Land Craft Ventures Ltd. Plaintiff And: Frank Wille Holdings Ltd. Defendant, 2013 BCSC 146

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Land Craft Ventures Ltd. v. Frank Wille Holdings Ltd., 2013 BCSC 146 Date: 20130131 Docket: 11-3969 Registry: Victoria Between: Land Craft Ventures Ltd. Plaintiff And: Frank Wille Holdings Ltd. Defendant Before: The Honourable Mr. Justice Bracken Reasons for Judgment Counsel for the Plaintiff: G. N. Harney Counsel for Defendant: P. G. Guy Place and Date of Hearing: Victoria, B.C. June 14, 2012 Written Submissions Received: June 18, 2012 and July 4, 2012 Place and Date of Judgment: Victoria, B.C. January 31, 2013 [ 1 ] The defendant Frank Wille Holdings Ltd. (FWH) applies for

summary dismissal of this action. The plaintiff Land Craft Ventures Ltd. (Land Craft) opposes the application for dismissal and seeks judgment on a

summary trial against FWH for an amount in excess of $3,000,000, alternatively, that the matter be referred to the trial list for a full trial. It has also made an application for an order amending the Notice of Civil Claim. [ 2 ] The history of this action is long and complicated. The action was commenced almost 11 years ago and there have been numerous applications prior to the

summary trial application. The subject matter of the dispute between the parties relates to property originally consisting of about 34 acres located in the Langford area near Victoria, British Columbia. Portions of the original parcel were later subdivided out and developed. [ 3 ] The remaining land has since been developed into a large shopping centre. Land Craft claims that sometime in 1999 it made an agreement with FWH by which the two corporations were to participate as equal partners in the development of the land charged by the FWH mortgage.

Pursuant to that agreement, Land Craft says it was entitled to one-half of the net proceeds of sale of the property which was sold by FWH at a price in excess of $10,000,000 in 2004. A further complicating factor is that Mr. Wille died in December 2004. [ 4 ] In 1992, Land Craft borrowed money from FWH secured by a mortgage against property. The amount borrowed was increased over the next two years and in 1994 a new mortgage was registered in the amount of $1,850,000. (“the mortgage”). The intention of Land Craft was to subdivide and develop the land.

However, it claims that part way through the subdivision of the property the principals of FWH and Land Craft, respectively Mr. Frank Wille and Mr. Erwin Brechert, made an agreement that FWH was to become an equal participant in the project rather than simply a lender. [ 5 ] Land Craft says that a term of the agreement was that the mortgage was fixed at an amount of approximately $5,000,000.

Land Craft claims that no further interest was to be charged on the mortgage from the time of the alleged agreement and that from that time forward the mortgage was intended only to secure FWH’s fifty per cent interest in the project. [ 6 ] FWH denies it agreed to become a participant in the project and claims the mortgage was in place to secure money loaned to Land Craft for the development of the property. FWH says it was at all times intended and agreed by the parties that the mortgage would continue to bear interest in accordance with its terms.

FWH says the amount due and owing under the mortgage for principal, interest, costs and disbursements to protect the property exceeded the amount of the subsequent sale price by a significant amount. It denies any agreement to freeze the amount of the mortgage or to stop the accrual of interest. [ 7 ] Affirmed Mortgage Investment Corporation (Affirmed) held a first mortgage charge over a portion of the property as well as charging other land owned by Land Craft. Affirmed subsequently commenced foreclosure proceedings against Land Craft on that

mortgage and also on its mortgage security charging the other land owned by Land Craft. FWH paid out the Affirmed first mortgage charging the property and took an assignment of the foreclosure action. [ 8 ] Later, FWH was granted an Order Absolute of foreclosure and it then took title to the property in its name and, by the express terms of the Order Absolute, it was able to maintain the mortgage against the property. The mortgage then became a first mortgage charge against all of the property.

FWH claims that Land Craft was at all times fully aware of what FWH was doing with respect to the Affirmed mortgage and says that Land Craft agreed with the actions of FWH. [ 9 ] FWH says that the agreement between the parties was that any remaining equity in the property would be paid to Land Craft even though title was in the name of FWH, but only after the amounts owing for principal and interest under the mortgage, any amounts paid for taxes, all expenses related to the sale of the property and all legal expenses were paid to FWH.

FWH says that by the time the property was sold more than $12,000,000 was owed to FWH by Land Craft and there were no proceeds of sale left after payment of the amount due under the mortgage to be paid to Land Craft. Background Facts [ 10 ] The extensive material presented in this matter reveals that Mr. Erwin Brechert and Mr. Frank Wille knew each other and became involved in a business relationship respecting the property that is the subject of this action.

It also appears that while both were represented by their respective solicitors, they met from time to time and made agreements that their solicitors later documented by formal written agreements or, in some cases, by letter agreements. It is perhaps useful to canvas those “agreements” in detail. [ 11 ] In November 1992, Mr. Brechert either personally or through Land Craft had acquired title to several properties constituting approximately 34 acres in the Langford area of Victoria. Land Craft wanted to develop the properties but needed money to proceed. Mr.

Brechert had dealt with Affirmed Mortgage Corporation on other occasions. Mr. McKinnon of Affirmed referred Mr. Brechert to Frank Wille as a possible lender, and Mr. Wille, through his corporation FWH agreed to lend money to Land Craft secured by a mortgage. [ 12 ] Initially, a mortgage in the amount of $793,501.72 was registered against certain land held by Land Craft.

It appears from the correspondence that is in evidence that there were prior charges against the property that were paid out of the proceeds of the new FWH mortgage. [ 13 ] On March 16, 1994 Land Craft granted a mortgage over its property to secure a loan of $1,850,000 at an interest rate of 15% calculated monthly. Mr. Brechert signed the mortgage as a “covenantor”.

The mortgage contained the usual promises to pay interest and principal as well as all charges and expenses related to the preparation and registration of the mortgage, any proceedings taken by FWH to enforce the mortgage and legal fees on a solicitor and client basis. [ 14 ] Two related agreements were part of the package of documents that were executed along with the new mortgage. The first was an agreement dated March 8, 1994 between the parties by which Land Craft acknowledged FWH had provided certain construction services with respect to the development of the properties for which it had not been paid.

The agreement provided for the transfer of one lot, free of all encumbrances, as compensation for those services. Land Craft now denies that there was any money owed for construction services to FWH at that time. [ 15 ] The second agreement was an assignment of $450,000 from FWH and Land Craft as assignors to T.K. Sales Ltd. to be paid upon the sale of three lots described in the agreement. T.K.

Sales Ltd. was apparently entitled to the money to pay for houses that were already built or were under construction on those lots. [ 16 ] On June 7, 1995 the parties replaced the March 8, 1994 agreement respecting the transfer of one lot to FWH in compensation for construction services with a new agreement. The new agreement confirmed that FWH had not been paid, acknowledged that Land Craft was developing a 17-lot subdivision and referred to a second phase subdivision. The agreement provided that FWH was entitled to one lot from the 17-lot subdivision and two lots from the second phase subdivision.

The lots were to be transferred free and clear of all financial encumbrances upon registration of the subdivision at the Victoria Land Title Office. [ 17 ] In April 1995 the parties agreed to a modification of the mortgage in favour of FWH. By the terms of the modification agreement the original amount of $1,850,000 was increased to $2,280,000. Then, on June 7, 1995 another modification agreement was made between the parties to further increase the amount of the mortgage to $2,780,000.

By the terms of the modification agreement it was confirmed that the amount outstanding under the mortgage at that time was $2,280,000.

The modification provided that interest was to be charged at 17% per annum, calculated monthly from April 1, 1995. [ 18 ] It was a term of that modification agreement that in exchange for a partial discharge of the mortgage, the greater of one hundred percent of the net sale proceeds or $75,000 for each lot for which a partial discharge was granted would be paid to FWH. [ 19 ] On June 18, 1996 the parties made another agreement in writing; again providing that the March 8, 1994 agreement would be modified.

By its terms, Land Craft was to continue the subdivision of the properties and upon subdivision one lot was to be transferred in accordance with the terms of the March 1994 agreement. It also provided that FWH was to release its financial charges from 10 lots in the subdivision, the lots to be chosen by Land Craft in its sole discretion. [ 20 ] On November 14, 1996 the solicitor for FWH wrote to the solicitor for Land Craft to confirm the agreement set out in the June 18, 1996 agreement and that Land Craft would pay the fees for the discharge of the mortgage over each of the lots.

Ten executed discharges and a related account for legal services were sent by courier to Land Craft’s solicitors the same day. [ 21 ] On January 27, 1997, the solicitors for Land Craft forwarded the sum of $300,000 to the solicitors for FWH. The covering letter from Land Craft’s solicitors said that the money represented a partial payment owing under the mortgage.

On January 29, 1997 the solicitors for FWH wrote to Land Craft’s solicitor to advise it was the understanding of FWH that the $300,000 was in substitution for the obligation of Land Craft to transfer three lots to FWH, free of all encumbrances, and that the money was not to be treated as a

payment on the mortgage. [ 22 ] There is a gap in the material after January 29, 1997 and it is not clear from the materials whether Land Craft agreed with how the $300,000 payment was treated by FWH. However, in December 2004, FWH filed and delivered a Notice to Admit to Land Craft and no response was ever filed.

Paragraph 21 provides that the payment was made in substitution for Land Craft’s obligation to transfer the three lots. [ 23 ] The Notice to Admit states further at para. 23 that In September 1997, the solicitors for Land Craft requested a partial release of the mortgage in exchange for a further payment of $300,000.

FWH advised, through its solicitors, that there was no provision in the mortgage for a partial release and through further correspondence between the respective solicitors, it appears that the parties agreed to treat that payment as a “bonus” and not as a payment in reduction of the amount owing under the mortgage. [ 24 ] The correspondence to the solicitors for FWH from Land Craft’s solicitor indicates that he was instructed that: ... our clients have settled this matter between them.

Accordingly, please accept this letter as authority to release the sum of $300,000 to your client, which sum will constitute a bonus as agreed between our clients. [ 25 ] While I have referred to the Notice to Admit, I will note that counsel for Land Craft who was not counsel at the time, now wants an order allowing Land Craft to withdraw the admissions on the ground that some of the admissions are contradicted by the evidence.

FWH is opposed to the granting of such an order. [ 26 ] Of significance in this matter is a document referred to as a “Certificate of Correctness” or “Certificate of Estoppel” that was executed by Land Craft and Mr. Brechert on March 25, 1999.

The document is directed to FWH and states: The undersigned, being the Principle Debtor and Guarantor respectively of a debt owing to Frank Wille Holdings Ltd. (“the Debt”), hereby confirms that the outstanding sum due and owing pursuant to the said Debt, for principal and interest as at November 1, 1998, is the sum of Five Million Thirty-two Thousand Four Hundred and Twelve Dollars and Fifty-four cents ($5,032,412.54), and that interest accrues thereafter at the rate of 17% per annum.

It is agreed that the Debt is secured in part by Mortgages and Assignments of Rent registered in the Victoria Land Title Office under numbers EH33775 (being a transfer of EF158922) and EH33776 (being a transfer of EF158923, and EH33773, as modified by EJ59329, and EH33774. This confirmation is provided so as to prevent the undersigned or anyone claiming through or by them that the state of accounts as between Land Craft Ventures Ltd. and Frank Wille Holdings Ltd. in respect of the said Mortgage, is anything other than as stated herein.

For greater certainty, it is agreed that LAND CRAFT VENTURES LTD. and ERWIN BRECHERT, as Guarantor, are hereby estopped from denying the authenticity of the accounts to November 1, 1998, attached to this Certificate. [ 27 ] The document was signed and sealed by Land Craft and signed by Mr. Brechert and witnessed by his solicitor. The accounts referred to in the document shows the loan amount to be $2,876,451.76 as at January 1, 1996 and $5,176,007.70 as at December 31, 1998.

The accounts show the addition of monthly interest and two payments of $100,000 (January 5 and March 29, 1996) and one payment of $50,000 on April 29, 1996. The draft document and statement of accounts was sent to Land Craft’s solicitor on November 24, 1998 but it was not signed until March 25, 1999. [ 28 ] In March 1999 Land Craft requested a further modification of the FWH mortgage to allow the release of an 11-acre parcel in exchange for a payment to FWH of $2,300,000.

FWH was prepared to agree on the condition a sketch plan of the land to be released be provided and that Land Craft execute the Certificate of Correctness or Estoppel Certificate. On March 29, 1999 the executed Certificate of Correctness was returned to the solicitors for FWH. [ 29 ] The same day, Land Craft’s solicitors wrote to Mr. McKinnon of Affirmed, who was apparently seen as a representative of FWH concerning the mortgage to advise that Land Craft and Mr. Brechert had been asked to execute the Certificate of Correctness.

The letter stated in part: My clients are prepared to sign the document and provide the same to Mr. Wille. However, they have expressed concern that the document may be used to end ongoing dealings with Mr. Wille, and more particularly any consideration to which they may be entitled with respect to the earlier payment to Mr. Wille of $300,000. My clients wish to confirm that they and Mr. Wille will continue to negotiate in good faith with respect to all matters which have arisen to date. [ 30 ] It is not clear what was meant by this letter. It does refer to “consideration” Land Craft and/or Mr.

Brechert “may” be entitled to, likely respecting the $300,000 payment made in January 1997, but it also seems to suggest a concern on behalf of Land Craft that Mr. Wille and FWH may wish to “end ongoing dealings” with Land Craft. [ 31 ] Affirmed was also still involved with Mr. Brechert as Land Craft had granted a mortgage in favour of Affirmed in December 1998 charging a property in North Saanich and part of property that was also charged by the FWH mortgage. [ 32 ] Whatever the concern was, FWH and Land Craft did have further dealings.

On May 7, 1999 the mortgage was modified to allow for the release of the 11-acre parcel upon payment to FWH of $2,300,000. Over the next few months it appears that a plan was prepared and circulated to the various interested parties for approval. The plan created two separate properties described as: PID: 024-756-415, Lot A,

Section 111 and 112 Esquimalt District, Plan VIP70599, Except that

part in Plan VIP70623 and; PID: 024-756-423, Lot B,

Section 111 Esquimalt District, Plan VIP70599 (“the property”)

The lots were just over four hectares each. This plan was referred to at times as a “boundary adjustment” plan. [ 33 ] FWH agreed to allow priority to the Affirmed mortgage charging Lot A and a priority agreement was subsequently registered for that purpose. The solicitors for FWH also advised that there was apparently an additional requirement agreed to between FWH and Land Craft that Mr. Brechert would arrange for the assignment to FWH of a second mortgage in the amount of $200,000 held by Affirmed over his residence as additional security.

The Affirmed first mortgage over Lot A was for the same face amount although Mr. Brechert claimed that only $125,000 remained owing. [ 34 ] As there were difficulties in placing a second mortgage on the title to Mr. Brechert’s residence the parties attempted to make an alternate arrangement. It does not appear they ever did so. [ 35 ] On April 6, 2000 the priority agreement agreed to by FWH, granting Affirmed priority over the FWH mortgage on Lot A was registered.

The new subdivision plan of the property was filed at the Victoria Land Registry the same day and the property was subdivided into Lots A and B. [ 36 ] Shortly after the registration of the new plan of subdivision, Affirmed commenced a foreclosure action respecting the mortgage granted to it by Land Craft on December 29, 1998. The foreclosure related to Lot A only as the Affirmed mortgage was only registered against that lot. Judgment against Land Craft, Mr. Brechert and Delora Holdings Inc. was also sought in the action. [ 37 ] On July 11, 2000 counsel for Affirmed and counsel representing Land Craft, Mr.

Brechert and Delora Holdings Inc. appeared in court and an Order Nisi of foreclosure was granted with respect to Lot A. The amount found due and owing at that time was $133,913.45 plus additional interest after July 11, 2000 and costs. [ 38 ] It appears that following discussions between counsel for FWH and Affirmed after the Order Nisi was granted, an agreement was reached by which FWH would take an assignment of the Affirmed mortgage and the related extension agreements that were registered in the Victoria Land Title Office.

The contents of a written agreement between FWH and Affirmed indicate that as at January 1, 2001, the amount outstanding was $144,369.21 plus interest and costs. [ 39 ] By the terms of the agreement the land charged by the mortgage was extended to include both Lot A and Lot B. The Order Nisi included only Lot A. [ 40 ] On February 8, 2001 counsel for FWH, Land Craft, Mr. Brechert and Delora Holdings Inc. appeared in court and an Order Absolute of foreclosure was granted respecting the assigned mortgage.

By the terms of the order the original petition of foreclosure and the Order Nisi of foreclosure were amended to include both Lots A and B of Sections 111 and 112, Esquimalt District, Plan VIP70599.

FWH was substituted as the petitioner in the foreclosure action in place of Affirmed and the style of cause was amended accordingly. [ 41 ] The Order Absolute provided in para. 4: That the respondents, their heirs, executors, administrators and assigns and all persons claiming by, through or under them, or any of them, and any person or persons in possession of the lands and premises which are the subject matter of these proceedings on their behalf or otherwise, with the exception of the Respondent FRANK WILLE HOLDINGS LTD. and the following charges registered in its favour and charging the subject lands and premises: Mortgage EF158922 (EH33775) Assignment of Rents EF158923 (EH33776) Mortgage EH33773 (EJ59329, EN40055) Assignment of Rents EH33774 Mortgage EN36978 do forthwith stand and they are absolutely debarred and foreclosed of and from all right, title and interest and equity of redemption in and to the said lands and premises and that the said Respondents, or any person or persons in possession of the said lands and premises shall forthwith deliver up vacant possession thereof to the petitioner. [ 42 ] The intent of this provision was to transfer the title to Lots A and B to FWH but still subject to the FWH mortgages, modifications of the mortgages and related charges.

The Order was unopposed by counsel for Land Craft, Mr. Brechert and Delora Holdings Inc. [ 43 ] Even though the solicitor for Land Craft attended the hearing of the application for Order Absolute of foreclosure and took no position on the application. In an affidavit sworn May 1, 2009 he said this: I discussed the foreclosure application with Mr. Brechert, but I do not recall discussing with him specifically either Lot A or Lot B. Mr.

Brechert instructed me to consent to the Order Absolute without reference to Lot A or Lot B provided I obtained something in writing from the Defendant confirming the arrangements between Mr. Wille and Mr. Brechert. I did obtain the letter from Mr. Delsey, who was acting on the foreclosure for the Defendant, which is now produced and shown to me and marked as Exhibit “A”, to this my Affidavit. When the application came on, I did not consent to the Order as I was troubled by some omissions in the material before the Court.

However, I took no position on the application, believing that my instructions were to do so. Indeed, I do not recall discussing Lot B in the foreclosure with Mr. Brechert at all. It is now obvious to me that Mr. Brechert and I were speaking at cross purposes, to some extent, and when he told me to oppose the Application, unless I receive something in writing from the Defendant confirming their agreement, he was not thinking of Lot B at all.

[ 44 ] What was received as “something in writing” from Mr. Delsey, the solicitor for FWH, was a letter, dated February 2, 2001, advising as follows: I have spoken to Mr. Wille and am able to confirm his advice that he proposes to pay to Mr. Brechert any surplus proceeds of the pending sale after payment of all amounts owing to Mr. Wille with respect to this property, including amounts paid for taxes, expenses of sale, costs of title transfer, mortgage principal and interest, all legal expenses, and payment of all other outstanding loans and mortgages on other properties. I have also discussed with Mr.

Wille, and he agreed, that to ensure that the application Monday goes uncontested, Mr. Brechert must make a satisfactory arrangement with Mr. Maybee. I would appreciate your letter today confirming that Mr. Wilson’s concerns about Monday have been dealt with in that regard. It would be unfortunate if Mr. Wille had to contend with opposition from Mr. Wilson, as he said this morning would be the case. [ 45 ] Mr. Wilson was counsel for Mr.

Maybee, a real estate appraiser who had registered a judgment against the title of the foreclosed property. [ 46 ] There was a separate and distinct proceeding brought by Affirmed against Land Craft, Delora Holdings Inc. and Mr. Brechert going on at the same time. On April 25, 2000 Affirmed obtained an Order Nisi of foreclosure and judgment against Land Craft, Delora Holdings Inc. and Mr. Brechert in the amount of $2,368,452.76 respecting its mortgage granted in 1998.

That sum was subsequently reduced to $1,170,452.76 by the sales of some of the property through court approved sales. [ 47 ] Affirmed itself was in the process of winding up its affairs and it engaged counsel to consider what means were available to recover some of the funds owed on its action against Land Craft. [ 48 ] Land Craft held an option on a separate property owned by FWH immediately adjacent to Lot B, which was described as Lot 1,

Section 111, Esquimalt District, Plan 18236 (“Lot 1”). FWH had granted an option to purchase the property to Land Craft for a price of $300,000. The option was, by its terms, open for acceptance until January 31, 2002. [ 49 ] As a result Affirmed sought and obtained a court order on February 27, 2002 for the appointment of a Receiver of the interest of Land Craft in the option. Land Craft, Delora Holdings Inc, Mr.

Brechert and FWH were all represented at the hearing of the application. [ 50 ] Shortly afterwards, in July 2002, Affirmed, along with others, commenced an action against FWH claiming that Land Craft was the beneficiary of a trust agreement between it and FWH whereby Lot B was to be held in trust as to a one-half interest in favour of Land Craft and that Land Craft had entered into an agreement with FWH and Mr. Wille to allow FWH take title to Lot B by means of the assignment of Affirmed’s mortgage and the subsequent Order Absolute.

Affirmed claimed that the arrangement between FWH and Land Craft was used to clear the title and to effectively put Lot B out of reach of Land Craft’s creditors. Affirmed and the other plaintiffs sought a Declaration that Lot B was held in trust for Land Craft subject to the judgments that had been registered against the title by the other plaintiffs in the action. It appears that Land Craft and Mr. Brechert were cooperating with the plaintiffs in that action. It is not clear what steps, if any, have been taken in that action since it was commenced and it may no longer be active. [ 51 ] In his Affidavit #1, Mr.

McKinnon of Affirmed said that he introduced Mr. Brechert to Mr. Wille because: ... Mr. Brechert was looking to borrow money to be secured by lands, including the lands which are the subject matter of this action, and Mr. Wille was a lender familiar with the lands and development potential of lands in that area. I was directly involved in the dealings between Mr. Wille and Mr. Brechert leading to Mr. Brechert and his companies receiving loans from Mr.

Wille and his company and was subsequently involved, from time to time, in the administration of those loans. [ 52 ] The lands that were the subject of the Order Absolute of foreclosure were sold in 2004 for a price of approximately $10,000,000. Land Craft and Mr. Brechert now want to resile from the Order Absolute of foreclosure, and in particular, the portion of the Order that extended the Affirmed mortgage over Lot B as well as Lot A. The Position of Land Craft [ 53 ] The plaintiff says that it owned a parcel of land consisting of about 23 acres in 1992.

It wanted to develop the lands and had borrowed some funds to commence development from Affirmed. When it needed additional funds it borrowed them from FWH. The plaintiff says that the total amount advanced under the mortgage was $2,100,000 not $2,280,000 and that it consisted of three advances of $1,850,000, $150,000 and $100,000 respectively.

The plaintiff claims that it repaid $620,000, also in three installments being $20,000 in March 1994, $300,000 in January 1997 and $300,000 in September 1997. [ 54 ] Land Craft claims that it signed the certificate of correctness certifying the outstanding balance of the mortgage as at November 1, 1998 to satisfy a request from Mr. Wille, who claimed he needed the certificate in the stated amount to satisfy his bank which was conducting a review of his financial affairs. Mr. Brechert says it did not agree with the amount stated to be owing but said Mr.

Wille assured him the true amount owing would be sorted out between them at a later time.

Land Craft claims the certificate is incorrect because it does not take into account $250,000 that was never advanced by FWH and $300,000 payment to FWH by Land Craft in January 1997. [ 55 ] Land Craft says further that over time, FWH became involved in the project more as a participant rather than a lender and that the two corporations began to operate as a partnership or joint venture with a view to developing the property to a point when it would be sold and any profits shared approximately equally. [ 56 ] Land Craft says that it was agreed sometime in 1999 that it and FWH would have joint control and conduct over the development and sale of the property; that the entire property would be held in trust one-half for Land Craft and one-half for FWH.

It was also agreed that upon payment by Land Craft of $2,300,000 FWH would release one-half of the property from the mortgage and it would become the sole property of Land Craft and the remaining one-half would be the sole property of FWH.

[ 57 ] Mr. Brechert described the arrangement in this way at his examination for discovery on December 9, 2004: Q 198 Yes, then did Frank Wille Holdings Ltd. become more involved in the development of the Millstream property after, say, 1994? A Frank – yes, I should say he was because I remember one time in particular, and I’m not sure, that was probably in ’95 when Frank took a plan like this and he said, Irwin, (sic) - this is before ’95 and ’96, I guess , when we started to subdivide the Millstream property. He made a motion of like, look, what I want this part, you take that part.

That’s our share in the property. So basically this was sort of start of all kind of agreements that came out of this. Q 373 After January 1997 what next happened in respect of the Frank Wille Holdings Ltd. Mortgage? In January of 1997 we have the $300,000 paid for the three lots. That didn’t affect the mortgage. What happened next after January 1997 to your recollection?

A Well, with the exception of the agreement that I had with Frank where we are going to sell the property, split the proceeds, whatever they may be, this is something that I had an agreement – this is a verbal agreement with Frank with a handshake. He also guaranteed me this agreement will always exist or whatever eventually we are going to get for the property will be split in half. Even though we have some paperwork here that was sort of something that him and I agreed to. We split the property in half.

If it sells for ten million, the 2.3 million was part of it, as a pay down, and then he would get the balance of, say, 2.5 million or seven million out of the other chunk. You know, I would keep the property, or if it sold it would be five and five. Five million. Q 374 When was this agreement made? A We have already orchestrated this agreement when the property what I mentioned earlier when he said to me, I take this half, and I will give you that half. That was the basis of that so-called agreement. Mr.

Brechert went on to say that the agreement occurred before the subdivision of the land into Lots A and B. [ 58 ] Land Craft claims that when Affirmed commenced foreclosure of its first mortgage over the properties, it had significant equity in the properties and says it could have raised sufficient funds from other sources to pay out the first mortgage of approximately $143,000, although the evidence he referred to consists only of a possibility he could arrange the money and not a commitment to lend.

Land Craft says that FWH made the decision to pay out the Affirmed mortgage, take an assignment of the mortgage foreclosure action and take title to the property as it had a potential buyer for the property. Land Craft claims that it was assured that upon the sale that was expected, FWH would pay all financial charges aside from the Affirmed mortgage and the FWH mortgage. In fact, those charges were significant; they consisted of outstanding property tax arrears in excess of $280,000 legal fees and the property purchase tax of $178,000.

FWH says it paid $605,277.21 to complete the transfer of title to its name. [ 59 ] Land Craft says that, while it was not discussed, he believed that once the title was transferred to FWH through the Order Absolute of foreclosure, no further interest would be charged on the FWH mortgage, thus leaving a balance owing in the approximate amount of $5,000,000 that he says was agreed to earlier. [ 60 ] Land Craft says that after FWH took title to the property it excluded Land Craft and Mr. Brechert from further involvement. Mr.

Brechert alleges that he had discussions with other potential purchasers for the property, including Lot 1, that could have realized significantly more money upon sale but he was excluded from any further involvement in the property by FWH. [ 61 ] Land Craft claims that the total debt owed to FWH on its mortgage as at February 8, 2001, the date of the Order Absolute of foreclosure, was $7,381,452.35 if the Certificate of Correctness is accurate and $6,277,457.96 if the payment of $300,000 in September 1997 is applied to the debt and if it is accepted that only $2,100,000 was advanced to Land Craft by FWH. [ 62 ] Thus, it appears Land Craft claims that it is entitled to one-half of the net sale proceeds after deduction of the amount of the FWH mortgage as at February 8, 2001 plus protective disbursements paid by FWH in the amount of $605,277.21.

It also alleges that it is entitled to receive a credit of $40,000 for an easement that Land Craft says it was entitled to for the registration of an easement over Lot A that was requested by and for the benefit of FWH.

This is inconsistent with Land Craft’s earlier assertions that the mortgage was agreed to be $5,000,000. [ 63 ] Land Craft claims that FWH received $620,000 in payments on its mortgage, $10,293,212 in sale proceeds and it says that if the position of FWH is accepted it will have received more than $8,200,000 in interest and bonuses from the time the mortgage was granted to it by Land Craft to the date the properties were sold.

Land Craft says it is entitled to the sum of $3,450,476.83 as damages or compensation resulting from the unjust enrichment of FWH. [ 64 ] In the alternative, if this matter is one that cannot be resolved in favour of Land Craft on a

summary trial, Land Craft submits the matter must be referred to the trial list. Position of FWH [ 65 ] FWH says there was no agreement made between it and Land Craft, or between Mr. Wille and Mr. Brechert, that contradicts the extensive documentation surrounding the dealings between the parties. [ 66 ] FWH says that it has been admitted pursuant to a Notice to Admit dated December 14, 2002 and not responded to, that all of the agreements between the parties between 1992 and May 11, 1999 were made in writing and were reviewed by the solicitors of the parties. The evidence before me seems to support that statement. FWH also says that the Certificate of Correctness signed on March 25,

1999 certified the amount due under the mortgage as at November 1, 1998 as $5,032,412.54 and that interest was to accrue after that dateat the rate of 17% per annum. Finally, FWH says that when the Order Absolute of Foreclosure was taken and the property transferred toFWH, the Order specifically preserved the FWH mortgage on title, even though FWH was also the owner of the property. [67] FWH says that all of the dealings between the parties were reduced to writing by the parties respective solicitors, and properlyexecuted by the parties.

It says that the documentation surrounding the property is extensive and detailed. FWH submits that thedocumentation contradicts Land Craft’s allegation that there was any other agreement between the parties or their principals relating tothis matter. [68] FWH also submits that given the clear terms and significant detail contained in the various written agreements, it is not open toLand Craft or Mr. Brechert to present evidence that contradicts the terms of the agreements because of the parol evidence rule.

FWHsays that there is no exception to that rule that could allow such evidence to be admitted. [69] FWH says that Land Craft and Mr. Brechert were well aware of, and agreed to the actions of FWH in taking an assignment ofthe Affirmed mortgage foreclosure action and subsequently taking title to the property subject to the FWH mortgage. [70] FWH says there is no evidence to support the claim of Land Craft or Mr.

Brechert that alternate financing was available to payout the Affirmed mortgage against the properties plus the arrears of taxes and costs, nor is there any evidence of a higher value for theproperties or other potential buyers who would have paid a higher price for the properties. [71] FWH says that the letter written on February 2, 2001 by Mr. Delsey, referred to in para. 44 above, in response to the inquiry ofLand Craft’s solicitors, sets out clearly the agreement as to how the then pending sale of the properties was to be dealt with.

The letterclearly contemplates the continued accrual of interest on the mortgage. [72] FWH submits that there is nothing in that letter or the related correspondence between the solicitors for the parties to suggestthat the principal and interest on the FWH mortgage was to be effectively frozen as at the time FWH took title to the property or in anyspecific amount, or that the various mortgage and mortgage modifications were to be altered in any way.

It does not suggest an equal orany sharing of the proceeds of sale but rather a payment of what was left after payment to FWH by Land Craft of the amount owingunder the mortgage together with additional expenses that it had paid. [73] FWH argues that on the facts of this case, the parol evidence rule excludes any oral evidence that is presented for the purposeof contradicting a written contract.

It says further that there is no evidence that FWH was unjustly enriched as all it did was collect theamount owing to it in accordance with the binding contracts agreed to by Land Craft. [74] FWH says the accounting of Mr. Chris Goodburn, C.A., referred to in the evidence, as to the amount outstanding under themortgage is unchallenged. The calculations assume the amount owing under the FWH mortgage as at November 1, 1998 was$5,032,413 as stated in the Certificate of Correctness.

On that assumption, additional interest at 17% per annum after that date results ina balance owing on the mortgage of $11,771,742 as at November 24, 2003. Therefore, by the time of the sale of the property in July2004, there was more owing by Land Craft to FWH under the mortgage than the gross sale proceeds received by FWH. [75] FWH therefore submits that the action should be summarily dismissed as there is no admissible evidence that contradicts theclear terms of the mortgage and other documented agreements that are in evidence. I will add here that as Mr.

Wille has since died,obviously there can be no further evidence from him as to any alleged dealings directly between him and Mr. Brechert.

Summary Trial [76] The first issue for determination is whether this matter can be decided on a

summary trial proceeding. The Supreme CourtCivil Rules provide that:

(15) On the hearing of a

summary trial application, the court may (

a) grant judgment in favour of any party, either on an issue or generally, unless (

i) the court is unable, on the whole of the evidence before the court on the application, to find the facts necessary todecide the issues of fact or law, or (ii) the court is of the opinion that it would be unjust to decide the issues on the application, (

b) impose terms respecting enforcement of the judgment, including a stay of execution, and (

c) award costs. [77] Land Craft referred to Grant v. Sunlife Assurance Co. Of Canada, [1977] B.C.J. No. 1492 (B.C.S.C.) at paras. 15 and 16 wherethe court stated: 15. However, the law is clear that cases should not be tried summarily if: (

i) There is not sufficient evidence for the court to find the necessary facts to make a determination: Bank of B.C. v. AngloAmerican Cedar Products Ltd. (1984), (BC SC), 57 B.C.L.R. 350 (S.C.); Cotton v. Wellsby (1991), (BC CA), 59 B.C.L.R. (2d) 366 (C.A.); Tamboline v. Dobbs Estate, [1997] B.C.J. No. 242, (28 April 1997), Vancouver A951001(B.C.S.C.); (ii) The case is complex: Delalla v. Great Pacific Management Co., [1989] B.C.J. No. 1001 (24 May 1989), VancouverCA0008804 (B.C.C.A.); Dixon v. Deacon Morgan McEwen Easson, (1989), 41 B.C.L.R. (2d) 180 (S.C.); D.K. Investments v. S.W.S.Investments (1990), (BC CA), 44 B.C.L.R. (2d) 1 (C.A.);

(iii) Credibility is in issue: Hogan v. Van Bourne Group Ltd., [1990] B.C.J. No. 1911, (31 August 1990), Vancouver C893846(B.C.S.C.); Inspiration Management, supra; or (vi) There are important conflicts in the evidence: Cotton v. Wellsby, supra; Jutt v. Doehring (1993), (BC CA),82 B.C.L.R. (2d) 223 (C.A.); Poudrier v. Imperial Life Assurance Co. of Canada (1994), 25 C.C.L.I. (2d) 225 (B.C.S.C.) 16.

However, where, on a consideration of all of the evidence, including documentary or other non affidavit evidence, it can bedetermined that one version of the facts is more probably true than another, then affidavit conflict should not preclude the court frommaking a decision: Coast Wholesale Appliances Ltd. v. Armistead (1993), (BC CA), 77 B.C.L.R. (2d) 267 (C.A.). [78] It is appropriate to proceed by way of a

summary trial if the necessary facts can be determined from the evidence that is beforethe court provided it would not be unjust to do so. As McEachern, C.J.B.C. said in Inspiration Management Ltd. v. McDermid St.Lawrence Ltd., (BC CA), [1989] B.C.J. No. 1003 (C.A.) at paras. 55 and 56: Lastly, I do not agree, as suggested in Royal Bank v. Stonehocker supra, that a chambers judge is obliged to remit a case to the trial listjust because there are conflicting affidavits. In this connection I prefer the view expressed by Taggart J.A. in Placer, quoted supra, at p.15 of these Reasons.

Subject to what I am about to say, a judge should not decide an issue of fact or law solely on the basis of conflictingaffidavits even if he prefers one version to the other. It may be however, notwithstanding sworn affidavit evidence to the contrary, thatother admissible evidence will make it possible to find the facts necessary for judgment to be given. For example in an action on acheque, the alleged maker might by affidavit deny his signature while other believable evidence may satisfy the court that he did indeedsign it. Again, the variety of different kinds of cases which will arise is unlimited.

In such cases, absent other circumstances ordefences, judgment should be given. But even if there is a conflict of evidence which cannot easily be resolved on affidavits, as is often the case, the chambers judge is stillnot required to remit the case to the trial list. He could, for example, adjourn the application and order cross-examination on one or moreaffidavits, or he could order the deponents to appear to be cross-examined before him or another judge after which time it may bepossible to find the facts necessary to give judgment.

The chambers judge also has the option of employing any of the other proceduresincluded in Rule 18A (5) instead of remitting the case to the trial list. See also: Chuang v. Wong, 2012 BCSC 233, at para 24. [79] Land Craft does not submit that this case cannot be decided on a

Summary Trial and, in fact, it submits the case should bedecided in its favour on a

Summary Trial. It is only if it cannot be decided in Land Craft’s favour that a full trial is sought. [80] Here, the critical issue is that Land Craft alleges that at some point prior to the granting of the Order Absolute in the Affirmedforeclosure, Mr. Brechert, as the principal of Land Craft and Mr. Wille, the principal of FWH, made an agreement to proceed with thedevelopment in a legal relationship that was different from, and that contradicted the terms of the mortgage and related agreements. The Evidence of Land Craft [81] The first question is to determine what evidence exists to support Mr.

Brechert’s claim that there was an agreement betweenhim and Mr. Wille and/or FWH. [82] In its submission, FWH referred to unrelated cases where it alleged that the evidence of Mr. Brechert was not accepted bycourts which heard those cases. On that point, I accept the response of Land Craft that it is not appropriate to draw any adverse inferenceagainst Mr. Brechert in relation to conclusions that may have been drawn as to his credibility in other forums: Law Society of UpperCanada v. Evans, (ON SCDC), [2008] O.J. No. 2729, at para. 50. [83] In these proceedings, Mr.

Brechert has sworn and filed several affidavits on behalf of himself and Land Craft. Relevant to thisapplication are his affidavits numbered 1, 3, 4 and 5. Affidavit #1, sworn March 19, 2004 relates to issues of security to be posted forthe release of a Certificate of Pending Litigation that was filed by Land Craft against the property. [84] Mr. Brechert’s Affidavit #3 was sworn May 1, 2009. In it, he describes the history of his relationship with Mr. Wille andFWH. He described Mr.

Wille as “gruff and terse” and said that he would make complicated deals in two or three sentences withoutproviding many details. [85] The mortgage that is at issue here was registered in March 1994 in the amount of $1,850,000. Mr. Brechert says therelationship between him and Mr. Wille and their corporations was later changed by agreement to an arrangement where Mr. Wille,through FWH, was to participate in the development as an equal participant. Mr. Brechert claimed that often his discussions with Mr.Wille resulted in a basic agreement and then Mr.

Wille relied upon his solicitors to prepare written documents setting out the agreement. Mr. Brechert claims that, on occasion, the documents generated were not consistent with the agreement they had reached. [86] Subsequently, the mortgage amount was increased and a new mortgage in was registered on March 16, 1994. After that, Mr.Brechert claims that Mr. Wille became more involved in the planning and development of the property. More funds were advancedunder the mortgage until April 1, 1995 when FWH claimed that $2,280,000 was due and owing. Mr.

Brechert says that he disagreedwith that amount and claims that only $2,127,500 was owed, but said that he signed it anyway after receiving assurances from Mr. Wille. [87] Mr. Brechert said this at para. 30 of his Affidavit #3: Land Craft had never made any interest payments on the mortgages, up to that point in time, other than by way of further mortgageproceeds themselves discharging earlier encumbrances. Mr.

Wille told me that he was content with that, and was content to have LandCraft not pay interest but, in exchange, he wanted to actively participate in the development and the sale of the development and hewanted to share equally in the proceeds of sale, after payment of his mortgage. He indicated that, if I were to agree, he would continuenot to demand his mortgage monies and interest, continue to provide funds as required by Land Craft for the development, and work with

me in developing and selling the property. [emphasis added] [ 88 ] He said that subsequently, he began to disagree with Mr. Wille about the development and “... the various collateral agreements we had, what our understandings were and had been, and the equity and fairness of our respective positions ...” and he said that on May 7, 1999 they reached a settlement agreement that was partly oral and partly written.

In its written submission filed in this matter it is alleged that the agreement had the following terms: • The development on the property would be completed and the property sold; • The Plaintiff and Defendant would have joint conduct of sale and control over the development and the sale of the property; • The property would be held in trust, as to an undivided one half interest therein, for the plaintiff and as to an undivided one half interest therein, for the defendant; • If the plaintiff chose, on payment to the defendant of approximately one half of the balance due to the defendant by the plaintiff, which balance was settled to be approximately $5,000,000 in one of the various agreements referred to in paragraph 14 of the statement of claim, approximately one half of the property would become the free and clear property of the plaintiff and slightly more than one half of the property would become the free and clear property of the defendant. • If the plaintiff were unable to, or did not pay such sum to the defendant, the defendant and the plaintiff would continue to have joint conduct and control of ongoing efforts to sell the property, with the intention being that the property would then be sold at fair market value, which was estimated by the plaintiff and the defendant to be $15,000,000; • If the property were sold, one half of the proceeds from the sale would be paid to the plaintiff and one half to the defendant after payment to the defendant of the agreed upon mortgage balance of approximately $5,000,000. [ 89 ] Mr.

Brechert says in his Affidavit #3 that, at that time, it was important to him to obtain a document that reflected the arrangements between Land Craft and FWH had changed from that of lender and borrower to one of equal participation. To that end he says that he sought a modification of the mortgage. By that time the face amount of the mortgage had been increased to $2,780,000 with an interest rate of 17% per annum, calculated monthly. Land Craft agreed that the balance outstanding on the mortgage as at April 1, 1995 was $2,280,000. [ 90 ] Mr.

Brechert alleges the new proposal, to be embodied in a new modification agreement, was to allow for the creation of the new Lots A and B and allow for partial release of the mortgage in respect of a proposed area of the property, not to exceed 11 acres, upon payment of $2,300,000. FWH also required that the Certificate of Correctness or Estoppel agreement be signed by Land Craft and Mr. Brechert and returned to FWH as part of the arrangement. The resulting agreement gave Affirmed a first mortgage over Lots A and B.

FWH then obtained priority so that it held a first charge over Lot B and a second charge, behind Affirmed, on Lot A. [ 91 ] When Affirmed commenced its foreclosure action, Mr. Brechert says that he could have obtained the necessary funds to pay out the mortgage and redeem the property; however he claims that Mr. Wille did not want any other entity involved in the property and decided that FWH would take an assignment of the mortgage and foreclosure action. [ 92 ] Mr.

Brechert denies agreeing to, or being aware that the Affirmed foreclosure action was extended by the terms of the Order Absolute to cover both Lots A and B. His counsel obviously must have been aware because he was present when the matter was spoken to in court on February 8, 2001. Mr. Brechert says that he spoke to Mr. Wille about the matter and he was assured that the agreement they had made in May 1999 was still in place. [ 93 ] In his Affidavit #4, sworn August 29, 2011, Mr. Brechert referred to the partly oral and partly written agreements he alleged were made between he and Mr.

Wille on behalf of Land Craft and FWH. He said that the mortgage modification agreement dated May 11, 1999 by which FWH agreed to a partial discharge of the mortgage against the parcel of approximately 11 acres upon the payment of $2,300,000 was a set payment and was “... not to incur interest or increase over time”. [ 94 ] At paragraph 15 of Affidavit #4, Mr. Brechert says that it was his “belief, understanding and expectation” that the interest on the FWH mortgage would stop accruing as at the date of the Order Absolute of foreclosure.

After that date, he said that FWH would be entitled to recover the “holding costs and expenses regarding the property”. He said that a letter from the solicitors for FWH to his solicitors dated February 2, 2001 outlined the terms of the agreement. [ 95 ] The difficulty with that statement is that the letter of February 2, 2001 that Mr. Brechert assets sets out the basics of the agreement provides not that interest will stop accruing but instead confirmed that FWH would be entitled to mortgage principal and interest, along with other costs and expenses. Mr.

Brechert also confirms that Land Craft did not oppose the granting of the Order Absolute. [ 96 ] Mr. Brechert said that at a pre-trial examination under oath, Mr. Delsey, solicitor for Mr. Wille and FWH and counsel for FWH at the Order Absolute of foreclosure hearing, confirmed there was an agreement and he attached an excerpt from the examination to the Affidavit. In that excerpt reference is made to a possible offer of purchase through a man named Rob Foley, acting on behalf of company called Alliance Blue Corporation of Alberta. It was suggested to Mr.

Delsey by the examining solicitor that he was not really clear as to who Mr. Foley was. Mr. Delsey gave this answer: That’s correct. It, as it happened, it wasn’t necessary. I didn’t find that it was necessary for me to find out more about that because the -- the upshot of it was that we made this agreement between the parties as set out in my February 2nd letter. That we would go ahead and get the order, and any surplus monies from that sale would go -- would be paid to Mr. Brechert so that he would not in fact have the prejudice -- the prejudicial effect of the order absolute. It was more than just -- and Mr.

Wille was very emphatic, I remember, that the agreement was, as I say in my letter, not only after

payment of the charges on this land, but after payment of any other amounts that he may have loaned to Mr. Brechert and that weren’t paid back yet. And I didn’t know what they were, but I assumed that there were other perhaps mortgages or unsecured loans that he made. [ 97 ] There is nothing in the mortgage modification or in the letter of Mr. Delsey to Land Craft’s solicitors to suggest that no further interest was to be charged on the FWH mortgage after the Order Absolute of foreclosure. Nor is there anything in the excerpt from Mr. Delsey’s examination under oath to suggest that; in fact, the evidence of Mr.

Delsey contradicts Mr. Brechert’s stated belief or understanding. [ 98 ] In his Affidavit #5, sworn June 7, 2012, Mr. Brechert again described the history of the relationship between him and Mr. Wille and their respective corporations. He again asserted that the amount he certified as correct in the Certificate of Correctness was not correct. He said that $250,000 of the amount was never advanced and $660,000 in payments made prior to the date of the Certificate of Correctness was never credited. He also said that the property was worth millions of dollars more than the amounts due under the mortgage. [ 99 ] Mr.

Brechert claimed that it was his “expectation, belief and understanding” of the 2001 agreement that FWH would take title to the property under the Affirmed foreclosure action; that Land Craft would satisfy the financial charge holders other than the Affirmed mortgage and the FWH mortgage so there would be no opposition to the Order Absolute and, upon the sale of the property, Land Craft would receive a cheque for the balance of the sale proceeds in accordance with the February 2, 2001 letter from Mr.

Delsey. [ 100 ] At paras. 18 and 19 of his Affidavit #5 he said: Wille and I did not discuss having interest continue to accrue after the defendant was to receive control of the Property. My expectation, belief and understanding was that interest would stop accruing for the defendant’s mortgage and the Affirmed mortgage as of the date of the order absolute. Wille wanted the defendant to control the marketing and sale of the Property, and the 2001 agreement gave the defendant control, so interest would not continue to run because I did not have the ability to sell the Property. [ 101 ] Mr.

Brechert also said that Land Craft “agreed to the Order Absolute” because he believed that there was someone ready to buy the property and that Land Craft would soon be paid out of the proceeds.

He said that he tried to be involved in marketing the property but was kept out of it even though he claims he had discussions with potential purchasers at prices in the area of $20,000,000. [ 102 ] He disputes the amount claimed by FWH under the mortgage on the grounds that no interest was to accrue after the granting of the Order Absolute of foreclosure; that the Certificate of Correctness did not include a payment of $300,000 made in 1997; the Certificate of Correctness did not include a payment of $40,000 on account of an easement; and the Certificate of Correctness does include an advance of $250,000 that was never made. [ 103 ] Mr.

Brechert stated in his examination for discovery that the agreement he made with Mr. Wille effectively capped the amount owing on the FWH mortgage at roughly $5,000,000 and that the property was to be sold and the net proceeds shared equally between Land Craft and FWH after payment of the mortgage, selling costs and protective disbursements made by FWH. Land Craft submits that evidence cannot be ignored and, if the court does not accept his evidence, the case should be set over for a full trial. [ 104 ] The parties executed a modification of the mortgage that Mr.

Brechert submits is evidence of his agreement with Mr. Wille and FWH. The specific provision he relies on states: In the event of the Mortgagor subdividing the property to create a parcel of not more than 11 acres and rezoning to accommodate not less than 400 dwelling units, the mortgagor shall be entitled to receive from the Mortgagee with respect to the said parcel of not more than 11 acres, on 30 days notice, duly executed partial discharge of this mortgage as it relates to such parcel upon payment to the Mortgagee of the sum of $2,300,000.

That in all other particulars the Mortgage is ratified by the parties hereto. [ 105 ] In his affidavit #5, filed June 7, 2012, Mr. Brechert said: 16. Consequently, in 2001 the plaintiff and defendant entered into an agreement regarding the property. 17.

My expectation, belief, and understanding of the parties’ 2001 agreement was that: a. the defendant would take legal title pursuant to the Foreclosure Action; b. the plaintiff would satisfy the financial charge holders to the Property other than the Affirmed mortgage and the defendant’s mortgage, so other parties would not oppose the Foreclosure Action; and c. the plaintiff would receive a cheque for the balance of the sale proceeds for the Property in accordance with Patrick Delsey’s February2, 2001 letter to lawyer Malcolm McMicken, which I attach as Exhibit “J”. [ 106 ] It is apparent that as at February 8, 2001 the parties anticipated that a possible sale of the property would complete and that the amounts due to FWH on the mortgage would be repaid within a few weeks of February 8, 2001.

The sale referred to appears to be a sale that was contemplated to a group of investors who were represented by Mr. Rob Foley of The Alliance Blue Corporation of Calgary. [ 107 ] As at December 31, 2000 just two or three months prior to the anticipated sale it appears that the amount owing under the mortgage according to the accounting prepared by Mr. McKinnon was $7,353,098.26. Thus, if the sale had completed and Land Craft had paid FWH what it was owed on the mortgage as well as its protective disbursements, the amount owing to FWH would have been approximately $8,000,000.

On the contemplated purchase price of $10,234,212.15, there would have been something over $2,000,000

left to be paid to Land Craft or Mr. Brechert. [108] However, the sale did not complete in the spring of 2001. It was not until July 2004 that the property was sold. By that time,with interest running at almost $4,000 per day, the amount due under the mortgage had increased to more than $12,000,000, about$2,000,000 more than the selling price of the properties.

Discussion [109] The obvious difficulty facing Land Craft is that the alleged oral agreements clearly relate to land and contradict the documentsand written agreements respecting the FWH mortgage and the various modification and extension agreements. [110] In particular, Land Craft and Mr. Brechert signed the Certificate of Correctness in March 1999 that settled the amount owingunder the FWH mortgage as at November 1, 1998. The latter document was executed after Mr. Brechert had discussed the matter withhis solicitor and indeed, after the solicitor had written to Mr.

McKinnon to try and get him to confirm that FWH would not “end ongoingdealings” with Land Craft. [111] The agreement of Mr. Brechert and Land Craft to the content of the Certificate of Correctness was expressed by their executionof the document only after it was reviewed by their solicitor and after almost four months had passed from the date it was first sent tothem. [112] Also, while the February 2, 2001 letter from Mr. Delsey refers to an agreement between FWH and Land Craft, it does notsupport Mr. Brechert’s claim that interest was to stop accruing after the Order Absolute.

In fact, it clearly says that any distribution ofsale proceeds to Land Craft or Mr. Brechert would be only after payment of all sale expenses and money due under the mortgage forprincipal and interest. [113] In my view, the evidence of Mr. Brechert as set out in the above affidavits falls short of evidence that is sufficient to prove anagreement between FWH and Land Craft or as between Mr. Wille and Mr. Brechert that interest under the mortgage was to stop accruingas of the granting of the Order Absolute of foreclosure. [114] The alleged terms of the agreements themselves are not certain. Mr.

Brechert says at several points in the affidavits that it was“his belief, expectation and understanding” that certain agreements had been reached. He admitted in Affidavit #5 that he and Mr. Willedid not specifically discuss the issue of continued interest. [115] I fail to see how the allegations of Land Craft can be proved on the evidence even if Mr. Brechert’s affidavits are given fullweight. At best the evidence indicates that had the sale completed soon after February 2001, there would have been money left to pay toLand Craft or Mr.

Brechert once all of the money due under the mortgage, protective disbursements, legal costs and the costs of sale hadbeen paid. There is nothing in the evidence sufficient to prove that interest was to stop accruing on the mortgage. [116] I do not accept that Mr. Brechert and Land Craft can now resile from the amounts agreed to be due under the FWH mortgage asset out in the Certificate of Correctness. Land Craft was represented by its solicitor at all times leading up to the execution of thatdocument and its solicitor was actively engaged in the matter.

The stated purpose of the Certificate was to establish the amount owingand to prevent Land Craft from later denying it owed that amount. [117] It is unreasonable to suggest that Land Craft would execute such a document given the scope of the relationship he had withFWH and Mr. Wille knowing that it was wrong. While Mr. Brechert alleges that he and Mr. Wille often made informal agreements, heacknowledges that their respective solicitors attended to the preparation of formal documents.

Throughout the course of their dealingsmany agreements were reduced to writing by the parties. [118] I conclude that the evidence of the mortgage, the modification and extension agreements and other collateral agreements madein writing between the parties are of sufficient strength and clarity to prove that the only agreement between the parties was that onceFWH obtained title to the property after the Order Absolute of foreclosure FWH would still recognize and pay any money received upona sale that was in excess of the amounts owed to FWH by Land Craft. [119] I am satisfied that the affidavit evidence of Mr.

Brechert is not sufficient to contradict the written documentation. I find thatthere is sufficient evidence upon which to base a judgment dismissing Land Craft’s claim. [120] There is no evidence upon which I can conclude that Mr. Wille or FWH agreed to alter the clear terms of the mortgage andrelated documentation. Even Mr.

Brechert puts the matter largely on the basis of his “belief, expectation and understanding” rather thanwords capable of establishing clear terms of a contract. [121] Land Craft refers to the payment of interest on the mortgage at 17% per annum as a “windfall profit” to FWH notwithstandingthe fact that it was the rate it had clearly agreed to not only in the mortgage documents themselves, but also in the Certificate ofCorrectness. [122] If, in fact, Mr.

Brechert had potential purchasers for the property at a price in the range of $15 - $20 million, there is no evidenceof who they were or, more importantly, that he ever told Mr. Wille about them. Parol Evidence Rule [123] Even if there was clear evidence of an oral agreement to contradict the terms of the written documents in this case, FWH saysevidence of such dealings is barred by the parol evidence rule. [124] FWH says that the application of the parol evidence rule will result in the exclusion of any extrinsic oral evidence that purportsto contradict or alter a written contract.

The rule was discussed in Gallen v. Allstate Grain Co., (BC CA), [1984]

B.C.J. No. 1621 (C.A.) at para. 10 : The rule of evidence may be stated in this way: subject to certain exceptions, when the parties to an agreement have apparently set down all its terms in a document, extrinsic evidence is not admissible to add to, subtract from, vary or contradict those terms. [ 125 ] At para. 11 of Gallen, the court added these comments: So the rule does not extend to cases where the document may not embody all the terms of the agreement. And even in cases where the document seems to embody all the terms of the agreement, there is a myriad of exceptions to the rule.

I will set out some of them. Evidence of an oral statement is relevant and may be admitted, even where its effect may be to add to, subtract from, vary or contradict the document: (

a) to show that the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack of contracting intention; (

b) to dispel ambiguities, to establish a term implied by custom, or to demonstrate the factual matrix of the agreement; (

c) in support of a claim for rectification; (

d) to establish a condition precedent to the agreement; (

e) to establish a collateral agreement; (

f) in support of an allegation that the document itself was not intended by the parties to constitute the whole agreement; (

g) in support of a claim for an equitable remedy, such as specific performance or rescission, on any ground that supports such a claim in equity, including misrepresentation of any kind, innocent, negligent or fraudulent; (

h) in support of a claim in tort that the oral statement was in breach of a duty of care. I do not consider that I am setting out an exhaustive list. I am only showing that appropriate allegations in the pleadings will require that the evidence be admitted. [ 126 ] It is difficult to understand how Mr. Brechert’s evidence purporting to contradict the Certificate of Correctness can fall within any of the possible exceptions to the rule. The Certificate of Correctness is clear and precise and it was clearly intended to fix the amount owing under the mortgage as at November 1, 1998. [ 127 ] The second aspect of Mr.

Brechert’s evidence is that there was an oral agreement that interest was to stop accruing on the FWH mortgage and fixing the balance owing. His evidence is that this was somehow confirmed by Mr. Delsey’s letter of February 2, 2001 referred to earlier in these reasons. [ 128 ] However, that letter does not support his evidence. The letter is at best an assurance that if and when the property was sold any net sale proceeds would be paid to Land Craft. The letter clearly states that net sale proceeds would be the money remaining after payment of principal and interest on the mortgage.

It does not suggest a stoppage of interest or a partnership between Mr. Brechert and Mr. Wille or their corporations. [ 129 ] Counsel represented Land Craft and Mr. Brechert at the hearing of the Order Absolute and did not oppose the extension of the Affirmed mortgage over both Lots A and B and the preservation of the mortgage granted by Land Craft to FWH even though FWH was to hold title to the property in its name.

The result was unusual in that it resulted in a title where the owner of the property had the benefit of a mortgage security over its own property. [ 130 ] The extensive documentation related to the property is all consistent with the position of FWH that it was a lender in this project and not a participant.

In each instance Land Craft has signed and sealed the mortgage documents and collateral agreements respecting partial releases of the mortgage, the exchange of releases for lots and the Certificate of Correctness. [ 131 ] All of the documentation reflects commitments by Land Craft that were reviewed by its solicitors and agreed to in writing. The only evidence to the contrary consists of statements by Mr. Brechert that notwithstanding those agreements there was a different agreement in place.

Had there been such an agreement it would not have been difficult to set it out in writing as the parties did with respect to other aspects of their relationship throughout this matter. [ 132 ] Any profit earned by FWH is attributable to interest calculated monthly at rates of 15% and 17%; precisely the amounts that Land Craft agreed to in the mortgage documents. At his examination for discovery, Mr. Brechert agreed that he has extensive experience in property development and that in the course of his business he has borrowed large sums of money secured by mortgages.

At one point in his career, he said he owed one bank over $8,000,000. At one point he clearly owed more than $2,000,000 to Affirmed in addition to what was owed to FWH. [ 133 ] In my view, the evidence of Mr. Brechert respecting an agreement between Land Craft and FWH or between him and Mr. Wille, is not admissible to contradict or alter the clear documentary evidence. Unjust Enrichment [ 134 ] Land Craft next argues that FWH was unjustly enriched by its relationship with Land Craft.

FWH says that the only money it received was money Land Craft agreed to pay by way of interest or compensation under the mortgage and its various modifications and extensions.

[135] Land Craft correctly states the test for unjust enrichment as set out in Pettkus v. Becker, (SCC), [1980] 2 S.C.R.834 as: an enrichment to the defendant; a corresponding deprivation of the plaintiff; and an absence of juristic reason for the enrichment. It claims that in the circumstances of this case, FWH has been enriched and Land Craft has been deprived of its interest in the properties. Land Craft argues there is no juristic reason for the enrichment.

In response, FWH says all that it received was the interest, principal andother monies due under the mortgage and collateral agreements it made with Land Craft. [136] FWH relies on Wilson v. Fotsch, 2010 BCCA 226 at para. 21 where the majority of the court, relying on Garland v. Consumers’Gas Co., 2004 SCC 25, held that the first step in the analysis is for Land Craft to show that there is no juristic reason for the allegedenrichment of FWH.

The existence of a binding contract between the parties is a proper juristic reason. [137] FWH says that all of the benefits that it received were as a result of valid and binding contracts and Land Craft has never allegedthe mortgage or any of the related contracts is invalid or unenforceable. Thus, FWH claims there is a proper juristic reason to defeat theclaim of unjust enrichment. [138] Relying on Atlas Cabinets and Furniture Ltd. v. National Trust Co., (BC CA), [1990] B.C.J. No. 719(BCCA) and Central Guaranty Trust Company and Dixdale Mortgage Investment Corporation et al., (ON CA),[1994] O.J.

No. 2949 (C.A.), Land Craft claims it is entitled to compensation for its lost share of profit from the sale of the properties. [139] In Atlas Cabinets, a number of subcontractors who had performed work on a project were encouraged by the defendantmortgage company to continue work even though they had concerns about receiving payment from further advances of the defendant’smortgage. The mortgage company had held back approximately $848,000 as a “lien holdback” on the project.

When the project wascompleted it refused to advance the money and the subcontractors brought an action against the mortgage company claiming anentitlement to the funds that were held back and alleged those funds were held in trust by the mortgage company to their benefit. [140] Lambert J.A., writing for the majority of a panel of five justices, and referring to the principles of an unjust enrichment asapplied in a commercial context, said: In the context of a domestic relationship those three circumstances are likely to be simpler to apply than in the context of a commercialrelationship, where the essence of the relationship is the enrichment of the participants, perhaps at the expense of each other, all in thename of fair and honest business dealing.

In a domestic relationship, equality of the parties to the relationship should normally be thestandard of fairness. But, in a business relationship, honest dealing not equal dealing should set the standard of fairness. That is not tosay that the three factors enumerated in Pettkus v. Becker are not equally applicable in commercial cases. They were referred to andtreated as applicable in the majority reasons, on this point, of Chief Justice Dickson in Hunter v. Syncrude, at p. 471.

But it is importantto understand what is meant by “enrichment”, by “deprivation”, and by “juristic reason” in the context of a commercial relationshipwhere ordinary and extraordinary flows of funds are part of the reality and purpose of the relationship. To my mind the key to thecorrect

interpretation and application of the decisions of the Supreme Court of Canada on this subject to a commercial relationship is tofocus on the “unjust” element of “unjust enrichment”. In that respect it is worthwhile to go back to the impetus given to this cause ofaction by the decision of the House of Lords in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd., [1943] A.C. 32. In thejudgment of Lord Wright, which was approved by Mr. Justice Cartwright, for the majority of the Supreme Court of Canada, in Deglmanv.

Guaranty Trust, this is said at p. 61: It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjustbenefit, that is, to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that heshould keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fallwithin a third category of the common law which has been called quasi-contract or restitution. In 66 Am.

Jur. 2d at p. 945, unjust enrichment is defined as “the unjust retention of a benefit to the loss of another, or the retention ofmoney or property of another, against the fundamental principles of justice or equity and good conscience.” And see Major-BlakeneyCorp. v. Jenkins, (1953) 263 P. 2d 655 (Cal); B and M Die Company v. Ford Motor Company (1988), 421 N.W. 2d 620 (Mich.); andBelpar Marine Inc. v. Adams and Porter Inc. (1986), 638 F. Supp. 1001 (N.Y.). Those cases illustrate the continuing insistence in theUnited States that the enrichment must be against equity and good conscience.

In my opinion the concept of the injustice of theenrichment as being against sound commercial conscience must continue to guide the application of the three tests in Pettkus v. Beckerwhen they are applied to a commercial relationship. [141] Can it be said, with the above principles in mind, that the receipt of money pursuant to an agreement to pay interest on borrowedmoney, even at a higher than normal rate, is “against conscience”? Land Craft makes no allegation of deceit or misrepresentation on thepart of FWH with respect to the mortgage.

It claims only that the clear terms of the mortgage and related modifications and extensionsof it should be ignored in favour of an oral agreement it says was made with FWH or Mr. Wille on behalf of FWH. [142] In making that submission Land Craft relies, in part, on the February 2, 2001 letter from Mr. Delsey that clearly says only thatupon sale of the property, the remaining money after payment of various expenses, including principal and interest owing under themortgage would be paid to Land Craft. Mr. Wille died in 2004 and cannot refute the allegations now.

The court is left to determine thematter on the available evidence. [143] Likewise, the facts of Central Guaranty Trust can be distinguished from the facts of this case. In Guaranty Trust, the firstmortgagee discharged its mortgage against the land in error and the court stepped in to prevent the second mortgagee from takingadvantage of the mistake. Land Craft says that its position is similar; it says it agreed to the transfer of title to FWH pursuant to the

Order Absolute of foreclosure in the expectation that it would be promptly sold and thus end any further interest charges under themortgage. However, there is insufficient evidence to raise the “expectation” of Land Craft to a contract binding on FWH to stop theaccrual of interest on the mortgage. In my view, neither case assists Land Craft. [144] I agree with the submission of FWH that the mortgage and related documents as well as the February 2, 2001 letter from Mr.Delsey determine this matter and cannot be defeated by Land Craft’s claim of a collateral oral agreement.

Anticipatory Breach of Contract [145] Land Craft also advanced the argument that FWH failed to account to Land Craft for all the funds of the sale when the propertywas sold. It alleges that the conduct of FWH amounts to an anticipatory breach of the agreement made between it and Land Craft. [146] The argument seems to rely upon the alleged agreement that interest on the FWH mortgage would stop accruing as at the date ofthe Order Absolute and that FWH should have accounted to Land Craft on the basis that no interest would be charged after that date.

Given my findings that the mortgage documents Land Craft agreed to and that there were no other agreements between the parties, I seeno merit in that submission. Merger [147] In its written submissions, Land Craft argued that the FWH mortgage should have merged into the title of the properties whenFWH became the registered owner the Order Absolute of foreclosure was registered.

The parties made supplemental writtensubmissions on that issue. [148] FWH referred to the traditional view of the rule, or doctrine of merger as it was stated in Falconbridge on Mortgages, 5th ed.,Canada Law Book, at para. 21:10: At common law, if a mortgage of land and the ownership of the land subject to the mortgage became united in the same person, themortgage was said to be merged in the ownership and the mortgage was extinguished, either by analogy to the merger of a lesser estate ina greater estate or because a person cannot be his or her own debtor ... [149] In British Columbia the Law and Equity Act, R.S.B.C. 1998. c. 253 at s. 12 provides: There is not any merger, by operation of law only, of an estate the beneficial interest in which would not be deemed to be merged orextinguished in equity. [150] FWH submits that merger does not occur unless there is a common intention that it should.

In Close v. Weigh West MarineResort Inc., 2009 BCCA 216 at para. 29, the court

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