In Valgardson v. Valgardson, the Alberta Court of Appeal considered the appropriate standard of proof to establish a complainant’s good faith when seeking leave to bring a derivative action pursuant to s.240(2)(b) of the Alberta Business Corporations Act. The Court of Appeal allowed the appeal, and held that the chambers judge erred in holding the complainant to a higher standard of proof than the balance of probabilities to establish good faith. The Court of Appeal also held that on the balance of probabilities, the complainant had demonstrated good faith.
The issue of whether or not there should be a “high onus” on the complainant to demonstrate good faith in a derivative action arose in the context of one brother seeking leave to bring a derivative action against two other brothers and their jointly owned family businesses. The chambers judge held that there was a high onus on the complainant to demonstrate that the action was brought in good faith, and that the animosity between the brothers and the fact that there was other unresolved litigation between them demonstrated that the action did not meet this high standard of proof. The chambers judge had relied on holdings from courts in Alberta, Newfoundland and British Columbia stating that there is a high onus on the complainant to establish good faith when seeking leave to commence a derivative action. However, the Alberta Court of Appeal confirmed that absent any statutory language to the contrary, the standard of proof in civil suits is the balance of probabilities, without any elevated high onus for questions of good faith.
Penny Garnsworthy
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