The Plaintiff sought leave to commence a statutory derivative action (SDA) on behalf of Forthwise against a director of Convoy who is also a director of Forthwise, concerning certain loans advanced by Forthwise which the Plaintiff claims were not arm’s length commercial transactions and contrary to Forthwise’s interests.

The Defendants argued that the Plaintiff’s application amounted to an abuse of process due to similar proceedings that Madam Wang had commenced as a common law derivative action against Convoy, Forthwise and the director, which were struck out. The Court considered this issue first and concluded that there were differences between a common law derivative action and an SDA, so went on to consider the other issues in dispute.

The Court considered the Defendants’ argument that the Plaintiff did not have standing as a registered member of Convoy. Mr Justice Coleman agreed and refused to grant a stay or adjournment of the application so as to seek to address the issue of standing, which the Plaintiff had failed to address during the proceedings.

The Court noted that the Plaintiff’s claim to being a registered member of Convoy was still disputed and that there was no bar to Convoy maintaining that he had no rights in respect of the shares he claimed an interest in notwithstanding the discontinuance of related proceedings against him.

Mr Justice Coleman also had to resolve whether leave to bring the SDA was required from the BVI Court as a pre-requisite. Although not determinative, the Court preferred the Defendants’ position, that the Plaintiff had failed to establish that he had relevant standing in the absence of obtaining leave from the BVI Court to bring the SDA.

Upon weighing the merits of whether there was a serious issue to be tried, the Court also agreed with the Defendants that the hurdle to establishing a serious issue to be tried had not been overcome by the Plaintiff and the available evidence fell short of what was required.

The Court also had to consider if the proposed SDA was statute barred. The Court considered an announcement that had been published by Convoy on 18 October 2016, to the Hong Kong Stock Exchange disclosing the transaction challenged. The Court considered that the limitation period applied from when the Plaintiff had public knowledge in 2016 by virtue of the announcement and/or from when he claimed to become a shareholder in 2017.

Finally, the Court held that even if there was a serious issue to be tried (despite having held otherwise), it was not of the view that it was necessary or appropriate for the Court to grant the Plaintiff leave to pursue the proposed SDA and did not accept that the SDA would be in the interests of Forthwise or Convoy.

As a result, the Defendants were successful in having the Plaintiff’s application dismissed. The decision highlights the significance of establishing jurisdiction, standing, and the prospects of success in any intended derivative action when pursuing an SDA in Hong Kong. Similar issues also apply when considering a statutory derivative action in the BVI.