LAM KIN CHUNG v. SOKA GAKKAI INTERNATIONAL OF HONG KONG LTD

HCMP 2685/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2685 OF 2016

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DECISION

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Introduction

1. This is the hearing of the applicant’s originating summons seeking an order against the respondent (“Soka”) for inspection and a for a copy of its register of members and index of the names of its members, pursuant to section 631 of the Companies Ordinance; and Soka’s summons seeking leave to file the 2^nd affirmation of its chairman, Mr Sun Po Loi (“Sun”), in opposition to the applicant’s originating summons.  Soka offered no explanation for the late application.  Realising that it may not succeed without occasioning an adjournment with the necessary costs consequence, Mr Chang, counsel for the respondent, chose not to pursue the application.  That application is therefore dismissed.

2. Soka is a company limited by guarantee incorporated in Hong Kong on 18 October 1966.  It is a non-profit making organization with the main objective of furthering the cause of Buddhism.  It is exempted from profits tax under section 88 of the Inland Revenue Ordinance.  It received public donations of $33 million and $37 million in the fiscal years 2014 and 2015 respectively.

3. The applicant (the “Applicant”) has been a member of Soka since 1975 when he was a secondary school student.  Having established his real estate agency business, he set up his own charity fund in 1992.  Between 1992 and 2013, he donated $1.3 million to Soka through his charity fund and $1 million in his personal name in 1994.  He is also holding other public and honorary positions in Hong Kong and the People’s Republic of China. 

4. The Applicant is concerned about the absence of any right of members to nominate and/or be elected as members of Soka’s management committee; and the excessively high salaries and wages of its staff, which is creating a disproportionate financial burden on Soka.  He requested Soka for access to the register for the purpose of calling for an extraordinary general meeting to address and vote on these matters.  Initially, Soka offered to provide him a copy of the register upon his undertaking not to use it for certain purposes.  It also offered alternatives to address the Applicant’s concerns, including posting the Applicant’s statements on the company’s website and acting as a post box to facilitate communication between him and the other members.  However, the Applicant insisted on his statutory entitlement to a copy of the register under section 631 of the Companies Ordinance.  Then, Soka rejected the Applicant’s purposes as improper and refused to provide a copy. On 6 October 2016, the Applicant took out the present summons.

Construction of section 631

5. The legal issue raised by this application is whether, on the true construction of section 631, a member of the company is entitled to an absolute right to a copy of the register or whether the exercise of that right is subject to the court’s discretion.  That section gives a member a statutory right to inspect the register and the index of members’ names and, on payment of a prescribed fee, to be provided a copy.  That section and other related provisions are derived from section 98 of the former Companies Ordinance and section 356 of the Companies Act 1985 of the United Kingdom.

6. Section 356(6) of the Companies Act 1985 was considered by the English Court of Appeal in the case of Dr Michael John Pelling v Families Need Fathers Limited[1].  The facts of that case are broadly similar to those of the present case.  Dr Pelling was a member of the defendant, a company limited by guarantee and registered as a charity.  He had some disagreement with the company which then suspended and subsequently terminated his membership.  He requested the company for a copy of part of its register, presumably for the purpose of his legal action against the company.  Upon the company’s refusal, he made an application to court pursuant to section 356(6) for an order directing the company to send him a copy of part of its register.  His application was refused by the registrar.  His appeal was also dismissed by the Court of Appeal on the company’s undertaking to facilitate communication between him and the other members by acting as a post box for mail.  The Court of Appeal adopted the approach of the Australian court in the case of O’Brien v Sporting Shooters Association of Australia (Victoria)[2].  In rejecting the absolutist construction of section 356(6) and holding that the members’ entitlement under that section is not a matter of unqualified right, Mummery LJ said:

“ [Byrne J] held (at 255) that the drafting of the Law was such that –

‘ the word “may” means exactly that. It means that the court is empowered to make the order where a refusal in contravention of the Law has been established, as in the present case. Whether the power will be exercised must depend upon the proper discretionary considerations affecting the power in the light of the facts as are found by the court.’

We agree.  For those reasons we reject the absolutist construction proposed by Dr Pelling.  (ii) The statutory discretion must be exercised judicially in accordance with established legal principles and having regard only to relevant considerations.  We agree with Dr Pelling that, as a general rule, the court will make a mandatory order to give effect to a legal right.  But, as stated by Lord Evershed MR in Armstrong v Sheppard & Short Ltd [1959] 2 All ER 651 at 656, [1959] 2 QB 384 at 396 ‘[i]t is not a matter unqualified right’.  There may be something special in the circumstances of the case which leads the court to refuse such an order may be narrow, but Dr Pelling is, in our view, wrong in his assertion that it is non-existent. Indeed, we understood him to accept that there would be cases in which it would be pointless for the court to make an order where, for example, it was no longer necessary to make one, because the request had been complied with after the application was issued but before it was heard, or where the request was physically impossible to comply with because the register had been destroyed or lost. There are other circumstances in which the court is entitled to refuse to make any order or to make one in unqualified terms.  It is common, for example, for a court to decline to exercise its discretion to make a mandatory or prohibitory order when the person against whom it is sought has offered to the other side or to the court an undertaking which meets the justice of the case. ….  (v) In our judgment, it is possible to cater for both Dr Pelling’s wish to gain access to the register for the professed purpose of legitimately communicating with the members and the proper and understandable concerns of Mr Hale about the detrimental effect of an unqualified order for disclosure of the names and addresses of the members, particularly on the charitable purposes for which the Company was established.  A reconciliation can be achieved by attaching relevant and reasonable terms and conditions to the exercise of the discretion.  As indicated in O’Brien’s case [1999] 3 VR 251 at 256, it is possible to provide a practical and fair solution either by making an order in favour of the applicant on terms as to the confidentiality and use of the information made available; or, as we suggested, and as was offered in O’Brien’s case (at 225), by declining to make an order for inspection, on the Company giving a suitably-worded undertaking to facilitate communication with members by acting as a postbox for mail between the applicant and the members.”

Thus, the English Court of Appeal held that on the true construction of section 356(6), the court had a discretion to refuse making the order, though as a general rule, it will make a mandatory order to give effect to a legal right.  However, the circumstances when it is appropriate to exercise such discretion are very rare.

7. In Democratic Party v Secretary for Justice[3], Hartmann J (as he then was) arrived at the same conclusion.  That was a case of judicial review in which one of the issues was the right of inspection by the public of the register of members of a limited company under section 98 of the former Companies Ordinance.  The Democratic Party chose to be incorporated and to order its affairs so that all persons becoming members of the political party would become members of the company.  It then sought a declaration that section 98 insofar as it gave the public the right to inspect the register of members of a political party registered as a company, was inconsistent with the right to freedom of association and the right to privacy under the Basic Law and Hong Kong Bill of Right.  Hartmann J also held that on the true construction of section 98, the right to access the register is not an absolute right.  The court has discretion to refuse an order for inspection or to make one in qualified terms.  But such discretion may be a narrow one.  He said[4]:

“ 69. In my judgment, however, the applicant is not left without any form of defence against demands to scrutinise its register which amount to an abuse.  On a true construction of s.98, I am satisfied that persons who demand access to the register do not have an absolute right to do so, their reasons for demanding access being irrelevant to the exercise of that right.  On a purposive construction of s.98, I am satisfied that it is not as supine as counsel for the applicant suggested.

70. S.98(1) of the Ordinance obliges a company to leave its register of members open for inspection both by members and third parties.  S.98(2) directs that, if required by members or third parties, the company must supply a copy of the register to any member or third party who seeks it.  A failure to comply with the obligations imposed under ss.98(1) and 98(2) attracts criminal liability.  Clearly, therefore, s.98 creates a legal right on the part of members and third parties to be able to inspect the register and to obtain a copy of it.  But s.98(4), in my judgment, on a true construction, reveals the legislative intention that the right should not be absolute.  I say that because s.98(4) gives to the courts a discretion whether or not to make an order compelling inspection or delivery up.  To cite it again, s.98(4) reads :

“In the case of any such refusal or default, the court may by order compel an immediate inspection of the register and index or direct that the copies required shall be sent to the persons requiring them.” [my emphasis]

71. Read in context, the discretion to refuse an order under s.98(4) may be a narrow one but, in my judgment, the courts must be able to exercise that discretion, either by refusing to make an order or by making one in qualified terms.”

8. I am of the same opinion.  Our company law gives a company a corporate identity distinct from its shareholders.  To protect the public dealing with a company, it is necessary that the public should have access to the register so that they may know who are behind this corporate veil.  Likewise, members of this corporate structure should also be in a position to know with whom they associate and to communicate with them in relation to matters of common interest relating to the company.  The language used in section 631 makes it clear that it was the legislature’s intention to give the public and members of a company a legal right to inspect the register for these purposes and to obtain a copy.  Section 657(1) gives the Financial Secretary power to make regulations to provide for the obligations of a company to keep company records, including the register, to make them available for inspection and to provide copies. Subsections (2), (3) and (4) set out the content and scope of these regulations.  It is worth noting that subsection 4(c) provides that these regulations may provide that the court may by order compel an immediate inspection of company records and provision of copies to persons entitled to be provided with copies.  Reading these provisions as a whole, it is clear that on the true construction of section 631, this right is not an absolute right.  The court has a supervisory discretion on how this right may be exercised.  If an application is made by a member of the public, it must be made in connection with some purposes which the applicant as a member of the public has an interest in.  If an application is made by a member of the company, it must be made in connection with some purposes which the applicant as a member has an interest in.  However, the court will not act in vain.  It will not order inspection or provision of a copy, if disclosure is impossible, or is sought for an improper purpose, or would serve no useful purpose, or would amount to an abuse.

9. As a general rule, the court will make a mandatory order to give effect to a legal right, but it, nevertheless, has a narrow discretion to refuse making the order.  The burden must be on the company seeking to resist disclosure to persuade the court that it is appropriate to exercise that discretion.  The usual grounds for refusing to make the order are that the inspection was sought for an improper purpose as to amount to an abuse of the legal right; or that it is necessary for the protection of privacy and confidentiality of its members.  If the company seeks to rely on any facts to support the exercise of that discretion, it bears at least the evidential burden of proving those facts.  In exercising such discretion, the court shall take into account the purposes for which information in the register is sought and balance the need of the applicant seeking the information against the concerns of the company in withholding the information.  While the circumstances when it is appropriate to exercise such discretion are narrow, the court’s discretion is wide.  It may order disclosure but impose such conditions as to the use of the information so as to address the concern of the company or refuse to make the order on the company’s undertaking to address the concerns of the applicant.  

10. I was also referred to section 116 of the Companies Act 2006 of the United Kingdom and the case of Burry & Knight Ltd v Knight[5]. Under that regime, the company must allow inspection or provide a copy of the register if requested.  It is for the company to seek relief by applying to court for an order under section 117(3) directing it not to comply with the request on the ground that it had not been made for a proper purpose.  As the regime of inspection under section 116 under the Companies Act 2006 is very different from that under section 631 of the Companies Ordinance, I do not find it necessary to consider that authority, except to mention that whether the inspection was sought for a proper purpose is a relevant factor for the court to consider in the exercise of its discretion in not making an order under section 631.

Nomination and election

11. As the application was made by the Applicant as a member of Soka, it must be made in connection with some purposes which he as a member has an interest in.  In other words, the purposes must be related to the exercise of a shareholder’s rights in Soka.  The Applicant’s stated purposes for inspection are his concerns for the members’ right to be nominated and/or elected as committee members; and the excessively high salaries and wages of the staff of Soka, most of whom are simultaneously committee members.  Soka’s case is that the Applicant’s reasons for obtaining a copy of the register could not constitute proper purposes and the stated purposes are not genuine.  Subject to the Applicant proving his stated purposes, Soka bears the burden of proving that those purposes are improper or not genuine and abuse by the Applicant of his legal entitlement. 

12. The Applicant’s case is based on articles 25, 30 and 33 of the Articles of Association of Soka (“the Articles”) which provide that Soka shall be managed by the committee; that one-third of the committee members shall retire at every annual general meeting; and that their vacancies may be filled by electing the like number of members at the general meeting. These articles provide as follows:

“ Article 25

The affairs of the Association shall be managed by the Committee, ….”

“ Article 30

At the first ordinary general meeting of the Association the whole of the Committee shall retire from office, and at the ordinary general meeting in every subsequent year one-third of the Committee members for the time being, or, if their number is not three or a multiple of three, then the number nearest one third, shall retire from office.”

“ Article 33

The Association at the general meeting at which the Committee retires in manner aforesaid may fill up the vacated offices by electing the like number of members thereto, and in default, the retiring Committee shall be deemed to have been re-elected.”

13. On the basis of these articles, the Applicant argues that members are entitled to nominate, be nominated and/or elected as committee members to manage Soka.  However, to the best of his knowledge and belief, since he joined Soka in 1975, Soka had never convened any annual general meetings.  It was only as a result of his repeated complaints that three annual general meetings were held on 15 January 2014, 27 November 2014 and 30 November 2015 for the years 2013, 2014 and 2015 respectively.  This allegation is corroborated by the fact that Soka is unable to produce minutes of meeting for the years between 2005 and 2011.  The Applicant further alleges that notices of annual general meeting sent to members prior to the said three meetings never informed the members of their right to nominate, be nominated and/or elected as committee members, nor did they include any forms to be completed by members to indicate their desire to nominate and/or be nominated.  The Applicant therefore complains that Soka has been wrongfully run by a small group of members and the other members are deprived of their right to nominate or be nominated and elected as committee members to run the association.

14. Mr Chang argues that it is incorrect for the Applicant to suggest that members are deprived of the right to nominate committee members.  He refers to Sun’s affirmation in which Sun produced what purports to be an extract from Chapter 4 of Rules and Regulations of the Religious Organization (the “Rules and Regulations”), containing only articles 13.2 and 22.1 which read:

“ Article 13

2.   The General Director can nominate from among the members of the Central Executive Committee, the Chairperson and the Directors of the Corporation (Soka Gakkai International of Hong Kong Limited), the Chairman and the Directors of Hong Kong Soka Kindergarten and the candidates of the Central Executive Committee members.  The General Director can recommend the candidates after approved by the Central Executive Committee and ratified by the SGI headquarters.”

“ Article 22

Person(s) appointed as members of the Central Executive Committee shall be recommended by the General Director, approved/ratified by the SGI headquarters from among outstanding members who have experience in faith, good character, wisdom, the ability to give guidance and an understanding of the principles of Buddhism.”

Mr Chang submits that according to these articles, only members who have experience in faith, good character, wisdom, the ability to give guidance and an understanding of the principles of Buddhism could participate in the management of Soka.  He refers to annual general meetings in which the Applicant’s objections to the nominations were overwhelmingly overruled and the nominations were approved by members who attended the meetings.

15. The Applicant disputes the existence of these Rules and Regulations.  He said that during his forty years as a member of Soka, he had never seen or heard of these Rules and Regulations.  Sun gave no particulars as to the history and genesis of these Rules and Regulations, specifically when and how they were formulated and passed by Soka.  He only produced extracts of parts of two articles from the Rules and Regulations. In the face of the Applicant’s disputes as to the authenticity and validity of these Rules and Regulations, Sun has utterly failed to produce evidence to support their authenticity and validity.

16. Furthermore, the terms used in these articles in the Rules and Regulations are totally alien to the Articles, such as “General Director”, “Central Executive Committee”, “Director” and “SGI headquarters”.  The provisions in these articles are clearly inconsistent with the Articles.  According to articles 25, 30 and 33 of the undisputed Articles, Soka is to be managed by the committee consisting of members nominated and approved by Soka in general meeting.  The regime under the disputed Rules and Regulations is as follows.  Under article 22, the “General Director” appoints members of the “Central Executive Committee” from outstanding members of Soka.  Then under article 13, he nominates, from among “members of the Central Executive Committee”, the “Chairperson” and “Directors” of Soka (assuming that term to mean the committee members under the Articles) for approval by the “Central Executive Committee” and then recommends them for ratification by “SGI headquarters”.  The office “General Director”, “Central Executive Committee” and “SGI headquarters” are unknown to Soka’s Articles.  It seems from these Rules and Regulations that the “General Director” is someone outside, but over and above Soka.  The regime under these Rules and Regulations is that it is for this “General Director” to nominate the chairman and committee members of Soka from an unknown body called the “Central Executive Committee” for ratification by another unknown body called “SGI headquarters”; and not for approval by Soka’s members in general meeting.  While it is not uncommon for articles of association of a company to provide for different classes of membership, some with voting rights and some without, this is not the case according to the Articles of Soka.  In my view, articles 13 and 22 of the Rules and Regulations are inconsistent with the Articles and are alien to Soka.  If Soka is being managed by members nominated and elected in accordance with these Rules and Regulations, instead of in accordance with the Articles, it is being hijacked by the “General Director” and “SGI headquarters” which are bodies alien to Soka.  

17. In the absence of any provision in the articles of association to the contrary, a member is entitled to participate in the management of the company.  If this function has been delegated to a board of directors or a management committee, a member is entitled to nominate or be nominated and elected as a director of the board or member of the committee.  I have not been referred to any contrary provisions in the Articles.  This right to nominate and be elected as a member of the committee is a membership right. In the face of the way in which nomination and election is being controlled by the committee, the Applicant has a true and serious concern to bring this malpractice to the attention of the other members.  His request for a copy of the register to enable him to call for an extraordinary general meeting to discuss this issue was clearly made in the exercise of a membership right and for a proper purpose.

Excessively high salaries and wages

18. The Applicant’s second purpose for obtaining a copy of the register is to enable him to communicate with the other members regarding the excessively high salaries and wages paid to the staff of Soka.  His complaint is that Soka, being a charitable organization, received substantial donations from the public to the tune of $33 million and $37 million in 2014 and 2015 respectively, which should be spent towards charitable objectives.  However, an excessively high proportion of these donations was spent on salaries and wages of its staff, amounting to 37.6% and 31.4% of the total donations received in the years 2014 and 2015 respectively.  Worst of all, some committee members were paid these high salaries and wages in breach of articles 6A and 6B of the memorandum of association of Soka, which expressly prohibit members of the committee from being appointed to any salaried office of Soka.

19. In the absence of evidence of the type and scale of operation of Soka and the number of staff involved, it is impossible to make a judgment whether the expenditure is out of proportion with the work and services carried out pursuant to the charitable objectives of Soka.  As for the complaint of breach of articles 6A and 6B of the memorandum of association by certain members of the committee, Soka had taken remedial actions, which rendered the Applicant’s complaint academic.  Furthermore, as was held in Burry v Knight[6], a member’s professed desire to communicate with other members regarding his allegations of purported wrongdoings of the directors were not proper purposes to order inspection of the register, as these desired communications “could not confer anything of value on fellow [members]”[7]. This purpose, though commendable, could not be a proper purpose for accessing the register.

Improper motive

20. Mr Chang argues, referring to the Applicant’s email dated 1 January 2015, that the original and real purpose of the Applicant’s request for the register was to obtain information for use in relation to Choy’s defamation proceedings against him; and that it was not until more than a year and half later that he was able to formulate for the first time the alleged purposes.  Mr Chang therefore suggests that the stated purposes were not genuine and criticises the Applicant for adopting a “very hard-nosed approach” by insisting to bring this matter to court.

21. There is no dispute that on 26 November 2014, Mr Choy Yuen On (“Choy”), a member and ex-committee member of Soka, instructed solicitors to issue a letter to the Applicant demanding an apology and retraction of certain allegedly defamatory statements made by the Applicant against him.  On or around the same day, the Applicant visited Soka’s registered office and informed one of its staff of the intended defamation proceedings and advised him to be alert of Choy.  He also requested another staff member to make a copy of the draft writ of summons attached to the letter for Soka’s record.  On 23 December 2014, Choy issued the defamation proceedings.  Then on 1 January 2015, the Applicant wrote to Sun by email seeking information about the dates of Choy’s appointment as committee member; the dates when Choy contracted for works with Soka; the minutes of the 2014 annual general meeting of Soka; and a copy of the register.  He did not specify the purposes for which the register was sought.

22. On 8 January 2015, Soka’s solicitors, Messrs Ruby Yeung & Co (“RY”) provided the information sought, but requested the Applicant to specify the purpose of his request for a copy of the register.

23. Two months later, on 17 March 2015, the Applicant’s solicitors, Messrs Rowdget W Young (“RWY”), requested Soka to provide all minutes, books and records since its incorporation and the complete register for inspection.  RWY also threatened to apply to court if no reply was received within 7 days.  In its second letter of the same date, RWY put on record the Applicant’s various complaints.  Specifically, it mentioned the committee’s failure in enclosing a nomination form for members to nominate members for election to the committee; and Choy’s breach of fiduciary duty as a committee member in entering into renovation contract with Soka. 

24. RY requested for more time to respond.  On 14 April 2015, RWY threatened to apply to court if no reply was received within 3 days. 

25. On 17 April 2015, RY replied that Soka was unable to locate the minutes of annual general meetings between 2005 and 2011. Again RY asked the Applicant to specify the purposes of his request and sought a confirmation, inter alia, that the Applicant will not release the personal information and/or data contained in the documents to anyone without the prior consent of the members concerned; and that the information will not be used for the purpose of any legal disputes or litigations, or for causing nuisance, annoyance, or inconvenience to the members.  Soka also offered to assist the Applicant to circulate any documents to the other members, if Soka considered it appropriate and necessary for the benefit of its members.  On 21 April 2015, RWY rejected Soka’s request for undertaking as unwarranted and threatened to apply to court unless Soka would respond within 3 days.

26. RY asked for more time to consider.  On 11 May 2015, RY explained that Soka’s reason for requiring the Applicant to specify the purposes of his request for the register and to provide the undertaking was because it was aware of the on-going defamation proceedings between the Applicant and Choy and did not wish to be dragged into that dispute.  As an alternative, Soka offered to circulate any information which the Applicant wished to bring to the attention of the other members. RY also drew RWY’s attention to the case of Democratic Party v Secretary for Justice that a member’s right to inspect the register is not an absolute one.

27. On 3 June 2015, RWY replied, insisting on the Applicant’s right under section 631 to inspect the register and argued that the request to inspect the register was not an abuse as it was the Applicant’s case that Soka had failed to keep records and/or convene annual general meetings, which concerned the interest of all members of Soka and affected public interest because of Soka’s status as a charitable organisation.  RWY renewed its threat to take legal action if RY did not reply within 14 days.  It also enclosed a draft originating summons.

28. On 10 August 2016, RWY wrote again expressing the Applicant’s concern about the election system and the excessively high salaries and wages of Soka’s staff.  On this occasion, RWY expressly stated that the Applicant’s purpose of obtaining a copy of the register was to enable him to communicate with the other members so as to bring their attention to the malpractice and to cause proper actions to be taken for the purpose of reinforcing the proper management of Soka.  It enclosed a draft letter for distribution to the members setting out the aforesaid matters for the purpose of securing sufficient support to request the committee to convene an extraordinary general meeting to discuss and vote on those matters.  RWY gave Soka 14 days to respond, failing which it will make an application to court.  It is based on this letter that Mr Chang argues that it took the Applicant a year and half to formulate his purposes for requesting for a copy of the register.  RY repeatedly sought extension of time but did not come up with any positive response.

29. On 9 September 2016, RWY gave Soka until 13 September 2016 to response.  On 13 September 2016, RY replied saying that Soka did not agree with the Applicant’s purpose of obtaining the register and offered to have a dialogue with him.  On 6 October 2016, the Applicant took out the present summons.

30. When all these events and correspondence are put in their proper context, I think it is a mis-statement to say that it took the Applicant more than a year and half to formulate his purposes for seeking a copy of the register and for adopting a “very hard-nosed” approach in bringing this matter to court. As a matter of chronology, the request started shortly after Choy commenced legal action against the Applicant.  However, just two and half months after Choy commenced his defamation proceedings, by RWY’s second letter dated 17 March 2015, the Applicant unequivocally stated his concern about the nomination and election procedure and Choy’s breach of fiduciary duty.  Though he did not mention that his purpose of obtaining a copy of the register was to solicit support for requesting the committee to convene an extraordinary general meeting, that must be the only purpose he had in his mind for obtaining a copy of the register.  RWY’s letter of 10 August 2016 only spelt out that purpose in more unequivocal terms.  In my view, the Applicant’s concern about a member’s right to be nominated and elected as a member of the committee is wholly separate from the defamation action.  I also failed to see how the information in the register could assist the Applicant in defending that action.  Furthermore, I think RY’s letter of 8 January 2015 had answered all the questions raised by the Applicant for the purpose of defending that action.  I do not think the Applicant’s stated purpose was a recent concoction.

31. Though RWY had repeatedly threatened to take legal action, it had always been accommodating to RY’s request for time.  Indeed, the threats had proved to be empty.  For over a year Soka has been delaying or resisting production of a copy of the register.  It was not until 13 September 2016 that it formally rejected the Applicant’s stated purposes as improper purposes and suggested to start all over with a dialogue with the Applicant.  This suggests that Soka never had any intention to provide a copy of the register and its requests for specified purposes and undertaking were just delaying tactics.  I do not consider RWY’s threat adversely reflected on the Applicant’s pre-litigation conduct. 

Soka’s concern for privacy

32. Another reason advanced by Soka for resisting the Applicant’s request for a copy of the register is its concern for the privacy of its members. According to Sun, as a religious and charitable body, Soka places a high priority on respect, dignity and privacy of its members and is committed to preserve the confidentiality of their personal data.  He said that some members joined Soka at a time of great personal stress when they were offered confidential service.  He argued that it is implicit in the sensitive nature of Soka’s work and the confidentiality of the services provided to its members that it would be totally obnoxious to them for their names and addresses to be made available to other members or to the world at large on demand. 

33. The Applicant does not dispute the lofty ideals of Soka, but disputes Sun’s assertion about the confidential service offered by Soka, which he said he had never heard of during his forty years’ membership.  Sun provided no particulars of the counselling service allegedly provided by Soka, the number and type of staff engaged for providing that service.  The memorandum of association of Soka stated that its principal objects are to preach, promote and support the faith of the great Buddhism as a fundamental ascetic practice to cultivate virtues, to promote family happiness and to enhance friendship amongst members; and also to promote peace, culture and education to mankind.  The other ancillary objects include purchasing real or personal property, maintaining non-profit making schools, homes for the aged, hospitals, maternity homes, nursing homes, clinics, dispensaries and stations for benevolent purpose.  There is no mention of counselling service.  While I would not rule out the possibility that such service is being provided by Soka, there is no suggestion that it is its principal activity. 

34. Mr Chang refers to Dr Pelling’s case in which the English Court of Appeal upheld the registrar’s refusal to order production of the register against a charitable organization on the grounds of confidentiality.  While the association in that case and Soka are characterized as charitable organizations, the facts of the two cases are distinguishable.  In Dr Pelling’s case, the organization was incorporated expressly for the purpose of providing relief for parents and their children and other close family members suffering from the consequences of divorce or separation by providing advice, assistance and other support etc.  The importance of the confidentiality of the identity and privacy for such members is self-evident from the stated purpose of the association.  By way of contrast, the principal activity of Soka is not to provide counselling service and there is nothing to suggest that the majority of its members are suffering social distress as in Dr Pelling’s case.  No such inference could be drawn from the objects clause of Soka’s memorandum of association and the service provided by Soka to its members.  Besides, when signing the membership application form, the applicant acknowledged that he is “aware and consent that the Company and its units may use [his] personal data stated [therein] for the purposes of communications and any other lawful purposes related to the activities and development of the Company”.  The Applicant is a member of Soka.  He is seeking to use the information in the register for purposes related to the activities and development of Soka, which I have found to be proper. The other members have consented to their personal data being used for the purposes of communications with them for such lawful purposes.  I cannot see any real substance in Soka’s concern based on confidentiality.

The alternatives offered

35. Soka is prepared to proffer an undertaking to implement any of the following options to address the Applicant’s need to communicate with the other members:

  (1)  to upload the Applicant’s written statement stating his concerns on the “Company Members” section of Soka’s official website for members’ perusal;

  (2)  to make and send copies of the Applicant’s written statement stating his concerns by post to the other members as directed by the Applicant at the Applicant’s expense and to provide him with a certificate of posting issued by the Post Office;

  (3)  to make and send copies of the Applicant’s written statement stating his concerns by hand to the other members as directed by the Applicant at the Applicant’s expense and to provide him with the original acknowledgement of receipts signed by the members;

  (4)  to send the Applicant’s sealed envelope containing his written statement stating his concerns by post to the other members as directed by the Applicant at the Applicant’s expense and to provide him with a certificate of posting issued by the Post Office; and

  (5)  to send the Applicant’s sealed envelope containing his written statement stating his concerns by hand to the other members as directed by the Applicant at the Applicant’s expense and to provide him with the original acknowledgement of receipts signed by the members.

Soka also undertakes not to conduct any screening and to send the statements or envelopes containing the statements within 28 days.  These offers were all rejected by the Applicant, understandably out of his distrust in the committee’s good faith in honouring its undertaking not to conduct screening when sending out the statements or envelopes containing the statements.

36. Since not everyone has regular access to or uses the internet, I do not think the first option sufficient for the purpose of drawing the other members’ attention to the alleged malpractice for the purpose of securing their support to convene an extraordinary general meeting.  I also do not think the other options could address the Applicant’s concern about screening by the committee members.  To my knowledge, a certificate of posting will not give the full name and address of the recipient.  If it does provide those particulars, it would defeat Soka’s purpose of preserving confidentiality.  The Applicant could have no assurance that his statement will be sent to all members.  The same consideration applies to the other two modes of delivery by hand.  Besides, such delivery is unduly expensive. 

37. I can well understand the Applicant’s concerns. While initially Soka seemingly acted reasonably in offering to provide a copy of the register upon the Applicant stating his purposes for having a copy and giving certain undertakings, when the Applicant stated his purposes, Soka simply rejected them as improper purposes and proposed to start another dialogue with him.  This, as I have found, was just delaying tactic evidencing no intention on the part of Soka to honour its promise.

38. The Applicant has shown a strong prima facie case of malpractice in the election and nomination of members to be appointed to the management committee.  As a result of this malpractice, it is likely that Soka is being hijacked by “SGI headquarters”.  The Applicant is intending to secure support from the other members to convene an extraordinary general meeting for the purpose of challenging such malpractice.  The present committee members who have control over the management and operation of Soka have a personal interested in what the Applicant is seeking to do and in the outcome of the extraordinary general meeting, if held.  In the light of Soka’s pre-litigation conduct, the Applicant’s concern about the committee’s good faith in honouring its undertaking not to perform any screening is well justified.  Screening is difficult to detect and prove and is costly to rectify.  

Conclusion

39. The Applicant has shown he has a proper purpose to access the register and to be provided a copy.  As a general rule, the court will make a mandatory order to give effect to a legal right and the burden is on the company seeking to resist the making of the order to persuade the court to exercise its discretion not to make such order.  Having regard to the circumstances above, I consider that the preferred course is to bend in favour of ordering inspection of the register and provision of a copy on terms rather than refusing to make the order by relying on Soka’s undertaking to act as a post box for facilitating communication between the Applicant and the other members.  I therefore allow the application and order inspection of the register and provision of a copy on payment of the prescribed fee and on the Applicant’s undertaking to use the information contained therein solely for the purpose of communicating with the other members in relation to the two purposes set out in paragraph 4; not to use the said information after the forthcoming annual general meeting; and to destroy the copy or any copies made therefrom, whether in the form of hard copies or soft copies or in whatever form, within one month after the said meeting.  I also make a costs order nisi that the Applicant shall have costs of the application.

40. Soka’s summons seeking leave to file Sun’s second affirmation is also dismissed with costs to the Applicant.