Vancouver-based Nevsun Resources Ltd. joined an interesting club
last month when three plaintiffs said they are suing the company in
a B.C. trial court, alleging forced labour and other human rights
violations at the company's Bisha gold mine in Eritrea.
Nevsun, which describes the allegations as unfounded, is the latest Canadian parent
company to be sued over the alleged actions of a foreign subsidiary
or contractor. Vancouver-based Tahoe Resources Inc. was named in a suit last June over an incident at
the company's mine in Guatemala. Then there's Toronto-based
Hudbay Minerals Inc., which has been sued in Ontario allegations
that security personal assaulted women at its mine in
It was once believed that as separate legal entities, a Canadian
parent company was distinct and therefore legally immune from the
actions of its foreign subsidiary or contractors. Or so goes the
legal reasoning if you believe the "corporate veil"
insulates the parent from any liabilities that attach to its
subsidiaries abroad. But plaintiff lawyers have developed a work
around that appears to be putting Canadian parent companies on the
hot seat. Lawyers expect more such cases.
"This is on the horizon more than ever. Companies
traditionally think they were protected from these types of actions
because of the corporate veil," says Luis Sarabia, a partner
with Davies Ward Phillips & Vineberg LLP in Toronto.
"Mining companies are just coming alive to this being a real
The law hasn't gone through a dramatic change. Rather,
lawyers are skirting around the corporate veil issue by pointing to
public statements that Canadian parent companies have made about
their commitments to corporate social responsibility. They're
then suing the Canadian parents for negligence and other
traditional torts on the grounds that management hasn't lived
up to the standards outlined in their public pronouncements.
"Realize that when you're making these statements,
you're creating a situation in which you'd better ensure
that your subs and employees are properly trained, and that there
are no incidents which could give rise to liability," Mr.
The implications are simple. Canadian companies must be prepared
to defend themselves in Canadian courts based on Canadian
principles, lawyers say. These cases involving the activities of
foreign subsidiaries are landing in Canadian courts based on
traditional and recognized Canadian legal principles.
"We will see more of this," says Craig Ferris of
Lawson Lundell LLP in Vancouver. "If you'd asked me
four years ago, I say there hadn't been any of them. Now
we've seen three of them. So there's a crack in the door
and somebody's got their foot in there."
Lawyers are following these cases closely. The plaintiffs in all
three cases have made allegations that have yet to be proven in
court. So far the most important legal ruling to emerge in any of
the actions has been a 2013 procedural decision in which an Ontario judge confirmed that the case
against Hudbay raises a proper cause of action that can be tested
"If Hudbay goes to trial and this new duty of care is
recognized by a trial judge, then we've got major new law and
it's explosive," says Kelley McKinnon, a litigator with
Gowling Lafleur Henderson LLP in Toronto. "If unsuccessful,
that will be one decision that shuts down the novel approach of
trying to go after the Canadian parent."
Meanwhile, lawyers have immediate advice for corporate clients:
when it comes to CSR, walk the talk.
"One of the biggest problems a company can get into is to
have all of these fine policies, which are broadcast to investors,
the market, and up on the internet, and then not follow through on
them," Mr. Ferris says. "It's going to have to
pervade the whole business."
Originally published in Financial Post, National
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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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