Owners of joint real estate rights and a company whose job it is to manage the project and advance the interests of the partners in the real estate are conducting an arbitration process, by virtue of an arbitration clause in the management agreement. The owners of the rights demanded that the controlling shareholder of the company also be included in the arbitration process, even though he is not a party to the agreement and did not personally sign the arbitration clause, but the company did.
The court accepted the request and ruled that the controlling shareholder would be included in the arbitration proceedings in order to prevent abuse of the principle of separate legal personality. An arbitration agreement and the authority of an arbitrator pursuant to it also apply to the parties’ successors to the agreement, including those who are closely related to one of the parties who signed the arbitration agreement but the principle of separate legal personality separates them. Charging a shareholder with a “debt of the company” will generally only be done in exceptional cases such as: “fraud” or “deprivation of a creditor” or “taking an unreasonable risk.” In contrast, for the purpose of attributing a “feature, right or obligation,” as opposed to attributing the debt itself, it is only required that it be found that “in the circumstances of the case, it is just and proper to do so, taking into account the intent of the law or agreement applicable to the matter before it.” Here, we are dealing with a dispute that broke out between the rights holders and the management company, whose sole shareholder was also the director of another company that purchased the remaining land in the complex behind the backs of the partners, and suspicion arose of alleged conflict of interest actions and a breach of the company’s obligation under the management agreement, while causing damage by the controlling shareholder. Consequently, the inclusion of the controlling shareholder in the arbitration process is indeed required to prevent abuse of the principle of separate legal personality.
