, the case is appropriate for a summary judgment.

D. Discussion and Analysis

[42] Ideal’s defence to MZ’s action and the basis of Ideal’s counterclaim is that MZ unlawfully terminated the loan transaction because it did not provide notice to allow Ideal to cure the default in meeting the initial funding conditions under section 2.1 of the Commitment Letter. Ideal submits that MZ did not provide due notice or the required cure-period. In particular, MZ submits that section 5 of the Commitment Letter required MZ to give Ideal; both (a) written notice of the alleged defaults; and also, (b) a 30-day cure-period to cure the defaults.

[43] A corollary to Ideal’s argument is that the Cancellation Provision of the Letter Agreement does not override Section 5.1’s requirement for notice and a cure-period. Thus, Ideal further submits that the Cancellation Provision did not become operative or applicable.

[44] Moreover, Ideal submits that if there is any ambiguity in the operation of the Cancellation Provision, then in accordance with the contra proferentum rule, [13] the term should be interpreted against MZ, which was the author of the Commitment Letter.

[45] While the Commitment Letter is far from plainly written and while both parties were inconsistent or confusing in their use such terms as cancellation, termination, default, breach, condition, and conditional, in my opinion, Ideal’s argument that s. 5.1 governs what happened in the immediate case is incorrect. The Cancellation Provision operated. There were no defaults that triggered the operation of s. 5 of the Commitment Letter.

[46] Although MZ from time to time used the language of default and termination (and contracts can be terminated for default), in the immediate case, MZ actually cancelled the contract pursuant to the cancellation provision, which stated:

Cancellation: The Lender may on demand require immediate payment of all amounts outstanding or accrued in connection with this Commitment. The Lender may at any time for any reason and without notice, cancel the undrawn portion of the Loan Advance.

[47] I see no ambiguity and no need or reason as a matter of contract interpretation to make the cancellation provision subject to s. 5.1 (Events of Default) of the Commitment Letter.

[48] Although, informally speaking there is not much difference from cancelling or terminating something, legal speaking, cancellation is more like rescission, which does not involve a breach of a contract. Rescission can arise as a matter of the contract, and the contracting parties can specify the consequences of ending the contract.

[49] In contrast, legally speaking, termination is a consequence of a breach of contract where the innocent party ends the unperformed contract promises and claims damages.

[50] In the immediate case, notwithstanding the loose language of the parties, there was no default that would trigger a right to damages as a consequence of a breach of contract, and the provisions of s. 5.1 were not triggered. The operative provision was the Cancellation Provision.

[51] What happened in the immediate case is that MZ exercised the Lender’s right under the Cancellation Provision “at any time for any reason and without notice, cancel the undrawn portion of the Loan Advance.”

[52] Read literally, the Cancellation Provision required MZ to have a reason for the cancellation and its expressed reason was that Ideal had not satisfied the Initial Funding Conditions. Section 2.1 of the Commitment Letter provided that MZ shall not be required to advance any funds prior to Ideal having fulfilled to the Lender's satisfaction the funding preconditions.

[53] Although MZ speaks of Ideal defaulting with respect to the Initial Funding Conditions, more felicitous and legally accurate language is that Ideal had not satisfied the pre-conditions for the loan. More importantly, by January 22, 2010 it was apparent that Ideal would not or could not satisfy the pre-conditions.

[54] Ideal probably could have satisfied the requirements about providing information, but the negotiations over whether MZ would consent to the additional financing and about what would be the terms of the postponement, subordination and standstill agreement had reached a dead-end, which was a very serious impediment to going forward with the loan for both parties.

[55] Further, Ideal would not or could not fix the problem with respect to the LTV Ratio.

[56] Pursuant to the Cancellation Provision, which the parties had negotiated, MZ had the right to cancel, which it did. Then, also in accordance with the Cancellation provision, MZ “may on demand require immediate payment of all amounts outstanding or accrued in connection with this Commitment,” which is what MZ did on January 23, 2019 and which it does again by this summary judgment motion.

[57] Pausing here, the above conclusions entail that Ideal’s counterclaim must fail. MZ did what it was entitled to do under the Commitment Letter. It did not breach the Commitment Letter. There are no genuine issues that require a trial in the Counterclaim, and Ideal’s action by way of a counterclaim should be dismissed.

[58] The Commitment Letter in the Cancellation Clause spelled out the consequences of what should happen in the circumstances of a cancellation; that is: MZ may on demand require immediate payment of all amounts outstanding or accrued in connection with this Commitment. Under the Commitment Letter, Ideal shall pay Lender Fees. In this regard, on this summary judgment motion MZ makes three claims; namely (1) Expenses, (2) Lender Fee; and (3) Standby Interest.

[59] Under the Commitment Letter, Ideal shall pay MZ all reasonable expenses including the cost of any third-party reports and all legal costs

[60] The Expenses Claim is for $60,112.27 comprised of: (a) Robert Harder Consulting Inc., $3,107.50; (b) CTR, $7,728.30; (c) Cassels Brock & Blackwell LLP, $2,000.00; and (d) Chaitons LLP, $47,276.47. This claim is recoverable by MZ pursuant to the Cancellation Provision.

[61] Under the Commitment Letter, Ideal shall pay MZ the Lender Fee of $396,000 less the Good Faith Deposit of $50,000; that it, Ideal shall pay $346,000. This claim is recoverable by MZ pursuant to the Cancellation Provision.

[62] Under the Commitment Letter, Standby Interest was payable in certain circumstances. The Standby Interest Provision stated:

Standby Interest: In the event that the Loan has not been fully advanced by December 5, 2018 or for any reason other than a default by the Lender, interest will commence on the advance date established herein for such advance, in the form of standby interest ("Standby Interest") on any unadvanced portion of the Loan and will become due and payable on the date the Loan is advanced or upon the termination of this Commitment Letter without any advances having been made.

[63] As may be observed pursuant to the Standby Interest Provision, the Standby Interest is payable upon the termination of the Commitment Letter without any advances having been made. In the immediate case, there was a “Lender Advance” as that term is defined in the Commitment Letter for the purposes of the commencement date for the charging of interest on the full loan, but the loan was not fully advanced to Ideal by the closing date and Standby Interest became payable. There never was a full advance to or a draw by Ideal, but pursuant to the Standby Interest Provision, the Standby Interest became payable upon the termination of the Commitment Letter.

[64] MZ has proven that the calculation of the Standby Interest is $101,958.82 and this claim is recoverable by MZ pursuant to the Cancellation Provision.

[65] In the result, MZ is entitled to: (a) a summary judgment against Ideal in the amount of $508,071.09; (b) a summary judgment dismissing Ideal’s counterclaim; and (c) its costs of the action and motion on a partial indemnity basis.

[66] I do not grant a declaration that MZ is entitled to an equitable charge/mortgage to be registered against title to the lands. The matter was not argued in the factums of the parties.

E. Conclusion

[67] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the submissions of MZ within twenty days of the release of these Reasons for Decision, followed by Ideal’s submissions within a further twenty days.

Perell, J.

Released: March 11, 2020

COURT FILE NO.: CV-19-614363 DATE: 2020/03/11 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: MARSHALLZEHR GROUP INC. Plaintiff (Defendant by Counterclaim) - and - IDEAL (BC) DEVELOPMENTS INC., IDEAL (BC2) DEVELOPMENTS INC., 2490568 ONTARIO INC., 2490564 ONTARIO INC., IDEAL DEVELOPMENTS INC. and SHAJIRAJ NADARAJALINGAM Defendants (Plaintiffs by Counterclaim)

REASONS FOR DECISION

PERELL J. Released: March 11, 2020

[1] 2014 SCC 7.

[2] 2014 SCC 8.

[3] Campana v. The City of Mississauga, 2016 ONSC 3421; Ghaeinizadeh (Litigation guardian of) v. Garfinkle Biderman LLP, 2014 ONSC 4994, leave to appeal to Div. Ct. refused, 2015 ONSC 1953 (Div. Ct.); Lavergne v. Dominion Citrus Ltd., 2014 ONSC 1836 at para. 38; George Weston Ltd. v. Domtar Inc., 2012 ONSC 5001.

[4] Gubert v. 1536320 Ontario Limited, 2015 ONSC 3294.

[5] Mitusev v. General Motors Corp., 2014 ONSC 2342 at para. 79; Gon (Litigation Guardian of) v. Bianco, 2014 ONSC 65 at paras. 41-47; Yusuf v. Cooley, 2014 ONSC 6501; Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 at para. 44.

[6] 2014 ONCA 450.

[7] 2014 ONCA 841.

[8] Abuajina v. Haval, 2015 ONSC 7938 at paras. 25-34; Gino L Arnone Professional Corp. v. Hacio, 2015 ONSC 5266; Trotter v. Trotter, 2014 ONCA 841.

[9] 2016 ONCA 966.

[10] Read Jones Christoffersen Ltd. v. Neilas Inc., 2016 ONCA 321.

[11] King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215 (Ont. C.A.), aff’g 2013 ONSC 6113.

[12] Kassburg v. Sun Life Assurance Co. of Canada, 2014 ONCA 922.

[13] Ideal relied on: Manulife Bank of Canada v. Conlin, [1996] 3 SCR 415 and Hillis Oil and Sales Ltd. v. Wynn's Canada Ltd., [1986] 1 S.C.R. 57.