EdperBrascan Ordered to Pay $135.5 Million to Labatt

On October 27, 2000, Mr. Justice Lane of the Ontario Superior Court of Justice granted Labatt Brewing Company Limited’s (Labatt) motion for summary judgment against EdperBrascan Corporation and ordered EdperBrascan to pay $135.5 million in cash to Labatt for certain investments that Labatt had in EdperBrascan companies.

The litigation arose out of facts detailing the corporate divorce of Labatt and EdperBrascan. In 1993, Edper Brascan sold its 38 per cent interest in Labatt. At that time, Labatt and EdperBrascan entered into a Letter Agreement to deal with the liquidation of Labatt’s interests in two Edper Brascan companies, Epsim Investments Limited and Mico Investments Ltd. The Letter Agreement provided that any of these investments remaining as at March 31, 1998, would be purchased by EdperBrascan at their book value either for cash or for shares of equivalent value of certain EdperBrascan companies. Equivalent value was to be determined by valuing the shares at 95% of their average trading prices on the TSE over the 30 days immediately preceding March 31, 1998 but, if Labatt did not agree that this calculation represented equivalent value, it had to be determined at a price mutually agreed.

On March 31, 1998, $135.5 million of the investments remained in Labatt’s hands. EdperBrascan attempted to fulfill its obligation to purchase these remaining investments by proposing to tender to Labatt 6.6 million shares of Great Lakes Power Inc., but Labatt rejected this proposal on the basis that it did not comply with the Letter Agreement, for various reasons. EdperBrascan sued Labatt, claiming that it had complied with its obligations under the Letter Agreement and that the Letter Agreement was at an end. Labatt brought a partial motion for summary judgment on its counterclaim for an order that EdperBrascan was obligated to fulfill its obligations under the Letter Agreement by paying Labatt $135.5 million in cash. Justice Lane concluded that, since Labatt rejected the 95% formula for determining the equivalent value of the shares, EdperBrascan’s option to pay with securities failed because, as an “agreement to agree”, it was not enforceable at law. As a result, EdperBrascan had to fulfill its purchase obligation with cash.

Labatt was represented by Neil Finkelstein, Sandra Forbes and Brian Smith of Davies Ward Phillips & Vineberg LLP (previously Davies, Ward & Beck LLP). EdperBrascan was represented by Paul Steep, Geoff Hall and Sarah Chesworth of McCarthy Tétrault. Epsim and Mico were represented by Bernard McGarva and Lindsay Burry of Aird & Berlis.