Law Times

Law Times • January 16, 2012 FOCUS PAGE 11 Dispute leaves Cameroon in property bind Court battle centred on owner's agreement not to lease mortgaged home BY KENNETH JACKSON For Law Times T he Republic of Cam- eroon found its high commissioner forced to leave its home in Ot- tawa aſter the $2-million prop- erty it was renting quickly turned into a heated battle between the owner and mortgagee. It was in the middle of Sep- tember 2008 that the Repub- lic of Cameroon signed onto a tenancy agreement to house its high commissioner for the one- year lease of the property owned by Marco Valenti. Cameroon would pay $144,000 for the year, payable in two equal instalments every six months. It was to move in on Oct. 7, 2008, but there was one problem. The owner wasn't al- lowed to rent out the house, ac- cording to an August 2011 court decision. When Valenti received a mortgage from the Equitable Trust Co. a few months earlier, he agreed to be the owner-occupier of the single-family home. He signed a statutory declaration stating he'd be the principal resi- dent and would lease no portion of it. If he was going to lease the property, he needed to obtain consent. Failing to do so meant all of the money owing under the mortgage became due and payable. At the same time, he'd have to pay three months' inter- est in addition to the outstand- ing principal. Valenti knew of these facts but went ahead with the deal never- theless. In fact, he sent a copy of the tenancy agreement to Equi- table Trust on Oct. 1, 2008. The company made no objec- tion until Feb. 19, 2009. But at some point, near the end of Janu- ary 2009, it did call and speak to the tenant. It asked the tenant not to pay any more money. Camer- oon agreed. At the beginning of the month, Valenti failed to make a payment. The same thing hap- pened later on. Then on Feb. 17, Equitable Trust issued a notice against Valenti. The notice said the company seeking the court's would be approval to set aside the lease. Equitable Trust knew that un- der the tenancy agreement, the tenant was to pay a six-month rental instalment in the amount of $72,000 on Feb. 27. Cameroon terminated its ten- ancy on April 7 and didn't pay the money it owed, thereby breach- ing its tenancy agreement. By June 1, the property was sold for more than $2 million. The problem wasn't over, how- ever. Equitable Trust wanted its penalty for three months of inter- est in the amount of $38,618. Valenti paid the money but said he did so under duress and Carswell-26880_LT_Jan16_12.indd 1 www.lawtimesnews.com 12-01-11 1:56 PM NOW IN ITS 25TH YEAR BROWN ON DEFAMATION: CANADA, UNITED KINGDOM, AUSTRALIA, NEW ZEALAND, UNITED STATES, SECOND EDITION RAYMOND E. BROWN (FORMERLY ENTITLED THE LAW OF DEFAMATION IN CANADA, 2ND EDITION) When your client's most personal asset – their reputation – is at stake, turn to the renowned authority. 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Price subject to change without notice and subject to applicable taxes. – $362 per supplement • Remedies • Charter implications • Injurious Falsehood – includes a closer look at slander of title, disparagement of goods, and interference with prospective advantage • Malicious Prosecution – includes an extensive analysis of the principles of law relating to the initiation and termination of judicial proceedings, reasonable and probable cause, malice, defences to the action and damages • Recent case highlights • Recent developments of the law relating to the Internet • Comparative analysis of special media privileges in England, Australia, New Zealand, South Africa, and the United States had to borrow half of it. He then turned around and sued to get the money back from Equitable Trust for breach of contract and wrongful interference with eco- nomic relations. Equitable Trust sought to throw the application out. The court agreed and said Valenti must have had blinders on in asking it to consider the lease in isolation. "The plaintiff has no dam- ages to pursue this claim but for an agreement he contracted not to enter into because he had no consent," the court said. "The foundational fault in the plaintiff 's action is his claim for damages regarding a lease he contracted not to enter into be- cause he lacked the prior written consent of the mortgagee." According to real estate lawyer Ryan Solomon, Valenti had sim- ply hoped the court would over- look the fact that he had leased lease in question was invalid and therefore the mortgager was not entitled to the remedies sought," says Solomon of Baker Schneider Ruggiero LLP. Solomon says that to decide Ryan Solomon the property to the Republic of Cameroon without the prior written consent of the mortgagee. "If looked at in isolation, the mortgager may have succeeded in its claim against the mortgagee. However, without the prior writ- ten consent of the mortgagee, the differently would mean that par- ties to an agreement could pick and choose which provisions they wish to adhere to, thus re- moving any certainty they may have. "As the court stated, to ac- cept the mortgager's breach of contract would create a judicial precedent which could encour- age other contractual parties to breach their contract and then recover damages if the other party seeks to address the breach through judicial process," says Solomon. "For the court to decide otherwise requires that a funda- mental provision of the mortgage be overlooked completely." The court also didn't have a problem with Equitable Trust's decision to call the tenant. "It will be impossible for the plaintiff to establish at trial that the intention of Equitable Trust in speaking to the tenant to seek delay in payment of rent and then commencing a court application were actions of or intended to cause a loss to the plaintiff under an agreement which the plain- tiff had contractually agreed not to enter into," the court said. The company, it added, "has estab- lished on this motion that it is plain, obvious, and without doubt that the plaintiff does not have a cause of action against this defen- dant on the tort of wrongful inter- ference in the economic relations." As part of the ruling, the court ordered Valenti to pay an ad- ditional $12,000 for Equitable Trust's legal costs. Lawyer Mi- chael Hebert, who represented the landlord, said his client is ap- pealing the decision. LT AVAILABLE RISK-FREE FOR 30 DAYS Order online at www.carswell.com Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800

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