Read the full judgment text of HCMP 2681/2012 on BabelCite. This Court of First Instance judgment was delivered on 22 January 2014 before Recorder A Chow, SC.
Company law – inspection of company records – Companies Ordinance (Cap 32) s.152FA – good faith and proper purpose requirements – shareholders' applications to inspect records of Masterwise International Limited and Foster Industries Company Limited – Hong Kong-incorporated companies owned by the Leung family – excessive directors' remuneration and reduced dividends – missing dividend from Shenzhen Fifu – failure to prepare group and consolidated accounts – alleged surreptitious transactions regarding Fifu Factory land sale and Tsuen Wan Property – surge in banking charges – scope of subsidiary records accessible under s.152FA – whether subsidiaries' documents currently in possession of the parent company fall within s.152FA – whether subsidiaries' documents not in the parent's possession are accessible – whether individual directors should be joined as defendants and made personally liable for costs – proper case for investigation requires sufficient materials but not firm conclusion on disputed facts – court must balance transparency against protection of commercial decisions – whether assessment of share value is a proper purpose absent a put option or s.168A petition – Re Opes Asia Development Ltd test for joinder of directors – Veron International Ltd v RCG Holdings Ltd on subsidiary records – Wong Kar Gee Mimi v Hung Kin Sang Raymond on proper purpose and director joinder – Re Italina (Holdings) Ltd on paragraph 18(4) of the Tenth Schedule – partial success on first, third and fourth complaints – inspection refused for second, fifth complaints and IRD tax dispute – 1st Defendant ordered to pay 50% of Plaintiffs' costs – Plaintiffs ordered to pay costs of 2nd to 4th Defendants.
Legal issues: Scope of subsidiary records under s.152FA Companies Ordinance · Proper purpose - excessive directors' remuneration and inadequate dividends · Proper purpose - significant transactions carried out surreptitiously · Proper purpose - missing dividend from Shenzhen Fifu · Proper purpose - accounting irregularities and failure to prepare group accounts · Proper purpose - surge in banking charges · Proper purpose - assessment of value of shareholdings · Joinder of individual directors and personal costs liability
Outcome: Plaintiffs' applications for inspection of company records granted in part: inspection ordered in respect of the first (excessive remuneration), third (missing dividend), and fourth (accounting irregularities, excluding the IRD tax dispute) complaints, but refused in respect of the second (surreptitious transactions) and fifth (banking charges) complaints and the IRD tax dispute. No order made against the 2nd, 3rd or 4th Defendants (the individual directors).
Cites 5 cases