



COURT OF APPEAL FOR ONTARIO

CITATION: Rougemount Capital Inc. v. Computer Associates
    International Inc., 2016 ONCA 847

DATE: 20161110

DOCKET: C59920

LaForme, Pardu and Roberts JJ.A.

BETWEEN

Rougemount Capital Inc.

Plaintiff (Respondent)

and

Computer Associates International Inc.

Defendant (Appellant)

Michael J.W. Round and Nicholas Robar, for the appellant

Peter J.E. Cronyn, for the respondent

Heard: March 8-9, 2016

On
    appeal from the judgment of Justice Mary A. Sanderson of the Superior Court of
    Justice, dated December 17, 2014, with reasons reported at 2014 ONSC 7070
.

By the Court:

INTRODUCTION

[1]

Sixdion Inc. (Sixdion) describes itself as an
    Aboriginal IT company. Its goal was to market comprehensive IT systems to
    Aboriginal communities. Computer Associates International Inc. (CA)
[1]
carries on the business of developing, manufacturing and licensing proprietary
    computer software programs in the U.S. and elsewhere. It has a subsidiary that
    markets and sells CAs products in Canada.

[2]

In 2004, Sixdion believed that it had a contract
    with CA. Sixdion claimed that CA breached the contract, resulting in Sixdion's
    filing for bankruptcy in 2005.  Rougemount Capital Inc. (Rougemount), a
    former Sixdion creditor, purchased the action against CA from Sixdions trustee
    for $5,000. It is common ground that this entitles Rougemount to 60% of any
    damages assessed to have been incurred by Sixdion as a result of CAs breach of
    their agreement. Rougemount claimed damages suffered by Sixdion of $20 million
    - $54 million as a result.

[3]

The trial judge found that there was a contract
    that CA breached and awarded $11 million in damages. CA appeals and argues that
    the trial judge made fatal errors in reaching her decision on both the issue of
    the validity and nature of the contract and in her assessment of damages.

[4]

Rougemount, on the other hand, stresses that
    this action is not just about the destruction of Sixdion, which flowed from
    CA's breach of contract. Rather, it argues that it is also about the loss of a
    formidable opportunity for both Sixdion and CA, as a direct result of CA's
    failure to fulfill its agreement.

BACKGROUND

(a)

Sixdions business and development

[5]

Sixdion was incorporated on February 22, 1996.
    At all material times it had three primary shareholders: Murray Dion (M.
    Dion), Lewis Staats (Staats), and Leo Dion (L. Dion). Sixdion was an
    Aboriginal company
[2]
involved in the information and communications technology business. Initially
    Sixdion provided low-tech services. However, Sixdions principals testified
    (and the trial judge accepted) that the company was constantly developing its
    business model and trying to provide more sophisticated services and products.

[6]

In 2004, Sixdion was at a crossroads. Its
    principals believed that it could achieve commercial success by capitalizing on
    the companys status as an Aboriginal company (in relation to government
    procurement contracts) and by providing technology services for Canadian (and
    eventually international) indigenous populations. However, in order to exploit
    that potential, it needed capital investment and partnership with more
    established companies. It is in this context that Sixdion began to interact
    with CA.

(b)

Negotiations and contract between Sixdion and CA

[7]

Representatives of CA-Canada approached Sixdion
    in March 2004. They were interested in Sixdion because working with an
    Aboriginal company would make it easier for CA to benefit from government
    projects and procurement. Initially, CA wanted a marketing agreement wherein
    Sixdion would re-sell CA products. However, Sixdion insisted on an agreement in
    which CA would purchase some equity in Sixdion and be an active partner in its
    business.

[8]

The trial judge provided a lot of detail about
    the negotiations between the two companies over the summer of 2004. We
    highlight the following salient details:

·

CA-Canada was enthusiastic about the deal but CA-International
    (specifically the head office in New York) was not;

·

Chris Devlin (Devlin) was a significant actor in these
    negotiations and CAs main representative to Sixdion;

·

Devlin told Sixdions principals that Gary Quinn (Quinn),
    Executive Vice-President at CA-International, had the authority to approve the
    deal;

·

Quinn approved the deal and, on July 30, 2004, Devlin told M.
    Dion that Quinn had approved the deal; and,

·

Devlin sent a letter dated August 11, 2004, which stated: I am
    pleased to commit our partnership based on your Term Sheet delivered to me on
    May 6 of this year. In addition to capital we will invest technical and
    architectural resources to ensure that Sixdion can deliver the industries [sic]
    best practices in infrastructure management.

[9]

The deal comprised the following elements:
    Sixdion would receive $1.5 million from CA; CA would get share warrants that
    would provide the option to obtain up to ten percent of Sixdions shares;
    Sixdion would cooperate in selling CA products to the federal government,
    allowing CA to benefit from Aboriginal procurement initiatives; and CA would
    become a partner of Sixdion, finding other investors and businesses, and
    helping Sixdion develop the capacity to achieve its business objectives.

(c)

Breach of agreement

[10]

CA did not honour its agreement with Sixdion. It
    never made the payments that it had promised. Officials at CA-International
    began to question Quinns decision to approve the transaction and in October
    2004, Jeff Clarke, Chief Operating Officer at CA-International, told Quinn to
    kill the deal. CA then informed Sixdion that it would not be continuing with
    their arrangement.

[11]

The trial judge made a number of findings about
    the period between July 2004 (when Quinn approved the proposed deal) and
    November 2004 (when the deal was killed). We note the following:

·

Sixdion hired additional staff and incurred additional expenses
    on the understanding that it would be receiving $1.5 million from CA and would
    be expanding its business;

·

People from CA worked with Sixdion, acting as if they had reached
    a deal. Devlin volunteered to look for other investors. A CA employee worked
    with Sixdion to create and implement a business plan for the partnership; and,

·

Quinn and Devlin believed that they had the authority to commit
    to the deal and believed that their agreement was sufficient to commit CA to
    the contract.

[12]

As noted, CA-International decided to kill the
    deal. Sixdion, which had been facing financial difficulties this entire time,
    collapsed. It filed an assignment into bankruptcy in February 2005.

TRIAL JUDGES DECISION

[13]

As mentioned earlier, Rougemount commenced the
    action, alleging breach of contract and seeking damages suffered by Sixdion of
    $20 million to $54 million as a result.

[14]

CA defended Rougemounts claim and argued that:
    (a) there was no binding contract between CA and Sixdion; (b) CA could rescind
    any contract because it was obtained through misrepresentations; and (c)
    Sixdion did not suffer any damages. The trial judge rejected CAs position. She
    concluded that there was a valid contract and that Sixdion had not made any
    misrepresentations. She awarded $11 million in damages, along with prejudgment
    interest.

(a)

Sixdion and CA entered into a binding contract

(i)

Quinn had the authority to approve the proposed contract

[15]

CA argued that Quinn and Devlin did not have the
    requisite authority to approve the proposed contract. They primarily relied on
    the evidence of George Cox (Cox), an employee at CAs business development
    group, who stated that any equity transaction needed the approval of
    CA-Internationals business development team and that Quinn could not approve
    an equity transaction.

[16]

On the other hand, Rougemount relied on the fact
    that Devlin (who testified) believed that Quinn had the authority, and
    communications from the time of the negotiation showed that both Devlin and
    Quinn thought that the latter could approve the deal as a marketing expense
    or a marketing transaction.

[17]

The trial judge concluded that Quinn had the
    requisite authority. She concluded that the proposed deal was a marketing deal
    and that, therefore, Quinn had the authority to pay the $1.5 million price out
    of his marketing budget. Furthermore, she concluded that Devlin and Quinn had
    obtained the requisite approvals.

[18]

In the alternative, the trial judge concluded
    that Quinn and Devlin had apparent authority to bind CA. CA held out Devlin and
    Quinn as having the requisite authority and did nothing to suggest to Sixdion
    that they were not authorized to make the deal. She found that the principals
    of Sixdion reasonably relied on what Devlin told them in regard to Quinn and
    Devlin's authority.

(ii)

Remaining issues regarding the contract

[19]

The remaining issues regarding the validity of
    the contract are not relevant on appeal. We summarize them briefly. The trial
    judge concluded that the parties had settled all essential terms of the
    contract by August 11, 2004, and the contract was not conditional on any due
    diligence, obtaining a second investor, or amalgamation. The trial judge also
    rejected CAs argument that Sixdion had induced it to enter into the agreement
    through misrepresentations. Therefore, the contract could not be rescinded.

(b)

Sixdions damages

[20]

The trial judge held that CA had breached its
    contract with Sixdion by (a) failing to pay the $1.5 million promised and (b)
    failing to provide the promised assistance, training and services business. The
    trial judge further found that CA had contributed to Sixdions losses in
    several ways: (i) CA wrongly informed one of Sixdions service providers
    (Telesat) that there was no contract, due to which Telesat insisted on more
    rigorous repayment terms, contributing to Sixdions demise; (ii) Devlin
    discouraged Sixdion from pursuing certain other investors, particularly
    competitors of CA; and (iii) in reliance on the promised business relationship,
    Sixdion incurred additional expenses and worsened its precarious financial
    situation.

[21]

Broadly speaking, the damages claimed by
    Rougemount related to the loss Sixdion suffered because of the collapse of
    Sixdions business and  Sixdions failure to achieve its business plan.
    Rougemount was seeking damages on the basis that, had CA kept to its bargain,
    Sixdion would have achieved all of the goals set out in the five-year business
    plan Sixdion had developed with CA. Therefore, the issue ended up being whether
    Rougemount was entitled to damages on the basis that CA deprived Sixdion of the
    opportunity to achieve this potential business plan (the Business Plan).

[22]

The trial judge first addressed a number of
    preliminary issues regarding whether the Business Plan was a proper basis for
    quantifying damages:

·

Would
    Sixdion have survived: the trial judge concluded that if CA had honoured its
    commitment, Sixdion would have survived through the critical period of
    2004-2006 and would have become a profitable enterprise.

·

Was
    Sixdions demise foreseeable: CA knew of Sixdions precarious financial
    circumstances and its need for cash. Therefore, Sixdions demise was a
    foreseeable result of CAs breach of contract.

·

Date
    of assessment of damages: the trial judge recognized that damages for a breach
    of contract are presumptively quantified with reference to the date of the
    breach. However, in this case, doing that would not fairly reflect Sixdions
    actual loss. The trial judge concluded that damages should be assessed as of
    January 31, 2010, the end of the period reflected on the Business Plan.

The quantum of damages

[23]

As noted, the trial judge concluded that a fair
    assessment of Sixdions damages would be to quantify its losses based on its
    five-year business plan as of January 31, 2010. The trial judge concluded that
    there was sufficient evidence in support of this business plan. Therefore,
    Rougemounts assertions were supported by evidence sufficient to discharge its
    onus.

[24]

The parties mostly relied on two expert
    witnesses in support of their respective positions regarding damages. The
    plaintiff relied on the testimony and expert report of Stephen Pittman
    (Pittman), a chartered professional accountant and chartered business
    valuator. The defendant relied on Domenic Marino (Marino), also an accountant
    and business valuator. Marino, however, did not present an independent report
    or valuation; he only provided a limited critique of Pittmans methodology.

[25]

After reviewing the parties evidence, the trial
    judge concluded that it was reasonable for Pittman to rely on the assumptions
    contained in the Business Plan. Then, she reviewed the competing methodologies
    presented by Pittman and Marino, and concluded that she preferred Pittmans.

[26]

As noted, the trial judge concluded that damages
    should be assessed as of January 31, 2010. However, Pittmans report was
    premised on damages being assessed as of 2012. The trial judge tweaked
    Pittmans assessment and calculated damages as of January 31, 2010. She also
    made some additional adjustments to reflect the risk that she found that
    Sixdion would have been facing between October 2004 and January 31, 2010. Based
    on this, she concluded that the plaintiff was entitled to $11 million in damages.

THE ISSUES

[27]

There are two questions that need to be answered
    on this appeal. First, did the trial judge err by concluding that Quinn or
    Devlin had the authority to enter into the contract with Sixdion? Second, did
    the trial judge err in her award of damages?

[28]

As we will explain, we conclude that Quinn and
    Devlin did have authority to enter into the contract and that CA breached the
    contract. However, we also conclude that the trial judge erred in assessing
    damages as of 2010, rather than as of 2004, when the breach of contract
    occurred. Accordingly, the appeal is allowed in part with respect to damages.

DISCUSSION

(a)      Did the trial judge err by
    concluding that Quinn or Devlin had the authority to enter into the contract
    with Sixdion?


[29]

CA makes two submissions regarding this ground
    of appeal. First, it argues the trial judge wrongly concluded that the proposed
    deal was a marketing deal and not an equity transaction. It points out
    that, as a result of the contract, CA would have acquired ten percent of Sixdions
    shares. Thus, it says, it was an equity transaction, which Quinn had no
    authority to approve.

[30]

Second, CA argues that neither Quinn nor Devlin
    had apparent authority. It says that there is no evidence that anyone from CA
    with actual authority ever represented that either Devlin or Quinn had
    authority. Moreover, CA asserts, Sixdion never made any attempt to inquire into
    their authority.

(i)

Nature of the contract

[31]

CA argues that the trial judge made a palpable
    and overriding error by disregarding the equity component of this transaction
    in her findings in deciding Quinn's authority. It contends, as it did at trial,
    that the transaction was an acquisition of ten percent of the equity interest
    in Sixdion. Thus, it required a process of approval that did not include Quinn.
    We reject this argument.

[32]

The trial judge specifically identified and
    fully addressed CAs view of the deal. She thoroughly reviewed the evidence
    related to it and, at para. 379 of her reasons, summarized her conclusion:

From the exhibits and Devlin's evidence, I
    infer and I find that Quinn had actual authority to authorize and incur a $1.5
    million marketing expense. In essence Quinn authorized a marketing deal that
    gave CA the additional option of exercising the warrants if it so chose. Quinn
    and Devlin considered that aspect to be an additional peripheral benefit, not
    the essence of the deal.

[33]

The contract included a purchase of share
    warrants that could lead to a ten percent equity interest in Sixdion only if CA
    chose to exercise the warrants. In other words, the trial judge did not
    disregard the equity component; rather, she put it in proper perspective in the
    larger scheme of the deal.

(ii)

Actual authority

[34]

CA argues that the trial judge made a palpable
    and overriding error in finding that Quinn had authority to approve the deal
    with Sixdion. We disagree.

[35]

As recently noted by Weiler J.A. in
1196303
    Inc. v. Glen Grove Suites Inc.
, 2015 ONCA 580, 337 O.A.C. 85, at para. 71:

While agency is often created by an express
    contract, setting out the scope of the agents authority, the creation of an
    agency relationship may be implied from the conduct or situation of the
    parties. Whether an agency relationship exists is ultimately a question of
    fact, to be determined in the light of the surrounding circumstances.
    [Citations omitted.]

[36]

In our opinion, there is no reason for taking a
    different approach to determining the scope of an agents authority. It is a
    question of fact to be determined in light of the circumstances, including the
    conduct or situation of the parties.

[37]

In this case, it is important to note that the
    trial judge did not receive any direct evidence about the scope of Quinns
    authority. CA did not provide any written record of its policies and did not
    call any senior officers or directors to testify. Rather, it called Cox, a
    relatively junior employee, who was the only witness who testified that Quinn
    did not have actual authority to approve the deal.

[38]

On the other hand, Devlin testified that Quinn
    did have actual authority and there was support for that position in the
    documentary evidence from the relevant time period.

[39]

The trial judge had to decide this issue on the
    basis of competing circumstantial evidence. Her conclusion, as quoted above, is
    reasonable and supported by the evidence. CA has not provided any reason why we
    should interfere.

[40]

Given this conclusion, it is not necessary to
    address CAs arguments on apparent, as opposed to actual, authority.

(iii)

Did the trial judge err in her award of damages?

Standard of review

[41]

Damages awards attract considerable deference.
    The limited scope for appellate interference was noted in
Naylor Group Inc.
    v. Ellis-Don Construction Ltd.
, 2001 SCC 58, [2001] 2 S.C.R. 943, at para.
    80:

It is common ground that the Court of Appeal was not entitled
    to substitute its own view of a proper award unless it could be shown that the
    trial judge had made an error of principle of law, or misapprehended the
    evidence, or it could be shown there was no evidence on which the trial judge
    could have reached his or her conclusion, or the trial judge failed to consider
    relevant factors in the assessment of damages, or considered irrelevant
    factors, or otherwise, in the result, made a palpably incorrect or wholly
    erroneous assessment of the damages.  Where one or more of these conditions
    are met, however, the appellate court is obliged to interfere.  [Citations
    omitted.]

[42]

Moreover, as recently observed by this court in
Livent
    Inc. v. Deloitte & Touche
, 2016 ONCA 11, 128 O.R. (3d) 225, at para.
    388, quantifying damages is not an exact science and trial judges are obliged
    to do the best they can on the evidence, short of failing to analyze the
    evidence at all or simply guessing.

What is the appropriate date for the assessment of damages?

[43]

The appellant submits that the trial judge erred
    in following the approach offered by Rougemounts expert, thereby rejecting the
    date of the breach and using the date at the end of the Business Plan as the
    date for the assessment of damages. We agree.

[44]

It is well established that the general measure
    of damages for breach of contract is the amount of damages that will, so far as
    money can, place the aggrieved party in the same position as if the wrong had
    not been done:
Ticketnet Corp. v. Air Canada
(1997), 154 D.L.R. (4th)
    271 (Ont. C.A.), at para. 97.  The focus is on the injured partys loss and on
    the measure of compensation required to restore it to the position that it
    would have been in had the contract been performed:
642947 Ontario Ltd. v.
    Fleischer
(2001), 56 O.R. (3d) 417 (C.A.) , at para. 41;
Kinbauri Gold
    Corp. v. Iamgold International African Mining Gold Corp.
(2004), 246
    D.L.R. (4th) 595 (Ont. C.A.), at para. 53.

[45]

With respect to the appropriate date for the
    assessment of damages, the presumption is that damages, including those for
    loss of a business or opportunity, should generally be assessed as of the date
    of breach:
Johnson v. Agnew
, [1980] A.C. 367 (H.L.), at pp. 400-401.

[46]

The trial judge correctly noted that the
    presumptive rule for assessing damages is that damages for breach of contract
    are to be quantified at the time of breach. However, she accepted Rougemounts
    submission that she could choose a date other than the date of the breach if an
    assessment as of that date would not fairly reflect Sixdions actual loss.

[47]

The trial judge found that an assessment of
    damages at the date of breach would not fairly reflect Sixdions actual loss or
    put it in the position it would have been in but for CAs breach. She concluded
    that had the contract been honoured, Sixdions earnings from the contract would
    have started shortly after July 30, 2004 and continued until at least January
    31, 2010. As a result, she found that it would be unfair to assess damages as of
    the date of breach in 2004 and to fail to reflect the benefits Sixdion would
    have derived after 2004 from the CA contract.  Instead, she assessed damages as
    of the end of the Business Plan, on January 31, 2010.

[48]

The trial judge appears to have based her conclusion
    largely on the opinion of Rougemounts expert, which she modified. Mr. Pittman
    did not assess Sixdions damages as of the date of breach in 2004. Rather, he
    valued Sixdion as it would have been in 2012 or 2014. In response to the trial
    judges question as to why he did not choose the date of breach, Mr. Pittman
    testified that it would not have properly reflected the upside of executing
    the Business Plan.  Specifically, he opined that the discounted valuation at
    the date of breach was not appropriate because it would apply all of the weight
    to the early years when there were losses anticipated and very little weight to
    the latter years when all of the upside of the Business Plan would be realized.
    As a result, he felt it did not fairly reflect the true damages sustained by
    Sixdion.

[49]

Rougemount submits that the presumptive rule
    that damages are assessed at the date of breach can be displaced where fairness
    requires it:
Kinbauri
, at paras. 66-68. Moreover, Rougemount submits
    that the trial judges determination that fairness required damages to be
    assessed at a later date in this case was an exercise of her discretion, based
    on the all of the circumstances, which should not be disturbed on appeal.

[50]

We agree that the general presumption that
    damages will be assessed as of the date of breach may be subject to exceptions
    where fairness requires it.  However, this presumption should not be easily
    displaced; any deviation from it must be based on legal principle. As the British
    Columbia Court of Appeal recently noted in
Dosanjh v. Liang
, 2015 BCCA
    18, 380 D.L.R. (4th) 137, at para. 55:

[T]he presumption that contract damages are to be assessed as
    of the date of the breach is not so easily displaced. It is important that the
    law in this area be predictable, and such predictability is not served by
    allowing judges unbounded discretion as to the date for assessment of damages.

[51]

The rationale for this general presumption was
    articulated by Laskin J.A., concurring in
Kinbauri
, at para. 125:

As Cronk J.A. points out, damages for breach of contract are
    generally assessed at the date of breach. An early crystallization of the
    plaintiffs damages promotes efficient behaviour:  the litigants become as free
    as possible to conduct their affairs as they see fit.  Early crystallization
    also avoids speculation:  the plaintiff is precluded from speculating at the
    defendants expense by reaping the benefits of an increase in the value of the
    goods in question without bearing any risk of loss.

[52]

Indeed, this general presumption should only be
    displaced in special circumstances, such as, for example, where no market
    exists to replace undelivered shares at the date of breach:
Kinbauri
,
    at para. 126; or in relation to [s]ome classes of property, including shares,
    whose value is subject to sudden and constant fluctuations of unpredictable
    amplitude, and whose purchase is not lightly entered into:
Asamera Oil
    Corp. Ltd. v. Sea Oil & General Corp.
, [1979] 1 S.C.R. 663, at pp.
    664-65.

[53]

The kind of special circumstances alluded to in
Kinbauri
and
Asamera
were not present in this case. The trial judge did not
    reference any. The circumstances of this case were no different than any other
    case where damages for future loss have to be determined. In concluding that
    the circumstances of the present case constituted the kind of unfairness that
    would allow an exception to the calculation of damages as at the date of
    breach, the trial judge erred.

[54]

First, by assessing damages starting in the
    future in 2010, the trial judge erroneously focused solely on maximizing the
    potential benefits to Sixdion under the contract with CA. The trial judge
    failed to take into account Sixdions deeply troubled financial history and
    uncertain status going into the contract with CA and the fact that Sixdion was
    embarking on a new line of business.

[55]

The evidence clearly established that Sixdion
    was in a very precarious financial position in October 2004. Its financial
    statements show a company on the brink of insolvency, with its liabilities well
    exceeding its assets and its revenues not covering its expenses. Moreover,
    Sixdions correspondence with CA during this time period is replete with
    references to its desperate need for financing simply to allow it to meet
    ordinary expenses as they came due, such as its payroll. Other than CA, Sixdion
    was unable to attract other investors. Sixdion voluntarily wound up its
    operations on October 27, 2004 and filed for bankruptcy in February 2005, with
    liabilities outweighing its assets by nearly $2.7 million.

[56]

While her evaluation of damages was based on her
    findings that Sixdion would have survived and avoided bankruptcy, the trial
    judge could not ignore the unchallenged evidence that Sixdion was in an
    insecure financial position with significant liabilities that it had to
    satisfy, even if it managed to become profitable in the future.

[57]

Further, the trial judge erred by not applying
    the discounted cash flow analysis prepared by the appellants expert. The
    appellants expert, Mr. Marino, opined that if the trial judge were to conclude
    that the forecasts were sufficiently reliable, the correct valuation
    methodology would involve a discounted cash flow analysis as set out in his
    calculations. Using a discounted cash flow approach and applying a venture capital
    discount rate of between 40% and 70% to Mr. Pittmans averages, Mr. Marino
    estimated that Rougemounts resulting share of Sixdions losses as at August 1,
    2004, would be in a range of approximately between $0 and $2.6 milliion.

[58]

The respondents expert, Mr. Pittman, confirmed
    that had he used August 2004, the date of breach, for the assessment of
    damages, the discounted cash flow approach applied by Mr. Marino would have
    been correct. He also testified in cross-examination that when venture
    capitalists are looking at a business with no prior history of revenue and are
    basing their assessment of a forecast, they would be looking at discount rates
    in the range of 40% to 100%.

[59]

In our view, although there were some obvious
    issues concerning the reliability estimates contained in the Business Plan, it
    was open to the trial judge, in the absence of better or other evidence, to use
    the Business Plan as a basis for her assessment of damages. The trial judges
    reasons demonstrate that she was well aware of the Business Plans
    deficiencies.

[60]

We agree that the Business Plan was subject to
    some inflationary puffery, given that it was an optimistic presentation of what
    the parties hoped would happen in the future in order to obtain CA head offices
    agreement to the investment. However, we also agree with the trial judges
    observation that it was the product of Sixdion and CA and, subject to
    appropriate tweaking and discounts, was the only solid financial information
    that was available for the purposes of estimating Sixdions future loss of
    opportunity.

[61]

That said, we are also of the view that the
    trial judge erred in failing to apply a discounted cash flow analysis as of the
    date of the breach. This meant that the risk and unpredictability of Sixdions
    future cash flows were ignored until a point many years after the date of
    breach and resulted in an artificial inflation of the damages. The approach
    followed by the trial judge failed to take into account the cumulative risk
    that the profits set out in the Business Plan might not materialize.

[62]

As such, even had CA fulfilled its contractual
    obligations, the new business would have had significant start-up costs,
    including the payment of significant past liabilities to Sixdions creditors,
    and the enormous revenues predicted towards the end of the Business Plan would
    have taken some time to generate.  Accordingly, placing Sixdion in the position
    that it would have occupied had the contract been performed meant taking into
    account the costs as well as the benefits of the new business venture. The
    trial judges approach failed to do this.

[63]

We conclude that the discounted cash flow
    analysis prepared by the appellants expert, calculating damages as of the date
    of breach in 2004, would be the fairest method to assess Sixdions damages. We
    also agree that Sixdions unstable financial past and condition, as well as the
    uncertainty of the new venture, justifies a substantial discount.

[64]

Having regard to the fact that the calculation
    of these damages is not an exact science, we are of the view that the mid-range
    of Mr. Marinos calculation would allow for the fairest assessment of damages
    in all the particular circumstances of the present case.  This would result in
    damages of $1,300,000.

DISPOSITION

[65]

For these reasons, we would allow the appeal
    with respect to damages and order that CA pay damages of $1,300,000 to the
    respondent, as a result of CAs breach of its agreement with Sixdion.

[66]

The parties costs submissions on appeal and at
    trial were premised on one party being entirely successful on all issues. Given
    the disposition of this appeal, if the parties cannot agree on the disposition
    of costs, we believe that the fairest approach to both parties is that further
    brief written submissions be delivered.

[67]

Accordingly, the parties shall deliver costs
    submissions of no more than five pages, not including a costs outline,
    concerning the disposition of the costs at trial and on appeal, as follows: the
    appellant shall deliver its submissions by November 14, 2016; the respondent
    shall deliver its submissions by November 28, 2016.  There shall be no reply
    submissions.

Released: November 10, 2016

H.S. LaForme
    J.A.

G. Pardu J.A.

L.B. Roberts
    J.A.





[1]
We refer to CA as one entity for the purpose of these reasons. The companys
    corporate structure is not explained in the trial judges reasons for decision or
    the parties factums; however, it seems there was some division. Where
    appropriate, we refer to CA-Canada and CA-International.



[2]
The trial judge at para. 3 describes an Aboriginal company as a company with at
    least 51% Aboriginal ownership and control.


