Koh v Atrium Mortgage Corporation, 2023 SKCA 45

Court of Appeal for Saskatchewan Docket: CACV3934 Citation: Koh v Atrium Mortgage Corporation , 2023 SKCA 45 Date: 2023-04-13 Between: Hee Jung Koh and Cameron Wilkes Appellants (Defendants/Non-parties) And Holly Wilkes, Trent Fraser, Gaye Fraser, Dev Francis, Glenda Francis, Richard Coupal and Joanne Coupal Non-parties (Defendants/Plaintiffs by Counterclaim) And Allan Hall and Bonnie Hall Non-parties (Defendants/Non-parties) And Atrium Mortgage Corporation Respondent (Plaintiff/Defendant by Counterclaim) And BTY Group Non-party (Non-party/Defendant by Counterclaim) Before: Leurer, Tholl and McCreary JJ.A.

Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Leurer In concurrence: The Honourable Mr. Justice Tholl The Honourable Madam Justice McCreary On appeal from: 2021 SKQB 285 , Regina Appeal heard: October 3, 2022 Counsel: Curtis Onishenko for the Appellants Jared Epp for the Respondent Leurer J.A. I. INTRODUCTION [ 1 ] Cameron Wilkes and Hee Jung Koh [appellants] are guarantors of the debt owed by King Edward Apartments Inc. [KEA] to Atrium Mortgage Investment Corporation [Atrium]. A Court of Queen’s Bench judge granted Atrium

summary judgment against them for the amount owing by KEA to Atrium: Atrium Mortgage Investment Corporation v Koh , 2021 SKQB 285 [ Chambers Decision ] . They appeal from the Chambers Decision , asserting that Atrium’s action against them should proceed to trial. [ 2 ] I am unpersuaded by the appellants’ arguments and therefore would dismiss their appeal. My reasons follow. II. BACKGROUND A. Facts [ 3 ] KEA was incorporated for the purpose of constructing an apartment complex in Regina [Project].

In 2014, Atrium provided the financing for the Project, to be secured by a first mortgage against it, the unlimited guarantees of the appellants and nine others [Guarantors], as well as other security. [ 4 ] By the spring of 2016, Atrium had advanced $11,725,957.27 to KEA pursuant to this credit arrangement. In May of that year, and before the Project had been completed, Atrium became aware that builder liens totalling $2.3 million had been filed against the Project. Financing and construction ground to a halt. [ 5 ] KEA’s loan matured on September 1, 2016.

Thereafter, Atrium made a formal demand to KEA for it to repay the loan, which KEA could not meet. The next month, Atrium also demanded payment from the Guarantors. [ 6 ] By November of 2016, the Project had sat idle for over six months.

The Chambers judge described some of the other problems that had arisen to include “ unreliable power source, unpaid property taxes, winter maintenance costs and unpaid insurance” (at para 60, quoting from Atrium Mortgage Investment Corporation v King Edwards Apartments Inc. , 2018 SKQB 296 at para 5 , 65 CBR (6th) 15 [ Project Sale Approval Decision ] ). [ 7 ] On November 25, 2016, Atrium obtained the court appointment of a receiver-manager of all the assets, undertakings and properties of KEA [Receiver]. Atrium later made several advances to the Receiver, totalling $6,662,000, to allow it to complete the

Project. These advances were all approved by orders made by judges of the Court of Queen’s Bench. [8] Atrium commenced an action against the Guarantors on August 31, 2018 [Debt Action]. The statement of claim asked forjudgment against each of the Guarantors for $13,997,599.65, being the amount it claimed was then owing to it pursuant to KEA’s creditfacility. [9] The Receiver entered into a court-approved process to sell the completed Project. Eventually, it agreed to do so for $14.5million, less the costs that had been incurred to complete the Project, to an entity controlled by Atrium.

The sale was approved by Layh J.on October 12, 2018, in the Project Sale Approval Decision. [10] Atrium credited the net proceeds from the sale of the Project against the amount of the debt owing by KEA to it. After this wasdone, and other adjustments were made, Atrium claimed to be owed $7,102,768.39, as of November 9, 2018. The statement of claim in theDebt Action was later amended to seek judgment against the Guarantors for this amount, together with interest. [11] KEA had two other assets of value that were not accounted for in the amount claimed in Atrium’s statement of claim.

KEA hadcommenced two actions in 2016 against the Project’s general contractor and associated entities. In 2019, the Receiver agreed to sell theseclaims to Atrium for $200,000, to be paid by way of credit against the amount owing by KEA to it. Justice Layh approved this sale: AtriumMortgage Investment Corporation v King Edward Apartments Inc. (16 April 2019) Regina, QBG 2905 of 2016 (Sask QB) [Lawsuit SaleApproval Decision]. [12] The appellants initially appealed the Lawsuit Sale Approval Decision.

However, that appeal was later abandoned by them. [13] On May 4, 2021, Layh J. approved the activities, fees and disbursements of the Receiver and discharged it: Atrium MortgageInvestment Corporation v King Edward Apartments Inc. (4 May 2021) Regina, QBG 2905 of 2016 (Sask QB) [Receiver DischargeOrder]. B. The

summary judgment application [14] Atrium applied for

summary judgment against the Guarantors in the Debt Action. Atrium also asked for

summary judgmentdismissing a counterclaim commenced by some of the Guarantors. [15] The Guarantors opposed Atrium’s

summary judgment application. They took the position that a trial was required to determinethe validity of all or some of their defences to Atrium’s claim and the counterclaim. C. The Chambers Decision [16] The Chambers judge identified the Guarantors’ two main defences to Atrium’s claim. The first of these was that the claimagainst them was barred by The Limitations Act, SS 2004, c L-16.1.

Because the Chambers judge’s ruling on this issue was not raised inthis appeal, I will not review her reasons for rejecting this argument. [17] The second main defence raised by the Guarantors was that the Receiver had “mismanaged the receivership process”(Chambers Decision at para 26(2)). In her consideration of this argument, the Chambers judge reviewed the procedural history of thereceivership, including the opposition that the Guarantors had mounted to the grant of the Project Sale Approval Decision. She also tooknote of the reasons for that order and the terms of the Receiver Discharge Order.

Following this, and a review of case law that dealt withthe doctrine of abuse of process, she concluded on this issue: [55] I agree with Atrium that the Guarantors cannot defend this claim based on claims they made to the court during the earlierreceivership process. The management of the Project by the Receiver, the marketing of the Project by the Receiver, and the sale of theProject by the Receiver to Atrium are matters considered during the receivership process and approved of by the court in [the Project SaleApproval Decision].

Defences that raise the management, marketing and sale of the Project by the Receiver are an abuse of the court’sprocess. [18] The Chambers judge then considered, but rejected, the Guarantors’ other defences. There were five. I will briefly review theChambers judge’s analysis of each issue, and then return to discuss the parts of her analysis relevant to the appeal later in these reasons. [19] First, she dismissed the suggestion that Atrium had obtained a windfall. She found there to be “[n]o evidence … to substantiatethis claim” (at para 56).

She also observed that “Layh J. rejected this argument by approving the sale and by noting [that] … ‘[T]he saleprice in the [agreement selling the Project] is above the appraised value of the Property and exceeds the only other bid by more thandouble the amount’” (quoting from the Project Sale Approval Decision at para 60). [20] Second, the Chambers judge rejected the Guarantors’ submission that the guarantees were unenforceable because their termswere unconscionable.

She found, at paragraph 57, that the Guarantors had “provided no evidence that meets the test for unconscionability”as set out in Input Capital Corporation v Gustafson, 2019 SKCA 78, 438 DLR (4th) 387, aff’d on remand, 2021 SKCA 56, leave to appealto SCC refused, . [21] Third, the Chambers judge considered the Guarantors’ argument that “Atrium breached its duty of honesty and good faith” (atpara 57). She rejected this allegation, concluding that “the Guarantors’ assertions were dealt with by Layh J.” in the Project Sale ApprovalDecision (at para 60). [22] Fourth, Atrium had relied on clause 9(

p) of the guarantee each Guarantor had signed. It provides that the Guarantors’ liabilitywas unaffected by “any dealing by the Lender whatsoever with the Borrower or other person or any security, whether negligently or not,or any failure to do so”. The Chambers judge stated that “if not barred by clause 9(p), the complaints raised by the Guarantors weredecisively dealt with by Layh J. when he approved the sale to Atrium”. She further found that the “Guarantors are attempting ‘to relitigate

a claim which the court has already determined’ … which is an abuse of the court’s process” (at para 62, quoting from Toronto (City) v CUPE, Local 79 , 2003 SCC 63 at para 37 , [2003] 3 SCR 77). [ 23 ] The fifth and final additional defence considered by the Chambers judge was the Guarantors’ allegation that “Atrium failed to mitigate its damages or act reasonably” (at para 62). In this regard, the Guarantors had identified four ways that they alleged Atrium had done so, as follows (at para 63): 1. Atrium failed to sell the property “as is” when it took possession; 2.

The Receiver invested $8,000,000, at Atrium’s direction to complete the Project; 3. Atrium paid an undisclosed bonus to Century West [one of the contractors]; 4. Atrium purchased from KEA a lawsuit against the general contractor that they are not pursuing. [ 24 ] The Chambers judge rejected this argument, on several grounds, as follows: [64] The Guarantors acknowledge that evidence is not before the court on any of these matters.

Moreover, I agree with Atrium that the first two matters mentioned were dealt with during the receivership process. [65] Regarding the third matter, the bonus referred to was embedded in the contract with Century West. Schwann J. (as she then was) approved the Century West contract in July 2017, a copy of which is on the court file and in Atrium’s affidavit of documents.

Nothing was said by either party about the lawsuit against the general contractor, so I will ignore this concern. [ 25 ] After addressing the Guarantors’ defences, the Chambers judge determined that a counterclaim that some of the Guarantors had filed did not present a triable issue.

Because the appellants were not a party to the counterclaim, and there is no appeal from the order dismissing it, there is no need to review this part of the Chambers Decision . [ 26 ] In the result, the Chambers judge granted judgment in favour of Atrium against each of the Guarantors, in the amount of $7,582,505.61, plus interest at the contractual rate, calculated and compounded monthly from and after December 16, 2019. III. ISSUES [ 27 ] In their notice of appeal, the appellants identified eight grounds of appeal.

However, in their factum, this was refined to the assertion that the Chambers judge erred in two ways. I accept those propositions as providing a proper framework to decide this appeal but restate them as questions: (

a) Did the Chambers judge err in finding that a trial was not required to determine the amount owing to Atrium by KEA ? (

b) Did the Chambers judge err in finding that a trial was not required to adjudicate the appellants’ defence that Atrium breached its duty of honest and good faith performance? A. The issue as to the amount owing to Atrium by KEA [ 28 ] The argument under this head is that Atrium has yet to demonstrate that it has suffered a loss on its loan to KEA. The basis for this proposition is that Atrium or its subsidiary now owns the apartment complex and the unconcluded lawsuits against the contractors.

In their amended statement of defence, the Guarantors say that the “current fair market value [of the apartment complex] exceeds the value of the advances made” by Atrium. They also allege that the claims made in the two lawsuits are worth many millions of dollars. Based on these assertions, the appellants invite this Court to conclude that “Atrium’s debt is not yet crystallized, and [to find that] the Receivership process does not determine the quantum of debt owed by KEA to Atrium”.

They also say that the Chambers Decision “permits Atrium to profit off of its debt claim”. [ 29 ] The Chambers judge addressed this argument in two ways. First, she held that the value of these assets was determined in the Project Sale Approval Decision and the Lawsuit Sale Approval Decision , and that the doctrine of abuse of process precluded the appellants from relitigating the value of the assets for the purposes of determining KEA’s debt.

Second, she found there was no evidence to challenge the value obtained from the sale of these assets; hence, there was no genuine issue for trial on this point. [ 30 ] The appellants attack both parts of this reasoning. Their argument relating to the first line of analysis is about a point of law. Therefore, the Chambers Decision on this ground is to be reviewed on a correctness basis.

The question of whether the Chambers judge erred in her assessment that there was no genuine issue for trial is “reviewable on appeal to this Court on the standard of palpable and overriding error” ( Deren v SaskPower , 2017 SKCA 104 at para 46 ). [ 31 ] Relating to the appellants’ challenge to the Chambers judge’s first-line reasoning, it is important to begin with a clear understanding about an argument that they do not make. Specifically, the appellants do not suggest that they can relitigate issues decided against them in the receivership process.

To the contrary, they state in their factum that they “do not challenge the Court-approved decisions made under the Receivership process, such as approving the additional lending to the Receiver, the Project’s sale, and the Lawsuit assignment”. [ 32 ] Accordingly, as I understand it, the appellants’ challenge to the Chambers judge’s conclusion that they are collaterally attacking orders made during the receivership depends on three different propositions. The first is that the value of these assets as security for KEA’s debt was not determined during the receivership process.

This is the justification for them saying that they are not collaterally attacking the orders approving their sale. The second is that, having purchased the assets from the Receiver, Atrium must account for any future increase in their value. The third is that, until Atrium liquidates the assets it now holds, i.e., the Project and the two lawsuits, no

claim can be advanced against the Guarantors. As I will explain, I reject all three of these propositions. [33] Relating to the first, contrary to the appellants’ submission, the value of the Project and the lawsuits as security for KEA’s debtwas conclusively determined by Layh J. in the Project Sale Approval Decision and the Lawsuit Sale Approval Decision. In both of thosedecisions, Layh J. considered the Receiver’s request for approval of the sales over the objection of all the Guarantors, including theappellants, that the assets could be sold for more.

He did so by applying the test articulated in Royal Bank of Canada v Soundair Corp.(1991), (ON CA), 83 DLR (4th) 76 at 93 (Ont CA) [Soundair]. That test requires the court to consider, when decidingwhether to approve the sale of an asset by a receiver, (a) “whether the receiver has made a sufficient effort to get the best price and has notacted improvidently”; (b) “the interests of all parties”; (c) “the efficacy and integrity of the process by which offers are obtained”; and(d) “whether there has been unfairness in the working out of the process”.

The appellants allege no error by Layh J. in adopting this testwhen approving the sale of these assets. To the contrary, they refer in their factum to “Justice Layh’s proper application of the Soundairtest” (emphasis added). [34] Part of Layh J.’s consideration of whether to approve the sales was the prospect that a better price might be obtained for each ifthe sale was not approved.

In connection with the approval of the sale of the Project, he stated that “the court not only finds littlelikelihood of a more successful method of sale, it finds that if the sale were to net a lesser amount, the entirety of the risk lies with Atrium”(Project Sale Approval Decision at para 58). The latter statement was offered considering the evidence that Atrium could expect littlerecovery from the Guarantors on their guarantees. [35] In the Lawsuit Sale Approval Decision, Layh J. described the selling of a lawsuit as “an uncommon commercial transaction” (at4).

He also threw cold water on the idea that the claims had been undervalued by observing that the Guarantors were in a privilegedposition to realize any greater value than they might possess (at 3 and 4): Those persons most likely to appreciate the strength and likely success of the Actions are the guarantors, many of whom are principals ofKEAI, the plaintiff in the Actions. Mr. Wilkes has suggested that the actions are worth $10,000,000. … … The court sees few other options to effect a valuable assignment of the Actions. Indeed, if Mr.

Wilkes, a commercial realtor, or any of theother guarantors thought that the Actions could be sold to any other person, they were entitled to canvas such purchasers and presentevidence to the court. No guarantor has provided evidence to the court of an alternate purchaser or method of obtaining value for theActions. [36] It is inherent in the Soundair test that a sale may be approved in the face of the possibility that a higher price might have beenobtained. In shorthand, the test is derived to determine if the “offer was one which it was provident to accept” (at 95).

I cannot thereforesee how it remains open to the appellants to relitigate the approved price for the purposes of determining KEA’s liability or their own. Asalready noted, the appellants initially appealed from the Lawsuit Sale Approval Decision, but later abandoned that appeal. [37] Recognizing all of this, the suggestion by the appellants that they can now again litigate the value of the Project or the lawsuitsmust be seen as a collateral attack on the Project Sale Approval Decision and the Lawsuit Sale Approval Decision.

Indeed, in oralargument, the appellants conceded that if the Project and lawsuits had been sold to a third party, they could not assert that the value ofthese two assets as security for KEA’s debt was not determined during the receivership process. I see no basis upon which to conclude thatthis would have been impermissible, but, somehow, that they retain greater rights simply because it turned out that Atrium’s nominee wasthe ultimate purchaser of the Project, and Atrium itself acquired the lawsuits. [38] This leads me to discuss the second proposition embedded in the appellants’ argument under this head.

This is the idea that,having purchased the assets from the Receiver, Atrium must account for any future increase in their value. [39] In connection with the second proposition, the appellants suggest that “it is trite law that a party cannot be placed in a betterposition than had the breach/default not occurred”. However, this principle does not apply in these circumstances. The reason for this isthat Atrium holds these assets as a purchaser of them from the Receiver, not as a secured party.

If it realizes a profit from its decision toacquire these assets, it is not doing so at the expense of the Guarantors, but because of its decision to invest in those assets. Were itotherwise, it would logically follow that if Atrium suffered a loss because of its decision to purchase these assets, the Guarantors’ liabilitywould go up. However, the appellants did not propose it would work this way.

This is a sufficient reason to reject the appellants’ secondargument. [40] A similar argument to that made by the appellants in this appeal was rejected in Saskatoon Credit Union Ltd. v Goertz andAtlas Industries Ltd. (1989), (SK CA), 73 Sask R 81 (CA). In that case, a debtor had granted his creditor a mortgageagainst certain lands to pay off a different mortgage and to renovate a building on the land, but the debtor defaulted on the loan. This Courtfound, over the objections of the debtor, that the creditor was entitled to both sell the property and obtain a judgment on the debt.

In thecontext of discussing a statutory provision that “prohibits judgment on the personal covenant in a mortgage where it secures all or a part ofthe purchase price” of the mortgaged property (at para 29), Sherstobitoff J.A. noted the duplicity of the suggestion that traffic only flowsone way on a two-way street, as the appellants here propose: [34] There is one last comment. If the land had increased in value, and there was a judicial sale, the mortgagor would be entitled to thesurplus over the amount required to satisfy the claim of the mortgagee.

Why should he not then bear the risk of a deficiency judgmentwhen the value of the land falls to less than the amount of the mortgage? Why should there be no shift of possible gain, but a shift ofpossible loss? There is no reason. The legislature has recognized in s. 2 [of The Limitation of Civil Rights Act, RSS 1978, c L-16] thatother considerations apply when the mortgage secures the purchase price of land. The vendor or lender is deemed to accept the land aloneas security and to give up the right to other remedies.

That is not the case here. (Emphasis added) [41] Finally, for similar reasons, I reject the third proposition embedded in the appellants’ argument under this head. This is the ideathat, until Atrium liquidates these assets, it cannot advance a claim against the Guarantors.

[ 42 ] This submission once again ignores that Atrium now holds these assets as their purchaser rather than as KEA’s secured creditor. The fact that Atrium, as opposed to some other person, now owns them is irrelevant to the issue of the value of KEA’s remaining liabilities, given that account has been made of the price obtained from their sale by the receiver.

The appellants’ third proposition also runs directly afoul of the idea that Atrium might in some way have to account for an increase in the value of the assets it now owns, but not be able to claim against KEA and the guarantors for a decrease. [ 43 ] In conclusion, the Chambers judge correctly held that the value of these assets was determined in the Project Sale Approval Decision and the Lawsuit Sale Approval Decision .

As the Chambers judge held, the doctrine of abuse of process precludes the appellants from relitigating the value of the assets for the purposes of determining KEA’s debt. [ 44 ] This conclusion means that I do not need to consider if the Chambers judge erred in determining that there was no evidence to challenge the value obtained from the sale of these assets. B.

The issue as to the duty of honest and good faith performance [ 45 ] The appellants’ other ground of appeal is that a trial is required in connection with their pleaded defence “that Atrium breached its duty of honesty and good faith in the manner in which Atrium varied the financing and/or the Project and the manner in which Atrium came to own the Project Lands”.

They say in their factum that there was evidence before the Chambers judge “to substantiate the existence of a triable issue on whether or not Atrium breached its duty of good faith and honest performance”. [ 46 ] I have no difficulty in accepting that, as a matter of law, Atrium was required to perform its contractual duties and exercise its contractual rights honestly and in good faith . See: Bhasin v Hrynew , 2014 SCC 71 , [2014] 3 SCR 494 [ Bhasin ]; C.M. Callow Inc. v Zollinger , 2020 SCC 45 , 452 DLR (4th) 44 [ C.M.

Callow ]; and Northrock Resources v ExxonMobil Canada Energy , 2017 SKCA 60 , 416 DLR (4th) 321. This proposition was also accepted by the Chambers judge, or at very least she proceeded on the basis that this duty existed. However, she found there to be no issue associated with this duty that required a trial to resolve. I see no error in her conclusion on this point. [ 47 ] The Chambers judge determined that the appellants’ argument that Atrium breached the duty amounted to a collateral attack on the Project Sale Approval Decision.

She began her analysis leading to this finding by summarizing the argument made to her, as follows: [58] The Guarantors assert Atrium breached the principle of good faith as follows: 1. By telling KEA and Cameron Wilkes it could complete the Project for less than $1,600,000 through the receivership process when the Receiver thereafter spent another $8,000,000 on the Project ; 2. By asserting a deficiency when it does not dispute Cameron Wilkes’ evidence that the Project is worth $20,000,000. 3.

By purchasing from KEA the right to pursue the general contractor, from which Atrium could obtain $10,000,000, and refusing to pursue the lawsuit. [ 48 ] The Chambers judge then continued by summarizing Atrium’s position to be that “the Guarantors are again attacking the receivership process” (at para 59).

She then quoted at length from the Project Sale Approval Decision and concluded that she “agree[d] with Atrium that the Guarantors’ assertions were dealt with by Layh J.” (at para 60). [ 49 ] The appellants challenge the Chambers judge’s reasoning in relation to each of the three particulars of bad faith conduct alleged against Atrium.

Their overarching argument is that the question of Atrium’s honest and good faith performance of its contractual obligations and exercise of its contractual rights was not before Layh J. when he issued the Project Sale Approval Decision or, for that matter, the Lawsuit Sale Approval Decision . [ 50 ] I would agree that in making these orders, Layh J. did not consider whether the sale of these assets was consistent with Atrium’s duty of honest and good faith performance of its contracts. However, this is because these assets were not sold by Atrium.

It was the Receiver, not Atrium, that was responsible for gathering up and selling KEA’s assets. Therefore, there was no reason for Layh J. to have considered Atrium’s duties and whether they were breached.

Indeed, the appellants offer no authority for the suggestion that Atrium’s duties were at play at all in the Receiver’s decision to sell these assets. [ 51 ] Because it was the Receiver’s conduct – not Atrium’s – that was at issue when it came time to approve the sale of these assets, the Chambers judge was correct to conclude that the Guarantors’ attack on the manner of the sale of the assets, and the price they fetched, was a challenge to the receivership process itself.

This conclusion is sufficient to dispose of the appellants’ arguments under the second and third particulars of the alleged breaches of the duties articulated in Bhasin , et al. (i.e., the arguments based on the idea that it is impermissible for Atrium to sue for a deficiency in the face of Mr. Wilkes’ evidence that the Project is worth $20,000,000 and that it was incumbent on Atrium to pursue the two lawsuits it now owns). [ 52 ] I now turn to consider the first particular of the alleged bad faith conduct by Atrium.

This is the allegation that it breached its duty to perform its contractual duties and exercise its contractual rights honestly and in good faith by “telling KEA and Cameron Wilkes it could complete the Project for less than $1,600,000 through the receivership process when the Receiver thereafter spent another $8,000,000 on the Project” ( Chambers Decision at para 58). [ 53 ] The appellants’ argument in relation to this allegation is grounded in Mr. Wilkes’ evidence.

He deposed that, in October of 2016, before the Receiver was appointed, the Project would have been completed by KEA for $1.6 million but Atrium had refused to advance these funds to it. Instead, according to Mr. Wilkes, he was told by Atrium that “via [the appointment of] a receiver, [Atrium] could complete the [Project] for less than [KEA] could”. He added that the “Receivership was not opposed because Atrium repeatedly stated that the [Project] would be completed for less than $1.6 million”.

[ 54 ] Mr. Wilkes’ evidence on these points was not directly answered by Atrium. Therefore, the appellants are correct when they say that, in the context of the

summary judgment application at least, Atrium did not dispute that its official made the statements attributed to him by Mr. Wilkes. Atrium also did not explain why this representation was made by its official.

Building on this, the appellants argue that this evidence, together with the undisputed fact that eventually the completion costs ballooned to roughly four times this amount, means that a trial should be ordered to consider the question of Atrium’s honest and good faith performance of its contractual obligations and exercise of its contractual rights. [ 55 ] However, notwithstanding all of this, I am unconvinced that the Chambers judge erred by refusing to order a trial about these matters. [ 56 ] I have accounted for what Mr. Wilkes gave by way of evidence.

However, it is also necessary to point out what he did not say. In this regard, Mr. Wilkes’ affidavit does not assert that, but for the representations made to him, the appellants would have opposed the Receiver’s appointment, let alone be successful in that attempt. [ 57 ] Rather than Mr. Wilkes’ evidence being directed to showing that some word or deed of Atrium affected the appointment of the Receiver, it served as

preamble to issues he identified with steps taken by the Receiver after its appointment. His evidence about the representations made to him continued, after the parts I have already summarized, with the observation that changes to the Project that the Receiver authorized “significantly increased its costs, including changes to landscaping and the use of a second engineering firm”. He indicated that he had not been given notice of many applications during the Receivership and offered, as an example, the application that “involved the approval of the marketing strategy to sell” the Project.

He then offered the opinion as to a better strategy that should have been followed and noted that when he “raised the objections at the time that Atrium applied to purchase the Property via a credit bid, Justice Layh ruled that it was too late in the process to change the marketing strategy”. Finally, he complained that the “Receiver’s completion of the Project was substantially delayed, thereby increasing the interest accrued under the Credit Agreement and insurance premiums paid”. [ 58 ] Second, although Mr.

Wilkes’ evidence was not answered by Atrium, this does not mean that it was the only evidence that related to the need for a trial. To the contrary, there was other, equally uncontradicted, evidence that bore on whether a trial was required. In this regard, Mr. Wilkes’ evidence stood alongside an affidavit of one of Atrium’s officers, Daniel Stewart. Mr. Stewart’s, November 17, 2016, affidavit was first filed at the time the Receiver was appointed. In it, he averred that (

a) KEA was “unable to complete construction of the Project”, (

b) Atrium had been informed by Allan Hall, the principal of KEA and one of the Guarantors, that “completing construction of the Project will require an additional expenditure of approximately $2,000,000.00 (excluding general contractor fees)” but that Atrium was “making further inquiries in that regard”; and (

c) regardless of the exact amount required to complete the Project, KEA “lacks the resources to complete construction of the Project”. These statements and other evidence formed the foundation for the appointment of the Receiver in November of 2016. [ 59 ] Considering all of this, I am satisfied that the Chambers judge was not asked to determine whether a trial was required to inquire into whether the appointment of the Receiver could have been avoided, and would have been avoided, but for the representation that Mr. Wilkes alleges was made.

Instead, the Chambers judge was invited to focus on events after the Receiver’s appointment. This focus appears in the brief of law filed in the Court of Queen’s Bench by the appellants in conjunction with the other guarantors. Their challenge under this head was advanced as a series of rhetorical questions, all of which were directed to conduct that post-dated the appointment of the Receiver.

In this regard, after identifying the advanced state of completion of the Project when the Receiver was appointed, the Guarantors asked in their brief of law, “Why then did the Receiver, at the direction of the Plaintiff invest another $8,000,000 into the project? Who is right and who is wrong on this issue? We will not know until all the facts are known.

At present we have either no or limited facts on this issue.” Later, they stated that “[i]f the Plaintiff is correct that it was necessary to invest another $8,000,000 into the project to complete it, then someone is to blame, and this is likely the general contractor (Walker)”. These, and the other particulars I have previously identified, were said to point toward Atrium “breaching its duty of good faith and honest performance and at the very least [giving rise to] a triable issue”. [ 60 ] When the evidence from Mr.

Wilkes is read in this broader context, it becomes evident why the Chambers judge concluded that no trial was required to investigate these matters further. The argument she received and was asked to adjudicate was, at its root, an attack on the actions taken by the Receiver and not a challenge based on the representation that Mr. Wilkes alleges was made to him before the Receiver was appointed. It was, again, also a challenge to actions that were the subject of court approvals.

As I have explained earlier, the proper forum for the appellants to have challenged those actions was through an appeal from those orders, as the Chambers judge can be taken to have held. [ 61 ] I would add one final point to the suggestion made in this appeal that a trial should have been ordered to inquire into the representations made to Mr. Wilkes.

If the argument was made to the Chambers judge that these representations influenced the decision taken by the Guarantors not to oppose the appointment of the Receiver, then I agree with Atrium that it is implausible for the appellants to now suggest that they would have been successful in that regard. The stoppage of construction, the default on the loan and the lack of other available financing meant that, as Atrium pointed out in its factum, the Receiver was going to be appointed “whether the Appellants agreed or not”.

On the record in this case, there is simply no triable issue on this point. [ 62 ] Finally, I turn to the appellants’ submission that the Chambers judge’s treatment of clause 9(

p) of the guarantee each had signed affected her analysis as to whether Atrium had breached its duty of good faith contractual performance. Clause 9(

p) provides that the Guarantors’ liability was unaffected by “any dealing by the Lender whatsoever with the Borrower or other person or any security, whether negligently or not, or any failure to do so”.

As earlier noted, the Chambers judge stated that “ if not barred by clause 9(p) , the complaints raised by the Guarantors were decisively dealt with by Layh J. when he approved the sale to Atrium” ( Chambers Decision at para 62, emphasis added). [ 63 ] Atrium relied upon this provision as providing a complete shield to any claim by the appellants that they had breached their duty of honest and good faith performance of their contracts. However, the appellants observe that the waiver in that provision is given only “to the fullest extent permitted by applicable law”.

They say that “parties are not free to contract out of such obligations all together”, making reference to the following passage from C.M. Callow :

[84] That said, I emphasize once again that it is unquestionable that the duty is imposed as a matter of contractual doctrine rather than by implication or

interpretation, and, by virtue of its status as contractual doctrine, parties are “not free to exclude” the duty altogether ( Bhasin , at para. 75 ).

Even if the parties, as here, have agreed to a term that provides for an apparently unfettered right to terminate the contract for convenience, that right cannot be exercised in a manner that transgresses the core expectations of honesty required by good faith in the performance of contracts . (All emphasis as it exists in the appellant’s factum) [ 64 ] My conclusion that there is no issue requiring trial relating to an alleged breach by Atrium of its duty of honest and good faith performance of its contracts means that I do not need to address the appellants’ submission that the Chambers judge misinterpreted clause 9(

p) of the guarantee each had signed. IV. CONCLUSION [ 65 ] The Chambers judge did not err in any of the ways alleged by the appellants. Their appeal must be dismissed. Atrium is entitled to one set of costs against the appellants taxable under Column 4. These costs shall be the joint and several liability of each of the appellants. “Leurer J.A.” Leurer J.A. I concur. “Tholl J.A.” Tholl J.A. I concur. “McCreary J.A.” McCreary J.A.