Habash v St. Clair College of Applied Arts and Technology
In this Ontario Superior Court of Justice decision, Justice Horvat considered whether a former college president could face personal liability for alleged tortious conduct arising out of an employment termination.
This case is a reminder that acting as a director, officer, or employee in a corporation does not make a person immune to personal liability.
The plaintiff was terminated without cause from his employment with the defendant, St. Clair College of Applied Arts and Technology (the “College”). In response, the plaintiff sought damages against the College, as well as the former president of the College in her personal capacity. The claims raised included intentional interference with contractual and/or economic relations, inducing breach of contract, defamation, and injurious falsehood.
The factual basis of the claims included comments made by the former president about the plaintiff. The former president allegedly stated to the College’s senior team that the plaintiff was useless and neglecting his job.
The defendants brought a motion to strike the claim on the basis that, amongst other things, there was no reasonable causes of action against the former president.
In assessing the claim, the court noted that a claim made against a corporate director, officer or employee must plead sufficient particulars to disclose a basis for attaching liability to the individual in their personal capacity. Their alleged actions must either (i) exhibit a separate identity or interest from that of the corporation, or (ii) be themselves tortious.
The defendants argued that the plaintiff had failed to explain how the former president’s comments fall into any of the above two categories. They noted that, as president, the personal defendant has a right to impact the plaintiff’s contract of employment, and her comments were made in the course of her duties as president. Further, they argued that the directing minds of a corporation will not be liable for inducing a corporation’s breach of contract when they are performing bona fide their functions as corporate officers.
The court disagreed with the defendants. The court noted that the plaintiff had pled that the comments made by the former president about the plaintiff were “outside her authority”. As a result, a reasonable cause of action in defamation and inducing breach of contract were adequately pled by the plaintiff against the former president personally, as she allegedly acted outside her authority. In other words, her comments exhibited a separate identity or interest from that of the corporation. The decision was not appealed.
For directors, officers, and even employees, this case is a reminder that the corporate veil will not protect them in all circumstances. Certain actions, if falling within the exceptions noted above, may lead to personal liability.