Although a corporation is a separate legal entity, a corporation can be held liable for the actions of its directors/officers in some circumstances.

  1. IMPLIED AUTHORIZATION TO BIND THE COMPANY. A corporation will be held liable for the actions of an individual when those actions are taken by the individual on behalf of the corporation. For example, in Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd [1972] 3 O.R. 199, Newtonbrook entered into a contract with Kelner, an employee of Rockwell who signed as Rockwell’s secretary. Money paid did not go through the corporation bank account, but through Kelner’s.

    Newtonbrook attempted to claim directly against Kelner. The court stated that Mr. Kelner was not the “actual contracting party” because the transaction was made in the name of the corporation; therefore, the corporation was held liable. In its reasoning, the court relied on the fact that Mr. Kelner could not have sued on the contract; therefore, nor could he himself have been sued. (see also R. v. Waterloo Mercury Sales Ltd.[1974] 4 WWR 516, where the manager at a used car dealership authorized odometers to be turned backwards. The company was held liable because the manager acted as the directing mind of the company. See also, Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, [1964] 1 All E.R. 630, where Mr. Freeman and Mr. Lockyer sued Buckhurst Park Ltd and its director, Shiv Kumar Kapoor, for unpaid fees for their architecture performed in the development of the ‘Buckhurst Park Estate’. The company argued it was not bound by the agreement because Mr. Kapoor had acted alone (as if he were a managing director) in engaging the architects, without proper authority from the other three directors.

    The court held that the company was bound by the agreement. The court stated that although Mr. Kapoor was not officially appointed managing director, he had been acting as such to the knowledge of the other three directors.)

  2. A CORPORATION WILL BE LIABLE IF THE CORPORATION RECEIVES A BENEFIT. For example, in Canadian Dredge & Dock Co. v. The Queen, 19 DLR (4th) 314, the court outlined that if the directing mind is acting solely in their personal interests and the corporation gets no benefit, then the corporation is not criminally responsible. However, if the corporation gets any benefit it will be found criminally responsible for the actions of the directing mind. In this case, four directing minds of corporations appealed their convictions of conspiracy and defraud. These convictions were based on collusive tendering bids for a government contract. The court held that the directing minds were acting in the course of their duties to the corporation and as such the company itself could be held criminally responsible.

 

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