Discovery Enterprises v. Ebco Industries
The following paper was originally presented at the Canadian Institute’s Advanced Forum on Directors and Officers Liability on June 27, 2003, Toronto, Canada. To access a full copy, please contact John Sullivan.
This paper relates to the long running court battle between Discovery Enterprises Inc. (“Discovery”), the venture capital arm of the B.C. Provincial Government, and Ebco Industries Ltd. (“Ebco”), a B.C. private corporation which, among other things, builds parts for the world aerospace industry in Richmond, B.C. Briefly stated, Discovery was a substantial minority shareholder in Ebco’s Aerospace Division, owning one class of the Aerospace Division shares (being Ebco Class “D” shares, as will be outlined below). Discovery made this investment in 1986, for $2.7 million. However, relations between Discovery and Ebco ultimately soured to the point where, in August 1996, Discovery launched an oppression proceeding against Ebco and its managing director Helmut Eppich. At the same time Discovery brought a petition in B.C. Supreme Court seeking leave to sue Helmut Eppich and his brother Hugo Eppich in the name of and on behalf of Ebco, pursuant to the derivative action provision of the B.C. Company Act.
What followed was six years of very hard fought litigation, culminating in a 45-day B.C. Supreme Court trial in spring, 2002. As will be seen the derivative action was ultimately dismissed in its entirety. Helmut Eppich was exonerated. Discovery did enjoy limited success in the oppression action, where it established unfair prejudice on the part of Ebco (though not Helmut Eppich personally) with respect to a few transactions. The Court ordered that Helmut Eppich could buy-out Discovery for $1.35 million plus interest, failing which Ebco’s Aerospace Division would be wound-up.