



COURT OF APPEAL FOR ONTARIO

CITATION:
OMJ Mortgage Capital Inc. v. King Square Limited, 2021 ONCA
    690

DATE: 20211008

DOCKET: C68294

Benotto, Brown and Harvison
    Young JJ.A.

BETWEEN

OMJ
    Mortgage Capital Inc.

Plaintiff (Respondent)

and

King Square Limited

Defendant (Appellant)

Maurice J. Neirinck, for the appellant

Melvyn L. Solmon and Rajiv Joshi, for
    the respondent

Heard: September 10, 2021 by video conference

On
    appeal from the judgment of Justice Sandra Nishikawa of the Superior Court of
    Justice, dated July 6, 2020, with reasons reported at 2020 ONSC 1188.

REASONS FOR DECISION

OVERVIEW

[1]

In 2014, the appellant, King Square Limited (KSL), was seeking
    construction financing for its project in Markham, Ontario. It engaged the
    respondent mortgage broker, OMJ Mortgage Capital Inc. (OMJ), in its efforts
    to obtain financing. In early February 2014, OMJ obtained an oral commitment
    from Firm Capital Corporation (FCC) for such financing.

[2]

On February 4, 2014, OMJ and KSL entered into a Commission Agreement in
    respect of construction financing for the project.

[3]

The Commission Agreement provided for a one-year term, running from
    January 25, 2014 until January 25, 2015, following which there would be a
    one-year holdover period expiring on January 25, 2016.

[4]

Clause 1 of the Commission Agreement described the borrowing agreement
    in respect of which KSL would pay OMJ a commission:

As at Feb 3, 2014, OMJ Mortgage Capital has
    negotiated and arranged for financing for KING SQUARE PROJECT from FIRM CAPITAL
    CORPORATION, her[e]by referred to as Lender. This Agreement is to confirm that,
    King Square Limited understand[s] and agrees that during the period of this
    agreement, they will act in good faith and work exclusively with OMJ Mortgage
    Capital in order to complete the Construction Financing of this project with
    Firm Capital Corporation (the lender). This would apply to any type or amount
    of financing for 9390 Woodbine Avenue, Markham, Ontario.

[5]

Clause 2 identified the circumstances in which KSL was obligated to pay
    OMJ a commission. The salient portions of clause 2 of the Commission Agreement
    stated:
[1]

COMMISSION:

In consideration of OMJ Mortgage Capital Inc.,
    hereinafter referred to as the Mortgage Broker, undertaking to assist the
    Borrower [KSL], the Borrower agrees to pay commission to the Mortgage Broker as
    follows:

If during the currency of this agreement the Borrower enters
    into an agreement to borrow of the general description indicated above, or if
    the Mortgage Broker provides a letter of intent or mortgage commitment of the
    general description indicated above, then the Borrower agrees the Mortgage
    Broker is entitled to receive and retain any commission offered by the borrower
    and / or the lender. The Borrower understands that the amount of
    commission offered in that case may be greater or less than the commission
    stated below.

...

[I]f during
    the currency of the agreement, the Borrower enters into an agreement to borrow
    of the general description indicated above, closes any mortgage transaction in
    the general description indicated above, is provided a letter of intent or
    mortgage commitment of the general description indicated above then the
    Borrower agrees that the Mortgage Broker is entitled to be paid a commission
    of
3%
of the amount borrowed or [blank]
    as well as any finders fee as hereinafter described.

...

The Borrower agrees to pay directly to the Mortgage Broker such
    commission if the Borrower enters into an agreement within
365
days after the
    expiration of the agreement (Holdover Period) to borrow any money from any
    Lender introduced to the Borrower from any source whatsoever during the
    currency of this agreement.



Said commission, plus any applicable taxes, shall be payable on
    the date set for completion of the financing.

[6]

On April 23, 2014, FCC provided KSL with a commitment letter for $50
    million in construction financing, which KSL accepted in May 2014 (the
    Original Commitment). That loan closed in November 2014. KSL paid OMJ a
    commission in accordance with the terms of the Commission Agreement.

[7]

On January 9, 2017, KSL and FCC entered into a Mortgage Loan Amendment
    and Renewal Agreement with respect to the $50 million loan (the Renewal
    Agreement) that increased the amount loaned by an additional $12.9 million
    (the Second Loan). Later that year, on September 14, 2017, KLS and FCC
    entered into a second Mortgage Loan Amendment Agreement (Amendment #2) that
    provided for a further loan increase of $11.8 million (the Third Loan). KSL
    did not advise OMJ about the Second or Third Loans.

[8]

When OMJ learned about the Second and Third Loans, it demanded payment
    of further commissions from KSL under the Commission Agreement. KSL refused to
    pay any further commissions. OMJ sued KSL.

[9]

The trial judge held that OMJ was entitled to commissions on the Second
    and Third Loans pursuant to the terms of the Commission Agreement. KSL appeals that
    judgment.

ANALYSIS

[10]

KSL
    submits that the trial judges interpretation of the Commission Agreement was
    wrong as the Commission Agreement was susceptible of only one interpretation 
    namely, that OMJ was not owed a commission. KSLs three core grounds of appeal
    are summarized at para. 72 of the appellant factum:

King Square respectfully submits that the
    Trial Judge was required to find that OMJ is not entitled to any commission on
    account of the two new loans in 2017 because (i) the $50 Million Commitment was
    only for the single $50 million loan and not for the two new loans in 2017
    which were made years later pursuant to other Agreements in 2017 and, at that,
    for materially different reasons, based on a different foundation and on
    materially different and more onerous business terms, (ii) because the two new
    loans in 2017 were made to King Square pursuant to Agreements that were entered
    into in 2017 well after the deadline dates for the commission-earning events in
    the Commission Agreement (
the deadlines being (i) January 25, 2015, for an
    agreement to borrow, a letter of intent, a mortgage or commitment or the
    closing of a mortgage transaction for commission on proceeds therefrom and (ii)
    January 25, 2016, for an agreement to borrow with a lender introduced before
    January 25, 2015
) and (iii) because the two new loans were made pursuant
    to the Agreements that were agreed upon/entered into in 2017. [Emphasis in
    original.]

[11]

KSLs
    grounds of appeal face a major obstacle in the standard of review now
    applicable to issues of contract interpretation. In
Corner Brook
    (City) v. Bailey
, 2021 SCC 29, 460 D.L.R. (4th) 169, the Supreme
    Court of Canada repeated the deferential standard of review applicable to most
    issues of contract interpretation stating, at para. 44:

In
Sattva
,

this Court also explained that contractual
    interpretation is a fact specific exercise, and should be treated as a
    mixed question of fact and law for the purpose of appellate review, unless
    there is an extricable question of law. The exception is standard form
    contracts, which is not relevant here: see
Ledcor
    Construction
. Extricable questions of law in the context of
    contractual interpretation include the application of an incorrect principle,
    the failure to consider a required element of a legal test, or the failure to
    consider a relevant factor:
Sattva
,

at para. 53, quoting
King v. Operating Engineers Training Institute of Manitoba Inc.
, 2011
    MBCA 80, 270 Man. R. (2d) 63, at para. 21. The circumstances in
    which a question of law can be extracted will be uncommon. Whether
    something was or should have been within the common knowledge of the parties at
    the time the contract was entered into is a question of fact:
Sattva
,

at
    paras. 49-55 and 58.

[12]

There
    is no dispute that the trial judge, at paras. 31-34 of her reasons, correctly
    identified the principles of contractual interpretation applicable to the issue
    before her.

[13]

KSLs
    first ground of appeal  that the trial judge failed to characterize the Second
    and Third Loans as new loans based on a different foundation than the
    Original Commitment  founders on the findings of fact made by her. The trial
    judge held that the Second and Third Loans were not new loans but further
    advances made by FCC pursuant to the original Loan Commitment. She concluded
    that KSLs attempt to portray the Second and Third Loans as new loans found no
    support in the loan documents. The trial judge gave three reasons for reaching
    this conclusion:

(i)

The Renewal Agreement and Amendment #2 refer to the Loan Commitment and
    incorporate its terms. Accordingly, they were not stand-alone loan
    agreements but were based on and connected to the original Loan Commitment;

(ii)

When
    the Second and Third Loans were made, the original mortgage was not discharged,
    nor were new mortgages registered. Instead, the amount of the charge increased
    by the additional amounts advanced; and

(iii)

Both KSL
    and FCC consistently treated the further advances as having been made pursuant
    to the original Loan Commitment.

[14]

KSL
    has not demonstrated that these findings of fact are infected by palpable and
    overriding error.

[15]

KSLs
    second and third grounds of appeal concern errors it submits the trial judge
    made regarding how the timing of the Second and Third Loans affected OMJs
    entitlement to further commissions. KSL strongly contends that the trial judge
    did not analyze whether the commission-earning events for which the Second and
    Third Loans were made had occurred before the respective deadline dates set out
    in the Commission Agreement. This, it submits, amounts to an error on an
    extricable question of law.

[16]

In
    our view, this submission mis-reads the trial judges reasons. She addressed the
    timing issue at considerable length at paras. 56-58 of her reasons:

[
56
]  Clause 2 of the Commission
    Agreement states if during the currency of the agreement, the Borrower enters
    into an agreement to borrow of the general description indicated above, closes
    any mortgage transaction in the general description indicated above, is
    provided a letter of intent or mortgage commitment of the general description
    indicated above then the Borrower agrees that the Mortgage Broker is entitled
    to be paid a commission of 3% of the amount borrowed  The language of
    Clause 2 is broad and included an agreement, mortgage transaction, letter of intent
    or mortgage commitment.  In this case, FCC provided a Loan Commitment
    during the currency of the agreement.

[
57
]  The Loan Commitment from FCC
    resulted from OMJs introduction and work.  KSL then received two
    additional advances from FCC based on the original Loan Commitment which were
    both done as amendments to the Loan Commitment and on the same security.
Having benefitted from OMJs work in securing
    the Loan Commitment, KSL cannot exclude OMJs entitlement to a commission for
    amounts advanced pursuant to the same arrangement, even if they were made a
    year after the Holdover Period expired.  The basis for the further
    advances was the original Loan Commitment, which was entered into during the
    currency of the Commission Agreement.

[
58
]  While the Second and Third
    Loans were not made until over a year after the Holdover Period, interpreting
    the Commission Agreement to apply to those advances does not lead to an
    absurdity.  The Commission Agreement applies to those advances because
    they were made pursuant to the Loan Commitment, which KSL and FCC continued to
    apply.  Contrary to KSLs submission, this does not result in OMJ being
    entitled to commissions indefinitely or for an unreasonable period of
    time.  Construction on the Project, and KSLs need for financing, would
    not have continued indefinitely.  At some point, if the terms of the Loan
    Commitment were no longer suitable, KSL and FCC could have entered into a new
    loan agreement.  In the circumstances, they did not opt to enter into a
    new loan agreement.  As long as the Loan Commitment was the basis for the
    advancement of further funds by FCC to KSL, OMJ was entitled to a commission.
    [Emphasis added.]

[17]

As
    with her reasons overall, this portion of her analysis was firmly anchored in
    the language of the Commission Agreement, as interpreted in light of the
    factual matrix, including the circumstances surrounding the Original Commitment,
    the Second Loan and Third Loan.

[18]

Applying
    the required deferential standard of review, we see no basis for appellate
    intervention with the trial judges conclusion that the Commission Agreement
    required KSL to pay OMJ commissions for the Second and Third Loans in 2017. Her
    interpretation of the Commission Agreement was a commercially reasonable one,
    in the context of the entire agreement and the factual matrix, and is entitled
    to deference: see e.g.,
Harvey Kalles Realty Inc. v. BSAR (Eglinton) LP
,
    2021 ONCA 426, at para. 8.

DISPOSITION

[19]

For
    the reasons set out above, the appeal is dismissed.

[20]

In accordance with the agreement of the parties, KSL shall pay OMJ
    its costs of the appeal fixed in the amount of $50,000, inclusive of
    disbursements and applicable taxes.

M.L.
    Benotto J.A.

David
    Brown J.A.

Harvison
    Young J.A.





[1]

Clause 2 of the Commission Agreement is reproduced in its
    entirety at para. 29 of the trial judges reasons.


