2007 BCSC 136 Melchior v. Pricewaterhouse Coopers et al

Introduction:

[1] Mr. Cable is an inventor and businessman who developed machinery and processes for the production of engineered solid wood products. He registered patent applications for these inventions under his name. With his common law spouse of over 10 years, Ms. Melchior, he started a business for the production and sale of these wood products called Interact Wood Products Inc. (“Interact”). This company is owned by the couple and their respective children through their ownership in Interact Holdings Ltd. (“Holdings”) which holds 100% of the shares of Interact. Mr. Cable and Interact Holdings are now bankrupt.

[2] Ms. Melchior pleads that there was a common intention that she held an equal interest in the various inventions that were developed and asserts a resulting trusts over them. Further, she argues that Mr. Cable was unjustly enriched through her contributions to both the domestic and business interests of the couple and seeks a remedial constructive trust against the assets of Mr. Cable; and in particular certain inventions, a patent, and patent applications that relate to converting waste wood into engineered wood products. Ms. Melchior pleads that she is an equal owner in the said intellectual property with Mr. Cable and by virtue of section 67(1)(a) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, her trust interest is exempted from the bankrupt’s assets in bankruptcy. Alternatively, she argues that the trust interest she asserts supersedes a secured creditor’s claim based on policy reasons and equitable principles.

[3] The processes in which they were producing or developing products involved three well known areas: finger jointing, edge-gluing and face gluing. Mr. Cable, with the assistance of his small work team of technical and operating people, as well as Ms. Melchior, developed certain inventions in three areas for which patent applications were filed. I will refer to these applications and the one actual patent that has been issued so far as the “Patent Assets”. In the trial they were categorized by the parties into three groups; namely Family 1, Family 2, and Family 3 though at the time the parties were transacting this categorization was not used as only the assets in Family 1 were known to 568864 B.C. Ltd. (“568”), a secured creditor of Mr. Cable.

[4] Generally speaking they can be described as follows:

Family 1: relates to apparatus and a system for wood-gluing and clamping which enables the continuous production of glued pieces of lumber for panels and the like. The continuous process includes the application of constant and consistent pressure. The process is described as high speed. The apparatus is comprised of a deck, a horizontal displacement system for advancing lumber across the deck, a braking system, a one-way clamping system and an upstream pressure system. The edge-gluing system may be used in conjunction with finger-jointing process or with single pieces of lumber and may be used for the production of both furniture grade and construction grade wood products. A patent application for the apparatus and method in the United States was filed in June 2001. A U.S. patent was issued August 24, 2004.

Family 2: relates to the method of producing a high end engineered wood product as well as the product which was referred to at trial as a web board. The method is a lamination process that builds in structural strength to edge-glued or face-glued wood products through the misalignment of the wood-fibre orientation of the adjacent laths. There is no specific machinery involved in the claims. A U.S. patent application was filed October 20, 2004.

Family 3: relates to apparatus and a system for wood gluing and clamping system enabling the production of engineered wood products through face gluing of wood laths in a non-linear horizontal assembly process. The process is a batch system and not continuous but. The apparatus is comprised of a frame; a glue application system, a conveyor system, and a clamping system for applying perpendicular clamping pressure to the assembly surface. A provisional U.S. patent application was filed in or about October 2004.

[5] More specifically, each Family of the Patent Assets are comprised of the following:

Family 1

I. United States Patent 6,779,576 (issued August 24, 2004) - Wood Gluing and Clamping Apparatus, Method, Products, plus one divisional application namely United States application 10/834,245; and

II. International Patent Application serial #PCT/CA02/00981 (filed June 26, 2002), plus 10 national phase applications namely;

a. United States Application 10/482,245

b. Canadian Application 2,452,776

c. Russian Application 2004102681

d. Chinese Application 02816192.0

e. Japanese Application 2003-506696

f. New Zealand Application 530737

g. Mexican Application PA/A/2004/000108

h. Australian Application 2002344891

i. European Application 02742606.3

Family 2

I. United States Application 10/895,458 (filed October 20, 2004) – Oriented Fiber Structural Wood Products and Methods of Manufacture;

II. United States Provisional Patent Application 60/512,779 (filed October 21, 2003); and

III. International Patent Application PCT/CA2004/001836 (filed October 19, 2004).

Family 3

I. United States Patent Application 60/614,419 (filed September 30, 2004) – Face Gluing Method and Apparatus.

[6] Ms. Melchior has pursued her claim because the rights that co-owners of patents have as set out in Forget v. Specialty Tools of Canada Inc. (1995) 11 B.C.L.R. (3d) 537 (B.C.C.A.). As a co-owner, she would be entitled to practice the inventions or alienate her entire interest in the patent assets without any consent from the other co-owners; however any licensing cannot further dilute the protection of the patent. She would be entitled to compete directly with other co-owners, but preclude the rest of the world from practicing the invention within that jurisdiction. If successful, Ms. Melchior intends to carry on in the same line of business as prior to the failure of Interact and Mr. Cable; namely, manufacturing and selling engineered wood products with the full involvement of Mr. Cable.

[7] The trustee in bankruptcy has denied Ms. Melchior’s claim. As a result of the nature of the claims, I ordered a trial of the issues.

[8] 568864 B.C. Ltd. (“568”), a secured creditor of Mr. Cable, opposes the claim of Ms. Melchior on the basis that in consideration of a $3.5 million loan it made to Interact on December 19, 2003, it was granted a first charge over all of the patents, inventions and improvements in the name of Mr. Cable and all continuations, divisions, renewals or substitutes for patent applications (the “Patent Assets”). It says that Mr. Cable represented that he held the sole interest in the Patent Assets and that Ms. Melchior knew of these representations and did not indicate to 568 that she held an interest in them. 568 argues that no trust has arisen. Alternatively, 568 asserts that if she has any interest in the Patent Assets, 568 ranks in priority to hers and any other parties claim to the Patent Assets. 568 states that it was a bona fide lender who took security in the patent assets without notice of the interest asserted by Ms. Melchior.

[9] 568 also submits that the equitable defence of laches should be applied based upon Ms. Melchiors’ delay in asserting her interest and during the delay, within her knowledge, 568 took the whole of the patent interest as security. 568 says that it would be inequitable for Ms. Melchior to assert a dominant interest after all material parties are bankrupt.

[10] 568 raises the defence of estoppel, estoppel by convention, waiver, and estoppel by representation.

[11] 568 also submits that Ms. Melchior is not entitled to equitable relief on the basis that she does not come to court with clean hands. More specifically, 568 points out that she accepted from Mr. Cable some $46,000 just prior to his bankruptcy and also took from the account of Interact a further amount of $36,000.

[12] 568 also submits that the business arrangement between Ms. Melchior and Mr. Cable based on their evidence was that of a partnership. As such, they held the Patent Assets as common property and by virtue of the partnership, the actions of Mr. Cable in entering into the Cable GSA, with the full knowledge of Ms. Melchior, was on behalf of the partnership and thus bound the partnership as a whole.

[13] 568 also claims setoff to any interest held by Melchior of monies claimed to have been taken out of Interact on the eve of insolvency.

[14] 568 in its counterclaim seeks an order declaring that it has a charge over the Patents Assets ranking ahead of all parties including Ms. Melchior, the Trustee and CVM Holding Ltd. Further, it seeks a permanent injunction declaring that 568 has exclusive rights to the Patent Assets and restraining all parties from selling, licensing, pledging, securing or otherwise dealing with the Patent Assets. That all interest of CVM Holdings Ltd. and the Trustee in the Patent Assets be transferred to 568 subject to the trustee’s right to redeem set out in sections 130-132 of the Bankruptcy and Insolvency Act.

[15] Ms. Melchior argues that the security held by 568 relates only to an initial group of patents assets which are called in these proceedings “Family 1” and that such security applies only against Mr. Cable’s interest and not hers.

[16] Given the dispute over which of the Patent Assets over which 568 has security, I have referred to the assets that have been secured as the “Secured Patent Assets” distinct from the Patent Assets to ensure a distinction.

Standing:

[17] 568 also argues that Ms. Melchior does not have standing to argue whether Schedule A encompasses in addition to Family 1, Family 2 and Family 3.

[18] In my view, Ms. Melchior does. The pleadings of 568 in its counterclaim indicate that it seeks a first charge over all of the patents, inventions and improvements in the name of Eric Cable and all continuations, divisions renewals or substitutes for patent applications, in priority over the interest claimed by Melchior and all other creditors of Cable, pursuant to the terms of the security.

568 further pleads that the patents, inventions and improvements over which it claims to have security are Family 1, Family 2, and Family 3.

[19] I also note that the trustee of the estate of Mr. Cable while opposing the claim of Ms. Melchior, states in its statement of defence that the trustee has not determined whether the security held by 568 extends to cover all or part of the assets of Mr. Cable.

568 has sought by counterclaim to seek priority over Ms. Melchior, opposes her trust claim, and seeks a declaration that its security encompasses the entirety of Family 1, Family 2 and Family 3. 568 has introduced its counterclaim within a “trial of an issue” related to the claim of Ms. Melchior in this bankruptcy proceeding. In choosing to do so 568 cannot complain that the party who has a potentially affected interest and who is the subject of the trial and in which 568 has injected its counterclaim has no standing.

Issues:

(1) Has Ms. Melchior established a resulting or constructive trust in her favour that entitles her to a proportion of the assets?

(2) Has 568 established a priority to the balance of the all three Patent Assets?

Conclusion:

[20] For the reasons that follow, I find that Ms. Melchior has not established a resulting trust in her favour, nor an unjust enrichment entitling her to a remedial constructive trust or a monetary award.

[21] With respect to the counterclaim of 568, I find that it has established that it has a first charge in priority to all others in relation to the Patent Assets in Family 1 but has not established a priority to in the balance of the Patent Assets.

Background:

[22] Ms. Melchior is 56 years of age and Mr. Cable is currently 54 years. They met in 1991 and started to date. At the time they met Mr. Cable was an equipment operator at the Weststar Mine in Sparwood, B.C., and later became the Labour Association President for the workers there. Ms. Melchior also worked for Weststar in an administrative position. They each have two adult children from previous relationships and no children together. They began to cohabit in late 1995. Their relationship is marriage-like and remains intact to this day. They describe their relationship as being “partners in life and partners in business” and speak of being “joined at the hip”. They remain devoted to each other.

[23] There is no written agreement between Mr. Cable and Ms. Melchior that deals with what assets they own equally; how the assets are to be managed, including the authority or right one had as to put up an asset as security; how any revenues or income arising from the assets are to be shared; or the division of any assets upon dissolution of their relationship.

[24] In 1993, the couple started their business. They began as a supplier of trim ends to a finger jointing mill in Montana. Mr. Cable would approach sawmills and buy their waste wood and the two would sort, package and deliver these pieces to the Montana mill. In 1994, the operating company Interact Wood Products Inc. (“Interact”) was started specifically for the production of “finger joint ready” products. Interact Holdings Ltd. (“Holdings”) was created to hold 100% of the shares of Interact. In 1995 or 1996, Mr. Cable transferred a 6% share in Holdings to Ms. Melchior. Each of Ms. Melchior’s and Mr. Cable’s children 5% shareholders, with the balance of the shares being held by Mr. Cable. There is no shareholder agreement that governs the shareholders. The business expanded, a five year supply contract for trim ends was established with Evans Forest Products in Golden and a processing facility was purchased in Golden. Mr. Cable and Ms. Melchoir each covenanted to pay a mortgage that facilitated the purchase of property. There Mr. Cable and Ms. Melchior sorted, graded and packaged the wood and shipped them to U.S. markets until 1995 when Evans Forest Products went out of business and the supply of wood ceased. A year later in 1996, Interact started up again when Crestbrook Forest Industries became a source of wood supply. In late 1998 a finger jointer was purchased through a loan from the Business Development Bank and a government grant, and finger jointed studs were added to its line of business.

[25] Mr. Cable’s experience in using of polyurethane adhesives in finger jointing led to experimenting with this adhesive in edge gluing in 2000, creating large structural finger-jointed panels which would expand their product line from the ‘stud’ market in which they were involved. Countless hours were spent creating an edge-gluing machine in 2000. In May 2002, production of Interact’s products using the edge-gluing machinery, the subject of Family 1 assets, began. This Family 1 technology was the only operating technology of the business from which revenues were generated until late 2004, when the Family 3 technology was installed. Up to late 2004 the extent of the business was finger-jointing and edge-gluing production.

[26] Mr. Cable and Ms. Melchior realized that the technology that was being developed in their business had value. Mr. Cable and Ms. Melchoir attended the law firm of Borden Ladner & Gervais for legal advice. Patenting was advised. Mr. Hicks a registered patent agent with Borden Ladner Gervais was identified for the task by a solicitor at the firm. He prepared the necessary documentation. After discussing the matter with Mr. Hicks, the couple determined that the patent application would be filed in the name of Eric Cable. Mr. Cable testified that in discussions with Ms. Melchior it was agreed that it would be his name that would be placed on the patent application. Ms. Melchior testified similarly and added that the patents were always to be in the name of Mr. Cable as he as the majority shareholder. The costs for the development of the invention and technology, the preparation and filing of the applications were paid by Interact. The reason that the application was not made in the name of Interact was because Interact did not have the funds to purchase the patent from Mr. Cable.

[27] In 2002, Crestbrook Forest Industries ceased its supply and again Interact halted operations for a few months in early 2003. However, in the spring of 2003, Interact was able to secure a nine year supply contract with Weyerhaeuser. This supply was conditional upon Interact purchasing the Weyerhaeuser plant in Vavenby, B.C. This permitted Interact to restart operations in April 2003. The purchase of the Vavenby plant was financed partly by bridge lenders, Century Services in June 2003, who loaned Interact $1.2 million, and CVM Holdings Ltd. who advanced $800,000 in September 2003. The Western Diversification Softwood Economic Adjustment Initiative Fund (“SCICEAI”) also committed a further $1.7 million toward development of the Vavenby site, though this funding was not advanced until 2004.

[28] In regard to the SICEAI financing, Ms. Melchior provided a personal guarantee for $170,000 of the loan.

[29] As the supply contract required Interact to develop the Vavenby site, and Interact required financing to do so, Interact hired Mr. Greg Vezina of Edgemark Capital in July 2003.

[30] The terms of the contract with Mr. Vezina, through his company Edgemark Capital, are contained in an agreement dated December 28, 2004. The agreement states that Mr. Vezina through Edgemark “will assist the president of Interact Wood Products Ltd….to raise financing and to maximize Interact’s revenues and profitability to prepare the Company for sale or to go public within 5 years. Edgemark will make all reasonable efforts to help maximize Eric Cable’s and Patty Melchior’s (“the Controlling Shareholders”) percentage ownership and net worth in the Company without compromising growth…Edgemark will take the primary responsibility to raise ongoing financing for the survival and growth of the Company and will work closely with Interact’s senior management team on corporate and business development and other important business matters.”

[31] The agreement is signed by Mr. Cable for Interact Wood Products Ltd., Interact Holdings Ltd and for himself. Ms. Melchior signed the agreement on behalf of herself.

[32] As part of his assignment, Mr. Vezina drafted materials that outlined an investment opportunity for potential investors in Interact and contacted people whom he felt may have an interest. One such document is entitled Executive Summary which stated that, “Interact has invented and patented a new product called Engineered Solid Wood (ESW)...Interact’s revolutionary technology upgrades wood to be as dimensionally stable and predictably strong as the engineered wood products that captured many billions of dollars of market share from solid sawn lumber over the last 30 years in structural applications.” Later in the document it states that: “The intellectual property is not included in the above assets valuations but it is by far the largest asset the company owns. This asset is of strategic significance to all of the major engineered wood product companies.”

[33] The Executive Summary also stated that the funding sought was $3.5 million which was to strengthen Interacts’ balance sheet, to pay out $2 million of bridge financing, to pay $500,000 of stretched payables, to provide $440,000 for working capital to run a second shift at the Golden plant, to cover $360,000 for carrying costs of the Vavenby plant, and to provide $200,000 for capital improvements, patent filing costs and product certification costs. All of these expenditures were stated as “key to accelerating the cash flow going forward and protecting the intellectual property”.

[34] In September 2003, Mr. Vezina contacted Mr. Jim Young of W.I. Woodtone Industries (“Woodtone“) to discuss investment in Interact. The Woodtone group of companies is in the lumber distribution and staining business. Several meetings were held to explore the business opportunity in Interact. Materials were provided to Mr. Young including the Executive Summary. With the executing of a confidentiality agreement further detailed documents were provided to him. Negotiations ensued with Mr. Young and his son Mr. Chris Young. Several terms sheets setting out the key business terms proposed by each party were exchanged. Negotiations towards the provision of a loan progressed to the point that on or about October 16, 2003, at the request of Mr. Cable, Mr. Young issued a cheque for $500,000 for delivery to Interact. Ms. Melchior immediately arranged for delivery of the cheque. Ms. Melchior had a keen understanding of the critical need for the funds as she was responsible for the company’s accounts payable and felt most directly the company’s cash shortage.

[35] A final term sheet was concluded on October 17, 2003, with Mr. Jim Young signing for Woodtone and Mr. Cable signing for Interact. Lawyers were retained by the parties. Borden Ladner Gervais was retained by Interact and Mr. Cable and Mr. Greenwood was retained by 568. The final loan agreement was entered into December 19, 2003, between Interact and 568, the management company for Woodtone. Borrower’s counsel took the lead in the drafting all documents relating to the loan.

[36] Some of the key terms of the loan as set out in the term sheet were as follows:

Loan amount:	$3,500,000
Use of funds:	As described in the Executive Summary and Cash Flow
Interest rate:	18%
Term:	3 years (repayable at any time after 5 months)
Security:	First mortgage (exceptions described below) on land building and equipment at golden and Vavenby as well as the intellectual property, subject to BDC term mortgage on Golden land and building of approximately $347,000, miscellaneous leases and loans on equipment at Golden of approximately $206,000 and a private vendor-take-back mortgage for $41,244 on one parcel of land that is part of the overall land used for the Golden operation. If Woodtone does partial advances the other bridge lenders, Century and CVM will have their charges in front of Woodtone until paid out by Woodtone. Upon advancement of $2,700,000 Century will be fully discharged. When the total loan of $3,500,000 is fully advanced CVM will be discharged.
Subordination to Project Lenders:	Woodtone agrees to subordinate to project lenders who want to finance the Vavenby project when appropriate from a financing perspective (subject to approval by Woodtone, which will not be unreasonably withheld).

[37] On October 20, 2003, Mr. Young arranged with Mr. Cable to visit Interact’s operations in Golden. The visit occurred on October 28, 2003 where Mr. Young met with Mr. Cable and Ms. Melchior and toured the facility.

[38] On or about October 21, 2003, Borden Ladner Gervais filed a U.S. provisional patent application for Mr. Cable’s invention known as the Face Glued Oriented Fibre Structural of Family 2.

[39] During November 2003, the Youngs’ undertook their due diligence reviews with respect to their proposed loan.

[40] On December 4, 2003, the parties agreed to an addendum to the final term sheet. The terms included guarantees for the loan by Mr. Cable and Interact Holdings. The guarantees would terminate if Interact met or exceeded the cash flow projections for the period ending April 2004 as set out in a schedule provided to Woodtone the week of November 23, 2003. The addendum also stated that Interact was not to subordinate 568 to any financing without the prior written consent of 568 which consent was not to be unreasonably withheld if the financing was acceptable financing.

[41] In the course of 568’s review of agreements surrounding the loan, Mr. Greenwood recognized his limitations in the area of intellectual property law and retained Mr. Hilton Sue, a lawyer specializing in intellectual property law at the firm of Oyen Wiggs Green and Mutala. His instructing letter of December 16, 2003, stated the following:

Mr. Cable is apparently the owner of certain intellectual property rights and has agreed to pledge those rights as security for the indebtedness of Interact to 568864. Gowlings [sic] is acting for the borrower and has prepared the security documents including a Security Agreement which it proposes be granted by Mr. Cable. I am attaching a copy of the Security Agreement for your information. Detailed in Schedule “A” are the patents that are apparently owned by Mr. Cable. Having no expertise whatsoever in the area of intellectual property law, I require your assistance in providing a recommended course of action in order to fully perfect our client’s security position. Sadly, time is of the essence in this transaction as our client is looking forward to advancing funds in the next few days. Please contact the writer at your earliest possible convenience to discuss this matter.

[42] Mr. Sue in his letter of December 18, 2003, set out his comments to Mr. Greenwood (it appears that Mr. Sue had provided his comments on the telephone the day before to Mr. Greenwood who had passed on the comments to Mr. Vezina) and raised questions as to the ownership of the two patent applications listed in Schedule A of the Security Agreement related to Mr. Cable. Interact did not appear to be the holders of the patent applications as originally indicated to Mr. Young. While this was news to 568’s lawyers, Mr. Young agreed he had been told orally and in writing in October 2003 that Mr. Cable had invented and owned the proprietary technology used by Interact. Mr. Sue notes that while the U.S. application is made out in the name of Mr. Cable, the subsequent Patent Cooperation Treaty application specified in Schedule “A” was filed in the name of Interact. In this regard, Mr. Sue wrote:

This initially suggested to us that, some time before 26 June 2002, ownership of the invention transferred from Eric Cable to Interact Wood Products Ltd. However, Andrew Hicks of Borden Ladner Gervais LLP, the patent agents of record for the PCT application, informed us by telephone this morning that Interact Wood Products was named in error in the PCT application as a result of a clerical error by Borden Ladner Gervais LLP. Mr. Hicks represented to us that, to his knowledge, there was never any assignment of the invention from Eric Cable to Interact Wood Products Ltd., and that Eric Cable was still legally the owner of the invention.

[43] On December 17, 2003, Mr. Hicks emailed Mr. Vezina and Mr. Greenwood, with a copy to Mr. Cable, to clarify the issue of ownership. He stated:

I have been asked by Mr. Vezina to clarify the ownership of the Interact patent applications.

All of Interact patent applications name Eric Cable as the sole inventor and, to the best of my knowledge, no assignment documents have been executed in favour of Interact. Accordingly, title and ownership of all patent applications currently resides with Eric Cable.

However, the PCT application (our file PAT 501w-90, PCT/CA02/00981) was inadvertently filed in the name of Interact Wood Products and, accordingly, the published documentation relating to this application identifies Interact as the Applicant. However, in the absence of any assignment documents, this is merely a clerical error in the published documents. PCT procedures do allow for the correction of a listed applicant, however, at this late juncture of the PCT procedure, such a correction could not be made. When the application is filed in any national jurisdictions [sic], it will be a straightforward matter to correctly identify the Applicant as Eric Cable.

Please let me know if you have any questions.

Andrew Hicks
Patent Agent
Partner
Borden Ladner Gervais LLP.

[44] As a result of Mr. Sue’s involvement in the transaction, a revised Schedule A was drafted by Mr. Sue and inserted into the Cable Security Agreement in the form as set out below.

[45] On December 19, 2003, Mr. Vezina emailed Mr. Hicks, copying in Mr. Cable, the following:

Is it worth talking to a patent litigation lawyer at your firm to confirm the wording on Schedule A that we discussed this morning. (quoted below for your convenience) does not reach to NEW patents like the one Eric is working on with you?

...and all right, title and interest in and to the said inventions or improvements and said applications, and all continuations, divisions, renewals of or substitutes for said applications, and in, to and under all Letters Patent which may be granted on or as a result thereof, and any reissues of said Letters Patent, in any and all countries.

[46] The final closing documents included the following:

Loan Agreement between Interact Wood Products and 568864 B.C. Ltd.

Security Agreement between Interact and 568 wherein Interact provided a continuing, specific and fixed security interest in the present and after acquired interest property, assets, rights and undertaking of Interact.

Demand Promissory Note from Interact Wood Products to 568.

Share Purchase Warrants wherein Interact granted to Woodtone the right to purchase 3,960,000 shares in the Interact at an exercise price of $1.00 upon terms. Guarantee and Postponement of Claim from Interact to 568.

Guarantee and Postponement of Claim from Eric Cable to 568.

Security Agreement between Eric Cable and 568.

[47] It is within the last mentioned agreement that Mr. Cable agreed to charge, assign and transfer to 568 a security interest in “those intangibles listed in Schedule “A”. Schedule A was drafted by Mr. Sue and states:

Inventions or improvements described and claimed in:

1. United States Patent Application 09/892, 142 filed June 26, 2001; and

2. Patent Cooperation Treaty (PCT) Application PCT/CA02/00981 filed June 26, 2002 designating all member states of the Patent Cooperation Treaty, and any and all applications constituting a national or regional phase entry of said PCT Application,

and all right, title and interest in and to the said inventions or improvements and said applications, and all continuations, divisions, renewals of or substitutes for said applications, and in, to and under all Letters Patent which may be granted on or as a result thereof, and any reissue or reissues of said Letters Patent, in any and all countries.

[48] In the Cable Security Agreement Mr. Cable warrants and represents to 568 that he “owns and possesses all presently held Collateral and has good title thereto, free from all security interests, charges, encumbrances, liens and claims except those charges set out in Schedule “B” hereto” (Schedule B relates to a prior charge he has provided to a prior lender CVM Holdings Ltd.).

[49] Pursuant to the Cable Security Agreement, 568 registered its security interest against the patent interests specified in Schedule “A” in PPSA December 24, 2003; the U.S. Patent Office as an assignment on December 19, 2003, and in the Canadian Patent Office on March 30, 2004. At all times, the patent records in the Canadian and U.S. Patent office showed Mr. Cable as the only owner.

[50] In the same agreement, Mr. Cable also covenanted to “defend the Collateral against all claims and demands of all persons claiming the collateral or an interest therein at any time.”

[51] The Loan Agreement differs from the Cable Security Agreement in the description of the security that is to be provided for the loan. The Loan Agreement states the security includes “a security agreement from Eric Cable (the “Cable GSA”) charging only the Patents”. Under the Loan Agreement, “Patents” are defined as:

1. United States patent Application 09/892,142 filed June 26, 2001

2. Patent Cooperation Treaty (PCT) Application CA 02/00981 filed June 26, 2002 designating all member states of the Patent Cooperation Treaty.

[52] The parties acknowledge that funds were advanced to Interact by 568 as required under the Loan. It is further acknowledged that Interact only made one payment to 568 under the loan.

[53] It is acknowledged that by the summer of 2004 Interact was in default of the Loan.

[54] Various attempts to find additional financing for Interact were made by Mr. Vezina.

[55] On December 14, 2004, 568 gave notice of default. No enforcement action was taken. On March 29, 2005, 568 made a demand for the accelerated balance under the loan. A receivership application was made in late June when the court did not approve further DIP financing.

[56] On April 7, 2005, Interact filed a petition for protection under the Companies’ Creditor Arrangement Act, R.S.C. 1985, c. C-36. On the same day, Mr. Cable filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act.

[57] On or about April 11, 2005, Ms. Melchior received $36,600 directly from Mr. Cable. This amounts to the difference between the shareholder loan accounts between the immediately preceding year end and the shareholder loan accounts at the time of the CCAA filing.

[58] On July 7, 2005, Ms. Melchior withdrew $45,000 from Interact by writing a cheque to herself. She admitted that the accounts had been frozen but kept the money.

[59] On July 8, 2005, by court order, PricewaterhouseCoopers Inc. was appointed receiver of Interact.

[60] On July 29, 2005, Interact was declared bankrupt.

[61] On August 2, 2005, Mr. Cable swore a Statement of Affairs deposing that 568 was owed $4.5 million.

[62] On August 11, 2005, Ms. Melchior swore an affidavit in which she for the first time asserted a co-ownership interest in the Patent Assets held by Mr. Cable. She testified that her awareness of this interest arose in a meeting she and Mr. Cable had with Mr. Hicks in late July 2005 related to Mr. Cable’s insolvency, wherein Mr. Hicks told Ms. Melchior that he should have asked at the time he was preparing the patent applications whether she had a co-ownership interest in the Patent Assets. Ms. Melchior testified that Mr. Hicks had made a mistake in not canvassing the topic. Prior to this point she did not know that she had an interest.

[63] On August 22, 2005, at the first meeting of creditors of Mr. Cable, the creditors refused to approve his proposal and Mr. Cable was deemed to have been assigned into bankruptcy on that date.

[64] Ms. Melchior contested the trustees rejection of her claim.

[65] As a result of that hearing, a trial of the issues raised by Ms. Melchior was ordered.

Analysis:

[66] In a case such as this, though the standard is on a balance of probabilities, there is a heavy onus resting upon Ms. Melchior. The dispute in this case is not based upon a marital or quasi marital break down. Though the relief sought arises from the relationship between Ms. Melchior and Mr. Cable, the relationship is intact. Her claim arose on the eve of the bankruptcy of Mr. Cable and the company owned by the couple. Ms. Melchior and Mr. Cable hope to continue together to pursue the business vision that they had through Interact if she is successful in her claim. The context is largely commercial. There are creditors who remain unpaid. Ms. Melchior says that there was an understanding of equal sharing in her relationship with Mr. Cable, but accepts no responsibility for sharing in the liabilities taken on by her bankrupt spouse. The focus of her claim is targeted. It is obviously in the interest of both to testify to a common intention to establish a resulting and liability free trust or facts that support a remedial constructive trust which will preserve their economic interests at the expense of what would be available to the creditors in Mr. Cable’s estate.

[67] With respect to a spousal claim of resulting trust, the difficulty in establishing it can be found in the observation of by Dickson J. (as he then was) in Rathwell v. Rathwell, [1978] 2 S.C.R. 436 where at ¶17 he stated: “There is seldom prior express agreement. There is rarely implied agreement or common intention, apart from the general intention of building a life together.”

[68] It is because of this limitation that the remedial mechanism of a constructive trust was shaped to address spousal disputes regarding property. However, this remedy is discretionary and the authorities have expressed reservations as to the availability of a constructive trust where creditors and third party interests are affected.

Resulting Trust

[69] Ms. Melchior’s primary position is the assertion of a resulting trust over certain assets of Mr. Cable. The Patent Assets are of the greatest interest to her. The other assets claimed in her pleadings are a Harley Davidson motorcycle, a skidoo and his RRSPs.

[70] An essential feature of a resulting trust is the existence of a “common intention manifested by acts or words that property is acquired as a trustee”.

[71] As stated in Pettkus v Becker (1980), 117 D.L.R. (3d) 257 (S.C.C.):

[T]he resulting trust is not available where the imputation of intention is impossible or unreasonable” one cannot imply an intention that the wife should have an interest if her conduct before or after the acquisition of the property is “wholly ambiguous” or its association with the alleged agreement “altogether tenuous”. Where evidence is inconsistent with resulting trust, the court has the choice of denying a remedy or accepting the constructive trust.

[72] Ms. Melchior submits that from the nature of her relationship with Mr. Cable, including her extensive contributions to the business, their home life, the brainstorming sessions at work regarding the inventions, her drawings and small model of an invention she made, all support the existence of a common intention that the property was to be shared equally and that though the assets including the Patent Assets were registered in the name of Mr. Cable, he held them for the benefit of both himself and Ms. Melchior. The evidence of Ms. Melchior and Mr. Cable was that they were “partners in life and in business” and that they described themselves and presented themselves to the public this way. Ms. Melchior at one point testified that “what was mine was his and what was his was mine” to describe the nature of their relationship. The evidence establishes that they are close and share all aspects of their lives with each other. The majority of their life appears to have been preoccupied with the business of Interact. Their personal and business lives were intertwined. Specific to the patents, Ms. Melchior testified that there was a common and mutual view from the outset between herself and Mr. Cable that the patents through Interact were to be jointly held and was for their future as well as a legacy for their children and grandchildren. She spoke of the couple’s joint vision of creating a wood products business giant.

[73] The defendant does not take issue with the applicable principles in this case. However, submits that common intention has not been made out.

[74] My assessment of the evidence is that a common intention neither express nor implied has been established to support a resulting trust in the Patent Assets in favour of Ms. Melchior. In my opinion, there are simply too many aspects in the evidence that detract from and rebut a finding of such a resulting trust.

[75] The words, actions, and documents of both Ms. Melchior and Mr. Cable belie their very late expressions of a common intention that Ms. Melchior was to have an unencumbered one half interest in the Patent Assets.

[76] There is the absence of objective evidence that supports her position. There is no letter, email, memo, note or any other piece of evidence that reflects the asserted specific common intention. No witnesses, other than Mr. Cable were called who could provide corroborative evidence of a specific common intent regarding the Patent Assets. Her conduct, if not inconsistent with her assertion, was clearly ambiguous with the intent that she had a joint interest in the Patent Assets. In my view, much of the evidence detracts from the stated notion of a common intention. I note particularly the following:

Ms. Melchior stated at the time the patents applications were first being prepared that after discussing the matter with Mr. Hicks, the couple agreed that Mr. Cable’s name alone be placed on the application. She also stated that from the outset the patents were to be in Mr. Cable’s name as he was the majority shareholder.

When it came to having certain patent applications that had been filed in the name of Interact amended to the name of Mr. Cable, Ms. Melchior typed up the following message to Mr. Hicks: “Please ensure and confirm that all steps have been taken to 100% guarantee that ‘Eric Cable’ is the owner of the patent and technology, both in North America and overseas.” This can hardly show a common intention.

Ms. Melchior filled out virtually all documents related to patent applications for Mr. Cable’s signature and witnessed his signature as sole inventor. It is to be noted that the application materials expressly indicate that more than one person can be listed as an inventor. She never raised an objection to this.

Ms. Melchior was paid a salary for her work for Interact. It is apparent that her contributions were in the course of her work for Interact. Further, her contributions were non-technical. She has no experience in mechanical and technical matters. The salaries of Mr. Cable and Ms. Melchior, while similar were not equal; and from 2001 through 2003 became increasingly disproportionately greater for Mr. Cable.

The division of shares held by the two in Interact Holdings are not equal. In fact, Mr. Cable held all of the shares in Interact initially. As a gift, Mr. Cable provided 6% of the shares to Ms. Melchior. Mr. Cable retaining 74% of the shares in Interact does not support an equal sharing. The percentage ownership and the notion that he gifted the shares does not further the assertion of an equal partnership or common intention.

Ms. Melchior’s estate planning does not reflect the common intention as her will divides the residue of her estate into thirds, between Mr. Cable and her two children. Further, the will only provides an option to Mr. Cable to purchase her shares in Interact. Mr. Cable apparently does not have a will.

At no time did Ms. Melchior ever mention to anyone that she held some type of interest in the Patent Assets.

[77] The actions of Mr. Cable in addition to the above are also inconsistent with an alleged common intention:

His testimony of a common intention at trial is at odds with his warranty and representation contained in the Cable GSA that title in the secured Patent Assets is in his name alone. He specifically represented to 568, that there were no other interests or claims against the secured Patent Assets. Mr. Cable’s testimony must be considered with some caution given his interest in the outcome. 568 points out that he is not living up to his commitment under the Cable Security Agreement to defend against claims for the secured Patent Assets.

His testimony of common intention is inconsistent with his testimony at trial regarding a subsequent financing with a company called Matco. Under cross-examination, he was asked about whether he advised his solicitors about seeking Ms. Melchior’s approval for transferring patents to a Matco company. His response was “I would not have thought of or turned my point [sic] to Patty’s legal interests in those patents at that time. I was the sole registered owner and I would be undertaking these transactions believing that I was the sole registered owner. I wouldn’t have thought of her legal position or legal interest in them at the time. There was no connect there.” This can hardly be taken as an endorsement of the sharing espoused by Mr. Cable.

Mr. Cable’s affidavit in his proposal to his creditors, states that he is the he is the owner of the patents. He does not refer to ownership being shared with Ms. Melchior. Mr. Cable in my view did not contemplate Ms. Melchior having an interest in the Patent Assets until the eve of his bankruptcy. Ms. Melchior read this affidavit prior to Mr. Cable swearing it and did not raise any objections. Her lack of objection reinforces the continued view that she and Mr. Cable were operating on the basis that either she had no interest or that she had provided her consent for Mr. Cable to use the Patent Assets as security for the loan required by their company.

[78] The concept of equal sharing breaks down when it comes to the personal risk each was to assume in the business. Mrs. Melchior said that the arrangement between herself and Mr. Cable from the outset was that she was to be insulated from financial risk. She said she was risk averse and did not take on personal liabilities. Mr. Cable took on the bulk of personal financial risk in regard to the enterprise and in particular the full risk in providing a personal guarantee to 568 for the loan. This arrangement detracts from the notion of equal sharing between the two and provides an explanation for the difference in ownership.

[79] Further, Mr. Hicks’, who worked with both Ms. Melchior and Mr. Cable in providing his patent services, opined to 568 that “title and ownership of all patent applications currently resides with Eric Cable.” He provided no qualifications to his opinion.

[80] As a final point, Ms. Melchior testified that she did not know that she had an interest in the Patent Assets until very late. This also militates against her claim of a resulting trust. Ms. Melchior understood the company was in serious need of funding, it was clear to her that the Secured Patents Assets were being put up as security. To the extent she had an interest she consented to having it put up as security.

[81] Given the foregoing, I do not find a common intention that establishes a resulting trust over the claimed property. If a common intention existed, that common intention was of general and broad nature of two people building a life together which related to a sharing in the benefit of a successful joint enterprise at some point in the future and not just a singular component of that enterprise.

Constructive Trust

[82] An alternative claim of Ms. Melchior is that Mr. Cable has been unjustly enriched and that she is entitled to a discretionary constructive trust. Such a remedy arises where a person holds title to property to which another has contributed and where it would be inequitable for the person in possession to retain the entire legal and beneficial interest. Pettkus set out a three part formulation for a finding of unjust enrichment as follows:

1. an enrichment of one person;

2. a corresponding deprivation; and

3. an absence of any juristic reason for the enrichment.

There must also be a causal connection between the deprivation and the enrichment.

[83] Intention is not a critical element to establish unjust enrichment.

[84] The somewhat unique feature of this case is that while Ms. Melchior’s claim is a claim of unjust enrichment against her spouse, this is not a case where the court is being asked to divide the remnants of a spousal relationship that has come to an end. Rather, the sought after interest is in a business assets and the relief claimed is to enable Ms. Melchior and Mr. Cable to continue on together with their business by limiting the scope of security available to creditors of Mr. Cable, and in particular, 568 a secured creditor. Reservations regarding the availability of a remedial constructive trust have been raised by the Supreme Court of Canada in its various judgments when third parties are impacted. In Peter v. Beblow, [1993] 1 S.C.R. 980, Cory J. stated at 640:

The remedy provided by the constructive trust seems to best accord with reasonable expectations of the parties in a marriage or quasi-marital relationship. Nevertheless, in situations where the rights of bona fide third parties would be affected as a result of granting the constructive trust remedy it may well be inappropriate to so…. (emphasis added)

In a later judgment the court in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217, though dealing with the imposition of a constructive trust based on wrongful conduct as opposed to unjust enrichment, stated at ¶34:

It thus emerges that a constructive trust may be imposed where good conscience so requires. The inquiry into good conscience is informed by the situations where constructive trusts have been recognized in the past. It is also informed by the dual reason for which constructive trusts have traditionally been imposed: to do justice between the parties and to maintain the integrity of institutions dependent on trust-like relationships. Finally, it is informed by the absence of an indication that a constructive trust would have an unfair or unjust effect on the defendant or third parties, matters which equity has always taken into account. (emphasis added)

[85] At ¶45 the court stated that one general condition that should be satisfied for a constructive trust was that: “There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g. the interest of intervening creditors must be protected.”

[86] In Caterpillar Financial Ltd. v. 360networks Corporation, 2004 BCSC 1066, 35 B.C.L.R. (4^th) 145, affirmed, 2007 BCCA 14, Tysoe J. relied in part on the statement of Lambert J.A. in Re Ellingsen, 2000 BCCA 458, 7 B.L.R. (3d) 12 at ¶71:

A remedial constructive trust will be imposed only if it is required in order to do justice between the parties in circumstances where good commercial conscience determine that the enrichment has been unjust. But a remedial constructive trust is a discretionary remedy. It will not be imposed without taking into account the interest of others who may be affected by the granting of the remedy. In this case that would include other creditors of the bankrupt (both secured creditors and general creditors, since the trust may defeat both), and any relevant third parties.

Enrichment, Deprivation and Juristic Reason:

[87] The plaintiff says that the enrichment in this case relates to the years of service, time, energy and contribution which Ms. Melchior provided to either her common law spouse or to the preservation, maintenance and improvement of specific property.

[88] Ms. Melchior argues that Mr. Cable was enriched, however unlike the leading cases that impose constructive trusts for spouses who made significant contributions but were not compensated during the relationship, Ms. Melchior was paid a respectable salary by her company for her contributions. The contributions that she provided towards the development of the patent assets were performed in the course of her work at Interact.

[89] The salaries of Ms. Melchior and Mr. Cable were as follows:

2001	Melchior	$46,785
	Cable	47,995
2002	Melchior	61,294
	Cable	73,143
2003	Melchior	81,673
	Cable	95,173

[90] In addition to their salaries the evidence also indicates that Ms. Melchior and Mr. Cable had a significant level of expenses, largely meals, covered by the company. Furthermore, the assertion that Mr. Cable was enriched must be considered in light of context of the understanding between Ms. Melchior and Mr. Cable from the outset of their relationship that she was to be insulated from personal liability. Ms. Melchior was sheltered significantly over the years from financial risk. This meant that Mr. Cable assumed the risk of personal liability when it came to their business. In the context of the loan transaction with 568, Ms. Melchior benefited from the loan without taking the personal financial risk of Mr. Cable. This arrangement clearly provided a benefit to Ms. Melchior and erodes the argument of deprivation. In fact, it shows she was enriched at the expense of Mr. Cable. That risk on Mr. Cable came to fruition. Though it is without doubt Ms. Melchior looked after much of the domestic matters, it is clear that Mr. Cable contributed much in terms of running the business owned by the two. There was no comparative analysis of the relative contributions of the parties to the relationship. The object of each one’s contribution was toward the enhancement of a joint enterprise. The work that Ms. Melchior performed, above and beyond what she did in her job, freed up Mr. Cable to put in time for the development of the business. While it can be seen that Mr. Cable’s investment in the enterprise was enhanced by her contribution, so too was Ms. Melchior’s through her ownership in it. It cannot be overlooked as well that Ms. Melchior benefited from the loan from 568, a loan that she wished to receive.

[91] The deprivation is the loss of the business enterprise through the operation of the marketplace. This does not constitute deprivation in the context of this case. I do not find the evidence sufficient to find an enrichment of Mr. Cable and a deprivation of Ms. Melchior in the context of an unjust enrichment.

[92] The plaintiff says that there is no juristic reason for the enrichment as a common law spouse has no duty to perform services for the other spouse.

[93] As mentioned at the start of this section, the authorities express reservations upon the imposition of a constructive trust in the circumstance where the interests of creditors or other third parties would be impacted by the trust. This is such a case. 568 was a bona fide lender without notice of the interest asserted by Ms. Melchior, a person who benefited as an owner and employee from the loan provided by 568.

[94] 568, in reliance upon the representations of Mr. Cable, the strength of the patent registers, and opinion of Mr. Hicks, loaned significant monies to Interact. 568 had no notice of the alleged interest asserted by Ms. Melchior. I say this despite my doubt as to the testimony of Mr. Young and his son that they did not know that Mr. Cable and Ms. Melchior were a couple. In any event, 568 duly registered its interest against the secured Patent Assets. Ms. Melchior did not register any interest that she now claims in the secured Patent Assets. 568 relied upon the registration of Mr. Cable’s ownership in the secured Patent Assets. Under the Patent Act, R.S.C. 1985, c. P-4, Ms. Melchior can only become a legal owner of the patents through an assignment as it was agreed that Mr. Cable was the inventor and owner. The only way for Ms. Melchior to attain a legal interest was by assignment in writing as per the Patent Act. There was no such assignment by Mr. Cable in this case.

[95] If for some reason, it could be established that Mr. Cable somehow transferred an interest to Ms. Melchior then the failure to register the transfer serves as a reason to preclude a finding of unjust enrichment. 568 was a bona fide lender without notice of a claimed interest in the very security put up by the company in which Ms. Melchior is a principal and which was in significant need of funds.

[96] In my view, Ms. Melchior understood that Mr. Cable was posting the entirety of the interest in the secured Patent Assets. She did not object. She did because she knew it was necessary in order to obtain the much needed funding to the company to meet its expenses, move forward in its development, as well as provide a salary for the two of them. Thus, from the facts, I find that Ms. Melchior consented to the granting of security over the Patent Assets. Accordingly there is a juristic reason.

[97] A critical feature to assessing a juristic reason is the question of the reasonable expectations of the parties. In this case, it cannot be said that Ms. Melchior had a reasonable expectation of receiving an interest in the Patent Assets. By her own admission, she stated that she did not know that she could have an interest in the Patent Assets and had agreed at the time the initial patent applications were being prepared that they were to be filed in Mr. Cable’s name alone. She only learned of her potential entitlement on the eve of Mr. Cable’s bankruptcy after talking to Mr. Hicks and learning about the potential of co-ownership in a patent. Based upon the positive evidence which runs counter to Ms. Melchior’s position, my view is that the reasonable expectation held by Ms. Melchior and Mr. Cable was that she had an interest or an entitlement to participate in the economic success of the enterprise that she and her spouse had started and not the Patent Assets. The reasonable expectations of the parties do not extend to Ms. Melchior having an entitlement to a targeted unencumbered interest in the Patent Assets. Further, if there was such an understanding, then given my assessment of Ms. Melchior’s knowledge of the transaction and her involvement in it, her understanding that the company was in serious need of cash, her retention of Mr. Vezina with Mr. Cable and Interact to find the financing, she consented to or authorized Mr. Cable (or waived any rights to the contrary) to offer up any interest that she had in the Secured Patent Assets for the loan. She admitted in her examination for discovery that there were no limits on Mr. Cable’s authority.

[98] While she portrayed herself in testimony as not being involved and only hearing small pieces of conversations regarding the loan, I am unable to accept that she was disinterested or unaware. Her evidence on this point is inconsistent with her testimony of her responsibilities in managing Mr. Cable on a constant basis and her detailed discussions on the operational aspects of the business with Mr. Cable and his team that would go well into the evening. Ms. Melchior’s duties included reading all of Mr. Cable’s correspondence, including his emails; determining what action was required and their priority and whether she could deal with the matter; printing out his emails; and placing them on Mr. Cable’s desk for his attention. She typed all of his correspondence, prepared all forms that required completion by Mr. Cable. The forms that she prepared for Mr. Cable’s signature included patent applications, patent information, financing documents, and documents relating to the subject loan agreement. She would have seen an email of December 17, 2003, from Mr. Hicks to Mr. Vezina, Mr. Cable and Mr. Greenwood which states that Mr. Cable is the sole inventor of the patents and that title and ownership of all patent applications resides with Mr. Cable. This email would have had to have been read by Ms. Melchior, as it was been printed out from Mr. Cable’s email file. It was obvious to me that it was her job to have a clear understanding of all of the activities of Mr. Cable and Interact. She attended virtually all meetings with Mr. Cable. The two operated closely as a team. She had her hand on the pulse of the business equal to that of Mr. Cable. Ms. Melchior was an owner of the business and understood the financial challenges faced by the company. As a final point, she was responsible for completing one of the final steps in the loan closing; she had the task of slip sheeting Schedule A to the Cable GSA. She held in her hand the very document that set out the Patent Assets which were to be charged that would enable the company that she co-founded to receive $3.5 million.

[99] Based on the above, I find that Ms. Melchior clearly understood that the Secured Patent Assets were security for the loan and that it was necessary to do so to meet the needs of Interact and protect and enhance their investment in the company. She did not complain as she knew that the loan was necessary for the business. She did not assert her interest she had under her alleged long standing arrangement with Mr. Cable at any time. Though she stated that she believed she had an interest in the Patent Assets, she also stated that she did not know that she could have a co-ownership interest. If that is so, then the argument is even stronger that she understood that the Secured Patent Assets were to be security free from any interest she could claim.

[100] Based on the aforementioned facts, I find that Ms. Melchoir understood the entire interest in the Patent Assets listed in Schedule A were being put up as security, that she had authorized Mr. Cable to provide the Secured Patent Assets as security given that she admitted there were no limits on his authority, and that in doing so she knew that she would be enhancing her opportunity to profit. She is estopped at this stage from asserting an interest.

[101] The foregoing establish juristic reasons and defeat Ms. Melchior’s entitlement to a remedial constructive trust.

[102] I find that the claim of unjust enrichment has not been established and that the application for a declaration of a constructive trust is denied.

[103] In conclusion, Ms. Melchior’s claim for a resulting trust or remedial constructive trust in the Patent Assets is denied. Further, there was little evidence, if at all, or submissions provided regarding the other assets, that claim is similarly dismissed.

Counterclaim of 568:

[104] 568’s argument is two-fold. First, 568 asserts that it has security in all of the Patent Assets held in the name of Mr. Cable. This means Families 1, 2, and 3. It relies upon Schedule “A” of the Cable GSA, which states that 568 has security over the following:

Inventions or improvements described and claimed in:

1. United States Patent Application 09/892, 142 filed June 26, 2001; and

2. Patent Cooperation Treaty (PCT) Application PCT/CA02/00981 filed June 26, 2002, designating all member states of the Patent Cooperation Treaty, and any and all applications constituting a national or regional phase entry of said PCT Application,

and all right, title and interest in and to the said inventions or improvements and said applications, and all continuations, divisions, renewals of or substitutes for said applications, and in , to and under all Letters Patent which may be granted on or as a result thereof, and any reissue or reissues of said Letters Patent, in any and all countries.

[105] 568 submits that security over Family 2 and Family 3 is specifically provided for by virtue of the bolded words above.

[106] Second, 568 says that it was the intention of the parties that 568’s security would be held over Family 2 and 3. Reliance is placed by 568 on the initial documents provided by Interact through Mr. Vezina, the discussions with and presentations made to Mr. Young by Interact and the term sheets that were exchanged in the negotiation process, the final term sheet agreed upon, as well as Mr. Young’s view that what he believed he had bargained for in terms of security was “everything in Mr. Cable’s head”. He testified that there was no talk of patent families in the discussions that he had with Mr. Vezina or Mr. Cable. 568 also states in support of its case that “the borrowers deliberately misled 568 as to the existence of Family 2 and 3.”

[107] 568 says that it was the intention of the parties that 568’s security would cover all of Interact and Cable’s “intellectual property”. In Mr. Young’s words, 568 was to get security over all the ideas “in Mr. Cable’s head” regardless of whether it had been set down as an application. This is the interpretation that 568 urges upon the court. In this regard it should be noted that Schedule “A” to the Cable GSA was drafted by a solicitor acting for 568 who was retained specifically because he was well versed in intellectual property law. It appears that neither Mr. Cable nor his solicitor’s objected to the proposed language and accepted it without alteration.

[108] Ms. Melchior on the other hand takes the position that the loan documents limit 568’s security to Family 1 Patent Assets either under Schedule C of the Loan Agreement or Schedule A of the Cable GSA. She submits that there was no common intention between Mr. Cable and 568 that 568 would take security beyond those in Family 1.

Intention of the parties

[109] In interpreting a written contract, the intention of the parties is to be discerned from the words of the contract taken as a whole. The words of a contract are not to be interpreted based on the intention of the parties. It is not permissible to reach beyond the words that have been written, or use evidence from negotiations, or to show that the terms of the written document vary from the actual intention of the contracting parties. Further, the plain and ordinary meaning of words must be given to words in a contract unless it would end in absurdity. If the language used is technical or scientific it must be examined in that light.

[110] The concerns of finding meaning outside of the contract are articulated in Black Swan Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 25 B.C.L.R. (3d) 285 (C.A.), wherein Macdonald J.A. quoted the words of Lord Wilberforce from Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.) at 240-41, as follows:

Far more, and indeed totally, dangerous is it to admit evidence of one party's objective even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition, and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised.

…

By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter, are changing and until the final agreement, although converging, still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back; indeed, something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus of the parties to appeal to. It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this is true; the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact. Cardozo J. thought so in the Utica Bank case [(1918), 118 NE 607]. And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go; it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention; the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways.

[111] Further, Macdonald J.A. also referred to Canadian Delhi Oil Ltd. v. Alminex Ltd. (1967), 62 W.W.R. 513, and the statement of Coleridge J., in Shore v. Wilson (1842) 9 Cl & Fin 355, at 525, 8 ER 450:

It is unquestionable that the object of all exposition of written instruments must be to ascertain the expressed meaning or intention of the writer, the expressed meaning being equivalent to the intention; and I believe the authorities to be numerous and clear (too numerous and clear to make it convenient or necessary to cite them), that where language is used in a deed which in its primary meaning is unambiguous, and in which that meaning is not excluded by the context, and is sensible with reference to the extrinsic circumstances in which the writer was placed at the time of writing, such primary meaning must be taken, conclusively, to be that in which the writer used it; such meaning, in that case, conclusively states the writer's intention, and no evidence is receivable to show that in fact the writer used it in any other sense, or had any other intention. This rule, as I state it, requires perhaps two explanatory observations: the first, that if the language be technical or scientific, and it is used in a matter relating to the art or science to which it belongs, its technical or scientific must be considered its primary meaning; the second, that by 'sensible with reference to the extrinsic circumstances' is not meant that the extrinsic circumstances make it more or less reasonable or probable is [sic] what the writer should have intended; it is enough if those circumstances do not exclude it, that is, deprive the words of all reasonable application according to such primary meaning. [emphasis added]

[112] Much of 568’s case is based upon the facts and circumstances leading up to the final agreements. Notwithstanding the limitation of considering such evidence I am unable to find that such evidence tendered by 568 supports its position in any event.

[113] The key negotiator for Interact was Mr. Vezina and Mr. Jim Young was the principal negotiator for 568, with assistance of his son, Mr. Chris Young.

[114] Mr. Young agreed that he would be required to conduct his own “due diligence” review of the transaction with his son and his advisors. This “due diligence” included investigation of the products of Interact, the certification for the products, the supply contracts for Interact, the customers of Interact, production capacity, the physical plant of Interact, sales volumes, revenues, unit revenues, general and administrative costs, margins, and working capital requirements of Interact.

[115] In negotiating the terms of the financing, several draft term sheets were exchanged with related discussions. After several exchanges of draft term sheets, Mr. Vezina wrote: “A) Loan Terms… Security: first mortgage…on land, building and equipment at Golden and Vavenby as well as the intellectual property…”. There is no definition of intellectual property provided in any of the term sheets.

[116] There was a noticeable and distinct vacuum on the side of 568 in regard to the any clear understanding of the security related to the loan. The 568 “due diligence” review was largely conducted by the Young’s. They appear to have focused on the opportunity to participate in a potential initial public offering through warrants under the loan agreement. The solicitors for 568 were not told of the broad scope of the security Mr. Young said that he believed was to be put up, namely, “everything in Mr. Cable’s head,” nor did the solicitors ask. Mr. Greenwood, the solicitor of the company, was given limited information on the essence of the business transaction. Mr. Young simply sent a fax of the final term sheet to Mr. Greenwood to work from. He had no direct discussion with Mr. Young on what intellectual property was to be secured. More specifically, he had no discussion regarding the importance or scope of the intellectual property that was to form part of the security for the loan. Mr. Greenwood had little recall of this discussion with Mr. Young. While he took the step of retaining an intellectual property lawyer, Mr. Sue of Oyen Wiggs Green and Mutala, in the absence of a fuller discussion with Mr. Young, Mr. Greenwood could hardly have provided Mr. Sue with specific instructions since he did not know of the breadth of the security that Mr. Young says he believed 568 would be taking as security. Mr. Sue’s instructions from Mr. Greenwood were limited and required a fast turn around. Mr. Sue had no discussion with Mr. Young. It does not appear anywhere that Mr. Sue sought to find out more about what intellectual property was to be secured. Mr. Greenwood never asked anyone to define what the intellectual property meant in the final term sheet. He never sought a definition. He agreed he did not speak to the borrower or their representatives regarding what intellectual property meant. He did not have an in-depth discussion with his client on what the definition of intellectual property was. His answer to whether he had a discussion with his clients on the intellectual property security was that they were relying on the discussions they had with Mr. Vezina. He had a recall that they told him that they were to get all the intellectual property. If that was so, then it would have been apparent to him to ask if the schedule represented all of the intellectual property. He did not ask this question nor did he seek any type of warranty or representation.

[117] I note as well the email from Mr. Verbrugge, of December 11, 2003, wherein after having incorporated most of the changes requested by Mr. Greenwood he wrote:

Eric Cables’ Security Agreement with respect to patents is substantially shorter, since it deals only with specific collateral, the enforcement of which is subject to forbearance provisions in the Loan Agreement. In my view, it is inappropriate for that Security Agreement to have all of the provisions of a full All-PAAPP GSA, but I will await your comments on that.

[118] All PAAPP means all present and after acquired personal property and this would have included all present and future patents assets.

[119] Mr. Young’s evidence, as to the security he says 568 was agreed, was eroded by several aspects of the evidence which include:

The stated importance of all encompassing security over all of the intellectual property of Interact or Mr. Cable is not borne out in the exchange of the initial term sheets. In fact, security over intellectual property was not inserted until draft #5 of the11 draft term sheets. I note that the term says ‘the intellectual property’ and not ‘all the intellectual property’. A review of one of the draft term sheets upon which Mr. Young has made several notations, evidencing a significant review and the articulation of a responding position shows no reference to the need for security over intellectual property. It appears that the need for security over intellectual property was driven by 568’s recognition that the technology was required to run some of the key equipment of Interact as without the technology rights the equipment would be of lesser value.

Mr. Young’s assertion that the security was to cover all current and future intellectual property is not found in the language of the term sheets nor in any of the notations made by Mr. Young in any of the draft term sheets.

The patent family, outlined in a schedule drafted by Mr. Hicks and provided to 568, relates only to Family 1 and his estimate for the filing of applications is about $77,000 plus or minus 10% to 15%, which approximates the $100,000 listed in the Executive Summary written by Mr. Vezina.

Chris Young said he understood the flow chart to be all of Interact’s intellectual property, yet no representation was requested for this in the Loan Agreement. There was no follow up on this by their lawyers. No questions were asked in the course of their due diligence. Mr. Chris Young submitted a list of many due diligence questions on December 21, 2004 to Mr. Vezina. They are detailed questions on various aspects of the business, however, not one deals with the Patent Assets.

Mr. Young noted the secretive manner in which Mr. Cable mentioned a new development during his visit to Golden in October 2003. He did nothing to follow up on this topic.

Mr. Chris Young’s evidence of his initial meeting with Mr. Vezina in terms of a reference to Interact’s technology was that Mr. Vezina described a high-speed edge gluing process to produce structural lumber. There is no reference to Family 2 or Family 3 technology. No one followed up from 568’s end to seek a definition of what ‘intellectual property’ meant in the context of the term sheet.

The edge-gluing technology was the only technology in use or in production at Interact’s plant in Golden, B.C.

They accepted the definition of secured patents was schedule C of the Loan Agreement. Mr. Greenwood testified that he thought intellectual property from the term sheet was what was defined as Patents in the Loan Agreement.

[120] While I accept that the technology was a key aspect of the value in Interact, and the testimony of the Youngs’ was that it was seen as such, there is an apparent lack of attention spent on investigating the scope and nature of the assets that they were being offered as security. This militates against their wholesale argument of a first on existing and all prospective technology.

[121] There was no attempt by 568 independently to find the value of the intellectual property. This would have forced a consideration of identifying the intellectual property. This is an indicator that intellectual property had secondary importance.

[122] There is also nothing in the Cable GSA that provides any security over future patents.

[123] In terms of realizing on the patents, the loan agreement contains a forbearance period and permits Interact and Mr. Cable to seek to provide licences to realize value there from. Surprisingly, Mr. Greenwood said he had not had discussions with the Youngs on this provision or how they could realize upon the patents.

[124] Mr. Chris Young’s comments on the loan agreement documents were not in relation to security over the patents; there are no comments on future patents or future applications. There was no provision sought in the agreements for Mr. Cable to advise of any future applications.

[125] During the trial, 568 was critical of Mr. Vezina’s failure to disclose the fact of patent application filings during the course of negotiations. However, it was clear that Mr. Vezina was working for Interact to find much needed funding and that it was recognized that Mr. Vezina was engaged to find funding beyond the loan of 568. It was reasonable to assume that Mr. Vezina would be seeking to reserve something to provide as further security for other financing. Mr. Young and his son understood that Mr. Vezina was seeking to find funding on several fronts for Interact including the construction of the Vavenby plant. Mr. Young and his son represented themselves as experienced businessmen. They undertook largely on their own to do their “due diligence”. If 568 wanted a “first on everything”, including everything in Mr. Cable’s head, one would have expected clear instructions from the Young’s to Mr. Greenwood or to Mr. Vezina. They certainly were not shy about expressing themselves in terms of other aspects of the transaction such in obtaining information of prior financings by Interact. In terms of Mr. Hick’s email confirming that the patent applications were in the name of Eric Cable, this email simply is a reference to what was being given as security from the perspective of Interact and Mr. Cable. Mr. Hicks had a further discussion with Mr. Sue on the ownership of the patent applications.

[126] Mr. Chris Young also agreed that in any of the meetings with Mr. Vezina or Mr. Cable there was no mention of web board or face glued oriented structural wood.

[127] Another aspect of the transaction was that Mr. Chris Young believed that the most important aspect of the transaction with Interact was the issuance of warrants by Interact to 568.

[128] Also, there is a difference in the wording between the Interact GSA and the Cable GSA. The Interact GSA has an All PAAP including intellectual property, but no such language in the Cable GSA. All of the foregoing does not support the position of 568 and is consistent with the narrower view that 568 was only to get security only over the specific Family 1 assets listed on Schedule A.

[129] Contextually, there is little to no evidence to support an intention on the part of those involved with 568 for the broad scope of security it has claimed over the Patent Assets.

Language of Schedule A:

[130] Focusing on the language of the contract itself and the question of whether schedule A encompasses more than Family 1, i.e. Family 2 and Family 3, I note that the language of Schedule A was drafted by the solicitor of 568, Mr. Sue, and reviewed by Mr. Greenwood the directing solicitor for 568. Mr. Sue was not called as a witness.

[131] The only documentation of the loan provided to Mr. Sue was the original draft of the Cable GSA, and more particularly the original draft of Schedule A. This schedule referred to two patent applications only and did not refer to the inventions which were the subject matter of the applications.

[132] From my reading of the language of the schedule as revised by Mr. Sue, he identified that the security in the proposed language by Interact did not attach to the inventions themselves but only to the applications. It appears that he properly attached the inventions through his revision and enhanced the security. It is apparent that Mr. Sue used language that was specific to the intellectual property law.

[133] Ms. Melchior’s initial position is that the appropriate security is that which is attached as Schedule C of the Loan Agreement. Under this agreement, the security to be provided for the loan includes a security agreement from Eric Cable “charging only the Patents”. The Patents are described in Schedule C of the Loan Agreement which are much more narrowly defined than in Schedule A of the Cable GSA. The schedule defines the Patents as:

1. United States Patent Application 09/982,142 filed June 26, 2001.

2. Patent Cooperation Treaty (PCT) Application CA 02/00981 filed June 26, 2002 designating all member states of the Patent Cooperation Treaty.

[134] Ms. Melchior argues that since the Loan Agreement expressly provides that it will govern and have precedence over any inconsistencies or conflict between the Loan Agreement and any term or provisions of the Security, which includes the Cable GSA, the security granted to 568 is restricted to the above stated applications.

[135] This definition was included in the draft Cable GSA which was provided to Mr. Sue for his review and reworded to what became Schedule A to the Cable GSA. For some unknown reason, Mr. Greenwood did not provide a copy of the Loan Agreement to Mr. Sue and did not seek to amend Schedule C to the Loan Agreement upon receiving Mr. Sue’s revisions to Schedule A.

[136] Notwithstanding the failure of Mr. Greenwood to ensure that the Loan Agreement matched up with the revisions to Schedule A, given the circumstances surrounding the transactions, I am of the view that it was understood by the parties that the security to be provided by Mr. Cable was that contained in Schedule A as revised by Mr. Sue.

[137] Schedule A bears repeating. It states:

Inventions or improvements described and claimed in:

1. United States Patent Application 09/892, 142 filed June 26, 2001; and

[138] The essence of 568’s argument is that Family 2 and Family 3 fall within the term “improvement” as referred to in the above schedule. More specifically, 568 argues that the wording of Schedule A should be read as applying to “all inventions or improvements” that are “described and claimed” in the named applications. I note that the U.S. patent application was granted under number 6,779,576. 568 argues that Schedule A extends to those inventions or improvements described in the whole of the patent document, including the Abstract, the Field of Invention, the background to the invention and the description of the invention; and should not be restricted to those inventions or improvements contained in the “Claims” section of the applications.

[139] For the reasons that follow I have concluded that the scope of Schedule A includes Family 1 but does not include Family 2 and Family 3.

[140] The opening words of Schedule A state that the security is the “Inventions or improvements described and claimed” in two applications that are described, and “all right title and interest in and to the said inventions or improvements and said applications…” The wording of Schedule A does not say what 568 urges upon me, namely that it includes “improvements to the inventions described and claimed”. The distinction is important. Rather, the words are obviously a technical statement as to the precise nature of the subject described or claimed in the applications. They are either inventions or improvements. In terms of the latter word, it is a characterization of the subject matter of the applications. It is either an invention or an improvement. In the context, “improvement” relates to the art described in the referenced application relative to a prior art, not a subsequent improvement. Support for this can be found in the definition of “Invention” in the Patent Act, a definition which is accepted by 568 as applicable to the instant case, and states:

“Invention” means any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter.

[141] Since 568 did not call any evidence to prove the prior art to which the “improvement” could relate, its claim cannot succeed on this point. The language of Schedule A does not support the interpretation asserted by 568. Further, to the extent that there is ambiguity in the provision, the principle of contra proferentum would operate against the interpretation of 568 given that the language was drafted by 568’s solicitor and 568 was in my view in the stronger of the positions of the parties as Interact was in serious need of cash.

[142] It is also noted that there are no continuations, renewals of or substitutes for the said applications and there have been non reissues of the only patent that has actually been granted to date.

[143] Further, in terms of whether Family 2 or Family 3 fall within the scope of Family 1, when comparing the inventions, the statement of by Binnie J. in Whirlpool Corp. v. Camco Inc., 2000 SCC 67, [2000] 2 S.C.R. 1067, provides the framework for addressing this point; namely, that it is the claims which are to be compared. Though 568 during submissions withdrew its claims for patent infringement, the statement of Binnie J. remains applicable for the analysis of this case:

¶52 It was permissible for the trial judge to look at the rest of the specification, including the drawing to understand what was meant by the word “vane” in the claims, but not to enlarge or contract the scope of the claims as written and thus understood…

…

¶63 [T]he prohibition against double patenting involves a comparison of the claims rather than the disclosure, because it is the claims that define the monopoly. The question is how “identical” the claims must be…

…

¶65 This branch of the prohibition is sometimes called “same invention” double patenting. Given the claims construction adopted by the trial judge it cannot be said that the subject matter of the ‘734 patent was the same or that the claims are “identical or conterminous” with those of the ‘803 patent.

¶66 There is, however, a second branch of the prohibition which is sometimes called “obviousness” double patenting. This is a more flexible and less literal test that prohibits the issuance of a second patent with claims that are not “patentably distinct from those of the earlier patent.”

[144] Since infringement is not claimed by 568, the question is whether Family 2 and Family 3 were anticipated in or obviously a part of Family 1. That is, to determine if there been a description sufficient to enable the making and use of the later technology in the disclosure portion of Family 1. In essence, 568’s position is that Family 2 and Family 3 applications are invalid. The “pith and marrow” approach argued by 568 appears to be outdated and has been supplanted by the purposive construction approach argued by Ms. Melchior.

[145] The concept of anticipation requires that 568 prove that the prior art, Family 1, anticipated the inventions claimed in Family 2 and Family 3. Anticipation is the complete lack of novelty, resulting from the prior disclosure of all elements of the relevant invention in a single publication. The test for anticipation is set out in Amecon Industries Ltd. v. Nutron Manufacturing (1996), 108 F.T.R. 161, [1996] F.C.J. No. 240 (QL), aff’d (1997), F.C.J. No. 239 (F.C.A.) (QL), leave to appeal S.C.C. dismissed, [1997] S.C.C.A. No. 374, which states at ¶36 and 37:

Firstly, the court must consider whether the prior disclosure gives clear and unmistakable direction which would, in every case and without possibility of error, lead a skilled person to arrive at what is covered by the claims of the patent in suit. In other words, in light of the prior patent, was it inevitable that a skilled person should be led to discover the patent in suit?

If the first question is answered in the affirmative, the court must then ask if the prior patent conveys enough information which, for practical purposes, would be sufficient for the skilled person to know how to make the claimed invention without the exercise of any inventive skill.

[146] There is also the concept of obviousness. This test is set out in Beloit Canada Ltd. v. Valmet Oy (1986), 8 C.P. R. (3d) 289 (F.C.A.):

The test for obviousness is not to ask what competent inventors did or would have done to solve the problem. Inventors are by definition inventive. The classical touchstone for obviousness is the technician skilled in the art but having no scintilla of inventiveness or imagination; a paragon of deduction and dexterity, wholly devoid of intuition; a triumph of the left hemisphere over the right. The question to be asked is whether this mythical creature (the man in the Clapham omnibus of patent law) would, in the light of the state of the art and of common general knowledge as at the claimed date of invention, have some directly and without difficulty to the solution taught by the patent. It is a very difficult test to satisfy.

[147] 568 called Mr. Suggitt as an expert. He is a mechanical engineer who holds several patents. He is an inventor who has been involved with the design of aircraft arts. He has an understanding of the use of glues. He is not a patent agent. Mr. Suggitt says that Family 2 and Family 3 are essentially the same as Family 1. The essence of Mr. Suggitt’s opinion is that because Family 1 is mentioned in the background of the applications of Family 2 and Family 3 that they are all the same invention. One has to note that Family 1 and Family 3 relate to an apparatus and process whereas Family 2 relates only to a process and product.

[148] Under cross examination, Mr. Suggitt agreed that the basis of his opinion was the fact that since the three technologies, Family 1, Family 2, and Family 3 are based upon the idea of gluing wood this made them the same. He offered as an example of the level of his analysis that a handsaw and a circular power saw were the same invention because the output from both would be the same and that they both cut wood with teeth. He also stated that Family 3 was the same as Family 1 because Family 3 consumes output from Family 1. He further stated that his analysis was not restricted to reviewing the patent materials but included contemplation of modifying the equipment. Mr. Suggitt's approach, with respect, is far too simplistic.

[149] He admitted that the inventions are found in the claims that are set out yet he did not set out any comparative analysis of the claims and stated that he relied upon the descriptions of prior art set out in the background description of the patent applications. In cross examination, Mr. Suggitt was taken through the mechanical aspects and the functionality of Families 1 and 3. He was also taken through a thorough comparison of the method claims in Families 1 and 2. Even though he said that the design components between the Family 1 and Family 3 had similar components, there were differences as well. There is a braking system in Family 1 and none in Family 3. Family 1 has a one way clamping system, Family 3 does not have a comparable structure. Further the claim in Family 3 has a gluing system but while Family 1 has such a system it is not in the claim for Family 1. There is a conveying system in Family 3 but none in Family 1. Family 3 is a batch system whereas Family 1 is continuous. Mr. Suggitt agreed that from a structural perspective the invention described in Family 1 is different from Family 3. He also agreed that there were functional differences in the two. He agreed that the face gluer equipment could not do edge gluing. The cross examination revealed that there are a number of elements that are claimed in one family that are not claimed in the other, both in terms of method, functionality and mechanical parts. Mr. Suggitt also admitted that one does not require the Family 1 apparatus in order to create Family 2 products. One can do the same thing with hand clamps and home depot wood. He also agreed that Family 2 relates to a wood product and a method as opposed to apparatus and process like Family 1 and Family 3.

[150] Overall, I did not find the evidence of Mr. Suggitt sufficiently persuasive or in line with the legal tests as set out in the authorities provided to me: Amecon Industries Ltd. v. Nutron Manufacturing and Beloit Canada Ltd. v. Valmet Oy. On the basis of the apparatus, their components, methods, products and functionality, the inventions of Families 1, 2, and 3 are distinct and separate. Family 1 relates to an isolated technology. Further, I am not persuaded by the report of Mr. Vermette’s that Families 2 and 3 are improvements of Family 1. The written submissions of Mr. Penman, counsel for Ms. Melchior casts sufficient doubt over the approach taken in the Vermette report as it applies to this case.

[151] In conclusion, I find that the collateral specified in Schedule A does not include the inventions of either Family 2 or Family 3.

Summary:

[152] In summary I find that:

1. Ms. Melchior has not established that there is a resulting trust in her favour relating to the Patent Assets and other assets;

2. Ms. Melchior has not established that Mr. Cable has been unjustly enriched. She is not entitled to a constructive trust over the Patent Assets and other assets;

3. The security of 568 is limited to Family 1 and that 568 has a first charge on the whole of the patents, patent applications set out in Family 1.

[153] There may be further directions or orders required arising from these reasons and I will hear any submissions if the parties require it.

“D. Masuhara, J.”
The Honourable Mr. Justice D. Masuhara

Counsel for the Plaintiff:	L.K.L. Li R.D.P. Penman
Counsel for the Defendant 568864 B.C. Ltd.:	D. Fitzpatrick
Date and Place of Trial/Hearing:	January 23-27, 30-31, 2006, May 15-19, 29-31, 2006, June 1-2, 12-14, 28-30, 2006, and July 10-12, 2006 Written Submissions July 17, 2006, and July 20, 2006
	Vancouver, B.C.

Citation:	*Melchior v. Pricewaterhouse Coopers et al,*
	2007 BCSC 136