AU YUK LIN AND ANOTHER v. MENFOND ELECTRONIC ART & COMPUTER DESIGN CO LTD

HCMP 1460/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1460 OF 2014

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D E C I S I O N

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1.  I have before me an originating summons issued on 17 June 2014 seeking, pursuant to section 732 of the Companies Ordinance, Cap 622, leave to commence proceedings against the director and minority shareholder of the company, Eddy Wong, and a company controlled by him, Pacific Rich (Asia) Limited, which the applicant shareholders believe is the corporate vehicle used by him to direct business away from the company for Mr Wong’s own benefit.

2.  The court is given the power, pursuant to section 733, to grant leave to commence a statutory derivative action if the court is satisfied: 

(i) that there is a serious question to be tried and the company has not itself brought the proceedings; or

(ii) it is in the company’s interests that leave be granted to a member to commence the proposed statutory derivative action.

3.  The company has not opposed the application.  I am satisfied, on the basis of the two affirmations that have been filed in support of the application, that there is a prima facie case for breach of fiduciary duty causing loss to the company as a result of Mr Eddy Wong’s actions. 

4.  It follows that I am also satisfied that there is a serious question to be tried and that, on the face of the application, it is in the company’s interests that leave be granted to the applicants to commence the proposed statutory derivative action which is detailed in the draft statement of claim, which is Exhibit AYL-25 to the second affirmation of the 1st applicant.

5.  I am also satisfied that the company has been given the notice required by subsection 733(3).

6.  I will therefore make an order giving the applicants leave pursuant to section 732(1) and (2) of the Companies Ordinance, Cap 622, to commence, on behalf of the company, a High Court action against Wong Wang Hin Eddy and Pacific Rich (Asia) Limited in respect of the matters described in the draft statement of claim which is Exhibit AYL-25 to the second affirmation of Au Yuk Lin, deposed on 4 September 2014.

7.  The costs of this application are to be paid to the applicants out of the assets of the company.  As is the normal practice, I reserve the costs of the proposed derivative action with liberty to restore the originating summons when the applicants have more information about the financial state of the company and it is appropriate for the court to determine whether or not to make an order that the costs of pursuing the derivative action which will be incurred by the applicants are indemnified out of the company’s assets.