Part 43 published on 01/09/13
Director of corporate developer might be personally liable to condominium corporation in relation to lease of heating and cooling equipment
The developer leased heating and cooling equipment to the condominium corporation while the developer controlled the condominium corporation. The developer then transferred the lease to GC Capital. GC Capital then sued the condominium corporation, alleging negligence in failing to maintain the equipment as required by the lease.
The condominium corporation counter-claimed against the developer, GC Capital and Wallace Chow (a director of both CG capital and the corporate developer). The condominium corporation alleged that the lease arrangement had not been properly disclosed to purchasers and that each of the developer, GC Capital and Mr. Chow (personally) had resulting liability to the condominium corporation.
Mr. Chow applied for summary dismissal of the counter-claim against him, arguing that he could not possibly be personally liable to the condominium corporation.
The Court reviewed the circumstances under which a director can be personally liable for actions taken by the director on behalf of the corporate entity. The Court refused Mr. Chow’s application. The Court said:
On (the facts of this case) it is certainly arguable that Mr. Chow could be personally liable. The arrangement that he allegedly orchestrated was arguably outside of, or contrary to, the legal obligations and duties of the corporate developer, Gateway MacLeod, and was of benefit to him personally. A director in a closely held corporation who carries out such actions risks personal liability. In such a situation it can be argued that the corporation was not acting in the manner required of it, but rather, its actions had been hijacked by an individual who caused it to act improperly for the individual’s own personal gain.