The requirements for leave to be granted in a derivative application reviewed by the Supreme Court of British Colombia

T
HEREQUIREMENTSFORLEAVETOBEGRANTEDINADERIVATIVE
APPLICATIONREVIEWEDBYTHESUPREMECOURTOFBRITISHCOLUMBIA

CATHERINEDAIGLE*
L
EGERROBICRICHARD,L.L.P.
L
AWYERS,PATENTANDTRADEMARKAGENTS
Bennettv.Rudek,2008BCSC1278(DocketL023468),LynnSmithJ.,2008
Theparties(threeindividuals,Bennett,VelaandRudek)tothisapplicationusedto
carryonbusinessunderthenameNexusCapitalCorporationbutarenowinvolvedin
alitigationconcerning,amongstothers,therighttousethename“Nexus”toidentify
theirbusiness.AtthetimeoffilingofthevariousproceedingsopposingBennettto
VelaandRudek,NexusCapitalceasedtocarryonbusiness.
Bennett,oneoftheshareholdersofNexusCapital,commencedanactionagainstthe
twoothershareholdersVelaandRudekbeforetheFederalCourtforinfringementof
theNexusandNexusLogotrade-marks.Bennettalsofiledapetitionbeforethe
BritishColumbia’sSupremeCourt,seekinganinjunctionrestrainingVelaandRudek
fromusingthename“Nexus”.
Intheaboveproceeding,itwasstatedbyVelaandRudekthatNexusCapitalwasa
defunctcompanythatwouldneverdobusinessagainandassuch,thatallparties
wereentitledtousethename“Nexus”.Itwasalsoarguedthatthename“Nexus”was
notanassetofNexusCapital.
Inthecontextoftheunderlyingpetition,anapplicationwasfiledbyVelaandisabout
whetherheshouldbegrantedleavetorepresentNexusCapitalinboththeabove
petitionandbeforetheFederalCourtofCanada.
Tobegrantedleaveasrequestedinhisapplication,Velamustestablished(1)thathe
hasmadereasonableeffortstocausethedirectorsofNexusCapitaltocommencea
proceeding;(2)thathehasgivenpropernoticeofthisapplication;(3)thatheisacting
ingoodfaith;and(4)thatitisinthebestinterestsofNexusCapitalfortheproceeding
totheprosecutedordefended.



















































©CIPS,2008.*Lawyerandtrade-markagent,CatherineDaigleisamemberofLEGERROBICRICHARD,L.L.P.,a
multidisciplinaryfirmoflawyers,andpatentandtrademarkagents.PublishedintheWorldTrademark
Report.Publication293.057

2
Tobeconsideredasactingingoodfaith,Velahadtodemonstratethathisapplication
wasprimarilyfiledforthepurposesofpursuingaclaimonthecompany’sbehalf.In
renderingherdecision,theCourtconsideredvariousfactors,amongstwhichthe
existingdisputesbetweenthepartiesandallegedulteriormotives.
BennettarguedthatVela’sprimarymotiveinthisapplicationwasinhisowninterests
andnotthoseofNexusCapital.Indeed,itwaspointedoutthatVelawouldhave
someadvantagesbeforetheFederalCourtshouldthepresentapplicationbe
granted.Ontheotherside,andalthoughheadmittedhavingmixedmotivesforfiling
theapplication,Velaarguedthatitdidnotfollowfromthefactthathehadan
incidentalpersonalinterestthathewasactinginbadfaith.
Inreachingitsdecision,theCourtnotedthatifsuccessful,theactionforinfringement
initiatedbeforetheFederalCourtwouldconclusivelyestablishNexusCapital’sright
totheuseofthename“Nexus”.ShouldVelabegrantedleavetorepresentNexus
Capital,hewouldthenhaveatacticaladvantageintheFederalCourt’slitigation.
TheCourtalsonotedthatNexusCapital’sbenefitwithregardstoVela’sapplication
wasunclearandthathischangeinpositionastowhetherNexusCapitalhadrightsin
the“Nexus”nameandlogoraisedquestionabouthisgoodfaithinfilinghis
application.
Inlightoftheabove,theCourtfoundthatVelahadnotestablishedthathewas
indeedactingingoodfaith,filingtheapplicationforitsowninterestsinsteadofthose
ofNexusCapital.Vela’sapplicationwasthereforedismissed.

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