Lam Kin Chung v Soka Gakkai International Of Hong Kong Ltd

Judgment Date14 July 2017
Subject MatterMiscellaneous Proceedings
Judgement NumberHCMP2685/2016
CourtHigh Court (Hong Kong)
HCMP2685/2016 LAM KIN CHUNG v. SOKA GAKKAI INTERNATIONAL OF HONG KONG LTD

HCMP 2685/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2685 OF 2016

________________________

IN THE MATTER of Soka Gakkai International of Hong Kong Limited (CR No 13363)

and

IN THE MATTER of section 631 of the Companies Ordinance, Cap 622

and

IN THE MATTER of Order 102, rule 2(1) of the Rules of the High Court, Cap 4A

________________________

BETWEEN

LAM KIN CHUNG Applicant
and
SOKA GAKKAI INTERNATIONAL OF HONG KONG LIMITED
Respondent

________________________

Before : Deputy High Court Judge To in Court
Date of Hearing : 2 June 2017
Date of Decision : 14 July 2017

________________________

DECISION

________________________

Introduction

1. This is the hearing of the applicant’s originating summons seeking an order against the respondent (“Soka”) for inspection and a for a copy of its register of members and index of the names of its members, pursuant to section 631 of the Companies Ordinance; and Soka’s summons seeking leave to file the 2nd affirmation of its chairman, Mr Sun Po Loi (“Sun”), in opposition to the applicant’s originating summons. Soka offered no explanation for the late application. Realising that it may not succeed without occasioning an adjournment with the necessary costs consequence, Mr Chang, counsel for the respondent, chose not to pursue the application. That application is therefore dismissed.

2. Soka is a company limited by guarantee incorporated in Hong Kong on 18 October 1966. It is a non-profit making organization with the main objective of furthering the cause of Buddhism. It is exempted from profits tax under section 88 of the Inland Revenue Ordinance. It received public donations of $33 million and $37 million in the fiscal years 2014 and 2015 respectively.

3. The applicant (the “Applicant”) has been a member of Soka since 1975 when he was a secondary school student. Having established his real estate agency business, he set up his own charity fund in 1992. Between 1992 and 2013, he donated $1.3 million to Soka through his charity fund and $1 million in his personal name in 1994. He is also holding other public and honorary positions in Hong Kong and the People’s Republic of China.

4. The Applicant is concerned about the absence of any right of members to nominate and/or be elected as members of Soka’s management committee; and the excessively high salaries and wages of its staff, which is creating a disproportionate financial burden on Soka. He requested Soka for access to the register for the purpose of calling for an extraordinary general meeting to address and vote on these matters. Initially, Soka offered to provide him a copy of the register upon his undertaking not to use it for certain purposes. It also offered alternatives to address the Applicant’s concerns, including posting the Applicant’s statements on the company’s website and acting as a post box to facilitate communication between him and the other members. However, the Applicant insisted on his statutory entitlement to a copy of the register under section 631 of the Companies Ordinance. Then, Soka rejected the Applicant’s purposes as improper and refused to provide a copy. On 6 October 2016, the Applicant took out the present summons.

Construction of section 631

5. The legal issue raised by this application is whether, on the true construction of section 631, a member of the company is entitled to an absolute right to a copy of the register or whether the exercise of that right is subject to the court’s discretion. That section gives a member a statutory right to inspect the register and the index of members’ names and, on payment of a prescribed fee, to be provided a copy. That section and other related provisions are derived from section 98 of the former Companies Ordinance and section 356 of the Companies Act 1985 of the United Kingdom.

6. Section 356(6) of the Companies Act 1985 was considered by the English Court of Appeal in the case of Dr Michael John Pelling v Families Need Fathers Limited[1]. The facts of that case are broadly similar to those of the present case. Dr Pelling was a member of the defendant, a company limited by guarantee and registered as a charity. He had some disagreement with the company which then suspended and subsequently terminated his membership. He requested the company for a copy of part of its register, presumably for the purpose of his legal action against the company. Upon the company’s refusal, he made an application to court pursuant to section 356(6) for an order directing the company to send him a copy of part of its register. His application was refused by the registrar. His appeal was also dismissed by the Court of Appeal on the company’s undertaking to facilitate communication between him and the other members by acting as a post box for mail. The Court of Appeal adopted the approach of the Australian court in the case of O’Brien v Sporting Shooters Association of Australia (Victoria)[2]. In rejecting the absolutist construction of section 356(6) and holding that the members’ entitlement under that section is not a matter of unqualified right, Mummery LJ said:

“ [Byrne J] held (at 255) that the drafting of the Law was such that –

‘ the word “may” means exactly that. It means that the court is empowered to make the order where a refusal in contravention of the Law has been established, as in the present case. Whether the power will be exercised must depend upon the proper discretionary considerations affecting the power in the light of the facts as are found by the court.’

We agree. For those reasons we reject the absolutist construction proposed by Dr Pelling. (ii) The statutory discretion must be exercised judicially in accordance with established legal principles and having regard only to relevant considerations. We agree with Dr Pelling that, as a general rule, the court will make a mandatory order to give effect to a legal right. But, as stated by Lord Evershed MR in Armstrong v Sheppard & Short Ltd [1959] 2 All ER 651 at 656, [1959] 2 QB 384 at 396 ‘[i]t is not a matter unqualified right’. There may be something special in the circumstances of the case which leads the court to refuse such an order may be narrow, but Dr Pelling is, in our view, wrong in his assertion that it is non-existent. Indeed, we understood him to accept that there would be cases in which it would be pointless for the court to make an order where, for example, it was no longer necessary to make one, because the request had been complied with after the application was issued but before it was heard, or where the request was physically impossible to comply with because the register had been destroyed or lost. There are other circumstances in which the court is entitled to refuse to make any order or to make one in unqualified terms. It is common, for example, for a court to decline to exercise its discretion to make a mandatory or prohibitory order when the person against whom it is sought has offered to the other side or to the court an undertaking which meets the justice of the case. …. (v) In our judgment, it is possible to cater for both Dr Pelling’s wish to gain access to the register for the professed purpose of legitimately communicating with the members and the proper and understandable concerns of Mr Hale about the detrimental effect of an unqualified order for disclosure of the names and addresses of the members, particularly on the charitable purposes for which the Company was established. A reconciliation can be achieved by attaching relevant and reasonable terms and conditions to the exercise of the discretion. As indicated in O’Brien’s case [1999] 3 VR 251 at 256, it is possible to provide a practical and fair solution either by making an order in favour of the applicant on terms as to the confidentiality and use of the information made available; or, as we suggested, and as was offered in O’Brien’s case (at 225), by declining to make an order for inspection, on the Company giving a suitably-worded undertaking to facilitate communication with members by acting as a postbox for mail between the applicant and the members.”

Thus, the English Court of Appeal held that on the true construction of section 356(6), the court had a discretion to refuse making the order, though as a general rule, it will make a mandatory order to give effect to a legal right. However, the circumstances when it is appropriate to exercise such discretion are very rare.

7. In Democratic Party v Secretary for Justice[3], Hartmann J (as he then was) arrived at the same conclusion. That was a case of judicial review in which one of the issues was the right of inspection by the public of the register of members of a limited company under section 98 of the former Companies Ordinance. The Democratic Party chose to be incorporated and to order its affairs so that all persons becoming members of the political party would become members of the company. It then sought a declaration that section 98 insofar as it gave the public the right to inspect the register of members of a political party registered as a company, was inconsistent with the right to freedom of association and the right to privacy under the Basic Law and Hong Kong Bill of Right. Hartmann J also held that on the true construction of section 98, the right to access the register is not an absolute right. The court has discretion to refuse an order for inspection or to make one in qualified terms. But such discretion may be a narrow one. He said[4]:

“ 69. In my judgment, however, the applicant is...

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