Caplink Financial Corporation v. Anago Enterprises Ltd., 2011 ABQB 190

Court of Queen ’ s Bench of Alberta Citation: Caplink Financial Corporation v. Anago Enterprises Ltd., 2011 ABQB 190 Date: 20110321 Docket: 1003 12226 Registry: Edmonton Between: Caplink Financial Corporation Applicant - and - Anago Enterprises Ltd., 1182832 Alberta Ltd., and Jacques Belzile Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B.

Veit _______________________________________________________ [ 1 ] Because of the urgency of the need for a decision on this application, with apologies to the parties, the court provides its reasons more in the style appropriate to an endorsement than to a decision. [ 2 ] Caplink applies for a Rice order. The property has been in receivership since early August 2010. The Receiver is, of course, neutral on the application, but points to the situation of the owners of condo units 19 and 20 as examples of the urgency of dealing with the situation.

The Royal Bank advises that it is also concerned about the delay and warns that it might take action on its security if there is not a prompt resolution of the within dispute.

[3] The defendant 118 opposes the application. It obtained an order on January 21, 2011 granting a 6 week adjournment toallow 118 to obtain its own affidavits of value. The order required a deposit of $2,000.00 for thrown away costs and gave leave toCaplink and the receiver to apply for reimbursement from 118 of total thrown-away costs. The adjournment order also provided that anycross-examination in respect of affidavits of value must be completed during the 6 week adjournment period. [4] 118 provided an affidavit of value on March 9, 2011; that affidavit was sworn by a licensed appraiser.

In addition, theappraiser attached a letter, sent to 118's solicitor, from a construction company setting out that company’s opinion about the cost ofcompleting the project. [5] Based on their respective affidavits of value, Caplink’s calculation of deficiency is $714,635.50 and 118's calculation of thedeficiency is $152,859.55. [6] 118 urges the court to accept its calculations, and to allow it a 90 day redemption period.

It argues that, if its position is notaccepted then, even though it must do so reluctantly, the court should order a trial of the issue of value. [7] The court accepts Caplink’s proposal. [8] First, there is the issue of the terms of 118's proposal.

None of the parties objected to 118 bringing its application on March17, 2011, even though the application was returned approximately 8 weeks after the adjournment, and, therefore, two weeks out of time.While it is true that Caplink did not move to ask questions on the information provided with respect to the completion of the project, Inote both that the letter from the construction company was not sworn, and therefore could not have been cross-examined on, and that afiling of that material on March 9 did not, in any event, give time for cross-examination within the period of the adjournment since thematerial was provided outside the time granted for the adjournment.

I realize that the task of the court on this application is principallyto determine a fair market value. I also accept that the principals of 118 have invested a big proportion of their life savings in thecollateral property. I am also mindful of the potential profit which Caplink might make on the eventual completion of the project. Mostimportantly, I recognize that the granting of a Rice order is the equivalent of granting

summary judgment. Nonetheless, I am of the viewthat I can take the fact that the information about value was provided by 118 “after the last minute” as evidence that the material was notcompiled as carefully and as open to questioning as was the value information provided by Caplink. In my view, 118's proposal is,overall, unrealistic. [9] With respect, the court disagrees with 118's contention that where there are competing affidavits of value, the court mustorder a trial of the issue of value.

This court has the capacity to establish a fair market value even in the face of competing affidavits: Fuhr v Madison Dev. Corp. (1984) (AB KB), 30 Alta. L.R. (2nd) 206 (Q.B.), Hoffman v Ohlson Ranch Ltd. [1995]A.J. No. 157 (C.A.). That is merely one aspect of the court’s ability, in certain circumstances, to choose between competing affidavits. Inconcluding that this is one of the circumstances where the court is entitled to choose between competing affidavits, the court notes: - this is not a credibility contest.

Therefore, the principles articulated in decisions such as Montgomery v Riviere [1989] have noapplication here; - this is a situation which is analogous to that referred to in Salesse v Jones 2008 ABCA 18; - this is a situation where, in the overall interest of all of the parties, given the lengthy period during this property has been underreceivership, the court must do its best to determine value on less than the best possible evidence. [10] In

summary, on this chambers application, the court is in a position more like the position it would be in at trial where thedefendant chooses not to cross-examine the plaintiff’s expert and tenders its expert evidence too late to allow real cross-examination. Faced with the conflicting evidence of two experts, the court would set about weighing the evidence before it. [11] Why then, in the circumstances here, does the court attach more weight to the Caplink proposal? [12] The various features of the two proposals which the court has considered in coming to the conclusion that the Caplinkproposal better represents fair market value include:

- the fact that a feature which 118 has not recognized as implicit in its proposal is that the cost of adoption of its proposal is over $100,000.00, just as a result of taking into account the per diem interest charges on the various mortgages; - the fact that another feature which 118 has not recognized as implicit in its proposal is that there has been a substantial cost incurred under the thrown-away standard which was made explicit in the adjournment order. The only information provided to the court on this hearing is that the administration costs are $25,000.00 per month.

In other words, the 2 months of the adjournment may well have cost $50,000.00 in thrown away costs, that is in costs which are not reflected in added value to the condo property itself; - in that context, 118 has not recognized that not all of the $250,000.00 which has been loaned by Caplink to the receiver has gone into the condo itself.

This is an example of 118's failure to recognize the high cost of administering this property to the detriment of the security holders; - although Caplink’s affidavit of value including the cost of completion of the project has been available to 118 since early January 2011, 118 has not chosen to cross-examine Caplink on its evidence; - while the evidence about value is presented by two experts who have similar qualifications, the evidence concerning the cost to complete the project is not presented by such experts.

However, the evidence presented by Caplink on that limited aspect of the value of the project was prepared by the receiver, an independent party to the proceedings; - the fact that Caplink has presented 3 valuations of the balance owing is not something that goes against Caplink’s proposal.

On the contrary, those statements dramatically illustrate how the balance owing has increased by $450,000.00 while this property has been in receivership; - similarly, the fact that there are valuations much higher than the $3.3 million which Caplink has accepted is attributable mainly to the fact that the higher values were set in the context of valuations for the purpose of financing. [ 13 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 17 th day of March, 2011. Dated at the City of Edmonton, Alberta this 18 th day of March, 2011. J.B.

Veit J.C.Q.B.A. Appearances: Ronald H. Haggett, Kennedy Agrios LLP for the Applicant, Caplink Financial Corporation D. (Jim) Chronopoulos, Stillman LLP for 1182832 Alberta Ltd. John M. Frame, Witten LLP,

for the Royal Bank of Canada Michael J. McCabe, Q.C., Reynolds Mirth Richards & Farmer LLP, for Deloitte & Touche Inc.