Litigation Brief

Court of Appeal decides in favour of Browns Social House in Cactus Club appeal

The Court of Appeal gave reasons today in Cactus Restaurants Ltd. v. Morison, 2010 BCCA 458, affirming the decision to deny an injunction that would have stopped a party to an agreement for the sale of shares from realizing on security given to him to insure payment for those shares.

Richard Jaffray and Scott Morison were each 25% shareholders in the Cactus Club chain of restaurants.  Mr. Morrison entered into an agreement to sell his Cactus Club shares to Mr. Jaffray’s holding company, retaining the right to take back his shares if he was not paid the full purchase price, and, with Mr. Jaffray’s consent, started a competing business, the Browns Social House restaurants.

Mr. Morison received a first payment for his shares, but not the second installment.  Instead, Cactus Restaurants Ltd. and Mr. Jaffray’s holding company brought a lawsuit against Mr. Morison, the Browns Social House Ltd., and Browns Restaurant & Bar Ltd. on the basis that the Browns restaurants had wrongfully copied Cactus Club’s design and décor – a claim that the Court of Appeal described as “essentially a passing-off action sounding in both tort and contract.” 

The Cactus Club plaintiffs argued that they did not have to make the second payment as they were entitled to an “equitable set-off” of the damages they claimed from the passing-off – in other words, that they could apply the damages had alleged they suffered against the money owed for Mr. Morison’s shares.  They also applied for an injunction to stop Mr. Morison from taking back his shares because of the non-payment.

Former RIM executive charged with securities law violations for insider trading

 Paul Donald, a former vice-president at Research In Motion Limited, is being investigated by the Ontario Securities Commission for insider trading. In a Statement of Allegations, the OSC alleges that Mr. Donald bought 200,000 shares of Certicom, a cryptology manufacturer, when he knew the shares were undervalued and that RIM was in acquisition talks with Certicom. After RIM acquired Certicom, Mr. Donald sold his Certicom shares for almost double the price he paid for them, making a profit of $295,000 according to the OSC. Mr. Donald is charged with violating RIM's insider trading policy, and trading with undisclosed material information. He is scheduled to appear at an OSC hearing on June 7.