ICI Mortgage Managers Inc. v. Brantec Developments Inc. et al., (2004) 362 A.R. 261 (QB)

• Judge: Chrumka, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 25, 2003
• Citations: (2004), 362 A.R. 261 (QB);2004 ABQB 395

ICI Mortgage v. Brantec Dev. (2004), 362 A.R. 261 (QB)

MLB headnote and full text

Temp. Cite: [2005] A.R. TBEd. JN.128

ICI Mortgage Managers Inc. (plaintiff) v. Brantec Developments Inc., Evan Deakin and Michael Deakin (defendants)

Brantec Developments Inc. (plaintiff by counterclaim) v. ICI Mortgage Managers Inc., Canada ICI Mortgage Services (Calgary) Inc., John Doe I, Jane Doe I, ABC Limited, DEF Limited (defendants by counterclaim)

(0001 03243; 2004 ABQB 395)

Indexed as: ICI Mortgage Managers Inc. v. Brantec Developments Inc. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Chrumka, J.

May 28, 2004.

Summary:

The defendants planned on developing condominium units. To finance the development, the plaintiff loaned monies to the defendants. A first mortgage was entered into for the sum of $10,375,000 plus 8.75% interest. As the defendants did not have the required funds to purchase the lands, they entered into a second mortgage with the plaintiff for the sum of $1,270,000 plus 12% interest. The defendants defaulted. The plaintiff sued for commercial foreclosure.

A Master of the Alberta Court of Queen's Bench granted summary judgment in favour of the plaintiff and imposed a Rice Order. The defendants appealed.

The Alberta Court of Queen's Bench dismissed the appeal.

Criminal Law - Topic 1742

Offences against property - Criminal interest rate - Interest defined - The defendants planned on developing condominium units - To finance the development, the plaintiff loaned monies to the defendants - A first mortgage was entered into for the sum of $10,375,000 plus 8.75% interest - As the defendants did not have the required funds to purchase the lands, they entered into a second mortgage with the plaintiff for the sum of $1,270,000 plus 12% interest - The defendants defaulted - The plaintiff sued for commercial foreclosure - Summary judgment was granted in favour of the plaintiff and a Rice Order was imposed - The defendants appealed, arguing that the second mortgage was illegal as the interest rate was criminal in violation of s. 347 of the Criminal Code - The defendants argued that with respect to the second mortgage, there was 12% simple interest on the principal, a standby fee, an arrangement fee, a processing fee and a participation fee, which totalled 69.2% interest - The Alberta Court of Queen's Bench dismissed the appeal - The court held that the participation fee was only to be paid from condominium sales after the mortgages had been fully repaid - The participation fee was a share of profits agreement and not interest - See paragraphs 60 to 94.

Criminal Law - Topic 1745

Offences against property - Criminal interest rate - Severability - The defendants planned on developing condominium units - To finance the development, the plaintiff loaned monies to the defendants - A first mortgage was entered into for the sum of $10,375,000 plus 8.75% interest - As the defendants did not have the required funds to purchase the lands, they entered into a second mortgage with the plaintiff for the sum of $1,270,000 plus 12% interest - The defendants defaulted - The plaintiff sued for commercial foreclosure - Summary judgment was granted in favour of the plaintiff and a Rice Order was imposed - The defendants appealed, arguing that the second mortgage was illegal as the interest rate was criminal in violation of s. 347 of the Criminal Code - The defendants argued that the interest rate, including all fees as well as a participation fee, amounted to a criminal interest rate - The Alberta Court of Appeal dismissed the appeal - The court held that the purpose and policy of s. 347 would not be subverted by the severance of the participation fee from the second mortgage - The parties had not entered into the agreement for an illegal purpose - All parties were represented by counsel and the relative bargaining position of each was the same - The terms of the second mortgage were not onerous - See paragraphs 95 to 100.

Interest - Topic 5

General - What constitutes interest - [See Criminal Law - Topic 1742 ].

Cases Noticed:

Trusts & Guaranty Co. v. Rice (1924) 2 W.W.R. 691, refd to. [para. 2].

274099 Alberta Ltd. v. West Edmonton Mall Shopping Centre Ltd. et al. (1990), 114 A.R. 57; 75 Alta. L.R.(2d) 389 (C.A.), refd to. [para. 47].

CompCorp Life Insurance Co. v. Harvard Developments Ltd. et al. (1996), 195 A.R. 133; 47 Alta. L.R.(3d) 97 (Q.B.), refd to. [para. 47].

Matwychuk v. Western Union Insurance Co. (1992), 134 A.R. 230; 5 Alta. L.R.(3d) 384 (Q.B.), refd to. [para. 47].

Willman v. Administrator, Motor Vehicle Accident Claims Act (1979), 17 A.R. 608; 11 Alta. L.R.(2d) 110; 107 D.L.R.(3d) 191 (C.A.), refd to. [para. 48].

Willman v. Coreman and Administrator of Motor Vehicle Accident Claims Act - see Willman v. Administrator, Motor Vehicle Accident Claims Act.

Royal Bank of Canada v. McLean (1997), 211 A.R. 297 (Q.B.), appld. [para. 50].

Garland v. Consumers Gas Co., [1998] 3 S.C.R. 112; 231 N.R. 1; 114 O.A.C. 1, consd. [para. 70].

Degelder Construction Co. v. Dancorp Developments Ltd. et al., [1998] 3 S.C.R. 90; 231 N.R. 122; 113 B.C.A.C. 1; 184 W.A.C. 1; 165 D.L.R.(4th) 417, refd to. [para. 70].

Transport North American Express Inc. v. New Solutions Financial Corp., [2001] O.T.C. 397; 200 D.L.R.(4th) 560 (Sup. Ct.), revd. (2002), 160 O.A.C. 381; 214 D.L.R.(4th) 44 (C.A.), revd. (2004), 316 N.R. 84; 183 O.A.C. 342; 235 D.L.R.(4th) 385 (S.C.C.), refd to. [para. 70].

Still v. Minister of National Revenue (1997), 221 N.R. 127; 154 D.L.R.(4th) 229 (F.C.A.), refd to. [para. 96].

Thomson (William E.) Associates Inc. v. Carpenter (1989), 34 O.A.C. 365; 61 D.L.R.(4th) 1 (C.A.), refd to. [para. 97].

Croll v. Kelly et al. (1983), 48 B.C.L.R. 306 (S.C.), refd to. [para. 98].

Royal Bank of Canada v. Grobman (1977), 83 D.L.R.(3d) 415 (Ont. H.C.), refd to. [para. 98].

Canada Permanent Trust Co. v. King Art Development Ltd., [1984] 4 W.W.R. 587; 54 A.R. 172 (C.A.), refd to. [para. 107].

Manufacturers Life Insurance Co. v. Daon Development Corp. (1989), 94 A.R. 334 (C.A.), refd to. [para. 107].

Authors and Works Noticed:

Waddams, Stephen M., The Law of Contracts (2nd Ed. 1984), p. 420 [para. 98].

Counsel:

D.R. Peskett, for the plaintiff;

W.L. Severson, for the defendants.

This appeal was heard on November 25, 2003, before Chrumka, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following decision on May 28, 2004.