Piercing the Corporate Veil - Still a High Bar Despite Clarification by the ONCA

In Chanderpaul v. Caesars Convention Centre Ltd., 2026 ONCA 332, the Ontario Court of Appeal reaffirmed that piercing the corporate veil is reserved for exceptional cases. While the Court clarified, and in important respects corrected, the motion judge’s articulation of the Transamerica test, the appellant’s claim ultimately failed for lack of evidence of systemic wrongdoing. Despite the appellant not meeting the test, the Court made it clear that the corporate veil can be pierced regardless of whether the wrongful acts are related to the operations of the corporate defendant.

Background

The appellant was seriously injured as a passenger in a vehicle driven by an intoxicated, underage driver who had consumed alcohol at Throne, a nightclub operated by Caesars Convention Centre Ltd. She sued Caesars arguing that they overserved the driver. She also sued Rajesh and Kanta Kaura (Caesars’ directors and shareholders) and R.K.S. Investments Ltd. (the property owner, also controlled by the Kauras), alleging negligent operation, failure to insure, and for steps taken to render Caesars judgment-proof. On summary judgment, the claim against Caesars was permitted to proceed and the claims against the Kauras and R.K.S. were dismissed.

The Court of Appeal’s Veil-Piercing Analysis

The Court reaffirmed the two-part Transamerica test: (i) complete domination and control of the corporation by the individual defendant, and (ii) use of the corporation as a shield for fraudulent or improper conduct giving rise to the liability sought to be enforced. It also corrected two errors made by the motion judge.

First, the wrongful conduct need not occur at the time of incorporation — a corporation legitimately incorporated can still later be used as a shield. Second, the impugned conduct does not have be outside the wrongdoer’s role as directing mind or unrelated to the operation of the corporate defendant. The veil can be pierced where those in control expressly direct a wrongful act to be done by the corporation, regardless of whether that act is bound up with the corporation’s operations or the director/officer’s role as directing mind.

The result, however, stood. The appellant’s evidence did not amount to systemic wrongdoing, let alone the flagrant injustice required to displace corporate separateness. Importantly, the Court of Appeal agreed that the plaintiff did not allege specific misconduct on the part of the Kauras and merely referred to the “defendants” generally. Further, the alleged steps taken by the Kauras to render the corporate defendant judgment-proof did not have a nexus with the appellant’s injuries.

Failure to Obtain Insurance

The appellant also argued that the Kauras ought to be personally liable in negligence for failing to obtain insurance for Caesars. The motion judge held that this claim was statute-barred, but, in the alternative, found that the Kauras did not owe a duty of care to the plaintiff to ensure that Caesars was adequately insured. The Court of Appeal agreed that the claim was statute-barred and therefore did not find it necessary to comment on the merits of the cause of action.

Implications for Victims of Fraud

  • Plead with specificity. Generic references to “the defendants” will not suffice. Plaintiffs must allege particularized misconduct, through the corporation, by each individual director or shareholder.
  • Impacts on post-judgment recovery will not suffice. While fraudulent conveyance may be an option if there is evidence of an intent to defeat, hinder, delay or defraud creditors, it may not form a basis for piercing the corporate veil if that wrongful act is unrelated to the underlying harm caused to the plaintiff.
  • Consider direct personal liability. Veil-piercing is rarely the most effective route to attributing liability to a corporate wrongdoing. As confirmed in CHU de Québec–Université Laval v. Tree of Knowledge International Corp., 2026 ONCA 209, directors and officers who personally make fraudulent misrepresentations are directly liable — no veil-piercing required. Where the facts support it, plead direct participation in fraud as a standalone basis for personal liability; it is often the more straightforward path to recovery.

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