Argo Mezzanine Financing No. 1 Ltd. v. Plaza 88 Developments Ltd.

2023 BCSC 2134 Argo Mezzanine Financing No. 1 Ltd. v. Plaza 88 Developments Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Argo Mezzanine Financing No. 1 Ltd. v. Plaza 88 Developments Ltd., 2023 BCSC 2134 Date: 20231204 Docket: S201596 Registry: Vancouver Between: Argo Mezzanine Financing No. 1 Ltd. Plaintiff And Plaza 88 Developments Ltd., Michael Degelder, Patricia Degelder, Degelder Project Management Ltd., Degelder Construction Co. (2010) B.C. Ltd., Philip Louis, Julie Fu, KBK No. 101 Ventures Ltd., Charter Pacific Developments (Azure) Ltd. and PMD Developments Ltd. Defendants Before: The Honourable Justice Shergill Reasons for Judgment Summary Trial Application Counsel for the Plaintiff: J.K. McEwan, K.C. M. Hunt A. Dhawan Counsel for the Defendants: D.P. Church, K.C. I. Schildt Place and Date of Hearing: Vancouver, B.C. June 27, 2023 Place and Date of Judgment: Vancouver, B.C. December 4, 2023 Table of Contents I. Overview... 3 II. Suitability for Summary Trial.. 4 III. Factual Background.. 6 A. Commitment Letter 7 B. First Amendment 8 C. Second Amendment 9 D. Participation Agreement 10 IV. Legal Framework.. 10 V. Is the currency exchange savings Excluded from the calculation of the NDC?.. 12 VI. Expert Evidence.. 17 VII. Orders Made.. 21 I. Overview [1] The underlying action for breach of contract arises out of a loan transaction by which the Defendant, Plaza 88 Developments Ltd. ("Plaza") borrowed funds (the "Loan") from the Plaintiff, Argo

Mezzanine Financing No. 1 Ltd. ("Argo"). The other individual and corporate defendants are all named as convenantors to the Loan. The money was to be used in the development and construction of a project in New Westminster, B.C. (the "Project"). The Project is a joint venture between the Defendants Charter Pacific Developments (Azure) Ltd. ("Charter") and PMD Developments Ltd. ("PMD"). PMD and Charter incorporated Plaza for the purpose of the Project. [2] The Project surrounds and incorporates the New Westminster SkyTrain Station. It consists of three residential strata towers, a commercial development, and a rental tower. Plaza began work on the Project around 2005. The Project was substantially completed by 2019. [3] Pursuant to a series of agreements between the parties, in addition to repayment of the principal plus interest, Argo was entitled to receive 10% of the "Net Distributable Cash from the Project" ("NDC"). The NDC was to be calculated by Plaza pursuant to a specified contractual formula. While the Loan has been repaid, the amount of the NDC that is payable to Argo remains unresolved. [4] The court action concerns three aspects of Plaza's calculation of the NDC: (1) Plaza's decision to exclude as revenue approximately $10 million in savings which were realized by Plaza due to currency fluctuations (the "Currency Exchange Savings"); (2) Plaza's decision to include

certain interest and profit participation payments as costs; and (3) Plaza's decision to include as costs, a payment to a project manager. The matter is set for a trial in April 2024. [5] In this summary trial application, Argo seeks declaratory judgment and damages for breach of contract based on Plaza's treatment of the Currency Exchange Savings. The central question for the Court is whether the Currency Exchange Savings should have been included in the calculation of the NDC. II. Suitability for Summary Trial [6] This summary trial application is brought pursuant to Rule 9-7(15) of the Supreme Court Civil Rules, B.C. Reg. 168/2009 [SCCR]. [7] Rule 9-7(15) permits the court to grant judgment in favour of any party, either on an issue or generally, unless it determines that it is not appropriate to do so. The relevant factors when considering suitability for summary trial are set out in Gichuru v. Pallai, 2013 BCCA 60, at paras. 28-31. [8] There are two aspects to the test under Rule 9-7(15). First, the court must be able to find the facts necessary to decide the issues of fact or law. Second, the court must be of the opinion that it would not be unjust to decide the issues: Brissette v. Cactus Club Cabaret Ltd., 2017 BCCA 200 at para. 26; see also Inspiration Management Ltd. v. McDermid St. Lawrence Ltd., 36 B.C.L.R. (2d) 202, 1989 CanLII 229 (B.C.C.A.). [9] The decision to

proceed summarily is a discretionary one for the trial judge. Our courts have held the following non-exhaustive list of considerations as being relevant in determining suitability for summary trial: 1. the amount involved; 2. the complexity of the matter; 3. its urgency, and prejudice likely to arise by reason of delay; 4. the cost of taking the case forward to a conventional trial in relation to the amount involved; 5. the course of the proceedings; 6. whether credibility is a critical factor in the determination of the dispute; and 7. whether the application would result in "litigating in slices". See Inspiration Management Ltd. at para. 49 and Dahl et al. v. Royal Bank of Canada et al., 2005 BCSC 1263 at para. 12, aff'd 2006 BCCA 369. [10] The parties submit that the Currency Exchange Savings issue is suitable for determination by summary trial. While they concede that resolution of this discrete issue will not be determinative, they say it will significantly advance the litigation. [11] I agree that this matter is suitable for summary determination. [12] The amount involved is substantial, however, the issue itself is not complex. It involves a relatively straightforward matter of contractual interpretation. Though the parties disagree on the application of the generally accepted accounting principles ("GAAP") to the contracts, they agree that the "relevant issue is the

interpretation of the agreements, not the interpretation of GAAP."[1] [13] In Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd., 2010 ABCA 126 ("Dow"), at para. 27, the Court held that a dispute involving a contract, which did not use specialized industry terminology requiring explanation by extrinsic evidence, was capable of summary disposition. [14] I do not consider this to be a situation of a party "litigating in slices". Though all of the issues in dispute involve interpretation of a contract, the Currency Exchange Savings issue is distinct and separate from the other issues. [15] I am satisfied that I can find the facts necessary to achieve a just outcome. There are no issues of credibility. The parties agree on the key facts that underlie this dispute. They agree on the contract documents that relate to this discrete issue. They also agree on the amount of the Currency Exchange Savings, and Argo's entitlement to a 10% share of any increase in the NDC. [16] Neither party will be prejudiced by this summary trial proceeding. Proceeding summarily will narrow the issues for trial, and assist in having the matter complete at lower cost to the parties. III. Factual Background [17] The following facts are uncontroverted. [18] Pursuant to the terms of the agreement between the parties, Argo Realty Advisors Inc. ("Argo Realty") provided $40 million[2] in "mezzanine"

financing for the Project. The Loan principal was advanced in two tranches: the first advance was made on September 30, 2006; and the second advance was made on December 31, 2006. The interest rate on the Loan was 17%, compounded annually. The Loan was to be repaid by December 31, 2009. [19] At the time of the advances, Plaza received notice of the amount of Korean Won[3] that was expended by Argo to acquire the Canadian funds that were advanced (₩16,878,000,000 for the first tranche, and ₩16,042,000,000 for the second tranche). [20] On September 30, 2009, Plaza notified Argo through its counsel, that it would be exercising its option to repay the Loan using Korean Won. [21] Around November 17, 2009, Plaza received a mortgage payout statement from Argo, confirming that ₩32,920,000,000 in Korean Won were needed to repay the Loan principal. Argo also confirmed the amount of interest that was owing to December 29, 2009 ($24,628,345.97). [22] Plaza repaid the Loan principal in full by the end of December 2009. In addition, Plaza also paid Argo over $24.6 million in interest on the Loan. [23] Between the date of the two loan advances and the date of repayment of the Loan, the Canadian dollar had appreciated in relation to the Korean Won. Consequently, Plaza saved $10,073,544 (Currency Exchange Savings) when repaying the Loan. [24] The Project is governed by a number of agreements,

four of which are pertinent to this application (collectively, the "Agreements"). This application turns on whether, pursuant to the Agreements, the Currency Exchange Savings should be added to, and included in, the calculation of the NDC. A. Commitment Letter [25] The first relevant agreement is a commitment letter (the "Commitment Letter") entered into on September 1, 2006, between Argo Realty as the "Lender" and Plaza as the "Borrower". [26] The salient portions of the Commitment Letter are as follows: 5. SECURITY The Loan shall be secured by the following documents (collectively the "Security") completed and, where necessary, registered in a form and manner satisfactory to the Lender's solicitors: 5.12 A Participation Rights Agreement detailing the Lender's right to participate in the Net Distributable Cash from the Project, as more particularly set out in paragraphs 13 and 13A hereof; and 10. PLACEMENT FEE A non-refundable placement fee in the amount of $400,000.00 shall be paid by the Borrower to the Lender. This fee will be deducted from the proceeds of the First Advance.

12. CURRENCY Notwithstanding that the Principal Amount of the Loan shall be advanced in Canadian Dollars, the Borrower shall repay the Principal Amount of the Loan to the Lender in Won, the legal tender of the Republic of Korea in a cumulative amount calculated at the exchange rate published by the Korea Central Bank as the rate at which a party can purchase Canadian dollars in the amounts of the First Advance and Second Advance as at the respective dates of the First Advance and Second Advance. Any benefit or loss resulting from fluctuations in the currency exchange rate between the dates of the First Advance and the Second Advance and the date of repayment thereof shall be to the credit of, or borne by, the Borrower.

13. PARTICIPATION RIGHTS 13.1 In addition to all other payments due to the Lender in connection with the Loan, the Lender shall be entitled to receive 10% of the Net Distributable Cash from the Project ("the Lender's Share"), as and when disbursed. For the purposes of this paragraph, "Net Distributable Cash from the Project" means the gross revenues from the Project less, without duplication, the total of all actual costs incurred for the Project identified as a cost category in the Project Budget delivered by the Borrower to the Lender pursuant to section 15.3 hereof, all construction and land acquisition costs, the Placement Fee described in paragraph 10, the Administration Fee described in paragraph 11, and the development fees described in paragraph 14.10, all other non-construction costs of the Project including the cost of any audit which may be requested by the Lender pursuant to paragraph 13.2 hereof, the amount repaid on all loans for the Project and interest thereon (including without limitation, all construction loans, this Loan, third party investor financing and loans advanced by PMD Developments Ltd. ("PMD") and Charter Pacific Developments (Azure) Ltd. ("Charter") which have been advanced in respect of the Project) and payment to Charter and PMD of the land value equity of $38,365,500.00 (collectively the "Deducted Costs"). [27] The parties amended the Commitment

Letter approximately six weeks after it had been entered into. B. First Amendment [28] In a letter dated October 18, 2006, the parties amended the Commitment Letter by appointing the Plaintiff Argo as the Lender, in place of Argo Realty (the "First Amendment"). In addition to other changes, the First Amendment also amended sections 12 and 13 of the Commitment Letter as follows: 6. Paragraph 12 of the Commitment Letter will be amended by adding the following sentence: a. "The respective principal amounts (each, the "Principal Amount") of the First Advance and the Second Advance, that the Borrower shall repay to the Lender hereunder, shall be the amount of the Canadian Dollar equivalent to the Won Principal Amount (as defined below), calculated by reference to the buying rate in Canadian Dollars of the Won Principal Amount as quoted by National for its best commercial clients at the opening of business [two (2)] Business Days prior to the date of any repayment which buying rate shall be confirmed by National to the Borrower in writing. The Borrower shall be advised by letter from the bank which effects the conversion of the amount ("Won Principal Amount") in Won (the legal tender of the Republic of Korea) paid by the Lender for purchases of Canadian Dollars on each remittance of the First Advance and Second Advance within [three (3)] Business Days after the remittance of each

advance." 7. Paragraph 13.1 of the Commitment Letter is amended by deleting the figure "$38,365,500.00" in the fifth the line from the bottom of the paragraph and replacing it with the figure "$22,064,250.00" [29] The parties made further amendments to the Commitment Letter, only hours after the parties entered into the First Amendment. C. Second Amendment [30] The third relevant agreement was made later in the day on October 18, 2006 (the "Second Amendment"). It provided as follows: Notwithstanding the terms and conditions set out in paragraph 12 of the Commitment Letter dated September 1, 2006 made between Argo Realty Advisors Inc. (the "Lender") and Plaza 88 Developments Ltd. (the "Borrower") and those other parties who or which are signatories thereto as covenantors (the "Covenantors") as amended by an amendment letter dated October 18, 2006 (the "Amendment"), between the Lender, the Borrower and 0375166 B.C. Ltd. as a further borrower (collectively that company with the Borrower are hereinafter called the "Extended Borrower"), the Covenantors and Argo Mezzanine Financing No. 1 Ltd. (the "New Lender"), as assignee of the Lender, the Lender and the New Lender covenant and agree for and in favour of the Extended Borrower and the Covenantors that the Extended Borrower shall have the option, to be exercised by the Extended Borrower in its sole and unfettered discretion by

written notice to the New Lender (the "Payment Option Notice") to repay the Won Principal Amount in either Korean Won or the Canadian Dollar equivalent thereof as determined pursuant to the provisions of paragraph 12 of the Commitment Letter as amended by the Amendment which Payment Option Notice shall be given on the earlier of: This letter of undertaking shall supersede the provisions of paragraph 12 of the Commitment Letter as amended by the Amendment as it relates to the currency in which the Won Principal Amount is to be repaid and any and all other documents, agreements and paper or electronic writings, registered or not, currently or hereafter signed by any of the Borrower, the Extended Borrower, the Covenantors, the Lender or the New Lender which repeat, reflect, arise from or contains terms relating to the terms of that paragraph 12 relating to the currency of repayment of the Won Principal Amount. [emphasis added] [31] The parties entered into a fourth and final agreement a few weeks after the Second Amendment. D. Participation Agreement [32] The fourth relevant agreement was entered into on October 30, 2006 (the "Participation Agreement"). Clause 1.1 of the Participation Agreement provides, among other things, as follows: 1. PARTICIPATION RIGHTS 1.1 The Developer shall pay to Argo a sum equal to 10% of the Net Distributable Cash from the Project. For the purposes of

this Agreement, "Net Distributable Cash from the Project" means the gross revenues generated from the Project, directly or indirectly, less, without duplication, the total of: (a) all actual Project costs incurred by the Developer identified as a cost category in the Project Budget; (b) all actual construction and Land acquisition costs; (c) the Placement Fee; (d) the Administration Fee; (e) the management fees, development fees and commissions described in paragraph 14.10 of the Commitment Letter; (f) all other reasonable non-construction costs of the Project, including: (i) the costs of any audit which may be requested by Argo pursuant to paragraph 1.4 hereof, (ii) the amount repaid on all loans for the Project and interest thereon (including without limitation, all construction loans, the Loan, third party investor financing and loans advanced by PMD and Charter in respect of the Project), and (iii) payment to Charter and PMD of the land value equity of $22,064,500.00. (collectively, the "Deducted Costs"). [33] Before considering the implications of these agreements on the issue of whether the Currency Exchange Savings should be included in the calculation of the NDC, I will set out the legal principles that govern this application. IV. Legal Framework [34] In Canaccord Genuity Corp. v. Reservoir Minerals Inc., 2019 BCCA 278 at para. 19, the Court of Appeal summarized the

process for contractual interpretation, by making reference to the following passages from Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53: [47] The overriding concern is to determine "the intent of the parties and the scope of their understanding". To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning . [48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement. [57] While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement. The goal of examining such evidence is to deepen a decision-maker's understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. While the surrounding

circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. [Citations omitted.] [35] The court went on to affirm the following principles of contractual interpretation, that were summarized in RBC Dominion Securities Inc. v. Crew Gold Corporation, 2016 ONSC 5529 ("RBC") at para. 52, aff'd 2017 ONCA 648: (1) When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. (2) The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. (3) In interpreting the contract, the court may have regard to the objective evidence of the "factual matrix" or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. (4) The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. (5) If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity. (6) While the factual matrix can be used to clarify the intention of the parties,

it cannot be used to contradict that intention or create an ambiguity where one did not previously exist. [36] I have applied these principles when interpreting the Agreements in this case. V. Is the currency exchange savings Excluded from the calculation of the NDC? [37] As noted above, the central question in this case is whether the Currency Exchange Savings should have been included in the calculation of the NDC. More specifically, Argo argues that the Currency Exchange Savings should be included in the calculation of the gross revenues. [38] To determine this issue, it is first necessary to look at Clause 12 of the Commitment Letter. By way of Clause 12, the parties agreed that the borrower (i.e. Plaza) would assume the risk of any loss or benefit from currency fluctuations. [39] Clause 13.1, which immediately follows Clause 12, sets out the "Participation Rights" of Argo. Pursuant to Clause 13.1, Argo's entitlement to 10% of the NDC from the Project is to be calculated based on the gross revenues from the Project, less various specified costs incurred for the Project. [40] Clause 13.1 expressly includes the Loan as one of the "actual costs incurred for the Project" which may be deducted when arriving at the NDC. However, absent from the NDC definition contained at Clause 13.1, is any specific reference to including gains or losses in currency fluctuations, when

calculating the gross revenue. [41] Argo argues that the word "gross revenues" is a broad term which includes the Currency Exchange Savings experienced by Plaza. In support, it points to Clause 1.1 of the Participation Agreement. [42] Clause 1.1, though visually different from Clause 13.1 in terms of formatting, largely incorporates the language of the Commitment Letter. There is, however, one key difference which is relevant to this discussion. Rather than simply referring to "gross revenues from the Project" as forming the basis for calculating the NDC, Clause 1.1 inserts the words "generated" and "directly or indirectly". The new definition for NDC uses the following language: "Net Distributable Cash from the Project" means the gross revenues generated from the Project, directly or indirectly, less, without duplication, the total of [43] It is Argo's position that the insertion of the words "directly or indirectly" was intended to capture the currency gains that would be experienced if Plaza decided to repay the Loan by "leveraging" the stronger performing currency (Notice of Application, Part 3, para. 11). I do not agree with this interpretation. [44] I also do not agree with the Plaintiff's attempt to sever Clause 12 from the Participation Agreement in order to reconcile these two agreements. Rather than severing Clause 12 and rendering it useless, the appropriate method

is to consider them in a manner that gives effect to both the clauses so that they can be read harmoniously: RBC, at para. 52. [45] It is a common commercial practice for contracting parties to turn their minds to the implications of currency fluctuations in situations where large sums of money are borrowed and different currencies are implicated. Such is the case here. Recognizing that the Loan would be advanced in Canadian dollars but repaid in Korean Won, the parties specifically addressed in the Commitment Letter what would occur if the value of the respective currencies changed between the Loan advancement and Loan repayment dates. In so doing, they decided that Plaza would bear the risk or reap the rewards. They affirmed this intention when they revisited the Commitment Letter through the First Amendment and the Second Amendment. Despite amending part of Clause 12, which related to the currency in which the Loan could be repaid, the parties left intact the provision that placed the risk or reward of currency exchange fluctuations on Plaza. [46] The parties' decision to not mention currency exchange fluctuations in the calculation of the NDC can only be considered to be intentional. The close physical proximity between Clauses 12 and 13.1 removes any concern that the parties were not alert to the implications of not specifically mentioning currency fluctuations when

addressing how the NDC would be calculated. [47] At Clause 13.1, the parties specifically referred to the Loan and related interest for the calculation of the Project-related costs that could be deducted from the gross revenues. Yet similar specific language that could capture the Currency Exchange Savings when determining the gross revenues to arrive at the NDC, is missing in the definition of gross revenues. This language is absent in both Clause 13.1 of the Commitment Letter and Clause 1.1 of the Participation Agreement. [48] While it is possible in some instances to interpret the words "gross revenues from the Project" to include currency gains, this interpretation is not supported by the facts of this case. [49] It is important to note that in Clause 1.1 of the Participation Agreement, the addition of the words "directly or indirectly" in relation to gross revenues, is tempered by the words "generated from the Project". [50] The word "revenue" is not defined in the Participation Agreement. The Defendants rely on the definition of "revenue" from the Encyclopedia Britannica which defines it as, "the income that a firm receives from the sale of a good or service to its customers": "revenue", Encyclopedia Britannica, Inc. online edition: 2023. This definition is of particular assistance when one considers the Agreements as a whole. [51] Unlike the word "revenue", the word

"project" is defined in both the Commitment Letter and the Participation Agreement. The definition of project in both these documents is substantially identical. It can be summarized as consisting of the development and construction of up to four residential condominium towers, and approximately 180,000 square feet of retail space, on certain lands. In my view, it is the direct or indirect revenue "generated from" this development and construction activity that is captured by the NDC definition. [52] The activity giving rise to the Currency Exchange Savings falls outside of the scope of the Project as defined in the Agreements. While borrowing money from Argo was necessary to finance the Project, it would be a stretch to say that the Currency Exchange Savings was "generated from" the Project, even indirectly. Those words, used in their ordinary meaning, relate to the direct or indirect revenue generated from the sale of a good or service, or in this case, the development and construction of the buildings on the lands. [53] In my view, the only logical way to give effect to Clause 12 of the Commitment Letter is to interpret the combined effect of Clauses 12 and 13.1 of the Commitment Letter and Clause 1.1 of the Participation Agreement, as a specific intention of the parties to not include currency exchange savings when determining the gross revenues needed to arrive at the

NDC. [54] If currency gains or losses are read in as factors of the calculation of the NDC, then the following words of Clause 12 are rendered meaningless: Any benefit or loss resulting from fluctuations in the currency exchange rate between the dates of the First Advance and the Second Advance and the date of repayment thereof shall be to the credit of, or borne by, the Borrower. [55] To accede to Argo's argument would violate the principle that the court is to construe the contract as a whole "in a manner that gives meaning to all of its terms": Canaccord Genuity Corp., at para. 20. [56] Read as a whole, Clauses 12 and 13.1 of the Commitment Letter, and Clause 1.1 of the Participation Agreement, lead to the logical conclusion that the parties intended that any currency exchange savings would be excluded from the calculation of the NDC. This interpretation is further affirmed by the other contractual documents. [57] Prior to any amendments, Clause 12 of the Commitment Letter required Plaza to repay the principal amount of the Loan in Korean Won. Not long after entering into the Commitment Letter, the parties amended their agreement in relation to the Loan repayment. [58] The language of the First Amendment suggested that Plaza was required to repay the Loan in Canadian currency. However, this requirement to repay the Loan in Canadian dollars was added to the Commitment Letter

without changing or removing the existing requirement under Clause 12 to repay in Korean Won. Consequently, following the First Amendment, the borrower was required to repay the Loan in two different currencies. [59] These inconsistencies were resolved in the Second Amendment to the Commitment Letter, which was made a few hours after the First Amendment. In the Second Amendment, Argo gave Plaza the option to repay the Loan in either Korean Won or the Canadian dollar equivalent. [60] Argo submits that the effect of the Second Amendment was to remove the provision in Clause 12 as it relates to the currency fluctuations. At para. 21 of their written brief of argument, counsel for Argo state that: Except for the Second [Amendment's] preservation of the exchange rate procedure for calculating the Won Principal Amount of the Loan to be repaid, Section 12 is otherwise and explicitly superseded, including the language on which Plaza relies. [61] This interpretation is not borne out by the language of the Second Amendment. It is clear from its wording that the issue that was being amended through the Second Amendment was in relation to the currency in which the Loan would be repaid. Indeed, the last paragraph of the Second Amendment affirms that this document only supersedes Clause 12 in a limited way. This sentiment is repeated at the end of the same paragraph as follows: This letter

of undertaking shall supersede the provisions of paragraph 12 of the Commitment Letter as amended by the Amendment as it relates to the currency in which the Won Principal Amount is to be repaid and any and all other documents, agreements which repeat, reflect, arise from or contains terms relating to the terms of that paragraph 12 relating to the currency of repayment of the Won Principal Amount. [emphasis added] [62] Thus, even after the Second Amendment, the risk allocation for the currency fluctuations that was agreed to in Clause 12 remained with Plaza. Further, the Second Amendment did not alter the formula for the NDC, which, by virtue of Clause 12, excluded the Currency Exchange Savings from the calculation of the NDC. [63] This interpretation of the Second Amendment is consistent not only with the language of the document, but also with the fact that the Second Amendment was executed only by Argo. I agree with Plaza that had the parties intended to make such a substantial change to Clause 12 of the Commitment Letter as suggested by Argo, they would have done so expressly and in a document executed by all affected parties. [64] In coming to this conclusion, I reject Argo's argument that additional consideration would need to have been given for Plaza to receive the option granted in the Second Amendment--to choose which currency to repay the Loan. The fact is that

regardless of which currency it is paid in, if the Korean Won had appreciated against the Canadian dollar between the dates of the advances and the date of the repayment, Plaza would have had to pay more than $40 million to repay the Loan principal. That risk was assumed by Plaza in Clause 12 of the Commitment Letter, and did not change with the First or the Second Amendment. Consequently, no further consideration was needed. VI. Expert Evidence [65] There was some dispute about whether Plaza's interpretation of the relevant agreements is consistent with GAAP. Specifically, the parties disagree on whether GAAP mandate the inclusion of the Currency Exchange Savings when calculating gross revenue. To that end, Plaza tendered an expert opinion report from Keith Jensen. [66] Mr. Jensen is a Chartered Professional Accountant. He was retained by the Defendants to prepare an expert opinion report opining on various questions, including the following paraphrased inquiries: 1. What accounting principles would apply in an audit of the Project?

2. How do those accounting principles define "revenue"?

3. Would the foreign exchange savings realized in repaying the Loan be considered revenue under the applicable principles?

4. Is it accurate to say that under GAAP principles "foreign exchange gains and losses are included in the determination of net income"? If so, does this affect the conclusion in relation to question 3 above? [67] Mr. Jensen's opinion is provided in a report dated April 26, 2023 (the "Jensen Report"). The Jensen Report refers to the definition of revenue contained at section 1000.32 of the Accounting Standards for Private Enterprises ("APSE"), as well as additional standards for revenue recognition set out in section 3400 of APSE. Mr. Jensen then opines: 9.1 Notwithstanding that the repayment of the "Won Principal Amount" is a reduction of a liability, based on my understanding of the Project and the general nature of development projects, the foreign exchange savings on the repayment of the Won Principal Amount did not "normally arise from the sale of goods, (or) the rendering of services" and would therefore not be considered "revenue" under ASPE. 9.3 Generally, the repayment of debt for entities undertaking development projects is not accounted for as revenue; it is accounted for as a "gain" or "loss", which is presented as an "other" item below revenue and expenses. 9.5 In my opinion, the repayment of the Won Principal Amount does not meet the revenue criteria under ASPE; accordingly, it must be reported as a "gain". [68] The Defendants rely on the Jensen Report to support

their submission that the Currency Exchange Saving does not constitute revenue, and that only revenue generated from the Project is factored into the formula for calculating NDC. They argue, per the Jensen Report, that this conclusion is supported by the relevant accounting principles. Based on the definitions of revenue, the Currency Exchange Saving is a "gain" and not "revenue". Therefore, the Defendants submit the Currency Exchange Saving is not relevant to calculating NDC. [69] At issue is the admissibility of the Jensen Report. [70] In White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23 ("White Burgess") the Supreme Court of Canada set out a two-step analysis for addressing the question of admissibility of expert opinion evidence. [71] At the first stage, the party seeking to admit the expert evidence must establish the following threshold requirements: 1. The evidence is relevant; 2. The evidence is necessary to the trier of fact; 3. There is no applicable exclusionary rule of evidence; and 4. The expert is properly qualified. (White Burgess at paras. 19, 23) [72] The second step is a discretionary gatekeeping one requiring the court to balance potential risks and benefits of admitting the evidence to decide if such benefits of admitting the evidence justify the risks: White Burgess at para.

24. At this point, the judge takes into account any concerns about the expert's independence and impartiality when weighing the evidence: White Burgess at para.

54. The evidence must be sufficiently beneficial to warrant admission despite any potential harm, and to make this determination a judge may consider the "relevance, necessity, reliability and absence of bias" of the evidence in question: White Burgess at paras. 24, 54. [73] While Argo does not take issue with Mr. Jensen's qualifications, it objects to the admission of his report on various grounds. First, it submits that an exclusionary rule of evidence applies, such that the report cannot be adduced as evidence on the meaning of the contract. I agree with Argo that the Jensen Report is inadmissible for that purpose: Dow at paras. 17-18. [74] Second, Argo submits that the Jensen Report does not fit within the narrow exception for "technical terms of art" that the Court referred to in Dow at para.

19. I also agree with that argument. [75] Third, Argo submits that Mr. Jensen's opinion is irrelevant, as it he has opined on the application of ASPE principles rather than GAAP, and that it is the latter set of principles that are implicated in this case. While it is conceded that ASPE replaced GAAP, it is submitted that it would be incorrect to equate the two sets of principles. I do not accede to this particular objection. I agree with the Defendants that if the Plaintiff was of the view that there was a material difference between GAAP and ASPE principles, it should have raised this objection to Mr. Jensen's report well in advance of this hearing. Further, at para. 21 of the Notice of Application, the Plaintiff relies on the KPMG audit which equates APSE with GAAP, stating that its source for certain accounting principles is the "CPA Handbook Part II: [ASPE] herein referred to as 'GAAP' ". This would indicate that the accountants at KPMG that conducted the audit considered the GAAP and ASPE interchangeable. [76] The fourth issue raised by Argo in relation to the conclusions of the Jensen Report is not disputed by Plaza. Plaza concedes that foreign exchange gains and losses are generally included as net income under GAAP (or ASPE). However, I agree with Plaza that the fact that such a gain or loss comprises part of "net income" from an accounting perspective, does not mean

that it forms part of the gross revenues that are referenced in the Agreements. [77] Expert evidence that is not relevant to the issues before the court, is prima facie inadmissible. [78] The words "gross revenue" are part of everyday parlance and do not require expert opinion evidence. Further, there is insufficient evidence to support the conclusion that the parties intended the words "gross revenue" to be read in reference to systems of accounting principles such as GAAP or APSE. [79] Thus, while the Jensen Report may be relevant for the issues that will be addressed at trial, I find it irrelevant to the issue before me. For that reason, the Jensen Report is inadmissible for the purposes of this hearing. VII. Orders Made [80] The relief sought at paragraphs 1 to 3 of the Notice of Application is dismissed. [81] As the Defendants were successful in this application, the general rule is that they are entitled to their ordinary costs at Scale B. However, if the parties wish to bring to my attention matters that could affect the award of costs, they may do so by providing submissions, as follows: 1. The party seeking a different costs award is to provide written submissions, up to a maximum of five (5) pages, within 30 days of these Reasons.

2. The responding party is to provide their written submissions, up to a maximum of five (5) pages, within 14 days of receipt of the submissions from the requesting party.

3. Any reply submissions are not to exceed three (3) pages, and are to be provided within 7 days of receipt of the responding submissions.

4. All submissions should be submitted via email to SC Scheduling, and marked to my attention. [82] Subject to the parties providing further submissions on costs, the above costs award shall stand. "Shergill J." [1] Application Response of the Defendants, at para. 44; and Written Submission of the Plaintiff, at para. 9. [2] All figures are in Canadian dollars unless indicated otherwise. [3] Korean Won is denoted using the "₩" symbol.