The Power of Perspectives

The Canadian Bar Association

Alexander Gay and Kirk G. Shannon

D&O

Securing corporate accountability through economic torts

By Alexander Gay and Kirk G. Shannon October 31, 2018 31 October 2018

Securing corporate accountability through economic torts

 

Piercing a corporate veil to hold the guiding mind of a corporation accountable for wrongdoing is not easy. The legal threshold is high. However, there are other ways to go after rogue directors who step out of their corporate role and fail to act in the interest of a corporation, such as claiming liability for economic torts. Economic torts speak to commercial behaviour that offends our basic values as a society an can all be of assistance in securing corporate accountability. 

The recent UK ruling in Palmer Birch (a partnership) v Lloyd illustrates how. There is nothing unique about this case, other than how the distinct legal personality of the corporation did not dissuade the court from applying economic torts against directors personally.  

It involved an action brought by the plaintiff against two directors for inducement of breach of contract, unlawful interference and unlawful means conspiracy. The plaintiff entered into a construction contract with HHL, a corporate entity controlled by two directors, one of whom was to be the beneficiary of the work performed under the contract. The directors stopped funding HHL and liquidated the company once a substantial portion of the construction work had been completed. The directors denied liability and argued that the plaintiff’s claims were an ill-conceived attempt to pierce the corporate veil. They argued that the losses were nothing more than a poor commercial deal for the plaintiff and the claims were limited to the company.

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