2010 ONSC 2597, 2010 ONSC 2597

CITATION : Agribrands Purina v.

Kasamekas, 2010 ONSC 2597 COURT FILE NO.: 44605/92 44871/92 DATE: 2010-05-03 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: ) ) AGRIBRANDS PURINA CANADA INC. ) ) ) ) ) ) ) Montgomery Shillington, for the Plaintiff and Defendants to the Counterclaim, Agribrands Purina Canada Inc., McGrath Farms Inc., Edward James McGrath Farms Limited, EJM Farms Ltd., and the Estate of Edward James McGrath ) Plaintiff ) ) - and - ) ) ) WALTER KASAMEKAS and SHERRY KASAMEKAS, RAYMOND JOSEPH JACKSON and SAVITRI JACKSON ) ) ) ) ) ) Graydon Sheppard, for the Defendants Walter Kasamekas, Sherry Kasamekas and Raymond Joseph Jackson, and the Plaintiffs by Counterclaim, Raymond Joseph Jackson, Walter Kasamekas, and Raywalt Feed Sales Ltd. ) Defendants ) ) A N D B E T W E E N: ) )) ) WALTER KASAMEKAS, SHERRY KASAMEKAS, RAYMOND JOSEPH JACKSON and RAYWALT FEED SALES LTD ) ) ) ) ) Plaintiffs by Counterclaim ) ) ) - and - ) ) )

AGRIBRANDS PURINA CANADA INC., REN’S FEED AND SUPPLIES LIMITED, WALTER RENDELL JOB, MCGRATH FARMS INC., EDWARD JAMES MCGRATH FARMS LIMITED, E.J.M. FARMS LTD. and THE ESTATE OF EDWARD JAMES MCGRATH ) ) ) ) ) ) ) Gerard V. Thompson for the Defendants by Counterclaim Ren’s Feed and Supplies Limited and Walter Rendell Job ) Defendants by Counterclaim ) ) Michael G. Quigley J.

Supplemental Reasons for Judgment Pre-Judgment Interest [ 1 ] In Reasons for Judgment released on January 6, 2010, the defendants by counterclaim (“defendants”) were found jointly and severally liable for damages to the plaintiffs by counterclaim (“plaintiffs”). I awarded damages to Walter Kasamekas, Raymond Jackson and their business, Raywalt Feed Sales Ltd. to compensate them for the business they lost because of the defendants’ actions.

The defendants were found to be jointly and severally liable for damages that resulted from the concerted action of all defendants, commencing initially with the breach of contract perpetrated by Purina against Raywalt, and continuing with the unlawful conduct conspiracy.

I concluded as well that Purina, but only Purina, would be liable to the plaintiff’s by counterclaim for an award of punitive damages. [ 2 ] Those reasons also reflect my conclusion that the damages award needed to be based on one full year of operations, but without initial startup losses being taken into account, in order to approximate the value of the business that the defendants’ action denied to the plaintiffs.

Although Raywalt commenced business in March of 1991, for that purpose I chose what would have been Raywalt’s first full year of operations from February 1, 1992 to January 31, 1993, absent the actions of the defendants. I accepted the methodology in Lister v. Dayton Tire that had been urged on me by the defendants as being appropriate to the damages quantification exercise.

I applied a three times earnings multiple to conclude that the going concern value of Raywalt at the end of that first full year of operations from February 1, 1992 to January 31, 1993 would have been $954,213, absent the wrongs perpetrated by the defendants.

That is the amount of general damages that I awarded to Walter Kasamekas, Raymond Kasamekas and Raywalt for Purina’s breach of contract and for the unlawful conduct conspiracy of all the defendants. [ 3 ] Even though no submissions were made on the subject at trial, I briefly addressed the question of the pre-judgment interest entitlement of the plaintiffs in paragraph 219 of my reasons. I stated as follows: [219] The average rate of interest established for pre-judgment interest by

section 128 of the Courts of Justice Act , R.S.O. 1990, c. C.43 , for 1992, the year in which I find that the cause of action of the plaintiffs arose, is 6.65%. Applying that rate of interest on a simple interest basis to damages of $954,213 for the 18 years that have passed since these events occurred results in pre-judgment interest payable of $1,142,193.

Accordingly I find and award general damages to the plaintiffs by counterclaim in the amount of $2,096,406 inclusive of pre-judgment interest. [ 4 ] Although paragraph 219 reflects an initial determination of pre-judgment interest (PJI) that should be payable here, I acknowledge that none of the parties had the opportunity to make submissions on that issue at the conclusion of the trial, and following the release of my reasons I received correspondence from Mr. Thompson asking to make further submissions on behalf of all of the defendants on the calculation of PJI. That request was opposed by Mr.

Sheppard, counsel for the successful parties, but I have concluded that principles of natural justice require that I receive further submissions from counsel, addressed to that issue only. [ 5 ] In their written submissions dated March 5, 2010, the defendants question the calculation of PJI. They claim that the court should exercise its discretion to reduce the interest rate from that reflected in paragraph 219 of the Reasons for Judgment.

They acknowledge that PJI was awarded at the rate of 6.65% for a period of 18 years for total PJI of $1,142,193 and that 6.65% was the average rate applicable under the Courts of Justice Act for 1992, but they submit that the PJI rate should be set lower, either at an

average rate of 4.29% or at what they say is the presumptive rate of 5.1%. In contrast, the plaintiffs reject those submissions as beingmisguided and without merit. They argue that my initial award of PJI is correct and should not be disturbed. Analysis [6] PJI is determined under

section 128 of the Courts of Justice Act. Case law establishes that the first step is to determine whenthe action was commenced, and to then consult the prescribed statutory tables to determine the applicable PJI rate and calculate theinterest from the date the cause of action arose: Bozzo v. Giampaolo, [2003] O.J. No. 3340 at paragraph 14, affd. [2005] O.J. No. 2062(C.A.). [7] I accept the proposition that in awarding PJI as prescribed by the statute, the court is simply awarding money that has beenwrongly withheld from a plaintiff, based on the application of prescribed rates.

Consequently, absent special circumstances that activateother factors enumerated in the Act, an award of PJI should be made at the prescribed rate as established by the Courts of Justice Act. InAdamni v. Peel (Regional Municipality), the Ontario Court of Appeal noted that an award of damages must include PJI in order toproperly compensate a plaintiff. It confirmed that the amount awarded must compensate the plaintiff for the loss of use, the loss of valueof a monetary award until it is paid: see also Andrew Kowalczewski Insurance Brokers Ltd. v. Hunt [2001] O.J.

No,. 4229 (C.A.) at para13, Irvington Holdings Ltd. v. Black et al. (ON CA), [1987] O.J. No. 56 (CA) at paragraph 30; and Andani v. Peel(Regional Municipality), [1993] O.J. No. 1604 (C.A.) at paragraph 15 to 17, leave to appeal refused [1993] S.C.C.A. number 438. [8] The defendants say that since the plaintiffs issued their defense and counterclaim in the fourth quarter of 1992, thepresumptive PJI rate in this case under section 127(1) of the Act is the 5.1% rate applicable for the fourth quarter of 1992.

However, theplaintiffs correctly observe that the 6.65% rate that I applied for the purposes of calculating PJI in this case is the average rate applicablefor the entire 1992 calendar year. More importantly, section 128(1) of the Courts of Justice Act shows that the appropriate starting pointfor the calculation is not the date on which the claim was actually filed, but rather the date on which the cause of action arose: see alsoSedigh v. Lange, [2000] O.J. No. 3606 (S.C.J.) at para. 11.

I focused on when the cause of action arose as the relevant time and found asa fact that the plaintiffs’ cause of action arose at some point in 1992 at or about the time that the business failed owing to the actions ofthe defendants, rather than focusing on the date upon which the plaintiffs filed their claim.

As such, I continue to regard it as appropriateto average the quarterly rates for 1992 in the manner that I did at paragraph 219 of my Reasons for Judgment. [9] The defendants then argued that the court ought to have adjusted the PJI rate down after taking into account factors listed insection 130(2) of the Act, specifically the factors in subsections (a), (c), (e), (

f) and (g). They claimed that: (

i) The court must take account of changes in market interest rates that caused PJI rates to vary widely between 1992 and2009.[1] (ii) The court ought to take account of the 18 years that have passed from the date of the occurrence of the events to the date ofthe judgment. (iii) The court must take account of the amount claimed and recovered in the proceedings. The plaintiffs claimed $1 million andrecovered $954,213 in respect of that claim, but recovered $2,096,406, more than double the amount claimed after PJI.

As such, the PJIcomponent of $1,142,192 comprises more than half of the total amount received by the plaintiffs. (iv) The court should take account of conduct attributed to the plaintiffs that they assert lengthened the duration of the proceedingunnecessarily, in particular a failure to bring the case on for trial until 18 years had elapsed since the occurrence of the events. They notethat Raywalt Feed Sales Ltd. itself was not brought into the action until March of 2003 when the plaintiffs retained new counsel, butwhen the PJI rate was only 3%. (

v) Finally, they note that subsection 130(2)(

g) of the Act provides that the court shall take into account any other relevantconsideration. They argue on the basis of Bozzo that one relevant consideration could include whether a small change in the interest ratewould result in a great change in the final award amount and the proportion attributable to interest. Use of the alleged presumptive PJIrate of 5.1% would reduce the PJI by 23% and the aggregate award by 13% and use of an alleged average PJI rate of 4.29% would reducethe PJI component to 36% and the aggregate award by 19%.

Essentially, given the extended period of time that has elapsed since thecause of action arose, and given that interest rates have fluctuated widely during that period, the defendants claim the court ought toexercise its discretion to average the PJI rate[2] and reduce the PJI payable by these defendants. [10] On the basis of these five factors set out in s. 130(2) of the Courts of Justice Act and their particular allegations, the defendantsask the court to set the PJI rate at 4.29%, rather than the 6.65% rate referenced in paragraph 219 of the Reasons for Judgment, oralternatively, at what they say should be the presumptive rate of 5.1%.

However Graham v. Rourke, (ON CA), [1990]O.J. No. 2314 (C.A.) at page 6 establishes that the plaintiff is prima facie entitled to the PJI specified in the Act once an award ofdamages has been made in its favour, and it shows as well that a variance from the prescribed rate should arise only where the courtexercises its discretion to deviate from the prescribed regime.

The case law also shows that the onus of justifying a deviation from thatrate rests upon a defendant who seeks the application of a lower rate. [11] Here, the defendants have advanced a range of reasons for their claim that a lower rate should be applicable, but I find that theyhave done nothing to discharge the onus that rests upon them of persuading me that it is appropriate that I should exercise discretion inthis case to deviate from what would otherwise be the applicable interest rate specified by the Courts of Justice Act.

The very nature andexistence of such a discretion recognizes that the Court may quite properly choose not to exercise it to alter the applicable interest rate:see Norton v. Kerrigan, [2004] O.J. No. 165 (S.C.J.) at paragraph 11. [12] While a long period of time has passed since these events occurred, I find that the defendants have offered no persuasive reasonwhy the court should ignore the prima facie entitlement of the plaintiffs by counterclaim to PJI at the prescribed rate.

Even if this courtwere willing to exercise its discretion, which I am not persuaded is appropriate in the circumstances of this case for reasons set out

further below, it is only then that the criteria noted in s. 130(2) of the Act would become relevant. Even in that case, however, I am notpersuaded that relief ought to be granted. [13] The defendants express great concern over fluctuation in interest rates, but it is evident from the Act and judicial commentaryon its language that the statutory scheme accepts that there may be real divergence between “market interest rates” and the PJI rate or the“bank rate” at any particular time: Triten Corp. of Canada v. Borden & Elliott, (ON SC), [1998] O.J. No. 3386(G.D.) at pp 3-5, affd. [1998] O.J. No. 4750 (C.A.).

However, while this might in some cases be a relevant consideration, it cannot behere for the simple reason that the defendants have not offered meaningful evidence relating to “market interest rates” during the relevantperiod and have thus failed to discharge the onus on them to show that such a consideration was relevant here and ought to merit theexercise of the courts discretion in favour of a rate reduction. [14] As for the “circumstances of the case”, or the “amount claimed and recovered” in the case as factors referenced in ss. 130(2)(b)and (

e) calling for the exercise of the discretion, I agree with the plaintiffs that it is ironic to now hear from the defendants that they aresomehow prejudiced by the results of this case and my findings on PJI in particular. I agree with the plaintiffs that the effect of the awardbeing granted is to recognize that the defendants deprived the plaintiffs of the value of the Raywalt business by their actions. I fixed thatvalue at $954,213. The defendants were effectively “enriched” by that amount.

It is an imprecise exercise because we do not knowexactly how the value of their businesses was enhanced by the disappearance of Raywalt, Kasamekas and Jackson as competitive forces,but I have no doubt that the effect of the disappearance of that business was that the defendants earned more or less what the plaintiffswould otherwise have earned had the Raywalt business continued, and in that sense it seems correct to me to say that the defendants havewrongfully had the use of money belonging to the plaintiffs, and thus should not now complain about paying prescribed rate PJI on thatsum. [15] As for the defendants’ argument that conduct of the plaintiffs caused undue delay in the prosecution of the case and getting itto trial, there is no merit in that contention.

It should be remembered that the plaintiffs here were the defendants and plaintiffs only bycounterclaim. Purina and the other “defendants” were the actual plaintiffs, who had it within their control to press on with the proceedinghad they wanted to. It is understandable in retrospect that they did not, and indeed Kasamekas, Jackson and Raywalt had to bring amotion to compel those “defendants” to answer their undertakings, and it was the Kasamekas parties, not Purina and the otherdefendants, who set the matter down for trial.

It was those defendants who might more easily be accused of causing delay but whetherthey did or not is not relevant. What is relevant, looked at on balance, is that if there was delay it was not the successful parties whocaused it or who ought to have pressed the matter forward. I reject this argument. [16] Finally, in determining the exercise of its discretion, the court is to consider “any other relevant consideration” as stipulated ins. 130(2)(g).

On this line of argument the defendants plead that the difference between the rate that applied in 1992 and the rate thatapplied for subsequent periods is inordinately high. That may be true looked at from today’s perspective, but that was the actualenvironment that these parties were operating in at the time that these torts were caused and these damages arose. The bank borrowingsthat these parties would have undertaken and the risks that they would have assumed in the hope of establishing a successful business,would have been at those rates, rates that are certainly higher than those applicable today.

However, this is not a persuasive basis toreject the position advanced by the defendants. What is persuasive are the comments of our Court of Appeal on the subject. [17] In Andani v. Peel (Regional Municipality), above, at paras 15-16, the Court of Appeal made clear that fluctuations in interestrates, even dramatic variances, would not, in and of itself, justify or compel a court to deviate from the statutorily prescribed scheme ofrates in the absence of other compelling circumstances.

As the court observed in paragraph 18, one of the collateral purposes of the PJIstatutory provisions was to introduce an element of certainty into the determination of the period over which PJI would be paid, whatawards will and will not attract PJI, and the interest and PJI rates.

The essence of the complaint here is that the plaintiffs are beingovercompensated or are enjoying a windfall in interest at the expense of the defendants, but as the majority observed in Andani, that musthave been within the contemplation of the legislature in enacting the prescribed scheme since an alleged overpayment that was made bya trial judge who ordered PJI in compliance with the statutory

schedule must be regarded as contemplated and permissible.[3] [18] Finally, notwithstanding the focused arguments vigourously advanced by Mr. Thompson in this case in an effort to cause me torevise my conclusions on the PJI that ought to be applicable in this case, I am not persuaded that substantial or cogent reasons have beenadvanced by the defendants that would cause the result to be more “just” if I were to deviate from the statutory scheme and the average1992 statutory rate that I have concluded ought to be applied in this case.

In all of the circumstances of this case, having regard to myReasons of January 6, and the additional Reasons set out in these Supplemental Reasons for Judgment, I remain of the view that theappropriate and the just result on the issue of PJI is that as set out in paragraph 219 of the January 6 Reasons. The supplementalsubmissions of the defendants by counterclaim are dismissed with costs to the plaintiffs by counterclaim. [19] In light of the result, no further order is required. ___________________________ Michael G. Quigley J.

Released: May 3, 2010 CITATION : Agribrands Purina v. Kasamekas, 2010 ONSC 2597 COURT FILE NO.: 44605/92 44871/92 DATE: 2010-01-06 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: AGRIBRANDS PURINA CANADA INC. and AGRIBRANDS PURINA CANADA INC., REN’S FEED AND SUPPLIES LIMITED, WALTER RENDELL JOB, MCGRATH FARMS INC., EDWARD JAMES MCGRATH FARMS LIMITED, E.J.M.

FARMS LTD. and THE ESTATE OF EDWARD JAMES MCGRATH Plaintiff/ Defendants by Counterclaim and – WALTER KASAMEKAS and SHERRY KASAMEKAS, RAYMOND JOSEPH JACKSON and SAVITRI JACKSON and WALTER KASAMEKAS, SHERRY KASAMEKAS, RAYMOND JOSEPH JACKSON and RAYWALT FEED SALES LTD Defendants/Plaintiffs by Counterclaim _______________________________ SUPPLEMENTAL REASONS FOR JUDGMENT _______________________________ Michael G. Quigley J. Released: May 3, 2010