Legal Blog

Derivative Action

Tran v. Bloorston Farms Ltd. 2020 Ont CA

Tenant’s corporation ran a business from tenant’s land. Landlord improperly terminated the lease and, consequently, the business failed. Tenant sued for the diminution in the value of her shares in the corporation. Landlord argued that, based on the rule in Foss v. Harbottle, a shareholder had no right to sue for a wrong done to the corporation and, accordingly, the tenant had no right to claim that loss against landlord. The court noted that there were exceptions to this rule. An applicable exception occurs when the shareholder is not suing for a wrong done to the corporation for which the corporation can sue. In this case, the corporation, which had no relationship to the landlord, had no right to sue and, if tenant had no right to sue, the improper actions of landlord would have no remedy. The court ordered landlord to pay to tenant the loss of the value of the corporation’s business.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.