A recent lawsuit in British Columbia is the latest example of an
emerging trend in which plaintiffs are seeking to hold parent
companies liable in negligence in relation to the actions of their
foreign subsidiaries. Residents of Guatemala are suing Tahoe
Resources Inc., a Canadian mining company incorporated in British
Columbia, in connection with an alleged shooting by security
personnel at the Escobal mine. The mine is not owned by Tahoe, but
by its Guatemalan subsidiary.
Instead of asking the B.C. court to "lift the corporate
veil" to hold Tahoe liable for its subsidiary's actions
– which Canadian courts have been very reluctant to do
– the plaintiffs are alleging that Tahoe is directly
liable in negligence and battery. Should the matter proceed to
trial, the plaintiffs will argue that the Canadian parent company
owed a duty of care directly to the Guatemalan residents, in view
of the extensive control that the parent company exercises over the
operating subsidiary (including with respect to mine security). The
plaintiffs will also argue that the Canadian parent company
breached its duty by negligently hiring, training and/or
supervising the security personnel.
The question remains open whether a parent company can owe a
duty of care to members of the local community in which a
subsidiary's operations are located. In Choc v Hudbay
Minerals Inc., the Ontario Superior Court of Justice refused
to strike out a similar negligence claim made against Canadian
mining company Hudbay Minerals (also in relation to an incident
involving security personnel at a mine located in Guatemala).
Although the Hudbay decision is not a final disposition of
the case on its merits, that decision provides an indication of the
factors that may be relevant in determining whether a Canadian
parent company owes a duty of care to local residents. In
particular, the following factors may be relevant:
effective control of the subsidiary (for example, whether the
subsidiary is wholly owned or not);
the degree of control exercised by the parent company over the
situation giving rise to potential liability;
public representations by the parent company regarding its
relationship with its subsidiary;
assumptions of responsibility by the parent company regarding
the situation giving rise to potential liability;
employment by the parent company, rather than the subsidiary,
of the individuals responsible for the subsidiary's activities;
adoption of policies by the parent company that apply to its
The claim against Tahoe, like the Hudbay decision,
should serve as a warning to all those who believe that a parent
corporation is immune from liability by reason of its separate
legal personality. The application of this new theory of parent
liability is not limited to issues of employee conduct; it could
open Canadian companies up to a wide universe of claims regarding
the conduct of their subsidiaries, including environmental claims.
Depending on the circumstances, the actions and omissions of
foreign subsidiaries could have serious financial and reputational
consequences for Canadian companies.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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