Cannabis company Aphria Inc. owes investment dealer Scotia Capital Inc. $1.5 million for unpaid work on the company’s defence of a hostile takeover bid, an Ontario court has ruled.
The Ontario Superior Court of Justice upheld a claim brought by Scotia Capital seeking payment of an invoice it sent to Aphria for work on the company’s successful defence of an unsolicited takeover bid.
According to the court’s decision, Aphria hired Scotia in 2019 to help its defence of a hostile takeover bid from Green Growth Brands (GGB) that was launched in 2019, in the wake of a report from a short seller that initially caused the stock to drop.
“The allegations in the report were ultimately not borne out,” the court noted.
The attempted takeover eventually failed, and the firm remained independent.
While the company paid the investment dealer $1 million for a fairness opinion on the GGB bid, it refused to pay the remaining $1.5 million billed by the firm, arguing that the services it provided didn’t lead to Aphria remaining independent.
“Aphria defends the claim by asserting that the parties intended that there must be a nexus between the services provided and Aphria’s independence,” the decision said. “Aphria claims that there was no causality between the services provided by Scotia and the result obtained.”
The court found in favour of the investment dealer, ruling that “Aphria’s defence to the claim fails because it got exactly what it bargained for: a successful defence of the hostile takeover bid and its independence going forward.”
Aphria countersued Scotia seeking damages for defamation, alleging that it suffered reputational damage when Scotia announced it had discontinued analyst coverage of the company, alongside another cannabis company that was facing regulatory issues.
“It claims that the timing and placement of the comment was a reaction by Scotia to Aphria’s refusal to pay the fee and that it seriously impacted Aphria’s share price and its reputation with investors,” the decision said.
Again, the court sided with the investment firm, ruling that “Aphria has not met the test for damages for defamation because there is no evidence of any connection between the comment and any alleged loss in share value or reputation.”