COURT FILE NO.: CV-21-00667501-00CL
DATE: 2021-10-28
SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)
RE: GOTHAM GREEN PARTNERS, LLC and GOTHAM GREEN ADMIN 1, LLC, Applicants
AND:
IANTHUS CAPITAL HOLDINGS, INC., IANTHUS CAPITAL MANAGEMENT,LLC, OASIS INVESTMENTS II MASTER FUND LTD., HADRON HEALTHCARE AND CONSUMER SPECIAL OPPORTUNITIES MASTER FUND, SENVEST GLOBAL (KY), LP and SENVEST MASTER FUND, LP, Respondents
BEFORE: Penny J.
COUNSEL: Matthew Milne-Smith, Chantelle Cseh, and Rui Gao, for the Applicants
Paul Steep and Trevor Courtis, for the Respondents, iAnthus Capital Holdings and iAnthus Capital Management, LLC
Jeffrey Levine, for the Respondents, iAnthus Capital Holdings and iAnthus Capital Management, LLC
Eliot Kolers and Brian Pukier, for the Respondent, Oasis Investments II Master Fund Ltd.
Ryan Jacobs and Timothy Pinos, for the Respondents, Hadron Healthcare and Consumer Special Opportunities Master Fund, Senvest Global (KY), LP and Senvest Master Fund, LP
HEARD: September 23, 2021
COSTS ENDORSEMENT
[1] In this matter (2021 ONSC 6518) I had to decide, as a matter of contractual interpretation, whether the Lenders’ right to the issue of shares under a restructuring support agreement was forfeit because the conditions precedent to closing the transaction had not been met by August 31, 2021. I held, in favour of the Lenders, that they had validly extended the Outside Date for closing the transaction and that their right to the issue of shares had not been forfeit.
[2] The parties filed cost summaries and, after the release of my decision, brief written submissions on costs. The parties’ cost summaries were:
Actual Partial Indemnity
Gotham $532,919.36 $323,539.28
Hadron and Senvest $481,566.30 $265,173.56
Oasis $175,221.76 $96,371.97
iAnthus $333,479.10 $200,815.02
[3] Thus, the Lenders seek roughly $1,189,700 in full indemnity costs. If successful, iAnthus would have sought a maximum of $333,480.
[4] The Lenders rely on a covenant given by iAnthus in s. 1.7(u) of the RSA, in which iAnthus agreed:
from and after the date of the advance of the Interim Financing and until the termination of this Support Agreement, and regardless of whether or not the Recapitalization Transaction is consummated, to pay all documented fees and expenses of each of the [Lenders] on a current basis and no later than seven (7) days following receipt by the Company of an invoice [emphasis added].
[5] The Lenders, therefore, argue that the RSA itself gives them the right to full indemnity costs. The Lenders also argue that they avoided duplication wherever possible and focussed on somewhat different issues in the drafting of factums and presentation of oral argument. Oasis did not file a separate factum and made no oral submissions.
[6] iAnthus argues that the parties should be held to partial indemnity costs and that the amounts are in any event excessive, having regard to the hours invested by counsel for three Lender groups in what was, in effect, a one issue case. In particular, it argues that the Hadron/Senvest costs should not exceed the partial indemnity costs claimed by Oasis (the quantum of which it does not oppose).
[7] While s. 1.7(u) contemplates full indemnity for the Lender’s fees, that contractual provision is but one factor, albeit an important one, the court must take into account. The agreement of the parties cannot exclude the court’s discretion; it is open to the court to exercise its discretion contrary to the agreement. Costs are always in the ultimate discretion of the court. A contractual right to full indemnity is not a blank cheque: Bosse v.Mastercraft Group Inc. (1995), 123 D.L.R. (4th) (C.A.).
[8] As the Court of Appeal said in Boucher v. Public Accountants Council for the Province of Ontario, (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, the fixing of cost does not begin or end with the calculation of hours times rates. It is always necessary to consider the result produced by any arithmetic calculations and determine whether, in all the circumstances, the result is fair and reasonable. In deciding what is fair and reasonable, the reasonable expectation of the parties concerning the quantum of the cost award is a relevant factor. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances, rather than an amount fixed by the actual costs incurred by the successful litigant.
[9] Further, I note that the Lenders’ covenants in s. 1.6(e) requires them “to act in good faith and take all commercially reasonable actions that are reasonably necessary or appropriate to promptly consummate” the RSA and the recapitalization transactions.
[10] I am unable to agree with iAnthus that the Lenders should, as a matter of principle, be limited to partial indemnity costs. To do that would be to ignore the contractual provisions specifically agreed to in the RSA indemnifying the Lenders against fees and expenses.
[11] I am equally unable to agree with the Lenders that their costs should be ordered simply on the basis of hours times rates. To do that would be to ignore the all-important factors of reasonable expectations and whether, in all the circumstances, the result is fair and reasonable.
[12] What the Lenders seek is almost four times what iAnthus was billed by its own counsel. The Lenders’ counsel collectively docketed 1,241 hours on this case from a total of 10 timekeepers. iAnthus’ counsel docketed, by contrast, 356 hours from six timekeepers.
[13] If the full indemnity argument advanced by the Lenders were taken to its literal and logical conclusion, the Lenders would be seeking the same amount ($1.189 million) even if they had lost the application.
[14] There is no doubt the stakes were high. The factums and oral submissions on all sides were of the highest quality. The Lenders’ “win” was complete and worth a great deal of money. However, it must also be remembered that this was a one issue case that took one day to argue.
[15] Counsel for Gotham took the lead role and made the most significant arguments. While I appreciate that there was some effort to reduce duplication, that does not appear to be much reflected in the cost summary of counsel for Hadron/Senvest. In all the circumstances, and having regard to the RSA and the factors in R. 57.01(1), I find that a total award of costs against iAnthus of $800,000 (all-inclusive) is fair and reasonable. The distribution of those costs shall be as follows:
Gotham $400,000
Hadron/Senvest $300,000
Oasis $100,000
Penny J.
Date: 2021-10-28