Arnold Hennessy Holdings Inc. v Flapperless Inc., 2016 ONSC 6341

The Ontario Court granted the Plaintiff's motion for summary judgment for payment of royalties owing under the licence agreement. The inventor, Arnold Hennessy, had assigned all of his personal right and interest in the patents and toilet tank technology which he had developed to the Plaintiff. The Plaintiff subsequently licensed the Defendant Company to commercialize the technology. The original agreement was amended in 2006 to provide that upon the incapacity or death of Arnold Hennessy, the intellectual property rights would become the sole and exclusive property of his nephew Philip Hennessy, the other named Defendant and current director and president of the Defendant Company. Before Arnold Hennessy's death, the Defendant Company reduced royalty payments to the Plaintiff by 50% following an oral agreement between Arnold and Philip Hennessy in late 2012. Arnold Hennessy died in 2014.

The Court considered various defences, including the impugned oral agreement. The Court was not prepared to accept Philip Hennessy's uncorroborated evidence that there was an oral agreement to vary the terms of the written agreements between the parties. As such, the Defendant Company was found liable for the unpaid royalties up until Arnold Hennessy's death. The Court found no basis to pierce the corporate veil to make Philip Hennessy personally liable for the Defendant Company's breach of contract. Furthermore, the Court refused to enjoin the transfer of the intellectual property to Philip upon the incapacity or death of Arnold, as was provided for in the 2006 amendments. The Court noted that the subsequent pursuit of remedies by the plaintiff did not have the effect of reversing what has already occurred.