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Digest of the Week – Derivative Action and Best Interests of Company

Digest of the Week – Derivative Action and Best Interests of Company

Whether a derivative action is in best interest of the company is properly determined at trial.

Yan. v. Ho
2016 CarswellBC 543
British Columbia Court of Appeal

Business associations --- Specific matters of corporate organization — Shareholders — Shareholders' remedies — Derivative actions — Under statute — Availability

Parties Y and H were directors and sole shareholders of company — Company purchased properties from vendor T, who had prior relationship with H — Y claimed that H did not disclose this relationship, and claimed breach of fiduciary duty — Y applied for leave to bring derivative action on behalf of company — Application was granted — H claimed that there was joint venture agreement between parties, which precluded derivative action — H appealed from granting of application — Appeal dismissed — Y was acting in good faith in starting derivative action, despite presence of separate action — Applicable Business Corporations Act allowed for derivative actions, and subject action was started within these parameters — Y had pledged to pay back creditors before making any personal recovery — Y had also agreed to indemnify company for costs if derivative action was unsuccessful — Derivative action had merit on prima facie basis — Whether derivative action was in best interests of company was matter properly determined at trial — Application judge made no error in determining issues.
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