Cls v. Lpkp

FCMC 17127 /2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 17127 OF 2014

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DECISION
(Discovery)

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The discovery application  

1.On 22 August 2016, the petitioner (“wife”) took out her amended summons for discovery of various items of financial or financial-related documents from the respondent (“husband”). Upon filing and service of their respective affirmations in support/in opposition/in reply (as the case may be) by 7 November 2016, the parties entered into a consent summons which was made into a consent order dated 9 December 2016, whereby the husband agreed to provide to the wife most of the documents that she asked for (“Consent Order”).

2.On the direction of this court, the parties have lodged a joint letter dated 13 December 2016 setting out all outstanding items of discovery to be dealt with in the argument hearing of 23 December 2016. They can be briefly divided into 3 main categories:

(1) Q1(i) and (iv) : the husband’s HSBC premier account and ICBC (China) account;

(2) Q1 (vi) and (vii) – (ix) : the schedule of assets attached to the probate of grant of the estate of the husband’s late father (“Father”), and information/documents relating to 2 stocks accounts, namely the SHK Account and the Merrill Lynch Account, registered in the name of the Father but the wife says that they are trust accounts held by the Father on trust for the husband;

(3) Q1(x) : the documents that the wife had obtained, allegedly through the son of the parties when he logged onto the husband’s computer, but were returned to the husband via his solicitors on 14 April 2014 (“Returned Documents”).

3.By his written and oral submission, Mr Jeremy Chan, counsel for the wife, now confirms that she would not pursue those documents under aforesaid Q1 (vi) and (vii) – (ix) against the husband, but would pursue the same against the estate of the Father,[1] as the said estate has just been joined, pursuant to my order made on 16 December 2016, for the trial on the preliminary issue of the beneficial ownership of the SHK Account and Merrill Lynch Account.

4.Despite her initial argument that the wife obtained the Returned Documents illegally and thus her 8^th affirmation should be struck out (See: Imerman v Tcheguiz & Others (CA) [2011] Fam 116), Ms Lily Yu, counsel for the husband, has agreed towards the end of the argument hearing that the husband would answer/explain Q1(iv) and (x) by way of an affirmation.  But in passing, she seeks leave that the husband be allowed to reply to the wife’s allegation on 5 audio clippings of the husband and his feng shui master on the divorce and financial arrangement in the same affirmation, to which Mr Jeremy Chan does not raise his objection. 

The only outstanding item

5.In the premises, at the end of the argument hearing, I am only required to make a determination on the outstanding item under Q1(i) , which relate to the withdrawal entries of the husband HSBC premier account as follows:

Item No	Date	Type of account	Details	Withdrawals
6.	4/6/2015	savings	CR to 030-XXXX	HK$8,000
11.	6/8/2015	savings	CR to 817-XXXX	HK$10,800

(030-XXXX & 817-XXXX will collectively be called the “Unknown Bank Accounts”)

6.Originally, the wife seeks in her amended summons to have the documentary evidence in support of the alleged purpose and destination of these 2 withdrawals including but not limited to bank transfer slip, copies of cheques, bank confirmation letter and/or statements of receiving account if the account is under the name of the husband. But in the argument hearing, Mr Jeremy Chan tells this court that the wife is prepared to narrow down her request to the provision by the husband of:

(1) the account name/holder of the Unknown Bank Accounts;

(2) to whom these bank accounts belong.

Submission and discussion

7.The law on discovery under Order 24 rule 7, Rules of High Court is well known and needs no further elaboration. The court has to consider whether the documents sought after are relevant and necessary for fair disposal of the cause or matter or for saving costs (See: Jade’s Realm Ltd v Director of Lands, HCA1509/2012, date of judgment 9/1/2015, per Ng J at §20).

8.It is the submission of Mr Chan that the case history shows that the husband has chosen not to disclose the documents requested by the wife, until and unless he was made to do so pursuant to court orders. There is evidence that he is actively concealing or dissipating his assets. To lay the foundation of his submission, Mr Chan refers me to 2 excerpted pages (marked as “A” and “B” for easy reference) of the latest documents disclosed by the husband to the wife the day before the argument hearing, pursuant to the Consent Order.  Document A is a Net Worth Report showing a balance sheet as at 31 December 2013. It says that the total cash assets are over HK$17.7 million, while the total security assets are over HK$18 million. Document B is a summary report with breakdown of assets and liabilities as at December 2014.  It says that the total net balance is over $50 million.

9.Mr Chan asks me to take the important note that the SHK Account and the Julius Baer Account[2] are included in both Documents as the husband’s assets. This, counsel says, is indicative that the SHK Account and Julius Baer/Merrill Lynch Account were treated by the husband as his own assets pre- and post-death of the Father, and are thus trust accounts held by the Father for him.   

10.As said above, there is going to be a preliminary trial for determination of the beneficial ownership of the SHK Account and Julius Baer/Merrill Lynch Account, and as such, I am not in any position to express any firm view on the same.  However, I take note that counsel for the husband has accepted in this argument hearing that Documents A and B are the husband’s documents. I am sure that he would have a lot to say by way of explanation to these 2 Documents in the trial to come.

11.By way of another example, Mr Chan refers me to several emails between the husband and Kam (his close friend) from 14 to 16 January 2008 under the subject “Re: my account”, in which the husband gave an account number 9558-XXXX to Kam, after which money were wired into this account. This account has never been disclosed or explained by the husband.

12.With the backdrop as aforesaid, Mr Chan submits, the wife needs to know to whom the Unknown Bank Accounts belong, so that she can start the train of enquiry to see if the husband is dissipating his assets to any other third party, or hiding any further bank accounts.    

13.The husband raises his objection to this request for documents on the main ground that:

(1) the request for identities of the Unknown Bank Accounts is a new request outside the perimeter of the wife’s amended summons;

(2) the amount withdrawn is so ridiculously small that it is irrelevant, or not costs-saving for a fair disposal of the matters.

14.I do not agree with the husband that the wife’s request for the identities of the Unknown Bank Account is a new request per se.  If Q1(i) is read in its entirety and properly, one would see that the wife is requesting for the details of and supporting documents for the relevant transfer from the husband’s HSBC premier account to the Unknown Bank Accounts, which must have included the identities of the account holders of the same. In the premises, I agree with Mr Chan that the wife is merely narrowing down her request (see §6 in this written decision).

15.I am fully aware that the amount involved in the relevant transfer in Q1(i) is small. However, quantity itself is by no means a conclusive factor.  Importantly, one must not lose sight of the background facts that the husband has to accept, namely he had transferred millions of dollars to his parents and his girl friend (Madam C) at least since 2011, allegedly as gifts to them. He has provided an unexplained bank account number 9558-XXXX to his friend (Kam) where money was wired into it.  Under such circumstances, the wife is entitled to know the identities of the Unknown Bank Accounts and require the husband to confirm who is/are the owner(s) of the same.  The amount involved in the relevant transfer, though small, is irrelevant in my consideration.

Costs

16.Towards the end of the argument hearing at about 1.30 pm, I ask counsel to address me on their position on costs.  Although the suggestion of written submission on costs is mentioned at some stage, counsel for the respective parties are able to make the following submission.

17.It is Mr Chan’s submission that the wife would ask for costs be to her up to the Consent Order, for the husband has literally conceded to most of her discovery request pursuant to the Consent Order. For the costs incurred after the Consent Order, Mr Chan says that costs should follow the event with certificate granted for 1 counsel only.  He invites this court to make a costs order nisi, thus giving the liberty of either party to vary the same if needs be.

18.In the written submission prepared by Ms Anita Yip SC and Ms Yu, the husband asks for costs of those items which the wife has decided not to pursue in this hearing. Additionally in her oral submission, Ms Yu points out that although towards the end of the hearing, the husband confirms that he would agree to answer Q1(iv) and (x), this should not be taken as any concession made on his part. He is merely taking a practical approach to the wife’s request. Apart from this submission, Ms Yu says that she would leave the costs matters in the hands of this court.

19.In my view, there cannot be any argument that the husband should bear the wife’s costs up to the Consent Order. Clearly, he made his concession to disclose most of the items sought after by the wife in her amended summons in the Consent Order.

20.There are broadly speaking 7 major items left for argument after the Consent Order was made. Among these 7 items, the wife has withdrawn her pursuit for 4 of them (ie Q1(vi) – (xi)) in her counsel’s written submission.  Technically, she cannot be described as the winner of these 4 items. That said, this must be balanced with the fact that no meaningful time has been spent/wasted during the argument hearing on these 4 items. Rather, hearing time has all been spent on the remaining 3 items, of which the wife is the winner. I am not persuaded by Ms Yu’s submission that the husband is merely taking a pragmatic approach in agreeing to answer Q1(x). I take the view that the husband is effectually making concession to this request for disclosure, and that such concession is made belatedly towards the end of the hearing. 

21.Taking into account the matters aforesaid and all other the circumstances, I take a broad brush approach and order that the husband do bear 50% of the wife’s costs after the Consent Order.

Conclusion

22.Due to the matters set out above, I will allow the wife’s amended summonses to the extent as conceded by the husband and as set out above in this decision.

23.In her oral submission, Ms Yu asks me not to set a time limit for the husband to reply to Q1(iv), because he is unable to tell when ICBC (China) would provide such documents to him. With respect, I cannot accept such line of submission. It is good case management that a reasonable time frame should be fixed by this court in order to make sure that the case is advanced with due despatch.

24.I will thus make an order as follows:

(1) The husband (respondent) do file and serve an affirmation to answer/explain the following within 60 days from the date of this written decision:

(a) Q1(i) items 6 and 11;

(b) Q1(iv) with added caveat that “in the alternative, the husband do provide a confirmation letter from ICBC (China) on what of the said documents that cannot be provided to the husband, and why”;

(c) Q1(x);

(2) Liberty to the husband to respond to the wife’s allegation on the 5 audio clippings between him and the feng shui master in the same affirmation ordered in sub-paragraph (1) above (if any);

(3) There be a costs order nisi that:

(a)  the husband do bear the wife’s costs of and incidental to her amended summons up to the date and inclusive of the consent order of 9 December 2016, to be taxed if not agreed;

(b)the husband do bear 50% of the wife’s costs of and incidental to her amended summons from 10 December 2016 to be taxed if not agreed, with certificate for 1 counsel; 

(4) The costs order nisi shall be made absolute 14 days from the date of this decision.

Mr Jeremy Chan instructed by Messrs Chaine Chow & Barbara Hung for the Petitioner (wife)

Ms Lily Yu instructed by Messrs Raymond Kwong & Co for the Respondent (husband) (with Ms Anita Yip SC and Ms Lily Yu instructed for preparation of written submission and reply submission)  

[1] In opposition to discovery request for documents under category (2), the husband says that he does not have the possession, custody and power of the requested documents, because he has renounced to be one of the executors of the Father’s 2011 will. Besides, he was told by his mother (who has obtained a grant of probate to the Father’s estate in 2014) that the Merrill Lynch Account does not exist anymore as at the death of Father.

[2] It is the wife’s submission that this court should take judicial notice that the Merrill Lynch Account has become the Julius Baer Account, after Julius Baer fully acquired and absorbed Merrill Lynch’s International Wealth Management business outside the USA (and excluding USA clients).