Court ruling a boost for Hong Kong's common law

This month, the Court of Appeal affirmed a decision that could be very important for Hong Kong's future as an international financial centre - its ruling in Luck Continent vs Cheng Chee Tock Theodore will facilitate the protection of small investors in Hong Kong-listed companies against the technically legal but unfair actions of controlling shareholders.

The court's decision made clear that statutory relief for "unfair prejudice" can be provided for listed companies. Hong Kong should be pleased with this decision, which will help shape a common law.

Common law arises when a court is presented with a dispute and makes a decision based on the local understanding of what is just, in accordance with earlier decisions of the same or higher court that are not clearly wrong. Because common law meets local needs with norms, it strikes local people as just and fair.

Once upon a time, Hong Kong was legally plugged into the greatest lawmaking machine the world has ever seen. This "Privy Council" in London homogenised the law of the British empire, while (often) also taking local needs into account.

At the handover in 1997, the Privy Council's jurisdiction over Hong Kong ceased. Hong Kong was free to make its own common law.

Perhaps nowhere was common law more needed than in addressing questions of fairness in Hong Kong companies. In the UK, companies listed on the stock exchange did not have a controlling family or the government as a dominant shareholder, so the UK courts were not faced with disputes regarding powerful shareholders legally but unfairly exploiting weak shareholders.