SL v. CPYD
HTML content
FCMC 12136 / 2011
[2024] HKFC 111
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES
NUMBER 12136 OF 2011
----------------------------
BETWEEN | ||
| SL | Petitioner | |
| and | ||
| CPYD | 1st Respondent | |
----------------------------
| Coram: | Deputy District Judge J. Chow in Chambers |
| Dates of hearing: | 21 April 2023 & 28 August 2023 |
| Date of Judgment: | 28 May 2024 |
----------------------------------------
DECISION
(Specific Discovery and Non Party Discovery)
----------------------------------------
Introduction
1. There are altogether 3 summonses taken out by both the petitioner (“the Husband”) and the 1st respondent (“the Wife”) for specific discovery and non-party discovery, namely,
(i) the Wife’s summons filed on 18 February 2022 for specific discovery (“the Wife’s SD summons”) and
(ii) the Husband’s summons filed on 2 December 2021 for specific discovery[1] (“the Husband’s SD summons”); and
(iii) the Husband’s summons filed on 18 February 2022 for non party discovery[2] (“the Husband’s NP summons”).
Background
2. The parties were married in 1995 with no children born in their marriage. They were both financial advisors. Decree nisi was made absolute on 13 February 2012. The Husband has remarried.
3. Notwithstanding this petition was filed in 2011, the parties are still at a stage of ascertaining the size of the matrimonial pot. In the above three summonses, the parties and the non-party are able to agree to disclose certain items of the respective summonses. This decision only deals with the disputed items therein.
4. In the Wife’s SD summons, she seeks specific discovery against the Husband relating to (i) the purchase and sale of a landed property in Shenzhen known as 深圳羅湖區寶安南路1661號幸福里雅居3棟17F號房 (“the SZ Property”); (ii) bank statements of the Husband’s Bank of China bank account and (iii) bank statements of the Husband’s company account.
5. In the Husband’s SD summons, he seeks specific discovery against the Wife on documents relating to (i) alleged funds dissipated from Money Concepts Asia Limited (“MCA”) to Money Concepts Asia (Holding) Limited (“MCAH”); (ii) three private companies: Tak Yi Investment Limited, Peak Harvest Limited and MC Fintech Solutions Limited and (iii) two landed properties in Hong Kong, namely, the Parc Oasis property (“the Parc Oasis Property”) and the Harbourfront property (“the Harbourfront Property”); (iv) payment schedules together with documentary evidence showing the latest outstanding loan claimed to be owed to MCAH, Ms Kwong[3] and Mr Cheung[4]”; and (v) the Wife’s HSBC account statements of April and May 2009 showing transfer of USD 2.4 million and documentary evidence showing the transfer of shares of Great Success Management Limited (“Great Success”).
6. In the Husband’s NP summons, the Husband seeks discovery against MCAH, the non-party, directly on (i) its audited accounts; (ii) two pershing accounts and (iii) documents on directors’ remuneration.
Legal principles on discovery
7. The law on specific discovery are well stated in Order 24 rule 7 of the Rules of the High Court, Cap 4A.
8. I rely on Jade’s Realm Ltd v. Director of Land (unrep., HCA No. 1509/2012, 10 June 2014), Hon Ng J set out the principles at para 21 thereof,
“21. I shall first remind myself of the principles which are germane to the present application.
(1) There is no jurisdiction to make an order for specific discovery under RHC O 24 r 7 unless there is sufficient evidence or prima facie case that: (a) the documents or classes of documents exist which the other party has not disclosed; (b) the documents relate to a matter in issue in the action; and (c) the documents are in the possession, custody or power of the other party.
(2) Once it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order discovery.
(3) The Court will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.
(4) The order must identify with precision the documents or categories of documents which are required to be disclosed, for otherwise the person giving discovery may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.
(5) Where discovery is sought in relation to a class of documents, it is important that the class should not be defined or described too widely, and should not be defined so as to include documents which are not relevant.
(6) Despite the Peruvian Guano test for relevance, “fishing” is not allowed, and discovery should not be oppressive.
(7) Statements in a party’s affidavit of documents are conclusive e.g. on the question whether he has or has had any documents other than those disclosed, as to their relevancy or as to the grounds stated in support of a claim for privilege from production.
(8) The respondent may answer an application for specific discovery by an affidavit stating that he does not have the documents, and this will be conclusive at the interlocutory stage.
See: Hong Kong Civil Procedure 2014 Vol. 1 para. 24/7/1; Berkeley Administration Inc v McClelland [1990] FSR 381 at 382-3; Lee Nui Foon v Ocean Park Corp (No 1) [1995] 2 HKC 390 at 391-3; Paul’s Model Art GMBH v UT Ltd [2006] 1 HKC 238 at paragraphs 24 & 32; Tai Fook Futures Ltd v Cheung Moon Hoi Jeff [2006] 4 HKC 81 at paragraphs 33 to 35.”
9. It is also helpful to revisit Rayden and Jackson on Relationship Breakdown, Finances and Children (July 2016) at para [13.104],
“In financial remedy proceedings, disclosure and discovery begins with service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E. Thereafter, disclosure and discovery is by means of a questionnaire served in advance of the First Appointment and considered by the court at that appointment, and, if the court gives permission, by further questionnaire at a later stage of the proceedings. Questionnaires can, like interrogatories, request information as well as seek production of documents. As part of its case management role, the court should regulate the extent of the discovery of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.”
10. Broadly, the above general principles are applicable in matrimonial context.
The Wife’s SD Summons
11. The Wife’s case is based on the Husband’s purchase and sale of the SZ Property which was purchased at a price of RMB6,430,000 in 2011 and was sold on 23 October 2019 at RMB12,000,000. The Wife relied on the Husband’s Answer filed on 30 November 2020 that he had deployed RMB1,974,164 from the family pot to settle the purchase price. In that the Wife seeks discovery on documents relating to the purchase and sale of the SZ Property.
12. The Husband responded by saying the SZ Property was purchased after he and the Wife had separated and was meant to be the matrimonial home for himself and his current wife. The Husband has fairly agreed to add back the sum of RMB1,974,164 to the matrimonial pot.
13. However, the Wife is aiming at the appreciation of value of the SZ property instead of just adding back RMB1,974,164.
14. The Husband argued, although he has profited from the sale of the SZ Property, the net profit (or appreciation of the value) shall be subjected to deduction of two sums, firstly, RMB3,000,000 being a bridging loan advanced by the Husband’s current wife to paid up the outstanding mortgage; and secondly, HK$441,841.52 being capital gain tax and other tax payments.
15. Upon reading the Husband’s documents, the Wife found out the Husband did not deposit the net sale proceeds to his only disclosed bank account with Nanyang Commercial Bank in the mainland. The Husband admitted the sale proceeds were deposited to the bank account of his current wife. Nonetheless, the Husband refused to disclose his current wife’s bank account statements claiming such documents were not in his custody, possession or power.
16. By way of a consent order filed on 3 May 2023, the Husband agreed to disclose some documents in the Schedule of the Wife’s SD summons as follows with costs reserved:
(i) Item 1 (under the heading of Sale and Purchase Agreement of the SZ Property);
(ii) Item 5 (under Transaction Record of the Petitioner’s BOC Account); and
(iii) Item 6 (under the heading of Bank Statement of the Petitioner’s Company’s Account).
17. Having done so, there came new developments of disclosure at the hearing, the Wife withdrew from seeking discovery of Item 4 of the Schedule (under the heading of Tax Payments) but indicated she will seek costs against the Husband under this head.
18. Premised on the above, the Wife only seeks discovery of both the bridging loan and whereabouts of the sale proceeds.
19. On admission on the part of the Husband that the proceeds of the sale of SZ Property was deposited to his current wife’s bank account, I am satisfied the Wife is able to establish a prima facie case that the matrimonial asset (or at least part of it) may have been dissipated from the matrimonial pot.
20. The Husband’s case is that the RMB 3 million was a bridging loan from the Husband’s current wife, I accept it is more likely than not between husband and wife, such sum was made by way of a soft loan without written loan agreement. However, the Husband, as vendor of the SZ Property, should be in possession, custody and power of document(s) evidencing how the mortgage has been discharged. I am not persuaded the Husband can skip disclosure by merely saying neither himself nor his current wife had kept any PRC bank records relating to the transfer of RMB 3 million bridging loan. In his respect, I shall exercise my discretion to order the Husband to disclose documents showing transfer of the RMB 3 million being bridging loan for the purpose of discharging the mortgage of the SZ Property.
21. Likewise, it is incumbent for the Husband to account for the whereabouts of the sale proceeds. Although I accept the Husband’s explanation that the sum of RMB1,974,164 is capable to be added back to the matrimonial pot, the Husband bears the duty of full and frank disclosure of any changes in his financial situation after filing of Form Es. (See TCP v. KLS (Ancillary Relief) [2020] HKFLR 254) By the same token, the Husband, as the vendor of the SZ Property, documents evidencing the whereabouts of the sale proceeds must exist and should be in his possession, custody and power.
22. For the purpose of saving costs, I shall limit the Husband’s disclosure in under Item 2 of the Schedule. I direct the Husband to disclose the whereabouts of the net sale proceeds of the SZ Property by identifying only the receiving bank account and disclosing the bank statements of the said account for the month of October 2019 and November 2019.
23. I am aware Item 1, Item 5 and Item 6 of the Schedule were disclosed with costs reserved by consent. I make an order nisi that the costs of Item 2, Item 3 and Item 4 of the Schedule shall also be reserved. The costs order nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
The Husband’s SD Summons
24. The Husband applies for specific discovery of 40 items on an entire different arena which can be categorized as follows:
(i) Items 1 – 13 – documents relating to audited accounts of MCA and relating documents on directorship, transfer of accounts to MCAH, staff remuneration “related party transactions” and the debt of HK$10,570,190;
(ii) Items 14 – 23 were dropped by the Wife;
(iii) Items 24 – 35: documents relating to Tak Yi Investment Limited, Peak Harvest Limited, MC Fintech Solutions Limited and two landed properties in Hong Kong;
(iv) Items 36 – 38 were disclosed by the Wife;
(v) Item 39: documents relating to “payment schedules together with documentary evidence showing the latest outstanding loan claimed to be owed to MCAH, Ms Kwong and Mr Cheung”; and
(vi) Item 40: documents relating to “the Wife’s HSBC account statement of April and May 2009 showing transfer of USD 2.4 million and documentary evidence showing the transfer of shares of Great Success Limited”.
25. The Wife takes issue the Husband delayed in taking out specific discovery applications, in absence of valid explanation given by the Husband, the Court shall not exercise discretion to allow such discovery. (See: CLS v. LPKP (Discovery) [2018] HKFLR 71)
26. The Wife also submitted, the documents requested run from years before the Petition. Disclosure on these items are disproportionate and oppressive.
Items 1 - 13
27. The Husband is not satisfied that the Wife has only provided audited financial accounts of MCA in the financial year 2008/2009, 2009/2010, 2010/2011 and 2011/ 2012. Items 1 – 13 are documents all relating to MCA, including its audited accounts from 2013 until 2022.
28. MCA is an investment company established by the Husband and the Wife in 2000. By their joint effort, in the same year, MCA obtained a franchise agreement with one company named Money Concepts International Inc. (“MCI”) for a period of 10 years. MCA has a SFC licence, its principal activity was providing investment advice and insurance brokerage service. Clients’ investments formed the major income of MCA.
29. MCA has two main shareholders: Great Success held the 90% shareholding whereas the Wife held the remaining 10%. The Husband and Wife were the shareholders of Great Success.
30. In 2009, the Husband was removed from the management and was subsequently resigned as a director in 2010.
31. In 2011, MCI terminated the franchise agreement with MCA.
32. The Husband’s case in ancillary relief proceedings is that MCA should have held substantial matrimonial assets of the family. It was the Wife who has depleted their matrimonial assets by transferring the money held by MCA to MCAH. The Wife has full control of MCAH and is the “the real boss” of MCAH.
33. The Husband highlighted the changes of directorship of MCA. The Wife was all along a director of MCA, she was replaced by one Mr. Cheung for the period from 1 January 2010 until 1 April 2012. After the transfer of all clients’ money from MCA to MCAH, the Wife resigned as director of MCA wholly on 30 June 2020 but however remained as a minority shareholder. The Wife also appointed Ms. Kwong (the Wife’s mother) and one Mr. Cheung as directors of MCA until 2019. Subsequently, Mr. Tang succeeded Ms. Kwong to be a director of MCA in 2020.
34. The Wife opposed disclosure by saying Items 1 – 13 are irrelevant to the issues in the ancillary relief proceedings. The Wife said MCA did not have any business activities after termination of the franchise agreement in 2011 and because of this, it recorded a net negative equity. For this reason, no audited reports were compiled after 2012. The Husband did not agree because there was evidence from MCA’s accountant saying the Wife was uncooperative in providing necessary documents for audit purpose. That was why no audited reports can be compiled.
35. The Husband further said, the Wife made herself suspicious by depleting family asset of MCA when a deficit of HK$10,570,190 was recorded in her Form E filed on 10 August 2020.
36. The Husband also submitted, by appointing the Wife’s mother, Ms Kwong as a director of MCA, she was guilty of dissipating family assets by paying disproportionately high director’s remuneration to Ms Kwong.
37. On this basis, the Husband seeks discovery of documents bringing about MCA’s deficit and also documents on director’s remuneration.
38. Lastly, the Husband also seeks documents showing changes of directorship of MCA.
39. Firstly, I agree with the Husband that the audited financial reports are highly relevant in showing the value of MCA and it is necessary for the Wife to disclose them from year 2013 until date of this decision. Nonetheless, the Wife has indicated MCA suffered losses since 2012 and because of this, no audited reports were compiled after 2012. It is also in the evidence that the accountant of MCA has once indicated the Wife was uncooperative to provide materials. The Wife shall answer by affidavit stating that she does not have the documents. This issue can be canvassed at the ancillary relief trial, in absence of satisfactory answers, the Court is capable to draw adverse inference against the Wife.
40. Secondly, for the changes of directorship, the documentary proofs should be well recorded in the Company Registry. Even so, I do not see this is relevant in determining the size of matrimonial asset, it is irrelevant to the ancillary relief proceedings. Items 2 – 7 needed not be disclosed.
41. With regard to the directors’ remuneration, I share the Wife’s view that they are irrelevant. The outgoings are recorded in the audited reports. I am not satisfied the directors’ remuneration and other items stated in Item 8 shall be disclosed.
42. For “remuneration and authorization, etc. with documentary evidence” of the transfer of 25 Pershing Accounts from MCA to MCAH, I find the Husband did not identify the precise class of documents. Remuneration and authorization are two different and unrelated classes of documents. Item 9 needed not be disclosed.
43. For the rest of the Items 10 – 12, I agree with the Wife such discovery is excessive. The franchise fee, related party transaction, staff costs and directors’ emoluments were well stated in the audited accounts of financial year 2011 to 2012. I understand the Husband did not accept the level of expense, however this is an issue subject to cross examination at the ancillary relief trial. Items 10 – 12 needed not be dismissed.
44. With regard to the documentary evidence of HK$10,570,190 debt, the Wife answered this sum was stated in the audited report of MCA for the year of 2011/2012. Mere requesting for evidence is very different from disclosure of documents. I fail to see the Husband could identify documents that could be disclosed in light of the said debt. Item 13 needed not be disclosed.
45. Items 24 – 27 are documents relating to disclosure of documents of Tak Yi Investment Limited and Peak Harvest Limited. I am given to understand the respective audited reports have been produced. Extensive discovery beyond the audited reports should not be allowed unless there is evidence that such reports should not be relied on (See B v. B [1979] 1 All ER 801, Dunn J). Disclosure on Items 24 – 27 is refused.
46. Items 28 – 29 are documents relating to MC Fintech Solutions Limited, the Husband is seeking disclosure on employment contracts and payroll of directorship remuneration payable to the Wife. According to the company searches, the Wife has resigned as a director on 17 June 2020. I agree with the Wife that the Husband is unable to state his prima facie case on the relevancy of these items and that disclosure on Items 28 – 29 shall not be allowed.
47. Items 30 – 35 are documents relating to Parc Oasis Property and Harbourfront Property of which were purchased in 1996 and 2005. The disclosure of documentary evidence named in Item 30 were the rental agreements from 2010. The document requested go beyond decades, they are too excessive, oppressive and clearly not costs saving. I refuse to allow disclosure on Items 30 – 35.
48. Item 39 related documents relating to “payment schedules together with documentary evidence showing the latest outstanding loan claimed to be owed to MCAH, Ms Kwong and Mr Cheung”. The Husband said the loans owed to MCAH and the parents of the Wife are highly suspicious.
49. The Wife replied in her answer that the payment schedules do not exist because she has answered the said loans were paid directly to settle the expenses and property payments.
50. For non-existence of documents, no discovery shall be ordered.
51. For Item 40, the Husband is asking for (i) the Wife’s HSBC account statement of April and May 2009 showing transfer of USD 2.4 million and (ii) documentary evidence showing the transfer of shares of Great Success.
52. It is not in dispute the transfer of USD 2.4 million was done by the Wife on the Husband’s request in 2009. Discovery is unnecessary.
53. It is again not in dispute that the Husband had transferred 50% of his shareholding in Great Success in 2009. Discovery is unnecessary.
54. To conclude, save and except Item 1 (the audited accounts of MCA from 2013 to present), the remaining items of the Husband’s SD summons against the Wife shall be dismissed.
55. I shall likewise reserve costs of the Husband’s SD summons on a nisi basis. The costs orders nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
The Husband’s NP summons
56. The Husband seeks specific discovery against a non-party MCAH for disclosure of documents. MCAH confirmed most of the items have already been disposed of by affirmations. The outstanding items are as follows:
(i) the audited reports of MCAH until present (Item A1);
(ii) the accounts statements of (a) P5H-001002; (b) P5H-002703 (Item A3); and
(iii) records of director’s remuneration from 2010 – 2020 and the Wife’s mother from 2012 – 2020 (Item B2).
57. I refer to the affirmations of Mr Tang Siu Ning (“Mr Tang”) filed on 27 October 2022 and Mr Denis S Walsh (“Mr Walsh”) filed on 14 November 2022. Both affirmations provided me with a historical account of the correlation between MCA and MCAH. Mr Walsh was the president of MCI (an US privately held company) and World Investment Network Inc (“WIN”). As early as 2000, the Husband and Wife, for an on behalf of MCA, went to meet Mr Walsh in the United States and had procured MCI/WIN and MCA entered into a franchise agreement for a term of 10 years. MCA was designated to operate wealth management / finance services with the label of “Money Concepts”. However, the Husband and Wife separated towards the expiry of the franchise agreement. Mr Walsh explained MCA was jointly operated by the Husband and Wife, it appeared to him that because they have separated, to avoid potential conflicts between them and with a view to keep the business going, he decided not to renew the franchise agreement in 2010.
58. After the termination of the franchise agreement, Mr Walsh set up MCAH in 2010 in place of MCA with a view to continue trading under the “Money Concept” brand in Asia. MCAH is a licensed corporation under the Securities and Futures Ordinance, Cap 24. Mr Walsh is the sole shareholder. There was a need to transfer all the clients’ accounts from MCA to MCAH to provide the same wealth management services, to achieve this, MCA notified all its clients and had sought consent from them to do so.
59. At the beginning of setting up MCAH, the Wife was appointed as a director and subsequently on 1 July 2012, Ms Kwong, the Wife’s mother was also appointed as a director. Since 2018, Mr Walsh and Mr Tang were appointed as directors. On 17 June 2020, the Wife resigned as a director of MCAH and she played no role in MCAH thereafter.
60. MCAH strenuously opposed to the Husband’s application because the documents sought to be disclosed are confidential. The amount of documents sought to be produced are both excessive and oppressive. Notwithstanding its opposition, MCAH agreed to disclose most of the requests of the Husband’s NP Summons save and except requests under Item A1, Item A3 and Item B2 of the Schedule.
61. It is worth mentioning the Husband has taken out an application to join Mr Walsh as the intended 2nd respondent of the ancillary relief proceedings in 2017. By the order of HHJ CK Chan dated 21 September 2017, the application of joinder was dismissed (“the 2017 Order”).
62. On issue of delay, MCAH submitted this summons should have taken out earlier. The Husband responded by saying it was the Wife who had delayed from disclosing documents requested which rendered him to seek non-party discovery from MCAH.
Applicable legal principles on non-party discovery
63. Non-party discovery application is governed by Order 24 Rule 7A of the Rules of High Court (Cap 4A). In that the party applying for such order shall state the following as per Order 24 rule 7A(3)(b):
“7A(3)(b) …in any case, specify or describe the documents in respect of which the order is sought and show, if practicable by reference to any pleading served or intended to be served in the proceedings, that the documents are relevant to an issue arising or likely to arise in the proceedings and that the person against whom the order is sought is likely to have or have had them in his possession, custody or power.” [emphasis added]
64. Disclosure orders against a non-party is discretionary in nature, the same is best illustrated in Global Gaming Philippines LLC v. Deutsche Bank AG (HCCL 1 of 2017), Lisa Wong J stated the following from paragraphs 39 to 49:
“39. Non-party discovery is granted by the discretionary exercise of the power vested in the court by s 42 of the HCO and Order 24 rule 7A(2) of the RHC and there is no existing ‘right’ or ‘entitlement’ to such discovery vested in a plaintiff: per Bharwaney J in Chan Yim Wah Wallace v New World First Ferry Services Limited [2015] 3 HKC 382 at [18].
40. Such exercise of discretion involves the conventional considerations of ‘existence, relevance and necessity’ under Order 24 rules 7A and 8(2) as well as a balancing exercise of the need for disclosure in the interest of the administration of justice to ensure a fair trial on full evidence and applicable countervailing factors: see again Chan Yim Wah Wallace at [19].
41. So at the first stage, the usual criteria of existence, possession custody or power, relevance and necessity apply equally to discovery from a non-party.
42. The Peruvian Guano test applies to determine whether the documents sought from the non-party are relevant to an issue arising out of the claim that has been made: per To J in Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick, HCA 219/2009, unreported, 9 June 2011 at [74] and [76].
43. Nevertheless, the need to ensure reasonable proportionality and procedural economy in the conduct of proceedings under Order 1A may inhibit the court from granting non-party discovery under s 42 and Order 24 rule 7A(2) for background or ‘chain of inquiry’ documents: Chan Yim Wah Wallace at [20] and [53].
44. When what is sought is a class of documents, each document of the class must be relevant in the Peruvian Guano sense. The court has power to order a non-party to disclose relevant documents which meet the Peruvian Guano test but has no power to order disclosure of documents that do not. This principle cannot be circumvented by including the relevant documents in a class which also includes documents which do not meet the Peruvian Guano test. See Tullett Prebon (Hong Kong) Limited at [81]-[84], where To J adopted what Chadwick LJ said in Three Rivers District Council v Bank of England (No 4) [2003] 1 WLR 210 (CA) at [34]-[38].
45. Fishing expedition with a view to hunting around the documents in the hope that they will reveal some improprieties on the part of the opposite party or will provide information for the applicant to pursue more inquires is not permitted. See Ngan In Leng v Chu Yuet Wah (No 1) [2013] 1 HKLRD 717, per Deputy Judge Queeny Au-Yeung (as her Ladyship then was) at [26] and [62(5)].
46. The court must also consider whether disclosure is necessary in order to dispose fairly of the claim or to save costs. The following considerations are relevant: (1) how important is the information to the issues; (2) has the applicant taken appropriate steps to obtain the information within the proceedings before seeking discovery from the third party; (3) would it be sufficient to draw adverse inferences on the basis that the party from whom the information was sought within the proceedings has failed to supply the information; (4) what is the nature of the relationship, if any, between the parties to the proceedings and the third party; and (5) if disclosure is necessary and proportionate, will the editing of documents protect private information? See Tullett Prebon (Hong Kong) Limited at [85] at which To J adopted, for the purposes of considering whether to exercise his discretion to order non-party disclosure, Hartmann JA’s approach in SMSE v KL (No 2), HCMC 2/2006, unreported, at [63] in the context of an application to set aside a subpoena duces tecum.
47. The condition of necessity requires the court to focus on the necessity of the third party being required to make discovery. A third party should not be ordered to make discovery if it is not necessary to do so, e.g. where the information can be obtained from within the proceedings or other sources: Chan Yim Wah Wallace v New World First Ferry Services Limited at [55].
48. If there is no other route to obtain the relevant and necessary information, the court must in the third and final stage proceed to balance the different interests: Chan Yim Wah Wallace v New World First Ferry Services Limited at [60].
49. The third party’s right to privilege is preserved by Order 24 rule 7A(6).”
65. The above is good law and the same principles are applicable in the matrimonial context.
The audited accounts of MCAH until present – Item A1
66. The Husband submitted the audited accounts are relevant because there was an “obvious relationship” between the Wife and MCAH. The Husband observed the Wife was still using MCAH’s registered office as her correspondence address at time of setting up MCAH. In that, the Husband said it is important for him to find out the financial condition of MCAH. However so, the Husband stated “he will not pursue on valuation of MCAH but instead would consider claiming against the Wife directly for any loss and damages and dissipation of assets that she caused by transferring all clients and funds from MCA to MCAH”.
67. Having considered the Husband’s case, I find he is unable to state the reason why the audited reports of MCAH are necessary in the ancillary proceedings. I am aware of the 2017 Order where the Husband’s application to join Mr Walsh has been dismissed. The Husband had ended there without making further applications. Not only this, the Husband did not take out section 17 application in light of the alleged matrimonial assets transferred to MCAH. Upon the Husband’s inaction, it could be deemed he did not wish to pursue anything further against MCAH. It would be oppressive for MCAH to disclose their audited accounts.
68. I understand the issue of confidentiality is not vital to the application because the Husband is capable to undertake such documents can only be used in this ancillary relief proceedings.
69. The mere statements on the “abnormalities” observed by the Husband that the Wife was related to MCAH could not justify disclosure of audited accounts.
70. Firstly, the Husband queried why Mr Walsh had set up MCAH instead of acquiring MCA. Mr Walsh’s franchise agreement ended in 2010. No renewal of franchise agreement would likely to be obtained and I believe it is more likely that not that it is a pure commercial decision on the part of Mr Walsh.
71. The remaining “abnormalities” raised by the Husband are (i) reason why the Wife’s mother can be appointed as a director of MCAH; (ii) reason why no payment of annual franchise fee to Mr Walsh by MCAH; (iii) questionable loan between the Wife and MCAH; and (iv) the Wife had used MCAH as a registered address and the staff of MCAH was helping her out.
72. If the Husband intended to pursue the above in the ancillary relief proceedings, that shall be done by way of cross examination of relevant parties or witness(es) at the ancillary relief trial. His queries did not justify disclosure of audited reports or at all.
73. I share the same view with the Wife that the Husband’s application for disclosure is a fishing expedition. I failed to see the Husband can establish a concrete prima facie case against MCAH in light of the alleged matrimonial assets dissipated. The audited reports requested are not of importance in the ancillary relief trial. The above “abnormities” raised by the Husband are capable to be canvased during cross examination of witness(es) during trial or by way of drawing adverse inference against the Wife. There are no other reasons that I shall exercise my discretion to allow discovery on this part.
The accounts statement of (a) P5H-001002; (b) P5H-002703 (Item A3)
74. These are pershing accounts of the Husband and his father. Mr Tang of MCAH affirmed that account owners can access to their accounts by requesting paper statements with prescribed fees. I see this is perfectly sensible and practicable. This is wholly unnecessary for the Husband to seek discovery against a non-party on documents which he has other means to obtain them.
The record of director’s remuneration from 2010 – 2020 and the Wife’s mother from 2012 – 2020 (Item B2)
75. If discovery on audited accounts of MCAH was not allowed, I see no reason why director’s remuneration should be ordered against MCAH. The issue of directors’ remuneration is irrelevant.
76. For the outcome of Husband’s NP summons, I do not need to address the issue of delay.
77. To conclude, Item A1, Item A3 and Item B2 of the Husband’s NP summons be dismissed.
78. I see no special feature to depart from the usual circumstance that costs should follow the event. I order on a nisi basis that the Husband do pay MCAH’s costs of his summons, including items disclosed by consent, with certificate of counsel, to be taxed if not agreed. The costs order nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
Orders
79. With reasons of the foregoing, I make the following orders.
The Wife’s SD summons:
(i) In respect of item 2 of the Schedule:
The Husband do disclose documents under paragraph 2(1) of the Schedule and to provide bank statement(s) of the specified bank account receiving net proceeds of the SZ Property from October 2019 until November 2019 within 28 days hereof. For avoidance of doubt, the remaining items in paragraph 2 of the Schedule be dismissed.
(ii) In respect of item 3 of the Schedule
The Husband do disclose documents, including but not limiting to bank transfer of the RMB 3 million bridging loan advanced by the Husband’s current wife for purpose of discharging of the SZ Property.
(iii) There be an order nisi that the costs of the Wife’s SD summons be reserved.
(iv) For avoidance of doubt, the costs of discovery pursuant to the consent order dated 3 May 2023 and costs of item 4 of the schedule, shall also be reserved.
(v) The costs order nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
The Husband’s SD summons:
(vi) The Wife do make specific discovery of Item 1 of the Schedule of the Husband’s SD summons within 28 days hereof.
(vii) If the Wife is unable to produce any of the above documents specified or described above, the Wife shall within 28 days from the date of this Order, file and serve an affirmation stating whether any of the documents specified or described above are or have at any time been in possession, custody or power, if have had but not now in her possession, custody or power, when she parted with them and what have become of them.
(viii) By consent of the Husband, discovery on Items 14 – 23 of the Schedule be withdrawn.
(ix) Save and except the above and Items 36 – 38, the remaining items of the Schedule be dismissed.
(x) There be an order nisi that the costs of the Husband’s SD summons be reserved.
(xi) The costs order nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
The Husband’s NP Summons:
(xii) Paragraphs A1, A3 and B2 of the Schedule of the Husband’s NP summons be dismissed.
(xiii) There be an order nisi that the Husband do pay MCAH’s costs of this summons (including items disclosed by consent), with certificate for counsel, to be taxed if not agreed.
(xiv) The costs order nisi be made absolute in absence of application to vary by summons within 14 days from the date of this decision.
| ( J. Chow) Deputy District Judge |
Mr Kay K.W. Chan instructed by Messrs Charles Russell Speechlys LLP for the petitioner
Ms Lily Yu instructed by Messrs Chaine, Chow & Barbara Hung for the 1st respondent
Mr Ken Chan instructed by Messrs Chiu, Szeto & Cheng for the Money Concepts (Asia) Holdings Limited (non party)