Canada: Supreme Court Of Canada Confirms Shareholders Do Not Have Sufficient Interest To Claim Damages From Losses Suffered By The Corporations They Own

In Brunette v. Legault Joly Thiffault, 2018 SCC 55 (Brunette), the Supreme Court of Canada confirms how standing rules in the Code of Civil Procedure, CQLR, c C-25.01 (CCP) apply in situations where shareholders want to sue on their own behalf to recover losses to the corporation they own.

Like litigants across Canada, any individuals or entities that want to file civil suits against other parties in Québec must show that they have standing to do so. To secure standing, claimants must be able to demonstrate what is known as "sufficient interest" in the dispute under article 85 of the CCP. If the party being sued believes that the claimants have no such sufficient interest, it can ask the court to dismiss the complaint under article 168(3) of the CCP.

The appellants in this case were trustees of a trust that was the sole shareholder of a holding company. That company, in turn, controlled a set of corporations that owned, renovated, and operated seniors' residences. By 2010, most of these corporations were bankrupt as the result of, amongst other things, unexpected tax bills issued by Revenu Québec. The corporations had received tax advice from the respondents — several lawyers and accountants. According to the appellants, these lawyers and accountants gave the corporations faulty advice. The appellants allege that this bad advice caused the corporations to unknowingly structure their tax liabilities in a manner that did not comply with tax legislation. The appellants claim that the unexpected tax bills, and the resulting bankruptcy of the corporations, flowed directly from the lawyers' and accountants' questionable advice. Once the corporations were stripped of value as a result of going bankrupt, the entire value of the trust property or "patrimony"— the shares in the corporations — was lost.

The appellants claimed damages for the loss of the trust property. They brought their claim against the respondents as trustees of the depleted trust, not on behalf of the corporations. The respondents successfully sought to have the claim dismissed by the Superior Court of Québec on the basis that the appellants did not have a sufficient interest in the dispute because they were acting as third-parties, and not on behalf of the corporations that actually suffered the losses in question. The Court of Appeal agreed.

The Supreme Court of Canada also agreed. The majority decision confirms that under article 168(3) of the CCP, an action brought by shareholders on their own behalf against a defendant who caused harm to the owned corporation can be dismissed for insufficient interest where the plaintiffs fail to allege the necessary facts to establish two elements. First, they must adequately allege a breach of an obligation owed to them that is distinct from obligations owed to the corporation itself. Second, they must similarly allege personal and direct injuries flowing from that breach that are distinct from injuries suffered by the corporation. Put another way: a shareholder can only independently seek damages related to losses to the corporation where that shareholder can make a distinct claim from the one the corporation could have pleaded against the defendants. The majority's decision is a confirmation of the Court's 1990 decision in Houle v. Canadian National Bank, [1990] 3 SCR 122 (Houle).

The Court's reasoning is premised on a hallmark of corporate law. Corporations have distinct legal personalities, therefore, it is the corporation that suffers losses that has the right to bring an action to recover those losses. This means that any sufficient interest in a dispute involving a collapsing corporation is attributed to the suffering corporation itself. The shareholders, acting on their own behalf, fall outside of the dispute unless they can plead a distinct cause of action.

The Court agreed with the courts below that the appellants' claim should be dismissed for lack of sufficient interest. The obligations, breaches, and damages pleaded by the appellants overlapped entirely with a claim the bankrupt corporations could have brought against their lawyers and accountants. The loss of the trust property, for example, was simply the indirect consequence of the corporations going bankrupt. Similarly, the defendant lawyers and accountants owed no separate obligation to provide advice to the trust. The Court concluded that, as a result, the trustees' claim was not distinct and so they were correctly refused standing for lack of sufficient interest.

The decision confirms the very narrow scope for direct actions by shareholders in Québec, which is consistent with how such claims are treated elsewhere in Canada. As per Houle, and now Brunette, shareholders will only have standing to bring independent causes of action for damages flowing from losses to the corporations they own if they plead adequate facts to establish that (1) the defendants owed the shareholders a unique obligation that was breached and (2) that the breach led to distinct and direct losses to the shareholders — losses that are separate from those suffered by the corporations.

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions