Reasons of The Court
The Court upheld the ruling of the lower courts.
First of all, the Court decided that this was not a situation where they should "lift the corporate veil".
To reach this conclusion the Court examined the requirements to "lift the veil". Wilson J. explained:
- The law on when a court may disregard this principle by “lifting the corporate veil” and regarding the company as a mere “agent” or a “puppet” of its controlling shareholder or a parent corporation follows no consistent principle. The best that can be said is that the “separate entities” principle is not enforced when it would yield a result “too flagrantly opposed to justice, convenience or the interest of the Revenue". The Court decided that in the current case, lifting the veil would unfairly allow the owner to enjoy the benefits of incorporation while avoiding the costs.
The court also rejected the owner's argument that he was a bailor (taking care of) the companies' assets. Since the company still "possessed" the assets, they could not be considered as bailed without "lifting the veil".
However, the court found that the owner, as insured, held an insurable interest in the assets—that is, he had enough of a link to the assets to validly insure them (one cannot insure, for example, a building they have nothing to do with). In doing so, the court rejected the Macaura principle that limited an insurable interest to those having legal or equitable title to an asset. Instead, they applied the "factual expectancy test" (another test proposed in Lucena v. Craufurd, the 1806 case relied on for the Macaura decision). According to this test, in order to insure something and recover for it, one must have "some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce a damage, detriment, or prejudice to the person insuring". Ownership, or title, to the insured asset is not required under this test.
Read more about this topic: Kosmopoulos V. Constitution Insurance Co. Of Canada
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