2014 QCCA 1431, 2014 QCCA 1431

Unofficial English Translation Banque de Montréal c. TMI-Éducaction.com inc. (Trustee of) 2014 QCCA 1431 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC No.: 200-09-007758-128 (200-11-009438-014, in the matter of the bankruptcy of TMI-Éducaction.com Inc.) DATE: September 11, 2014 CORAM: THE HONOURABLE PAUL VÉZINA, J.A. MARIE ST-PIERRE, J.A. CLÉMENT GASCON, J.S.C.C. [1] BANK OF MONTREAL APPELLANT – INCIDENTAL RESPONDENT – defendant v.

DANIEL ADAM, Trustee of the Estate of TMI-Éducaction.com inc., bankrupt RESPONDENT / INCIDENTAL APPELLANT – plaintiff JUDGMENT OF CORRECTION [ 1 ] The appellant seeks to vary the judgment rendered July 28, 2014. [ 2 ] It correctly points out that the amount of $6 million stated in paragraphs 118 and 120 of the judgement should instead read $6,085,000, thereby reducing the condemnation from $15.745 million to $15.660 million. [ 3 ] Consequently, paragraph 5 of the judgment is substituted with the following: [ translation ] [5] ALLOWS the incidental appeal, with costs, for the sole purpose of substituting paragraph [360] of the reasons of the judgment with the following: [360] ORDERS the Bank of Montreal to pay the trustee plaintiff the amount of $15.660 million in damages with interest as of the date on which the action was served and additional interest as of that same date.

PAUL VÉZINA, J.A. MARIE ST-PIERRE, J.A. CLÉMENT GASCON, J.S.C.C. Mtre Suzanne Côté Mtre Éric Préfontaine Mtre Alexandre Fallon Osler, Hoskin For the appellant Mtre Jacques Larochelle Jacques Larochelle Avocat inc. For the respondent

Unofficial English Translation Banque de Montréal c. TMI-Éducaction.com inc. (Trustee of) 2014 QCCA 1431 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC No.: 200-09-007758-128 (200-11-009438-014, in the matter of the bankruptcy of TMI-Éducation.com Inc.) DATE: July 28, 2014 CORAM: THE HONOURABLE PAUL VÉZINA, J.A. MARIE ST-PIERRE, J.A. CLÉMENT GASCON, J.S.C.C. [2] BANK OF MONTREAL APPELLANT/INCIDENTAL RESPONDENT – Defendant v.

DANIEL ADAM, Trustee of the Estate of TMI-Éducaction.com inc., bankrupt RESPONDENT/INCIDENTAL-APPELLANT – Plaintiff JUDGMENT [1] The appellant appeals from a judgment of the Superior Court, District of Quebec (the Honourable Madam Justice Suzanne Hardy-Lemieux), rendered on July 05, 2012, ordering it to pay damages to the respondent for abuse of right.

The appellant also appeals to obtain compensation higher than the $12.57 million awarded him. [2] For the reasons of Vézina, J.A., with which St-Pierre and Gascon, JJ.A. agree; [3] THE COURT: [ 4 ] DISMISSES the principal appeal, with costs; [ 5 ] ALLOWS the incidental appeal, with costs, for the sole purpose of substituting paragraph [360] of the reasons of the judgment with the following: [ translation ] [360] ORDERS the Bank of Montreal to pay the trustee plaintiff the amount of $15.745 million in damages with interest as of the date on which the action was served and additional interest as of that same date.

PAUL VÉZINA, J.A. MARIE ST-PIERRE, J.A. CLÉMENT GASCON, J.S.C.C.

Mtre Suzanne Côté Mtre Éric Préfontaine Mtre Alexandre Fallon Osler, Hoskin For the appellant Mtre Jacques Larochelle Jacques Larochelle Avocat inc. For the respondent Dates of hearing: March 24, 25 and 26, 2014 REASONS OF VÉZINA, J.A. [ 6 ] The appellant, the Bank of Montreal (BMO), appeals from a judgment ordering it to pay damages to the respondent, the trustee of the estate of the bankrupt TMI-Éducaction.com Inc. (“Educaction”) for abuse of right. The trustee appeals in turn to obtain compensation higher than the $12.5 million awarded him by the trial judge. [ 7 ] BMO's abuse is twofold.

In July of 2001, when Educaction was just about to go public and do an IPO (initial public offering), BMO blocked it from doing so by withdrawing its financial backing without a valid reason. Then, in January of 2002, when Educaction's creditors voted in favour of a proposal to revitalize the business, it manoeuvred to postpone the approval of that proposal. [ 8 ] Educaction was counting on the IPO to complete a promising project that was already well underway. The first obstacle postponed the project, but the creditors still believed in it. The second manoeuvre brought it to an abrupt end.

Educaction went bankrupt. [ 9 ] I find that the trial judge's conclusion as to BMO's prejudicial abuse is well founded. There is cause, however, to recalculate the compensation awarded.

PART I – PREJUDICIAL ABUSE [ 10 ] If the appeal concerned only prejudicial abuse, my reasons would be brief because BMO raises only questions of fact even though the trial judge's findings and inferences of fact are well supported by the evidence and free of any "palpable and overriding error", as the expression goes. To review compensation, however, it is necessary to review the narrative of events.

A- Obstacle to Exchange listing [ 11 ] Initially, BMO was the banker for a company called Multipartn'r, which offered a computer software training course and consulting services in that field. [ 12 ] For 15 years, the company gave this course in colleges or on-site. In 1999, it purchased a company called "Learnix" for $8.3 million. Learnix offered this course online. Multipartn’r then began to develop a computer platform to grow the online training so that it would be available anywhere, at any time, to anybody. E-learning was the way of the future. [ 13 ] In 2000, Multipartn’r had sales of $55 million.

Development was behind, however, which created cash flow issues and sent Multipartn'r looking for a cash investment. [ 14 ] In August of 2000, investors, including Mr. L., saw an opportunity. They intended to divide the company, keep only the training part, and tap all the potential of e-learning by speeding up the development of the platform with additional capital obtained through an IPO, which presupposed that Educaction would go public. [ 15 ] In September, BMO and Multilpartn’r entered into an [ translation ] "agreement-in-principle" whereby Multipartn’r received $2.3 million in cash.

BMO's consent was required to split the company, however, because Multipartn'r had pledged all of its assets to BMO. Following negotiations, BMO gave its consent, and the contract of sale of Multipartn'r to Educaction was signed in January of 2001, with retroactive effect to October 1, 2000. The assets were valued at $30 million. Multipartn'r then held 57% of Éducaction's capital stock. [ 16 ] On January 24, BMO issued a line of credit to Educaction in the amount of $3.5 million, guaranteed by a movable hypothec on its accounts receivable.

The [ translation ] "undertakings and conditions for the granting of credit" required that various ratios be respected, including: [ translation ] "the consolidated tangible net worth must not be less than $400,000; the working capital must reach a $900,000 surplus; and the consolidated internally generated funds must be at least $1,500,000" (“the ratios”). [ 17 ] There are other events prior to January 24, 2001, that are also worth mentioning. [ 18 ] During negotiations, BMO demanded that Educaction stand surety for the $6.5 million debt owed by Multipartn'r.

Educaction refused to do so, even stating that it would move to another bank, but BMO asked that it remain its client, and Educaction acquiesced.

[ 19 ] For Educaction, the situation going forward was clear. It was, in fact and in law, a distinct company from Multipartn'r. For BMO, the separation was not as clearly delineated. While it did acknowledge that there were two corporations and that Educaction had not stood surety, it nevertheless maintained its intention to pressure that company's "rich" investors into paying Multipartn'r’s residual debt (“BMO's backdoor strategy”), unbeknownst to Educaction.

It abused its rights to compel them to do this. [ 20 ] From October to December of 2000, investors injected $4 million and then $7 million into Educaction. [ 21 ] Thanks to these funds, the project made progress. Educaction acquired a company that already had an e-learning platform, which made developing its own easier. It acquired another company providing translation services to translate the 600 courses and books it already had in order to offer a broader range of courses. [ 22 ] Then, in January of 2001, Educaction received its line of credit from BMO and prepared to go public on the Montreal Stock Exchange.

It approached various institutional investors here and in Europe, where a promotional tour was held in February. [ 23 ] The trial judge observed that the project raised interest and that its financing looked promising. She accepted, inter alia , that: [3] [ translation ] [37] A meeting was held during which Educaction's project, including its possible listing, was presented to the members of the Dundee Securities selection committee and its president, Mr. G., who was so impressed by the project that he not only agreed to select it but also decided to invest $300,000 of his own cash. Mr. G. made an offer to Mr.

L. for his firm take charge of issuing Educaction's capital stock. ... [39] Between September and November of 2000, Mr. L. presented the project to about 60 investors. The proposed issue of shares was well-received by everyone for the following reasons: • it was reassuring because of the solid base of courses offered in classes by both [Multipartn'r] and ... Learnix; • there was an established North American training network; • some of the contracts held by ...

Learnix with respect to the Oracle and Sun systems were exclusive; • the management team was very, very good; • finally, there was an openness to the concept of e-learning that was very promising. [40] Some brokers, responsible for investments in various firms, invested personally, then and there, as did Mr. ... . Yet they could not recommend that their clients invest in Educaction until the shares were publicly traded. They could, however, reserve blocks of shares for the moment Educaction did go public. [41] Hampton Securities performed due diligence on Educaction. Mr.

B. [its representative] had the technological aspect of Educaction audited by an analyst from this firm, Mr. A., during the due diligence process. According to Mr. A., everything was in working order. All the authors of the due diligence requested by Hampton Securities issued a conclusion that was favourable to Educaction. ... [43] In December of 2000, Mr. S., a broker who then worked in the Montreal office of Hampton Securities, got involved in Educaction's project. He helped to put together the European fundraising tour to present Educaction's project. This tour took place in February of 2001.

His role was to arrange meetings between the representatives of Educaction, Mr. L. and Mr. A., and his European institutional clients. [44] According to Mr.

S. [the broker], the various European brokers were highly interested in the capital stock that Educaction would issue when it went public. ... [49] On January 22, 2001, Hampton Securities undertook to enter into an agreement to sponsor Educaction. [50] On March 9, 2001, the Stock Exchange issued a conditional acceptance of Educaction’s listing. [ 24 ] The trial judge found that, even though the technological bubble burst and the stock markets fell in late February of 2001, there was still interest from the investors: [ translation ] [53] Between May and June of 2001, despite market turbulence, Mr.

S's European investors were still willing to invest $10 million in Educaction. [54] Mr. ..., president of SIPAR, used his own professionals to perform due diligence of Educaction. He too obtained an opinion that was favourable to Educaction. [55] ... SIPAR was ready to invest in Educaction the moment it went public.

[ 25 ] As the trial judge stated, [ translation ] "[t]here was an openness to the concept of e-learning that was very promising", so the project went forward and Educaction was set to go public on May 22. But BMO had its own plan. [ 26 ] On May 3, it sent Educaction a default letter in which it stated that the ratios had not been respected. BMO demanded a [ translation ] "new injection of $1.5 million [4] prior to May 18, 2011, before the company goes public". The cash was not available and the Exchange listing was postponed to June 6, and then again to July 6. [ 27 ] There was a lengthy debate as to the

interpretation of the clauses setting the ratios. There is no reason to resume that debate here. It is admitted by Educaction that [ translation ] "the financial ratios imposed by BMO were not met on May 3, 2011". Although they were not as far away as BMO submitted: [ translation ] [204] The Court notes that the rationale behind the statements of Mr. A. [an accountant hired by BMO] is completely inaccurate. Not only do the receivables not decrease by $60,000 as he claims but, on the contrary, they increase by more than $500,000.

Moreover, the bank advances did not increase by $670,000 over this period of time but, on the contrary, they decreased by $25,000. ... [206] At the hearing, Mr. A. had to correct one important aspect of his report. He found that there was a $255,000 deficit. As he was forced to recognize, however, the truth is quite the opposite since there is not a deficit but an estimated surplus. [ 28 ] The important thing, and it is a crucial point of the impugned judgment, is that failure to respect the ratios is irrelevant because BMO was at all times fully secured by the accounts receivable.

It sent the letter of default to carry out its backdoor strategy, not because it feared any hypothetical loss. It still intended to force Educaction's investors to pay Multipartn'r's residual debt. [ 29 ] In May and June, Educaction increased its efforts to convince BMO to withdraw its letter, but to no avail. The BMO refused to budge unless a proposal was also submitted regarding Multipartn'r's debt.

The trial judge wrote: [ translation ] [155] The balance of probabilities clearly shows that BMO did not want to find a financial solution to Educaction's problems or even seriously consider any offers made to this end if a solution regarding Mulitpartn'r's precarious position was not also the subject of an agreement. [ 30 ] In fact, on July 4, BMO sent Educaction a formal notice of its intention to enforce its security according to subsection 244(1) of the Bankruptcy and Insolvency Act , [5] adding that it was [ translation ] "withdrawing its financial backing" from Educaction and that henceforth, none of its cheques would be honoured, [ translation ] "including payroll cheques". [ 31 ] During all this time, BMO knew that the Exchange listing and the IPO were vitally important to Educaction's project.

It also knew that the default letter created an obstacle to going public. BMO was fully aware of the situation when it refused to withdraw the default letter and gave its notice of intent. 1- Value of BMO's security [ 32 ] The trial judge analyzed the value of Educaction's accounts receivable and found that they were at all times worth more than the debt owed to BMO.

This is what she found with respect to four successive points of time. [6] [ 33 ] As at February 22: [ translation ] [180] Based on the February 28, 2001, financial statements, Educaction's situation was as follows: • the line of credit was used up to $2 million. • the company had $0.9 million in the bank. • the accounts receivable totalled $8.5 million. [181] The Court finds that BMO's actual risk was $1.1 million and the $8.5 million it has in security covered this risk eight times over. ... [184] The Court finds that on May 3, 2001, BMO had no reasonable grounds to be seriously concerned about suffering a financial loss because, as we have seen, its security was eight times greater that the amounts it was owed by Educaction. [ 34 ] As at March 31: [ translation ] [190] Based on the March 31, 2001, financial statements sent to BMO on May 31, 2001, Educaction's situation was as follows: • the line of credit was used up to $2.4 million.

• the company had $0.7 million in cash; • the accounts receivable totalled $7.6 million. [191] As at March 31, 2001, BMO's financial risk totalled $1.7 million. The security was greater than BMO's risk by a factor of at least 4. [ 35 ] As at April 30: [ translation ] [192] As at April 30, 2001, Educaction's financial statements established the following situation: • the line of credit was used up to $2.5 million. • the company had $9.5 million in the bank; • the accounts receivable totalled $6.4 million. [193] The Court finds that BMO's actual risk totalled $1.5M.

At the same time, BMO had security that was at least four times greater than its actual risk. [ 36 ] As at June 30, she recapitulated: [ translation ] [209] It is now appropriate to reproduce the financial risk elements in BMO's possession on June 30, 2001, based on the actual financial statements available at the time. 28-02-01 31-03-01 30-04-01 Cash flow Accounts receivable Bank advances BMO risk $0.9 million $8.5 million $2 million $1.1 million $0.7 million $7.6 million $2.4 million $1.7 million $9.5 million $6.4 million $2.5 million $1.5 million [210] From our review of the financial statements reproduced above, the Court finds that BMO's financial risk was at all times very low, if not non-existent, because of the significant security interest in the accounts receivable, which were, depending on the month, four to eight times greater than the amount owed by Educaction in bank advances. [ 37 ] Also, the trial judge noted that BMO was aware of the soundness of its security and was not concerned about sustaining a loss.

She cited three excerpts from the testimony of Mr. V., the BMO account manager: [ translation ] [183] Finally, after taking into consideration the situation in the consolidated statement of February 28, 2001, and acknowledging that BMO's actual risk as at May 3, 2001, based on the February 2001 financial statements, was, it will be recalled,, $1,100,000, Mr. V. recognized the following: [ translation ] Q. You saw.

And to protect one point one million ($1,100,000), you have eight and a half million ($8.5 million) in receivables, accounts receivable that are available to you, that are all offered as security, is that correct? A. Yes. ... Q. Were you concerned? A. No. ... [211] What was the true essence of BMO's concerns in July of 2001, a time that its director of special accounts, Mr. V., characterizes as increasingly critical. He explained it thus: [ translation ] Q. ... Would it be accurate to say, Mr.

V., that in this file, the Bank was never truly concerned, not in May, or June, or July, or August of 2001, that it would have to sustain a loss, ...

A. Me, ... that's what I wrote, the Bank thought it might lose some money, we even wrote it in one of the emails that I sent the credit people and my boss on June 25, and I said that the Bank stood to lose money... Q. Be careful! If it liquidates? A. That's right. [212] And Mr. V. then added [ translation ] Q. All right. And would it be correct to say that a risk might have developed but you were never actually at risk, would that be fair to say, yes or no? A.

There was always a chance that we would be at risk if there was a disruption of business, yes. [213] The Court accepts that BMO's risk is more significant in the event of a business disruption, as Mr.

V. states, but that there is no risk if the company continues to operate. [214] Yet, BMO never made any provisions in the event of a loss in Educaction. [ 38 ] And the trial judge made the connection with BMO's backdoor strategy: [ translation ] [215] To try to understand the stubbornness of BMO's representatives in refusing to withdraw their letter of default and then sending the notice of intent to enforce their security on July 4, 2001, BMO's internal documentation must be examined. 2- BMO's backdoor strategy [ 39 ] BMO's backdoor strategy was to put pressure on Educaction's investors to have them pay Multipartn'r's debt.

Without repeating the trial judge’s demonstration of this fact, it is useful to review the passages from the internal documents that she quotes (the emphasis is hers). [ 40 ] First, there is a

summary dated September 13, 2000 – four months before the line of credit was issued in January of 2001 – written by Mr. G., the second representative of BMO and the author of the letter of default dated May 3: [ translation ] [219] The first credit application and accompanying

summary are dated September 13, 2000. ... [220] In the credit application dated September 13, 2000, Mr. G. noted that: [ translation ] Undertakings 2, 3, 4, and 5 have not been complied with and they are thus in breach of the loan agreements. At this point, however, in light of the circumstances, it would be inept to report these failures. We will maintain these conditions for the time being and will notify you in due time when we see fit to enforce and/or renegotiate them . Despite the default, for these reasons, the account was not reported as being in breach. ... [222] In the credit

summary, Mr. G. states that every financial ratio imposed on Multipartn'r was in default but that they would not report it at that time, although they would not waive BMO's right to do so. He went on to define BMO's overall strategy as follows: [ translation ] Obtain a progressive reduction of the margin deficit and the reimbursement of advances in the near future by forcing cash inflows from new investors whose objective is to do a RTO [7] and/or an IPO [8] on the stock market from now until Dec. '00 or Jan. '01 for [Educaction]. [ 41 ] A few days later, on September 18, 2000: [ translation ] [224] Mr.

G. observed the following regarding the respect of financial undertakings: [ translation ] Undertakings 2, 3, 4, and 5 have not been complied with and are therefore in breach of the loan agreements. At this point, however, in light of the circumstances, it would be inept to denounce these failures. We will maintain these conditions for the time being and will notify you in due time when we see fit to enforce and/or to renegotiate them . For these reasons, despite these breaches, the account will not be on an F549 until January 31".

No letter of default will be sent to the client . [ 42 ] On January 12, 2001 – a few days before the line of credit was issued – Mr. G. reiterated the objective and noted that

Educaction had failed to respect the required ratios from the very beginning: [ translation ] [225] On January 12, 2001, another credit

summary was drafted following modifications brought to the financing proposal after Édu- Performance was acquired. The Exchange listing was then planned for February of 2001, and the cash that stood to be invested on the day it went public could reach $20 million. Even though Mr. G. found this amount to be "astronomical", he concluded that it might bring in [ translation ] "substantial additional cash that could only diminish the bank's risk". These modifications were therefore approved even though at the time Educaction was not respecting the financial ratios set out in the loan agreement. [226] At the time, Mr.

G. described BMO's strategy as such: [TRANSLATION] The Bank can always exercise its recourses, if it considers it necessary to do so , and there is a fair chance that it will be quickly repaid in light of the stakes involved for third-party investors . [227] While being cross-examined, Mr. G. insisted that he had chosen his words poorly in light of BMO's lack of power over third- party investors. And yet, Mr. V. who, lest we forget approved Mr. G.'s reports, had to acknowledge that: [ translation ] Q. You haven't answered my question.

I asked you: the stakes involved for third party investors, is that the fact that they invested twelve million dollars ($12 million) that they did not want to lose? Is that right or wrong? And if it is wrong, tell me why? A. Well, investors invested twelve million dollars ($12 million) and then yes, I am sure that they didn't want to lose that money. Q. So, those are the stakes for the investors, no? ... A.

Well, investors do not want to lose their money. [228] The Court finds that, from that moment on, BMO intended to enforce its security when it saw fit and to force a cash inflow from new investors. [ 43 ] It is worth noting in passing that the fact that the ratios were not respected when the line of credit was issued shows clearly their very relative importance for BMO and, conversely, the critical importance of its security interest in the accounts receivable. [ 44 ] And this brings us to May of 2001 and the letter of default: [ translation ] [231] As for the strategy adopted for the month of May 2001, Mr.

G. describes it in the following words: [ translation ] In the near future (one year), obtain the reimbursement of advances by forcing cash inflows from new investors whose objective is to realize an RTO or IPO on the stock market [Educaction] (scheduled for May of '01) and to ... [ 45 ] Pursuing its strategy, BMO met with the officers of Educaction and Multipartn'r and insisted that a solution be submitted simultaneously for both companies. The trial judge wrote: [ translation ] [242] As we know, Mr. V. then demanded solutions for both Educaction and Multipartn'r. ... [260] On June 22, 2001, a credit

summary was written by Mr. G. It concerned two companies, Multipartn'r and Educaction, even though these two are separate legal entities. ... [272] The first part refers to the legally non-existent surety imposed by BMO on Educaction with respect to Multipartn'r's obligations to BMO ... ... [274] One of the main elements is the requirement of a [ translation ] "separate solution for both companies", as specified by Mr. V. on several occasions, when discussing and refusing the offers submitted by Educaction.

The very content of this requirement has no legal basis, and is tantamount to requiring that Educaction stand surety for Multipartn'r, which, as we know, it refused to do. The agreement entered into between BMO and Educaction does not include the latter standing surety for Multipartn'r. [ 46 ] When Educaction received the letter of default, it formed a committee of experts that included a former bank manager, now

retired, to come up with ways to convince BMO to withdraw its letter. The trial judge listed the measures considered by Educaction and BMO's refusal, which was incomprehensible to the committee members: [ translation ] [248] Despite Mr. A. [9] and Mr.

G. not having any clear memory of the subject, the Court concludes that the evidence reveals on a balance of probabilities that the representatives of Educaction also addressed the following elements: • The Exchange listing initially planned for May 22, 2001, which was postponed to June 6, 2001; • Hampton Securities' offer was conditional to BMO withdrawing its letter of default, which would have allowed a $1,245,000 cash injection; • The $1 million offer from SIPAR was conditional on the Exchange listing and payable the day of that listing; • LBJ Partenaires's offer to convert $1 million of the debt owed to it by Educaction to company shares was increased during the meeting to $1.7 million; • The possibility that the total conversion of Educaction debt, including that of LBJ Partenaires, to shares would reach $3,500,000; • $10 million obtained on the day of the Exchange listing through an IPO. [249] The Court accepts that at the end of the meeting held on June 1, 2001, BMO refused to withdraw its letter of default.

Despite the incomprehension felt by the representatives of Educaction, they continued to work on their plan to go public July 6, 2001. [ 47 ] What was incomprehensible at the time became clearer when BMO's internal documents were obtained and its representatives were forced at the hearing to admit the backdoor strategy, which was already set in motion in September of 2000. [ 48 ] BMO's position is so unbelievable that Educaction and its committee of experts remained convinced that BMO would withdraw its letter.

They continued with their steps until they received the notice of July 4 from BMO regarding its intent to enforce its securities, a decision that was equally incomprehensible to them. [ 49 ] On May 3, the day it sent the letter of default, BMO knew that the Exchange listing was planned for May 22. Its representatives started out by denying this, but were later forced to admit it. The trial judge quoted other testimonial excerpts: [ translation ] [234] When Mr. G. sent the letter of default, he knew very well that the Exchange listing was planned for May 22, 2001.

He denied knowing that Educaction had already obtained conditional approval for its listing from the Stock Exchange, but then added: Q. ... were you aware that management deemed – Educaction's management, obviously, or TMI Learnix's management – deemed that when it went public, and you knew that the date was planned for May 22, that the Exchange listing would yield ten million dollars ($10 million)? ... A. No, I was not aware of that. Q. Are you sure? A. I'm sure. ... Q. Do you, like me, see a letter from Mr.

A. [president of Educaction] dated March 23, 2001 , ... : [ translation ] We wish to inform you that the Montreal Stock exchange has conditionally approved the listing quoting the common shares of the company. Presently, with the help of a syndicate of securities brokers, TMI-Learnix is working toward financing of about ten million dollars ($10 million) that will allow us to finalize the Exchange listing, which is planned for June 6, 2001, at the latest . [235] Upon reviewing BMO's

summary from early May, Mr. V. was forced to acknowledge that at that time, he knew that the Exchange listing was planned for May 22, 2001. Then, with respect to BMO's strategy at the time, he acknowledged: [ translation ] Q. "Strategy" ... I was suggesting earlier that your objective in May was to be reimbursed by forcing the investors' hand. Isn't it written in black and white in the document? A. That is what is written in the document.

[236] The Court finds that in the month of May of 2001, when BMO sent its letter of default, its representatives had the following information: • ... • The actual risk to BMO was $1.1 million and it had over $8 million in accounts receivable as security. The situation did not concern Mr.

V.; • ... • The Exchange listing was planned for June 6, 2001, at the latest and announced to the public as happening May 22, 2001; • They knew that sending a letter of default created an obstacle to Educaction's going public and determined that it was the [ translation ] "right time" to exercise the necessary pressure to obtain reimbursement of the bank advances. [ 50 ] The trial judge therefore concluded that BMO's actual objective was to prevent Educaction from going public if the investors did not settle Multipartn'r's debt: [ translation ] [264] The Court finds that the attitudes of Mr. G. and Mr.

V. are certainly not marked by honesty and that, without any legal basis, they insisted that Educaction settle the financial problems of Multipartn'r, for which it had not stood surety. ... [265] BMO decided to definitively prevent Educaction from going public by sending the notice of intent to enforce its securities, knowing very well that doing so would bring about the end of that company.

BMO refused to grant any additional time on July 13, 2001. [ 51 ] In short, BMO, despite being fully secured, knowingly prevented Educaction from going public and launching an IPO, thereby depriving it of the capital necessary to bring its e-learning project to fruition.

This led the trial judge to consider whether there was abuse of right. 3- BMO's abuse [ 52 ] The trial judge correctly stated the principle of law that was to guide her and that was reiterated by BMO in its statement: [ translation ] [268] It is well established that to decide whether a financial institution abused its rights against a debtor, the Court must consider whether the BMO's decision is based on reasonable economic factors while also taking into consideration the financial institution's actual risk. ... [ 53 ] She then restated the facts: Educaction’s failure to stand surety for Multipartn'r; BMO'S strategy to [ translation ] "be reimbursed in light of the stakes involved for third party investors"; the [ translation ] "almost non-existent" risk for BMO during the entire period. [ 54 ] It is worth noting that BMO does not contest these facts.

It does not contest that it was fully secured at all times. It does not contest that it had a backdoor strategy or that it exerted pressure. Instead, it argues that regardless of anything it may have done, Educaction's Exchange listing would never have been successful: “… entirely unrelated to the Bank’s actions, Educaction never met the MSE criteria required for the IPO to be successful”. [ 55 ] BMO raised this ground during its arguments at trial, but the trial judge dismissed it since it was not supported by evidence.

She recalled the steps that had been successfully completed for the Exchange listing: [ translation ] [339] The Court will first address BMO's argument that Educaction could not possibly go public because it could not establish with the managers of the Exchange its ability to survive financially for 18 months after its listing date. [340] A review of the evidence on this subject is useful. [341] Two separate firms carried out due diligence on Educaction and were satisfied with the results. This is in reference to Hampton Securities and the testimony of Mr. L. at the hearing.

BMO has adduced no evidence contradicting these assertions. [342] On March 9, 2001, the Stock Exchange issued its conditional acceptance. On May 9, 2001, Hampton Securities sent the Exchange another draft sponsorship letter. The applications to prolong the deadline for listing presented by Educaction first from June 6, 2001 to July 6, 2001, and then from July 6, 2001, to August 6, 2001, were granted by the Exchange. There is no evidence to contradict the content of these documents. [343] In fact, BMO's submission is raised during its oral arguments.

It is not supported by any of the testimony of those concerned by Educaction's applications to the Exchange. Not one of the Exchange's analysts, not even Mr. L., has confirmed or denied the possibility raised by BMO as to the conditions for listing in 2001, or the impossibility in fact for Educaction to actually be listed in July of 2001. [344] Oral arguments, however well presented, cannot compensate for a lack of direct evidence on the subject.

The Court finds instead that the balance of probabilities establishes that, had it not been for BMO's ill-timed and unreasonable decisions, Educaction would have gone public. ...

[ 56 ] BMO went even further: In its view, Educaction's business was in such a pitiable state that, regardless of any abuse on BMO’s part, Educaction was destined to fail. It is the theory supported by its expert in the debate on compensation. [ 57 ] BMO's theory goes directly against the inferences of fact drawn by the trial judge: the e-learning project was [ translation ] "promising"; the Exchange listing would have been successful; the capital would have followed the listing. These inferences are grounded in the evidence.

BMO's submission is nothing more than an argument – skillful yes – but insufficient to parry the lack of evidence or even counter the evidence accepted by the trial judge. [ 58 ] Moreover, BMO never offered an acceptable explanation for refusing to withdraw its letter of default or for sending its notice of intent on July 4 when the Exchange listing was planned for two days later. It stuck to the argument that the ratios were not met, which in its view entitled it to enforce its securities irrespective of circumstances. [ 59 ] If we knew nothing of BMO's backdoor strategy, its actions would make no sense.

Its position was fully secured by the accounts receivable, it had only to wait a few days and let things evolve. If the listing was unsuccessful, the accounts receivable would still be there the next morning and it would not have to now argue forcefully that the listing was bound to fail. The trial judge saw things as follows: [ translation ] [284] The fact that BMO did not run a financial risk has been confirmed by the following evidence: • Between July 4, 2001, when BMO gave notice of its intent to enforce its securities, and the moment it drafted the credit

summary two weeks later, Educaction's debt decreased by $600,000; • In the time between the moment BMO gave notice of its intent to enforce its securities, claiming the amount of $2,126,126, and the moment it subrogated all of its rights to Finloc after being paid by the latter on September 6, 2001, Educaction's debt was only $75,624.58. [285] With respect to its refusal to withdraw the letter of default – which would have allowed the exchange listing to go ahead – Mr. V. cannot explain why he did not grant an extension: [ translation ] Q. ...

Let's take for granted that the Bank of Montreal, generally, and it doesn't matter whether it's you or Mr. G., but let's take for granted that you knew that it was May 22 since that's obvious, why not withdraw the letter and give the company a week or two to get two million dollars ($2 million) for certain and perhaps even up to ten million dollars ($10 million)? What prevented you from doing that, since you were not running any risk? A.

Based on what you say, there is no reason . [ 60 ] It must be noted that BMO exercised its rights "with the intent of injuring another" [10] to obtain a payment that it was not entitled to demand from Educaction. We can only hope that this was a misfire in the complex workings of that large-scale organization.

B- Postponement of the approval of the proposal [ 61 ] Threatened with the notice of intent, Educaction sought protection under the BIA on July 13 and drew up a proposal at once to ensure the revitalization of its company. [ 62 ] In September, Finloc, the new financier, paid the amounts outstanding to BMO and gave Educaction a $2 million advance secured with the remaining accounts receivable. [ 63 ] The creditors approached were in favour of the proposal.

The plan to develop e-learning was still an option. [ 64 ] At the meeting of creditors for the proposal, to everyone's surprise, BMO filed a claim in the amount of $3.9 million. It consisted in part of Multipartn'r's claim against Educaction, which was assigned to BMO, and of Multipartn'r's debt, which Educaction had assumed, and which was added to Educaction's line of credit.

As stated earlier, the balance of this debt was paid by Finloc. [ 65 ] BMO's mandatary, who filed its proof of claim, provided a flawed explanation, as the trial judge explained: [ translation ] [302] Part of this claim is based on the service or management fees Educaction allegedly owes Multipartn'r. Another

part is allegedly the result of Educaction assuming one of Multipartn'r's debts. BMO's mandatary Mr. R. is looking for a cheque that would indicate the payments made by Educaction to Multipartn'r to establish the claim. He cannot find any because Multipartn'r's debt to BMO, which was assumed by Educaction, appears in the balance of Educaction's line of credit. [ 66 ] At the hearing, uncontradicted evidence established BMO's claim at $330,000, less than 10% of the amount claimed. The trial judge concluded: [ translation ] [309] In the Court's opinion, Mr.

R. with the firm ..., as mandatary of BMO, failed to make the appropriate verifications to establish the amounts likely to be due to its mandator.

[ 67 ] Unsurprisingly, the trustee rejected BMO's claim and declared that the proposal that 90% of the other creditors had voted for was accepted. [ 68 ] BMO then had a choice. It could challenge the rejection of its proof of claim without, however, opposing the approval of the proposal. The proposal would then be duly approved by the Court and the company could be relaunched.

Concurrently, the Court would establish the amount of BMO's claim, who could then, along with all the creditors, claim its share of the amount submitted in the proposal ($300,000). [ 69 ] Instead, BMO chose to oppose the approval as long as its appeal from the rejection of its proof of claim was pending.

It thereby caused a delay that prevented the company's relaunch, which could only be successful if the homologation was obtained quickly and no uncertainty remained. [ 70 ] The trial judge noted BMO’s deliberate choice and made the connection to its backdoor strategy: [ translation ] [311] When the trustee rejected BMO's claim, the parties had two options. BMO could appeal from the trustee's decision to the Superior Court. The transaction accepted by the creditors could be approved subject to the Court's decision as to the amount actually owed to BMO.

From this perspective, the transaction is approved, and the legal debate establishes BMO's actual claim, which will be paid according to the formula submitted by Educaction after judgment is rendered by the Court. [312] The Court is of the view that Mtre P. has not shown any bad faith in performing his duties as counsel for BMO. Simply put, the representatives of BMO, Mr. G. and Mr. V. in particular, never informed him of the strategy that was set in motion in September of 2000 and used his services for their own purposes.

They told him only what they wanted him to know so that he could draft the letter of default, the notice of intent to enforce the securities, the letter withdrawing financial backing and the proof of claim. Moreover, Mr. R. misled him. [313] Despite the fact that Mr. V. acknowledged it was urgent for the transaction to be approved to avoid Educaction's bankruptcy, BMO opposed it as long as the amount of its claim was undetermined... . The letters of Mtre P. on this subject reflect the position of his client's representatives: Mr. G. and Mr. V.

They could not be unaware that because of the amounts received from Finloc, their claim was untenable. Nevertheless, they dug in their heels. [ 71 ] The representatives' attitude at the assembly, including that of Mr. V., was unequivocal: BMO would never accept the proposal. The trial judge stated: [ translation ] [318] Mr. B and Mr. L. [from Educaction], as well as Mr. B [from Finloc], stated that because of the aggressive attitude of BMO's representatives and of Mr. V. in particular, they all understood that BMO would never allow Educaction to succeed. [ 72 ] Mr.

B from Finloc was surprised by the [ translation ] "aggressive attitude" of BMO's representatives, including Mr. V. He approached him in an attempt to reason with him, but was unsuccessful. The trial judge quoted his testimony to relate this episode: [ translation ] [321] The Court has no reason not to believe the independent, balanced, and sincere testimony of Mr. B., the president of Finloc. At the hearing, he stated that he did not understand the attitude of BMO's representatives. In fact, his incomprehension was such that he spoke with Mr. V. to ask him why he was acting this way.

He related this incident as follows: [ translation ] A. ... we tried talking to these guys, with V. and their lawyer, so that they could, in the end: "you know, it makes no sense what you’re doing, you’re killing the business, etc.” and then... it was very, very clear: "we'll never take the deal”. ... A. ... I said: "well that's it, I guess... “ ... Q. The case was closed? A. Case closed, over and done.

You don't invest more money when there's a sword of Damocles hanging over your head. [ 73 ] The trial judge insisted on pointing out the abusive amount claimed and the BMO's closed mindset: [ translation ] [323] Usually, the Court would not have any reason to find that an error of a few dozen or even one or two hundred thousand dollars would give rise to the mandator's extracontractual liability. ...

[325] The Court finds that BMO's representatives committed a fault giving rise to extracontractual liability by filing a grossly exaggerated claim that was largely without merit. Mr. V. also incurred BMO's extracontractual liability when he told Mr. B. that he would [ translation ] "never take the deal". As we know, his words and aggressive attitude so convinced Mr. B. that he recommended to Mr. D. that Finloc stop backing Educaction financially and enforce its securities. [ 74 ] Why was BMO so determined to prevent the arrangement and make any possibility of relaunching the e-learning project disappear?

No explanations have been offered. Was it to hide that the Exchange listing had been abusively thwarted and that BMO was hoping the bankruptcy would make the situation go away quietly? This would probably have been the case had it not been for the principal investor, Mr. L., who came to an agreement with the trustee to sue. [ 75 ] With no rational explanation at our disposal, we must conclude that BMO continued to exercise its rights for the sole purpose of injuring Educaction until it was paid the debt owed by Multipartn'r.

C- Prescription and objection to the evidence [ 76 ] A word is in order as to the two side issues raised by BMO: the prescription of the trustee's action and the objection to hearsay evidence of the European investors' interest. [ 77 ] The action was brought in late June of 2004, less than three years after BMO's notice of intent dated July 4, 2001, but more than three years after the default letter dated May 3, 2001. When does the limitation period begin to run? [ 78 ] For the trial judge, the answer to that question is July 4.

She explained her reasoning: [ translation ] [115] It is only when the notice of intent to enforce a security was sent on July 4, 2001, that the Exchange listing planned for July 6, 2001, becomes impossible. In the view of the Court, that is when BMO caused the prejudice that would permanently prevent the Exchange listing planned for July of 2001.

It is therefore at that moment that prescription began to run. [ 79 ] It is noteworthy that BMO's refusal to withdraw the letter of default dated May 3, which would have allowed Educaction to go public, continued to baffle Educaction, who was still convinced that common sense would prevail and BMO would agree to the reasonable solutions it proposed. Educaction's hope was legitimate and logical because BMO'S attitude was so out of step with the circumstances. For Educaction, there was no chance that it would sue BMO before July 4 if going public was still a possibility.

To any impartial third party who was not aware of BMO's backdoor strategy, it would even have seemed likely. [ 80 ] Educaction realized only on July 4 that it would suffer damage. At any rate, the way of seeing things adopted by the trial judge, is based on the evidence and cannot be characterized as a [ translation ] "palpable error". [ 81 ] In fact, BMO is criticized for abuse of right.

If, in Educaction’s view, it exercised its rights strictly and even threateningly until July 4, doing so did not constitute abuse so long as it kept the conversation going, at least to all appearances, to find common ground with its client. The threshold for abuse was met only when BMO followed through on its threat by putting an end to all negotiations and enforcing its securities. [ 82 ] As for the hearsay objection against evidence of the capital expected from European investors, the trial judge ruled thus: [ translation ] [125] BMO argues that the Court cannot give any credibility to the testimony of Mr.

S. with respect to the confirmed amount authorized for the purchase of shares by its European clientèle. In its view, this is mere hearsay and inadmissible. [126] Is that the case? [127] Mr. B. and Mr. S. both work for Hampton Securities. Mr. V. from BMO trusts the integrity of this firm so much that he did not make any verifications in its regard. [128] The remarks of Mr. S. and Mr. B. are moderate and balanced. [129] As for the amount they were authorized to invest, it appears regularly in the summaries and credit applications drafted by BMO's Mr. G. and in the letter dated March 23, 2001, that Mr.

A. [president of Educaction] sent to BMO. [ 83 ] Later, discussing the amount of compensation, the trial judge explained why she deemed the evidence to be satisfactory. [ translation ] [350] BMO argues that this amount [of $10 million] is only a possible investment, not a certain one. The Court cannot accept this argument because the evidence reveals that the workings of the securities brokerage business rely on telephone conversations, and orders placed this way are honoured, subject to force majeure. There is nothing in the evidence to contradict the modus operandi described by Mr. S. and Mr.

B. from Hampton Securities. [ 84 ] I share her opinion. Educaction had to prove that the e-learning project was considered promising at the time, that is, that according to the facts that were then known, its implementation was well on its way to becoming a reality and its success was likely. [ 85 ] A few days shy of the Exchange listing, the interest of the European institutional investors was one of these facts. At that stage of the project, it was not necessary to prove firm undertakings. It was enough to prove interest. The brokers who had solicited these

investors and received positive responses could testify to the interest that had then been communicated to them personally. [ 86 ] I do not see that there was any error committed with respect to these two side issues. [ 87 ] To conclude on this first part, I am of the view that the trial judge found rightly that BMO abused its rights to prevent the Exchange listing and then to postpone the approval of the proposal. This abuse caused the failure of the investors' e-learning project and then Educaction's ruin.

PART II – COMPENSATION [ 88 ] The trial judge reiterated the positions of the parties, which are based on contradictory premises. Educaction took for granted that the [ translation ] "Exchange listing would be successful" whereas BMO believed that [ translation ] "the company would not be listed". Generally, BMO's experts believed that Educaction had no future and that its value should therefore be assessed in a liquidation context.

Educaction's experts were optimistic and, as the trial judge said, [ translation ] "it is all success, all the time, and their report does not qualify this in any way". [ 89 ] The trial judge summarized: [ translation ] [337] In other words, in BMO’s view, because Educaction was worth nothing in June and July of 2001, it is not entitled to anything today as compensation. [338] Educaction’s position is quite the opposite: even though it was experiencing financial difficulties, they would have been solved by going public and the company was worth at least $30M, if not more, taking into consideration the estimated value of its capital-stock as at January 2001 and the future cash injections. [ 90 ] The trial judge revisited the question of the Exchange listing to find that [ translation ] "had it not been for the notice of intent to enforce the securities dated July 4 ...

Educaction would have gone public". [ 91 ] The trial judge therefore set aside the expert reports that have [ translation ] "very little common ground" and [ translation ] "do not take into consideration the lay evidence adduced at trial". She then thought it relevant to assess the compensation [ translation ] "as at July 6, 2001, that is, after the notice of intent to enforce the securities was sent". [ 92 ] The various amounts that make up the $12.5 million in compensation awarded by the judge will be discussed later.

Let us first consider the merit of setting aside the expert reports on the value of Educaction's shares. [ 93 ] It is well established that a court is not bound by the opinion of experts. Here, the trial judge set the opinions aside because the premises of those presented by one side were too optimistic, while those on the other were too pessimistic.

She noted that their assessments failed to consider reality, that is, the situation revealed by the evidence, which included the Exchange listing and completion of the e-learning project on the one hand, and the stages that were yet to be completed to achieve the increase in sales on the other. [ 94 ] Educaction's experts used three valuation methods yielding wildly varied results ranging from $23 million to $46 million. Educaction went even further, extrapolating a value of $60 million to $90 million based on an offering of $1 to $1.50 per share. These considerable discrepancies do not inspire confidence.

Two of the three methods are rather theoretical while the third, recognized by the Canadian Institute of Chartered Business Valuators, is the method also used by BMO's experts. [ 95 ] Educaction's experts, however, are enthusiastic. As the saying goes, they see the future through rose-coloured glasses. Their calculations are based on a cash flow of $2.3 million for the period from July 2001 to June 2002, whereas Educaction anticipated only $0.5 million.

A 20% growth rate for this period is somewhat utopian when Educaction's sales plummeted in 2001, like those of other computer-related businesses. [ 96 ] The trial judge found the opinion of Educaction's experts to be unreliable. I do not see in this a "palpable error". [ 97 ] BMO's experts erred in the opposite extreme. To them, the future is doom and gloom. They base their calculations on the 2001 results, which were atypical and did not represent the years to come. [ 98 ] Educaction was a new business even though it stemmed from Multipartn'r.

Going from on-site training to online training was a major operational change. The year from August 2000 to July 2001 signalled that the past was being left behind even though the future was not quite figured out. [ 99 ] BMO's experts support its theory that Educaction could never have gone public and would not have completed its IPO.

Even their amended report from November of 2011 repeats the theory of an [ translation ] "absence of imminent new investments" and favours an assessment based on a 90% liquidation valuation rather than an operational valuation. [ 100 ] The trial judge ruled that the Exchange listing and the IPO would have been successful. The assessment of the compensation had to be based on this fact.

While it is certainly true that the evidence was contradictory, the trial judge's observation is supported by that evidence and cannot be characterized as a "palpable error". [ 101 ] It is not possible to average it all out to find [ translation ] "a middle ground". Even if the third method of Educaction's experts is also the one used by BMO's experts, their results are too disparate ($43 million versus $13 million) as a result of their opposing premises.

One assumes profit was a sure thing, while the other views the project as dead in the water. [ 102 ] In fairness to the experts, the subject of the valuation had a very particular nature. It was not really a more or less established

business with an operational history and a relatively foreseeable future, but rather an intangible asset, a promising project becoming a reality and ensuring a new, more modern operation through a revitalized business, whose wings were clipped just as it was about to take flight. [ 103 ] Even if the expert reports are practically useless and despite the difficulty of the task, the trial court had to determine compensation, even resorting to approximation where necessary. In Videotron Ltd. v.

Bell Express Vu, l.p. , [11] the Court expressed this clearly: [734] The quantification of compensatory damages in the context of the present proceedings presents considerable challenges. The various methods of calculating the loss of potential subscribers, the income generated therefrom and the resultant loss of profits are, at best contentious.

Clearly, the significant differences in the evaluation of damages arrived at by the financial experts retained by each of the parties to assist the Court in the quantification of damages reflect the extent of the challenge. [735] However, the presence of these challenges does not negate the right of recovery of an aggrieved party when, as in the present case, fault, causation and the existence of damages has been adequately proven on the balance of probabilities.

The Court’s role in such circumstances is to arbitrate the quantum of damages based upon whatever credible evidence may be available to it. [Emphasis added] [ 104 ] In Société du Parc des îles v. Renaud , [12] this Court ruled similarly: [ translation ] [26] In doing so, the judge adjudicated the damages as he had to in the circumstances.

Having concluded that the appellants breached their obligations in various ways thereby, in all likelihood, harming the goodwill of the business operated by the respondent, he had to find in the evidence the probable demonstration of the amount of financial harm suffered by the respondent. ... [ 105 ] And it did the same in Provigo Distribution Inc. v. Supermarché A.R.G. Inc. : [13] [ translation ] The existence of several largely unforeseeable factors made assessing the prejudice an extremely complicated task.

The additional difficulties encountered by this Court in assessing the damage while basing itself solely on the evidence on the record will no doubt explain its lack of strict mathematical rigour. It must rely on a certain amount of approximation, estimation and its own discretion when proceeding with the calculation. That is, however, the role of judges . [ 106 ] In the absence of useful expert reports, the trial judge based herself on [ translation ] "the lay evidence adduced at trial".

To do so, she considered some assets lost by Educaction because of the failed Exchange listing, including the investment of [ translation ] "$1 million from SIPAR to be paid on the day of entry followed by $500,000 within 90 days of this date" and that of Hampton Securities of $945,000. [ 107 ] She added the European investments that had been promised in February, but halved them because the Exchange listing was postponed to July 6. She wrote: [ translation ] [347] As we know, the many [ translation ] "summary [reports] and credit applications" written by Mr. G. and approved by Mr.

V. show that there was to be a $10 million investment the very day on which Educaction went public. This amount came from the European investors of Hampton Securities. The Court must examine whether the amount in question was still available on July 6, 2001. [348] The evidence reveals that some European investors, tired of waiting for the Exchange listing that had been presented as imminent since the European tour in February of 2001, decided to invest their capital elsewhere. How many did this and how much capital did they take with them?

The evidence does not say. [349] In these circumstances, the Court deems it appropriate to use its discretion and find that damages amount to only half the amount promised by the European investors of Hampton Securities, that is, $5 million. [ 108 ] The trial judge also included [ translation ] "the $3.12 million conversion of debt into capital-stock".

BMO argues, correctly, that this operation [ translation ] "would not have brought any new funds to Educaction". [ 109 ] I am nevertheless of the view that this direction taken by the trial judge to assess compensation based on the value of the lost assets is valid. I shall explain. [ 110 ] The main point to be considered is the expected success of going from on-site training to e-learning. According to the evidence, the project was well underway on July 6. The computer platform was progressing nicely and the capital required to complete the work would be available as soon as the company went public. [ 111 ]

Article 1611 of the Civil Code of Québec establishes that compensation is the "loss... sustained" by the victim, in addition to the "profit of which he has been deprived". In this case, the loss is the value of the e-learning project, partly completed as at July 6, and the profits, in addition to the surplus in value corresponding to its completion in the near future. [ 112 ] From September to December of 2000, Educaction's assets increased because of amounts that were invested.

Then, up until July of 2001, the increase was transformed into an intangible asset in the form of the e-learning project being developed. In early July of 2001, Educaction's assets were about to increase, thanks to the IPO, with the additional capital required to complete the project and take it to its full value.

[ 113 ] Overall, the value of the assets that Educaction was deprived of is equivalent to the cost of completing the e-learning project, which includes some approximation, inherent to the Court's mandatory adjudication "based upon [the] credible evidence ... available to it". [ 114 ] Investors would certainly like their compensation to include an amount for the anticipated profits from future e-learning operations in addition to the cost of the project. But this leads us back to Educaction's expert reports, which were set aside by the trial judge.

And quite rightly so, in my opinion, because pondering the future in these circumstances includes too many intangibles and leads us further from "the immediate and direct consequence" of the fault, which is the yardstick for compensation (art. 1607 C.C.Q. ). [ 115 ] The evidence reveals that the cost of the project – that is, the funds invested in September of 2000 ($2.3 million); until October 16, 2001 ($4 million); in November and December ($7 million); and those immediately available on July 6, 2001, from SIPAR ($1.5 million), Hampton Securities ($0.945M), and the Europeans ($5 million) – total $20.745 million. [ 116 ] To this loss sustained in July, we must add the $1 million invested by the principal investor between July of 2001 and January of 2002 to ensure the relaunch of the business. [ 117 ] Indeed, after the bankruptcy, the project remained very much alive.

The creditors believed in it, and 90% of them voted in favour of the proposal. Finloc had already invested $0.75 million and agreed to act as banker and loan the amount of $2 million. The principal investor reinvested an additional $1 million. [ 118 ] From this total amount of $21.745 million, the parties agree that Educaction's residual assets, $6 million, should be subtracted, resulting in compensation in the amount of $15.745 million. [ 119 ] The project was promising, but It was completed elsewhere. A service manager for Educaction with twenty years' experience in the field recognized its value.

He too never understood why the project failed: [ translation ] A. ... So, I could see better days for [Educaction], not the year that I got there, but the following year, or the years after that. Q. Why? A. Because by the time customers purchase these new technologies, that's automatically going to generate a strong demand from application developers, for example, who were developing in an... with old tools so they won't have a choice but to train for them with certified courses ... Q. I understand. You say that you were counting on it.

Why the following year, and just as a question of fact, did what you were counting on happen? A. Well yes, I mean, the Microsoft courses, they have taken off. Afterward, I worked for another firm that is now the number one firm for Microsoft courses and I observed that what I had predicted happened, but for another firm. Q. O.K. For another firm? A. Well, yes. [Educaction] was not there. ... A. ...

I never understood why [Educaction] closed. [ 120 ] For these reasons, the Court dismisses the principal appeal, with costs, allows the incidental appeal, with costs, for the sole purpose of substituting paragraph [360] of the conclusions of the judgment with the following: ORDERS the Bank of Montreal to pay to the trustee plaintiff the amount of $15.745 million in damages with interest as of the date on which the action was served and the additional interest as of that same date. PAUL VÉZINA, J.A. [10] C.c.Q. : Art. 7.

Aucun droit ne peut être exercé en vue de nuire à autrui ou d'une manière excessive et déraisonnable, allant ainsi à l'encontre des exigences de la bonne foi. C.C.Q.: Art. 7. No right may be exercised with the intent of injuring another or in an excessive and unreasonable manner, and therefore contrary to the requirements of good faith.