Joint and Several Liability Final Report: Backgrounder

Joint and Several Liability Final Report: Backgrounder2017-03-03T18:33:23+00:00

PDF Version

 

Ontario’s Business Corporations Act contains corporate law rules that govern the relationship between the corporation and its directors, officers, shareholders and stakeholders. Legal claims involving these parties take place in a system of joint and several liability: any one co-defendant is liable to pay the whole of a plaintiff’s loss and the risk of a co-defendant’s insolvency, unavailability or inability to pay falls on the co-defendants. Some jurisdictions have implemented a proportionate liability regime: co-defendants are only liable for the portion of their loss for which they were found to be at fault. Other jurisdictions use statutory limits (“caps”) on damages, often in conjunction with proportionate liability.

The Law Commission of Ontario (LCO) initiated a Project on joint and several liability in response to other jurisdictions, as well as Ontario under the Securities Act, moving towards a system of proportionate liability, or otherwise away from joint and several liability. The project is limited to the application of joint and several liability under the OBCA and does not address the application of this principle to tort law more broadly.

The LCO asked Professor Poonam Puri, then the Osgoode Hall Law School LCO Scholar in Residence, to head the project.

On October 28, 2009, the LCO, supported by the Hennick Centre for Business and Law, held a half-day roundtable discussion to review the joint and several liability scheme for professionals under the OBCA. The Roundtable panelists and participants consisted of a diverse range of professionals. Their views were taken into account in preparing the Consultation Paper released in May 2010. The LCO received 17 submissions from various stakeholders, ranging from those adamantly opposing reform to those stressing an urgent need to move toward a proportionate liability regime.

Following consultations with those interested in this issue from various perspectives, consideration of the approaches taken in other jurisdictions, a comparison between Ontario and other jurisdictions and other ways in which professional advisors may limit their liability, the LCO has concluded that change to the current regime of joint and several liability under the OBCA is not warranted.

The LCO reaches this conclusion on the basis that (i) the common law tests for professional negligence sufficiently address concerns about excessive or unfair liability; (ii) the available evidence on the specific deleterious effects of joint and several liability on insurance premiums, insurance coverage, pricing of audit services, and entry into the professions does not justify a change; and (iii) trends in other jurisdictions toward proportionate liability, particularly the United States, do not provide a sufficient grounding for reform, particularly in light of the more litigious environment in the United States.