CHUI PUI KUN v. FOOK LAM MOON RESTAURANT LTD AND OTHERS

HCMP 270/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 270 OF 2010

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(Heard Together)

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J U D G M E N T

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Applications

1.  There are two applications before the Court.  In HCMP 270/2010, which is an application made by Chui Pui Kun (“Pui Kun”) in his capacity as a director of the 1^st Respondent, Fook Lam Moon Restaurant Limited (“FLM (HK)”), Pui Kun seeks an order that FLM (HK) do provide, and the 2^nd to 5^th Respondents, being the other directors of FLM (HK), do procure FLM (HK) to provide, to Pui Kun within 7 days with full and uninterrupted access to, and allow him to inspect and take copies of all the minutes of all proceedings at meetings of directors of FLM (HK) from its date of incorporation up to the date of the Originating Summons (12 February 2010) and such further period as may be ordered by the Court.

2.  HCMP 271/2010 is an application by Pui Kun and a company called Coqueen Company Limited (“Coqueen”) seeking similar relief in respect of another company called Fook Lam Moon (Kowloon) Restaurant Limited (“FLM (Kowloon)”).

3.  On 30 September 2010, Mr Justice Barma J ordered the two applications to be heard together.

The parties

(i)    HCMP 270/2010

4.  In HCMP 270/2010, the 1^st Respondent, FLM (HK), is a company incorporated in Hong Kong on 25 November 1975.  Currently, it has an issued share capital of HK$600,000 divided into 60,000 shares of HK$10.00 each, which are divided into the following classes:-

(1)    26,780 “A” shares;

(2)    26,780 “B” shares;

(3)    6,440 “C” shares.

5.  These shares are held in the names of the following persons:-

(1)    Chui Wai Kwan (“Wai Kwan”) – 26,780 “A” shares;

(2)    Coqueen – 26,780 “B” shares;

(3)    Chui Yau Foon (“Yau Foon”) – 1,663 “C” shares;

(4)    Tsui Yau Hing (“Yau Hing”) – 1,663 “C” shares;

(5)    Tsui Yau Hoi, also known as Elizabeth Tsui (“Yau Hoi”) – 1,577 “C” shares; and

(6)    Tsui Yau Mui (“Yau Mui”) – 1,557 “C” shares.

6.  Coqueen is a company incorporated in Hong Kong and owned and controlled by Pui Kun and his family members.

7.  Pui Kun and Wai Kwan are brothers begotten by the late Madam Ho Wai Hing, the second wife of their late father (Chui Fook Chuen).  Yau Foon and Yau Hing are elder half-sisters of Pui Kun and Wai Kwan begotten by the first wife of the late Chui Fook Chuen.  Yau Hoi and Yau Mui are younger half-sisters of Pui Kun and Wai Kwan begotten by the third wife of the late Chui Fook Chuen.

8.  FLM (HK) currently has seven directors, namely:-

(1)    Wai Kwan, the 2^nd Respondent – “A” Director

(2)    Chui Tak Yiu, also known as Daniel Chui (“Daniel Chui”), the 3^rd Respondent – “A” Director;

(3)    Hui Jia Yin, Janet (“Janet Hui”), the 5^th Respondent – “A” Director;

(4)    Pui Kun, the Applicant – “B” Director

(5)    Chui Tak Keung Duncan (“Duncan Chui”) – “B” Director;

(6)    Chui Chan Oi Lin Eileen (“Eileen Chui”) – “B” Director;

(7)    Yau Hing, the 4^th Respondent – “C” Director.

9.  Daniel Chui is the son of Wai Kwan, and Janet Hui is the wife of Daniel Chui.

10.  Eileen Chui is the wife of Pui Kun, and Duncan Chui is the son of Pui Kun.

(ii)   HCMP 271/2010

11.  In HCMP 271/2010, the 1^st Respondent, FLM (Kowloon), is a company incorporated in Hong Kong on 22 March 1977.  Currently, it has an issued share capital of HK$1,000,000 divided into 1,000 ordinary shares of HK$1,000 each.

12.  These shares are held in the names of the following persons:-

(1)    Pui Kun – 140 shares;

(2)    Coqueen – 290 shares;

(3)    Wai Kwan – 410 shares;

(4)    Daniel Chui – 10 shares;

(5)    Chui Wai Kwan Investments Company Limited (“CWKI”) – 10 shares

(6)    Fullbond Properties Limited (“Fullbond”) – 140 shares.

13.  CWKI is a company owned and controlled by Wai Kwan and his family members.

14.  Fullbond is a company incorporated in the British Virgin Islands owned and controlled by Mr Lo On.  He is not related to the Chui families.

15.  FLM (Kowloon) currently has five directors, namely:-

(1)    Wai Kwan, the 2^nd Respondent;

(2)    CWKI, the 4^th Respondent;

(3)    Fullbond, the 5^th Respondent;

(4)    Pui Kun, the 1^st Applicant;

(5)    Coqueen, the 2^nd Applicant.

16.  Daniel Chui, the 3^rd Respondent, used to be a director of FLM (Kowloon).  Apparently, he ceased to be a director of FLM (Kowloon) on 9 January 2010, but the relevant notification of change of director was not filed with the Companies Registry until 24 February 2010.  I assume that this explains why, in HCMP 271/2010 which was commenced on 12 February 2010, Daniel Chui is named as the 3^rd Respondent.

17.  In what follows, FLM (HK) and FLM (Kowloon) will collectively be referred to as the “Companies”, and Pui Kun and Coqueen the “Applicants”.

The Applicants’ complaints

18.  The Applicants’ case is that since December 2009, they have demanded unimpeded access to the original board minutes of the Companies and to be allowed to take copies of them.  However, their demands were repeatedly frustrated by what they allege to be flimsy excuses by the other directors of the Companies who have de facto control of the documents sought.

19.  In paragraph 8 of the Skeleton Argument of Miss Audrey Eu SC (leading Mr Johnny K C Ma) acting for the Applicants, it is contended that the Applicants’ rights to have access to the original board minutes of the Companies and to take copies of the same have been impeded by the Respondents, as shown by the following matters:-

(1)    Insisting on compliance with certain rules written in Chinese, entitled “公司董事查閲帳簿之守則” (“the Rules”), adopted during board meetings held on 21 June 2008;

(2)    Requiring the Applicants to give reasons for inspection and sign a written undertaking in terms which are wholly objectionable, purportedly in pursuance of the Rules;

(3)    Imposing additional hurdles such as the presence of and close surveillance by an “A” Director and a “C” Director during the inspection (which are not stipulated in the Rules);

(4)    Delaying unreasonably in supplying copies of board minutes upon request.

20.  The Applicants have used the description “Wai Kwan Parties” to collectively refer to the 2^nd to 5^th Respondents in each the two applications.  Mr Jat Sew-tong SC (leading Miss Linda Chan) acting for the 2^nd, 3^rd and 5^th Respondents in HCMP 270/2010 and the 2^nd to 4^th Respondents in HCMP 271/2010 takes issue with this description, on the ground that it tends to suggest that the directors of the Companies (other than the Applicants) are acting in concert to resist the Applicants’ attempts to have unimpeded access to the original board minutes of the Companies, whereas the 4^th Respondent in HCMP 270/2010 (Yau Hing) and the 5^th Respondent in HCMP 271/2010 (Fullbond) are (it is said) independent of Wai Kwan and his family members and are separately represented by Miss Zabrina Lau. I do not think it matters much how one describes or labels the directors of the Companies (other than the Applicants), although on the facts it does not seem to me that there is any real basis to allege that Fullbond is acting in concert with those other directors.

21.  Before I turn to consider the validity of the Applicants’ complaints, I ought to explain the approach that I would adopt in this judgment.  Pui Kun, Wai Kwan and some of the parties to these two applications are currently engaged in a number of litigations against each other, including a libel action commenced by Pui Kun against Wai Kwan (HCA 2339/2009) and two shareholders’ petitions (HCMP 438/2010 and HCMP 937/2010).  HCMP 438/2010 relates to a petition presented by Coqueen against Wai Kwan, Yau Hing and FLM (HK) pursuant to section 168A of the Companies Ordinance, complaining of unfairly prejudicial conduct and seeking, inter alia, an order that Wai Kwan and Yau Hing do sell their respective shares in FLM (HK) to Coqueen at a fair value to be determined.  It is apparent from a perusal of the petition in HCMP 438/2010, in particular paragraphs 93 to 106 and 135 to 156 thereof, that Pui Kun’s complaint in HCMP 270/2010 about the denial of right to inspect the board minutes of FLM (HK) also forms a matter of complaint in the petition.

22.  HCMP 937/2010 relates to a petition presented by Wai Kwan seeking to buy out Coqueen’s shares in FLM (HK).  Some of the meetings and events relevant to Pui Kun’s allegations of denial of access to board minutes are addressed in paragraphs 229 to 278 of that petition.

23.  I am not, of course, hearing these two petitions, and have not heard the evidence of the witnesses, although I have the benefit of reading the affirmations (including the exhibits thereto) filed in the two applications before me.  Mr Jat submits, correctly in my view, that generally I cannot determine disputes of facts based on evidence given by way of affirmations only.

24.  In the circumstances, I consider that the approach that I should adopt here is to deal only with those issues which are strictly essential for a resolution of the two applications before me and concentrate on facts which are undisputed or indisputable, in order not to pre-judge issues which will have to be determined at the hearing of the petitions in HCMP 438/2010 and HCMP 937/2010.  For this reason, I do not consider it appropriate for me to make comments or findings on various allegations raised in affirmations filed by the Applicants where the underlying facts are in dispute.

Brief summary of facts leading to the two applications

25.  By a letter dated 4 December 2009 from Pui Kun to Apex Corporate Secretaries Limited (“Apex”), the company secretary of FLM (Kowloon), Pui Kun requested for the inspection of the original minute books of FLM (Kowloon).  According to Pui Kun, he was told by Teresa Wong, Assistant to the General Manager (i.e. Wai Kwan), that they were kept in the custody of Apex.  About 1 to 2 weeks later, Pui Kun told Teresa Wong that he would like to inspect the minute books of FLM (HK), but was told by Teresa Wong that Apex was arranging the minute books of the company, and therefore they were not available for inspection. 

26.  Pui Kun says that on or about 14 or 15 December 2009, he was told by Lithia Ho, Chief Accountant of FLM (Kowloon), that Daniel Chui had required him (Pui Kun) to sign a “standard form letter of request”.  This letter, on the face of it, would suggest that Pui Kun made the request for inspection of the documents for the purpose of his own private litigation (namely, the libel action in HCA 2339/2009) and not for any purpose of the Companies.  Daniel Chui has given an explanation for the request, the details of which do not, I think, matter much.  It seems to me that Daniel Chui did not have any sufficient ground to suppose that Pui Kun’s request for the documents was for the purpose of his libel action.  This having been said, the “standard form letter of request” was not insisted upon once Pui Kun (through his solicitors) issued a strongly worded letter dated 4 January 2010 objecting to it, threatening legal proceedings unless his demands were met within a matter of 2 days. I do not think this episode relating to the “standard form letter of request” adds anything of substance to the Applicants’ case.

27.  On 6 January 2010, Pui Kun attended the registered office of FLM (Kowloon) to inspect its minute books. Pui Kun alleges that his inspection was subject to various unreasonable fetters, restrictions, hindrances and interferences, including being subject to the close scrutiny and surveillance of Lithia Ho, and that he was prevented from making copies of various minutes or having copies of the minutes made for him.  In the words of Pui Kun, Lithia Ho was “virtually breathing down” his neck, making it very difficult for him to focus on the perusal of the minute books.  Pui Kun also alleges that Lithia Ho refused to make photocopies of various minutes requested by him on the instruction of Wai Kwan.  These allegations are denied by Lithia Ho, and I do not consider that they can be resolved on affirmation evidence only.

28.  On 26 January 2010, Pui Kun went to the office of FLM (HK) to inspect the minute books.  According to Pui Kun, when he arrived at the office, Yau Hing and Daniel Chui were already there, sitting in front of a small round table, on which one of the minute books was placed.  He was only allowed to inspect the minute book in the presence of Yau Hing and Daniel Chui under their close surveillance.  Pui Kun alleges that his inspection was interfered with or disturbed by Daniel Chui and Yau Hing, that they told Pui Kun that he could only inspect the minute books in the presence of a director nominated by the “A” shareholder (i.e. Wai Kwan) and the “C” shareholders (i.e. Yau Hing, Yau Foon, Yau Mui and Yau Hoi), and that they refused Pui Kun’s request for copies to be made of the minutes.  Apparently, words were exchanged between Pui Kun and Yau Hing. There is also an allegation by Daniel Chui that at one point, Pui Kun threw an A4 note pad at Daniel Chui’s head.  What happened during the inspection of the minutes at the office of FLM (HK) on 26 January 2010 is very much in dispute, and it would not be possible for the court to determine these disputes on affirmation evidence only.

29.  The allegations and counter allegations of the parties are set out in detail in letters exchanged between the solicitors for the parties.  I do not think it is not necessary to burden this judgment further by summarising the contents of those letters, suffice it to say that the Applicants’ demands were not met, thus leading to the two applications made on 12 February 2010.

A pplicable principles

30.  Miss Eu submits that the following legal principles are well established:-

(1)    Common law confers a right upon a director to inspect documents belonging to the company, and, if necessary, to take copies of the documents, which is essential to the proper performance of a director’s duties.

(2)    A director will not be called upon to furnish his reasons before being allowed to exercise his right of inspection since “the right of inspection flows automatically from the director’s duties”, and “in the absence of clear proof to the contrary”, the court would assume that the director is exercising it for the benefit of the company.

(3)    It is only if it can be clearly and affirmatively proved that (i) “a director intends to abuse the confidence in relation to the company’s affairs so as to injure the company in a material way”, or (ii) “a director is wanting to inspect the books of a company for a collateral purpose other than in pursuit of his duties as a director and for the benefit of the company”, that the director’s right of inspection could be interfered with.

(4)    The onus of establishing any alleged “abuse of confidence” or “improper purposes” lies clearly and squarely on the person who asserts it, and “the court will not restrict [a director’s] right to inspect the books of accounts on the strength of flimsy assertions by a hostile camp in the board”.

31.  I was taken through a line of English and Hong Kong authorities, including Conway v Petronius Clothing Co Ltd [1977] 1 WLR 72; Re Boldwin Construction Co Ltd [2001] 3 HKLRD 430; Re Grand Sino International Ltd, HCMP 4616 of 2001 (unreported); Re Peaktop Technologies (USA) Hong Kong Ltd [2007] 4 HKLRD 207; Oxford Legal Group Ltd v Sibbasbridge Services plc [2008] 2 BCLC 381; and Re Alvarez & Marsal Asia Ltd [2009] 4 HKLRD 727.  The above propositions of law are borne out by these authorities.

32.  Neither Mr Jat nor Miss Lau disputes the above propositions of law.  The argument of Mr Jat (adopted by Miss Lau generally) is rather, as I understand it, that:

(i)     the Applicants’ inspections of the board minutes have not been obstructed or hindered by the Respondents,

(ii)    the Applicants were (and still are) obliged to comply with the Rules adopted by the boards of directors of the Companies which apply to inspection of all documents belonging to the Companies,

(iii)   in any event, even if the Rules have no application to inspection of board minutes, the commencement and continued pursuit of these applications are unnecessary, abusive and a complete waste of time and costs, as Pui Kun has already inspected the original minute books containing the board minutes of the Companies and had possession of copies of such minutes, and

(iv)   there is in any event no basis to join the individual directors as respondents to these applications.

The Rules

33.  The Rules were adopted by the boards of directors of the Companies on 21 June 2008.  Under the Rules, a director wishing to inspect the Companies’ documents is required to give advance notice to the relevant company stating, amongst other things, the purpose of the inspection and whether he wishes to take copies of the documents inspected.  Provision is made for the length of notice required, depending on whether the documents in question are kept in the registered office of the company or elsewhere, and the time that copies of the documents would be made available.  Also, the director is required to sign a Letter of Undertaking and the persons participating in the inspection also have to sign a Letter of Undertaking, essentially agreeing to maintain confidentiality of the information derived from inspection of the company’s documents.

34.  It seems clear from the contemporaneous documents (including the minutes of the board meetings of FLM (HK) and FLM (Kowloon) held on 16 February 2008 and 29 March 2008 respectively, a letter from Pui Kun to the company secretary, Apex Corporate Secretaries Limited, dated 13 March 2008, and the minutes of the AGM of FLM (HK) and FLM (Kowloon) held on 12 April 2008) that the Rules originated from certain issues raised at those meetings regarding the inspection by directors of accounting documents of the Companies.

35.  In the discussion leading to the adoption of the Rules, the parties were focusing on the accounting documents of the Companies, and references were made to the accounts, documents and records relating to purchase, sale and keeping of stocks such as general ledgers, sub-ledgers, balance sheets, profit and loss accounts, income and expense statements, bank books and statements, receipts, payment and journal vouchers, inventory lists, lists of accounts payable and accounts receivables, invoices of sales, cheque stubs and monthly management accounts, etc.

36.  The minutes of the boards meetings of FLM (HK) and FLM (Kowloon) held on 21 June 2008 recorded that all the directors, including the Applicants, of the Companies resolved unanimously to adopt the Rules to govern a director’s inspection of documents referred to as “帳簿” in the Rules.  Miss Eu submits that “帳簿” means the “books of account” of the Companies, and does not include the board minutes of the Companies.

37.  Mr Jat refers me to the fact that in the discussion recorded in the minutes of the board meeting of FLM (HK) held on 21 June 2008, there was a reference to “單據” (receipts and invoices), which obviously would not be the same as “books of account”.  I think it is fair to say, from the discussion preceding the adoption of the Rules by the directors of the Companies, that the parties intended that the Rules would apply to wider classes of documents than just the books of account strictly so called, and it may well be that the Rules should be regarded as being applicable to other types of accounting documents mentioned above.  I do not, however, have to determine the precise scope of application of the Rules.

38.  What seems to me clear is that there was no discussion or agreement that the Rules would be applicable to the minutes of board meetings of the Companies.  Also, it seems to me that the term “帳簿” used by the parties in the Rules, as it is ordinarily understood, would not be apt to refer to or include board minutes.  Further, there is nothing in the detailed provisions of the Rules which demonstrates that they have application to the board minutes of the Companies.  Thus, I agree with the submission of Miss Eu that the Rules have no application to the inspection of the board minutes of the Companies by their directors.

39.  In reaching this conclusion, I have not placed much weight on the ex post facto explanation or interpretation of the scope of the Rules given by the parties or the solicitors of the Companies or Mr Lo On.  I consider it far more relevant to have regard to the contemporaneous documents leading to the adoption of the Rules as well as the wording of the Rules.

The validity of the Rules

40.  Having reached the above conclusion on the scope of application of the Rules, it is strictly not necessary for me to consider whether the Rules are, in any event, not valid as being inconsistent with the common law right of directors to inspect documents belonging to the company, and, if necessary, to take copies of the documents. However, since submissions on this issue have been made by counsel, I shall deal with it briefly.

41.  Miss Eu submits that the Rules cannot have the legal effect of limiting the directors’ rights and duties in relation to the Companies, and relies on paragraph 16-38 of Gower & Davies, Principles of Modern Company Law, 8^th Ed, which states as follows:-

“Exercise of future discretion

Thirdly, it was debated at common law whether the non-fettering rule prevented a director from contracting with a third party as to the future exercise of his or her discretion.  The answer ultimately arrived at was that this was permissible in appropriate cases.  The starting point at common law, despite the paucity of reported cases on the point, seems to be that directors cannot validly contract (either with one another or with third parties) as to how they shall vote at future board meetings or otherwise conduct themselves in the future.”

42.  Miss Eu goes on to say that the Rules do not enjoy any constitutional status such as the articles of association or the bye-laws of the Companies.  Further, given that a director’s right of inspection flows from his duties to the company, just as directors, acting individually or collectively, cannot validly resolve or agree to modify or restrict the duties owed by them in law or equity to their company, they are not at liberty to fetter the way in which they will perform those duties by giving up or restricting their right to inspect or take copies of company documents in future.  Miss Eu submits that the Rules which require the director to justify his request for inspection are wholly inconsistent with his rights at common law, and also that the requirement in the Rules that a director must sign an undertaking of confidentially violates the presumption that he is exercising his right of inspection for the benefit of the company, and thus the Rules constitute an unlawful and unenforceable fetter on the directors’ exercise of their rights which may in turn impact on the proper discharge of their duties.

43.  On the other hand, Mr Jat submits that, as is clear from the wording of the Rules, they are designed to recognize a director’s right to inspect the Companies’ documents and records, to protect the confidentiality of the Companies’ commercial secret, to ensure the smooth process of inspection and to avoid any dispute.  I think this is correct, as one can see from the first paragraph of the Rules.

44.  Mr Jat further says that it is well established that the decisions of directors are to be taken collectively either by written resolution or by a resolution passed by the majority at a meeting.  Once a decision has been taken, the directors, including dissenters, are bound by the decision and must carry it into effect or resign.  Reliance is placed on paragraph 5.05 of Mortimore: Company Directors, Duties, Liabilities and Remedies, and the following statement by Millet J (as he then was) in Re Equiticorp International plc [1989] 1 WLR 1010 at 1013E-G:-

“Once a proper resolution of the board has been passed, however, it becomes the duties of all the directors, including those who took no part in the deliberations of the board and those who voted against the resolution, to implement it; and even in the absence of the specific authorisation to any and every director to take such steps as are necessary to implement it, which is contained in this particular resolution, that remains the legal position”.

45.  It seems to me clear that the Rules do not amount to any contract by the directors amongst themselves as to how they shall exercise their discretion in future or vote at future board meetings.  I do not think the passage in Gower & Davies, Principles of Modern Company Law referred to by Miss Eu provides the answer to the question before me.

46.  It is, in my view, important to bear in mind that the directors’ common right to have access to company documents and, if necessary, to take copies of them exists for the benefit of the company and not for the directors’ personal benefit.  This right is to enable the director to properly perform their duties, but the duties are owed to the company and no one else (at any rate when one is dealing with a solvent company).  I see no reason in principle why the company may not, by a resolution passed by a proper organ of the company, lay down procedural rules relating to the manner of exercise of such right by the directors. I leave open for further consideration whether the company may, by a board (or shareholders) resolution, seek to restrict the substantive right of the directors to inspect company documents or to take copies of them.  It may of course be difficult sometimes to determine whether a restriction is procedural or substantive in character, but I do not think any such difficulty arises in this case.  I should add that I am not here dealing with a mandatory rule imposed by statute, as to which different considerations may apply.

47.  Turing to these particular Rules, I do not see anything objectionable which requires the director seeking to inspect documents belonging to either of the Companies to state his purpose of inspection to the company concerned, and to give a written undertaking to the company to maintain confidentiality of the information derived from the documents inspected.

48.  If the resolution adopting the Rules was passed by some of the directors constituting a majority of the board for an improper purpose or was otherwise beyond the powers of the directors, the resolution itself may be challenged.  However, the Rules in this case were adopted by the unanimous agreement of all the directors of the Companies, and there is no suggestion that the Rules were not adopted bona fide for the benefit of the Companies.

49.  In all, I have come to the conclusion that the Rules are themselves valid and effective, but they do not apply to the board minutes of the Companies.

Whether Applicants’ exercise of right to inspect and take copies of board minutes has been impeded or interfered with

50.  Although there are substantial factual disputes as to what occurred during the inspections on 6 and 26 January 2010, it seems clear that Pui Kun in fact had access to and inspected at least some of the board minutes of the Companies which were available and kept at the offices of the Companies.  Further, Pui Kun did so without having to comply with the requirements of the Rules, in particular, stating the purpose of the inspection and giving a written undertaking of confidentiality.  Also, it appears that copies of those board minutes of the Companies kept by Teresa Wong were given to the Applicants in December 2009 and again in January 2010.  As mentioned above, I am not prepared to make any finding that Pui Kun’s inspections of the minutes were interfered with, or his requests for copies of the board minutes denied on those occasions.

51.  On the other hand, it is apparent from the letter dated 29 January 2010 from Messrs Woo Kwan Lee & Lo (now acting for the 2^nd, 3^rd and 5^th Respondents in HCMP 270/2010 and the 2^nd to 5^th Respondents in HCMP 271/2010) to Messrs Henry Wai & Co (acting for the Applicants) that their clients were insisting that the Rules applied to inspection of board minutes by the directors, including the Applicants.  The same stance was adopted by the Companies, as can be seen from Messrs Alfred Lam, Keung & Ko’s letter dated 30 January 2010 to Messrs Henry Wai & Co.

52.  This stance was maintained up to at least the commencement of the Originating Summonses on 12 February 2010.  Mr Jat refers me to a letter dated 30 April 2010 from Messrs Woo Kwan Lee & Lo to Messrs Henry Wai & Co and submits that because the Respondents were tired of the Applicants and Messrs Henry Wai & Co’s intimidating manner in pursuing their requests for access to company documents they decided not to further insist on the Applicants’ compliance with the Rules.  Mr Jat says that since then the Respondents have not insisted on the Applicants’ compliance with the Rules and no further complaint in this regard has been raised by Messrs Henry Wai & Co. However, this “concession”, if one can describe it as such, on the part of the Respondents as stated in Messrs Woo Kwan Lee & Lo’s said letter of 30 April 2010 related to what were described as the “Retrieved Documents”, which apparently were some old minutes and other documents of the Companies located by Cherry Sin, an accountant of FLM (HK), in a warehouse.  There was no indication that the “concession” would extend generally to all board minutes of the Companies.

53.  However, by a further letter dated 23 October 2010 from Messrs Woo Kwan Lee & Lo to Messrs Henry Wai & Co, Mr Jat’s clients made it clear to the Applicants that they would no longer insist on compliance with the Rules (“Our clients reiterate that they will not insist on your clients’ compliance with the Rules … Your clients are at liberty to inspect any documents of the Companies as they have been doing in the past 6 months.  To ensure the integrity and safekeeping of the Companies’ documents, our clients suggest your clients make their request through the accounting staff and with reasonable notice in advance.  In this way, the accounting staff can assist your clients to arrange for copies of the documents required by your clients and ensure that all originals of the Companies’ documents will be returned for their safekeeping.  This notwithstanding, if your clients do not want to accept our clients’ suggestion, our clients will not insist on it, but will bring such conduct to the attention of the Court.”)

54.  The letter ended with a proposal that the hearing of the two applications be adjourned sine die and that the costs of the proceedings be determined at the trial of the section 168A petitions.  This proposal was rejected by the Applicants.

55.  Notwithstanding this latest “concession”, I note that Mr Jat maintains in his submissions that the Applicants are obliged to comply with the Rules which apply to inspection of all documents belonging to the Companies, including board minutes. Miss Lau’s case is also that the Rules are binding on all the directors, including the Applicants, and they apply to the board minutes of the Companies.

56.  Other than the “insistence” upon compliance with the Rules, I do not find the Applicants’ complaints mentioned in paragraph 19 above, i.e., interference with their rights to have access to the original board minutes of the Companies and to take copies of the same by the Respondents, to be established on the evidence before me.

57.  I am therefore left in the rather unusual situation that although the Respondents have maintained, in words, the stance that the Applicants’ right of inspection and taking copies of the board minutes of the Companies is subject to the procedural restrictions contained in the Rules, the Respondents did not strictly enforce or apply the Rules when the Applicants sought to inspect the documents or requested for copies of the documents to be taken.  In other words, although the Respondents’ stance is not, in my view, justified, it has not been proved that Applicants’ right of access to the board minutes has in fact been impeded.

58.  Before I turn to the question of what, if any, relief ought to be granted to the Applicants in these circumstances, I should mention that in Mr Jat’s Skeleton Argument, it is said that the Applicants’ suggestion that they sought inspection of the board minutes for the purpose of discharging their duties as directors of the Company is plainly not sustainable.  This is tantamount to saying that the Applicants are seeking inspection of the documents for a collateral or improper purpose.  As is clear from the authorities mentioned in paragraph 31 above, the court will not lightly infer that a director is acting for a collateral or improper purpose.  I do not think there are sufficient materials to justify such inference in the present case.

Relief

59.  Mr Jat submits that the commencement and continued pursuit of these applications are unnecessary, abusive and a complete waste of time and costs, as Pui Kun has already inspected the original minute books containing the board minutes of the Companies and had possession of copies of such minutes.  In view of the stance taken and maintained by the Respondents that the Rules apply to the inspection of board minutes by the directors of the Companies, including the Applicants, I do not think it can be said that the commencement or continued pursuit of these proceedings are unnecessary.  There are three other points which I consider are relevant in deciding whether relief ought to be granted to the Applicants.  First, although I have not been able to find that the Applicants’ inspections of the board minutes were impeded or interfered with, the existing evidence does not permit me to conclude that the Applicants have inspected all the original board minutes of the Companies from their respective dates of incorporation, and taken copies of all those minutes that they may want to.  Second, I accept Miss Eu’s submission that the Applicants are entitled, as a matter of law, to exercise the right to inspect the board minutes of the Companies as often as they wish, and there is no principle which says that they can inspect the documents only once.  Third, the “concession” made in Messrs Woo Kwan Lee & Lo’s letter of 23 October 2010 came at quite a late stage when significant costs would already have been incurred, although it would be relevant to the issue of costs.

60.  As for Mr Jat’s submission that there is no basis to join the individual directors as respondents to these applications, it seems to me that the Applicants and the individual respondents are the true opposing parties.  It may be that Fullbond was not involved in the original disputes, but he as well as Yau Hing have chosen to adopt the stance of the other individual respondents and resist these applications.  All the individual respondents were (and, save Daniel Chui in respect of FLM (Kowloon), still are) directors of the Companies at all material times.  In essence, the present disputes are between different camps of shareholders/directors of private companies, and it is not unreasonable for the Applicants to look to the opposing shareholders/directors to pay the costs of the proceedings. Otherwise, if the costs are to be borne by the Companies, the Applicants would effectively be funding part of the costs of opposing their own applications. I therefore consider that the Applicants are justified in joining the individual directors as respondents to these applications.

61.  For the above reasons, I would grant an order in HCMP 270/2010 that the 1^st Respondent do provide, and the 2^nd to 5^th Respondents do procure the 1^st Respondent to provide, to the Applicant within 14 days with full and uninterrupted access to, and allow him to inspect and take copies of all the minutes of all proceedings at meetings of directors of the 1^st Respondent from its date of incorporation up to the date of the order herein, notwithstanding anything contained in the “公司董事查閲帳簿之守則” adopted by the directors of the 1^st Respondent on 21 June 2008.

62.  Similarly, in HCMP 271/2010, I would grant an order that that the 1^st Respondent do provide, and the 2^nd, 4^th and 5^th Respondents do procure the 1^st Respondent to provide, to the Applicants within 14 days with full and uninterrupted access to, and allow them to inspect and take copies of all the minutes of all proceedings at meetings of directors of the 1^st Respondent from its date of incorporation up to the date of the order herein, notwithstanding anything contained in the “公司董事查閲帳簿之守則” adopted by the directors of the 1^st Respondent on 21 June 2008.

63.  On the question of costs, the offer made by Messrs Woo Kwan Lee & Lo in their letter of 23 October 2010 would give the Applicants practically the same relief pending the outcome of the trial of the petitions.  I do not see that the Applicants have any particular good reason for refusing the offer, which seems to me to provide an acceptable interim arrangement pending determination of all relevant issues (including disputed factual issues) at the trial of the petitions, thereby saving the parties’ time and costs.  Also, the Respondents’ proposal that the costs of these proceedings be determined at the trial of the petitions seems to me to be a sensible proposal.  On the other hand, the Applicants have succeeded on the issue of the scope of application of the Rules and, as mentioned above, I have decided to grant the Applicants some relief.  Overall, I consider it fair that the parties should bear their own costs.  I would therefore make an order nisi that there be no order as to the costs of these applications.

64.  Lastly, I wish to thank counsel for their most helpful submissions in these matters.