Ken McEwan, K.C. and Erik Aitken Successful After Trial in Enforcing $3 million Memorandum of Understanding

Ken McEwan, K.C. and Eric Aitken successfully represented the plaintiff in an 18-day trial in the British Columbia Supreme Court for specific enforcement of an agreement for the sale of shares in a British Columbia parent company. The case adds to a growing body of jurisprudence in British Columbia emphasizing the need for courts, when presented with contractual documents that are inelegantly or inartistically drafted (in this case because the parties had limited proficiency in English), to give effect to the agreement the parties have created by looking at substance and not mere form.

The dispute involved the enforceability of a two-page Memorandum of Understanding (MOU) for the defendant, an Italian company, to purchase the plaintiff’s shares for $3.1 million. The defendant argued that the MOU was merely an agreement to agree, and lacked the hallmarks of an enforceable contract. The defendant also sought rescission on the grounds that the plaintiff (who was the manager of the B.C. Company’s Indian subsidiary) had materially misrepresented the financial affairs of the subsidiary. The defendant advanced a counterclaim claiming over $10 million in damages on the basis that it had purchased the shares of other shareholders based on the same alleged misrepresentations.

The trial judge found for the plaintiff, concluding that the MOU, drafted and signed by Indian and Italian nationals who were non-native English speakers, was an enforceable contract. The trial judge ordered the defendant to purchase the plaintiff’s shares for the expressed purchase price. The trial judge rejected all of the arguments advanced on behalf of the defendant, whose witnesses he found not to be credible, and concluded that the plaintiff had not made any material misrepresentations. The counterclaim was dismissed in its entirety.

This case, in addition to being an important addition to the jurisprudence on contract formation and interpretation, illustrates the consequences of a party failing to lead the best evidence. The trial judge, in dismissing the defendants’ allegations of fraud and misrepresentation, repeatedly emphasized the defendant’s failure to call witnesses with personal knowledge of the matters or documents in question. The defendants’ failure to lead proper evidence led to multiple mid-trial voir dires, including a voir dire resulting in the exclusion of the defendant’s evidence of damages for its counterclaim that it purported to lead through its own CFO rather than a properly qualified expert (a decision which can be found here).

The full trial reasons can be found here.

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