Can a plaintiff in a derivative action receive a pre-emptive costs order?

British Columbia, Canada


The following excerpt is from Turner v. Andrews, 2001 BCCA 76 (CanLII):

The Court went on to hold, however, that the plaintiffs should receive a pre-emptive costs order, but “by a different route.” Their claim was found to be closely analogous to that of the plaintiff in a derivative action brought against a company, alleging injury to the company as a whole. Again in Hoffmann L.J.’s analysis: On the other hand, if one looks at the economic relationships involved, there does seem to me a compelling analogy between a minority shareholder’s action for damages on behalf of the company and an action by a member of a pension fund to compel trustees or others to account to the fund. In both cases a person with a limited interest in a fund, whether the company’s assets or pension fund, is alleging injury to the fund as a whole and seeking restitution on behalf of the fund. And what distinguishes the shareholder and pension fund member, on the one hand, from the ordinary trust beneficiary on the other, is that the former have both given consideration for their interests. . . . The relationship between the parties is a commercial one and the pension fund members are entitled to be satisfied that the fund is being properly administered. Even in a non-contributory scheme, the employer’s payments are not bounty. They are part of the consideration for the services of the employee. Pension funds are such a special form of trust and the analogy between them and companies with shareholders are so much stronger than in the case of ordinary trusts that, in my judgment, it would do no violence to established authority if we were to apply to them the Wallersteiner v. Moir (No. 2) [[1975] 1 All E.R. 849 (C.A.)] procedure. [at 972-3; emphasis added.]

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