In this case, the Ontario Superior Court of Justice (ONSC) considered, among other matters, the alleged misuse of confidential information by a shareholder who sought to nominate a new slate of directors, and ultimately succeeded in avoiding injunctive relief to prevent it from doing so.
Maudore Minerals Ltd. (Maudore) is a Canadian mining corporation with its shares listed on the TSX Venture Exchange. It has mining projects in Québec, including the Comtois gold project near the town of Val-d'Or. The largest shareholder of Maudore was The Harbour Foundation (Foundation) and City Securities Limited (largest shareholder), which together owned approximately 18.4% of Maudore shares. With support of the second largest shareholder, the largest shareholder nominated, and planned to vote for, a new slate of directors. On the eve of the annual and special meeting of shareholders, Maudore brought a motion to enjoin the largest shareholder from voting its shares and from soliciting proxies on the grounds that the nominee for director, Dr. Howard Carr, had breached a confidentiality agreement. Alternatively, Maudore sought an injunction based on the defendants having misused confidential information.
Dr. Carr signed the confidentiality agreement prior to a visit to the Comtois project with Dr. Harbour, a trustee of the Foundation. Although unknown to Maudore at the time, Dr. Carr and Dr. Harbour were asked by the Foundation to visit the project site in order to assess the accuracy of public disclosures and the competence of current management. When Maudore's CEO and President learned that Dr. Carr had a doctorate in economic geology and had been involved with an Australian mining corporation, he asked Dr. Carr to sign a confidentiality agreement. The agreement required Dr. Carr to keep confidential the information he obtained and not to use it so as to obtain any commercial advantage over Maudore.
In assessing whether an injunction should be granted, the ONSC referred to the three-part test set out in the Supreme Court of Canada's decision in RJR-MacDonald Inc. v. Canada (Attorney General): whether a plaintiff has presented a serious issue to be tried, or in a narrow band of cases, a strong prima facie case, whether the plaintiff would suffer irreparable harm if the injunction were not granted and whether the balance of convenience lies in granting or refusing the injunction.
In considering the first part of the test, the ONSC found that although Maudore had shown a strong prima facie case that confidential information had been received from Maudore, it had only established a weak case that there was a misuse of confidential information. The two alleged misuses of confidential information were the confidential information was used to give the largest shareholder the comfort it needed to undertake a proxy fight and the confidential information was used to prepare the proxy fight material (although Maudore could not identify any confidential information in the proxy circular). Neither alleged use found favour with the ONSC, and the injunction application was dismissed on that basis. Although unnecessary to the application, the ONSC also opined that the balance of convenience element did not favour Maudore and would be another independent reason for dismissing the application.
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