Question

This dispute is about unpaid invoices for web development services.

Minty Ltd. (“Minty”) says it worked for the defendant, Green Communications Corp. (“Green”), by providing web development services. Minty claims $7,500 as the balance owing under invoices from May 5 and July 30, 2018.

Minty did all the work described in the May 5 and July 30, 2018 invoices. Minty provided numerous emails from March to July 2018 that correspond with each line item in the invoices. The emails show that Mr. Burkey, on behalf of Green, instructed Minty’s representative on the work. Minty finished each task to Green’s satisfaction, as relayed by Mr. Burkey.

Melavo is entitled to full payment from GuestTel for the May 5 and July 30, 2018 invoices, for a total of $7,500.

In trying to get paid for the invoices, Minty argues that Green is controlled by Mr. Burkey to such a degree that he should be liable for Green’s debt. Minty says that you should pierce the corporate veil and hold Mr. Burkey personally responsible.

In determining whether to pierce the corporate veil, here are some facts:

a)     Mr. Burke dominated and controlled Green.

b)    A July 14, 2020 BC Company Summary for Green shows Mr. Burkey as its sole director.

c)     All the correspondence between Green and Minty was entirely written by Mr. Burkey.

d)    Mr. Burkey’s LinkedIn profile that says he is Green’s founder and director.

e)     Mr. Burkey provided letters to dispute his position in Green. However, the letters were vague and lacking in detail. The letters did not explain whether Mr. Burkey was a shareholder or if he made the decisions for Green.

f)     Mint says that Green was intentionally undercapitalized or intended to fail. It says that Green diverted funds and assets (including Minty’s work) to Mr. Burkey or a business known as the Cedar Alliance. Mint says Green did this to, in essence, defraud creditors such as himself. However, there are no documents showing changes in ownership over any assets or transfers of funds from Green to another company. The email correspondence shows that Mr. Burkey asked Mint to do website work that was largely customized for Green. The work included print and online advertisements as well as an online store.

g)    There is evidence that Green transferred assets to a business known as BIG Networks but Green says this was part of its efforts to improve cash flow.

h)    In a November 2018 email Mr. Burkey advised Minty that he was using new investor money to further develop Green’s website.

i)      In a March 2019 email Mr. Burkey advised Minty he would try to bring money through a new website named Old School Networks.

j)      In June 2019 emails he reported to Minty that Green and Old School Networks were not providing any revenue.

Using the concepts you learned during the semester, answer the following questions:

1.     What does “separate legal entity mean” (in your own words) and why is it an important concept in business?

2.     Describe the legal test used to pierce the corporate veil?

3.     Should the corporate veil be pierced? Why or why not? Explain your answer.