COURT FILE NO.: 15-66562
DATE: 20190104
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Thomas Scullion and Thomas Scullion Holdings
Plaintiffs
AND
Paul Munro, Paul Munro Holdings Inc., Munro & Scullion Contracting Inc., John Sweeping (2014) Inc., 1561987 Ontario Inc., and 1823059 Ontario Inc.,
Defendants
AND BETWEEN
Paul Munro, Paul Munro Holdings Inc.
Plaintiffs by Counterclaim
AND
Thomas Scullion, Thomas Scullion Holdings Inc., Munro & Scullion Contracting Inc., John Sweeping (2014) Inc., 1561987 Ontario Inc., and 1823059 Ontario Inc.
Defendants by Counterclaim
BEFORE: The Honourable Justice C.T. Hackland
COUNSEL: Benoit M. Duchesne, for the Plaintiffs/Defendants by Counterclaim, Thomas Scullion and Thomas Scullion Holdings Inc.
K. Scott Mclean and James Wishart, for the Defendants/Plaintiffs by Counterclaim Paul Munro and Paul Munro Holdings Inc.
Lisa Langevin, for Bank of Montreal, (creditor)
HEARD: In writing
COSTS ENDORSEMENT
[1] This is my ruling on the costs of a 3 day hearing held to determine the valuation of the plaintiff Thomas Scullion’s 50% shareholding interest in the Munro & Scullion group of companies. Pusuant to my ruling dated October 24, 2018, (reported at 2018 ONSC 6371), I valued Mr. Scullion’s interest at $2,192,400 and required Mr. Munro to purchase Mr. Scullion’s interest at that amount.
[2] As noted in the court’s reasons the parties had been unable to agree on a buyout price for Mr. Scullion’s interest in the companies. Subsequently the court appointed a business valuator to prepare a market valuation of the shares of the companies. As explained at paras. [4] and [5] of the court’s reasons:
[4] A valuation report has been undertaken by a court appointed business valuator, with the agreement of the parties, being Stephen R. Pittman, CPA, CA, CBV. Mr. Pittman provided a report to the court (the Pittman report) dated June 14, 2018 which, as noted, valued the companies as of the valuation date November 30, 2017. The Pittman report valued the companies at a mid-range value of $4,348,800. This would suggest that Mr. Scullion’s 50% shareholding interest would have a market value of $2,192,400.
[5] It was hoped that the Pittman report would suffice to provide a valuation of the companies, and M. Scullion’s 50% shareholding interest, which the court would then use to establish the appropriate buy-out price. The parties have advised the court that they are in general agreement with the Pittman report as providing a careful and fair neutral valuation of the companies. Mr. Munro is content to accept the valuations in the Pittman report. However, Mr. Scullion wishes to raise 3 discreet issues which he contends would increase the valuation in the Pittman report and which the court should recognize in fixing the value of his interest in the companies. I will discuss these issues below.
[3] The Pittman report, dated June 14, 2018, valued the companies at a mid-range value of $4,348,800 and therefore Mr. Scullion’s 50% shareholding interest would have a market value of $2,192,400. Mr. Munro was content that this sum be fixed as the buyout price. Mr. Scullion was not content with this amount and sought a substantially higher valuation. Accordingly it was necessary for this hearing to take place.
[4] Mr. Scullion called expert evidence to challenge valuations in the Pittman report on 3 issues dealing with (a) the effect of the companies’ inability to obtain bonding, (b) the treatment of catch basin revenues and (c) the property valuations. Mr. Scullion was unsuccessful on each of these issues. The court preferred the evidence and conclusions in the Pittman report and adopted the report’s valuation of the companies.
[5] In the circumstances Mr. Munro was successful on this hearing and is entitled to his costs. In point of fact this hearing was unnecessary and should not have been required. The parties had a credible valuation report from an independent court appointed business valuator. Furthermore Mr. Munro made a with prejudice offer, open for acceptance at the time of the hearing, to buy out Mr. Scullion’s shareholding interest for a cash amount in excess of the courts valuation of $2,192,400.
[6] Mr. Scullion asserts in his costs submissions that he was successful at the valuation hearing and therefore should have his costs of the hearing. I reject that submission. The hearing was required by Mr. Scullion to allow him to attempt to persuade the court not to accept the Pittman report valuation. Had Mr. Scullion been prepared to accept the Pittman valuation, as Mr. Munro did, there would have been no hearing.
[7] At the conclusion of the second day of the hearing, the court suggested and counsel agreed to go ahead with Mr. Munro’s buyout offer on the understanding that if the amounts received thereunder were less than the court determined to be the proper valuation of Mr. Scullion’s shareholding interest such shortfall would be a charge on the companies, to be paid to Mr. Scullion on terms as to interest and security as the court would fix in the absence of agreement. This was intended to expedite the buyout, which was important for a number of reasons including the companies’ need to address a range of pressing financial issues.
[8] The amount specifically allotted to the share purchase in the Munro offer was $2,100,000, ie.: some $92,400 less than the valuation fixed by the court. However the Munro offer required payment to Mr. Scullion of a number of other amounts for a total consideration of $2,352,836, all reasonably attributable to the buyout of Mr. Scullion’s interest in the companies. This does not include amounts owed to Mr. Scullion for severance and for an earlier costs award. Plainly the Munro offer should have been accepted well before the valuation hearing and very arguably when it was made (July 18, 2017) or shortly following receipt of the Pittman report). However, quite irrespective of the Munro offer, the hearing held at Mr. Scullion’s behest in order to seek a valuation significantly in excess of that proposed in the Pittman report, was totally unnecessary.
[9] In the circumstances, Mr. Munro is awarded his costs of the valuation hearing on a substantial indemnity scale. Mr. Munro seeks his substantial indemnity costs in the sum of $71,106.60 for the valuation hearing as well as disbursements in the sum of $11,620.12 and for preparation of the costs submissions in the sum of $6,312.52 (total $89,039.24).
[10] I award the substantial indemnity costs in the amounts claimed by Mr. Munro. The amounts are objectively reasonable and do not differ substantially from the fees accrued by Mr. Scullion. This was a relatively complex and hotly contested commercial litigation proceeding, of considerable importance to both Mr. Munro and Mr. Scullion. I need not repeat my observations about Mr. Munro’s offer and the lack of success of Mr. Scullion on this unnecessary 2½ day hearing.
[11] Mr. Munro also claims the costs of the Pittman valuation ($51,550), the monitor’s fees ($8,474) and the fees billed to the company by counsel to the Bank of Montreal ($7,319). I note that these fees were not factored into the Pittman valuation and were incurred after the valuation date in that report. I have considered Mr. Munro’s argument that the Pittman valuation should have been unnecessary in view of his July 18, 2017 offer. On balance, this valuation should have been obtained at a much earlier date and should have formed the basis of a less acrimonious negotiated buyout. The costs of this valuation should be shared, so the sum of $25,000 will be paid by Mr. Scullion to Mr. Munro on this account. The companies are to absorb the monitor’s fees and those of the bank’s counsel.
[12] The amounts awarded herein to Mr. Munro, ($114,039), shall constitute a set off against the amount owed to Mr. Scullion under the court’s judgment.
[13] An order will issue accordingly. I may be spoken to with regard to the form of the order if required.
Justice C.T. Hackland
Date: January 4, 2019
COURT FILE NO.: 15-6656
DATE: 20190104
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Thomas Scullion and Thomas Scullion Holdings Inc., Plaintiffs
AND
Paul Munro, Paul Munro Holdings Inc., Munro & Scullion Contracting Inc., John Sweeping (2014) Inc., 1561987 Ontario Inc., and 1823059 Ontario Inc., Defendants
AND BETWEEN:
Paul Munro, Paul Munro Holdings Inc., Plaintiffs by Counterclaim
AND
Thomas Scullion, Thomas Scullion Holdings Inc., Munro & Scullion Contracting Inc., John Sweeping (2014) Inc., 1561987 Ontario Inc., and 1823059 Ontario Inc., Defendants by Counterclaim
COUNSEL: Benoit M. Duchesne, for the Plaintiffs/Defendants by Counterclaim, Thomas Scullion and Thomas Scullion Holdings Inc.
K. Scott Mclean and James Wishart, for the Defendants/Plaintiffs by Counterclaim Paul Munro and Paul Munro Holdings Inc.
Lisa Langevin, for Bank of Montreal, (creditor)
COSTS ENDORSEMENT
Justice Charles T. Hackland
Released: January 4, 2019