Owners of joint land and a company whose role is to manage the project and promote the interests of the partners of the land resorted to an arbitration procedure, by virtue of an arbitration clause in the management agreement. The owners demanded that the controlling shareholder of the management company be added to the arbitration procedure, even though he is not a party to the agreement and is subject to the arbitration clause personally, but rather the company.
The Court granted the motion and held that the controlling shareholder is to be added to the arbitration proceeding in order to prevent abuse of the principle of separate legal entity. An arbitration agreement and the authority of an arbitrator under it also apply to the substitutes of the parties to the agreement, including those who are closely related to one of the parties that signed the arbitration agreement, but the principle of separate legal personality separates them. Attributing a company "debt" to its shareholder will usually be done in exceptional cases only such as: "fraud" or "deprivation of a creditor" or "taking an unreasonable risk". However, for the purpose of attributing "an attribute, right or obligation", as opposed to the attribution of the debt itself, it is only required that it be found that "in the circumstances of the case, it is just and correct to do so in view of the intention of the law or the agreement that applies to the matter before it". Here, a dispute broke out between the rights holders and the management company, in which the sole shareholder was also the director of another company that purchased the remaining land in the complex behind the partners backs and there was a suspicion of alleged conflicts of interest and a breach of the company's undertaking under the management agreement while causing damage by the controlling shareholder. Therefore, the inclusion of the controlling shareholder in the arbitration proceeding is indeed required in order to prevent the misuse of the principle of separate legal entity.