Chow Yin Man v. Vega Services Ltd

HCMP 2423/2024
HCMP 2424/2024
HCMP 2425/2024
HCMP 2426/2024
HCMP 2427/2024
(Heard Together)

[2025] HKCFI 2082

HCMP 2423/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2423 OF 2024

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BETWEEN

AND

HCMP 2424/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2424 OF 2024

________________________

________________________

BETWEEN

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AND

HCMP 2425/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2425 OF 2024

________________________

________________________

BETWEEN

________________________

AND

HCMP 2426/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2426 OF 2024

________________________

________________________

BETWEEN

________________________

AND

HCMP 2427/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2427 OF 2024

________________________

________________________

BETWEEN

________________________

(Heard Together)

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DECISION

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APPLICATIONS

1.The Plaintiff, by his five Originating Summonses (the “OS”) seeks the inspection of 19-21 categories of documents for each of the Companies (i.e. 97 categories of documents in total) pursuant to sections 372 to 378 of the Companies Ordinance.

2.These proceedings first came before this Court for a 30 - minute hearing on 16 December 2024. This Court gave directions for these matters to be determined by paper disposal. In fact, the Companies’ position is that they have never denied the Plaintiff’s access to the Companies’ books and records.

3.The Plaintiff’s inspection and the taking of copies duly took place on 5, 6 and 12 December 2024. As this Court observed during the hearing, the real issue is the costs of these applications.

LEGAL PRINCIPLES

4.The legal principles in this area of the law are well established. As this Court explained in Wong Sau Man v Wong Kan Po [2017] 4 HKLRD 542 at §13, “[I]t is established law that a person has a right to inspect all accounting records of the company to which he or she is a director at all times without charge. A director has both a statutory and common law duty vis-à-vis the company. In order for him or her to discharge his or her director’s duties, he or she must have unrestricted access to all documents and records of the company.”

5.Section 375 of the Companies Ordinance, Cap.375 provides that:

“(1) A company must allow a director of the company to make a copy of its accounting records in the course of inspection.

(2) A company must provide a director of the company with a copy of its accounting records without charge if so requested by the directors.”

6.However, as pointed out by Harris J in Re Matsue Limited, HCMP 2667/2011, 23 August 2012, at §7:

“…However, a director is only entitled to seek the intervention of the Court in support of this right if it is necessary. He needs to satisfy the Court that there are documents in existence that he has improperly been prevented from inspecting. If an applicant is unable to demonstrate that the documents he wishes to inspect probably exist or the Court concludes that the application was unnecessary the director is not entitled to an order. In considering these issues the Court will have regard to circumstances of the particular case before it. The right does not operate without regard to realities that affect the conduct of a particular company’s affairs.”

7.I would also like to point out that the right to inspection and the right to be provided with copies of documents are two separate rights. It must be remembered that in relation to accounting records, a director has a right to be provided with copies of the same. However, in relation to documents other than accounting records, the company does not have the burden of providing a full set of documents from the date of incorporation to the date of the application to a particular director.

8.A director can have full access to inspect such documents and take copies of the same without charge. But this does not mean that the director can simply sit back and demand the company to provide copies of all corporate documents to him or her, not to say within an unreasonable period. I am of the view that there is an issue of proportionality involved in deciding whether the application is necessary.

9.In Howard Nathan Shapiro v. Asia Interactive Services (Hong Kong) Ltd And Others [2024] HKCFI 680 at §9 per Harris J. said:

“I would add one minor further qualification. The court will not make an order if the company demonstrates that access to the documents requested has been made available and the application is unnecessary.” (Emphasis added.)

ANALYSIS AND DETERMINATION

10.I have carefully considered the parties’ submissions, in party Mr Ng’s submissions for the Plaintiff. I have come to the view the OS should be dismissed with costs to the Companies. First, on the facts, the Plaintiff has never been denied of any access to inspect the documents of the Companies.

11.The Plaintiff was the CEO of the Companies until 2022. He still participates in the Companies’ daily operations and regularly attends the Companies’ office where such documents are stored. The Plaintiff already has access to most, if not all, of the documents, books and records of each of the respective Companies.

12.Prior to issuing his solicitors’ letter on 7 October 2024 demanding the production of documents, the Plaintiff had never suggested that his access to the Companies has been restricted or that he had requested any of these documents from the relevant employees of the Companies and been refused.

13.The Plaintiff relies on the email from Mr. Hall dated 8 October 2024 and the letter from the Companies dated 18 October 2024 inviting the Plaintiff to identify his substantive concerns for the Companies to be in a better position to prepare and provide the information the Plaintiff has requested.

14.In my view that is perfectly reasonable. In fact, in the letter dated 18 October 2024, from the Companies to the Plaintiff, it is stated, inter alia, that:

“The Companies acknowledge your client’s rights as a director of each of them to copies of their accounting records pursuant to 375(2) of the Companies Ordinance (Cap. 622), and confirm that they are preparing the relevant documents and will comply with their legal obligations under the CO……

Please can your client therefore explain what his overarching concern(s) are that give rise to the information requests. The Companies will then be in a better position to consider and discuss with your client as necessary how they might prioritise preparation and provision of information to address those concerns as far as possible, and also to assist with his discharge of his duties as a director of the Companies.” (Emphasis added.)

15.Prioritisation of preparation and provision of information is commercially sensible. It can in no way be characterized as “obstacles” to the exercise of the Plaintiff’s rights.

16.In Cornwall Agency Company Ltd [2020] HKCFI 2779, Linda Chan J., in §39 said:

“I should say that in the ordinary course, a director in particular one who has been holding the office for a long time and has actively participated in the management of the company, should not seek a wholesale inspection of all the documents of the company without any temporal limit. This is because during his directorship, he should have some knowledge of, if not familiar with, the affairs of the company. In that scenario, I would expect the director to seek inspection of documents relevant to the purposes identified or the areas of which he has some basis to be concerned with.” (with emphasis added)

17.Similarly, Harris J. in Howard Nathan Shapiro (supra) at §8:

“… In practice one would expect a director to restrict requests for inspection to particular areas of interest in a company’s affairs if only because a request to inspect all, or even a large proportion, of a company’s documents would be immensely time consuming for the director and serve little purpose. …” (with emphasis added)

18.Further, the Companies have further agreed to make documents available to the Plaintiff “on a rolling category by category basis commencing from 22 November 2025”. The typographical error of “2025” was obvious and could easily have been clarified by a phone-call or an email. It did not warrant issuing the OS.

19.In any event, in the same letter, the Companies proposed the steps to facilitate the Plaintiff’s inspection of documents.

20.I am of the view that the OS are unnecessary as first, prior to the OS being taken out (19 November 2024), the Plaintiff has never made any request to the Companies for access to inspect the Companies’ documents.

21.Secondly, when the Plaintiff made the request for provision of copies on 18 October 2024, the Plaintiff was informed by the majority shareholders from the outset that they “will not object to the provision by the relevant companies …”.

22.Thirdly, prior to the OS having been served on the Companies, on 18 November 2024, the Companies had already proposed steps to facilitate the Plaintiff’s inspection of documents – namely that the Plaintiff should notify the Companies of the intended attendance 48 hours in advance, provide the names of third parties the Plaintiff engages to assist such inspection and confirm that he will comply with the data privacy laws.

23.It was only on 3 December 2024 (being after the OS were issued and in response to the Companies’ proposed steps), that the Plaintiff did so. The Plaintiff’s solicitors notified the Companies for the first time that he wished to inspect the documents on 5 and 6 December 2024. The Companies duly facilitated and made arrangements for the same, including a follow-up inspection on 12 December 2024.

24.Pertinently, I like to stress that the Plaintiff has no legal entitlement to demand the production of the wide-ranging categories of documents.

25.In the Plaintiff’s solicitors’ letter dated 7 November 2024, it asked not only for the provisions of copies of the Companies’ accounting records but also corporate documents. The Plaintiff was asking for the provision of copies in respect of the “Agreed Documents” and the 14 categories of new documents not previously requested. The “alternative proposals” was only in relation to the “Remaining Documents”. The primary demand was still to provide the Remaining Documents, with an “alternative” option for the Remaining Documents to be “made available at the registered office of the Company for inspection and making copies by our client and I or his authorised representatives, provided that the Company shall bear our client's reasonable costs”.

26.Upon receiving this letter, on 18 November 2024, the Companies therefore invited the Plaintiff to clarify whether the Plaintiff’s demand was for the Companies to provide copies on a voluntary basis or for the Plaintiff to undertake inspection; and confirmed that the Companies are willing to make documents available for inspection.

27.I accept Ms Ha’s submissions that the Companies’ position all along has been that (1) the Plaintiff (and/or his authorized representatives) may attend the Companies’ office to inspect documents, (2) the Companies will make documents available, and (3) during the course of inspection, the Plaintiff (and/or his authorized representatives) may take copies. This is entirely consistent with each of the reliefs sought in the OS.

28.The Plaintiff relies on a distinction on whether a director is entitled to production, rather than himself attending the inspection and making copies. In Howard Nathan Shapiro (supra) at §18 Harris J. disallowed part of the costs for this erroneous request in early stages:

“This is because it would appear that the Plaintiff could have inspected a significant proportion of the documents prior to issuing the originating summons, but his solicitors had failed to appreciate that a director is not entitled to production only to inspect data.”

29.Further, I accept Ms Ha’s submission that any orders by this Court will not serve any usefully purposes after the Plaintiff’s inspections. Mr Ng for the Plaintiff submitted that the Plaintiff’s inspections were incomplete.

30.However, the Companies’ representative, Mr. Medeiros has already stated in his affirmation evidence on oath that:

(1) “the Company has, as far as practicable, provided all the documents and/ or information that are available and in the Company's possession as at the time of the inspections on 5, 6 and 12 December 2024, and the hearing before Mr. Recorder William Wong SC on 16 December 2024. Those allegedly outstanding documents simply do (or did) not exist, cannot be located by our employees and therefore cannot be provided for inspection. The Plaintiff's allegation that some documents requested by the Plaintiff remain outstanding and incomplete is therefore untrue.” (emphasis added)

(2) The Companies also provided specific responses to the items alleged to be outstanding by the Plaintiff in its tables. Again, on oath, Mr. Medeiros says the table “has been confirmed by the board of the Company (except the Plaintiff)”.

(3) In those responses, it is stated for many of the allegedly outstanding items that “these documents do not exist”. The Companies simply cannot locate them, after conducting the relevant searches.

(4) Other documents that only came into existence after the last inspection on 12 December 2024 are stated to be now “available for inspection” by the Plaintiff, such as the audited financial statements for the year of 2024 and unaudited management accounts after 31 October 2024. These were not prepared prior to the inspections on 5, 6, 12 December 2024.

(5) Ms Ha submitted that the Plaintiff can again make an appointment to inspect them, or better yet, ask the Companies’ employees for them (if the Plaintiff so wishes).

31.I am of the view that for documents not in existence or have gone missing, there is no point to make an order for inspection in respect of them: Ng Yee Wah v Lam Chun Wah, HCMP 4616/2001, 28 June 2005. As Godfrey Lam J (as he then was) said in Tan Beng Huat And Another v. Swisscelin Distribution Ltd And Others (HCMP2000/2015, 26 February 2016) at §10:

“If a document does not exist, then it cannot be inspected. It really is as simple as that.”

32.On the facts of the present case, I am satisfied that the Plaintiff has been afforded full access to the books and records that he likes to inspect and take copies. He will be allowed further opportunities to continue to carry out inspections without court orders. Court orders are not there to provide incentives as suggested by Mr Ng for the Plaintiff.

33.The Plaintiff queries why the Companies did not keep proper records and what “non-existence” of those documents mean. Incomplete record-keeping (e.g. of correspondence with banks) and/or why the Companies have lost possession of specific documents (which P as an ex-CEO is equally responsible for), falls outside the scope of the OS or the Plaintiff’s director’s entitlement in these cases. The OS solely concern the Plaintiff’s access, inspection and obtaining of copies, not the Companies’/directors’ liabilities in improper record-keeping.

DISPOSITION

34.By reason of the analysis set out above, I make an order to dismiss all the OS in these proceedings.

35.The Plaintiff is to paid costs of and incurred by these OS forthwith. I summarily assess the costs at HK$250,000.

36.Finally, I thank Mr Ng for the Plaintiff and Ms Ha for the Companies for their able assistance to this Court.

Mr Tom Ng, instructed by Holman Fenwick Willan, for the Plaintiff

Ms Terri Ha, instructed by P. C. Woo & Co., for the Defendant