PAN SHI LIANG v. HARSEN INDUSTRIES LTD

HCMP 1917/2017

[2018] HKCFI 211

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1917 OF 2017

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J U D G M E N T

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1.  I have before me an application under ss 732 to 733 of the Companies Ordinance, Cap 622, for leave to bring a statutory derivative action on behalf of Harsen Industries Limited against one of its directors, Mr Wong Yee Chuk.

2.  The shares of the Company are held as to 10% by the applicant, Mr Pan, as to 40% by Mr Harry Lo, as to another 40% by Mr Wong, and as to the remaining 10% by Mr Wong’s wife.  There are two directors, namely Mr Lo and Mr Wong.  Mr Lo supports the present application, which means there are essentially two camps in the Company, split 50/50, at both the board and the shareholders’ levels. 

3.  Broadly speaking, the application seeks leave for a derivative action to be brought against Mr Wong for alleged breaches of duties as a director of the Company in relation to: (1) the transfer of eight of the Company’s registered trademarks in the mainland to a company controlled by Mr Wong; (2) the registration of five trademarks bearing similarities with the Company’s trademarks, by a company controlled by Mr Wong; and (3) the engagement by Mr Wong in businesses competing with the Company. 

4.  The application came before me in November last years.  Although both the Company and Mr Wong had been given notice, no one appeared at that hearing in opposition.  As a result of the questions I raised, however, the hearing was adjourned to today.  Those questions have since been addressed, to my satisfaction, in the 3^rd affirmation of Mr Pan and in the supplemental skeleton of Mr Leung who has appeared for Mr Pan.  Neither the Company nor Mr Wong has appeared today to oppose the application. 

5.  Since the matter is going forward and no opposing argument has been advanced, I will not go into the substantive claims in detail, except to say that I accept Mr Leung’s submission, for the reasons he has given, that there are serious issues to be tried, which is not a very high threshold, and that it appears prima facie to be in the interests of the Company that leave be granted given the remedies claimed are primarily damages and account for profits which, if granted, would enure to the benefit of the Company.  I therefore grant leave for a statutory derivative action to be brought and make an order in terms of paragraph 1 of the originating summons.

6.  As for costs, I think the applicant should have the costs of the application, but I am minded to order that he be indemnified as to 75% of the costs of the application by the Company because of certain duplication and wastage of costs having regard to the need for two hearings, which cannot all be laid at the door of the Company.  So far as the costs of the derivative action are concerned, I will order that they be paid by the Company out of its assets up to the exchange of lists of documents by way of discovery.  So far as any further costs of the derivative action are concerned, paragraph 3 of the originating summons is adjourned sine die with liberty to restore.