CITATION: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2012 ONSC 7182
COURT FILE NO.: 12-DV-1823
DATE: 2012/12/17
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
GEOGRAPHIC RESOURCES INTEGRATED DATA SOLUTIONS LTD., and THE STATE OF OREGON, ACTING BY AND THROUGH ITS STATE BOARD OF HIGHER EDUCATION, ON BEHALF OF SOUTHERN OREGON UNIVERSITY
Appellants/Plaintiffs
– and –
PERRY PETERSON, NELLIGAN O’BRIEN PAYNE, NELLIGAN O’BRIEN PAYNE LLP, and WING T. YAN
Respondents/Defendants
Patrick Snelling, for the Appellants/Plaintiffs
Heather Williams, for the Respondents/Defendants, Nelligan O’Brien Payne, Nelligan O’Brien Payne LLP, and Wing T. Yan
HEARD: December 12, 2012
REASONS FOR JUDGMENT
Aitken J.
Nature of Proceedings
[1] The appellants, Geographic Resources Integrated Data Solutions Ltd. (“GRIDS”) and The State of Oregon (“SOU”), appeal from the decision of Master MacLeod dated February 24, 2012 dismissing their motion to file an Amended Amended Statement of Claim. The defendants, Nelligan O’Brien Payne and Nelligan O’Brien Payne LLP (collectively referred to as “NOP”), and Wing T. Yan (“Yan”) were successful respondents on the motion before the Master and have responded to this appeal. The defendant, Perry Peterson (“Peterson”), did not participate in the motion before the Master and is not a respondent on this appeal.
Brief Chronology of Litigation
[2] On August 15, 2006, the appellants commenced an action against Peterson, NOP, and Yan seeking, amongst other forms of relief: (1) a declaration that they are the sole and exclusive owners of certain intellectual property (“IP”), and that Peterson holds in trust for them the invention in question and any patents relating to it (including a Canadian patent obtained with the assistance of NOP and Yan); (2) various injunctions; and (3) damages for breach of contract, breach of fiduciary duty, and conversion. The Statement of Claim was subsequently amended to add claims for aggravated, punitive and exemplary damages against each of the defendants in favour of GRIDS. Included in the Amended Statement of Claim, issued April 14, 2008, are the following factual allegations which, it will be noted, are at times inconsistent:
• GRIDS and SOU are the joint owners of IP, including the invention in question.
• Peterson was an officer, director, employee, and fiduciary of GRIDS and, through his company, Archibald Peterson Limited (“APL”), was a shareholder of GRIDS.
• In September, 2002, GRIDS and SOU instructed Peterson to retain NOP and Yan to provide legal advice and services for the protection of the IP, and to file patent applications on behalf of GRIDS and SOU (paras. 5, 9). At the time, Peterson was a director, officer, and subcontractor of GRIDS, and occupied the position of project manager.
• NOP was retained by GRIDS to provide legal advice and services for the protection of the IP and to file patent applications in regard to the invention on behalf of GRIDS (para. 5). NOP was retained by both GRIDS and SOU to provide these services (para. 22).
• Yan was a member of NOP and was the lawyer who performed the work for GRIDS (para. 6). Yan performed work for both GRIDS and SOU (para. 22).
• On March 28, 2003, Peterson resigned from his role as project manager of GRIDS.
• In June, 2003, Peterson resigned as a director of GRIDS.
• On or about August 1, 2003, unbeknownst to GRIDS and SOU, NOP and Yan filed patent applications in Canada, Europe, Australia, the United States, and internationally in regard to the invention in question.
• On or about January 21, 2004, GRIDS and SOU filed a separate patent application for the same invention in the United States.
• NOP and Yan knew, or ought to have known, that GRIDS and SOU were the sole owners of the IP (para. 22).
• Peterson owed a fiduciary duty to GRIDS and SOU and breached that duty (para. 21). Peterson owed a fiduciary duty to GRIDS and breached that duty (paras. 4, 28).
• NOP owed a fiduciary duty to GRIDS and SOU and breached that duty (paras. 21, 23). NOP owed a fiduciary duty to GRIDS and breached that duty (paras. 35-37.1).
• Yan owed a fiduciary duty to GRIDS and SOU and breached that duty (paras. 21, 23). Yan owed a fiduciary duty to GRIDS and breached that duty (paras. 35-37.1).
• Peterson committed the tort of conversion as against GRIDS and SOU.
• NOP and Yan “deliberately and intentionally” filed the Canadian patent application for Peterson “in circumstances where NOP ... and Yan knew that they were acting in a manner that would cause damage to GRIDS” (para. 37.1).
[3] Peterson filed a Statement of Defence dated January 25, 2007[^1], which was subsequently amended. In the Amended Statement of Defence, Peterson alleged that he was the sole inventor and owner of the invention subject to the Canadian patent, and other international patents, in question. Peterson denied that, when he had the Canadian patent filed, he was a subcontractor, employee, or fiduciary of GRIDS. Peterson acknowledged that in March, 2003, he held the position of director and officer of GRIDS and was the project manager of GRIDS in respect to a particular project. Peterson acknowledged that he had NOP and Yan file on his behalf the application for the Canadian patent of the invention in question. He denied that he retained NOP and Yan to provide any services to GRIDS.
[4] NOP and Yan filed their Statement of Defence on June 15, 2007. An Amended Statement of Defence was filed on September 9, 2008. In that document, NOP and Yan cross-claimed against Peterson for indemnification. As well, NOP and Yan denied that they were ever retained by either GRIDS or SOU with respect to the protection of any IP or the filing of any patent applications. NOP and Yan alleged that they had been retained by Peterson in September, 2002, to provide general information about the patent application process, and not to provide services in relation to any specific patent application. NOP and Yan also alleged that, in June, 2003, Yan was retained by Peterson to provide legal services in regard to a specific Canadian patent application. At all times, Yan understood that Peterson was the sole inventor and owner of the invention. Yan and NOP denied that they had anything to do with the filing of any patent application, other than the Canadian application. Yan and NOP denied that they ever had any contractual or other relationship with SOU. Yan and NOP denied that, when they were retained by Peterson in June, 2003, they owed any fiduciary duty to GRIDS.
[5] Subsequently, Peterson filed a Statement of Defence to the Cross-claim dated August 17, 2009 in which Peterson made the following allegations:
Perry Peterson relies on the knowledge that legal staff of NOP were at all times aware of the material facts necessary to establish Mr. Peterson’s ownership over intellectual property claimed in the Canadian patent.
Perry Peterson relies on the knowledge that, at all times, he relied on the skill, judgment, their detailed knowledge of the material facts and advice of NOP legal staff in his actions to protect his intellectual property rights and his obligations to GRIDS.
[6] During the discovery process, Peterson, by mistake, produced to GRIDS and SOU an email dated June 4, 2003 (“Document 134”) from Tracey Ross (“Ross”), a lawyer at NOP, to Peterson in which Ross provided certain legal advice to Peterson regarding the filing of a patent application for the invention in question. The following are some statements included in that email:
• “I have spoken with Wing Yan about your ongoing situation. I know you and he have spoken briefly before about filing a patent for this technology.”
• “At this point, prior to sending out a cease and desist letter, it is ABSOLUTELY ESSENTIAL that you file for a patent for the IP in question. Once the patent is filed, the presumption, at law, is that you are the owner. This doesn’t mean that they can’t dispute this with litigation but you would certainly have the standing to bring an application for injunction and to have any third parties pay attention to your claims.”
• “Time is however of the essence because at this stage, any of the other parties could do the same thing – rush down and register their patent and they would be presumed to be the owner of the invention. IT is imperative that you do this immediately.”
• “If you wish, Wing can assist you with your application.”
• “I am expecting that Shai will be calling me to find out what i[s] going on – They will likely figure out that you are planning on filing the patent application and may race to do the same themselves.”
[7] A motion was brought before Master MacLeod to determine whether Document 134 was privileged and, therefore, immune from production. In their factum filed in support of the motion, the appellants stated:
The Plaintiffs take the position that document 134 cannot be the subject of a proper claim of privilege insofar as it is evidence of the Defendants, Wing T. Yan (“Yan”) and Nelligan O’Brien Payne and Nelligan O’Brien Payne LLP (“NOP”) advising Peterson with respect to what course of action to take to undermine Grids’ proprietary interest in certain intellectual property. The course of action advised and subsequently taken by Peterson amounts to the tort of conversion. Communications made in advance of or in furtherance of tortious conduct of this nature are not protected by solicitor-client privilege.
The Plaintiff says the contents of that email are of significant probative value for the within litigation as it [is] evidence which:
a) It underscores the seriousness of the Defendant’s [sic] conduct insofar as it reveals that his conduct is based on the advice of counsel, was planned and deliberate in design with the purpose of defeating Grids’ proprietary interest and thus constitutes the tort of conversion;
b) Establishes that contrary to the position alleged in their Statement of Defence Yan and NOP were aware that Grids was asserting a proprietary interest in the I.P., and hence recommended a course of action calculated to undermine Grids’ rights to the I.P.;
c) Demonstrates a calculated effort by Peterson to move expeditiously to patent the I.P. in order to undermine Grids’ rights to the I.P.;
d) Is thus at odds with the testimony of Peterson with respect to the nature and scope of legal services which Yan and NOP actually provided with respect to the I.P. in question.
- Solicitor client privilege is not absolute. Privilege cannot be claimed in cases where the communication counsels or is in furtherance of the commission of a fraud. This is regardless of whether or not the lawyer in question was aware that the conduct in question was fraudulent.
[8] In his decision released April 3, 2009, the Master determined that privilege did not attach to the document and that Peterson had to answer questions in relation to the legal advice and services provided by NOP and Yan. The Master concluded that there was a waiver of solicitor/client privilege in regard to the patent application and also that the document might fall within the future crime and fraud exception regarding production of privileged communications between a solicitor and client. The Master observed that Document 134 demonstrated the following:
• Peterson and NOP knew that GRIDS was challenging Peterson’s ownership of the IP.
• Peterson was advised not to send a cease and desist letter until he commenced a patent application.
• Peterson was advised to commence a patent application immediately to give him standing to obtain an injunction.
• Peterson was advised to commence a patent application immediately because it was likely there would be a competing application commenced by GRIDS.
[9] The Master concluded at para. 12 of his Reasons: “It is readily apparent that this document could be evidence of sinister intent if it is shown that Peterson is not the rightful owner of the invention that was patented and if it is shown that he knew or ought to have known he was appropriating intellectual property belonging to GRIDS.”
[10] On August 21, 2009, the appellants conducted further examinations for discovery of Peterson, at which time Peterson was questioned about the legal advice he had received from NOP and, more particularly, about Document 134. He stated:
Tracy Ross in that email says to me that, “I’ve already spoken to Wing about this because I understood you had talked to him previously about patent. That’s my interpretation of it and you need to get that patent filed right away”.
So this was an initiative that Tracey has taken upon the conclusions of understanding the process that had been going on with Archibald Peterson, the discussions that she had with Frank Huntley, including the one of June 3rd or 2nd, I believe, it’s the draft letter to the Professor at Queen’s University, James Stewart.
She had reviewed the Agreements that we just talked about between APL and myself and GRIDS and myself, she had seen the email correspondence from Kevin Sahr that said, you know, “I’m jealous that I didn’t invent this”, and so this is with the knowledge that I would have had up to that date, as well.
I don’t think there’s any external knowledge that I had that she didn’t have, not knowingly any knowledge, anyway. She had all the knowledge to make that decision to say to me, “You need to file a patent as soon as possible”.
[11] On August 16, 2011, the appellants brought a motion before the Master seeking leave to issue an Amended Amended Statement of Claim to include a claim against NOP and Yan for damages pursuant to the doctrine of knowing assistance in regard to Peterson’s breaches of fiduciary duty. The particulars of the claim sought to be advanced were provided in paragraphs 29 and 30 of a draft Amended Amended Statement of Claim filed with the Notice of Motion:
- In addition to the breach of fiduciary duty aforementioned, NOP/NOP LLP and Yan are further liable to each of the Plaintiffs for the consequences of Peterson’s fiduciary breaches pursuant to the legal doctrine of knowing assistance owing to the fact that:
a) NOP/NOP LLP and Yan knew or should have known that Peterson was not entitled to claim ownership of the I.P. given that Peterson had sought specific advice and provided instructions on this matter and had specifically sought their advice as to his entitlements to the I.P. and the best way to secure the I.P. for himself to the exclusion of the Plaintiffs;
b) NOP/NOP LLP and Yan knew or should have known that, owing to the services Peterson performed for GRIDS, and the remuneration he was paid, and the absence of an agreement otherwise between himself and GRIDS, GRIDS retained ownership of all intellectual property which Peterson created or participated in creating in the course of providing innovative services to GRIDS;
c) NOP/NOP LLP and Yan knew or should have known that Peterson stood in a fiduciary role to GRIDS owing to the fact that he was a director of GRIDS and was hence bound by the statutory obligations provided for in s. 134 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16; and
d) NOP/NOP LLP and Yan knew or should have known that Peterson, by virtue of his position in GRIDS, received confidential proprietary information from GRIDS and SOU, and therefore Peterson held the proprietary information which make up the I.P. in trust for GRIDS and SOU, owed those partners fiduciary obligations with respect to the I.P. for the reasons enumerated in paragraph 21.4 supra.
- By advising Peterson to file a patent so as to trump the Plaintiffs’ claims and subsequently causing the Peterson patent to be filed, NOP/NOP LLP and Yan rendered assistance to Peterson in circumstances where they knew or were wilfully blind to the fact that Peterson was instructing them to act in a manner contrary to his fiduciary obligations of trust, fidelity, loyalty, good faith and confidence which he owed to SOU and GRIDS, and with the intent of deliberately converting the I.P. to his own use to the exclusion of the Plaintiffs.
[12] In the Notice of Motion seeking leave to file the Amended Amended Statement of Claim, the appellants stated under “Grounds”:
- The proposed amendments to the Statement of Claim amount to a fleshing out of the original claims advanced by the Plaintiffs, Geographic Resources Integrated Data Solutions Ltd. (“GRIDS”), and the State of Oregon, acting by and through its State Board of Higher Education, on behalf of Southern Oregon University (“SOU”) against Nelligan O’Brien Payne, Nelligan O’Brien Payne LLP and Wing T. Yan (“NOP/NOP LLP and Yan”) arising from a breach of duties with respect to the Plaintiffs, and all the material facts that give rise to the new claims are plead in the current Statement of Claim. [Emphasis added.]
[13] It was only as an alternative argument that the appellants stated that the facts giving rise to the new claims in the proposed amendments to the Statement of Claim were not discoverable by them until August 17, 2009, at the earliest, when Peterson served his Statement of Defence to the Cross-claim in which he made reference to the legal advice he received from NOP and Yan. In paragraph 12 of their Notice of Motion, the appellants stated:
- Prior to Peterson putting the legal advice he received from NOP/NOP LLP and Yan in issue, the Plaintiffs were aware of no factual basis to allege the actual knowledge requirement to make out a claim of knowing assistance against NOP/NOP LLP and Yan. Furthermore, prior to Peterson putting the legal advice in issue, the facts underlying a claim for knowing assistance were not discoverable due to the legal protections provided by solicitor and client privilege.
[14] In their factum in support of the motion to amend before the Master, the appellants reiterated that the claim based on knowing assistance was merely a further particularization of existing claims and was based on the same facts that had already been substantially pleaded in the Amended Statement of Claim. In the alternative, if the proposed amendments were considered a new cause of action, the appellants took the position that the claim was not statute barred because it was only discoverable on August 22, 2009. In their factum, the appellants stated that they were relying on the concept of “wilful blindness” or “failure to investigate” as the basis for satisfying the “actual knowledge” element of the knowing assistance claim which they sought to add in their Amended Amended Statement of Claim.
Order Under Appeal
[15] The Master found that the proposed claim for knowing assistance was a new cause of action not encompassed in the existing pleading. No appeal is taken in regard to this aspect of his decision.
[16] The Master concluded that the claim of knowing assistance was statute barred because October 30, 2008, at the latest, was the date when a reasonable person in the exercise of reasonable diligence would have realized that: (1) the plaintiffs had suffered a loss, (2) the loss was due to the act or omission of the defendants, and (3) there was a legal remedy against those defendants which could appropriately be pursued. In arriving at this conclusion, the Master pointed to those portions of the appellants’ factum dated October 30, 2008 used in support of their motion for production of Document 134, as set out in paragraph 7 above.
[17] The Master went on to observe that the only thing that had changed since October 30, 2008, was that Peterson pleaded in his Statement of Defence to the Cross-claim dated August 17, 2009 that he had provided information to NOP and Yan concerning his ownership of the IP in question and had received legal advice from NOP and Yan, and Peterson stated during his examination for discovery on August 22, 2009 that he had shared certain specific documents with NOP and Yan in regard to his proprietary rights to the IP. His evidence on that discovery was that he told Ross that the IP was his invention and he provided her with documents that he believed supported that assertion. The Master pointed out that, when the motion was argued, the appellants’ theory was that the documents provided to Ross by Peterson were so inadequate for that purpose that Ross was wilfully blind as to the true ownership of the IP. The Master concluded that the appellants had not adequately explained why all of the necessary elements to trigger discoverability of the appellants’ knowing assistance claim were not known to the appellants once they had Document 134. He noted that, on the motion for production of that document, the appellants had argued that Document 134 was not privileged because it fell under the fraud exception to solicitor/client privilege.
[18] The appellants concede that the Master properly interpreted the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 4 and the principles regarding discoverability. The parties are in agreement that, since the Notice of Motion seeking to further amend the Amended Statement of Claim was served on July 29, 2011, the limitation period would have expired if all of the essential elements required to establish a knowing assistance claim were discoverable prior to July 29, 2009. In fact, the Master found, based on the evidence provided on the motion, that all such elements were discoverable no later than October 30, 2008.
Grounds of Appeal
[19] The appellants advanced three grounds of appeal:
• The Master made an error in law in identifying the elements of a claim for knowing assistance, particularly in regard to SOU’s claim.
• The Master made a palpable and overriding error in failing to appreciate that Document 134 did not demonstrate that NOP and Yan knew of GRIDS and SOU’s proprietary interest in the IP.
• The Master made a palpable and overriding error in failing to appreciate all of the relevant evidence before the Master on the motion and focusing instead on Document 134.
Standard of Review
[20] In Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, the Supreme Court of Canada addressed the standard of review on an appeal from a judge’s decision. In summary:
On a pure question of law, the basic rule with respect to the review of a trial judge’s findings is that an appellate Court is free to replace the opinion of the trial judge with its own. Thus the standard of review on a question of law is that of correctness (at para. 8).
The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”: Stein v. The Ship "Kathy Krantzberg" (at para. 10).
Questions of mixed fact and law are subject to the “palpable and overriding error” standard unless it is clear that the trial judge made some error of law or principle that can be identified independent of the judge’s application of the law to the facts of the case. In these circumstances, the error of law is extricable from the questions of mixed fact and law in issue and must be separated out and reviewed on a standard of correctness (at paras. 36-37).
[21] The Ontario Court of Appeal elaborated on the definition of a palpable and overriding error in Waxman v. Waxman (2004), 186 O.A.C. 201, [2004] O.J. No. 1765 (C.A.), at paras. 296-297, 300:
The “palpable and overriding” standard addresses both the nature of the factual error and its impact on the result. A “palpable” error is one that is obvious, plain to see or clear: Housen at 246. Examples of “palpable” factual errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference.
An “overriding” error is an error that is sufficiently significant to vitiate the challenged finding of fact. Where the challenged finding of fact is based on a constellation of findings, the conclusion that one or more of those findings is founded on a “palpable” error does not automatically mean that the error is also “overriding”. The appellant must demonstrate that the error goes to the root of the challenged finding of fact such that the fact cannot safely stand in the face of that error: Schwartz v. Canada, [1996] 1 S.C.R. 254 at 281.
[22] In Zeitoun v. Economical Insurance Group, 2009 ONCA 415, 96 O.R. (3d) 639, at para. 1, the Ontario Court of Appeal confirmed that the standard of review set out in Housen v. Nikolaisen applies to appeals from decisions of a master.
[23] If a master’s findings of fact are reasonably available based on the entirety of the evidence, the fact that some aspects of the evidence are capable of alternate interpretations is insufficient to support a finding of misapprehension of the evidence warranting appellate interference (Musselman v. 875667 Ontario Inc., 2012 ONCA 41, at para. 6).
[24] Even though a motion is decided on the basis of a written record, the decision of a master must be accorded deference (Equity Waste Management of Canada v. Panorama Investment Group Ltd. (Ont. C.A.), at para. 45).
Analysis
Elements for Claim of Knowing Assistance
[25] There is no dispute that, as set out in Gold v. Rosenberg, [1997] 3 S.C.R. 767, at para. 34, the required elements to establish a claim for knowing assistance are the following:
• There was a trust;
• The named trustee perpetrated a dishonest and fraudulent breach of trust; and
• The third party against whom the claim is made had actual knowledge of the trustee’s dishonest and fraudulent breach of trust and participated in it.
[26] It is not in dispute that recklessness or wilful blindness will suffice to establish the actual knowledge required under the third element.
[27] The appellants acknowledge that the existence of a fiduciary duty on the part of Peterson to GRIDS and SOU was discoverable prior to July 29, 2009. As well, that Peterson perpetrated a dishonest and fraudulent breach of that fiduciary duty was discoverable prior to July 29, 2009. What the appellants take issue with in regard to the Master’s decision is his conclusion that the third element (i.e. that NOP and Yan had actual knowledge of Peterson’s dishonest and fraudulent breach of that fiduciary duty and assisted him in that regard) was discoverable prior to July 29, 2009.
[28] The appellants argued that, in order for the third element to have been discoverable prior to July 29, 2009, the appellant in question had to have been aware that: (1) NOP and Yan knew, ought to have known, or were wilfully blind to the fact that Peterson owed a fiduciary duty to the appellant; (2) NOP and Yan knew, ought to have known, or were wilfully blind to the fact that Peterson was breaching his fiduciary duty in a fraudulent way by applying for the Canadian patent; and (3) NOP and Yan assisted Peterson in applying for the patent. It is not in dispute that NOP and Yan assisted Peterson in applying for the patent.
[29] The appellants took the position that, although it was discoverable prior to July 29, 2009 that NOP and Yan knew that Peterson owed a fiduciary duty to GRIDS, it was not discoverable by that date that they knew that Peterson owed a fiduciary duty to SOU. There are numerous problems with this argument.
[30] First, at no time prior to the hearing of this appeal did the appellants raise the argument that the claims of the two plaintiffs (appellants) were discoverable at different times. This was not pleaded in any of the earlier pleadings or in the draft Amended Amended Statement of Claim. The draft Amended Amended Statement of Claim does go into greater detail as to why Peterson owed fiduciary duties to each of the appellants and as to why NOP and Yan knew or should have been aware of those fiduciary duties; however, the facts upon which it relies in making these allegations were known to the appellants long before July 29, 2009. The appellants did not raise in their factum on the motion before the Master that the claims of the two appellants were discoverable at different times. This argument was not raised in the appellants’ factum for this appeal. Motions and appeals are not supposed to be argued on the basis of new submissions not included in the facta exchanged in advance of the hearings.
[31] Second, the argument the appellants are now raising in regard to the discoverability of SOU’s claim, as distinct from GRIDS’ claim, ignores those portions of the Amended Statement of Claim that expressly state that Peterson owed a fiduciary duty to SOU as well as GRIDS, that GRIDS and SOU (through Peterson) retained NOP and YAN to represent them, that NOP and YAN ought to have known that GRIDS and SOU were the sole owners of the IP, that NOP and YAN owed a fiduciary duty to GRIDS and SOU as their clients, and that NOP and YAN assisted Peterson to assert ownership of the IP – thereby defeating the proprietary interests of both GRIDS and SOU in the IP. In view of all of these statements of fact contained in earlier pleadings, I cannot conclude that it was a palpable and overriding error for the Master to find that the appellants were in the position to discover that NOP and Yan ought to have known that Peterson owed a fiduciary duty to SOU (if such existed) prior to August 2009.
[32] The draft Amended Amended Statement of Claim provides more particulars as to why Peterson owed a fiduciary duty to SOU (para. 21.4), but the only further particular it provides as to why NOP and YAN should have been aware of such fiduciary duty is the following paragraph:
29.d) NOP/NOP LLP and Yan knew or should have known that Peterson, by virtue of his position in GRIDS, received confidential proprietary information from GRIDS and SOU, and therefore Peterson held the proprietary information which make up the I.P. in trust for GRIDS and SOU, owed those partners fiduciary obligations with respect to the I.P. for the reasons enumerated in paragraph 21.4 supra.
[33] Nothing is pled in the draft Amended Amended Statement of Claim as to why the appellants could not have been aware of this fact – at least in regard to wilful blindness – prior to July 29, 2009. Paragraphs 49 to 53 of the Amended Amended Statement of Claim are unhelpful in this regard. As well, the thrust of all earlier pleadings was that NOP and Yan should have made further inquiries regarding Peterson’s relationship with the appellants and about the appellants’ proprietary interests in the IP.
[34] In regard to the second factor identified in para. 28 above, namely, that NOP and Yan knew, ought to have known, or were wilfully blind to the fact that Peterson was breaching his fiduciary duty in a fraudulent way by applying for the Canadian patent, the appellants particularize this factor in para. 30 of the draft Amended Amended Statement of Claim as follows:
- By advising Peterson to file a patent so as to trump the Plaintiffs’ claims and subsequently causing the Peterson patent to be filed, NOP/NOP LLP and Yan rendered assistance to Peterson in circumstances where they knew or were wilfully blind to the fact that Peterson was instructing them to act in a manner contrary to his fiduciary obligations of trust, fidelity, loyalty, good faith and confidence which he owed to SOU and GRIDS, and with the intent of deliberately converting the I.P. to his own use to the exclusion of the Plaintiffs.
[35] Nothing is pled in the draft Amended Amended Statement of Claim as to why the appellants could not have discovered this fact prior to July 29, 2009. In fact, as of April 3, 2009, the contents of Document 134 were available for the appellants to rely on. As the Master noted, that document would be evidence of sinister intent if Peterson was not the rightful owner of the IP, as already alleged by the appellants. In earlier pleadings, the appellants had already stated that GRIDS and SOU were the rightful owners of the IP, that Peterson had converted that IP to his own use, and that NOP and Yan should have been aware of that through their interactions with Peterson and through exercising their professional duties in an appropriate fashion.
[36] In paras. 49 to 53 of the draft Amended Amended Statement of Claim, the appellants point to the information gleaned from Peterson’s Statement of Defence to the Cross-claim in which Peterson stated that NOP and Yan knew of the material facts relevant to his ownership of the IP and he relied on the advice of NOP and Yan to protect his IP rights. The appellants argue that this pleading allowed them to discover that NOP and Yan had the actual knowledge that could support a claim for knowing assistance. First, a claim for knowing assistance can be based on recklessness or wilful blindness; actual knowledge is not required. Second, Peterson’s statements in his Statement of Defence to the Cross-claim are consistent with Peterson being the rightful owner of the IP and his having provided NOP and Yan with all relevant information to establish his proprietary interests therein. The statements do not add anything of significance to the appellants’ claim regarding knowing assistance based on wilful blindness. It must be remembered that para. 22 of the Amended Statement of Claim stated that NOP and Yan knew or ought to have known that the appellants were the sole owners of the IP; therefore, presumably the appellants had already discovered by April 2008 that NOP and Yan ought to have known that Peterson did not own the IP in question.
[37] The appellants have failed to persuade me that the Master made any error in law in his appreciation of the knowing assistance test when he considered whether the limitation period for this claim had expired.
Master’s Findings of Fact
[38] As is apparent from the previous section, the appellants have also failed to persuade me that the Master made any palpable and overriding errors in his appreciation of the facts or in his application of the law to the facts. The appellants themselves stated in the materials filed on their motion for production of Document 134 that that document was evidence that NOP and Yan advised Peterson with respect to what course of action to take to undermine GRIDS’ proprietary interest in the IP in question and that the deliberate and fraudulent course of action Peterson then took, with NOP and Yan’s support and on the basis of their advice, amounted to conversion. The appellants also stated that NOP and Yan were aware of GRIDS’ proprietary right in the IP and recommended a course of conduct calculated to undermine those rights. It was open to the Master to conclude that, based on Document 134, the factum the appellants had submitted on the motion for its production, the affidavits filed on this motion, and the pleadings to date, the appellants had not satisfied him that the limitations clock regarding the knowing assistance claim started ticking only in August, 2009.
[39] As the Master rightfully noted in his endorsement, throughout the course of this litigation, the appellants’ theory has been that NOP and Yan were wilfully blind as to whether Peterson was the sole owner of the IP in question and as to whether GRIDS and SOU had a proprietary interest in that IP. The Master’s finding, that the appellants did not provide any evidence as to why their ability to make claims based on the failure to make reasonable inquiries was materially better in August, 2009 from what it had been on October 30, 2008, was a finding available to him on all of the evidence. It was not a finding which, by any stretch, amounted to a palpable and overriding error.
Disposition
[40] The appeal is dismissed. The parties may make brief written submissions regarding costs within 30 days of the release of these reasons.
Aitken J.
Released: December 17, 2012
CITATION: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2012 ONSC 7182
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GEOGRAPHIC RESOURCES INTEGRATED DATA SOLUTIONS LTD., and THE STATE OF OREGON, ACTING BY AND THROUGH ITS STATE BOARD OF HIGHER EDUCATION, ON BEHALF OF SOUTHERN OREGON UNIVERSITY
Appellants/Plaintiffs
– and –
PERRY PETERSON, NELLIGAN O’BRIEN PAYNE, NELLIGAN O’BRIEN PAYNE LLP, and WING T. YAN
Respondents/Defendants
REASONS FOR JUDGMENT
Aitken J.
Released: December 17, 2012
[^1]: I am assuming the correct date is January 25, 2007 and not 2006 as stated in some of the documents, in that the initial Statement of Claim was only issued in August, 2006.