Meghan Rourke

The Court of Appeal for Ontario heard an appeal and cross-appeal concerning a share purchase agreement with earn-out milestones.

The appellants, former shareholders, alleged breach of contract and the duty of good faith by the respondent's predecessor, Origin House, particularly regarding a delayed transaction closing date impacting milestone payments.

The respondent cross-appealed the lower court's finding of a breach of the duty of honest performance.

The Court of Appeal dismissed the appeal, affirming that a finding of breach of the duty of honest performance does not create a legal presumption of loss without an evidentiary foundation of lost opportunity.

The court allowed the cross-appeal, finding a palpable and overriding error in the lower court's determination that the appellants were unaware of the delayed closing date, thereby setting aside the finding of a breach of the duty of honest performance.

The plaintiff was overwhelmingly successful on a motion for interlocutory injunctive relief, including Mareva and Norwich orders, and sought costs of $118,417.86 on a substantial indemnity basis.

The defendants sought their own costs or, alternatively, that each party bear its own costs.

The court found the plaintiff was the successful party but applied the principle that costs of an interlocutory injunction are preferably reserved to the trial judge.

The court ordered the costs of the motion to be in the cause.

The plaintiff employer sought interlocutory injunctive relief, including Mareva and Norwich orders, and a certificate of pending litigation against a former employee and his wife.

The employee had created a fictitious vendor company, secretly awarded it contracts from the employer, and received over $675,000.

The court found a strong prima facie case of civil fraud, unjust enrichment, and breach of confidence.

The court granted the Mareva injunction and the certificate of pending litigation, finding a serious risk of asset dissipation.

However, the court declined to issue a Norwich order, instead ordering the defendants to provide a sworn affidavit of assets and bank records.

The plaintiffs brought a motion to set aside a Registrar's administrative dismissal order that dismissed their product liability action for delay under Rule 48.14.

The action arose from an incident where the plaintiff was allegedly struck by a defective liftgate on a minivan.

The court applied the Reid factors using a contextual approach to determine if the dismissal should be set aside.

The court found that the plaintiffs failed to provide a satisfactory explanation for over two years of cumulative delay and that the dismissal was not due to mere inadvertence.

Furthermore, the court held that the defendants would suffer non-compensable prejudice due to the degradation of physical evidence (the prop rods) and fading witness memories.

The motion to set aside the dismissal order was dismissed.

The applicants sought the release of funds held in trust, arguing that a writ of execution obtained by the respondent against a bare trustee did not attach to the property.

The respondent argued that the bare trustee was also acting as an agent for the applicants, making them liable as principals for her unpaid commissions.

The court found that while an agency relationship did exist, the respondent was precluded from recovering against the principals because she had already obtained judgment against the agent, and the limitation period to sue the principals had expired.

The funds were ordered released to the applicants.

The applicants sought damages under a share purchase agreement for revenue and license milestone payments, and a working capital adjustment for tax credits.

The court interpreted the SPA provisions, including the "Unearned Milestone Payment Commitment" in the event of an Indirect Sale Transaction, and considered the purchaser's duty of good faith.

The court dismissed claims for milestone payments, finding the contract terms unambiguous and no actionable breach of good faith regarding impediments to earning milestones.

However, the court found a breach of the duty of honest performance for failing to disclose a delay in the closing date of the Indirect Sale Transaction, but no damages flowed from this breach as the applicants could not prove a lost opportunity.

The applicants were awarded the SR&ED tax credits without deduction for consultant fees.

The applicants sought an order declaring that a writ of execution obtained by the respondent against Stonebrook Inc. did not attach to real property registered in Stonebrook Inc.'s name.

The respondent had obtained the writ to enforce a judgment for unpaid commissions.

The court found that Stonebrook Inc. held the property merely as a bare trustee for the applicants (the beneficial owners) and had no independent discretion or beneficial interest in the property.

Consequently, under section 9(1) of the Execution Act, the writ could not attach to the property.

However, the court deferred releasing funds held in trust to allow the respondent an opportunity to argue that the bare trustee acted as an agent for the beneficial owners.