Brunette v. Legault Joly Thiffault – Supreme Court of Canada finds that a shareholder generally cannot sue for bad tax advice provided to the corporation

A Quebec trust, whose sole asset was its investment in the holding company for a group of retirement residences companies (Groupe Melior) that became bankrupt following an ARQ assessment, sued the professional advisors of Groupe Melior on the basis that they had set up a flawed tax structure for Groupe Melior. In finding that the trust had no standing to bring this action because it was a mere shareholder, Rowe J indicated that the “the civil law produces a conclusion similar to that” under Foss v. Harbottle (1843), 67 E.R. 189 “which categorically bars shareholder recovery for faults committed against a corporation,” stating:

The corporate veil is impermeable on both sides; just as shareholders cannot be liable for faults committed by the corporation, so too are they barred from seeking damages for faults committed against it … .

There was an exception to this rule where shareholders established that there had been the breach of “a distinct obligation owed to the[m]” by the defendant and “this breach resulted in a direct injury suffered by the shareholders, independent from that suffered by the corporation.…” This was not established to be the case here. The loss suffered by the trust was precisely the loss suffered by Groupe Melior: a loss based on the net value of the seniors’ residences.

Neal Armstrong. Summary of Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55 under General Concepts – Negligence.