Our litigation team achieved a major appellate victory this week.

Shane Coblin and Milaad Hashmi successfully represented the developer and guarantor appellants in a dispute over a $422M construction loan tied to the “Atmosphere” — one of Richmond’s largest proposed developments – a seven-tower residential, office, and commercial project spanning more than a city block.

The decision is reported at GEC (Richmond) GP Inc. v. Romspen Investment Corporation, 2025 BCCA 332.

Background

This case arose from an ambitious $726 million project to build seven residential and commercial towers in Richmond, B.C. To finance the project, the developers entered into a construction loan agreement with Romspen Investment Corporation (“Romspen”), as lender, in November 2019.

The loan provided for a $422 million credit facility, with Romspen committing to fund the initial $212 million itself and to use “commercially reasonable efforts” to syndicate the remaining $210 million by March 31, 2020. All parties knew Romspen could not carry the full loan alone.

Between late 2019 and March 2020, Romspen advanced about $143 million. But when its syndication efforts failed, Romspen sent a letter to the developers on March 31, 2020, advising the developers that it would not advance any further funds, relying upon its own failure to syndicate the balance of $210 million as the justification.  As a result, the developers defaulted under the loan agreement and were forced to seek protection under the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36 (“CCAA”).

Romspen’s refusal to fund triggered a number of law suits between the parties to the loan agreement, and parties to ancillary agreements, including actions brought by Romspen seeking judgment on its alleged outstanding debt; an action brought by the developer and guarantors of the loan agreement seeking damages for Romspen’s breaches of the loan agreement; and an action commenced by GEC (Richmond) GP Inc. and Global Education City (Richmond) Limited Partnership (another lender to the Project) seeking damages against Romspen.

Pursuant to a direction in the CCAA proceedings, the three claims were directed to be heard together on the issue of liability only, with damages to be assessed in a later proceeding.

Trial Judgment

The central question before the trial judge at the liability phase of the trial was whether Romspen was required to fund a minimum of $212 million of the $422 million construction loan even if it did not successfully syndicate the balance ($210 million). Romspen took the position that it was not obligated to fund any portion of the loan, including the initial $212 million, unless it was satisfied that it had syndication commitments for the full $422 million. The appellants took the position that the initial $212 million commitment was not subject to syndication.

In his reasons for judgment, the trial judge found that “Romspen was entitled to cease funding on March 31, 2020, because the Syndication Condition was not met. Romspen was not obliged to provide a minimum of $212 million to the Developers regardless of whether the Syndication Condition was met” (Alderbridge Way GP Ltd. (Re), 2024 BCSC 1433 at para. 189).

Accordingly, the trial judge granted judgment to Romspen and dismissed the appellants claims.

Court of Appeal Reasons

On September 22, 2025, the Court of Appeal issued its reasons and overturned the trial judge’s central finding. The Court of Appeal concluded that the trial judge’s interpretation of the loan agreement failed to give meaning to key terms and was inconsistent with the circumstances known to the parties when they entered into the agreement.

Accordingly, the Court of Appeal held at para. 46 of its reasons that:

“Romspen breached the Loan Agreement when it refused to advance further funding after March 31, 2020, on the basis of the syndication condition.”

The court emphasized that s. 2.02(2)(d) of the loan agreement expressly addressed what would happen if syndication failed. It provided that the borrowers waived Romspen’s obligation to fund any advances “in excess of the portion of the Construction Loan Commitment Amount set out in Schedule B”—namely, $212 million. According to the court, this language only made sense if Romspen’s $212 million commitment remained binding regardless of syndication.

To read the agreement otherwise, the court explained, would render the $212 million “Lender Commitment” redundant.

In the end, the court set aside the trial orders granting Romspen judgment under the loan agreement and found that Romspen breached the loan agreement when it refused to fund beyond March 31, 2020, on the basis of the syndication condition.

The Court of Appeal then remitted the question of damage payable in respect of Romspen’s breach for determination at the damages phase of the trial, so stay tuned for future updates.

Key Takeaways

The Court of Appeal’s reasons underscore an important principle: contracts must be interpreted as a whole and each provision must be given meaning and effect. Courts will avoid interpretations that render key terms superfluous.

In this case, Romspen’s argument would have turned the $212 million “Lender Commitment” into an empty promise. The court rejected that reading.

The ruling also highlights the risks for lenders who seek to suspend funding. If a lender intends to rely on a contractual term to stop advances, it must be certain that the term applies and that its reliance is consistent with the agreement as a whole. A failure to do so can lead to a finding of breach and potentially significant liability on the part of the lender, as this case illustrates.

If you have any questions about this decision or the drafting and interpretation of construction loan agreements, please do not hesitate to contact the authors.

Shane Coblin
scoblin@kornfeldllp.com
604-331-8320

Milaad Hashmi
mhashmi@kornfeldllp.com
604-331-8353