Waddington Ltd v. Chan Chun Hoo Thomas and Others

cacv 220/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 220 of 2005

(on appeal from HCA NO. 3291 of 2003)

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BETWEEN

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Before : Hon Rogers VP and Le Pichon JA in Court

Date of Hearing : 31 January 2007

Date of Handing Down Judgment : 14 February 2007

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J U D G M E N T

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Hon Rogers VP:

1.This was an application for leave to appeal to the Court of Final Appeal from a Judgment of this court handed down on 30 May 2006.  At the conclusion of the hearing of the application, this court’s decision was reserved.

2.The background to this matter can be gleaned from the Judgment of this court and of the court below.  The application is made under Section 22(1)(b) of the Court of Final Appeal Ordinance Cap. 484 on the basis that the questions involved are of great general and public importance.  The questions said to arise are as follows:

“	(1)	whether, as a matter of law in Hong Kong, there exist in the applicable exceptions to the Principle as affirmed in Johnson v. Gore Wood & Co. (a firm) [2002] 2 A.C.1 so as to enable a shareholder in a company to pursue an action in respect of a loss which is wholly reflective of that suffered by the company itself.
	(2)	whether as a matter of law in Hong Kong a “double derivative action” or a “multiple derivative action” is permissible or maintainable;
	(3)	whether as a matter of law in Hong Kong it is permissible for a writ of summons and the statement of claim to be amended so that a plaintiff be allowed to pursue and/or continue an action purportedly on behalf of a company which was not in existence or had ceased to exist as at the date of the issue of the writ.”

3.In approaching this matter it is important to bear in mind that not only is this an interlocutory application but the matter at issue was whether the plaintiff would be entitled to bring an action at all.  To a certain extent, applications to strike out proceedings on the basis that they are not viable in law have to be decided on matters of inference.  In this case there are clearly inferences which the plaintiff seeks to draw: see for example paragraphs 19 and 20 of the Judgment of this court.  Furthermore, the matters at issue in these proceedings are fact sensitive.  Until the facts have been found and it has been decided whether it is correct or incorrect to draw particular inferences, I would not consider it right for this court to give leave to have the matter argued in the Court of Final Appeal.

4.As was pointed out by Mr Yu SC, who appeared on behalf of the plaintiff, there are a number of exceptions to the “no reflective loss” principle.  Not least the exceptions to the rule in Foss v Harbottle constitute the first and most obvious exception to the principle that only a corporate entity itself can pursue a claim in respect of a loss which has been suffered.  This court was reminded, in the course of argument and in the skeleton argument, of a number of more recent cases which demonstrate the existence of exceptions.  The existence of those exceptions not only makes the first question far too general and imprecise, as was argued, but it makes it all the more important that the specific facts of the case have been found before any matter of public policy of this nature should be considered.

5.In respect of the second question, apart from the fact that this court considered the matter was clear, it would again seem premature, prior to the conclusive findings of fact, to give leave for the case to be taken to the Court of Final Appeal.

6.In respect of the final question, it has to be approached on the basis that the company in question was in existence at the date of the application to make the amendments.  Reliance was placed on Order 15 rule 8(4) of the Rules of the High Court that a person only becomes a party when the writ has been amended and has been served.  On that basis the point sought to be raised is at best a procedural point.

7.I would therefore dismiss this application with an order nisi of costs in favour of the plaintiff.

Hon Le Pichon JA:

8.I agree.

Mr Benjamin Yu SC & Ms Eva Sit, instructed by Messrs Kao, Lee & Yip, for the Plaintiff/Respondent

Mr Martin Lee SC & Mr Hectar Pun, instructed by Messrs Fairbairn Catley Low & Kong, for the 1^st Defendant/Applicant