Court File No. 1801-04745 Court Court of Queen's
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DocuSign Envelope ID: A75076B7-D1B5-4979-B9B7-ABB33B19F417 Clerk’s stamp: COURT FILE NO. 1801-04745 COURT COURT OF QUEEN’S BENCH OF ALBERTA JUDICIAL CENTRE CALGARY PLAINTIFF HILLSBORO VENTURES INC. DEFENDANT CEANA DEVELOPMENT SUNRIDGE INC., BAHADUR (BOB) GAIDHAR, YASMIN GAIDHAR AND CEANA DEVELOPMENT WESTWINDS INC. PLAINTIFFS BY COUNTERCLAIM CEANA DEVELOPMENT SUNRIDGE INC., BAHADUR (BOB) GAIDHAR AND YASMIN GAIDHAR DEFENDANTS BY COUNTERCLAIM HILLSBORO VENTURES INC., NEOTRIC ENTERPRISES INC., KEITH FERREL AND BORDEN LADNER GERVAIS LLP DOCUMENT BRIEF OF LAW AND ARGUMENT OF THE APPLICANT HILLSBORO VENTURES INC. ADDRESS FOR SERVICE AND Dentons Canada LLP CONTACT INFORMATION OF PARTY Bankers Court FILING THIS DOCUMENT 15th Floor, 850 – 2nd Street SW Calgary, Alberta T2P 0R8 Attn: Derek Pontin / John Regush Ph. (403) 268-6301 / 7086 Fx. (403) 268-3100 File No.: 559316-3 Brief of Law and Argument of the Applicant in respect of an application to be heard by the Honourable Madam Justice Eidsvik, scheduled on June 2 and 3, 2021 NATDOCS\54598355\V-1 DocuSign Envelope ID: A75076B7-D1B5-4979-B9B7-ABB33B19F417 Table of Contents I. INTRODUCTION..............................................................................................................................1 II. FACTS..............................................................................................................................................1 a. The Application Record....................................................................................................................1 b. Hillsboro’s Loan Facility and Guarantees ........................................................................................3 c. The Accounting for the Mortgage Indebtedness ..............................................................................4 d. Evidence Supporting Dismissal of the Counterclaim .......................................................................6 e. Evidence Warranting Security for Costs ..........................................................................................7 III. ISSUES ............................................................................................................................................7 IV. LAW AND ARGUMENT ...................................................................................................................8 a. Summary Judgment on the Guarantees ..........................................................................................8 i. The Test for Summary Judgment.....................................................................................................8 ii. Application of these Principles to the Facts ...................................................................................10 iii. Calculations for the Guarantee Indebtedness................................................................................11 b. Dismissal of the Counterclaim........................................................................................................11 c. Security for Costs...........................................................................................................................12 V. CONCLUSION ...............................................................................................................................13 VI. TABLE OF AUTHORITIES.............................................................................................................15 NATDOCS\54598355\V-1 DocuSign Envelope ID: A75076B7-D1B5-4979-B9B7-ABB33B19F417 1 I. INTRODUCTION 1. The Plaintiff, Hillsboro Ventures Inc. (“HVI”), is a mortgage lender to Ceana Development Sunridge Inc. (“Ceana Sunridge”). HVI is a part of the Hillsboro Group of Companies. Hillsboro Enterprises Inc. (“HEI”) and Neotric Enterprises Inc. (“Neotric”) are companies related to HVI (collectively, “Hillsboro”). HEI is the assignee of all rights and indebtedness of HVI and is seeking the relief set out herein. 2. The Defendant, Ceana Sunridge, is in receivership as a result of a Receivership Order made July 3, 2019 and amended and restated June 17, 2020. 3. The Defendants, Bahadur (Bob) Gaidhar (“Bob Gaidhar”) and Yasmin Gaidhar (together the “Gaidhars”), and Ceana Development Westwinds Inc. (“Westwinds”, together with the Gaidhars, the “Guarantors”), are guarantors of the indebtedness of Ceana Sunridge to Hillsboro and are respondents to this application. 4. Ceana Sunridge and the Gaidhars have filed a Counterclaim, naming HVI, Neotric, Keith Ferrel (“Mr. Ferrel”, the principal and directing mind of the Hillsboro companies), and Borden Ladner Gervais LLP (“BLG”, former counsel to Hillsboro) as Defendants by Counterclaim. 5. The relief sought by Hillsboro and its related parties herein includes, inter alia, an order confirming the indebtedness of Ceana Sunridge, summary judgment in favour of HEI as against the Guarantors, and dismissal of the Counterclaim. II. FACTS a. The Application Record 6. The record in this case is robust, but to the Court’s advantage, the Receiver has independently reviewed and opined on the essential matters of fact that are material to Hillsboro’s application. 7. Further, the issues at hand are discreet. This Honourable Court has already dealt with the conveyance of the assets of Ceana Sunridge. Certain determinations in respect of liability and quantum of the debt have already been determined. The remaining indebtedness – the deficiency – is the only material unresolved issue. 8. By way of background, this Action was commenced by Hillsboro by way of Statement of Claim seeking foreclosure of the Project under one of its registered mortgages. The mortgage facilities were originally set up with Ceana Sunridge for the purpose of development and construction by Ceana Sunridge of a commercial condominium project (the “Project”). The inability of Ceana NATDOCS\54598355\V-1 DocuSign Envelope ID: A75076B7-D1B5-4979-B9B7-ABB33B19F417 2 Sunridge to advance and complete the Project led to the appointment of a receiver (the “Receiver”). 9. By way of Order for Sale to Plaintiff, granted January 14, 2021 (the “Sale Order”), the Project was sold to Hillsboro. The sale of the Project closed on February 19, 2021 and the Receiver filed its Closing Certificate.1 10. In the Sale Order, Hillsboro was granted judgment against Ceana Sunridge for its mortgage indebtedness, subject to a reservation that the quantum of Hillsboro’s remaining deficiency would be determined after the sale had closed (the “Hillsboro Deficiency Amount”).2 This was necessary at the time as the various components of the purchase price were fluctuating, and adjustments could not be crystallized until the date of closing. The deficiency would only be known after the adjustments had been confirmed. 11. The Guarantors were not included in the original foreclosure action. By way of Statement of Claim filed in Action 1901-00264 (the “Guarantee Action”), Hillsboro commenced action separately against the Guarantors. The Guarantors defended the Guarantee Action, and in the foreclosure action filed a Counterclaim. 12. By way of Application filed February 17, 2021, Hillsboro applied for, inter alia, the following relief: (a) lifting the stay of proceedings for this matter to proceed; (b) compelling Bob Gaidhar to provide responses to undertakings; (c) consolidating the Guarantee Action into the receivership action; (d) confirming the Hillsboro Deficiency Amount; (e) granting summary judgment against the Guarantors for the Hillsboro Deficiency Amount; and (f) dismissing the counterclaim filed by the Gaidhars in this Action, or alternatively ordering certain procedural relief in respect of the same. 13. That application was heard on February 25, 2021 and the relief sought at paragraphs (a)-(c) above was granted: the stay was lifted for the purposes of this Application; Bob was directed to furnish responses to undertakings; the Guarantee Action has been consolidated into this action. 1 [F344] – References to Caselines in this format are included throughout this Brief. 2 [E65] – Sale and Vesting Order, at para 8. NATDOCS\54598355\V-1 DocuSign Envelope ID: A75076B7-D1B5-4979-B9B7-ABB33B19F417 3 14. The balance of items - confirmation of the Hillsboro Deficiency Amount, summary judgment against the Guarantors, and dismissal of the Counterclaim - were adjourned to be heard on June 2 and 3, 2021, and a scheduling Order was made directing timelines for filings and examinations. 15. Hillsboro observed the scheduling order and filed its supporting affidavit on March 19, 2021.3 16. Bob Gaidhar missed the deadline for a response and served a late affidavit on April 26, 2021 (the “Late Affidavit”), more than three weeks after the deadline. 17. The lateness of the Late Affidavit effectively precluded Hillsboro from cross-examining as, to do so, additional dates would have had to be moved and Hillsboro would have had to compromise the June hearing dates. 18. Aside from the Receiver (on behalf of Ceana Sunridge) and the Guarantors, there are no other responding parties with standing in this matter. 19. Bob Gaidhar is the only responding party that has filed materials on his own behalf. Those materials are largely a repetition of materials earlier filed in various affidavits. b. Hillsboro’s Loan Facility and Guarantees 20. All of Hillsboro’s loan facility and security documentation have been filed into evidence. The Receiver independently reviewed and opined on the validity and enforceability of Hillsboro’s loan and security documentation.4 The Court confirmed under