Apr 2, 2015

What’s in a Name? Potential Personal Liability for Failure to Ensure Companies in BC Use Their Full Corporate Name

Out West Windows v. Tilley, 2014 BCPC 296 (CanLII)

Many companies do business under a shortened version of their name or a separate business or trade name, without also setting out their full legal name. Recent British Columbia cases have confirmed the importance of using a company’s full legal name in contracts, invoices, purchase orders and other business documents. Failing to do so can result in the individual representing the company being found personally liable for the company’s obligations. It can also trigger personal liability of the company’s directors under the BC Business Corporations Act.

In a February 2015 BC Supreme Court case (269893 Alberta Ltd. v. Petersen 2015 BCSC 184), a landlord tried to hold the individual owner of the tenant company liable for obligations under the lease. There was no signed lease, but the landlord pointed to a Letter of Intent that referred in various places to the individual principal, to the trade name “Otter Bay Marina”, and to the numbered company. The court cited the 2013 BC Court of Appeal case Pageant Media v. Piche, 2013 BCCA 537 as authority that a person who signs as agent for a limited liability company has the onus to advise the third party of this fact, or runs the risk of being held personally liable. In this case, the court found that the owner of the tenant, by signing the Letter of Intent as “David Bromley, President 269893 Alberta Ltd.”, gave sufficient notice to the landlord that he was contracting in the name of the numbered company. He was not held personally liable.

The signor was not so fortunate in a 2014 decision of the BC Provincial Court (Out West Windows Glass Home Maintenance Ltd. v. Tilley, 2014 BCPC 296). In that case, a homeowner claimed against a contractor for defective work on a home. The purchase order prepared by the contractor named the contracting entity as “Out West Windows, Glass & Home Maintenance”. No reference was made to the full legal name “Out West Windows Glass Home Maintenance Ltd.” The court found that the homeowner had not been told that he would be contracting with a limited company. Section 27 of the BC Business Corporations Act requires each company doing business in BC to display its full name (including the “legal” component, which in this case was “Ltd.”) on all contracts and certain other business papers and notices. The purchase order was consistent only with the inference that the principal, Mr. Hargrave, was doing business as a sole proprietorship under the business name “Out West Windows, Glass & Home Maintenance”. In those circumstances, the court found that Mr. Hargrave could not shelter behind the limited liability of his company, and found him personally liable for damages.

Whether or not they sign contracts intended to be in the name of the company, directors and officers who knowingly permit a BC company or extraprovincial company to fail to state its full legal name may be personally liable to indemnify a purchaser of goods or services from the company who suffers loss or damage as a result of being misled thereby (BC Business Corporations Act ss 158(1) and 384(1)). Liability under these sections does not, however, appear to have been applied in recent years.

Note that the registration of a trademark (federally) or a business name (provincially) as owned by a company may be found to give the third party notice of the fact that it is dealing with a limited liability company – this concept was not considered in the cases reviewed. Whether or not a trademark or business name is registered, however, s. 27 of the Business Corporations Act requires the full legal name to be displayed.