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Rockwell Developments Ltd v Newtonbrook Plaza Ltd, [1972] 3 OR 199, 27 DLR (3d) 651 (Ont CA).

Facts:

Kelner, through is corporation Rockwell, was going to buy land from Newtonbrook, but there was a zoning issue discovered later so the land was not worth as much. Rockwell said he would still buy it, but at a lower price. He asserted that he had a legal right to pay less under contract law. Newtonbrook countersued. The judge ruled for Newtonbrook, saying that Rockwell had to pay the full price. Rockwell was a shell company with no assets, so Newtonbrook motioned to get his costs from Kelner. It was found that Kelner paid directly for a number of the corporation's expenses, including solicitors, which he later explainer were shareholder loans.

Issue(s):

Can getting damages be a reason for piercing the corporate veil?

Ratio:

"The use of a "one man company" for the carrying on of business transactions, authoritatively recognized and expressed in Salomon v Salomon & Co., [1897] AC 22, and the correlative propositions that the property of the company is distinct from that of its members, and its transactions create legal rights and obligations vested in the company itself as opposed to its members, continue today."

Analysis:

Although Kelner was certainly the human acting on behalf of the corporation, it was Rockwell that was entering into contracts and litigating, not Kelner. Kelner personally cannot sue or be sued as a result of Rockwell's contracts. It is backwards to think that the corporation would be a trustee for a shareholder, and further, Kelner was not the only shareholder. Nor did Kelner participate in any kind of fraud.

Holding:

Appeal dismissed in favour of Rockwell/Kelner. Corporate veil not pierced.


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