A Manitoba court has decided the province can't wriggle out of an agreement to provide up to $2.1 million worth of construction financing to a downtown Winnipeg condo project.

The receiver in charge of completing the Assiniboine Avenue condo tower originally known as D Condo has won a legal bid to hold the provincial government to a commitment to help build the 24-storey, 91-unit tower.

In a decision dated Feb. 13, Court of Queen's Bench justice David Kroft decided a legal agreement remains in place to provide up to 2.1 million over 10 years to receiver PricewaterhouseCooper Inc., which is acting on behalf of credit union Caisse Financial Group, the main lender on the project.

The $48-million condo tower, now known as 390 On The River, was started by a company called Sandhu Development, a Winnipeg company that hoped to complete the project with the help of downtown residential-housing grants from the city and province.

In 2011, Sandhu applied for up to $4 million worth of city-provincial funding through a now-expired package of housing incentives called downtown residential development grant program, which was managed by downtown development agency CentreVenture.

The cash would have flowed toward the project in 10 annual instalments, provided the condo tower was substantially complete within four years.

When the project missed the four-year deadline, city council voted in September 2016 to provide the project with up to $1.9 million over 10 years in the form of a strategic economic incentive grant. This was intended to replace the expired downtown-housing program.

In 2017, the provincial treasury board negotiated a 10-year replacement grant of its own, worth up to $2.1 million. At first, provincial officials communicated with Sandhu, Kroft recounted in his decision.

The province then worked on the grant with with receiver PricewaterhouseCooper Inc., which was placed in charge of D Condo after Sandhu ran into financial trouble, Kroft wrote.

In 2018, the deputy minister of Municipal Relations informed the receiver the province would not follow through with the grant because it didn't meet the timeline envisioned by the original downtown residential development grant program and would be unfair to other applicants, Kroft wrote.

The province also argued the tower would not generate a significant benefit to the public because it didn't have an affordable-housing component and insisted it had no agreement in place with the receiver, Kroft wrote.

A former D Condo development in February 2017, when it was under construction. (Tyson Koschik/CBC News)

In his decision, Kroft rejected the provincial arguments, noting both the city and provincial replacement grants were made outside the scope of the expired downtown residential development grant program.

"Any rights or obligations under the DRDG program evaporated when the defendant could not meet the four-year completion condition. No money was paid under that grant. The province was at liberty to make another funding offer and the defendant was at liberty to offer again the construction of the project as consideration. That is what occurred," Kroft wrote.

"In all the circumstances, I am satisfied that in the eyes of the objective reasonable bystander, an enforceable funding agreement existed between the province and the defendant at the time of the receivership."

In addition to ruling in favour of the receiver, Kroft said PricewaterhouseCooper is entitled to costs from the province.

The province is reviewing the decision, according to a statement provided on Friday.

PricewaterhouseCooper was not immediately able to comment.