Source: https://langlois.ca/beyond-duties-care-loyalty-civil-liability-directors/
Timestamp: 2020-02-21 02:29:21
Document Index: 236129700

Matched Legal Cases: ['Art. 298', 'Art. 301', 'art. 302', 'art. 303', 'Art. 309', 'Art. 311', 'art. 312', 'Art. 321', 'Art. 2157', 'art. 2158']

Beyond the Duties of Care and Loyalty ... the Civil Liability of Directors | Langlois lawyers
Home > Publications > Articles > Beyond the Duties of Care and Loyalty … the Civil Liability of Directors
In our first article on governance, entitled “Duties and Obligations of Directors: a Brief Overview”1, we summarized the main concepts underlying the duties and obligations typically associated with directors, i.e.:
the duty of prudence and diligence (the “duty of care”) and the duty of loyalty – duties that are often associated to fiduciary duties at common law2;
A director’s civil liability flows from the Civil Code of Québec (“CCQ”), which “governs persons [and] relations between persons”4, and specifically from article 1457 thereof, which provides that every person must “abide by the rules of conduct incumbent on him, according to the circumstances, usage or law, so as not to cause injury to another”5. If directors do not act in accordance with these rules, they may be liable for any harm thereby caused to another person.
Circumscribing the scope of directors’ immunity
a director is considered to be the agent (“mandatary”) of the corporation10;
A court will also look at whether the director acted in accordance with the corporation’s enabling legislation (provincial or federal) and with the applicable provisions of the CCQ. The court could also take into account any other rules, directives or policies that specifically apply to the corporation involved, and how courts have interpreted similar situations in the past.
[168] … On the other hand, to determine if an extra-contractual fault was committed, the general civil law regime uses the ‘abstract and objective criterion’ model. Therefore, the reference to be used is the “behaviour of a reasonable, prudent and diligent person, and the behavioural norm to be applied is that of conduct accepted or tolerated by society”. This does not entail completely ignoring “any concrete dimension of the personality of the individual who caused the harm when assessing his or her conduct”. One must situate the person in the office he or she occupied and take into account the specific circumstances of the situation.12 [TRANSLATION]
In civil liability matters, there is no evidentiary presumption in favour of or against a director. That is not the case, however, in certain instances of statutory liability, which will be the subject of our next article15.
1 Duties and Obligations of Directors: a Brief Overview
2 In our view, while the term “fiduciary duties” has the merit of being concise, it erroneously conveys the legal nature of these duties under the Quebec Civil Code. In this regard, see Gravino v. Enerchem Transport inc., 2008 QCCA 1820, para. 39.
6 Art. 298 CCQ: “Legal persons are endowed with juridical personality.”
7 Art. 301 CCQ: “Legal persons have full enjoyment of civil rights.”; art. 302 CCQ: “Every legal person has a patrimony which may, to the extent provided by law, be divided or appropriated to a purpose. It also has the extra-patrimonial rights and obligations flowing from its nature.”; art. 303 CCQ: “Legal persons have the capacity to exercise all their rights, and the provisions of this Code concerning the exercise of civil rights by natural persons are applicable to them, adapted as required.”
8 Art. 309 CCQ: “Legal persons are distinct from their members. Their acts bind none but themselves, except as provided by law.”
9 Art. 311 CCQ: “Legal persons act through their organs, such as the board of directors and the general meeting of the members.”; art. 312 CCQ: “A legal person is represented by its senior officers, who bind it to the extent of the powers vested in them by law, the constituting act or the by-laws.”
10 Art. 321 CCQ: “A director is considered to be the mandatary of the legal person. He shall, in the performance of his duties, conform to the obligations imposed on him by law, the constituting act or the by-laws and he shall act within the limits of the powers conferred on him.” It is interesting to note that the Civil Code does not provide that an officer is the mandatary of a legal person, despite officers generally acting as such. The second paragraph of section 116 of Quebec’s Business Corporations Act expressly provides that officers are mandataries.
11 Art. 2157 CCQ: “A mandatary who binds himself, within the limits of his mandate, in the name and on behalf of the mandator, is not personally liable to the third person with whom he contracts.”; art. 2158 CCQ: “A mandatary who exceeds his powers is personally liable to the third person with whom he contracts, unless the third person was sufficiently aware of the mandate, or unless the mandator has ratified the acts performed by the mandatary.”
15 Statutory Liabilities of Directors: Marking the Risk Areas to Avoid Sliding out of Control