WONG CHUN KIT and WONG PUI KWAN (suing for and on behalf of all shareholders of MADERA LIMITED, save and except for the 1st - 3rd Defendants herein) AND ANOTHER v. CHENG KWONG FAT AND OTHERS

WONG CHUN KIT and WONG PUI KWAN (suing for and on behalf of all shareholders of MADERA LIMITED, save and except for the 1st - 3rd Defendants herein) AND ANOTHER v. CHENG KWONG FAT AND OTHERS

Leave to continue the derivative action would not be granted because the defendants openly acknowledged the fund belonged to the company (Boden) and the principal objective (recovery of the fund) had been achieved or could be protected by other means; a pre‑emptive Wallersteiner indemnity was refused because the plaintiffs did not demonstrate they lacked resources or that the company would gain sufficient benefit to justify indemnifying future costs; the plaintiffs were ordered to pay the defendants' costs of the application (including post‑hearing submissions).

Citation
[2020] HKCFI 486
Parties
1st Plaintiff: WONG CHUN KIT (suing for and on behalf of all shareholders of MADERA LIMITED save and except for the 1st–3rd Defendants); 2nd Plaintiff: WONG CHUN KIT (suing for and on behalf of all shareholders of BODEN LIMITED save and except for the 1st–3rd Defendants); 1st Plaintiff (co Plaintiff): WONG PUI KWAN (suing for and on behalf of all shareholders of MADERA LIMITED save and except for the 1st–3rd Defendants); 2nd Plaintiff (co Plaintiff): WONG PUI KWAN (suing for and on behalf of all shareholders of BODEN LIMITED save and except for the 1st–3rd Defendants); 1st Defendant: CHENG KWONG FAT; 2nd Defendant: YIP ALEXANDER THOMAS KAM YUEN; 3rd Defendant: LUI SIU FUNG; 4th Defendant: MADERA LIMITED; 5th Defendant: BODEN LIMITED
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
19 March 2020
Case Number
HCA1705/2017
Procedural Posture
Common Law Derivative Action; Related Unfair Prejudice and Winding‑up Petitions; Applications for Leave and Pre‑emptive Costs (wallersteiner) and Injunctions / Hearing of Application for Leave and Pre‑emptive Costs; Decision on Application (costs Order)
Outcome
Application for leave and pre‑emptive costs denied; costs of the application awarded against the plaintiffs.
Legal Topics
Derivative Action, Wallersteiner Order (pre‑emptive Costs), Mareva/proprietary Injunction, Constructive Trust, Unfair Prejudice Petition, Winding Up, Post‑hearing Submissions
Source Language
EN
Company Law Civil Procedure Costs Injunctions Equity and Trusts Derivative Action Wallersteiner Order (pre‑emptive Costs) Mareva/proprietary Injunction +4 more

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Parties

WONG CHUN KIT (suing for and on behalf of all shareholders of MADERA LIMITED save and except for the 1st–3rd Defendants)

1st Plaintiff

WONG CHUN KIT (suing for and on behalf of all shareholders of BODEN LIMITED save and except for the 1st–3rd Defendants)

2nd Plaintiff

WONG PUI KWAN (suing for and on behalf of all shareholders of MADERA LIMITED save and except for the 1st–3rd Defendants)

1st Plaintiff (co Plaintiff)

WONG PUI KWAN (suing for and on behalf of all shareholders of BODEN LIMITED save and except for the 1st–3rd Defendants)

2nd Plaintiff (co Plaintiff)

CHENG KWONG FAT

1st Defendant

YIP ALEXANDER THOMAS KAM YUEN

2nd Defendant

LUI SIU FUNG

3rd Defendant

MADERA LIMITED

4th Defendant

BODEN LIMITED

5th Defendant

Procedural Posture

Common Law Derivative Action; Related Unfair Prejudice and Winding‑up Petitions; Applications for Leave and Pre‑emptive Costs (wallersteiner) and Injunctions / Hearing of Application for Leave and Pre‑emptive Costs; Decision on Application (costs Order)

Legal Issues

  1. 1 Whether leave should be granted to continue the derivative action
  2. 2 Whether a pre‑emptive Wallersteiner costs indemnity should be ordered against the companies
  3. 3 Whether the court should entertain post‑hearing submissions lodged without leave and contrary to positions taken at hearing

Ratio Decidendi

Leave to continue the derivative action would not be granted because the defendants openly acknowledged the fund belonged to the company (Boden) and the principal objective (recovery of the fund) had been achieved or could be protected by other means; a pre‑emptive Wallersteiner indemnity was refused because the plaintiffs did not demonstrate they lacked resources or that the company would gain sufficient benefit to justify indemnifying future costs; the plaintiffs were ordered to pay the defendants' costs of the application (including post‑hearing submissions).

Court Disposition

Application for leave and pre‑emptive costs denied; costs of the application awarded against the plaintiffs.

Orders

  • The plaintiffs shall pay the defendants their costs of and occasioned by the Application (including plaintiffs' post‑hearing submissions), to be taxed if not agreed, on a party and party basis with a certificate for counsel for the hearing on 4 April 2018.