Hogarth et al. v. Rocky Mountain Slate Inc. et al., 2013 ABCA 57

• Judge: O'Brien, Slatter and Rowbotham, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: February 15, 2013
• Citations: 2013 ABCA 57;(2013), 542 A.R. 289

Hogarth v. Rocky Mountain Slate Inc. (2013), 542 A.R. 289; 566 W.A.C. 289 (CA)

MLB headnote and full text

Temp. Cite: [2013] A.R. TBEd. FE.082

Lance Hogarth, James Snyder Construction Ltd., James Snyder, Don Jeffers, Anthony Marquart, Dwight Miller, Sani Tech Mechanical Ltd., S & P Cattle Company Ltd., Gary Schaller, Charles Sinclair, Theresa Sinclair, Juana Tamura, Josh Holdings Inc., Freedom Enterprises Inc., 972678 Alberta Ltd., Western International Plastics (Alta.) Ltd., All Services Plumbing and Heating Ltd., Rick Adams, Millie Atkinson, Bitaco Holdings Ltd., Doug Bateman Holdings Ltd., Karl Durst, Stephanie Durst, Giusti Group Ltd., Hallmark Resources Ltd., Harvey Prang Holdings Ltd. and Barry Gould (respondents/plaintiffs) v. Roger Simonson (appellant/defendant/third party) and Rocky Mountain Slate Inc., John Powell, Eli Suhan, Charles Edward Kucera and Kucera Engineers Inc. (not a party to the appeal/defendants/third parties)

Rocky Mountain Slate Inc. (not a party to the appeal/plaintiff by counterclaim) v. John Pfeifer, Don Dunsmore, Millie Atkinson and Harvey Prang (not parties to the appeal/defendants by counterclaim)

(1201-0029-AC; 2013 ABCA 57)

Indexed As: Hogarth et al. v. Rocky Mountain Slate Inc. et al.

Alberta Court of Appeal

O'Brien, Slatter and Rowbotham, JJ.A.

February 15, 2013.

Summary:

The plaintiffs collectively invested almost $1.8 Million in a company that operated a slate quarry. The business failed almost immediately and the plaintiffs lost their investments. The plaintiffs sued the defendants for a return of their investments, claiming that they were induced to invest based on negligent misrepresentations made by the company and its three principals (directors) in written materials and at company meetings. The plaintiffs also alleged that the company's chartered accountant was negligent in preparing future-oriented financial information which induced them to invest. The company counterclaimed against four of its investor directors, alleging various breaches of their duties as directors.

The Alberta Court of Queen's Bench, in a judgment reported (2011), 517 A.R. 203, held that the company and its three principals/directors made negligent misrepresentations which induced all but one of the plaintiffs (Miller) to invest in the company. The chartered accountant was negligent in preparing the future-oriented financial information. The action was dismissed against the remaining defendants and the counterclaim was dismissed. The court apportioned liability. One of the principals/directors (Simonson) appealed and applied for an order staying enforcement of the monetary judgment pending the appeal.

The Alberta Court of Appeal, per O'Ferrall, J.A.,in a judgment reported (2012), 522 A.R. 1; 544 W.A.C. 1, dismissed the application. The appeal proceeded.

The Alberta Court of Appeal allowed Simonson's appeal on the ground that he was not personally liable, in carrying out the business of the company, for the negligent misrepresentations.

Company Law - Topic 4183

Directors - Liability of directors - For torts - The plaintiffs collectively invested almost $1.8 Million in a company (RMS) that operated a slate quarry - The business quickly failed and the plaintiffs lost their investments - The plaintiffs sued for a return of their investments, claiming that they were induced to invest based on negligent misrepresentations made by the company and its three principals/directors in written materials and verbally at company meetings - Particularly, "the principals ... misrepresented the actual knowledge, expertise and competence of the 'quarry management team', and provided inaccurate and misleading projections about the amount of slate that RMS would harvest" - A trial judge found the principals/directors, including Simonson, personally liable - The Alberta Court of Appeal allowed Simonson's appeal, noting that "there will be circumstances in which the actions of a shareholder, officer, director or employee of a corporation may give rise to personal liability in tort despite the fact that the impugned acts were ones performed during the course of their duties to the corporation" - This general statement was qualified as follows: "where those actions are themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own, they may well attract personal liability" - The court held that "we are not satisfied that the conduct of Simonson was tortious in itself, or exhibited a separate identity or interest from that of RMS, the corporation. Here, the statements were made for the purposes of raising funds for the corporation and for its benefit. It is not sufficient to create a separate identity that Simonson himself was an officer and investor in the corporation. ... having a shareholding or other financial interest in the corporation does not translate into a separate interest for purpose of establishing personal liability in trust ... Nor did the trial judge identify any aspect of Simonson's conduct in making the impugned representations independent from his activity as a corporate officer. The claim against Simonson for personal liability in carrying out the business of the corporation must fail." - See paragraphs 1 to 15.

Company Law - Topic 4566

Officers and agents - Liability - General - For tortious acts - [See Company Law - Topic 4183 ].

Cases Noticed:

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1; 84 D.L.R.(4th) 291, refd to. [para. 5].

Hamilton (City) v. Metcalfe & Mansfield Capital Corp. et al. (2012), 290 O.A.C. 42; 2012 ONCA 156, refd to. [para. 10].

Blacklaws et al. v. 470433 Alberta Ltd. (2000), 261 A.R. 28; 225 W.A.C. 28; 187 D.L.R.(4th) 614; 2000 ABCA 175, leave to appeal denied [2001] 1 S.C.R. vii; 270 N.R. 197, refd to. [para. 12].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 23].

Sharbern Holding Inc. v. Vancouver Airport Centre Ltd. et al., [2011] 2 S.C.R. 175; 416 N.R. 1; 306 B.C.A.C. 1; 516 W.A.C. 1; 2011 SCC 23, refd to. [para. 23].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 30].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 30].

Fullowka et al. v. Pinkerton's of Canada et al., [2010] 1 S.C.R. 132; 398 N.R. 20; 474 A.R. 1; 479 W.A.C. 1; 2010 SCC 5, refd to. [para. 34].

Hanke v. Resurfice Corp. et al., [2007] 1 S.C.R. 333; 357 N.R. 175; 404 A.R. 333; 394 W.A.C. 333; 2007 SCC 7, refd to. [para. 34].

Athey v. Leonati et al., [1996] 3 S.C.R. 458; 203 N.R. 36; 81 B.C.A.C. 243; 132 W.A.C. 243, refd to. [para. 34].

Clements v. Clements (2012), 431 N.R. 198; 346 D.L.R.(4th) 577; 2012 SCC 32, refd to. [para. 34].

Snell v. Farrell, [1990] 2 S.C.R. 311; 110 N.R. 200; 107 N.B.R.(2d) 94; 267 A.P.R. 94, refd to. [para. 37].

South Australia Asset Management Corp. v. York Montague Ltd., [1997] A.C. 191; [1997] U.K.H.L. 10; 199 N.R. 366 (H.L.), refd to. [para. 38].

Kenny & Good v. M.G.I.C.A., [1999] H.C.A. 25; 163 A.L.R. 611, refd to. [para. 39].

Bank of New Zealand v. New Zealand Guardian Trust Co., [1999] 1 N.Z.L.R. 644 (C.A.), refd to. [para. 40].

Sherwin Chan & Walshe Ltd. v. Jones, [2012] N.Z.C.A. 474; 25 N.Z.T.C. 20, refd to. [para. 40].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 42].

Motkoski Holdings Ltd. v. Yellowhead (County) (2010), 474 A.R. 367; 479 W.A.C. 367; 20 Alta. L.R.(5th) 43; 2010 ABCA 72, refd to. [para. 59].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 64].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Hercules Managements Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 64].

Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.), refd to. [para. 71].

Said v. Butt, [1920] 3 K.B. 497, refd to. [para. 75].

London Drugs Ltd. v. Brassart and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 77].

Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al. (1995), 87 O.A.C. 129; 26 O.R.(3d) 481; 129 D.L.R.(4th) 711 (C.A.), leave to appeal denied [1996] 3 S.C.R. viii; 205 N.R. 314, refd to. [para. 95].

AGDA Systems International Ltd. v. Valcom Ltd. et al. (1999), 117 O.A.C. 39; 43 O.R.(3d) 101; 168 D.L.R.(4th) 351 (C.A.), leave to appeal denied [2000] 1 S.C.R. xv; 254 N.R. 400, refd to. [para. 100].

NBD Bank Canada v. Dofasco Inc. et al. (1999), 127 O.A.C. 338; 46 O.R.(3d) 514; 181 D.L.R.(4th) 37 (C.A.), leave to appeal denied [2001] 1 S.C.R. xv; 254 N.R. 400, refd to. [para. 104].

Michaud v. PMM Assurance & Services Inc. (2005), 289 N.B.R.(2d) 310; 753 A.P.R. 310; 256 D.L.R.(4th) 435; 2005 NBCA 66, refd to. [para. 136].

Bedard v. Martyn et al. (2010), 469 A.R. 322; 470 W.A.C. 322; 17 Alta. L.R.(5th) 225; 2010 ABCA 3, refd to. [para. 142].

Counsel:

J.C. Price and E. Semenova, for the respondents;

R.W. Armstrong and M. McCartney-Cameron, for the appellants.

This appeal was heard on December 4, 2012, before O'Brien, Slatter and Rowbotham, JJ.A., of the Alberta Court of Appeal.

On February 15, 2013, the following memorandums of judgment was delivered and the following opinions were filed:

O'Brien and Rowbotham, JJ.A. - see paragraphs 1 to 15;

Slatter, J.A. - see paragraphs 16 to 146.