Case information

Commercial law — Corporations — Derivative actions — Whether a person seeking to bring a common law derivative action in Canada requires leave — If so, whether they must seek leave from the place of the proposed action, or the place where the entity for whose benefit the action is purportedly brought is domiciled — What is the test for changing Canadian common law.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

The respondent, Treasure Bay HK Limited, is the only minority shareholder of the respondent, GM International Holding Limited (“GMIH”). Both are Hong Kong companies. Treasure Bay sought to bring a common law derivative action against the applicants, 1115830 B.C. Ltd., 1104227 B.C. Ltd., Harlow Holdings and Kang Yu Canning Zou, also known as Kenny Zou (together the “BC Defendants”). Mr. Zou is a British Columbia resident who owns and controls the corporate applicants which are all British Columbia companies. Mr. Zou is alleged to beneficially own and control the majority shareholder of GMIH, and acts as the de facto director of GMIH. Treasure Bay’s derivative action is based on allegations that Mr. Zou, in breach of his fiduciary duties to GMIH, advanced $30 million to his British Columbia companies without adequate security. The companies defaulted on the loans and despite an alleged request to do so, Mr. Zou prevented GMIH from acting to recover the indebtedness. The loans are governed by British Columbia law, and British Columbia is the non-exclusive forum for actions relating to them. In the derivative action, Treasure Bay seeks damages for the losses suffered by GMIH, as well as an equitable interest in property located in British Columbia and owned by the BC Defendants.

The BC Defendants applied to strike Treasure Bay’s derivative action for failure to disclose a cause of action on the basis that Treasure Bay did not, as was required, first seek leave of the court to initiate the action. The applications judge dismissed the BC Defendants’ application to strike and the Court of Appeal dismissed their subsequent appeal.