Key Takeaways
In Ghias v Sirnaomics Ltd [2025] HKCFI 4284, the Petitioners’ unfair prejudice petition under section 724 of the Companies Ordinance (Cap. 622) was stayed in favour of arbitration pursuant to section 20 of the Arbitration Ordinance (Cap. 609), as the dispute fell within the ambit of an arbitration agreement contained in a Members’ Agreement.
This marks the second time the Hong Kong Court has adopted with approval the judgment of the Privy Council in FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corpn [2024] Bus LR 190[1] in considering the resolution of minority shareholder disputes through arbitration. Following FamilyMart, the Hong Kong Court’s key consideration in assessing whether the parties’ dispute falls within the ambit of an arbitration agreement is to consider the substance of the matter or dispute with common sense and from a practical point of view.
Background Facts
The Petitioners are registered shareholders of the Respondent company (the “Company”), holding approximately 1.67% of the Respondent company’s issued ordinary share capital. Subsequent to the listing of the Company on the Stock Exchange of Hong Kong, the Petitioners were issued physical share certificates containing restrictive wordings which stated that the transfer of the shares would require the approval of the Company (the “Restrictive Legend”).
Prior to the listing, the parties had entered into a Members’ Agreement containing provisions on share transfer restrictions and restrictive wordings (the “Restrictive Legend Clause”). The Members’ Agreement included an arbitration agreement covering ‘any dispute, controversy, difference, or claim arising out of or relating to this Agreement, including the existence, validity, interpretation, performance, breach, or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to this Agreement’ (the “Arbitration Clause”).
The Petitioners complained that the Company had unlawfully refused to remove the Restrictive Legend from the Petitioners’ share certificates despite the listing of the Company. Upon the Respondents’ application to stay the Petition to arbitration, the Petitioners attempted to re-formulate their claim not on a breach of the Members’ Agreement by the Company, but instead:
- breach of a fundamental tripartite understanding between the Company and its shareholders as well as the shareholders inter se that the Company’s shares would be freely transferable;
- breach of implied terms in the Articles of Association of the Company; and
- breach of the Company’s Braganza duty[2] to exercise its discretion in relation to the Restrictive Legend Clause in good faith, rationally, and for proper purposes.
Court Decision
Despite the Petitioners’ claim formulation attempt, the Hong Kong Court, following the approach in FamilyMart, considered the parties’ dispute in a practical and common-sense way in determining the substance of the matter, and held that the true substance of the Petitioners’ claim was the enforcement of the Restrictive Legend Clause in the Members’ Agreement. As this fell within the ambit of the Arbitration Clause, the Petition was stayed in favour of arbitration.
Importantly, the court emphasised that one should not be ‘overly respectful to the formulation’ of the claim or defence of either side in the dispute. The Court explicitly noted that the Petitioners’ formulation of its claim was aimed at avoiding reference of the dispute to arbitration.
Practical Implications
The case underscores the Hong Kong Court’s pro-arbitration stance and its commitment to upholding the parties’ agreement to arbitrate disputes. The Hong Kong Court would not consider only how the parties’ cases are pleaded or formulated, but go to the substance of the matter with common sense. As such, any attempts at ‘creative formulation’ to get around an arbitration agreement will unlikely be viewed with favour by the Hong Kong Court.
Ghais is another example of an unsuccessful attempt at relying on Dickson Holdings Enterprise Co Ltd v Moravia CV [2019] 3 HKLRD 210 to resist the reference of a minority shareholder claim to arbitration.[3] In Dickson Holdings, which similarly concerned an unfair prejudice petition, the judge held that there were ‘special features of company law’ that existed independently of the contractual agreements between the parties, and which did not fall within the scope of the arbitration clause in that case. However, it is clear that Dickson Holdings was decided on the basis of the arbitration clause and nature of dispute in that case, but does not lay down any general rule that a minority shareholder dispute cannot be arbitrated due to the existence of ‘company law elements’.
Case Details
Case: Ghias v Sirnaomics Ltd [2025] HKCFI 4284
Court: Court of First Instance (Deputy High Court Judge Gary CC Lam)
Date: 19 September 2025
[1] The first time being in PI 1 and PI 2 v MR [2025] HKCFI 1110.
[2] Braganza v BP Shipping Ltd [2015] 1 WLR 1661.
[3] A similar argument also failed in in PI 1 and PI 2 v MR [2025] HKCFI 1110.