Legal Blog

Directors’ Liability

2638023 Ontario Inc. v. 1701288 Ontario Inc. 2021 Ont SCJ

As part of closing, the vendor’s directors delivered a statutory declaration in their capacity as directors stating that the leases produced were valid, all obligations had been performed by the vendor, and no litigation was threatened by the tenants. Before closing, the purchaser discovered that the roof was leaking and negotiated a $100,000 abatement of the purchase price to reflect the roof’s poor condition. After closing, the purchaser alleged that the lease produced was not the actual lease and that the actual lease obligated the landlord to repair all areas of the roof. The purchaser sued not only the vendor, but also the vendor’s directors. The purchaser alleged fraudulent misrepresentation. Although the directors attempted to strike the claim against them, they were unsuccessful. Officers and directors are personally liable when their actions are themselves tortious or exhibit a separate identity of interest from that of the corporation.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.