Executive Summary: Key Legal and Evidentiary Issues

• Whether Ms. Dang had implied authority to commence litigation on behalf of Bonjour Vietnam without court leave.

• Application of Rule 9-5(1) of the Supreme Court Civil Rules to strike pleadings for lack of reasonable cause or abuse of process.

• Determination if the underlying action constitutes a derivative action requiring compliance with the Business Corporations Act, sections 232–233.

• Assessment of whether claims relate to the business or internal affairs of the company.

• Analysis of Mr. Hoang’s alleged misappropriation of company funds and destruction of company property.

• Evaluation of whether the claims advanced disclose a reasonable cause of action sufficient to proceed to trial.

Facts of the case

Bonjour Vietnam Restaurant Corp. sued Trung Kien Hoang, alleging that he misappropriated $70,000 from the restaurant’s account by transferring it to his wife, Thi Bich Uyen Nguyen, and destroyed company recipes and other property. Ms. Dang, one of the two directors and a 50% shareholder of Bonjour Vietnam, commenced the action without obtaining prior leave from the court. Mr. Hoang applied to strike the lawsuit on the basis that it was improperly filed as a derivative action without court approval under the Business Corporations Act. He also argued the claims disclosed no reasonable cause of action and constituted an abuse of process.

Court’s discussion of the legal issues

The Court first analyzed whether Ms. Dang had the implied authority to initiate litigation on behalf of Bonjour Vietnam without needing to comply with the statutory requirements for derivative actions. The key test was whether she had the authority to manage the company’s day-to-day business and whether the claims related to the business rather than the internal affairs of the corporation. The Court found that Ms. Dang was effectively managing Bonjour Vietnam’s operations after Mr. Hoang resigned as an employee and that the claims were linked to the preservation of the company's assets and operations, not its internal governance structure.

Additionally, the Court emphasized that claims such as breach of fiduciary duty, misappropriation of funds, and damage to corporate property typically concern a company's business and not its internal corporate affairs. Therefore, Ms. Dang’s filing did not amount to a derivative action that required leave of the court. The action was thus not a nullity and could not be struck on the basis of being improperly brought.

Outcome of the case

The Court dismissed Mr. Hoang’s application to strike the lawsuit. It held that Mr. Hoang failed to show that it was plain and obvious that Ms. Dang lacked the authority to bring the action, that the claims disclosed no reasonable cause of action, or that the lawsuit constituted an abuse of process. Consequently, Bonjour Vietnam’s lawsuit against Mr. Hoang and Ms. Nguyen was allowed to proceed to trial.