CHAN KAI YAN AND ANOTHER v. LEUNG CHI KIT AND OTHERS

CHAN KAI YAN AND ANOTHER v. LEUNG CHI KIT AND OTHERS

The plaintiffs' bulk claims are barred by the reflective loss rule because the losses claimed principally reflect losses to Lucky Ford for which only the company/liquidators may sue; only limited categories of personal loss that are distinct from company loss (for example, failure to procure distribution where company had distributable profits but was prevented from distributing by defendants' specific failures to prepare accounts or file returns) survive at this stage; plaintiffs granted limited leave to re-amend to plead only non-reflective losses.

Citation
[2019] HKCFI 1828
Parties
1st Plaintiff: CHAN KAI YAN; 2nd Plaintiff: TO YUK LING formerly known as TO SHUET MUI (Administratrix of the Estate of CHIU CHI KUEN, Deceased); 1st Defendant: LEUNG CHI KIT; 2nd Defendant: SHIU KWOK KUEN; 3rd Defendant: NG CHOI CHI; 4th Defendant: WONG HOI MING; 5th Defendant: CHOI WAI KIT; 6th Defendant: SUN HING GINZA LIMITED
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
7 August 2019
Case Number
HCA2498/2014
Procedural Posture
Civil Shareholder Dispute (breach of Shareholders' Agreement; Conspiracy; Fiduciary Claims) / Interlocutory Application to Strike Out Pursuant to Order 18 R19; Hearing in Chambers; Decision on Summons
Outcome
Summons largely allowed in defendants' favour: most of the ASoC struck out on grounds of reflective loss save narrow categories; plaintiffs granted limited leave to re-amend; order nisi for costs in favour of defendants.
Legal Topics
Reflective Loss, Striking Out, Shareholders' Agreement Enforcement, Abuse of Process, Conspiracy to Injure, Fiduciary Duty, Liquidation and Locus Standi
Source Language
EN
Company Law Civil Procedure Contract Law Tort Law Equity (fiduciary Duties) Reflective Loss Striking Out Shareholders' Agreement Enforcement +4 more

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Parties

CHAN KAI YAN

1st Plaintiff

TO YUK LING formerly known as TO SHUET MUI (Administratrix of the Estate of CHIU CHI KUEN, Deceased)

2nd Plaintiff

LEUNG CHI KIT

1st Defendant

SHIU KWOK KUEN

2nd Defendant

NG CHOI CHI

3rd Defendant

WONG HOI MING

4th Defendant

CHOI WAI KIT

5th Defendant

SUN HING GINZA LIMITED

6th Defendant

Procedural Posture

Civil Shareholder Dispute (breach of Shareholders' Agreement; Conspiracy; Fiduciary Claims) / Interlocutory Application to Strike Out Pursuant to Order 18 R19; Hearing in Chambers; Decision on Summons

Legal Issues

  1. 1 Whether plaintiffs' personal claims are barred by the rule against reflective loss
  2. 2 Whether the plaintiffs have locus standi to pursue claims that belong to the company/liquidators
  3. 3 Whether the pleaded causes of action arising from the shareholders' agreement and alleged misappropriation disclose a viable claim

Ratio Decidendi

The plaintiffs' bulk claims are barred by the reflective loss rule because the losses claimed principally reflect losses to Lucky Ford for which only the company/liquidators may sue; only limited categories of personal loss that are distinct from company loss (for example, failure to procure distribution where company had distributable profits but was prevented from distributing by defendants' specific failures to prepare accounts or file returns) survive at this stage; plaintiffs granted limited leave to re-amend to plead only non-reflective losses.

Court Disposition

Summons largely allowed in defendants' favour: most of the ASoC struck out on grounds of reflective loss save narrow categories; plaintiffs granted limited leave to re-amend; order nisi for costs in favour of defendants.

Orders

  • Plaintiffs granted leave to serve a draft re-amended statement of claim on 1st, 2nd and 5th defendants within 14 days from date of decision
  • Parties to inform court within 14 days thereafter whether they agree proposed re-amendments and terms of disposal of the summons