Case information

Commercial Law — Corporations — Derivative actions — How should the nunc pro tunc framework developed in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, be applied to the leave requirement for derivative actions brought under Canadian corporate statutes — Where a derivative action is filed without leave of the court, can that defect be cured by granting leave nunc pro tunc, or must the action instead be struck as a nullity.

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The applicant, Hougen Co. Ltd. is a shareholder of Toyomoto Canada Supply Chain Inc. In August 2022, Hougen filed a petition seeking leave to commence a derivate action in the name of Toyomoto. Hougen asserted that the respondent, Ms. Su, a director of Toyomoto, mismanaged Toyomoto and diverted corporate opportunities and/or corporate assets to herself, her husband and their companies. In late 2022, Hougen began seeking court dates for the hearing and the earliest date obtained was in late April 2023. The April hearing did not proceed, as a judge was not available. A second hearing in May 2023 was adjourned at Ms. Su’s request so that she could respond to a late-filed affidavit. The application came on for hearing over two days in June 2023. Judgment was reserved until October 5, 2023 when the chambers judge granted leave to Hougen to commence a derivative action in relation to seven of eleven proposed claims.

Hougen filed a Notice of Civil Claim (“NOCC”) on September 6, 2023, while the leave decision was under reserve. Hougen did so to avoid a potential limitation defence that could have arisen if the claim was not filed before September 8, 2023. Although Hougen’s counsel had flagged this potential limitation problem at the hearing before the chambers judge, he had not asked for a response by a particular date. He had also written to the court scheduling on August 28, 2023 identifying the issue and asking if the court could advise if reasons for judgment could be expected prior to September 8, 2023.

Ms. Su applied to strike out the claim and Hougen cross-applied for a nunc pro tunc order backdating the leave order to September 6, which would have the effect of validating and preserving the NOCC claim filed on that date. The chambers judge refused to backdate the leave order, struck the NOCC as a nullity and granted Ms. Su special costs. The Court of Appeal dismissed the appeal from the order granting leave. The appeal from the order denying a nunc pro tunc order was allowed only to the extent of setting aside the award of special costs and replacing it with an award of party and party costs.