On January 21st, 2022 the Alberta Court of Appeal released its decision in Driving Force Inc. v. I Spy-Eagle Eyes Safety Inc. The court addressed whether the sole director of I Spy-Eagle Eyes Safety Inc. (“I Spy”) was concurrently liable for the tort of conversion with I Spy. After reviewing the law surrounding concurrent liability in tort between corporations and their human agents, the court concluded that the director of I Spy was not concurrently liable, even though she was the sole director and controlled I Spy’s operations. The court listed 10 factors to consider when determining if a human agent should be concurrently liable for a corporate tort.
In 2017 The Driving Force (“TDF”) leased a number of trucks to I Spy. After the lease term ended, I Spy failed to return the trucks to TDF. TDF continued to invoice I Spy monthly and I Spy continued to pay some of the monthly invoices but not others.
TDF sued I Spy and its director for breach of contact and conversion of the trucks. The trial judge found that I Spy was liable to TDF for breach of contract and in tort for conversion, but declined to find I Spy’s director liable in either contract or tort. TDF appealed seeking to find I Spy’s director concurrently liable in tort with I Spy. I Spy appealed factual findings of the trial judge which were dismissed.
The two issues on appeal were: (1) whether I Spy’s director was jointly liable with I Spy for conversion; and (2) whether TDF was entitled to solicitor and client costs. Only the first issue will be examined in this article.
A tort is a civil wrong (as opposed to a contractual breach). However, the court noted that a party can be both liable in contract and in tort on the same facts. In this case, the tort in question was the tort of conversion. The tort of conversion has generally been described as the wrongful interference with the goods of another in manner inconsistent with the owner’s right of possession. While the court noted there was no universal test for the tort of conversion, they applied the following factors:
(a) a wrongful act;
(b) involving chattel;
(c) consisting of handling, disposing or destruction of the chattel, and;
(d) with the intention or effect of denying or negating the title of another person to such chattel.
In this case, the alleged tort was I Spy’s and the director’s retention of the trucks after the lease term had ended. The court found that factors (a) and (d) were not met. Factor (a) was not met because after the original lease term had expired the lease became month to month. Therefore, I Spy implicitly had TDF’s consent to continue possessing the trucks meaning there was no “wrongful act.” Factor (d) was not met because I Spy did not do any thing with the intention or effect of denying or negating TDF’s title to the trucks. Accordingly, the court held that the tort of conversion against I Spy had not been made out. As a result, the tort of conversion was also not made out against I Spy’s director. Nonetheless, the court examined the law relating to when a person could be concurrently liable for the tort of a corporation.
The court recognized that while corporations can only act through human agents, and that often a corporate tort will involve those human agents, concurrent liability is not always appropriate. The court recited the following factors used to determine when it is appropriate to find a corporation’s human agent concurrently liable in tort:
- Whether the tortious act was committed while engaged in the business of the corporation, and whether the tort of the employee was contemporaneous with that of the corporation;
- Whether the individual was pursuing any personal interest beyond the corporate interest;
- Whether the director or corporate representative owed a separate and distinct duty of care towards the injured party;
- That the conduct was “in the best interests of the company”;
- Whether the plaintiff voluntarily dealt with the limited liability corporation, or had the corporate relationship “imposed” on it;
- The expectations of the parties, specifically whether it was reasonable for the plaintiff to think that the individuals involved would be personally responsible for any damage that resulted;
- Whether the tort was “independent”. The cases sometimes say that the employee or individual is liable for his or her “independent” torts, implying that there are some torts which are so closely identified with corporate activity that they are not fairly categorized as “individual torts” as well;
- The case law clearly recognizes the rule in Said v Butt, [1920] 3 KB 497, respecting claims that individuals induced a breach of a corporate contract, which is not a situation of concurrent liability because the corporation is not liable in tort;
- The nature of the tort, and particularly whether it was an intentional tort;
- Whether the damage was physical or economic.
Applying these factors, the court found that, to the extent there is even a corporate tort involved, concurrent liability would be inappropriate because: the retention of the trucks was part of the business operations of I Spy and its director was only acting on behalf of I Spy and had not personal interest beyond that; TDF’s relationship with I Spy was in contract and TDF knew it was dealing with a corporation (which is a separate and distinct legal entity); TDF could have no reasonable expectation that I Spy’s director would be personally liable for the manner I Spy dealt with the trucks; and the damages were economic in nature and we essentially a claim in debt.
This case clarifies some of the blurry law surrounding the tort of conversion, and reaffirms at the appellate level concrete factors to consider when determining if a corporation’s human agent should be concurrently liable in tort.
By Dakota Bailey
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.
