ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-83
DATE: 20121003

BETWEEN:

1047358 Ontario Inc. Plaintiff – and – The Haliburton Broadcasting Group Incorporated and Christopher Grossman Defendants

David Morin, for the Plaintiff

Sharon Addison, for the Defendants

HEARD: September 24, 2012

J.S. O’Neill

REASONS ON MOTION

[ 1 ] PART A: Introduction

[ 2 ] On January 28, 2011 the Plaintiff filed with the Court a Summary Judgment Motion seeking judgment against the Haliburton Broadcasting Group and Christopher Grossman personally, with respect to payments due pursuant to a Promissory Note. The summary judgment motion was argued in court on September 24, 2012. During argument counsel for the Plaintiff also sought judgment in favour of the Haliburton Broadcasting Group Incorporated with respect to the loan payable to the parent company in the sum of $75,220 as reflected in Mr. Nichol’s letter of September 22, 2011. At the conclusion of argument, I reserved my decision pending the release of written reasons.

[ 3 ] PART B: The Date of Timing For Payment of the Promissory Note

[ 4 ] Reference to the Promissory Note(s) and the timing issue can be found in the following documents:

i. Share Purchase Agreement dated August 23, 2007

ii. Amendment Agreement dated November 2007

iii. Promissory Note (attached as Schedule 1 to Share Purchase Agreement)

[ 5 ] It is acknowledged and agreed by the parties that following the new timetable worked out by the parties under court supervision, the concluding date for the adjustment/settlement of the purchase price was November 14, 2011.

[ 6 ] Counsel for the Defendants takes the position, accordingly, that the first payment with respect to the Promissory Note of $250,000 is to occur with the payment of $75,000 on the first anniversary of the date of completion of the SPA, namely November 14, 2012. Accordingly the second and third payments as reflected in the Promissory Note would be made on November 14, 2013 and November 14, 2014.

[ 7 ] Counsel’s argument, in short, is that the words in the Promissory Note “completion of the SPA” means completion, finalization or closing of the process to determine the settlement and adjustment of the purchase price and that such completing or completion process could not have occurred any earlier than November 14, 2011.

[ 8 ] I am not able to accept that submission for several reasons. Firstly, closing as defined in the SPA means “the completion of the sale and purchase of the Shares in accordance with the terms hereof”. Closing date means “the date the sale and purchase of the Shares is completed, being the business day immediately following the Effective Date and on or before June 30, 2008.”

[ 9 ] The parties acknowledge and agree that the closing date herein was December 17, 2007. That is the date the payment of the sum of $3,000,000 was made, the Shares were purchased and the Promissory Note was delivered.

[ 10 ] In addition, the Amendment Agreement of November 2007 referenced, albeit it in the recital, the following:

The parties have agreed that the SPA will be completed on December 17, 2007 and that the SPA will be amended in accordance with the terms of this Agreement.

[ 11 ] At paragraph 3 of the Amendment Agreement it was stated that the closing date “shall be December 17, 2007.” I also accept the position of counsel for the Plaintiff’s that Article 3.5 of the SPA does not as much determine the purchase price as it does settle or adjust the price through a process outlined in Article 3. And it is to be noted that in accordance with Article 3.8, Payment of Adjustment to Purchase Price:

If the Purchase Price settled though the Statements is less that the Purchase Price paid on the Closing, the difference shall be refunded to the Buyer on or before the Settlement Date. If the Purchase Price settled through the Statements is greater than the Purchase Price paid on the Closing, the Buyer shall pay the difference as directed by the Seller on or before the Settlement Date.

[ 12 ] I appreciate that the Promissory Note used the words “completion of the SPA” rather than the words ‘closing date’ or ‘closing’. But I am not able to accept the argument that the start date or the trigger date for the one year anniversary for payment of the first sum of $75,000 is November 14, 2011, rather than the closing date or the date when completion of the sale and purchase of the Shares took place, namely December 17, 2007. I find that it would be commercially unacceptable and completely unreasonable to expect that a real possibility existed that upon delivery of the Promissory Note in accordance with the SPA, and having regard to the language of the Promissory Note, the SPA and the Amendment Agreement, that the recipient of the Promissory Note could, in the circumstances that we now know exist, wait five years (2007 to 2012) for payment of the first sum of $75,000.

[ 13 ] The argument made by counsel for the Defendants is a fair argument, in accordance with the wording utilized and outlined in the Promissory Note itself, but having regard to the SPA, the Amendment Agreement and the process of settlement and adjustment, I am not able to accept that the payment schedule in the Promissory Note is tied to or triggered by anything other than the date of completion of the SPA. I conclude this means the date of closing of the SPA, and more particularly, the closing date of December 17, 2007.

[ 14 ] I am supported in this conclusion by the fact that effective control was relinquished and all shares were transferred on December 17, 2007. Further, it is to be noted that in Mr. Venutti’s letter dated December 2, 2008, he himself confirms that the first payment date with respect to the Promissory Note is December 17, 2008. I appreciate that I have gone outside the Agreement to reference this letter, but it was written by one of the participants who was most closely involved in the entire transaction, and the position of Mr. Venutti supports the decision which I have reached on my review of the legal materials.

[ 15 ] PART C: The Grossman Guarantee

[ 16 ] Christopher Grossman signed a Guarantee and Indemnity on December 17, 2007. It can be found at Tab D of the Plaintiff’s Motion Record. I concur fully that on the wording of the Guarantee and Indemnity, Christopher Grossman is jointly and severally liable for any Promissory Note judgment rendered as against the Defendant, The Haliburton Broadcasting Group Incorporated, including any and all costs incurred by the Plaintiff in order to enforce, secure, collect or obtain payment of the monies due under the Promissory Note. This original and independent obligation under the Guarantee and Indemnity is set out, more particularly, in paragraph 8 of the document which states:

As an original and independent obligation under this Guarantee and Indemnity, Grossman shall:

a) indemnify and save 104 harmless and keep 104 indemnified against any cost, loss, expense or liability of whatever kind resulting:

(i) from the failure of Haliburton to make due and punctual payment of any of the Indebtedness to 104; or

(ii) from any of the Indebtness being or becoming void, voidable, unenforceable or ineffective against it (including, but without limitation, all reasonable legal and other costs and expenses incurred by 104 in connection with preserving or enforcing, or attempting to preserve or enforce his [sic] rights under this Guarantee and Indemnity); and

b) pay on demand the amount of such cost, loss, expense or liability whether or not 104 has attempted to enforce any rights against Haliburton or any other person or otherwise.

[ 17 ] Part D: Loan Payable to Parent Company

[ 18 ] The loan payable to parent company, $75,220 is clearly a reference to the parent company, 1047358 Ontario Inc. This amount was of course adjusted, in accordance with the letter of November 14, 2011 such that the net working capital shortfall is $39,588. While it is true that counsel for the Plaintiff did not specifically reference judgment against the Defendant(s) with respect to non-payment of the sum of $35,632, it is acknowledged and understood that as a result of the settlement and adjustment process, and the correspondence that I have reviewed on the summary judgment motion, that this sum remains due and payable. In my view, the Superior Court of Justice has an inherent jurisdiction, and the Rules of Civil Procedure can be made flexible on the basis of fairness, justice and equity so as to permit, on this summary judgment motion, the Plaintiff’s oral request to include judgment as against the Haliburton Broadcasting Group Incorporated for the remaining sum of $35,632.

[ 19 ] The parties have appeared before me on numerous occasions in court and there can be no doubt that they have incurred substantial and ongoing legal costs. Further, it is acknowledged and admitted that the radio station in question will itself change hands, once more, within the next 30 days or so. In all of this, I believe there to be a role for the Superior Court, on this summary judgment motion, to permit what might be viewed as a late amendment or argument, so as to enable this court to rule and make judgment upon the remaining aspect relating to the unpaid adjusted balance with respect to the loan payable to parent company.

[ 20 ] I accept, in addition, the submission by the Plaintiff’s counsel that the parties themselves engaged in a court agreed, court structured settlement and adjustment process so as to arrive at the adjustment as set out in Mr. Nichol’s letter of November 14, 2011. In other words, arriving at a net working capital shortfall of $39,588, as referenced in this letter, and as referred to in my reasons of May 15, 2012, indirectly subsumes or incorporates an understanding or acknowledgment that the loan payable to parent company is in the sum of $75,220. To not address this matter, but somehow come to the conclusion with respect to net working capital shortfall is to undo or fail to finalize the court directed adjustment and settlement process, as reflected in the amended schedule agreed to by the parties. In all of these circumstances, and for the reasons herein noted, I conclude that in addition to summary judgment on the Promissory Note, the Plaintiff is entitled to judgment against the Haliburton Broadcasting Group Incorporated for the additional sum of $35,632.

[ 21 ] CONCLUSION

[ 22 ] My reasons with respect to the timing for payment of the Promissory Note thus result in a finding that:

i) $75,000 plus accrued interest was due on December 17, 2008.

ii) $75,000 plus accrued interest was due on December 17, 2009.

iii) $100,000 plus accrued interest was due on the third anniversary, namely December 17, 2010.

[ 23 ] The Haliburton Broadcasting Group Incorporated and Christopher Grossman are jointly and severally liable to the Plaintiff for payment of the Promissory Note and accrued interest. The Haliburton Broadcasting Group Incorporated is solely liable for payment to the Plaintiff of the additional sum of $35,632 together with interest.

[ 24 ] The parties have agreed as to the interest calculations now triggered by this decision. Accordingly, the Plaintiff shall recover judgment against the Defendants in the sum of $311,751.46, inclusive of prejudgment interest calculated to October 3, 2012. Additionally, the Plaintiff shall recover judgment against the Defendant, The Haliburton Broadcasting Group, in the sum of $35,632 together with the prejudgment interest calculated from November 14, 2011.

[ 25 ] As for legal costs, I conclude as follows:

i. The Plaintiff is entitled to the costs of this summary judgment motion on the partial indemnity scale. These costs are in an amount either to be agreed to by the Plaintiff and the Defendants, and failing an agreement, to be fixed by me.

ii. The Defendant Christopher Grossman is liable to pay full indemnity costs to the Plaintiff with respect to the costs incurred in relation to this summary judgment motion. This conclusion is based on the strength of the Guarantee and Indemnity as discussed. Those costs are as agreed between the parties or to be fixed by me.

iii. Included in the partial indemnity costs award in favour of the Plaintiff are the costs incurred by it with respect to securing or recovering judgment for the sum of $35,632. Christopher Grossman is not responsible or liable for payment of those costs.

iv. It is understood that there may not be a double recovery of costs, or a recovery greater than what would amount to full indemnity.

[ 26 ] If it is necessary for me to fix costs, the Plaintiff shall deliver a Bill of Costs to the Trial Coordinator at Parry Sound by October 13, 2012. The Defendants may deliver a response to this Bill of Costs, by delivering such response to the Trial Coordinator by October 23, 2012.

[ 27 ] Judgment accordingly.

JUSTICE J.S. O’Neill

Released: October 3, 2012

ONSC 5532

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: 1047358 Ontario Inc. – and – The Haliburton Broadcasting Group Incorporated and Christopher Grossman REASONS on motion JUSTICE J.S. O’NEILL

Released: October 3, 2012