Boardroom battles are becoming more common in Hong Kong, particularly in a listed company context. A boardroom can be a place where individuals with the best intentions for a company can exchange views, but it can also be a hotbed for conflict when disagreements arise.
A recent Court of First Instance judgment sets out some reminders of the cardinal principles that an applicant in a boardroom battle should observe in an ex parte application, particularly those involving an order restraining another party from exercising voting rights at a company’s general meeting.
Ex parte injunction applications are exceptional, and the court will not entertain such applications unless there are cogent justifications showing extreme urgency and/or the need for secrecy. Where there is no such justification to make an ex parte application, the court can set aside any order obtained on that ground alone.
Injunction applicants are reminded of the duty to make full and frank disclosure in ex parte applications, i.e. they must disclose all the facts and points of law relevant to the application, even if these may not be in their favour.
All reasonable means should be taken to notify a counterparty of an injunction application. Where appropriate, telephone calls or emails should be made to parties who might be affected by the application. Notices should be made at the earliest opportunity, and should not be left to the last moment. Otherwise, the applicants may face a real risk of having the ex parte order discharged, with unfavourable cost orders to follow.
In respect of injunctions sought to affect exercise of voting rights, such applications typically do not call for secrecy. Applicants are encouraged to seek an injunction at the earliest opportunity, with notice to all parties concerned.
“Duty judge shopping” should be discouraged. Where appropriate, parties involved in a series of linked litigation should attempt to identify the judge or judges with prior involvement in the serial litigation.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at email@example.com