Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether an enforceable agreement granted Junfeng Jia a 30% equity interest in Skycope Technologies.

• Trial judge relied heavily on an early email (the “Equity Distribution Memo”) to support the existence of the equity agreement.

• Appellate court found no sufficient evidence to prove the 30% equity was part of an enforceable employment contract.

• Use of proprietary code and violation of confidentiality led to $800,000 in general damages against Jia, Pan, and Bluvec.

• Arbitration in China ruled that Jia forfeited his shares in Shengkong due to breach of non-compete obligations.

• Appeal partially allowed: equity damages award reversed, but punitive damages claim remained denied.

Facts and outcome of the case

Background and parties involved

The dispute arose between Skycope Technologies Inc., a Canadian anti-drone technology company, and its former Chief Technology Officer, Junfeng Jia, along with other former employees and a competing company, Bluvec Technologies Inc.. Skycope alleged that Jia and other defendants breached employment contracts and fiduciary duties by misusing confidential information and source code to establish a rival business.

Jia, in turn, filed a counterclaim asserting he was entitled to a 30% equity interest in Skycope, had been wrongfully dismissed, and was owed repayment for a loan he made to the company. The counterclaim also claimed damages based on unjust enrichment or unpaid compensation for work done.

Trial court findings

The trial judge found that while Jia and others had indeed misused Skycope’s proprietary technology—leading to an $800,000 general damages award against Jia, Pan, and Bluvec—Jia had also proven an oral agreement entitling him to 30% of Skycope’s shares. The judge relied significantly on a July 23, 2016 email from Skycope’s founder Eric Liu proposing a 60/30/10 equity split among Liu, Jia, and a reserve pool. She ruled that this email and subsequent conduct indicated a binding oral contract. Accordingly, she awarded damages equal to the value of a 30% equity interest in Skycope as of Jia’s termination date in December 2017. Jia was also awarded repayment for his personal loan to the company.

Claims for punitive damages brought by Skycope were denied, with the court finding that the conduct of Jia and others, though wrongful, did not rise to the high bar required for such an award.

Court of Appeal decision

On appeal, the British Columbia Court of Appeal overturned the award of damages equivalent to a 30% equity interest. The appellate justices held that the evidence did not support the conclusion that there was a finalized agreement granting Jia that specific shareholding. They found the “Equity Distribution Memo” to be a proposal rather than a contract and noted that no party had clearly testified that the memo represented a binding deal. Discussions about equity had been ongoing, and no final agreement had been reached before Skycope became a subsidiary of a Chinese entity, Shengkong Technologies, in 2017.

While the court affirmed that Jia was likely entitled to some form of equity or compensation, it ruled that there was insufficient evidence to confirm the 30% claim. The matter was remitted to the trial court for further consideration on whether Jia may have an equitable claim based on principles like unjust enrichment.

The Court of Appeal also dismissed Skycope’s claim for punitive damages, agreeing with the trial judge that the misconduct, while serious, did not meet the threshold for such an extraordinary remedy.

Final outcomes and costs

The appeal was allowed in part. The award of 30% equity interest damages to Jia was set aside. Skycope was awarded its costs for the appeal, and the question of costs at trial was remitted back to the lower court for reconsideration. Jia’s repayment claim for his loan to Skycope stood, but the majority of his counterclaim relief was eliminated.