Thursday Lawsuit Hearing Recap

Published: September 13, 2018 09:49 am EDT

Trot Insider has compiled this comprehensive report from Day 4 of the proceedings in regard to the civil lawsuit that a group of Ontario Standardbred breeders has filed against the Province of Ontario and the Ontario Lottery and Gaming Corporation over the cancellation of the former Slots at Racetracks Program.

Monday (Sept. 10) marked the first day of court hearings in the civil suit (‘Seelster Farms Inc. v Her Majesty The Queen In Right Of Ontario’) which is taking place at the A. Grenville and William Davis Courthouse, located at 7755 Hurontario St. in Brampton, Ont.

The breeders' lawyers, from Lax O’Sullivan Lisus Gottlieb LLP in Toronto, had been presenting the Plaintiffs’ factum as part of their Motion for Summary Judgment since Monday. The lawyers finished presenting their motion Thursday afternoon, at which point the lawyers representing the Province of Ontario took their turn and started to present their Motion for Summary Judgment.

To read Trot Insider’s coverage from Day 2 and 3, please utilize the corresponding links which appear below.

Tuesday, September 11
Wednesday, September 12

Thursday’s proceedings (Day 4) got underway at 10:00 a.m. Trot Insider's recap of the Day 4 proceedings appear below.

Testimony continued on Thursday morning in the case of Standardbred breeders vs. The Government of Ontario and the OLG, with the plaintiffs stressing that the plan to phase out the Slots at Racetracks Program was done without consultation with the industry, despite government claims that there was extensive consultation.

Lisus, representing the Ontario breeders, began the day pointing out evidence to the court that there was no consultation or study with respect to either a three-year or five-year phase out of the Slots at Racetracks Program.

Lisus quoted testimony from Rod Phillips, who was the president and CEO of the OLG at the time, about whether or not there was any consultation prior to "going to zero."

Phillips said in testimony that there was not any consultation with the horse racing industry by OLG and there was no consultation that he was aware of by the government – related specifically to the end of the horse racing revenue sharing program.

According to Lisus, cabinet stated that there was "extensive stakeholder consultation and market analysis" when, in fact, the industry was never spoken to regarding it.

Lisus also quoted Minister Dwight Duncan in question period in the Ontario Legislature on April 26, 2012 stating that there was extensive consultation about the decision being made. Lisus said that, in fact, there was not any consultation with the industry to end the program.

Lisus stated that after announcing the decision, the government began a "very regrettable" and harmful campaign to speak negatively about the horse racing and breeding industry.

According to Lisus, the Auditor General in her report said the Minister of Finance and Chief of Staff went to Finance staff to inform them that they would be going to zero on horse racing and remove all funding and a "complete exit," and funding to the horse racing industry be eliminated, not reduced.

Lisus said that decision came after a meeting between Duncan, McGuinty and Shortill on February 3, 2012, despite cabinet deciding earlier to a three-year phase out plan.

After a short morning break, plaintiff lawyer Ian Matthews, representing the Standardbred breeders, argued that the obligation of 20 per cent of slot revenues going to the industry, agreed upon in the original Slots at Racetracks Letter of Intent, still remains in force.

He argued that the signed letter of intent, guaranteeing 20 per cent of slot revenues to the industry, is an enforceable agreement. He further argued that the only agreement the industry entered into was the letter of intent.

According to the plaintiffs, the letter of intent was the only document signed by Ontario Horse Racing Industry Association (OHRIA), which did not sign any siteholder agreements.

Addressing the question of whether the Standardbred breeders could seek to enforce the benefits of the letter of intent when they are not specifically mentioned in the letter of intent, the plaintiffs argued that OHRIA was clearly "representing all segments of the horse racing industry."

In addition, that letter of intent was signed by a director of Standardbred Canada. The plaintiffs, when asked by the judge if any Standardbred breeders signed the letter of intent, indicated that Standardbred Canada is the national breed organization that represents Standardbred breeders.

According to the plaintiffs, it is the letter of intent that holds the parties to the 20 per cent commitment. The siteholder agreements signed with racetracks may implement the core of that bargain, but also deal with private matters between the OLG and racetracks. "The 20 per cent bargain was established in the letter of intent and it remains in force."

The plaintiffs raised a number of case law examples where letters of intent were deemed to have been agreements.

According to the plaintiffs, the letter of intent is an enforceable agreement, explaining that a letter of intent can be enforceable if a reasonable person would contend that the parties intended to contract when they signed the letter of intent.

The plaintiffs argued that the test is whether the parties conducted themselves as if they had an agreement, and, yes, the parties did so for 14 years.

Matthews noted that nowhere in the siteholder agreements does it indicate that the siteholder agreement overrides the letter of intent. Instead, the siteholder agreement in fact refers to the letter of intent.

According to Matthews, the only document that the industry is a party to is the letter of intent and the addendum of the letter of intent, which indicates that 20 per cent of slot revenues are to be paid to the industry.

The plaintiffs argued that there was a deal (20 per cent) with the industry, and the breeders were not party to the siteholder agreements.

Matthews pointed out that there are still numerous racetracks in Ontario with slot machines, yet the industry is not currently sharing 20 per cent of revenues as clearly defined in the letter of intent.

The plaintiffs point out that the letter of intent has no termination provision and no termination date.

The plaintiffs point out case law about what happens when there is no termination date noted. The words "trust and confidence" were noted.

Addressing how much notice would be expected to potentially terminate an agreement of this sort, the plaintiffs said, "breeding a horse is a five-year investment and the evidence is abundant that the defendants knew that."

Thus, the plaintiffs concluded that the news release that the end of SARP would happen after a one-year period was in breach of the letter of intent.

The lawyers representing the plaintiff breeders concluded their testimony on Thursday afternoon at 3:10 p.m. by speaking about the immediate and long-term damages suffered by Ontario breeders as a result of the cancellation of the Slots at Racetracks Program.

Upon the conclusion of the plaintiff testimony, the Province of Ontario began its defence. The province is one of two defendants in the case. The OLG will present its defence afterward.

The position put forward by the lawyer representing the province of Ontario was that Cabinet decided to terminate SARP with one year's notice. Because of the one-year notice, there was a year before the SARP money dried up. During that one year there was a panel to determine transition.

The defence argued that no one has the right to public funds and that the plaintiffs do not have a case in court.

According to the province's defence, there were no misrepresentations and the plaintiffs do not have any contractual rights. The only contracts are the siteholder agreements between the OLG and the individual racetracks and it is not an issue that the plaintiffs are not signatories to these agreements.

After speaking for less than 15 minutes, the defence argued that they could simply sit down at this point, but because of the claims made by the plaintiffs, they will instead address them.

The defence claimed that "there is a lot of noise" and the claims are not legally relevant for the purposes of the plaintiff claims, submitting that it is not the court's responsibility to grade the policy choices made by cabinet in the legislature; and that while one of the tasks of the court is to decide if the policy decision was irrational or made in bad faith, "It is abundantly clear there is no evidence that the court could come to this decision."The government concluded the afternoon session by stating that it is the position of the province, and the OLG, that the letter of intent signed in 1998 is not a contract.

According to the defence, the Honourable Chris Hodgson signed for Ontario. He was a cabinet minister.

"Our position with respect to SARP is that 'fundamentally, SARP was a policy to allow slots in racetracks in order to benefit the horse racing industry and the rural economy through contracts between OLG and racetracks that contained one-year termination clauses.'"

Following the statement, the judge asked the defence that if the Slots at Racetracks Program was a policy, why was it a letter of intent with all parties signing, rather than an edict from the government?

The defence attorney called the question "an excellent question" that she was not sure of the answer to. "Perhaps, I don't know, to get everyone motivated?"

The defence subsequently stated that SARP was put into a formal document in 1998 in the cabinet minutes, and then through siteholder agreements with the racetracks.

"These siteholder agreements are the only contracts. There are no other ones," stated the defence.

According to the defence, the Sadinsky report, while it does not recommend termination of SARP, does set out a number of perceived flaws with SARP, which helped educate decisions later made.

The case will continue on Friday.

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