The respondent, a former CEO and director of the appellant corporation, was removed from his position by shareholders.
He filed a claim for enhanced severance, a bonus, and a share appreciation rights (SAR) cancellation award under his management services agreement.
The trial judge found that the respondent breached his fiduciary duties by establishing the bonus and SAR cancellation awards for his own benefit, but still awarded him the enhanced severance, finding the breach did not constitute a default under the agreement.
The Court of Appeal allowed the corporation's appeal, holding that the trial judge's interpretation of the agreement ignored s. 134(3) of the Business Corporations Act and led to a commercially absurd result.
The respondent's breach of fiduciary duty constituted a default disentitling him to the enhanced severance.
