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Debra, Lawyer
Category: Canada Law
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Experience:  Lawyer
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Can a director be held personally liable for a federal

Customer Question

Can a director be held personally liable for a federal corporation in alberta provincial small claims court
Submitted: 9 months ago.
Category: Canada Law
Expert:  Debra replied 9 months ago.

I am sorry to hear this.

What do you mean when you say you accepted a judgment based on duress?

Customer: replied 9 months ago.
Hi, it is a rather log and complicated story that has dragged on for 3 years in small claims. I had a federal corporation with an extra-provincial in Alberta (which is now struck off). So a former employee sued me for lost wages claiming the 6 months maximum allowed. I went through mediation, pre-trial etc. and was asked to submit financials, which I did in November 2014 to her lawyer, and never heard fro a year and a half. When we went to court, I did not know that they had changed strategy.The Plaintiff ArgumentThe federal and provincial business corporations statutes contain similar though not identical provisions respecting directors’ liability for unpaid wages. Subsection 119(1) of the CBCA reads: Directors of a corporation are jointly and severally liable to the employees of the corporation for all debts not exceeding six months wages payable to each such employee for services performed for the corporation while they are such directors respectively (emphasis added). Similarly, subsection 131(1) of the OBCA states: The directors of a corporation are jointly and severally liable to the employees of the corporation for all debts not exceeding six months’ wages that become payable while they are directors for services performed for the corporation and for the vacation pay accrued while they are directors for not more than twelve months under the Employment Standards Act, and the regulations thereunder, or under any collective agreement made by the corporation (emphasis added). Under these provisions, employees may seek reimbursement from the directors of their corporate employer for up to six months of unpaid wages. However, the liability of directors under these corporate statutes is tempered by conditions precedent set out in the acts.6 Under the CBCA, a director is not considered to be liable unless: 1) the corporation has been sued for the debt in question after it has become due, and execution was returned unsatisfied in whole or in part7 ; 2) the corporation has commenced legal liquidation and dissolution proceedings or has been dissolved; and 3) a claim for the debt has been proved within six months after the earlier of the date of commencement of the liquidation and dissolution proceedings and the date of dissolution8 ; or 4) the corporation has made an assignment or a bankruptcy order has been made against it under the Bankruptcy and Insolvency Act and a claim for the debt has been proved within six months.I was very upset, and did not have a lawyer so reluctantly agreed, to paying $18k. It was completely wrong and I only agreed because i felt out of my depth.My argument is that I want to file an appeal (I only have a few days) based on a Due Diligence Defence.Where a corporation is incorporated under federal jurisdiction (CBCA), the directors may employ a statutory defence of reasonable diligence under subsection 123(4) of the CBCA. A director may be relieved of liability where he or she has relied in good faith on financial statements or professional reports that confirm the financial health of the corporation.
These were provided to Brad in Nov, 2014 at no point following did I hear anything further till 2016. He said he asked for more information from me? Never heard a thing.
Under section 123(4), a director is not liable for improper share issuances or payments (s. 118), unpaid wages (s.119), or breach of fiduciary duty and the duty of care (s. 122) if he or she has relied in good faith on: 1. Financial statements represented to him or her by an officer of the corporation or in a written report of the corporation’s auditor to reflect fairly the financial position of the corporation; or 2. a report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by him or her. The application of this provision can be utilized in situations where the directors act in good faith and in reliance on other professionals. For example, directors can rely on this provision in situations where they refuse to pay an amount to an employee based on a legal opinion that such payment is not warranted, or based on statements of officers responsible for paying wages, which indicate that the wages have been paid.I met all the terms of this. Can the case even be heard in samll claims for a corporation? And can I be liable in small claims as a corporation. I want to file an appeal for eaither, duress (I agreed to something, I did not understand, or that the decision was wrong as it was out of juristiction as a federal corporation.What are your thoughts, sorry it is long story, but I never even felt it would ever get to this point, it is just a "money grab" and it is wrong.
Expert:  Debra replied 9 months ago.

Are you able to say that you were unduly pressured and didn't understand what you were signing?

Customer: replied 9 months ago.
I have requested the transcript and yes that is what I believe, I am also trying to find out if the decision was out of juristiction because it was a federal incorporate company judged in small claims. Do you know?
Expert:  Debra replied 9 months ago.

Small Claims Court is for matters up to $25,000. It is the right court.

But at this point in time the law and the facts about the substantive issues don't matter.

You settled and the matter is done. There is nothing to appeal.

The only possible approach to take is you were without a lawyer and had no advice and were scared and bullied essentially agreed without being able to really understand what you were signing.

Then you might be able to get the settlement set aside.

What may be best in your case is to consult with a lawyer in your city at once and have that lawyer send a letter to the other lawyer explaining that you settled under duress, without independent legal advice and if you cannot come to a much more reasonable settlement you will be moving to set aside the settlement and to proceed to trial.

Does that help as a starting point?

Please feel free to post back with any follow-up questions you may have. If you don't have any then I hope I have earned a 5 star rating but if you don't feel that I have please don't hesitate to reply back and let me know what more I can do to assist you. Finally, please know that even after you rate me I will be here for you and you can ask follow-up questions if you think of them later on at no further charge of course.

Expert:  Debra replied 9 months ago.

Is there anything more I can help you with at this point in time?

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