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No fiduciary breach by Ogilvy Renault, appeal court finds

Case centres on firm’s failure to pay maintenance fee for patents
|Written By Yamri Taddese

Ogilvy Renault LLP didn’t breach its fiduciary duty to its client when it failed to maintain two patents on a skin cholesterol testing technology more a decade ago, the Ontario Court of Appeal ruled on June 20.

PreMD Inc., a Canadian developer, retained Ogilvys to maintain the two patents in the United States, but the firm failed to pay the required maintenance fee, causing them to lapse.

PreMD went out of business in 2009, but according to the Court of Appeal, the two lapsing patents didn’t cause the company’s demise.

PreMD appealed the dismissal of its claim for breach of fiduciary duty, arguing that the firm, which has since become part of Norton Rose Fulbright Canada LLP, “intentionally failed to disclose it had not paid the fees on the two United States patents,” according to the court ruling.

But the appeal court dismissed the appeal, finding that there’s no evidence to suggest the firm concealed material information that could affect PreMD’s decision.

“I do not accept PreMD’s submission that the trial judge erred by failing to find a breach of fiduciary duty. Various pieces of evidence and inferences from the evidence reasonably support her finding of no breach of duty,” Justice John Laskin wrote in PreMD Inc. v. Ogilvy Renault LLP.

PreMD’s claim was that Robert Carrier, the Ogilvy Renault partner handling its file, should have testified at trial. Although ill health was cited as a reason for Carrier’s absence, the trial judge should have been suspicious of his failure to testify, PreMD argued.

But PreMD knew about Carrier’s illness from other sworn declarations, Laskin wrote, adding that an internal investigation into the firm found no evidence it knew about the lapsed patents.

“The trial judge concluded that it was ‘not plausible’ Carrier was aware the maintenance fees had not been paid and intentionally did not disclose this fact,” wrote Laskin.

“Similarly, she concluded that it was ‘inconceivable’ Carrier intentionally misrepresented the status of the patents in a prospectus. I am not persuaded that she erred in these conclusions. I would not give effect to this ground of appeal.”

The court also rejected PreMD’s claim for an increased reliance damage award. The developer wanted the court to factor in the losses it incurred prior to its contract with Ogilvy Renault, a request the court denied entirely.

In a more complex part of the ruling, the court said damage awards for precontractual expenses are granted “only if the parties reasonably contemplated that the expenses would likely be wasted if the contract were breached.”

The court didn’t offer an explanation on what is a reasonable contemplation. It’s an area of the law could benefit from guidance from the Supreme Court of Canada, says Toronto dispute resolution lawyer Javad Heydary.

“It’s an area of the law that impacts every province. Issues of negligence and breach of contract really have a lot of impact on many other issues.”

William Horton, counsel for the plaintiff, says he’s “in no position” to comment on the case. He hasn’t yet received instructions from his client to seek leave to appeal to the Supreme Court of Canada, he adds.

“The decision is an important one,” says Heydary. “It’s dealing with a number of areas in business relationships. If there was some guidance from the Supreme Court of Canada, it would be very helpful.”

The appeal court also dismissed Ogilvy Renault’s cross-appeal regarding cost endorsements. Law Times was unable to reach Alan Lenczner, the firm’s legal counsel, by press time.

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