COURT FILE NO.: CV-20-00638503-00CL
DATE: 20210816
SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)
RE: 2056706 ONTARIO INC., KOZO HOLDINGS INC., CANCOR DEBT AGENCY INC., Applicants AND: PURE GLOBAL CANNABIS INC., PURESINSE INC., 237A ADVANCE INC., 237B ADVANCE INC., SPRQ HEALTH GROUP CORP. AND THE GREAT CANADIAN HEMP COMPANY, Respondents
BEFORE: S.F. Dunphy J.
COUNSEL: Jeffrey Levine, for the Secured Debenture Holders Ryan Atkinson and Saurabh Singhal, for TS Pharmaceuticals Ltd. Leanne M. Williams and Mitchell W. Grossell, for the Receiver, Thornton Grout Finnigan LLP Hylton Levy and Paul Denton, for the Court-Appointed Receiver, A. Farber & Partners Inc.
HEARD at Toronto: June 28, 2021
REASONS FOR DECISION
[1] On June 28, 2021, I heard the motion of TS Pharmaceuticals Ltd., the purchaser of certain assets from A. Farber & Partners Inc. as court-appointed Receiver of the Respondents. The moving party sought damages arising from the claimed failure of the Receiver to perform its obligations under an Asset Purchase Agreement (or “APA”) in good faith. I dismissed the motion from the bench with reasons to follow. These are those reasons.
Overview of conclusions
[2] At its core, this dispute comes down to conflicting views of the parties as to what it was the Receiver undertook to do when it entered into the APA. It ought to have been abundantly clear to the moving party Purchaser that the Receiver was not in a position to convey the various licenses and approvals necessary to grow and sell cannabis. The receivership order went to great lengths to make quite clear that the receivership applied to all of the assets of the debtors except those in relation to the subject cannabis licenses.
[3] The Receiver fully complied with its agreements with the Purchaser. Upon entering into the APA, it agreed to negotiate in good faith and to use its best efforts to complete a complementary share purchase agreement. This second agreement was to be designed to give the Purchaser the opportunity to attempt to retain the benefit of an existing cannabis license held by one of the respondents by acquiring the shares of the license holder once it had been purged of its unwanted liabilities. Although described as a “post-closing covenant” under the APA, the Receiver began negotiating that second agreement before even obtaining court approval of the first.
[4] A detailed share purchase agreement was negotiated diligently over the course of the following four weeks with no evidence of delay or lack of diligence. While both transactions were explicitly “as is, where is” transactions without warranty on the part of the Receiver as to any but very basic facts, the Purchaser failed to discover during its due diligence a basic fact that was hiding in plain sight all along: the cannabis license in question would expire in accordance with its terms the business day following the execution of the share purchase agreement and ten days before either agreement was to be presented to the court for approval. The potential loss of a regulatory permit over which the Receiver had neither possession nor control was a circumstance that the Purchaser was responsible for discovering through its own due diligence and was not known in fact to the Receiver. No amount of best efforts or good faith following the completion of negotiations of the share purchase agreement could have prevented that license expiry from occurring the next day nor can an obligation of “best efforts to complete” a transaction imply an obligation to apply such best efforts before the transaction has even been negotiated and its terms settled. At all events, the “best efforts” that the Purchaser suggested the Receiver ought to have applied prior to the completion of negotiations lay beyond its powers under its appointing order and that position was clearly and unambiguously communicated.
Background Facts
[5] Following an unsuccessful attempt to restructure pursuant to the Companies’ Creditors Arrangement Act, R.S. C. 1985, c. C-36, the Receiver was appointed on May 1, 2020 over the respondents for the purpose of liquidating their assets in order to repay the applicant secured creditors. The debtors were in the cannabis business – a very closely regulated industry. The respondent Puresinse Inc. was a wholly-owned subsidiary of the Respondent Pure Global Cannabis and held a cannabis license issued by Health Canada under applicable legislation. As was subsequently discovered, that license was scheduled to expire on December 28, 2020 unless validly renewed.
[6] The receivership order was carefully crafted to ensure the Receiver had no power or control over any of the debtor’s regulated cannabis assets since such would potentially violate applicable federal and provincial laws regarding the ownership and control of such assets. The Receiver was directed in paragraph 2 of the Receivership Order not to take possession of any “Excluded Assets”. These were defined as “any asset of the Respondents for which any permit or license issued in accordance, or in connection, with” the listed Federal and Ontario statutes governing cannabis is required.
[7] Subsequent paragraphs reinforced this exclusion to avoid all possible doubt. Paragraph 3 declared the Receiver to have no authority over the undertaking of the Respondents as it relates to the Excluded Assets. Paragraph 4 ordered the Receiver not to manage, operate or carry on any business of the respondents in relation to the Excluded Assets.
[8] The Excluded Assets were expressly left in the possession of the respondents. Indeed, the CCAA process (a “debtor in possession” process) remained in place with the principal of the respondents remaining as the designated “Responsible Person in Charge” (or “RPIC”) under the regulations in order to remain in charge of the cannabis assets and the destruction of the cannabis inventories on hand. There were thus parallel proceedings left in place for a time.
[9] The intent of the initial order to constrain the scope of the receivership so as to give a wide berth to the regulated cannabis business and its strict regulatory regime was clear and unmistakable.
[10] The RPIC remained in place after the appointment of the Receiver although the individual’s employment with the Respondents was not continued by the Receiver after the cannabis on hand was disposed of later in May 2020. The RPIC was the only person authorized to give directions to Health Canada in relation to the Cannabis License and to monitor and renew same. The Receiver neither controlled nor directed the actions of the RPIC.
[11] As is usual in such cases, a sales process was undertakne by the Receiver in order to obtain the highest and best price for the assets being sold. A data room was established that contained, among other documents, the Cannabis License. Prospective purchasers, including the Purchaser, were given access to the data room to perform such due diligence as they thought necessary. The Cannabis License clearly indicated on its face that it had an effective date of October 22, 2019 and an expiry date of December 28, 2020. The license and its terms were also public documents available on line.
[12] On November 26, 2020, the Receiver and Purchaser entered into the APA. The APA was expressly subject to court approval to be obtained in the form of an “Approval and Vesting Order”. It contemplated a two-step transaction to recognize the limitations in the Receiver’s authority while permitted the Purchaser latitude to attempt at least to retain the benefit of the existing Cannabis License. In the first instance, the Purchaser would purchase certain designated assets under the control of the Receiver but excluding the Excluded Assets. In the second step, the Purchaser would acquire all of the shares of the holder of the Cannabis License (the respondent PureSinse Inc.) pursuant to a subsequent share transaction but after PureSinse had been purged of its unwanted liabilities through a transaction itself requiring court approval. Thereafter the Purchaser would be in a position to attempt to acquire the benefit of the Cannabis License through a change of control transaction subject always to all necessary regulatory approvals.
[13] The second step of the transaction described above was characterized as a “Post-Closing Covenant” in Article 8 of the APA:
Article 8 POST-CLOSING COVENANT
8.1. The Parties covenant and agree to negotiate in good faith and on a best efforts basis to complete a share purchase transaction whereby: (i) the Purchaser will acquire all of the issued and outstanding shares of PureSinse Inc., (ii) certain obligations, liabilities and claims against PureSinse Inc. will be vested out and channeled to a new corporation to be incorporated by the Vendor, as described in section 4.1, and (iii) the Parties will work cooperatively towards obtaining approval from Health Canada for the change of control contemplated by the share purchase transaction such that the Health Canada Licence will be valid and in good standing following Closing of the share purchase transaction.
[14] The APA allocated the purchase price among the specific assets being conveyed (none of the purchase price being allocated to the Cannabis License). None of the representations or warranties of the Receiver applied to the status of the Cannabis License held by PureSinse. The representations and warranties given were the standard, bare-bones representations and warranties common in a receivership transaction.
[15] Section 5.4 of the APA contains an extensive acknowledgement by the Purchaser of its reliance upon its own due diligence and that all Purchased Assets were being purchased “on an "as is, where is" basis as they shall exist on the Closing Date, subject to the terms of the Approval and Vesting Order, as applicable” (emphasis added).
[16] Immediately after signing the APA, the parties began working towards negotiating the terms of the agreement required to give effect to the share purchase transaction contemplated by s. 8.1. During the course of those negotiations, the Purchaser entered into direct discussions with the RPIC in relation to the Cannabis License. The Receiver was not party to those discussions but learned from the Purchaser that the discussions were not productive and that the Purchaser was unwilling to meet the financial demands made by the RPIC as the price of his cooperation.
[17] In early December 2020, the Purchaser decided to follow advice received from an expert and ask the Receiver to take steps to replace the RPIC with its own designee who would be more willing to work with the Purchaser in relation to the Cannabis License. The Purchaser asked the Receiver to take this step despite the existing limitations in paragraphs 2-4 of its appointing order, prior to finalizing or signing the share purchase agreement then in negotiation and prior to the Receiver obtaining court approval of either of the two transactions contemplated. This step was not urged as a remedy for a pending license expiry – there is no indication that either the Purchaser or the Receiver were actually aware that the Cannabis License would expire in accordance with its terms on December 28, 2020. The proposed replacement was suggested as a means to remove the potential threat of the RPIC taking steps to cancel the license unilaterally and generally to assist obtaining change of control approvals as the transaction moved forward. The Purchaser was promptly advised by the Receiver’s counsel that the Receiver lacked the authority to take steps to replace the RPIC as asked.
[18] Between December 4 and December 23, 2020, the Receiver and the Purchaser had numerous discussions regarding what the Receiver could and could not do in relation to the RPIC. The Receiver expressed the view that productive discussions with Health Canada in that regard would be possible only after the share purchase agreement was executed and the Receiver could advise Health Canada of the contemplated change of control. The Purchaser continued to negotiate the terms of the share purchase agreement with knowledge of this position and without negotiating for any changes to the draft share purchase agreement to require the Receiver to appoint a new RPIC.
[19] On December 23, 2020, the parties entered into the Share Purchase Agreement. There can be no doubt that the SPA signed that day is the “share purchase transaction” referenced in s. 8.1 of the APA. The SPA contained no representations or warranties regarding the status or renewal of the Cannabis License nor did it require the Receiver to take any steps in relation to the appointment of an RPIC prior to closing.
[20] Pursuant to the SPA, the Receiver agreed to sell the shares of the licensee PurseSinse at closing for a nominal price of $10.00. The transaction contemplated a staged closing such that certain excluded assets and liabilities would be vested out of PureSinse by court order immediately prior to the sale of the shares thereof to the purchaser. The assets to be transferred out did not include Permits and Licenses including any Health Canada Licenses which were to remain.
[21] The SPA was subject to obtaining court approval and contained only “bare bones” receivership-type representations and warranties. Section 4.4 of the SPA provides that the sale of the shares to the Purchaser is on an “as is, where is” basis subject only to the representations and warranties contained therein. None of the Receiver’s representations or warranties concerns the status of the Health Canada Licenses held by PureSinse.
[22] Section 5.6 of the SPA contains the following covenant on the part of the Receiver:
5.6 Health Canada Cooperation
Prior to and after Closing, the Receiver shall work cooperatively with the Purchaser and make reasonable best efforts to assist the Purchaser with approval from Health Canada in respect of the change of control of the Company, such that the Health Canada Licence will be valid and in good standing.
[23] On January 5, 2021, the Receiver learned that the Cannabis License had in fact expired unrenewed on December 28, 2020. This information was conveyed to the Purchaser the next day. There is no evidence that the Purchaser ever availed itself of the opportunity to examine the Cannabis License during its due diligence nor that it ever made inquiries into the expiry date of it despite having cannabis licensing expertise at its disposal.
[24] The Receiver did not have access to the Cannabis Tracking and Licensing System maintained by Health Canada. Access to that system was delegated at all relevant times to the RPIC prior to the appointment of the Receiver and that did not change thereafter. License renewal applications can only be processed by the RPIC using that system.
[25] On January 7. 2021, Hainey J. approved both the APA and the SPA. Those approvals were sought and granted based upon the Receiver’s Second Report describing the process leading to both agreements, their terms and a specific discussion regarding the Purchaser’s request to change the RPIC and the Receiver’s position that it had no authority to do so. The approval order included an approval of the Receiver’s activities and was on notice to the Purchaser. The endorsement of Hainey J. indicates that the motion was unopposed.
[26] Although originally intended to be closed on January 18, 2021, the APA did not close on that date. Following various extensions consented to by the Receiver, both the APA and the SPA were later terminated by the Receiver in accordance with their terms following a default by the Purchaser arising from a failure to procure the financing needed to close the APA on time. A motion to reinstate both agreements was abandoned by the Purchaser after the Receiver agreed to reinstate the APA on terms satisfactory to both. The closing of the APA occurred on May 4, 2021. The SPA remains terminated and no subsequent attempt to reinstate it has been made.
Issues to be Decided
[27] The following issues required determination:
a. Has the Receiver breached s. 8.1 of the APA?
b. Has the Receiver breached s. 5.6 of the SPA?
[28] The concept of good faith performance of contractual obligations is one that the moving party Purchaser raises throughout and this will be considered in relation to both contractual obligations.
[29] If the answer to either question is yes, is the Purchaser entitled to some or all of the claimed $350,000 abatement of the purchase price or damages?
Analysis and Discussion
(a) Has the Receiver breached s. 8.1 of the APA?
[30] While Article 8 is given the heading “Post-Closing Covenant” in the APA, it appears that both parties began work on fulfilling this particular covenant immediately following execution of the APA without waiting for court approval or closing. Nothing turns on whether they were required to begin that negotiation effort before or after Closing. They in fact began and completed negotiations prior to court approval or closing.
[31] Section 8.1 required both parties “to negotiate in good faith and on a best efforts basis to complete a share purchase transaction”. The balance of s. 8.1 simply described in general terms what the transaction to be negotiated should look like. There are thus two distinct obligations created by s. 8.1: first to negotiate the transaction so-described in good faith and second to use best efforts to complete the transaction the were both required to negotiate.
[32] The parties in fact negotiated an SPA and thus fulfilled the first part of the obligation imposed by s. 8.1 on December 23, 2020. The SPA agreed to by both parties that day remained subject to court approval which was intended to be sought contemporaneously with approval of the APA.
[33] The terms of the SPA were by no means simple “boiler plate”. Among other things, the SPA was conditional upon obtaining a relatively unusual “reverse vesting order” by which obligations of PureSinse not assumed by the Purchaser were to be vested away from PureSinse to a newco incorporated for the purpose. Prior to the SPA being finalized, there was no share purchase transaction that anyone could be obliged to use best efforts to complete. The terms of the SPA – being the detailed agreement actually reached following the mandated negotiations – supersedes the general description of the “share purchase transaction” in s. 8.1 of the APA that the parties agreed to negotiate. The “best efforts” obligation – such as it was – was confined thereafter to s. 5.6 of the SPA discussed further below.
[34] I need not speculate about what would have happened had the parties failed to agree on the terms of the contemplated transaction or whether an “agreement to agree” in such terms is enforceable. The parties did negotiate and they did reach an agreement on the terms of the transaction on December 23, 2020.
[35] There is no serious issue taken with the good faith of the Receiver as regards the discharge of its obligation to negotiate the terms of the SPA nor is there anything in the evidence that reasonably calls this into question. While the heading of Article 8 is not determinative, it is at least noteworthy that it appears to contemplate the negotiation phase of the share purchase transaction taking place in whole or in part after closing of the APA. There is simply no basis to allege a breach of s. 8.1 of the APA by reason of the time taken to negotiate and finalize the terms of the SPA nor has the moving party made such an allegation.
[36] The SPA was entered into on December 23, 2020 which fell on a Wednesday. The Cannabis License expired on Monday, December 28, 2020 – virtually the next business day following the intervening weekend and Christmas holidays. There is no evidence that anything could have been done by the Receiver to renew the Cannabis License or otherwise forestall its expiry in accordance with its terms. Not only was the Receiver unaware of the pending expiry date in fact, but the Receiver’s appointment by the Court specifically precluded the Receiver from asserting any authority over the Cannabis License in explicit and unambiguous terms. The Receiver had no access to Health Canada’s Cannabis Tracking and License System through which renewal applications had to be processed. Indeed, earlier in the receivership proceeding the Receiver had sought to cause a termination of the Cannabis License by stopping the RPIC from withdrawing a prior request to revoke it. That request was opposed by the Department of Justice on the grounds of the Receiver’s lack of authority to deal with the license. Renewal of the Cannabis License lay beyond the Receiver’s powers even if the looming expiry had been identified as an issue earlier. There is at all events no suggestion that a renewal application could have been completed and processed within a single business day even if the RPIC had decided on his own to do so.
[37] It is clear that s. 8.1 of the APA merged into the SPA that the parties actually negotiated and signed. The general description of the “share purchase transaction” in s. 8.1 was superceded by the actual detailed SPA and the extent of the “best efforts” required to close the SPA was also specifically addressed in s. 5.6 thereof. Even if s. 8.1 of the APA had further independent application following the execution of the SPA on December 23, 2020, there can be no reasonable basis to conclude that the Receiver failed to use its best efforts to complete the transaction during the one business day that elapsed between entering into the SPA and the expiry of the Cannabis License.
[38] The moving party Purchaser takes the position that the “best efforts to complete” obligation in s. 8.1 of the APA must be applied to the “share purchase transaction” as a whole both before and after the completion of negotiation its terms in the form of the SPA itself. As a result, the Purchaser says that s. 8.1 imposed an immediate and continuous obligation upon the Receiver to expend its “best efforts” to complete a transaction while still in the process of negotiating its terms. This interpretation puts the completion cart before the negotiation horse and runs quite contrary to the clear wording of s. 8.1 of the Agreement.
[39] While the foregoing analysis disposes of the Purchaser’s arguments as regards s. 8.1 of the APA, I shall nevertheless consider the arguments advanced by the Purchaser regarding the alleged failures of the Receiver in the period prior to the execution of the SPA on December 23, 2020. As shall be seen, it makes little difference whether the “best efforts” standard is also applied to the actions or failures of the Receiver during the negotiation phase of the SPA.
[40] The affidavit of the moving party Purchaser contains an extensive account of the back and forth that occurred between the Receiver and the Purchaser regarding the matter of replacing the RPIC between December 4, 2020 and December 22, 2020. I do not find it necessary to delve into the details of those exchanges beyond the following summary observations:
a. The Purchaser expressed considerable frustration with the price demanded by the RPIC for its cooperation during his private negotiations with the Purchaser – a price that the Purchaser was unwilling to pay;
b. The Receiver played no part in those negotiations and was only made privy to selected aspects of them by the Purchaser;
c. The Purchaser communicated its fear that the RPIC might unilaterally take steps to cancel the Cannabis License prior to closing: “[the RPIC] has the power to request a revocation of the license and he has threatened to do so but thankfully has not acted on that threat as yet”;
d. The Purchaser communicated to the Receiver the advice received from its own cannabis licensing expert that replacing the RPIC with a nominee of the Purchaser would be the best path forward to deal with this prospect;
e. The Purchaser repeatedly asserted that the Receiver was in the “best position” to direct Health Canada to effect a change in the RPIC under the Cannabis License.
f. The Receiver for its part consistently pointed out its own lack of authority over the Cannabis license but also consistently recommended finalizing the SPA so that the Receiver and Purchaser would be in a better position to seek whatever administrative assistance Health Canada might be prepared to extend to facilitate a change of control transaction.
[41] Nothing in the correspondence record produced indicates in any way that either party had turned their mind to the question of the possible expiry of the Cannabis License or the need for their renewal. The risk sought to be averted by the requested appointment of a replacement RPIC was to prevent the RPIC making good on an alleged threat to request a revocation of the license and to ensure the necessary cooperation from the RPIC during the change of control phase.
[42] Given the failure of the Purchaser to have noticed the looming license expiry date in the course of its own due diligence, there is simply no reason to believe that the appointment of a replacement RPIC of the Purchaser’s choosing would have had any impact at all upon the course of events. It cannot be assumed that a new RPIC designated by the Purchaser would have been any more diligent than the Purchaser itself had been in that regard. Indeed, the existing RPIC’s correspondence makes clear that he would have tried to take steps to try to preserve the license had he known it was at risk because he still hoped to monetize his future cooperation.
[43] The idea that the Receiver had a positive obligation to designate a representative of a mere prospective Purchaser while still in the process of negotiating the relevant purchase agreement (and prior to court approval which could not be presumed) and to clothe such designate with the authority to act as the lawful representative of one of the respondents for purposes of dealing with a license over which the Receiver itself had no explicit control is absurd. The Receiver did take steps to alert Health Canada of developments and the emerging status of the proposed Purchaser. More than that it could not reasonably do. Anything further would have required stepping beyond the metes and bounds of the court order appointing the Receiver. A responsible court-appointed Receiver does not take aggressive “try it on for size” interpretations of its constating order without seeking directions from the Court. The actions requested of the Receiver went considerably beyond even that quite inappropriate standard.
[44] The Purchaser is attempting to create indirectly a positive obligation upon the Receiver to keep the licenses in good standing which a fair reading of both agreements clearly excludes. The Receiver never had authority over the Cannabis License and therefore could not have renewed it.
[45] The Receiver did not undertake to keep the Cannabis License in good standing until closing nor did it even represent that it was in good standing at the time of signature.
[46] The Purchaser affirmed its reliance upon its own due diligence and had no reason to be believe that the Receiver was better placed to know the status of the Cannabis License or that the Receiver would take any concrete steps in relation to it. The Purchaser had a duty to inform itself of the expiry date of the Cannabis License if expiry was a matter of importance to it.
[47] Conversely, the Purchaser had no reason to believe that the Receiver had any authority over the Cannabis License by reason of the clear terms of its appointment order nor did it have any reason to believe that the Receiver had inquired into matters (such as expiry date of a license it did not control) that the Purchaser itself had not bothered to examine. Due diligence was explicitly the responsibility of the Purchaser.
[48] There is simply no basis to assert that any best efforts of the Receiver to complete a transaction prior to reaching an agreement as to its terms would have resulted in the survival of the Cannabis License even if either party knew in fact that it was on the verge of expiry. The Receiver had no authority in fact to renew the Cannabis License on its own or to direct the RPIC to do so nor did it have the authority to appoint a replacement RPIC as sought by the Purchaser in any event. It would be pure speculation to assume that any renewal application would have been accepted or that any such renewal would have been accepted as the basis for the transfer of the license of an inactive and in default producer by way of a change of control transaction. There is at least some evidence which the Purchaser has not seriously contradicted that Health Canada would have required a fresh application by the Purchaser at all events.
(b) Has the Receiver breached s. 5.6 of the SPA?
[49] Leaving aside the rather significant objection that the Purchaser can assert no rights under s. 5.6 of the SPA by reason of its termination following default by the Purchaser[^1], the argument that the Receiver has breached s. 5.6 of the SPA is necessarily circular.
[50] The obligation imposed by section 5.6 of the SPA came into being with its execution on December 23, 2020. On December 23, 2020, the Cannabis License had one business day to run and there is no indication that any amount of heroics on the part of the Receiver might have saved it from its inevitable expiry. What fault the Purchaser lays at the feet of the Receiver (failure to take up its suggestion of appointing a new RPIC) had already occurred before the obligations imposed by s. 5.6 were born.
[51] Further, s. 5.6 of the SPA imposes only a narrowly-focused obligation upon the Receiver. Such obligations as the Receiver undertook were directed to the goal of assisting the purchaser to obtain “approval from Health Canada in respect of the change of control of the Company, such that the Health Canada Licence will be valid and in good standing” (emphasis added). The loss of the Cannabis License was in no way tied to the change of control of the Company. That change of control never occurred because the SPA was ultimately terminated. There was no warranty in the SPA as regards the good standing or time to expiry of the Cannabis License. There was no closing condition relating to the status of the Cannabis License and the transaction was explicitly an “as is, where is” transaction.
[52] While the Purchaser claims that there was an obligation to ensure that the licenses remain valid and in good standing, no such obligation was undertaken in either of the two contracts the parties signed and both contracts contain an explicit “entire agreement” clause. I can give no effect to such unilateral wishful thinking.
[53] The Purchaser repeatedly attempted to persuade the Receiver to undertake the obligation to replace the RPIC with a person designated by the Purchaser prior to execution of the SPA. The Receiver pointedly refused to do so and explained its refusal – the Purchaser did not negotiate a change to the SPA to reflect such an explicit obligation and signed an agreement, complete with an “entire agreement clause” containing no such stipulation.
[54] I find that the Receiver has not breached its obligations under s. 5.6 of the SPA. The Purchaser cannot use the language of s. 5.6 of the SPA to supply its own want of due diligence in relation to the Cannabis License particularly when it knew at all material times that the Receiver’s appointment order precluded it from asserting authority over it.
(c) Has the Purchaser demonstrated an entitlement to damages or an abatement?
[55] Given my conclusions regarding the first two questions, I do not find it necessary to assess damages or a possible abatement in the purchase price. There was an issue at the outset of the hearing regarding a late affidavit filed by the Purchaser in support of the damages claim. That affidavit was delivered following the completion of cross-examinations and leave was neither sought nor granted prior to the hearing to deliver same. I declined to grant leave to file the affidavit at the hearing but agreed to consider what subsequent orders might be needed regarding the assessment of damages should such become necessary. In light of my findings on liability, no further orders were sought or granted.
Disposition
[56] As indicated, I dismissed the Purchaser’s motion from the bench following the hearing. As regards costs, I found that the Receiver had made a qualifying Offer to Settle prior to the hearing and ordered the moving party to pay the Receiver’s costs on a partial indemnity basis to the date of the Offer and a full indemnity basis thereafter. The parties were directed to return to me to settle the amount of costs if they were unable reach an agreement on the amount. No party has come back to me on that issue to date. I assume that the parties have reached agreement on the amount and that no further order is required.
[57] If I am wrong in that assumption, I am directing the Receiver to provide its Outline of Costs and written submissions as to the amount claimed (scale having already been settled) within fourteen days from today’s date. The Purchaser shall have seven days to respond and shall provide its own Outline of Costs to me at that time.
[58] Written submissions from both parties shall be restricted to five pages excluding Costs Outlines and shall be delivered electronically through my assistant. Case citations alone are sufficient.
[signed pdf saved]
S.F. Dunphy J.
Date: August 16, 2021
[^1]: The Purchaser does not purport to have exercised any right to terminate the SPA but rather repeatedly agreed to extensions of the time to close it after January 7, 2021 after it had learned of the loss of the Cannabis License.