Question

Gertrude owns one-third of the shares of Jumpers Inc. which operates a sky diving business outside Ottawa.  The corporation owns one aircraft for skydiving purposes, 20 parachutes and it employs two full time sky diving trainers.  Another sky diver provides training to customers for Jumpers Inc, but he has an independent contractor arrangement with Jumpers Inc for the  part time services he provides to them.

Tina, Ike and Gertrude each own an equal number of shares and they all sit on the board of directors. There are no other directors.

They lease the air strip and hangar for the aircraft.  The airstrip and hangar are owned by Ike and Tina.  The lease is up for renewal in three months and Gertrude would like to find another location because the strip sits on a former gas station site.  Gas spills from the old gas station remain underground and been leaching into the adjacent river.

She has been asked by the two other shareholders, Ike and Tina, to seek legal advice to protect the three of them from personal liability and to protect the corporation from liability as well. They authorize her to engage counsel to represent the corporation at $350 per hour and conduct a legal audit of it.  She reaches out to you to advise her and conduct the audit at the rate of $400 per hour. She agrees on behalf of the corporation to hire you at that rate

Identify as many legal issues as you can and discuss them. Do you require any additional information from the corporation or Gertrude on any of the issues and, if so, what? Develop a risk management plan for the legal risks you are able to identify.

Answer 1

Answer:

The lawyer would require further information on the following issues:

1. On ownership of Gas station: Because if the Directors are not the owners of the gas station and if any litigation occurs, they can claim any business loss or other kind of losses from the gas station owner based on Strict Liability.

2. An agreement or authorization between the parties to ascertain these legal risks.

Risk Management Plan:

Keep a disclaimer in the sky diving registration form for the customers, stating that the Corporation or the Directors shall not be held liable for any risk of health or life due to the gas station below the strip.
Take an Indemnity or consent note from the customers to enjoy sky diving at their sole risk.
Obtain a license or clearance from the Environmental Protection Department.
Get clearance from the Fire Department and follow their compliances.