COURT OF APPEAL FOR ONTARIO DATE: 20230524 DOCKET: C70387

Hoy, Thorburn and Favreau JJ.A.

BETWEEN

Interhealth Canada Limited Plaintiff (Appellant)

and

Michael O’Keefe and Canadian Hospitals Network International Inc. Defendants (Respondents)

Counsel: Robert B. Cohen, David Kelman and Stephanie Mills, for the appellant Emily Evangelista, for the respondent, Michael O’Keefe Paul Le Vay, Spencer Bass and Kevin A. Johnson, for the respondent, Canadian Hospitals Network International Inc.

Heard: March 10, 2023

On appeal from the judgment of Justice Andra Pollak of the Superior Court of Justice, dated January 27, 2023 with reasons at 2022 ONSC 589.

Hoy J.A.:

I. Introduction

[1] The appellant, Interhealth Canada Limited, sued Michael O’Keefe, a former Chief Executive Officer (“CEO”) and director, for breach of fiduciary duty. Relying on Can. Aero Service v. O’Malley, [1974] S.C.R. 592 (“Canaero”), the appellant alleged that, after resigning, Mr. O’Keefe diverted two maturing corporate opportunities that belonged to it to Canadian Hospital Network International Inc. (“CHNI”), a corporation in which Mr. O’Keefe held a 15% interest for a time after his resignation.

[2] The appellant also sued CHNI. Its claim against CHNI depended on a finding that Mr. O’Keefe breached his fiduciary duty to the appellant.

[3] After an 18-day trial, the trial judge found that the two “opportunities” the appellant alleged Mr. O’Keefe had diverted to CHNI did not fairly belong to the appellant in the circumstances. Therefore, Mr. O’Keefe had not breached his fiduciary duty to the appellant and, because he had not, there could be no finding against CHNI. She dismissed the appellant’s claims against Mr. O’Keefe and CHNI.

[4] The appellant seeks an order overturning the trial judge’s judgment, which dismissed its claims and awarded costs to Mr. O’Keefe and CHNI, and awarding judgment in the appellant’s favour. Alternatively, it seeks a new trial.

[5] The appellant advances both process-related and substantive grounds of appeal. In its oral submissions, the appellant focused on two grounds of appeal it characterizes as process-related:

1. The trial judge conducted a “trial by stopwatch” and deprived it of due process by unreasonably cutting its trial counsel off before he could complete his cross-examination of Mr. O’Keefe and another key witness, Skip Schwartz.
2. The trial judge erred in dismissing its motion to recall Mr. O’Keefe for cross‑examination pursuant to r. 53.01(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and in refusing to admit two affidavits.

[6] The appellant also argues that the trial judge made several substantive errors in her interpretation and application of applicable law which I will detail later in these reasons, when I have provided some context.

[7] For the following reasons, I would not give effect to the appellant’s arguments. I would dismiss the appeal.

[8] The allegations arose out of events that occurred 15 years before trial. Before turning to the issues raised, I will provide some high-level background, highlighting portions of the narrative relevant to the appellant’s arguments on appeal.

II. BACKGROUND

The appellant

[9] The appellant is a corporation with its head office in Toronto. It is in the business of providing hospital management and related services in the Middle East and elsewhere. It is controlled by Dr. Emad El Dukair. As noted above, Mr. O’Keefe was its CEO and a director.

Mr. O’Keefe’s resignation

[10] In June 2005, Mr. O’Keefe submitted his notice of resignation, effective December 31, 2005. In October, he accelerated the effective date of his resignation, and resigned on October 31, 2005.

[11] Mr. O’Keefe testified that he submitted his resignation in June 2005 because there were discussions that the CEO should be located in the UK and he did not want to move there. He wanted to spend more time in Canada with his family. In early October, he became aware that, without his knowledge and against his strong recommendation, employees in the UK were preparing to submit pre‑qualification proposals for projects referred to as the “Wave 2 projects”. He did not support the appellant’s pursuit of the Wave 2 projects because the appellant did not have the resources to get or perform them. The CEO of the appellant’s UK operations testified and expressed the same opinion. Further, Mr. O’Keefe believed that the submission of pre-qualification proposals would require misleading and/or untrue statements about the appellant’s resources that compromised his and the appellant’s reputation.

[12] On October 9, 2005, Mr. O’Keefe advised the appellant in writing that if it submitted pre-qualification proposals for the Wave 2 projects on October 26, 2005, he would move up his resignation to October 25, 2005. The appellant submitted the pre-qualification proposals on October 26, 2005. On October 31, 2005, Mr. O’Keefe advised that he was resigning, effective immediately.

[13] The trial judge accepted Mr. O’Keefe’s evidence on the reasons for his resignation.

The incorporation of CHNI and the two opportunities allegedly diverted to it

[14] CHNI was incorporated on April 6, 2006, a little over five months after Mr. O’Keefe resigned.

[15] The trial focused on two opportunities that the appellant alleged Mr. O’Keefe diverted to CHNI following his resignation: the “HIH Opportunity” and the “Cromwell Opportunity”. I discuss them below.

[16] One of the substantive errors the appellant alleges is that the trial judge confined her analysis to whether the corporate opportunities belonged to the appellant and failed to consider whether Mr. O’Keefe’s involvement with Healthcare Investment Holding (“HIH”), an investment company established in Abu Dhabi, 70% owned by Abu Dhabi’s Royal Family, and the balance by high‑ranking individuals from Abu Dhabi, before he resigned breached his fiduciary duty. Accordingly, before explaining the HIH Opportunity and the Cromwell Opportunity, I will provide some background about Mr. O’Keefe’s involvement with HIH before he resigned, including sending a letter to Hospital Business Systems on October 20, 2005 on behalf of HIH and providing his thoughts to HIH about a proposed project called “Women’s Island.”

The appellant’s prior involvement in Abu Dhabi and Mr. O’Keefe’s discussions with Healthcare Investment Holding (“HIH”) before he resigned

[17] Mr. O’Keefe was candid that after he submitted his notice of resignation, he began to think about how to generate revenue after his retirement.

[18] He talked with Ali Jaffar, who was also a director of the appellant and a long‑time associate and business partner of Dr. El Dukair, about opportunities in Abu Dhabi, in the United Arab Emirates and setting up their own business.

[19] From 1999 to 2003, the appellant managed the Sheikh Khalifa Medical Center (the “SKMC”) in Abu Dhabi pursuant to an agreement with the General Authority for the Support and Development of Health Care (the “Authority”). While the Authority is a government ministry distinct from the Royal Family of Abu Dhabi, the SKMC provided medical services to some members of the family during that time.

[20] The relationship between the appellant and the Authority was not without problems. In 2001, after a member of Abu Dhabi’s Royal Family took a greater leadership role at the Authority, the Authority sought to audit the management fee that the appellant was charging. The appellant took the position that the Authority was not entitled to audit the fee it charged, and, for about eight months, the Authority stopped paying management fees. Mr. O’Keefe became involved on behalf of the appellant in resolving this dispute.

[21] In the course of doing so, Mr. O’Keefe met Dr. Abdul Rahman Al Muhairi, who was a medical consultant to the Authority. Dr Muhairi was a respected consultant to the Royal Family of Abu Dhabi and was also director of the Cromwell Hospital in London, England. The Royal Family enlisted him to try and resolve the issue with the appellant.

[22] Ultimately, the dispute was resolved by a reduction of approximately $5 million USD in the management fee. The Authority did not renew the appellant’s contract to manage the SKMC after the contract expired in May 2003.

[23] Mr. O’Keefe and Dr. Muhairi maintained a collegial relationship after the expiry of the SKMC contract. On July 12, 2005, Dr. Muhairi told Mr. O’Keefe that the Crown Prince of Abu Dhabi had approved the creation of the Emirates Medical City (“EMC”), an international medical center in Abu Dhabi to be used as a referral centre for the Middle East and Africa, as well as for Abu Dhabi’s own population. HIH was created to invest in the provision of healthcare services in the Emirate of Abu Dhabi and establish EMC.

[24] Subsequently, Dr. Muhairi spoke to Mr. O’Keefe about whether he was interested in being a director of HIH.

[25] Mr. O’Keefe testified that he did not tell the appellant about potentially joining the HIH board because he was not sure that it would go forward and he did not see HIH as a competitor to the appellant: HIH was in the investment business, and the appellant was in the hospital management business. Mr. O’Keefe never attended an HIH board meeting, and never received any compensation.

[26] Mr. O’Keefe believed that the appellant had been shut out of the Abu Dhabi market because of its fractured relationship with the Authority, and that there were opportunities for him, but not for the appellant, in the Abu Dhabi market. Mr. O’Keefe testified that Dr. Muhairi made it clear in September of 2005 that the appellant would not be considered to perform any scope of work on EMC because of the relationship it had with the Authority. The Royal Family distrusted Dr. El Dukair and the appellant.

[27] Mr. O’Keefe admitted that he wanted to pursue opportunities with HIH.

The letters to Hospital Business Systems (“HBS”)

[28] On October 20, 2005, Mr. O’Keefe sent a letter to the Chairman of HBS on the appellant’s letterhead. HBS is a group of some 10 Toronto hospitals who looked at opportunities to share back-office work. In the letter, Mr. O’Keefe stated that he was “approached by representatives of HIH in Abu Dhabi, to provide advice to establish a relationship with Canadian healthcare centres of excellence” and that there “could be a range of opportunities available for interested hospitals to provide consulting and other resources”. He sent a similar letter to the former general manager of HBS.

[29] Mr. O’Keefe testified that he sent the letters on behalf of HIH as a director in an attempt to solicit HBS’s interest in pursuing consulting arrangements with HIH. He admitted that he should not have sent them on the appellant’s letterhead.

[30] In the letters, Mr. O’Keefe adverted to HIH’s intent to set up “a subsidiary healthcare consultant/operator company” that “will also become involved in providing consultation and support to existing Government hospitals in Abu Dhabi…”.

The Women’s Island Project

[31] The following day, Mr. O’Keefe sent a two-and-one-half page letter to Dr. Muhairi, outlining his thoughts about a potential part of the EMC project then called “Women’s Island”. His letter was at a very conceptual, general level. He suggested that Women’s Island be planned to provide a “healthy” range of programs for women. He admits he did this for his personal benefit, and not for the benefit of the appellant. He testified that this was his only involvement with the Women’s Island potential project, nothing came of this potential project, and he was not paid for this work.

Mr. O’Keefe becomes a director of FHG

[32] On November 28, 2005 (approximately one month after his resignation from the appellant), Mr. O’Keefe was appointed a director of First Healthcare Group LLC (“FHG”), a subsidiary of HIH and its operating arm for the EMC Project. The letter appointing him indicated that FHG intended “to pursue opportunities in Hospital Operations and Management; Healthcare Planning and Consulting; Facilities Management; Equipment Planning and Procurement; Pharmaceutical supply and management.” It also indicated that the board would meet approximately 3 times per year and that Mr. O’Keefe would be paid both a retainer and per meeting fees. However, Mr. O’Keefe did not participate in any directors’ meetings and received no compensation for this role.

[33] There appeared to be no dispute that FHG was the “subsidiary healthcare consultant/operator company” contemplated in the letters that Mr. O’Keefe sent to HBS.

The HIH Opportunity

[34] On or around April 12, 2006, CHNI entered into an agreement with HIH to provide services in relation to the EMC project. At the time, Mr. O’Keefe held a 15% beneficial interest in CHNI. Mr. Jaffar indirectly owned the balance of the shares.

[35] This agreement with HIH is referred to by the parties and the trial judge as the “HIH Opportunity.”

[36] In November 2005, after Mr. O’Keefe had resigned, the appellant received an HIH memorandum about the “Prime Consultants” it proposed to engage for the EMC project. The HIH memorandum indicated that HIH would be represented by an “Employee Prime.” Receipt of the memorandum prompted the appellant to make a proposal to HIH to fill the role of “Strategic Healthcare Planner”, one of the consulting roles identified in the memorandum. HIH did not accept the appellant’s proposal. Instead, it engaged The Monitor Group as its Strategic Healthcare Planner.

[37] On April 9, 2006, four months after the appellant had submitted its proposal to HIH, and more than two months after HIH had rejected the appellant’s proposal, CHNI submitted a proposal to HIH to act as “Employee Prime.” That proposal was accepted, resulting in the April 12, 2006 agreement which constitutes the “HIH Opportunity.”

[38] Before Mr. O’Keefe resigned, Dr. Muhairi sought his guidance about how to deal with the Prime Consultants it proposed to retain on the EMC project, but there was no discussion between Dr. Muhairi and Mr. O’Keefe about the opportunity to act as “Employee Prime” for EMC before Mr. O’Keefe resigned.

[39] CHNI received an “upfront payment” of $479,400 USD under its agreement with HIH. Mr. O’Keefe testified that an upfront payment of that magnitude was customary in these types of agreements in the Middle East. He also testified that CHNI provided some services, but the EMC Project did not proceed, and it received no further payments.

[40] As detailed later in these reasons, the trial judge found that the opportunity to act as “Employee Prime” was “an entirely different opportunity” from the opportunity that the appellant had pursued after Mr. O’Keefe’s retirement to act as Strategic Health Care Planner.

The Cromwell Opportunity

[41] In December of 2006, a corporation which CHNI had a minority interest in acquired the corporation which held a 20-year operating licence for Cromwell Hospital (sometimes referred to as the “Hospital”). The acquiring corporation was controlled by, and the funds for the acquisition were provided by, the Rotary Group, a privately owned British company with a consolidated asset value greater than $1 billion USD. Mr. O’Keefe served as the Hospital’s Interim CEO from December 2006 until February 2007.

[42] In October of 2007, following a contested legal dispute – the subject of the separate court application in 2007 mentioned later in these reasons – Mr. O’Keefe sold his 15% interest in CHNI for $1,359,975 CAD. In March 2008, the shares in the corporation which held the operating licence for the Hospital were sold and CHNI received gross proceeds in the approximate amount of €32,983,146. (Fifteen percent of that amount, Mr. O’Keefe’s interest in CHNI, is €4,947,471.90.)

[43] Mr. O’Keefe’s or CHNI’s indirect interest in the purchase of the operating licence for the Cromwell Hospital is the “Cromwell Opportunity” – the second alleged maturing opportunity of the appellant that Mr. O’Keefe diverted to CHNI.

[44] The appellant had inquired about obtaining the right to manage the Hospital while Mr. O’Keefe was still employed by it.

[45] In the spring of 2003, the appellant had learned that Cromwell Hospital might be interested in outsourcing its management. On July 21, 2003, Mr. O’Keefe wrote to Dr. Muhairi, on behalf of the appellant, expressing the appellant’s interest in meeting to discuss potential opportunities. Dr Muhairi told him that the Hospital had decided to continue to self-manage. Moreover, if there were an opportunity, it would not be given to the appellant. The Royal Family of Abu Dhabi, which owned the Hospital, did not have confidence in the appellant, because it was owned by Dr. El Dukair. Mr. O’Keefe reported this to Dr. El Dukair and to Dr. Al Sabti, who was then the appellant’s Business Development Director.

[46] Dr. Al Sabti testified that he raised the possibility of managing the Hospital with Dr. Muhairi again at a meeting in the first quarter of 2004 and Dr. Muhairi replied “inshallah”. Dr. Al Sabti testified that, translated to English, “inshallah” means “if God wills”, and, to a practicing person, means “it’s going to happen with God’s blessing.” (Mr. O’Keefe said that to him, it meant probably not: “God’s will, we’ll see.”) Dr. Al Sabti testified that at another meeting with Dr. Muhairi in December of 2004, he was given the impression that the appellant was still in the running if the Hospital decided to contract out its management.

[47] Mr. O’Keefe was not aware of the potential “revival” of the 2003 opportunity to acquire the right to manage the Hospital while still employed by the appellant. In fact, the Hospital remained self-managed until December 2006 and the trial judge found that there was no “revival” of the opportunity to manage the Hospital.

[48] As outlined further below, the trial judge found that participating in the indirect purchase of the operating licence for the Hospital was a different opportunity from the opportunity to manage the Hospital about which the appellant had made inquiries before Mr. O’Keefe resigned. Acquiring an operating licence was not in the appellant’s line of business.

[49] I turn now to the first process-related issue raised by the appellant.

III. TRIAL BY STOPWATCH

[50] The appellant’s characterization of the trial as a “trial by stopwatch” is not unfair. I do not endorse the strict “time’s up” approach as applied by the trial judge. However, I am not persuaded that the appellant was prejudiced and would not order a new trial on this basis.

[51] The trial was conducted virtually during the COVID-19 pandemic. The schedule for the hearing of evidence was set by counsel and was updated frequently during the trial. Eight witnesses testified. The trial judge was clear that if the trial were not completed within the agreed upon schedule, additional court time could not be found for many months. She was also clear at the outset of trial that she would cut counsel off if they exceeded the time allotted. She cautioned that, “These are COVID times. You have to focus and get to the points.” The trial judge held all parties to the schedule. As the appellant submits, she did not permit appellant’s counsel to exceed the time allotted to him to cross-examine Mr. O’Keefe or Mr. Schwartz.

[52] Counsel had cross-examined Mr. O’Keefe over two days and had cross‑examined Mr. Schwartz for approximately a half-day. When appellant’s counsel had 35 minutes left to cross-examine Mr. O’Keefe, he inquired whether it was a “hard stop”. The trial judge confirmed that it was. In the case of Mr. Schwartz, the trial judge simply told appellant’s counsel that his time was up.

[53] I begin by noting that deference is owed to trial management decisions. Judicial resources are scarce and were particularly scarce during the COVID-19 pandemic. Trial management is an essential and versatile tool. That said, it must be exercised carefully. “The trial management power is not a license to exclude otherwise relevant and material evidence in the name of efficiency”: R v. Samaniego, 2022 SCC 9, at paras. 22, 25.

[54] Where counsel seeks an extension of the time agreed or fixed for cross‑examination, and their cross-examination has not been unduly repetitive, rambling, argumentative, misleading or irrelevant, it is prudent for a trial judge to inquire as to what additional questions counsel wishes to ask, and how long doing so might take before cutting counsel off. This brief exchange may need to take place in the absence of the witness. Such an inquiry should not create delay. Armed with the responses to these questions, the trial judge will be able to quickly assess the relevance and materiality of counsel’s proposed line of further inquiry and determine whether a brief extension is reasonable and warranted in all the circumstances. Whether the pace of counsel’s cross-examination has been slowed by unreasonable interjections of opposing counsel may be a relevant factor in deciding whether a brief extension is appropriate.

[55] Here, the trial judge did not ask counsel for the appellant what additional questions he wished to ask Mr. O’Keefe or Mr. Schwartz, and how long doing so might take. She may have concluded that trial counsel had failed to focus and get to the point, as she had cautioned him to do, but she made no comment to that effect.

[56] In any event, counsel did not put on the record what additional lines of inquiry he sought to pursue, and why. While counsel says it was clear that nothing he said would change the trial judge’s mind, he nonetheless should have done so. Nor did the appellant outline in its factum on appeal what those additional lines of inquiry were, and why he was prejudiced by his inability to ask further questions.

[57] When pressed at the hearing of the appeal, counsel says that he wished to further press Mr. Schwartz, also a former director of the appellant, on why Mr. O’Keefe accelerated his resignation from December 31, 2005 to October 31, 2005. Whether Mr. O’Keefe’s resignation was prompted or influenced by a wish to acquire the “opportunities” at issue for CHNI was an issue at trial. As noted above, the trial judge accepted Mr. O’Keefe’s evidence about the reasons for his resignation, including that he accelerated his resignation because he did not support the appellant’s pursuit of the “Wave 2” projects in the UK. In his cross‑examination, Mr. Schwartz testified that his understanding was that Mr. O’Keefe accelerated his resignation because of the issues related to the “Wave 2” projects.

[58] The trial judge noted that Mr. O’Keefe’s concern was shared with the other Canadian directors, including Mr. Schwartz. Mr. Schwartz and another director stated in emails that they would resign in solidarity with Mr. O’Keefe. Three other directors resigned around the same time as Mr. O’Keefe.

[59] In the circumstances, I am not persuaded that the appellant was prejudiced by his inability to further press Mr. Schwartz on this issue.

[60] As to its cross-examination of Mr. O’Keefe, the appellant submitted that it would have pursued with Mr. O’Keefe why his June 2005 resignation letter did not mention the concern with Wave 2 projects [^1] and asked more questions about the letter he sent to HBS on behalf of HIH on October 20, 2005. While the appellant had explored the interests of Dr. Muhairi in the Cromwell Opportunity, the appellant says it wished to explore this further, and also to further cross-examine Mr. O’Keefe on inconsistencies in his evidence.

[61] Counsel for the appellant did not explain what he hoped to elicit from these further questions, besides somehow casting doubt on Mr. O’Keefe’s credibility, and what role they would have had in the trial judge’s reasoning process. Again, I am not persuaded that the appellant was prejudiced.

[62] I will turn next to the second process-related ground that the appellant advances.

IV. THE RECALL MOTION

[63] On day 15 of the trial, after both the appellant and Mr. O’Keefe had closed their cases, the appellant brought a motion pursuant to r. 53.01(3) of the Rules of Civil Procedure to recall Mr. O’Keefe for further cross-examination on two allegedly newly discovered affidavits, neither of which was sworn by Mr. O’Keefe. The affidavits had been filed in a different application, in 2007. During the trial, the appellant had cross-examined one of the affiants and was permitted to and used his affidavit to attempt to impeach him.

[64] The appellant argues that the trial judge’s exercise of discretion in dismissing its motion was unreasonable in the circumstances. In particular, it argues that the affidavits disclose relevant information in relation to the Cromwell Opportunity and, since the respondents should have disclosed the affidavits in their affidavit of documents, the fair thing would have been to permit them to recall Mr. O’Keefe to cross-examine him about them. The appellant also argues that the trial judge erred by refusing to admit the affidavits as evidence.

[65] I do not agree that the trial judge’s exercise of her discretion to dismiss the recall motion was unreasonable or that she erred in refusing to admit the affidavits as evidence at trial.

[66] Both parties cited the same jurisprudence, including Griffi v. Lee, 2005 ONSC 48316, as to the principles that the trial judge should consider in determining the motion. Consistent with the jurisprudence, the trial judge considered several factors in coming to her conclusion that the motion should be dismissed.

[67] The trial judge found that the appellant had been aware of the existence of the 2007 application since 2008, when the first affidavit of documents was served; the appellant received a copy of the face page of the 2007 application record in response to undertakings in 2011, along with the respondents’ position that the application record was not relevant; the appellant had taken no steps in the intervening years to bring a motion to deal with the issue; appellant’s counsel had asked Mr. O’Keefe in his examination for discovery whether the affidavits were sworn in the 2007 application; and appellant’s counsel had cross examined Mr. O’Keefe extensively on the 2007 application and yet did not ask about the affidavits. She also considered that the recall motion was brought in the late stage of the trial.

[68] The trial judge considered the jurisprudence which the parties agreed applied. She balanced the interests of both parties. She considered relevant factors and concluded that Mr. O’Keefe should not be recalled. She rejected the appellant’s argument that recall was warranted solely on the basis of relevance. The question was not whether the evidence sought to be gained from recalling Mr. O’Keefe was relevant (which the respondents continued to dispute at trial). Rather, it was whether there would be a “failure of justice” if he were not recalled. The trial judge did not err in applying a multi-factorial approach. Except perhaps in exceptional circumstances, relevance alone sets the bar too low on a recall motion.

[69] The trial judge did not err by refusing to admit the affidavits. She had permitted the appellant to use the affidavit of one of the witnesses to attempt to impeach that witness. There was therefore no basis or need to admit the affidavit itself as evidence. As to the other affidavit, the affiant was not a witness at trial. The trial judge properly ruled that it was inadmissible hearsay. And none of the exhibits to the affidavits were identified or authenticated in such a way that they could have been admitted into evidence in their own right.

[70] I turn, finally, to the trial judge’s alleged substantive errors.

V. THE ALLEGED SUBSTANTIVE ERRORS

A. The issues raised

[71] The appellant argues that the trial judge erred in her interpretation and application of the applicable law in several respects:

(i) She relied on hearsay evidence for the truth of its contents in concluding that the opportunities did not belong to the appellant. (ii) She made palpable and overriding errors of fact. (iii) She erred in law (1) by considering whether the opportunities were “different” from those pursued by the appellant when Canaero instructs that the opportunity does not even need to bear a “substantial resemblance”, and (2) by not considering the fact that the Cromwell Opportunity could be considered a “related business” as a factor suggesting that it did belong to the appellant. (iv) She erred by confining her analysis to whether the corporate opportunities belonged to the appellant and failing to consider whether Mr. O’Keefe’s involvement with HIH before his resignation breached his fiduciary duty.

[72] Before addressing these arguments, it is helpful to articulate the guiding legal principles from Canaero and outline the trial judge’s reasons for concluding that Mr. O’Keefe did not divert corporate opportunities belonging to the appellant to CHNI.

B. The core legal principles

[73] At p. 607 of Canaero, Laskin J. wrote that a director or senior officer is disqualified:

…from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.

[74] Thus, the issues at trial were: (1) whether Mr. O’Keefe’s resignation was prompted or influenced by a wish to acquire for himself or divert to CHNI a maturing business opportunity which the appellant was actively pursuing; or (2) whether after his resignation Mr. O’Keefe usurped for himself or diverted to CHNI a business opportunity which, before he resigned, was maturing and the appellant was actively pursuing.

[75] Canaero, at p. 620, explains that whether there is a breach of fiduciary duty which survived resignation must be tested against many factors. A non-exhaustive list includes the “position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director’s or managerial officer’s relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge.”: Canaero, at p. 620.

[76] A finding that a defendant has usurped a corporate opportunity does not depend upon proof by a plaintiff that, but for the acts of the fiduciary, the plaintiff would have obtained the opportunity at issue: Canaero, at pp. 621-22.

C. The trial judge’s reasons

[77] Significantly, the trial judge rejected the appellant’s argument that Mr. O’Keefe was motivated to accelerate his resignation to pursue the HIH Opportunity and the Cromwell Opportunity. She accepted Mr. O’Keefe’s evidence on the reasons for his resignation.

[78] In relation to the Cromwell Opportunity, the trial judge held as follows:

I find that the opportunity was available to Mr. O’Keefe as a result of his good professional reputation and the personal relationships he had established. These relationships were not available and not the property [of the appellant]. When I assess all the evidence I find that the “opportunity” did not fairly belong to [the appellant] in the circumstances.

[79] In coming to this conclusion, she considered that:

The Cromwell opportunity… was a different opportunity and was not a mature opportunity when it was considered by [the appellant].

The [Cromwell] opportunity was not in the line of business of [the appellant]. At best, it could be described as a “related business”.

[The appellant] could not have taken advantage of the opportunity as the opportunity arose as a result of personal relationships and professional reputations. The evidence was that the royal family of Abu Dhabi did not trust the appellant or its owner Dr. El Dukair. Further… Dr. Muhairi’s and the Rotary Group’s approval was critical. The evidence was clear that Dr. Muhairi had advised that [the appellant] would not be considered to manage the Cromwell hospital even if that opportunity had become available.”

[80] Elsewhere in her reasons, the trial judge was clear that the Cromwell Opportunity was not a “revival” of an earlier opportunity.

[81] With respect to the HIH Opportunity, the trial judge found that:

…the opportunity was never an opportunity that fairly belonged to [the appellant]. The evidence was that it was an entirely different opportunity that would not have been available to [the appellant]. CHINI [sic] was engaged to coordinate and manage the consultants who were retained on the project. It was an opportunity that did not exist when Mr. O’Keefe was with [the appellant.] It was a new and fresh opportunity that had never belonged or was available to [the appellant.]

D. The hearsay issue

[82] Mr. O’Keefe and CHNI concede that what Mr. O’Keefe testified Dr. Muhairi told him (namely, that the appellant would not be considered to perform any scope of work for HIH on the EMC project or manage the Cromwell Hospital, even if that opportunity became available) is hearsay, and not admissible for its truth. [^2]

[83] Their position at trial was that this evidence had two significant non-hearsay purposes. First, it led Mr. O’Keefe to conclude that the possibility of being involved with HIH or managing the Cromwell Hospital were not potential opportunities for the appellant. Second, in the case of the Cromwell Hospital, Mr. O’Keefe reported to Dr. El Dukair and Dr. Al Sabti that this is what Dr. Muhairi said, so the appellant would not have believed that managing the Cromwell Hospital, should it decide to cease self-managing, was a potential opportunity, let alone a maturing one.

[84] As to this second, argued purpose, there was no evidence that Dr. Al Sabti communicated to Mr. O’Keefe or Dr. El Dukair that he believed that the appellant was still in the running if the Hospital decided to contract out its management. And Dr. Al Sabti’s belief was based entirely on hearsay evidence. Moreover, the hearsay evidence was ambiguous. The word “inshallah” on which Dr. Al Sabti relies, could also be interpreted as a polite way to dismiss Dr. Al Sabti’s unsolicited inquiries.

[85] It was open to the trial judge to accept the evidence of Mr. O’Keefe that he believed that the possibility of being involved with HIH or the Cromwell Opportunity would not have been available to the appellant, as she clearly did, and to conclude that the appellant would not have believed that the Cromwell Opportunity was open to it.

[86] Further, it was open to the trial judge to draw reasonable and logical inferences based on the admissible evidence. HIH did not accept the appellant’s proposal to act as Strategic Healthcare Planner on the EMC project. As noted above and explained in more detail below, HIH instead appointed The Monitor Group. This is consistent with Mr. O’Keefe’s belief that HIH would not consider the appellant for any scope of work on the EMC project. As well, the Authority did not extend the appellant’s contract to manage the SKMC following its dispute with the appellant about the management fees it charged the Authority. As noted above, that dispute resulted in a significant reduction in the management fees that the appellant charged. There was no evidence that the appellant performed any work in Abu Dhabi in the more than 15 years between the expiry of its contract to manage the SKMC and trial. As noted above, a finding that a defendant has usurped a corporate opportunity does not depend upon proof by a plaintiff that, but for the acts of the fiduciary, the plaintiff would have obtained the opportunity. Nonetheless, the appellant did not adduce evidence from Dr. Muhairi or anyone else associated with the Abu Dhabi’s Royal Family that the Royal Family was not averse to engaging the appellant.

[87] If the trial judge relied on what Mr. O’Keefe recounted that Dr. Muhairi told him for the truth of its contents, I am not persuaded that her error is material. Her finding that the HIH Opportunity and the Cromwell Opportunity were not available to the appellant is amply supported by the record.

[88] Moreover, the core of the trial judge’s reasons in relation to the HIH Opportunity and the Cromwell Opportunity is that they were different opportunities from an opportunity to act as a Strategic Healthcare Planner and to manage the Cromwell Hospital. As I discuss below, those findings are sound.

E. Alleged palpable and overriding errors of fact

[89] The appellant argues that the trial judge made three palpable and overriding errors of fact.

[90] First, her finding that the Cromwell Opportunity was not in the appellant’s line of business is contrary to the evidence of two witnesses, Dr. Al Sabti and Shashikant Nayak, Accounts and Finance Manager for the appellant’s operations in the Middle East, about the scope of the appellant’s expertise.

[91] Second, her finding that the HIH Opportunity was “an entirely different opportunity” is a clear error: it involved providing substantially similar services on the EMC Project to those the appellant had proposed to provide to HIH.

[92] Third, the trial judge’s acceptance of Mr. O’Keefe’s evidence as to why he resigned, without reviewing the evidence that suggested to the contrary, and without fully assessing his credibility, in face of what it says are numerous inconsistencies in his testimony, amounts to a palpable and overriding error. Her credibility findings should not be entitled to deference, given the deficiencies in her reasons.

[93] I am not persuaded that the trial judge’s conclusions are tainted by palpable and overriding error. While the trial judge could have done a far better job of explaining why she came to these conclusions, each of the impugned findings is supported by the record.

[94] The Cromwell Opportunity involved acquiring the operating licence for the Hospital. That required significant capital. The holder of the operating licence bears full responsibility for the Hospital’s operating profit and loss. The appellant had been involved in managing hospitals and, as Dr. Al Sabti and Mr. Nayak testified, had significant expertise in doing so. But the undisputed evidence of Mr. O’Keefe was that the appellant had never attempted to obtain an operating licence for a hospital. The trial judge’s finding that the Cromwell Opportunity was not in the appellant’s line of business (and her finding that the Cromwell Opportunity was a different opportunity from the argued maturing opportunity of managing the Hospital) are supported by the record.

[95] The trial judge’s finding that the HIH Opportunity was “an entirely different opportunity” from that pursued by the appellant is supported by the evidence of Mr. O’Keefe as well as by the documentation.

[96] Mr. O’Keefe explained that the HIH Opportunity involved CHNI acting as “Employee Prime.” Essentially, it was to act as HIH’s representative and coordinate the work of the three Prime Team consultants HIH had hired on the EMC Project – HOK International (“HOK”), an international architectural firm, Deloitte, on the business side, and The Monitor Group, as the Strategic Healthcare Planner for EMC – and report to HIH’s executive committee. The appellant had sought to provide the Strategic Healthcare Planning component which was awarded to The Monitor Group. Had the appellant been retained as strategic planner, it would have reported to CHNI as the Employee Prime.

[97] The documentation is consistent with Mr. O’Keefe’s evidence. That documentation includes HIH’s Memorandum of Information & Terms of Reference regarding the Consulting Services dated November 21, 2005, which outlines the expectations of the strategic healthcare planner and indicates that HIH will be represented by an Employee Prime, the appellant’s proposal, in response, to act as Strategic Healthcare Planner, as part of the “Prime Team of consultants to the project”, dated December 5, 2005, and CHNI’s April 9, 2006 proposal to HIH to act as Employee Prime (Client Representative) and, as such, monitor the “Prime Team Consultants”.

[98] Finally, a trial judge’s credibility assessments are entitled to deference. There is no basis for this court to interfere with the trial judge’s acceptance of Mr. O’Keefe’s evidence as to why he resigned, and why he accelerated the date of his resignation. Reading her reasons in context, the evidence of Mr. Schwartz and the resignation of several other directors at nearly the same time as Mr. O’Keefe clearly bolstered his evidence as to why he accelerated his resignation and underpinned her credibility finding.

[99] The reasons of the trial judge are far from perfect but, combined with the record, including the parties’ submissions, permit appellate review. As the Supreme Court held in R. v. G.F., 2021 SCC 20, at para. 70, “bad reasons” are not an independent ground of appeal.

F. Different vs. “substantial resemblance” and the “related business” factor

[100] The trial judge did not err in her application of Canaero by considering whether the Cromwell Opportunity and the HIH Opportunity were different from the opportunities which the appellant had sought to pursue. The “substantial resemblances” language in Canaero is merely a factor that may assist in determining whether the opportunity pursued by a fiduciary post-departure is different from one that the company pursued.

[101] In Canaero, Laskin J. considered to what extent the project in relation to which a fiduciary made a post-departure proposal must differ from the project for which the company made a proposal for the fiduciary to evade liability. Liability cannot be evaded merely because the project has “been varied in some details”: at p. 616. The presence of substantial resemblances is “a factor to be considered on the issue of breach of fiduciary duty but they are not a sine qua non.”: at pp. 616-17. In Canaero, at p. 617, the “cardinal fact” was that the departed fiduciary, Zarzycki, pursued the same project as Canaero had been pursuing, through the departed fiduciaries.

There is no suggestion that there had been such a change of objective as to make the project for which proposals were invited from Canaero, Terra and others a different one from that which Canaero had been developing with a view to obtaining the contract for itself. [Emphasis added.]

[102] In the case of the Cromwell Opportunity, the “project” changed from inquiring about the possibility of a contract to manage a hospital, to acquiring a licence to operate a hospital. In the case of the HIH Opportunity, the “project” changed from being hired by HIH as consultant – a Strategic Healthcare Planner – to acting as HIH’s representative, supervising that consultant and others. The opportunities were not simply “varied in some details”. They were fundamentally different.

[103] Nor did the trial judge err in law by not considering that the Cromwell Opportunity could possibly be described as in a related business as an indicator that it belonged to the appellant.

[104] The question of whether a corporate opportunity has been appropriated is a highly contextual one, which must be tested in each case by many factors. Whether, or the extent to which, the opportunity is in a related business might be a relevant factor [^3], it is only one factor. The other factors that the trial judge relied on, and the record, amply supported her conclusion that Mr. O’Keefe did not appropriate a corporate opportunity.

[105] In this case, there was no “opportunity” for Mr. O’Keefe to usurp. In 2003, there was really nothing more than an exploratory expression of interest on the part of the appellant as to whether Cromwell officials might be interested in outsourcing the management of the Cromwell Hospital to the appellant. The trial judge accepted that Mr. O’Keefe and Dr. Muhairi did not discuss the Cromwell Hospital between the time that Mr. O’Keefe submitted his resignation and the effective date of his resignation. Dr. Al Sabti’s inquiries in 2004 did not convert the appellant’s exploratory expression of interest in 2003 into a maturing business opportunity. Moreover, even if there were an opportunity to manage the Hospital, the Cromwell Opportunity was a different opportunity.

G. Whether the trial judge erred by confining her analysis to whether the corporate opportunities belonged to the appellant and failing to consider whether Mr. O’Keefe’s involvement with HIH before his resignation breached his fiduciary duty

[106] The focus of the appellant’s case was its argument that Mr. O’Keefe had diverted the Cromwell Opportunity. Almost all its written submissions at trial were related to that argument. Indeed, the appellant’s theory linked the HIH Opportunity to the Cromwell Opportunity: it argued that the HIH Opportunity, which resulted in the advance of approximately $479,000 USD to CHNI, was “for the ulterior purpose of facilitating CHNI’s acquisition of the [Cromwell Opportunity]”. The trial judge did not accept this theory, which she characterized as a “conspiracy allegation” and “not supported by any direct evidence.” She considered the HIH Opportunity on a stand-alone basis and concluded, in part, that the HIH Opportunity “was an entirely different opportunity that would not have been available to [the appellant]”.

[107] On appeal, the appellant argues that this court should order a new trial because the trial judge confined her analysis to whether the corporate opportunities belonged to the appellant and failed to consider whether Mr. O’Keefe’s involvement with HIH before he resigned from the appellant breached his fiduciary duty. In particular, the appellant points to Mr. O’Keefe’s admitted non-disclosure of his pre-resignation discussions with Dr. Muhairi and his approaches to HBS on behalf of HIH. It says that in approaching HBS to pursue hospital partnerships of the type that the appellant frequently relied upon, on behalf of HIH’s to-be-incorporated operating arm, FHG, which it argued was intended to perform services that competed with it, and in providing Dr. Muhairi with his thoughts about the proposed Women’s Island project, Mr. O’Keefe improperly competed or was taking steps to improperly compete with the appellant. It argues that Mr. O’Keefe also breached his fiduciary duty by failing to disclose the steps he was taking to compete with the appellant.

[108] I reject this ground of appeal.

[109] The trial judge appears to have treated her findings in relation to the alleged diversion of the Cromwell Opportunity and the HIH Opportunity as dispositive of these arguments. In the context of the parties’ submissions at trial, she did not err in doing so.

[110] The trial judge accepted that Mr. O’Keefe did not resign to pursue a relationship with HIH. Based on her finding of fact that the HIH Opportunity would not have been available to the appellant, Mr. O'Keefe’s pre-resignation conduct posed no threat to the appellant’s market base. Taking preliminary steps in the period between submitting notice of resignation and the effective date of resignation that might assist in obtaining work post-resignation that was not, and would not be, available to one’s employer is not competing. Accordingly, Mr. O’Keefe did not have a material conflict of interest and, in all the circumstances, not disclosing those preliminary steps to the appellant did not breach his duty of loyalty. Further, there was no suggestion that Mr. O’Keefe neglected his duties during this period. Dr. El Dukair described Mr. O’Keefe as a “fantastic CEO.” And the trial judge did not accept that Mr. O’Keefe used any confidential information belonging to the appellant.

[111] I acknowledge that Mr. O’Keefe conceded in cross-examination that some of the services that CHNI was to provide in its role as “Employee Prime” for the EMC project were the types of services that the appellant provided. However, the trial judge found that there was no discussion between Dr. Muhairi and Mr. O’Keefe about the opportunity to act as Employee Prime for EMC before Mr. O’Keefe resigned. Rather, it was a “new and fresh opportunity.” Further, CHNI was required to provide more services to HIH than just the types of services that the appellant provided. In any event, HIH would not have engaged the appellant to provide those services.

[112] It must also be recalled that the trial judge rejected the appellant’s argument at trial linking the Cromwell Opportunity to Mr. O’Keefe’s role at the appellant. She found that the Cromwell Opportunity “was available to Mr. O’Keefe as a result of his good professional reputation and the personal relationships he had established. These relationships were not available and not the property or assets of [the appellant]”. In essence, Mr. O’Keefe utilized personal goodwill. There is no basis to interfere with this finding, and, in my view, it carries over to the HIH Opportunity.

[113] While, in my view, in all the circumstances, Mr. O’Keefe’s pre-resignation involvement with HIH did not breach his fiduciary duty, even if it did, the appellant has not satisfied me of the requisite causal link between the breach and the gain which the appellant seeks disgorgement of.

[114] In the event the court found that Mr. O’Keefe did not divert the Cromwell Opportunity to CHNI, the appellant sought disgorgement of the profits earned by Mr. O’Keefe from the HIH Opportunity as a result of the breaches of his fiduciary duty to the appellant. [^4] The appellant’s submission properly acknowledged that the fiduciary’s breach must be the cause-in-fact of the wrongdoer’s gain in respect of which disgorgement is sought: see Southwind v. Canada, 2021 SCC 28, at para. 70. Thus, the appellant must establish both that Mr. O’Keefe’s involvement with HIH prior to his resignation breached his fiduciary duty to the appellant, and that it was the cause-in-fact of CHNI securing the HIH Opportunity.

[115] As noted above, the trial judge found that the HIH Opportunity was “an entirely different opportunity that would not have been available to [the appellant]… It was an opportunity that did not exist when Mr. O’Keefe was with [the appellant]. It was a fresh and new opportunity…”. I am not persuaded that an opportunity that is entirely different, fresh and new and was not available to the appellant, and did not exist before, Mr. O’Keefe’s resignation, and the related gain, was caused‑in‑fact by Mr. O’Keefe’s pre-resignation conduct. In my view, none of the pre‑resignation fiduciary breaches that the appellant alleges can be said to have caused CHNI to obtain the contract with HIH to act as “Employee Prime.”

VI. DISPOSITION

[116] For these reasons, I would dismiss the appeal. I would award Mr. O’Keefe and CHNI their costs of the appeal in the amounts of $23,000 and $46,000 respectively, inclusive of HST and disbursements.

Released: May 24, 2023 “A.H.” “Alexandra Hoy J.A.” “I agree. Thorburn J.A.” “I agree. L. Favreau J.A.”

[^1]: Mr O’Keefe testified that he only learned in October 2005 that the appellant intended to pursue the Wave 2 projects. [^2]: Interestingly, in cross-examination, counsel for the appellant specifically asked Mr. O’Keefe, more than once, what Dr. Muhairi told him about the appellant not being acceptable. It invited some of the hearsay evidence that it now objects to. [^3]: Whether an opportunity is in a “related business” appears to have grown out of the “line of business” test. That test, an approach in some American jurisprudence reviewed by Laskin J. (as he then was), was not specifically listed as a relevant factor in Canaero. Burg v. Horn (1967), 380 F. 2d 897, the “line of business” case which Laskin J. specifically referred to was a pre-resignation case. Arguably, such an approach is not as relevant in the case of a fiduciary who has resigned or retired. In such a case, there is a tension between the interests of the company and the right of a former fiduciary to leverage their personal skills and pursue new opportunities. A “related business” is a lesser connection than the same “line of business”. Thus, the tension is even greater where “related business” is invoked. However, the appropriateness of, or weight to be given to, a finding that the opportunity pursued by departed fiduciary is in the same line or a related line of business is for another day. Here, the trial judge used the line of business and related business factors to conclude that Mr. O’Keefe did not breach his fiduciary duty. [^4]: The appellant did not seek punitive damages.