Canada: Quebec Law Limits Personal Liability For Administrators & Officers In Wrongful Dismissal Actions

In Quebec, actions for dismissal without just and sufficient cause against administrators and officers of a corporation can be set aside, provided that it can be demonstrated that the plaintiff's motion alleges insufficient facts to lead the court to conclude that administrators and officers should be held personally liable. Courts should not pierce the corporate veil and search blindly and indiscriminately for any cause of action that might work against administrators or officers where the plaintiff's action is clearly unfounded in law.

In Ronald Stark v. F & D Plastics Inc.1, the plaintiff was a former employee of the defendant F & D Plastics, of which the defendants Darren and Roger Rosbury were administrators and officers. At trial, it was acknowledged that the plaintiff was dismissed without just and sufficient cause and that a release had been signed, but the plaintiff alleged that that release did not provide for sufficient notice. Therefore, he filed a motion to institute proceedings against F & D, but also against the Rosburys personally, in their capacity as administrators and directors, for an indemnity in lieu of a longer notice period. The Rosburys filed a motion to dismiss the plaintiff's action. Justice Danielle Turcotte of the Quebec Superior Court granted the Rosburys' motion and dismissed the plaintiff's action against them personally.

The plaintiff alleged that there was cause to pierce the corporate veil because the Rosburys used a legal person to violate rules of public order. The plaintiff further alleged that they had acted in bad faith in not giving him sufficient payment in lieu of notice and thereby committed a fault. According to the plaintiff, he had a right to pursue all parties at fault as co-defendants and the Rosburys could not invoke the corporate veil to deflect their personal responsibility for violations of rules of public order, such as those requiring notice or payment in lieu thereof.

The Rosburys requested the dismissal of the case against them personally since in his motion, the plaintiff alleged insufficient facts to lead the Court to conclude that they should be held personally liable. Furthermore, since at all relevant times the Rosburys acted as agents of F & D, and since the plaintiff's motion identified no distinct fault on their part, the action was unfounded in law. As such, the plaintiff's action constituted an improper use of procedure and the Rosburys argued, should be dismissed.

The Court first examined whether the action against the Rosburys was unfounded in law. The Court found that while the plaintiff explicitly mentioned in his motion that all defendants had acted in bad faith, he provided no facts whatsoever describing the nature of the Rosburys' personal actions.

As for the issue of improper use of procedure, the Court reviewed legal commentary which clearly stated that directors were not personally liable so as long as they acted within the confines of the powers conferred on them, and that generally, in matters of dismissal, only the employer could be held liable. For an individual to be held personally liable, a distinct fault on his part had to be proven. No such fault was alleged in the plaintiff's motion.

The dismissal, in and of itself, was not a fault or an abuse of right, and none of the facts alleged in the plaintiff's motion could lead the Court to conclude that the Rosburys had committed any fault of their own. Their actions in carrying out the dismissal and signing the release were performed as agents of the company and therefore could not be considered grounds for their personal liability.

Since an unfounded suit may constitute procedural impropriety, section 54.2 of the Code of Civil Procedure provides for a reverse onus where a defendant summarily establishes that an action or pleading may constitute such an impropriety. In this case, the Court found that the plaintiff was unable to satisfy this reverse onus to establish that his action against the Rosburys was founded in law.

Furthermore, the Court found that no intention to harm on the part of the plaintiff was needed in order to dismiss the action; the fact that he instituted an action that was unfounded in law constituted a "culpable" action in and of itself. Quoting legal commentary on the subject, the Court stated that where no reasonable cause of action existed, one should not search blindly and indiscriminately for any cause of action that might work.

In the Court's opinion, the action against the Rosburys had no reasonable chance of success. Therefore, it dismissed the action against them, with costs against the plaintiff.

Footnotes

1 Ronald Stark v. F & D Plastics Inc., FD Plastiques Canada Corporation, Darren Rosbury, Roger Rosbury, Quebec Superior Court, February 12, 2013.

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