DATE: 20050211

DOCKET: C41071

COURT OF APPEAL FOR ONTARIO

RE:

MILLGATE FINANCIAL CORPORATION LIMITED (Plaintiff/Appellant) – and – BF REALTY HOLDINGS LIMITED, BCE INC., CARENA DEVELOPMENTS LIMITED, PARTNERCO EQUITIES LTD., BROOKFIELD DEVELOPMENT CORPORATION, GORDON E. ARNELL, WARREN CHIPPINDALE, JACK COCKWELL, JOSEF J. FRIDMAN, WILLARD J. L'HEUREUX, ROBERT E. KADLEC, JOHN R. MCCAIG, ALLAN S. OLSON, JOHN A. RHIND, J. STUART SPALDING, KEVIN BENSON, C. WESLEY M. SCOTT, J. V. RAYMOND CYR, A. JEAN de GRANDPRE, LYNTON R. WILSON, HENRY A. ROY, GERALD T. MCGOEY and NATIONAL TRUST COMPANY (Defendants/Respondents)

BEFORE:

WEILER, MOLDAVER and SIMMONS JJ.A.

COUNSEL:

Robert K. Stephenson

for the appellant Millgate Financial Corporation Limited

Andrew D. Gray

for the respondent BF Realty Holdings Limited

Elizabeth Pillon

for the respondents Carena Developments Limited, Partnerco Equities Ltd., Arnell, Cockwell, L’Heureux and Benson

Edward J. Babin

for the respondent Brookfield Development Corporation

Mark A. Gelowitz

for the respondents Olson, Kadlec, McCaig and Rhind

HEARD:

January 12, 2005

On appeal from the judgment of Justice Maurice Cullity of the Superior Court of Justice dated November 12, 2003, reported at [2003 ONSC 39497](https://www.canlii.org/en/on/onsc/doc/2003/2003canlii39497/2003canlii39497.html), [2003] O. J. No. 5555 (S.C.J.).

E N D O R S E M E N T

[1] This appeal stems from the appellant’s attempt to enforce its security in certain convertible subordinated debentures against the respondent Brookfield Development Corporation (“Brookfield”). The debentures were issued by the respondent BCED (BF Realty), of which Brookfield was a wholly owned subsidiary. The appellant brought a motion for summary judgment against the respondent Brookfield to enforce its security. This motion was dismissed. The appellant appeals from this dismissal. While ordinarily, the dismissal of a motion for summary judgment is an interlocutory order, in the circumstances of this case the parties agreed to amend the order to reflect the point of law finally decided. The order as amended reads:

This Court orders and adjudges as a matter of law that the word “Company” as it appears in s. 7.01 of the Trust Indenture refers to BCED (BF Realty) and any successors who will have complied with the provisions of Article IX. It does not include Brookfield and, in consequence, it imposes no obligation on Brookfield to make payments under the debentures.

[2] Following oral argument we reserved this matter in order to consider the positions advanced by the parties. Having done so, we are of the opinion that the motions judge did not err in his interpretation of the trust indenture. We agree that the term “Company” in Article VII, section 7.01 should not be interpreted as including the wholly owned subsidiaries of BCED.

[3] In an earlier trial decision involving the same parties, reported at [2000] O.J. No. 2487 (S.C.J.), Cumming J. held that the term “Company” in Article IX, section 9.01 of the Trust Indenture did include the wholly owned subsidiaries of BCED. On appeal from his decision, this Court decided it was unnecessary to uphold Cumming J.’s interpretation of the word “Company” in determining that the transactions in issue did not breach Article IX (appeal reported at (2002), 2002 ONCA 44954, 214 D.L.R. (4th) 121 (C.A.). While Article IX could have been worded more clearly, we agree with the respondent that it was designed to assist the bondholders. However, because Cumming J.’s interpretation was context driven, it should not be viewed as determining the meaning of the word “Company” throughout the document.

[4] The point is illustrated in Article VI. Article VI section 6.01(2) allows the debentures to be converted into common shares of the “Company” at a price of $4.80 per common share subject to adjustment as set forth in s. 6.04. Section 6.04(7)(d)(ii) states in part:

(d) for the purposes of subsections 6.04(2) there will be deemed not to be outstanding (iii) any Common Share owned by or held for the account of any Wholly-Owned Subsidiary Company.

Brookfield was a wholly-owned subsidiary of BCED until January 20,1995. The word “Company” as used in these sections of the 1988 Trust Indenture can only mean BCED and would not include its wholly owned subsidiary Brookfield.

[5] Consequently, we would not give effect to the appellant’s argument that the principles of res judicata and issue estoppel bound Cullity J. Nor is it necessary to ascribe the meaning to the document that the appellant suggests in order for it to make commercial sense. We would not interfere with Cullity J.’s decision.

[6] The issue of the appellant bondholders’ standing, while raised in their factum, was not raised in oral argument. However, given our conclusion, it is unnecessary for us to deal with this issue.

[7] Accordingly the appeal is dismissed with costs to the respondents fixed in the agreed amount of $10,000 in total all inclusive.

“Karen M. Weiler J.A.”

“M. J. Moldaver J.A.”

“Janet Simmons J.A.”