SIT YAU KAM v. FREMERY RESOURCES LTD AND ANOTHER

HCMP 2627/2024

[2025] HKCFI 1142

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2627 OF 2024

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BETWEEN

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REASONS FOR DECISION

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Introduction

1.  This is the application of Sit Yau Kam (“P”) by Originating Summons filed on 6 December 2024 (the “OS”) to inspect and take copies of the documents of the 1^st defendant, Fremery Resources Limited (the “Company”) as specified in §§1.1 to 1.8 of the OS (the “Documents”). P’s application is premised solely on her rights as a director of the Company at common law and under sections 373 to 378 of the Companies Ordinance, Cap 622 (the “Ordinance”).

2.  The Company and the 2^nd defendant Chan Kam Ping (“D2”) were absent at the hearing. However, a letter dated 11 March 2025 addressed to “Honourable Judge” was delivered to P’s solicitors on 14 March 2025. It was not delivered to this Court. The letter comprised a one-page cover letter in English and a bundle of documents in Chinese. The cover letter purports to sum up D2’s “defence statement (in Chinese version)”.

3.  At the outset of the hearing, Ms Bonnie Cheng, counsel for P, provided the Court with a copy of what had been sent to P’s solicitors.

Legal principles

4.  The legal principles are trite and well-established. A useful statement may be found in the judgment of B Chu in Huinong Delta Investments Limited v CCCC Financial Limited, unrep., HCMP 3194/2016, 8 November 2017 at §§16-22.

5.  In summary, a director’s right of inspection at common law flows from the director’s duties to the company and, generally speaking, the exercise of such a right is not a matter of discretion for the Court. Its scope extends to any document belonging to the company and its records.

6.  A restriction would only be imposed if it can be proved that the grant of the right of inspection would be detrimental to the interests of the company, for example where it can be shown that the director intends to abuse the confidence in relation to the company’s affairs and to injure the company in a material way.

7.  Sections 373 to 375 of the Ordinance requires a company to keep accounting records at a company’s registered office or any other place that the directors think fit; that such records must be open to inspection by the directors at all times without charge; and that a director must be allowed to make a copy of its accounting records in the course of inspection.

Relevant background

8.  The 2^nd defendant, Chan Kam Ping (“D2”) is P’s former husband. P and D2 each hold 50% of the shares in that Company which they incorporated in 1995/1996 to carry on their family business of trading iron ores in Hong Kong and Mainland China. P and D2 were and are the only directors of the Company.

9.  D2 brought divorce proceedings against P and the parties separated in September/October 2014 after which D2 continued to run the family business while P ceased to be substantively involved it.

10.  Since 3 September 2020, Michael their only son has been the company secretary of the Company.

11.  Sometime in September 2020, D2 requested P to sign a special resolution to declare the Company dormant on the basis that it no longer had any business activities.

12.  It has transpired that the Company in fact continued to receive commissions from a mining project in Australia pursuant to a Deed of Release entered into on 4 August 2006 with certain Australian counterparties. Clause 5 of that Deed set out the Company’s entitlement to commission and the formula for its calculation.

13.  D2 has issued invoices in the Company’s name and without P’s knowledge for the payment of sizeable commissions in 2019. The sample invoices exhibited show that the relevant commissions paid in 2019 covers the period from October 2013 through to the 2^nd quarter of 2020. The commissions were paid to an offshore account in the Company’s name but without P’s knowledge.

14.  P has also produced evidence of D2 having procured the Company to lend substantial sums to himself, in apparent breach of his fiduciary duties as a director.

15.  The categories of Documents sought in the OS pertain to the matters set out above. Broadly speaking, they comprise:

(1)  Financial statements et cetera of the Company (OS §1.1);

(2)  Corporate documents relating to bank/securities accounts of the Company (OS §1.2);

(3)  Mining Right and Site Lease Agreement[1] (OS §1.3);

(4)  Corporate documents relating to commissions which have been or would be received or owed to the Company under the Deed of Release (OS §1.4);

(5)  Communications between the Company and the Australian counterparties to the Deed of Release (OS §1.5);

(6)  Corporate documents relating to loans from the Company to D2 (OS §1.6);

(7)  Corporate documents relating to transactions between the Company and Fremery Enrich Holdings Limited[2], a corporate vehicle wholly owned by D2 (OS §1.7);

(8)  Corporate documents relating to the appointment of Liu Sheng[3] as company secretary of the Company (OS §1.8);

16.  D2 has ignored P’s prior requests for some or all of the Documents.

Procedural history

17.  The OS and P’s affirmation were served on the Company and D2 on 11 December 2024. On 2 January 2025, D2 filed his Acknowledgement of Service out of time, indicating that he acts in person and intends to contest the proceedings.

18.  D2 failed to file any evidence within 28 days as required by RHC Order 28 rule 1A (4). As of today, after more than 12 weeks D2 has not filed any evidence in opposition. Rather, as earlier noted, he chose to send the letter of 11 March 2025 (with attachments) to P’s solicitors.

19.  The cover letter made unsubstantiated allegations against P. D2 had every opportunity to file his evidence in opposition under the rules but decided not to avail himself of that opportunity. In those circumstances, his letter of 11 March 2025 is not evidence and falls to be disregarded.

20.  The Court was advised that D2 is legally represented in related proceedings (the divorce proceedings). P submitted that this was a conscious decision on D2’s part not to be legally represented.

21.  Ms Cheng also advised the Court of developments that occurred yesterday evening. P received an email from D2 intimating his intention to resign as director of the Company as well as of 2 of the Australian companies.

22.  Upon receipt of the email, P purported to file a notice of change of directors as well as her purported appointment of Michael as a new director. D2 remains a director of the Company until all the procedure and formalities for resignation is completed.

Disposition

23.  There is no doubt that P is entitled to that documents that she seeks in §§1 and 2 of the OS. She also seeks the costs incurred in making this application from D2.

24.  Accordingly, I made an order in terms of §§1 and 2 of the OS and ordered that the costs incurred by P for this application be paid by D2, such costs to be taxed if not agreed.

25.  I would add that so long as D2 is the incumbent director of the Company, he remains under a duty to comply with this Court’s order. Should D2 resign, he remains under a duty to hand over relevant documents to the Board.