LIU HSIAO CHENG v. WONG SHU WAI AND OTHERS

LIU HSIAO CHENG v. WONG SHU WAI AND OTHERS

The Amended Counterclaim and related Defence paragraphs are not plain and obvious to be struck out on the basis alleged. Wrongdoer control in a deadlock was arguable on the pleadings and no legal rule requires a futile attempt to procure the company to sue. It is not plain and obvious that a CLDA based on breach of fiduciary duty must allege the wrongdoer received personal benefit; the point is arguable and therefore the claim should not be struck out at this stage. Leave to amend and particulars should be given and costs adjusted accordingly.

Citation
LIU HSIAO CHENG v. WONG SHU WAI AND OTHERS
Parties
Plaintiff (original Action); 1st Defendant (counterclaim): LIU HSIAO CHENG; 1st Defendant (original Action); Plaintiff (counterclaim): WONG SHU WAI; 2nd Defendant: GOLD DRIVEN INVESTMENTS LIMITED; 3rd Defendant: TSOI YU YU trading as FOK HING INDUSTRIAL CO.; 4th Defendant: FOK HING INTERNATIONAL COMPANY LIMITED; 5th Defendant: WONG LEUNG WUN
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
21 August 2015
Case Number
HCA1278/2013
Procedural Posture
Common Law Derivative Action (company Law) / Strike Out Application Under O.18 R.19 RHC With Appeal and Cross Appeal on Pleadings
Outcome
Wong's appeal allowed; Liu's cross-appeal dismissed
Legal Topics
Common Law Derivative Action, Strike Out for No Reasonable Cause of Action, Control/wrongdoer Control, Requirement of Personal Benefit for Derivative Claim, Burden to Account, Pleadings and Case Management
Source Language
EN
Company Law Civil Procedure Equity and Fiduciary Duties Common Law Derivative Action Strike Out for No Reasonable Cause of Action Control/wrongdoer Control Requirement of Personal Benefit for Derivative Claim Burden to Account +1 more

Case Brief

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Parties

LIU HSIAO CHENG

Plaintiff (original Action); 1st Defendant (counterclaim)

WONG SHU WAI

1st Defendant (original Action); Plaintiff (counterclaim)

GOLD DRIVEN INVESTMENTS LIMITED

2nd Defendant

TSOI YU YU trading as FOK HING INDUSTRIAL CO.

3rd Defendant

FOK HING INTERNATIONAL COMPANY LIMITED

4th Defendant

WONG LEUNG WUN

5th Defendant

Procedural Posture

Common Law Derivative Action (company Law) / Strike Out Application Under O.18 R.19 RHC With Appeal and Cross Appeal on Pleadings

Legal Issues

  1. 1 Whether the Amended Counterclaim discloses a reasonable cause of action
  2. 2 Whether Liu 'controls' GDIL such that he can stifle the company from suing (wrongdoer control/deadlock)
  3. 3 Whether a CLDA based on breach of fiduciary duty requires an allegation that the wrongdoer received personal benefit

Ratio Decidendi

The Amended Counterclaim and related Defence paragraphs are not plain and obvious to be struck out on the basis alleged. Wrongdoer control in a deadlock was arguable on the pleadings and no legal rule requires a futile attempt to procure the company to sue. It is not plain and obvious that a CLDA based on breach of fiduciary duty must allege the wrongdoer received personal benefit; the point is arguable and therefore the claim should not be struck out at this stage. Leave to amend and particulars should be given and costs adjusted accordingly.

Court Disposition

Wong's appeal allowed; Liu's cross-appeal dismissed

Orders

  • Allow appeal of Wong Shu Wai dated 18 February 2015
  • Dismiss Liu Hsiao Cheng's Notice of Appeal dated 25 February 2015