AWK also known as AWK, Y v. MLTH also known as MTH

FCMC 2454/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2454 OF 2014

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RULING
(Leave to file an affidavit, Discovery and costs)

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Introduction

1.  There are three applications before me that now require adjudication as follows:

a)  An application by the wife that the order on costs arising out of my Ruling on the 17 August 2015 be varied. On that occasion I made an order nisi that the Respondent husband do pay the wife a 50% contribution towards her costs on the premise that notwithstanding the fact that neither party had been wholly successful the wife had been more successful than the husband. This was originally challenged by both sides;

b)   a second application by the wife for further discovery and

c)  an application by the husband that leave be granted for the husband’s forensic accountant, Mr T to file and serve his 4^th affirmation in reply to the 4^th affirmation from the wife’s forensic accountant.  

I intend to deal with these applications in reverse order.

Background to the litigation

2. However before doing so I wish to put this application into its proper context. In my first Ruling of the 17 August 2015 I set out briefly the background to the litigation as follows:

4.  By way of background this is a big money case. The husband is a private equity investor and by all accounts a very successful one. He has historically done a lot of business with a previous employer who subsequently became a close personal friend and business mentor, a Mr PVK (P) and other family members, particularly his eldest and youngest brothers (Mr MTK his eldest brother otherwise known as K and Mr MTY his youngest brother otherwise known as M). Much of the difficulty in this case lies in the financial relationship between these four people and their respective shareholdings in various companies. We are told that a lot of the business done between them appears to have been conducted without any formal documentation making it difficult to ascertain the truth or otherwise of what is asserted. The husband maintains that he often holds very large sums of money on trust for each of these three people. The husband’s case is that much business is done on the basis of verbal agreements only. P, K and M have each filed affidavit evidence in support of the husband’s basic position. The wife for her part, perhaps understandably in the circumstances, is somewhat sceptical.

5.  Mr Coleman SC for the wife has spent a long time in his written submission setting out what he says are the deficiencies in the husband’s disclosure to date. I do not intend to go through those submissions point by point in this Ruling. Much of the argument strictly speaking lies outside the ambit of this application in any event. In a nut shell however it seems that the wife’s main concerns centre on two things:

a)  The whereabouts of HK$945 million deposited into the husband’s account in 2007 and b) his involvement or otherwise in a large infra structure project in Macau. 

Background to the marriage

3.   I should add that the parties married on the XX February 2003 and had two children – twins, a boy and a girl who are now just over 6 years of age. It is the husband’s case that the wife’s decision to apply for a divorce came as a complete surprise to him. That be as it may, the divorce petition was filed by the wife on the 4 March 2014 and the decree nisi was pronounced on the 19 May of the same year. An order was also made for joint custody of the twins with care and control to the wife and reasonable access to the husband. There has been some satellite litigation concerning the twins but the main focus is now on discovery and the ancillary relief process. The matter is listed for a Financial Dispute Resolution hearing on the 20 May 2016 with one day reserved.  

4.  On the 17 August 2015 I handed down my Ruling in relation to the wife’s first application for discovery. The wife at that stage wished to have sight of the statements for two USB accounts from 2007 to date. As a result of my Ruling she now has the accounts for 2007 and 2008 and for 2012 onwards. This was in part so that both accountants should have sight of the same raw material with respect to a report filed by the husband’s forensic accountant. There were also related issues concerning the redaction of documents. 

Leave to file Mr T’s 4^th affirmation

5.  This was the husband’s application. He sought leave to file an affirmation in response to Mr A’s 4^th affirmation, on the basis that on his case new issues had been raised by the wife which he should then be given an opportunity to respond to. Having now had the opportunity to read all of the affidavits filed I would agree with that analysis of the situation and on that basis I will make an order in terms of paragraph 1 of the husband’s summons dated the 2 March 2016. I accept in the circumstances that it is not sufficient to say that ‘as it was the wife’s application that she should have the last word’. Costs shall follow the event and therefore the costs of this application shall be to the husband to be taxed on a party and party basis if not agreed. 

The discovery application

6.  The wife original summons dated the 20 November 2015 stated as follows:

1.  All the information and documentation of the Respondent to which the Respondent’s expert, Mr. MT, has had access and/or sighted and/or reviewed in preparation of all his reports and opinions including but not limited to the Expert Report dated 13 January 2015 [P15/3738-3739] and his 2 Affirmations dated 1 December 2014 [P14/3413-3418] and 20 April 2015 [P17/4072-4081] be provided forthwith to the Petitioner and her expert.

[In this context, the Petitioner will rely on that fact that, in her Ruling dated 17 August, 2015 HHJ Melloy stated in relation to expert reports that “in order for any Judge to attach any weight to a report of this nature, both sides must have access to the same information”.]

2.  The Respondent do provide copies of the following UBS Statements since 2007 to date, save for those already provided), namely:

(i)  UBS account no. XXXXXX in the name of MTH;

(ii)  UBS account no. XXXXXX in the name of U International Inc.

(collectively referred to as “UBS Accounts”)

3.  The Respondent do answer fully as to Questions B5, B8, B9, B10 and B11 of the Petitioner’s 4^th Supplemental Questionnaires with supporting documentation and explain all the subsequent movement of funds that is equivalent to HK$15,000,000 or above flowing from the UBS Accounts into the Respondent’s various different bank accounts or otherwise, so as to reconcile the figures through to the Respondent’s Form E.  For the avoidance of doubt, the Petitioner requires the Respondent to explain all the subsequent movement of funds that is equivalent to HK$15,000,000 or above and not just those referenced to in Questions B5 to B11.

4.  The Respondent do answer the following three questions in relation to the C share deal, namely:

(i)  The opening number of shares held by USI in C RH according to public records and as shown in the Schedule in Annexe A was 7,2000,000,000 shares.  However, according to the Respondent’s statement in Section 5.5 of his Form E USI in July 2000 agreed to subscribe for 8,179,946,667 shares in L Industries Holdings Limited (“L”) for HK$122,699,200.  It would appear that USI must have sold/placed 979,946,667 shares.  Please provide a reconciliation with full particulars and relevant supporting documents in this regard.

(ii)  We refer to the Announcement dated 19 January 2004 by C Resources Holdings Limited (C RH) advising that USI had agreed to sell 500,000,000 shares to E.  This share movement has been reflected in the movement in USI’s holdings in C RH in the attached Schedule.  However, the price at which these shares were sold was not publicly announced.  Please advise the actual date and price of the sale of these 500 million shares and provide relevant supporting documents.

(iii)  KMTK affirmed (paragraph 10) [P15/3776] that he transferred HK$70mn to USI in 2007 for 18,750,000 C RH shares and that they were held in trust by the Respondent.  According to the public records and as shown in Annex A, the Respondent transferred out all his remaining shares totalling 130 million shares on 29 July 2008 to EK said to be as part settlement of the alleged overpayment of $247mn of profit on the C RH deal.  Please provide an explanation with relevant supporting documents as to how these 18,750,000 shares have been accounted for in regards to the realised profit on the C RH deal and how the Respondent accounted for these shares when he held no shares in USI as at 29 July 2008.

[In this context, the Petitioner will rely on the facts that:

(i) there was an outflow of significant funds of some HK$3.1 billion in 2007 and 2008 from the UBS Accounts;

(ii) the Respondent avers that was, and the fund flow was due to, an alleged oral agreement between the Respondent and Mr. EK of a 75/25 C RH profit share deal, as stated in the Affirmation of PVK dated 9 January 2015 [P15/3661-3669];

(iii) the Respondent suggested in his 5^th Affirmation dated 21 April 2015 [P17/4062-4071] that rather than he providing the information directly that the Petitioner could make enquiries from sources of information publicly available;

(iv)  the Petitioner has discovered from relevant Announcements and Annual Reports pertaining to the C RH deal that the formal and public information in respect of the shares indicated a 50/50 sharing.]

7.  In a letter dated the 24 February 2016 the wife further clarified her position and said that she was seeking the following:

Now that you have received the 4^th Affirmation of Mr. SA together with his two exhibits in reply relating to our client’s Summons, we wish to utilize the hearing time effectively and, therefore, set out our client’s latest position in respect of her Summons using the same paragraph numbers contained therein as follows:-

1.  Your client was ordered to comply with this request pursuant to the Order dated 15^th December 2015.

2.  Our client continues to pursue this request for all the UBS bank statements from 2007 to date, save for those already provided.

3.  Our client continues to pursue this request for your client to explain all the subsequent movement of funds that are equivalent to HK$15,000,000 and above flowing from the UBS accounts in your client’s various bank accounts or otherwise, save for B8.

4.  Our client does not pursue this request as Mr. A has been able to answer the 3 questions raised regarding the C RH share reconciliation following a review of the information and documents provided, upon which he has expanded in his 4^th Affirmation.

Consequently the first request is no longer in issue, as I made an order in those terms on the15 December 2015. Further the wife is no longer pursuing the very detailed fourth request as she says that those questions have now been answered in any event.

Each party’s case on discovery

The wife’s case

8.  The wife’s case is that there is approximately HK$733 million missing from the husband’s disclosure. This is based on her accountant’s analysis of the publicly listed documents and the disclosure provided to date. Although she is no longer pursuing her line of enquiry with respect to the Macau project she says that she simply cannot get to the husband’s figures as disclosed, based on the facts and figures provided. In so far as the verbal agreement between the husband and P is concerned she challenges their assertion (made on oath) that there would be a 75:25 split of the profit on the original “C” deal, plus all future deals going forward. The wife believes that they split the profit 50:50. Much flows from this with the wife’s forensic accountant putting forward a number of theoretical assertions based on the argument that the husband is entitled to a 50% share of the profits. In the 4^th affirmation of Mr A dated the 19 February 2016 he states as follows:

8.  EK’s Affirmation of 9^th January 2015 [P15/3661-3669] sought to substantiate this debt due to him, and EK affirmed that:

(a)   He had set up USI jointly with the Respondent and had provided all the funding, being US$18 million, for USI’s investment in O.

(b) He had a verbal arrangement to split profits on the C RH deal 75% in his favour and 25% in favour of the Respondent.

(c)   The profit on the deal, based on the calculations set out in his exhibit PVK-4 [P15/3701], was HK$2,790,740,220 and, based on the 75/25% verbal deal, the Respondent’s profit share was HK$697,685,055.  In reconciling the debt due to him of HK$ 116,037,109, EK deducted from the Respondent’s profit share the HK$945,192,327 cash that USI paid to the Respondent in October 2007 resulting in an excess payment of HK$247,507,272 (the alleged overpayment of HK$247 million).

(d)  This “overpayment” together with an opening balance of HK$32,375,000, for which there are no supporting documents, totalling say HK$280 million is the opening debt said to be due to EK with subsequent cash transactions and various expenses paid for and on behalf of each other resulting in a net debt due to EK of approximately HK$116 million.

9.  I will demonstrate in this Affirmation the following:

(a)   USI should have made a profit on the C RH transaction of nearly HK$4 billion of which HK$938 million was earned prior to 2005, but with only HK$27 million of this earned prior to the parties’ marriage, with the balance of HK$3 billion earned from 2005 to 2007 (refer to Appendix 1 of my Report, Exhibit SJA4-2).

(b)  The Respondent’s share of 50% of the C RH share profit still to be taken into account when considering his net worth is approximately a net amount of HK$733 million, being the $2 billion 50% share of the C RH shares profits less cash and shares distributed to the Respondent by USI (refer to Table 1 under paragraph 22 of this Affirmation).

(c)   Having calculated the profits that USI should have made on the C RH deal and having regard to substantial evidence that EK and the Respondent would have shares the profits on a 50/50 basis, the stated net worth of the Respondent of HK$600 million, excluding the investment in VCGL, is significantly understated and should be closer to HK$1.9 billion excluding the investment VCGL (refer to Table 2 under paragraph 24 of this Affirmation).

(d)  The Respondent ought to be ordered to provided all his UBS bank statements save for those already provided, which would mainly be for the period from years 2009 to 2011, and provide supporting documents for all subsequent transactions of HK$15,000,000 and above.

9.  Mr Coleman made the same point, although he put it somewhat differently, when he said in his oral submissions that husband’s case that the profit was split on a 75:25 basis needed to be tested against contemporaneous documents that will go to either prove or disprove the assertion made.

The husband’s case

10. The husband argues that the wife’s latest request is excessive, unnecessary, time consuming and disproportionate to the length of marriage; he strenuously denies that he has not made full and frank disclosure of his assets although he accepts that there may have been some inconsistencies with respect to some of the explanations given to date. He has since sought to clarify those inconsistencies. He accuses the wife and her team of undergoing an expensive and detailed audit of his finances going back to 2007 – i.e. 9 years. In his affirmation of the 15 January 2015 he goes through the discovery given to date. In particular he points out that he has already answered questions B5, B8, B9, B10 and B11. As will be seen having perused these documents I accept what the husband says in this respect.  He may not have answered the questions as fully as the wife would have liked – but I accept that answers have been given and that it may not be possible for him to answer more fully in any event, given the length of time involved. He also points out that many of the queries relate to a period of time when the parties were happily married.

11. Mr Todd for the husband says that the wife is not simply embarking on a fishing expedition but on a ‘trawl’. He points out that if what the wife maintains is true then she is making a very dark assertion, which borders on accusing the husband and his business partners of fraud. He also points out that the party’s are still awaiting a valuation of the husband’s company where funds have clearly been invested and that going through the exercise proposed by the wife will not assist the court prior to FDR in any event. I accept what he says in this respect. He further points out that by simply looking at the USB accounts for 2007 and 2008, if I were to grant the wife her application, the husband would be obliged to identify the movement of 281 transactions all of which are in relation to sums of money of over HK$15 million. This figure would increase dramatically if it were to include all the missing UBS accounts for the period from 2009 – 2011 inclusive. (The wife already has the accounts for 2007 – 2008 and 2012 – 2014).

The law

Discovery

12.  I summarized the law on discovery in my previous judgment, as follows:

9.  The law is relatively straight forward and does not appear to be in dispute. It is of course correct that disclosure in ancillary relief proceedings should be both “proportionate and relevant” as pointed out by Mr Shieh SC in his written submission. Reference was also made to the general rules for discovery set out in Order 24 of the Rules of the High Court and to Practice Direction 15:11 which governs the general approach taken by the Family Court to discovery prior to and at a Financial Dispute Resolution hearing. The objective, again as rightly pointed out by Mr Shieh, is to define the issues and to save costs. 

10.  The 18^th edition of Rayden is of some assistance as to the correct approach to be taken and a summary can be found at paragraph 17:30 where it is stated as follows:

Discovery of documents: questionnaire

17.30  In ancillary relief proceedings 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 discovery is by mutual request by means of a questionnaire served in advance of the first appointment, and by further questionnaire at a later stage of the proceedings with the court’s permission. Questionnaires can, like interrogatories, request information as well as seeking production of documents.  As part of its case management role, the court should regulate the extent of the disclosure 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. An order for discovery can only be made against a party to the application.  Discovery encompasses all documents which are or have been in a party’s possession, custody or power relating to matters in question in the application for ancillary relief; it is a two-stage process: where objection is taken to production of a document in the possession or power of a party, the proper course is for the existence of the document to be disclosed and objection then taken to its production.  A party giving discovery is not obliged to disclose any part of a document which is irrelevant to the issues, and it is established practice to redact irrelevant parts of the document provided that the irrelevant part could be covered without destroying the sense of the rest of the document or make it misleading.

13.  Suffice it to say that the objective is for there to be appropriate and proportionate disclosure so that an effective FDR can take place. As a matter of good case management therefore the court will often try to limit the discovery process prior to the FDR, as to do otherwise will often simply lead to an increase in legal costs and often for no good reason. It is of course always open for the parties to revisit issues pertaining to the questionnaires and discovery generally if settlement is not achieved and the case proceeds to trial.

14. In this instance it is of note that over HK$8.7 million has now been spent on legal fees, much of which will be related to the discovery process.

Discussion

15.  At the end of the day in order for me to conduct an effective FDR it is necessary for there to be a schedule of assets. In an ideal world the schedule of assets should be agreed. However it is normally possible to proceed even where there is not agreement on all the items under discussion. The issue then is what level of disclosure is necessary in order for an effective FDR to take place? My concern is that the wife’s request does seem excessive in light of the extensive disclosure given to date. I also agree with Mr Todd in that there is a danger that even if all of the UBS accounts are produced and even if the husband answers all of the questions posed with respect to transactions of HK$15 million or above, it is unlikely that the matter will end there. I accept that the wife is “fishing”. She is looking for a “smoking gun”. If the wife does not accept what the husband and those who support him have said on oath, then it seems to me that there may be no alternative but for this matter to proceed to trial, so that the evidence can be properly tested and appropriate findings made. In that event the issue of disclosure may need to be looked at again. However both parties need to be aware the possible cost implications of this approach.

16. Consequently I will dismiss paragraphs 2 and 3 of the wife’s summons dated the 20 November 2015. As indicated above I am satisfied that the husband has answered questions B5, B8 – B11 as previously ordered. The wife shall pay the husband the costs of and occasioned by paragraphs 2 and 3 of her summons dated the 20 November 2015 on a party and party basis to be taxed if not agreed. There shall be certificate for all counsel involved.   

Costs arising out of the Ruling dated the 17 August 2015.

17.  Both sides filed written submissions in relation to this costs point. In Mr Coleman’s written submission dated the 16 November 2015 he proposed that a more appropriate order might be that the wife should be awarded no less than 80% of her costs. Ms Tong, then for the wife, argued that the more appropriate order is that there should be no order as to costs. (Please see Ms Tong’s submission dated the 30 November 2015). This was reiterated by Mr Todd during the hearing, whereas Mr Coleman confirmed that his client would now be content for the original order to be made absolute.  There was also some discussion about the possibility of reserving costs. In the circumstances however it seems to me that it would be more appropriate for an order to be made now given that I may not be the judge dealing with this matter at trial (if indeed the matter proceeds to trial). In the circumstances I remain of the view that the appropriate order is that the husband do make a 50% contribution towards the wife’s costs of and occasioned by the original discovery application, to be taxed if not agreed on a party and party basis. There shall again be certificate for all counsel involved. I should add that in making that order I am cognizant of the fact that the wife was generally more successful on the discovery point at that time and that the husband had been more successful with respect to the arguments on redaction. I have considered making an order that there be no order as to costs but it seems to me that that does not fully recognise the fact that the husband was not prepared to make any concessions at all on the discovery application and that the wife had no alternative but to make the application at that time. There were significant costs consequences that arose as a result.

18.  The costs of this application shall therefore follow the event and shall be to the wife in any event to again be taxed on a party and party basis if not agreed. There shall be certificate for counsel.   

FCMC 2454/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2454 OF 2014

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RULING
(Discovery)

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Introduction

1.  This is an application by a petitioner wife for further discovery. The application arose as a result of the husband’s agreement to answer her third questionnaire save for Part A, Part D, questions 5 – 11 of Part B and Part F. Consequently at the second First Appointment hearing on the 12 March 2015 I ordered inter alia that:

1. The Petition do file and serve her 3^rd Questionnaire save for Part A, Part D, questions 5 to 11 of Part B, and Part F (the “Disputed Questions”) on or before 13^th March 2015;

2. The Respondent do file and serve his Answers to the Petitioner’s 3^rd Questionnaire (without the Disputed Questions) on or before 13^th April 2015;

3. Leave be granted to the Respondent to file his Affirmation and/or an Affirmation of his forensic accountant on the issue of whether the Disputed Questions are to be answered, and in response to the 2^nd Affirmation of SJA filed on 26^th February 2015, on or before 13^th April 2015;

4. The Petitioner be at liberty to file a Reply to the Affirmation(s) referred to in paragraph 3 above within 14 days if so advised;

5. No further Affirmation evidence on the Disputed Questions be filed without leave of the Court;

6. The hearing of the Petitioner’s Summons dated 25^th February 2015 in respect of the Disputed Questions is fixed for hearing on 9^th July 2015 at 10:30 am with one day reserved;

7. The Parties do file their respective Skeleton Submission by close of business on Monday 6^th July 2015.

Other orders were made in relation to the valuations of properties, companies and other valuable items.

2.  Thus the questions in dispute at that time were as follows:

A. GENERAL

It is noted that many of the Annexures and Exhibits filed in support of the Respondent’s answers have been redacted.  These proceedings are confidential to the parties themselves and accordingly there should be no valid reason for any documents to be so redacted and no reasons or explanations have been presented by the Respondent for such redaction Accordingly the Petitioner requests that all documents be re-submitted in their original form.

D. AFFIRMATION OF MTY

1. Further to the request in Section A above, please arrange for MTY’s exhibits to be provided in their original and unredacted form.

B. EXPERT REPORT OF MJT (“Mr. T and Mr T’s Report)

5. According to 3.3.4 of Mr. T’s report a structured note of US$10,000,000 was transferred in.  Please explain from which account this note was transferred from and the subsequent movement in this note and provide all supporting documents.

6. Please explain the subsequent movement of the funds of HK$39,000,000 that were transferred on 4^th October 2007 to the Respondent’s account with Citibank Singapore and provide supporting documents.

7. Please provide a schedule detailing the bank accounts, names, account numbers and amounts making up the net interbank transfers of HK$72,408,104, as referenced in 3.3.5 of Mr. T’s report and provide supporting documents.

8. Please explain the subsequent movement of the funds of HK$10,000,000 and HK$2,500,000 transferred to the Respondent’s account with “C Inc” and to LMK respectively as referenced in 3.3.6 of Mr. T’s report and provide supporting documents.

9. Please explain the subsequent movements in the investment in G limited of HK$78,182,820 and the amount of HK$100,000,000 transferred to the Respondent’s securities account with G as referenced in 3.3.7 and 3.3.12 of Mr. T’s report and provide supporting documents.

10. Please provide full particulars as to the subsequent sales of the properties acquired in 2008 at a total cost of approximately HK$174m being No. XX R, No.XXX, R and No. X, F and provide supporting documents including details of bank accounts in which the relevant sales proceeds were deposited.

11. Please explain the subsequent movements in the funds of HK$380,919,072 which were transferred to a new account the Respondent opened with Credit Suisse as referenced in 3.3.17 of Mr. T’s report and provide supporting documents.

Form E

1. Please now provide an update of the Respondent’s Form E dated 5^th June 2014 insofar as “TBC [To be determined]” was inserted (in Part 2.4 (No. 9)) in respect of the value of the Respondent’s shareholding/beneficial interest in V Limited and the subsequent figures to be included to the total figure at (D) and Summaries of Assets and Liabilities in Part 2.

3.  Since then the husband has filed his Answer to those parts of the questionnaire that he had agreed to answer (filed on the 21 April 2015). The wife is not happy with many of those answers and asks that this application be viewed in that context.

Background

4.  By way of background this is a big money case. The husband is a private equity investor and by all accounts a very successful one. He has historically done a lot of business with a previous employer who subsequently became a close personal friend and business mentor, a Mr PVK (P) and other family members, particularly his eldest and youngest brothers (Mr MTK his eldest brother otherwise known as K and Mr MTY his youngest brother otherwise known as M). Much of the difficulty in this case lies in the financial relationship between these four people and their respective shareholdings in various companies. We are told that a lot of the business done between them appears to have been conducted without any formal documentation making it difficult to ascertain the truth or otherwise of what is asserted. The husband maintains that he often holds very large sums of money on trust for each of these three people. The husband’s case is that much business is done on the basis of verbal agreements only. P, K and M have each filed affidavit evidence in support of the husband’s basic position. The wife for her part, perhaps understandably in the circumstances, is somewhat sceptical.

5.  Mr Coleman SC for the wife has spent a long time in his written submission setting out what he says are the deficiencies in the husband’s disclosure to date. I do not intend to go through those submissions point by point in this Ruling. Much of the argument strictly speaking lies outside the ambit of this application in any event. In a nut shell however it seems that the wife’s main concerns centre on two things:

a) The whereabouts of HK$945 million deposited into the husband’s account in 2007 and b) his involvement or otherwise in a large infra structure project in Macau.    

The HK$945 million

6.  In 2007 (about 4 years after marriage), the husband generated HK$945 million from a “deal” and that money was deposited into a U account. Putting aside other issues relating to the valuations of companies/properties etc, the husband’s case as set out in his Form E is that he now has net assets of approximately HK$600 million. The wife wishes therefore to have sight of the U statements relating to two accounts from 2007 to date. The husband has been very resistant in providing that information. In his affirmation of the 27 November 2014, in answer to one of the wife’s earlier requests he puts his case on this as follows:

3. I maintain my position that the Petitioner’s request for monthly statements of U Private Banking A/C No XXXXXX in the name of U Inc, in which I am one of the two shareholders, from March 2007 to date, save as already provided (Question 5(c)) and bank statements in respect of my sole name U account XXXXXX from 2007 onwards, save for those already provided (Question 10(c)) is a fishing exercise and is oppressive.

4. The rationale behind the request, as set out in their Affirmations, is also illogical, as I will explain below.

5. By way of background, I would like to point out that the Petitioner and I married in February 2003 and the children of the family were born in December 2009.  The disclosure that the Petitioner is seeking is from 2007; i.e. 2 years before the children were even born.  There was no way I was contemplating a divorce, nor were the Petitioner and I having any marital problems in 2007 otherwise we would not have had children 2 years later.  It came as a complete shock to me and caught me by surprise when I received the Petition for Divorce on 5 March 2014 as we had just returned to Hong Kong from Las Vegas after spending 10 days there for a family holiday over Chinese New Year in February 2014.  We were already planning our next holiday to Bali over Easter.

10. The Petitioner’s request for bank statements of the 2 U accounts has no basis and is merely a fishing exercise.  The production of these bank statements will not facilitate settlement negotiations as claimed by the Petitioner.  Accordingly, it would create more excuses for the Petitioner and her advisers to raise more questions which might not be at all useful for these Proceedings, at least at this stage.  The Petitioner’s request that I do answer Questions 5(c) and 10(c) of the Petitioner’s draft Second Questionnaire contained in her First Appointment Bundle filed on 10 November 2014 should therefore be dismissed.

7.  Subsequently it was agreed that the husband’s forensic accountant, Mr T would file an affidavit for and on behalf of the husband to deal in part with the issue of the U account. As can be seen above, it is the report from Mr T that has in part, now become subject to this further rounds of questions.

The Macau project

8.  The second issue relates to the husband’s involvement – or otherwise, in a big infrastructure project in Macau. The husband’s position put quite simply is that he has no involvement in this project. The wife does not seemingly accept this. In his affidavit of the 27 November 2014 the husband says that:

(f) I repeat again that I am not a director of L Investments Limited (“L”).  L belongs to my brother, M, and he will confirm the same in his Affirmation and to provide supporting documentation.  I have no control over incorrect information that is published by the press.

8. It is absurd that just because the Petitioner claims that I have an interest in a business in Macau with no evidence in support, and then because the project was launched in 2010, that I must have started paying monies into the project from 2007.  It is entirely a fabrication and speculation of the Petitioner and should not be a reason to justify the production of bank statement since 2007.

9. It makes no sense to request bank statements of over 7 years to see if monies were paid into the Macau project.  Obtaining the bank statements will be of little use, as it will not show anything other than numerous transactions thereon.  Such transactions are not unusual and are in fact, rational and on a regular basis which are normal business dealings for me prior to and during the marriage, and it is clear from the bank statements already provided, and my previous answers and explanations provided, that I have always had numerous transactions, including but not limited to those with K, M and P.  This will be further explained by them in their respective affirmations.  It is instead M’s affirmation, with supporting documentation, that will clearly explain the real ownership of the Macau project.

The law

Discovery

9.  The law is relatively straight forward and does not appear to be in dispute. It is of course correct that disclosure in ancillary relief proceedings should be both “proportionate and relevant” as pointed out by Mr Shieh SC in his written submission. Reference was also made to the general rules for discovery set out in Order 24 of the Rules of the High Court and to Practice Direction 15:11 which governs the general approach taken by the Family Court to discovery prior to and at a Financial Dispute Resolution hearing. The objective, again as rightly pointed out by Mr Shieh, is to define the issues and to save costs. 

10.  The 18^th edition of Rayden is of some assistance as to the correct approach to be taken and a summary can be found at paragraph 17:30 where it is stated as follows:

Discovery of documents: questionnaire

17.30 In ancillary relief proceedings 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 discovery is by mutual request by means of a questionnaire served in advance of the first appointment, and by further questionnaire at a later stage of the proceedings with the court’s permission. Questionnaires can, like interrogatories, request information as well as seeking production of documents.  As part of its case management role, the court should regulate the extent of the disclosure 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. An order for discovery can only be made against a party to the application.Discovery encompasses all documents which are or have been in a party’s possession, custody or power relating to matters in question in the application for ancillary relief; it is a two-stage process: where objection is taken to production of a document in the possession or power of a party, the proper course is for the existence of the document to be disclosed and objection then taken to its production.  A party giving discovery is not obliged to disclose any part of a document which is irrelevant to the issues, and it is established practice to redact irrelevant parts of the document provided that the irrelevant part could be covered without destroying the sense of the rest of the document or make it misleading.

Redaction

11.  In so far as the law on redaction is concerned I accept the submissions made by Mr Shieh on this point also as follows:

32. It is well established that a party is entitled to redact parts of a disclosed document on the basis that they are irrelevant to issues in dispute.  In GE Capital Corporate Finance Group Ltd v Bankers Trust Co & Ors [1995] 2 All ER 993 (CA), the UK Court of Appeal held (see headonote):

“It was well established that a party was entitled to seal up or cover up parts of a disclosed document on the ground of irrelevance just as it could withhold an entire document on that ground, provided that the irrelevant part could be covered without destroying the sense of the rest or making it misleading … The test to be applied in deciding whether material was relevant was not whether it was at least potentially relevant but whether it was unreasonable to suppose that the passages contained information which might either directly or indirectly enable the defendant either to advance his own case or to damage the plaintiff’s case. The Court would not ordinarily disregard the oath of the party that the parts concealed were irrelevant unless it appeared from the documents produced that that was not the case.”

(Emphasis added)

33. GE Capital has been applied in numerous cases by the Hong Kong Court, including in the context of matrimonial litigation:

(1) In H v T (Discovery: bank statements) [2011] HKFLR 533 where the Court dismissed the wife’s application for disclosure of redacted parts of bank statements disclosed by the husband, on the grounds inter alia that she had failed to demonstrate its relevance to the issues in the case.

(2) In SMSE v KL (No 2) [2009] 5 HKLRD 770 (CA) (which concerns, inter alia, redactions of documents disclosed by a third party), the Court of Appeal (per Tang VP as he then was) held that if a document contained materials which were immaterial to the issues in the case they should be redacted, and the burden was on the applicant for disclosure to show that the redaction had been done wrongly.  The Court of Appeal also emphasized the importance to maintain the principle that any intrusion on the privacy of a third party must be justified (see §§41-43).  Any requirement by a Court for disclosure of personal information against a third party is an interference with his privacy rights and it has to be justified for the protection of the rights of the applicant (see per Cheung JA at §52, applying M v M [2006] 2 FLR 1253).  In that case, the Court of Appeal held that to prohibit a third party company to redact the part of a document not relevant to the issues in the proceedings clearly impinges upon the company’s right to privacy (see per Cheung JA at §55).

34. Further, in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 (CA), the Court of Appeal applied GE Capital as regards the entitlement to redact irrelevant material in disclosed documents, and further confirmed the conclusiveness of an affirmation given by the party providing discovery as to the irrelevance of the redacted materials (see per Kwan JA at §51):

“The oath of the party giving discovery is conclusive, “unless the court can be satisfied - not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by [that party], or by any admission by him in the pleadings, or necessarily from the circumstances of the case - that the affidavit does not truly state that which it ought to state”⁴. The test is not whether the redacted parts are potentially relevant, and it is not enough that they might provide material for cross-examination as to credit. The test is whether it is not unreasonable to suppose that the parts redacted do contain information which may, either directly or indirectly, enable Ms Wong to advance her own case or to damage the defendants’ case⁵. A heavy burden lies on a party who seeks to challenge the veracity of the other party’s oath regarding redaction⁶.”

(Emphasis added)

Discussion   

Part A and Part D

12.  Both of these requests relate to the provision of unredacted documents. Part A is a general request centring on the husband’s Answers to the Wife’s 2^nd questionnaire and Part D relates to documents exhibited to M’s affirmation. I accept that the redacted information in the husband’s Answers consists of information that relates to third parties including inter alia confidential information pertaining to other directors, third party bank account numbers and third party involvement in M’s companies. The husband had confirmed on oath that the redacted information is not relevant and prima facie that stands. In his oral submission Mr Coleman said that：

Yes, my learned friend seemed to be saying -- the last thing he said almost was that the husband had himself looked at the redactions and then said on oath that none of them are related to him.  But what he -- what he says is “I’ve looked at the redactions.”  What he doesn’t say is “I’ve looked at the document unredacted,” and indeed in his paragraph 13 on page 4066, P17, 4066, he says, “The redactions were done by M himself.”  “I’ve looked at the redactions,” he says, “and the redactions only relate to X, Y and Z.”

Well, you can see that redactions relate to third parties’ addresses, bank accounts, ID numbers. I can see that by looking at the redacted document.  What he’s not done is said, “I’ve looked under the redactions and I can confirm that what has been redacted has got nothing to do with me.”

And, anyway, by virtue of the other material that I have identified, this is one of those cases where the oath on disclosure is not good until one gets to the trial or an FDR, as is the next target in our case.

13.  With respect this seems a little farfetched – especially in so far as M is concerned, who is not even a party to the proceedings. On the face of it the material that has been redacted does not appear to be of any import to the issues in hand. Nor does the redaction appear to have been done wrongly. Neither can it be inferred that the affidavits do not state truly what it ought to state.  In such circumstances it seems to me that there is no proper basis for insisting that unredacted material be produced. Thus parts A and D will not succeed.

Part B

14.  These questions arise out of Mr T’s report that was filed on the 1 December 2014. He says that the purpose of the report was as follows:

2. I have been engaged by the solicitors of the Respondent, Messrs Withers, to:

(a) review questions 5(c) and 10(c) of the Petitioner’s draft Second Questionnaire contained in her First Appointment bundle filed on 10 November 2014 in which a request was made for the statements of two U bank accounts, namely account #XXXXXX in the name of the Respondent and account #XXXXXX in the name of U Inc (together “U Accounts”), from March 2007 to date, save as already provided by the Respondent (I note that the Respondent has already disclosed to the Petitioner and to the Court the bank statements of the U Accounts for the period between April 2012 and July 2014);

(b) consider the Petitioner’s allegation that the Respondent has an interest in a Macau residential project namely “X” (“X Project”).

(c) review the affirmation of Mr SJA, the forensic accountant of the Petitioner, dated 19 November 2014; and provide my views on Mr A’s purported justification for the Petitioner’s requests for the U Accounts bank statements in paragraph 2(a) above, as set out in his Affirmation.

15.  He then goes on to make a number of findings based in part of information provided to him by the husband. The main difficulty is that the wife is being asked to believe Mr T’s assertions, without having sight of any of the original documents, which support what he says. This cannot be right. I agree with Mr Coleman when he said:

Now, that’s why I said Mr T has the advantage over us, because he’s said, “I’ve looked at these accounts and I can tell you that none of the money goes to Macau.”  But we should be entitled to do is say, “Okay, well, we want to check that and anyway we want to see where the money does go.”  And that is why we’ve asked these questions.

16.  With respect that must be right – notwithstanding the fact that that means that the disclosure will go back to 2007. In these particular circumstances I accept that that may be necessary.

17.  As indicated in court, it seems to me that in order for any Judge to attach any weight to a report of this nature, both sides must have access to the same information. That is not the case here.

18.  In any event I accept that the wife has made a case out in relation to the questions referred to in Part B questions 5 – 11.  

Part F

19.  This section has been overtaken by events and consequently is no longer relevant.

The order

20.  Consequently I will give leave for the wife to issue a fourth supplemental questionnaire to contain questions B 5 – 11 within the next 7 days. The husband shall provide the answers to those questions within 28 days thereafter. The wife’s summons dated the 5 May 2015 for maintenance for the children (presumably interim maintenance) has been set down for hearing on the 23 October 2015 at 2:30 pm with two hours reserved.  There shall be a further FA hearing returnable on the same date.

Costs

21.   Notwithstanding the fact that neither party has been wholly successful in their application, it seems to me that the wife has been more successful than the husband. Consequently I will exercise my discretion and make an order nisi to be made absolute in 14 days time that the husband do make a 50% contribution towards the wife’s costs of and occasioned by this discovery application, to be taxed if not agreed. There shall be certificate for all counsel involved.