COURT FILE NO.: CV-15-10906-CL

DATE: 20190729

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

EMILY MURRAY and 2327342 ONTARIO INC.

Plaintiffs

– and –

PIER 21 ASSET MANAGEMENT INC., DAVID STAR and 8165246 CANADA INC.

Defendants

COUNSEL:

Edward J. Babin, Cynthia Spry and Michael Bookman for the Plaintiffs

Igor Ellyn and Kathryn J. Manning, for the Defendants

HEARD: June 27, 2019

SUPPLEMENTARY REASONS

Penny J.

[1] This is an action under the oppression remedy, s. 241(2) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44. Following a trial, in Reasons dated April 12, 2019, I dismissed the plaintiffs’ claim to have a 2012 share repurchase set aside, allowed the plaintiffs’ claim for a buy out of her shares (using an enterprise value of $39.1 million) and awarded the plaintiff equitable compensation in the amount of $278, 760 in connection with her removal from office and employment at Pier 21.

[2] Certain matters were referred to a follow-up case conference and possible continuation of the hearing. One of those matters involved the plaintiffs’ claim for equitable damages/interest in connection the time value of money for any award of damages or other monetary award post-valuation date, i.e., February 27, 2015.

[3] Since the release of the Reasons, the parties themselves have each raised other issues in respect of which they seek correction or amendment under the provisions of Rule 59.06(1).

[4] Motions by each party were brought and heard on June 27, 2019 as well as supplementary submissions requested by me on the issue of the “time value of money.”

[5] The defendants’ motion for the correction of certain typographical, syntactical or similar errors was not contested and was granted at the time of the hearing on June 27, 2019. The relief sought in paras. 1 (b), (c) and (d) of the defendants’ notice of motion is therefore granted.

[6] The remaining, contested issues are:

(a) the defendants’ motion to remove references to certain matters of a personal, and potentially embarrassing, nature (para 6, last sentence, and para. 11 of the Reasons) which did not explicitly form the basis for the relief granted in the Reasons;

(b) the defendants’ motion to correct an arithmetic error in the calculation of fair value for Pier 21;

(c) the plaintiffs’ motion to correct an arithmetic error in the calculation of fair value for Pier 21;

(d) the plaintiffs’ motion to correct a mistake in the calculation of equitable damages, resulting in an increase in the amount of the award sought from $278,760 to $680,579; and

(e) the plaintiffs’ supplemental submission in support of an award of equitable damages and/or compound interest at a rate determined under s. 130 of the Courts of Justice Act, R.S.O. 1990, c. C43, to reflect the time value of money since February 27, 2015.

References to Matters of a Personal Nature

[7] At the trial, Ms. Murray lead evidence, not contested, that she and Mr. Star were in a personal relationship for a period of time while they were both working at Pier 21. Ms. Murray testified that the end of that relationship coincided with a significant, adverse change in Mr. Star’s attitude towards her and her role as both an employee and a shareholder. Reliance was placed on this evidence by the plaintiffs to explain why Ms. Murray did or did not take certain actions at the time and to support certain relief sought.

[8] While it is true that I did not in the Reasons specifically rely on this evidence in relation to the grant or denial of any relief, this evidence nevertheless formed a significant part of the overall evidence at trial and of Ms. Murray’s narrative relied on in argument.

[9] The references to this relationship in the Reasons was founded on the evidence at trial. It does not represent an accidental slip or omission, nor does it require amendment in any particular on which the court did not adjudicate.

[10] For these reasons, the motion to amend the Reasons to remove these references is dismissed.

Arithmetic Errors in the Calculation of Fair Value

[11] I will deal with both the defendants’ and the plaintiffs’ motions under this heading.

[12] The defendants argue that the Reasons contain a miscalculation of the deductions from the Cambridge valuation which produced my total enterprise fair value of $39.1 million. The defendants argue that the deductions add up to $17.4 million, not $13.7 million as found in the Reasons, giving rise to a fair value of $37.6 million.

[13] The principal contributing factor to this difference arises from the addition of $2.2 million to the “Market Return” in the summary table at para. 57, line item 9, of the Reasons. The defendants rely on a sentence from para. 141 of the Reasons in which I wrote that “I make no further adjustment to the updated Cambridge valuation account of this issue.” On this basis, the defendants argue that I ought not to have added $2.2 million to the fair value.

[14] I am unable to agree with this argument. The sentence “I make no further adjustment to the updated Cambridge valuation on account of this issue,” when read in context, clearly means that I accepted Cambridge’s use of the MSCI World Index as the measure for both growth (line item 9) and risk (line item 10). This, while reducing the growth number itself, had the net effect, as calculated by Cambridge and accepted by me, when also applied to the risk calculation, of increasing Cambridge’s overall valuation by $2.2 million. The Reasons make it clear that I accepted the Cambridge argument that the same index should be used for the calculation of both values (growth and risk) and that the MSCI World Index is the more appropriate index to use (as submitted by Ms. Glass of KPMG).

[15] There is no miscalculation. The defendants’ request that I amend the Reasons on account of this issue is therefore dismissed.

[16] The plaintiffs submit that there is a miscalculation in the $0.6 million amount deducted for “other projection errors” in para. 77 of the Reasons.

[17] This is an issue which I flagged for the parties at an earlier case conference.

[18] While the total deduction necessary, as found by me, is in fact $0.6 million, my beginning number used as the basis for further deductions was Cambridge’s revised valuation number of $52.8 million (see summary table at para. 57 and Footnote 2 of the Reasons). That number already contains a deduction of $0.2 conceded by Cambridge on account of “other projection errors.” Thus the net further deduction should only have been $0.4 million, not the full $0.6 million. I erred in using the full $0.6 million amount in para. 77 of the Reasons which, in effect, double counted the $0.2 million already conceded by Cambridge and already embedded in my starting point of $52.8 million.

[19] The net result is that the fair value for Pier 21 on February 27, 2015 is increased by $0.2 million, to $39.3 million.

Recalculation of Equitable Damages

[20] In para. 203 of the Reasons, I found that Ms. Murray was entitled to the equitable compensation claimed in the amount of $278,706. This was based on the plaintiffs’ calculations in their written argument at trial, using a base compensation of $130,000.

[21] However, the plaintiffs point out that, in para. 685 of their written argument, they submitted that if the “KPMG analysis regarding Ms. Murray’s compensation is accepted for the purposes of the valuation, then the amounts claimed herein should be adjusted upwards, as indicated in the damages report from Ms. Glass.”

[22] In paras. 92 to 96 of the Reasons, I did accept the KPMG analysis regarding Ms. Murray’s compensation and found that Ms. Murray’s actual compensation was $350,000 per annum, not $130,000. This, it turns out, is also an arithmetic error. The evidence supports the conclusion that the actual compensation was $325,000 per annum, not $350,000.

[23] In any event, the plaintiffs submit that, having found Ms. Murray’s actual compensation to be the appropriate amount to use for purposes of valuing Pier 21, and having accepted the defendant’s evidence from Ms. Glass on this point, it was a mistake to value Ms. Murray’s foregone equitable compensation on the basis of the artificially low compensation amount of $130,000.

[24] The defendants object to any adjustment on the basis that the plaintiffs are simply re-arguing a point already decided.

[25] I am unable to agree with the defendant’s position. Having reread the parties’ written arguments from the trial on this point, with the benefit of additional submissions as a result of these motions, I am satisfied that the Reasons, in para. 203, failed to appreciate that the $278,706 claimed was based on an annual salary level which I rejected at paras. 92 to 96 of the Reasons. As the plaintiffs submitted at the time, if the higher, actual value of $325,000 were accepted for valuation purposes, then the amounts claimed as equitable compensation should be adjusted upwards as well.

[26] I agree, as noted above, with the defendants, however, that the amount must be $325,000, not $350,000. Accordingly, the amount awarded for equitable compensation shall be the amount calculated in accordance with the table at para. 12 of the plaintiffs’ factum on the plaintiffs’ motion to vary, substituting the figure of $325,000 for the amount of $350,000 in the first line. This reduces the overall amount claimed by $75,000, to $605,579. Accordingly, $605,579 is the correct figure for the equitable compensation awarded in the Reasons.

Time Value of Money

[27] This issue was revisited at my request because, as I said in the Reasons, I was concerned that issue had not properly been joined on this matter in the written and oral arguments presented following the completion of evidence at trial.

[28] Both parties have now filed extensive supplementary submissions on this point.

[29] In essence, Ms. Murray seeks an award that will compensate her for the time value of money beyond the usual award of pre-and post-judgment interest under ss. 128 and 129 of the Courts of Justice Act. Ms. Murray seeks this compensation either by way of an award of equitable damages or an award of compound, non-statutory interest under s. 130 of the Courts of Justice Act.

[30] What Ms. Murray seeks, as the basis for this award, is the compound return she actually earned on the capital she received as a result of the 2012 repurchase of shares. This return is 10.38%. Ms. Murray seeks this return, on a compounded basis, on all amounts awarded in the Reasons, since February 27, 2015.

[31] Ms. Murray argues that equitable compensation of this kind is warranted on two grounds. First, she argues that by wrongfully denying Ms. Murray the return of her capital in Pier 21, Mr. Star deprived Ms. Murray of the return she, in fact, earned on other capital previously returned to her. There can be no surprise in this to the defendants, since their own expert used this very methodology in establishing the amount of the offset that would be required by way of mitigation if Ms. Murray’s claim to set aside the 2012 share purchase had been successful.

[32] The second reason advanced by the plaintiffs in support of this claim is that there has been significant growth in Pier 21 since valuation day, February 27, 2015. By wrongfully denying Ms. Murray the return of her capital since 2015, Mr. Star has had the use of that capital to substantially increase the value of the company – value that Ms. Murray cannot realize because the valuation cannot be done as of the date of judgment. Mr. Star, the plaintiffs argue, will receive a substantial windfall if only modest, simple interest available under the Courts of Justice Act is used as the basis for compensating Ms. Murray for the time value of her money.

[33] There are a number of problems with this argument. First and foremost, neither basis for this remedy has been pleaded. The plaintiffs argue that a claim for “equitable damages” was pleaded. However, that plea was advanced in the most generic possible terms and lacked any specificity to the claim now being advanced after all the evidence at trial is in.

[34] The claim for a compound and a non-statutory interest rate was also not pleaded. Indeed, the opposite is true. The statement of claim specifically pleads and relies on ss. 128 and 129, not s. 130, of the Courts of Justice Act.

[35] In neither case have the plaintiffs sought to amend or provided any explanation for their failure to do so.

[36] Related to this is the fact that these issues have been raised after the conclusion of the evidence at trial. The evidentiary foundation for the rate of return sought has not been laid and cannot now be tested. To the extent the plaintiffs seek now to put in further evidence, it has not been tested by cross-examination. Nor have the defendants had the opportunity to respond to it with evidence of their own. The plaintiffs have not sought to reopen the evidence at trial.

[37] The fact that a perhaps similar issue was raised, and cross-examined on, in respect of the return earned on the proceeds of the earlier 2012 share purchase agreement, while relevant, is not very helpful. This is because what Ms. Murray did with several hundred thousand dollars in 2012 is not necessarily indicative of what Ms. Murray might have done with several million dollars in 2015. The decisions of the courts in Leu v. Amodio, 2005 CarswellOnt 3510, Bank of America v. Mutual Trust Co. 2002 SCC 43 at para. 55 and Kerr v. Danier Leather Inc. 2005 CarswellOnt 1938 paras. 81-82 are all supportive of the need to plead “extraordinary” relief of this kind and to establish a clear evidentiary basis, in the evidence at trial, to justify a departure from the “norm.”

[38] For these reasons, I am unable to agree with the plaintiffs’ submissions. To allow these claims to be advanced now would be seriously prejudicial to the defendants. No sufficient reason has been advanced for why these issues were not raised during the evidentiary phase of the trial, when a proper evidentiary record, for both sides, might have been developed.

[39] The plaintiffs’ claims for a compounded interest rate of 10.38% since 2015 is therefore dismissed.

[40] The defendants also asked me to deny full recovery of interest on the basis of an adjournment of the trial which was at the request of the plaintiffs. I do not think any basis has been shown to deny the full amount of regular pre and post-judgment interest under the Courts of Justice Act. The defendants’ request is denied.

Costs

[41] As no submissions have yet been made on costs, the costs of these motions and additional submissions shall be addressed in the overall context of the costs of the trial.

Penny J.

Released: July 29, 2019

COURT FILE NO.: CV-15-10906-CL

DATE: 20190729

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EMILY MURRAY and 2327342 ONTARIO INC.

Plaintiffs

– and –

PIER 21 ASSET MANAGEMENT INC., DAVID STAR and 8165246 CANADA INC.

Defendants

SUPPLEMENTARY REASONS

Penny J.

Released: July 29, 2019