Paletta Intl. v. Can. Life Mortgage, (2003) 170 O.A.C. 5 (CA)

• Jurisdiction: Ontario
• Judge: MacPherson, Simmons and Armstrong, JJ.A.
• Date: 14 March 2003
• Citation: (2003), 170 O.A.C. 5 (CA)
• Court: Court of Appeal (Ontario)

Paletta Intl. v. Can. Life Mortgage (2003), 170 O.A.C. 5 (CA)

MLB headnote and full text

Temp. Cite: [2003] O.A.C. TBEd. AP.009

Paletta International Corporation (plaintiff/respondent) v. Canada Life Mortgage Services Ltd. and Canada Life Assurance Company (defendants/appellant)

(C38060)

Indexed As: Paletta International Corp. v. Canada Life Mortgage Services Ltd. et al.

Ontario Court of Appeal

MacPherson, Simmons and Armstrong, JJ.A.

April 2, 2003.

Summary:

The plaintiff entered into negotiations with the defendant to obtain a long term mortgage which was to be secured by a charge on a shopping centre. A Commitment Agreement specified the minimum rental income that the shopping centre had to generate to support the loan before the mortgage would be advanced. A Commitment Fee Agreement required that the plaintiff pay the defendant a $138,000 commitment fee. The minimum amount of rental income was not reached and the transaction did not proceed. The defendant retained the commitment fee. The plaintiff sued for the return of the fee.

The Ontario Superior Court, in a decision reported at [2002] O.T.C. Uned. 237, ordered the defendant to return the fee. The defendant appealed.

The Ontario Court of Appeal allowed the appeal, set aside the trial judgment and dismissed the action.

Contracts - Topic 3563

Performance or breach - Performance of conditions precedent - Failure to perform - Effect of - The parties entered into negotiations respecting a mortgage secured by a charge on the plaintiff's shopping centre - A Commitment Agreement specified a minimum rental income that the centre had to generate before the mortgage would be advanced - A Commitment Fee Agreement required that the plaintiff pay a $138,000 fee - The minimum rent was not achieved and the transaction did not proceed - The defendant retained the $138,000 - The Commitment Agreement required that the fee be returned unless the plaintiff defaulted - The trial judge ordered the defendant to return the fee, holding that there had been no default where the failure to achieve the minimum rent was not the plaintiff's fault, but the result of market conditions - The Ontario Court of Appeal allowed the defendant's appeal - In a commercial transaction between two sophisticated parties, the reasons for the failure to meet a condition of the agreement was irrelevant - The plaintiff failed and, therefore, was in default - The condition was a critical component of the agreement - The defendant was entitled to decline to advance the funds and to retain the fee - See paragraphs 22 to 31.

Contracts - Topic 3672

Performance or breach - Repudiation - Forfeiture of monies paid - [See Contracts - Topic 3563 ].

Mortgages - Topic 1326

The mortgage - Agreement to make loan - Breach of - [See Contracts - Topic 3563 ].

Cases Noticed:

Prudential Insurance Co. of America v. Cedar Hills Properties Ltd. et al. (1994), 54 B.C.A.C. 128; 88 W.A.C. 128; 100 B.C.L.R.(2d) 312 (C.A.), refd to. [para. 26].

Counsel:

Les J. O'Connor and Michael R. Swartz, for the respondent;

Geoff R. Hall and Genevieve Currie, for the appellant.

This appeal was heard on March 14, 2003, by MacPherson, Simmons and Armstrong, JJ.A., of the Ontario Court of Appeal. MacPherson, J.A., released the following judgment for the Court on April 2, 2003.