Article by Kevin Martin, Growth Op
The $130-million lawsuit filed by a Calgary cannabis retailer is a “defensive tactic” to allow it to default on a loan, a B.C. pot company claims.
In a statement of defence and counterclaim, Tilray Inc. and its subsidiary, High Park Shops Inc. say 420 Investments Ltd., which operates Four20 cannabis outlets, owes them $7 million.
The court documents, obtained Wednesday by Postmedia, dispute 420’s claim Tilray reneged on a deal to purchase the Calgary-based company for $110 million.
Tilray alleges 420 commenced its court action in response to the defendant’s “lawful and entirely justified termination … of an agreement,” and the default by 420 of a $7-million “bridge loan” the retailer received from High Park.
“The plaintiff … has brought this action as a defensive tactic,” the statement of defence states.
It says after the parties entered into an arrangement agreement last August “the defendants proceeded diligently and in good faith towards a closing of the applicable transaction.”
Part of that was providing the bridge loan “to assist 420 in financing the construction, development and improvement of its existing licensed retail cannabis locations.”
The defence states Tilray and High Park took several steps, including participating in several meetings and providing information to regulatory agencies “all of which took place over several months in furtherance of an anticipated closing of the transaction.”
But the response alleges it became apparent to 420 that if it continued to carry on business as it had “it would be unable to meet the conditions precedent to closing.”
“By taking the steps that it did, and failing to take others as contractually obligated, 420 breached numerous provisions of the arrangement agreement and fundamentally breached that agreement,” the defence states.
“The defendants pursued the implementation of the arrangement agreement with all reasonable diligence, in compliance with the agreement, in good faith and honestly. The defendants exercised a contractual right to terminate and were lawfully entitled to do so.”