Superior Court Grants $22M Summary Judgment

On May 31, 2002, Justice Hoy of the Ontario Superior Court of Justice, awarded Imoney Corp. summary judgment against Quebecor Communications Inc. The action arose out of the sale, in April 2002, by Imoney to Canoe Inc., of the assets relating to Imoney’s financial intermediary, news and analysis Web site.

Part of the consideration received by Imoney was in the form of preferred shares of Canoe. As a condition of Imoney’s entry into the asset purchase agreement with Canoe, Quebecor entered into a put agreement with Imoney granting Imoney an irrevocable put option whereby Imoney could require Quebecor to purchase the preferred shares.

Imoney exercised its put option in late August 2001. Quebecor alleged misrepresentations in the asset purchase agreement and took the position that it was relieved of its obligations under the put agreement, claiming that it was the de facto assignee of Canoe’s rights. Imoney denied the allegations and disputed Quebecor’s entitlement to raise those allegations because Quebecor was not a party to the asset purchase agreement. Imoney sued Quebecor for specific performance of the put agreement and moved for summary judgment. Quebecor moved to stay Imoney’s summary judgment motion.

The judge rejected the de facto assignee concept. She noted that even if Canoe had purported to assign its rights to Quebecor, such assignment would be in breach of the asset purchase agreement and, therefore, ineffective as against Imoney. As a result, Quebecor could not invoke an arbitration clause in the asset purchase agreement and could not rely on s. 7 of the Arbitration Act, 1991.

The judge also declined to exercise her discretion to stay Imoney’s summary judgment motion under s. 106 of the Courts of Justice Act. She noted that Quebecor and Imoney had attorned to the Ontario courts in the put agreement that Imoney’s put option was expressed to be irrevocable and that the put agreement contained a comprehensive entire agreement clause. Thus, the judge concluded, the parties intended that Quebecor’s obligations under the put agreement not be conditional upon rights and obligations as between Imoney and Canoe under the asset purchase agreement.

The judge found that Quebecor had not advanced any tenable defence to Imoney’s claim for specific performance of the put agreement, and granted judgment for specific performance. As at the date fixed by the judgment for completion of the put agreement, the price payable by Quebecor for the preferred shares, together with the costs awarded against it, totalled just under $22 million. Quebecor appealed.

Imoney was represented by Joseph Steiner of Osler, Hoskin & Harcourt LLP. Quebecor was represented by Teresa Walsh of Ogilvy Renault.