Lutheran Church Canada (Re), 2017 ABQB 307

Court of Queen’s Bench of Alberta Citation: Lutheran Church Canada (Re), 2017 ABQB 307 Date: 20170502 Docket: 1501 00955 Registry: Calgary In the Matter of The Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended and In the Matter of Lutheran Church – Canada, the Alberta – British Columbia District, Encharis Community Housing and Services, Encharis Management and Support Services, and Lutheran Church – Canada, The Alberta- British Columbia District Investments Ltd.

Corrected judgment: A corrigendum was issued on June 5, 2017; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of the Honourable Justice B.E. Romaine _______________________________________________________ I.

Introduction [ 1 ] The Shepherd of the Valley Lutheran Church (“SVLC”) applies in this Companies’ Creditors Arrangement Act proceeding for an order prohibiting the Lutheran Church – Canada, the Alberta – British Columbia District (the “District”) from selling certain property in Canmore, and for a declaration that an agreement between SVLC and the District is a valid loan agreement that, upon payment of the outstanding amount of the loan, gives SVLC the right to redeem title to the property. The District cross-appeals to have the caveat against title filed by SVLC in 2015 discharged.

[ 2 ] For the reasons that follow, SVLC is entitled to redeem title to the property upon payment of the outstanding loan. II. Facts [ 3 ] SVLC is a religious society incorporated in 1984 and is part of the synod of the Lutheran Church - Canada.

Shortly after SVLC was formed, SVLC and the District entered into an agreement whereby the District agreed to provide financial support to SVLC for the purpose of enabling it to create a financially self-sufficient ministry in Canmore (the “Financial Support Agreement”). [ 4 ] In 1984, SVLC purchased land in Canmore for approximately $128,000, using a grant from the District and a loan from the Church Extension Fund. The Church Extension Fund (“CEF”) was created by the District to allow District members to lend money to faith-based developments.

Title to the land was registered in the name of SVLC. [ 5 ] From 1985 to 1993, SVLC used an existing house on the lands as a worship and retreat centre while making payments on the CEF loan. In June, 1993, SVLC purchased an adjacent lot using its own funds. At the end of 1993, the outstanding balance on the CEF loan was about $6,000. [ 6 ] In 1992, SVLC requested a loan from the District to assist it in constructing a church on the lands.

In a letter dated July 16, 1992, Ted Ulmer, then the Executive-District Services of the District proposed that: - SVLC transfer title to the lands to the CEF, which would in turn transfer the lands to the District.

The CEF would assume the indebtedness on the lands as well as provide funds necessary to expand the facilities; - the facilities would be leased to SVLC for $1 per year; and - when SVLC no longer required a subsidy and demonstrated that it was able to manage the debt repayment, the lands would be sold back to SVLC “ according to [CEF] policy”, which was described as being for a price equal to the lesser of the appraised value or the original cost plus 10% per year. [ 7 ] The letter states that, in SVLC’s case, the original cost would be the amount of funds provided by the CEF to eliminate the current indebtedness plus the funds necessary to build the church. [ 8 ] The letter makes it clear that the CEF provides low-cost loans for capital projects, not grants or operating funds.

It concludes with the advice that, if the congregation agreed to proceed this way, Mr. Ulmer would draft an agreement “so that there would be clear understanding on the part of everyone as to the current arrangements and the future re-purchase of the church site.” [ 9 ] In May, 1993, the Pastor of SVLC wrote to Mr. Ulmer indicating that SVLC was ready to start building and asking whether it was the appropriate time for Mr. Ulmer to draft the agreement. On June 7, 1993, SVLC sent the original documents of title to the lands to the District’s Executive Assistant – Mission Services.

The covering letter states that SVLC had enough money in its building fund to see it through preliminary plans and the development permit stage, and would then call a meeting of the congregation “for approval on their part to ask for a [CEF] loan”. [ 10 ] On August 17, 1993, the District sent SVLC a copy of the proposed agreement, stating that “title to the church property would be transferred into the name of the [District] and the congregation would lease the land from the District for a cost of $1 per year until the congregation is in a position to be able to purchase the property back from the [CEF]”.

In December, 1993, the SVLC congregation voted to enter into the agreement drafted by the District and to start building a new church. [ 11 ] The first executed agreement is dated December 13, 1993.

The rental amount is stated to be equal to any costs incurred by SVLC for taxes or town levies and also provides that SVLC will pay all utility costs, maintenance and repairs and insurance. [ 12 ] An “Option to Purchase” clause provides that SVLC has the option “upon full payment of all indebtedness to the Lessor to purchase the demised land and original building for a price established on the basis of an independent appraisal or [the District’s] purchase price of the demised land plus original building plus out-of-pocket expenses relative to the demised land plus not more than ten (10) per cent per annum.” [ 13 ] In February, 1994, SVLC transferred title to the lands to the District.

The affidavit of value sworn by Mr. Ulmer noted the consideration for the transfer to be “$220,000 – by agreement for sale”. Both members of the SVLC congregation who executed and witnessed the transfer have stated in affidavit evidence that they understood that the lands were transferred as security for the loan, and that once SVLC paid the District the outstanding amount of the loan plus interest, title would be transferred back to SVLC. SVLC did not obtain legal advice on the agreement or the conveyance. [ 14 ] On February 9, 1994, Mr.

Ulmer wrote to the Chairman of SVLC to confirm a telephone discussion of that date with respect to the agreement. With respect to interest, Mr. Ulmer stated: It is my understanding that we will probably be charging the same rate of interest on the value of the leased properties that we would on [CEF] loans, which currently is 9 ¼%. The interest would be calculated on the total investment that [CEF] has in the property and building project. The interest would be charged as funds are disbursed to [SVLC] for its building project. In

section fifteen [the “Option to Purchase” clause of the lease], where it talks about the“total indebtedness to the Lessor”, it there refers to all costs incurred by the District or Church Extension Fund on behalf of the property or building at Shepherd of the Valley. This would mean that any taxes or improvement assessments that the city might impose which are not paid by the congregation but rather are paid by the District would be added to the total indebtedness regarding that property and building. There would be no other indebtedness included in that Lease Agreement.

At the present time I have approval for disbursing $200,000.00 for Shepherd of Valley’s new building project. (emphasis added) [ 15 ] The District kept track of the building cost, including funds paid by the District for building maintenance and property taxes. As of July 1, 2015 the account stood at $246,203.50 [the “Loan”]. [ 16 ] Throughout 1994, SVLC and its congregation built a church, using volunteer labour when it could and using the funds advanced by the District to pay hard construction costs. [ 17 ] SVLC made regular payments to the District on the Loan.

Minutes of some SVLC meetings indicate that individuals within SVLC believed that the land was mortgaged. SVLC paid all property taxes until 2015 when the District failed to forward property tax notices to SVLC and paid the taxes itself. [ 18 ] SVLC has paid all utilities and property insurance premiums, all maintenance costs and the costs of completing various renovations.

It has rented out the church for occasional use to various groups and has received rent from the house on the lands. [ 19 ] On March 7, 1995 the District provided SVLC with a subsidy pursuant to the Financial Support Agreement for a portion of its annual operating budget, in the amount of $20,000. The letter indicates: You will recall that the District purchased your property and thus provided funds for your ministry and reduced or eliminated your capital debt. The Department of Mission Services borrowed the money to do this from [CEF]. Interest on the loan this year will cost the Department $10,000.

Thus, our total financial investment in the ministry of your church is $30,000. [ 20 ] On March 6, 1996, the District wrote to SVLC with respect to its request for subsidy assistance for 1996. The letter states: With regard to your request for assistance for 1996, the Board of Directors has approved $18,750 in subsidy for your congregation for 1996.

Combined with the $29,520 in interest payments which Mission Department is making on your behalf for the various properties we provide through the lease agreement, our total commitment to your congregation for 1996 is $48,270. [ 21 ] Sometime in 1996, the District provided the SVLC with a Loan statement.

It shows a closing balance as of January 31, 1996 of $300,320.61. [ 22 ] Also in 1996, the District provided approximately $57,000 to the Loan account, being a portion of the sale proceeds of a separate property owned by the District in which the pastor of the SVLC lived. [ 23 ] SVLC received subsidies from the District from 1994 to 2000.

In 2000, as part of the subsidy program, the District began to transfer funds to the CEF to cover interest accumulating on the Loan. [ 24 ] On December 4, 2001, the District wrote to SVLC advising that the lease expired in August 2001 and enclosing a new lease for a three year term. The letter states: Over the years, the ABC District Department of Missions and Social Ministry Services has worked with a number of congregations in different ways to assist them in their mission and ministry plans.

One of these ways was to take over all or a portion of the congregation’s property debt and pay the interest for a period of time, enabling the congregation to focus on its work. Your congregation was one of those with which such an arrangement was made. According to my records, the District assumed approximately $275,000 of your debt and has been paying the interest on that so that the debt doesn’t grow. Each month, $1592.97 is payed (sic) to Church Extension Fund to service the debt on your behalf. It has recently come to my attention that this agreement came to an end in August, 2001.

Enclosed you will find a new lease agreement for a three year period. You will notice some changes, though, from the previous years. What we are asking for the next three years is that you take over the part of the interest payments by way of a monthly rent. We are asking for $100/month in 2002, $110 in 2003 and $120 in 2004. I know that it is difficult for your congregation to make ends meet financially, and I do not intend, by this, to increase that pressure.

I can assure you that the Department of Missions and Social Ministry Services will take this into account when we receive your request for subsidy or other funding for the following years. In a sense, we may have to send you money so that you can send it right back. ... In addition to this, I would like to give your congregation an opportunity over the next three years to pay down the principal while we are paying the interest. If it is a goal of your congregation to own your property again one day, this might be the time to tackle that task ...

Anything the congregation can send in over and above the monthly rent [$100 per month] would be applied to the outstanding principal on the loan (emphasis added). [ 25 ] SVLC made regular payments on the Loan as requested and the District applied all rent payments made by SVLC against interest accruing on the Loan. SVLC also made some relatively minor lump sum payments on principal on the Loan. [ 26 ] The last lease between the District and SVLC expired on December 30, 2004. The parties did not enter into another lease, but SVLC has continued to use the property, including the church.

As it became more financially self-sufficient, SVLC continued to make payments on the principal balance of the Loan, which were accepted by the District until approximately February 2016. The District was

granted an initial order under the CCAA on January 23, 2015. [27] In March, 2015, the District informed SVLC that it intended to sell the lands. SVLC filed a caveat against title in May, 2015,and notified the Monitor that it wished to pay out the balance of the Loan and regain title to the lands. [28] As noted previously, the amount of the Loan as of July 1, 2015 was $246,203.50. In December, 2015, SVLC obtainedapproval for mortgage financing in the amount of $200,000 and raised $50,000 from its congregation and others in order to pay out theLoan. [29] The 2016 property tax assessment of the lands was $1,139,500.

The District wishes to sell the lands and distribute theproceeds to creditors in accordance with the District plan of arrangement and compromises. III. Issues A. Is the arrangement between the parties an absolute conveyance of title to theproperty, a lease with an option or an agreement for sale or mortgage? B. Did the terms of the leases change the nature of the agreement between theDistrict and SVLC? C. Is the District estopped from denying that SVLC is entitled to redeem title to thelands upon payment of the outstanding balance of the Loan? IV. Analysis A.

Is the arrangement between the parties an absolute conveyance of title to the property, a lease withan option to purchase or as an agreement for sale or mortgage? [30] There is no written agreement setting out the terms of the Loan from CEF and/or the District, and no current lease agreement.However, SVLC submits that the circumstances surrounding the arrangement between SVLC and the District support the view that thetransfer of the lands to the District was not an absolute conveyance, but rather an agreement for sale pursuant to which the parties agreedthat title to the lands would be re-conveyed to SVLC upon repayment of the Loan.

It submits that the surrounding circumstances equallysupport the view that the arrangement is in the nature of a mortgage, whereby title to the lands was transferred by SVLC to the District assecurity for the Loan, and SVL has the equitable right to redeem title to the lands. [31] The District submits that it was not the intention of the parties to create a legally binding contract, on the basis of the nature ofthe relationship between the parties and the financial support that the District and SVLC knew would be necessary in order to support theCanmore congregation.

This submission fails in the face of the surrounding circumstances. A reasonable person, reviewing thecorrespondence and the nature of the documents produced by the District for execution by SVLC prior to the transfer of property and aspart of the advancement of funds, particularly Mr. Ulmer’s letter of July 16, 1992, would conclude that the District considered what itemphasized to be a loan from the CEF to be a legally enforceable obligation: Hole v Hole, 2016 ABCA 145 at paras 33-35.

Thus, theissue is the character of the transaction. [32] Even when an agreement purports to be an absolute conveyance of land, evidence of surrounding circumstances andcommunications between the parties may indicate that the transaction is not as it appears to be: Wilson v Ward, (SCC),[1930] SCR 212 at paras 11 and 13. [33] While the February, 1994 conveyance does not clearly indicate any terms other than a conveyance, the surroundingcircumstance, including the pre-conveyance correspondence between the District and SVLC, the conduct of both parties, the first leaseagreement with its option to purchase clause, and the affidavit of value, which refers to consideration “by agreement for sale”, allindicate that the real agreement between the parties is not evidenced exclusively by this conveyance: Wilson at para 11. [34] The circumstances relevant to determining the nature of the agreement are as follows:

a) SVLC was the registered owner of the property prior to the transfer to the District;

b) the affidavit of value attached to the conveyance documentation expressly contemplated an agreement for sale;

c) there was only minor indebtedness owing by SVLC to the District at the time it executed the conveyance;

d) Mr. Ulmer’s July 16, 1992 letter stated that when SVLC no longer required a subsidy and could manage the debt repayment, thelands would be sold back to SVLC according to CEF policy, being for a price equal to the lesser of the appraised value or the fundsprovided by the CEF to eliminate current indebtedness plus the funds necessary to build the church;

e) the proposed lease was sent to SVLC with the advice that the land would be leased “until the congregation is in a position to beable to purchase the property back from the CEF;”

f) the transfer of the property was not a gift, but rather made in conjunction with the corresponding loan to SVLC from the CEF;

g) SVLC through its own labour (and that of a volunteer organization) constructed the church building on the lands and maintainedthem from the date of the transfer to present day;

h) at all times, SLVC believed and acted as if it was paying down a mortgage and not simply a loan;

i) SVLC acted as the owner in maintaining the property (including the church building on the property) and paying property taxes,utilities and insurance;

j) the District applied the rent payments under the leases to interest accruing on the Loan; and

k) the District encouraged SVLC to make payments on the Loan with the aim of having title to the lands re-conveyed. [35] An agreement for sale is a contract for the sale of an interest in land pursuant to which one party agrees to pay the purchaseprice over a period of time, and on full payment, the other party is obliged to convey the title back to the buyer. [36] The District submits, relying only on the language of the option to purchase clause in the lease, that SVLC did not agree topurchase the land, but only had the option to do so, such that it was an optionee rather than a purchaser under an agreement for sale.However, the agreement between the parties is informed not merely by the lease provisions, which are no longer in effect at any event;but by the circumstances as a whole, which indicate that SVLC made payments on the Loan with intention of having the landreconveyed to it when it was able to pay down the indebtedness. [37] On entering into an agreement for sale and making payments pursuant to it, a purchaser acquires an equitable interest in theproperty.

As long as the conditions to the sale are fulfilled, the purchaser has the right to demand a conveyance to the land: Francis C. R. Price and Marguerite J.

Trussler, “Mortgage Actions in Alberta” (Carswell Legal Publication: Calgary, 1985), at pages 434-435. [38] Evidence of the surrounding circumstances is cogent and persuasive: the arrangement between the parties was a validagreement for sale between SVLC and the District whereby SVLC would make payments on the Loan over time, and once the Loan waspaid in full, plus applicable interest, the District would re-convey title of the SVLC lands to SVLC. [39] As noted by SVLC, the circumstances surrounding the arrangement are also consistent with a finding that the agreement is inthe nature of a mortgage, with a right to redeem: Wilson; Montgomery v Montgomery, (1970) (AB KB), 74 WWR 41;Winthrob v Roberts, (1907) (MB KB), 17 Man R 220; Arnal v Arnal (1969) (SK CA), 6 DLR (3d)245; Creswell v Raven Bay Holdings Ltd, [1984] BCWLD 1512. [40] The correspondence between the District and SVLC, and the conduct of SVLC and its internal characterization of thearrangement support the conclusion that the conveyance was intended to be security for the Loan from CEF to build the church. [41] As noted in Arnal at paras 11 and 12, the Statute of Frauds does not preclude treating a conveyance as a mortgage when thesurrounding circumstances indicate that this was the agreement between the parties and the essential terms are set out in writtencommunications: Waslyshyn v Waslyshyn, 2008 ABQB 39 at para 36. [42] In addition, the doctrine of part performance would apply in this case as an exception to the requirement of a written documentunder the Statute of Frauds.

SVLC’s conduct was referable to the contract, the contract was one for which the law would grant specificperformance if it had been evidenced in writing and there is clear evidence of the existence of a contract: Kang Corp v KRTT Group Ltd, (2007) 56 RPR (4th) 278, at paras 11 and 12; Haan v Haan, 2015 ABCA 395. [43] As noted by Joseph E Roach in “The Canadian Law of Mortgages”, 2nd ed (Markham: LexisNexis, 2010) at page 90, a salewill be presumed in reality to be a mortgage when the following circumstances are present.

a) the grantor remains in possession of the land;

b) the grantor made improvements to the property;

c) the taxes are paid by the grantor;

d) the consideration is less than the true value of the land;

e) the grantor is in financial need; and

f) there is inequality of position and the mortgagee dictates the form of the transaction. [44] All of these indicia that a conveyance should be considered to be a mortgage are present in this case. While the District did notpressure SVLC into a conveyance, SVLC did not obtain legal advice on the arrangement in light of its relationship to the District, whichdrafted the transfer and lease documentation. [45] Thus, whether the arrangement is characterized as an agreement for sale or a mortgage, SLVC has the right to purchase the

property. [46] A purchaser’s equitable right to enforce the transfer of property by way of specific performance with respect to an agreementfor sale is akin to, and synonymous with the equitable right of redemption that applies to mortgages, with the result that the equitableright of redemption of title to property applies to both agreements for sale and mortgages.

Section 41 of the Law of Property Act appliesthe statutory right to redeem title to agreements for sale as it does to mortgages: Law of Property Act, RSA 2000, c L-7,

Part 5 sections37 to 50.1; Triangle Lumber & Supply Co, Re, [1978] 3 ACWS 196, at para 7; Oscar Fech Construction Ltd v 509211 Alberta Ltd,[1994] AJ No 764 at paras 32 and 33; Morguard Mortgage Investments Ltd v Faro Development Corp, (AB CA),[1974] AJ No 286, at para 16. [47] SVLC has carried out the terms of the agreement for sale or mortgage and has made payments on the Loan sinceapproximately 1994.

It is true that the District has paid interest on the Loan for the majority of time the Loan has been outstanding.However, it is clear that these payments have been made pursuant to the Financial Support Agreement with SVLC, wherein the Districtagreed to support SVLC in becoming financially self-sufficient. The Financial Support Agreement was for the benefit of the District, aswell as SVLC, given that it was in the interests of the District to establish ministries in its area of jurisdiction.

At no time has the Districtever indicated that SVLC was in default or arrears on the Loan, nor has the District indicated that it would require repayment of theinterest payments it made on the Loan from SVLC as a pre-condition to the reconveyance of the property.

The District has acted in amanner consistent with SVLC’s understanding of the arrangement. [48] Even if SVLC is or was in default or arrears on the Loan, SVLC is currently able and willing to repay to the District the fullamount of Loan, including interest, prior to title to the property being transferred to it, thereby allowing the Court to grant relief to SVLCunder

section 38 of the Law of Property Act for any non-payment. B. Did the terms of the leases change the nature of the agreement between theDistrict and SVLC? [49] The District submits that SVLC is an optionee, rather than a purchaser under an agreement for sale or a mortgagor, relying onthe language of the option to purchase in the leases. [50] The leases are no longer in effect.

However, the District submits that the leases more accurately set out the terms of theagreement between the parties, and that, since SVLC continued to make rental payments as called for in the last lease after it expired atthe end of 2004, and the District continued to apply those payments on the Loan, the option is still in existence. The District submits that,if it is not, SVLC can only obtain title to the lands if it makes an offer that is acceptable to the District, the Monitor and the DistrictCreditors’ Committee. [51] This

interpretation of the leases and the option ignores the surrounding circumstances that existed at the time of the Loan, theconveyance and the drafting of the leases. The agreement between the District and SVLC was not limited to the formal leases, whichwere one element in a series of communications and documentation that made up the agreement between the parties. [52] The entire transaction was not, as characterized by the District, a purchase of the lands with an option back.

The District didnot pay a purchase price for the lands; they were transferred to the District as security for the assumption of an existing relatively smallloan, and the commitment to lend SVLC funds to build a church. The conveyance document itself described the transaction as being byway of agreement for sale.

The case of Kreick v Wansbrough (SCC), [1973] S.C.R. 588, relied upon by the District, isdistinguishable on its facts, as the plaintiff in that case conceded that he had agreed to pay back a higher price for the land than he hadoriginally borrowed. [53] The Court noted at page 594 of Kreick that “(d)ifferent considerations would apply if the evidence in this case was related to aconveyance absolute in form or to an agreement of sale with an option to repurchase for the amount of the vendor’s debt without more”.The Court cited Wilson as a case different in kind and not merely of degree: page 595.

This case is closer to Wilson than to Kreick on itsfacts. [54] The District submits that the option should be interpreted to mean that once SVLC paid all indebtedness to the District as afirst step, it would then have the option to purchase the lands at appraised value or the amount of money the District had expended onthe building and the lands plus no more than 10% per annum. In other words, the District submits that the option means that SVLCwould have to pay twice the Loan amount plus interest for the lands.

The option clause in the lease is ambiguous, and the District’sinterpretation would give rise to a commercial absurdity. In any event, the meaning of the option to purchase clause was clarified by Mr.Ulmer in his letter of July 16, 1992, and more specifically February 9, 1994, where he assured SVLC that total indebtedness in the optionmeant: ... all costs incurred by the District or the [CEF] on behalf of the property or building ... That would mean taxes or improvementassessment ... not paid by the congregation but rather are paid by the District...

There would be no other indebtedness included in theLease Agreement.” [55] Even if the leases were still in effect, and should be interpreted as submitted by the District, to impose more onerousrequirements on SVLC to obtain title to the SVLC lands than are imposed by the agreement that I have found existed by virtue of thesurrounding circumstances, the option to purchase would be unenforceable as being a “clog” on SLVC’s equitable right to redeem title tothe lands under the mortgage or agreement for sale. [56] As noted in Montgomery at para 24; ...

Any provision inserted in the mortgage to prevent redemption on payment of the debt or performance of the obligation for which thesecurity was given is termed a clog or fetter on the equity of redemption and is void: Ibid., p. 158;

See also Wilson at para 22. [57] Therefore, the language of the now expired leases do not change the nature of the agreement between the District and SVLC. C. Is the District estopped from denying that SVLC is entitled to redeem title to thelands upon payment of the outstanding balance of the Loan? [58] The elements of proprietary estoppel are as follows:

a) the owner of the land induces, encourages or allows the claimant to believe that it has or will enjoy some right or benefit over theowner’s property;

b) in reliance upon this belief, the claimant acts to its detriment to the knowledge of the owner; and

c) the owner then seeks to take unconscionable advantage of the claimant by denying it the right or benefit which it expected toreceive. [59] The relief granted may be either negative, in the form of an order restraining the owner from asserting its legal rights, orpositive, by ordering the owner to either grant or convey to the claimant some estate, right or interest in or over its land or to pay theclaimant appropriate compensation: Eberts v Carleton Condominium Corp. No. 396, (ON CA), [2000] O.J. No.3773 (Ont. C.A.) at para 23: Parkdale Nifty Fifties Seniors Assn. v.

Parkdale Community, 2011 ABQB 433 at para 29. [60] The existence of a belief by the claimant alone is not sufficient to establish proprietary estoppel: there must be a clear andunambiguous representation, by words or conduct, that leads the claimant to believe that the owner will not insist on its strict legal rights:Wincal Properties Ltd. v. Cal-Alta Holdings Ltd., 1983 CarswellAlta 5 (Alta. Q.B.) at paras. 16-17. [61] In this case, the three elements of proprietary estoppel have been met. The representations made in Mr.

Ulmer’s July 16, 1992letter that the property would be sold back to SVLC for the funds provided by the CEF to eliminate the current indebtedness plus thefunds necessary to build the church (essentially, the Loan), Mr.

Ulmer’s February 9, 1994 letter clarifying the meaning of totalindebtedness in the option to purchase clause of the lease, and the manner in which the District kept track of, and advised SVLC of, thestatus of the Loan, together with its encouragement of SVLC to make payments on the Loan with the aim of re-gaining title to theproperty, all constitute representations that satisfy the first element of the test. [62] SVLC acted and relied upon this understanding of the arrangement to its detriment by constructing the church building on thelands through its efforts and labour, maintaining the church building, paying utilities, rent (which was applied to the Loan), propertytaxes, insurance and making payments on the Loan, all with the aim of recovering title to the lands. [63] There is no issue that the District now seeks and has sought to deny SVLC its right to reconveyance of title upon payment ofthe outstanding balance of the Loan. [64] The District and the Monitor submit that if SVLC becomes owner of the lands through payment of the Loan, it would obtain asignificant windfall in excess of its contribution to the property.

The windfall results in large part from the appreciation of propertyvalues in the Canmore area, rather than merely from the additional contributions made by the District to SVLC under the FinancialSupport Agreement.

If the District intended that SVLC would have to repay the funds advanced to it by the District under the FinancialSupport Agreement before reconveyance of the property, the District could have made that clear through the documentation if drafted. [65] I undertand that if the District had been successful in this application, the property would be sold and the funds realized wouldbenefit the remaining affected creditors of the District’s insolvency, but this attractive goal cannot be accomplished by denying SVLC’scontractual and equitable rights. [66] I therefore find that SVLC is entitled to the equitable relief of proprietary estoppel, and the District is directed to transfer thelands to SVLC upon payment of the Loan in full.

V. Conclusion [67] SVLC’s application is granted. The agreement between SVLC and the District is a valid loan agreement, and in any event theDistrict is estopped from denying SVLC the right to redeem title to the property. [68] An order will issue prohibiting the District from selling the property, and declaring that upon the payment of the Loan, title tothe lands shall be re-conveyed to SVLC. Dated at the City of Calgary, Alberta this 2nd day of May, 2017.

B.E. Romaine J.C.Q.B.A. Appearances: Francis N.J. Taman and Ksena J. Court for the District Group Jeffrey L. Oliver for the Monitor Stephen G. Raby, Q.C. and John Cassell for SVLC Chris D. Simard and Alexis E. Teasdale for the District Creditors’ Committee Douglas S. Nishimura for the DIL Creditor’s Committee Christa Nicholson for Francis Taman, Bishop and McKenzie LLP _______________________________________________________ Corrigendum of the of The Honourable Justice B.E.

Romaine _______________________________________________________ Under the Appearances Heading a change has been made to reflect that Christa Nicholson acts for Francis Taman and Bishop and McKenzie LP not Prowse Chowne LLP.