The Court of Appeal elucidated approach in interim injunctions in shareholders’ disputes in Acropolis Limited & another v W&Q Investment Ltd & others (CACV 276 & 277/2017)
The Court of Appeal gave judgment in Acropolis Limited & another v W&Q Investment Ltd & others (CACV 276 & 277/2017) on 26 March 2018, allowing the appeals of the 1st-4th Defendants and 5th-9th Defendants, overturning the decision of the Court of First Instance (HCA 1496/2017, 31 August 2017) to grant an interim injunction restraining the shareholders’ resolutions (the “Resolutions”) passed at the extraordinary shareholders’ meeting of Aeso Holding Limited (the “Company”), a GEM listed company, from being carried into effect. The Resolutions concerned the appointment of new directors as well as removal of existing directors of the Company.
The Court of Appeal emphasised that the Court should only make an order which has the effect of determining the composition of a board of directors in very special circumstances, and may only interfere in the management of a company if it is absolutely essential to do so.
This case concerns a shareholders’ dispute in which the Plaintiff, being the largest shareholder and founder of the Company, accused the second largest shareholder and others of colluding at the listing stage and perpetrating a fraudulent scheme to obtain control of the Company. The Plaintiff alleged that the Resolutions were the result of the fraudulent scheme and ought to be restrained from being carried into effect.
The Court of Appeal concluded that the balance of convenience lied in favour of refusing to grant the interim injunction. In coming to that conclusion the Court of Appeal took into account inter alia that despite the allegations of fraud and collusion there was insufficient evidence that those directors appointed as a result of the Resolutions would dissipate assets or harm the Company, and that granting the injunction would result in the Company being left without a functioning board.
Richard Yip and Tara Liao acted for the 1st-4th Defendants (led by Ronny Tong SC and Anson Wong SC). Denis Chang SC, Jeffrey Tam and Ian Chau acted for the 5th-9th Defendants.
The judgment of the Court of Appeal can be found here. The judgment of the Court of First Instance can be found here. The Court of Appeal refused the Plaintiff’s application for leave to the Court of Final Appeal.