Read the full judgment text of HCA 1116/2013 on BabelCite. This Court of First Instance judgment was delivered on 6 August 2014 before Deputy High Court Judge B Chu.
Civil procedure – striking out – Order 18 rule 19(1)(a) of the Rules of the High Court – rule against reflective loss – whether shareholder may claim loss suffered by subsidiary – breach of fiduciary duty by employee – dishonest assistance and knowing receipt by associated parties – sale of industrial property in Tsuen Wan – property registered in sole name of Hopely Copper Aluminium Company Limited – property sold at alleged undervalue of HK$3.6m to Billion Morning Limited in August 2010 – on-sold six months later for HK$8.3m yielding profit of HK$4.7m – plaintiff wholly owned by Guangzhou Iron & Steel Enterprise Holdings Limited 廣州鋼鐵企業集團有限公司 – plaintiff held 9,999,999 of 10m issued shares of Contrive Company (Hong Kong) Limited which held 70% of Hopely – 30% of Hopely held by other shareholders – 1st defendant employed by plaintiff in Finance Department and mother of 3rd defendant who was director of Billion – confirmation letter 確認書 dated 14 August 2012 by 1st defendant admitting she misled plaintiff's Board and abused trust – statement of claim pleading breach of fiduciary duty and dishonest assistance – defendants applied to strike out under rule 19(1)(a) – general principles from Johnson v Gore Wood & Co that only company may sue for loss caused by breach of duty owed to it – exception where shareholder suffers separate and distinct loss – court finds no such separate loss – plaintiff expressly pleaded loss as majority shareholder of Hopely being lost profits – other shareholders and creditors would be prejudiced – principle in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) preferred over New Zealand approach in Christensen v Scott – Waddington confirms Rule applies to sub-subsidiaries and at any level of corporate chain – Landune International Ltd confirms Rule debars shareholder recovery even with independent cause of action – Gardner v Parker confirms Rule bars recovery in damages or restitution regardless of whether cause of action in common law or equity – Pico confirms Rule not limited to damages claims – possible derivative action under section 733, Part 14, Division 4 of Companies Ordinance Cap 622 not pursued by plaintiff – defects not curable by proposed amendments – SOC struck out as disclosing no reasonable cause of action – action dismissed – amendment summons dismissed – plaintiff to pay defendants' costs of all summonses on party and party basis – order nisi as to costs
Legal issues: Whether the rule against reflective loss bars the plaintiff's claims · Whether the defects in the statement of claim can be cured by amendment
Outcome: Plaintiff's statement of claim struck out as disclosing no reasonable cause of action; action against all defendants dismissed; amendment summons dismissed.
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