Personal Liability of a Corporate Director

It is startling how often directors of corporations are added to claims without any legal basis.  The very recent Newfoundland decision in BAE-Newplan Group Limited v. Dalton, 2012 NLCA 21 gives a helpful summary of the law regarding the personal liability of a director:

 

General Principles – Personal Liability of a Director

[19]         It is helpful to begin the analysis of this appeal with general principles that apply to possible personal liability of corporate directors.  In Montreal Trust Co. of Canada v. ScotiaMcLeod Inc. 1995 CanLII 1301 (ON CA), (1996), 129 D.L.R. (4th) 711 (ONCA), leave to appeal refused (1996), 205 N.R. 313, Finlayson J.A., for the Court, explained limits on the scope of personal liability of directors, at pages 720 to 721:

…  A corporation may be liable for contracts that its directors or officers have caused it to sign, or for representations those officers or directors have made in its name, but this is because a corporation can only operate through human agency, that is, through its so-called “directing mind”.  Considering that a corporation is an inanimate piece of legal machinery incapable of thought or action, the court can only determine its legal liability by assessing the conduct of those who caused the company to act in the way that it did.  This does not mean, however, that if the actions of the directing minds are found wanting, that personal liability will flow through the corporation to those who caused it to act as it did.  To hold the directors of Peoples personally liable, there must be some activity on their part that takes them out of the role of directing minds of the corporation.  …

[20]         The Court in ScotiaMcLeod also noted that assessing the personal liability of directors in the context of the relevant case law requires a “fact-specific” analysis, and that the facts giving rise to personal liability must be “specifically pleaded” (page 720).  In addition, the actions of the directors “must exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own” (page 720).