Getting Around The Corporate Veil Through Agency

In the recent decision of 1196303 Ontario Inc v Glen Grove Suites Inc, 2015 ONCA 580, the Ontario Court of Appeal considered to what extent parties not privy to an agreement should be held liable for the obligations it creates.

In that case, 1196303 Ontario Inc. ("119") entered into a settlement agreement with 1297475 Ontario Inc. ("129"), a shell corporation which was owned by Mrs. Sylvia Hyde. Mrs. Hyde was also the sole owner of Glen Grove Suites Inc. ("Glen Grove"), which owned valuable rental property. Mr. Edwin Hyde, who exercised de facto control over both Glen Grove and 129, agreed that Glen Grove was to provide guarantees and security obligations as part of the settlement. However, Glen Grove was not a signatory to the settlement agreement. 129 subsequently failed to fulfill its obligations under the settlement and 119 sought to collect from Glen Grove.