LO KAI SHUI v. HSBC INTERNATIONAL TRUSTEE LTD AND OTHERS

HCA 404/2018

[2025] HKCFI 4876

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 404 OF 2018

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D E C I S I O N

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INTRODUCTION

1.  This is the decision on the amended summons taken out by the plaintiff dated 10 December 2024. The plaintiff seeks specific discovery of (1) seven categories of documents against the 1^st and 5^th defendants, and (2) three categories of documents against the 2^nd and 4^th defendants. In this decision, I shall call the plaintiff “Lu”, the 1^st defendant “the Trustee”, the 2^nd defendant “KS”, the 1^st and 5^th defendants together “the Trustee parties”, and the 2^nd and 4^th defendants together “the KS parties”.

2.  The summons (in its original form) came on for substantive hearing on 29 May 2025. It was adjourned part-heard to 26 June 2025.

3.  I wish to make this remark at the outset. It is undeniable that the categories of documents sought, as originally crafted in the summons, are extremely broad in scope. If granted in those terms, it would require, in respect of some of the categories, the Trustee parties to search for documents going back over a period of 40 years.

4.  Notwithstanding the extraordinary breadth of the requests, the Trustee parties have been giving partial discovery in response to the summons. They have done so through their opposing affidavit and by filing their 5^th and 6^th supplemental lists of documents before the substantive hearing. This is to be contrasted with the stance of the KS parties, who have all along opposed the application as a whole. One of their primary complaints is that the scope of discovery is excessively wide, and is hence unnecessary and oppressive. For that reason, the KS parties say that the application is liable to be dismissed in its entirety.

5.  During the adjournment, as directed by the court, Lu narrowed down his requests and lodged a refined list on 9 June 2025.

6.  By letter dated 18 June 2025, the Trustee parties indicated their willingness to conduct searches for some of the refined requests and produce a confirmatory affirmation in respect of them for the purpose of saving time and costs. They made it clear that this should not be taken as an admission to the propriety of Lu’s discovery application. They reserved their right to seek appropriate costs orders, particularly in the event that their searches reveal that they had already disclosed the documents under those categories. The Trustee parties maintained their opposition to the rest of the refined requests.

7.  By letter also dated 18 June 2025, the KS parties maintained their opposition to the discovery application in its entirety, notwithstanding the narrowing down of the requests.

8.  Lu then took out a summons on 23 June 2025, seeking leave to amend the discovery summons so as to formally reflect the refined requests. Leave to amend was granted at the adjourned hearing. I also made an order against the Trustee parties in respect of those categories to which they agreed on the basis stated above. They are categories 1(i), 3, 4 and 7(c) and (d)[1] of Schedule A of the amended summons.

9.  At the conclusion of the adjourned hearing, as regards the Trustee parties, I dismissed the requests under categories 1(ii) and (iii) and 2(i) and (ii), and reserved my decision on the requests under categories 6(c), 7(a) and (b) of Schedule A of the amended summons. As regards the KS parties, I dismissed the requests under categories 1 and 2 and reserved my decision in respect of category 3 in Schedule B of the amended summons. (I should record here that in the course of the hearing, it was agreed that the remaining categories not mentioned above, namely categories 5 and 6(a) and (b), would be dealt with without the need for a court order.)

10.  I now give my decision for the reserved categories, and my reasons for decision for the decided categories.

BACKGROUND

11.  For the purpose of this application, it is unnecessary to set out the factual background of this action and Lu’s claims in detail. It would be sufficient to, and I would respectfully, refer to paras 18 to 34 of the Court of Appeal decision handed down on 18 August 2023 in [2023] HKCA 983 for a broad outline of the background, and para 35 for a brief introduction of Lu’s causes of action as against the Trustee parties and the KS parties.

12.  I shall refer to the Lo family trust as “the Trust”, Great Eagle Holdings Ltd as “Great Eagle”, and the Lo Ying Shek Chi Wai Foundation as “the Foundation”.

13.  For this application, I only need to highlight the following causes of action in general terms. As against the Trustee, Lu alleges breach of trust. The major complaint is that the Trustee failed to maintain the Trust’s de facto controlling shareholding position in Great Eagle in the face of KS’s increasing competing stake. As against KS, Lu alleges conflict of interests in that as appointor and guardian of the Trust, KS accumulated a substantial competing shareholding along with his allies to the detriment of the Trust.

DISCOVERY AGAINST THE TRUSTEE PARTIES

14.  Lu’s application against the Trustee parties is mounted on two bases. First, under Order 24, rule 7 of the Rules of the High Court. Second, under what is referred to by Mr Ambrose Ho, SC, appearing with Mr Andrew Lynn for Lu, as the trust supervisory jurisdiction. Mr Ho has made it clear in his written submissions that Lu primarily relies on the former basis. At the same time, Mr Ho seems to acknowledge the breadth of some of the categories, as he states that insofar as it is necessary, Lu also invokes the trust supervisory jurisdiction, which “supplements and fortifies” his discovery requests.

Order 24, rule 7

15.  The principles governing specific discovery under our civil procedural rules are well-established: see, eg, Hong Kong Civil Procedure 2025 at 24/7/2. I would highlight the following.

16.  The applicant needs to make out a prima facie case of existence, possession and relevance. These are threshold requirements to satisfy in order to establish the jurisdiction to grant discovery. If satisfied, the court has a discretion whether or not to make the order. It will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter or saving costs. The burden is on the party objecting to discovery to demonstrate that discovery is not necessary.

17.  Relevance in the Peruvian Guano sense needs to be established. A document is relevant if it is reasonable to suppose that it contains information which may, not must, either directly or indirectly enable the party requiring the same either to advance his own case or to damage the case of his adversary, or it is a document which may fairly lead the party to a train of inquiry which may have either of these two consequences.

18.  Fishing is not allowed.

19.  In any given case, there is likely to be a spectrum of evidential materiality within which documents may fall. Even where a document is relevant in the Peruvian Guano sense, if its content is such that it is unlikely to contain or yield information of such evidential materiality to the pleaded case, the court is entitled to take the view that it is not necessary for it to be disclosed. There may be cases where the probative value of a document is considered to be so slight as not to justify the inconvenience of giving discovery: see, eg, Lee Sai Nam v Li Shu Chung HCA 1711/2009, 10 January 2014 at paras 49 and 50.

20.  Lastly, discovery should be sensibly controlled and not used as an oppressive weapon pursued without sufficient regard to economy and efficiency of the usefulness of the information which is likely to be gained: see, eg, Billion Lead Investment Ltd v Union Joyce Ltd HCMP 2145/2011, 14 December 2012 at para 20.

The trust supervisory jurisdiction

21.  The court’s inherent jurisdiction to order disclosure of trust documents is separate and distinct from the jurisdiction under Order 24, rule 7. In the latter regime, an adversarial litigation is already on foot and the focal point of the application is the list of issues as disclosed by the pleadings. Existence, possession, relevance and necessity are to be determined by reference to these issues. By contrast, the trust supervisory jurisdiction can be invoked even when there is no existing litigation. A beneficiary may request a trustee to disclose a document in relation to the administration of the trust without any threat of litigation.

22.  Lu is claiming against the Trustee parties for breach of trust. Two issues concerning the trust supervisory jurisdiction arise in this application. First, what is the scope of this jurisdiction? Second, does the jurisdiction apply to the present case?

23.  Mr Ho submits that in an action against a trustee, a beneficiary is generally entitled to the discovery of all documents relating to the affairs of the trust. He relies heavily on what Lord Parmoor said in O’Rourke v Darbishire [1920] AC 581, 619 to 620:

“A cestui que trust, in an action against his trustees, is generally entitled to production for inspection of all documents relating to the affairs of the trust. It is not material for the present purpose whether this right is to be regarded as a paramount proprietary right in the cestui que trust, or as a right to be enforced under the law of discovery, since in both cases an essential preliminary is either the admission, or the establishment, of the status on which the right is based.”

24.  In that case, Lord Wrenbury took the view that a beneficiary’s right to inspect trust documents is a proprietary right. His Lordship said, at 626 to 627:

“If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is a right to see someone else’s documents. The proprietary right is a right to access to documents which are your own.”

25.  Mr Ho further submits that there are several well-established categories of documents that a trustee ought to disclose and where disclosure will as a rule be ordered. Materially, these categories include documents containing legal and professional advice taken by the trustee for the benefit of the trust and paid for from the trust funds. In such a case, there is a strong presumption that these trust documents ought to be disclosed and it is for the trustee who refuses disclosure to give a good reason to rebut the presumption. This is so whether the right of the beneficiary is classified as a proprietary one or not. He cites the decision of the Royal Court of Jersey in Re the Rabaiotti 1989 Settlement 2 ITELR 763, at para 28, in support of this “strong presumption” proposition.

26.  In my view, the modern starting point of a discussion of the scope of the trust supervisory jurisdiction must be the decision of the Privy Council in Schmidt v Rosewood Trust Ltd [2003] 2 AC 709, which confirms that the right of a beneficiary to seek disclosure of trust documents is firmly based upon the trustee’s fundamental duty to be accountable to the beneficiaries in respect of the trust funds. The following principles are laid down, at paras 51, 52, 54, 66 and 67:

(1)  The right of a beneficiary to seek disclosure of trust documents is best approached as one aspect of the court’s inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts.

(2)  This right of the beneficiary is founded not upon any equitable proprietary rights which he may have in respect of those documents but upon the trustee’s fiduciary duty to keep the beneficiary informed and to render accounts. The court will enforce such right of access in order to uphold the beneficiary’s entitlement to a reasonable assurance of the manifest integrity of the administration of the trust.

(3)  There may be circumstances, especially of confidentiality, in which disclosure may be refused. The court has a discretion to order disclosure. Or, put differently, the court has to form a discretionary judgment. No beneficiary has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document.

(4)  Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties.

(5)  Disclosure may have to be limited and safeguards may have to be put in place.

(6)  Evaluation of the claims of a beneficiary may be an important part of the balancing exercise.

27.  O’Rourke must now be seen in the light of the principles explained in Schmidt.

28.  Subsequent case law has applied Schmidt.

29.  In Breakspear v Ackland [2009] Ch 32, the English court was faced with the issue of whether a settlor’s wish letter ought to be disclosed. The court tackled the issue as a matter of discretion. It discussed at length the issue of confidentiality associated with wish letters and a trustee’s decision-making process. The court did not approach the matter by adopting any presumption for or against disclosure: paras 52 to 73.

30.  Erceg v Erceg [2017] 1 NZLR 320 is a decision of the Supreme Court of New Zealand. The court discussed Schmidt and reached the same conclusion as to the basis of a beneficiary’s right to have access to trust documents.

31.  The court emphasised that the starting point is the obligation of a trustee to administer the trust in accordance with the trust deed and a duty to account to beneficiaries. A beneficiary who seeks such an account may seek access to documentation necessary to assess whether the trustee has acted in accordance with trust deed: para 51. However, the court would prefer not to regard it as a discretion, but rather “a jurisdiction that must be exercised in accordance with principle, after careful assessment of the factors relevant to the disclosure sought”: para 50. As there will normally be a number of beneficiaries, the task of the court is to identify the course of action which is most consistent with the proper administration of the trust and the interests of the beneficiaries, not just the beneficiary requesting disclosure: para 53.

32.  The court then, at para 56, set out a number of matters which should be evaluated. They include:

(1)  the documents that are sought;

(2)  the context for the request and the objective of the beneficiary in making the request;

(3)  the nature of the interests held by the requesting beneficiary;

(4)  whether there are issues of personal or commercial confidentiality;

(5)  whether there is any practical difficulty in providing the information;

(6)  whether the documents sought disclose the trustees’ reasons for decisions;

(7)  the likely impact on the trustee and other beneficiaries if disclosure is made;

(8)  the likely impact on the settlor and third parties if disclosure is made;

(9)  whether disclosure can be made while still protecting confidentiality; and

(10)  whether safeguards can be imposed on the use of the trust documents.

33.  The significance of Erceg is that it confirms that the court’s task is to perform an evaluative exercise, taking into account all the relevant matters, and disclosure is not to be ordered as of right. The court also did not analyse the matter in terms of any presumption in favour of disclosure or otherwise.

34.  It is therefore clear from the above authorities that Mr Ho’s submissions as set out in paras 23 and 25 above should be rejected. In an application by a beneficiary to seek disclosure of trust documents under the court’s inherent jurisdiction, the modern approach is for the court to perform an evaluative exercise. In my view, it does not matter too much whether this process is branded as an exercise of discretion or an exercise of jurisdiction, or the making of a discretionary judgment. What is important is that in substance the court is to take into account a host of relevant matters, balance the competing interests of the beneficiaries, the trustee and third parties, and resolve the tension between the advantages and disadvantages of disclosure with a view to coming to a decision that best gives effect to the proper administration of the trust: Schmidt at para 67; Breakspear at para 52; and Erceg at para 53.

35.  Those are the principles which I will apply in this application. I would decline to follow Mr Ho’s submission that I should start with the proposition that a beneficiary should generally be entitled to inspect all the trust documents and that there are specific categories of documents in respect of which a strong presumption would arise in favour of disclosure. This submission is contrary to the weight of the authorities in this area.

36.  I should add here that both parties have cited quite a few other authorities on the scope of the trust supervisory jurisdiction. I do not consider it necessary to discuss them. Insofar as they apply or follow the principles set out in Schmidt, Breakspear and Erceg, they are instances of application of such principles to the specific facts of the cases. Insofar as they deal with the applications by applying any default position or presumption, the approach should not now be strictly followed.

37.  This would answer the first issue which I have set out in para 22 above.

38.  As regards the second issue, Mr Joshua Chan, counsel for the Trustee parties, contend that the trust supervisory jurisdiction is inapplicable in the present case. He emphasises that the jurisdiction is separate and distinct from the rules governing proceedings for breach of trust brought by beneficiaries against trustees. Applications under the former are normally made under Order 85, rule 2 whereas applications in the latter are governed by Order 24. As the present action is a breach of trust litigation, Mr Chan submits that the trust supervisory jurisdiction is not applicable, and Lu must resort to Order 24 to seek discovery.

39.  I do not agree with that submission. As a matter of principle, there is no good reason why there should be an absolute bar which prohibits a party from making an application for disclosure under the trust supervisory jurisdiction in the course of an existing breach of trust action. It is correct to say that the court’s powers to order disclosure under the trust supervisory jurisdiction and under Order 24 are separate and distinct. But it does not follow that they are mutually exclusive in the sense that the applicant has to choose one or the other, but not both.

40.  As a matter of authorities, Mr Chan’s submission is not supported by the passages cited by him from Lewin on Trusts (20^th ed) at paras 21.108 to 21.118 and Breakspear at paras 10 to 13. Those passages reinforce the point that the two jurisdictions are separate and distinct but they say nothing about the applicability (or inapplicability) of the trust supervisory jurisdiction in a breach of trust action.

41.  I therefore hold that Lu may rely on the trust supervisory jurisdiction as well to seek discovery against the Trustee parties.

42.  The last point which I wish to discuss in this subsection is Mr Ho’s submission concerning the interaction between the two jurisdictions.

43.  He submits that in an application under Order 24, rule 7, at the stage when the court exercises its discretion, a trustee’s duty of disclosure under the trust supervisory jurisdiction will be a material consideration. This is because disposing fairly of the case requires due consideration to be given to the trustee’s duty to disclose the requested documents in that it cannot be anything other than fair to order disclosure of documents that the trustee has, in any event, a duty to disclose. Furthermore, costs will be saved if sufficient disclosure is obtained through a standard interlocutory application rather than requiring the beneficiary to bring a separate and potentially costly application under Order 85. He relies on the following remark made in the New Zealand case of Gavin v Powell [2018] NZHC 2866 at para 41:

“I nevertheless consider that the trustees’ obligations as to disclosure and a beneficiary’s right to information will be relevant in determining whether discovery of certain documents sought would be oppressive or disproportionate and in determining, in the exercise of my discretion, whether discovery is appropriate.”

44.  I am prepared to accept that in an adversarial litigation between a trustee and a beneficiary, where the latter applies for specific discovery under Order 24, rule 7, if the court does come to the stage to exercise its discretion, the general trust context may well be a relevant consideration. A relevant context may be that a trustee is under a duty to keep proper records in the course of administering the trust. Another relevant context may be that the court may form a judgment that the documents requested by the beneficiary should be ordered to be disclosed in order to hold the trustee accountable, applying the principles set out in Schmidt, Breakspear and Erceg. Against such context, a view may be taken that discovery would not be oppressive or disproportionate in the circumstances even though the documents may be voluminous.

45.  But, apart from that, I do not agree with the submission that the trust context is necessarily a material consideration in any Order 24, rule 7 application. The exercise of the court’s discretion must depend on the particular circumstances of each individual case.

46.  I shall now address the individual categories under Order 24, rule 7, which is the primary basis for Lu’s discovery application. As will be seen below, I am of the view that no order should be made under that rule. It is therefore necessary to go on to consider whether disclosure should be ordered under the trust supervisory jurisdiction.

Category 1(ii)

47.  Under category 1(ii), Lu seeks the following documents:

“Instructions to seek legal advice(s) and any legal advice(s) obtained from the 1^st and /or 5^th Defendants’ legal advisor(s) (whether external or in-house): … relevant to the matters pleaded in paragraph 60.1 of the Plaintiff’s Re-Amended Statement of Claim as particularized in Answer (4) … and summarized in paragraph 8 of the Affidavit of Brent Edward York dated 7 March 2025”

48.  In para 60.1 of the re-amended statement of claim, Lu alleges the following breach of trust where the Trustee:

“Failed to take any or sufficient steps to inquire into the diminution to the value of the Trust Fund that would occur as a result of failing to maintain or increase the Trust’s absolute and relative percentage shareholding owned directly or indirectly by the Trust in Great Eagle in the face of KS’s competing stake, and in particular failed to take any (or any satisfactory) advice – whether internal or external – from appropriate experts such as lawyers, accountants, and financial valuation experts as pleaded in Answer (4) of the Plaintiff’s 23 January 2019 Answer to the 1^st and 5^th Defendants’ Request for Further and Better Particulars of the Answer to the 1^st and 5^th Defendants’ Request for Further and Better Particulars of the Statement of Claim” (underline added)

49.  Answer (4) sets out the advice which Lu says the Trustee ought to have taken. It comprises:

(1)  generally, the approach to be taken to preserve and increase the value of the Trust’s shareholding in Great Eagle as a de facto controlling shareholding position; and

(2)  specifically, the risk to the value of the Trust that would arise from the Trustee’s failing to take steps to purchase shares in Great Eagle, in view of potential threats posed by the increasing stakes of non-Trust shareholders, including KS and his allies.

50.  In short, under this category, what Lu is now seeking is any legal advice received by the Trustee and any instruction it gave to lawyers concerning the alleged de facto controlling shareholding position of the Trust in Great Eagle. That would cover advice from both external lawyers and in-house counsel. This category will therefore capture not only any formal legal advice compiled by external law firms but also internal emails exchanged between the officers and in-house lawyers of the Trustee.

51.  In the opposing affidavit, Mr Brent Edward York, a director of the 1^st and 5^th defendants, stated that the Trustee had not conducted a search for documents under category 1 but confirmed that to the best of his knowledge, the Trustee did not seek legal advice which falls within this category prior to the commencement of Madam Lo’s action against the Trustee in 2016.

52.  In order to determine the issues of existence, possession, relevance and necessity, one first needs to identify the issue to which this category relates. The relevant pleas are to be found in para 60.1 of the re-amended statement of claim, para 26.1 of the re-amended defence, and para 24 of the re-amended reply.

53.  In gist, Lu’s allegation is that the Trustee failed to take legal advice concerning the alleged de facto controlling shareholding position of the Trust. The Trustee denies that it is under any duty to inquire into the change in value of the Trust’s assets that would occur because of changes in the percentage of shareholding held by other shareholders of Great Eagle. The Trustee further denies that it was under any duty to take advice, whether internal or external, on such changes in value. The Trustee avers that any such duty would impose an excessively onerous burden on it, such duty not being imposed under the trust deed and/or pursuant to the applicable law.

54.  It is therefore plain, in my view, that the real debate here is whether the Trustee was under a duty to obtain legal advice. It is an objective question of law, going to the scope of the Trustee’s duty. The resolution of this question of law does not turn on the factual question of whether, and if so, what legal advice was sought and received. That is the submission made by Mr Chan and I agree with him.

55.  I am not satisfied that Lu has made out a prima facie case of existence in respect of category 1(ii).

(1)  Brent York specifically stated in his affidavit that no search had been done for this category. Hence I take it to be the Trustee’s position that it cannot definitively confirm that the documents do not exist. However, in this application, the burden is on Lu to establish the existence of the documents, rather than on the Trustee to disprove it.

(2)  To discharge the burden, Mr Ho submits that there is a real likelihood arising from the circumstances that a professional trustee in the position of the Trustee, in refusing repeated requests from multiple beneficiaries to purchase shares in Great Eagle, would take some legal advice on its investment duties. He further submits that it would have been good business practice for the Trustee to take legal advice in respect of such an important, and repeated, request from multiple beneficiaries: Union Bank of India v General Nice Resources (Hong Kong) Ltd HCA 299/2007, 10 May 2010 at para 10.

(3)  While a prima facie threshold is a low one, I am not satisfied that the points made by Mr Ho are sufficient to surpass that threshold. The Trustee’s position is that it did not consider it was under any duty to take legal advice in relation to the alleged de facto controlling position. That would suggest that no legal advice would be taken. On this, Lu has not been able to point to anything which suggests otherwise. Mr Ho’s points appear to be purely speculative.

56.  I am also not satisfied that relevance is made out. I repeat what I have said in para 54 above. The real debate at the trial will be whether the Trustee was under a duty to take legal advice. Any legal advice, if existed, would not help resolve this issue and hence is not relevant for discovery purposes.

57.  As the prerequisites for discovery are not established, there is no need to determine the issue of necessity for category 1(ii). However, if I am wrong on the above, I would hold that necessity is not made out and the court should not exercise its discretion to grant discovery.

58.  Mr Chan submits that this category is plainly unnecessary and disproportionate. The request would most likely require the Trustee parties’ solicitors to review a large number of documents as the request is formulated without any temporal limitation and there is likely to be a significant number of communications between the Trustee and its then legal advisers containing relevant search terms such as “premium” and “Great Eagle shares” by virtue of Madam Lo’s actions and the present action.

59.  Mr Chan has also pointed out that extensive discovery has already been provided by the Trustee parties. There has been disclosure of over 2,000 documents containing over 10,000 pages. In my view, I agree that the (further) substantial time and efforts that are expected to be spent by the Trustee parties on complying with this request is a factor against discovery.

60.  However, more importantly, I do not think that it is necessary to present such legal advice, if existed, to the trial judge in order for him to dispose of the case fairly. If the court holds that there is no duty to seek legal advice as alleged, that will be the end of the matter (as far as this point is concerned) and there is no need to further look at any actual legal advice received. If the court holds otherwise and finds that there was such a duty, as things presently stand, the Trustee has not put forward any evidence of legal advice which it had obtained, and, on that basis, the court will likely find that it had failed to fulfil such duty. Either way, the dispute between the parties in relation to legal advice can be properly resolved without the need to go into the content of any legal advice that might have existed.

61.  The request under category 1(ii) should be dismissed.

Category 1(iii)

62.  Under category 1(iii), Lu seeks the following documents:

“Instructions to seek legal advice(s) and any legal advice(s) obtained from the 1^st and /or 5^th Defendants’ legal advisor(s) (whether external or in-house): … relevant to the matters pleaded in paragraphs 60.6 and 60.7 of the Plaintiff’s Re-Amended Statement of Claim”

63.  In para 60.6 of the re-amended statement of claim, Lu alleges the following breach of trust where the Trustee:

“Wrongly considered itself – and misdirected itself in law in considering itself – under a “fiduciary duty to diversify” (as per the Trustee’s Note of Meeting dated 1 March 2013) and “bound” to diversify the Trust’s holdings in Great Eagle in the absence of a “specific provision – directing the Trustee to retain the specific concentrated holding or prohibiting the Trustee from selling it” (as per Ms Paulina Lau’s email dated 6 September 2013). Insofar as this proposition as to the Trustee’s purported duty was based merely on “some case law”, as indicated in the email, which had neither been disclosed nor properly considered, and appears to be based on non-Hong Kong law, the error was grossly negligent.”

64.  In para 60.7 of the re-amended statement of claim, Lu alleges the following breach of trust where the Trustee:

“Failed, in circumstances in which it is alleged by the Trustee that concentration risk was a relevant and/or determinative consideration mandating against the purchase of further shares in Great Eagle, to carry out any or sufficient contemporaneous analysis:

60.7.1 As to the degree of risk, including analysis of probability and extent of possible loss, as well as alternative solutions to manage such risk as may have been identified, and mitigating or countervailing factors;

60.7.2 As to the extent to which any risk attributable to concentration could be counterbalanced by benefits arising from maintaining the Trust’s de facto control over Great Eagle; and

60.7.3 As to the extent to which any risk attributable to concentration is counterbalanced by the high NAV of Great Eagle shares relative to market price per share.”

65.  In short, under this category, what Lu is now seeking is any legal advice received by the Trustee and any instruction it gave to lawyers concerning the issue of concentration risk.

66.  To understand the issue of concentration risk, one needs to look at the following pleas: the above pleas in the re-amended statement of claim, paras 26.9 (which in turn refers to paras 15.2 and 23.2 to 23.4 and to which para 15.4 is also relevant) and 26.10 of the re-amended defence, and paras 12, 19 and 20 of the re-amended reply.

67.  In gist, it is the Trustee’s case that it administered the Trust on the basis that it was under a duty to diversify the portfolio of the trust assets and avoid concentration risk. This arises from the Trustee’s general duty to act in the best interests of the beneficiaries and to prudently invest the trust assets in order to produce a return for them. To fulfil this duty, a reasonable trustee would seek to invest in a portfolio of reasonably diversified assets. In the administration of the Trust, the Trustee became, and remains, concerned about the concentration of the assets of the Trust on the shares in Great Eagle. As at 30 April 2016, the Trust’s shareholding in the company represented approximately about 87% of the then aggregate value of the Trust. This has been referred to as “the concentration risk” in the pleadings. The Trustee took, and maintains, the view that further substantial investment in Great Eagle would not be the right direction to go in terms of investment policy.

68.  It is therefore plain, in my view, that the real debate here is whether the Trustee’s stance on the duty to diversify and concentration risk was right or wrong. It is an objective question, which does not turn on any legal advice which the Trustee might have received. That is the submission made by Mr Chan and I agree with him.

69.  I am not satisfied that Lu has made out a prima facie case of existence in respect of category 1(iii).

(1)  Unlike category 1(ii), the Trustee parties have in fact already provided disclosure of documents which potentially come under para 60.6 of the re-amended statement of claim. They comprise: (a) those setting out the basis for its position, including internal manuals and guidelines concerning the management of concentration risk, and (b) those showing that at the time, it had been advised by its in-house lawyer of its duty to diversify the Trust’s investments.

(2)  For (b), see this internal email from Jacqueline Shek, whose title was Associate General Counsel, to Paulina Lau, whose title was Senior Director, sent on 27 February 2013:

“Dear Paulina

On Gwen’s point about the existing clause 12(a), our view is that it is not sufficient to justify holding onto the GE Shares indefinitely.

Specifically, case law (particularly in the US) suggests that a permissive provision or mere authorization to retain certain investment is not sufficient to insulate a fiduciary from liability for failure to diversify. In order for the trustee to abrogate the duty to diversify, the trust must contain specific language authorizing or directing the trustee to retain specific investment. Our existing clause 12(a) merely say that the trustee ‘shall be entitled to permit”.

…”

(3)  Hence, the burden is on Lu to make out a prima facie case that there is additional, undisclosed legal advice on this point.

(4)  To discharge the burden, as far as I can see, Mr Ho is saying that the email chain containing the above quoted email from Jacqueline Shek to Paulina Lau was only disclosed by Brent York in his opposing affidavit. This shows how inadequate the Trustee’s observance of its discovery obligations has been. This is because the issue of concentration risk had clearly been raised in the pleadings and it lies at the very nub of the issue in this litigation. The fact that the Trustee only disclosed this email chain seven years after the commencement of the action and only in the face of a discovery application raises real doubts as to the adequacy of the Trustee’s discovery compliance so far.

(5)  I do not agree with this observation. I have identified the core issue concerning concentration risk in para 68 above. Given that the resolution of the issue does not turn on the actual content of any legal advice received by the Trustee, there is no obligation on its part to make discovery in the first place. I do not therefore agree that the Trustee’s discovery compliance has been inadequate as suggested by Mr Ho.

(6)  As for documents which come under para 60.7 of the re-amended statement of claim, the Trustee’s position is that it did not consider that it was under any duty to carry out the alleged analysis. The likelihood is therefore that no such legal advice existed.

70.  I am also not satisfied that relevance is made out for the reasons set out in paras 68 and 69(5) above. In addition, Lu has failed to establish relevance in the Peruvian Guano sense. The documents so far disclosed show that the Trustee has been taking a consistent stance on concentration risk. There is therefore no obvious basis for Lu to suggest that any further legal advice, if existed, would be contrary to, or inconsistent with, the Trustee’s stance. The disclosure of such advice, if any, would therefore not help advance his case or undermine the Trustee’s.

71.  As the prerequisites for discovery are not established, there is no need to consider the issue of necessity for category 1(iii). However, if I am wrong on the above, I would hold that necessity is not made out and the court should not exercise its discretion to grant discovery.

72.  In this regard, Mr Chan makes the same submission as that in respect of category 1(ii). The request would require the Trustee to review voluminous documents. It is thus oppressive. I agree. More fundamentally, however, the documents are not necessary for the fair disposal of the issue. I would ask this question – what is the point of Lu getting hold of more documents recording similar advice as has already been disclosed? In my view, it would not help resolve the dispute.

73.  The request under category 1(iii) should be dismissed.

Category 2(i) and (ii)

74.  Under category 2, Lu seeks the following documents:

“Instructions to seek professional and/or expert advice and any professional and/or expert advice obtained from the 1^st and/or 5^th Defendants’ advisor(s) (whether external or in-house), including financial, corporate, securities and/or trust valuation and/or accounting experts(s) and/or advisor(s),

(i) relevant to the matters pleaded in paragraph 60.1 of the Plaintiff’s Re-Amended Statement of Claim as particularized in Answer (4) … and summarized in paragraph 8 of the Affidavit of Brent Edward York dated 7 March 2025; and/or

(ii) relevant to the matters pleaded in paragraphs 60.6 and 60.7 of the Plaintiff’s Re-Amended Statement of Claim, including but not limited to instructions to and/or advice obtained from Grant Thornton UK LLP by Messrs. Stephenson Harwood LLP as agent of the 1^st Defendant for advice on administration of the Trust unless previously disclosed.”

75.  This request stems from the same pleas in the re-amended statement of claim as in category 1. The only difference is that category 1 concerns legal advice whereas category 2 concerns other types of professional advice, including from financial, corporate, securities and/or trust valuation and/or accounting experts. Brent York also made a confirmation in respect of category 2 similar to the one set out in para 51 above.

76.  Due to the similar nature, the above analysis on category 1 should apply equally to category 2. In fact, it can be said that the request under category 2 is even more oppressive than that under category 1 because the former covers a much wider range of expertise.

77.  The request under categories 2(i) and (ii) should be dismissed.

Category 6(c)

78.  Under category 6(c), Lu seeks the following documents:

“Financial documents in respect of the Lo Ying Shek Chi Wai Foundation (“Foundation”) unless previously disclosed, including but not limited to the following documents: … Monthly statements of assets of the Foundation, issued by HSBC Private Banking to the 5^th Defendant, from the establishment of the Foundation up to the financial year ended 30 April 2014”

79.  I should point out at the outset that the Trustee parties have already disclosed, or have agreed to disclose when available, the documents requested under categories 6(a) and (b). They are the annual financial statements of the Foundation from the year ended 30 April 2011 to the year ended 30 April 2024. Category 6(c), which is now being pursued, covers monthly statements over a shorter period of four years within that period, namely 2010 to 2014. I shall call that period “the four-year period”. In addition, there has also been discovery of one monthly statement issued by HSBC Private Banking to the 5^th defendant as trustee of the Foundation which was made up as of August 2013. I shall call that “the August 2013 monthly statement” below.

80.  The background to this request are a group of claims made by Lu against the Trustee in respect of the Foundation, as pleaded in paras 101 to 125A of the re-amended statement of claim.

81.  The Trustee made distribution in 2009 and, again, in 2015. Among other distributions, the Trustee distributed trust assets to KS in 2009 for settlement of a charitable trust. KS subsequently established the Foundation, with the 5^th defendant as its trustee, and transferred the distributed assets to the Foundation in May 2010. In December 2015, the Trustee resolved to add the 5^th defendant in its capacity as the trustee of the Foundation as beneficiary of the Trust, and distributed further assets to the Foundation.

82.  Lu’s complaints include:

(1)  In respect of the 2009 distribution, the distribution to KS for the establishment of a charitable trust constituted a fraud on a power in that the Trustee had no power to make it because at the time there was no charity that fell within the definition of “Eligible Beneficiary” under the trust deed.

(2)  In respect of the 2015 distribution, it involved a breach of the trust terms because the Foundation falls outside the definition of “Eligible Trust”.

(3)  Also, the Trustee breached its duties because it misapprehended or failed to apprehend that the transfer of funds to the Foundation involved the misappropriation of the trust funds outside the Trust under the management of KS, KS being the chairman, member of the Advisory Committee and the Management Committee of the Foundation.

83.  Within this group of claims, there is an allegation made by Lu that (1) the greater part of the funds transferred to the Foundation from the Trust are being held as investments under the control of KS rather than funding independent charitable causes, and (2) KS has been using funds to purchase shares in Champion REIT and Langham-SS, of which he is chairman, which may give rise to a conflict of interest. The allegation is made in para 120B.3 of the re-amended statement of claim and para 47.12 of the re-amended reply. I shall call this allegation “the para 120B.3 allegation”.

84.  The Trustee denies the alleged fraud on power, the alleged breaches of trust and the alleged misappropriation. The Trustee also says that Lu is estopped from bringing these claims by reason of his concurrence, acquiescence and laches: see paras 57 to 66 of the re-amended defence.

85.  The request in category 6(c) is raised, and maintained (notwithstanding the extensive disclosure of the annual financial statements disclosed under categories 6(a) and (b)), in relation to the para 120B.3 allegation for the following reasons:

(1)  The August 2013 monthly statement shows that at that time, in the Foundation’s account held with HSBC Private Banking, nearly 97% of the portfolio amounting to about US$15 million were holdings in Champion REIT and Langham-SS. This piece of information would therefore appear to support the para 120B.3 allegation.

(2)  While the Trustee has disclosed annual statements of accounts for the four-year period, they do not contain information or breakdown of the Foundation’s investments, in particular its holdings in Champion REIT and Langham.

(3)  The monthly statements of the Foundation should contain a breakdown of its investments. And that would be relevant to the resolution of the para 120B.3 allegation.

86.  I do not think that there is any dispute that the monthly statements for the four-year period exist and are in the possession of the Trustee parties.

87.  I am satisfied that Lu has made out a prima facie case of relevance.

(1)  Included in the hearing bundle is one annual statement of account which falls within the four-year period and that is the statement for the year ending 30 April 2014. It shows that as of the year end, the bulk of the Foundation’s assets were “FUNDS WITH INVESTMENT MANAGER(S) / ON ADVISORY A/C”. There is, however, no breakdown showing what these funds comprised.

(2)  Mr Chan’s submission is that one can tell from the annual statements of account for the four-year period the manner in which the Foundation invested its funds. That would appear to be incorrect, judging from the above 2014 annual statement.

(3)  On this point, I agree with Lu’s position as set out in paras 85(1) to (3) above.

88.  However, I am of the view that the court should not exercise its discretion to grant discovery of these monthly statements.

89.  It is important to bear in mind that discovery should be sensibly controlled with sufficient regard to economy and usefulness of the information which is being sought. This is particularly so in an action in which extensive and far-ranging allegations and cross-allegations are made and numerous issues are to be resolved at trial, just like the present action.

90.  From the outline of the parties’ cases set out above, it is plain that the para 120B.3 allegation is only one of the many allegations raised within the group of claims which concern the Foundation, which itself is one of the many categories of claims mounted by Lu against the Trustee parties in this action. I think it is fair to say that, practically speaking, the para 120B.3 allegation is a minor point in the overall scheme of things.

91.  I also take into account the fact that the monthly statements now asked for by Lu relate only to the four-year period (when the Foundation has been in existence since 2010), and the August 2013 monthly statement already disclosed is within that period. It means that there is already material based on which Lu may pursue the para 120B.3 allegation insofar as the four-year period is concerned.

92.  Discovery is therefore, in my view, not necessary for a fair disposal of the action as a whole. Nor do I consider that the time, costs and efforts to be incurred on the discovery of these documents will be proportionate to the resolution of the action, given the relatively minor importance of the para 120B.3 allegation in this case.

93.  In the circumstances, I consider that it is open to me to, and I do, exercise my discretion to decline discovery in respect of this category, even though the documents may be relevant to one of the issues in the action.

94.  The request under category 6(c) is therefore not allowed.

Category 7(a)

95.  Under category 7(a), Lu seeks the following documents:

“Communications recorded in documents (in the form of emails, correspondence, meeting minutes, telephone notes, mobile phone texts, audio recordings of telephone calls, etc.) between (i) KS; and (ii) Paulina Lau and/or Bernard Rennell of the 1^st Defendant to which reference has been made in the disclosed documents identified in paragraph 68 subparagraphs (a) to (d) of the 6^th Affirmation of Gilbert Kwok dated 10 December 2024”

96.  The document identified is an internal email of the Trustee dated 30 April 2015 and was sent by Bernard Rennell to Paulina Lau and Brent York. Bernard Rennell’s title was Regional Head of Global Private Banking, Asia Pacific and Global Head of Family Governance and Family Enterprise Succession of HSBC Private Bank. The subject of the email was “ks”. The contents read:

“further to discussions with above i’m thinking about some ways to help him which i would like to discuss with you.

first though, would you be able to give me an idea of the % of GE shares

[Bullet points which set out a list of entities, including KS, are not reproduced here]” (underline added)

97.  The request is for documents recording the discussions between KS and Bernard Rennell referred to in the above email.

98.  The background to this request is the series of claims made by Lu against the Trustee and KS as appearing in paras 30, 147 to 154 of the re-amended statement of claim. Broadly, Lu contends that the Trustee has acted in breach of its duty to act with undivided loyalty in the best interests of the Trust and the “Eligible Beneficiaries”, KS’s relationship with the Trustee is such that he is unable to exercise his duties as a person appointed to the offices of appointor and guardian objectively and neutrally, and the Trustee has been in breach of its duty to exercise its powers impartially. As described by Mr Ho in the hearing, Lu is saying that there has been improper association between KS and the Trustee in the administration of the Trust.

99.  The Trustee’s position is that there has not been any inappropriately close relationship. It denies that it has attempted to help KS to take control of Great Eagle: paras 67, 67A, 67B and 67C of the re-amended defence.

100.  According to the Trustee’s case, the discussions referred to in the email can be traced back to its concern about the concentration risk. The Trustee had put forward multiple ways to address the issue since 2010. This included requesting the family members to sign waivers in about 2013. Under the proposed waivers, the beneficiaries would confirm that they were fully aware of the risks associated with the retention of shares in Great Eagle and they would agree to waive all claims which they would have against the Trustee arising out of such retention. However, only some of them proceeded to sign the waivers. Hence, the Trustee had to explore other ideas. One preliminary idea which was considered in 2015 was a buyout of the interests of those family members who were not willing to provide waivers.

101.  I am satisfied that there is a prima facie case of existence (and possession) of documents recording the discussions between KS and Bernard Rennell referred to in the email. The documents disclosed by the Trustee parties to date include recordings and transcripts of telephone conversations between the Trustee and the beneficiaries.

102.  I am, however, not satisfied that Lu has established relevance.

(1)  Lu is seeking the documents to show that there has been improper association between KS and the Trustee.

(2)  The Trustee denies any improper association and explains that it was in discussions with KS to explore alternative solutions to the concentration risk issue. Hence, any documents uncovered under this category would be of no use to Lu.

(3)  Whether that explanation is true or not is of course a matter for trial.

(4)  In this discovery application, the burden is not on the Trustee to show that the documents are not going to be relevant. It is for Lu to demonstrate that the documents would help advance his case.

(5)  But it is plain to me that there is no plausible basis for Lu to say so. All that he can point to is (a) the fact that there were private discussions between KS and Bernard Rennell, to the exclusion of other beneficiaries, and (b) Bernard Rennell said in the email that he was thinking of ways to “help” KS.

(6)  As to (a), there is nothing inherently wrong for a senior representative of the Trustee to be engaged in one-to-one discussions with KS about the Trust, who is one of its appointors and guardians, and himself a beneficiary. As to (b), the reliance on the word “help” is plainly unjustified. It is a simple English word. Whether the help is being offered with a proper intention or an improper one must depend on the context in which the word is used. Lu has simply failed to put forward any basis to suggest that in this case, the “help” was being offered with an improper intention. The suggestion that one may deduce that there was some improper intention solely based on the use of the word “help” is tenuous at best and hopeless at worst.

(7)  What Lu seems to be doing is that he is trying to get hold of more documents recording the communications between KS and the Trustee without being able to say that they may reveal some improprieties but in the hope that they may provide more information for them to pursue more enquiries. This is classic fishing. Discovery should be refused.

103.  If I am wrong about relevance, I would still refuse discovery as it is oppressive.

104.  Mr Chan highlights that in the discovery made to date, voluminous documents recording communications between KS and the Trustee have already been disclosed, and that there will be practical difficulties and significant costs involved in identifying documents responsive to category 7(a). This is because it is not known from the email itself when those prior discussions took place and what the contents were. The Trustee parties would potentially have to review multiple years’ worth of emails, notes of calls, mobile phone texts etc (from say 2010). That is to be contrasted with categories 7(c) and (d), where the emails in question actually mention specific dates of the communications.

105.  I agree with the submission and, for that reason also, I would decline to order discovery of the category 7(a) documents.

Category 7(b)

106.  The document identified in category 7(b) is a transcript of a telephone call between KS and Paulina Lau on 7 January 2016. This took place shortly after the Trustee received a letter from Madam Lo’s solicitors which purported to depart from an earlier letter of wishes issued back in October 1988.

107.  Lu relies on the following exchange (reproduced below is the English translation of the conversation):

“KS: I don’t know, I completely have no idea, I don’t know. He/she did all these things behind my back. But he/she made my Mother sign this … I feel that this is a bit off. Well … I … I can tell you, they can really do anything, I think apart from hiring an assassin, they really can do anything, (Laughs) especially Nina … Antony, Lu, those are cunning and very powerful …

Paulina Lau: Hmm …

KS: … as you already know, but for these things how should one deal with it?” (underline added)

108.  The basis of Lu’s request is that KS made allegations about Nina, Antony and Lu in the above conversation, and the words “as you already know” indicate that there were prior discussions between KS and Paulina Lau in relation to those allegations. At the hearing, Mr Ho tried to spell out precisely what the subject matter of those prior discussions was. He submitted that the words “as you already know” showed that there were prior communications between KS and Paulina Lau regarding their association and their attempt to ward off challenges or requests of the other beneficiaries.

109.  Lu seeks documents recording these prior discussions as they would show the improper association between KS and the Trustee.

110.  It is plain to me that this is yet another attempt to fish for documents without a proper basis but in the hope that something would turn up.

111.  I am not satisfied that a prima facie case of existence of these discussions, and hence the documents recording them, is established. The words “as you already know” do not suggest there were prior discussions.

(1)  KS was referring to the “cunning and very powerful” nature of his siblings and said that that was something which Paulina Lau already knew.

(2)  Mr Chan submits, and I agree, that KS might well be just referring to the siblings’ personalities generally, and Paulina Lau’s perception gained from her interactions with them over the years.

(3)  I reject the oral submission of Mr Ho as being far-fetched and reading too much into the words “as you already know”.

112.  If I am wrong about this, I would still refuse discovery as it is oppressive. The reasoning in para 104 above applies with even more force here. If discovery is granted, the Trustee parties are supposed to conduct a search of their records to look for discussions in which the “cunning and very powerful” nature of the siblings was discussed. The search will be unlimited as to time period or specific subject matter.

113.  For that reason also, I would decline to order discovery of the category 7(b) documents.

Should discovery be made under the trust supervisory jurisdiction?

114.  I have refused discovery of all of the above categories under Order 24, rule 7. It is therefore necessary to consider whether a disclosure order should be made under the trust supervisory jurisdiction. As accepted by Mr Ho, this jurisdiction does not apply to category 6(c), as that is a request made to the 5^th defendant, not the Trustee.

115.  Applying Schmidt, Breakspear and Erceg, the rationale for a disclosure order under this jurisdiction is to hold the trustee accountable to the beneficiaries, the order being a means of achieving accountability. The court’s task is to carry out an evaluative exercise.

116.  In this case, I consider that there are two matters which carry significant weight.

117.  First, the context for Lu’s request and his objective in making the request: see Erceg para 56(b). In that case, it was said:

“The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur.”

118.  The context here is indisputably the present breach of trust action brought by Lu against the Trustee. Lu’s objective is plain. He seeks these documents in order to advance the extensive claims and allegations which he has already made against the Trustees. I have concluded that no discovery should be ordered under Order 24, rule 7. This means that Lu’s present complaints can be properly and fairly resolved without these documents. There is therefore no reason to order disclosure of the same documents under the trust supervisory jurisdiction in order to hold the Trustee accountable to Lu in respect of these existing claims.

119.  To complete the analysis, as submitted by Mr Chan, there is no suggestion from Lu that the Trustee has engaged in other conduct falling outside the scope of this action which requires investigation. It is therefore not a case where one would say that the disclosure is plausibly required in order to hold the trustee accountable.

120.  Second, the practical difficulty in providing the information: see Erceg at para 56(e). For the reasons stated in paras 58, 59, 72, 76, 104 and 112 above, a disclosure order would present real and practical difficulties to the Trustee and the process of identifying the documents can be expected to generate significant costs. I agree with Mr Chan’s submission that this may result in detriment to the other objects of the Trust, since the Trustee may ultimately be entitled to seek reimbursement of the costs from the Trust.

121.  It is important to bear in mind that the trust supervisory jurisdiction is not to be exercised solely for the benefit of the requesting beneficiary. The court is to take a course of action which is most consistent with the proper administration of the trust and the interests of the beneficiaries as a whole: Erceg at para 53. In the present case, I conclude that the circumstances do not warrant ordering disclosure as sought by Lu.

DISCOVERY AGAINST THE KS PARTIES

122.  The discovery sought against the KS parties is made under Order 24, rule 7 only. There are three categories of documents. I shall deal with categories 1 and 2 together as the same issue of existence arises.

Categories 1 and 2

123.  Under categories 1 and 2, Lu seeks the following documents:

“Category 1

Voting records, proxy forms, voting instructions/ confirmations, communications recorded in documents (in the form of emails, correspondence, meeting minutes, telephone notes etc.) in relation to the exercise /non-exercise of voting power at all Annual General Meetings and Special General Meetings of Great Eagle from 1 January 2004 up to the date of disclosure of Great Eagle shares owned/controlled by:-

1. KS (personally and through corporate entities and related trusts owned/controlled by him);

2. Proxy givers giving proxy forms to KS as the chairman of Great Eagle;

3. The Concert Group as defined in paragraph 38 of the 2^nd and 4^th Defendants’ Re-Amended Defence dated 30 October 2024; and

4. The allies of KS as defined in footnote 1 to paragraph 34 of the Plaintiff’s Re-Amended Statement of Claim dated 2 October 2024.

Category 2

1. The voting/poll results of all Great Eagle shareholder general meetings in 2004.

2.  Great Eagle’s shareholder registers as at the dates of all Annual General Meetings and Special General Meetings from 2004 to the date of disclosure.”

124.  These two categories are generally referred to as the voting records, voting results and shareholder registers of Great Eagle in this application. Lu’s request is made on the basis that KS has the documents in his power in his capacity as managing director and chairman of Great Eagle.

125.  It is unnecessary to spell out why Lu wants these documents. This is because he has, in my view, failed to establish that they are within the power of the KS parties to obtain. The request for discovery therefore fails for that reason.

126.  There is no dispute that the documents sought are company documents belonging to Great Eagle and should be in its possession, and that KS is the chairman and managing director of the company. The material question is whether, for discovery purposes, given KS’s position within the company, it is in his power to obtain those documents from the company and make use of them in this litigation.

127.  Ms Elizabeth Cheung, appearing for the KS parties, points out that Lu has in fact previously taken out a summons in June 2019 seeking third party discovery of essentially the same documents against Great Eagle and/or Computershare Hong Kong Investor Services Ltd. That summons was adjourned sine dine with liberty to restore pending determination of a number of interlocutory applications. Following the decision of the Court of Appeal in August 2023, those applications were finally determined. Yet, Lu has chosen not to restore the summons without giving any explanation.

128.  Returning to the application against the KS parties, the general principles governing the material question of “power” are as follows.

129.  In the discovery context, the word “power” means a presently enforceable legal right to obtain from whoever actually holds a document and to inspect it without the need to obtain the consent of anyone else: Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 at 635H.

130.  In a case where documents belonging to a company are being sought against a person related to the company, for example a director, when the company itself is not a party to the litigation, the question of whether it is within that person’s power to obtain the documents is a question of fact in each case. This was explained in B v B (Matrimonial Proceedings: Discovery) [1978] Fam 181 at 188F-G:

“But the right to inspect, under the provisions of that section, is a right vested in a director in his capacity as a director or officer of the company; he is in a fiduciary relationship with the company; he owes duties to the company and to its shareholders. Without the consent of the company he has no right to inspect documents, much less to take copies of them or remove them from the premises of the company for his own purposes unconnected with the business of the company. Because, in his capacity as a director, he has the right to inspect the company documents, it does not follow that in his personal capacity he has an enforceable right to inspect or to obtain possession or control of them so that the documents can be said to be in his power. It is a question of fact in each case whether or not a director has such an enforceable right; much will depend upon the share structure of the company.” (underline added)

131.  The importance of differentiating the different capacities of the director in question was highlighted in the English Court of Appeal decision in Re Tecnion Investments Ltd [1985] BCLC 434 at 437g-h:

“In particular, it is not suggested and, in my view, rightly not suggested that the mere fact that a party to litigation is a director of a company and has, as a director, a right to inspect the documents of the company for the purposes of the company’s business makes those documents of the company documents in the power of the director for purposes of general discovery in litigation to which the director in his personal capacity happens to be a party.”

132.  The above principles have been applied in Hong Kong: see Ngan In Leng v Chu Yuet Wah (No 1) [2013] 1 HKLRD 717 at para 44; Bruno Arboit v Koo Siu Ying HCMP 2749/2012, 8 March 2016 at paras 138 to 142. It was said in the latter case that in the context of a one man company, where the director owns all or substantially all the shares and any minority shareholders are not adverse to him, then the inference may be drawn that the company, although a separate legal entity, does not control him but he controls the company in such manner as to make it his other person or alter ego, and in such a case documents of the company are within the director’s power in the sense that in truth and in fact he is able to obtain control of them.

133.  Mr Ho submits that if a shareholder is also a chairman and managing director of a company, this is persuasive evidence that he would have in his power to obtain all of the company’s business documents in that capacity. He relies on the following remark made by the Court of Appeal in Innovisions Ltd v Chan Sing Chuk, Charles CACV 55/1992, 4 August 1992 at pp7-8:

“We would have thought it strongly arguable that as Chairman and Managing Director he had all of the company’s business documents in his power in the period during which he occupied those positions.”

134.  I would make three points on the above remark:

(1)  It was a comment made on the facts of that case. It is worth pointing out that the director there was not only chairman and managing director of the company, but also its founder and substantial shareholder, and “had a dominant role in the executive and management functions of the company” (p9).

(2)  The remark was obiter, as one can tell from reading the rest of the paragraph in which it was made:

“Whether he could properly have been held to have had power over the documents by virtue of his position as “Chairman and Managing Director” of Continental does not, as far as the judge’s ruling reveals, appear to have been canvassed. …  This matter has, however, not been raised by way of cross-appeal and we need, therefore, concern ourselves with it no further.”

(3)  Authorities such as B v B and Re Tecnion were not discussed.

135.  For the above reasons, the principles which I would apply in this application would be those adopted in B v B, Re Tecnion, Ngan In Leng and Bruno Arboit. I will not take the obiter remark in Innovision as the starting point of my discussion, and will not treat the mere title of the director in question, on its own, as persuasive evidence of his power over the company documents.

136.  Here, Great Eagle is not a party to this litigation. The fact that KS is its chairman and managing director does not, without more, confer on him a power to obtain corporate documents from Great Eagle in order to pursue his defence in this litigation, which is unconnected with the company’s business. It is for Lu to establish a prima facie factual case that KS controls Great Eagle in such a manner that it may be said that in truth and in fact he controls the company such that he is able to obtain control of the documents belonging to the company.

137.  The objective facts here are plainly a far cry from that type of situation. Great Eagle is a listed company and KS is one of the 15 directors sitting on the board (including independent non-executive directors). He simply does not have that level of control which is required to establish that it is within his power to obtain corporate documents from Great Eagle for his own personal use.

138.  It is true that, as a matter of reality, owing to his position, KS may be given access to company documents if he makes a request to the staff. But that is beside the point. That does not amount to a presently enforceable legal right to obtain documents.

139.  I therefore hold that it is not within KS’s power to obtain the documents from Great Eagle. As such, the court has no jurisdiction to order discovery against the KS parties.

140.  The request under categories 1 and 2 should be dismissed.

Category 3

141.  The request under category 3 as against the KS parties is the same as the request under category 7 as against the Trustee parties. For the same reasons, no discovery order should be made in respect of sub-categories (a) and (b). Since the Trustee will be searching for documents under sub-categories (c) and (d), it is not necessary to order the KS parties to make discovery of the same.

CONCLUSION

142.  In addition to the orders made at the hearing, I order further as follows.

143.  As against the Trustee parties, I dismiss the discovery application in respect of categories 6(c), 7(a) and (b).

144.  Mr Chan has asked the court to reserve the issue of costs pending the searches to be conducted as until then it will not be clear whether and to what extent Lu has actually succeeded in obtaining discovery: Hong Kong Civil Procedure 2025 at 24/7/6. I make an order to that effect and give liberty to restore the issue of costs upon the Trustee parties giving at least 14 days’ notice to Lu.

145.  As against the KS parties, I dismiss the discovery application in respect of category 3.

146.  Lu has failed completely on his application against the KS parties. Costs should follow the event. I make an order nisi that the KS parties do have costs of the entire application, including all reserved costs, to be taxed if not agreed.