The Art of Battling Giants – Part 2
The Art of Battling Giants: Nelligan O’Brien Payne LLP Client Awarded $11 Million Judgment Following Six-Week David and Goliath Trial
In a 70-page decision released on December 17, 2014, the Ontario Superior Court of Justice, awarded damages in the amount of $11 million to Nelligan O’Brien Payne’s client, Rougemount Capital Inc. (“Rougemount”), for breach of contract in Rougemount Capital Inc. v Computer Associates International Inc.
Damages
Noting the Sixdion relied upon the contract and CA’s subsequent repeated representations that the first investment installment was forthcoming, by, among other things: (1) hiring new employees; and (2) making promises to trade creditors based on the strength of CA’s contractual commitment, Justice Sanderson found that, but for CA’s breach of contract, Sixdion would have survived.
The decision is noteworthy for its review of the principles to be considered in assessing damages for lost opportunity. In order to establish that Rougemount was entitled to damages for Sixdion’s lost opportunity, Rougemount first needed to establish that Sixdion would have survived as a going concern but for CA’s repudiation of the contract. As stated by the Court: “[F]or Sixdion’s lost opportunity to have had any value, Sixdion would have had to avoid bankruptcy. It would have needed to have obtained financing, forbearance from its creditors, and to have met the earnings forecasts contained in its October 15, 2004 Business Plan.
Notably, relying in part on the survivability opinion of the principal expert witness called by Nelligan O’Brien Payne LLP litigation lawyer Peter Cronyn, the Court found that, but for CA’s breach of contract, Sixdion would have not only avoided bankruptcy, but would have “thrived”. Thus, the Court found that Rougemount was entitled to damages for Sixdion’s lost opportunity.
With respect to quantum, the Court applied the principles established by the Ontario Court of Appeal in Ticketnet Corp v Air Canada (1997) DLR (4th) 271 (Ont CA), assessing the value of Sixdion’s lost opportunity on the basis of projections contained in a five-year Business Plan prepared jointly by Sixdion and CA, discounted for contingencies. The Court rejected CA’s position that the forecasts upon which the Business Plan was based were unreliable and speculative, finding that the projections provided a reasonable approximation of what would have occurred had the contract been performed, and thus satisfied the evidentiary burden affirmed in Ticketnet. Ultimately, the Court assessed the value of Sixdion’s lost opportunity on the basis of the projections, adjusted for additional risk, and awarded damages to Rougemount in the amount of $11M.
While the decision is currently under appeal, this was a significant victory for Nelligan O’Brien Payne LLP client, Rougemount Capital Inc.