Former insiders at Unique Broadband Systems and at Look Communications, its principal holding ? a group that was handsomely rewarded following the sale of Look?s spectrum assets four years back ? keep getting rebuffed when the amount and circumstances of the multi-million payments gets to the courts.
The latest rebuff occurred this week when the Court of Appeal for Ontario dismissed an appeal from former insiders that their legal bills should be covered by Look,? a company that emerged with a new management team following a proxy battle at UBS. The former insiders can? seek leave to appeal the decision by Justices James MacPherson, Robert Sharpe and Peter Lauwers to the Supreme Court of Canada.
?I would dismiss the appeal,? said the panel, in a 37-page ruling? that agreed with a decision made about nine months back by Justice Pattillo of the Ontario Superior Court of Justice. In making the ruling, the three judges noted that while S. 124 (4) of the Canadian Business Corporations Act does apply to claims for advancement in suits brought by the corporation, ?the statute imposes a judicial filter on advance funding and the strong prima facie test for determining whether advancement should be denied is apt.?
The three added that ?advance funding is ordinarily available to those claiming it unless there is strong evidence of bad faith. In my view, there was ample evidence to support the application judge?s finding that Look?s evidence overcame the presumption of good faith and that Look was likely to succeed at trial.?
In the asset sale the insiders through bonuses and equity cancellation payments rewarded themselves with $20 million, or 32% of net proceeds, payments not disclosed until January 2010 or many months after the sale was completed. In June 2010, the board authorized Look to pay $1.55-million ?as retainers to three law firms acting for them personally.? In July 2011, the new management group at Look started an action, alleging (among other matters) breach of fiduciary duty.
Last May Justice Mesbur of the Ontario Superior Court of Justice, ruled Gerald McGoey, former chief executive at UBS and Look, was not entitled to the large payments received at UBS, because, according to a UBS release at the time, ?the former UBS board, including McGoey, failed to consider the interests of shareholders and breached their fiduciary duties owing to the Company.? Justice Mesbur ruled McGoey was entitled to an ?enhanced severance? under his employment contract.? This is being appealed.
Source: http://business.financialpost.com/2013/07/05/look-communications-and-the-latest-rebuff/
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