PICO NORTH ASIA HOLDINGS LTD v. CHEUNG YUK TING LINDA AND ANOTHER

HCA1371/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1371 OF 2009

----------------------------

--------------------------

J U D G M E N T

--------------------------

Introduction

1.  This is the 2^nd Case Management Conference in this action at which various applications have been fixed to be heard, namely:

(1)     the plaintiff’s summons dated 30 July 2010 to amend its Statement of Claim;

(2)     the plaintiff’s summons dated 3 September 2010 to amend its Statement of Claim;

(3)     the plaintiff’s summons dated 29 September 2010 for an order that there be separate trials of the issues of liability and damages in this action; and

(4)     the defendants’ summons dated 12 October 2010 to strike out the Statement of Claim on the basis it discloses no reasonable cause of action and an order for the action to be dismissed with costs.

2.  It is only the latter application that is controversial between the parties.  The defendants’ position is that, if the Statement of Claim is not dismissed and the action is permitted to continue, they do not oppose the proposed amendments sought by the plaintiff’s summons dated 3 September 2010 (this summons superseding that dated 30 July 2010).  So far as the split trial application is concerned, Mr Ashley Burns SC, appearing for the plaintiff, invited me to adjourn that application pending my decision on the strike out application.  For his part, Mr John Yan SC, appearing for the defendants[1], did not object to this course.

3.  The issue arising on the strike out application is simply whether the plaintiff’s claim offends against the “no reflective loss” principle.  The defendants say it does, whilst the plaintiff says this is not plain and obvious.

The “no reflective loss” principle

4.  The rule against reflective loss originates judicially in the decision of the English Court of Appeal in Prudential Assurance Co. Ltd v Newman Industries Ltd (No.2) [1982] Ch 204.  The rule was authoritatively discussed by the House of Lords in Johnson v Gore Wood & Co. (a firm) [2002] 2 AC 1.

5.  The following is the effect of the speeches in Johnson’s case as summarised by Blackburne J in Giles v Rhind [2001] 2 BCLC 582 (subject to two qualifications added by Chadwick LJ in the Court of Appeal in that case):

(1) A loss claimed by a shareholder which is merely reflective of a loss suffered by the company — i.e. a loss which would be made good if the company had enforced in full its rights against the defendant wrongdoer — is not recoverable by the shareholder, save in a case where, by reason of the wrong done to it, the company is unable to pursue its claim against the wrongdoer;

(2) where there is no reasonable doubt that that is the case, the court can properly act, in advance of trial, to strike out the offending heads of claim;

(3) the irrecoverable loss (being merely reflective of the company’s loss) is not confined to the individual claimant’s loss of dividends on his shares or diminution in value of his shareholding in the company but extends to all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds and also to other payments which the company would have made if it had had the necessary funds even if the plaintiff would have received them qua employee and not qua shareholder, save that this does not apply to the loss of future benefits to which the claimant had an expectation but no contractual entitlement;

(4) the principle is not rooted simply in the avoidance of double recovery in fact; it extends to heads of loss which the company could have claimed but has chosen not to and therefore includes the case where the company has settled for less than it might; and

(5) provided the loss claimed by the shareholder is merely reflective of the company’s loss and provided the defendant wrongdoer owed duties both to the company and to the shareholder, it is irrelevant that the duties so owed may be different in content.

6.  In Gardner v Parker [2004] 2 BCLC 554, Neuberger LJ (as he then was) approved and applied that summary at §33 and the Court of Appeal in this jurisdiction has approved and applied the first proposition thus summarised in Landune International Ltd v Cheung Chung Leung [2006] 1 HKLRD 39 per Yuen JA at §34.

7.  The real dispute between the parties on this application was not as to the content of the “no reflective loss” principle.  Rather, the dispute between the parties has been whether the principle applies in the circumstances of this case.

8.  In respect of the rule against reflective loss, it is necessary, when faced with an application to strike out a claim as offending against that rule, to subject the pleadings to close scrutiny.  In Johnson’s case, Lord Bingham said at p.36B-E:

“These principles do not resolve the crucial decision which a court must make on a strike-out application, whether on the facts pleaded a shareholder’s claim is sustainable in principle, nor the decision which the trial court must make, whether on the facts proved the shareholder’s claim should be upheld. On the one hand the court must respect the principle of company autonomy, ensure that the company’s creditors are not prejudiced by the action of individual shareholders and ensure that a party does not recover compensation for a loss which another party has suffered. On the other, the court must be astute to ensure that the party who has in fact suffered loss is not arbitrarily denied fair compensation. The problem can be resolved only by close scrutiny of the pleadings at the strike-out stage and all the proven facts at the trial stage: the object is to ascertain whether the loss claimed appears to be or is one which would be made good if the company had enforced its full rights against the party responsible, and whether (to use the language of Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch 204, 223) the loss claimed is ‘merely a reflection of the loss suffered by the company’. In some cases the answer will be clear, as where the shareholder claims the loss of dividend or a diminution of the company’s assets, or a loss unrelated to the business of the company. In other cases, inevitably, a finer judgment will be called for. At the strike-out stage any reasonable doubt must be resolved in favour of the claimant.”

Chronology of this action

9.  The writ in this action was issued on 10 June 2009.  The defendants filed their Defence on 28 August 2009 and the plaintiff filed its Reply on 16 November 2009.

10.  On 5 January 2010, Master Ho gave directions for, amongst other things, discovery and inspection of documents and the exchange of witness statements.

11.  On 3 February 2010, the defendants filed an Amended Defence.

12.  On 3 March 2010, the parties filed their respective Lists of Documents.  On 25 March 2010, the defendants’ solicitors inspected the documents disclosed by the plaintiff.

13.  On 2 July 2010, Master Lung made an order requiring the plaintiff to issue a summons for leave to amend the Statement of Claim and Reply by 31 July 2010 and extending the time for the exchange of witness statements.

14.  On 8 September 2010, the 1st Case Management Conference took place before Master Lung, at which, amongst other things, he (i) ordered the plaintiff to answer a Request for Further and Better Particulars of the Statement of Claim seeking details of the loss and damage alleged to have been suffered by it and (ii) directed the fixing of a 2^nd Case Management Conference for the hearing of the various applications now before me.

Summary of the plaintiff’s claims against the defendants in this action

15.  The plaintiff and the 1^st defendant entered into two agreements respectively dated 26 November 1992 (“the JVA”) and 31 March 2003 (“the Supplemental JVA”) to form joint venture companies between themselves.  These companies were Allied Pacific Investment Limited (“API”) and Allied Hill Investment Limited (“AHI”).  The plaintiff and the 1^st defendant are shareholders of the companies.  The 1^st defendant is a director of the companies and the 2^nd defendant was a director until his resignation on 12 June 2009.

16.  The plaintiff relies on the following terms of the JVA and Supplemental JVA:

(1) Clause 21.1 of the JVA by which the parties undertook not to use and/or abuse any information or knowledge furnished to or by API by anyone except in accordance with the provisions of the JVA;

(2) clause 22.1 of the JVA by which the parties agreed not to solicit or otherwise deal in services or any other aspect of API’s business, whether directly or indirectly, in competition with API; and

(3) clause 1.3 of the Supplemental JVA by which the parties agreed that the provisions of the JVA would apply to the Supplemental JVA, with the exception of clauses 5.1, 5.2, 6 and 7.

17.  The plaintiff claims that the 1st defendant breached clauses 21.1 and 22.1 of the JVA and clause 1.3 of the Supplemental JVA in the following respects:

(1) in directly or indirectly dealing in the operation of airport lounges in competition with the companies (“the Alleged Competing Lounges”); and

(2) in using information and/or knowledge relating to the opportunity to open airport lounges in other locations by indirectly operating the Alleged Competing Lounges outside of the joint venture.

18.  The plaintiff alleges, in particular, that:

(1) the Alleged Competing Lounges directly compete with the businesses of API and AHI;

(2) the Alleged Competing Lounges trade on the Companies’ goodwill;

(3) the opportunities to operate the Alleged Competing Lounges were opportunities belonging to API and AHI; and

(4) the defendants misappropriated such opportunities in setting up the Alleged Competing Lounges outside the joint venture.

19.  The plaintiff also alleges that the 2^nd defendant induced the 1st defendant to breach the JVA and the Supplemental JVA.

20.  The plaintiff further alleges that the 1^st defendant owed the plaintiff fiduciary duties by reason of her having acted on behalf of the plaintiff in circumstances which gave rise to a relationship of trust and confidence, and that she breached such duties by indirectly operating the Alleged Competing Lounges.

21.  The plaintiff alleges that, as a result of these breaches and conduct by the defendants, it has suffered loss and damage.

22.  The plaintiff claims, amongst other things, damages for breach of the JVA and the Supplemental JVA, damages for breach of fiduciary duties and an account of profits by reason of such breach.

HCA No.1177 of 2010

23.  On 3 August 2010, the plaintiff issued a writ in a second action, which was brought by it as a derivative action in its capacity as a shareholder of API and AHI, against the defendants with API and AHI also being joined as nominal defendants (“the Derivative Action”).

24.  The Derivative Action has been stayed by mutual consent until 9 February 2011.

25.  There is an overlap of allegations between the Derivative Action and this action, save that in the Derivative Action the plaintiff claims that the defendants breached their fiduciary duties owed to API and AHI.

26.  The underlying complaint in the Derivative Action, as in this action, alleges that the defendants have set up airport lounges in competition with the business of API and AHI and have misappropriated business opportunities and knowledge and information allegedly belonging to those companies.

27.  There are a number of differences between the Derivative Action and the action, the main ones being:

(1) There is an additional allegation in the Derivative Action that the Alleged Competing Lounges used API and AHI to purchase supplies.

(2) The plaintiff alleges that the defendants owed fiduciary duties to API and AHI as a director and former director of those companies respectively.

(3) The plaintiff pleads additional particulars of the alleged breach of fiduciary duties by the defendants, although the allegations of breach themselves largely overlap with those in this action, namely operating competing lounges, expropriating/diverting business opportunities and providing consulting services to other PRC airport lounges.

(4) The relief sought in the Derivative Action also includes damages for breach of fiduciary duties and an account of profits but, additionally to this action, claims declaratory relief that the defendants hold certain corporate opportunities as constructive trustees for API and AHI and injunctive relief requiring the defendants to refrain from operating any competing business.

Discussion

28.  It is trite that it is only in plain and obvious cases that the court should exercise its summary power to strike out the indorsement on any writ or any pleading under RHC O.18, r.19.  There should be no trial upon affidavit and disputed facts should be taken in favour of the party sought to be struck out. The court should not decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out: see Hong Kong Civil Procedure 2011 Vol.1 at Note 18/19/4 (p.404) citing Ha Francesca v Tsai Kut Kan (No.1) [1982] 1 HKC 382.

29.  There was also no dispute between the parties that, on this application, the burden rested on the defendants to show that the claim was plainly and obviously unsustainable.

30.  For the plaintiff, Mr Burns took a preliminary point that, due to its lateness, the application to strike out should not be entertained at all or should only be acceded to in the clearest circumstances.  He pointed out that it was not until 24 August 2010 that the defendants first challenged the plaintiff’s right to bring this action in correspondence and not until 12 October 2010 that the defendants issued their strike out summons.  He referred to the commentary in Hong Kong Civil Procedure 2011 Vol.1 at Note 18/19/3 (p.403) which includes the statements that “the application should always be made promptly and as a rule before the pleadings are closed” and “the Court of Appeal has confirmed that late applications for strike out (i.e. at the commencement of the trial) should only be acceded to in the clearest circumstances”.

31.  I do not consider the timing of this application precludes a strike out. The commentary at Note 18/19/3 also states that “the application may be made even after the pleadings are closed … or the trial set down.  … An important factor in exercising the Court’s discretion [is] the emphasis upon saving precious court time, no matter the stage of the application”.  Although the pleadings in this action have closed, they are subject to applications to amend by the plaintiff, and the action has not yet reached the stage of being set down.  Witness statements have not yet been exchanged.  The application was made promptly following the plaintiff’s response to requests for further and better particulars of its losses.  I note, in the context of the submission of delay, that the striking out application which was entertained in Johnson’s case was brought after the exchange of witness statements and the action had been fixed for trial.  For these reasons, I am satisfied that the timing of this application to strike out is not such that the court should decline to hear it, nor that it should apply a more stringent test than normal in approaching it.

32.  More substantively, Mr Burns submitted that the no reflective loss principle had no application in this case for a number of reasons.  First, he submitted that the principle only applies in respect of claims for damages and has no application to a claim for an account of profits or to other relief sought by the plaintiff in this action.  Secondly, he submitted that the principle only applies to a plaintiff suing in his capacity as shareholder of a company and the plaintiff is not suing in such capacity in this action. Thirdly, he submitted that the causes of action relied on by the plaintiff in this action are different to those relied on in the Derivative Action. Fourthly, he submitted that the losses claimed in this action may be greater than those recoverable in the Derivative Action.

33.  I do not consider that the first point advanced on behalf of the plaintiff is correct.  In my opinion, the principle can apply to other types of remedies including an account of profits and is not limited to claims for damages.  The test is not the form of relief but, whether as a matter of substance, the claim is for monies that the company may claim for itself.  By way of example, see Shaker v Al-Bedrawi [2003] 1 BCLC 157 AT §80, where Peter Gibson LJ said :

“… We agree … that if the claim by Mr Shaker for an account is in substance a claim to moneys to which ANA Inc has a claim against Mr Bedrawi, then consistently with the reasoning in Johson v Gore Wood & Co (a firm) the Prudential principle would bar Mr Shaker’s claim for what in effect reflects part of the loss suffered by ANA Inc, and it matters not that the causes of action of Mr Shaker and ANA Inc are different. …”

See also, Gardner v Parker at §49 and Minority Shareholders : Law, Practice and Procedure by Victor Joffe QC et al. (3^rd Ed.) at §1.151.

34.  So far as the plaintiff’s second point is concerned, namely that the principle only applies in respect of claims for damages and has no application to a claim for an account of profits or to other relief sought by the plaintiff in this action, again, I do not consider this submission to be correct.  It is trite that the principle is not only applicable to losses suffered by a claimant as shareholder but also to claims instigated by him in other capacities, such as creditor or employee: see Landune International Ltd v Cheung Chung Leung at §§31-32 where Yuen JA held :

“31. As for Mr Shum’s second submission that the fact that the Company owned shares in the Subsidiary should not be allowed to prejudice its claim, with respect that ignores the principle (or at least one of the principles) behind the rule against reflective loss — the prevention of double recovery. The principle debarring reflective loss is not based on the relationship of the plaintiff to the company, whether it be shareholder-company, or employee-employer, or creditor-debtor. The common thread is that the plaintiff’s loss would be made good if the company, employer or debtor, recovers from the defendant.

32. Thus in Gardner v Parker, Neuburger L.J. held (§70):

‘ ... the rule against reflective loss is not limited to claims brought by a shareholder in his capacity as such; it would also apply to him in his capacity as an employee of the company with a right (or even an expectation) of receiving contributions to his pension fund. On that basis, there is no logical reason why it should not apply to a shareholder in his capacity as creditor of the company expecting repayment of his debt. Indeed it is hard to see why the rule should not apply to a claim brought by a creditor (or indeed an employee) of the company concerned, even if he is not a shareholder.’ (Emphasis added).

This conclusion is supported by a passage in Lord Millett’s speech in Johnson v Gore Wood (66):

‘If the company chooses not to exercise its remedy, the loss to the shareholder is caused by the company’s decision not to pursue its remedy and not by the defendant’s wrongdoing.  By parity of reasoning, the same applies if the company settles for less than it might have done.  Shareholders (and creditors) who are aggrieved by the liquidator’s  proposals are not without a remedy; they can have recourse to the Companies’ Court, or sue the liquidator for negligence’.   (Emphasis added).”

See also, Minority Shareholders: Law, Practice and Procedure at §§1.156-1.157.

35.  In considering the plaintiff’s third point, namely that the causes of action relied on by the plaintiff in this action are different to those relied on in the Derivative Action, it is important to bear in mind that:

“… the rule against reflective loss is not concerned with barring causes of action as such, but with barring recovery of certain types of loss.”

(per Neuberger LJ in Gardner v Parker at §49)

36.  The principle applies where the loss claimed by the shareholder is merely reflective of the company’s loss, even though the defendant may owe wholly different duties to the company and to the shareholder : see per Peter Gibson LJ in Shaker v Al Bedrawi at §81 and principle (5) identified by Blackburne J in Giles v Rhind at §27.

37.  Thus, the fact that the defendants in this action may owe different fiduciary duties to the plaintiff, by reason of the alleged relationship of trust and confidence arising from their business dealings, to those owed by them as directors to API and AHI, does not affect the application of the principle.  Similarly, the reliance by the plaintiff on breaches of contractual duties or duties in tort on the part of the defendants does not affect its application.  Ultimately, the question is whether the loss allegedly suffered by the plaintiff by reason of the breaches asserted in the action is merely reflective of the companies’ loss.

38.  When the Statement of Claim in this action is compared with the Statement of Claim in the Derivative Action, it is clear that the fiduciary duties relied on by the plaintiff in this action (see §15 of the draft AmSoc) overlap with those pleaded in the Derivative Action (see §80 of the AmSoc in that action). The asserted duties in this action are duties to act in good faith and not to make a profit at the expense of the plaintiff or to act for their own benefit to the exclusion of the plaintiff and these are not any different, in substance, to those alleged to be owed by the defendants to the companies as directors.

39.  I also agree with Mr Yan that the conduct relied upon by the plaintiff as constituting the alleged breach of duties in both actions is essentially the same, namely setting up competing businesses, misappropriating business opportunities belonging to the companies and misuse of the companies’ information.  The observation of Lord Millett in Johnson’s case, commenting on Stein v Blake [1998] 1 All ER 724, is apposite here:

“The plaintiff sought to distinguish Prudential Assurance Co Ltd v Newman Industries (No 2) [1982] Ch 204 by arguing that the defendant was in breach of a duty owed to him personally. But, as I pointed out, that was not the problem. The problem was that the only conduct relied upon as constituting a breach of that duty was the misappropriation of assets belonging to the old companies, so that the only loss suffered by the plaintiff consisted of the diminution in the value of his shareholding which reflected the depletion of the assets of the old companies. The old companies had their own cause of action to recover their loss, and the plaintiff’s own loss would be fully remedied by the restitution to the companies of the value of the misappropriated assets.”

40.  In short, I am satisfied, from a comparison of the pleadings in this action and in the Derivative Action, that the same conduct on the part of the defendants’ forms the basis of the claims in both actions.

41.  Mr Burns’ fourth point in respect of the applicability of the no reflective loss principle was that the losses claimed in this action may be greater than those recoverable in the Derivative Action.  His submission in this regard was that, in this action, the plaintiff is suing for breaches of the restrictive covenants contained in the JVA (clause 22.1) and the Supplemental JVA (clause 1.3) and fiduciary duties (as pleaded in §§12 to 15 of the draft AmSoc), as well as the tort of inducing such breaches, which causes of action are not available to the companies.  Furthermore, he submitted that the fiduciary duties pleaded in the Derivative Action are the normal duties of a director and these are not co-extensive with those which the plaintiff alleges were owed to it in this action. 

42.  It was submitted that, by reason of the differences in the causes of action relied upon in the two actions, the court might hold that some of the conduct complained of by the plaintiff does not constitute a breach of fiduciary duty owed to the companies, although it might amount to breaches of the non-compete restrictive covenant in the JVA and Supplemental JVA or to breaches of the specific fiduciary duties owed by the defendants or either of them directly to the plaintiff.  Thus, the losses claimed by the plaintiff in this action may well be greater than those recoverable by the companies in the Derivative Action.  It is incumbent on the plaintiff, submitted Mr Burns, to show that the whole of the losses claimed by the plaintiff reflected what the companies had lost and what they have a cause of action to recover.  Since it is unlikely that the loss claimed in this action is merely reflective of the companies’ loss and probable that the plaintiff may elect to pursue an account of profits rather than damages, the defendants cannot show this.

43.  For the latter submission as to the need to show the whole of the losses are reflective of what the companies had lost, Mr Burns relied on Shaker v Al Bedrawi at p.159d and Perry v Day [2004] EWHC 1398 (Ch), 18.6.04 at §§58-59 & 68-71.

44.  It is important to note that an essential difference between Shaker’s case and Perry v Day is that in those cases no derivative claim had yet been advanced.  Hence, in those cases, the courts were speculating as to what the company’s claim against the relevant defendants might be.  Here, the Derivative Action has been commenced and API and AHI’s case against the defendants fully pleaded.

45.  Furthermore, in Shaker’s case it was not part of the plaintiff’s case that the abstraction of monies from the company was in breach of his duty to the company or an unlawful distribution or otherwise involved a breach of duty by Mr Al-Bedrawi to the company (see per Peter Gibson LJ at §60).  In those circumstances, the court held that the defendants had to satisfy the court that it was the inevitable conclusion from the facts which were admitted or agreed to be assumed that the abstraction of monies was a breach of duty by Mr Al-Bedrawi to the company.

46.  Similarly, in Perry v Day, the company had no cause of action against Mrs Day for the relevant loss (see §69).

47.  That is to be contrasted with the position here where, in the Derivative Action, it is pleaded that the very same conduct complained of by the plaintiff in this action constitutes breaches of fiduciary duty owed by the defendants to API and AHI and that, by reason of such breaches, those companies have suffered loss and damage (see AmSoc in Derivative Action §§78-81).  In this context, assuming the facts pleaded in the Derivative Action are established, I do not think the dictum of Laskin J in Canadian Aero Service Ltd v O’Malley (1973) 40 DLR (3rd) 371 at p.382, relied upon by Mr Burns, would lead to the conclusion that the activities complained of did not constitute a breach of fiduciary duty on the part of the defendants as a director and former director respectively of API and AHI.

48.  I therefore do not accept that this, fourth, point advanced on behalf of the plaintiffs demonstrates that the no reflective loss principle cannot operate in this case.  On the contrary, I am satisfied that it has been demonstrated clearly by the defendants that the loss sought to be claimed by the plaintiff in this action is purely reflective of loss suffered by API and AHI, which loss is being claimed by those companies in the Derivative Action. A comparison of the claims made in this action and the Derivative Action shows, in my opinion, that the claims are for the same loss.

49.  I would add that my conclusion as to the applicability of the no reflective loss principle is not affected by the submission, which Mr Burns advanced, that the defendants have failed to give discovery of documents relating to earnings made by and profits derived from the Alleged Competing Lounges and hence the plaintiff is not in a position to plead particulars of damages.

50.  In my opinion, the present action can and has been shown to infringe the rule against no reflective loss without reference to the actual quantum of damages being identified.  Notwithstanding the absence of discovery, there was and is nothing to prevent the plaintiff pleading the types of loss and damage it alleges it has suffered and which might be different to the loss for which the companies might claim in the Derivative Action.  In any event, I agree with the submission of Mr Yan that the earnings or profits of the Alleged Competing Lounges (of which there is yet to be discovery), if said to be earnings and profits which API and AHI would otherwise have earned, would fall to be recoverable loss of those companies and is claimed as such (see AmSoc in Derivative Action §95).

51.  Finally, Mr Burns submitted that there is no real prejudice to the defendants if this action is not struck out since (i) the interlocutory steps in the action are at an advanced stage, (ii) the outstanding matters will arise in the Derivative Action in any event, and (iii) this action and the Derivative Action can be consolidated.  Because of these matters, it was submitted that there will in practice be no or no significant saving in costs if the action is struck out.

52.  I do not accept this submission.  The question before me is whether the action is sustainable or not, not whether it should be allowed to proceed to trial as a matter of discretion.  In Landune International Ltd v Cheung Chung Leung at §33, Yuen JA cited Lord Millett’s speech in Johnson’s case at p.62E-G where he said:

“If the shareholder is allowed to recover such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved. Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company’s creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.”

53.  In short, if the claim offends the no reflective loss principle, it should be struck out.

54.  For the reasons set out above, I conclude that the defendants are correct in their submission that the plaintiff’s claims in this action offend against the no reflective loss principle and should accordingly be struck out as disclosing no reasonable cause of action.  The Derivative Action will continue, in which the companies can pursue the defendants for their alleged losses.

Disposition and costs

55.  I therefore make an order in terms of paragraphs 1 and 2 of the defendants’ strike out summons dated 12 October 2010.

56.  I make an order nisi that the plaintiff pay the defendants the costs of the strike out summons dated 12 October 2010, with a certificate for two counsel, to be taxed if not agreed.

57.  In the circumstances, the other applications of the plaintiff before me (see §§1(1) to 1(3) above) are dismissed and I make an order nisi that the plaintiff pay the defendants the costs of those applications, to be taxed if not agreed.