Supreme Court of Canada clarifies corporate attribution test to be applied in a “purposive, contextual, and pragmatic” manner

Corporations are considered separate legal persons distinct from the people that run them. But, they do not have their own minds or willpower. This raises a question when statutory or common law tests require a finding as to the intent of the corporation. Whose intent counts as the intent of the corporation? The answer is to be derived through the law of corporate attribution.

The Supreme Court revisited the corporate attribution test in a recent decision: Aquino v Bondfield Construction Co., 2024 SCC 31. The SCC clarified that the corporate attribution test is not a “one-size-fits-all” doctrine, but must be applied purposively and tailored to the specific context at issue.

The decision related to the transfer at undervalue provisions of the Bankruptcy and Insolvency Act (s. 96), which allows a CCAA monitor or bankruptcy trustee to recover from persons who were “privy” to transfers at undervalue with an insolvent corporation. The statutory provision at issue required a finding that the debtor (Bondfield) intended to defraud, defeat or delay a creditor. A directing mind of Bondfield had carried out a false invoice scheme, which the courts found was done with the intent to defraud, defeat or delay its creditors. The question was whether the intent of the directing mind could be attributed to Bondfield.

The appellants argued for a strict or inflexible application of the corporate attribution law derived from cases in which the Supreme Court considered whether a corporation should be held criminally and civilly liable for the misdeeds of directing minds who also acted in fraud on the corporation. Under that approach, there would be no attribution of the directing mind’s intent because of exceptions to corporate attribution referred to as the fraud or no benefit exceptions. These were limits imposed by the courts to find that the intent of a directing mind acting in fraud on a corporation or with no benefit to a corporation should not be attributed to the corporation in order to avoid corporate liability when the corporation itself was the victim of fraud or wrongdoing.

In the context of transfers at undervalue under the BIA, the SCC found that these exceptions failed to reflect the remedial context of s. 96, which was not aimed at corporate liability, but allowed for the reversal of transfers that deprived an insolvent corporation of value. The Supreme Court of Canada found that the corporate attribution test should be applied contextually and purposively to attribute intent where the person responsible for the impugned transactions was (1) a directing mind of the corporation, and (2) acting within the scope of his or her authority, without the application of the fraud and no benefit exceptions. 

Implications for the future

The Bondfield decision preserves a powerful tool for reversing transfers carried out by a corporation’s directing mind that were made in fraud on its creditors. Applying the fraud or no benefit exceptions to that context would have significantly narrowed the scope of the provision. Jurisprudence on transfers at undervalue reveals that these transfers are often carried out with no or minimal consideration. As a result, applying the fraud and no benefit exceptions could have stripped the provisions of much of their power. 

More broadly, however, the decision clarifies a statement made in the earlier Dejong Supreme Court of Canada decision  that “while the presence of public interest concerns may heighten the burden on the party seeking to have the actions of a directing mind attributed to a corporation, Canadian Dredge states minimal criteria that must always be met.” It is now definitively established that the test of corporate attribution does not require an identical approach in all contexts but instead must be approached having regard to the context and purpose of attributing intent. This test should have broad application across other contexts that require attribution of intent, both at common law and under statute.

The author would like to thank Farah Abdel Haleem, articling student, for her contribution to preparing this legal update.

Norton Rose Fulbright Canada (Stephen Taylor and Evan Cobb) successfully represented the CCAA Monitor of Bondfield Construction Company Limited.¹