Jonathan Lim v. She Wai Hung and Others
Read the full judgment text of HCA 391/2010 on BabelCite. This High Court CFI judgment was delivered on 8 February 2011.
1. This is an application for variation of my costs order nisi given on 6 December 2010 upon my dismissal of the plaintiff’s application for summary judgment. This application was initially made by letter within time followed by a summons filed out of time. The 1st and 2nd defendants argued that the application was made out of time. I think the application should properly have been made by a summons. But that does not affect its outcome.
Cited by 6 cases · Cites 1 case
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HCA 391/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 391 OF 2010 ____________ BETWEEN
____________ Before: Deputy High Court Judge L. Chan in Chambers Date of Hearing: 8 February 2011 Date of Decision: 8 February 2011 _____________ D E C I S I O N _____________ 1.This is an application for variation of my costs order nisi given on 6 December 2010 upon my dismissal of the plaintiff’s application for summary judgment. This application was initially made by letter within time followed by a summons filed out of time. The 1st and 2nd defendants argued that the application was made out of time. I think the application should properly have been made by a summons. But that does not affect its outcome. 2.The plaintiff applied for summary judgment on two alternative bases. The first basis is that he is the holder of one out of 10,000 shares of the 3rd defendant and he brought this action as a derivative action against the 1st and 2nd defendants for the benefit of the 3rd defendant. 3.However, the 1st and 2nd defendants challenged his entitlement to bring this action as a derivative action, the reason being that his father is the registered holder of 5,999 shares of the 3rd defendant. Though his father has been adjudged a bankrupt, his father can still exercise the voting rights attached to these shares according to the will of the trustees in bankruptcy. 4.The 1st defendant is only the registered shareholder of 4,000 shares of the 3rd defendant. The 3rd is therefore not in the control of the 1st defendant and/or his son, the 2nd defendant, who is not even a shareholder of the 3rd defendant. 5.I therefore did not grant summary judgment on the ground that there is a triable issue of the plaintiff’s entitlement to bring this action as a derivative action. 6.I also declined the plaintiff’s application for interim injunction on the ground that his loss can be adequately compensated by damages. 7.The plaintiff’s second basis of action is to pursue his personal rights as a shareholder of the 3rd defendant. I also did not accept this ground for the reason that any problem of management of the 3rd defendant could be sorted out by the ordinary majority of the 3rd defendant’s members in general meeting. The details of my reasoning are in my decision given on 6 December 2010. 8.The 1st defendant has already in his affirmation filed on 31 August 2010 pointed out that the trustees in bankruptcy of the plaintiff’s father could mobilise the 3rd defendant to sue for wrongs inflicted on it. He in fact referred to the plaintiff’s father as the holder of 6,000 shares as he regarded the plaintiff as the nominee of his father in holding the one share of the 3rd defendant. 9.However, whether the plaintiff’s father is the holder of 5,999 or 6,000 shares, the point made by the 1st defendant is the same, namely the trustees in bankruptcy, being in control of the majority of the 3rd defendant’s shares, could mobilise the 3rd defendant to pursue remedies for wrongs done to it. Hence, there is no basis for the plaintiff to bring this action as a derivative action. 10.I therefore dismissed the plaintiff’s summons for summary judgment and made a costs order nisi requiring him to pay the costs of the application to the 1st and 2nd defendants. 11.On 30 December 2010 I also dismissed the plaintiff’s application for leave to appeal. I pointed out that it was for the plaintiff to show a prima facie case of his entitlement to bring a derivative action regardless of whether the issue has been raised in the defence (see Waddington Ltd v Chan Chun Hoo (2008) 11 HKCFAR 370 at paras 12 and 13 per Ribeiro PJ). 12.I also dismissed the plaintiff’s ground of appeal to pursue his personal right as a director of the 3rd defendant as the undertakings given by the 1st and 2nd defendants to the court have made this matter non-contentious. 13.In this application, counsel for the plaintiff referred to the defence of the 1st and 2nd defendants and submitted that the only defence raised was that the plaintiff had no locus to bring the action as he was a mere nominee of his father and had no beneficial interest in the one share of the 3rd defendant that was registered in his name. Counsel said that the plaintiff’s Order 14 summons was issued on the basis of this defence. 14.Counsel further submitted that the no beneficial interest defence was maintained by the 1st defendant in his affirmation in opposition. 15.Counsel further said that it was only two days before the hearing that counsel for the 1st and 2nd defendants asserted in a skeleton submissions that the plaintiff could not maintain this action as a derivative action. 16.Counsel thus submitted that it could not be said that the plaintiff clearly knew that there was an arguable defence whether before the issue of the Order 14 summons or when he prepared his affirmations in support and in reply. Counsel therefore submits that the cost of the Order 14 summons should be in the cause. 17.Counsel further said that this should be so particularly when my decision in refusing injunctive relief was premised on the undertakings of the 1st and 2nd defendants not to hold out as directors of the 3rd defendant. Counsel may be right on this, but the offers of undertakings by the 1st and 2nd defendants were made in the affirmation of the 1st defendant filed on 31 August 2010. Hence, that was not a matter that needed consideration since then or at the hearing on 3 December 2010. 18.Counsel further asked for costs be to the plaintiff for two issues that had been abandoned by the 1st and 2nd defendants at the hearing, namely the reliance on a nominee shareholding defence and the defence under section 157 of the Companies Ordinance for validating the acts of the 1st and 2nd defendants. 19.Alternatively, counsel seeks a percentage of the plaintiff’s costs to be paid by the 1st or 2nd defendants, or that the 1st and 2nd defendants should be deprived of part of their costs to reflect the abandonment of these two issues. However, these two issues did not take up any significant amount of time at the hearing. 20.More importantly, on the question of whether the 1st and 2nd defendants have in the 1st defendant’s affirmation challenged the plaintiff’s entitlement to bring this action as a derivative action, I will refer to paragraph 12 of the 1st defendant’s affirmation as follows:
21.I think this paragraph has clearly suggested that the trustees in bankruptcy are in control of the majority of shares rather than the 1st defendant. The reference to 6,000 shares rather than 5,999 shares reflected the 1st defendant’s desire to maintain his nominee shareholder defence, but that has not eclipsed the point that the trustees in bankruptcy are in control of the majority of shares and the 1st defendant is not in control. 22.In any case, it is for the plaintiff to establish his entitlement to bring this action as a derivative action. It is wrong for the plaintiff to assume that if this point is not being taken by the 1st and 2nd defendants, the court would then have no concern about it. This attitude is wholly misconceived. 23.It is an abuse of process for a minority shareholder to bring a derivative action without showing its entitlement to do so. The Order 14 summons based on a derivative action was doomed from the start, even without any challenge by the 1st and 2nd defendants. The alternative basis for summary judgment also failed at the latest on 31 August 2010 upon the filing of the 1st defendant’s affirmation. 24.In the premises, I see no basis to vary the costs order nisi. I therefore dismiss the application. 25.I also order the plaintiff to pay the 1st and 2nd defendants the costs of this application, and I will now assess the amount summarily.
Mr Norman Nip, instructed by Messrs Fairbairn Catley Low & Kong, for the Plaintiff Ms Stephanie Yan, instructed by Messrs Benson Li & Co., for 1st, 2nd and 3rd Defendants | ||||||||||||||||||||
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