LUI YAU TAK AND ANOTHER v. MELOFIELD NURSERY AND LANDSCAPE CONTRACTOR LTD

HCMP 312/2024

[2025] HKCFI 1037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 312 OF 2024

_________________

_________________

_________________

_______________

JUDGMENT

_______________

A. INTRODUCTION

1.  This is the substantive hearing for the Originating Summons dated 23 February 2024 (“OS”)  issued by (i)  the 1^st Plaintiff, Lui Yau Tak (“Paul”), the then director of the Company, and (ii)  the 2^nd Plaintiff, Lui Yau Bun Raymond (“Raymond”), a shareholder of the Company (collectively “Ps”), against the Defendant, the Company, for orders for the Company to (i)  provide to Paul (a director)  and Raymond (a shareholder)  the accounting records of the Company as particularized in the Schedule annexed to the OS (“Schedule”)  for Ps’ inspection forthwith and without charge, pursuant to sections 373 to 378 and section 740 of the Companies Ordinance (Cap. 622)  (“CO”), and (ii)  provide or allow Ps to make copies of such accounting records without charge if they so request.

2.  The Schedule seeks inspection of accounting records of the Company under 7 Categories (each with various sub-Categories), namely (1)  bank accounts, (2)  tax filings, (3)  ledgers and contracts, (4)  suppliers and/or sub-contractors, (5)  wages and other expenses, (6)  finance costs and (7)  financial position.  In particular, under Category 7(5)  of the Schedule, Ps seek inspection of records of transactions, relationship, and other dealings between the Company and 27 “related companies”.

3.  On 26 March 2024, about a month after the issuance of the OS, Paul was removed as a director of the Company.  It is common ground that as a result of such removal, Paul is not entitled to seek inspection of the Company’s accounting records qua director.  Nevertheless, since Paul was a director of the Company at the time of issuance of the OS, there is a question as to whether Paul should nonetheless be entitled to costs of the OS against the Company.  Aside from the question of costs in respect of Paul’s application, the real issue before the Court is Raymond’s application for inspection qua shareholder under statute, namely section 740 of the CO.

4.  The fact that Raymond’s application is made under statute has a bearing because, quite apart from the statutory route, Raymond has also entered into a shareholders’ agreement in Chinese entitled “經緯園藝有限公司策略投資協議” (i.e. strategic investment agreement)  (“SHA”)  on 20 October 2020 with (i)  Lau Sum Yan (劉森仁)  (“SY Lau”)  and (ii)  Lau Ming Fung (劉銘豐)  (“Lewis”). By the SHA, Raymond acquired 30% shareholding in the Company from SY Lau and Lewis, whereupon the remaining 70% shareholding in the Company is held by Lewis.  The parties also entered into supplemental agreements to the SHA subsequently.

5.  The SHA is for a term of 5 years.  It confers on Raymond various rights of access to information.  At the hearing before me, Ms Lydia Leung for Ps confirmed that Ps are not pursuing inspection pursuant to the contractual rights under the SHA.  Nevertheless, there remains a question as to the relevance of the SHA to the present application.

6.  The substantive hearing of the matter first took place before DHCJ Jonathan Wong on 31 October 2024, with submissions lodged by Ps and the Company respectively.  In that hearing, his Lordship brought to the parties’ attention an Australian decision in Simba Global Pty Ltd v IFOTA Pty Ltd[2019] FCA 1020, where Moshinsky J stated at §23 as follows:

“23 In my view, notwithstanding the submissions advanced on behalf of the second, third and fourth defendants, it is appropriate in the circumstances to make an order for inspection of the books of IFOTA. As indicated above, the application is made in good faith and for a proper purpose. The context includes the Shareholders Agreement, which contains a clause conferring a right of access to the documents. I note the practical concerns that have been raised by the second, third and fourth defendants. There is a degree of speculation about these concerns. I note that IFOTA is not a large company and that it has not been trading for a long time. It seems to me that if the parties approach the inspection in a sensible and cooperative way, these concerns will largely be addressed. In any event, if difficulties arise, the parties can approach the Court.” [Emphasis added]

7.  His Lordship took the view that the parties should address the Court further on the relevance of the SHA, and directed the parties to file further skeleton submissions to deal with “the significance of the right of information conferred upon the 2^nd Plaintiff by the Strategic Investment Agreement dated 20 October 2020”.  The matter was later fixed to be heard before me on 28 February 2025.

8.  I should also mention that, on 23 November 2023, Lewis and the Company commenced an action in HCA 1899/2023 against Raymond and Paul (“1899 Action”). Clause 4(9)  of the SHA provides inter alia that, if the revenue of the Company exceeds HK$120 million, the shareholders should provide loan financing to the Company in proportion to their shareholding ratio: “… 如果營業額突然提升超過港幣一億貳仟萬元，則所有股東需按其持股份比例對公司進行融資貸款”.  In gist, in the 1899 Action, Lewis and the Company contend that, in breach of Clause 4(9)  of the SHA, Raymond failed to provide financing or loans to the Company, and claim damages for the loss suffered.  In response, Paul and Raymond contend inter alia that the financing or loans were not provided due to the Company’s failure to provide access to accounting documents.  In the OS, the Company’s main objection is that Raymond’s request for access mirrors his defence in the 1899 Action, and should be dismissed as he is in effect seeking “discovery” for the 1899 Action.

B.  SALIENT BACKGROUND AND STANCE

9.  The principal activity of the Company is the provision of nursery and landscaping contracting works.

10.  On 20 October 2020, Raymond entered into the SHA with SY Lau and Lewis. He acquired 30% shareholding in the Company with the remaining 70% shareholding held by Lewis.  Raymond acquired his shares in the Company by providing a HK$15 million investment (Clause 3).

11.  Among others, the SHA provides for the following:

(a)  Term of the SHA is 5 years: “是次投資協議為期五年” (Clause 1);

(b)  Main objective of investment is for the Company to become listed on the Main Board of the Hong Kong Stock Exchange (“HKSE”)  within 5 years of the SHA: “投資的主要目的是在這協議期限完結前，經緯園藝有限公司具備足夠資格申請在香港主板上市” (Clause 2);

(c)  Undertaking by Lewis that the net asset value of the Company would not be less than HK$30 million: “劉銘豐先生確保經緯園藝有限公司的資產淨值不得少於港幣叁仟萬元正” (Clause 4(1));

(d)  Financing obligation of shareholders, i.e. if the revenue of the Company exceeds HK$120 million, the shareholders should provide financing or loans to the Company in proportion to their shareholding ratio: “… 如果營業額突然提升超過港幣一億貳仟萬元，則所有股東需按其持股份比例對公司進行融資貸款” (Clause 4(9)). 

12.  Notably, the SHA stipulates various protections, rights of participation and access to information in favour of Raymond as follows:

(a)  Undertaking by Lewis that Raymond’s shareholding would not be less than 30%: “劉銘豐先生確保雷有彬持有的經緯園藝有限公司股份不少於30%” (Clause 4(2));

(b)  Right of 30% shareholder to appointment of director: “持股量30%或多於30%的股東，可在任何時候要求經緯園藝有限公司董事局通過委任自身或委派第三者 (每30%股權委派一位)，出任公司董事一職，劉銘豐先生須確保該委任董事的決議案得以通過” (Clause 4(4));

(c)  Right to request for repurchase of shareholding after the expiry of first year of the term of the SHA: “從協議正式生效第一年完結後，雷有彬先生有權隨時要求劉銘豐先生或劉銘豐先生指定之投資者均必須以約定的回購作價回購雷有彬先生所持有的30%經緯園藝有限公司股份” (Clause 4(6));

(d)  Right to attend board meetings and requirement of written consent for major decision-making: “雷有彬先生有權列席並參與董事局會議，任何董事局通過的決議和紀錄，須由公司秘書負責主持會議和撮寫會議記錄，並抄送雷有彬先生保存。關於公司的一些重大決策，必須得到雷有彬先生的書面同意” (Clause 4(10));

(e)  Right to receive response to inquiry on day-to-day business: “劉銘豐先生應作經緯園藝有限公司的主要管理行政人員，須妥善管理公司的日常運作事宜，並隨時解答雷有彬先生的查詢” (Clause 4(11));

(f)  Requirement of written consent for salary cap and reward criteria of management staff: “劉銘豐先生根據過往標準擬定經緯園藝有限公司管理層員工的薪金上限和獎勵準則，須得到雷有彬先生的書面同意” (Clause 4(12));

(g)  Right to pursue third-party independent audit: “所有公司審計報告和公司資產凈值財務報表，均須由華強會計師事務所出具，雷有彬先生有權隨時自費尋求第三方進行獨立審核” (Clause 4(13));

(h)  Requirement of consent to appointment of senior accounting manager: “經雷有彬先生同意公司須聘請一名資深會計主管，負責改善及優化現時公司的會計管理制度和備存足夠財務文件及資料，以供日後申請上市之用” (Clause 4(14));

(i)  Right to receive monthly reporting from accounting manager on financial situation relating to the Company: “上述的會計主管不但須向公司董事局和管理層負責及每月報告，亦須向投資者雷有彬先生負責及每月報告有關公司的財務狀況” (Clause 4(15));

(j)  Right to access and inspection of financial information and records of the Company and all resolutions and records of the Board: “投資者雷有彬先生有權在任何時刻自行或委派專業人仕查閱監督公司的財務資料及紀錄和所有董事決議案及紀錄” (Clause 4(16)).

13.  Ps say they have been requesting for access to accounting information since 2021, but to little avail.  On the other hand, Lewis and the Company say that Raymond failed to provide financing or loans, in breach of Clause 4(9)  of the SHA.

14.  Meanwhile, Lewis claimed to have provided or procured financing or loans to meet the Company’s need and sought to have more shares allotted.  By a share allotment/ share disposal exercise purportedly passed at the Annual General Meeting of the Company on 27 September 2023, the shareholding percentage of the Company was adjusted to Lewis (holding 76.9%), Home Harmony Limited (“HHL”)  (holding 12.8%), and Raymond (holding 10.3%)  after the allotment of new shares on 5 October 2023 (“Share Allotment”).  Raymond believes that HHL is Lewis’ company, and challenges the validity and legality of the Share Allotment as a breach of the SHA and the Articles of Association of the Company.

15.  On 23 November 2023, Lewis and the Company commenced the 1899 Action against Raymond and Paul.  They contend that Raymond failed to provide financing or loans to the Company in breach of Clause 4(9)  of the SHA, and claim damages for the loss suffered.  On the other hand, Raymond counterclaims against Lewis inter alia for his failure to maintain Raymond’s 30% shareholding in the Company.

16.  On 17 January 2024, Ps’ solicitors Darin Leung & Partners (“DL&P”)  wrote to the Company’s solicitors Li, Kwok & Law (“LKL”), requesting various accounting information of the Company, which is later reflected in the Schedule.  On 30 January 2024, LKL replied, refusing the provision of the said documents, alleging that the scope of documents sought is “obviously excessive and disproportionate and constitutes a fishing exercise”, and that discovery is “premature”.

17.  On 16 February 2024, the Company held an Extraordinary General Meeting (“EGM”)  to remove Paul as a director. The resolution was not passed as the meeting was not quorate.  The EGM was adjourned to 23 February 2024.

18.  In the morning of 23 February 2024, Ps issued the OS.  At the time of issuing the OS, the board of directors of the Company (“Board”)  consist of Lewis, Lewis’ parents (i.e. SY Lau and a Lau Wah), and Paul.  In the adjourned EGM held later on the same day, the resolution to remove Paul was not passed due to the lack of special notice to Paul.

19.  In view of the ongoing efforts to remove Paul as a director, Ps already foreshadowed that further moves will be made to remove Paul as a director. Therefore, at the time of issuing the OS, Raymond has made an application for inspection of documents in the alternative in his capacity as shareholder of the Company.

20.  In Raymond’s Affirmation in support, he deposed to the need for inspection as follows:

(a)  In the 1899 Action, Lewis and the Company claim against Raymond and Paul a huge sum of more than HK$158 million being damages for the breach of the SHA, on the basis of Raymond’s failure to provide financing in proportion to his shareholding on the condition that the Company’s annual revenue is above the threshold of HK$120 million.

(b)  Lewis has insisted that the Company’s annual revenue is in fact above the said threshold, but Raymond has made repeated requests to the Company for the provision of the financial information of the Company, a right which has been included in the SHA.  His requests have been repeatedly refused.

(c)  Raymond is particularly concerned that according to the Income Statement and Statement of Financial Position of the Company between April to June 2023 (the “April to June 2023 Statement”), the Gross Profit Ratio of the Company has decreased drastically from 20.64% of 2022 to 2023, to only 2.06% of April to June 2023 to June 2023. In particular, although the revenue of the Company for April 2023 to June 2023 is around HK$57 million, the costs of services is somehow more than HK$55 million.  There is also a projected loss of over HK$8 million.

(d)  The amount due from directors has also skyrocketed from 2020 to 2021.  In 2020, the amount due from director SY Lau, i.e. Lewis’ father, is only HK$283,321.  Whereas in 2021, the amount has increased to HK$16.6 million.  The Company also appears to be borrowing more and more money from banks without providing any information to Raymond or Paul about why there is a need to do so.

(e)  If Paul is removed as a director, it would make Raymond’s application for inspection even more important, as he would have lost his contact (via his brother)  who previously had the right to access to the Company’s accounting records.

(f)  Raymond’s application is made in good faith and for a proper purpose, based on his concerns as to the financial health of the Company, which affects his economic interest therein.

21.  On 26 March 2024, Paul was removed as director in the EGM of the Company. 

22.  On 27 March 2024, the Company filed the Affirmation of Lewis dated 26 March 2024, where Lewis stated inter alia that:

(a)  Reliance on section 373 to 378 of CO in Paul’s application is misconceived;

(b)  As a majority shareholder, Lewis is entitled to propose a resolution to remove Paul and whether Paul would be removed is a matter of voting by the Company’s shareholders;

(c)  The burden is on Raymond to show that the application is made in good faith and that it is made for a proper purpose;

(d)  It is impermissible to substitute an inspection order for a pre-action discovery or a discovery exercise in another action;

(e)  An applicant is not entitled to abuse the procedure by going on a fishing expedition through vast amounts of the company’s records to support his mere suspicion of wrongdoing;

(f)  It is inappropriate to compare gross profits of the Company over a 3-month period (April to June 2023)  with a 12-month period (April 2022 to March 2023);

(g)  Even where an applicant is acting bona fide and has shown a proper purpose, the Court has a discretion whether to order inspection.

23.  Specifically, Lewis alleges in his Affirmation that Raymond’s application is not bona fide nor for a proper purpose as it is made with the express intention of seeking discovery of documents of the Company in place of the normal discovery process in various proceedings including:

(a)  The 1899 Action, where Raymond and Paul contend that Lewis and the Company have not provided them with the Company’s financial information and documents, and seek to challenge the validity of the Share Allotment;

(b)  HCA 1263/2023 (“1263 Action”), in which Hope Rich Consulting Limited (“Hope Rich”)  claims against Lewis for breach of an agreement to pay commission for a proposed sale of his shareholding in the Company; and

(c)  HCA 1599/2023 (“1599 Action”), in which Raymond claims against the Company, Lewis and his parents (namely SY Lau and Lau Wah who are directors of the Company)  for breach of contract and/or guarantees.

24.  Lewis further contends in his Affirmation that the Company has already provided Ps with the audited financial statements which are sufficient for the purpose of informing Ps the revenue and financial position of the Company and that, in any event, the scope of the documents sought under the Schedule is simply too extensive and wide.

25.  On 16 May 2024, Ps filed the 2^nd Affirmation of Paul and the 2^nd Affirmation of Raymond in reply.  Paul’s 2^nd Affirmation stated inter alia that:

(a)  The Company could not remove Paul as director at the EGM on 23 February 2024 as it failed to give him special notice as required by section 462(4)  of the CO.  Whilst he was removed on 26 March 2024, he believes that his removal may well have been a breach of the SHA in light of Clause 4(4).  In any case he seeks costs;

(b)  It is clear from Clauses 4(13)  to (16)  of the SHA that Raymond’s access to the Company’s financial and auditing records was at the forefront of the parties’ minds, not least because the ultimate aim of the SHA was for the Company to become listed on the Main Board of the HKSE within 5 years of the SHA (Clause 2);

(c)  As early as December 2022, he has been requesting the Company’s accountant to see the Company’s accounting records and supporting documents such as invoices and bank statements, in order to ascertain the financial health of the Company, and to see whether they were on track to become publicly listed, but his requests were not met;

(d)  In September 2023, he asked for explanations and supporting invoices for the significant increase in cost of services of $55,735,988.73 for the period from April to June 2023, but Lewis still did not accede to his requests and simply replied that Ps have been provided with the Company’s audited financial statements;

(e)  The disputes in the 1899 Action, HCA 1263 Action and HCA 1599 Action show why Raymond and Paul had, from the outset and prior to the instigation of these cases, independently sought to have access to the Company’s financial documents;

(f)  It is precisely because of the obligations under the SHA to provide financing or loans, and the contractual duty under the Hope Rich agreement, that Ps had always been particularly concerned about the real financial position of the Company, rather than that which Lewis wants them to believe.

26.  By his 2^nd Affirmation, Raymond stated inter alia as follows:

(a)  He denies the allegations of seeking “discovery” or fishing expedition and repeats that he seeks inspection to protect his economic interest as a minority shareholder of the Company;

(b)  Ps have been seeking information since 2021, but to no avail.  For instance he has been asking Lewis to provide him with the Company’s monthly management accounts since June 2021 (via WhatsApp messages from June 2021 to March 2024), but Lewis and the Company refused to accede to such requests;

(c)  He prays in aid Clauses 4(10)-(16)  of the SHA;

(d)  The OS is a result of Lewis’ failure to provide Ps with the Company’s financial information for the past three years pursuant to the SHA, rather than an attempt to bypass the discovery process of the 1899 Action (or other actions);

(e)  He acknowledges having received various audited financial statements and management accounts from the Company but contends that:

(i)    those documents alone do not allow him to investigate the financial health of the Company,

(ii)   there are extremely concerning figures which would lead any director or shareholder of a company to become concerned, and seek supporting documents to ascertain the true financial position, and

(iii)  the numbers in the audited financial statements are always significantly different from those in the management accounts;

(f)  He produces a comparison table in Exhibit “LYB-5” showing certain financial data of the Company in the financial years ended 31 March 2020 to 2023 (extracted from audited financial statements)  and in the period from April to June 2023 (extracted from management accounts)  (“Comparison Table”), and points to the Company’s apparent financial deterioration;

(g)  He sets out the reasons for seeking inspection of the 7 categories of documents under the Schedule.

27.  At the hearing before DHCJ Jonathan Wong on 31 October 2024, the Company has adduced further affidavit evidence to (i)  exhibit the unqualified opinion to the Company’s audited financial statements for the year 2023, and (ii)  update the Court as to the progress of the 1899 Action.

C.  RELEVANT PRINCIPLES

C1.   Inspection by director

28.  It is trite that a director is in general entitled, both under common law and statute, to seek inspection of accounting documents and records of a company.  In particular, Sections 375(1)-(2)  CO provide for a director’s right to make a copy of a company’s accounting records in the course of inspection and to be provided with a copy of the company’s accounting records without charge if so requested by the director.

29.  Equally, it is trite that even if an applicant was a director at the time of an application, such application would be dismissed if by the time of the hearing, the applicant is no longer a director of the company: see Wong Kar Gee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241, per Harris J at §6; Re Opes Asia Development (unreported, HCMP 447/2012, 17 May 2012), per Harris J at §2; Re China Ease Investments Limited [2018] HKCLC 175, per DHCJ Maurellet SC (as he then was)  at §13; Wong Sau Man Samuel v Wong Kan Po Wilson & Ors [2017] 4 HKLRD 542, per DHCJ William Wong SC (as he then was)  at §26.

30.  Nevertheless, where an applicant was entitled to inspection at the time of application but was thereafter removed, and would have succeeded in the application but for the removal, the applicant may be entitled to costs: see e.g. Yiu Ho Wing v China Ease Investments [2018] HKCFI 1498 at §21.  Of course, that would very much depend on the circumstances of a case.

C2.   Inspection by shareholder under section 740 of CO

31.  Section 740(1)  CO provides that, on application by a required number of a company’s members, the Court may make an order authorizing a person who is the applicant or one of the applicants to inspect any record or document of the company.  Section 740(2)  CO further provides as follows: -

“(2)  The Court may make an order authorizing a person to inspect a record or document if it is satisfied that—

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

(b)  the inspection is for a proper purpose.”

32.  On behalf of Ps, Ms Leung refers to Wong Kar Gee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241 at §14, where Harris J held that the above requirements are two separate and independent tests, the former being subjective and the latter being objective.

33.  The requirement of “proper purpose” was examined in Leung Chung Pun v Masterwise International Ltd [2014] 1 HKLRD 1129 at §16(3):

“a)  it requires the court to apply an objective test and look at all surrounding circumstances to see whether the purpose for the inspection is indeed proper;

b)  the purpose for which inspection is sought must bear some reasonable relationship to the interests of the applicant qua shareholder;

c)  once the primary or dominant purpose of the application is deemed by the court to be proper (in that it is germane to the applicant’s status as a shareholder), any further or secondary purpose in seeking the records is irrelevant;

d)  if the purpose is to protect the applicant’s economic interest in a company by finding out whether there has been some impropriety which adversely affects that interest, prima facie the ‘proper purpose’ requirement is satisfied;

e)  a genuinely held desire to assess the value of an applicant’s shareholding, where the possibility of a disposal of his investment is in prospect, is a ‘proper purpose’...”

34.  In Wong Kar Gee Mimi, supra at §22, Harris J elaborated on proposition (c)  above as follows:

“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 Hume (No 2), p.479.”

35.  At §24, he observed that the predecessor of section 740 CO:

“affords shareholders an often overlooked yet powerful right by which to expose wrongful conduct in relation to the company’s affairs. Where the shareholders and directors are at loggerheads, the right of access to corporate information is particularly important: in these circumstances, even if a member suspects that something is amiss, for example an egregious breach of fiduciary duty, he will be unable to protect his economic interest and financial investment within the company (through, for instance, a derivative action)  unless he is able to obtain sufficient information.”

36.  At §26, he identified the primary purpose of inspections statutes by citing §§286 & 288 of 18A American Jurisprudence 2d 2004:

“286 ... The primary purpose of these inspection statutes, like that of the common law right, is to protect small and minority shareholders against the mismanagement and unfaithfulness of their agents and officers, by providing a stockholder with a simple, practical and expeditious procedure for obtaining inspection of the corporate books and records. The fact that a shareholder may also have discovery rights when engaged in a lawsuit with a particular corporation does not eliminate the statutory right of inspection.

…

  288  Statutes providing for inspection by stockholders should be liberally construed in favour of stockholders, particularly in enforcing the inspection rights of stockholders in a close corporation, at least in the absence of a satisfactory showing of bad faith on their part.”

37.  Nevertheless, an applicant should not abuse his statutory right of inspection by using it as a fishing expedition or a substitute for a pre-action discovery exercise: see Wong Kar Gee Mimi, supra at §40.

38.  Moreover, if the application is for the purpose of enabling the applicant to carry out investigation into alleged misconduct or maladministration, the Court should assess, on the basis of available evidence, whether the applicant has made out a proper case for investigation taking into account such explanations as offered by the company.  If the applicant is able to make out a proper case for investigation, the Court should then consider whether to exercise its discretion to grant the inspection order by taking into account a wide spectrum of matters.  The Court should strike a proper balance between (i)  requiring the company to be transparent and (ii)  not permitting the statutory jurisdiction to be used by a shareholder to challenge managerial or commercial decisions made by the board of directors of the company: see Leung Chung Pun, supra at §25.

39.  Similarly, on behalf of the Company, Mr Wong refers to the summary of relevant principles in Wong Sau Man Samuel v Wong Kan Po Wilson & Ors [2017] 4 HKLRD 542 per DHCJ William Wong SC (as he then was)  at §39:

“(a)  The good faith and proper purpose requirements constitute two separate and independent tests. (Wong Kar Gee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241 at paragraph 14; Re Bank of East Asia Ltd [2015] 4 HKC 137 at paragraph 25)

(b)  The burden of proof rests on the applicant. (Lehman & Co Management Ltd v Efficient Ltd [2011] 5 HKLRD 668 at paragraph 33; Veron International Ltd v RCG Holdings [2013] 3 HKLRD 657 at paragraph 19). The burden is not discharged by suggesting that an inference that the company resisting a section 740 application must have something to hide can be drawn.

(c)  Good faith is not to be inferred from an established proper purpose (Lehman & Co Management Ltd v Efficient Ltd (supra)  at paragraph 34)  but depends on whether the applicant acted honestly with a purpose that he or she believes to be proper. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 16).

(d)  Proper purpose is to be determined objectively by considering all the surrounding circumstances of the case. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraphs 14 and 16).

(e)  The test for proper purpose is prima facie satisfied if the purpose is to protect a shareholder’s economic interest. (Re Bank of East Asia Ltd (supra)  at paragraph 25 affirming Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 25).

(f)  The purpose must be germane to or reasonably related to the interests of the applicant qua member. A mere desire to obtain information will not constitute proper purpose. (Lehman & Co Management Ltd v Efficient Ltd (supra)  at paragraphs 34 – 35).

(g)  If the primary or dominant purpose is proper, whether inspection may be of benefit to the applicant for other purposes is irrelevant. (Lehman & Co Management Ltd v Efficient Ltd (supra)  at paragraph 31 and Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraphs 21 and 24).

(h)  Purpose must be genuine and not a mere pretense. (Lehman & Co Management Ltd v Efficient Ltd (supra)  at paragraph 35).

(i)  Valuation or assessment of an application’s shareholding will not constitute a proper purpose if the applicant does not have a legal right to have his or her shares bought out by defendants or other parties. (Leung Chung Pun v Masterwise International Ltd (supra)3 at paragraph 61).

(j)  The section is not an opportunity for shareholders to undermine entrenched company law principles and challenge the commercial decisions of the company’s management. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 36).

(k)  An applicant is not entitled to go on a fishing expedition in search of a cause of action to support his or her mere suspicion of wrongdoings. Section 740 shall not be used as a substitute for pre-action discovery. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 40; Lehman & Co Management Ltd v Efficient Ltd (supra)  at paragraph 41).

(l)  If the purpose is to investigate alleged misconduct, there must be proper evidence to support a reasonable case for investigation, taking into account any explanations offered by the defendants. Mere assertions of misconduct will not suffice. (Re Bank of East Asia Ltd (supra)  at paragraph 25).

(m)  The court retains a discretion to decide whether an application for inspection should be granted (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 39)  after taking into consideration of a wide spectrum of matters. (Leung Chung Pun v Masterwise International Ltd (supra)  at paragraph 25).

(n)  Insufficient prospect of anything useful resulting from the inspection sought is a relevant consideration. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 39).

(o)  The fact that the applicant may have other means of obtaining the information elsewhere does not mean that he cannot satisfy the two requirements, but it is relevant to the court’s decision whether to exercise its discretion to grant an order. (Veron International Ltd v RCG Holdings (supra)  at paragraph 38.2).

(p)  Confidentiality is a relevant consideration but concerns of confidentiality can be addressed by undertakings restricting the use of information. (Re Bank of East Asia Ltd (supra)  at paragraphs 27 and 29).

(q)  Substantial prejudice to the company in complying with an inspection order is also a relevant consideration. (Veron International Ltd v RCG Holdings (supra)  at paragraph 38.4).

(r)  Inspection should be limited to documents that are necessary, relevant and germane to the proper purpose. (Wong Kar Gee Mimi v Hung Kin Sang Raymond (supra)  at paragraph 83).”

40.  Further, apart from citing Wong Kar Gee Mimi, supra at §40, Mr Wong relies on other authorities in support of the proposition that it is not a proper purpose for an application to serve as a substitute for discovery, e.g. Smartec Capital Pty Ltd v Centro Properties Ltd & Anor (2011)  83 ACSR 461, per Barret J at §67(2); Lehman & Co Management Ltd v Efficient Ltd [2011] 5 HKLRD 668 at §§39, 41.

41.  That said, Mr Wong has fairly drawn to the Court’s attention the decision of Fung Chuen v Sandmarin International Holdings Limited (unreported, CACV 240/2017, 17 April 2018), where the Court of Appeal stated at §10.6 that “there was no hard and fast rule that statutory inspection should be refused if the documents might also be disclosed in the course of discovery”, though he argues the facts there are very different.

42.  In my view, the relevant principles set out by Ms Leung and Mr Wong are well-established.  Whilst they might have different emphasis, it does not appear to me that there is any serious dispute or controversy on those general principles.

C3.   Relevance of shareholders’ agreement

43.  As mentioned above, at the hearing on 31 October 2024, DHCJ Jonathan Wong drew the parties’ attention to the Australian decision in Simba Global Pty Ltd v IFOTA Pty Ltd[2019] FCA 1020, and directed the parties to file further submissions to deal with “the significance of the right of information conferred upon the 2^nd Plaintiff by the Strategic Investment Agreement dated 20 October 2020”.

44.  On behalf of the Company, Mr Wong argues that there is a clear distinction between a shareholder’s information rights under a shareholder’s agreement and a shareholder’s information rights under the statute, citing Australian decisions in Yara Australia Pty Ltd v Burrup Holdings Limited [2010] FCA 1273 and ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896.  He submits that Yara, supra is authority for the following propositions:

(a)  First, rights under a shareholders’ agreement (including information rights)  are governed and constrained by the incidence of other rights and obligations under it;

(b)  Second, for inspection orders under statute, some “matters of proper concern” must be identified by the applicant – and accepted by the Court – before the Court’s powers under the statute would be invoked, and such orders should be limited to identifying the books that bear upon that specific purpose and must be “tailored to the matters of proper concern”.

45.  Further, he contends that on a more conceptual level, a shareholders’ rights under contract and under company law are “two different relationships on two different planes”, i.e. the private law plane and the company law plane, praying in aid the Singapore High Court case of BTY v BUA [2018] SGHC 213 (at §§79-107)  and ACD Tridon, supra (both cited with approval by Godfrey Lam J (as he then was)  in Dickson Holdings Enterprise Co Ltd [2019] 3 HKLRD 210).  In BTY, the Singapore Court has explained why these claims operate on separate planes (at §§85-90).  Indeed, the private law plane is subordinate to company law (at §91).  By nature, it is supplementary to the company law plane.  As explained in ACD Tridon, supra at §165:

“Of its nature, a shareholders’ agreement is supplementary to the rights and liabilities of the shareholders conferred by company law. It does not purport to exclude or replace the shareholders’ company law rights. Indeed, the statutory rights of shareholders cannot, for the most part, be taken away by an agreement. Instead, a shareholders’ agreement imposes consensual limitations on the way in which certain rights, such as voting rights and the right to transfer shares, may be exercised”

46.  Significantly, a company is often not a party to a shareholders’ agreement.  Mr Wong submits that this is important as the shareholders’ agreement is a consensual agreement and any provisions therein could only bind the parties to it.  In this regard, he reminds the Court that, in the present case, the Company is not a party to the SHA; whereas the company is a party to the shareholders’ agreement in Simba, supra.  In any event, the judge in Simba, supra was not asked to deal with the point of whether there is any distinction between the two routes; there was no analysis on the point; and apparently no case authority has been cited to the judge.

47.  As Mr Wong put it in his oral submissions, the routes under a shareholders’ agreement and company law are akin to two separate tunnels.  If an applicant chooses to enter one of them, the applicant should abide by the requirement or criteria of that specific tunnel.  Hence, any intention to “enforce” Raymond’s information rights under the SHA cannot constitute a free-standing proper purpose for the purpose of section 740 CO.

48.  In my view, there is support for Mr Wong’s two propositions, and his contention that on a more conceptual level, the rights under a shareholders’ agreement and the rights under company law relate to two different planes, namely the private law plane and the company law plane.  This must be right because a shareholders’ agreement is a consensual arrangement among the shareholders. The rights under such contract are separate and distinct, both by nature and in terms of the parties thereto, from statutory provisions – and very often mandatory provisions – under company law.  This explains why in ACD Tridon, supra at §165, Austin J observed that a shareholders’ agreement is supplementary to the rights and liabilities of the shareholders conferred by company law, and does not purport to exclude or replace the latter – indeed, the statutory rights of shareholders cannot, for the most part, be taken away by an agreement.  This also explains why provisions in a shareholders’ agreement may not necessarily be binding on a company, even if the company is a party to it (e.g. due to fetter of its statutory powers).  It follows that a shareholder cannot contend that, simply because he or she may be entitled to right of access under a shareholders’ agreement as a matter of contract, he or she can ipso facto invoke statutory right to obtain access against the company.  

49.  However, such analysis is not the end of the matter.  What it entails is that one cannot transplant or superimpose provisions on right to access in a shareholders’ agreement to an application under section 740 CO, as if those provisions can replace or dispense with the requisite statutory requirements.  One must still apply the statutory requirements.  However, the fact that there are two separate and distinct routes does not mean that a shareholders’ agreement is irrelevant for the purpose of considering the statutory requirements under section 740 CO.  The requirements of “good faith” and “proper purpose” are inherently fact-sensitive, and whether a request is made in “good faith” and for “proper purpose” would necessarily vary from cases to cases, depending on the relevant factual matrix and context.  Viewed such way, relevant provisions in a shareholders’ agreement might well form an important factual matrix or context against which the Court would assess whether a request is made in “good faith” and for “proper purpose”.

50.  On behalf of Ps, Ms Leung relies on Simba, supra at §23 where Moshinsky J considered the shareholder’s inspection application to be made in good faith and for a proper purpose, saying that “The context includes the Shareholders Agreement, which contains a clause conferring a right of access to those documents”.  Such dicta tallies with my view that a shareholders’ agreement, including provisions on right of access, forms part of the context in evaluating the statutory requirements.  Of course, it does not follow that simply because a document sought to be inspected is covered by a provision on right of access in a shareholders’ agreement, such request would, without more, satisfy the statutory requirements.

51.  Such analysis is consistent with other authorities cited by Ms Leung.  In Tsai Shao Chung v Asia Television Ltd [2012] 4 HKLRD 52, the Court of Appeal rejected the argument that a director’s application for inspection be refused because he may allow shareholders from his camp to use them for purposes other than in the proper performance of his duties as director, and took into account the shareholders’ agreements which provide for shareholder’s right to receive information from its appointed director, thereby ensuring that the shareholder’s economic interest in his shares are protected via the director (at §§45-46).  This illustrates (albeit in the context of directors)  that provisions in a shareholder’s agreement could be relevant in assessing whether a request for inspection is for proper purpose.

52.  Ms Leung also relies on decisions which take into account specific shareholder’s rights when considering whether an application for inspection was made for proper purpose and in good faith: see Yeung Chun Kei v 2A Limited [2024] HKCFI 3188,at §§11 & 23; Sea Heritage Holdings Limited v Nice Wave International Limited [2023] HKCFI 3076,at §§6, 58.  They illustrate that such specific rights (and by analogy those under shareholders’ agreement)  form part of the context which should be taken into account in considering if the statutory requirements are satisfied.

53.  It is instructive to note that, even in Yara, supra, Barker J accepted that “the facts of each case will finally dictate what documents might be appropriately accessed under this provision” (§122).  There is no reason why, in undertaking such a fact-sensitive analysis, the Court should exclude the relevant provisions in a shareholder’s agreement.

54.  I agree with Ms Leung’s submissions that, whilst the statutory right of a shareholder to inspect a company’s books should not be limited by contract, it is quite another thing to say that a shareholder’s right under contract has no significance or bearing to the Court’s analysis (or indeed fact-sensitive assessment)  of proper purpose and good faith.  As confirmed by Ms Leung, Ps do not suggest that the Court, in exercising its discretion under section 740 CO, should adopt, blind-folded, the rights as conferred by a shareholders’ agreement.  Instead, the real question is whether such shareholders’ agreement bears any significance to the Court’s evaluation of good faith, proper purpose, and the proper scope of inspection.

55.  In the circumstances, the provisions in the SHA should fall within the relevant factual matrix and context against which the Court could assess the statutory requirements of good faith and proper purpose, and indeed the proper scope of inspection.  Whilst I will go into some of the specific provisions of the SHA in the analysis further below, I wish to mention at this juncture two broad aspects under which provisions in a shareholders’ agreement may become relevant.

56.  First of all, insofar as the shareholders’ agreement provide for specific rights and obligations of shareholders and there is a need to seek access to relevant documents for the purpose of performing such rights and obligations, then plainly the Court must be entitled to take into account such contractual rights and obligations as relevant context in evaluating the statutory requirements.  This aspect relates to the substantive contents of contractual provisions, independent from any right of access provisions.

57.  Second, insofar as the shareholder’s agreement provide for right of access, or indirect access (e.g. through appointment of director), this is a relevant context pertaining to such shareholder’s level or extent of participation in the business of the company, and the right to information commensurate with the same.  In other words, in a context where a shareholder is envisaged to participate and/or be kept informed of the daily business of a company, the Court may well consider a wider request for inspection to be in good faith and for proper purpose, as contrasted with a different context where the shareholder is a passive investor simpliciter without any right to access to information under a shareholder’s agreement.

D.  ANALYSIS

D1.   Relevant Provisions of SHA

58.  I have set out some of the relevant provisions of the SHA in §§11-12 above.  Before going further into them, I should mention a few words about the status of the SHA.

59.  In the 1899 Action, Lewis and the Company aver in §§17-18 of the Statement of Claim therein that Lewis is entitled to treat the SHA as having been repudiated by Raymond, and Lewis has accepted repudiation of the SHA and has communicated his acceptance of the same to Raymond since around August to September 2023 or, further or alternatively, by service of the Writ and Statement of Claim in the 1899 Action to Raymond. Nevertheless, for the purpose of the OS, Mr Wong has not suggested that the Court should disregard the SHA simply because of the Company’s stance that the SHA had been terminated by acceptance of repudiation.

60.  In any event, in the Defence and Counterclaim of Raymond and Paul, they deny §§17-18 of the Statement of Claim, and specifically deny that Raymond is in breach of the SHA.  Therefore, as far as Ps are concerned, the SHA remains in existence since its term of 5 years (until October 2025)  has not yet expired.  For the purpose of the OS, it is neither necessary nor appropriate for this Court to express any view on the merits of the 1899 Action.  It suffices to say that, in the absence of submissions by the Company to the contrary, there is no reason why the Court could not proceed on the footing that prima facie the SHA remains extant, at least for the purpose of assessing whether Ps seek inspection in good faith and for proper purpose, irrespective of the outcome of the 1899 Action in future.

61.  Moving on to the provisions of the SHA, as I have explained in §§56-57 above, they could be relevant firstly in terms of their substantive contents, and secondly in terms of the rights of access.  On the former, the following call for heightened access to accounts and financial information:   

(a)  Clause 2 – main objective of investment is for the Company to become listed on the HKSE within 5 years of the SHA (“投資的主要目的是在這協議期限完結前，經緯園藝有限公司具備足夠資格申請在香港主板上市”)  – an investor (like Raymond)  would have legitimate reason to seek inspection of accounts and financial information to appraise whether the objective of getting listed could be achieved throughout such term and to make decisions to protect his economic interest (e.g. whether to remain as shareholder and provide funding, or to ask Lewis to repurchase his shares instead);

(b)  Clause 4(1) – Undertaking by Lewis that the net asset value of the Company would not be less than HK$30 million (“劉銘豐先生確保經緯園藝有限公司的資產淨值不得少於港幣叁仟萬元正”)  – Raymond would have legitimate reason to  seek inspection of accounts and financial information to find out the true net asset value of the Company;

(c)  Clause 4(6) – Right to request for repurchase of shareholding after the expiry of first year of the term of the SHA (“從協議正式生效第一年完結後，雷有彬先生有權隨時要求劉銘豐先生或劉銘豐先生指定之投資者均必須以約定的回購作價回購雷有彬先生所持有的30%經緯園藝有限公司股份”)  – Raymond would have legitimate reason to seek inspection of accounts and financial information to ascertain the financial well-being and prospects of the Company in order to decide whether (and if so, when)  to invoke the right to request Lewis for repurchase of Raymond’s shareholding (pursuant to the price and procedure in Clauses 4(7)-(8));

(d)  Clause 4(9) – Financing obligation of shareholders, i.e. if the revenue of the Company exceeds HK$120 million, the shareholders should provide financing or loans to the Company in proportion to their shareholding ratio (“… 如果營業額突然提升超過港幣一億貳仟萬元，則所有股東需按其持股份比例對公司進行融資貸款”)  – Raymond would have legitimate reasons to seek inspection of accounts and financial information (i)  to ascertain whether the threshold requirement of revenue exceeding HK$120 million has in fact been satisfied, and (ii)  to ascertain the financial well-being and prospects of the Company in order to decide whether he should perform the funding obligation (or, alternatively, request Lewis to repurchase his shares instead, etc).

62.  On the latter, and consistent with the substantive contents of the former which call for heightened access to accounts and financial information, there are built-in provisions in the SHA conferring rights of participation and access to information in favour of Raymond, viz.:

(a)  Clause 4(2) – Undertaking by Lewis that Raymond’s shareholding would not be less than 30% (“劉銘豐先生確保雷有彬持有的經緯園藝有限公司股份不少於30%”)  – this is linked to Clause 4(4)  which enables Raymond or his nominee to participate as director;

(b)  Clause 4(4) – Right of 30% shareholder to appointment of director (“持股量30%或多於30%的股東，可在任何時候要求經緯園藝有限公司董事局通過委任自身或委派第三者 (每30%股權委派一位)，出任公司董事一職，劉銘豐先生須確保該委任董事的決議案得以通過”)  – hence other than as investor Raymond can also participate via director;

(c)  Clause 4(10) – Right to attend board meetings and requirement of written consent for major decision-making (“雷有彬先生有權列席並參與董事局會議，任何董事局通過的決議和紀錄，須由公司秘書負責主持會議和撮寫會議記錄，並抄送雷有彬先生保存。關於公司的一些重大決策，必須得到雷有彬先生的書面同意”)  – this gives Raymond right to participate and a veto for major decisions;

(d)  Clause 4(11) – Right to receive response to inquiry on day-to-day business (“劉銘豐先生應作經緯園藝有限公司的主要管理行政人員，須妥善管理公司的日常運作事宜，並隨時解答雷有彬先生的查詢”)  – an extensive right to receive information on daily business operation;

(e)  Clause 4(12) – Requirement of written consent for salary cap and reward criteria of management staff (“劉銘豐先生根據過往標準擬定經緯園藝有限公司管理層員工的薪金上限和獎勵準則，須得到雷有彬先生的書面同意”)  – a right to exert control on remuneration of management staff;

(f)  Clause 4(13) – Right to pursue third-party independent audit (“所有公司審計報告和公司資產凈值財務報表，均須由華強會計師事務所出具，雷有彬先生有權隨時自費尋求第三方進行獨立審核”)  – an extensive right to do a re-audit;

(g)  Clause 4(14) – Requirement of consent to appointment of senior accounting manager (“經雷有彬先生同意公司須聘請一名資深會計主管，負責改善及優化現時公司的會計管理制度和備存足夠財務文件及資料，以供日後申請上市之用”)  – this confers control over senior accounting staff;

(h)  Clause 4(15) – Right to receive monthly reporting from accounting manager on financial situation relating to the Company (“上述的會計主管不但須向公司董事局和管理層負責及每月報告，亦須向投資者雷有彬先生負責及每月報告有關公司的財務狀況”)  – this confers regular reporting by account staff on monthly basis;

(i)  Clause 4(16) – Right to access and inspection of financial information and records of the Company and all resolutions and records of the Board (“投資者雷有彬先生有權在任何時刻自行或委派專業人仕查閱監督公司的財務資料及紀錄和所有董事決議案及紀錄”)  – this is couched in very wide terms and covers virtually all accounting records.

63.  The above provisions demonstrate that, notwithstanding the status of Raymond as an investor, the consensus among shareholders of the Company is that Raymond should nonetheless enjoy a high level and extent of participation in the business and management of the Company, and a heightened right to information commensurate with the same.  There is no sound reason why, in seeking inspection under section 740 CO, Raymond could not have these substantive contents of provisions of the SHA and the heightened right of access under the SHA in mind, or otherwise as part of the factual matrix informing the Court as to whether he has been acting in “good faith” and for “proper purpose”.  In my view, it is at least a relevant context which the Court may take into account in assessing whether a wider request for inspection remains in good faith and for proper purpose.

D2.   Specific concerns of Ps

64.  As mentioned above, Ps have raised a number of specific concerns in their evidence.  On behalf of Ps, Ms Leung also highlights those concerns in her written and oral submissions.  Suffices it to say that the Court has taken these into account and need only set out a few key concerns by way of illustration.

65.  First of all, Ps acknowledge that in the 1899 Action, Lewis and the Company claim against Raymond and Paul substantial damages for Raymond’s failure to provide financing on the premise that the Company’s annual revenue is above the threshold of HK$120 million (as reflected in the Company’s audited financial statements).  This relates to the financing obligation under Clause 4(9)  of the SHA.  Ps’ stance is that Raymond has made repeated requests to the Company for the provision of the financial information of the Company since 2021, but to no avail.  Whilst I can see Mr Wong’s point that the audited accounts should prima facie be correct, it must not be forgotten that the financing obligation is a substantial (if not onerous)  one. As such, Ps’ concern (particularly when viewed alongside other concerns)  should not be lightly dismissed.  In my view, Raymond has legitimate reasons to seek inspection to verify the revenue of the Company.  If the threshold were indeed satisfied, Raymond could well be mistaken in failing to provide financing, and he might seek to remedy the situation by providing financing going forward (if it is still open to him to do so).

66.  In this regard, as both Ms Leung and Mr Wong have accepted, Raymond remains a shareholder of the Company at present.  Hence, such information is relevant to the financing obligation in the SHA specifically or, at the very least, the economic interest and prospects of Raymond remaining as a shareholder and investor of the Company going forward.

67.  Second, Ms Leung submits that a most alarming feature here is the increase of borrowings to the directors of the Company. Specifically:

(a)  Under Note 10 to the Company’s audited financial statements for the year ended 31 March 2021, the amounts due from directors (SY Lau, Lau Wah and Lewis)  and related companies (there was none)  have increased substantially from HK$326,813 to HK$24,227,034 in 2021 (about 74 times). 

(b)  Under Note 15(b)  to the Company’s audited financial statements for the year ended 31 March 2022, the amounts due from directors (SY Lau, Lau Wah and Lewis)  and related companies (First Harvest Limited (“FHL”)  and Synergy Horticulture & Logistics Limited (“SH&LL”)  which have common director with the Company)  have increased to a maximum of HK$32,755,874 during the year, albeit reducing to HK$16,569,197 at the end of the financial year.

(c)  Under Note 16(b)  to the Company’s audited financial statements for the year ended 31 March 2023, the amounts due from directors (SY Lau, Lau Wah and Lewis)  and related companies (FHL and SH&LL)  have increased to a maximum of HK$35,731,005 during the year, albeit becoming a negative HK$916,336 (i.e. amounts due to them)  at the end of the financial year.

68.  On behalf of Ps, Ms Leung say that they suspect that these amounts are money lent to the directors to buy properties.  Significantly, as stated in the audited financial statements, all these amounts are “unsecured, non-interest-bearing and repayable on demand”.  Whilst Mr Wong has rightly pointed out that such amounts have substantially reduced and reached a negative in 2023 (i.e. amounts are due to directors and related companies instead), this is not itself an answer to the use of the Company’s funds by directors and related companies without payment of interest which prima facie conferred financial benefits on them. With respect, Mr Wong has no answer to the suggestion that this may constitute wrongdoings such as breach of fiduciary duties by Lewis and others.  In my view, Raymond has legitimate reasons to seek inspection to investigate into the same.

69.  Third, Ps produce the Comparison Table to demonstrate the Company’s apparent financial deterioration, e.g.:

(a)  the Company’s gross profit margin and net profit margin continued to drop (e.g. the net profit margin has continuously dropped from 2020 to 2023: (i)  4.77% for 2020, (ii)  3.38% for 2021, (iii)  3.11% for 2022, (iv)  0.75% for 2023 and (v)  -14.68% for April to June 2023);

(b)  significant increase in the amount due from directors and bank borrowings;

(c)  the amounts owed to such directors, related companies and banks have increased to the point that the auditor issued opinions regarding a material uncertainty related to the Company’s going concern in the audited financial statements for the years ended 31 March 2022 and 2023;

(d)  the Company’s current liabilities exceeded its current assets by HK$7,919,646 for the year ended 31 March 2022 and by HK$12,955,336 for the year ended 31 March 2023, and this number continued to increase to HK$15,819,182 as at 30 June 2023 based on the management accounts; and

(e)  the auditor’s qualified opinion in the Company’s audited accounts for the year ended 31 March 2023.

70.  In particular, as emphasised by Ms Leung, in both the audited financial statements for the years ended 31 March 2022 and 31 March 2023, the auditors expressed concern under the heading “Material Uncertainty Related to Going Concern” in the Independent Auditor’s Report.  They noted that the Company’s current liabilities exceeded its current assets by HK$7,919,646 as of 31 March 2022 and by HK$12,955,336 as of 31 March 2023, and opined that “This condition indicates that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern”.

71.  Further, it may also be noted that, according to the Company’s audited financial statements, its net assets have fallen below HK$30 million since 2021: (i)  HK$25,903,120 for 2021, (ii)  27,264,051 for 2022, and (iii)  23,526,235 for 2023.  This is apparently contrary to Clause 4(1)  of the SHA.

72.  Whilst the Company has subsequently adduced an unqualified opinion of its audited accounts for the year ended 31 March 2023, this does not address most of the concerns raised above.  The financial well-being and prospects of the Company not only affect Raymond’s economic interest as a shareholder in general, but they also have bearings on specific matters under the SHA including inter alia (i)  whether the main objective of getting the Company listed on the Main Board of the HKSE within 5 years could be achieved, (ii)  whether the net asset value of the Company is less than HK$30 million, (iii)  whether Raymond should invoke Clause 4(6)  of the SHA to request for repurchase of his shares, and (iv)  whether Raymond should provide financing under Clause 4(9)  of the SHA (e.g. commercially or in terms of Raymond’s economic interest, quite apart from whether he is legally obliged to do so).  In my view, Raymond has legitimate reasons to seek inspection in relation to the above.

73.  Fourthly, Ps point out that there are material discrepancies between the Company’s management accounts and its audited financial statements.  For instance, the management accounts of the Company dated 19 September 2022 show an after-tax profit of HK$14,533,101.81 for the year ended 31 March 2022, whereas the audited financial statements for the year ended 31 March 2022 record an after-tax profit of HK$7,360,931.  As noted by Ms Leung for Ps, the latter were signed off by Lewis on behalf of the Board on 20 September 2022, which is only 1 day apart from the date of the management accounts.  Ps’ stance is that discrepancies such as these warrant investigations into the Company’s accounts, which I agree.

74.  For the avoidance of doubt, discrepancies between the management accounts and the audited accounts are not uncommon, but the point is where the discrepancies are material and adjustments are made within a very short period of time, it could give rise to legitimate concern.  As Ms Leung has explained, in view of such discrepancies, there is a need for Ps to seek inspection of supporting documents (such as those pertaining to expenses on wages and entertainment)  to verify the same.

75.  Fifthly, Ps produce another table on the expense analysis of the Company from 2020 to 2023, and also the period in April to June 2023.  As one can see from the table, there are substantial increase in the wages, staff benefits and entertainment expenses over such 3-year period.  In particular, as noted by Ms Leung, despite the Company’s apparent liquidity problems in recent years, a substantial bonus of HK$2.4 million was paid to a director (presumably to Lewis himself)  in 2023, as shown in Note 4 to the Company’s audited financial statements for the year ended 31 March 2023 report, when no such bonuses have previously been paid. 

76.  In addition, there is a big jump in rent, rates and building management fees.  Importantly, the latter are expenses charged by related party.  As shown in Note 16(a)  to the Company’s audited financial statements for the year ended 31 March 2023, there was substantial increase in rental expenses charged by related party in 2023 (being (i)  HK$720,000 by a subsidiary, (ii)  HK$2,809,000 by a director and (iii)  HK$644,600 by related companies)  as compared with 2022 (being HK$225,000 charged by a subsidiary only).  Indeed, one can also see substantial increases in other expenses charged by related party, such as interest expenses, purchase and sub-contractor fee.

77.  In this regard, Mr Wong has referred the Court to various audited accounts of the Company which display a continuous increase in the revenue of the Company in the past few years.  As Ms Leung accepts, the increases of expenses are not, without more, a matter of concern because, if the revenue of the Company has increased, more expenses might have to be incurred in order to generate revenue at a greater scale. 

78.  In response, Ms Leung contends that the problem is that revenue has purportedly increased but not the net assets or profits. As I have made clear at the hearing, it is not the case that, as revenue increases, the net assets or profits would necessarily increase, as it depends on various factors such as profit margins and costs of sales.  Nevertheless, this can raise legitimate concerns and call for further investigations.

79.  On balance, I do accept that substantial increases in the Company’s expenses, particularly remuneration (such as bonus)  paid to directors and expenses charged by related party, coupled with the Company’s apparent liquidity problems and reduction in profits, do raise concerns and would at least warrant investigations, without prejudging if there is anything improper at this stage.

80.  Sixthly, Ms Leung emphasises that Ps have been requesting for information all along since 2021.  For instance, Raymond has been asking Lewis to provide him with the Company’s monthly management accounts via WhatsApp messages since June 2021 to date.  Similarly, Paul has been requesting the Company’s accountant as early as December 2022 to see the Company’s accounting records and supporting documents such as invoices and bank statements.  More recently but before the instigation of the 1899 Action, Paul has asked for explanations and supporting invoices for the significant increase in cost of services for the period from April to June 2023.  All these tend to suggest that Ps have a genuine interest to seek inspection since the outset.

81.  In view of the above, I am of the view that there are sufficient factors and evidence to suggest that Raymond’s request for inspection is made in good faith and for proper purpose, subject to the Company’s main objection and the scope of inspection, which I now turn to.

D3.   Company’s main objection of seeking “discovery”

82.  The Company’s main objection is that the purpose of this application is to serve as a substitute for discovery in the 1899 Action in an attempt to “fish” for documents which may be useful in proving Ps’ defence in the 1899 Action.  It is also argued that the document request should be dealt with in a more focused manner by way of specific discovery in the 1899 Action.

83.  On behalf of the Company, Mr Wong drew my attention to the pleadings in the 1899 Action.  He submits that the same issues and allegations of alleged failure to provide documents relating to the Company’s finances were made in the 1899 Action.  In gist, Ps say that they did not put in the funds because they are not provided with financial information. In addition, Mr Wong relies heavily on the letter dated 17 January 2024 from DL&P (“DL&P Letter”)  which stated as follows:

“Re: HCA 1899 of 2023

We refer to the above proceedings and are in the course of preparing our clients’ Defence and Counterclaim (if any). …

However, to prepare a proper Defence and without wasting time and cost, we are instructed that our clients should have provided with us all the bank statements, general ledger of MNLC and any other relevant financial information of MNLC for our perusal.

In this regard, you will no doubt appreciate that our client, Mr. Lui Yau Tak is the director of MNLC and he is entitled to have access to all the financial information of MNLC without any interference from your client or the staffs of MNLC. However, even though our client, Mr Lui Yau Tak sent a whatsapp message on 31st August, 2023, copy attached A, to the directors and accountants of MNLC, there has never been any reply to him and on 12th Sept., 2023, our client, Lui Yau Bun Raymond also sent your clients a list of questions, copy attached B, relating to the audited reports of MNLC for the years ended in 2022 and 2023 and item (3)  above but again, there has never been any reply from your clients.

  In the circumstances, we now write to demand for your clients to release the same to us for our clients’ and our perusal within 5 working days from the date hereof so that we can have time to prepare a Defence and Counterclaim (if any)  for our clients. We also look forward to receiving your clients’ reply to the list of questions being raised by our client, Mr. Lui Yau Bun Raymond on 12th Sept., 2023. The perusal of the required documents and information and reply are relevant to the preparation of our clients’ Defence and Counterclaim (if any)  and we see no reason that your clients can refuse and/or fail to provide the same within the stipulated period.”

84.  Given such letter from DL&P, it seems fair to say that, at first blush, there is force in Mr Wong’s submissions that Ps are seeking inspection for the purpose of “discovery” or to otherwise assist Ps in the preparation of defence and counterclaim in the 1899 Action. Nevertheless, having considered the matter in the round, I do not agree that Raymond’s application should be rejected on such ground.

85.  First of all, such purpose is not necessarily mutually exclusive with other proper purpose under section 740 CO.  As a matter of law, if the primary or dominant purpose of the application is proper, whether inspection may be of benefit to the applicant for any further or secondary purpose is irrelevant: Lehman & Co Management Ltd v Efficient Ltd, supra at §31; Wong Kar Gee Mimi v Hung Kin Sang Raymond, supra at §§21, 24; Wong Sau Man Samuel v Wong Kan Po Wilson & Ors, supra at §39(g).

86.  As mentioned above, Ps have been requesting for various information of the Company since 2021.  Indeed, even in the DL&P Letter, it has referred to requests for information by Paul on 31 August 2023 and by Raymond on 12 September 2023, which predates the commencement of the 1899 Action on 23 November 2023.  Ms Leung has also drawn my attention to a reply letter dated 22 September 2023 from Lewis in response to Ps’ requests for information which, again, predates the 1899 Action.  Based on the chronology, it does not seem right to suggest that primary or dominant purpose of the application is to seek “discovery” for the 1899 Action.  Instead, it would appear that Ps have been seeking information all along, and this should not be undermined simply because of any further or secondary purpose arising subsequently since the onset of the 1899 Action.

87.  This is particularly the case given that Raymond’s request for inspection is substantiated by the substantive contents and the right of access under various provisions of the SHA, and further borne out by the specific concerns raised by Ps.  They remain valid and legitimate concerns of Raymond qua shareholder, in respect of existing affairs of the Company and the prospects of the Company going forward, separate from any other concerns which Raymond might have as a party to the 1899 Action.

88.  Secondly, Ms Leung argues that, if the documents sought are relevant to the 1899 Action, they should have already been disclosed by the Company; alternatively if the documents sought are not relevant to the 1899 Action, there is no reason why Ps could not apply for inspection.  I accept there is limit to such tautological argument as it assumes that the Company has already disclosed all relevant accounting documents in the 1899 Action, which is not necessarily the case.  Indeed, Mr Wong’s point is that the matter should be dealt with by applications for specific discovery in the 1899 Action.

89.  However, what I consider to be crucial is the different nature of the purposes of discovery in the 1899 Action and the purpose of inspection here.  Whilst it is true that Ps’ stance herein is similar to Ps’ defence in the 1899 Action, it may not be strictly necessary for Ps to obtain the accounts and documents sought herein to make good their defence in the 1899 Action.  On behalf of Ps, Ms Leung submits that the success or failure of Ps’ defence in the 1899 Action is not dependent on the information to be obtained herein but on the interpretation of the SHA on which the 1899 Action is predicated upon.  There is force in such argument.  In other words, it probably suffices for Ps to establish, for instance, that the financing obligation is dependent on the provision of financial information to Ps, without having to obtain those financial information now.  

90.  Whilst it may still be helpful for Ps to obtain financial information (for instance if it can demonstrate that the revenues of the Company are overstated), it is fair to say that most of the documents requested under the Schedule are probably not necessary or relevant to the 1899 Action (although I need not, and should not, express any final view).

91.  Thirdly, by saying that Ps’ stance mirrors their defence in the 1899 Action, the Company has failed to grapple with the nub of Ps’ case, namely that the dispute in the 1899 Action can be said to have arisen in the first place due to the Company’s repeated refusal to be transparent with its finances.  Properly understood, such stance echoes and supports Ps’ request for information since the outset, rather than undermining the same.

92.  Fourthly, apart from investigating into existing affairs and financial position of the Company, another purpose of the inspection herein is to enable Raymond to appraise the prospects of the Company such that Raymond could protect his economic interest in the Company and be better informed in terms of the options which he may exercise, including the possibility of invoking the right to ask for repurchase of his shares.  This is a forward-looking perspective, as may be contrasted with the 1899 Action which is concerned with alleged breaches of the SHA in the past.

93.  For all these reasons, I do not find in favour of the Company’s main ground of objection.

D4.   Scope of Inspection

94.  As noted by Mr Wong on behalf of the Company, there is no temporal limit in some of the documents sought under the Schedule.  Whilst Categories 1, 3, 6 and 7(1), (3)  are sought from October 2020 onwards, Categories 2, 4, 5, 7(2), (4)  and (5)  are unlimited in scope.  At the hearing, Ms Leung has confirmed that Ps are only interested to seek inspection of documents since Raymond has become a shareholder, i.e. from October 2020 onwards.

95.  Further, Mr Wong argues that the scope of inspection should be specifically tailored to address Ps’ concerns.  He says the scope of the Schedule is so wide that Raymond is trying to do a complete re-audit of the Company’s accounts.  In my view, there is some force in Mr Wong’s stance although I note that, under the SHA, extensive rights of access have been conferred on Raymond which are commensurate with the substantive rights and the level and extent of participation on the part of Raymond.  That said, it would not be right for the Court to transplant or superimpose the provisions in the SHA as if they could replace the statutory requirements, and I will consider each Category in the Schedule in turn.

D4.1 Category 1: Bank Accounts

96.  Under Category 1(1), Raymond seeks inspection of monthly bank statements for all bank accounts belonging to the Company from October 2020.  Raymond further seeks under Categories 1(2)-(6)  all transaction documents, board/shareholder resolutions, contracts and power of attorney in relation to the same, and a list of names and date of appointment of all authorized signatories of the Company’s bank accounts.

97.  The above requests are extensive and wide.  Not only do they cover bank statements, they seek to cover virtually all sorts of documents pertaining to all transactions reflected on the monthly bank statements.  There is no attempt to limit the scope, for instance, by reference to the nature or value of the transactions.

98.  On behalf of Ps, Ms Leung points to the dramatic increase in bank borrowings from around HK$12m as at 31 March 2020 to around HK$105m as at 30 June 2023, but the Company says this is a result of Raymond’s failure to provide financing.  She also points to the amounts due from directors, shareholders, subsidiary and related companies as raising concerns, including concerns that funds have been channelled to them from external bank borrowings.  Against such context, she argues that monthly bank statements, cross checked against underlying transaction documents, board/shareholder resolutions and contracts, will reveal whether the incomings and outgoings of the Company are legitimate and whether the transactions undertaken by the Company are for its best interests, whilst powers of attorney and authorized signatories will reveal whether there are any unauthorised payments.

99.  Whilst I agree that Raymond should be allowed access to monthly bank statements as a starting point, together with documents pertaining to bank borrowings or related party transactions or balances, it is difficult to see how one can justify an extensive scope of inspection covering virtually everything.  Nevertheless, the context and concerns in Sections D1 and D2 above would, in my view, support allowing access to documents relating to transactions which are relatively more substantial.  Adopting a broad-brush approach, I am prepared to extend the inspection to cover, in addition, transactions with a value of HK$250,000 or above. 

100.  On balance, I am of the view that:

(a)  Category 1(1)  should be allowed;

(b)  For Categories 1(2)-(5), those relating to (i)  bank borrowings, (ii)  related party transactions or balances (within the meaning of the Company’s audited accounts)[1], or (iii)  transactions for a value of HK$250,000 or above, from October 2020 to date, should be allowed;

(c)  In addition, for Category 1(5), any power of attorney issued with respect to the Company’s bank accounts from October 2020 to date, should also be allowed;

(d)  Category 1(6)  should be allowed, provided the timeframe should be “from its creation or October 2020 (whichever is later)  to the date of the Order”.  

D4.2 Category 2: Tax filings

101.  In my view, the context and concerns in Sections D1 and D2 above do not seem to justify inspection in relation to tax filings. There are no specific concerns or evidence adduced by Ps to cast doubt on the correctness or accuracy of the same.

102.  Ms Leung argues that any problematic transactions in the Company’s audited financial statements would necessarily be reflected in the Company’s tax filings and even points to increased staff costs etc, but this does not justify additional access to tax filings – it is a separate question whether the Court would allow access to underlying documents under other Categories.  Ms Leung also says that problematic transactions may have been identified and investigated by the Inland Revenue Department but this appears to be mere speculation.

103.  On balance, Category 2 is not allowed.

D4.3 Category 3: Ledgers and contracts

104.  In the present case, Raymond complains about excessive bank borrowings, excessive remuneration paid to director(s), and improper or unjustified payments to related parties, and also discrepancies in the Company’s accounting records, etc.  On behalf of Ps, Ms Leung argues that if the Court is satisfied that Raymond is entitled to inspect some of the Company’s detailed financial records, such as bank statements, then it would necessarily follow that it would be reasonable for Raymond to access the Company’s ledgers and contracts to enable him to properly trace through various transactions he suspects of wrongdoing.  She relies on the dicta of Harris J in Wong Kar Gee Mimi, supra at §71:

“... if the plaintiff is entitled to examine some of the Company’s detailed financial records, it logically follows, and is entirely appropriate, that she be entitled to the complete set of financial records of the Company in order to properly trace through and investigate the various transactions she suspects of wrongdoing, and this must necessarily include the monthly management accounts and the ledgers.”

105.  Having reflected on the matter, and even though Category 3(1)  is crafted in a wide manner, I agree that Raymond should be entitled to access the complete set of financial records which must necessarily include the monthly management accounts and the ledgers.  Nevertheless, in relation to contracts and other documents in Category 3(2), it seems fair to impose limits similar to those pertaining to Categories 1(2)-(5).

106.  On balance, I am of the view that:

(a)  Category 3(1)  should be allowed;

(b)  For Category 3(2), those relating to (i)  bank borrowings, (ii)  related party transactions or balances (within the meaning of the Company’s audited accounts)  [2], or (iii)  transactions for a value of HK$250,000 or above, from October 2020 to date, should be allowed.

D4.4 Category 4: Suppliers and/or sub-contractors

107.  In essence, Ps contend that (i)  the Company’s cost of services had increased at a rate that is disproportionate to the growth in revenues and (ii)  the Company made purchases from related parties after Raymond became a shareholder.  In my view, it is difficult to justify extensive scope of inspection in respect of all suppliers and/or sub-contractors from the first point alone, and it is fair to say that Ps’ submissions focus predominantly on the second point.  In the circumstances, it seems fair to impose limits similar to those pertaining to Categories 1(2)-(5)  (save that it is not necessary to refer to bank borrowings which are not applicable).

108.  On balance, I am of the view that:

(a)  For Categories 4(1)-(2), those relating to (i)  related party transactions or balances (within the meaning of the Company’s audited accounts)  [3], or (ii)  transactions or services  / products for a value of HK$250,000 or above, from October 2020 to date, should be allowed;

(b)  Category 4(3)  should be allowed.

D4.5 Category 5: Wages and other expenses

109.  Under this Category, the main theme of Ps’ case is twofold: (i)  the audited accounts show a clear trend of increase in wages and other expenses that is not commensurate with the Company’s revenue growth and (ii)  the Company stopped annexing the detailed income statement which shows a breakdown of cost of sales, other revenue, finance costs and all general and administrative expenses to its audited accounts from the year ended 31 March 2022 onwards.

110.  In my view, the above could not justify an extensive scope of inspection of all records of wages and breakdown of all expenses, let alone record of taxes on top of them.  The focus should be on wages to related party, or management staff (“管理層員工”)  within the meaning of Clause 4(12)  of the SHA.  Moreover, Raymond should be able to ascertain the breakdown of all expenses from the ledgers, etc in Category 3(1).

111.  On balance, I am of the view that:

(a)  For Category 5(1), those relating to (i)  related party transactions or balances (within the meaning of the Company’s audited accounts)  [4], or (ii)  management staff (“管理層員工”)  (within the meaning of Clause 4(12)  of the SHA), from October 2020 to date, should be allowed;

(b)  Category 5(2)  is not allowed;

(c)  Category 5(3)  is not allowed.

D4.6 Category 6: Finance Costs

112.  Ps have concerns over (i)  persistent increase in borrowings by the Company and (ii)  substantial interest expenses to shareholders ($2,387,818)  and related companies ($12,000,000)  during the year ended 31 March 2023.  Ps thus seek inspection of underlying documents and records to investigate whether there have been any unauthorised or improper transactions undertaken to the detriment of the Company.

113.  Whilst it seems difficult to suggest that all the borrowings by the Company could be challenged, I accept that logically if Raymond plaintiff is to be allowed to inspect some of the Company’s detailed financial records on borrowings, it logically follows, and is entirely appropriate, that he be allowed to the complete set of financial records on such borrowings in order to properly trace through and investigate those borrowings he suspects of wrongdoing.

114.  On balance, I am of the view that:

(a)  Category 6(1)  should be allowed;

(b)  Category 6(2)  should be allowed, provided the timeframe should be from October 2020 to the date of the Order.

D4.7 Category 7: Financial Position

115.  In relation to motor vehicles under Category 7(1), Ps point to the Company’s acquisition of motor vehicles of HK$5,567,822 for the year ended 31 March 2022, which represents 37% of the cost of motor vehicles at the beginning of the financial year of HK$14,866,698.  Bearing in mind the significant capital outlay and the restriction of the request to a financial year, I am prepared to accede to the same.

116.  As regards Category 7(2), Ps say that excessive borrowing by the Company and unexplained increases in movement of the Company’s funds to related companies have led Raymond to suspect that the Company’s funds have been improperly and unjustifiably redirected to purchase landed properties and other investments through related companies owned by Lewis and his family. Coupled with Ps’ concern over the big jump in rent, rates and building management fees charged by related party in the year ended 31 March 2023, I am prepared to accede to the same in relation to real estate investments (but not other investments which are overly broad).

117.  In relation to Category 7(3), Ps say that cash flow statements would show precisely how much has been applied to operating, investing and financing activities so that Raymond can understand the root cause of the severe liquidity problem now faced by the Company.  I am prepared to accede to the same.

118.  As regards Category 7(4), I accept that Raymond’s concern of misapplication of the Company’s funds is closely connected to related party transactions.  Nevertheless, it does not mean that Raymond should be entitled to inspect “all records of related companies”, as opposed to records pertaining to related party transactions or balances within the meaning of the Company’s audited accounts.

119.  In respect of Category 7(5), it is very extensive and covers 27 companies.  Ps produce a table setting out the particulars of these 27 companies with remarks as to why Ps say they are related companies.  However, some of the remarks are based on loose concepts of friendship (“朋友”), good friend (“好友”), an aunt (“阿姨”)  or ex-employee (“舊伙記”).  In her oral submissions, Ms Leung explained Ps have compiled such table as they are not in a position to tell which companies fall within the meaning of “related companies” in the audited accounts.  With respect, that is not an excuse for adopting a homemade list of “related companies”.  Instead, the Company itself must be in a position to tell, whether by itself or through its auditors, the “related companies” (or “related party transactions or balances”)  within the meaning of its own audited accounts.

120.  On balance, I am of the view that:

(a)  Category 7(1)  should be allowed;

(b)  For Category 7(2), those relating to real estate investments made by the Company and/or those persons falling within the meaning of “related party transactions or balances” in the Company’s audited accounts [5], from October 2020 to date, should be allowed;

(c)  Category 7(3)  should be allowed;

(d)  For Category 7(4), only records of related party transactions or balances (within the meaning of the Company’s audited accounts)  [6], from October 2020 to date, should be allowed;

(e)  For Category 7(5), instead of the 27 companies, only records of transactions, relationship, and other dealings between the Company and those persons falling within the meaning of “related party transactions or balances” in the Company’s audited accounts[7], from October 2020 to date, should be allowed.

121.  Further, in terms of costs, although I have found in favour of Raymond, I have also taken the view that the Schedule is too wide and I have made various modifications and disallowed certain Category or sub-Categories.  Adopting a broad-brush approach, I would allow Raymond to claim 80% of his costs against the Company, with certificate for two Counsels (bearing in mind there is some complexity on the law).

D5.   Question of Costs in respect of Paul

122.  Ps contend that Paul should be entitled to costs because, but for his removal as director, Paul should be entitled to the relief under the OS.  On behalf of Ps, Ms Leung emphasises that Paul has been seeking inspection of documents for a long time.

123.  On the other hand, the Company opposes costs. The main arguments are twofold: (i)  no formal pre-action letter was sent before the OS was taken out, and (ii)  it was patently clear at the time that Paul would be removed as director once the procedural matters (e.g. special notice)  were sorted out.

124.  In my view, Paul should be entitled to costs on a similar basis as Raymond, i.e. I would allow Paul to claim 80% of his costs against the Company.  Although it may be foreshadowed that Paul would sooner or later be removed as director, given the lack of special notice there is still utility for Paul to issue the OS because, if there can be a first hearing of the OS before 26 March 2024, Paul could well obtain an order in his favour as he was yet to be removed as director.  That said, the timing is tight. Moreover, whilst a director is entitled to a wider scope of inspection, the Schedule still appears to be rather wide even for a director.  On the whole, since Paul is also filing his Affirmation in support of Raymond’s application, one may also subsume that or treat the costs of Paul’s application as part and parcel of, or otherwise on a similar footing as, the costs of Raymond.  I would therefore also allow Paul to claim 80% of his costs against the Company, with certificate for two Counsels.

E.  CONCLUSION

125.  For all these reasons, I find in favour of Raymond and would make an Order in terms of paragraphs 3 and 4 of the OS, provided that:

(a)  The Schedule is to be modified in line with my rulings under Section D4 above;

(b)  Under paragraph 3, the word “forthwith” should be replaced by the phrase “within 28 days of the date of the Order”; and

(c)  Under paragraph 4, the phrase “, within 28 days of the date of such request” should be added at the end.  

126.  Further, I order that 80% of the costs of the OS (including all hearings)  be paid by the Company to Ps, with certificate for two Counsel, to be taxed if not agreed.

127.  It remains for this Court to thank Ms Leung and Ms Law for Ps and Mr Wong for the Company for their assistance to the Court.