Audit, Compliance and Risk Blog

In December, the Ontario Court of Appeal reviewed a case involving two disputing factions in a 5-member partnership (Extreme Venture Partners Fund I LP v. Varma).¹  The two partners who managed the activities decided that their efforts were being undervalued by the other 3, and responded by starting competing businesses, diverting resources from the original entity, and hiding these activities. The other 3 partners eventually found out and sued them for breaches of their fiduciary duties. The trial court found against the wrongdoers, and on appeal the Court of Appeal actually increased their punishment.

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In June, the Ontario Court of Appeal issued a decision addressing two issues that should interest corporate directors – certainly in the province, and probably throughout Canada. The case is O’Reilly v. ClearMRI Solutions Ltd., and the issues it addresses are:

• when might two companies be considered “common employers” of a single individual employee, sharing responsibilities for compliance with applicable labour laws; and

• when might corporate directors, including directors of “common employers,” become personally liable for their company’s non-compliance with those laws.

The rest of this note discusses these issues, and the O’Reilly case decision.

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