The Alberta Court of Appeal has provided helpful analysis relating to personal liability of actors in investment schemes: personal liability of principals and claims under the Securities Act.


Charles Ryan promoted a plan to develop land through various corporate vehicles. Markus Abt invested $800,000 after speaking with an investment advisor with Sun Life. Mr. Abt believed he would receive 70% return on the investment and monthly payments of $2,600.

When the developer corporation became insolvent, the Abts sued numerous people involved in the investment. Prior to trial, the Abts settled with Sun Life for $360,000.

The trial judge found Mr. Ryan and several other defendants liable for the Abts’ losses. The trial judge held that Mr. Ryan was liable for negligent misrepresentation. Mr. Ryan appealed.

Personal liability for corporate acts

While the trial judge found Mr. Ryan should be personally liable in tort for negligent misrepresentation, the Court of Appeal did not find it necessary to come to a “definitive conclusion” on this issue. However, the Court of Appeal noted that the “circumstances here may well be sufficient” to meet the test for Mr. Ryan’s personal liability.

The circumstances under which a corporate officer will be personally liable for the corporation’s misrepresentations is noted in Blacklaws v. Morrow, 2000 ABCA 175: are the individual director’s actions “themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own”.

The court found that the circumstances may be sufficient to indicate that Mr. Ryan was acting in his personal interest, separate from the corporation, based upon the following factors:

  • Significant amounts of the funds raised were used to pay the “straw mortgages” to the Ryan corporations.
  • Ryan had organized the corporate structure so that he acquired for a nominal consideration all the “B” units, which were entitled to 35% of the venture’s profits.
  • Ryan was actively involved in helping the Abts’ investment advisor close the transaction with the Abts. He agreed to provide collateral security for the investment by pledging land that he owned.

The Securities Act claim

Since the trial judge found Mr. Ryan liable at common law, he declined to “unpack” the Abts’ Securities Act claim, but concluded the Abts had not proven a Securities Act violation. However, the Court of Appeal found Mr. Ryan liable under the Securities Act.

The Abts alleged that Mr. Ryan breached section 204(1) of the Securities Act, which provided that security purchasers have a right of action for misrepresentation in a prescribed offering document. The offering memorandum used by Mr. Ryan was missing certain required disclosures, such as an independent appraisal disclosing the market value of the real property. While there was no overt misrepresentation on the form, the court held that Mr. Ryan’s failure to disclose material facts constituted a misrepresentation, and held Mr. Ryan personally liable.

In defence, Mr. Ryan relied on the statutory cap on damages in section 204(4) of the Securities Act. Mr. Ryan argued that the Abts could recover the principal amount of the investment but not the 4% compound interest awarded by the trial judge. The Court of Appeal found that section 204(4) may not bar a claim for interest between the date the cause of action arose until judgment. Further, the court held that it did not need to come to a decision on this issue. The Abts had settled with Sun Life prior to trial, and the Court of Appeal found that the Abts “were entitled to allocate the settlement amount paid by Sun Life on any reasonable basis.” The Abts could treat the Sun Life settlement as payment of the interest the trial judge awarded.

Mr. Ryan further relied upon the 180‑day limitation period set out in section 211, arguing that the Abts knew of the claim earlier than March 15, 2012. The court held that the Abts’ earliest warning about their investment occurred in late 2011, when their accountant grew concerned. The accountant expressed further concerns in February 2012. Mr. Abt attempted to take up Mr. Ryan’s previous offer to buy back his units, but Mr. Ryan stopped communicating and Mr. Abt resolved to consult a lawyer by March 28, 2012. The court held that while the accountant had serious reservations about the investment by March 15, 2012, there was no evidence that he or Mr. Abt knew about the misrepresentation by that point.


The Court of Appeal has confirmed the appropriate legal framework for considering claims personally against the principals of investments schemes. Regarding personal liability for misrepresentation, the court examined the true circumstances of the transaction. On the matter of the claim under the Securities Act, the Court of Appeal held that an omission to state material facts can ground liability under the legislation. Further, the court adopted a pragmatic approach to the defences of limitations of liability and limitation periods, in a manner that appreciates the unique challenges of an investment scheme victim.