Court File and Parties

Court File No.: CV-17-11840-00CL Date: 2019/01/07 Superior Court of Justice - Ontario

Re: AQUAM CORPORATION, Applicant And: RICHARD COFFEY, LISA FIELDING, AND RICHARD CHRISTOPHER, Respondents

Before: GANS J.

Counsel: Dena N. Varah and Brian Kolenda, for the Applicant Kevin O’Brien and Robert Carson, for the Respondents Richard Coffey and Lisa Fielding Richard Christopher, self-represented

Heard: By Written Submissions

Costs Endorsement

Costs

[1] I am now called upon to fix the costs of the subject application. At the time I released the reasons in this case in early November, I urged the parties to come to a reasonable and reasoned resolution of the costs having regard to the results achieved. Regrettably, the parties did not pick up on my suggestion.

[2] The Respondents Coffey and Fielding, and even Mr. Christopher in his separately filed submission, are seeking to be recompensed for the costs incurred, including a significant fee for Respondents Coffey and Fielding’s forensic expert, Mr. Rudson.

[3] Overarching this issue are the comments of Anderson J. set out in Brant Investments Ltd. v. KeepRite Inc. where he observed that the “assessment of the fair value of shares in circumstances such as these is a difficult and unpredictable business” [^1].

[4] Having regard to the above stated ‘admonition’, which is oft-repeated in the applicable jurisprudence, and the disparity of the positions of the parties throughout, fueled by the reports and evidence of their experts, I would have thought there would and should have been offers to settle describing some modified position. Such was obviously not the case.

[5] The results achieved, as the Applicant observed in its costs material, were mixed. Consequently, following the lead of the court in Brant Investments, I believe each party should bear their own costs, including those of their respective experts.

Interest

[6] The more interesting question is whether the Respondents are entitled to the statutorily prescribed rate of interest on the amount owing in respect of the value of their respective shareholdings, and if so, from what date and at what amount.

[7] In some respects, the resolution of these questions creates a debate between the application of the interest provisions of the Courts of Justice Act [^2] and the Ontario Business Corporations Act [^3].

[8] The operative sections of the CJA are as follows:

127. (1) in this section and in sections 128 and 129,

“postjudgment interest rate” means the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the date of the order falls, rounded to the next higher whole number where the bank rate includes a fraction, plus 1 per cent;

“prejudgment interest rate” means the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point;

128. (1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.

129 (1) Money owing under an order, including costs to be assessed or costs fixed by the court, bears interest at the postjudgment interest rate, calculated from the date of the order.

130 (1) The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129,

(a) disallow interest under either section;

(b) allow interest at a rate higher or lower than that provided in either section;

(c) allow interest for a period other than that provided in either section.

[9] The Applicant argues, quite forcefully, that under the circumstances of the instant case, as a consequence of Aquam’s suggested insolvency as at the Valuation Date, that no interest order should be made. Additionally, the Applicant suggests, relying on the decision of Henry J. in Smeenk v. Dexleigh Corp. [^4], that to award interest would run counter to the purpose of the valuation section of the OBCA.

[10] The starting position for this analysis is found in s. 185(27) of the OBCA which states that “[t]he court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder from the date the action approved by the resolution is effective until the date of payment ” (emphasis added).

[11] The Applicant states, however, that this discretion is effectively ousted by operation of s. 185(30), which provides as follows:

A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for believing that,

(a) the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or

(b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities. R.S.O. 1990, c. B.16, s. 185 (30) .

[12] As I said in the reasons for judgment, I was not persuaded that Aquam was insolvent as at the Valuation Date [^5]. It was, as I observed, in straightened circumstances. While it did not have “free cash” sufficient to pay the dissenting shareholders the amount awarded in the instant application before the Valuation Date, there was more than sufficient cash on the day immediately post-closing.

[13] In any event, I am of the opinion that the above proscription set out in s. 185(30) speaks only to a corporation’s ability to discharge any payment owing to a dissenting shareholder after, if not before, the Valuation Date. It does not speak to or otherwise curtail a judge’s discretion to award interest to a dissenting shareholder under s. 185(27) in respect of the fair value determined. The two subsections just described are, in my view, mutually exclusive, or at least not codependent.

[14] I am also of the opinion that s. 185(27) provides but a guideline for the timing and amount of the interest to be awarded.

[15] In the circumstances, I believe it is fair and reasonable to now marry the above section with ss. 127(1) and 128(1) of the CJA and award interest at the prescribed rate from the date of the cause of action, namely the date of the statutory offer, May 11, 2017, to the date of the above judgment, and postjudgment interest thereafter.

[16] From my reading of the Rules of Civil Procedure [^6], the applicable rate for prejudgment interest is 0.8%.

[17] In accordance with the original judgment, the per share valuation was fixed at $.304 per share. The amount awarded to each of the respondents is as follows:

• Richard Coffey: $1,777,626 [^7]
• Lisa Fielding: $927,457 [^8]
• Richard Christopher: $140,925 [^9]

[18] The interest therefore calculated on the basis of the aforesaid 0.8% rate [^10] is:

• Richard Coffey: $21,051 [^11]
• Lisa Fielding: $10,983 [^12]
• Richard Christopher: $1,667 [^13]

GANS J. Date: January 7, 2019

Footnotes

[^1]: (1987), 60 O.R. (2d) 737 (H.C.) at para. 5. ["Brant Investments"]. [^2]: R.S.O. 1990, c. C.43 ["CJA"]. [^3]: R.S.O. 1990, B.16 ["OBCA"]. [^4]: (1990), 74 O.R. (2d) 385 at para. 27. [^5]: Aquam Corporation v. Richard Coffey et al., 2018 ONSC 6582 at para. 27. [^6]: R.R.O. 1990, Reg. 194. [^7]: (5,847,453 shares * $0.304 = $1,777,626). [^8]: (3,050,845 shares * $0.304 = $927,457). [^9]: (463,568 shares * $0.304 = $140,925). [^10]: $12,300,000 * (.8/100) * (539/365 days) = $145,308.493. On that basis, the per share interest will be $.0036 based on a total share number of 40,421,491 ($145,308 * 40,421,491 shares = $.0036). [^11]: ($.0036 * 5,847,453 shares = $21,050.83). [^12]: ($.0036 * 3,050,845 shares = $10,983.04). [^13]: ($.0036 * 463,568 shares = $1668.84).