Rohit Capital Inc. v. Aqua Terra Developments Corp., 2011 ABQB 716

Court of Queen ’ s Bench of Alberta Citation: Rohit Capital Inc. v. Aqua Terra Developments Corp., 2011 ABQB 716 Date: 20111118 Docket: 1003 10341 Registry: Edmonton Between: Rohit Capital Inc. Plaintiff - and - Aqua Terra Developments Corp., Bella Homes Inc., 101062219 Saskatchewan Ltd., Janina Mazza and Guistino Mazza Defendants _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is an application for

summary judgment against the Defendant Aqua Terra Developments Corp. The result depends on a subtle grammatical difference in the way the word “loan” can be interpreted. [ 2 ] After a period of negotiations, Aqua Terra signed a loan commitment letter. The loan documents were ultimately drawn up and sent to the Defendant’s lawyer. However, the loan documents were never signed and the loan was not advanced. The Plaintiff sues for its Lender’s Commitment Fee.

[3] Although the contract has to be interpreted as a whole, the central issue has to do with the

interpretation of clause 18, whichis as follows: 18. Fees Lender’s Commitment Fee is $182,000.00 or 2.0% of Loan Amount. Full amount of fee is part of the loan program budget and may beclaimed as progress at first advance by Borrower in the normal course subject to loan funding conditions having been met. On executionof the Commitment Letter by the Borrower, the entire fee shall be deemed to have been fully earned and shall not be refundable underany circumstances. [4] The Plaintiff argues the Lender’s Commitment Fee of $182,000.00, or 2% of the amount of the loan, is a debt payable in anyevent.

The Defendant denies this, saying that the commitment fee is contingent upon the loan being advanced. The Defendant says thatit understood that the Lender’s Commitment Fee was not payable until the loan was advanced. Clause 18 indicates that the Lender’sCommitment Fee “may be claimed as progress at first advance ...”. The Defendant argues that since the loan was not advanced, the feewas not payable. [5] One party’s understanding (or misunderstanding) of a contract would not usually create a triable issue unless there is anambiguity that requires parol or extrinsic evidence.

However, there is such an ambiguity here. [6] The Plaintiff reads the word “loan” in the commitment letter as a transitive verb. In this sense, “loan” describes a futureevent, as in: “ Rohit will loan 9.1 million dollars to Aqua Terra .” Viewed in this light, the lender’s commitment fee is the price ofbuying Rohit’s commitment to do something in the future. [7] The Defendant reads the word “loan” as a noun. Until the funds are advanced, there is no loan. If the funds are notadvanced, the commitment fee is not payable.

In this sense, the cost of securing the obligation is optional, at the option of the borrower. [8] Other portions of the agreement are equivocal. [9] The difference is subtle but fundamental. It leads to an ambiguity. This in turn raises the issue of contra proferentem (Ironside v. Smith, 1998 ABCA 16 , 1998 ABCA, p. 16 at para. 64-65.) It also invites parole evidence. The evidence suggeststhat there may have been representations by the Broker that would support the Defendant’s

interpretation. The Plaintiff argues that theserepresentations were made after the commitment letter was signed, but there is some evidence that the representations were made beforesignature, or were at least contemporaneous with this event. The ambiguity might have been resolved once and for all by describing theCommitment Fee as an irrevocable debt arising on signature but this lanuage was not used and it is the Plaintiff’s document. [10] If

summary judgment were decided on a balance of probabilities, the Plaintiff would probably win. However, for there to besummary judgment the matter must be ‘beyond doubt’: Here it isn’t. Two possible meanings and the likelihood of parol evidence stand inthe way (Tottrup v. Clearwater (Mun. Dist.) No. 99, 2006 ABCA 380 at para. 11). The issue cannot fairly be decided on the recordbefore the Court. [11] Accordingly, the application for

summary judgment is dismissed. In the circumstances, the peripheral issues need not beconsidered. Heard on the 7th day of November, 2011.

Dated at the City of Edmonton, Alberta this 18 th day of November, 2011. W. S. Schlosser M.C.C.Q.B.A. Appearances: Michael Coombs Brownlee LLP for the Plaintiff Vance Siakaluk Oshry & Company for the Defendants