Mcyp v. Cwyw
Read the full judgment text of FCMC 11432/2018 on BabelCite. This Family Court judgment was delivered on 26 July 2022 before Deputy Judge R. Chow.
Matrimonial proceedings – Third-party discovery – Company documents – Confidentiality – Expert evidence – Admissibility – Necessity – Dismissal – Costs – Whether third-party discovery necessary for fair disposal – Whether confidentiality concerns justify refusal – Whether expert notes admissible under O.38 r.37C – Expert notes unsigned and lacking declaration – Application dismissed – Wife to pay costs of Companies on indemnity basis
Legal issues: Admissibility of Expert Evidence · Necessity of Third-Party Discovery · Confidentiality of Company Documents
Outcome: Wife's Re-Amended Summons dismissed.
Cites 6 cases
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FCMC 11432/2018 [2022] HKFC 147 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 11432 OF 2018 ------------------------
------------------------ Before Coram: Deputy Judge R. Chow (Paper Disposal) Dates of Submissions: 31 December 2021 and 21 January, 11 February, 21 July and 22 July 2022 Date of Decision: 26 July 2022 ---------------------------------- DECISION ( Third-Party Discovery ) ----------------------------------- INTRODUCTION 1.This is an application by the Respondent (“the Wife”) for third-party discovery by the companies that the Petitioner (“the Husband”) has interests in. 2.An expert (“the Expert”) has been appointed for the Wife for evaluation of the Husband’s assets. 3.In order for the Expert to prepare his report, the Husband was requested to disclose financial documents from 2 private companies, namely [KC] & Company Limited (“KC”) and [H] Limited (“H”) and 1 publicly listed company, [TSLD] Limited (“TSLD”) in which he holds interests (collectively “the Companies”). 4.The Husband claimed that the Companies had refused to release all such documents to him for reason of confidentiality and necessity. 5.The Wife therefore took out an application for an order for the Husband and the Companies’ production of such documents. 6.After the Husband has produced part of the documents requested, the Wife now seeks disclosure against only the Companies for the remaining requested documents. BACKGROUND 7.The Husband and the Wife were married in 1995 and they gave birth to 3 children. 8.In 2018, the Husband petitioned for divorce, a Decree Nisi was granted on 11 July 2019. The marriage lasted 23 years. 9.The Husband was born into a wealthy family, his father passed away in 1980s and substantial wealth passed on to him and his siblings. The Husband admittedly had asset worth over $370 million according to his Form E filed on 14 May 2019. 10.From the Husband’s Form E, he holds shareholdings in 18 private companies and 1 publicly listed company. 11.The Husband holds 25% of shares in KC and 26.28% of shares in H. His shareholdings in KC and H were worth $304,071,121.18 and $21,777,754.81 as at 31 March 2018. 12.The Husband is only a minority shareholder of KC and H. He is one of 13 and 12 shareholders of KC and H respectively and one of 7 and 6 directors on their respective boards. 13.In addition, the Husband holds 0.0444% shares of TSLD value of which was reported to be worth $3,475,553 in his Form E. 14.The shareholdings in KC, H and TSLD constitute the most valuable assets of the Husband. 15.The Wife considered the asset of the Husband in the Companies to be undervalued. 16.The Wife invited the Husband to consider appointing a single joint expert for an expert report on valuation of the Husband’s assets, he had no objection to the valuation by an expert appointed by the Wife but rejected the proposal of appointing a single joint expert. 17.The Husband later changed his stance and claimed that there was no need for valuation as the shares in KC and H could not be sold to third parties and value of TSLD could refer to its closing price on the stock exchange. 18.By Summons filed on 14 December 2020, the Wife applied for an appointment of the Expert for preparation of expert reports on value of the Husband’s interests in the Companies and for the Husband to provide certain documents. 19.Without objection, the Expert was appointed by the Order made on 23 December 2020 to prepare expert reports on the fair market value of the Husband’s beneficial interests (including direct and indirect shareholdings) in respect of KC, H and TSLD as at 31 December 2020. 20.On 23 December 2020, parties agreed that the Expert be appointed and valuation reports be prepared by him. The question of whether the documents requested by the Experts ought to be produced remained in dispute. 21.After the Husband had filed evidence stating that the Companies rejected his requests for financial information to be produced to him as requested by the Wife. 22.The Wife applied on 31 March 2021 to amend her Summons filed on 14 December 2020 to additionally seek third party discovery against the Companies. 23.By consent, leave was given on 26 April 2021 for the Wife’s said Summons to be amended and leave be granted for the Amended Summons to be served on the Companies. The Wife’s Summons was amended on 5 May 2021. 24.Directions were given on 23 September 2021 for the Wife’s Amended Summons to be dealt with by way of paper disposal and the Wife, the Husband and the Companies were directed to file their evidence and lodge their submissions accordingly. 25.By Consent Summons filed on 16 December 2021, leave was granted for the Wife to re-amend her Summons on 23 December 2021. The Wife’s re-amended her Summons on 24 December 2021. 26.The Husband had since the Wife’ Summons further produced documents except those objected by the Companies. 27.So far, the Husband has produced Organisation Charts of Companies as of 31 March 2021, the audited financial statements of KC and H for the year ended 31 March 2021 and annual reports of TSLD for the year ended 31 December 2020 covered by the Wife’s Re-Amended Summons. 28.Ms Yip, SC leading Ms Yu for the Wife had confirmed in their written submissions that there is no outstanding issue between the Husband and the Wife as regards the Re-Amended Summons. 29.As the matter now stands, dispute remains only between the Companies and the Wife for those documents not yet produced under the Re-Amended Summons as follows (“the Requested Documents”):
30.Despite directions allowing the Husband to lodge written submissions in respect of the Wife’s application against the Companies, the Husband has not done so. 31.The Wife relied on the 2 notes prepared by the Expert and was so advised that the estimated value of the Husband’s asset in his Form E did not truly reflect the true value of his beneficial interests in the Companies and it was highly likely that the Husband’s estimates were substantially lower than the fair market value. 32.The Wife believed that the Requested Documents were necessary to ascertain the total matrimonial pot for a fair disposal of the disputes between the Husband and herself. 33.The Companies are represented by Ms Lam, SC. It is the Companies’ case that the third party discovery are not necessary. The Companies do not argue that the discovery is not necessary, it is production of the Requested Documents that is not necessary. Further, the Requested Documents are their confidential information. LEGAL PRINCIPLES 34.Rule 3 of Matrimonial Causes Rules (Cap.179A) provides that the Rules of the High Court (Cap. 4A) shall apply to the practice and procedure in matrimonial proceedings with the necessary modifications. 35.Non-party discovery is governed by Order 24 Rules 7A and 8 of the Rules of High Court. 36.In essence, an applicant must show that 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. (O.24 r.7A(3)) 37.No order for the disclosure of documents shall be made unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs. 38.Ms Yip, SC helpfully summarised the applicable legal principles which I accept:
EXISTENCE OF TSLD DOCUMENTS 39.Ms Lam, SC made a preliminary point that the Requested Documents related to TSLD did not exist as TSLD’s financial year cut-off date was 31 December 2020 and not 31 March 2021. Hence, any such documents referable to 31 March 2021 were not in existence. 40.If the Wife were to ask for TSLD’s audited financial statements as at 31 March 2021, TSLD naturally could not produce it due to the financial year cut-off date but she is not. 41.The Requested Documents concerning TSLD that the Wife is seeking relate to breakdown of liabilities and non-current assets as well as management accounts and/or audited financial statements of TSLD’s associate companies for the last three fiscal years before 31 March 2021. 42.The Companies did not in evidence deny being in possession of the Requested Documents related to TSLD, the evidence of the Companies was that such documents were not readily available as they were all related to the specific cut-off date of 31 March 2021. 43.I agree with Ms Yip, SC that the Requested Documents related to TSLD are obviously available but just require a proper compilation. Consequently, an order could be made for the production thereof. COMPANIES’ OBJECTION TO DISCLOSE 44.Ms Lam, SC relied on B v B (Matrimonial Proceedings: Discovery) [1978] 3 WLR 624 for the law on discovery and production of company documents in ancillary relief applications and made the following points:
45.Ms Lam, SC submitted that given the objections by affirmations of the directors of the Companies, this Court should not order production of the Companies’ documents and there was no evidence that the Companies contrived with the Husband in making the objection. 46.Ms Yip, SC pointed out B v B (supra) was a case where a husband opposed to the production of company’s documents that were not in his possession, custody or power because the company refused to allow disclosure. Hence, it was a case concerning the discovery by a party but not a non-party and is therefore not applicable in the present case. 47.I agree with Ms Yip, SC. 48.Now the present application is against the Companies, the objection by the Companies of the Husband’s production of documents has become a non-issue, the test that applies now should be the usual test of existence, relevance, and necessity for third party discovery. CONFIDIENTIALITY 49.It is the Companies’ case that the discovery sought by the Wife would necessitate the divulgence of confidential and price-sensitive information privy to the Companies, the disclosure of which has potentially far-reaching and detrimental ramifications, further titles the balance against order disclosure. 50.Ms Lam, SC submitted that the court may in its discretion refuse to order the disclosure of confidential documents although confidentiality alone affords no ground for refusing production. 51.Ms Lam, SC further submitted that the concern over disclosure of confidential and price-sensitive information has particular salience as regards production sought against TSLD, not least because TSLD is a listed company which is subject to stringent rules on disclosure. Disclose of information could lead to prosecution against TSLD of insider dealing offence. 52.Ms Yip, SC replied that there was no factual basis or evidence that TSLD could be considered leaking insider information when the disclosure is made pursuant to a court order. 53.Ms Yip argued that the matrimonial proceedings are held in camera and confidential in nature and the Wife would be subject to an implied undertaking to confidentiality. In any event, the Wife has offered an express undertaking to confidentiality. 54.Ms Lam, SC argued that even if the Wife has offered to give an express undertaking as to confidentiality, there remains an unquantifiable risk that any such information, once disclosed, could leak to a non-party who is not subject to any undertaking. 55.Further, Ms Yip, SC relied on the case of Distillers Co v Times Newspapers [1975] QB 613 at 621D per Tablot J. that the protection of implied undertaking as to confidentiality and not to collateral use documents extend to “anyone into whose hands the documents may come”. 56.I accept Ms Yip, SC’s submissions. The express and/or implied undertaking by the Wife and anyone who would be in touch with the information ought to be enough to address the Companies’ concern of confidentiality. I therefore am not with the Companies on the question of confidentiality. NECESSITY 57.Ms Yip, SC submitted that both relevance and necessity of the Requested Documents should not be an issue anymore. As the appointment of the Expert has been ordered, it would not be open for the Companies as non-parties to dispute whether the Requested Documents sought by the Expert are relevant and necessary. If the outcome or process of valuation by the Expert is to be disputed, it would have to be challenged by the Husband later by evidence or otherwise. 58.Ms Yip, SC further submitted that the Companies have no standing to comment on the issue in the family proceedings. The Companies should just behave like most of the third parties who remain neutral without actively participating in disputing such application. 59.While the Companies are not parties to the matrimonial proceedings, my view is that they already have all the necessary information to resist this application. The Companies certainly have the standing to oppose this application when the application is made against them. 60.I share Ms Lam, SC’s view that the necessity of valuing the Husband’s interest in the Companies should not be conflated with the necessity of producing the Requested Documents to enable the valuation to be carried out. 61.Given the quasi-inquisitorial role of the Family Court, even though the Husband has dropped out of the picture, the evidence already put in by the Husband would still have to be considered by this Court. 62.In Global Gaming Philippines LLC v Deutsche Bank AG, Hong Kong Branch & Anor [2019] HKCFI 405, Hon Lisa Wong J stated the following:
63.In particular, I refer to paragraph 46 of Global Gaming Philippines LLC v Deutsche Bank AG. When dealing with the question of necessity, the first thing to consider is the importance of the information sought. It follows that the consideration of necessity should not confine to just the need for an application for non-party discovery but also the need for the discovery of the information requested. 64.Ms Lam, SC should be entitled to argue that production of the Requested Documents was wholly unnecessary for the fair disposal of the proceedings or saving costs. 65.Ms Lam, SC commented that Ms Yip, SC had failed to demonstrate to the Court with reference to each category of documents why there were necessary and ought to be disclosed. 66.Ms Yip, SC disagreed and argued it was for the Expert to comment on what documents were considered necessary to complete the task of valuing the Companies. The Wife already produced the notes prepared by the Expert on the documents required, she just did not repeat what the Expert had stated in submissions. 67.This application is for specific discovery, I agree with Ms Lam, SC that the Wife has to be specific about the class of documents requested and demonstrate why each category of documents is necessary. 68.For that, the Wife relies on the notes of the Expert. 69.I consider it a matter of style of submissions as to whether further elaboration based on the Expert’s comments is to be made. 70.Ms Lam, SC submitted that the Requested Documents are not necessary and relied on B v B (supra) at 633H-634A that “In many, perhaps most cases, audited accounts of companies of which the party against whom discovery is sought is a shareholder will be sufficient, together with full disclosure of that party’s personal financial records. Whilst there are cases where the court will behind company accounts and order discovery of company books and documents if it has the power within the law and the rules to do so, it is not usual for the court to take this course unless there is evidence before it from accountants or other experts that the published accounts of the company cannot be relied upon;” 71.Ms Lam, SC submitted that the audited financial statements of the Companies already disclosed to the Wife should be sufficient and the Court should be realistic with broad assessment without precise valuation. 72.As for TSLD, Ms Lam, SC argued that as a listed company, all its audited financial statements as contained in its annual reports are publicly available information, the price of TSLD’s shares that reflect the market value of TSLD is also easily ascertainable from the latest closing price of TSLD quoted on the Hong Kong Stock Exchange. 73.Further, the audited financial statements of the Companies had all been audited by independent qualified accountants who had issued unqualified opinions confirming that these statements gave a true and fair view of the financial position of KC and H in accordance with professional accounting standards and statutory requirements. 74.As a listed company, TSLD would be subject to stringent audit and accounting requirements as set out under the Listing Rules and relevant legislation. 75.There should be no reason why the Wife cannot rely on the audited financial statements of the Companies for valuation of the Husband’s interest in the Companies. 76.Further, KC and H are closely-held private companies with significant restrictions on transferability. There should be no ready market for the sale of the shares in KC and H and shares could not be transferred to outsiders. Accordingly, their marketability of their respective shares would be restricted and minute valuation exercises would be academic and costs-wasting. A broad-brush approach should best accord with the O.1A underlying objectives and the broad justice of the case. 77.Given the extremely small direct shareholding by the Husband of TSDL, a complex valuation exercise of the market value of TSLD would be disproportionate and antithetical to the underlying objectives under O.1A. The far more obvious and commercial realistic conclusion is that his shareholding value must be referable to the latest closing price, a figure which is readily obtainable in public. 78.Further, the fair market value of the Companies could be straightforwardly assessed or approximated on the basis of their net asset value as reflected in the Companies’ audited financial statements already provided. 79.Ms Lam’s arguments are essentially in line with the evidence of the Husband’s accountant who was of the view that there should be no need for valuation of the Companies. 80.Ms Yip, SC’s short answer to Ms Lam, SC’s reference to B v B (supra) is that there is evidence that from the Expert that the audited financial reports could not be relied upon. 81.The Expert and the Husband’s accountant held opposite opinions on the question of necessity for valuation. 82.It is not in dispute that there are restrictions over KC and H for the sale and transfer of shares thereof to anyone outside the Husband’s family. 83.It was the contention of the Husband’s accountant that since KC and H could not be sold to outsiders, there should be existing market for valuation purposes. 84.The Expert disagreed with the Husband’s accountant’s suggestion that there was no market for KC and H for valuation, he considered the family members of the Husband to be available market. 85.The Expert and the Husband’s accountant also had different opinions as to whether the closing price of TSLD ought to be used for valuation thereof. 86.I am of the view that this is not the time for the court to make a finding as to who is correct which is a matter ought to be dealt with at trial. Bearing that in mind, I proceed to consider the comments made by the Expert. THE EXPERT’S NOTES 87.The Expert has prepared 2 notes to comment on the fair market value of the Companies. He was instructed to answer 3 questions as follows:-
88.In answer to question A, the Expert set out 6 bases of value and concluded that fair market value should be used as a basis of value for the valuation of KC and H. 89.For question B, the Expert came to the conclusion that it is inappropriate to adopt the proposed values as stated in the Form E of the Husband for KC and H and the closing price of H on the stock exchange. 90.In the Husbands Form E, the estimated values of the Husband’s beneficial interest in the Companies are as follows:
KC 91.The Expert noted from the Husband’s Form E that the estimated value of the Husband’s shareholding or beneficial interest in KC of HK$304,071,121.18 was calculated by multiplying the net assets value as at 31 March 2018 of HK$1,216,284,484 as stated in KC’s Audited Financial Statement ended 31 March 2018 (“KC AFS 2018”) 92.The Expert gave reasons for not adopting the estimated value. (i) Company Level NAV 93.The company level net asset value (“NAV”) only included the financial position of KC at the company level, it had not consolidated the financial positions of all subsidiary and associate companies of KC. The company level NAV does not reflect the fair market value of all subsidiaries of KC and its investments in associates. 94.However, the Expert was able calculate the consolidated NAV of KC as at 31 March 2018 as HK$1,286,991,908, which was HK$70,707,424 greater than the company level NAV without the need of further documents. 95.For this, it is apparent that the Expert does not need any of the Requested Documents to make the valuation. 96.However, by the Expert’s review of KC AFS 2018, the following items of asset were considered not reported at their fair value:
97.The Property, plant and equipment, leasehold land and overseas freehold land were recorded at costs, ie. historical value only. 98.As for the investment of KC in its associates, TSLD, [CC] (“CC”) and [TSB] (“TSB”) was, the Expert considered the values of TSLD, CC and TSB so reported in KC’s AFS 2018 did not reflect their fair market value stated at costs less impairment losses. 99.In particular, TSB holds a licence for banking business, it is a valuable asset of TSB. 100.In respect of investment properties, although KC’s AFS 2018 claimed that they were measured at their fair value, the revaluation was assessed by the directors of KC instead of independent property valuer. 101.These assets represented 97% of KC’s total assets, the company level NAV did not reflect the fair market value of all issued shares in KC. 102.In my view, the Expert has demonstrated why he considered that the non-current assets of KC have to be assessed. (ii) Assets held by the estate of the Husband’s Father on trust for KC 103.The Expert noted that the Will of the Husband’s father that the estate included shares in private companies, lands and motor vehicles held on trust for KC, it is not known if the said assets were still held in the estate on trust for KC and whether the said assets held on trust for KC are not accounted for in KC AFS 2018. 104.In my view, the Expert has not demonstrated that the information in the AFS 2018 was wrong or could not be relied upon. There is not enough material for the Expert to assume that KC AFS 2018 was wrong or could not be relied upon. (iii) The Husband’s shareholding as stated in Form E 105.It is stated in Form E that the Husband’s shareholding in KC is 25%. However, the said percentage only took into account the total 240,000,000,000 issued A shares and has not taken into account of the 10,000 issued B shares in KC; and has not taken into account of the Husband’s indirect interest in KC through his shareholding interest in H, which directly held 3,500,000 A shares in KC representing approximately 1.458% of issued shares in KC and his interest in the Husband’s father’s estate which held 12,280,000 A shares and 5,000 B shares in KC representing approximately 5.116% of issued shares in KC. 106.Accordingly, the Expert was of the view that the Husband’s estimate of the value of his interest in KC in the amount of HK$304,047,121.18 is incorrect. 107.However, I do not consider that there are further documents required because the Expert apparent have all the information required to work out the Husband’s interest in KC. 108.While the husband’s beneficial interest in KC can be more than what he stated in the Form E, I could understand why the Husband merely stated the direct shareholding that he held instead of all the direct and indirect interest in KC. 109.In filling out the Form E, the Husband was required to put a value to the all his shareholdings in all the companies that he had interests in including 18 private companies. If the Husband were to state all his direct and indirect interests in each of the companies, since he held the indirect interests through other companies, it could cause confusion or difficulties in filling out the estimated value of each company and the aggregate value. 110.For example, in this case, the Husband holds KC directly and indirectly through H. Estimated value of H supposedly already included that value of its shares in KC, if the Husband has to put a value to reflect all his shares held in KC both directly and indirectly, the stated estimated value of KC might overlap between the entry of KC and H. 111.In the present case, the Expert is clear how much interest the Husband is holding in each company from the information already disclosed, that is in my view enough. H 112.The Expert noted that the Form E that the estimated value of the Husband’s shareholding or beneficial interest in H in the sum of HK$21,777,754.81 was calculated by multiplying the net assets value of H as at 31 March 2018 of Hk$82,868,169 by 26.28% being the percentage of 63,080 A shares in H directly held by the Husband out of the total 240,000 issued A shares in H. The Expert considered that it is wrong for the Husband to adopt the said proposed valuation due the following reasons: (i) H NAV 113.In H’s Audited Financial Statement ended 31 March 2018 (“H AFS 2018”). The available-for-sale financial assets in the sum of HK$117,772,138 were major assets of H which was stated at fair value in H AFS 2018 which included both listed securities in the sum of HK$108,650,538 and unlisted securities in the sum of HK$9,071,600. Based on the information currently available to the Expert, the details of the said unlisted shares held by H are unknown. 114.It is stated in H AFS 2018 that the available-for-sale financial assets of H in the sum of HK$117,722,138, HK$108,650,538 of which was stated as fair value which was measured was defined for financial/accounting report purposes only and such measurement of value may not be suitable and appropriate for valuation purposes, the remaining HK$9,071,600 was recognized at cost less impairment losses. 115.I accept that the Expert has demonstrated why he considered the value of the financial assets could be wrong or could not be relied upon. 116.The Expert was further uncertain if the said financial assets included the value of investment of H in the following companies: 117.KC of which H directly holds 3,500,000 A shares representing appropriately 1.458% of shareholding interest in KC. 118.TSLD of which H holds approximately 6.021% of shareholding interest in TSLD. 119.However, such alleged uncertainty is not enough for the Expert to say that information in the H AFS 2018 was wrong or could not be relied upon. (ii) The Husband’s shareholding as stated in Form E 120.It is stated in Form E that the shareholding in H is 26.23%, the said percentage does not take into account of the Husband’s indirect beneficial interest in H through his shareholding interest in KC, which holds 2,700 A shares representing approximately 1.125% in H. 121.I repeat my view in the case of KC. No further disclosure of documents would be required for this. TSLD 122.The Expert noted that the estimated value of the Husband’s shareholding or beneficial interest in TSLD of HK$3,475,553 was calculated by multiplying the net assets value of TSLD as at 31 December 2018 in the sum of HK$7,827,821,274 (TSLD NAV) per its annual report ended 31 December 2018 by 0.0444%, being the percentage of 127,741 shares in TSLD directly held by the Husband out of the total 287,669,676 issued shares in TSLD. 123.The Husband suggested that his interest in TSLD in respect of his 0.044% held in his personal name can be valued by the stock price on the Hong Kong Stock Exchange. Their value amounted to HK$535,234.79 as at 27 July 2020. 124.The Expert did not agree to use its closing price on the stock exchange and gave his explanation. (i) TSLD NAV and Share Price Very low PE 125.According to Bloomberg, the average daily PE ratio of TSLD for the last 12, 24 and 36 months ended on 11 November 2020 were 6.03, 4.99 and 4.28 which were much lower than the 135 comparable companies listed in Hong Kong that had the average PE ratio of 18.66, 18.56 and 17.811 respectively for the last 12, 24 and 36 months. Substantial Discount to NAV 126.As at 31 December 2018, the share price of TSLD was HK$4.55 having a substantial discount of the share price to the net assets value per TSLD share at approximately 84% on 31 December 2018. The net assets value per TSLD share as at 31 December 2013 to 31 December 2017 were between HK$3.80 and HK$5.31 representing discounts ranged from 79% to 84% to net assets value per share of TSLD. Thin Trading Volume 127.The historical trading volume of TSLD was thin throughout the period from November 2015 to October 2020. The average daily trading volume to the total number of issued TSLD shares ranged from 0.0036% to 0.0247% during the period from January to September 2020, the substantial discount of the share prices to the net assets value per share of TSLD may have caused by the thin trading volume of TSLD shares. 128.Given majority of the shareholding interest of TSLD was tightly held by an individual and/or his related parties, the Expert claimed it was possible that the share price could be easily affected by a small change of the forces of demand and/or supply of the shares of TSLD. This factor should be considered in analyzing the share price of TSLD. Goodwill 129.The share price of TSLD may not reflect and/or include the value of the goodwill including the listing status of TSLD. 130.The Expert considered that the share price of TSLD might not necessarily reflect the fair market value of TSLD shares. 131.However, the factors mentioned by the Expert are public information that ought to have been taken into account of by the investors in the stock market. 132.From what the Expert said, there is nothing to suggest that the information contained in TSLD’s annual report was wrong or could not be relied upon. 133.The Expert may still make adjustment to the value based on either the NAV in the audited financial statement of TSLD or stock price but my view is that the Expert has failed to demonstrate why the information in TSLD’s annual report was wrong or could not be relied upon. There is therefore no need for disclosure of further documents for valuation. (ii) Assets held by the estate of the Husband’s father on trust for TSLD 134.The Expert noted that the will of the Husband’s father that the estate included shares in private companies held on trust for TSLD. It was stated in the Report of the Directors in the annual report of TSLD for the years ended in 31 December 2018 and 2019 that certain directors of TSLD held non-beneficial interests in subsidiaries of TSLD in trust to the absolute benefit of TSLD without stating any detail. 135.In my view that is no enough to suggest that the information in the audited financial statements and annual reports of the TSLD to be wrong or could not be relied upon. 136.In any event, the value of the total equity of TSLD was over $10 billion as shown in its audited financial statement ended 21 December 2018, I am not convinced that my discretion should be exercised in favour of a complex valuation of TSLD when both the audited financial statement and stock price are available which is disproportionate to the underlying objectives under O.1A. 137.In light of the foregoing, the Expert has in my view only demonstrated why further information would be required for the valuation of the non-current assets of KC and H. It follows that only documents relating thereto in principle should be considered to be allowed. 138.However, for the following reasons, I will reject all claims by the Wife for discovery by the Companies. ADMISSIBILITY OF EXPERT’S EVIDENCE 139.Under O.38 r. 37C of the Rules of High Court (Cap 4A), an expert report disclosed under these rules is not admissible in evidence unless the report contains a declaration by the expert witness that—
140.The Expert did not prepare any affidavit for this application. Only the first note of the Expert referred to the declaration as to code of conduct and then it was stated that “If so required, I am willing to produce the above content in a form of an expert report pursuant to O.38 rr.35, 37B and 37C of the Rules of the High Court (Cap.4 sub leg A) and verify it by a statement of truth in accordance with Order 41A of the Rules of High Court (Cap. 4 sub leg A)”. 141.Both notes of the Expert remain unsigned. 142.It is true that the Expert expressly stated in his notes that it was not his expert opinion on the value of the Companies. 143.However, the Expert was asked to address on why the proposed valuation figures by the Husband were appropriate. The Expert did so expressing his opinions in a way that not a layman could. In my view, that qualified as expert opinion. 144.When Ms Lam referred to B v B (supra) to say that the audited reports of the Companies could be relied on. Ms Yip’s answer was that the audited reports could be challenged when there was evidence from an accountant or an expert, and the Expert did give the evidence. 145.While neither the Husband nor the Companies have raised this point, I do not consider it right for me to ignore it by reason of the quasi-inquisitorial role of the Family Court. I find the evidence of the Expert to be inadmissible. 146.The Wife’s case is founded upon the opinion given by the Expert, now that his evidence is inadmissible, the Wife must fail to demonstrate why the documents are necessary for disposing of the cause or the matter or for saving costs. 147.In light of the foregoing, I dismiss the Wife’s Re-Amended Summons. 148.For the sake of completeness, I shall mention paragraph 6 of the Re-Amended Summons that the Husband is asked to initially bear the fees of the Expert until determination of the ancillary relief. 149.It was not argued by either the Husband and the Wife. 150.In Ms Yip, SC’s written submissions, it was said that there is no issue left between the Husband and the Wife, it is taken that the relief in paragraph 6 of the Re-Amended Summons has been abandoned. COSTS 151.Given the results of the Wife’s application, I see no reason why the Wife should not bear costs of the Companies on an indemnity basis as it usually should be. Irrespective of the results, I accept that the Companies were entitled to protect their interest in relation to their documents and have acted reasonably in defending the Wife’s application. 152.As between the Wife and the Husband, my view is that the fair order should be no order as to costs. ORDERS 153.I hereby make the following orders that:
Withers, Solicitors, for the Petitioner (Husband) Ms Anita Yip, SC and Ms Lily Yu instructed by Chaine, Chow & Barbara Hung, Solicitors, for the Respondent (Wife) Ms Rachel Lam, SC instructed by Deacons, Solicitors, for the Third Party (Companies) | ||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under FCMC 11432/2018