Thursday, 20 December 2018

Hong Kong: section 729 of the Companies Ordinance (Cap 622)

Judgment was given earlier this week in Ge Qingfu and Others v L & A International Holdings Ltd and Others (17/12/2018, HCMP2222/2016) [2018] HKCFI 2742. This is an important decision on the operation of section 729 ("Court may order remedies") of the Companies Ordinance (Cap 622) that came into force in 2014 (about which, see here). Section 729 is found within Part 14 ("Remedies for Protection of Companies’ or Members’ Interests"), Division 3, of the Ordinance and provides the court with the power to provide remedies in respect of, inter alia, directors' breaches of fiduciary duty. A key issue before the court was the scope of section 729. The trial judge (Mr Recorder Pow SC) stated (at paras. 115 and 116):
... section 729 is a new piece of legislation not to be shackled by its predecessors or forerunners.  I find that the Australian authorities are not applicable to the interpretation and application of our new section 729. I also disagree with the author of the Brief Notes [here, pdf].  My interpretation is consistent with the fact that the title for Division 3 (ie sections 728 to 730) is 'Remedies for others’ Conduct in relation to Companies etc' and the title for section 729 is 'Court may order remedies'.  The Court’s power to grant relief under Division 3 is not confined or parasitic to the Court’s power of granting injunction.  In my judgment, the wordings of section 729 are unambiguous ....".

... this Court has both the jurisdiction and power to award damages in accordance with the terms of that section irrespective of whether the Court would have been prepared to grant any injunction.  In my judgment, damages could be awarded when: (1) an application is made by a member or a creditor to the Court pursuant to section 729; (2) it is established by evidence that the interest of this member or creditor are or have been affected by the relevant conduct identified in section 728(1), (4) and/or (5); and (3) the circumstances are such that the Court finds it just and proper to exercise its power under section 729(1)(b) to order the person (who committed the relevant conduct) to pay damages to 'any other person'.  These circumstances could include those justifying the award of damages in addition to or in substitution for a grant of injunction.

Furthermore, in my judgment, the person to be awarded damages is not even confined to that 'member or creditor' making the application". 

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