XY Inc. v. International Newtech Development Inc. et al., (2013) 343 B.C.A.C. 30 (CA)

• Judge: Newbury, Chiasson and D. Smith, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: July 26, 2013
• Jurisdiction: British Columbia
• Citations: (2013), 343 B.C.A.C. 30 (CA);2013 BCCA 352

XY Inc. v. Intl. Newtech Dev. Inc. (2013), 343 B.C.A.C. 30 (CA);

    586 W.A.C. 30

MLB headnote and full text

Temp. Cite: [2013] B.C.A.C. TBEd. JL.057

XY, LLC (respondent/plaintiff) v. Jesse Jia-Bei Zhu (appellant/defendant) and JingJing Genetic Inc. (formerly IND Lifetech Inc.), Shu Xi Wang, Selen Zhou, Jin Tang (respondents/defendants)

(CA039816)

XY, LLC (formerly XY, Inc.) (respondent/plaintiff) v. Selen Zhou (appellant/defendant) and Jesse Jia-Bei Zhu, Jin Tang, and JingJing Genetic Inc. (formerly IND Lifetech Inc.) (respondents/defendants)

(CA039817)

XY, LLC (respondent/plaintiff) v. Jin Tang (appellant/defendant)

(CA039818)

XY, LLC (appellant/plaintiff) v. International Newtech Development Incorporated, IND Lifetech Group Ltd., IND Lifetech (U.S.A.) Incorporated, IND Lifetech (USA) Inc., IND Lifetech (Qingdao) Co. Ltd., IND Lifetech (Zouping) Co. Ltd., IND Lifetech (Beijing) Co. Ltd., also known as Beijing IND Embryontech Co. Ltd., IND Lifetech Co. Ltd., IND Embryontech Inc., Shanghai JingJing Biotech Co. Ltd., formerly known as JingJing Genetic (Shanghai) Ltd., IND Lifetech, Inc., now known as JingJing Genetic Inc., Jesse Zhu, Selen Zhou and JinTang (respondents/defendants)

(CA039822)

(2013 BCCA 352)

Indexed As: XY Inc. v. International Newtech Development Inc. et al.

British Columbia Court of Appeal

Newbury, Chiasson and D. Smith, JJ.A.

July 26, 2013.

Summary:

Litigation arose in the context of a technology licensing agreement between the plaintiff, as licensor, and one of the defendants (JingJing Genetic Inc.) as licensee. Prior to trial JingJing filed for bankruptcy.

The British Columbia Supreme Court, in a decision reported at [2012] B.C.T.C. Uned. 319, found that JingJing had provided the plaintiff with false reports concerning the revenue that it had received from its use of the technology, underpaid royalties that it owed to the plaintiff, concealed documents from the plaintiff, and violated the confidentiality provisions of the agreement. The court found JingJing liable for breach of contract and the tort of deceit. The court found that three of the defendants who had been employed by JingJing were liable for the torts of deceit and civil conspiracy. The court assessed damages at $8.6 million and held that JingJing and the three employees were jointly and severally liable. The court also granted a permanent injunction against JingJing. The employees appealed. Two of the employees asserted that they should not have been found liable for JingJing's fraudulent conduct and were simply "following orders". The third employee (Zhu), who was the controlling mind of JingJing and the controlling shareholder of related companies (collectively, the IND Group) involved in the dispute, asserted that the trial judge erred in finding that JingJing had committed the tort of deceit and, therefore, erred in finding that he was either a joint tortfeasor with JingJing or had committed the tort of civil conspiracy. Zhu also asserted that the trial judge erred in his calculation of the damage award and challenged the injunction. The plaintiff cross-appealed on the basis that the other members of the IND Group should have been found liable with JingJing for the damages suffered by the plaintiff or, alternatively, they constituted a "common interest entity", so that their individual corporate personalities should be notionally "collapsed" into one with JingJing.

The British Columbia Court of Appeal allowed the plaintiff's cross-appeal to the extent of remitting the claim for unjust enrichment against the corporate defendants for retrial. The court allowed the appeal respecting the injunction to the extent of deleting a paragraph and incorporating exceptions to confidential information as listed in the licensing agreement.

Company Law - Topic 313

Nature of corporations - Lifting the corporate veil - Related companies - See paragraphs 85 to 97.

Company Law - Topic 4566

Officers and agents - Liability - General - For tortious acts - See paragraphs 56 to 75.

Damages - Topic 3625

Deceit and misrepresentation - Fraudulent misrepresentation - See paragraphs 17 and 18.

Damages - Topic 5710

Contracts - Breach of contract - Damages - Breach of contract compared with tort - See paragraphs 17 and 18.

Evidence - Topic 7000.4

Opinion evidence - Expert evidence - General - Admissibility - See paragraphs 115 to 126.

Fraud and Misrepresentation - Topic 221

Fraudulent misrepresentation (deceit) - Reliance and alteration of position - General - See paragraphs 22 to 41.

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - See paragraphs 17 and 18.

Injunctions - Topic 7129

Particular matters - Particular interests protected - Confidential information - See paragraphs 98 to 114.

Master and Servant - Topic 4601

Liability of servant - To third parties - General - See paragraphs 56 to 75.

Master and Servant - Topic 4606

Liability of servant - To third parties - Where employer liable for act of servant - See paragraphs 76 to 81.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to - Improper, irresponsible or unconscionable conduct - See paragraph 127.

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previous raised - See paragraph 115.

Torts - Topic 5083

Interference with economic relations - Conspiracy - What constitutes a conspiracy - See paragraphs 43 to 50.

Torts - Topic 5088

Interference with economic relations - Conspiracy - Conspiracy to defraud - Unlawful means conspiracy - See paragraphs 43 to 50.

Torts - Topic 7162

Joint and concurrent tortfeasors - Joint tortfeasors - What constitutes - See paragraphs 42 and 82 to 84.

Cases Noticed:

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 18].

3Com Corp. et al. v. Zorin International Corp. et al. (2006), 211 O.A.C. 222 (C.A.), refd to. [para. 18].

Wiebe v. Gunderson et al. (2004), 205 B.C.A.C. 214; 337 W.A.C. 214; 2004 BCCA 456, refd to. [para. 18].

Han et al. v. Cho et al., [2009] B.C.T.C. Uned. 458; 2009 BCSC 458, refd to. [para. 19].

Soleil Hospitality Inc. et al. v. Louie et al., [2010] B.C.T.C. Uned. 1183; 2010 BCSC 1183, refd to. [para. 19].

Catalyst Pulp and Paper Sales Inc. v. Universal Paper Export Co. (2009), 274 B.C.A.C. 30; 463 W.A.C. 30; 2009 BCCA 307, refd to. [para. 20].

Derry v. Peek (1889), 14 App. Cas. 337 (H.L.), refd to. [para. 23].

Firbank's Executors v. Humphreys (1886), 18 Q.B.D. 54 (C.A.), refd to. [para. 27].

Kelemen v. El-Homeira (1999), 250 A.R. 67; 213 W.A.C. 67; 1999 ABCA 315, refd to. [para. 33].

Karas v. Rowlett, [1944] S.C.R. 1, refd to. [para. 38].

Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd., [1985] 1 S.C.R. 271; 58 N.R. 195; 8 O.A.C. 381, refd to. [para. 38].

Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co. (1990), 67 D.L.R.(4th) 348 (B.C.C.A.), refd to. [para. 40].

Morrison v. Pankartz et al. (1995), 55 B.C.A.C. 170; 90 W.A.C. 170; 122 D.L.R.(4th) 352 (C.A.), refd to. [para. 40].

Ship Koursk, Re, [1924] P. 140 (C.A.), refd to. [para. 42].

Bank of Montreal v. Tortora et al. (2010), 287 B.C.A.C. 14; 485 W.A.C. 14; 2010 BCCA 139, refd to. [para. 42].

Lonrho Ltd. v. Shell Petroleum Co., [1982] A.C. 173 (H.L.), refd to. [para. 43].

Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191, refd to. [para. 43].

Golden Capital Securities Ltd. v. Holmes et al. (2004), 205 B.C.A.C. 54; 337 W.A.C. 54; 2004 BCCA 565, refd to. [para. 44].

Lombardo v. Caiazzo et al. (2006), 211 O.A.C. 270 (C.A.), refd to. [para. 46].

Gagnon v. Foundation Maritime Ltd., [1961] S.C.R. 435, refd to. [para. 49].

Agribrands Purina Canada Inc. v. Kasamekas et al. (2011), 278 O.A.C. 363; 2011 ONCA 460, refd to. [para. 49].

Rummery et al. v. Matthews et al. (2000), 146 Man.R.(2d) 1; 2000 MBQB 67, varied (2001), 153 Man.R.(2d) 229; 238 W.A.C. 229; 2001 MBCA 32, refd to. [para. 49].

Lerik v. Zaferis, [1930] 1 D.L.R. 634 (B.C.C.A.), refd to. [para. 49].

Said v. Butt, [1920] 3 K.B. 497, refd to. [para. 58].

ADGA Systems International Ltd. v. Valcom Ltd. et al. (1999), 117 O.A.C. 39; 168 D.L.R.(4th) 351 (C.A.), refd to. [para. 59].

ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. - see Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al.

Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al. (1995), 87 O.A.C. 129; 129 D.L.R.(4th) 711 (C.A.), refd to. [para. 60].

Salomon v. Salomon & Co., [1895-99] All E.R. Rep. 33 (H.L.), refd to. [para. 64].

Lewis v. Boutilier (1919), 52 D.L.R. 383 (S.C.C.), refd to. [para. 65].

Berger v. Willowdale A.M.C. et al. (1983), 41 O.R.(2d) 89 (C.A.), refd to. [para. 65].

Sullivan and Sullivan Farms Ltd. v. Desrosiers et al. (1986), 76 N.B.R.(2d) 271; 192 A.P.R. 271 (C.A.), leave to appeal refused (1987), 80 N.R. 315; 79 N.B.R.(2d) 90; 201 A.P.R. 90 (S.C.C.), refd to. [para. 65].

Kepic v. Tecumseh Road Builders et al. (1987), 23 O.A.C. 72; 18 C.C.E.L. 218 (C.A.), refd to. [para. 65].

London Drugs v. Kuehne & Nagle International Ltd. et al. - see London Drugs Ltd. v. Brassart and Vanwinkel.

London Drugs Ltd. v. Brassart and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 66].

Normart Management Ltd. v. West Hill Redevelopment Co. et al. (1998), 113 O.A.C. 375; 37 O.R.(3d) 97 (C.A.), refd to. [para. 67].

Alper Development Inc. v. Harrowston Corp. et al. (1998), 107 O.A.C. 318; 38 O.R.(3d) 785 (C.A.), refd to. [para. 67].

Hildebrand v. Fox et al. (2008), 262 B.C.A.C. 11; 441 W.A.C. 11; 2008 BCCA 434, refd to. [para. 68].

Strata Plan VIS3578, Owners v. Neilson (John A.) Architects Inc. - see Strata Plan VIS3578, Owners v. Canan Investment Group Ltd. et al.

Strata Plan VIS3578, Owners v. Canan Investment Group Ltd. et al. (2010), 295 B.C.A.C. 132; 501 W.A.C. 132; 2010 BCCA 329, refd to. [para. 70].

Strata Plan LMS 2262, Owners v. Stoneman Developments Ltd. et al., [2004] B.C.T.C. Uned. 565; 39 C.L.R.(3d) 127; 2004 BCSC 828, refd to. [para. 70].

Hogarth et al. v. Rocky Mountain Slate Inc. et al. (2013), 542 A.R. 289; 566 W.A.C. 289; 2013 ABCA 57, refd to. [para. 73].

Schembri et al. v. Way et al., [2012] O.A.C. Uned. 492; 2012 ONCA 620, refd to. [para. 73].

Correia v. Canac Kitchens et al. (2008), 240 O.A.C. 153; 2008 ONCA 506, refd to. [para. 73].

Unisys Canada Inc. v. York Three Associates Inc. et al. (2001), 150 O.A.C. 49 (C.A.), refd to. [para. 73].

Cooper v. Universal Music Australia Pty. Ltd., [2006] FCAFC 187, refd to. [para. 77].

United Services Funds v. Lazzell (1988), 28 B.C.L.R.(2d) 26 (S.C.), refd to. [para. 79].

Osborne et al. v. Pavlick et al. (2000), 134 B.C.A.C. 311; 219 W.A.C. 311; 2000 BCCA 120, refd to. [para. 82].

Smith, Stone & Knight Ltd. v. Birmingham Corp., [1939] 4 All E.R. 116 (C.A.), refd to. [para. 86].

Alberta Gas Ethylene Co. v. Minister of National Revenue (1988), 24 F.T.R. 309 (T.D.), refd to. [para. 87].

Bow Valley Husky (Bermuda) Ltd. et al. v. Saint John Shipbuilding Ltd. et al. (1995), 130 Nfld. & P.E.I.R. 92; 405 A.P.R. 92; 126 D.L.R.(4th) 1 (Nfld. C.A.), varied [1997] 3 S.C.R. 1210; 221 N.R. 1; 158 Nfld. & P.E.I.R. 269; 490 A.P.R. 269, refd to. [para. 87].

Edgington v. Mulek Estate et al. (2008), 266 B.C.A.C. 56; 449 W.A.C. 56; 2008 BCCA 505, refd to. [para. 87].

Prest v. Petrodel Resources Ltd. et al., [2013] N.R. Uned. 94; [2013] UKSC 34, refd to. [para. 87].

B.G. Preeco 1 (Pacific Coast) Ltd. v. Bon Street Holdings Ltd. (1989), 60 D.L.R.(4th) 30 (B.C.C.A.), refd to. [para. 88].

Gilford Motor Co. v. Horne, [1933] Ch. 935 (C.A.), refd to. [para. 88].

Woolfson v. Strathclyde Regional Council, [1978] S.C. 90 (H.L.), refd to. [para. 88].

Industrial Equity Ltd. v. Blackburn (1977), 137 C.L.R. 567 (Aust. H.C.), refd to. [para. 88].

Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. et al. (1996), 2 O.T.C. 146; 28 O.R.(3d) 423 (Gen. Div.), refd to. [para. 90].

Qureshi v. Gooch, [2005] B.C.T.C. 1584; 2005 BCSC 1584, refd to. [para. 100].

Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al., [1999] 1 S.C.R. 142; 235 N.R. 30; 117 B.C.A.C. 161; 191 W.A.C. 161, refd to. [para. 100].

Moorgate Tobacco Co. v. Philip Morris Ltd. (1984), 156 C.L.R. 414 (Aust. H.C.), refd to. [para. 100].

C.A. et al. v. Critchley et al., [1996] B.C.T.C. Uned. F05 (S.C.), refd to. [para. 123].

Perry v. Vargas et al., [2012] B.C.T.C. Uned. 1537; 2012 BCSC 1537, folld. [para. 123].

Authors and Works Noticed:

Berryman, J., Remedies: Issues & Perspectives (1991), p. 423 et seq. [para. 40].

British Columbia, Law Reform Commission, Report on Shared Liability (1986), pp. 25, 26 [para. 79].

Burns, Peter T., and Blom, Joost, Economic Interests in Canadian Tort Law (2009), p. 76 [para. 72].

Dimock, Ronald E., Intellectual Property Disputes: Resolutions and Remedies (2004 Looseleaf Supp.), para. 15.2 [para. 101].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (4th Ed. 1999), pp. 309, 310 [para. 31].

Fridman, Gerald Henry Louis, The Law of Torts in Canada (2nd Ed. 2002), pp. 747 to 749 [para. 23]; 750, 751 [paras. 20, 23, 31]; 752 to 755 [para. 23]; 769 to 771 [para. 49].

Halsbury's Laws of England (4th Ed.), vol. 31, §§ 778, 779 [para. 25].

Klar, Lewis N., Tort Law (2nd Ed. 1996), p. 490 [para. 23].

McGuinness, Kevin Patrick, Canadian Business Corporations Law (2nd Ed. 2007), p. 49 [para. 86].

Sharpe, Robert J., Injunctions and Specific Performance (2010 Looseleaf Update), para. 4.690 [para. 101].

Spencer-Bower, George S., Turner, Alexander Kingcome, and Handley, K.R., Actionable Misrepresentation (4th Ed. 2000), §§ 138, 181, 182 [para. 24].

Tilbury, M.J., Two Models of Concurrent Tort/Contract Liability & Their Application to Remoteness and the Measure of Damages, in Berryman, J., Remedies: Issues & Perspectives (1991), p. 423 et seq. [para. 40].

Williams, Glanville, Joint Torts and Contributory Negligence (1951), p. 1 [para. 42].

Counsel:

R.N. McFee, Q.C., and M.D. Shirreff, for the appellant, Jesse Jai-Bei Zhu (CA039816), and for the appellants, International Newtech Development Incorporated et al. (CA039822);

J.J. Hunter, Q.C., and G. van Ert, for the appellant, Selen Zhou (CA039817);

S.K. Gudmundseth and A.S. Dosangh, for the appellant, Jin Tang (CA039818);

C.S. Wilson and G. Bowman, for the appellant, XY, LLC in CA039822 and respondent XY, LLC in CA039816, CA038917 and CA039818.

This appeal was heard at Vancouver, British Columbia, on May 15-17, 2013, by Newbury, Chiasson and D. Smith, JJ.A., of the British Columbia Court of Appeal. Newbury, J.A., delivered the following reasons for judgment for the court on July 26, 2013.