Court Dismisses Breach Claim

Court Dismisses Breach Claim
The Court of Appeal for Ontario dismissed, on April 25, 2002, the plaintiffs’ appeal from the judgment of Justice Nola Garton of the Superior Court of Justice, which dismissed a claim for breach of fiduciary duty, breach of an implied duty of good faith in pre-contractual negotiations, and deceit.
The plaintiffs were minority shareholders in Husky Injection Molding Systems Ltd. They sold their Husky shares to a personal holding company of Husky’s CEO, Robert Schad, following negotiations with Schad and Husky’s CFO, Peter Hall. While those negotiations were ongoing, Husky began discussions with a third-party strategic investor, Komatsu Ltd., which ultimately purchased Husky shares at a higher price than the plaintiffs received on their sale to Schad’s holding company. The plaintiffs’ claim was based on the non-disclosure to them of the Komatsu discussions during their negotiations for the sale of their Husky shares.
Justice Garton dismissed the claim on the grounds that Schad and Hall, in the circumstances, did not owe a fiduciary duty to the plaintiffs, there was no duty of good faith that obliged disclosure in the circumstances, and there was no deceit. The court affirmed the decision.
Sheila Block and James Tory of Torys LLP acted for the defendants/ respondents. Gordon Bent of Mann & Gahtan LLP acted for the plaintiffs/appellants.