LW5962 Revision

2017-2018 Semester A

By Dr. Yu-Hsin Lin

1. The separate legal entity and limited liability doctrines 独立法人与有限责任学说

1.1. Salomon v Salomon [1897] AC 22
1.2. Lee v Lee’s Air Farming Ltd [1961] AC 12
1.3. Macaura v Northern Assurance Co Ltd [1925] AC 619

2. Veil-lifting
2.1. Common Law veil-lifting 习惯法
Evading existing legal obligations: Gilford Motor Co v Horne [1933] 1 Ch 935;
Jones v Lipman [1962] 1 All ER 442
Fraud: HKSAR v Leung Yat Ming [1999] 2 HKLRD 402
It’s legal to use corporate structure to avoid future obligation: Bakri Bunker
Trading Co Ltd v Neptune [1986] HKLR 345; China Ocean Shipping Co v
Mitrans Shipping Co Ltd [1995] HKLY 1058; Adams v Cape Industries plc
[1990] 1 Ch 433
2.2. Statutory veil-lifting 成文法
Criminal Procedure Ordinance (Cap 221) s 101E: R v Mirchandani [1977] HKLR
523
Cap 32 s 275 Fraudulent trading; Aktieselskabet Dansk Skibsfinansiering v
Brothers (2000) 3 HKCFAR 70

3. Corporate constitution 公司章程

3.1. The current form of corporate constitution in HK: Articles of Association – Model
HK公司章程现
行形式AOA Articles (CO s80 default rules)
3.2. The legal nature of the articles: CO s 86; Wood v Odessa Water Works (1889) 42 Ch D
法律实质
636; Hickman v Kent or Romney Marsh Sheep-Breeders’ Assoc [1915] 1 Ch 881;
Rayfield v Hands [1960] 1 Ch 1; Ng Kin Kenneth v HK Football Association Ltd [1994]
1 HKC 734; Eley v Positive Government Security Life Assurance Co [1875] 1 Ex D 20
章程变更 3.3. Alteration of constitution
Mechanics (level of majority required): CO ss 88(2), (3)
Statutory protection of members against the change of their rights or liability
through constitutional amendments: CO s 92. 通过宪法修正案保护成员不受权利或责任的改变
Limitation on majority shareholders’ power to alter constitution in equity 多数股东变更权利的限
o Where company’s interest is engaged - Bona fide in the interest of the 制
company: Allen v Gold Reefs West Africa Ltd [1900] 1 Ch 656
（涉及公司利益的情况）

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 （仅涉及股东之间利益的情况）
o When alteration only involves adjustment of interests among shareholders:
if what the majority benefited is what the minority has been deprived of,
then the alteration is not valid. Greenhalgh v Ardene Cinemas Ltd [1951]
Ch 286; Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457
o [Australian authority] Where the alternation involves appropriation of
shares (where the company’s articles is silent on the majority’s power to
amend the articles to grant themselves the power to appropriate) - proper
purpose and fairness: Gambotto v WCP (1995) 182 CLR 432

4. Director’s duty:
4.1. To whom are the duties owed
4.1.1. Percival v Wright [1902] 2 Ch 421
4.2. Duty of care 注意义务
4.2.1. Provision: CO s 465 (minimum objective standard)
4.2.2. Earlier case: subjective standard. Re City Equitable Fire Ins Co (1925) Ch 407
4.2.3. Cases on minimum objective standard: Re D’Jan of London Limited [1993] BCC
646; Dorchester Finance v. Stebbing; Daniels v Anderson (1995) 37 NSWLR 438
(AWA v Daniels (1992) 9 ACSR 383)
4.2.4. HK authority before codification: Law Wai Duen v Boldwin [2002] 4 HKC 403
4.3. Fiduciary duties 信托义务 agency theory
4.3.1. Definition: Hospital Products Ltd v United States Surgical Corporation (1984) 55
ALR 417
bona fide 4.3.2. Duty to act bona fide in the best interest of the company: Re Smith & Fawcett Ltd
善意
[1942] Ch 304 为公司最大利益真诚考虑行事的义务
proper purpose4.3.3. Duty to exercise power for proper purpose: Howard Smith v Ampol Petroleum Ltd
正当目的
[1974] AC 821; Hogg v Cramphorn [1966] 3 All ER 420
4.3.4. Duty to avoid conflict of interests 避免利益冲突
4.3.4.1. Conflict rule: Transvaal Lands Co v New Belgium (Transvaal) Land and
Development Co [1914] 2 Ch 488
4.3.4.2. Profit rule: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
4.3.4.3. Disclosure 一般法/普通法
香港法律大致上由基本法、普通 At general law: Imperial Mercantile Credit Association v Coleman
法、衡平法和成文法（或稱條文
(1871) LR 6 Ch App 558; Man Luen Corp v Sun King Electronic
法）組成。Hong Kong law
generally consists of the basic law, Printed Circuit Board Factory Ltd [1981] 1 HKC 407
common law, equity law and Effects of non-disclosure: transaction voidable at election of company
不披露，交易可撤销的，可使无效的
statutory (or statutory) law Man Luen Corp
成文法 Statutory duties: CO ss 536-539.
4.3.5. Remedies: account of profits (independent of whether co has suffered any loss)
救济方法

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 批准
4.4. Ratification: Bamford v Bamford [1970] Ch 212; CO s473 only by resolution of general
meeting

5. Share Capital
5.1. Transfer of shares股份转让
5.1.1. Restriction on transfer of shares in private companies (CO s11) 转让限制
5.1.2. Directors can refuse to register shares at its discretion (MA private co s2(2)) 董事可酌情拒绝注册
5.1.3. Re Smith & Fawcett Ltd [1942] Ch 304 股份

5.2. Prohibition on financial assistance

5.2.1. CO s275; Chaston v SWP [2003] 1 BCLC 675 (CA); MT Realisations v Digital
Equipment
5.2.2. Statutory exceptions 法定例外
5.2.2.1. Pursuant to solvency test
5.2.2.2. Principle purpose exceptions (Brady v Brady)
5.2.2.3. Miscellaneous 其他情形
5.3. Pre-emptive rights 优先购买权

6. Loan capital
6.1. Fixed charge vs floating charge (Cap 32 s267, s267A)
6.2. Preferential creditors in priority of floating charges (Cap32 s79 & 265)
？？6.3. Automatic crystallisation clause

7. Liquidation 清算
7.1. Priority of claims
7.1.1. Fixed charge
7.1.2. Preferential payments: sequence (Cap32 s265)
7.1.3. Floating charge
7.1.4. Unsecured creditors
7.2. Winding up

8. Members’ remedies
8.1. The rule in Foss v Harbottle (1843) 2 Hare 461, 67 ER 189
8.1.1. Exceptions to the rule in Foss v Harbottle
Ultra vires越权原则 Ultra vires or illegal conduct
The matter could be done only by a prescribed majority of members:
Edwards v Halliwell [1950] 2 All ER 1064
Personal claims: Pender v Lushington (1877) 6 Ch D 70
Fraud on the minority: Cook v Deeks [1916] 1 AC 554
8.2. Derivative action in general law
8.2.1. Fraud on the minority/company: Cook v Deeks [1916] 1 AC 554

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 8.3. Statutory derivative action
8.3.1. Provisions: CO ss 732, 733
8.3.2. Case authorities:
o In the co’s interest: Re F & S Express Ltd [2005] 4 HKLRD 743
o Serious question to be tried: Re F & S Express Ltd [2005] 4 HKLRD 743
8.4. ‘Unfairly prejudicial’ remedies
8.4.1. Provisions: CO s 724, 725
8.4.2. “unfair” “prejudicial”: Re Taiwa Land Investment Co Ltd. [1981] HKC 277.
Legitimate expectation: O’Neill v Phillips [1999] UKHL 24
8.4.3. Objective test: Re RA Noble & Sons [1983] BCLC 273
8.4.4. Case examples on unfairly prejudicial conduct
o Lost of trust and confidence in quasi-partnership situation: Ebrahimi v
Westbourne Galleries Ltd [1973] A.C. 360
o Inadequate dividend payment whiles the directors obtain returns through
directorial remunerations and other benefits: Re Sam Weller and Sons Ltd
[1990] Ch 682
o Diversion of company profits: Sanford v Sanford Courier Pty Ltd (1986) 5
ACLC 394
o Misapplication of company funds for own benefit: Re Tai Lap Investment
Co Ltd [1999] 1 HKLRD 384
8.5. Just and equitable winding up
o Provision: Cap 32 s 177(1)(f)

9. Auditor’s Liability
9.1. Standard of care
9.1.1. What a reasonably competent practitioner would do; refer to codes of practice and
industry standard
9.1.2. Tort liability arising from negligent misstatements (Hedley Byrne & Co. Ltd v
Heller & Partners Ltd [1964] A.C. 465)
9.1.2.1. Special relationship
9.1.2.2. Assumption of a duty to take care
9.1.2.3. Reliance on the advice
9.1.2.4. Damaged caused
9.2. Cases: Killick v Price Waterhouse Coopers (a firm) [2001] 1 BCLC 65; Caparo
Industries plc v Dickman [1990] 2 AC 605; Al Saudi Banque v Clark Pixley (a firm)
[1990] Ch 313