Publications

The practice area of Directors and Officers Liability focuses on the liabilities of directors and officers arising out of their duties and responsibilities as directors and officers of business corporations and non-profit organizations. Much of modern society’s activities are carried out by such corporate entities, and as they act through their directors and officers, it is not surprising that there is a broad range of sources of liability for directors and officers when acting in their respective capacities for these corporations. 

Over the past few years, there have been significant developments in both legislation and case law which have had an impact on corporate governance and the obligations and liabilities of directors and officers in Canada. In Canada, directors’ and officers’ statutory liability arises generally from two principal sources: the applicable Canadian and provincial corporate statutes and the provincial securities statutes. Directors and officers may also incur liability arising from various other statutes which impose specific liabilities to ensure compliance with their dispositions. It is important to note that the federal Canadian crown, the ten provinces and the three territories each have their own set of statutes by which corporate entities can be created and regulated. Each of these is slightly different, although most of the provinces have based their statutes in large measure on the federal statute, the Canada Business Corporations Act (R.S.C. 1985, c. C-44, ‘the CBCA’).Securities statutes have been enacted by the provincial legislatures and securities matters are governed by these statutes which are enforced by provincial regulators. There is no central Canadian regulator and while many believe having one would be preferable, the issue has been hotly debated for some time without resolution. Other federal and provincial statutes provide for specific liabilities for directors and officers. Some of the more significant examples are found in tax and excise legislation, employment standards legislation and environmental protection legislation. This chapter is a summary of the significant recent developments in legislation and case law that have an impact on corporate governance and the duties, obligations and liabilities of directors and officers in Canada.

In late November 2007, the Supreme Court rendered a judgment on the law of sale in Quebec in the case of ABB Inc. v. Domtar Inc. in which it pointed out important differences between Quebec law and the law of the other Canadian provinces regarding limitation of liability clauses. It also clarified its thinking on the scope of the presumption of knowledge of the defect and the defences available to the anufacturer/seller and it dealt with the manufacturer/seller’s duty to inform and the extent of the buyer’s duty to inform himself.This judgment is certainly a landmark decision, because it clarifies the Kravitz decision and older rulings concerning the rebuttability of the presumption of knowledge. It also makes a clear distinction between the rules applicable in the common law provinces and those applicable in Quebec. All manufacturers and professional sellers who sell products in Quebec will be affected by this decision. It will be difficult for them to invoke a clause excluding or limiting liability unless they have succeeded in establishing that the presumption of knowledge and bad faith applicable to them has been rebutted by the rare admissible defences. These are the buyer’s own fault, the fault of a third person, an event of force majeure (superior force), or the existing state of technical knowledge at the time the good was manufactured. One may now have to consider the potential impact that a detailed disclosure of a product’s characteristics may have on establishing the state of technical knowledge at the time of manufacture.

The Application of Ontario's Bill 198 to Securities Class Actions in Quebec

Directors Duties Defined: The Supreme Court of Canada Confirms that Directors Owe No Fiduciary Duty to Creditors

Directors make mistakes (CA Magazine.com)

Peoples Department Stores v. Wise: The Directors Are Not Personally Liable in Bankruptcy

Y2K: the Countdown Draws to a Close