TORONTO — Cineworld Group is appealing a decision by an Ontario court that ruled the British movie giant had no valid grounds to walk away from its $2.18 billion deal to buy Cineplex.
In an appeal filed January 12 to the Ontario Court of Appeal, Cineworld argues that Judge Barbara Conway made “extractable errors of law” in her ruling which ordered the payment of $1.24 billion to Cineplex. .
The appeal argues that Judge Conway made a “palpable and overriding error of fact” when she ruled that Cineplex did not breach the terms of the takeover agreement.
“The evidence showed that Cineplex had significantly deviated from its normal day-to-day operations and past practices by unilaterally suspending or deferring payments due to its owners, suppliers, movie studios and film distributors (for goods, services and films already provided),” Cineworld’s attorneys wrote in their appeal.
The case pitted the two cinema chains against each other and stemmed from Cineworld’s decision in June 2020 to end the agreement to acquire Cineplex.
Cineworld Group argued it was free to break the deal because Cineplex deferred its accounts payable for at least 60 days, cut spending to the ‘bare minimum’ and stopped paying owners, movie studios , film distributors and suppliers at the start of the pandemic.
Cineworld claims that Cineplex used the sums it would normally have paid to these partners to keep its debt below the $725 million threshold, one of the conditions of the takeover agreement.
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Cineplex said in court that these actions were part of the normal course of business for movie companies during a pandemic and did not damage its reputation with owners and studios, but Cineworld now argues the postponements began even before the closure of Canadian theaters and were not permitted under the agreement.
Cineworld also claims that the judge was wrong to rule that the agreement between the two companies allowed Cineplex to deviate from its normal course of business due to an epidemic.
“Normal course” is a legal term used by companies making acquisitions to ensure that they will have the power to terminate an agreement and limit their risk, if other parties deviate significantly from their operations. or their current business model.
Cineplex, which declined to comment for this story because the matter is before the courts, argued that it had fulfilled all of its obligations and continued the “normal course” of the industry during the pandemic.
Cineplex called Cineworld’s complaints “nothing more than a case of buyer’s remorse.”
On December 14, Judge Conway sided with Cineplex and dismissed Cineworld’s counterclaims.
Cineworld did not respond to a request for comment and one of its attorneys, McCarthy Tétrault partner Shane C. D’Souza, declined to discuss the appeal with The Canadian Press.
The case is being watched closely by lawyers as it could offer clues as to how judges will handle pandemic-affected deals that end up in litigation.
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Tara Deschamps, The Canadian Press