CORPORATIONS - Standard of care of directors and officers - Honesty and good faith

Law360 Canada (October 30, 2023, 9:07 AM EDT) -- Appeal by the Appellants from a judgment of the Quebec Court of Appeal that affirmed the Superior Court’s judgment and upheld the remedy awarded to Respondents. The Appellants were presidents of three corporations grouped together under the name Groupe Excellence (“l’Excellence”) and controlled by the Respondents who were the majority shareholders. The parties had entered into a Presidents’ Agreement which governed their relationship and entailed implied obligations for the Appellants. In 2006, the Respondents sold their shares to the Appellants. Unknown to them, the Appellants had been negotiating the sale of l’Excellence to Industrielle Alliance (“IA”) since 2005. Following the purchase of the shares, the Appellants sold their interests in l’Excellence to IA for a substantial profit. Upon knowledge of the resale, the Respondents brought an action for damages against the Appellants. The trial judge ruled in favour of the Respondents and awarded damages equivalent to the profits made by the Appellants. The Court of Appeal affirmed the trial judgment and upheld the remedy awarded while specifying that the Appellants had breached their obligation of contractual good faith and obligation to inform. The Appellants argued that the failure to inform could not constitute a civil fault because there was no legal basis requiring them to share IA’s interest in acquiring l’Excellence. The Respondents argued that the requirements of good faith made it obligatory for the Appellants to disclose IA’s interest....
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