Executive Summary: Key Legal and Evidentiary Issues

• Authority of Mission Contractors Ltd.’s (Misco’s) president, Gabrielle Berard, to instruct counsel and commence the petition and notice of civil claim (NOCC) was attacked based on an alleged irregularity in her appointment as president and secretary.

• Scope of a president’s implied authority to initiate litigation on behalf of a company, without express board authorization or leave of the court, in relation to alleged misappropriation of company funds, breach of fiduciary duty, and preservation of company assets was central to the application.

• The respondents argued the petition and NOCC were an abuse of process, asserting the litigation was a sham commenced solely as leverage in an underlying shareholder dispute over Misco’s assets.

• The court had to determine whether the actions related to internal corporate affairs or to Misco’s business, and found they concerned alleged misappropriation of funds and breaches of fiduciary duties, not changes to shareholder, director, or president status.

• Allegations that Misco’s counsel, Mr. Overholt, breached the principle of corporate neutrality and was in a conflict of interest were examined in light of the parties’ separate representation and the Court of Appeal’s reasoning in Yen v. Ghahramani.

• The applications to strike the petition and NOCC and to remove Misco’s counsel were dismissed, and the court ordered that the usual order as to costs would apply, with costs to the plaintiff and petitioner; no specific amounts were stated.

Factual background

Mission Contractors Ltd. (Misco) is in the process of being wound up. Its president, Gabrielle Berard, is the majority shareholder and is described as the founder’s spouse and an employee (though her status as an employee is disputed). The respondents, Jon Murphy and Scott Roberge, are directors and minority shareholders of Misco and are also former employees. Following the death of Misco’s founder, Mr. Murphy and Mr. Roberge attempted to purchase Misco, but the purchase did not proceed. They then created a new company whose scope of business was in the same area as Misco and wished to obtain certain assets and former Misco customers. The actions were brought against the backdrop of a shareholder dispute. As a result of allegations of misappropriation of funds, Misco’s assets were frozen.

Proceedings brought on behalf of Misco

Two sets of proceedings were commenced on behalf of Misco. By petition, relief was sought pursuant to allegations that Mr. Murphy and Mr. Roberge, as officers of the company, had breached their fiduciary duties, and dissolution of Misco was also sought. In the NOCC, Misco alleged misappropriation of Misco funds and assets by Mr. Murphy and Mr. Roberge. The respondents applied to strike both the petition and the NOCC as an abuse of process under Rule 9-5(1) of the Supreme Court Civil Rules. They did not challenge the sufficiency of the pleadings; they conceded that, on their face, the pleadings disclosed valid causes of action. Instead, they raised two issues as constituting abuse of process: first, that Misco’s president was not authorized to instruct counsel to commence the actions on behalf of Misco; and second, that the actions were a sham commenced solely as leverage in the underlying shareholder dispute.

Legal framework for abuse of process

The court summarized the governing law by reference to Mohsenipour v. Mountain Institution (Warden), 2025 BCSC 1750, at paras. 75–83. To succeed, the applicants had to show that the actions were brought for an improper purpose, or that permitting either action to proceed would be so unfair as to offend the court’s sense of justice. The court emphasized that its role was not to determine the truth of the underlying allegations at this stage, but to assess the actions broadly and generously in deciding whether they were plainly and obviously abusive. The court noted that the applicant bears a heavy onus in establishing that the matter should be struck.

Status of Ms. Berard as president

The applicants argued that Ms. Berard was unable to exercise the powers of president because, at the time counsel was retained and litigation commenced, she held both the position of president and secretary. The respondents relied on s. 143 of the Business Corporations Act, S.B.C. 2002, c. 57, which provides authority to act despite an irregularity in appointment. The court noted that, in this case, the president was unanimously appointed by all of the directors, and they supported her acting in that role until she uncovered allegations of their misconduct and sought to address them. The court characterized the applicants as relying on a technicality in her appointment to invalidate her actions. In addition, Misco retroactively approved her appointment, which the court held would validate any actions she took should the argument under s. 143 fail. On this record, the court found that the applicants had not established that it was plain and obvious that she was not appropriately acting as president.

Authority of the president to litigate on behalf of Misco

The court then considered whether Ms. Berard had authority to litigate on Misco’s behalf. It relied on Bajwa Farms Ltd. v. Bajwa, 2022 BCSC 1056, particularly paras. 54, 59, 65, and 68–69. In that case, Justice Majawa clarified that a president, or a person who has authority to operate a company in its ordinary course and manage its day-to-day business, has implied authority to commence litigation on behalf of the company without authorization of the board of directors or leave of the court. However, that implied authority is not unlimited; it should be limited to day-to-day operations or an emergent situation and should not relate to internal affairs of the company. The examples given in Bajwa Farms included seeking monies due to the company, claims for breach of fiduciary duties by directors, and actions to preserve company assets. Justice Majawa held that litigation seeking remedies for alleged interference with leasing relationships, misappropriation of company funds and assets, and breach of fiduciary duties could relate to preservation and protection of the company’s business, rather than its internal affairs, even if brought against a director or president. Applying these principles, the court found that Ms. Berard is Misco’s president and that there is evidence she is in charge of day-to-day operations. The evidence included her involvement in payroll and cash flow management through her daughter, Renee Berard, and her continuation with day-to-day operations such as staying up to date on current jobs, contract invoicing, and general matters required to keep Misco operating. The court concluded that it was not plain and obvious that she was not the president or not in charge of day-to-day operations. The court added that, even if it were wrong on that point, the applicants had voted in favour of granting themselves unrestricted access to Misco’s bank accounts at a January 30 directors’ meeting. The court considered that fact sufficient to satisfy it that emergent conditions existed that merited bringing an action to freeze the company’s bank accounts.

Whether the actions relate to internal affairs

The applicants argued that the litigation was a sham brought for an improper purpose: to gain leverage in an internal shareholder fight over assets. They submitted that the existence of a shareholder dispute and the timing of the litigation supported this conclusion. The court noted that Ms. Berard had set out the factual basis and steps taken in terminating Mr. Murphy and Mr. Roberge and the basis for the claims that they misappropriated funds from Misco and breached their fiduciary duties as directors. The court referred to a helpful summary of the evidence contained in Exhibit B. On that basis, the court concluded that there was ample evidence to support some basis in fact for commencing the action for a legitimate purpose. The court was not satisfied that the circumstantial allegations made by the applicants established that the actions were plainly and obviously abusive or focused on internal issues. To the contrary, the court found that there appeared to be a solid basis in fact supporting that the actions were brought on behalf of Misco and not for leverage in internal company affairs.

Alleged conflict of interest and corporate neutrality of counsel

The applicants also sought an order removing Misco’s counsel, Mr. Overholt, on the basis that he was in a conflict of interest and had breached the principle of corporate neutrality. The court observed that all of the directors were represented by their own counsel, independent of the counsel acting for Misco. None of the directors had objected to Mr. Overholt being retained as company counsel until allegations were made against the respondents; only then did they question whether he was in a conflict of interest because of an alleged violation of neutrality owed to all directors, including Mr. Murphy and Mr. Roberge. The court recognized that Mr. Overholt faced challenges in navigating his retainer, but found that he had taken care to ensure he met his ethical obligations. The court noted that he solely represents Misco, that Ms. Berard has her own counsel, and that her counsel unsuccessfully attempted to intervene in the application. The court also noted that, if Mr. Overholt became uncertain as to how to proceed, he could apply to the court for instructions.

Corporate neutrality, Yen v. Ghahramani, and use of corporate funds

The court stated that the real issue raised by the applicants was not whether Mr. Overholt is in a conflict of interest, but whether it is appropriate for Misco to pursue the actions against the applicants or whether Ms. Berard should have sought relief through a derivative action. The court identified two related bases for the applicants’ concerns: the principle of neutrality and the legal cost principle, as well as the issue of a party “ganging up” on the opposing party with the corporation in an internal corporate matter. The applicants relied on Yen v. Ghahramani, 2023 BCCA 403, where an oppression action between two shareholders was met with an independent response and counterclaim by the corporation, which then did not remain neutral in the internal dispute and was instructed by the defendant while using corporate funds to finance the litigation. The Court of Appeal in Yen noted that a corporation’s interests do not necessarily equate to those of the majority shareholder or the majority of the board of directors. The court in the present case distinguished Yen. It held that the actions here do not involve internal issues but fundamental business issues: alleged misappropriation of company funds. It noted that Ms. Berard is not a party to either action and has her own counsel, whose application to intervene had been unsuccessful. The court found it clear that the actions focus on Misco’s interests and are being pursued by counsel appointed to represent only the company. The applicants submitted that they had similar allegations of misconduct against Ms. Berard and her daughter, but that Misco had not commenced an action to pursue those allegations. The court recorded that the applicants had drafted and were seeking leave to bring a derivative action based on those allegations, and that arrangements had been made through a consent order to provide some corporate funds, despite Misco’s accounts being frozen, to investigate or support that litigation. The court concluded that, in these actions, it did not see the issues of conflict of interest, participation of both a corporate party and an aligned personal party, or improper use of corporate funds (which are currently frozen) to support litigation, of the kind considered in Yen that would create mischief necessitating court intervention.

Policy terms and contractual clauses

The reasons do not discuss any insurance or other policy terms or clauses. The analysis focuses on corporate authority, abuse of process, implied authority to litigate, and issues of corporate neutrality and costs in the context of the Business Corporations Act and related case law.

Outcome and costs

The court dismissed the applications of the defendants/respondents. It held that it was not plain and obvious that Ms. Berard was not appropriately acting as president or lacked authority to commence the actions, and it found there was ample evidence providing some basis in fact for a legitimate purpose in bringing the proceedings on behalf of Misco. The court also found no conflict of interest or breach of the principle of neutrality by Misco’s counsel that would require his removal. On costs, the court ordered that, unless the parties wished to make submissions on costs, the usual order would apply and costs would go to the plaintiff and petitioner. The successful party is therefore Mission Contractors Ltd. (as plaintiff and petitioner). The judgment does not state any specific dollar amount for costs or any other monetary award in favour of the successful party.