A dispute over the circumstances surrounding a failed 2003 business deal that would have seen Integral Wealth Management Inc. buy KingsGate Wealth Management Services Ltd. has resulted in the filing of a claim by Integral and a counterclaim by KingsGate.

The legal tangle also draws in Quebec-based Industrial Alliance Insurance and Financial Services Inc., which has purchased KingsGate Securities Ltd, a subsidiary of KingsGate.

In March, Integral filed a statement of claim in Ontario superior court for $2 million against KingsGate and its securities subsidiary and $2 million against Industrial Alliance and its subsidiary Industrial Alliance Securites Inc.

Integral, a privately owned investment management firm based in Toronto, alleges that KingsGate, an investment service corporation based in Etobicoke, Ont., breached a May 2003 letter of intent that would have seen Integral purchase 100% of KingsGate.

“This thing was to the point where we had a 50-page purchase and sale agreement done. We were just dotting the ‘I’s’. [KingsGate] walked from it,” says Darryl Sherriff, president of Integral.

The Integral claim further alleges that Industrial Alliance, a large insurance and financial services company, interfered with the contractual relations of Integral by coming to an agreement with KingsGate for the purchase of its security arm in March.

Sherriff indicated that the $4 million claim figure against both KingsGate and Industrial Alliance represented funds it spent on due diligence surrounding its purchase attempt of KingsGate and costs necessitated by having to seek another purchase target and conduct due diligence on that target. In March 2004, Sherriff purchased brokerage Brawley Cathers Ltd.

“Some people initiate lawsuits and they just throw out numbers. These [his claims] are actual, sustainable damages that I can show, out of pocket,” Sherriff said.

This month, KingsGate and Industrial Alliance filed a joint statement of defense, alleging, among other things, that the letter of intent had been rendered void by late September 2003 when Integral had failed in its repeated attempts to find financing for the deal.

“We believe the suit is unfounded and without merit,” says Jacques Carrière, vice-president, investor relations, for Industrial Alliance. “We will vigorously defend our case. We’re confident that we’ll be successful … And Industrial Alliance and KingsGate are also committed to not letting our new partnership be distracted by this suit.”

Along with the joint statement of defense, KingsGate, acting without Industrial Alliance, filed a $5 million counterclaim against Integral alleging, among other points, breach of the confidentiality agreement and misrepresentation on Integral’s part in relation to the May 2003 letter of intent.

Contacted about the counterclaim, Sherriff indicated that he hadn’t had neither seen it nor had an opportunity to review it, but said that a counterclaim was “typical” and that he was undeterred in seeking his original claim.

Fred Roberts, co-founder of KingsGate, echoed Industrial Alliance in saying that Integral’s claim was without merit.

“Regardless of [Integral’s] tactics, we will not be distracted from achieving our business development goals,” Roberts said.