FACT PATTERN AND QUESTION
Paper details
I have to respond to the following case:
Wally is in the building and renovation business. He has incorporated a number of corporations, each of which provides one key service needed in the construction
business. For example, there is Wally’s Plumbing Inc, Wally’s Dry Wall Inc, Wally’s Electrical Services Inc, and even a Wally’s Welding Inc. Wally is the sole
shareholder, sole director, and sole officer in each corporation. Wally has structured his business in this way in order to minimize his exposure to liability. He
wants to ensure that the assets in, say, his plumbing business cannot be used to satisfy liability incurred by the work done through his dry wall business.
Wally’s business structure proved to be very important when Wally’s Electrical Services Inc was sued for work it had done for Eli. Eli had hired Wally’s Electrical
Services Inc to do some rewiring that was needed for a renovation in his home. Unfortunately, a careless error made during the rewiring resulted in an electrical fault
that caused a fire. Eli’s entire house burned to the ground.
Most of Eli’s losses were covered by his insurance policy, which was provided by Beta Insurance Corp (BIC). BIC has paid Eli’s claim, and now it is planning to sue
Wally’s Electrical Services Inc to recover damages. (Insurance policies like Eli’s usually contain a subrogation clause that allows the insurance company to sue a
person who has caused a loss to an insured party like Eli on behalf of the insured. The insurance company basically steps into the shoes of the insured party and
brings an action to recover damages for the loss.) Wally’s Electrical Services Inc admits liability for the fire. The problem is that Wally’s Electrical Services Inc
does not have many assets. It does not even own its own tools or trucks; it leases everything for its business from Wally’s Construction Equipment Ltd, another one of
Wally’s corporations. While some of Wally’s corporations do hold significant assets, Wally’s Electrical Services Inc is not one of those corporations.
BIC would like the court to disregard the corporate existence of Wally’s Electrical Services Inc so that BIC can sue Wally directly and access the wealth of resources
Wally holds through his various corporations. BIC argues that since Wally is the sole shareholder, director, and officer of every single one of his corporations, it
should not matter which corporation’s assets are used to satisfy its claim; what matters most is compensating the wronged victims of Wally’s Electrical Services Inc’s
carelessness.
For his part, Wally argues that BIC’s only recourse is to sue Wally’s Electrical Services Inc. Since Wally’s Electrical Services Inc is not the same person as Wally,
Wally cannot be and should not be responsible for any damages payable by Wally’s Electrical Services Inc.
Here is the question I have to respond to:
Who is right? Can BIC legally access the assets of Wally personally and Wally’s other corporations in order to satisfy the debt owed by Wally’s Electrical Services Inc
due to this latter corporation’s negligence? Ethically, should BIC be able to do so? Write a brief essay [maximum 275 words, excluding footnotes] that provides a legal
and ethical analysis of this situation.
You should ensure that you do the following in your essay:
(a) Identify the central issue in this case that has both a legal and an ethical dimension. Clearly state both the legal dimension/question and the ethical
dimension/question raised by the issue.
(b) Explain how the legal issue will be resolved by stating the law and then applying it to the facts to support your conclusion.
(c) Discuss the ethical dimension of this issue using one of the ethical forms of reasoning that we have discussed in class. (For your convenience, the four types of
ethical reasons discussed in class are set out below.) In particular, make an argument about whether the likely legal result in this case is also an ethical result. If
the result is unethical, what could be done to address the situation?
??2
ADDITIONAL RESOURCES Four types of ethical reasoning
?? Consequences: we should promote good consequences and avoid bad ones, for all concerned, in the long run. (Happiness is good; pain is bad!)
?? Fairness/justice: we should make sure that good & bad consequences are distributed fairly. We should pay our debts and treat like cases alike.
?? Rights and Duties: we should protect rights and perform duties. These are often “nearly absolute.”
?? Character/virtue: we should consider what kind of people we want to be, and what example we want to set
Remember that if you quote the above or paraphrase it, you must provide a citation. You can cite the above as follows: Chris MacDonald, “Law 122 Ethical Reasoning
Module”, Toronto, 2013.
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