In a recent BC decision, Fitzgerald Living Trust v. Mountainstar Gold, Inc., a judgment against the corporate defendant resulted in jail time for the principal behind the defendant.
Following a successful judgment against the defendant, the plaintiff had taken further steps to force the defendant to pay, and had obtained a further order of the court directing the defendant to pay a certain amount by a certain date. The defendant failed to comply with this order, even though the principal behind the defendant was present in court and consented to the order.
In a later court application, the court fined the defendant and its principal $5,000 each for contempt in failing to make the payment. A further fine of $10,000 each was made following the defendant's continuing failure to pay. Finally, after further non-payment, the court ordered the principal jailed for 18 days, although that order was suspended for 30 days to give the principal and the defendant a final opportunity to pay all outstanding amounts. The court also fined the principal a further $6,000 and the defendant a further $8,000, and awarded the plaintiff $10,000 for their costs of the court proceedings.
Although a corporation is a separate legal entity and a judgment against it is not a judgment against its principal, the principal can nevertheless face personal liability depending on how they react to the judgment. Experienced advice is critical to avoid this pitfall.