Company Lawyer
2008
Corporate wrongs litigated in the context of unfair prejudice claims: reforming the unfair prejudice remedy for the redress of corporate wrongs
Rita Cheung
Subject: Company law. Other related subjects: Legal systems
Keywords: Comparative law; Derivative claims; Discretionary powers; Hong Kong; Reflective loss;Unfairly prejudicial conduct
代写留学生论文*Comp. Law. 98 The issue as to whether the broadly worded s.994 unfair prejudice action1 can beused to deal with corporate wrongs has been the subject of much current academic debate.2Traditionally, the unfair prejudice remedy was developed by the courts as a personal remedy for
shareholders, whether in response to personal wrongs,3 or in relation to corporate wrongs.4 Theremedy is not meant to redress corporate wrongs which are seen as within the ambit of derivativeclaim.5
The legal uncertainties surrounding the issue of corporate wrongs litigated in the context of unfairprejudice claims has troubled the courts in recent times. There have been cases which indicate that
the use of the unfair prejudice action to redress corporate wrongs should be restricted.6Significantly, however, there are recent decisions by the courts which seem to display approval of
using s.994 to secure the redress of corporate wrongs for breaches of directors' fiduciary duties whichresulted in loss or damage to the company.7This article analyses the interrelationship between derivative claims and claims in relation to unfairprejudice, and the difference in approach between the English courts and the Hong Kong Court of
Final Appeal to the issue of corporate wrongs litigated in the context of unfair prejudice claims. Thefirst part of this article discusses the burgeoning case law on the issue of corporate wrongs litigated in
the context of unfair prejudice claims. Part two inquires into an indefinite, but fundamental, questionthat has received inadequate attention by the courts to date: the application of the no reflective lossprinciple to unfair prejudice claims. It will be argued that the issue in question is controversial andproblematic, and when it was considered by the court in Re Brightview it received inadequate and
unconvincing coverage. This article concludes by considering the possibility of reforming s.994 of theCompanies Act by conferring on the courts a discretion to grant corporate remedies in an unfair
prejudice petition. This proposal, it is argued, if properly formulated and subject to appropriate
safeguards, would help to avoid the unnecessary duplication of proceedings, remove uncertainties
and sidestep the conflicting reasoning in the cases in this complicated area of law.
Corporate wrongs litigated in the context of unfair prejudice claims
Restriction of the role of unfair prejudice action to redress corporate wrongs
The relationship between the unfair prejudice claim and the derivative claim was considered, obiter,
by Millett J. in Re Charnley Davies Ltd (No.2), 8 a case on the unfair prejudice provisions of s.27(1)
of the Insolvency Act 1986, which are similarly worded to those of what is now s.994 of theCompanies Act 2006. Millett J. pointed out that the distinction between “misconduct” and “unfairlyprejudicial management” does not lie in the particular acts or omissions of which complaint is made,but in the nature of the complaint and the remedy necessary to meet it.9 Thus his Lordship recognisedthat there may be more t
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