Inventory of Reforms
Joint and Several Liability Under the Ontario Business Corporations Act
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.
Law Commission of Ontario
2011: Final Report by the Law Commission of Ontario
The purpose of this Report is to analyze whether the system of joint and several liability that operates for claims relating to OBCA corporations should be reformed to some version of proportionate liability and/or a statutory cap on damages.
After reviewing and analyzing arguments for retention of the status quo of joint and several liability, reform to a system of proportionate liability and/or statutory caps, as well as market based mechanisms that professionals can use for addressing liability concerns, the LCO recommends that the provisions of joint and several liability should continue to operate for OBCA corporations. 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.
This summary was last reviewed in Aug 16, 2012