CHEN HA PING HEPBURN also known as CHEN HA PING AND ANOTHER v. LOONG SAN INVESTMENT COMPANY LTD AND ANOTHER

CHEN HA PING HEPBURN also known as CHEN HA PING AND ANOTHER v. LOONG SAN INVESTMENT COMPANY LTD AND ANOTHER

The court granted leave under s168BC for derivative actions in respect of the misappropriation (HK$11,375,108) against Daniel on behalf of LS and LW because Daniel was in possession of company funds, no valid defence of beneficial entitlement or board-authorised set-off was made out, and his evidence was opaque; the dividends dispute was resolved by Daniel's undertaking and required no substantive order; the Loans issue was withdrawn from determination because the beneficial ownership dispute was the subject of separate proceedings (TK's action) and the court declined to displace entries in company books absent established illegality or lack of beneficial title.

Citation
CHEN HA PING HEPBURN also known as CHEN HA PING AND ANOTHER v. LOONG SAN INVESTMENT COMPANY LTD AND ANOTHER
Parties
1st Applicant: CHEN HA PING HEPBURN; 2nd Applicant: CHEN TING HOI; 1st Respondent (hcmp 1380/2013): LOONG SAN INVESTMENT COMPANY LIMITED; 1st Respondent (hcmp 1381/2013): LOONG WAN INVESTMENTS LIMITED; 1st Respondent (hcmp 1383/2013): LEELOONG INVESTMENT COMPANY LIMITED; 2nd Respondent: CHEN TING SAN DANIEL
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
30 April 2014
Case Number
HCMP1380/2013
Procedural Posture
Leave Application for Statutory Derivative Action Under S168 BC Companies Ordinance / Interlocutory Hearing; Reasons for Judgment (application for Leave Determined)
Outcome
Leave granted to institute derivative actions for misappropriation on behalf of Loong San Investment Co Ltd and Loong Wan Investments Ltd; dividends issue resolved by undertaking; loans issue withdrawn/left to separate proceedings; costs orders made and certificate for two counsel granted.
Legal Topics
Statutory Derivative Action, Misappropriation of Company Funds, Beneficial Ownership of Loans, Company Accounting and Books, Admissibility of Expert Reports, Costs Orders
Source Language
EN
Company Law Fiduciary Duty Civil Procedure Evidence (expert Reports) Statutory Derivative Action Misappropriation of Company Funds Beneficial Ownership of Loans Company Accounting and Books +2 more

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Parties

CHEN HA PING HEPBURN

1st Applicant

CHEN TING HOI

2nd Applicant

LOONG SAN INVESTMENT COMPANY LIMITED

1st Respondent (hcmp 1380/2013)

LOONG WAN INVESTMENTS LIMITED

1st Respondent (hcmp 1381/2013)

LEELOONG INVESTMENT COMPANY LIMITED

1st Respondent (hcmp 1383/2013)

CHEN TING SAN DANIEL

2nd Respondent

Procedural Posture

Leave Application for Statutory Derivative Action Under S168 BC Companies Ordinance / Interlocutory Hearing; Reasons for Judgment (application for Leave Determined)

Legal Issues

  1. 1 Whether leave should be granted under s168BC for derivative actions in respect of alleged misappropriation
  2. 2 Whether alleged loans recorded in company books are beneficially owned by Daniel or held on trust for TK
  3. 3 Whether dividends recorded to Daniel were improperly held and require rectification

Ratio Decidendi

The court granted leave under s168BC for derivative actions in respect of the misappropriation (HK$11,375,108) against Daniel on behalf of LS and LW because Daniel was in possession of company funds, no valid defence of beneficial entitlement or board-authorised set-off was made out, and his evidence was opaque; the dividends dispute was resolved by Daniel's undertaking and required no substantive order; the Loans issue was withdrawn from determination because the beneficial ownership dispute was the subject of separate proceedings (TK's action) and the court declined to displace entries in company books absent established illegality or lack of beneficial title.

Court Disposition

Leave granted to institute derivative actions for misappropriation on behalf of Loong San Investment Co Ltd and Loong Wan Investments Ltd; dividends issue resolved by undertaking; loans issue withdrawn/left to separate proceedings; costs orders made and certificate for two counsel granted.

Orders

  • Leave granted to commence derivative actions on behalf of Loong San Investment Co Ltd and Loong Wan Investments Ltd in respect of misappropriation of HK$11,375,108
  • Costs regarding Dividends Issue assessed at 25% of total costs incurred up to and including 10 April 2014 to be paid by Daniel, to be taxed if not agreed