Bernadette Escaler v. Noel Escaler

HCMC001057/1988

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H E A D N O T E

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(1)     Where an order as to disclosure has been made in the District Court and the party who obtained the Order complains that the other party is in breach of the same, the proper course for the complainant are steps to compel compliance rather than an application to the High Court (following the transfer of proceedings to that Court) to in effect, pile another, but similar, Order on top of the one made by the District Court Judge.

(2)     The High Court ought not (following such transfer) to order disclosure refused by a District Court Judge (before such transfer) unless there has been a material change of circumstances since such refusal, and it is appropriate in such changed circumstances to order such disclosure. In the absence of a material change of circumstances, the proper course for the party seeking disclosure is an appeal against the refusal, rather than a fresh application for the disclosure refused.

(3)     Where a business provides the family with its means of support, and is not going to be sold, a detailed inquiry into its capital worth is irrelevant and an unwarranted expense.

Per curiam: "... applications for discovery of facts and documents beyond the legitimate requirements of the particular case ... result in delay - all too often to the detriment of the wife - and tend to be very costly, not only in terms of money but also in terms of wear and tear to the emotions of the parties at a time when their emotions are already in a delicate state following the break-up of their marriage. That sort of thing serves nobody's legitimate interests, least of all those of the children who can but stand on the sidelines through it all when, in truth, they are the ones whose interests are paramount, and who are always wholly innocent."

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BETWEEN

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Coram: Bokhary, J. in Chambers

Date of hearing: May 11-12, and June 13-15, 1989

Date of delivery of judgment: June 23, 1989

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J U D G M E N T

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1. The parties were married some 20 years ago in the Philippines. They come from that country, but have been living here for some time now. Unfortunately, their marriage ran into difficulties. Such difficulties increased. Things come to a head last year; and on March 14, that year, the wife presented a petition for divorce. A few months later, in July, she amended her petition to tone it down. The amended petition then went undefended; and, in the succeeding month, a decree nisi was pronounced.

2. There has been - and remains - a large measure of bitterness. The police were summoned to the matrimonial home on one occasion. And there have been proceedings under the Domestic Violence Ordinance, Cap. 189. Whatever may turn out to be the extent to which it is necessary to sift the rights and wrongs in regard to those matters, it is certainly too soon to say where they lie. All that one can say at this stage is that the situation is a very unfortunate one - especially as there are children caught up in all this unhappiness. The bitterness which exist between the parties has not made the question of money any easier to deal with. The only saving grace has been the constructive way in which counsel - Miss Jacqueline Leong for the wife and Mr Gibert Rodway QC and Mrs Valerie Penlington for the husband - have prepared and presented the cases which they were instructed to advance on behalf of their respective clients.

3. On March 23, 1988, the wife filed a Notice of Application for Ancillary Relief. The husband's Affidavit of Means was filed on May 31, 1988. The wife raised a questionnaire on that Affidavit. That questionnaire (which I will call 'the First Questionnaire') was filed on October 6, 1988. A summons to compel the husband to answer the First Questionnaire and to produce the documents sought thereby was taken out by the wife on October 17, 1988. The summons came before His Honour Judge Chism. On October 31, 1988, he made on Order granting certain part's, and refusing other parts, of the relief sought by the summons.

4. For some reason, the order of October 31, 1988, was not filed until December 8, 1988. Moreover, it was not wholly accurate when filed. The husband's Solicitors complained of such inaccuracy. But their complaint was not accepted by the wife's Solicitors. When the matter came before me on May 11, 1989, I granted the husband an adjournment to enable him to have the question of the Order's accuracy brought before Judge Chism for clarification. He very kindly received the parties straightaway. And, in the result, he at once upheld the husband's challenge to the accuracy of the Order as drawn up. It was amended accordingly. The morning of the first day of the hearing before me was spent in clarifying the Order. Such consequences as that may have in regard to the order to be made by me as to costs may have to be gone into in due course.

5. I now revert to the sequence in which things happened. On December 22, 1988, the husband filed his answer to the First Questionnaire. I will refer to it as 'the First Answer'.

6. These proceedings were them, on March 2, 1989, transferred from the District Court to this Court. And on the very next day, March 3, 1989, the wife raised a questionnaire on the Firs Answer. I will refer to it as 'the Second Questionnaire'. Shortly thereafter, on March 16, 1989, she took out a summons to compel the husband to answer the questions raised, and produce the documents sought, by the Second Questionnaire.

7. That summons is the one now before me.

8. On May 12, 1989, at the end of the second day of the hearing before me, it was necessary - for reasons which may have to be gone into in connection with the question of costs - to adjourn the matter for some time. Before so adjourning the matter, I made an Order in respect of so much of the things sought by the Second Questionnaire as the husband was willing to provide. He preferred to have 21 days to comply. But no argument was advanced on his behalf against the wife's suggestion of 14 days. I ordered compliance within 14 days.

9. The result of my Order of May 12, 1989, is an answer - headed 'Interim Reply' - which the husband filed on the 3rd of this month, before the adjourned hearing resumed on the 13th. The wife does not accept that the Interim Reply constitutes full compliance with my order. But Miss Leong accepts that the question whether or not it does, and what should be done if it does not, is one to be gone into at a later stage rather than now.

10. Apart from those which I dealt with in the Order which I made on May 12, 1989, the things sought by the Second Questionnaire fall into three categories : first, things which (by Judge Chism of October 31, 1988) have already been granted; secondly, things which (also by that Order) have already been refused; and, thirdly, 'new' things i.e. things not asked of Judge Chism.

11. As far as the things ordered by Judge Chism but not supplied by the husband are concerned, the husband's case is that he has been unable to supply them because, despite his efforts to get them, he has not been able to do so. In the course of the resumed hearing, I raised the question whether the appropriate course for the wife to take, if she did not accept what the husband said on that score, were steps to compel compliance with Judge Chism's Order. Would not that - rather that an application to me to, in effect, to pile another, but similar, Order on top of the one which Judge Chism has already made - be the correct course? Having considered the matter, Miss Leong no longer seeks from me what Judge Chism has already granted.

12. This brings me to what Judge Chism has already refused. Of course if the wife thought that such refusal was wrong, the proper course for her to have taken was to appeal against it rather than to apply to me for what has already been refused. I raised this point; and Miss Leong accepts it. What she says is that there has been a change of circumstances which justifies my looking at the matter afresh.

13. The things which I am now asked to order despite Judge Chism's earlier refusal are : first, bank statements since January 1, 1985, of three companies, namely, Emel International Ltd, Emel Holdings Ltd and Bernel Holdings Ltd; and, secondly, details of the authorised signatories of the bank accounts since that date, January 1, 1985, of one of those companies, namely, Bernel.

14. It would be convenient if - before going any further - I were to identify the new things now sought. They are :-

(i) particulars of Emel Holdings' shareholdings, other than as a nominee for its clients, in private companies in which the husband has, or has had, a legal and beneficial interest, either directly or indirectly, since January 1, 1985;

(ii) the names of Bernel's directors since January 1, 1985;

(iii) the names of Bernel's shareholders since January 1, 1985;

(iv) particulars of Bernel's shareholdings, other than as a nominee for its clients, in private companies in which the husband has, or has had, a legal and beneficial interest, either directly or indirectly, since January 1, 1985;

(v) details of all companies; whether within or without the jurisdiction, of which the husband has, or has been, a director, either directly or indirectly, since January 1, 1985; and

(vi) details of all companies, whether within or without the jurisdiction, in which the husband has, or is had, a shareholding, either directly or indirectly, since January l, 1985.

Emel International, Emel Holdings and Bernel are private companies of which the husband is a director and in which has an interest as shareholder. Emel International is a Hong Kong company. Emel Holdings and Bernel are companies registered in Vanuata. Between them they own the whole of the 25,000 shares issued in Emel International. Bernal holds 24,999 of those shares, while Emel Holdings holds one.

15. Originally, I was asked for more by way of things which Judge Chism has refused, and by way of new things, than I have just listed. The demands contracted as the resumed hearing proceeded. Miss Leong was satisfied, looking at the Interim Reply and a fax of an Affidavit of the husband's father produced on the second last day of the hearing, that she had, by that Reply and Affidavit, got some of the 'refused' things, and some of the new things, for which she had been pressing.

16. In regard to one new item, namely, the executors' accounts in respect of the husband's mother's estate, the wife dropped her request upon an undertaking given by the husband. She did so without prejudice to her right to renew her request if the undertaking did not result in all that she feels that she should have. The husband's undertaking is two-fold. First, it is to take up the offer which his father has made to instruct his lawyers to provide details of all distributions to be made to him i.e. the husband from his mother's estate. Secondly, it is to pass such details on to the wife.

17. Miss Leong described the position in regard to Emel International as the 'key' to her application. And so, in a sense, it is. What matters as far as Emel International is concerned, says Miss Leong, is what the husband can get out of it as a going concern. That seems to me to be correct.

18. The husband is a financial consultant. That consultancy is, in effect, carried out through Emel International. The picture I get is that - whatever the position in regarding to shareholding in that company may be - the only person who is indispensable to its operations is the husband, while, at the same time, the only person who gets, or has been getting, any substantial benefit out of its success as a going concern is likewise the husband and, through him, his wife and children. Miss Leong, as I understand her, does not dispute that such is the position. What she disputes is that the position was apparent when the matter was before Judge Chism.

19. Looking at the material before him, I do not think that the overall picture before Judge Chism was materialy different from the one presented to me. In my judgment, there has been no such change of circumstances since his Order of October 31, 1988, as would enable me to grant what Judge Chism has refused without, in effect, sitting as if on appeal from his decision. This Court is not the appropriate forum for such an appeal.

20. In any event, I would not, even looking at the matter completely afresh, decide the matter any differently from the way in which Judge Chism has decided it.

21. I do not grant what he has refused.

22. My attention has been drawn to a recent decision of Mr Justice Anthony Lincoln, B. v. B (Financial Provision) [1989)l FLR 119, in which he brought his experience in this branch of the law to bear on what I regard as a serious problem, and one which - unless the Courts begin to increase their vigilance - will not only remain with us but will probably get worse. It would be convenient to set out the headnote of that case in full. It reads :-

'In divorce proceedings following 21 years of marriage it was agreed between the parties that care and control of their three children should be entrusted to the wife, but there was a dispute with regard to the wife's claim for a lump sum and periodical payments. The husband's main source of income was his architectural practice and accountants were called to give elaborate assessments, varying between 300,000 and nil, of its value. There was also considerable divergence of professional opinion as to the equity available to the husband and his business partner with regard to groups of properties in the partnership's name. In all some 50,000 was spent by the spouses to support their conflicting views of the extent and value of the husband's assets. The main capital asset of the parties over which there was no dispute was the matrimonial home, with a net value of .342,225. The husband earned a substantial income from his practice.

Held - fine-tuned assessments of the value of a spouse's business, achieved at great cost to the parties, were meaningless and irrelevant where, as in the present case, the business produced the family's income and was not to be sold. The proper approach, as enjoined by s.25 of the Matrimonial Causes Act 1973 was to balance the wife's reasonable requirements against the husband's ability to pay, after taking into account a general but not a detailed consideration of the husband's sources of income and capital and of his liquidity. On that basis the proper order for the court to make was an order :

(1) for the matrimonial home to be sold, with a lump sum of 275,000 to the wife from the proceeds and the balance to the husband;

(2) for any interest held by the wife in the properties in the partnership's name to be transferred to the husband; and

(3) for periodical payments of 10,500 p.a. to be paid to the wife and 2,600 to each of the children.'

There is a striking similarity in the facts of that case and the facts of the case before me. The matrimonial home in the present case is rather like the one in that case. More to the point, the consultancy which the husband carries on through Emel International is rather like, for present purposes, Mr B's architectural practice. Emel International is no more likely to be sold than that practice. Nor is anyone more likely to buy it without the services of the husband than Mr B's practice without his services.

23. What Mr Justice Anthony Lincoln said at pp 120H - 121G is something I would like to repeat :-

"It is now 6 years since Potter v. Potter (1983) 4 FLR 331 was decided. It contained a clear warning against attempting to reach a global figure as to the value of the husband's assets. In that case the husband was engaged in a one-man business. Dunn LJ said this at p.334E :

'This is a necessarily hypothetical exercies because the only way that it can be done is for those valuing it to assume that the business would be sold and that, of course, is the one thing which in fact is not going to happen and very rarely does happen. This case is a particularly acute example of the result of approaching these cases in this way. No fewer than four accountants were instructed to value this comparatively small business. Three of them were called to give evidence; none of them agreed as to their conclusions which were hotly contested; there was disagreement as to the proper way of arriving at a figure of goodwill for a business of this kind; there was disagreement as to the proper figure to be attributed to a notional managerial expense which, on one theory, was necessary to deduct before arriving at the goodwill : and there was disagreement as to whether or not the incidence of capital gains tax and other taxes was a proper deduction from the valuation of the business. We were told that the total costs of this inquiry amounted to some 12,000, the bulk of which - no doubt will be payable to the accountants.

At the end of the day, this exercise, namely the detailed valuation of the business, is an almost irrelevant consideration.'

I break off from my citation to emphasize the words which follow :

'In a case of this kind, the proper approach of the court should be to take the wife's reasonable requirements and balance those against the husband's ability to pay. That involves a general consideration [and I emphasize general consideration] 'of his sources of income and capital and, in particular, of his liquidity. As this court has said many times the best way to arrive at that is to rehearse the specific provisions of s.25 of the Matrimonial Causes Act 1973.'

Despite the warning litigants continue to become embroiled in titanic struggles to unearth or withhold data which are thought to advance or damage their respective causes. In the case before me a substantial proportion of 50,000 has been spent by both spouses in an utterly sterile controversy, much of it detailed, as to the extent and value of the husband's assets. Of course, s.25 of the 1973 Act enjoins the court to take into account the husband's resources; this involves a general consideration, as Dunn LJ stated, of his sources of income and capital, not a detailed one. Thus, in the present case I consider it meaningless or irrelevant to state that the architectural practice was worth nothing or worth 300,000. It is not to be sold. It produces the family's income. What is important is to establish the husband's ability to meet the wife's reasonable requirements. One useful guide in this regard is the pattern of the husband's actual expenditure over the years. I accept that the overall asset position should not be wholly disregarded but it should be given a broad and general consideration looked at against the backcloth of his broad and general standard of life."

24. On the basis of matriality or a lack thereof alone, I would-be against ordering any of the refused things - even ignoring the fact that they have already been refused, and just asking myself whether or not they should, on the merits looked at afresh, be granted.

25. Even if the request for those things were not defeated on that basis, it would, in my judgment, fail as far as documents are concerned by reference to the tests laid down in regard to discovery of company documents in matrimonial cases by Mr Justice Dunn in H v. B (Matrimonial Proceedings : Discovery) [1978] Fam.

181. Those tests are well-known. I do not consider it necessary to rehearse them.

26. Turning to the new things, one can see at once that last request must - to use Mr Justice Hunter's expression in Hsin Chong Construction v. Hong Kong and Kowloon Wharf and Godown [1986] HKLR 987 at p.990F - 'collapse under its own weight'. To her credit, Miss Leong recongnised the oppressive nature of that request even though she had no instructions to, and did not, abandon it.

27. The other new requests she did press with skill and persistence. But, in my judgment, they are not appropriate to what must, in all the circumstances, be the correct approach to the present case, which is, within reason, the broad approach.

28. Undoubtedly, the law does - as it should - allow the most searching enquiries where appropriate. The requests already ordered in the present case - by Judge Chism and by me - are searching. Sometimes it is appropriate to go farther; but not, in my judgment, in this case.

29. I do not order any of the new things either.

30. In conclusion, I would like to echo the concern voiced by Mr Justice Anthony Lincoln as to applications for discovery of facts and documents beyond the legitimate requirements of the particular case. Such applications result in delay - all too often to the detriment of the wife - and tend to be very costly, not only in terms of money but also in terms of wear and tear to the emotions of the parties at a time when their emotions are already in a delicate state following the break-up of their marriage. That sort of thing serves nobody's legitimate interests, least of all those of the children who can but stand on the sidelines through it all when, in truth, they are the ones whose interests are paramount, and who are always wholly innocent.

31. [Submissions as to costs and in regard to the undertaking]

Court : The husband will have 80% of his costs recovered on a party-and-party basis of taxation, in any event. Certificate for two counsel.

The husband has already taken up his father's offer. He undertakes to communicate any information received as a result to the wife within 10 days of receipt.

The summons for direction taken out by the husband is, by consent, adjourned sine die.

Representation:

Miss J. Leong (Hampton Winter & Glynn) for the Petitioner

Mr G. Rodway, Q.C. and Mrs V. Penlington (Haldane Midgley & Booth) for the Respondent