Piercing the Corporate Veil When Entities are so Closely Related
Should the courts in appropriate family law cases disregard the separate legal personality of a corporate entity where, in the latter case, "it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct"? In my view, the answer to this question is a resounding 'Yes'.
The above is the crux of the issue dealt with by Kurz J in Jamieson v Jamieson, 2020 ONSC 6935. Kurz J, after reviewing past cases, laid out the following factors in piercing the corporate veil –
1. The individual exercises complete control of finances, policy, and business practices of the company.
2. That control must have been used by the individual to commit a fraud or wrong that would unjustly deprive a claimant of his or her rights.
3. The misconduct must be the reason for the third party's injury or loss.
4. Are the corporations in question completely controlled by one spouse, for that spouse's benefit and no third parties are involved.
Applying the above factors in the present circumstances of the case, Kurz J said -
1. David exercises complete control of the company.
2. That control has been used to shield David from the claims of Nora and the parties’ daughter. That occurred when David placed the assets of the sale of Anexxa Medical into Anexxa Tech without regard to their right to a share of those proceeds. He then has been able to use the corporation to shield his assets from Nora’s claims in this proceeding, especially because he was self-employed and made collection by FRO difficult for any support that was ordered.
3. Nora has suffered a resulting loss and is in danger of suffering a further loss if the corporate structure that David had adopted prevents her from enforcing my order.
Conclusion: The above case and the factors are a complex example of matrimonial litigation. Often, we have cases where one party so completely controls the finances through a business and refuses to share the finances with the other party. These are complex cases, requiring thorough analysis, research and sustained work.
At Shankar Law, we are happy to do the hard hitting for you.
We are happy to assist and guide you through whatever challenges you have in your spousal life.
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