Read the full judgment text of HCA 000231/2006 on BabelCite. This High Court CFI judgment was delivered on 10 February 2006 before Deputy High Court Judge To.
Company law – shareholders – voting rights – interim injunction – cause of action – abuse of process – balance of convenience – interlocutory injunction to restrain extraordinary general meeting (EGM) – directors' removal by majority vote – section 113 and section 168A of the Companies Ordinance – principles in American Cyanamid – The Siskina – Clemens v Clemens Bros – Estmanco (Kilner House) – North-West Transportation Co Ltd v Beatty – Allen v Gold Reefs of West Africa Ltd – Gower and Davies' Principles of Modern Company Law – whether majority shareholders' voting rights are subject to equitable limitations – whether removal of directors is a protected legal right – whether an undertaking by some shareholders binds others – whether damages are an adequate remedy – application dismissed with costs and two counsel certificate – Plaintiffs and Defendants are 22 of 43 shareholders of Sai Kung P L B (Maxicab) (No. 1 & 2) Company Limited with split shareholdings of 6.5 and 20.5 shares respectively and no clear majority – Plaintiffs control the board while Defendants' Camp has been gaining ground since a Section 168A petition filed 25 April 2005 – After 1st Requisitionists gave an undertaking not to proceed with their EGM requisition, Defendants issued a fresh section 113 requisition on 13 January 2006 to convene an EGM on 15 February 2006 to remove the 1st to 5th Plaintiffs and the 7th and 10th Defendants as directors and appoint eight new directors – Plaintiffs issued HCA 231/2006 seeking an interim injunction – Whether Plaintiffs have a cause of action or substantive right to support an interlocutory injunction restraining the EGM – No – an interlocutory injunction is ancillary to a pre-existing cause of action and unlike directors, shareholders owe no fiduciary duty to each other and may vote in their own self-interest – Clemens v Clemens and Estmanco fall within the two recognised exceptions (alteration of articles and fraud on the minority) and do not create a general equitable curb on majority voting – Plaintiffs' directorships are not protected by the articles and their removal does not involve alteration of articles – No director is entitled to remain in office against the wishes of the majority – Whether Defendants' requisition is an abuse of legal process – No – Defendants are not parties to the 1st Requisitionists' undertaking and cannot be bound by it, and are merely exercising their statutory right to convene a meeting – Whether damages are adequate such that balance of convenience favours refusal of injunction – Yes – Plaintiffs have not discharged burden of showing damages would be inadequate; loss of director remuneration is modest and Defendants are good for the damages, and the EGM itself is the proper forum for Plaintiffs to resist removal and clear their names – Plaintiffs' application for interlocutory injunction dismissed with costs with certificate for two counsel.
Legal issues: Whether plaintiffs have a cause of action or substantive right to support an interlocutory injunction restraining an EGM · Whether convening the EGM amounts to an abuse of legal process · Balance of convenience and adequacy of damages
Outcome: Application for interlocutory injunction dismissed with costs and certificate for two counsel.