WONG CHUNG CHI v. YUILLEY BUILDING MATERIALS CO LTD AND OTHERS

HCMP 137/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 137 OF 2015

________________________

________________________

________________________

________________________

J U D G M E N T

________________________

Introduction

1.  By the Originating Summons (“the OS”) dated 20 January 2015 the plaintiff (“P”) applies for inspection of the documents of the 1^st defendant (”D1”) as listed in the Schedule to the OS.

2.  P is a shareholder of D1.  He was also a director of D1 until his removal as a director on 21 January 2015.

3.  The 2^nd defendant (“D2”) and the 3^rd defendant (“D3”) are the younger brothers of P.  D2 and D3 are and were, at all material times, shareholders and directors of D1.

4.  It was clear from the submissions made on behalf of P that D2 and D3 should not have been joined as defendants in the OS for the relief sought, which was an order against D1 for inspection of documents of D1.  At the hearing, I dismissed the OS against D2 and D3 with costs against P to be taxed on a common fund basis, if not agreed, and to be paid forthwith. 

Background

5.  The relevant background facts are that D1 was incorporated on 4 March 1988 under its former name Yuilley Limited.  At that time the father of P (who was also the father of D2 and D3) and Richard Lau incorporated D1 as a joint venture business to carry on the business of the sale of building materials.  The issued share capital was $2 comprising 2 shares of $1 each, with D2 holding 1 share and Richard Lau holding the other share.

6.  There is no dispute that it was the father and Richard Lau who provided the set up capital for the business of D1 at the time of incorporation.

7.  Richard Lau sold out his shares in D1 in 1994.

8.  From 1994 onwards, D1 has been a family business with P, D2 and D3 as shareholders.  P was a director of D1 from 1994 until his removal on 21 January 2015 after the OS was issued .  D2 and D3 were and are still directors of D1.

9.  Since 1994 and until the recent dilution in February 2014 of P’s shareholding in D1, P held 250 shares in D1 representing 25% of the share capital of D1.  D3 also held 25% of the shares whereas D2 held the balance of 50% of the shares of D1.

10.  In 1994 D1 operated its retail business from one retail shop at G/F, 323 Lockhart Road, Wanchai, Hong Kong (“the Wanchai shop”).  From 1996 onwards, D1 operated a second retail shop in Kowloon at G/F, 1142 Canton Road, Mongkok, Kowloon (“the Mongkok shop”).

11.  According to P, he and D2 were in charge of the Wanchai shop as well as the Mongkok shop.  However, according to D2, when D1 established the Mongkok shop in 1996, D2 managed the Mongkok shop whereas the Wanchai shop was managed by P and D3. 

12.  In about September 1997 P’s wife also joined D1 as an accounts clerk.  On the evidence, it appears that she was mainly stationed at the Wanchai shop.

13.  Since 2007 P and his wife no longer worked in D1.  There is a dispute of fact between the parties as to the reasons why P was asked to leave.

14.  P says that since 2007 he began to press D2 and D3 to disclose the accounts of the Mongkok shop which they refused.  As a result, he says that he was asked to leave and to stop working for D1.  D2, however, says that at a family meeting in June 2007 P admitted to misappropriating the assets of D1 by taking monies from D1’s cash sales for his family’s use.  Rather than continue with an investigation into the misdeeds of P, D2 says that P agreed that he would no longer take part in the management of D1 but would remain as a director thereof.  These are issues of fact which cannot be resolved on affidavit evidence.

15.  There is no dispute that P remained as a director of D1 after he left the management of D1 in 2007 until his removal on 21 January 2005.

16.  There is also no dispute that P received monthly payments for his living expenses from D1 and other benefits including medical insurance cover and the use of a credit card until about November 2014 after P’s solicitors first wrote to D2 and D3. 

17.  Although P says that since 2007 he has been asking for disclosure of the accounts of the Mongkok shop, on the evidence it is clear that it was only on 12 November 2014 that his solicitors first sent a letter of that date to D2 and D3 requesting, inter alia, for inspection of the books and accounts of D1 for the period from 2008 to 2014.

18.  By a further letter dated 5 December 2014 P, through his solicitors, gave notice to D2 And D3 that he would attend with his advisers at D1’s registered office on 12 December 2014 for inspecting and taking copies of D1’s documents and records as stated therein for the period from 1999 to the date of the letter.

19.  On 12 December 2014 P attended the Wanchai shop accompanied by his solicitor for the purpose of inspecting the accounts there but they were informed by D3 that the accounts were not ready for inspection.  A letter putting the matter on record was also sent by P’s solicitors on 12 December 2014.

20.  There was further correspondence in December 2014.

21.  By a notice of extraordinary general meeting dated 17 December 2014, an extraordinary general meeting of D1 was convened for 21 January 2015 for the purpose of passing a resolution to remove P as a director. 

22.  By a letter dated 6 January 2015 to P’s solicitors from S K Wong & Co, solicitors for the defendants, P was informed that D1 was prepared to allow P to inspect the accounting records for 7 years.  P was informed that accounting records prior to 2011 were stored in the Mainland and the suggestion was made that in the meantime P could inspect the accounting records from 2011 onwards on 19 January 2015.  P did not attend the offices of D1 to inspect the documents on 19 January 2015.

23.  On 20 January 2015 the OS was issued.

24.  On 21 January 2015 P was removed as a director of D1 at the extraordinary general meeting.

25.  P also complains that to his detriment D2 and D3 have caused his shareholding in D1 to be diluted.  P says that he discovered in October 2014 when conducting a company search on D1 that by a Return of Allotment dated 14 February 2014 presented by D2, 2,000 ordinary shares of D1 were allotted to D2 and D3.  Out of the allotment of 2,000 shares, 1,500 shares were allotted to D2 and 500 shares were allotted to D3.  P, who was a director and also the secretary of D1 at the time, says that he did not know of the allotment of the shares to D2 and D3 until he discovered the same from a company search on D1 conducted in October 2014. The effect of the allotment is that P’s shareholding has been diluted from 25% to 9% of the shares of D1, to the detriment of P.

26.  It is D2’s case that an extraordinary general meeting was held to allot new shares to D2 and D3 and that notice of the extraordinary general meeting was properly given to P.

27.  P is adamant that he was not given notice of the extraordinary general meeting when it was decided to allot the new shares to D2 and D3.

28.  As accepted by P’s counsel, Mr Chan, P does not require inspection of documents for the purposes of pursuing a claim based on the alleged unlawful dilution of his shareholding.  I would observe that by the fax dated December 2014 from D2 and D3 to P’s solicitors (Exhibit WCC‑12 to P’s 1^st affirmation) copies of the notice of the extraordinary general meeting of shareholders together with the minutes of the extraordinary general meeting and the minutes of the meeting with directors were provided to P.

29.  Needless to say, by the time of P’s solicitors’ request for inspection of documents in November 2014, there was already growing hostility between P and his two brothers D2 and D3 who were in control of D1. 

30.  It appears that as a result of P’s hostility towards D2 and D3 at that time, D2 and D3 caused D1 to terminate the monthly payments to P on or about 28 November 2014.  Also, on or about 30 November 2014, D2 and D3 caused D1 to cancel the credit card that had been issued to P.  P’s medical insurance cover was also cancelled.

31.  P and D2 accuse each other of misappropriating the assets of D1 in their evidence.  These are disputed issues of fact which cannot be resolved solely on affirmation evidence.

32.  P says that he has instructed his solicitors to apply for leave for him to bring a derivative action on behalf of D1 against D2 and D3 and that he requires the inspection of the documents to assist him in particularizing his claim in the derivative action.

The applicable legal principles

33.  Although P’s application by the OS was originally brought under sections 373‑375 and 740 of the Companies Ordinance (Cap 622), since 21 January 2015 P was no longer a director of D1 as he was removed as a director on that day.  That being so, P cannot rely on sections 373‑5 and seek an order for inspection of documents as a director. He can only rely on section 740 and seek an order for inspection of documents as a shareholder of the company.

34.  By section 740(1) on application by a required number of a company’s members the court may make an order authorizing a person who is the applicant to inspect any record or document of the company. The required number of a company’s members is a reference to the number of members that represents at least 2.5% of the voting rights of all the members having a right to vote at the company’s general meetings at the date of application.  There is no dispute that P holds sufficient shares in the company to enable him to make the application under section 740.

35.  By section 740(2) the court may make an order authorizing a person to inspect a record or document of the company if it is satisfied that:

(a)     the application is made in good faith; and

(b)     the inspection is for a proper purpose. 

36.  In Wong Kar Gee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241 in considering the same two requirements of good faith and proper purpose under sections 152FA and 152FB of the former Companies Ordinance, (Cap 32), Harris J held that the good faith and proper purpose requirements constituted two separate and independent tests. 

37.  Harris J said at para 14 of his judgment:

“… it appears to me that the two tests under s.152FA(3), to some extent, lay down a subjective and objective test: the applicant must first establish that he believes his purpose in applying for an inspection order is proper (ie that he is acting in good faith) and secondly, the Court must believe the circumstances are such that the inspection applied for is for a proper purpose.”

And at para 16 Harris J said:

“… the requirement of good faith merely requires that the applicant himself act ‘honestly with a purpose that he himself believes to be proper. The requirement of ‘proper purpose’ however, is an objective test that calls for the court to look at all the surrounding circumstances and to determine whether the purpose for the inspection order was indeed, proper.”

38.  It was also held in Wong Kar Gee Mimi that once the primary or dominant purpose for the application was deemed proper, any further or secondary purpose was irrelevant.  At paras 21 and 22 of his judgment Harris J said:

“21. It has also been said that once the primary or dominant purpose for the application for inspection is deemed by the court to be ‘proper’ in that it is germane to the applicant’s status as a shareholder, then any further or secondary purpose in seeking the records is irrelevant: Unity APA v Humes (No 2), pp.480‑481; approved in Barrack Mines Ltd v Grants Patch Mining Ltd (No 2), p.639.

22. The corollary of this proposition is that so long as the applicant acts in good faith and for a proper purpose, then the fact that there is hostility between the parties is equally irrelevant and is no bar  to an application for an inspection order: Unity APA v Humes (No 2), p.479.”

39.  I would also refer to what Harris J said at para 25 of his judgment:

“By enacting s.152FA, the Legislature provided an important new procedure for the protection of shareholder rights and interests and the community’s more general interest in the maintenance of good corporate governance. Section 152FA should therefore be interpreted and applied in a manner consistent with these legislative objectives. This can be achieved through taking a generous approach to the interpretation of what constitutes an interest ‘reasonably related’ or ‘germane’ to the applicant’s status as a shareholder. Given that a member’s status is based entirely on his shareholding in the company, I am inclined to think that where the purpose for seeking an inspection order is founded upon the protection against a change in the value of a member’s shares, that purpose is ‘germane’ to his status as a shareholder and ‘proper’ under s.152FA. Put another way, where a member seeks to protect his economic interest in the company, this should prima facie satisfy the ‘proper purpose’ requirement.”

40.  It is clear that the burden is on the applicant to demonstrate that he is acting in good faith and that the inspection is for a proper purpose.

41.  I would also refer to the observations of Harris J on sections 152FA  and 152FB of the former Companies Ordinance (Cap 32) and the present section 740 of the Companies Ordinance (Cap 622) at para 25 of his judgment in Artan Investment Limited and others v The Bank of East Asia, Limited and others (HCMP 125/2015, 5 June 2015):

“The expression ‘proper purpose’ is not defined in the section, but its meaning and how the 2 requirements are to be understood and applied has been considered in a number of cases in relation to section 740 and its predecessor sections 152FA and 152FB of the former Companies Ordinance, Cap 32, which are in all material respects the same.”

42.  And as Harris J said at para 26 of his judgment in Artan Investment Limited:

“The court is not required and should not endeavour, on an application under section 740 to reach conclusions about the merits of the matters relied on as constituting a proper purpose. The court needs to be satisfied that a proper purpose has been established and that in the exercise of the court’s discretion it is a proper case in which to make an order for inspection.”

43.  Even where the application is made for the purpose of investigation based on some reasonable grounds for believing that misconduct or maladministration has taken place, the court may nevertheless refuse to exercise its discretion to permit inspection where it is satisfied that nothing of utility will come from the inspection or that the company will suffer undue prejudice as a result (Leung Chun Pun v Masterwise International Ltd [2014] 1 HKLRD 1129 at para 18).

44.  Each case, of course, depends on its own facts.

The application

45.  The category of documents in respect of which inspection is sought by the Schedule to the OS covers the period from 1 January 1999 to the date of the order to be made and includes the following categories:

“1. Ledgers, journal entries, vouchers, and supporting documents;

2. Bank books, bank statements, bank slips and records, and such like accounting records;

3. Records of the assets and liabilities, and fixed assets register;

4. Records of daily entries of money received and expended by [D1], and the matters in respect of which the receipt and expenditure takes place;

5. Records of all goods purchased and sold by [D1];

6. Invoices, receipts, cash memos and cheque stubs;

7. Payroll records, management accounts and audited financial statements;

8. Minutes of meetings of the board of directors.”

46.  The OS does not identify the concerns or transactions in respect of which an order for inspection is sought.  Without identifying the concerns or transactions, the application for all the documents as set out in the Schedule to the OS is extremely wide ranging and in my view, oppressive.

47.  At the hearing, Mr Chan, for P, submitted a draft order limiting the inspection of documents only in respect of the following concerns or transactions:

“(a) Daily transactions in the Mongkok and Wanchai Shops;

(b) The provision of funds to Powerful Pacific Limited for the purchase of the properties known as (1) Flat B, 4/F Block C2, Ville De Cascade, Nos. 2‑4 Lai Wo Lane, Fo Tan, Shatin, New Territories and (2) Car Parking Space 93 on Basement of Central Block, Ville De Cascade Nos. 2‑4 Lai Wo Lane, Fo Tan, Shatin, New Territories;

(c) The purchase of landed properties in Thailand;

(d) Loans to Madam Sae or any third parties;

(e) The purchase of vehicles funded by [D1].”

48.  Mr Chan also sought to expand on the categories of documents in the draft order by seeking documents in the following categories as set out in the draft order:

“1. Contracts or agreements;

2. Monthly management accounts of [D1];

3. All journal entries, ledgers, vouchers and support documents (including any instructions given by [D1];

4. Records of daily entries of money received and expended by [D1] and the matters in respect of which the receipt and expenditure takes place;

5. Bank statements and other evidence showing records and payments in respect of all the bank accounts opened in the name of [D1];

6. Records of goods purchased and sold by [D1];

7. Invoices, receipts, cash memos and cheque stubs;

8. Payroll records, management accounts and audited financial statements;

9. Minutes of all meetings of the Board of Directors of [D1];

10.  Correspondence and communications between [D1] and its accountants.”

49.  I shall deal with each of the concerns or transactions in respect of which complaint is made by P in support of his application.

Daily transactions in the Mongkok and Wanchai shops

50.  The complaint is made in P’s 1^st affirmation (at para 21) that P became increasingly concerned about the accounts of the Mongkok shop as his wife had discovered that there had been shortfalls in cash and that certain cheques recorded in the books of account for settlement of outstanding receivables did not actually appear in the bank statements of D1.

51.  At para 24 of his 1^st affirmation, P particularized the shortfalls in cash and account receivables of D1.  The particulars given are:

(1) For the period from 3 May 2006 to 8 May 2006, the account receivables should be $80,190.80 but only a sum of $50,000 was deposited into D1’s bank account, resulting in a shortfall of $30,190.80.

(2) On or about 14 August 2006, the account receivables due from a customer amounted to $2,043.70 and the customer drew a ICBC cheque no 000221 for $2,044 for settlement of the same.  The complaint is that the cheque did not appear to have been paid into the bank account of D1.  Further, in respect of the period from 15 August 2006 to 31 August 2006, the complaint is that a total of 5 cheques received from customers for settling outstanding receivables did not appear to have been paid into the bank account of D1.

52.  On D2’s evidence, there is nothing untoward about the shortfall in cash in respect of which the specific complaint was made by P as set out above. 

53.  D2’s explanation is that often in their business, there would be urgent purchases of goods and other expenses incurred by the Mongkok shop which used the cash obtained from cash sales.  D2 says that the alleged shortfall of $30,190.80 was in fact offset by cash expenditure of $28,152.20 and that the remaining balance should have been left as petty cash in the Mongkok shop.

54.  It seems to me that the cash expenditure in May 2006 of $28,152.20 is supported by the table and the supporting documents in exhibit WTS‑11 exhibited to D2’s affirmation.

55.  In relation to P’s complaint that cheques that were received were not deposited into D1’s bank account in August 2006, D2 has also dealt with this in his affirmation.  It appears from his evidence and exhibit WTS‑12 that the cheques, with one exception , were in fact deposited into D1’s bank account , contrary to what P believed to be the case.  The bank pay in slips and the bank statements support the evidence of D2 on this matter.

56.  The one exception was the ICBC cheque no 000221 for $2,044.  D2’s evidence is that the said cheque was not deposited into D1’s bank account as the cheque was subsequently replaced by cash by the customer.  The supporting documents in exhibit WTS-13 exhibited to D2’s affirmation supports his evidence that the relevant invoices were paid in cash.  In any event , the said cheque was only for the insignificant sum of $2,044.

57.  I am not satisfied that a proper purpose has been established by P for the inspection applied for in respect of the daily transactions of the Mongkok and Wanchai shops.  No order for inspection should be made in respect of this concern or transaction.

The provision of funds to Powerful Pacific Limited

58.  P complains that in November 2000 D2 and D3 caused D1 to provide monies for the purchase of the properties known as (1) Flat B, 4/F, Block C2, Ville De Cascade, Nos 2‑4 Lai Wo Lane, Fo Tan, Shatin, New Territories and (2) Car Parking Space 93 on Basement of Central Block, Ville De Cascade, Nos 2‑4 Lai Wo Lane, Fo Tan, Shatin, New Territories (“the properties”).  On his evidence, P was personally involved in withdrawing about $1.2 million from D1 and transferring the same as a down payment to solicitors to pay for the purchase of the properties. His evidence is that although the properties were purchased with the funds of D1, the properties were, however, registered in the name of Powerful Pacific Limited (“Powerful”) as the registered owner. 

59.  There is no dispute that the shareholders and directors of Powerful are D2, D3 and D2’s wife (“Madam Sae”).  P considers that the properties are held on trust for D1 but over the years it has been occupied by D2 for his own benefit.

60.  D2’s evidence is that in about November 2000 he wanted to purchase a property for himself and his family to reside in.  For that reason, he incorporated Powerful with D3, D2 and another brother Wong Chung Yau, who was a civil servant, as shareholders.  He considered that as his other brother was a civil servant that would enhance the chance of obtaining a mortgage for the purchase of a property by Powerful.

61.  D2 says that as his brother Wong Chung Yau held his share in Powerful on trust for him, he recently directed Wong Chung Yau to transfer his share to Madam Sae.  This was done on 19 May 2014 as shown in the Annual Return for Powerful in evidence (Exhibit WCC-6 exhibited to P’s 1^st affirmation).

62.  D2 accepts that $1.26 million of D1’s funds were used to purchase the properties which he and his family have used for their own benefit. 

63.  D2’s evidence is that the properties have all along been registered in the name of Powerful and beneficially owned by him. D2’s case is that the properties are not beneficially owned by D1.  His case is that the $1.26 million represented loans made by D1 separately advanced to him (for $460,000), to D3 (for $400,000) and to Powerful (for $400,000).  This is disputed by P.

64.  D2 also says that at the time of the purchase of the properties, he agreed with P and D3 that the properties would be used as director’s quarters for D2 and that rental would be paid by D1 to Powerful.  He says that it was also agreed that every month Powerful would borrow monies from D1 to meet its monthly expenses and at the same time charge D1 for rent.  Any difference would be treated as a loan due to D1. 

65.  D2’s case is that D1 has no interest in the properties.  He says that D1 remains a creditor for $1.26 million due from Powerful.

66.  It appears from his evidence that for all those years from November 2000, Powerful has been a debtor of D1 for $1.26 million which has been treated as a loan owing to D1 and that this is still the current position.

67.  P denies the allegations of D2.  There is obviously an issue of fact which cannot be resolved solely on the affidavit evidence. 

68.  The purchase of the properties with the loans made by D1, the monthly rentals paid by D1 to Powerful, the monthly borrowings by Powerful from D1 to pay its monthly expenses are all matters which benefitted D2 and his family at D1’s expense.  I am satisfied that the purpose of the inspection in respect of these matters is to protect P’s economic interest in D1 as a shareholder. 

69.  I am satisfied that P has established a proper purpose for an order for inspection of documents in respect of these matters.  Notwithstanding P’s delay in making an application for inspection, I am satisfied that in the exercise of my discretion, an order for inspection should be made in respect of these matters, although not for all of the categories sought by P. 

The purchase of landed properties in Thailand

70.  The complaint in respect of this matter is made at para 33 of P’s 1^st affirmation.  His evidence is that a piece of land in Thailand was purchased for D1 through Madam Sae who is a Thai national.  P’s understanding is that the price of the land was fully settled by D1’s funds and he seeks inspection of D1’s documents in relation to this transaction.

71.  D2’s evidence is that there was an acquisition of a piece of land in Thailand for investment.  This was for the purchase of a house near an intended resort and as it was an investment to be made in Thailand, it was required to be made be a Thai national.  As Madam Sae was a Thai national, she was chosen to be D1’s nominee for this investment.  D2 says that the total sum spent by D1 should be less than $100,000.  However, the project in Thailand was aborted after the 1997 Asian Financial Crisis and has resulted in a total loss of the investment. 

72.  On the undisputed evidence, the acquision of the piece of land in Thailand was made before the 1997 Asian Financial Crisis. That was over 18 years ago.  I would observe that by the OS, P is not seeking inspection of documents for any period before 1999. 

73.  I would also observe that the complaint made is about the unsuccessful investment made by D1 in a piece of land in Thailand.  As submitted by Mr Lee, for the defendants, correctly in my view, this was a managerial decision made by the directors of D1 at the time.  P was also a director at the time.  In my view, this was a managerial decision of the directors and as such, it is not open to question by P as a shareholder. 

74.  I am not satisfied that a proper purpose has been established in respect of this concern or transaction.  In my view, an order for inspection of documents should not be made in respect of this concern or transaction.

Loans to Madam Sae or third parties

75.  P says in his 1^st affirmation that Madam Sae had once owed a loan shark about $150,000 for a gambling debt and that she was held as a hostage to repay the same.  He says that D1 paid the loan on her behalf but that it has not been fully repaid to D1.

76.  D2 denies the assertions of P.  His evidence is that Ms Sae accompanied a friend to Macau on a date he could not recall.  Her friend incurred a gambling debt from a loan shark and both Ms Sae and her friend were held hostage.  Ms Sae borrowed $150,000 from D1 to help her friend pay off the gambling debt.  D2’s evidence is that the said sum was fully repaid to D1. 

77.  The documentary evidence in exhibit WTS‑27 exhibited to D2’s affirmation supports the repayment of the sum of $123,000.  The balance of $27,000 ($150,000 ‑ $123,000) is an insignificant amount. 

78.  As this transaction took place over 13 years ago, it is unlikely, in my view, that D1 would have any further documents in relation to this transaction which have not been produced by D2 in his affirmation. 

79.  I am not satisfied that a proper purpose for inspection has been established for this concern or transaction.  In my view,  an order for inspection of documents in respect of this concern or transaction should not be made.

The purchase of vehicles funded by D1

80.  P’s complaint at para 34 of his 1^st affirmation is that since 1993, D2 and D3 caused D1 to purchase 3 BMW sedans (Model Nos 318, 540 and 745) and another vehicle registration no AZ328 registered in their own names for their own use. 

81.  D2 in his affirmation explained that the vehicles were purchased with D1’s funds for the use in D1’s business notwithstanding that they were registered in the personal name of D3.  He explained that they were in D3’s name to take advantage of a no‑claim bonus discount in the vehicle insurance policies.  On his evidence, the vehicles have been regarded by D1 as the fixed assets of D1 as shown in the fixed assets section of D1’s audited accounts exhibited as WTS‑21 and WTS‑23 to D2’s affirmation.  D2 also exhibited declarations of trust in favour of D1 executed by D3 in respect of some of the vehicles.

82.  In essence, D2 says that the vehicles have always been regarded as the assets of D1 with declarations of trust executed by D3 in favour of D1.  This is supported by the documentary evidence exhibited by D2 in his affirmation.

83.  Although vehicles were purchased using D1’s funds since as early as 1993, it does not appear from P’s evidence that he ever complained about the purchase of vehicles before making the complaint in his 1^st affirmation affirmed on 20 January 2015. 

84.  I am not satisfied that a proper purpose has been established in respect of the purchase of vehicles.  In my view, an order for inspection of documents in respect of this concern or transaction should not be made.

Conclusion

85.  The only matters in respect of which an order for inspection should be made are in respect of the funds provided to Powerful for the purchase of the properties, the monthly rentals paid by D1 to Powerful and the monthly borrowings by Powerful from D1.  As regards the other concerns or transactions, an order for inspection should not be made.

86.  I am also of the view that the categories of documents sought should also be narrowed down.

87.  I make an order that:

1. D1, acting that by a proper officer, do within 28 days of this order serve on P an affirmation verifying a list of the records of D1 for the period from 1 November 2000 to the date of this order which fall into the following categories:

(1) Contracts or agreements;

(2) Ledgers, journal entries, vouchers and supporting documents; and

(3) Minutes of Meetings of the Board of Directors

in so far as they relate to the provision of funds to Powerful for the purchase of the properties, the monthly rentals paid by D1 to Powerful and the monthly borrowings by Powerful from D1;

2. P shall, within 21 days of service of the list of documents referred to in 1. above, serve on D1 a notice stating the documents in the list of documents which he would like to have copies of (“the notice”);

3. D1, upon payment of reasonable photocopying charges, shall provide copies of all the documents stated in the notice within 7 days of service of the notice;

4. P do have leave to disclose and provide copies of the documents to his legal advisers and accountants duly appointed by him;

5. There be liberty to apply.

88.  I also make an order nisi that D1 should pay 50% of P’s costs of the OS to be taxed on a party and party basis, if not agreed, since P has partially succeeded in his application.