C.I. Covington Fund Inc. v. White
Ontario Supreme Court
C.I. Covington Fund Inc., Moving Party (Applicant) (Respondent on Appeal)
And
Jeffrey A. White, Delta M3 Technologies Corporation, M3 Environmental Services Inc., Watertek Corporation, Fred Rossignol and LF Rossignol Development Corporation, Respondents (Appellants on Appeal)
Ontario Superior Court of Justice (Divisional Court) Carnwath, Lang, Day JJ.
Heard: October 3, 2001
Judgment: October 9, 2001
Counsel: David P. Chernos and M. Paul Michell, for Applicant/Respondent on Appeal David C. Moore, for Respondents/Appellants on Appeal, Jeffrey A. White & Watertek Corporation
Endorsement
1We all agree the Appellants have failed to demonstrate Swinton J. was clearly wrong in her findings or incorrect in her application of the law.
2The Appellants argued Swinton J. erred in finding that Covington had established oppressive conduct. We reject this submission. Swinton J. considered language of Article 4.1.12 of the Investment Agreement, including its Schedule "C", other documents provided to Covington, plus the many references in the Business Plan that suggested Delta owned the Snowfluent technology. She concluded that Delta was represented to Covington as the owner of the technology. This was a finding she was entitled to make on the evidence. In addition, she found it telling that Delta, and particularly Mr. White, failed to disclose the existence of the licencing agreement to Covington.
3The Appellants argued Swinton J. erred in finding that Covington had established oppression, based upon the doctrine of reasonable expectations. They submitted Covington could not be entitled to relief if it could be shown that Covington knew that Delta did not have title to the technology and proceeded with its investment despite that knowledge. In deciding to invest, Covington was entitled to rely on the representations made by Delta and Mr. White. The Appellants are fixed with the reasonable expectations of Covington created by those representations. For this reason, even if the legal opinion showed Mr. White had applied for the patents in his own name, that does not mean he did not hold the technology for the benefit of Delta. Also for this reason, it was unnecessary for there to be the trial of an issue. Swinton J. based her conclusions on the documents filed, there being no relevant credibility issues identified by the Appellants.
4The Appellants argued Swinton J. erred in finding that Mr. White had committed a breach of fiduciary duty. We reject this submission. She found Mr. White's deliberate withholding of title to the patents from Delta for his own purposes constituted a form of self-dealing at the expense of the corporation, constituting an unfair disregard of Covington's interests as a creditor and shareholder. She found this unfairness prejudicial to Covington, contrary to s. 248(2) of the OBCA. These findings are supported by the evidence and are correct in law.
5The Appellants submit the remedy granted was inappropriate, arguing firstly that paragraphs 1 and 2 of the Order under appeal are unduly broad and ambiguous. We reject this submission. Delta and Mr. White represented to Covington that Delta owned a process—called for sake of convenience, the Snowfluent Technology. If the technology was developed based on both patentable and non-patentable components, that does not nor should not prevent an order declaring Delta the owner of the process. We find no ambiguity.
6The Appellants further submitted Swinton J. erred by directing an accounting and related relief in connection with the Wesport contract. We disagree. Swinton J. correctly concluded Mr. White had an obligation not to pursue corporate opportunities available to Delta. Having done so, Mr. White must now account for any profits derived from the use of the technology. We find no error in the exercise of the broad discretion given to Swinton J. by the OBCA when fashioning a remedy.
7For the above reasons, the appeal is dismissed.
Appeal dismissed.