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Transamerica Life Insurance Co. of Canada v Canada Life Assurance Co. (1996) 28 OR (3d) 423 (Ont. Gen Div.), affirmed, [1997] OJ No 3754 (Ont CA).

Facts:

Transamerica issued a number of mortgages after it believed that CLMS did a risk assessment and was underwriting the loans. It was not. CLMS is a subsidiary of the defendant, and the two had entered into a business agreement. Transamerica asserts that the president of CLAC knew of the oversight, and that is sufficient for CLAC to have liability. CLAC asserts that it is not responsible for the wrongs of its subsidiary.

Issue(s):

Can the corporate veil be pierced so that CLAC can be held responsible for CLMS's actions?

Ratio:

Corporations are separate legal persons from the persons that run them. Courts may only disregard this principle in very limited circumstances, one of those being 'doing justice between the parties'. This would require activities akin to fraud.

Analysis:

There seem to be three circumstances only in which the courts can lift the corporate veil. They are: "(1) when the court is construing a statute, contract or other document. (2) When the court is satisfied that a company is a "mere facade" 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." This is compiled from a number of cases, most notable Salomon v Salomon and Kosmopoulos v Constitution Insurance Co of Canada.

The facts show that CLAC did not have more than ordinary control over CLMS than that of a normal parent and subsidiary company. CLAC had no involvement in any fraud towards Transamerica.

Holding:

Summary judgment: CLAC has the motion against it dismissed.


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