Piercing the Corporate Veil: What is Required in Ontario?
What are the requirements to “pierce the corporate veil” in Ontario? Specifically, what is the test and how have Ontario courts recently interpreted this equitable remedy? The Ontario Court of Appeal’s decision in Chanderpaul v. Caesars Convention Centre Ltd. speaks to these questions (“Chanderpaul”).[1] In Chanderpaul, despite finding a legal error in the lower court’s reasons, the Court of Appeal did not allow the appellant to pierce the corporate veil because the appellant did not provide sufficient evidence to allow the Court to do so.
Piercing the Corporate Veil
The “corporate veil” is a metaphor for the legal separation between principals of a corporation and the corporation itself, so that individuals are not personally liable for a corporation’s wrongdoings or liabilities. Piercing the corporate veil, therefore, describes the rare occurrences where courts permit the corporate veil to be pierced to hold individuals accountable. The legal test for piercing the veil in Ontario is:[2]
- complete domination or abuse of the corporate form by the owners, not just ownership or control of the corporation; and
- the presence of fraudulent or improper conduct, which gave rise to the liabilities that a claimant seeks to enforce.
So, what does recent Ontario case law have to say about “piercing the corporate veil”?
Chanderpaul v. Caesars Convention Centre Ltd.
Michelle Chanderpaul (“the Appellant”) sustained injuries as a passenger in a car driven by Aaron Ramrattan, who was intoxicated after being served at Caesars, a nightclub that was falsely registered as a Banquet Hall, which was not permitted to serve alcohol.[3] At the lower court, the Appellant did not specifically seek to pierce the corporate veil, but the respondents argued that the corporate veil would need to be pierced in order for them to be held liable.[4] The lower court concluded that the Appellant failed to establish that it could pierce the corporate veil and hold the nightclub owners, Rajesh Kaura, Kanta Kaura (the “Kauras”) and R.K.S. Investments Ltd. (“R.K.S.”), liable for Caesars’ wrongdoing for the following reasons:[5]
- The Appellant’s pleadings did not allege specific misconduct from the Kauras and R.K.S.
- Even if the Appellant’s non-specific pleadings were to be accepted, the alleged misconduct would still not be enough to pierce the corporate veil because Caesars’ actions and the Appellant’s injuries did not have a nexus.
- In the alternative, if Appellant’s pleadings were accepted, the evidence did not raise a genuine issue for trial regarding whether the corporate veil could be pierced to hold the Kauras liable.
- Kanta Kaura was not actively involved in the business of Caesars and therefore had no wrongful conduct. Rajesh Kaura, as the manager of the nightclub, could also not be held liable because the evidence of wrongdoing provided by the Appellants was in connection with Kaura’s role as directing mind of Caesars, and not the product of actions taken outside of that role. R.K.S. was not liable either, as it was a separate corporation and not a shareholder of Caesars.
The Court of Appeal agreed with the result and held that the corporate veil could not be pierced in this case; however, the Court found legal errors in the lower court’s reasoning. The Court found that the lower court appeared to take an overly narrow view of the second part of the test for piercing the corporate veil, but said the lower court’s reasons had to be read as a whole. When read in context, the motion judge understood that the allegations involved ongoing conduct, including overserving alcohol and violating liquor laws. The real issue for the lower court was whether the corporation was being used as a shield for fraudulent or improper conduct.[6] The Court clarified and re-stated the law, which is that improper conduct justifying piercing the corporate veil is not limited to misconduct occurring at incorporation; later misconduct can also justify piercing the veil.[7]
The Court then turned to the lower court’s legal error. The lower court had suggested that the wrongful conduct could not justify piercing the veil because it was carried out in the Kauras’ roles as directors/managers of the corporation and was related to the corporation’s operations. The Court of Appeal held that this was a legal error. Courts can pierce a corporation’s veil where those controlling the corporation direct wrongful acts through the corporation, even if those acts are part of the corporation’s ordinary operations and even if the individuals were acting as the corporation’s “directing mind”. The Court emphasized that the proper question is whether the corporation was completely dominated and used as a shield for fraudulent or improper conduct.[8]
Despite identifying this legal error, the Court still dismissed the appeal because the evidence was insufficient to actually justify piercing the corporate veil. The evidence relied on by the appellant included nightclub advertisements promoting alcohol; photographs showing patrons drinking; sales records from several servers; and a forensic accountant’s opinion that the nightclub’s records were inadequate.[9]
The Court held this evidence did not establish the kind of systemic fraud, abuse, or misuse of the corporate structure necessary to pierce the corporate veil. The Court stressed that piercing the veil is an exceptional remedy and that “corporate separateness is the rule”.
Key Takeaways
The Chanderpaul decision highlights the high threshold required to pierce the corporate veil in Ontario, while also clarifying that courts may look beyond a corporation’s formal structure where those in control direct wrongful conduct through the corporation itself.
- Corporate separateness remains the default rule. Courts will only pierce the corporate veil in exceptional circumstances involving clear evidence that the corporation was completely dominated and used as a shield for fraudulent or improper conduct.
- Wrongful conduct is not limited to the time of incorporation. Ontario courts may consider ongoing operational misconduct, including conduct carried out through the ordinary business operations of the corporation, when determining whether the veil should be pierced.
- General allegations against “the defendants” are insufficient. Claimants must specifically plead and prove the alleged misconduct of the individuals sought to be held personally liable, supported by concrete evidence of systemic wrongdoing or abuse of the corporate form.
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[1] Chanderpaul v. Caesars Convention Centre Ltd., 2026 ONCA 332 (“Chanderpaul”).
[2] Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., 1996 CanLII 7979 (ON CTGD), aff’d [1997] O.J. No. 3754 (C.A.).
[3] Chanderpaul at paras. 1, 3 and 4–16.
[5] Chanderpaul at paras. 51–54.
[6] Chanderpaul at paras. 58–60.
[8] Chanderpaul at paras. 63–66.