



COURT OF APPEAL FOR ONTARIO

CITATION: Del Hugh Terrelonge v. CVC
    Ardellini Investments Inc., 2019 ONCA 811

DATE: 20191010

DOCKET: C66562

Sharpe, Hourigan and Jamal JJ.A.

In the Matter of the Bankruptcy
    of The Templar Hotel Corporation, of the City of Toronto, in the Province of
    Ontario

BETWEEN

Monk Development Corporation,

1586091 Ontario Limited c.o.b. as Rhed

and
Del Hugh
    Terrelonge

Applicants

(
Appellant
)

and

CVC Ardellini Investments Inc.
, The
    Templar Hotel Corporation, Gabretta Investments Limited, Gail Appel, Lynn
    Digenova, Taragar Holdings

Limited, Tenebaum Family Trust, Lawrence Tenenbaum,

Wendy Tenenbaum, Randi Usher, Shael Sone,

Her Majestry The Queen in Right of Ontario

as represented by the Minister of Finance,

National Leasing Group Inc., Howieco Entertainment Inc.,

Martin Kravashik, in Trust, Misim Investments Limited,

Prime One Financial, Inc., Ralcap Investments Corporation, Indcom
    Leasing

Inc., 1220356 Ontario Limited, 768124 Ontario Inc., Snap Premium
    Finance Corp., Her Majesty the Queen in the Right of Canada as represented

by the Minister of
    National Revenue, Aubrie Appel, MCAP Service Corporation, Templar Lake on the
    Mountain Inc. and A5 Capital Inc.

Respondents

(
Respondent
)

Alfred Schorr, for the appellant

Liliana Ferreira and Raffaele Sparano, for the respondent

Heard: October 4, 2019

On
    appeal from the order of Justice H.J. Wilton-Siegel of the Superior Court of
    Justice, dated January 8, 2019.

REASONS FOR DECISION

[1]

The appellant, Del Terrelonge, was the principal
    of Templar Corporation (Templar), which owned a hotel in Toronto. The Romspen
    Investment Corporation (Romspen) extended mortgage financing to Templar and
    held charges against the hotel property and the appellants personal residence.
    Templar defaulted on the mortgage in 2013. At that time, the balance owing was
    approximately $15 million.

[2]

To avoid a sale of the properties, Templar
    arranged financing from the respondent, CVC Ardellini Investments Inc. (CVC)
    and other parties who CVC has subsequently bought out. In May 2014, that group
    paid Romspen $8.5 million for the debt owed by Templar. CVC also signed a
    Forbearance Agreement with the appellant and Templar in the same month.

[3]

The nature of the Forbearance Agreement is
    contested in this appeal, but all parties agree that it obliged CVC to hold off
    on enforcing its rights for one year, and to accept payment limited to $8.5
    million plus interest, costs and expenses upon maturity, provided that Templar
    did not default on payments or conditions within the year of forbearance. In
    the agreement, Templar and the appellant acknowledged that the debt owing
    exceeded $17 million and that there was an existing default that had not been
    waived. The agreement also included an entire agreement clause that provided in
    part:

This Agreement constitutes the entire
    agreement between the Chargee and the Chargor with respect to the subject
    matter herefor but is not intended to replace the Charge and/or Security
    Documents, which remain in full force and effect

[4]

The parties dispute what the Forbearance
    Agreement requires in the event of default. CVC maintains that in the event of
    default, the full $17 million becomes due. The appellant takes the position
    that the amount due on default is limited to $8.5 million.

[5]

Templar defaulted on its obligations to CVC
    during the forbearance period. In August 2015, CVC obtained judgment against
    the appellant personally for approximately $8 million and possession of his
    residence. CVC also took possession of the hotel and sold it for $9,750,000.

[6]

The appellant brought a motion in the Superior
    Court submitting that under the terms of the Forbearance Agreement, the debt to
    CVC was limited to the $8.5 million that CVC paid to Romspen. The appellant
    claimed that this debt was now paid off by the sale proceeds of the hotel, and
    that CVCs charge against his residence ought to be discharged. The motion
    judge rejected this argument, holding that CVC had been assigned the full $17
    million debt, and was still owed at least $7 million.

[7]

The appellant appeals this decision, submitting
    that the motion judge made legal and palpable and overriding errors of mixed
    fact and law by interpreting the Forbearance Agreement as assigning the full
    $17 million. Further, he submits that the motion judge erred in law by
    determining that the court had no jurisdiction to grant relief from forfeiture
    under s. 98 of the
Courts of Justice Act
, R.S.O.1990, c. C.43, or that
    it lacked grounds to exercise its discretion under s. 98 in his favour.

[8]

With respect to the amount assigned, the
    appellant argues that Templars intention was to borrow $8.5 million and that
    the commitment letters exchanged as part of the negotiation of the new
    financing are consistent with that intention. The appellant submits that the
    only reason the Forbearance Agreement included a transfer of the full
    outstanding debt owing was to preserve that debts priority over other Templar
    creditors. According to the appellant, the intention of the parties was that
    Templar would not be liable for more than the $8.5 million, interest and
    associated costs of enforcement in the event of default.

[9]

We do not give effect to this ground of appeal.
    There in nothing in the Forbearance Agreement that indicates that CVC is
    limited to recovering only $8.5 million on default. The motion judge was
    correct in his observation that if the purpose of the Forbearance Agreement was
    to preserve CVCs priority, and not assign the full debt in the event of
    default, then the agreement would have provided for that explicitly. These were
    sophisticated parties represented by counsel and they could have easily
    documented the interpretation of the agreement now urged upon us by the
    appellant. The trial judge did not err in holding them to the bargain they
    struck as memorialized in the Forbearance Agreement.

[10]

In addition, article 10 of the Forbearance
    Agreement provided for the reduction in the principle amount owing only if
    Templar complied with its obligations under the agreement and paid the $8.5
    million plus interest and associated costs at the end of the forbearance
    period. That article would not have been necessary had the parties intended
    that the amount owing was limited to $8.5 million regardless of default.

[11]

The appellant submits that the motion judge
    erred in law by not giving sufficient consideration to the circumstances
    surrounding the creation of the Forbearance Agreement. We disagree. The motion
    judge was cognizant of the surrounding circumstances but avoided impermissibly
    using them to deviate from the text such that the court effectively creates a
    new agreement:
Sattva Capital Corp. v. Creston Moly Corp
, 2014 SCC
    53, [2014] 2 S.C.R. 633, at para. 57.

[12]

We also do not give effect to the appellants
    submission regarding relief from forfeiture under s. 98 of the
Courts of
    Justice Act
. Contrary to the appellants argument, the motion judge did
    not find that the court lacked jurisdiction to grant relief. Instead, the
    motion judge found that this was not an appropriate case to grant the relief
    sought. This is a discretionary remedy, highly dependant on the equities of the
    case, and is generally used to relieve against unconscionable transactions and
    disproportionate results.

[13]

The motion judge did not err in declining to
    grant relief. The transaction the parties agreed to was not unconscionable and
    the result was not disproportionate. There was no dispute that Templar received
    the benefit of the funds advanced under its financing arrangement with Romspen.
    At the time the Forbearance Agreement was executed, the total amount owing was
    over $17 million. If Templar had complied with the terms of the agreement, it
    would have expunged that debt for the price of approximately $8.5 million and
    would have notionally earned an additional $3.5 million in equity based on the
    appellants projected value for the hotel. Therefore, if the Forbearance
    Agreement was complied with, it would have granted Templar and the appellant a
    significant windfall. In addition, if the $8.5 million was not repaid within a
    year, it is commercially reasonable that CVC would require repayment of a
    greater sum.

[14]

For the foregoing reasons, the appeal is
    dismissed. The appellant shall pay CVC its costs of the appeal fixed in the
    all-inclusive amount of $15,000.

Robert J. Sharpe
    J.A.

C.W. Hourigan
    J.A.

M. Jamal J.A.


