"You need to show good faith to sue on the Co's behalf!"

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A sought to bring a derivative suit on behalf of TCo. TCo was trustee of a trust. A was a principal benef of the trust: [3]

Pursuant to the trust deed, absent a resol from TCo the trust’s income would be paid to the trust’s principal benefs: [3]

From 1988 to 1994 A was a director of TCo: [3]

Broadly, as former director A sought to bring a claim on TCo’s behalf re a 2005 transaction that saw the Rs (or entities related to them) acquire valuable land. A claimed the opportunity to acquire that land was TCo’s and the Rs breached their duties to TCo by directing that away from TCo: [4]

At first instance A was denied leave on the basis the application was not brought in good faith: [5]

A appealed.The Rs resisted on the basis of a previous judgment of the CoA, relevant real property law, and a statute bar: [23]

A said that the previous judgment (which required a link between the status an applicant relies on, and the loss they seek to vindicate for the company) added a gloss on the s237 criteria. A also said the evidence weighed in their favour: [24]

What amounts to “good faith” is context dependent: [29]

The right to bring a derivative action is granted to vindicate a right of the company. An application made for another reason it is not made in good faith: [31]

If there is no connection between an applicant’s capacity and the loss alleged, it is difficult to find an application was brought in good faith: [32]

The greater the lapse in time between an applicant occupying the relevant role, and the application, the more difficult it is to prove good faith: [32]

Crucially, if an applicant, relying on their status as director, seeks to bring an action on behalf of trustee company where they are beneficiaries of the trust they will need to prove they are attempting to advance the interests of the company itself, and not merely their interests as a benef: [35]

Unexplained delay may suggest ulterior purpose. A genuine application to vindicate the company’s rights might be expected to be brought as soon as the applicant is aware of a claim: [36]

The CoA found A was attempting to advance their interests as benef, and not TCo’s interests because: (i) A took no steps at the time of the relevant transaction, (ii) A did not adequately explain their delay, (iii) A has separately commenced proceedings in their capacity as benef suggesting A is more interested in their rights than TCo’s, and (iv) A has had no connection with TCo for many years providing a “compelling” reason to find the application was not brought to vindicate TCo’s interests: [38]

The Court dismissed A’s appeal. Costs followed the event: [39] - [41]

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