CHAN LAAM AND OTHERS v. KING & COMPANY (a firm)

HCMP 1399/2023

[2024] HKCFI 543

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1399 OF 2023

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DECISION

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1.  This is the application of Chan Laam (“P1”), Choy Ka Leuk (“P2”) and Choy Ka Shing, a minor suing by his mother and next friend, Chan Laam (“P3”) (collectively “the Plaintiffs”) by originating summons dated 24 August 2023 (the “OS”) seeking, inter alia, production and disclosure from King & Company (a Firm) (the “Defendant”) of the following documents (the “Requested Documents”):

(1)  All documents showing, recording and/or referring to (i) the transfer, allotment, registration or otherwise placing of shares in Kingsun Consultant Limited (“Kingsun”) to/under the name of P1; (ii) P1’s interest, title and/or ownership in any of the shares in Kingsun; (iii) the Register of Members of Kingsun (“the Company Documents”).

(2)  All documents showing, recording and/or referring to any trust or arrangement under which Ps is/are the beneficiary, recipient, transferee or object (“the Trust Documents”).

2.  At the outset of the hearing, the court granted leave to the Defendant to file the 2^nd affirmation of Ching Kwok Ho Samuel (“Mr Ching”), a partner of the Defendant firm, dated 17 January 2024 (“Ching 2^nd”).

3.  At the conclusion of the hearing, the decision was reserved which I now give.

Background facts

4.  P1 had been in a relationship since the late 1990s with the late Choy Willian Andrew Man Shau (“the Deceased”) who died on 23 June 2022.

5.  P2 (born on 27 August 2000) and P3 (born on 20 June 2006) are the children of P1 and the Deceased. P1 lost contact with the Deceased since about 25 May 2022.

6.  At the time of his death, the Deceased was married to Madam Lau Yuet Wan Yvonne (“Madam Lau”). P was informed of his death by Lau 20 October 2022

7.  The Defendant is a firm of solicitors. The Defendant, and in particular, Mr Ching, a partner in the Defendant firm assisted the Deceased with various legal affairs during his lifetime.

8.  Shortly after P2’s birth, the Deceased purchased a multi-unit property in Shanghai (“the PRC Property”) and established a company (“the PRC Company”) to hold the PRC Property for the purpose of providing for P1 and P2.

9.  P1 was appointed the general manager of the PRC Company. The net rental income of the PRC Company has been and continues to be deposited into P1’s bank account under the arrangement with the Deceased.

10.  The PRC Company was a wholly owned subsidiary of Kingsun Consultant Limited (“Kingsun”) a BVI company incorporated 5 July 2001. A search made on an online database maintained by the International Consortium of Investigative Journalists and subsequently confirmed by the Register of Companies search report of Kingsun shows both the Deceased and P1 as Kingsun’s shareholders since 30 July 2001, the Defendant as the intermediary of Kingsun, and Portcullis (BVI) Limited (“Portcullis”) as its registered agent.

11.  It is P1’s evidence[1] that when the PRC Company and Kingsun were established in 2001, the Deceased expressly told her that those companies were set up for the benefit of P1 and P2, and had made inter alia the following representations to P1 (“the Deceased’s Representations”) that:

(1)  the Deceased had made arrangements to give P1 and/or their children the full beneficial ownership and control of the PRC Company and Kingsun (and the PRC Property);

(2)  he had signed and executed certain document(s) to that effect (“ the Executed Document(s)”);

(3)  such Executed Document(s) was/were left with the Defendant;

(4)  once the Deceased passed away, Mr Ching of the Defendant would contact P1;

(5)  provision made for the Plaintiffs would be separate from any provision for Madam Lau.

  (a) Attempts to obtain production of documents from the Defendant

12.  After learning of the Deceased’s death, in light of the Deceased’s Representations, the Plaintiffs made several attempts by themselves to make enquiries of Mr Ching, and subsequently by their then and current legal representatives to obtain the Trust Documents from the Defendant[2].

13.  On 24 October 2022, P2 wrote to Mr Ching (on behalf of himself and P1) stating their understanding that the Deceased had entrusted Mr Ching “with his wishes either in the form of a trust, or a will, regarding the status of the ownership of [the PRC company] and other assets”. Mr Ching’s response only offered information as to the existence of a will. He further stated that the Defendant was acting for Madam Lau to deal with the estate of the Deceased.

14.  When the Plaintiffs’ former solicitors made enquiries on their behalf, the Defendant declined to respond due to a potential conflict of interest, stating that Madam Lau had instructed another firm to deal with the enquiries made.

15.  On 12 January 2023, the Plaintiffs were informed by another firm (“CCBH”) that they act for Madam Lau, “the sole executrix and trustee of the Deceased’s last will made on 26^th April 2021”.

16.  On 18 January 2023, KWM, the Plaintiffs’ current solicitors requested information on 6 matters from the Defendant who declined to respond, asserting legal professional privilege (“LPP”).

17.  All those attempts were thus unsuccessful. Meanwhile, on 9 November 2022, the Plaintiffs filed a caveat in HCCA 6106/2022.

  (b) Request for Company Documents

18.  In response to KWM’s request for Company Documents, on 28 February 2023 Portcullis asserted that KWM was “not the authorized contact person for [Kingsun]” and Portcullis had delivered the message to the authorized contact person for him to deal with.

19.  On 15 March 2023, Portcullis informed KWM that the authorized contact of Kingsun refused to provide any information as to Kingsun.

20.  When on 12 April 2023 KWM requested to be provided with the identity and contact details of the authorized contact, they were informed that Portcullis needed to obtain the authorized contact’s permission. On 13 April 2023 Portcullis replied that they would “obtain an authorization” before proceeding and would inform KWM upon receipt of any update.

21.  Portcullis never provided any update.

22.  KWM then sought the Defendant’s confirmation as to whether it had acted as intermediary between Kingsun and Portcullis and requested to be provided with a certified copy of Kingsun’s register of members.

23.  The Defendant’s response some 3 weeks (on 2 May 2023) later stated that they “are not the intermediary, administrator or other agent of the Company” (emphasis added).

24.  The upshot of the Plaintiffs’ unsuccessful attempts in obtaining information is that the Plaintiffs remain entirely ignorant of the identities of (i) the trustee, if any, of any trust(s) set up by the Deceased in favour of the Plaintiffs; and (ii) the “authorized contact person” of Kingsun.

Overview

25.  The documents the Plaintiffs seeking are basic documents which would show whether P1 is a shareholder of Kingsun as well as their status (if any) as beneficiaries under the Trust.

26.  The basis of the Plaintiffs’ application against the Defendant for the Requested Documents has to be viewed in context. The relationship between the Deceased and P1 was long-standing, being upwards of 20 years, with 2 sons born from that relationship. It is highly relevant that the Deceased did provide for the Plaintiffs shortly after P2’s birth by giving P1 the net income of the PRC Company derived from the PRC Property. Against that backdrop, at this stage, there is no reason to believe that Deceased’s Representations are not credible.

27.  The Plaintiffs rely on 3 main grounds for the relief that they seek: (A) substantive right pursuant to common law, equity and/or statute: (B) pre-action discovery; and (C) the Norwich Pharmacal principle.

(A) Substantive right

    (1) The Company Documents

28.  Mr Kerby Lau, counsel for the Plaintiffs, submitted that a shareholder is entitled to “disclosure of all documents obtained by the Company in the course of the company’s administration of its affairs”, citing Re NDT (BVI) Trading Limited [2009] 2 HKLRD 409 at §14 a case where the Court granted a disclosure order against a BVI company. A company’s records relating to the transfer and allotment of shares and registration of shareholders clearly fall within the company’s administration of its affairs.

29.  A shareholder’s right to examine and access a company’s records is based on and originated from common law: Wong Kar Yee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241 at §9. Further, the basis of such a right of inspection is proprietary in nature[3].

30.  Ms Queenie Lau, counsel for the Defendant, submitted that the common law principles stated are directed at the company (or, where appropriate its officers) and not at 3^rd parties, citing CAS (Nominees) Limited v Nottingham Forest Plc [2002] BCC 145 at §11[4]. However, I can discern nothing in §11 of that authority that supports the proposition advanced.

31.  Be that as it may, as pointed out by Mr Lau, the right of inspection is an aspect of the shareholder’s proprietary interest in the company. In those circumstances, I agree that as a matter of principle there would be no reason why it should not apply to a 3^rd party.

32.  In the present case, on 12 April 2023, the Plaintiffs sought confirmation from the Defendant whether it ever acted as intermediary, administrator or other agent of Kingsun. It was not until 17 January 2024[5] that the Defendant clarified its reply of 2 May 2023[6] and admitted that it performed services as the “administrator” of Kingsun up until 24 April 2023 when it resigned as administrator.

33.  The Defendant did not assert in Ching 2^nd that it does not have possession, custody or control of the Company documents. Documents in the hands of the agent are subject to disclosure: Matthews and Malek on Disclosure (6^th edn) §§ 4-24.

34.  The fact that the Company Documents may be sought from 3^rd parties cannot affect the Plaintiffs’ entitlement to disclosure from the Defendant, particularly when the Plaintiffs have made attempts to obtain them from Portcullis who simply stonewalled the Plaintiffs’ enquiries. Given that attitude, the suggestion that the Plaintiffs should pursue its enquiries in the BVI cannot be taken seriously.

35.  It should be mentioned that the Plaintiffs put forward an alternative procedure to achieve their objective, namely via Section 740 of the Companies Ordinance and/or its analogous principles, an enactment designed for the protection of shareholder rights and interests.

36.  As I consider that the Plaintiffs should be granted the relief they seek in respect of the Company Documents from the Defendant, it is unnecessary to consider the alternative procedure.

    (2) The Trust Documents

37.  The Plaintiffs’ purpose in seeking disclosure of the Trust Documents is limited to ascertaining the existence and scope of their beneficial interests (if any) pursuant to any trust(s) set up by the Deceased. While they have reason to believe from the Deceased’s Representations[7] that such a trust or trusts may exist, their attempts to ascertain the same have come to naught.

38.  The Plaintiffs submitted that the jurisdiction to order disclosure of trust documents to beneficiaries is a wide and flexible jurisdiction, being part of the court’s jurisdiction to supervise and intervene in the proper administration of trust. It does not depend on any fixed transmissible beneficial interest or proprietary right.

39.  The Defendant’s answer that the requests should be directed to the trustee borders on the disingenuous: it is precisely because the Plaintiffs have no knowledge as to the identity of the trustee or trustees that they seek that information from the Defendant in light of the Deceased’s Representations.

40.  Murphy v Murphy [1999] 1 WLR 282[8] is authority for the proposition that a non-trustee may be ordered to disclose the names and addresses of the trustee. In Murphy, the court ordered the defendant (a non-trustee) to disclose the names and addresses of the defendant’s 1965 settlement to the plaintiff (a discretionary object of the trust).

41.  The Defendant sought to distinguish that authority on the basis that it involved very special and unusual facts. One may say that each case is different and very often the outcome turns on the particular facts. But the principle it does establish is that a disclosure order may be made against 3^rd parties if the circumstances warrant that relief.

42.  In general, equity should be protective of the interests of beneficiaries: Wong Poh Geak v Chin Lan Hong, unrep., HCMP 3956/2002, 29 January 2004 at §44. Orders for the discovery of documents, the rendering of accounts or the holding of enquiries form part of the arsenal of tools which the Court can deploy in exercising its equitable jurisdiction to ensure that trusts or estates are properly administered and that the Court’s jurisdiction is flexible jurisdiction: see per Reyes J in Wong Poh Geak at §9.

43.  An important element of the present case is that the Trust Documents do exist and were/are in the Defendant’s possession, custody or control: see the Deceased’s Representations §11(1)-(3) above. Significantly, in Ching 1^st §16, the Defendant referred to the existence of documents transferred to Madam Lau “that may be subject to [the Plaintiffs’] requests”.

44.  The Defendant, citing Chairman, Preliminary Investigation Committee, Medical Council of Hong Kong [2018] HKCFI 843 at §77, submitted that at common law, there is no independent cause of action whereby a person can ask an innocent 3^rd party to produce documents or information. The exceptions are where the principles in, for example, section 41 of the High Court Ordinance Cap 4, or Norwich Pharmacal are engaged.

45.  The Defendant accepted that the exceptions mentioned in §77 are not exhaustive. In the Medical Council case, the applicant seeking disclosure was the Preliminary Investigation Committee (“PIC”) of the Medical Council. The PIC claimed to have power to compel the Hospital Authority to provide certain documents without the patient’s consent. The Chairman, PIC and the Council’s functions and powers were limited to those expressly or impliedly conferred by statute. It was held that the mere need for the documents (to enable the Chairman to better discharge his duties) cannot justify disclosure and inspection orders if the governing statute does not authorise him to seek such orders. The statutory scheme did not expressly confer such a power and none could be implied.

46.  The Plaintiffs submitted (and I agree) that the Medical Council case is distinguishable because in that case there was no suggestion that the PIC had any substantive right to seek production.

    (3) Conclusion on substantive right

47.  For the reasons set out above, I accept the Plaintiffs’ submissions that, on the evidence, P1 does have a substantive right as shareholder of Kingsun to disclosure of the Company Documents and the Plaintiffs have a substantive right as potential beneficiaries to disclosure of the Trust Documents from the Defendant.

48.  In the circumstances, it is not strictly necessary to consider the other 2 grounds for disclosure, namely pre-action discovery and Norwich Pharmacal. I will do so briefly.

(B) Pre-action discovery and (C) Norwich Pharmacal

49.  As a preliminary matter, the Defendant submitted that the requirements that need to be met for “ordinary” pre-action discovery, and pre-action discovery under Norwich Pharmacal, are not the same. They are directed at different parties: the former is directed at wrongdoers whilst the latter is for those who are innocent.

50.  Further, the parties can only plead inconsistent alternatives if they have reasonable grounds for so doing: Order 18, rule 12A, §18/7/12. For those reasons, the Defendant submitted that it is not appropriate for there to be this ambiguity as to whether the Plaintiffs allege that the Defendant is a wrongdoer or not because that affects which of those jurisdictions on which they seek to rely.

51.  The Plaintiffs acknowledged that the principles applicable for pre-action discovery and for Norwich Pharmacal, as formulated, technically, and in a formulistic manner, are different. Nevertheless, it should be recognised that they are but different tools that the court has in terms of its jurisdiction to grant discovery.

52.  In that connection, it is salutary to have regard to Leung Yiu Ting v MTR Corp [2020] 5 HKC 550 at §14 where Anderson Chow J (as he then was) remarked that it is “important to recognise and bear in mind that the remedy is a flexible one the use of which should not be stultified by rigid concepts”.

    (1) Pre-action discovery

53.  The conditions for exercising the court’s power to order pre-action discovery are set out in Hong Kong Civil Procedure 2024 at §24/7A/5 and are not controversial. As regards the 5^th requirement, the applicant has to show that discovery is necessary either for dispensing fairly cause or matter or for saving costs.

54.  The Defendant submitted that when considering whether discovery is necessary, the court should have regard to third-party interests including confidentiality: Li Tak Yee Samuel v Societe Generale Bank and Trust and Another HCA 2478/2009 & 1198/2011, 16 April 2013 at § 35.

55.  It is common ground that confidentiality is not an absolute bar. The Defendant submitted that is a factor that should be taken into consideration is whether the disclosure sought is otherwise available, such as from other sources,: Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick & Ors, unrep., HCA 2197/2009, 9 June 2011 at §16. The court should only grant pre-action discovery as a matter of last resort.

56.  No doubt, those are all relevant considerations. Ultimately, as Lord Wilberforce explained in Science Research Council v Nasse [1980] AC 1028 at 1067E, “it is an exercise in judicial judgment”.

57.  It is not the Defendant’s case that there is some fundamental objection to pre-action discovery or that, on the facts of the present case, it cannot be applicable.

    (2) Norwich Pharmacal

58.  The general principles are well established and are not controversial. The Defendant emphasised the element of necessity, the relevant test being whether, unless discovery has been given, the trial would be rendered nugatory: Ng Ying Mo v Secretary for Justice [2021] 4 HKLRD 574 at §§31-32.

    (3) Conclusion on pre—action discovery and Norwich Pharmacal

59.  Had it been necessary to consider whether disclosure should be ordered by way of pre-action discovery or applying Norwich Pharmacal principles, I see no intrinsic objection to the grant of the relief sought under either head of relief.

(D) Confidentiality and privilege

60.  The Defendant was at pains to emphasise the solicitor-relationship between the Defendant and the Deceased and Kingsun and the fact that a solicitor has a continuing duty to preserve the confidentiality of information imparted during its subsistence. Arguably, that obligation survives the death of a person.

61.  However, confidentiality is not a reason in law to deny production of documents: see the Tullett case at §18. Nor is a litigant entitled to refuse disclosure of documents and information merely because they were supplied to him in confidence: HKCP 2024 at §24/5/46.

62.  In so far as legal advice privilege is raised as an objection to production of the Trust Documents, the relevant considerations may be summarised as follows:

(i)  a general unparticularised claim of privilege is insufficient: HKCP 2024 at§24/5/8

(ii)  documents that evidence trust deeds and/or completed transactions are not privileged: see Passmore, Privilege (4^th ed) at §2-024;

(iii)  it does not apply to non-existent documents: Passmore at §2-003;

(iv)  there can be no claim to LPP among persons who enjoy some form of common interest in the subject matter of the communication, for example, that of trustee and beneficiaries: Passmore at §6-001 to 6-006; and Angela Chen v Wai Wai Chen & Ors [2021] HKCFI 2436 at §§55-56.

(D) Conclusion

63.  For the reasons set out above, I see no reason why the relief sought should not be granted.

Order

64.  Accordingly, I make an order in terms of paragraphs 1 to 3 of the Originating Summons.

65.  I also make an order nisi of costs in favour of the Plaintiffs with certificate for counsel, such costs to be summarily assessed and payable forthwith.

66.  It is further directed that (1) the Plaintiffs do lodge their statements of costs within 14 days; (2) the Defendant do lodge its list of objections (not exceeding 2 pages) within 14 days thereafter; and (3) the Plaintiffs do lodge their respective the reply (not exceeding 2 pages if any) within 7 days thereafter.