There was good news and bad news for Philom Bios in an Alberta court decision handed down in mid-April.
The bad news was that the provincial Court of Appeal upheld a 2005 lower court decision that ruled against the Saskatoon-based inoculant company in a 10-year-old business dispute with Dow AgroSciences.
The good news is the court substantially reduced the damages.
The original ruling ordered Philom Bios to pay Dow $944,000 in damages, plus interest and court costs totalling another $900,000, for a total of nearly $1.8 million.
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In its April 11 ruling, the appeals court reduced that to $463,273, along with yet-to-be-calculated interest and court costs.
As a result, Dow will return to Philom Bios some of the previous payment, and the inoculant company will be able to record a net after-tax extraordinary gain of $705,000, or 20 cents per share, for the 2007 fiscal year.
“This is a very significant and positive judgment for us,” said Philom Bios president and chief executive officer Calvin Sonntag.
“It dramatically improves our position compared to the initial judgment.”
Following the initial judgment, the company had recorded a loss of $1.2 million (representing damages less tax recovery) for the fiscal year 2005, driving down earnings by 34 cents a share.
Sonntag said he was disappointed that the appeals court upheld the original judgment in favour of Dow.
“Certainly we had hoped it would be reversed,” he said. “We have our view but the court disagreed at both the trial and appeals level so we have to accept that.”
Philom Bios could seek leave to appeal the decision to the Supreme Court of Canada, but Sonntag said it had no intention of doing that.
He is happy the damages were reduced and relieved that the case, which dates back to 1996, is finally over.
“At the end of the day in something like this, who wins? The lawyers win,” he said.
The case centred on the disposition of expired inventory of a phosphate inoculant called Provide.
In September of 1996, Philom Bios advised Dow it was unilaterally ending their business relationship, under which Dow had been the sole distributor of Provide. Dow was left holding inventory of Provide that it had bought in October 1995.
Despite a series of exchanges, proposals and counter-proposals, over the next few months the two companies were unable to agree on a process for testing and disposing of the inventory. Dow eventually destroyed the product, for which it had paid $422,000.
The case ended up in court, with each side claiming the other was in breach of contract.
In a July 2005 decision, the court ruled in favour of Dow on every issue, saying Philom Bios breached its contractual obligations, leaving Dow with unsold inventory and no way to mitigate the loss.
It also dismissed a counterclaim by Philom Bios, saying it provided no evidence of losses sustained as a result of actions by Dow.
Sonntag said the situation is unlikely to occur again, adding Philom Bios and Dow continue to do business together.
