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... newest of the legal person. " These articles are also supported by articles 121 (1) and (121) (2) of the Canada Business Corporation Act that state: S. 121 (1) (Duty of care of directors and officers). Every director and officer of a corporation in exercising his powers and discussing his duties shall a) Act honestly and in good faith with a view to the best interests of the corporation; and b) Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. S. 121 (2) (Duty to comply). Every director and officer of a corporation shall comply with this act, the regulation, articles by-law and any unanimous shareholder agreement. Many cases can be quoted where judges have held directors and officers responsible for breaching their loyalty obligations with their corporation.
This issue was clearly seen in the case of Bank of Montreal Vs. NG where the Supreme Court judge sites: " The employee's obligation of good faith increases with the responsibility attached to the position held by the employee. " The obligations of directors and senior officers are imposed upon them not because they are true mandatories of their corporation or of the shareholders but because of the nature of the control exercised over the affairs of the corporation. The fiduciary obligation recognized in the circumstances in the common law into good faith and loyalty of the employee to the employer and the avoidance of the conflict of interest including seeking an advantage which is incompatible with the terms of employment. " Royal Laser Tech Corporation in turn, believes that the claim made by Magna is without merit and as defendants they have variety of meritorious defenses. For one, they claim that they are not a competition of Magna, they argue by saying that the nature of the two companies are different. On the first hand, Royal Laser Tech is described as a metal molding company and for the present time, as well as the past, has not focused on trying to serve solely the automotive industry or any transportation industry for that matter. Secondly, profits are nowhere in the same vicinity for both companies.
While Magna International Inc. enjoys revenues of $ 4 billion dollars per year and is an international company, Royal Laser Tech operates only in North America and has revenues of $ 45, 000, 000 per year. Consequently, Royal Laser Tech believes that the employment of Mister Jaekel and Mister Nick Orlando is not contrary to Magna's non-competition clause. As mentioned previously, this court suit follows a $ 70 -million wrongful-dismissal suit filed last month by Jaekel, claiming Aurora, Ont. -based Magna (TSE: MG. A MG. B) fired him in March without cause and broke agreements on restructuring the Cosma subsidiary.
Mr. Jaekel states: "I do not see how they can try to claim I am not free to earn a living, " implying that he feels he has the right to continue with his career seeing that the non-competition clause do no longer hold in his case in reference to Article 2095 which goes as follows: "An employer may not avail himself of a stipulation of non-competition if he has retaliated the contract without a serious reason or if he has himself given the employee such reason for retaliating the contract. " Jaekel also claims he's owed several million dollars in bonuses, shares and other payments and must be compensated for the damages that he has had to live with because of his unlawful dismissal stated in the Article 2181 in the Civil Code of Quebec, to defend his position, which goes as follows: Article 2181 " A mandatory who revokes a mandate remains bound to perform his obligations towards the mandatory; he is also liable for an injury caused to the mandatory as a result of revocation made without a serious reason and an inopportune moment. In response to Jaekel's defense, Magna denied these allegations, saying Jaekel had decided to leave and was therefore not entitled to the money. A first issue that must be addressed is the question as to whether or not Magna International Inc.
and Royal Laser Corporation are actually direct competitors. After referring to many sources such as CNN news and CBC Business News, these two companies have been cited as rivals in many articles. Moreover, the founder and chairman of the Royal Laser Corporation, William Iannaci, in an interview having taken place in the year of 1999, actually admitted to this fact by saying: "We " re going into the automotive industry and competing with the big boys. We " ll eventually be competing against the Magna's of the world. We " ve got the technology. " Furthermore, what seems even more relevant to this case is the fact that Cosma International, a Magna unit, is one of the world's largest metal molding companies using hydro forming technologies which envelopes perfectly the operations executed by Royal Laser Tech Corporation.
Hence, Royal Laser Tech Corporation's argument cannot be supported and seems unfounded even though the scale at which they enter the market is different. Since the spring of 2000, Royal Laser switched its focus from making store fixtures and industrial products to supplying the auto industry. It installed hydro forming presses in its Toronto area factory and last year bought SCS Manufacturing, a metal stampings and seat assembler - areas that compete with Cosma and Magna. It has become more than obvious to me that the two industrial companies have become growing rivals in a rapidly expanding segment of the auto parts business called hydro forming, an area where Magna has invested heavily in new plants and technology and Royal has also focused its efforts.
Given the information and the scope of the case, it is difficult to assess the situation fully. However, a second issue that is very important to address is the question of whether or not Jaekel was actually dismissed or not. If he was wrongfully dismissed what does this imply? If he left because of personal reasons, what does this imply for the case? Given the uncertainty of the question, one must draw a conclusion according to the limited information that we have at hand.
Although Article 2095 states that an employer may not use the argument of non-competing clause to his favor if he has wrongfully dismissed his employee or without any valid reason. Even if Mister Jaekel was dismissed, it is important to point out that he was more than just merely an employee. As the former CEO and president of Cosma International, Mister Jaekel has the highest duty of fiduciary and loyalty obligations to its former corporation even after the termination of his employment and forever after. This good faith obligation of the officer holds even if the following has been dismissed.
This statement is supported by Article 328 that cites the following: " The acts of a director or senior officer may not be annulled on the sole ground that he was disqualified or that he was irregular. " Having said this, one must address a final issue. Is the non-competing clause legitimate and will it stand in the Court of Law? Unfortunately, the terms and the activities that this non-competition clause prohibits are not available to the reader. Taking into consideration the former position of Mister Jaekel and Mister Orlando, a two-year time limitation imposed on the former CEO and the one-year limitation for the former CFO seems more than reasonable. Assuming that the geographical limitations is also valid, this restrictive covenant seems sound in nature and should have been respected by the new employees of Royal Tech Corporation. As to whether or not theft of trade secrets and corporate espionage as well as the true reasons for which Mister Jaekel's departure are actually critical issues to this case must be left to the Court of Law seeing that we do not have sufficient information and hence evidence against this claim in order to render the proper decision.
In conclusion, in my opinion, an injunction should be imposed on both Mister Jaekel and Mister Orlando to terminate their employment with Royal Laser Tech and they should be held liable for any damage incurred by Magna as a result of their unethical behaviour.
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Research essay sample on Magna Versus Royal Laser
