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DIRECTORS AND OFFICERS - Personal liability of directors to persons other than the corporation

Thursday, April 11, 2019 @ 7:52 AM  


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Appeal by the plaintiffs from dismissal of their action seeking to hold the defendant liable in tort in his capacity as a director or employee of a corporation. The defendant was the director of a construction company retained as a subcontractor to install a temporary basement staircase in a new home. The plaintiffs were the employees of another subcontractor who were injured when the staircase collapsed underneath them. The defendant supervised and participated in the installation of the staircase. He denied that the installation was negligent and alleged the staircase failed because it was overloaded, or because other employees removed bracing holding it in place. The plaintiffs were compensated for their injuries by the Workers’ Compensation Board. The board brought a subrogated action against the defendant to recover the amounts paid. The defendant sought summary dismissal of the claim on the basis he was acting within the scope of his duties as an employee rather than as an officer of the company. A master granted the application on the basis there was no overt or extraordinary act that took the defendant’s conduct beyond the scope of his employment. A chambers judge sustained the master’s decision on appeal. The plaintiffs appealed to the Court of Appeal.

HELD: Appeal allowed. The case raised the competing policy objectives of compensation of persons injured by tortious acts versus the limitation of personal liability for corporate acts. In assessing whether a corporate representative should be exposed to personal liability for corporate torts, it was acknowledged that the underlying risk could readily be managed and diverted through the purchase of appropriate insurance. In this case, the injured claimants would have anticipated that all work at the jobsite was performed through corporate entities with limited liability. That limited liability was not designed to immunize tortfeasors who caused personal injuries. While the claimants would have anticipated receiving compensation from the board for any injuries they suffered, that did not negate the board’s expectation that it could pursue subrogated claims against tortfeasors outside the system. The defendant could not escape personal liability for any personal injuries he caused to the claimants as a result of a negligent act, even though his involvement in the construction of the staircase was a part of the business of his company. The summary dismissal was set aside with the merits of the plaintiffs’ claim to be determined at trial.

Hall v. Stewart, [2019] A.J. No. 305, Alberta Court of Appeal, J. Watson, F.F. Slatter and B.K. O'Ferrall JJ.A., March 18, 2019. Digest No. TLD-April82019009