Read the full judgment text of CACV 160/2010 and CACV 161/2010 on BabelCite. This Court of Appeal judgment was delivered on 14 June 2011 before Tang Ag CJHC, Fok JA and Chu JA.
Civil procedure – derivative actions – multiple derivative actions – whether governed by lex incorporationis or lex fori – joint venture – Macao Studio City (MSC) – Cotai Site – Share Purchase Agreement clause 6.2.2 – land grant modification – whether clause 6.2.2 breached – inducing breach of contract – exception to rule in Said v Butt – whether director acting in good faith within scope of authority – reflective loss – whether loss of enterprise value of MSC project recoverable in derivative action – whether Macao and BVI law permit multiple derivative actions – article 248 of Macao Commercial Code – section 184C of BVI Business Companies Act – section 168BC(4) of Companies Ordinance – whether piercing the corporate veil enables multiple derivative action – service out of jurisdiction – material non-disclosure – duty to disclose significant factual, legal and procedural aspects – Companies Ordinance s.168A petition for unfair prejudice – appeal from striking out of claims – new points on appeal – leave to amend Notice of Appeal – Whether claim against New Cotai Directors for inducing breach of SPA discloses reasonable cause of action, taking case outside Said v Butt exception where directors alleged to have procured breach through false representations – held, claim B5 not to be struck out. Whether availability of multiple derivative action is governed by law of place of incorporation – held, right to bring multiple derivative action is governed by lex incorporationis, following Konamaneni v Rolls Royce (India) Ltd and Base Metal Trading Ltd v Shamurin. Whether multiple derivative actions permissible under BVI law for Cyber Neighbour – held, not permissible under section 184C, as agreed by BVI law experts. Whether multiple derivative actions permissible under Macao law for MacaoCo – held, not permissible under article 248; lifting of corporate veil does not enable multiple derivative action. Whether derivative claims for loss of enterprise value are reflective loss – held, claims are reflective loss and were struck out. Whether service out on External Defendants should be set aside for material non-disclosure – held, Reyes J's discretion not to be interfered with. Outcome: appeal partly allowed; leave granted to raise new points; Claim B5 not struck out; multiple derivative and reflective loss claims remain struck out; draft orders and costs submissions invited within 14 days.
Legal issues: Whether Claim B5 for inducing breach of contract against the New Cotai Directors should be struck out · Whether lex fori or lex incorporationis governs availability of multiple derivative actions · Whether multiple derivative actions are permissible under BVI law for Cyber Neighbour · Whether multiple derivative actions are permissible under Macao law for MacaoCo · Whether the derivative claims for loss of enterprise value are claims for reflective loss · Whether service out of jurisdiction on External Defendants should be set aside for material non-disclosure
Outcome: Appeal partly allowed: Claim B5 (inducing breach of SPA) not struck out; new points (Said v Butt exception and lex fori argument) permitted; further submissions and draft orders invited from parties within 14 days. Striking out of multiple derivative claims and reflective loss claims, and setting aside of service out on External Defendants, were effectively upheld.
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