Executive Summary: Key Legal and Evidentiary Issues

• Dispute over whether 20% annual yield applied to $1M principal only or to $1.25M including unpaid yield

• Conflicting accounting methods regarding allocation of payments to principal vs. yield

• Disagreement about whether certain payments were made or constituted extension fees

• Validity and enforceability of unsigned subscription amendment agreements raised

• Credibility assessment favored plaintiff’s witness over defendants’ principal on key factual points

• Determination that yield does not accrue on unpaid yield due to non-compounding clause in PPSA

Facts and outcome of the case

In this case, the plaintiff, OTBEC3 Holdings Inc., invested $1 million into Promintory Developments Limited Partnership (PDLP) through a Private Placement Subscription Agreement (PPSA) dated August 30, 2019. The investment was meant to help fund a 120-townhome real estate development project in Kelowna, British Columbia. In return, OTBEC was to receive a 20% annual, non-compounding yield—$250,000—along with full repayment of the capital by November 30, 2020. However, due to COVID-19 delays and cost overruns, PDLP did not repay the full amount. From January 2021 to August 2022, PDLP made partial payments totaling $1,119,000. The parties disputed the application and continuation of the yield and the treatment of additional extension fees and unverified payments.

The central issue was whether the 20% yield continued to accrue on the full $1.25 million (original capital plus yield due as of November 30, 2020) or only on the original $1 million principal. The PPSA explicitly stated the yield was non-compounding, and did not address post-maturity accruals. OTBEC argued the parties had subsequently agreed that the entire $1.25 million should bear interest; PDLP denied this and claimed payments should be allocated first to principal. The court accepted OTBEC’s position, relying on credible testimony from its CFO, Ms. Olga Karan, and corroborating emails. It found that from December 1, 2020, the parties had agreed to apply the 20% yield to the $1.25 million balance, though unpaid yield beyond that point would not itself bear interest.

The court also resolved specific disputes regarding payment classifications. It determined that three extension fees totaling $78,500 were not to be credited against the principal or yield repayment and rejected PDLP’s claim that a $50,000 payment had been made, citing a lack of corroborating evidence. Importantly, PDLP’s counterclaims were abandoned at trial, weakening its defensive posture.

Ultimately, the court ruled in favor of OTBEC, holding that the principal amount as of December 1, 2020, was $1.25 million and that 20% annual non-compounding interest accrued on this balance until repayment. Payments made were to be applied first to outstanding yield and then to principal. Since the exact figure owed was contested and defendants had not had a fair opportunity to review the final accounting, the court allowed for the amount to be settled either by agreement or through certification by a Registrar. OTBEC was also awarded costs on Scale B and post-judgment interest at the statutory rate.