U of R rebuked by judge for falsely alleging its carbon capture partners committed fraud

A Court of Queen's Bench judge has rebuked the University of Regina for falsely alleging its carbon capture business partners had committed fraud.

In 2012, the university sued HTC Pure Energy and the South Korean-based Doosan group of companies, alleging the two companies had secretly entered into an agreement to commercialize the university's carbon capture technology in exchange for payment, but failed to pay royalties to the U of R.

The lawsuit claimed HTC received a $10 million payment from Doosan for the technology but concealed that fact from the university.

The allegations of fraud made by the university were baseless and wholly without merit.- Justice Kalmakoff in Queens Bench court judgment

For years HTC and Doosan have been been arguing that the university was falsely alleging fraud in its lawsuit. They said the university knew about the payment all along.

And in an October ruling, Justice Kalmakoff agreed.

"The allegations of fraud made by the university were baseless and wholly without merit," he wrote.

Furthermore, he found the university never had a basis for believing HTC and Doosan had committed fraud but for a long time, it refused to withdraw the claim.

"Even once the information which demonstrated the lack of merit in the allegations of fraud was clearly drawn to the university's attention, the university persisted with the allegations, refusing to change its position until the eleventh hour," the judge explained.

In the end, the university did remove the allegation of fraud against HTC and Doosan from its statement of claim. According to the judgment, the university told the judge it was planning to make that change, but at a later time in the proceedings. 

He said because of the university's behaviour, it deserves a more severe penalty. As a result, the judge awarded Doosan triple costs. 

​"An immediate sanction is, in my view, necessary to denounce that sort of conduct in the litigation process." He awarded about $35,000 in legal costs to HTC and Doosan.

How the dispute arose

In 2005, Regina-based HTC became a sponsor of the university's carbon capture research program. According to an HTC annual report that agreement "provided the corporation access to CO2 capture technologies developed by the ITC (International Test Centre at the University of Regina)."

HTC went on to negotiate a $10 million deal in 2008, licensing Doosan to use the university's technology.

As part of it's statement of claim, the university alleged that payment was made behind the university's back. It said the payment should have been disclosed and a portion should have been paid to the university.

But Doosan claimed the university was aware of this payment and with that knowledge, signed a letter "granting Doosan the right to become a direct licensee of the university in certain circumstances."

That letter was signed by Ian Bailey, who was an employee of the university and the director of the University Industry Liaison Office.

In the lawsuit, the university said HTC and Doosan deceived Bailey into signing the letter while failing to reveal to him that Doosan had paid money to HTC.

The university claimed HTC and Doosan didn't reveal the fact of the $10 million payment and "deceived Mr. Bailey into believing, incorrectly, that the exclusive consideration being provided by the Doosan Defendants was the promise to pay "royalty fees" under the Doosan License Agreement."

In addition, the university argued that Bailey didn't have the authority to sign on behalf of the U of R and it claimed Bailey didn't write the so-called confirmation letter at the heart of the dispute. Instead, the university said, that letter was written by HTC and/or Doosan.

According to the court judgement, the university argued that HTC and Doosan, "on the basis of a material misrepresentation misled and thereby induced an unauthorized representative of the university to execute the confirmation letter, which contained strategically uncertain language calculated to enrich HTC and the Doosan defendants at the expense of the university."

But, the judgement points out, Doosan says the university's attempt to portray Bailey as unauthorized is "baseless."

"Doosan says that Mr. Bailey had actually authority to enter into the confirmation letter agreement on behalf of the university. Mr. Bailey held an executive or high ranking position within the UILO, which is a unit, branch, department and or division of the university."

Doosan said that until the lawsuit was launched in 2012, the university never questioned whether Bailey had the authority to sign agreements on behalf of the university.

While this issue has now been resolved, the university's original lawsuit against HTC and Doosan continues. 

Bailey has been at the centre of controversy before

A few years back, CBC News broke the story of another carbon capture research controversy at the University of Regina in which Bailey also played a central role.

In 2009, Bailey was running the university's International Performance Assessment Centre for Geologic Storage of Carbon Dioxide (IPAC-CO2), while at the same time, he was on the board of IPAC's largest supplier.

The government and the university concluded this was a conflict of interest.

University of Regina president Vianne Timmons said she was preparing to take disciplinary action when Bailey went on medical leave. 

CBC has been unable to reach Bailey for comment.