Sole shareholder and director not always concurrently liable for tort done by corporation

No reason to pierce corporate veil if there was no independent personal interest: court

Sole shareholder and director not always concurrently liable for tort done by corporation
Failure to pay lease does not always mean liable for tort of conversion

The Court of Appeal for Alberta has ruled that an individual human agent of a corporation is not automatically concurrently liable for the tort of conversion even if they are the sole shareholder and director of the corporation.

In Driving Force Inc v. I Spy-Eagle Eyes Safety Inc, 2022 ABCA 25, Driving Force leased nine trucks to I Spy, who stopped making payment on six of them and failed to return the trucks. Driving Force sued I Spy and Loretta Juneau, the sole shareholder and director of I Spy. The trial judge ruled that I Spy was liable to Driving Force not only in contract but also for the tort of conversion. The trial judge, however, rejected Driving Force’s assertion that Juneau should also be liable as the sole shareholder and director of I Spy. Driving Force appealed, claiming that Juneau should be held jointly liable for the tort of conversion.

The appellate court disagreed.

Driving Force asserted that since I Spy was liable for both breach of contract and the tort of conversion, Juneau must also be liable for that tort. But upon review, the appellate court ruled that the trial judge incorrectly concluded that I Spy was liable for conversion.

“To be sufficient to constitute the tort of conversion, any ‘unlawful act’ must somehow deny or negate the possession of the owner,” said the court. In this case, the failure to make lease payments did not render possession unlawful for the purposes of the tort of conversion. Thus, this line of reasoning failed, said the court.

Further, there was no basis to lift or pierce the corporate veil in this case, said the court. Driving Force voluntarily contracted with I Spy, a properly incorporated entity with separate legal personality and, absent unusual circumstances of fraud, respecting the corporate veil cannot be “flagrantly opposed to justice,” said the court.

Also, the appellate court ruled that concurrent liability for tort is not always appropriate. “There is no fixed rule that a tort by a corporation always involves a concurrent tort by one of its human agents,” said the court. Here, the transaction and its breach were clearly part of the business operations of I Spy and Juneau was only acting on behalf of the corporation with no “independent” or personal interest beyond that, said the court in dismissing the appeal.

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