Louis P. Bélanger

The appellants, who served as presidents of a group of insurance companies under an incentive pay agreement with the majority shareholders, learned that a major company was interested in acquiring the group.

Rather than disclosing this to the shareholders, the presidents purchased the shareholders' interests and resold them at a substantial profit.

The Supreme Court of Canada held that the presidents breached both an implied contractual obligation to inform arising from the nature of the Presidents' Agreement and the obligation to perform that agreement in accordance with the requirements of good faith under arts. 1434 and 1375 of the Civil Code of Québec.

Disgorgement of profits was held unavailable as a non-compensatory remedy absent an obligation of maximalist loyalty, but damages equivalent to the appellants' profits were awarded pursuant to a rebuttable presumption that the shareholders' lost gain equalled those profits, where the appellants' own disloyal conduct prevented precise proof of injury.

The appeal was dismissed with costs.

The Court considered whether section 27 of the Crown Liability and Proceedings Act removes Crown immunity from discovery when the Crown is not a party.

It held that immunity can be displaced only by clear statutory language, and section 27 applies only to proceedings against the Crown.

Because neither the Crown nor the chief investigator was a party, the investigator could refuse discovery.

The appeal was allowed and the respondents’ discovery motion was dismissed with costs throughout.