ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

COURT FILE NO.: CV-12-9547-00CL
DATE: 20140602

BETWEEN:

The Estate of John Wood, by his Estate Trustees, Deborah Daymond, Jason Wood, Alan Wood, Jennifer Wood, and Michael Wood

Plaintiffs

– and –

Arius3D Corp., David Beutel, Perry Monych, Valdis Martinsons, Joe Waechter and James P. McGlone

Defendants

G. Hall and K. Peters, for the Plaintiffs

D. Woodfield and B. Arnold, for the individual defendants, David Beutel, Perry Monych, Valdis Martinsons, Joe Waechter and James P. McGlone

James P. McGlone, in person, for Arius3D Corp.

HEARD: November 18, 19, 20 and 21, 2013

D. M. Brown J.

I. Oppression action to recover funds loaned

[1] In August, 2011, the late John Wood, having just been terminated as the Chief Executive Officer of the defendant, Arius3D Corp., indirectly lent that company $750,000 in order to finance a break fee required under an acquisition agreement Arius3D had negotiated with a company called Masterfile Corporation. Wood had made available those funds to Arius3D by advancing them to a Guernsey company, A3DL Limited, which, in turn, lent the funds to Arius3D. Wood received an August 18, 2011 promissory note from A3DL, the pre-payment term of which read, in part:

Proceeds received from any of the companies listed on the attached schedule A (referred to as the “Irish Companies”) will, at the sole discretion of the Holder, be used to repay all amounts outstanding pursuant to this Note, such payment to occur, if so determined by the Holder, the day after receipt of funds from the Irish Companies.

[2] In the result, three of the four “Irish deals” closed, with Arius3D receiving a total of $990,625 in payments in November, 2011. Arius3D did not use any of that money to repay the $750,000 loan Wood had made to finance the Masterfile break fee. Only in December, 2011 did Wood learn of the receipt of those funds. He complained to Arius3D, to no effect.

[3] In January, 2012, Wood commenced this oppression action against Arius3D, its directors and an officer, seeking damages of $950,000, consisting of the return of the $750,000 principal of his break fee loan, as well as two other amounts specified in the note from A3DL - $75,000 for a Cash Finance Fee and $125,000 on account of the Additional Finance Fee.

[4] Wood took his own life on January 23, 2013, at the age of 62. His estate, as represented by the individual plaintiff estate trustees, continued the action. Arius3D consented to the dismissal before trial of the counter-claim it initially had asserted against Wood. The trial proceeded as a hybrid trial with evidence-in-chief in part by way of affidavits.[^1]

[5] For the reasons set out below, I grant judgment against the defendants, David Beutel, Perry Monych, James McGlone and Arius3D Corp., and I dismiss the action against the defendants, Valdis Martinsons and Joe Waechter.

II. Evidence[^2]

A. The parties

[6] Arius3D Corp. was a publicly-traded Ontario corporation in the business of offering 3D imaging systems and services, such as scanners and related software, as well as licensing products from a 3D imaging library. The financial viability of Arius3D depended heavily on a technology licence it held from the National Research Council of Canada which was terminated at the end of 2012. The company’s shares were cease-traded in mid-2012 and the company had ceased operations prior to the trial.

[7] The individual defendants David Beutel, Perry Monych, Valdis Martinsons and Joe Waechter, were directors of Arius3D at the material times.

[8] The defendant, James McGlone, was its Chief Financial Officer. By order of this Court made May 9, 2012, McGlone was permitted to represent the interests of Arius3D.

[9] John Wood was a long-time Board member of Arius3D and served as its CEO from 2010 until mid-2011. He was a former Canadian Olympian, winning a silver medal for Canada at the 1976 Montreal Olympics. John was a very experienced businessman, held a number of securities licences, and had worked for several investment management companies. Wood’s wife, Deborah Daymond, testified at trial that Wood was a “risk taker.”

(continues verbatim…)

D. M. Brown J.

Released: June 2, 2014

Footnotes

[^1]: As per the directions contained in 2012 ONSC 5596.
[^2]: Let me make a Cojocaru v. British Columbia Women’s Hospital and Health Centre, 2013 SCC 30, disclaimer: all parties filed electronic copies of their closing submissions upon which I drew in preparing these reasons.