"Defending the Honest Director", Harper Grey LLP Law Bulletin
December 2002In Ebco a minority shareholder (Discovery Enterprises Inc., an entity owned by the Provincial Government) sued Helmut Eppich by way of a derivative action. Discovery alleged (on behalf of, and in the name of Ebco Industries) that Helmut Eppich had acted in breach of his duties as a director by agreeing to an arbitration in 1992 which effectively split Ebco Industries in two, dividing it between Helmut Eppich and his brother Hugo Eppich. More particularly, Discovery alleged that the agreement between Helmut and Hugo Eppich to have Ebco Industries pay the costs of this arbiration was in the breach of their duties as directors, such that Helmut Eppich should re-pay to the company the full amount spent on the arbitration. Helmut Eppich’s argument, in basic terms, was that the arbitration expenses were proper corporate expenses, given that an arbitrated split of Ebco Industries between the two brothers was necessary in order to ensure the company’s survival in the face of a deadlock on the board of directors. Helmut Eppich argued in the alternative, however, that if the arbitration expenses were personal in nature, he ought nonetheless to be relieved from liability, on the basis of s. 202.
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