COURT FILE NO.: CV-10-402931
DATE: 20220127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IHC CANADA LIMITED
Plaintiff
– and –
MICHAEL O’KEEFE and CANADIAN HOSPITALS NETWORK INTERNATIONAL INC.
Defendants
Robert B. Cohen & David Kelman, for the Plaintiff
Michael A. Handler for the Defendant O’Keefe
Kevin A. Johnson, for the Defendant Canadian Hospitals Network International Inc.
HEARD: April 19-23, 28, 29, May 3, 4, 10-14, May 24-27, June 7-9, 11, 28-30, July 2, 2021
JuSTICE POLLAK
REASONS FOR DECISION
[1] The Plaintiff, IHC Canada Limited (“ICL”) is a corporation with head office and a place of business in the City of Toronto and describes its business as the “provisioning of hospital management and related services in the Middle East and elsewhere”.
[2] The Defendant Michael O’Keefe (“O’Keefe”), resident in the City of Toronto is an expert in hospital management and related matters.
[3] The Defendant, Canadian Hospital Network International Inc. (“CHNI”), is a corporation with head office and place of business in the City of Toronto. The Defendant O’Keefe was, but is no longer, a shareholder, a director and officer of the Defendant CHNI.
[4] The Plaintiff claims:
(a) As against the Defendant, Michael O’Keefe;
(i) Damages of $104,000,000 for breach of contract, breach of fiduciary duties and for unlawful interference with economic interest.
(b) As against the Defendant, Canadian Hospital Network International Inc.;
(i) Damages of $104,000,000 for unlawful interference with economic interest.
(c) As against both Defendants;
(i) An accounting of damages, if required;
(ii) An order for disgorgement;
(iii) Pre and post-judgment interest pursuant to the Courts of Justice Act;
(iv) Applicable Goods and Services Tax;
[5] IHC seeks the following damages as against the defendant, O’Keefe:
The proceeds of O’Keefe’s sale of his ownership interest in CHNI to Handa
$1,359,009.00
O’Keefe’s salary of $10,000 per month, which he received from CHNI between May 2006 – October 2007
$ 170,000.00
O’Keefe’s Salary from serving as Interim CEO of Cromwell Hospital from December of 2006 until February of 2007
$ 30,000.00
TOTAL
$1,559,009.00
Interest on the above amounts in accordance with the Courts of Justice Act
$ 95,180.16
TOTAL DAMAGES
$1,654,189.16
[6] IHC seeks the following damages as against the defendant, CHNI:
CHNI’s proceeds from the sale of Cromwell Health Group Limited (Minerva) to Bupa
$16,743,310.00
TOTAL
$16,743,310.00
Interest on the above amount in accordance with the Courts of Justice Act
$ 1,111,480.55
TOTAL DAMAGES
$17,854,790.55
[7] In the event that this Court finds that O’Keefe did not breach his fiduciary duty in connection with the appropriation of the Cromwell Operating Licence (which is denied), and in light of the position taken by counsel to IHC that it would not be seeking damages against CHNI in connection with its involvement with HIH, the Plaintiff takes the position that O’Keefe ought to disgorge the entirety of the $479,400 USD ($592,766 CAD) that HIH paid to CHNI pursuant to the EMC Contract. In this respect, the Plaintiff states that:
a. O’Keefe testified that he received a salary of $10,000 per month from May or June of 2006 until he sold his interest in CHNI in October of 2007, which funds resulted directly from the upfront payment received by CHNI in connection with the EMC Contract; and
b. the remainder of the funds received by CHNI in connection with the EMC Contract either: (i) enabled CHNI’s continued growth and successful pursuit and eventual sale of the Cromwell Operating Licence, or; (ii) were excess funds which remained on CHNI’s balance sheet. In either case, these funds resulted in a significant increase in the enterprise value of CHNI, which directly flowed to O’Keefe when he sold his interest in CHNI to Handa in return for proceeds of $1,359,009.
[8] A glossary of the individuals and corporate entities relevant to the events in this proceeding, and their descriptions which are also agreed to as fact, is as follows:
Glossary of Relevant Individuals and Corporate Entities
Individual/Corporation
Description
Abdul Rahman Al Muhairi
Director of Cromwell Hospital; believed to be a director of HIH; believed to be a respected consultant to the Authority.
Ali Jaffar
Director of IHC at various times; Director of the Priory Group during all of the term of the Participation Agreement; a directing mind of Oneworld and of CHNI until July 2007 when the relevant shares in Oneworld were acquired by entities affiliated with P.K. Handa.
Ballyrogan Holding Limited
Successor in interest to the Rotary Group, through name change, with respect to its indirect interest in the Cromwell Hospital (through Minerva a.k.a. Cromwell Health Group Limited).
Canadian Hospitals Network International Inc. (“CHNI”)
Company incorporated by O’Keefe and Jaffar on April 6, 2006, which acquired a minority interest in Minerva.
Colin Patey
Consultant to IHC with respect to the SKMC Management Contract beginning in November of 1999; subsequently appointed as Vice President of SKMC; Thereafter assumed an executive position in respect of IHC’s U.K. operations.
Cromwell Health Group Limited (“CHG”)
Corporate entity incorporated by the Rotary Group in January 2006 as Goldenhold Limited; company name amended to Minerva Health Care Limited in October 2006; in December 2006, Rotary came to own 51% of the issued and outstanding shares together with preferred shares and CHNI came to own 49% of the issued and outstanding shares; corporate purchaser of Medical Services International Limited.
Emad El-Dukair
Director of IHC from February 5, 1998 to September 29, 1999, June 25, 2001 to October 23, 2002, April 19, 2005 to September 29, 2006; Representative of the majority shareholder of IHC and the Priory Group.
HealthCare Investment Holding (“HIH”)
A company that is based in Abu Dhabi and controlled by the Royal Family of Abu Dhabi and/or affiliated individuals, formed to invest in the development of Emirates Medical City in Abu Dhabi. It remains in dispute whether HIH also invested or intended to invest in other healthcare services throughout the UAE.
Hume Martin
Volunteer Chairman of the Board of Hospital Business Systems, an organization comprised of various Toronto
Individual/Corporation
Description
hospitals; C.E.O. of Cromwell Hospital at the time of the Cromwell Share Sale.
IMC Holdings (Grand Cayman) Limited (“IMC”)
Corporate entity believed to be owned by the Royal Family of Abu Dhabi, which jointly (along with Medical Corporation (Grand Cayman) Limited) owned and operated the Cromwell Hospital; sold the shares of Medical Services International Limited, through which it held its interest in the operating license for the Cromwell Hospital, to CHG a.k.a. Minerva.
Injaz Mena
A private joint stock company believed to be owned and controlled by the Abu Dhabi Royal Family; parent company of HIH.
James (Jim) Metcalfe
IHC Director from June 25, 2001 to November 15, 2005; Chair of the Board of Directors of IHC at the time of O’Keefe’s resignation, until his own resignation effective November 15, 2005.
John Callum
Appointed as a “B Director” of Minerva a.k.a CHG on December 6, 2006.
Medical Corporation (Grand Cayman) Limited (“MCGCL”)
Corporate entity owned by the Royal Family of Abu Dhabi, which jointly (along with IMC) owned and operated the Cromwell Hospital; sold the shares of Medical Services International Limited, through which it held its interest in the operating license for the Cromwell Hospital, to CHG a.k.a. Minerva.
Medical Services International Limited (“MSI”)
Corporate entity which held the operating license for the Cromwell Hospital; sold by IMC and MCGCL, entities owned by the Royal Family of Abu Dhabi, to CHG a.k.a. Minerva.
Michael O’Keefe
CEO of the SKMC from 1999-2000; Regional Director for Middle East of IHC from 2000-2003; CEO of IHC from 2003-2005; Director of IHC from September 29, 2003 to October 31, 2005; former director and minority shareholder of CHNI.
Minerva Health Care Limited (“Minerva”)
Corporate entity incorporated by the Rotary Group in January 2006 as Goldenhold Limited; company name amended to Minerva Health Care Limited in October 2006; in December 2006, Rotary came to own 51% of the issued and outstanding shares together with preferred shares and CHNI came to own 49% of the issued and outstanding shares; corporate purchaser of Medical Services International Limited.
Individual/Corporation
Description
O’Keefe Health Systems Inc. (“O’Keefe HoldCo”)
Corporate entity controlled by O’Keefe, which held 15% of the issued and outstanding shares of CHNI until October 9, 2007, at which time it was purchased by Oneworld.
Oneworld Health Care Group Inc. (“Oneworld”)
Corporate entity which initially was the legal owner of 51% of the issued and outstanding shares of CHNI upon CHNI’s incorporation; Beneficial owner of 85% of the issued and outstanding shares of CHNI from incorporation to October 9, 2007; As of the fall of 2006, became the legal owner of 85% of the issued and outstanding shares of CHNI; it was controlled by Jaffar until it was acquired by entities controlled by P.K. Handa in or around July of 2007; acquired O’Keefe HoldCo on October 9, 2007, at which point it held 100% of the issued and outstanding shares of CHNI.
Pradeep Kumar Handa
A directing mind (through Oneworld) of CHNI from July of 2007 onward.
Priory Healthcare Group (Middle East) Limited (“Priory Group”)
Pursuant to the Participation Agreement, the Priory Group was responsible for executing certain logistics of the SKMC Management Agreement described above in exchange for 60% of the Management Fee.
Raad Nasser
Served as a consultant to IHC from time to time. Office Manager of the Sponsor Shaikh Abdulla bin Bati during the term of the SKMC Management Agreement.
Rotary Group
Privately owned British company, whose owners, Seamus and Frances Jennings, have a consolidated asset value in excess of US$1 billion; incorporated Goldenhold Limited
a.k.a Minerva a.k.a CHG; majority shareholder of Minerva,
a.k.a. CHG, along with CHNI; held the facilities contract for the Cromwell Hospital prior to December 6, 2006.
Shaikh Abdulla bin Bati
IHC official sponsor in or around the time of the SKMC Management Contract; son of the Mayor of Abu Dhabi as at or around the time of the SKMC Management Contract.
Sheikh Khalifa Medical Centre (“SKMC”)
Hospital located in Abu Dhabi, which was commissioned and managed to Canadian standards by IHC from 1999- 2003.
Shashikant Nayak
Served in various finance and accounting positions with IHC throughout the relevant period, including Accounts and Finance Manager for IHC’s operations in the Middle East beginning in 2000, CFO of IHC’s operations in the United Kingdom beginning in 2005 and CFO of IHC from 2008-2013.
Individual/Corporation
Description
Shibu Mathew
Consultant and financial advisor to CHNI beginning in or around July 2007.
Skip Schwartz
IHC’s first CEO in 1994; IHC Director from April 6, 2001 to October 25, 2005.
Wilson Parasiuk
President and CEO of IHC, predecessor to O’Keefe and IHC Director from February 5, 1998 to October 23, 2002.
Zahid Al Sabti, Dr.
Business Development Director for IHC from 1999 to 2005; Managing Director of IHC’s operations in the Middle East, Central Asia and Africa beginning in 2005; CEO of IHC beginning in 2012.
[9] The following witnesses testified in this [4] week trial:
• Dr. Emad El-Dukair, the majority shareholder of IHC;
• Dr. Zahid Al-Sabti, the Business Development Director of IHC respondible for managing new corporate opportunities, including the Cromwell Opportunity;
• Shashikant Nayak (“Shashi”), Accounts and Finance Manager for IHC’s operations in the Middle East who as responsible for financing and conducting financial analysis of perspective corporate opportunities;
• Michael O’Keefe, former Chief Executive Officer and Director of IHC, who incorporated CHNI;
• Skip Schwartz, Chief Executive Officer of IHC from 1994 to the end term of the Management Agreement (the “Management Agreement”) for the Sheikh Khalifah Medical Centre (“SKMC”);
• Colin Patey, Vice President of the SKMC and subsequently an executive for IHC’s operations in the United Kingdom;
• P.K. Handa, Sole shareholder of CHNI at the time it sold its interest with respect to operations of the Cromwell Hospital to Bupa Finance; and
• Shibu Matthew, Consultant and financial advisor to CHNI at the time of the Cromwell Share Sale.
[10] Mr. Jaffar, a person who could have potentially given direct evidence, was not made a party to this action and not summoned to give evidence. He was also a business partner of Dr. El Dukair in the Toad Hall Nursery chain in the UK until 2020.
Agreed Statement of Facts
[11] In or around 1998, IHC became aware of the opportunity to commission, staff and manage the Shaikh Khalifa Medical Center (the “SKMC”), the contract for which was being tendered in Abu Dhabi, United Arab Emirates (the “SKMC Project”).
[12] The SKMC Project was to retain a third party to manage the SKMC, a hospital in Abu Dhabi, which had been built but had never been fully equipped, staffed or opened.
[13] In or around 1998, Dr. Emad El Dukair (“El Dukair”), who represented the majority shareholder of IHC at that time, advised the Board of Directors of IHC that a sponsor was required in order to bid for the SKMC Project. El Dukair arranged to have a sponsor, Shaikh Abdullah bin Butti, act as IHC’s sponsor with respect to the SKMC Project.
[14] IHC entered into a Management Agreement dated April 20, 1999 (the “SKMC Management Agreement”) with the General Authority for the Support and Development of Health Care. IHC assigned its obligations thereunder to IHC Canada Management Limited via an Allocation Agreement dated April 20, 1999. The SKMC Management Agreement and the Allocation Agreement are located at Tabs 5 and 8 of the Joint Document Brief.
[15] In 1999, IHC Canada Management Limited was created as a subsidiary of IHC in order to enter into the SKMC Management Agreement.
[16] In advance of entering into the Participation Agreement (defined below), El Dukair represented to the Board of IHC that the Priory Healthcare Group (Middle East) Limited (the “Priory Group”) had experience operating hospitals in the Middle East region.
[17] IHC and the Priory Group entered into the Participation Agreement dated April 20, 1999 (the “Participation Agreement”). The Participation Agreement is located at Tab 9 of the Joint Document Brief.
[18] Subject to the specific provisions of the Participation Agreement, the Priory Group was entitled to receive 60% of the Management Fee paid to IHC under the Management Agreement in exchange for assuming responsibility for executing much of the logistics associated with the Management Agreement, including arranging bid bond, liaising with authorities, travel, cleaning, catering, boarding, and staffing. IHC would retain 40% of the Management Fee.
[19] At the June 5, 2002 meeting of the Board of Directors of IHC, the Independent Committee adopted the CEO’s recommendation that the Participation Agreement be renegotiated and perhaps terminated.
[20] Michael O'Keefe ("O'Keefe") occupied the following positions with IHC:
(a) Chief Executive Officer of the SKMC from 1999-2000;
(b) Regional Director for Middle East of IHC from 2000-2003;
(c) Chief Executive Officer of IHC from January 24, 2003- October 31, 2005; and
(d) Director of IHC from September 29, 2003 to October 31, 2005.
[21] The Cromwell Hospital in London, United Kingdom (the “Cromwell Hospital”) was indirectly owned, and continued to be indirectly owned at all material times, by entities affiliated with the Royal Family of Abu Dhabi.
[22] At all material times, Dr. Abdul Rahman Al Muhairi (“Muhairi”) was a director of the Cromwell Hospital. Muhairi eventually became the Managing Director of the Cromwell Hospital.
[23] O’Keefe first met Muhairi while working for IHC at the SKMC
[24] On July 21, 2003, O’Keefe, as CEO of IHC, wrote to Muhairi, as director of the Cromwell Hospital, expressing IHC’s interest in meeting with officials of the Cromwell Hospital to discuss the potential for IHC to be involved in the management of the Cromwell Hospital.
[25] O’Keefe subsequently advised IHC that there was no opportunity available for IHC to take over the management of the Cromwell Hospital. The precise timing of this advice remains in dispute.
[26] In June of 2005, O’Keefe notified IHC that he intended to resign from his positions as Director and Chief Executive Officer of IHC effective December 31, 2005.
[27] On October 9, 2005, O’Keefe wrote to IHC to advise that he would move up his resignation to October 25, 2005 if IHC submitted pre-qualification proposals on October 26, 2005 for the projects known as “Wave 2” in the United Kingdom (“Wave 2”). His correspondence is located at Tab 150 of the Joint Document Brief.
[28] IHC submitted pre-qualification proposals for the Wave 2 projects on October 26, 2020.
[29] On October 31, 2005, O’Keefe advised IHC in writing that he was resigning from his positions as Director and Chief Executive Officer, effective immediately. His memorandum and letters of resignation are located at Tabs 183 and Tabs 187 of the Joint Document Brief.
[30] Following his resignation as a director, officer and employee of IHC, O’Keefe acted as a consultant for IHC on certain projects until in or around the second quarter of 2006.
[31] On or around April 6, 2006, O’Keefe and Ali Jaffar (“Jaffar”) took steps to incorporate Canadian Hospitals Network International Inc. ("CHNI"). Jaffar was at times a director of IHC.
[32] As of April 6, 2006, through to and including October 9, 2007, O’Keefe was a controlling shareholder and director of O’Keefe Health Systems Inc. (“O’Keefe Holdco”).
[33] As of April 6, 2006, through to in or about July of 2007, Jaffar was a directing mind of Oneworld Health Care Group Inc. (“Oneworld”).
[34] O’Keefe Holdco was registered as the owner of 49% of the shares of CHNI; however, it was only ever the beneficial owner of 15% of the shares of CHNI. From the date of incorporation, O’Keefe Holdco held 340 shares of CHNI in trust for Oneworld.
[35] At all relevant times, HealthCare Investment Holding (“HIH”) was a company that was controlled by the Royal Family of Abu Dhabi and/or individuals affiliated with the Royal Family of Abu Dhabi, which was created to invest in the provision of healthcare services in the Emirate of Abu Dhabi.
[36] By November of 2005, IHC received a copy of the Memorandum of Information for a project initiated by HIH, referred to as the Emirates Medical City Project (the “EMC Project”). The Memorandum of Understanding is located at Tab 197 of the Joint Document Brief.
[37] On December 5, 2005, IHC submitted a proposal to HIH to provide services in the role of Strategic Healthcare Planner on the EMC Project. The proposal is located at Tab 209 of the Joint Document Brief.
[38] On January 26, 2006, IHC was advised that its proposal for the EMC Project was not successful.
[39] On April 9, 2006, CHNI submitted a proposal to provide a variety of services to the EMC Project, including to: (i) serve as Employee Prime (client representative); (ii) develop hospital standards, policies and practices; (iii) research, negotiate and secure agreements with “World Class Centres” that meet HIH’s branding objective; (iv) research and recommend educational institutions to be affiliated with HIH; and (v) develop and supervise the implementation of a medical regulatory framework. This proposal is located at Tab 223 of the Joint Document Brief.
[40] On or around April 12, 2006, HIH executed the engagement letter, accepting CHNI’s proposal to provide services to the EMC Project. The agreement provided that the fees for CHNI’s services would be $1,598,000 USD, which fees included expenses. An upfront payment of $479,400 USD was to be paid to CHNI on the commencement date.
[41] HIH paid the upfront payment of $479,400 USD to CHNI, and no further payments were made in respect of the Letter Agreement.
[42] Minerva Health Care Ltd. (“Minerva”) (subsequently renamed Cromwell Health Group Ltd.) was a United Kingdom corporation incorporated by Rotary Group Limited (the “Rotary Group”) as Goldenhold Limited in January 2006. On October 18, 2006, Goldenhold Limited changed its name to Minerva Health Care Ltd.
[43] On December 6, 2006, the Rotary Group, including through its principals, subscribed for 510 Class A Shares of Minerva (out of an issued share capital of 510 Class A Shares) and 2,000,000 Preference Shares of Minerva (out of an issued share capital of 2,000,000 Preference Shares) and CHNI subscribed for 490 Class B Shares of Minerva (out of an issued share capital of 490 Class B Shares). Minerva did not issue any Common Shares other than the aforementioned Class A Shares and Class B Shares. The Subscription and Shareholders’ Agreement of Minerva is located at Tab 306 of the Joint Document Brief.
[44] As of December 6, 2006, O’Keefe HoldCo held 15% of the issued and outstanding shares of CHNI and Oneworld held 85% of the issued and outstanding shares of CHNI.
[45] On December 6, 2006, Minerva appointed John Callum and Michael O’Keefe as “B Directors” of Minerva.
[46] The Cromwell Hospital was self-managed prior to December 2006.
[47] On or around December 6, 2006, Minerva acquired all of the share capital of Medical Services International Limited ("MSI"), whose principal asset was the operating license for the Cromwell Hospital, from IMC Holdings (Grand Cayman) Limited and Medical Corporation (Grand Cayman) Limited, corporations controlled by the Royal Family of Abu Dhabi. A diagram setting out the ownership interests of the relevant corporate entities immediately following this transaction is attached as Schedule “A”.
[48] From May 2006 until October 2007, O’Keefe received a salary in the amount of $10,000 per month from CHNI.
[49] In or around July of 2007, Jaffar, through a corporate entity, directed the sale of all of the issued and outstanding shares of Oneworld, including its 85% ownership interest in CHNI, to corporate entities affiliated with P.K. Handa.
[50] On October 9, 2007, O’Keefe HoldCo sold its 15% interest in CHNI to Oneworld for $1,359,975. A copy of the cheque in the amount of $1,359,975 that was received in connection with this sale is located at Tab 278 of the Joint Document Brief.
[51] On October 9, 2007, following the acquisition of O’Keefe HoldCo’s 15% interest in CHNI, Oneworld held all of the issued and outstanding shares in CHNI.
[52] On or around March 14 2008, CHNI and Ballyrogan Holdings Limited agreed to sell their shares in Cromwell Health Group Ltd. (previously known as Minerva) to Bupa Finance PLC, a United Kingdom corporation, for proceeds of £90 million before working capital and other closing adjustments (£91,980,433 after such adjustments) (the “Cromwell Share Sale”). The Share Purchase Agreement is located at Tab 285 of the Joint Document Brief.
[53] As at the time of the Cromwell Share Sale, CHNI held 49% of the Common Shares of Cromwell Health Group Ltd. (previously known as Minerva) and the Rotary Group held 51% of the Common Shares of Cromwell Health Group Ltd. (previously known as Minerva). A diagram setting out the ownership interests of the relevant corporate entities immediately preceding the Cromwell Share Sale is attached as Schedule “B”.
[54] The Cromwell Share Sale was completed on or around March 14, 2008 and CHNI received gross proceeds in the approximate amount of £32,983,146.
[55] The Plaintiff claims that Mr. O’Keefe resigned for the purpose of taking advantage of an eligible opportunity belonging to the Plaintiff, which he did for his own benefit. Mr. O’Keefe was in breach of his fiduciary obligations to the Plaintiff. It is submitted that Mr. O’Keefe was precluded in law from resigning to take advantage of a business opportunity that had or would have matured due to his efforts while employed, for his own advantage solely or jointly with others, within a reasonable period post-employment.
[56] The Plaintiff claims that while Mr. O’Keefe was a director of IHC, the “Cromwell Hospital” and the Healthcare Investment Holding (“HiH”) opportunity contract were viable projects which he deliberately and surreptitiously pursued for his own interest.
[57] Mr. O’Keefe told the Plaintiff that he would retire from IHC and from full-time work at the end of 2005 for family related reasons. While still employed with IHC, the Plaintiff claims that he pursued plans to continue to engage actively in the hospital management and related consultancy business. He advanced the interests of HiH seeking to associate with Toronto based hospitals for his personal projects including the Cromwell Hospital management contract. All of which was without the knowledge and consent of the Plaintiff.
[58] The Plaintiff alleges that Mr. O’Keefe secretly and deliberately participated in the diversion of the “Cromwell Opportunity” and the opportunity to consult on the Emirates Medical City (“EMC”) project to the Defendant CHNI by:
a. “advising IHC not to pursue the Cromwell Opportunity;
b. concealing his developing relationship with Dr. Muhairi, the lynchpin for the Cromwell Opportunity and other corporate opportunities with HiH, from IHC;
c. surreptitiously taking steps designed to entrench his relationship with Dr. Muhairi and independently pursue corporate opportunities with HiH, while still an officer and director of IHC and in competition with IHC, including:
i. sending his C.V. to Dr. Muhairi for the admitted purpose of seeking appointment to the Board of Directors of IHC’s competitor, HiH;
ii. Concealing his appointment to the Board of Directors of HiH and First Healthcare Group;
iii. soliciting the cooperation, support and resources of Hospital Business Systems (“HBS”), a network of Toronto hospitals, for purposes of independently pursuing HiH projects, in competition with IHC;
iv. scheduling numerous secret meetings with Dr. Muhairi, including with HiH executives and John Callum, General Manager of HBS, who would eventually become a director of Minerva Health Care Ltd. (“Minerva”), the company established to acquire the Cromwell Operating Licence; and
v. receiving presentation materials relating to HiH projects, including the Emirates Medical City (“EMC”) project, which were being actively pursued by IHC and concealing those materials from IHC;
d. resigning from IHC for the stated reason that he “will be 63 in January, and want[s] to spend more time with family”;
e. advising IHC of his intention to accelerate his resignation from IHC within days of receiving a confidentiality agreement from Dr. Muhairi and soliciting John Callum, to partner with HiH and Dr. Muhairi on EMC, which he described as “a matter of urgency”;
f. incorporating CHNI to serve as a corporate vehicle to pursue the HiH projects and the Cromwell Opportunity;
g. executing a contract for CHNI to perform services for the EMC project (which did not proceed), for which Dr. Muhairi arranged for CHNI to be paid an advance of $479,000 that was used to fund its operations and pay Mr. O’Keefe’s salary;
h. shortly after his accelerated resignation from IHC, meeting with Mr. Jaffar, Dr. Muhairi and the principals of the Rotary Group to solidify their partnership to pursue the Cromwell Opportunity; and
i. along with Mr. Jaffar, continuing to develop and leverage his relationship with Dr. Muhairi to negotiate for and procure a consulting position on the EMC project and, most significantly, the lucrative rights to operate the Cromwell Hospital, which projects were pursued by IHC.”
[59] During the trial, the Plaintiff introduced double hearsay evidence (which was objected to) to support its theory of a conspiracy between Mr. O’Keefe, Mr. Jaffar, Dr. Muhairi and, eventually, the Rotary Group, whereby:
a. “Mr. O’Keefe and Mr. Jaffar concealed the Cromwell Opportunity from IHC, with Dr. Muhairi’s authorization;
b. Dr. Muhairi gave CHNI an advance of approximately $479,000 under the guise of an advance for the EMC project that did not proceed in order to fund its further pursuit of the Cromwell Opportunity; and
c. Dr. Muhairi agreed to sell the Cromwell Operating Licence to CHNI and the Rotary Group at a steep discount on the understanding that they would re-sell the Cromwell Operating Licence several years later at a significant profit and give Dr. Muhairi a kickback.”
[60] The Plaintiff argues that such evidence discloses that after acquiring the Cromwell Operating Licence for £7,500,000 GBP in a confidential transaction in December of 2006, CHNI and the Rotary Group sold the Cromwell Operating Licence for £90,000,000 GBP (12 times what they paid for it) just over one year later in March of 2008, with Dr. Muhairi receiving £18,413,096 GBP. The Defendants object to the “double hearsay” evidence, which objection will be dealt with below.
[61] The Plaintiff’s claim is that such actions by Mr. O’Keefe constituted breach of contract and breach of fiduciary duties owed to the Plaintiff and are the basis for the liability for CHNI.
[62] IHC submits that throughout his employment as Chief Executive Officer and as a director, he was obliged in law to be loyal, transparent and diligent in support of the interests of the Plaintiff, but did not do so. Mr. O’Keefe had no written contract of employment with the Plaintiff. He did not have a non-competition agreement.
[63] The Plaintiff pleads and relies on the Canadian Business Corporations Act, section 122(1), but made no submissions in this regard.
[64] The claim is that starting in June of 2005 and continuing through to his resignation at the end of October 2005, while still on IHC’s payroll and leveraging IHC’s resources and relationships, Mr. O’Keefe, in collaboration with Mr. Jaffar, took steps designed to pursue directorships and corporate opportunities in connection with HIH and in competition with IHC. Mr. O’Keefe admitted at trial that he did not disclose any such pursuits, board appointments or projects to IHC. In particular, he:
a. “concealed his developing relationship with Dr. Muhairi, developed while working for IHC and using IHC’s resources, from IHC, in breach of his duty of loyalty and avoidance of self-interest, which would have required that he disclose this relationship such that it could be leveraged by IHC;
b. surreptitiously sent his C.V. to Dr. Muhairi for the admitted purpose of seeking appointment to the Board of Directors of HiH, in the hope that this position would generate corporate opportunities and relationships to be leveraged by CHNI to the exclusion of IHC;
c. served as a Director of HiH and its “operating arm”, First Healthcare Group, which was established to engage in “Hospital Operations and Management”, “Healthcare Planning and Consulting” and some “Equipment Procurement”, all of which Mr. O’Keefe testified were services performed by IHC;
d. actively sought to establish strategic partnerships (of the precise nature that IHC seeks to establish and upon which IHC relies) with a network of Toronto hospitals on behalf of First Healthcare Group, in direct competition with IHC;
e. attended multiple secret meetings with Dr. Muhairi, including one meeting with John Callum, General Manager of HBS, in pursuit of corporate opportunities with HIH for his personal benefit, including for the admitted purpose of establishing strategic partnerships for HIH, to IHC’s detriment;
f. withheld from IHC corporate materials relating to current and impending HIH projects, including relating to the EMC project that IHC had expressed an interest in pursuing, which materials were received from Muhairi, with the intention to use those materials to his advantage in pursuing such projects against IHC;
g. announced his intention to accelerate his resignation from IHC within days of receiving a confidentiality agreement from Muhairi and soliciting John Callum, to partner with HiH and Muhairi on the EMC project, which he described as “a matter of urgency”; and
h. on the very date of his resignation from IHC, emailed Jaffar in connection with the pursuit of strategic partnerships for the EMC project, wherein he revealed his true motivations for resigning by stating: “It will certainly be much easier dealing with this now that I will no longer be with IHC.” When asked about this email at trial, O’Keefe testified in no uncertain terms that he “wanted to be cut loose” from IHC so he could pursue opportunities with HIH.”
[65] All of these allegations are denied by the Defendants, who also raise a limitations defence.
Limitations Defence
[66] It is submitted that the claim against Mr. O’Keefe for these alleged breaches of fiduciary duty with respect to HiH and the EMC project are barred by the operation of the Limitations Act, 2002 (the “Act”). Section 4 of the Act provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. Section 5(1)(b) provides that claim is discovered on the day in which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have discovered it.
[67] Mr. O’Keefe submits that both of his successors at IHC were aware, or should have been aware, that he was planning to become involved with HiH on the EMC Project. First, Mr. O’Keefe’s evidence was that the Beauty Island Project was conceived as part of the EMC Project. After Mr. O’Keefe replied to Dr. Muhairi’s request for his ideas regarding that aspect of the Project,Dr. Muhairi replied by email that he had a meeting with Mr. George Commander in London, who had received a copy of Mr. O’Keefe’s email. Mr. O’Keefe inquired if Mr. Commander would be the Project Manager and Dr. Muhairi replied “George will be the project manager for the Beauty Island”. Mr. Commander had been heavily involved in IHC’s proposals for Wave 1 in 2004, as he was working for IHC or Dr. El Dukair, and in 2006, was leading the bidding for the construction aspect of the Turks and Caicos project for IHC. Mr. Commander was a long-time associate of Dr. El Dukair’s through Thinet, (the construction company in which Dr. El Dukair had an interest) and is the current Chairman of the Board of IHC. The evidence strongly suggests that Commander, who by 2005 had been working with IHC or Dr. El Dukair, was aware of Mr. O’Keefe’s involvement in the Beauty Island component of the EMC Project. He would also have been aware, after having received a copy of Mr. O’Keefe’s email from Dr. Muhairi, that it was not in Mr. O’Keefe’s capacity as the CEO of IHC. Mr. Commander succeeded Eric Parsons and preceded Dr. Al Sabti as the CEO of IHC.
[68] There is also evidence that Eric Parsons was aware in November 2005 that Mr. O’Keefe had involvement in the HiH Project. An email exchange between him and Mariam Hasan, suggests that Mr. Parsons was aware that Mr. O’Keefe had a continuing interest in EMC.
[69] The Defendant Mr. O’Keefe relies on such evidence to submit that this Court can and should draw an inference that the Plaintiff was aware of Mr. O’Keefe’s involvement with HiH in the EMC Project by no later than November 23, 2005. As this action was not commenced until 2008, the claims relating to the Plaintiff’s claims against Mr. O’Keefe are statute-barred and should be dismissed entirely. I do not agree that such evidence is enough to support a finding that the claims against Mr. O’Keefe are statute barred.
[70] On April 6, 2006, Mr. Jaffar and Mr. O’Keefe incorporated Canadian Hospitals Network International (“CHNI”). Mr. O’Keefe, through O’Keefe Health Care Systems Inc. (“O’Keefe Hold Co.”) was registered as the owner of 49% of the shares of CHNI but was only the beneficial owner of 15% of the shares of CHNI. From the date of incorporation, Mr. Jaffar, through Oneworld Health Care Group Inc. (“Oneworld”), controlled 85% of the shares of CHNI, with Mr. O’Keefe Hold Co. holding 340 shares in trust for Oneworld.
[71] Mr. O’Keefe testified that there were opportunities for him to leverage his expertise as a hospital administrator in Abu Dhabi, as a result of the personal relationships he had developed with officials there. As IHC had been shut out of that market as a result of its fractured relationship with the governing Authority, the opportunities were for him, but not to IHC. There was extensive evidence on the dispute with respect to the distrust the Authority had for the Plaintiffs.
[72] Mr. O’Keefe testified that he submitted his notice of resignation to the Board of Directors in June 2005. He had discussions with Mr. Metcalfe, the Chairman of the Board, that the CEO of IHC should be based in the UK and Mr. O’Keefe did not want to move there. He wanted to spend more time in Canada with his family. He gave six months’ notice to find his replacement.
[73] He testified that in early October 2005, he became aware that employees in the UK, without his knowledge and against his strong recommendation, were preparing to submit pre-qualification proposals for projects in the UK known as “Wave 2” Projects. Mr. O’Keefe expressed his opinion that IHC did not have the resources to get or perform these contracts(an opinion shared by the CEO of UK Operations, Colin Patey) and he believed that the submission of pre-qualification proposals would require misleading and/or untrue statements about IHC’s resources that compromised its reputation, and his own reputation as CEO of IHC.
[74] On October 9, 2005, Mr. O’Keefe wrote to Dr. El Dukair stating that he did not support IHC’s pursuit of Wave 2 Projects and that he would not be involved in completing documentation that he knew was not true. He advised him that if he decided to proceed with Wave 2 submissions, he would move his resignation forward to October 25, 2005 and would not wait until the end of the year.
[75] His concern was shared by the other Canadian directors Mr. Jim Metcalfe and Mr. Skip Schwartz who stated in emails they would also submit their resignations in solidarity with Mr. O’Keefe, expressing corporate governance concerns about Dr. El Dukair’s actions. Mr. Metcalfe, Mr. Schwartz and Mr. Saunderson all resigned around the same time of Mr. O’Keefe’s resignation.
[76] Mr. Jaffar had also advised the Plainitff in the fall of 2005 that he intended to resign by the end of the year and end all of his associations with Dr. El Dukair. Mr. Jaffar formally resigned effective January 31, 2006. I accept Mr. O’Keefe’s evidence on the reasons for his resignation.
[77] On July 12, 2005, Dr. Muhairi told Mr. O’Keefe that the Crown Prince of Abu Dhabi had approved the creation of Emirates Medical City (“EMC”) in Abu Dhabi. HealthCare Investment Holding (“HiH”) was created to establish EMC.
[78] On November 28, 2005, (approximately one month after his resignation from the IHC), Mr. O’Keefe was appointed as a member of First Healthcare Group LLC, a subsidiary of HiH, which was the operating arm of HiH for the EMC Project. Mr. O’Keefe did not participate in any director’s meetings and received no compensation for that role.
[79] Dr. Muhairi and Mr. O’Keefe had correspondence regarding HiH in the summer and fall of 2005. Dr. Muhairi sought Mr. O’Keefe’s guidance in dealing with the prime consultants.
[80] Mr. O’Keefe testified that he was advised by Dr. Muhairi in September of 2005, that IHC would not be considered to perform any scope of work on EMC.
[81] On October 20, 2005, Mr. O’Keefe, through Judy Olsen, sent a letter to Hume Martin, who was the Chairman of HBS and would eventually become the CEO of the Cromwell Hospital. In the letter, he stated that he was “approached by representative 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”. Mr. O’Keefe concludes this letter by referencing the “urgency” of the opportunity. Mr. O’Keefe admitted that he should not have sent the letter out on IHC letterhead. He testified that he wrote this letter on behalf of HIH as a Director, in an attempt to solicit HBS’s interest in pursuing consulting opportunities with HIH. The Plaintiff submits that Mr. O’Keefe’s conduct, in pursuing hospital partnerships of the type IHC frequently relied upon, for HIH’s operating arm, (which was formed to perform services that competed with IHC), is a breach of fiduciary duty.
[82] IHC submitted a bid when it received a Memorandum of Information regarding the EMC Project at the end of November 2005. Dr. Eric Parsons, interim CEO testified that he saw an opportunity for IHC to submit an expression of interest for a Strategic Healthcare Planner, a member of the Prime Team, which reported to HiH’s Employee Prime. He directed Mariam Hasan, an employee of IHC’s Dubai office, to speak to Mr. O’Keefe about the proposal, as both were apparently aware Mr. O’Keefe had previously had some interest in the project.
[83] IHC’s Response to Memorandum of Information to provide Strategic Healthcare Planning Consulting Services on the EMC Project was submitted December 5, 2005.96 On January 26, 2006, IHC’s submission was rejected by HOK.
The HiH Opportunity
[84] On April 9, 2006, four months after IHC submitted its proposal to provide consulting services as Strategic Healthcare Planner and more than two months after IHC’s proposal was rejected, CHNI submitted a proposal to HiH directly, at the invitation of Dr. Al Muhairi, to act as Employee Prime for the EMC Project. The role of the Employee Prime was to act as HiH’s representative and liaise with the consultants retained on the Project. HiH lacked the clinical and administrative expertise required to monitor the consultant’s work. This position assumed by Mr. O’Keefe was not available at the time Mr. O’Keefe resigned in October 2005. CHNI’s proposal was accepted on April 12, 2006.
The Cromwell Opportunity
[85] In the spring of 2003, Mr. Jaffar, a long-time associate and business partner of El Dukair, and a Director of IHC and a Director of Priory (a corporation owned by Dr. El Dukair) found out that the Cromwell Hospital in London, England, might be interested in outsourcing the management of the hospital. The Hospital was indirectly owned by entities affiliated with the Royal Family of Abu Dhabi.
[86] On March 29, 2003, Mr. Jaffar received a Floor Comparison document sheet from 2002 from Dr. Muhairi. On March 30, 2003, Mr. Jaffar forwarded it to Mr. O’Keefe.
[87] Mr. O’Keefe testified that the document had no information that would be useful, on its own, to assess whether or not managing the hospital could be a profitable venture for IHC. This evidence was corroborated by Shashikant Nayak, the Accounts and Finance Manager for IHC’s operations in the Middle East. He testified that, upon receiving the Floor Cost Comparison document, he advised that more information was needed to assess the information. No additional information was provided.
[88] On July 21, 2003, Mr. O’Keefe, on behalf of the Plaintiff, wrote to Dr. Muhairi, expressing IHC’s interest in arranging a meeting with officials from the Cromwell Hospital to discuss potential opportunities. Mr. O’Keefe testified that he received a phone call from Dr. Muhairi who advised him that the Cromwell Hospital had decided to self-manage and that if there were an opportunity, it would not be open to IHC, because Cromwell Hospital was owned by the Royal Family of Abu Dhabi who did not have confidence in IHC because it was owned by Dr. El Dukair. Mr. O’Keefe reported this to Dr. El Dukair and Dr. Al Sabti.
[89] Mr. O’Keefe’s evidence is that no further work was done in pursuit of an opportunity to manage the Cromwell Hospital. This is disputed by the Plaintiff.
[90] Mr. O’Keefe’s evidence on the work performed by IHC with respect to the Cromwell is that:
a. he reviewed and analyzed the confidential “Cost-Floor Comparison” document that had been provided to IHC with Shashi Nayak;
b. he discussed the opportunity from a clinical perspective with Veronica Nickerson, the Chief Nursing Officer at the SKMC, and Dr. Eric Parsons, IHC’s Medical Director;
c. he discussed the merits of the opportunity with Dr. Al Sabti, Dr. El Dukair, Mr. Jaffar and Mr. Shashikant Nayak; and
d. he reported to the Board of Directors regarding the potential opportunity.
[91] Dr. Al Sabti also testified about three meetings that he had with Dr. Muhairi in 2004:
• In or around the first quarter of 2004, he and Mr. Jaffar met Dr. Muhairi at the Hilton Hotel in Abu Dhabi to discuss potential opportunities for collaboration. He asked Dr. Muhairi if the Authority was any closer to awarding IHC with the contract to manage the Cromwell Hospital and Dr. Muhairi replied “inshallah”, which, when translated to English, means “in good time it will happen with God’s blessing.”
• In or around December of 2004, he met with Dr. Muhairi in Vienna, at which they discussed forming a corporate partnership between IHC, Dr. Muhairi and other strategic partners to pursue a contract for a military hospital in Abu Dhabi; and
• Later in December 2004, he met with Dr. Muhairi at his office on the grounds of the Cromwell Hospital, where he was again given the impression that IHC was still in the running for the Cromwell Opportunity.
[92] Dr. Al Sabti admitted that, at the meeting at the Hilton in Abu Dhabi, he was the one who brought up the Cromwell with Dr. Muhairi.
[93] The Plaintiff’s evidence is that Dr. Al Sabti and Dr. El Dukair were very interested in pursuing the Cromwell Opportunity but ceased their pursuit when advised by Mr. O’Keefe that IHC would not be able to get the Cromwell Opportunity.
[94] Dr. Al Sabti gave evidence as to IHC’s demonstrated track record of success in procuring and executing hospital management contracts that were similar in nature, size, scope and complexity to the Cromwell Opportunity.
The Cromwell Transaction
[95] In late February 2006, Mr. O’Keefe was introduced to Seamus and Frances Jennings, who owned the Rotary Group by Mr. Jaffar. The Rotary Group was a privately owned British company with a consolidated asset value in excess of US $1billion, and which, in 2006, had extensive experience in healthcare. It also held the facilities management contract for the Cromwell Hospital. At this meeting, the Rotary Group advised that it was interested in purchasing the operating license for the Cromwell Hospital from IMC Holdings (Grand Cayman) Limited and Medical Corporation (Grand Cayman) Limited, the holding companies controlled by entities affiliated with the Abu Dhabi Royal Family. The Rotary Group had the capital and connections required, but it did not have the clinical experience or expertise needed to operate the hospital. It was aware that Mr. O’Keefe had a good reputation in Abu Dhabi and that the ruling family of Abu Dhabi owned the Cromwell Hospital. It was looking for a clinical partner with that expertise.
[96] The Rotary Group and CHNI submitted a Term Sheet to Dr. Al Muhairi in his role as the Acting CEO of the Cromwell Hospital on May 2, 2006. The offer was to purchase Medical Services International Limited (“MSI”), which held the operating license for the Cromwell Hospital for a period of 20 years, to assume all the liabilities and responsibilities relating to the management of the Hospital for that period, and to lease the property on which the Hospital sat. This was not an opportunity put out for tender, made public or offered to others.
[97] The Term Sheet was accepted and the parties entered into extensive due diligence for six months. The due diligence and structure of the transaction was directed and carried out by Rotary Group’s lawyers, bankers and consultants, consistent with the fact that the transaction was financed entirely by the Rotary Group. CHNI assumed no financial risk in the transaction. This was reflected in the shareholdings of the corporation established to purchase the shares of the Cromwell Healthcare Group Ltd. On December 6, 2006, the Rotary Group, including through its principals, subscribed for 510 Class A Shares of the Cromwell Health Group Ltd. (CHG) (out of an issued share capital of 510 Class A Shares) and 2,000,000 Preference Shares (out of an issued share capital of 2,000,000 Preference Shares) and CHNI subscribed for 490 Class B Shares (out of an issued share capital of 490 Class B Shares). Also, on December 6, 2006, CHNI had two representatives appointed to the Board of Directors of CHG as Class B Directors. The Rotary Group retained control of CHG.118 It had two Class A Directors who in turn had a deciding vote. On December 6, 2006, CHG acquired all of the share capital of MSI from IMC Holdings (Grand Cayman) Limited and Medical Corporation (Grand Cayman) Limited, and thereby the operating license for the hospital.
[98] Following the purchase, CHG began conducting an operational review of the Cromwell Hospital. Mr. O’Keefe acted as the interim CEO, until Hume Martin was appointed in March 2007.
[99] Following its acquisition of MSI, CHG experienced financial difficulties and Rotary Group made it known that it would be calling for a significant capital infusion from shareholders. Mr. Jaffar sold his shares in Oneworld, through which he controlled 85% of CHNI’s issued and outstanding shares, to entities controlled by Pradeep Kumar Handa (“Handa”). This sale was completed in July 2007, with no further involvement from Mr. Jaffar.
[100] Mr. O’Keefe testified that he was very unhappy with Mr. Jaffar’s sudden departure and unable to meet any demand for an infusion of capital, and following a legal dispute which he had for control of CHNI with Mr. Handa, he also sold his interest in CHNI to Oneworld, now controlled by Mr. Handa. Oneworld acquired O’Keefe Hold Co’s 15 % interest in CHNI for a total payment of $1,359,975.00 on October 9, 2007. Mr. O’Keefe resigned from all associated positions and had no further involvement in CHNI, CHG or MSI. He also had no further contact with the Jennings brothers, Mr. Jaffar and Dr. Muhairi.
[101] It is the Plaintiff’s theory that Mr. O’Keefe discovered that the Cromwell Opportunity had been revived while he was still employed by IHC and that he, in collaboration with Mr. Jaffar and Dr. Muhairi, deliberately concealed this information from IHC to pursue the Cromwell Operating Licence on CHNI’s behalf, with the understanding that Dr. Muhairi would receive a kickback when the Cromwell Operating Licence was eventually re-sold at a profit.
[102] The Plaintiff submits that in the context of the developing “friendship” between Mr. O’Keefe and Dr. Muhairi, including an offer to travel to Algeria together and numerous emails, phone calls and meetings relating to business opportunities, Mr. O’Keefe’s testimony that he did not discuss the Cromwell Hospital with Dr. Muhairi is unbelievable.
[103] The Plaintiff submits that this Court should not accept Mr. O’Keefe’s evidence and find that Dr. Muhairi at least discussed the possibility that the owners of the Cromwell Hospital might be amenable to granting an interest in the operation of the Cromwell Hospital to a third party and therefore that in failing to disclose this possible opportunity to IHC, Mr. O’Keefe breached his fiduciary duty.
[104] In keeping with the established case law, this Court need only find that Mr. O’Keefe’s evidence, including that he was not aware of the potential revival of the Cromwell Opportunity while still employed at IHC, is not credible on a balance of probabilities – that it is merely “more likely than not” that a given fact to which he testified did not occur – in order to make a finding of fact to the contrary. I do not agree and decline to make such a finding.
[105] The submission is that As a fiduciary to IHC, Mr. O’Keefe was obligated to inform IHC that the owners of the Cromwell Hospital had a renewed interest in seeking a third-party operator and to seek its consent to pursue that opportunity for his personal benefit. His and Mr. Jaffar’s failure to do so constituted breaches of their fiduciary duties.
[106] IHC relies on these submissions:
a. Between June and October of 2005, and while still employed by IHC, Mr. O’Keefe’s relationship with Dr. Muhairi had become “very strong”, and Dr. Muhairi trusted and respected Mr. O’Keefe professionally and asked for his advice;
b. In September and October of 2005, Mr. O’Keefe attended multiple secret meetings with Dr. Muhairi, including one meeting with John Callum, who would eventually become a Director of Minerva. IHC requests that this Court find that Dr. Muhairi, at the very least, advised Mr. O’Keefe that the owners of the Cromwell Hospital were considering selling the Cromwell Operating Licence to a third party operator (of which Mr. O’Keefe’s duties would have required disclosure to IHC), and likely even discussed the plan under which Mr. O’Keefe and Mr. Jaffar would incorporate a new company to purchase the Cromwell Operating Licence. There is no evidence supporting this allegation. Rather, the Plaintiff urges this court to make such a finding.
c. Mr. O’Keefe abruptly announced his intention to accelerate his resignation from IHC under questionable circumstances and shortly after his meeting with Dr. Muhairi in October. IHC requests that this Court find that Mr. O’Keefe’s accelerated resignation was, at least in part, motivated by a desire to pursue the Cromwell Opportunity. I have already found that I accept Mr. O’Keefe’s evidence on why he resigned for IHC;
d. In early February of 2006, Mr. O’Keefe met with Mr. Jaffar, Dr. Muhairi and the Rotary Group, at which meeting the parties allegedly solidified their plan to bid for (and, in Dr. Muhairi’s case, to accept their bid for) the Cromwell Operating Licence. IHC requests that this Court find that Mr. O’Keefe was already aware of this plan, which crystalized at this meeting;
e. In April of 2006, Mr. O’Keefe and Mr. Jaffar incorporated CHNI and entered into complicated and unusual arrangements, including a declaration of trust and indemnity and power of attorney, with the intention to conceal Mr. Jaffar’s ownership interest in accordance with Dr. Muhairi’s instructions in furtherance of CHNI’s pursuit of the Cromwell Opportunity;
f. In April of 2006, Dr. Muhairi awarded CHNI a position on the EMC project through a confidential process that was not subject to public scrutiny (as distinct from the public bidding process run by HOK through which IHC bid on the exact same project). Notwithstanding that the project did not proceed and CHNI did not perform any services, CHNI was paid an advance of approximately $479,000 USD, which money was used to fund its further pursuit of the Cromwell Opportunity. IHC requests that this Court find that this advance was provided for the ulterior purpose of facilitating CHNI’s acquisition of the Cromwell Operating Licence;
g. On or around May 9, 2006, after receiving CHNI’s and Rotary Group’s term sheet for its acquisition of the Cromwell Operating Licence, Dr. Muhairi agreed to sell the Cromwell Operating Licence to CHNI and the Rotary Group for 7,500,000 GBP through another confidential process that was not subject to scrutiny or competition;
h. CHNI and the Rotary Group sold the Cromwell Operating Licence for 90,000,000 GBP – 12 times what they paid for it in March of 2008, with Dr. Muhairi receiving 18,413,096 GBP; and
i. When Mr. Jaffar discovered the Rotary Group’s intention to issue a cash call, which he didn’t believe he could meet, he informed Mr. Handa of the conspiracy and resulting potential to earn a huge profit from the contemplated sale of the Cromwell Operating Licence, thereby explaining Mr. Handa’s agreement to invest significant sums in an “unprofitable business” in respect of which he had minimal information and in the wake of an impending cash call to be issued by difficult partners.
[107] Mr. Handa testified that Mr. Jaffar approached him in April or May of 2007 with the opportunity to acquire an interest in CHNI, which he had an interest in the Cromwell Hospital in London.
[108] Mr. Handa’s evidence was that:
a. Mr. Jaffar wanted to sell his interest in CHNI because he had issues with its partner, the Rotary Group, which was planning to issue a significant cash call that would require a further capital injunction of approximately £4,000,000 GBP;
b. The Rotary Group held a majority interest in Minerva, the entity that owned the Cromwell Operating Licence, and CHNI would not have any control over the company;
c. The Cromwell Hospital was a loss-making institution at the time;
d. He was not permitted to enter the Cromwell Hospital to witness its operations; and
e. He believed that “there wasn’t any upside”.
[109] The Plaintiff submits that Mr. Handa’s evidence is not believable as despite his evidence that he had legal representation and that “a couple of months” elapsed from when Mr. Jaffar approached him with the opportunity, he testified that he agreed to pay Mr. Jaffar £2,000,000 GBP for what Mr. Jaffar fraudulently advised him was 100% of CHNI without conducting any due diligence, including investigating title to the shares. According to Mr. Handa, Mr. Jaffar “told me he had the shares” and that was all Mr. Handa needed to hear. Mr. Handa further testified that there was no formal analysis or due diligence to arrive at the price that he paid to Mr. Jaffar. Mr. Jaffar asked for £2,000,000 GBP and Mr. Handa agreed. However, Mr. Handa gave an explanation for his decision as he made arrangements with a contact of his that he referred to as Mr. Doumas. He concluded that as a result of his agreement with Mr. Doumas, he would bear no financial risk.
[110] The Plaintiffs further submit that the courts should not accept Mr. O’Keefe’s evidence that he never even mentioned the word “Cromwell” with Dr. Muhairi during their meetings in September and October of 2005, as it is unbelievable given the nature of their relationship and their overlapping professional pursuits. Mr. O’Keefe was a natural fit to fill the vacancy in the management of the Cromwell Hospital and Dr. Muhairi was in a position to effectively award the Cromwell Operating Licence to CHNI and the Rotary Group in February of 2006, which was just a few months later. Similarly, it is submitted that Mr. O’Keefe’s testimony that he was unaware that Dr. Muhairi was entitled to receive any financial compensation in connection with the Cromwell Opportunityis not believable.
[111] These submissions are part of the Plaintiff’s “conspiracy theory”, which I review below.
[112] The Plaintiff submits that it is “more likely than not” that the facts underlying Mr. O’Keefe’s discovery of the revival of the Cromwell Opportunity and the arrangements resulting in the ultimate sale of the Cromwell Operating Licence, all as portrayed in O’Keefe’s and Handa’s testimony, did not occur. Accordingly, IHC requests that this Court make findings of fact consistent with IHC’s theory of the case. However, the burden of proof is on the Plaintiff. The Plaintiff must prove that in conspiring with Mr. Jaffar and Dr. Muhairi to conceal the revival of the Cromwell Opportunity for his personal benefit while still employed by IHC, Mr. O’Keefe acted in his own self-interest, in bad faith and in conflict with his duty to IHC, as he knew IHC was interested in pursuing this opportunity, which constitutes a breach of his fiduciary duty to IHC.
[113] The Plaintiff submits that even if this Court accepts Mr. O’Keefe’s improbable evidence that the Cromwell Opportunity was somehow revived and crystalized in the three-month period between his resignation and the February 2006 meeting (which is denied), and that Dr. Muhairi never mentioned the possible opportunity in their numerous encounters in late 2005 while Mr. O’Keefe was still employed at IHC (which is denied), Mr. O’Keefe still breached his fiduciary duty to IHC by failing to seek IHC’s consent to pursue the opportunity on behalf of CHNI shortly after his resignation.
[114] In addition to the Plaintiff’s position that it was, in fact, the revival of the Cromwell Opportunity (in conjunction with the HIH opportunities) that motivated Mr. O’Keefe to accelerate his resignation, it is clear that it was Mr. O’Keefe’s position with IHC that led him to the Cromwell Opportunity.
[115] The Plaintiff argues that it is only through Mr. O’Keefe’s position with IHC, while he was receiving a salary from IHC and using IHC’s resources to pursue corporate opportunities for IHC’s benefit, did he meet Muhairi, develop his relationship with Dr. Muhairi, discover the Cromwell Opportunity and conduct the analysis to determine that the Cromwell Opportunity would be a lucrative and worthwhile venture. It was Mr. O’Keefe’s position with IHC that led him to the Cromwell Opportunity, which, as a matter of law, belonged to IHC.
[116] The Plaintiff submits that the case law suggests that his fiduciary duty ought to extend for a period of at least 12 months beyond his departure beyond February of 2006 , three months after his departure.
[117] It is the plaintiff’s position that CHNI and HIH never intended that CHNI would perform a role in connection with the defunct EMC project; rather this secretive, non-competitive, non-arm’s length transaction provided CHNI with an advance to provide the finances necessary for its due diligence and proposal in connection with the Cromwell Opportunity. The term sheet was executed by CHNI and the Rotary Group with respect of the Cromwell Opportunity on May 9, 2006, within a month of HIH’s execution of the EMC Contract and delivery of the upfront payment.
[118] On direct examination, Mr. O’Keefe gave evidence that:
a. Jaffar arranged the meeting;
b. The meeting took place in the end of February or in March;
c. Only Mr. O’Keefe, Mr. Jaffar and the Jennings brothers were in attendance; and
d. The Jennings brothers promoted the idea of pursuing the Cromwell Opportunity during the meeting.
[119] Though he subsequently walked back certain of his trial testimony, including acknowledging that Muhairi attended the meeting, promoted the opportunity and gave him the impression that Dr. Muhairi was “supportive” of Mr. Jaffar, Mr. O’Keefe and the Rotary Group pursuing the opportunity, only two conclusions can be drawn from Mr. O’Keefe’s inconsistent testimony: either his memory is failing him, in which case his evidence is of questionable reliability and value, or (more likely) he is deliberately tailoring his evidence in support of his legal position, in which case he lacks all credibility as a witness.
[120] The Plaintiff challenges Mr. O’Keefe’s evidence at trial, which had the effect of distancing the meeting further from his resignation and minimizing the involvement of Dr. Muhairi, an important link to O’Keefe’s employment at IHC and IHC’s pursuit of the Cromwell Opportunity, because it was more favourable to his position in the litigation than the evidence that he gave on discovery.
[121] Further, the Plaintiff submits that Mr. O’Keefe’s evidence on this meeting, defied common sense. He attended the meeting knowing only that it was for purposes of discussing a “business opportunity”. He also testified that he believed Mr. Jaffar and the Jennings brothers had conducted prior “meetings” relating to the pursuit of the Cromwell Opportunity for some time before the meeting, and that it was “reasonable” to draw the inference that Dr. Muhairi was involved in co-ordinating the joint venture, such that the parties were able to solidify their agreement at the meeting by agreeing to prepare a term sheet.
[122] Such, it is submitted, implies that Mr. O’Keefe attended this meeting without asking any questions at all as to who was in attendance or the nature of the opportunity (notwithstanding that he was on vacation with his wife at the time) and/or that Mr. Jaffar, Mr. O’Keefe’s business partner, withheld critical information that would be of interest to Mr. O’Keefe, including that the opportunity involved Dr. Muhairi, It also implies that Mr. Jaffar and Dr. Muhairi concealed their pursuit of the Cromwell Opportunity throughout all of their prior discussions, including in the lead-up to this meeting, at which they were relying on Mr. O’Keefe to make the significant decision to join their joint venture.
[123] It is argued that Mr. O’Keefe’s testimony of this meeting, which provides critical support for his allegation that this opportunity arose separately from Mr. O’Keefe’s and Jaffar’s pursuit of the Cromwell Opportunity on behalf of IHC, is inconsistent, illogical and tailored to suit his litigation position. It ought not be believed.
[124] IHC urges the Court to prefer the following theory, which is consistent with the evidence on the record and as recorded in Dr. Al Sabti’s contemporaneous notes of his consideration with Mr. Handa and their 2008 conversation:
a. Beginning at a time that is not know to the Plaintiff, but while still employed by IHC, Mr. Jaffar and Mr. O’Keefe nurtured their relationship with Dr. Muhairi, developed while working for IHC, in an attempt to position themselves for the Cromwell Opportunity upon their resignations from IHC;
b. Mr. Jaffar, with the knowledge of Mr. O’Keefe, negotiated with Dr. Muhairi for the Cromwell Opportunity, including by giving Dr. Muhairi a significant personal financial interest;
c. Dr. Muhairi requested that Mr. Jaffar and Mr. O’Keefe partner with a local company, the Rotary Group;
d. Mr. Jaffar, with the knowledge of Mr. O’Keefe, engaged in numerous meetings with the Jennings brothers and Dr. Muhairi for purposes of establishing the framework for their pursuit of the Cromwell Opportunity;
e. The parties solidified their agreed upon framework for the pursuit of the Cromwell Opportunity during the February 2006 meeting; and
f. Mr. O’Keefe, Mr. Jaffar and the Jennings brothers incorporated CHNI and Minerva in a manner designed to hide Jaffar’s involvement and subsequently prepared a term sheet, which, Mr. O’Keefe testified, required confidential financial and operational information that was furnished by Dr. Muhairi.
The Law
[125] The Plaintiff relies on the Supreme Court of Canada decision in Canadian Aero Service Ltd. v. O’Malley, (1973), 1973 CanLII 23 (SCC), [1974] S.C.R. 592, 1973 CarswellOnt 236, the sanctity of the fiduciary duty is so high that it is still a breach of fiduciary duty to usurp a corporate opportunity even if the corporation could not pursue the opportunity itself which held:
31 The reaping of a profit by a person at a company's expense while a director thereof is, of course, an adequate ground upon which to hold the director accountable. Yet there may be situations where a profit must be disgorged, although not gained at the expense of the company, on the ground that a director must not be allowed to use his position as such to make a profit even if it was not open to the company, as for example, by reason of legal disability, to participate in the transaction. An analogous situation, albeit not involving a director, existed for all practical purposes in the case of Phipps v. Boardman, which also supports the view that liability to account does not depend on proof of an actual conflict of duty and self-interest. Another, quite recent, illustration of a liability to account where the company itself had failed to obtain a business contract and hence could not be regarded as having been deprived of a business opportunity is Industrial Development Consultants Ltd. v. Cooley, a judgment of a Court of first instance. There, the managing director, who was allowed to resign his position on a false assertion of ill health, subsequently got the contract for himself. That case is thus also illustrative of the situation where a director's resignation is prompted by a decision to obtain for himself the business contract denied to his company and where he does obtain it without disclosing his intention. [emphasis added]
[126] The Plaintiff argues that if this court accepts that the evidence supports the defendants’ position that IHC would have been unlikely to succeed in procuring the corporate opportunities, Mr. O’Keefe’s conduct, in leveraging resources and relationships accessed in his role as a Director and Officer of IHC in order to secretly pursue the corporate opportunities for himself and CHNI, would still be cause to disgorge all profits that were earned from those corporate opportunities.
[127] The Plaintiff submits that in Canadian Aero, the Court established the following governing principles:
a. The fiduciary duty extends beyond the director’s resignation: In addition to the prohibition on usurping corporate opportunities while serving as a director or officer, he or she 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.”
b. The fiduciary duty extends to prohibit directors or officers from diverting corporate opportunities to associated companies: “In my opinion, this ethic disqualifies a director or senior officer 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”.
c. A director must not be allowed to use his or her position to make a profit even if the corporate opportunity was not available to the company: “The reaping of a profit by a person at a company’s expense while a director thereof is, of course, an adequate ground upon which to hold the director accountable. Yet there may be situations where a profit must be disgorged, although not gained at the expense of the company, on the ground that a director must not be allowed to use his position as such to make a profit even if it was not open to the company, as for example, by reason of legal disability, to participate in the transaction.”
d. Liability for such breaches of fiduciary duty does not rely on “proof of mala fides” on the part of the fiduciary.
e. The corporate opportunity does not even need to bear a “substantial resemblance” to that previously pursued by the corporation: “In my opinion, the fiduciary duty upon O'Malley and Zarzycki, if it survived their departure from Canaero, would be reduced to an absurdity if it could be evaded merely because the Guyana project had been varied in some details when it became the subject of invited proposals, or merely because Zarzycki met the variations by appropriate changes in what he prepared for Canaero in 1965 and what he proposed for Terra in 1966. I do not regard it as necessary to look for substantial resemblances. Their presence would be a factor to be considered on the issue of breach of fiduciary duty but they are not a sine qua non. The cardinal fact is that the one project, the same project which Zarzycki had pursued for Canaero, was the subject of his Terra proposal. It was that business opportunity, in line with its general pursuits, which Canaero sought through O'Malley and Zarzycki.”
f. The corporation is entitled to seek an accounting of profits as a remedy: “Liability of O'Malley and Zarzycki for breach of fiduciary duty does not depend upon proof by Canaero that, but for their intervention, it would have obtained the Guyana contract; nor is it a condition of recovery of damages that Canaero establish what its profit would have been or what it has lost by failing to realize the corporate opportunity in question. It is entitled to compel the faithless fiduciaries to answer for their default according to their gain. Whether the damages awarded here be viewed as an accounting of profits or, what amounts to the same thing, as based on unjust enrichment, I would not interfere with the quantum.”
[128] As the Supreme Court of Canada found in Canadian Aero, a fiduciary is precluded from pursuing a corporate opportunity without the consent of his or her employer after his or her 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.”
[129] Extending the prohibition on appropriating corporate opportunities arising in one’s capacity as a director beyond his or her resignation makes good sense as a matter of policy. To the extent an opportunity arises as a result of efforts made, relationships built and analysis conducted by fiduciary employees that are paid by and acting on behalf of a corporation, such opportunities ought to properly belong to the corporation. A director’s fiduciary duty would be hollow if it could be avoided by resigning and, within several months, taking the fruits of the corporation’s efforts for his or her own personal benefit.
[130] The Plaintiff further relies on the Manitoba Court of Appeal decision in Matico v. Waldner, 2016 MBCA 60, which examined the common law and held that:
In summary, determining whether a director has breached his or her fiduciary duty under the corporate opportunity doctrine requires an extensive contextual analysis.
All relevant factors must be taken into account, including: the maturity of the opportunity; whether it was actively pursued by the corporation; whether the corporation was capable of taking advantage of the opportunity; whether the opportunity was in the corporation’s line of business or a related business; how the opportunity arose or came to the attention of the director; whether the other directors of the corporation had knowledge of the director’s pursuit of the opportunity; and whether the other directors gave their fully informed consent to the director’s pursuit of the opportunity. The overall goal of the analysis is to determine whether the opportunity fairly belonged to the corporation in the circumstances.
144 Due to the strict ethic that is imposed on directors, a breach of fiduciary duty can occur when the diverted opportunity is a potential, rather than a mature opportunity, or one that the corporation is not actively pursuing.
[131] The Plaintiff argues that Mr. O’Keefe’s and Mr. Jaffar’s breaches of fiduciary duty are not saved by the Defendants’ allegations that the Cromwell Operating Licence that was ultimately awarded to CHNI was different in nature to the Cromwell Opportunity that was pursued by and belonged to IHC.
[132] The Defendants, however, rely on what they submit is significant binding jurisprudence and that this Court should be guided and follow the current jurisprudence of Ontario.
[133] They rely on the Divisional Court in Pizza Pizza Ltd. v. Gillespie, 1990 CarswellOnt 408 (Gen Div) wherein the Court stated:
“[I]t is open to a former employee, including a fiduciary, to take advantage of a business opportunity where that opportunity was not mature or specific to the corporation and where the employee did not resign to pursue that opportunity; moreover, the opportunity must be “ripe” [citations omitted, emphasis added].” “By ripe, I understand the case law to mean that the opportunity available to the corporation is a prize ready for immediate grasping – not a general course of future conduct which is merely being explored […] [emphasis added](paras. 81-82).
[134] Further, this Court has held in Donor Gateway Inc. v. Passero, 2007 CarswellOnt 724, “A mere idea is not sufficient to constitute a maturing corporate opportunity. A plaintiff must be able to prove that it was actively pursuing the maturing business opportunity at the time when the defendant is alleged to have diverted it” [emphasis added] (para. 12).
[135] More recently, in Tracey v. Tracey, 2012 ONSC 3144, the Divisional Court held that a “maturing business opportunity”, is a ‘maturing’ or ‘ripe’ business opportunity, immediately available to the corporation, that constitutes a business advantage or opportunity that the fiduciary may not appropriate to himself. On the other hand, a director may pursue a business opportunity that the corporation has rejected, or that the corporation is unable or unwilling to pursue.” (para. 56)
[136] With respect to CHNI’s liability, it is submitted that where fiduciaries have diverted a corporate opportunity to another company that “knowingly receives the fruits of such a breach”, that company is liable along with the fiduciaries. The Court in Polar Wireless Corp. v Roberts, 2012 ONSC 6482 explained this well-established jurisprudence (emphasis added):
[23] It is also well-established that a third party who knowingly assists or participates in a breach of fiduciary duty, or who knowingly receives the fruits of such a breach, will be liable along with the breaching party: Anderson, Smyth & Kelly Customs Brokers Ltd. v. World Wide Customs Brokers Ltd. et al. (1996), 1996 ABCA 169, 184 A.R. 81 (C.A.). In order to grant meaningful and effective relief, the new employer, who has knowledge of the employee's obligations, must also be restrained: Ontario Duct Cleaning Ltd. v. Wiles, [2001] O.J. No. 5150 (S.C.J.); Wallace Welding Supplies Ltd. v. Wallace reflex, (1986), 1986 CanLII 7626 (ON SC), 32 B.L.R. 99 (Ont. H.C.J.). It is not disputed that Inter-World was aware from the outset of Mr. Durkin's non-solicitation agreement and it may be liable for any breaches of his obligations, both contractual and common law. There is a strong inference to be drawn that Inter-World was aware of the Durkins' breaches of duty and knowingly received the fruits of their misconduct.
[137] The Defendants submit that there is no evidence surrounding these meetings from which it can reasonably be inferred that the Cromwell Opportunity, as the Plaintiff has characterized it, was an opportunity for IHC at any time after 2003. Dr. Muhairi did not initiate discussions with IHC. A more reasonable interpretation, based on all of the evidence, is that if Dr. Muhairi did say “Inshallah” (which is, of course, hearsay), it was as a polite way to dismiss the unsolicited inquiries of Dr. Al Sabti and not as any promise or representation of an opportunity for IHC at the Cromwell.
[138] The Defendants submit that the purchase of an interest in the Operating License for the Cromwell Hospital was a fundamentally different opportunity than the one Mr. O’Keefe inquired about in 2003 and that Mr. O’Keefe and CHNI, were introduced to the opportunity by the Rotary Group, which held the facilities management contract for the Cromwell Hospital.
[139] It is important to note that the Rotary Group and CHNI submitted a Term Sheet to Dr. Muhairi in his role as the Acting CEO of the Cromwell Hospital on May 2, 2006. The offer was to purchase Medical Services International Limited (“MSI”), which held the operating license for the Cromwell Hospital for a period of 20 years, to assume all the liabilities and responsibilities relating to the management of the Hospital for that period, and to lease the property on which the Hospital sat. This was not an opportunity put out for tender, made public or offered to others.
[140] It is submitted that IHC was interested in acquiring a contract to manage the Cromwell Hospital. That is not what CHG acquired. Mr. O’Keefe and Mr. Handa testified with respect to the fundamental differences between the two. Importantly, Mr. O’Keefe did not acquire this opportunity as a result of any misuse of his fiduciary position or power with the Plaintiff. His evidence is that he was introduced to the opportunity in February 2006 by Mr. Jaffar and the Rotary Group that managed the hospital.
[141] They rely on the following evidence:
• Rotary incorporated the corporation that became CHG in the United Kingdom in January 2006;
• Rotary’s lawyers, bankers and advisors (i.e. PWC, Deloitte, Wilson Gillespie) who prepared and structured each transaction;
• the Term Sheet submitted by the Rotary Group and CHNI in May 2006 lists the Cromwell Hospital as one of the Rotary Group’s numerous healthcare clients in the United Kingdom;
• the Project Minerva Business Plan states that Rotary was recently awarded the facility management contract for the Cromwell Hospital.
[142] Mr. O’Keefe’s evidence is that he was approached by Rotary as a result of his reputation as an excellent hospital administrator and not because of any unfair advantage he gained as a result of his position with IHC. It is submitted that he can use his goodwill based on his reputation and expertise after his employment with IHC has ended. It is submitted that the fact that he had been introduced to Dr. Muhairi while he was the CEO of the SKMC is not a basis upon which to find any liability for breach of fiduciary duty. His relationship with Dr. Muhairi was a personal one, based on mutual professional respect and goodwill. Dr. Muhairi was not an asset of IHC that could be lost. Dr. Muhairi, and the Royal Family of Abu Dhabi, have the right to do business with who they had confidence in rather than IHC. There was evidence about the Royal Family and the Authority’s distrust of IHC and Dr. El Dukair. Mr. O’Keefe did not persuade Dr. Muhairi or the Authority to withhold or divert work from IHC by unfair means. (Palumbo v. Quercia, 2018 ONSC 5034 at paras. 56-65).
[143] The Plaintiff relies on two documents which are alleged to be confidential information Mr. O’Keefe received while he was employed. A Floor Cost Comparison spreadsheet, which Mr. Jaffar received from Dr. Muhairi in March 2003 and forwarded to Mr. O’Keefe. The second is an Executive Summary prepared for the Cromwell Hospital by the UK consulting firm, Booze Allan Hamilton. Mr. O’Keefe’s evidence is that he did not see that document until he was engaged in due diligence with the Rotary Group.
[144] I accept Mr. O’Keefe’s evidence that the Floor Cost Comparison contained little information that would be useful, to evaluate if managing the Cromwell Hospital could be profitable for IHC and the evidence of Shashikant Nayak, who testified that more information was needed to assess the document and that no further information was provided.
[145] Mr. O’Keefe, therefore, did not use these documents in CHNI and Rotary’s bid to acquire the operating license for the Cromwell Hospital in 2006. The Project Minerva Business Plan prepared in 2006 references financial information from 2004 forward. The information IHC received was only until 2002. Mr. O’Keefe testified that the information in the Business Plan was from the Cromwell Hospital in March or April 2006 and thereafter.
[146] One of the key conclusions reached by the Supreme Court in Canadian Aero was that a director or senior employee is precluded from usurping for himself or diverting to another person or company with which he is associated a maturing business opportunity which his company is actively pursuing, and that preclusion continues 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 within the company rather than a fresh initiative that led him to the opportunity which he later acquired (para. 25).
[147] There is an extensive amount of jurisprudence that has been referred to and relied on by the parties
[148] Although the parties argue that the jurisprudence is not consistent when it is considered in light of the facts that each case dealt with, it is apparent that our courts do agree that a variety of factors must be considered. The existence of a corporate opportunity will depend upon the particular facts. In this regard the decision of the Manitoba court of appeal in the Mattick case is helpful. The court provides guidance as to what factors should be considered. These are:
• The maturity of the offer of the opportunity
• Whether it was actively pursued by the corporation
• Whether the corporation was capable of taking advantage of the opportunity
• Whether the opportunity was in the corporations line of business or a related business
• How the opportunity arose or came to the attention of the Director
• Whether the other directors of the corporation had knowledge of the directors pursuit of the opportunity
• Whether the other direction directors gave their fully informed consent to the directors pursuit of the opportunity
[149] Most importantly the court held that the overall goal of the analysis is to determine whether the opportunity fairly belong to the corporation in the circumstances. When I consider these factors,with respect to the allegation regarding the Cromwell opportunity and the HIH opportunity, I conclude that:
• The Cromwell opportunity that was obtained by Mr. Okeefe was not a mature opportunity when it was considered by IHC.
• The opportunity was not in the line of business of IHC. At best it could be described as a “related business”.
• IHC could not have taken advantage of the opportunity as the opportunity arose as a result of personal relationships and professional reputations. The evidence did disclose that the royal Family of Abu Dhabi did not trust IHC or its owner Dr. El Dukair. Further The opportunity was not available to IHC as Dr. Muhairi’s approval and participation was critical. The evidence was clear that Dr. Muhairi had advised that IHC would not be considered to manage the Cromwell hospital even if that opportunity had become available.
• The directors of IHC did not have knowledge of the opportunity and therefore had not given their consent to Mr. Okeefe‘s pursuit of the opportunity.
[150] I find that the opportunity was Available to Mr. Okeefe 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 IHC. When I assess all of the evidence I find that the “opportunity” did not fairly belong to IHC in the circumstances.
[151] With respect to the HIH opportunity, I find that the opportunity was never an opportunity that fairly belonged to IHC. The evidence was that it was an entirely different opportunity that would not have been available to IHC. CHINI was engaged to coordinate and manage the consultants who were retained on the project. It was an opportunity that did not exist when Mr Okeefe was with IHC. It was a fresh and new opportunity that had never belonged or was available to IHC.
[152] As a result of my findings with respect to whether the corporate opportunities could fairly have been said to belong to the plaintiff, I find that it is therefore not necessary for the court to rule on the extensive fraudulent and conspiracy allegations submitted by the Plaintiff for the first time at trial. Further, as I discuss below, such evidence is not admissible.
The Conspiracy Allegation
[153] The Defendant’s argued that the “double hearsay” evidence that the Plaintiff sought to introduce to support its theory that Mr. O’Keefe and Dr. Muhairi conspired to conceal the “revival of the Cromwell Opportunity” from the Plaintiff is unsupported by evidence. The rule in Browne v. Dunne requires that the Plaintiff put this theory to Mr. O’Keefe. It did not do so.
[154] Mr. O’Keefe was caught by surprise with the allegations of a conspiracy, but can not be considered by the court for several reasons as described by the Plaintiff in its closing submissions. This is a serious breach that occurred at the conclusion of an action that is more than ten years old. The Defendants submit that prior to these submissions did the Plaintiff give any suggestion that its theory of the case involved a conspiracy between Mr. O’Keefe and Dr. Muhairi.
[155] The conversation relied on, as testified to by Dr. Al Sabti in his direct examination, is double hearsay. Mr. Handa alleged if Dr. Al Sabti told about his conversations with Mr. Jaffar, who is not a defendant or a witness. In cross-examination, Dr. Al Sabti testified that he took some notes and called Dr. El Dukair (reversing the order of events as recounted in his direct examination, and told Dr. El Dukair that CHNI was majority owned by Jaffar and only minority owned by Mr. O’Keefe.
[156] In his examination in chief, Dr. Al Sabti testified that he drafted the notes because Dr. El Dukair called him shortly after he had discussed the topic of the Cromwell with Mr. Handa, and Dr. El Dukair asked Dr. Al Sabti to write down the contents of that conversation.
[157] The Plaintiff submits that its theory, (which is not supported by any direct evidence), is consistent with, and supported by, the contemporaneous notes made by Dr. Al Sabti, which recorded his conversation with Mr. Handa in January of 2008. Mr. Handa testified that he did not recall the conversation, but he did not expressly deny the contents of Zahid’s notes. To the extent the notes differ from his testimony at trial, IHC submits that the notes, which were prepared contemporaneously and in a circumstance where Mr. Handa would be more likely to speak truthfully, are more accurate and reliable than Mr. Handa’s testimony at trial, which frequently defied common sense.
[158] The Defendants point out that Dr. Al Sabti’s notes of this conversation were first produced on January 14, 2021, and their authenticity is disputed. Following the Defendants objection to the introduction of these notes, I ruled that I would reserve my ruling on admissibility and weight.
[159] The Defendant emphasize that there is no evidence that these notes (which are typed), were made in 2008. Further, the Plaintiff produced no metadata to support the contemporaneity of the document which purports to support the allegations of fraud, deceit and conspiracy (not alleged in the Amended Statement of Claim). The Defendants had no opportunity to request any information, or conduct any discovery on these notes, as a result of the non-disclosure.
[160] Further, there is no evidence that the conversation that the notes purport to record ever occurred. Mr. Handa had no recollection of such a conversation. Even more importantly, Dr. Al Sabti’s evidence about the circumstances surrounding his recording is contradicted by the evidence of Dr. El Dukair.
[161] Dr. El Dukair was cross-examined about when he found out that Mr. Jaffar owned a substantial part of CHNI. His evidence was that he found out during the discovery in this action. Mr. Johnson Cromwell, CHNI and Mr. O’Keefe. The only discussion he could recall was about what IHC should do with this information. He could not recall that Dr. Al Sabti told him any further information regarding CHNI’s details or shareholdings.
[162] Further, the Statement of Claim does not have the information about the split in shareholding interest between Jaffar and O’Keefe. Rather, it pleads that O’Keefe was the sole shareholder and “alter ego” of CHNI.
[163] Mr. Handa;s evidence is that he did not know if there was such a deal with Dr. Muhairi.
[164] I agree that these notes should not be considered by this court as they are double hearsay and further, that their late disclosure deprived the Defendants from their normal pre-trial remedies with respect to authenticity. Most significantly, as I have mentioned above, this evidence is not relevant because I have found that the Corporate Opportunities did not fairly belong to the Plaintiff.
Costs
[165] The parties both argued costs at the end of the trial. The successful parties in this trial are the Defendants Mr. O’Keefe and CHNI. If the parties are unable to agree to costs, the Defendants Mr. O’Keefe and CHNI shall provide their cost submissions of no more than 5 pages each, by 12 p.m. on _________. The Plaintiff shall serve their responding cost submissions by 12 p.m. on ________________. The Defendants collectively may serve any reply cost submissions by 12 p.m. on ________________.
Judge
Released: [Click and Type Date]
COURT FILE NO.: CV-10-402931
DATE: 20220127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IHC CANADA LIMITED
Plaintiff
– and –
MICHAEL O’KEEFE and CANADIAN HOSPITALS NETWORK INTERNATIONAL INC.
Defendants
REASONS FOR JUDGMENT
Pollak J.
Released: January 27, 2022