Friday 15 April 2016

Hong Kong: Court of Final Appeal considers directors' fiduciary duties

The English decision London and Mashonaland Exploration Co Ltd v New Mashonaland [1891] WN 165 has invariably been seen as authority for the proposition that the holding per se of directorships in competing companies is not objectionable (see e.g., Bell v Lever Brothers [1932] AC 161). The Mashonaland decision is widely cited, sparsely reported and, in recent years, much criticised (see, e.g., Commonwealth Oil and Gas Company v Baxter [2009] CSIH 75; Plus Group Ltd v Pyke [2002] EWCA Civ 370; Links Golf Tasmania Pty Ltd v Sattler [2012] FCA 634).

Such criticism has now been made at the highest appellate level in Hong Kong in an important Court of Final Appeal decision on directors' fiduciary duties: Cheng Wai Tao v Poon Ka Man Jason [2016] HKCFA 23. To quote Mr Justice Spigelman NPJ: "The duty of diligence expected from contemporary directors ... makes Mashonaland an anachronistic authority on which reliance cannot now be placed" (para. [98]).

A summary of the court's decision, in English, is available here.

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