Putting forward ill-founded defenses with the aim of prolonging the proceedings may constitute a significant procedural breach and justify the granting of a sanction under articles 53 and 54 of the Code of Civil Procedure 1 . In a recent judgment of the Superior Court, the directors and officers of a company, although they were not prosecuted directly, but only as defendants, were condemned personally and jointly with the company in question for the payment of damages in order to compensate the party victim of the procedural abuse for the fees and expenses that it had to incur unnecessarily.
The context
The parties take part in a share acquisition and debt assignment agreement in which the plaintiffs sell the financial interests they hold in a company to the defendant. In September 2018, the plaintiffs served on the defendant a request instituting proceedings aimed at obtaining payment of the balance of the sale price of the shares that they had then sold to it.
As part of the legal proceedings, the parties agree on a joint protocol of the proceedings in which the defendant company sets out succinct means of defense and indicates, without specifying a deadline, that it intends to file a counterclaim. The deadline for preparing the case was subsequently extended and suspended for a few months due to settlement talks which failed.
The procedure resumes its course and the hearing of the case is then set for June 10 and 11, 2020. Two days before the hearing, the defendant notifies the plaintiffs of a Notice of stay of proceedings following the filing of a Notice of intention to make a proposal to its creditors under section 50.4(1) of the Bankruptcy and Insolvency Act 2 . The plaintiffs did not delay in notifying a Request in order to obtain the lifting of the suspension of proceedings and request for declaration of abuse of procedure and payment of professional fees and disbursements resulting from this abuse . The next day, the defendant responds to the plaintiffs’ procedure and affirms that it consents to the conclusions of the request with the exception of the declaration of abuse. Then, on the day of the investigation, the defendant reconsidered her response from the day before and acquiesced in the request in its entirety. The Honorable David R. Collier, jcs, rules on the request and orders the defendant company to pay the entire sums claimed by the plaintiff companies 3 . The debate on the request for declaration of abuse is however postponed. This case concerns this request.
decision
The plaintiff companies claimed damages representing professional fees and legal costs that they had incurred as a result of the abuse of process and the behavior of the company being sued.
In light of the facts of the dispute, the Honorable Pierre A. Béliveau, jcs, concludes that the legal procedures and the behavior of the defendant were abusive. The fact of stating means of defense whose objective is only to prolong the progress of the proceedings constitutes a perversion of the ends of justice. In a legal action, the parties must respect certain obligations, namely to be cooperative, not to act unreasonably and to act in good faith. However, in the course of the proceedings in this case, the defendant failed to respect these obligations. This omission was made for a purely dilatory, reckless and unreasonable purpose in order to “save time” and delay payment of the sums claimed.
Thus, the court considers that such breaches must be sanctioned in such a way as to allow the injured parties, the plaintiffs, to obtain reasonable compensation. This repair is provided for in articles 54 and 342 CPC 4. It must be proportional to the damage actually suffered. The court therefore awards the plaintiffs the sum of $35,030 in damages for payment of part of the legal costs they incurred. This sum must be paid by the defendant, but also by its directors and officers. Indeed, the court considers that the responsibility of the directors and managers cannot be dissociated from that of the defendant in that their behavior is at the origin of the alleged abuse. This possibility of personally condemning the directors and officers of a legal entity for damages in connection with article 54 CCP is provided for in article 56 CCP, which reads as follows:
“56. When the abuse is committed by a legal person or a person who acts as administrator of the property of others, the directors and officers of the legal person who participated in the decision or The administrator of the property of others may be personally ordered to pay damages. »
Furthermore, given the bankruptcy of the defendant, it appears all the more relevant to hold the directors and managers liable to facilitate the plaintiffs obtaining any sort of compensation.