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  • October 22, 2020

What’s in a name? Understanding “piercing the corporate veil” in Canada after Yaiguaje v Chevron Corp

Robert Nanni, University of Toronto


The House of Lords’ judgment in Salomon v A Salomon and Co is frequently cited for the proposition that corporations have legal personalities that are separate from the individuals who control them.1 This long-standing principle of corporate separateness has appeared repeatedly in Canadian jurisprudence and has been reflected in s 15 of the Canada Business Corporations Act (“CBCA”), which states that “[a] corporation has the capacity and, subject to this Act, the rights, powers and privileges of a natural person.”2 An extension of this principle has been the limited liability afforded to shareholders, as per s 45 of the CBCA, which provides, with few exceptions, that “the shareholders of a corporation are not, as shareholders, liable for any liability, act or default of the corporation.”3 Despite these endorsements of corporate separateness, the judiciary has occasionally invoked its equitable jurisdiction to disregard the distinct legal personalities of the corporation and its controllers in order to effect the claimant’s desired outcome.

In Adams & Ors v Cape Industries plc & Anor, the U.K. Court of Appeal considered three situations in which corporate separateness could be disregarded.4 In Transamerica Life Insurance Co of Canada v Canada Life Assurance Co, the Ontario Court (General Division) introduced Adams into Canadian law.5 However, the three distinct situations from Adams were misstated, resulting in the judiciary generally considered them as all “piercing” or “lifting” the corporate veil.

The umbrella term of piercing the corporate veil has been further confused by its application in two related but distinct contexts: First, the traditional notion of disregarding corporate separateness to prove a shareholder’s liability for the debts of the corporation; and second, disregarding corporate separateness to enforce a judgment against an already liable debtor. In Yaiguaje v Chevron Corp, the two opinions in the Court of Appeal for Ontario (“ONCA”) tracked this divide quite cleanly.6 The majority judgment understood piercing the corporate veil to mean liability, whereas the concurring opinion described it as a means of enforcement against a liable party. Further, the concurring opinion expressed an openness to piercing the corporate veil in equitable circumstances, which the majority staunchly rejected.

Inconsistencies in Canadian jurisprudence regarding the ambit of piercing the corporate veil—both as a conflation of the three approaches in Adams and a confusion between liability and enforcement—do not sit well with the approach put forward by the majority in Chevron. The correct approach moving forward must consider the law’s development over time, recognize the relevant comments from each of the two opinions in Chevron in that context, and craft a blended approach that respects the important contours of disregarding corporate separateness.


The decision to disregard corporate separateness is founded in equity, which dons a great deal of discretion upon the decision-maker. At common law, a corporation is presumed to have its own legal personality, from which judges can deviate under limited circumstances.

2.1. Introducing corporate personality: The impact of Salomon

In Salomon, the primary legal issue was the interpretation of the Companies Act, 1862, which required an incorporated company to have at least seven shareholders. Salomon incorporated his business as “A. Salomon and Company” by issuing 20,001 shares to himself and one share to each of his wife, daughter, and four sons.7 When his company went insolvent, Salomon tried to recoup his debs using his secured creditor status, which the liquidator contested and, in response, sued Salomon personally to recover the funds to be paid to unsecured creditors.8

Salomon’s case made it to the House of Lords, which successfully overturned both lower courts’ decisions. The House of Lords described the statute as simply requiring seven shareholders and refused to inquire into unwritten requirements about each shareholder’s position vis-Ć -vis one another.9 Instead, it was sufficient that the company had been validly constituted and that the creditors had notice about the limited liability company with which they were contracting.10

In considering the constitution of a corporation under the Companies Act, 1862, Lord Macnaghten described a company as being “at law a different person altogether from the subscribers to the memorandum.”11 Lord Macnaghten’s comments emphasized the foundational reasons for which individuals incorporate their companies: To increase the corporation’s access to credit and to limit the liability of shareholders.12 Despite Salomon’s predominant leadership and influence in the company, as well as the nominal shares held by the other shareholders, the company was no less duly constituted as per the statute’s express language.13 This textualist approach in Salomon has been described by some scholars as a “substantial shift in attitude” in corporate law, speculating that the House of Lords intended to afford heightened protections to businesses that exerted sociopolitical influence in Britain’s economy at the time.14

This commitment to separate legal personhood of the corporation was quickly followed by Canadian jurisprudence in Soper v Littlejohn, where the Supreme Court of Canada (“SCC”) described the shareholders and the company as “undoubtedly distinct legal persons” and held that the “acts and conduct of one cannot have any effect on the other.”15 Support for this principle from the highest courts in England and Canada in such a short timeframe clearly empowered this newly-founded pillar of corporate law. However, as with many rules, it was subject to exceptions.

Although the House of Lords in Salomon unanimously upheld the importance of separate corporate personality and limited liability, both Courts below had unanimously dismissed it. The choice to disregard shareholders’ limited liabilities is discretionary, as evidenced by the U.K. Court of Appeal’s comments in Salomon, where A. Salomon & Company was called “a mere sham”16 and the Court held that the sale should be invalid “at least in equity”.17 This equitable jurisdiction is broadly referred to as disregard of corporate separateness or disregard of corporate personality.

2.2.Disregarding corporate personality: Three approaches from Adams

The approach for disregarding corporate personality in English law was summarized by the U.K. Court of Appeal in Adams.18 In Adams, Cape Industries plc (“Cape”) was a parent company whose subsidiaries mined asbestos, shipped it to Texas, and had its marketing subsidiary (“NAAC”) distribute it to another Texan company. When NAAC employees fell sick with asbestosis, they successfully sued Cape and its subsidiaries in Texas for negligence. The claimants sought to enforce the judgment against Cape in the U.K., which called into question Cape’s presence in the U.S. via its subsidiary, NAAC. To address this uncertainty, the claimants asked the U.K. court to disregard the distinct legal personalities of Cape and NAAC, thereby allowing an enforcement of the Texas judgment against Cape. In putting forward their claim, the claimants argued three theories by which the Court could disregard corporate separateness and enforce the judgment against the parent company.19

2.2.1. Single economic unit

The first theory addressed by the Court was that Cape and NAAC effectively performed the same functions; thus, NAAC’s physical presence in the U.S. was tantamount to Cape’s presence as well.20 As a result, the two businesses were effectively a single economic unit and should be treated as such for the purposes of disregarding corporate separateness. While the Court outright rejected the proposition that all companies in a group of companies are to be viewed as a single company, it contemplated the notion that this particular situation justified blurring the distinction between parent and subsidiary.21 The plaintiffs provided a series of cases for the Court’s review, claiming that they suggested that “where legal technicalities would produce injustice in cases involving members of a group of companies, such technicalities should not be allowed to prevail.”22 However, the Court was not convinced, narrowing the scope of this argument to situations “which turn on the wording of particular statutes or contracts”.23 Although the Court recognized that, economically, the two might be viewed as one unit, their judicial role was one of legal analysis, rather than economic analysis, and dismissed this argument.24

At the crux of the Court’s hesitation to accept the plaintiffs’ argument was the long-standing principle in Salomon, which the Court refused to disregard “merely because it considers that justice so requires.”25 The Court maintained this position despite assertions made by the plaintiffs that suggested the two companies were one and the same: Cape made all major policy decisions concerning NAAC, Cape’s control did not depend on NAAC’s corporate form, NAAC’s directors were formal in function, and Cape represented NAAC as its U.S. office.26 The Court maintained that the parent-subsidiary relationship was expectedly one of general policy control.27 Despite being informed by Cape’s policies, NAAC’s chief executive decided how those policies were implemented in carrying out daily functions.28 As such, the Court refused to disregard corporate separateness by viewing the two separate legal entities as a single economic unit.

2.2.2. Piercing the corporate veil

The Court in Adams then addressed the second theory put forward by the plaintiffs, which asked for the corporate veil to be pierced. The plaintiffs’ position was that Cape used NAAC as a “device or sham or cloak” to remove its assets from the U.S. and evade asbestos-related liability.29 The Court adopted a narrow construction of piercing the corporate veil, based on comments made by Lord Keith of Kinkel in Woolfson v Strathclyde Regional Council: “[I]t is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere faƧade concealing the true facts.”30 The Court further added that the motive of the purported fraudster must be considered at law, citing Jones & Anor v Lipman & Anor as one such case where the motive of the perpetrator was highly persuasive for piercing the corporate veil.31 In Jones, the defendant was a shareholder who had conveyed a parcel of land to another company in order to evade an order of specific performance. The Court “saw through” the faƧade and enforced an order against the company to convey the land to the plaintiff.32 Accordingly, the offending party’s motive was highly relevant to determining whether the corporate veil should be lifted.

The plaintiffs in Adams did not allege that Cape’s NAAC subsidiary was maintained with any unlawful purpose, impropriety, or intention to deceive, nor that it conducted any unlawful act or intended to do so.33 Nonetheless, the plaintiffs claimed that the subsidiaries constituted a faƧade that concealed Cape’s real activities, including limiting liability of risk and reducing the burden of taxation.34 However, the Court held that, following the principle outlined in Salomon, corporations are entitled to organize their affairs as they see fit, and refused to pierce the corporate veil.35

2.2.3. Agency

The final theory put forward by the plaintiffs for disregarding corporate separateness in this case was that NAAC, as a subsidiary of Cape, was a mere agent for the will of the parent company. To assess this claim, the Court considered the relationship between NAAC and Cape.36 An analysis of the circumstances demonstrated that NAAC was its own entity and not Cape’s agent: NAAC owned its property and furniture; employed its own staff with their own pension scheme; purchased, imported, and stored asbestos on its own terms; and had its own creditors and debtors.37 The Court maintained that NAAC’s general independence was incontestable.38 However, the Court considered whether the specific activities that NAAC carried out on behalf of Cape were directed by Cape with NAAC as its agent.39 The plaintiffs suggested a few situations in which NAAC acted as an intermediary in carrying out some functions for Cape: Cape referred to NAAC as its Chicago office, NAAC referred to Cape as its London office, NAAC marketed itself as part of Cape, and NAAC was viewed by consumers as an intermediary between Cape and another Cape subsidiary.40 Nonetheless, the Court did not agree that these marketing representations sufficiently established an agency relationship.41 Absent an explicit agency agreement, there was no basis upon which the Court could accept the plaintiffs’ argument.

2.2.4. Considering the three theories of disregarding corporate separateness

Although the Court in Adams attempted to clearly delineate three approaches for disregarding corporate separateness, jurisprudence following Adams has treated them as one general manner of disregarding corporate personality under the umbrella term “piercing the corporate veil”. When a court lifts the corporate veil, they are looking through the subsidiary to the parent company. This, in effect, might be seen as treating the two legal entities as one corporate body whereby the parent company is in control of the sham subsidiary. This might be further confounded by the Court’s comment in Adams that English jurisprudence has provided “sparse guidance as to the principles which should guide the court in determining whether or not the arrangements of a corporate group involve a faƧade”.42 Despite adopting the comments on piercing the corporate veil in Woolfson, the Court in Adams refused to provide a comprehensive definition of what the phrase meant in practice.43

The judiciary in Canada has noted that cases considering veil-piercing “illustrate no consistent principle”.44 Peter Spiro, an employment lawyer at Monkhouse Law, has described the issue as founded in the discretionary nature of disregarding corporate separateness: If piercing the corporate veil is an “equitable remedy, rather than a rule of law, there is less scope for clear rules of precedent to apply to it.”45 Without guidance about what it means to pierce the corporate veil, extracting that approach from the others becomes a matter of semantics. Accordingly, it is easy for insufficient diligence and imprudent choice of language to bleed into the jurisprudence on what it means to pierce the corporate veil in a narrow sense. While this has resulted in a conflation of the different theories put forth in Adams, it has also expanded the application of piercing the corporate veil to situations of both liability and enforcement.


Corporate separateness, while founded in the common law and statute, can be disregarded by the judiciary to inculpate shareholders. However, deviations from this principle of corporate separateness in Canada have not materialized in a consistent manner. The Court in Adams purported to clarify the contours of veil piercing in English jurisprudence, which the Court in Transamerica adopted into Canadian law. By reviewing various oft-cited cases in which piercing the corporate veil was litigated, the impact of Transamerica can be identified and evaluated.

3.1. Piercing the corporate veil before Transamerica

Prior to Transamerica, Canadian jurisprudence housed a series of exceptions to the principle outlined in Salomon; however, these various situations were notably inconsistent. In Clarkson Co v Zhelka, Selkirk incorporated a company called “Industrial Sites and Locations Ltd.” (“Industrial”). Industrial purchased land and conveyed it to Selkirk’s sister, Zhelka, after which Selkirk became insolvent and petitioned for bankruptcy. Clarkson, as Selkirk’s trustee in bankruptcy, sought a declaration that the land held by Zhelka should be reverted to Selkirk for the benefit of his creditors. The Ontario High Court of Justice phrased the legal issue as one that sought a lifting of the corporate veil, a declaration that Industrial was merely Selkirk’s agent, and a finding that Selkirk and Industrial were not distinct legal entities.46 Although Clarkson predated Adams by over 20 years, the jurisprudence on veil piercing already identified a conflation of the three grounds that English law would later tease apart.

On balance, the Court was not convinced that it should pierce the corporate veil in Clarkson. The Court acknowledged that Selkirk retained complete control over his company, dictated the corporate policy, and was the operating mind behind its operations.47 The Court even went so far as to say that Industrial was subject to Selkirk’s influence and perhaps even to his domination.48 However, while his personal creditors might be disappointed, the Court simply pointed to the limited liability that is afforded to incorporated companies.49 Short of committing fraud to avoid existing personal liabilities or obligations, the Court was not prepared to accept that the corporate veil should be pierced.50 Instead, the Court would only do so if the company was formed “for the express purpose of doing a wrongful or unlawful act, or, if when formed, those in control expressly direct a wrongful thing to be done”.51 Alternatively, if “the company is the mere agent of a controlling corporator, it may be said that the company is a sham, cloak or alter ego”.52 These statements jointly represented the Canadian approach to corporate veil piercing at the time.

In considering whether to deviate from Salomon and (as the Court defined it) pierce the corporate veil, the Court noted the inconsistency in the jurisprudence and claimed to require circumstances that “would be flagrantly opposed to justice".53 This was a new approach to disregard of corporate personality and imputed an increasingly discretionary flavour into this already equitable doctrine. Despite the Court’s finding that there was a resulting trust in Industrial and that Zhelka was never intended to take beneficial interest in the conveyed property,54 which the Court noted was tantamount to fraud against Industrial’s creditors,55 it still dismissed Clarkson’s claim.

These comments about piercing the corporate veil where justice demands it were adopted by the SCC in Kosmopoulos v Constitution Insurance Co of Canada.56 In that case, the claimant had incorporated his business; however, he had not updated his insurance policy to reflect this change from a sole proprietorship to a corporation.57 When the corporation’s property and assets were damaged by a fire at an adjacent location, the insurance company refused to carry out the insurance policy.58 Kosmopoulos wanted the Court to pierce the corporate veil, thereby allowing him to collect the insurance claim.59 Ultimately, the Court refused his request.60

Justice Wilson, writing for the majority, began from the principle in Salomon that a corporation has a distinct legal personality from its shareholders,61 describing the difficulties and uncertainties that pervaded deviating from that principle, and also suggested a standard predicated on flagrant oppositions to justice.62 Justice Wilson’s comments were a reminder that the decision to pierce the corporate veil, although seemingly unprincipled, rested in an equitable jurisdiction. Effectively, a court is free to consider whether deviating from the long-standing principle in Salomon would avoid an unjust outcome. This is notably a high bar, whereby the court cannot simply pierce the corporate veil to achieve a just outcome, but rather to combat an unjust one.

Continuing her sentiment, Justice Wilson stated that “theoretically the veil could be lifted in this case to do justice,” which reformulated the above principle with a lower onus.63 In the same breath, Justice Wilson admitted inconsistencies in the law, proffered her best formulation of a guiding principle, and then undermined it with an inconsistency. Nonetheless, she concluded that several factors weighed in favour of rejecting Kosmopoulos’ request to pierce the corporate veil.64

The Court described Kosmopoulos’ situation as one that pits the benefits and burdens of incorporation against one another.65 Kosmopoulos incorporated his sole proprietorship to limit his liability; however, it was now beneficial for the corporation to be viewed as a sole proprietorship once more, so he wanted the corporation’s legal personality to be disregarded.66 Effectively, the Court was wary of permitting Kosmopoulos to “blow hot and cold” at the same time.67

Multiple interpretations regarding the ambit of piercing the corporate veil and the circumstances under which it will be invoked remained unclear following the comments in Clarkson and Kosmopoulos. The only clear takeaway from these cases was the relevance of unlawful acts, of the corporation being a faƧade, and of the equitable considerations at play when the judiciary is considering whether to pierce the corporate veil. However, the comments in these cases do not fill well under the Adams framework. In Clarkson and Kosmopoulos, litigants and judges alike conflated piercing the corporate veil with the different theories of disregarding corporate personality from Adams. Scholars commenting on the jurisprudence leading up to Kosmopoulos described the different judicial opinions about piercing the corporate veil as irreconcilable: “Cases are decided by judges who adopt different attitudes to the question and rarely, if ever, state what their general theory of corporate personality is.”68 Accordingly, Justice Sharpe took it upon himself in Transamerica to adopt Adams into Canadian law and settle this inconsistency.

3.2. The impact of Transamerica on Canadian corporate law

In Transamerica, Canada Life Mortgage Services Ltd. (“CLMS”) arranged 54 mortgages for Transamerica Life Insurance Company of Canada (“Transamerica”), some of which went into default.69 Transamerica pleaded several torts against CLMS and its parent company Canada Life Assurance Company (“CLAC”), which wholly owned CLMS.70 The claimant relied on Justice Wilson’s comments in Kosmopoulos about piercing the corporate veil in the face of flagrant oppositions of justice;71 however, the Court in Transamerica was not willing to accept this significant departure from Lord Macnaghten’s comments in Salomon.72

Justice Sharpe’s rejection of the highly discretionary approach suggested in Kosmopoulos aligned well with the approach in Adams, in which Lord Justice Slade stated that “the court is not free to disregard the principle of Salomon […] merely because it considers that justice so requires”.73 Instead, the Court in Transamerica reflected on Gower’s comments in Modern Company Law (5th ed), which described the Adams Court’s thorough review of piercing the corporate veil in English law.74 The Court in Transamerica noted that, unlike the previous edition of Modern Company Law cited by Justice Wilson in Kosmopoulos, there was no longer a conception of a “just and equitable standard” following Adams.75 Accordingly, the extensive jurisprudential review and thoughtful analysis undertaken in Adams was fit to be adopted into Canadian law. Justice Sharpe held that there are only three circumstances the corporate veil can be pierced:

  1. When the court is construing a statute, contract or other document.
  2. When the court is satisfied that a company is a “mere faƧade” concealing the true facts.
  3. When it can be established that the company is an authorized agent of its controllers or its members, corporate or human.76

Loosely, these three categories map onto the three theories in Adams: (1) Single economic unit, (2) Piercing the corporate veil, and (3) Agency. However, a few inconsistencies arise. First, the Court in Transamerica did not use the language of a “single economic unit” but did import its narrowed scope of situations “which turn on the wording of particular statutes or contracts”.77 Next, the second situation required more than just a mere faƧade in Adams, but further inquired into the motive of the alleged perpetrator, and required an element of an unlawful purpose, impropriety, or intention to deceive, or an actual unlawful act, or the intention to conduct an unlawful act.78 Moreover, the agency argument in Adams was framed vaguely, with the possibility of an implicit or explicit agreement; however, the court in Transamerica limited the circumstance to one in which the company is an “authorized agent”, without any further guidance on whether that necessitates an explicit agency agreement. Finally, and most fundamentally at issue here, the Court refers to all three situations as those which can enable piercing the corporate veil; however, the Court in Adams only considered the second situation as one that truly involved veil-piercing.

This mangled importation of Adams into Canadian law was further distorted by the Court’s acknowledgement that the list of three circumstances was caveated by the existence of “situations where justice requires that the corporate veil be lifted.”79 Despite this statement, the Court cautioned that an imperfect test is not an open invitation to pierce the corporate veil.

Having said this, the Court then attempted to summarize its previous discussion, stating that “the 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” [emphasis added].80 This summarized test for piercing the corporate veil, similarly to the Court’s reading of Adams, was writhe with errors. First, despite intending the clarify the law on piercing the corporate veil, the Court inconsistently employed that phrase. The Court considered it in the narrow sense intended in Adams, requiring a mere faƧade and wrongful act, with attention paid to the alleged perpetrator’s motive, as well as in the broad sense that pervades corporate law jurisprudence and scholarship, which considers piercing the corporate veil and disregarding corporate personality as one and the same. This imprecision did not support an improved understanding of how and when to pierce the corporate veil.

Second, the Court changed the test for piercing the corporate veil from a disjunctive one to a conjunctive one. In Clarkson, the Court was willing to pierce the corporate veil if a corporation was formed “for the express purpose of doing a wrongful or unlawful act, or, if when formed, those in control expressly direct a wrongful thing to be done” or if “the company is the mere agent of a controlling corporator, it may be said that the company is a sham, cloak or alter ego”.81 By introducing a conjunctive element, Justice Sharpe increased the difficulty of piercing the corporate veil (however that phrase it to be understood). Moreover, this amendment to the test—which was done without any acknowledgment—modified the agency theory from being a situation in which the corporate veil could be lifted in Canada to becoming a central and necessary component of the test. Perhaps this shift occurred by the interpretation of the phrase used in Clarkson of “those in control”. While Clarkson can be read to mean that the controlling mind in a corporation is the board of directors, the Court in Transamerica read it to mean the shareholders. This distinction emphasizes the importance of distinguishing between piercing the corporate veil and agency, whereby incorporating the latter into the former results in the outcome seen in Transamerica.

Underpinning all of these comments is the importation of the Adams Court’s conception of disregarding corporate personality from an enforcement context into a liability context. In Adams, the plaintiffs sought to disregard corporate personality in order to enforce a Texas judgment against Cape in England. In Canada, however, disregarding corporate personality was being used to consider shareholder liability even before Transamerica, as seen in Clarkson. Nonetheless, the Court in Transamerica imported the framework from Adams into Canadian law (albeit erroneously) and applied principles of enforcement to those of liability. The judiciary has historically adopted Transamerica and Clarkson without any regard to the distinction between liability and enforcement, which raises the question—should there be a distinction at all?


Piercing the corporate veil has been used in the enforcement context as well. Spiro has noted this approach has been recognized in the U.S. as “reverse piercing”,82 where a claimant alleges that an individual is the beneficial owner of corporate assets; thus, the corporation’s separate personality should be disregarded to use those assets to relieve the defendant’s debts.83

4.1.Reverse piercing the corporate veil

The notion of reverse piercing has been commented on in Canadian jurisprudence as well, albeit without using that exact phrasing. In Wildman v Wildman, the Court pierced the corporate veil, noting that the situation was atypical in the realm of veil piercing, but explained that the typical concern of unanticipated personal liability was absent.84 While piercing the corporate veil in the typical sense is a story about liability (i.e., trying to inculpate shareholders for the corporation’s debts), reverse piercing is a story about enforcement (i.e., trying to collect rightly owed assets from a shareholder or subsidiary through the parent corporation). Arguably, even Kosmopoulos was an example of reverse piercing, whereby Kosmopoulos (the sole shareholder in his company) sought veil piercing to use his company’s insurance policy to address his own debts.

Aside from one case, Canadian jurisprudence has not engaged explicitly with the reverse piercing argument. In Borden Ladner Gervais v Sinclair et al, the Court considered many of the cases reviewed above and concluded that “it was […] nonsensical to rely on formalism and refuse to pierce the corporate veil in reverse.85 Accordingly, the Court held that “[i]f piercing the veil is a doctrine that can be deployed one way to make a personal shareholder responsible for corporate debt, then it can logically be deployed the other way to make a corporate property holder responsible for the controlling shareholder’s personal debt.”86 While this express language has not been adopted in other cases, the underlying principles have manifested in cases where reverse piercing occurs without being explicitly stated.

4.2. Reverse piercing and the oppression remedy

Reverse piercing may explain the outcome in Downtown Eatery (1993) Ltd v Ontario, where the claimant successfully sued a company that wronged him, but the company moved its assets to another company.87 Accordingly, the claimant sued the asset-holding company to enforce his judgment. This post-Transamerica case did not rely on claims about piercing the corporate veil, which was perhaps appropriate given the traditional notion of inculpating a shareholder or subsidiary for the actions of its parent company. Instead, the claimant sought to enforce a judgment against the corporation that was responsible for the assets of the wrongdoing company.

The trial judge found that the assets were moved due to a bona fide re-organization, which may explain why piercing the corporate veil was not pursued on appeal.88 Nonetheless, the ONCA had two theories by which it allowed the claimant’s appeal. First, the Court invoked the common employer doctrine, which described both corporations (the one that rightly employed the claimant and the one that did not) as the same employer.89 In effect, this was a manifestation of the single economic unit theory, which empowered the Court to disregard the two corporations’ distinct legal personalities on the basis of the contractual wording between the employer and employee.

Second, the Court relied on the oppression remedy, found in s 248 of the Ontario Business Corporations Act (“OBCA”). This remedy is intended to address personal complaints against a corporation. The OBCA empowers a court to rectify an issue if it is satisfied that the corporation has directly or indirectly acted or omitted to act in a manner that is “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer”.90 The Court described the claimant in this case as a complainant under s 248 of the OBCA, noting that he had an enforceable judgment against the corporation and was thus a creditor. Additionally, a complainant can also be “any other person who, in the discretion of the court, is a proper person to make an application under this Part.”91 Applying this provision to the claimant’s situation, the Court maintained that he could enforce his judgment under the oppression remedy.92

Accordingly, the question is raised of whether reverse veil piercing is better addressed with the oppression remedy than with traditional veil piercing jurisprudence. Spiro has suggested that the oppression remedy might be the correct way of considering situations that require reverse piercing.93 Interestingly, commentary by CC Nicholls has noted that the traditional veil piercing approach does not sit well among ss 15 and 45 of the CBCA; however, no such concern exists for reverse veil piercing, which might actually be justifiable under the CBCA’s s 241 oppression remedy.94 Although Canadian jurisprudence has historically conflated both forms of corporate veil piercing, the ONCA’s 2018 decision in Chevron—and, in particular, the concurring opinion—may have finally helped realize the distinction between the two approaches.95


The ONCA’s 2018 decision in Chevron finalized a lengthy legal battle seeking reparations for environmental damage done to the traditional lands of an Ecuadorian indigenous group.96 The environmental damage was allegedly caused by a subsidiary of Texaco Inc. (“Texaco”).97 Texaco is part of Chevron Corporation (“Chevron”), which owns Chevron Canada Limited (“Chevron Canada”) as a seventh-level subsidiary.98 The claimants had previously commenced a class action suing Texaco in Ecuador which rendered a judgment for $9.5 billion USD;99 however, Chevron no longer had assets in Ecuador. Accordingly, the claimants unsuccessfully tried enforcing the judgment in the U.S. against Chevron, after which they tried enforcing it in Canada against Chevron Canada.100 The OSCJ denied the claimants’ request to pierce the corporate veil and enforce the judgment against Chevron Canada, which was then appealed to the ONCA.101

5.1.The majority’s approach

On appeal, the claimants maintained that the corporate veil should be pierced.102 The majority rejected this claim for a variety of reasons. First, it dismissed Justice Wilson’s comments in Kosmopoulos about piercing the corporate veil when the interests of justice demand it.103 The Court noted that Kosmopoulos was decided 30 years prior and the law had developed since then, referring to Justice Sharpe’s framework in Transamerica as the appropriate starting point.104 The ONCA referred to its own jurisprudence from the past decade, explaining that it had repeatedly rejected a just and equitable ground for veil piercing.105 The appellants contended that several Canadian authorities supported a flexible approach to disregarding corporate separateness; however, the majority dismissed them all as a “misplaced” reliance on the case law.106

Second, the majority maintained that Transamerica introduced a clear conjunctive test for determining when the corporate veil should be pierced, which clarified inconsistent Canadian jurisprudence and rendered Canadian law better off than the current state of the law in the U.S.107 Since the appellants alleged no wrongdoing on Chevron’s behalf, they could not meet the second branch of this test; thus, the Court refused to consider the first branch (whether Chevron maintained sufficient control over Chevron Canada).108

Third, the majority rejected the appellants’ position that Transamerica did not apply because it addressed piercing the corporate veil to establish liability rather than to enforce a judgment debt in which liability had already been established.109 This argument was dismissed from a policy standpoint, where the Court feared that future litigators would sue a single corporation under the Transamerica test and enforce that judgment against all related entities.110 Further, the Court was concerned about adopting a “group enterprise theory of liability” in which closely related organizations are viewed as a single enterprise.111 The Court claimed that such a theory had already been rejected in numerous cases at the ONCA, as well as in the English case of Adams.112 Sticking to the clear language in s 15 of the CBCA, the majority focused on the legal protections afforded to Chevron rather than what might be its economic realities.113

5.2.The concurrence’s approach

Although Justice Nordheimer agreed that the corporate veil should not be pierced, he disagreed with the majority’s reasoning on two grounds: First, with the majority’s application of Transamerica in this case and, second, with its broader approach regarding when the corporate veil should be pierced.114

Regarding the application of Transamerica, the concurrence was cognizant of the significant differences between the facts in that case (regarding liability) and the facts in Chevron (regarding enforcement).115 Justice Nordheimer was particularly concerned with the difficulties presented to a judgment creditor in trying to meet the Transamerica test, since they would likely never be able to show that the corporate structure was being used as a shield for fraudulent or improper conduct.116

Justice Nordheimer then turned to the majority’s dismissal of Justice Wilson’s comments in Kosmopoulos, which he read in support of a standalone just and equitable standard for piercing the corporate veil.117 Considering the facts at hand, the concurrence described the concern in Kosmopoulos that corporate creditors are often shafted by the judiciary’s narrow approach to piercing the corporate veil, and explained that reading Kosmopoulos as the SCC’s endorsement of an equitable approach is particularly persuasive in that context.118 The concurrence further described that the Transamerica Court did not itself foreclose a potential expansion of its framework for piercing the corporate veil.119

In reviewing the cases cited by the majority that supported denying to pierce the corporate veil, the concurrence noted that they were all cases in which the veil was being pierced to inculpate a party, rather than to enforce a judgment.120 Further, Justice Nordheimer contended that the majority misread the cases relied on by the appellants’ in support of their position, which is why the majority opinion rejected them.121 The concurrence described the situation in Downtown Eatery as providing some support for the appellants’ claim, since the factual matrix aligned quite similarly.122 In that case, the corporate veil was pierced despite a lack of fraudulent activity, in order to prevent an otherwise legitimate corporate structure from working an injustice, and as an avenue of enforcing a claimant’s judgment debt against a related corporation.123

Finally, the concurrence dismissed the majority’s concern that deviating from a principle of corporate separateness would endorse a group enterprise theory of liability, since this concern is strictly related to liability and, in any event, this theory had already been adopted by the ONCA in Downtown Eatery.124 While the majority supported Mary Elisabeth Kors’ description of this doctrine as vague and amorphous,125 the concurrence spoke to the reality of the situation: “While that may be a legitimate concern in some instances, there is nothing vague or amorphous about a situation where a corporation owns 100% of the shares of another corporation.”126

5.3 Who got it right?

Given the majority and concurring opinions, where does this leave the state of the law on piercing the corporate veil? Both opinions were perhaps correct in rejecting the appellants’ claim on the basis of a potentially fraudulently obtained judgment in Ecuador.127 However, each opinion’s comments on piercing the corporate veil were in stark opposition to one another. For the majority, the distinction between liability and enforcement was one without a difference. The test in Transamerica laid out a conjunctive test for piercing the corporate veil and this was the narrow basis on which the Court was willing to act. For the concurrence, however, the doctrine of piercing the corporate veil was much broader than that. Prior Canadian jurisprudence—including the ONCA itself in Downtown Eatery—had already pierced the corporate veil in similar enforcement situations. The concurrence viewed the distinction between liability and enforcement as an important one, since enforcement necessarily required that liability had already been proven. The concurrence viewed piercing the corporate veil as a tool founded in equity, which prevails over the common law when the two conflict.128 In Justice Nordheimer’s view, this equitable jurisdiction could only be ousted or limited by stronger language in the case law or clear statutory guidance.129

Spiro has described this divide between the majority and concurring opinions as one founded in traditional veil piercing and reverse veil piercing, respectively.130 While the majority sought to protect corporations from their related corporations’ wrongs, the concurrence recognized that this was not a matter of limiting shareholders’ liabilities for the wrongs of a corporation, but rather a matter of enforcing a judgment against a parent company for the debts of its already liable subsidiary. In that sense, neither opinion was wholly incorrect. Instead, each one simply conceived of piercing the corporate veil from a different angle.

While the majority’s narrow perception of piercing the corporate veil may have perpetuated confusion in Canadian corporate law, the concurrence’s comments were not without their own rights and wrongs. Justice Nordheimer appropriately considered that the situation at hand differed greatly from the one in Transamerica and, drawing upon recent English jurisprudence, described the Court’s ability to pierce the corporate veil as one founded in equity.131 This equitable approach for situations involving reverse veil piercing appropriately extracted the facts in enforcement cases, such as Chevron and Downtown Eatery, from those in liability cases, such as Transamerica and Clarkson. However, the concurrence fell prey to the conflation of single economic unit theory and piercing the corporate veil, as was done in Transamerica, despite both Courts referring to the decision in Adams, which considered three distinct theories for disregarding corporate personality. Although both the majority and the concurrence made points that aligned with Canadian jurisprudence on piercing the corporate veil, and while they were both correct to refuse enforcement of a judgment potentially obtained on fraudulent grounds, neither opinion correctly stated the law in a manner that will assist future courts in considering whether to pierce the corporate veil in either direction.


The contention between the majority and concurrence in Chevron identifies two understandings of piercing the corporate veil. On the majority’s view, it is a doctrine by which a court will hold shareholders liable for the debts of a corporation. On the concurrence’s view, it can also be a way by which a court will enforce a corporation’s debtor judgment against a subsidiary. If one considers that a parent corporation holds all shares in its subsidiary, this is the reverse proposition from the traditional veil piercing model. An approach moving forward will now be suggested for both forms of veil piercing.

6.1.Piercing the corporate veil: A properly narrow remedy

A court’s ability to invoke its equitable jurisdiction to pierce the corporate veil appears inconsistent with common law jurisprudence and express statutory language. Over a century ago, the House of Lords in Salomon emphasized the distinct legal personality of a corporation,132 which was quickly adopted in Canadian jurisprudence, and later declared a legal principle by Parliament in s 15 of the CBCA.133 One of the underlying forces of this legal separatism was to limit shareholder liability, which has similarly pervaded common law jurisprudence and has been codified by Parliament in s 45 of the CBCA.134 Accordingly, the broad use of such an inconsistent doctrine to defy Parliament’s express intent does not seem just.

Nevertheless, there have been situations where this doctrine’s invocation has been justified. In 2012, the Alberta Court of Queen’s Bench summarized a list of circumstances in which the corporate veil had been pierced,135 which can be broadly categorized as piercing the corporate veil when: (1) Legislation permits or requires it; (2) The corporate structure enables misconduct or fraudulent activity; (3) Other areas of the law (i.e., family law, trusts law) require it; and (4) The impugned entities are legally distinct but functionally aligned (e.g., an agency relationship or a single economic unit). However, (3) does not necessarily always involve piercing the corporate veil. For example, the outcome in Clarkson was achieved by way of resulting trust.136

This approach notably endorses a conflation of the distinct theories put forth in Adams; however, if piercing the corporate veil is to be clarified in Canadian law, it is unproductive to latch onto the specific language used by the Court in Adams. Canadian jurisprudence views piercing the corporate veil and disregarding corporate personality as the same principle. While this may not be correct in theory, it may be preferable for courts to focus on better understanding the principles underlying the doctrine, however it is to be named.

Based on all of the cases discussed thus far, in considering the four broad categories laid out above, and being cognizant of the statutory language that suggests a high degree of protection afforded to separate corporate personality, the following should be the test for piercing the corporate veil:

  1. Is there a way to achieve the intended outcome without piercing the corporate veil?
  2. If not, does applicable legislation require veil piercing?
  3. If not, is the corporation completely dominated and controlled and being used as a shield for fraudulent or improper conduct?

Components of this test align with what has been stated in Transamerica; however, there are a few key distinctions that will improve its use by the judiciary. First, it begins with the important acknowledgement that piercing the corporate veil should not be done lightly. If there is another manner of achieving the intended outcome—for example, by use of a resulting trust—the judiciary should employ that method to avoid deviating from Parliament’s express language in the CBCA. Next, and being cognizant of the statutory guidance at play, the court should consider whether Parliament has carved out an exception to its provisions in the CBCA through other legislation. It is more preferable for Parliament to deviate from its own principles through other legislation than to have the judiciary invoke an equitable jurisdiction to do so themselves.

Finally, the court can pierce the corporate veil if the corporate structure is, in effect, being used to purposefully harm a claimant while evading liability for its actions. The language chosen here has not made use of phrases such as “mere sham” and “faƧade”, since the U.K. Supreme Court has recently criticized those monikers as being dismissive of the fact that the corporation is a properly incorporated legal entity.137 By instead focusing on the relationship between legal entities and the conduct that arose, courts can justify their divergence from legislative intent as an avenue to address extremely serious injustices. However, it is important to note that—contrary to Justice Wilson’s comments in Kosmopoulos—this branch of the test should not extend to a standalone equitable jurisdiction to remedy flagrant oppositions of justice. Broadening the judiciary’s powers in that way would enable this doctrine to continue being pervaded by inconsistencies, to the detriment of claimants and corporations who rightfully expect the law to be principled and certain.

6.2.Reverse veil piercing: Relying on the oppression remedy

Unlike traditional notions of piercing the corporate veil to inculpate shareholders for the debts of a corporation, reverse veil piercing does not sit uncomfortably within the bounds of the CBCA. Instead, it is supported by the oppression remedy, which empowers the judiciary with a broad discretion to address situations that “unfairly disregard the interests” of a complainant creditor.138 Parliament’s use of the word “unfairly” intimates that this remedy is intended to be founded in equity. Accordingly, there is more room within the oppression remedy to disregard the legal realities of the corporate structure and effect an outcome that is founded in economic realities.

Drawing a distinction between traditional and reverse veil piercing will be critical to maintaining two separate realms of jurisprudence. If Kosmopoulos is a case of reverse piercing, then Justice Wilson’s comments about the equitable nature of veil piercing are not incorrect, but rather misplaced. While traditional veil piercing should not be subject to an equitable standard, reverse piercing is supported by the legislative intent that a creditor’s oppression can be remedied in an equitable manner. Accordingly, for cases of reverse veil piercing, the oppression remedy will be a useful guide. Resultantly, the test for reverse piercing the corporate veil should be as follows:

  1. Does the defendant owe a debt?
  2. If so, does the defendant’s non-payment of that debt unfairly disregard the interests of the plaintiff?

If the answer to both of these questions is “yes”, then the judgment debtor should be required to pay its debt using its assets, which may include its wholly owned subsidiaries’ assets. The judiciary’s equitable jurisdiction is potentially far-reaching and, absent language in the CBCA that precludes this manifestation of the oppression remedy, the corporate veil can be pierced in reverse to enforce a rightfully attained judgment.


Piercing the corporate veil is traditionally viewed as holding shareholders liable for the debts of a corporation. This does not sit well within established common law principles and Parliament’s clear language in the CBCA; however, courts have nonetheless pierced the corporate veil in numerous circumstances. Relatedly, but distinctly, reverse veil piercing involves a creditor’s enforcement of a judgment against an already liable debtor. In this circumstance, liability has been established, and the only question to be resolved is the asset source from which the debt will be paid. This conception of veil piercing fits well within the CBCA, as it is supported in principle by the oppression remedy—a remedy founded in equity. The distinction between these two veil piercing doctrines is most cleanly tracked in Chevron, where the majority and concurrence approached the same factual matrix from opposing views on veil piercing.

This paper has reviewed some pertinent judicial history in the development of these doctrines, exploring how piercing the corporate veil has been conflated with other methods of disregarding corporate personality and been confused with the reverse piercing doctrine. Using Chevron as a clear example of how these two doctrines have been viewed, this paper suggests two tests to acknowledge these different perspectives and respect their individual merits in different circumstances. In sum, the tests outlined in 6.1. and 6.2. seek to differentiate the doctrines from one another and define their applicable scope in a manner that respects Parliament’s intent, is cognizant of the judiciary’s bounds, and will provide clarity to corporate law over time.


1 Salomon v A Salomon and Co, [1896] JCJ No 5 at para 50, [1897] AC 22 [Salomon].
2 Canada Business Corporations Act, RSC 1985, c C-44, s 15 [CBCA].
3 Ibid, s 45
4 Adams & Ors v Cape Industries plc & Anor, [1990] BCC 786 at 816, [1990] Ch 433 [Adams].
5 Transamerica Life Insurance Co of Canada v Canada Life Assurance Co, [1996] OJ No 1568, 28 OR (3d) 423 [Transamerica].
6 Yaiguaje v Chevron Corp, 2018 ONCA 472 [Chevron].
7 Ibid at para 28.
8 Ibid.
9 Salomon, supra note 1 at para 33.
10 Ibid.
11 Ibid at 50.
12 Ibid at 54.
13 Ibid at 56.
14 Phillip Lipon, “The mythology of Salomon’s Case and the law dealing with the tort liabilities of corporate groups: An historical perspective” (2014) Monash University Law Review 40:2 at 469–70.
15 Soper v Littlejohn, (1901) 31 SCR 572 at 578.
16 Broderip v Salomon, [1895] 2 Ch 323 at 329–32 [Salomon CoA].
17 Ibid at 347.
18 Adams, supra note 4.
19 Ibid at 816.
20 Ibid.
21 Ibid at 817.
22 Ibid at 820.
23 Ibid.
24 Ibid at 822, citing Bank of Tokyo Ltd v Karoon, [1987] AC 45 at 64F, [1986] 3 WLR 414.
25 Ibid at 820.
26 Ibid at 820–21.
27 Ibid at 821.
28 Ibid.
29 Ibid at 822.
30 Ibid, citing Woolfson v Strathclyde Regional Council, 1978 SLT 159 (HL) at 161 [Woolfson].
31 Ibid at 823, citing Jones & Anor v Lipman & Anor, [1962] 1 WLR 832.
32 Ibid.
33 Ibid.
34 Ibid at 826.
35 Ibid.
36 Ibid at 827.
37 Ibid.
38 Ibid.
39 Ibid at 827-28.
40 Ibid at 828
41 Ibid.
42 Ibid at 825
43 Ibid.
44 Clarkson Co v Zhelka, [1967] OJ No 1054 at para 77, [1967] 2 OR 565 [Clarkson].
45 Peter S Spiro, “Clarifying the Rules for Piercing of the Corporate Veil” (2013) at 7, online (pdf): SSRN [Spiro PCV].
46 Clarkson, supra note 44 at para 6.
47 Ibid at para 62.
48 Ibid.
49 Ibid at para 75.
50 Ibid at paras 72–74.
51 Ibid at para 80.
52 Ibid at para 81.
.53 Ibid at para 77.
54 Ibid at para 47.
55 Ibid at para 85.
56 Kosmopoulos v Constitution Insurance Co of Canada, [1987] 1 SCR 2, [1987] SCJ No 2 [Kosmopoulos].
57 Ibid at para 3.
58 Ibid at paras 4–5.
59 Ibid at para 3.
60 Ibid at para 15.
61 Ibid at para 12.
62 Ibid, citing LCB Gower, Modern Company Law, 4th ed (1979) at 112 [Gower 4th ed].
63 Ibid at para 12.
64 Ibid.
65 Ibid at para 13, citing Gower 4th ed, supra note 62 at 138.
66 Ibid at para 13.
67 Ibid at paras 13–14
68 Mayson et al, Mayson, French, & Ryan on Company Law (London: Blackstone, 1997) at 128.
69 Transamerica, supra note 5 at para 1.
70 Ibid at paras 1–2.
71 Ibid at para 13, citing Kosmopoulos, supra note 56 at para 12.
72 Ibid at para 14.
73 Adams, supra note 4 at 820.
74 Transamerica, supra note 5 at para 19, citing Gower, Modern Company Law, 5th ed. (1992) at 125 [Gower 5th ed].
75 Transamerica, ibid at para 19, citing Gower 5th ed, ibid at 132–33.
76 Transamerica, ibid.
77 Adams, supra note 4 at 820.
78 Ibid at 823.
79 Transamerica, supra note 5 at para 21.
80 Ibid at para 22.
81 Clarkson, supra note 44 at paras 80–81.
82 Peter S Spiro, “Piercing the Corporate Veil in Reverse: Comment on Yaiguaje v. Chevron Corporation” (2019) at 1, online (pdf): SSRN [Spiro Chevron].
83 Ibid.
84 Wildman v Wildman, 2006 CanLII 33540 (ON CA) at para 24, 82 OR (3d) 401.
85 Borden Ladner Gervais v Sinclair et al, 2013 ONSC 7640 at para 20 [Sinclair], citing Adams, supra note 4 at 539.
86 Ibid at para 20.
87 Downtown Eatery (1993) Ltd v Ontario, [2001] OJ No 1879 at paras 3, 13, 54 OR (3d) 161, leave to appeal to SCC refused [Downtown Eatery].
88 Ibid at paras 48–49.
89 Ibid at para 34.
90 Business Corporations Act, RSO 1990, c B16, s 248(2) [OBCA]. The same provision is found in CBCA, supra note 2, s 241(2).
91 Ibid, s 235(c). The same provision is found in CBCA, supra note 2, s 238(d).
92 Ibid at para 63.
93 Spiro Chevron, supra note 82 at 20.
94 CC Nicholls, “Piercing the Corporate Veil and the ‘Pure Form’ of the Corporation as Financial Innovation” (2008) 46 Can. Bus. LJ at 233.
95 Chevron, supra note 6.
96 Ibid at para 1.
97 Ibid at para 2.
98 Ibid at paras 2, 6.
99 Ibid at para 3.
100 Ibid at paras 5–6.
101 Ibid.
102 Ibid at para 47.
103 Ibid at para 64, citing Kosmopoulos, supra note 56 at para 12.
104 Ibid at paras 65–66.
105 Ibid at para 67, citing Boyd v Wright Environmental Management Inc, 2008 ONCA 779 at paras 44–45; Parkland Plumbing & Heating Ltd v Minaki Lodge Resort 2002 Inc, 2009 ONCA 256 at paras 50–51; and Indocondo Building Corp v Sloan, 2015 ONCA 752 at para 9.
106 Ibid at para 69.
107 Ibid at paras 71–72.
108 Ibid at para 74.
109 Ibid at para 75.
110 Ibid.
111 Ibid at para 76.
112 Ibid.
113 Ibid at para 77.
114 Ibid at para 92.
115 Ibid at para 94.
116 Ibid at para 95.
117 Ibid at para 97.
118 Ibid at paras 97–99.
119 Ibid at para 101.
120 Ibid.
121 Ibid at para 102.
122 Ibid at para 105.
123 Ibid at paras 106–08.
124 Ibid at para 110.
125 Ibid at para 78, citing Mary Elisabeth Kors in her article, “Altered Egos: Deciphering Substantive Consolidation” (1998), U Pitt L Rev 59:381, at 437–38.
126 Ibid at para 112.
127 Ibid at paras 80–82, per majority; ibid at para 93, per concurrence.
128 Ibid at para 114, citing Bathgate v National Hockey League Pension Society (1992), 11 OR (3d) 449 (Gen Div), 1992 CanLII 7525 (ON SC), cited with approval by the Supreme Court of Canada in Schmidt v Air Products of Canada Ltd, [1994] 2 SCR 611 at 641, 1994 CanLII 104 (SCC).
129 Ibid at para 115.
130 Spiro Chevron, supra note 82 at 2.
131 Chevron, supra note 6 at paras 115–16.
132 Salomon, supra note 1 at para 50.
133 CBCA, supra note 2, s 15.
134 Ibid, s 45.
135 Elbow River Marketing Limited Partnership v Canada Clean Fuels Inc, 2012 ABQB 277 at para 182, aff’d 2012 ABCA 328.
136 Clarkson, supra note 44 at para 47.
137 See: VTB Capital plc v Nutritek International Corp, [2013] UKSC 5 at para 124, [2013] 2 AC 337, per Lord Neuberger; Prest v Petrodel Resources Ltd, [2013] UKSC 34 at para 28, [2013] 2 AC 415, per Lord Sumption.
138 CBCA, supra note 2, s 241(2).