Unfinished Business: An Analysis of Stones Unturned in ADGA Systems International v. Valcom Ltd.
(2001) 35 Canadian Business Law Journal, pp. 39-54
20 Pages Posted: 24 May 2013
Date Written: 2001
The recent Ontario Court of Appeal case, ADGA Systems International v. Valcom Ltd., is an important decision on corporate directors’ personal liability for torts. The court in this case interpreted the Said v. Butt exception to personal liability for a tort narrowly. Rather than concluding that a director is not liable whenever she commits a tort that is in the best interests of the corporation, the court concluded that the director is not liable for the tort of inducing her own corporation to breach a contract, and only for this tort, if she acts in the best interests of the corporation. In the author’s view, the court in ADGA accepted two premises without examining fully the implications of either. First, the court in accepting even the narrow Said v. Butt exception implicitly accepted the premise that costly overdeterrence of torts is an important consideration. However, there is no principled reason to conclude that overdeterrence is relevant only to the tort of inducing the director’s corporation to breach a contract. Yet the court adopts a narrow exception to personal liability for tort without considering overdeterrence more broadly. Secondly, while the court accepts that the principle of limited liability raises issues distinct from those relevant to personal liability of directors, the author shows that it does not fully consider the implications of this distinction in discussing the policy surrounding personal liability for directors.
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