Piercing the Corporate Veil

Tobey v. Loranger, 2020 ONSC 4669 (CanLII) DIVISIONAL COURT

[32] The appellant argues that the trial judge “pierced” the corporate veil without adequate grounds in light of the fact that Dan’s Auto Sales was operated by a corporation. This is reflected in the bill of sale dated March 3, 2018 which identified the name of the dealer as 2195127 ON Ltd. o/a Dan’s Auto Sales. The issue of Mr. Loranger’s personal liability was recognized early on by the trial judge where he addressed Ms. Tobey as follows,

Ms. Tobey, Mr. Loranger in his defence says that the contract that you signed, the bill of sale, is with a numbered company that operates as Dan’s Auto Sales, and that he shouldn’t be personally liable, that its his company that you signed the contract with. Do you have anything to say about that?

[33] Ms. Tobey then responds,

Ms. Tobey: I didn’t know that.

The Court: What didn’t you know?

Ms. Tobey: I thought I was purchasing the truck off him.

The Court: You mean off him personally?

Ms. Tobey: Yes. Its his business. Its his – its his name on the business.

The Court: Well it says a numbered company, 2195127 Ontario, operating as Dan’s Auto Sales.

Ms. Tobey: Well – I don’t understand that.

The Court: Well, what do the signs in the shop say? What do they say?

Ms. Tobey: I didn’t see any – I wasn’t looking for that. I just went to an honest…

The Court: Just a minute. When you drive by, does it say Dan’s Auto Sales or does it say a numbered company operating as Dan’s Auto Sales. What do the signs say?

Ms. Tobey: I don’t look for things like that. I was brought there by my daughter. I only go to a dealership. I have never been to a side of the road dealership. So my daughter introduced me to this company.

[34] The evidence of the daughter was that there was no sign on the building identifying that the business was run through a corporation. Mr. Loranger in his evidence relied on the bill of sale where the corporate identity was identified as well as a sign that he hangs in his office. He agreed, however, that not everyone reads what is hanging in his office.

[35] In holding Mr. Loranger personally liable the trial judge stated,

The next problem is, whatever amount I fix as Dan’s Auto Sales liability, is Mr. Loranger personally liable, because he says that he operates as a limited company, carrying on business as Dan’s Auto Sales? In my opinion, I am not satisfied that he has done everything possible to make it known to the public that he is carrying on business via a corporation. It’s rarely the case in these situations where people know “Oh I know, its numbered 12345678, carrying on business as Dan’s Auto Sales”. That’s not the way it works. It may work that way for tax purposes, when you are dealing with your accountant and all of that, but unless its really made clear that you are a corporation, most people in this kind of a situation would not know it. So I have every reason to believe that Ms. Tobey assumed she was dealing with an individual. So I do not find that defence to be helpful.

[36] In the Ontario Court of Appeal decision in Total Crane Erectors Ltd. v. Fontana, 2007 ONCA 121, the trial judge found a contractor personally liable. In upholding that decision, the Court of Appeal stated,

In our view there is no basis to interfere. The law is clear. If a party is contracting for another and does not make it clear to the person with whom he is contracting that he is contracting in the capacity of an agent, he will be personally liable. There is no conflict in the legal authorities.

[37] In my view, the Reasons of the trial judge make it clear that he correctly understood the legal principles to be applied. If a party expects to benefit from the protection of limited corporate liability then others must be informed in a reasonable manner that they are dealing with a corporation and not an individual (see also Dhillon v. Stewart, 2018 ONSC 4004 at para. 14). Having correctly understood the applicable law, the trial judge’s application of the facts to the law is entitled to deference (See para. 37 of the Housen decision, supra).

[38] In the present case, the agreement to purchase the vehicle occurred in January and the bill of sale was not delivered to the plaintiff until March when the vehicle was delivered and after two payments totaling $4,500 were made by the plaintiffs. The plaintiff testified that she did not know that she was dealing with a corporation and the trial judge found that Ms. Tobey reasonably believed that she was dealing with an individual. The trial judge also found that Mr. Loranger did not take all reasonable steps to advise his customers that he was acting as agent for a corporation. There was evidence to support his finding in this regard.

[39] It is apparent that the trial judge considered the totality of the evidence including the bill of sale which identified the incorporation of the defendant’s business. His finding that the defendant did not make it clear to the plaintiff that he was acting as agent for a corporation and that Ms. Tobey thought she was dealing with an individual are entitled to deference. I therefore conclude that there is no basis to interfere with his conclusion that Mr. Loranger is personally liable to the plaintiffs.

Yaiguaje v. Chevron Corporation, 2018 ONCA 472 (CanLII)

[7] On appeal to this court, the appellants advance two primary submissions. First, they argue that the Execution Act, R.S.O., 1990, c. E.24 (the “Act”), permits execution on Chevron Canada’s shares and assets to satisfy the Ecuadorian judgment. Second, and in the alternative, they submit that this court should pierce the corporate veil in order to render Chevron Canada’s shares and assets exigible.

[36] Because the principle of corporate separateness applied to Chevron Corporation and Chevron Canada, Hainey J. held that the appellants had to meet the test for piercing Chevron Canada’s corporate veil, established in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), affirmed: (1997) 74 A.C.W.S. (3d) 207 (Ont. C.A.). That case held, at pp. 433-34, that “courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct.” The appellants did not allege that the corporate structure of which Chevron Canada is a part was designed or used as an instrument of fraud or wrongdoing. This was fatal to their claim: para. 65.

[37] Hainey J. also held that the appellants failed to establish that Chevron Corporation had “total effective control” over Chevron Canada to meet the first part of the Transamerica test. That test requires more than ownership, but “complete domination of the subsidiary corporation” such that the subsidiary does not function independently or is a “puppet” of the parent: paras. 69, 72.

[38] Finally, Hainey J. rejected the appellants’ argument that corporate separateness should not be applied where it will yield a result “too flagrantly opposed to justice.” In his view, the jurisprudence established that courts do not have a carte blanche to pierce the corporate veil where it appears just to do so, absent fraudulent or improper conduct: paras. 66-68.

[68] The Supreme Court of Canada has protected the principle of corporate separateness without suggesting a standalone just and equitable exception. In Sun Indalex Finance v. United Steelworkers, 2013 SCC 6, [2013] 1 S.C.R. 271, at para. 238, Cromwell J. rejected the submission that a subsidiary should be liable for a breach of fiduciary duty committed by its parent corporation, holding that “unless there is a legal basis for ignoring the separate corporate personality of separate entities, those separate corporate existences must be respected.” See also Continental Bank Leasing Corp. v. Canada, 1998 CanLII 794 (SCC), [1998] 2 S.C.R. 298, at paras. 108-112.