Case Document

100%Judiciary

FCJA 3690/2017

[2019] HKFC 177

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

JOINT APPLICATION NO. 3690 OF 2017

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BETWEEN
	TYT	1^st Applicant
	and
	TLH	2^nd Applicant

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Before :

Deputy District Judge Doris To in Chambers

Date of Hearing :	22 March 2019
Date of Decision :	5 July 2019

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Decision
(Discovery)

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1.This is the hearing of the 2^nd Applicant/Wife’s (“W”) Summons dated 24 September 2018 for discovery (“the Summons”).

2.At the hearing, the scope of discovery sought by W is narrowed down to the following:

(a) the 1^st Applicant/Husband’s (“H”) bank statements since January 2014 (“Bank Statements Request”);

(b) particulars of certain bank transactions listed out in Table A annexed to the Summons, with documentary evidence in support (“Table A Request”);

(c) audited financial statements of four PRC companies since 2014 (“Audited Financial Statements Request”); and

(d) updated lists of assets owned by the four PRC companies (“Lists of Assets Request”).

W no longer sought any order in respect of the request for a list of valuable artworks.

H’s stance regarding the above requests

The Bank Statements Request

3.H by his Form E disclosed that he has or has had various accounts with Ping An Bank, but claims that he only held them on behalf of others. Nevertheless, H has produced the Ping An Bank statements from June 2017 (12 months before June 2018, the date of Form E).

4.H objects to W seeking general discovery of bank statements from January 2014 which is beyond the 12-month Form E period; and that W is not entitled to carpet searching without justification.

The Table A Request

5.The Table A Request is for particulars of some specified Ping An Bank transactions, including the destination/source/purpose of payments, with documentary evidence in support. These transactions amount to more than RMB160 million in total.

6.H said those accounts listed in Table A are held by him for his brother and are ultimately controlled by his brother. His brother assigned the operations of those accounts to some accounting staff whose identities are unknown to H; and his brother refused to provide further information.

7.In short, H is saying that he is unable to provide those information; and he has already provided full particulars on what he has knowledge of.

The Audited Financial Statements Request and the Lists of Assets Request

8.W asked for audited financial statements of four PRC companies with start date from 2014. She also asked for updated lists of assets which are necessary for assessing the values of the companies.

9.H said he does not own the said PRC companies and none of them are registered under H’s name. He disputed W’s allegation that these companies are held on H’s behalf by his nominees.

10.In short, H is saying that he is unable to produce documents which do not belong to him; and he has already provided full particulars on what he has knowledge of.

Relevant Legal Principles

11.O 24 r 7 of RHC is applicable to matrimonial proceedings for discovery by virtue of Rule 3 of the Matrimonial Causes Rules (Cap 179A). The party seeking discovery must establish a prima facie case that

(a)     the specified document or class of documents exists;

(b)     the party against whom the order is sought has or had the documents in his possession custody or control;

(c)     the specified document or class of documents relates to a matter in question; and

(d)     the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.

12.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. Following the CJR, the increasing emphasis is for the court to limit discovery in the context of its duty actively to manage the case.

See : HSBC Private Bank (Suisse) SA v Mission Bridge Ltd (unreported HCA 406/2008 on 18 June 2012)

Discussion

The Bank Statements Request

13.The Petition was issued in 2017; W seeks financial disclosure as from 2014. She relies mainly on the following grounds :

(i)     In recognition that W is entitled to apply for setting aside any dispositions pursuant to section 17 of MPPO with a 3-year presumption in her favor, she should have 3 years’ worth of financial documents to see whether there is any possible application.

(ii)     Amongst the financial disclosure already made by H, there are huge unexplained transactions involving substantial sums all of which took place during the parties’ separation. This is a long marriage of 40 years; parties have separated for more than 7 years by the time the Petition was filed.

(iii)     While H seeks to uphold a divorce agreement dated 3 August 2017 that he would pay W RMB 100 million, H’s financial disclosure does not show anything near such figure. The irresistible inference is that H has hidden assets and the scale of non-disclosure is massive.

(iv)     In light of the size of the matrimonial pot and the substantial transactions involved, to allow a 3-year period of discovery is not disproportionate to the issue in question.

14.(a) I reject ground (i) without hesitation.

(b)     The statutory 3-year presumption under Section 17 MPPO does not justify any extension of general discovery period. An extension to enable W to search for any possible Section 17 application is akin to approving a fishing expedition, hence wrong in principle. If there is any force in this argument, a 3-year period of general discovery shall apply to all cases, and the 12-month statutory requirement for financial disclosure would fall apart.

(c)     W has in her affirmation set out some suspected dissipations of matrimonial assets by H, such as incorporating new companies to take over the family businesses and/or companies, and transferring matrimonial assets to his son for setting up business in Thailand etc. However, suspicion is insufficient; it does not justify an extension of general discovery period.

(d)     W makes reference to CLS v LPKP [2018] 1 HKLRD 786 where disclosure of 3 years’ worth of financial documents is ordered. However, it is to be noted that the Judge has not ordered such discovery in recognition of the statutory 3-year presumption; she has only approved parties’ consent to the extension.

15.(a) On grounds (ii) and (iii), if there are unexplained transactions or untenable position amongst the financial disclosure already made by H, W should follow up by questionnaires to request for information, clarification as well as production of documents. In appropriate cases, specific discovery may be ordered. It is unjustified to have general discovery to give W an opportunity to hunt around the documents in the hope that they will reveal some improprieties on H’s part or will provide information for them to pursue more enquiries.

See : Re the Estate of Ng Chan Wah, unrep, HCAP5/2003, 5 March 2003

(b) I note that W has spared no effort in analyzing the evidence in detail with an attempt to demonstrate how incredible H is, how probable he has hidden assets and how unsatisfactory his financial disclosure is. However, the Court shall not in an interlocutory application for discovery conduct forensic examination of evidence.

16.(a) On ground (iv), W submitted that the mutual 12-month Form E period is just a starting point. In light of the size of the matrimonial pot and the substantial transactions involved, to allow 3 years is not disproportionate to the issue in question. W also submitted that there is no unfairness since the same extended period of discovery should apply both ways.

(b) Firstly, I disagree that any extended period of discovery has to apply both ways. There is no need for a “tit for tat” equivalent; parties’ respective scope of discovery depends on relevance and necessity which are assessed in the circumstances of the case.

(c) Secondly, even extending the discovery period to 3 years is not disproportionate in the context of the case, the test is whether it is necessary either for disposing fairly of the cause or matter or for saving costs. I do not think W has established this.

17.By reason of the aforesaid, I disallow the Bank Statements Request.

The Table A Request

18.W said it is no answer to resist discovery by simply saying that the account belongs to third parties beneficially. She relied on Fisher Meredith v JH [2012] 2 FCR 241 regarding the law of ownership presumption :-

“[42] In my judgment there is a clear distinction to be drawn between the state of affairs where a claimant is saying that a property held in the name of a third party is the property of the respondent; and the situation (as here) where the respondent says that property to which he has legal title is beneficially owned by a third party.

[43] In the former case I strongly indorse my discipline. In such a case there is a clear obligation on the claimant to apply to join the third party at an early stage and to seek to invoke the discipline in TL v ML. Only in this way can the pool of assets over which the dispositive powers of the court ranges be established and an effective FDR take place.

[44] In the latter situation which is the case here the duties re by no means so clear cut. If an asset is (say) in the name of the respondent husband then in my judgement the starting point or prima facie position, is that it belongs to him both legally and beneficially. In my judgment this cannot be seriously disputed in the light of Stack v Dowden [2007] UKHL 17, [2007] 2 FCR 280, [2007] 2 All ER 929 where Baroness Hale of Richmond stated :

‘[56] Just as the starting point where there is sole legal ownership is sole beneficial ownership the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership, it is upon the joint owner who claims to have other than a joint beneficial interest.’ ＂

19.I do not think the law of ownership presumption can assist W at the interlocutory discovery stage. Discovery should not be ordered base on a prima facie position that H owns the accounts legally and beneficially. It has to be demonstrated that H has or had the documents specified (documents in support of the Table A Ping An Bank transactions) in his possession custody or control.

20.W submitted that she is at least entitled to have H filing an affidavit in accordance with O 24 r 7. H said he has already in his affidavit given explanation of why he cannot provide the information sought, and that is conclusive for the purpose of discovery.

21.An affidavit of H explaining the nominee arrangement in favor of his brother and why H cannot provide the information sought is different from an O 24 r 7 affidavit. The latter is an affidavit to state whether the document specified is, or has at any time been, in his possession, custody or power, and if not then in his possession, custody or power, when he parted with it and what has been of it.

22.If the documents in support of the bank transactions can be specified, I agree that W is entitled to an O 24 r 7 affidavit of H. However, unless and until the bank transactions are particularized, there cannot be any identifiable supporting documents.

23.By reason of the aforesaid, the Table A Request is disallowed.

The Audited Financial Statements Request and the List of Assets Request

24.While none of the PRC companies are registered under H’s name, W alleged that these companies are held on H’s behalf by his nominees. To substantiate her allegation, W has made every effort to identify H’s involvement with the companies’ accounts. However, unless there is a factual finding that H held these companies via nominee arrangements, it remains that H is not privy to these documents.

25.When legal ownership is vested in third party and W disputes his/her beneficial ownership, there is a clear obligation on W to apply to join the third party at an early stage and to seek to invoke the discipline in TL v ML. In those chancery proceedings, discovery will automatically follow.

26.While the court cannot compel H to disclose documents which he is not privy to, W asked for an order that H do use his best endeavors to make disclosure. Firstly, there is no legal basis to make such order when W has failed to establish possession, custody and control. Secondly, H has deposed that he has already disclosed to the best of his knowledge.

27.Therefore, I disallow both the Audited Financial Statements Request and the Lists of Assets Request.

Order

28.The 2^nd Applicant’s Summons dated 24 September 2018 is dismissed.

29.There be a cost order nisi that the 2^nd Applicant do pay the 1^stApplicant’s costs of this application in any event, with certificate for two counsel, to be taxed if not agreed.

30.Unless there is an application within 14 days to vary, the nisi order shall become absolute.