1299362 B.C. Ltd. v. Marine Investments Inc.

2021 BCSC 2569 1299362 B.C. Ltd. v. Marine Investments Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: 1299362 B.C. Ltd. v. Marine Investments Inc., 2021 BCSC 2569 Date: 20211222 Docket: H210091 Registry: Vancouver Between: 1299362 B.C. Ltd. Petitioner And Marine Investments Inc., Marine 2 Investments Inc., Marine 3 Investments Inc., Living Marine Development Limited Partnership, Living Marine 2 Development Limited Partnership, Port Capital Development (Marine) Inc., Port Capital Development (Marine 2) Inc., Port Capital Development Inc., Port Capital Group Inc., Macario Teodoro Consunji Reyes, 1219134 B.C. Ltd., 1260780 B.C. Ltd., Sea Investments Ltd., Lonnie Roy, Philip Raagner, Jong Jang, Jaydee Bunagan, Bryan Bravo, Anne Shen, Amanda Godfrey, Hugh Yu, Rex Lai, Greg Hastings, Rohain Arora, Adam Skinner, Ling Ma, Antoni Wojtra, Homan Kwan, Karolyn Jackson, Don Scott, Mildred Ramos, Alex Mendoza, Marinel Soliva, Serg Maghalian, Blanine Masudi, Jesse Benson, Marco Wong, Dennis Wong, Eugenia To Respondents Before: The Honourable Mr. Justice Skolrood Oral Ruling Re Appeal of a Master's Order and Application to Extend a Redemption Period (In Chambers) Counsel for the Petitioner appearing via videoconference: P.J. Reardon Counsel for the Respondents, Marine Investments Inc., Marine 2 Investments Inc., Marine 3 Investments Inc., Living Marine Development Limited Partnership, Living Marine 2 Development Limited Partnership, Port

Capital Development (Marine) Inc., Port Capital Development (Marine 2) Inc., Port Capital Development Inc., Port Capital Group Inc., and Macario Reyes appearing via videoconference: R. Clark, QC Counsel for the Respondent, 1219134 BC Ltd. appearing via videoconference: T.M. Chan Place and Date of Hearing: Vancouver, B.C. December 21 and 22, 2021 Place and Date of Ruling: Vancouver, B.C. December 22, 2021 [1] THE COURT: There are two matters before the court in this foreclosure proceeding. The first is an appeal from a decision of a master dated November 22, 2021, granting an order extending the redemption period to December 16, 2021, and a further order conditionally extending the redemption period to February 8, 2022. The further extension order was subject to certain steps being taken in a proposed sale of the subject property. Pursuant to the master's order, if the requisite steps, specifically the payment of certain deposits, were not completed by September 21, 2021, the petitioner was entitled to file an order absolute without the need for further application or court order. [2] The second application is brought by a number of respondents who have legal or beneficial ownership interests in the subject property, referred to collectively as Living Marine. They seek an order further extending the redemption period. Background [3] I do not intend to canvass the background

facts as they are set out in some detail in the master's reasons for judgment (1299362 B.C. Ltd. v. Marine Investments Inc., 2021 BCSC 2356). I will, however, touch upon those facts most pertinent to the current applications. [4] The subject property (the "Property") is a large development site located in the vicinity of Cambie Street and Southwest Marine Drive in Vancouver. It currently comprises three adjacent multifamily residential buildings. It is apparent from the record that the proposed redevelopment of the site has been beset by financial issues. The Property is heavily mortgaged, and there have been a number of foreclosure proceedings commenced. [5] Without going into detail about all of those proceedings, the most relevant circumstances, for our present purposes, are as follows. The petitioner before the master, and a respondent in the present appeal, 1299362 BC Ltd. ("129"), currently holds the fourth mortgage registered against the Property. It took an assignment of that mortgage from the original mortgagee, Robert Lee Ltd. The first three mortgages are held by a company called BCMP Mortgage Corporation ("BCMP"). [6] The appellant in the present appeal, 1219134 BC Ltd. ("121"), holds the fifth mortgage on the Property and ranks third in priority behind BCMP and 129. There are further encumbrances registered against title to the Property ranking in priority behind

121. As noted, various foreclosure proceedings have been commenced, including by each of BCMP, Robert Lee Ltd., (now 129) and 121. On August 30, 2021, 121 obtained an order nisi with a one‑day redemption period and exclusive conduct of sale of the Property. On September 9, 2021, 129 obtained an order nisi by consent with a six‑week redemption period expiring on October 23, 2021. [7] Throughout the relevant period, the principals of 121 have been exploring options for selling the Property, and on September 21, 2021, an agreement of purchase and sale was entered into with Stanton Development Ltd. at a proposed price of $72 million (the "Stanton Offer"). There were subsequent negotiations that led to an increase in the proposed purchase price to $77 million and a proposed completion date of January 31, 2022. The agreement had certain conditions attached to it with certain milestones for completion. The circumstances of this agreement, including the conditions, are what in large part led to the application before the master. [8] There were two applications before the master, one by 129 for an order absolute of foreclosure and the second by Living Marine seeking an extension of the redemption period. The Living Marine parties were supported in their application by 121. [9] Following the hearing of the two applications, the master made the order currently under appeal. In his reasons

for judgment, the master said the following: [42] The first question is whether there is a reasonable prospect of payment. Second is does the property have sufficient value by way of security for the amount outstanding. [43] The Stanton offer is really the only potential event on the horizon which offers any prospect that the petitioner will be paid out within the proposed extended redemption period. 1219134 B.C. Ltd. suggested that if the Stanton offer does not proceed, the proposed extended redemption period would afford some additional time to market the property to a realtor. When assessing this submission, I note that 1219134 B.C. Ltd. has had court ordered conduct of sale for a considerable time, but has chosen to pursue discussions with Stanton rather than arranging a broader exposure of the property to potential purchasers. Given that a listing process would not get started until after the revised Stanton offer as definitively terminated, I do not view a short listing that would follow to hold out a likelihood of resulting in a binding agreement at a price similar or superior to the Stanton offer by February 15, 2022. [44] I am prepared to accept that the Stanton offer is serious and it has been in the works for some time. This appears consistent with Stanton being motivated to purchase the property. It is concerning that its revised offer at $77,000,000 remains

conditional on it arranging financing, and this will continue until December 16, 2021. [45] There is evidence that a $500,000 initial deposit has been paid to its solicitor; however, those funds are not yet "at risk" and available to the various mortgagees. To borrow counsel's terminology, Stanton does not yet have any financial "skin in the game". I also do not have evidence which provides any indication of how likely or not Stanton is to be able to raise the necessary financing in the time available. If that financing can be secured, the January 31, 2022 completion date seems a remarkably short time frame in which to complete a transaction of this scope and complexity. That said, this does appear to be a real offer, and if events unfold as the applicants desire, there would be sufficient funds available to fully pay out the first through fourth mortgages. [46] I have concluded that it is appropriate to allow some additional time to determine whether Stanton removes the financing condition on its agreement of purchase of sale as modified by the revival agreement and pays the full deposit, which includes the initial deposit of $500,000 plus additional deposit of $2,500,000, for a total of $3,000,000. The agreement provides that Stanton has three business days after removing the financing condition, which is until December 21, 2021, to place the additional deposit in trust with

its solicitors. [10] The master then set out the terms of the order as follows: a) The redemption period is extended to December 16, 2021. b) If the financing condition is removed from the Stanton contract of purchase and sale as amended, making it firm and binding, and if Stanton pays the additional deposit of $2,500,000 in trust to its solicitors by December 21, 2021 in accordance with the terms of that agreement, the redemption period will be further extended until February 8, 2022, to allow time for the sale to complete. c) If the financing condition is not removed from the Stanton contract of purchase and sale as amended, or if it fails to pay the additional deposit of $2,500,000 in trust to its solicitors by December 21, 2021, then the petitioner will be granted an order absolute of foreclosure which can be filed on or after the earlier of the two dates being missed [that is either the subject to financing not being removed or the additional deposit not being paid] without further order. d) An affidavit setting out proof of removal of the financing condition and payment of the additional deposit to Stanton's solicitors in trust must be filed forthwith after those events have been satisfied. [11] I note that none of the parties before the master sought an order in these terms. 129 sought the immediate granting of an order absolute whereas Living Marine sought an extension

of the redemption period. It is apparent from the record that counsel was somewhat caught off guard and required further direction from the master on how to proceed. Then counsel for 129, an experienced insolvency practitioner, described the order as "somewhat new circumstances for me." I will return to the relevance of this observation shortly. [12] As discussed, the master's order led to the two matters before me, the first being the appeal by 121 and the second being the application by Living Marine for a further extension of the redemption period. The 121 Appeal [13] I will deal first with the 121 appeal. [14] Before turning to the grounds of appeal, it is necessary to touch briefly on the standard of review. The standard of review from a master's order depends upon the nature of the order. Where the order is a final order or where it raises questions which are vital to the final issue, then an appeal from that decision is a rehearing on the merits, and the presiding judge may substitute his or her own views and assessment of the evidence for that of the master: see Abermin Corp. v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188. Where the order is truly interlocutory in nature the appellant must establish that the order was "clearly wrong": see Fat Mel's Restaurant Ltd. v. Canadian Northern Shield Insurance Co. (1993), 76 B.C.L.R. (2d) 231 at para. 13. [15] 121

submits that because the master's order granted a final order absolute, the proper standard is the hearing de novo standard, citing Kokanee Mortgage MIC Ltd. v. 669655 B.C. Ltd., 2014 BCSC 458, at paras. 14-15. [16] 129 submits that the standard of review is the "clearly wrong" test because the fundamental issue before the master was whether an extension of the redemption period should be granted, a decision that is subject to the clearly wrong standard: see Imor Capital Corp. v. Bullet Enterprises Ltd., 2014 BCSC 2540, at para. 5. [17] While I tend to favour the position of 129, for reasons that I will come to, not much turns on the applicable standard of review. [18] Turning then to the grounds of appeal, 121 raises two points of alleged error on the part of the master. First, the master erred in law in granting what amounts to a conditional order absolute; and second, the master erred in fact or mixed fact and law by making incorrect findings, drawing incorrect inferences or making findings not supported by the evidence. As a result, he misapplied the test for granting an extension of the redemption period. [19] Living Marine supports 121 in its appeal, although it approaches the issue on a slightly different footing. It submits that the master erred in making a guillotine order, meaning an order that comes into effect automatically if certain events happen, or in this case,

do not happen. Living Marine submits that such an order is not appropriate or available in the case of an order absolute, which requires the court to exercise a discretion based upon relevant factors and evidence at the time the order absolute is made. [20] 129 submits that it was open to the master to make the order he did, and that he did so on the evidence before him at the time of the applications. [21] I will deal first with the second ground of appeal raised by 121. In my view, that ground has no merit. I am satisfied that the master carefully and properly considered the evidence before him and drew proper conclusions from that evidence. [22] One of 121's principal complaints is that the master did not adequately consider appraisal evidence suggesting a much higher value for the Property, specifically, an appraisal by LW Property Advisors that suggested a value of $90 million. In fact, the master did consider that appraisal and quite fairly described it as being based on "pure speculation," something that is apparent from even a cursory review of the appraisal. [23] 121 further submits that the master failed to properly consider ongoing marketing efforts in respect to the Property. Again, I disagree. The master was called upon to make a decision based on the evidence before him, and in my view, he rightly concluded that the only realistic sale option before the court was

the Stanton Offer. Indeed, it was the fact of that proposed sale that formed the basis for Living Marine's application to extend the redemption period. The master was also very concerned about the likelihood of that transaction actually proceeding but was prepared to give the parties some time to firm it up. Hence the order he granted. [24] In my view, he did not err in granting an extension of the redetermine period tied to the key milestones in the Stanton Offer. [25] Turning to the first ground of appeal, that the master erred in granting what was in effect a conditional order absolute, or as Living Marine described it, a guillotine order, there appears to be minimal case law directly on point. [26] 121 cites the decision of Justice McLachlin, as she then was, in Bank of Montreal v. Brett, 1984 CanLII 859 (B.C.S.C.), where she was called upon to consider a term of an order of foreclosure that provided upon expiry of the redemption period, in the event of ongoing default, the respondents were "absolutely debarred and foreclosed of" all rights and title in the subject property. The issue before Justice McLachlin was whether that was in the form of a final order. [27] Justice McLachlin noted at paras. 5 and 7: [5] It has long been established that notwithstanding the unqualified language traditionally used in orders nisi of foreclosure, a further application for an order

absolute is required at the expiry of the redemption period to finally and absolutely foreclose the mortgagor of his rights. Thus in Collinson v. Jeffery, [1896] 1 Ch. 644 at 647, it was stated: The form of the order in a redemption action is that if the money is not paid by a certain time "let this action from thenceforth stand dismissed out of this Court." No doubt, there is great difficulty in dealing with the action after the time for payment has expired when peremptorily fixed; yet it is not the practice to say that the action is dead, for it is necessary in this and other analogous cases to make a further application in order to obtain the absolute dismissal of the action. There is another form of order available and appropriate where the imposed -- namely, that on failure to do certain acts within a specified time then "the action do stand dismissed without further order." [7] The Supreme Court Rules, 1976, do not use the term "order absolute" found in s.

28. However, the phrase "final order" used in R. 50(5)(a) and (6) is the equivalent of "order absolute". "Absolute" may be defined as "unqualified", or "unconditional": The Concise Oxford Dictionary, new ed. (1964). Those words accurately describe a "final order" of foreclosure under R.

50. They do not, by contrast, describe an order such as that under consideration here which fixes a redemption period in which the mortgagor may redeem his property by payment of the amount due under the mortgage together with costs. Such an order is, by the applicant's admission, conditional and qualified. A further order is required to finally and absolutely determine the parties' rights. [28] As indicated, Living Marine submits that the conditional order issued by the master was an error because it constituted a guillotine order that is inappropriate in foreclosure matters, particularly in respect of orders absolute. Living Marine cites a number of cases in which the courts have been critical of the use of such orders, albeit not in a foreclosure context: see for example, Global Banking Systems Inc. v. Datawest Solutions Inc., 2006 BCCA 577. Living Marine also cites a number of cases emphasizing the importance of the equity of redemption: for example, Chien v. Teh, 2015 BCSC 2287. Living Marine submits that the master's order amounted to an improper attempt to limit the right of redemption. [29] 129 does not take issue with the requirement that a separate application be brought for an order absolute after the expiry of the redemption period set by way of an order nisi. In fact, it says that is exactly what happened here. When faced with the competing application to extend

the redemption period, the master was prepared to grant an extension for the purpose of permitting the Stanton Offer to complete, failing which there was no basis for a further extension and the order absolute should be granted. It is apparent that the master was trying to craft a common-sense order based upon the circumstances before him. Respectfully, however, it is my view that it was not open to him to make the order that he did. I reach this conclusion for the following reasons. [30] First, I was provided with no authority supporting the granting of a conditional order absolute. As held by Justice McLachlin in Bank of Montreal, the concepts of a conditional order and a final order or order absolute are inconsistent. Second, having found that the test for extending the redemption period was met, it was not open to the master to make a prospective order absolute effective upon the expiry of the extended period. I agree with the submissions of 121 and Living Marine that the decision to issue such an order, and to extinguish all rights of redemption, is an exercise of discretion that must be made based upon the circumstances in place at the time the order is made effective. Those circumstances may well be very different from the time of the initial order, particularly when dealing with commercial transactions that often have a certain degree of fluidity to them. [31] Finally,

I have some difficulty with the master making an order that was not sought by either party without hearing submissions from the parties on whether such an order was available or appropriate. I do not have a transcript of the proceeding before the master, but as I previously noted, it is apparent that the terms of the order caught counsel for 129 by surprise. His exchange with the master supports an inference that the terms granted were not, in fact, addressed by the parties and are out of keeping with normal practice. [32] For these reasons I find that the master committed an error of principle and was clearly wrong in granting the conditional order absolute. I would therefore allow the appeal to the extent of removing paras. 4 and 5 from the master's order, which paragraphs permit the entry of the order absolute without the need of a further application or court order. [33] The effect of this order is to leave in place the other terms of the master's order, meaning that the conditions for further extending the redemption period have not been met, and the period has expired. In keeping with the established practice and these reasons, it will be for 129 to bring a further application for an order absolute. Application to Extend the Redemption Period [34] Turning to Living Marine's application to extend the redemption period, all parties agree on the applicable two‑part test: a.

Is there sufficient equity in the Property to protect the mortgage? b. Is there a reasonable prospect that redemption will occur during the extended redemption period? See, for example, Bancorp Growth Mortgage Fund II Ltd. v. Rouleur (Woodland) Limited Partnership, 2021 BCSC 898, at para. 23. [35] Living Marine rests its application in large part on the fact that it has essentially a new deal in place for the purchase and sale of the Property. I note that Stanton assigned its rights under the original purchase agreement to a new entity, 1301981 BC Ltd., on December 14, 2021, following which amendments were made to the purchase agreement. Included in those amendments were an extension of the time for paying an initial deposit of $1 million to December 23, 2021, and options for the proposed purchaser to further extend the closing date upon payment of further deposits. [36] I will say at the outset that I do not agree with 129 that the court lacks jurisdiction to vary the master's order setting the redemption period. The cases cited by 129 are concerned with instances in which parties essentially attempted to relitigate matters that had already been decided. This Court always has jurisdiction to vary previous orders based upon new circumstances. Indeed, that is what an application to extend a redemption period in effect is. [37] Having said that, I do agree with 129 that Living

Marine has not met the test for extending the redemption period at this time. Specifically, I am not satisfied that the requirement of a reasonable prospect of payment has been met. In my view the prospects of this deal completing are even more uncertain than the deal that was before the master. While I am unaware of any relationship between Stanton and the new numbered company, the fact that apparently none of the conditions requiring Stanton, the former proposed purchaser, to pay deposits have been met is troubling, particularly in light of the fact that as of today, the proposed new purchaser has also not been required to pay any deposit money. The fact that the completion date is also subject to extension at the option of the purchaser adds another level of uncertainty. [38] In the circumstances, it is my view that the appropriate course of action is to adjourn Living Marine's application to extend the redemption period with leave to reset it at the same time as 129's application for an order absolute. At the time, presumably the likelihood of this new transaction completing will have come into clearer focus. For example, the initial $1 million deposit due tomorrow will or will not have been paid. Conclusion [39] In summary I make the following orders: 1) 121's appeal is allowed to the extent of removing paras. 4 and 5 from the master's order; and 2) Living Marine's application to further extend the redemption period is adjourned with leave to reset it at the same time as 129's application for an order absolute. [40] Those are my reasons. My inclination on the issue of costs is that success has largely been divided and that the parties should bear their own costs, but I am happy to hear submissions. [NO SUBMISSIONS ON COSTS] "Skolrood J."