A and Another v. C and Another

HCA 882/2025

[2025] HKCFI 3494

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 882 OF 2025

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REASONS FOR DECISION

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1.This was the application by the 1^st and 2^nd Plaintiffs (the “Plaintiffs”)’ for a Norwich Pharmacal Order and an Order under section 21 of the Evidence Ordinance (Cap.8). A gagging order had been made in relation to the present application. In order to avoid any unnecessary risk that the Reasons for Decision would somehow reveal the existence of the present application before the order I made would be fully complied with, I publish this Reasons for Decision only now. Further, I should also be as brief as possible in this Reasons for Decision, only setting out the bare minimal necessary to explain why at the end of the ex parte hearing, I agreed with Ms Catrina Lam (leading Ms Lilian Ip), counsel for the Plaintiffs, that the Court has jurisdiction to grant a Norwich Pharmacal Order to the Plaintiffs for them to decide whether there is sufficient evidence to commence derivative action in the name of a BVI company (the “BVI Company”), although the present action is an action commenced by the Plaintiffs in their personal capacity against the 1^st and 2^nd Defendants (the “Defendants”) (none of which is the BVI Company) for wrongs committed personally against the Plaintiffs.

2.On record, the 1^st Plaintiff is the sole director and the sole shareholder of the 2^nd Plaintiff. The 1^st Plaintiff holds 50% shares in the BVI company via the 2^nd Plaintiff. The Plaintiffs’ application for a Norwich Pharmacal Order was made for the purpose of examining wrongdoings by the Defendants against them personally, and “commenc[ing] a derivative action on behalf of the BVI Company against the Defendants”, as pleaded in §23 of the General Indorsement.

3.In response to my query whether the Court can make a Norwich Pharmacal Order for a shareholder to see whether there is any evidence of wrongdoing against the company in which the shareholder holds shares, Ms Lam made the following submissions:-

(1)  A Norwich Pharmacal Order is to enable a plaintiff to “enforce his legal rights”: see Yuan & Partners v DBS Bank (Hong Kong) Ltd [2020] HKCFI 2815 at §11 per Recorder Stewart Wong SC, as well as “to vindicate his rights and prevent a sense of injustice”: see Chan Yim Wah Wallace v New World First Ferry Services Ltd [2015] 3 HKC 382 at §25 per Bharwaney J.

(2)  The procedural device should be available “when [the applicant] desires to obtain redress against the wrongdoer – or to protect himself against further wrongdoing”: see Ashworth Hospital Authority v MGN Ltd [2002] 1 WLR 2033 at §45 per Lord Woolf CJ.

(3)  A shareholder’s right to commence a derivative action is his “right”, the exercise of which would enable him to “obtain redress” and “protect himself against further wrongdoing”.

4.As examples where courts have granted a Norwich Pharmacal Order for potential derivative actions, Ms Lam referred me to an English High Court case BNP Paribas v TH Global Ltd [2009] EWHC 37 (Ch) and a Kuala Lumpur High Court case Teoh Peng Phe v Wan & Co [2001] 1 AMR 358.

5.In BNP Paribas v TH Global Ltd, supra, the applicant’s position was that as a result of certain restructuring transactions in relation to the 1^st defendant therein, assets of substantial value had been removed from the 1^st defendant to the detriment of the applicant which was one of its preferential shareholder. Based on this, the applicant applied for a Norwich Pharmacal Order in relation to the restructuring transactions. In support of its application, the applicant contended (as recorded in §32 of that case) that it would have a claim for damages for conspiracy to defraud or injury by unlawful means, or alternatively, it would have “grounds to bring a derivative action in the name of [the 1^st defendant] against those responsible for what appear[ed] to have been a wrongful asset stripping exercise”. It also contended (as recorded in §40 of the decision) that it required the information to identify “the form of any claim” that might be brought. DHCJ Sheldon QC granted the order.

6.In Teoh Peng Phe v Wan & Co, supra, the applicant was a minority shareholder of a limited company. It sought disclosure from the auditors of the company for certain information. One of the grounds in opposition raised by the auditors was that “[t]he right of action lies with the company and not with the plaintiff as the wrong was done to the company and only the company has the right to bring an action” (at 371(10)-(15)). The applicant made it clear that it would like to “institute a derivative action on behalf of the company against the errant director or directors in order to recover from them such monies that may have been diverted to their use” (at 380(36) – (40)). At 381(6) – (10), Kang J referred to the case before him falling within an exception to the Foss v Harbottle rule, by which exception the minority shareholder may bring a derivative action to enforce the company rights, and at 381(36-43) held that so long as the applicant can show a viable case against the wrongdoer and would require the pre-action discovery to facilitate his action, the court may grant the disclosure order sought.

7.Having considered the authorities above, I agreed that the Court has jurisdiction to grant a Norwich Pharmacal Order for a potential derivative action. I, however, add a caveat. Under the relevant statutory regime, a shareholder may apply for an order of inspection of corporate records and documents from the company: see section 740 of the Companies Ordinance (Cap. 622). In applying for a Norwich Pharmacal Order, the applicant is expected to explain why the statutory means is not appropriate and/or not sufficient so that a Norwich Pharmacal Order is necessary. For example, in the present case, assuming that the BVI statutory regime is similar to that of Hong Kong, I see that because of the need for secrecy, section 740 is not an appropriate because an order under section 740 could only be an order against the company or its officer: see section 740(4), or because the shareholding held by the applicant shareholder does not meet the statutory threshold. In some cases, the applicant shareholder may also be a director, and in such circumstances, the applicant may also have to explain why his director’s rights to corporate documents at common law and under the Companies Ordinance would not be sufficient. For example, in the present case, there has been dispute over the Plaintiffs’ directorship such that there has been difficulty for the Plaintiffs to enforce their rights as directors.

8.I should also mention that the present action is an action commenced by the Plaintiffs in their personal capacity against the Defendants and the company is not a party. To apply for a Norwich Pharmacal Order for information for a potential derivative action may technically not be desirable, giving an impression that the application is only for the action commenced in the Plaintiffs personal capacity. The Plaintiffs’ current application for disclosure for a potential derivative action clearly goes beyond the scope of the present action. But this is, in my view, a technical point only and at least in the present case, does not carry any substance.

9.As I said, I was satisfied that the Court has jurisdiction to grant a Norwich Pharmacal Order for a potential derivative action. Having considered the evidence and submissions, I was satisfied that the usual requirements for a Norwich Pharmacal Order were established, and granted the order sought by the Plaintiffs.

Ms Catrina Lam and Ms Lilian Ip, instructed by Jones Day, for the 1^st and 2^nd Plaintiffs