Court of Appeal for Ontario confirms personal liability for fraud regardless of corporate structure

In CHU de Québec-Université Laval v. Tree of Knowledge International Corp., 2026 ONCA 209, the Court of Appeal for Ontario upheld a finding of personal liability against a corporate director for civil fraud, reinforcing that the corporate form does not shield individuals from the consequences of their own dishonest or reckless conduct.

The case arose during the early days of the COVID-19 pandemic. CHU de Québec-Université Laval (“CHU”), the largest hospital network in Quebec, was urgently seeking personal protective equipment in March 2020. CHU entered into an agreement with Tree of Knowledge International Corp. (“TOKI”) to purchase three million NIOSH-certified N95 respirator masks for over US$11 million, paying the full purchase price in advance given the extraordinary market conditions at the time.

TOKI’s sole director and officer, Michael Caridi (the appellant), personally negotiated the transaction and repeatedly assured CHU that the masks had been secured and would arrive within days. In reality, TOKI had not sourced any masks at the time it executed the agreement. TOKI ultimately failed to deliver any compliant N95 masks, and months later tendered a small quantity of non-conforming KN95 masks, which CHU rejected.

At trial, the Ontario Superior Court of Justice found Mr. Caridi personally liable for civil fraud. He appealed, arguing that the trial judge applied too low a threshold for recklessness and that personal liability could not be imposed without piercing the corporate veil. The Court of Appeal dismissed the appeal.

i.    Why this Decision Matters

Personal fraud liability is not the same as piercing the corporate veil. One of the most significant aspects of this decision is the Court of Appeal’s clear distinction between these two concepts. Piercing the corporate veil remains an exceptional remedy, reserved for situations where the corporate structure itself is being misused. Personal liability for fraud, by contrast, arises directly from the individual’s own tortious conduct. A director or officer who personally makes fraudulent representations can be held liable on that basis alone, there is no need to look behind the corporate entity. The Court was careful to note that Mr. Caridi was not held liable simply because he was a director; he was held liable because he personally made the misrepresentations.

Recklessness is enough, actual knowledge of falsity is not required. The Court reaffirmed the established standard for the mental element of civil fraud: a plaintiff does not need to prove that the defendant knew a statement was false. It is sufficient to show that the defendant made a representation without an honest belief in its truth or was indifferent to whether it was true or false. On the facts, Mr. Caridi gave definitive assurances of imminent delivery at a time when TOKI had no supply secured and no enforceable sourcing arrangements in place. The Court rejected the suggestion that optimism, hope, or informal discussions with third parties could justify making unqualified commercial promises in those circumstances.

No additional prerequisites apply when fraud is established. Mr. Caridi argued that personal liability should require proof of a “separate identity or interest” from the corporation, or conduct that was independently “tortious in itself” beyond the fraud. The Court rejected these arguments, holding that fraud occupies a distinct position in Canadian tort law. Once fraud is established, personal liability follows automatically, regardless of whether the individual personally benefitted or acted solely in the corporation’s interest.

ii.    Practical Implications for Directors, Officers, and Businesses

This decision is a clear reminder that serving in a corporate capacity does not protect individuals from personal exposure when they engage in fraudulent conduct, and it carries significant implications for directors, officers, and insurers alike. The corporate veil protects corporate actors in many circumstances, but it has never been intended to protect dishonesty.

For directors and officers, the takeaway is straightforward, commercial representations must be grounded in a reasonable factual basis. Making unqualified assurances about matters that have not been confirmed, particularly in high-value or time-sensitive transactions, carries real legal risk. Where certainty does not exist, representations should be appropriately qualified.

For businesses entering into significant commercial arrangements, this case also makes clear the importance of conducting appropriate due diligence on counterparties, particularly when advance payment is involved and the stakes are high.

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