Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of stock option plan provisions under corporate governance rules

• Whether a former director could exercise options after resignation based on plan language

• Failure to seek board confirmation or legal advice regarding interpretation of option rights

• Appellant's omission to exercise options while still holding qualifying status as director

• Court's application of contract interpretation principles from Sattva Capital Corp. v. Creston Moly Corp.

• Rejection of equitable relief in light of clear contractual language.

Facts of the case

David Jarvis, the appellant, had been granted stock options under 1CM Inc.’s 2019 Option Plan. A key provision of that plan required individuals to be directors at the time they exercised their options. Mr. Jarvis resigned as a director of the company and later attempted to exercise his options, relying on his own interpretation of the plan that he had one year post-resignation to do so.

Mr. Jarvis believed that section 2.10(c) of the Option Plan granted him a one-year window following resignation to exercise his options. However, the controlling provision, section 2.06(c), clearly stated that only current directors were eligible to exercise such rights. Despite having the ability to act while still a director, Jarvis neither exercised the options nor sought legal advice or board confirmation regarding his interpretation before stepping down.

Outcome of the case

The Ontario Court of Appeal dismissed Mr. Jarvis's appeal. The panel found no palpable or overriding error in the application judge’s interpretation of the Option Plan. It held that the plan’s language was unambiguous: the right to exercise the options was contingent on being a director at the time of exercise. The court emphasized that Jarvis had every opportunity to clarify his interpretation or act while he was still eligible, but failed to do so. The appeal was dismissed with costs awarded to the respondent in the agreed amount of $15,000, inclusive of disbursements and HST.