LAU WING YAN v. PACIFIC BULK INVESTMENT LTD

LAU WING YAN v. PACIFIC BULK INVESTMENT LTD

The court found the threshold for a serious question to be tried under s733 met because ambiguity exists as to beneficial ownership following a nominal-value transfer and whether the transfer was intended to pass beneficial title; the substitution of ownership via Smart City did not conclusively show absence of prejudice because a shareholder does not own the company’s assets and Smart City's liabilities and value were unclear; allegations of material non-disclosure and ulterior motive were not supported by strong and convincing evidence. Accordingly the ex parte leave was not set aside and the Indorsement of Claim was not frivolous or vexatious.

Citation
[2020] HKCFI 769
Parties
Applicant (hcmp315): Lau Wing Yan; Applicant (hca379); Respondent (hcmp315): Pacific Bulk Investment Limited; 1st Defendant: Chu Kong (朱江); 2nd Defendant: Kwong Hon Keung Gerry (Gerry Kwong); 3rd Defendant: Smart City Investment Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
14 May 2020
Case Number
HCMP315/2019
Procedural Posture
Statutory Derivative Action Under the Companies Ordinance (s732/s733) With Interlocutory Applications to Set Aside Ex Parte Leave and to Strike Out / Interlocutory; Hearing of Setting Aside Summons (hcmp315) and Strike Out Summons (hca379); Judgment on Summonses
Outcome
Setting Aside Summons (HCMP315) dismissed; Strike-out Summons (HCA379) dismissed; ex parte leave under s733 maintained and derivative action permitted to proceed; costs order nisi in favour of Applicant (HCMP315) and Plaintiff (HCA379) against Defendants.
Legal Topics
Statutory Derivative Action, Leave Under Companies Ordinance S733, Resulting Trust, Breach of Fiduciary Duty, Abuse of Process, Strike Out Jurisdiction
Source Language
EN
Company Law Equity Civil Procedure Statutory Derivative Action Leave Under Companies Ordinance S733 Resulting Trust Breach of Fiduciary Duty Abuse of Process +1 more

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Parties

Lau Wing Yan

Applicant (hcmp315)

Pacific Bulk Investment Limited

Applicant (hca379); Respondent (hcmp315)

Chu Kong (朱江)

1st Defendant

Kwong Hon Keung Gerry (Gerry Kwong)

2nd Defendant

Smart City Investment Limited

3rd Defendant

Procedural Posture

Statutory Derivative Action Under the Companies Ordinance (s732/s733) With Interlocutory Applications to Set Aside Ex Parte Leave and to Strike Out / Interlocutory; Hearing of Setting Aside Summons (hcmp315) and Strike Out Summons (hca379); Judgment on Summonses

Legal Issues

  1. 1 Whether there is a serious question to be tried under s733 CO
  2. 2 Whether material non-disclosure occurred at the ex parte leave application
  3. 3 Whether the derivative action constitutes an abuse of process or was commenced for an ulterior motive

Ratio Decidendi

The court found the threshold for a serious question to be tried under s733 met because ambiguity exists as to beneficial ownership following a nominal-value transfer and whether the transfer was intended to pass beneficial title; the substitution of ownership via Smart City did not conclusively show absence of prejudice because a shareholder does not own the company’s assets and Smart City's liabilities and value were unclear; allegations of material non-disclosure and ulterior motive were not supported by strong and convincing evidence. Accordingly the ex parte leave was not set aside and the Indorsement of Claim was not frivolous or vexatious.

Court Disposition

Setting Aside Summons (HCMP315) dismissed; Strike-out Summons (HCA379) dismissed; ex parte leave under s733 maintained and derivative action permitted to proceed; costs order nisi in favour of Applicant (HCMP315) and Plaintiff (HCA379) against Defendants.

Orders

  • Setting Aside Summons dismissed
  • Strike-out Summons dismissed