On the Motion to rescind settlement agreements, Mr. Ivan Whitehall, the Crown's lead counsel, will be continuing this afternoon with his argument.

It is expected that the Plaintiff's counsel, Mr. Ronald Slaght and Mr. Peter Griffin, will be making their argument tomorrow morning. Her Honour Justice Haley indicated that she will likely reserve until Wednesday. The next witness, Dr. Quirin, is expected on Thursday to recommence his testimony as to discount rate.

The Crown's position as enunciated by Mr. Whitehall is inconsistent with the evidence, the correspondence, the five settlement agreements, and statements in the transcripts.

The Crown seems to be confused as to its position. It does not challenge the language of the settlement agreements. The Crown admits that the cash flow will not vary for the purposes of the judgment as to what the cash flow is, but it could vary for other purposes, i.e. determination of the discount rate.

The Plaintiff's position is that the issue of business or financial risk has not been foreclosed by the settlement agreements and the discount rate continues to be an issue as it concerns itself with business and financial risk.

The effect of the settlement agreements is that the parties cannot lead evidence as to specific risk that any agreed cashflow item will not be realized.

The business and financial risk that relates to an enterprise has yet to be determined. Is the Airport development and operation similar to a utility, therefore having a utility type of risk, as opposed to the risk related to the business of oil or resource exploration?

You may recall that Mr. Nixon's financial advisor, Mr. Crosbie, testified before the Senate Inquiry into the Pearson Airport Agreements and suggested capitalization rates of 9, 9.5 and 10% and applied these to free cashflow. The basis of this position was that, "we have done a fair bit of work trying to get a handle on what we think might be the required rates of return on a pre-tax basis that equity investors would require".

In assessing risk, Mr. Nixon testified, "The risk aspects were offset as much as possible, for example, by prohibiting the Government of Canada to undertake any competitive development within 75 kilometres. For example, that was one way in which the risk was moderated. The fiscal and the financial risk was guaranteed perhaps in other ways." Mr. Crosbie then testified, "Yes, that's absolutely right because as part of the transaction, Mergeco or Pearson Development Corporation entered into a long-term contract with Air Canada where a lot of the construction risk and the operating cost risk and interest cost risk was effectively passed on to the airlines."

Mr. Nixon then testified, "That's right, it balances the risk".

The point of their testimony was that the Pearson Development Corporation transaction was of such low risk that the developers should have paid $252 million (net present value) in additional lease rent.

The developers have always taken the position that they were receiving a fair rate of return and that the discount rate should be in the range of 10.75% to 11.5%, representing a utility level of risk. The Crown's experts in the court case are suggesting a discount rate of 20.5% to 22%, reflecting very high risk. The inconsistencies are not credible; just as the inconsistencies in the Crown's motion to cancel the five settlement agreements are not credible; just as the Liberal government's allegations in cancelling the contracts have been proven not credible (before the Senate Inquiry and before the courts).