The Alberta Court of Appeal recently decided that a corporate
director who was found to have made negligent misstatements about
the management team's knowledge, expertise and competence to
operate its business, was not personally liable in tort.
In Hogarth v. Rocky Mountain Slate Inc. et
al, 2013 ABCA 57, the Alberta Court of Appeal overturned
the decision of the trial judge, thereby absolving one of six
corporate directors (and the only one to appeal the trial decision)
of personal liability for negligent misrepresentation.
Simonson was Chairman of the Board of Directors of Rocky
Mountain Slate Inc. He was also a shareholder and an officer of
Rocky Mountain Slate Inc.
For the purpose of raising capital for the company, a limited
partnership was created. Among the material prepared was a business
plan, an "Investment Opportunity" document, and a
"Future Oriented Financial Information for the Three Years
ended December 31, 2001, 2002 and 2003."
When the investment failed, various investors commenced an
action to recover their investments alleging negligent
misrepresentation against the officers and the corporate entities
involved. The promotional materials contained what were said to be
negligent misrepresentations about the capabilities, competence and
knowledge of the management team, including Simonson.
The trial judge agreed that the promotional material contained
materially inaccurate misrepresentations about the management
team's knowledge, expertise and competence to operate the
business. She also found that the individual Defendants, including
Simonson, were personally liable, citing evidence of standalone
tortious conduct. It appears that the trial judge was persuaded to
find personal liability on Simonson by virtue of his status as an
officer and an investor (shareholder) of the company.
However, the Alberta Court of Appeal, while upholding the
finding of negligent misrepresentation, found that Simonson's
position as a director, officer and investor in the company, did
not give him a sufficiently separate identity from the corporation
so as to ground personal liability in tort.
The Court of Appeal relied upon its own decision in
Blacklaws v. Morrow, 2000 ABCA 175 in acknowledging
... There will be circumstances in which the actions of a
shareholder, officer, director or employee of a corporation may
give rise to personal liability in tort despite the fact that the
impugned acts were once performed during the course of their duties
to the corporation.
The Court of Appeal went on to qualify this general statement,
again borrowing from its earlier reasoning in Blacklaws v.
Where those actions are themselves tortious or exhibit a
separate identity or interest from that of the corporation so as to
make the act or conduct complained of their own, they may well
attract personal liability.
The Court of Appeal found that the statements made in the
promotional material of Rocky Mountain Slate Inc. were for the
purpose of raising funds for the corporation and for its benefit,
not for the individual benefit of Simonson and others. Simply being
an officer of the company and having a shareholding or other
financial interest in a corporation does not automatically
translate into a separate interest for the purpose of establishing
Moreover, the Court of Appeal recognized that the trial judge
did not identify any aspect of Simonson's conduct in making the
impugned negligent misrepresentations independent from his activity
as a corporate officer.
Therefore, the Court of Appeal found that the claim against
Simonson for personal liability in tort failed and Simonson's
appeal was allowed.
This case is illustrative of the need to distinguish between
corporate and personal liability when suing directors and officers
of a corporation in tort. At least in the Province of Alberta,
Courts are reluctant to pierce the corporate veil to find personal
liability on corporate directors and officers for what can be
considered to be corporate wrongdoing.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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