Beyond The Veil: Alberta Court Pierces Corporate Veil On The Basis Of Authorized Agency

In the recent decision of In the Matter of the Bankruptcy of Wolverine Energy and Infrastructure Inc.  et al(“Wolverine”), the Court of King's Bench of Alberta (the “Court”) granted an application by a trustee in bankruptcy to pierce the corporate veils of two separate corporations and hold their mutual director personally liable to repay certain payments in respect of reviewable transactions.¹ In particular, the Court relied upon the authorized agency test for piercing the corporate veil, finding that the corporations were acting as the authorized agent of the director in receiving the impugned payments.

Background Facts

The trustee in bankruptcy (the “Trustee”) of Wolverine Energy and Infrastructure Inc. (“WEI”) and a number of related groups (collectively, the “Wolverine Group”) sought to recover payments made by WEI to two related entities, Wolverine Management Services Inc. (“WMSI”) and 1586329 Alberta Ltd. (“158”).

The Trustee sought to recover these payments and have those amounts returned to the Wolverine Group's estate on the grounds that the payments were (i) preferences under section 95 of the Bankruptcy and Insolvency Act  (Canada) (the “BIA”); (ii) fraudulent preferences contrary to the Fraudulent Preferences Act  (Alberta); (iii) fraudulent transfers made contrary to the Statute of Elizabeth; (iv) transfers at undervalue under section 96 of the BIA; and/or (v) unjust enrichments of the recipients.

The Trustee also sought an order against Jesse Douglas (“Douglas”) to hold him personally liable for the amounts paid to WMSI and 158. Douglas was the sole owner of WMSI and 158 and, at the time the payments were made, Douglas was also the director and executive chairman of WEI. The Trustee asked the Court to hold Douglas personally liable by piercing the corporate veil of WMSI and/or 158.

The Decision

The Court determined that the payments were preferences under the Fraudulent Preferences Act  and the Statute of Elizabeth,  and that they were transfers at undervalue under section 96 of the BIA.

Turning to whether the Court should pierce the corporate veils of WMSI and 158 to hold Douglas personally liable for the amount of those payments, the Court relied upon the Court of Appeal for Ontario's decision in Yaiguaje et al v Chevron Corporation et al.  (“Chevron”) for the test to pierce corporate veils.² In Chevron, the Court of Appeal clarified that corporate separateness is generally the rule, and that courts cannot ignore corporate veils on an equitable, result-oriented basis. Relying on its earlier decision in Transamerica Life Insurance Co. of Canada v Canada Life Assurance Co.,³ the Court of Appeal confirmed there are only three circumstances under which a court will pierce a corporate veil:

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; and
3. when it can be established that the company is an authorized agent of its controllers or its members, corporate or human.⁴

In applying the test from Chevron, the Court rejected the Trustee's argument that the corporate veils of WMSI and 158 should be pierced because, if not, the WEI estate would likely not recover the funds from the payments, finding that this is the ends-driven equitable relief that the Court of Appeal in Chevron  specifically rejected.

The Court also rejected the Trustee's argument that WMSI and 158 were mere facades of Douglas. The evidence failed to demonstrate that Douglas had complete control of WMSI and 158 such that they were his “mere puppet”, that they were incorporated for a fraudulent or improper purpose, or used as a shell for improper activity. To the contrary, the uncontroverted evidence before the Court was that WMSI and 158 were both incorporated for legitimate business reasons.

Turning to the authorized agency path for piercing the corporate veil, the Court noted that there has been little discussion in the case law of this basis for piercing the corporate veil. The Court considered the well-understood and often cited definition of agency from 1196303 Ontario Inc. v Glen Grove Suites Inc., in which the Court of Appeal stated that:

[a]gency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal's legal position by the making of contracts or the disposition of property.⁵

Under this definition, the authorized agency path for piercing the corporate veil required the Trustee to demonstrate that WMSI and 158 acted in such a way as to “legally affect” Douglas's legal position.

The Court found that the receipt of the impugned payments by WMSI and 158 demonstrated an agency relationship that justified the piercing of their corporate veils. In particular, the evidence established that WMSI and 158 were treated as receiving agents who had legal authority to receive payments owed to Douglas personally. WEI paid WMSI for salaries it believed it owed to Douglas. Similarly, WEI made payments to 158 for claims that appeared payable to Douglas personally, or at least partially to Douglas personally. The Court relied upon evidence of reconciliations and ledger journal entries demonstrating that WEI had repaid Douglas's personal visa charges on behalf of his corporations, as well as invoices describing payments to 158 as being for consulting services and wage and expenses settlements, despite there being no such agreements for those services in place.

The Court ultimately ordered that WMSI and 158 repay the amounts received by each of them from WEI and that Douglas was personally responsible for those payments, via piercing of the corporate veils.

Implications and Key Takeaways

Wolverine  reinforces that courts may pierce the corporate veil and expose directors to personal liability when corporations are used as an agent for their personal benefit. As illustrated in Wolverine,  piercing the corporate veil is a legal remedy available to court officers to seek to recover payments made by an insolvent entity that are later determined by the court to be reviewable transactions. The Court's reasonsprovide helpful guidance to court officers, creditors, and other litigators on the legal test for and the evidence necessary to establish the requisite agency relationship that justifies veil-piercing.

Footnotes

1. In the Matter of the Bankruptcy of Wolverine Energy and Infrastructure Inc, Court of King's Bench of Alberta [Court] Action No. B301-191521, Oral Decision of the Honourable Justice C. D. Simard, rendered November 21, 2025.

2. Yaiguaje et al v Chevron Corporation et al, 2018 ONCA 472, 141 OR (3d) 1 [Yaiguaje].

3. Transamerica Life Insurance Co of Canada v Canada Life Assurance Co, [1997] OJ No 3754 (ONCA), 74 ACWS (3d) 207.

4. Yaiguaje at para 65.

5. 1196303 Ontario Inc v Glen Grove Suites Inc, 2015 ONCA 580. [2015] OJ No 4488 at para 69.

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