TSAI SHAO CHUNG v. ASIA TELEVISION LTD AND OTHERS

CACV 185/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 185 OF 2011

(ON APPEAL FROM HCMP NO. 749 OF 2011)

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REASONS FOR JUDGMENT

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Hon Cheung JA:

1. I agree with the Reasons for Judgment of Fok JA.

Hon Yuen JA:

2. I agree with the Reasons for Judgment of Fok JA.

Hon Fok JA:

Introduction

3. This is an appeal against an order of Barma J dated 16 September 2011[1] allowing an application by the plaintiff against the 2^nd defendant for inspection of certain documents of the 1^st defendant, Asia Television Limited (“ATV”), of which the plaintiff is a director.  The 2^nd defendant, appellant in this court, contends that Barma J should not have made the order for inspection, or if so, he should have ordered it subject to conditions as to the plaintiff’s use of the documents.

4. At the conclusion of the hearing, we dismissed the appeal with costs to the plaintiff indicating that we would hand down our reasons in due course.  These are our reasons.

The background

5. I summarise the background which is stated in the Judge’s Reasons for Decision.

6. The appeal arises in the context of a dispute between shareholders seeking to secure control over ATV.  That dispute has given rise to two actions, namely HCA 317 of 2010 in which the plaintiff’s father, Mr Tsai Eng-meng (“Tsai Senior”) seeks to prevent the issue of convertible bonds by ATV to Mr Wong Shing or companies controlled by him, and HCA 773 of 2010 in which Tsai Senior seeks to prevent Messrs Payson and Johnson Cha (“the Cha brothers”) from selling their stake in ATV to Mr Wong Shing.

7. Before the involvement of Mr Wong Shing, ATV’s major shareholder was Antenna Investments Limited (“Antenna”), whose shares were divided into A shares and B shares.  The A shares had voting rights but no economic interest, whilst the B shares had the economic interest but not voting rights.  The A shares were held as to 51% by the Cha brothers and as to 49% by a company controlled by Tsai Senior and the B shares were wholly owned by a company controlled by Tsai Senior.  This structure was in order to comply with a restriction in the Broadcasting Ordinance (Cap. 562) on the ability of non-Hong Kong residents to own controlling interests in local television stations.  There is a shareholders’ agreement between Antenna’s shareholders (“the Antenna Shareholders’ Agreement”) to regulate their relationship as such.

8. The rest of ATV’s shares were owned by three parties, one being a company controlled by the Cha brothers and the other two being Mainland investors.  As in the case of Antenna, there is a shareholders’ agreement between ATV’s shareholders (“the ATV Shareholders’ Agreement”) to regulate their relationship as such.

9. In short, under these shareholders’ agreements, Antenna was entitled to nominate four directors to the board of ATV and the Mainland investors were entitled to nominate two each.  So far as the board of Antenna is concerned, two of its directors were to be nominated by Tsai Senior’s interests and two by the Cha brothers’ interests.  The plaintiff is one of the directors of ATV nominated by Tsai Senior’s interests.

10. It would appear that Mr Wong Shing has been able to acquire the interests of the Mainland investors and so to procure the Mainland investors to nominate directors to ATV at his direction.  This has resulted in four of the directors of ATV being related to Mr Wong Shing or representing his interests, with the remaining four directors being nominated by Tsai Senior’s interests and the Cha brothers’ interests.

11. At a board meeting of ATV on 23 March 2010, one of the directors aligned with Mr Wong Shing proposed a resolution to appoint the appellant, Mr Shing Pan Yu, James (“Mr Shing”), another of the directors representing Mr Wong Shing’s interests, as Executive Director of ATV.  That appointment was subject to the following terms of reference:

“(1) All the powers and discretions of the board of ATV in relation to the management, operation and business of ATV and its subsidiaries were to be delegated to the Executive Director, subject to any strategies and policies agreed by the board, and limitations specified in the following paragraph of the resolution. The appointment was to be on a temporary basis, until otherwise determined by the board, which should review the appointment and terms of reference from time to time.

(2) Certain matters were required to be referred by the Executive Director to the board for approval. These included transactions, financial decisions and capital expenditure over stated amounts, involvement in a new area of business, matters relating to the capital structure of the company, declaration of dividends and the appointment or removal of auditors or the chief executive officer and chief financial officer.

(3) Subject thereto, wide powers were conferred on the Executive Director to manage the affairs of ATV.

(4) The Executive Director was to report to the board at board meetings to be held in the future in respect of material decisions made by him.”[2]

12. Before Barma J, the plaintiff contended that, after becoming Executive Director, Mr Shing effectively ran the business of ATV himself.  In particular, it is alleged that Mr Shing, as from the latter part of 2010, failed to call board meetings (which, according to ATV’s articles of association, should have been held at least once every three months), and denied ATV’s other directors access to its documents and records.  The plaintiff also made other allegations against Mr Shing in respect of his management of ATV.

13. The Judge noted that it did not seem to be disputed that no board meetings had been held for some time and that the plaintiff and other directors associated with Tsai Senior or the Cha brothers did not seem to have been provided with much, if anything, in the way of documents or information concerning ATV at least in the last few months.[3]

The application for inspection

14. In these circumstances, the plaintiff issued an originating summons on 21 April 2011 seeking an order allowing him uninterrupted access to, and to allow him to inspect and take copies of:

“(a) the books of account of [ATV] including all documents as are necessary to give a true and fair view of the state of [ATV’s] affairs, including the classes of documents and information particularized in the schedule attached hereto;

(b) (to the extent not including within paragraph 1(a) above) all board papers and other documentation (including any correspondence between [ATV] and the Broadcasting Authority) which has been withheld from the Plaintiff for the period from August 2010 up to the date of the Order to be made herein; and

(c)  all management committee meeting minutes for the period from September 2010 up to the date of the Order to be made herein.”

15. The schedule to the originating summons sought, in summary, the following categories of documents:

(1)  Material contracts, business plans and business proposals;

(2)  Copies of weekly cashflows from February 2011 onwards;

(3)  Copies of monthly financial reports from December 2010 onwards;

(4)  A copy of the convertible bond register and all other information documenting the identity of ATV’s creditors;

(5)  Documentation relating to whether ATV was or is involved in the acquisition of property in Beijing;

(6)  Documentation relating to the cash flow position and net asset value of ATV.

16. The application was made pursuant to s. 121(3) of the Companies Ordinance (Cap. 32) and also pursuant to the plaintiff’s rights under the common law.

The issues arising on appeal

17. In his notice of appeal, the appellant maintained the same grounds of opposition to the order for inspection as were advanced before the Judge below, namely that:

(1)  On its proper construction, article 159 of ATV’s articles of association prevents a director having individual access to the company’s books of account and only permits the board to have such access;

(2)  The plaintiff has misused or will misuse the documents by using them for purposes other than those connected with the business of ATV; and

(3)  The scope of the documents of which inspection is sought is too wide.

18. The appellant therefore contended that Barma J’s decision granting the plaintiff an order of inspection in terms of the originating summons was wrong and should be set aside, or at least, because of ground (2) above, should be modified so that inspection is subject to a condition that the plaintiff’s access to the documents should be used by him only for the purpose of his discharging his duties owed to ATV in the capacity of a director.

The proper construction of Article 159 of ATV’s articles

19. Article 2 of ATV’s articles provides (amongst other things):

“In these Articles the words and expressions set out in the first column below shall, if not inconsistent with the subject or context, bear the meanings set opposite to them respectively:-

…

‘Board’	the board of Directors of the Company or the Directors present at a meeting of the Directors at which a quorum is present;
…
‘Directors’	the directors of the Company from time to time;

…”

20. Article 130 provides:

“The quorum necessary for the transaction of business shall be three Directors … provided that no meeting of the Directors shall be quorate unless a majority of directors present shall be persons who are for the time being ordinarily resident in Hong Kong and who have also been so resident for at least one continuous period of not less than 7 years. …”

21. Article 158 provides:

“The Board shall cause proper books of account of the Company to be kept and the provisions of the Statutes and the Broadcasting Ordinance in this regard shall be complied with.”

22. Article 159 provides:

“The books of account shall be kept at the Office, or at such other place in Hong Kong as the Board shall think fit, and shall always be open to the inspection of the Board.”

23. The Judge held that:

“20. … in construing Article 159, the court should not have regard to the definitions contained in Article 2, and should read the word ‘board’ in that article, as referring to the directors both as a body and individually. This would appear to be permissible having regard to the opening words of Article 2, which make it clear that the definitions are to apply unless the context otherwise requires. In my view, the context of Article 159, dealing, as it does, with the director’s right of inspection, is a context that requires the definitions to be departed from and not strictly applied.”

24. Mr Anson Wong, appearing with Mr Arthur Redisall Lee for Mr Shing, submitted that this was wrong for three reasons:

(1)  First, there is a clear and deliberate distinction drawn between the words “Directors” and “Board” in Article 2 and there is no reason why the word “Directors” was not used in Article 159 if it was intended that inspection could be carried out by a director individually;

(2)  Secondly, save that the word “directors” was substituted by the word “Board”, Article 159 is materially the same as s. 121(3) of the Companies Ordinance and Article 125 of Table A and this shows that the word “Board” must have been deliberately chosen to reflect the intention that the inspection should only be carried out by the “Board” as defined in Article 2; and

(3)  Thirdly, the design of the Articles must be construed in the peculiar context of the regime of the Broadcasting Ordinance which requires (per ss. 2 and 8) that the affairs of a local television service provider should remain firmly rooted in the hands of ordinary residents in Hong Kong.

25. For the reasons set out below, I would reject these construction arguments advanced on behalf of the appellant which, if accepted, would mean that no individual director could exercise a right of inspection of the company’s documents and that instead he could only do so collectively with the board.

26. It is helpful to begin the analysis by a restatement of the relevant principles which were helpfully set out in the judgment of Kwan J (as she then was) in Ng Yee Wah v Lam Chun Wah, unrep., HCMP 4616/2001, 28.6.05, at §29, namely:

“(1) The right of a company director to inspect the company’s documents is well established at common law (Burn v London and South Wales Coal Company and Risca Investment Company (1890-91) 7 TLR at 118-119; Edman v Ross [1922] 22 SR (NSW) 351 at 360-361; Conway v Petronious Clothing Company [1977] 1 WLR 73 at 89-90; Berlei Hestia (NZ) Limited v Fernyhough [1980] 2 NZLR 150 at 163-164; Molomby v Whitehead & Australian Broadcasting Corp [1985] 7 FCR 541 at 550-552; Wuu Khek Chiang George v ECRC Land Pte Limited [1999] 3 SLR 65 at paragraphs 25, 27, 31-34; Law Wai Duen v Boldwin Construction Limited [2001] 4 HKC 403 at 408-409).

(2) The right of inspection flows from the director’s duties to the company and a director does not have to explain why the inspection is sought or demonstrate any particular ground or ‘need to know’ as a basis (Law Wai Duen, supra at 405 and 409; Molomby, supra at 550; Wuu Khek Chiang George, supra at paragraph 27). Thus, the inaction on the part of the director after grounds for suspicion concerning the company’s affairs have arisen is irrelevant; likewise, the intention of the director to discover misfeasance with the view to seeking relief, or that the desire to find evidence is motivated by vindictiveness (Law Wai Duen, supra at 409).

(3) It is only where it can be proved that the director intends to abuse the confidence in relation to the company’s affairs and to injure the company in a material way that the director’s right of inspection can be interfered with, and such interference can only be effected in circumstances where a restriction on a director’s right can be imposed because of misuse of confidential information leading to damage (Law Wai Duen, supra at 408).

(4) In view of the proposition in (3), the exercise of a director’s right of inspection is, ‘generally speaking, not a matter of discretion with the Court’ (Edman v Ross, supra at 361; Berlei, supra at 163; Wuu Khek Chiang George, supra at paragraphs 32 and 33; Law Wai Duen, supra at 408).

(5) The onus of establishing that the right of inspection will be exercised for improper purpose lies on the person who asserts it and ‘clear proof’ is required to satisfy the court ‘affirmatively’ that the grant of the right of inspection would be detrimental to the interests of the company (Wuu Khek Chiang George, supra at paragraph 34).

(6) The scope of inspection can potentially be very wide, covering any ‘documents belonging to the company’ (Burn v London and South Wales Coal Company, supra at 118; Edman v Ross, supra at 360), ‘corporate material’ (Molomby, supra at 550), ‘corporate records and accounts’ or ‘corporate information’ (Berlei, supra at 163), ‘accounting and other records of the company’ (Wuu Khek Chiang George, supra at paragraph 25).

(7) It is perfectly proper for a director to engage an accountant to conduct the inspection in exercise of his right. A director may certainly exercise his right through his agent (Edman v Ross, supra at 361; Law Wai Duen, supra at 409). A director is also entitled to take copies of the documents during inspection (Burn v London and South Wales Coal Company, supra at 118; Edman v Ross, supra at 361).

(8)  Whilst there may be some dispute in the authorities if the statutory provision (our statutory provision is section 121(3) of Cap. 32) adds a statutory right of inspection to an existing common law right, it is abundantly clear that the statutory provision is consistent with and does not detract from the common law right (Conway v Petronious, supra at 85 and 89; Berlei, supra at 163; Wuu Khek Chiang George, supra at paragraphs 25 and 31).”

27. I would observe, first, that there is a well-established common law right on the part of a company director to inspect the company’s documents.  That right is a corollary to the duties owed by each director individually to the company and is given to them in order that they may properly discharge those duties.  There is some difference of opinion whether the statutory right under s. 121(3) of the Companies Ordinance adds a separate statutory right or whether the right of inspection is solely founded on the common law.  I shall return to that difference of opinion later in this judgment but, for present purposes, there is no doubt that each director of a company has such a right of inspection, regardless of the source of that right, and that it is an important right.  In the circumstances of the present case, the appellant’s construction of Article 159 would deny the plaintiff (and the other directors of ATV) their right of inspection: here, Mr Shing’s appointment as Executive Director has resulted in there being no board meetings of ATV and so, no opportunity for the plaintiff (or any of the other directors) to exercise the right of inspection.

28. Secondly, there is nothing in the wording of Article 159 to suggest that the company’s documents can only be inspected by the board as a whole and that any right of an individual director to do so is curtailed in that way.

29. Thirdly, on the contrary, both the common law right and, to the extent that it is a separate right, the right under s. 121(3) of the Companies Ordinance is clearly one given to each individual director and not only to those directors acting collectively as a board.

30. Fourthly, Article 159 can be construed as confirming that the right of inspection is conferred on the board acting collectively as a whole, in addition to the individual directors. It is therefore not seeking to restrict any right but is confirming that it may be exercised not only by the individual directors but by the board of directors acting together.

31. Fifthly, Article 159 serves an additional purpose of expressly providing that the right may be enjoyed by the board at any time (“always”) and therefore confirms that no other procedural requirement is imposed on the board’s access to the company’s documents.

32. Sixthly, if Article 159 were intended to exclude individual directors from having access to the company’s documents, I would expect clear words to be used given the nature and purpose of that right.

33. Finally, I see no reason why the Broadcasting Ordinance’s requirement that the affairs of a local television service provider should remain firmly rooted in the hands of ordinary residents in Hong Kong supports the appellant’s construction of Article 159. There is nothing in the requirements for a majority of the directors of a television service provider to be ordinarily resident in Hong Kong (see ss. 2 and 8) that requires Article 159 to be construed as excluding an individual director’s right of inspection of the company’s documents.  There is no suggestion that the duties of a non-Hong Kong resident director are less onerous than one who is ordinarily resident in Hong Kong.

34. I do not accept the additional construction argument advanced by Mr Wong on behalf of the appellant in his oral submissions that Article 159 is merely a procedural restriction on the way in which a director may inspect the company’s documents.  Mr Wong submitted that Article 159 did not mean that an individual director could not exercise his right of inspection because he could have resort to Article 131 to call for a meeting of the board and, even if the other directors opposed this, take advantage of the special rules in Article 132 as to quorum (especially Article 132) to constitute him as the Board and thereby exercise the right given by Article 159.  In my view, this argument is highly artificial and demonstrates that the appellant’s construction of Article 159 would amount to a substantive deprivation of the director’s right of inspection and not merely a procedural restriction of it.

35. For all these reasons, and applying the purposive construction which I consider Article 159 requires, I would hold that Article 159 does not exclude the right of an individual director to inspect the company’s documents but instead permits inspection both by the individual directors and by the board as a whole.

Would the appellant’s construction of Article 159 be contrary to public policy?

36. The Judge went on to hold that:

“22. If, contrary to the view that I have come to, Article 159 must be construed in the way suggested by Mr Anson Wong, I would regard it as being contrary to public policy and therefore void. The right of a director to inspect documents and obtain information concerning the company of which he is a director is an important one, given for the vital purpose of enabling him to carry out his office as a director in accordance with the duties imposed on him. That being the case, I do not think that it can be right that a company could in effect contract out of recognising this right through a provision in its articles.”

37. It is, of course, strictly unnecessary to deal with this point in the light of my conclusion as to the proper construction of Article 159.  However, I shall address this ground of appeal briefly.

38. Mr Anson Wong drew attention to the difference of opinion in the authorities as to whether s. 121(3) of the Companies Ordinance creates a new statutory right of inspection or merely re-states the common law position.  As noted above, Kwan J addressed this in Ng Yee Wah v Lam Chun Wah[4].  It was Mr Wong’s submission that the analysis of Slade J in Conway v Petronius [1978] 1 WLR 72 at 89G, that the right of inspection is one of common law and that the statute creates no new right, should be preferred.  He drew our attention to Sir John Chadwick’s obiter dictum in Oxford Legal Group Ltd v Sibbasbridge Services Ltd [2008] 2 BCLC 381 at §23 that he preferred Slade J’s analysis that the right of inspection is founded at common law.

39. However, even if it is assumed that the right is founded at common law, it seems to me that the restatement of that right in s. 121(3) of the Companies Ordinance permits the Court to have regard to public policy when construing Article 159.  As Sir John Chadwick observed in Oxford Legal Group Ltd: “It is plain that the right exists, whether at common law or by statute, …”.  The right having been so recognised in the statute, I can see no reason why it should not be open to the Court to conclude that it would be contrary to public policy to limit the right of inspection in the way the appellant contends it should.  Had it been necessary to do so, I would have concluded, like the Judge, that the appellant’s construction of Article 159 was contrary to public policy and the restriction on the director’s right of inspection therefore void.  As I have noted above, that construction substantively deprives the director of the right where, as here, no board meetings are being held and, so construed, the article is not merely a procedural rule relating to the manner of the exercise of that right (which would be permissible: see, Re Fook Lam Moon Restaurant Ltd [2011] 1 HKLRD 965 at §46).  Furthermore, nothing in the requirement that a majority of the directors be ordinarily resident in Hong Kong affects this conclusion.

Use of materials for improper purpose

40. The appellant complained that the plaintiff seeks to pass on information and materials obtained by him as a director of ATV to assist his father and his father’s company, San Want Media Holdings Limited (“San Want”), to prosecute legal actions against other shareholders of ATV and that these legal actions were brought and are being prosecuted for the personal interests of Tsai Senior and San Want and are not connected with the business of ATV.

41. The Judge noted (Reasons §25) that the plaintiff did not seek seriously to refute the suggestion that information which he might obtain as a result of the inspection would be likely to find its way to Tsai Senior.

42. Mr Anson Wong also pointed to documentary evidence that the documents and information divulged by the plaintiff have been used by San Want and Tsai Senior for the prosecution of their claims in HCA 317 of 2010 and HCA 773 of 2010 and that, in the former action, the plaintiff has made affirmations in support of San Want’s claim against other shareholders of ATV in which what were described as extensive references were made to internal documents of ATV.

43. The starting point is that the Judge was satisfied that the plaintiff was seeking inspection of the documents in order to enable him to carry out his duties as a director of ATV.  He held:

“26. In my view, having regard to the current state of affairs in relation to the management of ATV, and given the fact that it appears to be universally acknowledged that it is in financially straitened circumstances, it is impossible to reject the Applicant’s contention as to his purpose in seeking inspection. It is clear that for some months now, ATV’s directors have been given little or no information relating to its affairs, and have had no opportunity to consider ATV’s affairs at board meetings (which should, according to ATV’s articles of association, be held at least once in three months). Even allowing for the fact that Mr Shing has been appointed Executive Director with wide powers, it must be borne in mind that his powers are not unlimited – this is apparent from the terms of his appointment recorded in the resolution appointing him. Further, it is also evident from the terms of that resolution that it was envisaged that there should be oversight of Mr Shing in this role, and that such oversight was to be carried out by the Board, both through reports by Mr Shing to the Board of material matters, and by the Board considering, from time to time, whether it was appropriate to continue the arrangement so put in place, or to terminate or modify it. In order to carry out even these limited functions, it would seem essential for the directors to have access to information relating to the business and affairs of ATV. It is clear that the Applicant is dissatisfied with the way in which Mr Shing is managing the affairs of ATV. Regardless of whether or not such dissatisfaction is ultimately found to be justified, it seems to me that it must be open to the Applicant to seek information as to ATV’s affairs so as to consider whether any modification to Mr Shing’s role is called for. In these circumstances, it seems to me that whatever else might be done with any information obtained through inspection, it should be accepted that the Applicant seeks inspection for the entirely proper purpose of monitoring ATV’s affairs, and considering how such affairs should be conducted going forward.”

44. In contrast, there is no evidence constituting “clear proof” to satisfy the court “affirmatively” that the grant of the right of inspection would be detrimental to the interests of the company: see Ng Yee Wah v Lam Chun Wah at §29(5).

45. It was submitted by Mr Wong that the crux of the matter is that any information of ATV passed by the plaintiff to Antenna is subject to a confidentiality clause in the ATV Shareholders’ Agreement (clause 23) and that the plaintiff has used and has allowed San Want and Tsai Senior to use documents obtained by him from ATV for purposes other than in the proper performance of his duties as a director of the company.

46. However, it is clear from the terms of the ATV Shareholders’ Agreement (clause 8.12) that a director of ATV appointed by a shareholder would be entitled to pass information concerning ATV to his appointing shareholder and clear from the terms of the Antenna Shareholders’ Agreement (clause 11.6) that, in turn, a director of Antenna would be entitled to pass that information on to his appointing shareholder.  In other words, the shareholders’ agreements permitted information emanating from ATV to be passed to those holding the economic interest in the shares of ATV.  Thus, the plaintiff is entitled to pass information concerning ATV to San Want and Tsai Senior.  The confidentiality requirement in the ATV Shareholders’ Agreement (clause 23) must, in my view, be read and understood as being subject to a shareholder’s right to receive information from its appointed director.

47. In any event, I would agree with the submission, advanced by Mr Charles Manzoni SC in the plaintiff’s skeleton argument, that it has not been demonstrated that there has been any misuse of any documents passed to Tsai Senior by the plaintiff or that any harm will be caused to ATV by the release of information concerning it by the plaintiff to Tsai Senior.  Absent such evidence, there is no basis for refusing to grant to the plaintiff an order for the inspection of the company’s documents.

48. Mr Wong sought to meet this argument by submitting, in reliance on the decision in Oxford Legal Group Ltd, that the court would refuse to allow a director to inspect the books of a company not only where the purpose of the inspection was to injure the company but also where it was sought for an improper purpose.  Thus, he contended, it was not necessary to establish injury to the company. However, Oxford Legal Group Ltd is distinguishable on its facts because there the director was inevitably going to cease to be a director after a buy-out and so there could be no proper purpose in the director inspecting the company’s books.  In contrast, the Judge found the plaintiff in the present case clearly has a proper purpose in seeking inspection.  In circumstances where there is a proper purpose in the inspection, it seems to me that it is relevant to consider whether it has been shown that any injury will be caused to the company in order to determine if, in the exercise of the court’s discretion, any condition should be imposed on the exercise of the right of inspection.

Scope of the order for inspection

49. It was contended on behalf of the appellant that the inspection order was too broad in that some of the categories of documents in the originating summons could not be regarded as books of account or accounting records.

50. Mr Anson Wong referred to the judgment of Yuen J (as she then was) in Ho Pui Tin v Wah Nam Group Ltd [2006] 3 HKC 40 where she held (at §§25-26) that the term “books of account” in s. 121 of the Companies Ordinance should be understood to include “ledgers, journals, vouchers, statements and such like accounting records” but not contracts, agreements or minutes.

51. He submitted that, although Rogers VP appeared, in Cornforth v Alvarez & Marsal Asia Ltd [2009] 3 HKC 41, to adopt a more liberal construction of the term “books of account” as including all such documents which would be necessary to give a true and fair view of the state of the company’s affairs (see §§24-26), he held that documents such as notices, agenda, minutes and resolutions of board meetings or general meetings would not fall within that category.

52. On the authority of Ho Pui Tin v Wah Nam Group Ltd and Cornforth v Alvarez & Marsal Asia Ltd, Mr Wong submitted that the scope of inspection ordered by the Judge was too wide in that the documents sought under paragraphs 1(b) and 1(c) of the originating summons and paragraph 1 of the schedule do not come within the category of documents which a director is entitled to inspect upon his application for inspection.

53. I do not agree.  As Kwan J held in Ng Yee Wah v Lam Chun Wah at §29(6), where the application is made under both the common law and the statute (cf. Ho Pui Tin v Wah Nam Group Ltd[5]) the scope of inspection can potentially cover any documents belonging to the company, corporate material, corporate records and accounts, corporate information and accounting and other records of the company.  That is the case here: see §16 above.  The Judge here approached the ambit of the order for inspection on the basis that:

“41. … as long as the documents sought to be inspected are such as could reasonably be thought to be of assistance to a director seeking to carry out his duties, they are susceptible to being inspected at the application of the director concerned. …”.

54. I consider that approach to be appropriate in defining the limits of the director’s entitlement to inspect the company’s documents.  Applying that definition, I am satisfied that the Judge was correct in concluding that “all of the documents sought are documents which the Applicant could reasonably regard as being likely to assist him in carrying out his duties as a director of ATV”.

Should inspection be subject to conditions?

55. As the appellant indicated a desire to appeal against the inspection order, Barma J granted an interim stay of execution of that order.  On further application, this court granted a limited stay in the following terms, namely that, pending the determination of the appeal, the plaintiff’s inspection of the documents in question should be subject to the condition “that all documents and/or information obtained and/or inspected by the Plaintiff shall not be disclosed or used by the Plaintiff otherwise than for the purpose of discharging his duties owed to [ATV] in the capacity as its director.”

56. Mr Anson Wong invited this court to continue that condition as a condition of the inspection order even if the appeal is dismissed.

57. I do not consider that it would be appropriate to do so.  The condition was imposed by way of alternative to the grant of a stay of execution on the footing that, if the appeal were successful and the inspection order set aside, the refusal of a stay would render the appeal nugatory.  Since, I have concluded that the appeal should be dismissed, there is no justification, in my view, for imposing the condition in question on the exercise of the plaintiff’s right to inspect the company’s documents.

Conclusion and disposition

58. For these reasons, I would dismiss the appeal with costs to be paid by the appellant to the plaintiff.