Court File and Parties

CITATION: York Bremner Developments Limited v. FHR Properties Inc., 2008 ONCA 308

DATE: 20080423

DOCKET: C47833

COURT OF APPEAL FOR ONTARIO

SHARPE, GILLESE and BLAIR JJ.A.

BETWEEN:

YORK BREMNER DEVELOPMENTS LIMITED

Applicant (Appellant)

and

FHR PROPERTIES INC.

Respondent (Respondent in Appeal)

John A.M. Judge and Meagan Blake for the appellant

Awanish Sinha for the respondent

Heard and released orally: April 21, 2008

On appeal from the judgment of Justice Beth Allen of the Superior Court of Justice dated September 14, 2007

ENDORSEMENT

[1] This appeal arises from a commercial land transaction between the appellant and purchaser, York Bremner Developments Limited (“York Bremner”), and the respondent and vendor, FHR Properties Inc. (“FHR”). In July 2006, FHR transferred the property to York Bremner, who granted FHR a Charge by means of a two year Vendor Take Back Mortgage. The appeal involves the interpretation of paragraphs 2 and 3 of the Vendor Take Back Mortgage agreement. Paragraph 2 reads:

Provided that this Charge will mature and be repaid in full at the expiry of the Term from the Closing Date. Interest on the principal amount owing is payable and due under the Charge, semi-annually at the rate of 2% per annum. On the date the Charge is due and payable, the principal amount thereunder shall be reduced by the amount of One Million Five Hundred Thousand dollars ($1,500,000) (the “Reduction Amount”). There will be no interest computed and payable on the Reduction Amount portion of the principal under this Charge. Notwithstanding the foregoing, the amount owing under the Charge will become due and payable five (5) days after the Chargor obtains a shoring and excavation permit for the lands. [Emphasis added.]

[2] The “shoring and excavation permit” refers to a document issued by the City of Toronto. Such a permit is required to conduct work to remedy a problem with pipes and equipment installed by the City that block access to a service tunnel on the property. The application judge noted that the idea behind para. 2 was that once York Bremner had obtained this permit, it was prepared to begin construction, anticipated that alternative financing would become available and render the Vendor Take Back Mortgage unnecessary.

[3] Paragraph 3 of the VTBM states:

The Charge shall be open to prepayment. Such prepayment may only be made in full and on the fifteenth day of January and the fifteenth day of July of each year of the Term. In the event the Purchaser makes a prepayment in accordance with this Section 3, the principal amount will be reduced by an amount equal to interest calculated on such principal amount for the period of the Term otherwise remaining, which interest will be calculated at the prime rate posted by Canadian Imperial Bank of Commerce on the date of such prepayment less 2% calculated on the same basis as the interest payable on the Charge. [Emphasis added.]

[4] York Bremner applied for the shoring and excavation permit in September 2006. Then, in early December 2006, York Bremner advised FHR that it intended to exercise the repayment option under para. 3 at the first possible date, namely, January 15, 2007. On that date, York Bremner tendered payment for the amount that was outstanding under the Charge after taking into account the deductions contemplated by both paras. 2 and 3. Unknown to both parties at the time, the City had already issued the permit on January 10, thereby making the Charge due and payable pursuant to para. 2 on the same day as York Bremner intended to exercise the prepayment option under para. 3.

[5] The application judge accepted the respondent’s submission that the appellant was not entitled to exercise the prepayment option under para. 3 of the Charge and ruled accordingly.

[6] We agree with the result reached by the application judge. In our view, the effect of the issuance of the permit on January 10 was to trigger, pursuant to para. 2, maturity of the mortgage and the obligation to pay the “amount owing under the Charge” five days later, on January 15. As the mortgage had matured and become due and payable on January 15, it could not be prepaid on that date and, therefore, para. 3 simply had no application. Accordingly, we do not accept the submission that the application judge erred by failing to harmonize paras. 2 and 3. On the facts, there was no disharmony between those two provisions. Given the issuance of the permit and the consequent operation of para. 2, para. 3 simply did not apply. As the application judge concluded, at para. 38 of her reasons, the type of payment contemplated by para. 3 “by its nature must be made before a maturity payment is due and payable. That did not occur in this case.”

[7] Accordingly, the appeal is dismissed. Costs to the respondent fixed at $11,060.18 inclusive of disbursements and GST.

“Robert J. Sharpe J.A.”

“E.E. Gillese J.A.”

“R.A. Blair J.A.”