Gu v. Tai Foong Intl. Ltd., (2003) 168 O.A.C. 47 (CA)

• Judge: Morden, MacPherson and Cronk, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: February 03, 2002
• Jurisdiction: Ontario
• Citations: (2003), 168 O.A.C. 47 (CA)

Gu v. Tai Foong Intl. Ltd. (2003), 168 O.A.C. 47 (CA)

MLB headnote and full text

Temp. Cite: [2003] O.A.C. TBEd. FE.006

Chujun Gu, China Sun Group and Greencool Canada Inc. (plaintiffs/defendants by counterclaim/ appellants/respondents by cross-appeal) v. Tai Foong International Ltd., Tai Foong Investments Ltd., David Lam, Robert Fu and Gu Cooling Systems Ltd. (defendants/plaintiffs by counterclaim/respondents/appellants by cross-appeal)

(C32933, C35894, C36868)

Indexed As: Gu et al. v. Tai Foong International Ltd. et al.

Ontario Court of Appeal

Morden, MacPherson and Cronk, JJ.A.

February 3, 2003.

Summary:

Gu held patents for certain refrigerants. Gu et al. and Lam et al. entered a joint venture agreement (JVA) to market Gu refrigerants in North America. The JVA enterprise failed. The parties entered into a new agreement, the founders shareholders agreement (FSA). The FSA relationship was also a failure. The Lam group seized some of the Gu group's property, including Gu's personal laptop computer. The Gu group sued the Lam group for, inter alia, conversion and return of property and for injunctive relief to restrain the Lam group from using and marketing confidential information and technology associated with Gu refrigerants. The Lam group responded with two lawsuits: an action alleging breach of the JVA, misrepresentation, conversion, breach of fiduciary duty, and deceit; and an application for oppression remedies. Various interlocutory injunctions issued including one that the Lam group exclusively conduct the business of marketing and selling Gu refrigerants in North America. The lawsuits were consolidated.

The Ontario Superior Court, in judgments reported at [1999] O.T.C. Uned. 762, [2001] O.T.C. Uned. 30 and [2001] O.T.C. 549, held, inter alia, that: 1) Gu terminated the JVA by accepting the Lam group's repudiation of it, but waived any action on the JVA; 2) the Gu group was not entitled to damages arising from the Lam group's undertaking as to damages respecting the interlocutory injunction because the Gu group violated the order by carrying on business in the United States; 3) any precontractual representations by the Gu Group concerning the development stage and marketability of Gu refrigerants were "of no moment" in determining that the Lam group repudiated the JVA; 4) any claim under the JVA must fail given the court's finding that it was at an end; and 5) the Gu group was entitled to $50,000 punitive damages for the conversion of Gu's laptop computer. The Gu group appealed the first and second findings. The Lam group cross-appealed the third and fourth findings and appealed the fifth.

The Ontario Court of Appeal dismissed the appeals and cross-appeal.

Company Law - Topic 9781

Actions against corporations and directors - Action for oppressive conduct - When available - The Gu group and the Lam group entered a joint venture agreement (JVA) to market Gu refrigerants in North America - The joint venture failed - The parties entered into a new agreement which was also a failure - Litigation ensued - The trial judge held that the Lam group repudiated the JVA and the JVA was terminated when Gu accepted the repudiation - The Ontario Court of Appeal held that this breach and termination defeated any oppression claim by the Lam group - See paragraphs 79 to 80.

Contracts - Topic 4007

Remedies for breach - General - Bars - Waiver - Gu held patents for certain refrigerants - Gu et al. and Lam et al. entered a joint venture agreement (JVA) to market Gu refrigerants in North America - The JVA enterprise failed - The parties entered into a new agreement, the founders shareholders agreement (FSA) - The FSA relationship was also a failure - The Gu group sued the Lam group for, inter alia, damages for breach of the JVA - The trial judge held that Gu terminated the JVA by accepting the Lam group's repudiation of it, but the Gu group waived any action on the JVA through its post-termination conduct, including the execution of the FSA - The Ontario Court of Appeal upheld the decision - See paragraphs 39 to 48.

Damage Awards - Topic 2029

Exemplary or punitive damages - Wrongful seizure, detention or conversion of goods - Gu held patents for certain refrigerants - Gu et al. and Lam et al. entered a joint venture agreement to market Gu refrigerants - The enterprise failed - The parties entered into a new agreement, which also failed - The Lam group seized some of the Gu group's property, including Gu's personal laptop computer - Litigation ensued - The trial judge awarded the Gu group $50,000 punitive damages in addition to $25,000 which the parties agreed the Lam group would pay as a result of the conversion of Gu's computer - The Ontario Court of Appeal upheld the award - The Lam group stole the computer, damaged it, retained it for several weeks, attempted to use it to extract concessions from Gu and, at trial, minimalized this misconduct, which went well beyond the tort of conversion - See paragraphs 81 to 84.

Injunctions - Topic 1669

Interlocutory or interim injunctions - Undertaking as to damages - Enforcement - Gu et al. and Lam et al. entered a joint venture agreement to market Gu refrigerants in North America - The joint venture failed - The parties entered into a new agreement which was also a failure - Litigation ensued - An interlocutory injunction gave the Lam group the exclusive right to market and sell Gu refrigerants in North America - The Lam group provided the usual undertaking as to damages - The trial judge found that the Gu group violated the order by carrying on business in the United States and this constituted special circumstances disentitling it to damages related to the undertaking - The Ontario Court of Appeal upheld the decision - While there was a strong presumption favouring an inquiry into an enjoined party's damages, the violation here was not inadvertent or minor - See paragraphs 52 to 73.

Practice - Topic 1628

Pleadings - The defence - Defences which must be pleaded - The plaintiffs' witness gave evidence that was contrary to their pleadings - In closing argument, the defendants raised affirmative defences that they had not pleaded - The Ontario Court of Appeal held that the trial judge did not err in permitting the defendants to advance the unpleaded defences in their closing argument - The defences were a late unpleaded response to a late unpleaded position advanced in the evidence and in argument by the plaintiffs - The plaintiffs were not prejudiced by the defendants' arguments - See paragraphs 31 to 36.

Waiver - Topic 1002

Contracts - Acts constituting waiver - [See Contracts - Topic 4007 ].

Cases Noticed:

Strong v. Paquet (2000), 135 O.A.C. 161; 50 O.R.(3d) 70 (C.A.), refd to. [para. 31].

Kalkinis et al. v. Allstate Insurance Co. of Canada (1998), 117 O.A.C. 193; 41 O.R.(3d) 528 (C.A.), refd to. [para. 35].

1394918 Ontario Ltd. v. 1310210 Ontario Inc. et al. (2002), 154 O.A.C. 137; 57 O.R.(3d) 607 (C.A.), refd to. [para. 37].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 37].

Keneric Tractor Sales Ltd. v. Langille, [1987] 2 S.C.R. 440; 79 N.R. 241; 82 N.S.R.(2d) 361; 207 A.P.R. 361, refd to. [para. 38].

Saskatchewan River Bungalows Ltd. and Fikowski v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490; 168 N.R. 381; 155 A.R. 321; 73 W.A.C. 321, refd to. [para. 40].

Reierson v. Northern Life Assurance Co. of Canada, [1977] 1 S.C.R. 390; 8 N.R. 351, refd to. [para. 41].

Griffiths v. Zambosco et al. (2001), 146 O.A.C. 83; 54 O.R.(3d) 397 (C.A.), refd to. [para. 41].

Nashville Contractors Ltd. v. Middleton, [1984] O.J. No. 99 (C.A.), refd to. [para. 46].

Payzu Ltd. v. Saunders, [1918] 2 K.B. 581, refd to. [para. 46].

Vieweger Construction Co. v. Rush & Tompkins Construction Ltd. (1964), 48 D.L.R. (2d) 509 (S.C.C.), appld. [para. 57].

Nelson Burns & Co. et al. v. Gratham Industries Ltd. et al. (1987), 25 O.A.C. 89; 23 C.P.C.(2d) 279 (C.A.), refd to. [para. 58].

Toronto (City) v. Polai, [1970] 1 O.R. 483 (C.A.), refd to. [para. 67].

R. v. Rezaie (M.) (1996), 96 O.A.C. 268; 31 O.R.(3d) 713 (C.A.), refd to. [para. 71].

Whiten v. Pilot Insurance Co. et al. (2002), 283 N.R. 1; 156 O.A.C. 201; 209 D.L.R.(4th) 257 (S.C.C.), refd to. [para. 82].

Counsel:

Paul J. Bates and Thomas D. Kerr, for the appellants;

Alan J. Butcher and Benjamin Na, for the respondents.

These appeals and cross-appeal were heard on October 15 and 16, 2002, by Morden, MacPherson and Cronk, JJ.A., of the Ontario Court of Appeal, who delivered the following decision on February 3, 2002.