{"id":18016,"date":"2024-09-10T12:10:52","date_gmt":"2024-09-10T16:10:52","guid":{"rendered":"https:\/\/www.millerthomson.com\/?post_type=insights&p=224261"},"modified":"2025-07-10T18:11:13","modified_gmt":"2025-07-10T22:11:13","slug":"corporate-agents-personal-liability-negligent-misrepresentations","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/commercial-litigation\/corporate-agents-personal-liability-negligent-misrepresentations\/","title":{"rendered":"Clarifying the law regarding corporate agents\u2019 personal liability for negligent misrepresentations"},"content":{"rendered":"\n

Introduction<\/h2>\n\n\n\n

A corporation may appoint an individual to act as its \u201cagent,\u201d vesting that individual with the authority to act on the corporation\u2019s behalf when signing contracts or making certain decisions. But what recourse does a plaintiff have when a corporate agent misrepresents the extent of their authority to act on the corporation\u2019s behalf? Or when a corporate agent misrepresents the nature of the corporation\u2019s future conduct? Can the corporate agent be held personally liable for such negligent misrepresentations? The Court of King\u2019s Bench of Alberta (the \u201cCourt<\/strong>\u201d) considered these questions in a recent decision, Axiom Foreign Exchange International v Rudiger Marketing Ltd<\/em>, 2024 ABKB 224<\/a> (the \u201cAxiom Decision<\/strong>\u201d).<\/p>\n\n\n\n

Background<\/h2>\n\n\n\n

Calvin Rudiger was the sole owner and shareholder of Rudiger Marking Ltd. (\u201cRML<\/strong>\u201d or the \u201cDefendant<\/strong>\u201d), where Calvin\u2019s son, Morgan, served as a corporate agent. RML was in the business of exporting vehicles to the United States and hired Axiom Foreign Exchange International (\u201cAxiom<\/strong>\u201d or the \u201cPlaintiff<\/strong>\u201d) for currency exchange services. The parties entered into \u2018open forward contracts\u2019 that required RML to purchase Canadian currency at a fixed rate within a specified period. However, when the CAD-USD exchange rate rose considerably, RML refused to use Axiom\u2019s services. As a result, Axiom commenced an action against RML for the amount owed under the contract.<\/p>\n\n\n\n

The parties subsequently entered into a settlement agreement, in which RML agreed to pay the amount owed to Axiom. However, RML experienced financial difficulties and failed to make the required payments. Axiom subsequently resumed its action and obtained a judgment against RML, but RML had insufficient assets to satisfy the judgment. Axiom brought an action in tort against Calvin and Morgan Rudiger for alleged negligent misrepresentations that caused its losses.<\/p>\n\n\n\n

An Action Commenced By or Against a Partnership Survives the Partnership\u2019s Dissolution<\/h2>\n\n\n\n

Prior to commencing an action in tort against the Rudigers for their alleged negligent misrepresentations, Axiom dissolved its partnership. The Court had to determine the threshold issue of whether the action could be maintained despite the dissolution of the Plaintiff\u2019s partnership.[1]<\/a><\/p>\n\n\n\n

The Court found that partnerships are groups of legal persons \u201ccarrying on business in common with a view to profit.\u201d[2]<\/a> A partnership\u2019s name merely describes this group of legal persons; it \u201cdoes not signify the existence of a distinct legal entity.\u201d[3]<\/a> Therefore, \u201c[a]n action commenced using the name of a partnership \u2026 is really an action by or against the partners.\u201d[4]<\/a> The Alberta Rules of Court <\/em>also provides \u201cthat an action by or against a partnership may be brought in the name of the partnership or the individual partners.<\/em>\u201d[5]<\/a><\/p>\n\n\n\n

As a result, the Court found that an action may be maintained by or against a dissolved partnership. However, if a partnership is dissolved after the commencement of an action, the parties should apply to amend the action\u2019s style of cause \u201cto identify the individual partners, [though] a failure to do so is not fatal.\u201d[6]<\/a><\/p>\n\n\n\n

The Law of Personal Liability for Corporate Torts is Unclear<\/h2>\n\n\n\n

Having found that the action could be maintained, the Court proceeded to survey \u201c[t]he continuing division in the law concerning corporate agents\u2019 liability in tort.\u201d[7]<\/a> The Court noted that this division originates from \u201ctwo arguably contradictory decisions of the Ontario Court of Appeal,\u201d[8]<\/a> ScotiaMcLeod Inc. v Peoples Jewellers Ltd.<\/em>[9]<\/a> and ADGA Systems International Ltd. v Valcom Ltd<\/em>.[10]<\/a> According to ScotiaMcLeod<\/em>, \u201cdirectors and officers will only be personally liable if they are not acting in the best interests of the corporation.\u201d[11]<\/a> In contrast, pursuant to ADGA Systems<\/em>, \u201cdirectors and officers of a corporation are always liable for their own torts, even when acting in the bests interests of the corporation.\u201d[12]<\/a> Recent appellate decisions in British Columbia and Alberta highlight this continuing discrepancy in the case law.[13]<\/a><\/p>\n\n\n\n

Corporate Agents May Be Personally Liable for Negligent Misrepresentations if Their Statements are Undertakings of Personal Responsibility<\/h2>\n\n\n\n

To resolve this division in the law, the Court cited Justice Slatter\u2019s concurring opinion in Hogarth v Rocky Mountain Slate Inc.<\/em>,[14]<\/a> where he held that \u201cthe analysis of a corporate agent\u2019s liability in tort should start with consideration of the nature of the duty of care as provided for in Cooper v Hobart<\/em>, 2001 SCC 79.\u201d[15]<\/a> Therefore, the plaintiff and the corporate agent must be in a proximate relationship, and the losses suffered by the plaintiff must have been foreseeable.[16]<\/a> In a proximity analysis, courts consider whether the plaintiff \u201cwillingly accepted and relied on representations from [a] corporate entity,\u201d with the knowledge that they were \u201cdealing with a limited liability partnership.\u201d[17]<\/a> Further, \u201ceven if proximity and foreseeability between a corporate agent and a stranger to the corporation alleging a tort was established, the Cooper <\/em>analysis requires a court to consider whether residual policy concerns prevent the imposition of a duty of care.\u201d[18]<\/a><\/p>\n\n\n\n

While acknowledging that it is unclear if Hogarth <\/em>is the law in Alberta, the Court nonetheless found that Justice Slatter\u2019s concurring opinion in the decision \u201cis the best way to bring order to this area of the law.\u201d[19]<\/a> Indeed, \u201c[t]he logic of the Hogarth <\/em>concurrence has been reinforced by developments\u201d originating from other decisions.[20]<\/a> For instance, pursuant to the Supreme Court\u2019s decisions in Deloitte & Touche v<\/em> Livent Inc. (Receiver of)<\/em>[21]<\/a> and 1688782 Ontario Inc. v<\/em> Maple Leaf Foods Inc.<\/em>,[22]<\/a> \u201cwhether there has been an undertaking of responsibility as part of the proximity analysis is very much in keeping with Slatter J.A.\u2019s approach.\u201d[23]<\/a> Therefore, applying the Hogarth<\/em> methodology \u201crequires the principle of separate corporate personality to be balanced with competing concerns \u2013 specifically, the importance of holding individuals accountable for their actions and injured parties being compensated for their losses \u2013 on a case-by-case basis.\u201d[24]<\/a><\/p>\n\n\n\n

The Court Found the Rudigers Did Not Undertake Personal Responsibility for Their Representations to the Plaintiff<\/h2>\n\n\n\n

Axiom alleged five separate instances of negligent misrepresentation by the Rudigers. In applying the Hogarth <\/em>methodology, the Court found that \u201c[t]he question that must be considered with respect to each of the alleged misrepresentations is whether the [Rudigers\u2019] statements \u2026 amounted to an undertaking of personal responsibility to Axiom for RML\u2019s obligations.<\/em>\u201d[25]<\/a> To this end, the Court must consider \u201c[t]he context surrounding the representation \u2026 [and] whether it was reasonable for the plaintiff to rely on the individual defendant\u2019s connection to the representation as engaging a personal duty on the part of that defendant.\u201d[26]<\/a> The five separate instances of alleged negligent misrepresentation are described below:<\/p>\n\n\n\n