In effect, Hockey Fantasy is a transparent business shell through which the owner retains personal liability for all debts incurred by the sole proprietorship. Contrary to the owner's assertion that GSL may not "pierce the sole proprietorship's veil", an explicit admission that he is not a statutory corporate entity, personal liability is indeed the standard result. Thus, there is a seller whom has delivered his goods according to the terms of the contract, a sole proprietor in receipt of these goods whom has refused to tender payment because of problems reselling the goods, and a dispute heading towards litigation. There is no mention of a consignment and the seller is not a guarantor of the buyer's business success.
Litigation being likely, because Hockey Fantasy alleges its sole proprietorship cannot be pierced, GSL will be forced to pursue its claim through the Ontario court system. To be sure, this case ought not to be too complicated or prolonged. By simply retaining legal representation, GSL should be able to persuade Hockey Fantasy that the facts are in its favor. First, there is a contract for the sale of goods between the seller and the buyer. There is no allegation by Hockey Fantasy that consideration was lacking, that there was fraud or mistake, or that any other legally recognizable excuse or defense exists. The contract would therefore appear to be valid. Second, the buyer is a sole proprietorship. This means that the owner is accorded no limited liability under Canadian business organization law; quite the contrary, the owner of the sole proprietorship is personally liable for all debts incurred by this particular type of business organization. His allegation of a veil is incorrect and illusory. Finally, Hockey Fantasy's interposition of the fact that it could not resell the goods raises no plausible legal defense. This is because there is no allegation that the goods were defective, that they were misrepresented, or that the seller did not perform as agreed upon in the sales contract.
The case law in Canada is extraordinarily straightforward in these types of cases. Absent a contractual basis for avoiding recognition of the contract, the owner of a sole proprietorship may not invoke the principles of limited liability; this is because limited liability is a statutory creation, and the sole proprietorship does not rise to this level because of a lack of organizational and legal formalities. The cases studied, in short, dismiss the notion of a veil for a sole proprietorship. Hockey Fantasy is arguing a position without legal merit or established legal precedent.
In the final analysis, GSL will most likely prevail. They should force a pretrial settlement because the facts are so favorable to the seller; however, if the buyer remains obstinate, then the Ontario courts will almost certainly offer relief against him personally as well as against the assets of the sole proprietorship. After all, from a legal point of view, these assets are one and the same.
Piercing the Veil of a Corporate Entity: Gross Misconduct
One of the main attractions of the corporate form of business organization is the limited liability feature; in effect, by properly forming a corporate entity pursuant to the applicable laws, individuals are able to separate themselves from the