The applicant Fund sought the return of $1,461,220 that its Former Manager unilaterally paid itself upon resigning.
The Former Manager claimed the funds were owed as Incentive Participation Amounts (IPA) compensation under the Management Agreement.
The court found that the IPA compensation was contractually required to be paid as dividends.
Because the Fund no longer qualified as an open-end mutual fund, it was subject to the solvency test under s. 42 of the Canada Business Corporations Act, which it could not meet.
Therefore, the Fund was prohibited from declaring dividends, making the Former Manager's self-payment unauthorized.
The court ordered the Former Manager to repay the funds but declined to award punitive damages, noting the Former Manager did not conceal its actions.
