CanWest and National Post Granted Summary Judgment Award

On August 13, 2004, Justice Michael Dambrot of the Ontario Superior Court of Justice granted CanWest and the National Post Co. summary judgment for $22.5 million plus compound interest against Hollinger International. The motion arose from an agreement by which an affiliate of CanWest purchased the remaining 50 per cent interest of Hollinger International and its affiliates in the National Post. Under that agreement, Hollinger International agreed to pay $22.5 million to the National Post on September 30, 2001 on account of its future losses and cash requirements until March 31, 2002. In addition to granting summary judgment in the amount of $22.5 million, Justice Dambrot found that the plaintiffs were entitled to prejudgment and postjudgment interest at CanWest’s borrowing rate, compounded every 90 days. Justice Dambrot also dismissed a motion by Hollinger International under the Arbitration Act, 1991 to stay the court proceedings and refer the claims to arbitration to be arbitrated with existing disputes concerning post-closing adjustments arising from the acquisition by CanWest in November 2000 of various newspaper and other assets of Hollinger International and its affiliates. Justice Dambrot also dismissed Hollinger International’s motion for a stay of execution of the summary judgment.

In dismissing the motion for a stay of proceedings, Justice Dambrot found that the obligation of Hollinger International to pay the $22.5 million was part of a new agreement, independent of the earlier agreements between CanWest and Hollinger International which contained arbitration provisions. Also, as Hollinger International agreed to pay the $22.5 million prior to the resolution of the disputes concerning the post-closing adjustments, it could not have been the intent of the parties to submit any dispute with respect to this obligation to arbitration.

With respect to the motion for summary judgment, Justice Dambrot found that the defence of set-off advanced by Hollinger International raised no genuine issue for trial, as Hollinger International admitted that, at the time it entered into the agreement, its intent was to pay the $22.5 million on September 30, 2001, notwithstanding that it was aware that any claims that it may have concerning the post-closing adjustment would not be resolved by that date. The resolution of these claims would take place in the arbitration to which Hollinger International wanted this claim for $22.5 million referred, so that it could be set-off against other claims allegedly owing to Hollinger affiliates.

Justice Dambrot also dismissed the motion of CanWest and the National Post for partial summary judgment as against Hollinger Inc. finding that there was a genuine issue for trial with respect to whether Hollinger Inc. executed the agreement containing the $22.5 million obligation of Hollinger International solely as agent for Hollinger International.

Mr. Justice Dambrot noted that the disputes concerning the post-closing adjustments will proceed to arbitration with CanWest claiming in excess of $60 million and Hollinger International claiming approximately $45 million.

Hollinger International is appealing the decision.

CanWest and the National Post were represented at the hearing by Brian Morgan and Allan Coleman of Osler, Hoskin & Harcourt LLP.

Hollinger International was represented by Lincoln Caylor and Maureen Ward of Bennett Jones LLP.
J. Anthony Caldwell of Fogler, Rubinoff LLP and William Sasso of Sutts, Strosberg LLP acted for Hollinger Inc.