HKCFI: courts can grant retrospective s733 leave, but only exceptionally

The Court of First Instance holds that Hong Kong courts have jurisdiction to grant retrospective leave under section 733 of the Companies Ordinance for a member to defend and counterclaim on a company's behalfJudiciary, but refuses such leave on the factsJudiciary. In [2026] HKCFI 5958, decided 26 October 2026Judiciary in HCA 1323/2025, Lai Mun Wing v. New Grand Coach Limited, Deputy High Court Judge Gary CC Lam dismisses the retrospective applicationJudiciary, strikes out the defence and counterclaim filed without authorityJudiciary, and instead treats a second summons as a fresh prospective application which he grantsJudiciary.

The company has only two directorsJudiciary and equal shareholders: the plaintiff's son and the intended intervener, Chan Kwok KuenJudiciary. On 26 August 2025 Chan caused a defence and counterclaim to be filed on the company's behalfJudiciary and then sought retrospective leave on 15 September 2025Judiciary. The court holds the filing had no authorityJudiciary. The plaintiff's son was then restrained from acting as a director by an ex parte order in separate proceedingsJudiciary, but he remained a director on the register and in Company Registry recordsJudiciary, so the articles requiring at least two directors for a board meeting could not be satisfied by Chan acting aloneJudiciary. A restraint on acting does not rewrite the articles; the parties could have sought an exception to it for company business.

On jurisdiction, nothing in sections 732 and 733 points for or against retrospective leaveJudiciary. Control over derivative proceedings is procedural: the statute regulates and augments, but does not displace, the court's management of its own process, which includes the inherent power to order with retrospective effect, nunc pro tuncJudiciary. That reading is consistent with Wilton v Shuttleworth in England, RTP Holdings v Roberts in South Australia, Su v Hougen in British Columbia, and Hong Kong practice granting retrospective leave to sue a court-appointed receiver. That the pleading was unauthorised when filed does not defeat jurisdictionJudiciary, since derivative proceedings by nature begin without corporate authority and seek the court's validation.

Jurisdiction is distinct from exercise. The court adopts a two-stage test: first, whether prospective leave would have been granted before the filing; second, only if so, whether exceptional circumstances justify the failure to apply prospectively, such as a limitation deadline discovered too late for an urgent applicationJudiciary. Without a time bar, an applicant who files first can simply re-apply, so routine retrospective validation would undermine the court's early gatekeeper functionJudiciary.

The first stage is met for the draft Amended Defence and Counterclaim: serious issues are raised on the defence and counterclaimJudiciary, including misappropriation pleas clarified by adding "for no ascertainable proper purpose" to paragraph 24, with nothing suggesting the action is against the company's interests, and the 14-day written notice under section 733(1)(c) is dispensed with given the two-person shareholdingJudiciary. The second stage fails: Chan gave the plaintiff no warning against seeking default judgment pending a prospective application, and no limitation issue arisesJudiciary.

Taken as a fresh application, the second summons succeedsJudiciary: the deadlocked company has not diligently defended the claimJudiciary, serious counterclaim issues ariseJudiciary, and defending and counterclaiming on the amended pleading appears in the company's interestsJudiciary. The court waives non-service on the company, orders a fresh defence and counterclaim within 14 days with redlines removedJudiciary, allows the plaintiff 28 days after service to replyJudiciary, and orders Chan to pay all three summonses' costs on an indemnity basisJudiciary, summarily assessed at HK$360,000Judiciary.

Legal basis is sections 732 and 733 of the Companies OrdinanceJudiciary (Cap. 622), with the court's inherent nunc pro tunc power and the above authorities on retrospective leave.