Tsc v. Lyk

FCMC 2359 /2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2359 OF 2013

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DECISION

(Inspection of company’s books of accounts)

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Introduction

1.By her summons dated 9 May 2013 (“1^st Summons”), the petitioner (wife) applies for an order to allow her to appoint an accountant and to enter into the office of 3 companies, namely (i) HY Logistics Ltd; (ii) HY Enterprises Ltd; and (iii) FC Ltd (collectively “3 Major Companies”) for the purpose of carrying out an inspection and taking copies of their books of accounts and underlying records set out more particularly in the Schedule 1 attached hereto.

2.On 29 July 2013, the wife takes out another summons dated 29 July 2013 (“2^nd Summons”) whereby she extends her request for inspection to the books of accounts and the underlying records of 11 other companies.

3.There is no objection from the respondent (husband) that both summonses be dealt with and argued in the same hearing.

4.The period of documents sought is from 1 April 2011 up to date. They primarily cover the underlying records necessary for the preparation of the 2011-2012 audited financial statements of the 14 companies.

5.These 14 companies are part of a web of family companies which businesses are mainly provision of logistic services in China and Hong Kong. They are owned by the husband solely or jointly with the wife. The wife is an equal director with the husband, as she was in charge of the accounts and management of the family companies until at least February 2012 when the parties separated.

6.The 3 Major Companies account for the lion share in the family businesses and income. Their businesses are structured in such a way so that HY Enterprises Ltd and HY Logistics Ltd are the major clients of FC Ltd. Details of the division of work among the family companies is set out in the wife’s 1^st affirmation at §31 (p293-294/bundle P1).

7.It is necessary to point out at this early stage that although the wife purports to seek, inter alias, leave to appoint an accountant to carry out the inspection, it has become apparent from the submission of Ms Anita Yip, counsel for the wife, that what the wife essentially wants at this stage is an order for inspection of the underlying/primary records of the 14 companies. Ms Yip confirms during the hearing that if an order for inspection is allowed and the wife finds abnormality in the accounts or records of the companies, she would take out necessary application for expert directions for valuation of the companies.

8.In the premises, I would, in this decision, treat the wife’s application as one for inspection only. I would, however, urge both parties to take careful note of the new CJR rules of Order 38 rule 4A (evidence on single joint expert) and Order 38 Part IV (expert evidence) of the Rules of High Court (“RHC”), both of which are applicable to matrimonial proceedings (See PD 15.12 at part G).    

The issues

9.The wife makes it clear in her affidavit evidence and the written submission of her counsel that her application is premised on 2 limbs:

(i)   section 121, Companies Ordinance (“Ordinance”) and the common law in that the wife, as the director of these family companies, is entitled to inspect the books of accounts as of right; and/or

(ii)   Order 24 rule 13 of the RHC.

10.At the outset of his oral submission, Mr Robert Pang SC for the husband confirms that the husband is now agreeable to provide copies (but not inspection at office) of the profit and loss accounts, balance sheets, general ledgers and bank statements of all 14 family companies within 28 days. The husband would, however, object to let the wife inspect the rest of the underlying documents on the major grounds of wrong forum, lack of necessity and ulterior intent on the part of the wife.  

11.In the premises, the major issues that require my determination are:

(i)   whether the Family court has the jurisdiction to grant the wife’s right (as a director) to inspect the companies’ books of accounts under common law and/or pursuant to section 121 of the Ordinance;

(ii)   If no, whether discretion should be exercised in favour of the wife to allow her to inspect the books of accounts and underlying records pursuant to Order 24 rule 13 of the RHC.  

The marriage and relevant background

12.The husband is now 55. The wife is now 40. They got married in March 2003. They have 3 children (2 daughters and 1 son) born in their wedlock, now aged 9, 8 and 7 respectively.

13.After they first met in 2002, the wife joined and was made in charge of the accounts department of FC Ltd. Gradually, she took over the management and accounts of the other family companies. The husband, on the other hand, focused on business development.

14.The family companies did very well in business between 2006 and 2009 so that the parties were able to acquire substantial assets, including landed properties.  Subject to valuation, it is quite fair to say that the total family assets are likely to worth over $100 million.

15.However, since about 2009 when the husband started to spend more time at the office and get more involved in the management and sales of the family companies, argument between the couple began more frequent.  

16.On the other hand, the wife, in order to spend more time with the children (then aged 6, 5 and 3), gradually reduced her working hours in the office from the end of 2009 onwards. But she still continued to be in charge of the accounts of the family companies and signed all the office cheques up to February 2012.

17.The husband moved out of the matrimonial home on 17 February 2012 and sadly the parties separated since then.

18.In October 2012, the wife filed a petition to divorce the husband by relying on the fact of “unreasonable behaviour”. By the consent of the parties, a fresh petition on “1 year separation” was filed by the wife (this suit). Decree Nisi was granted on 17 June 2013.

19.Both parties are able to agree on the children matters. An order has already been made by this court to the effect that joint custody is granted to both parties with sole care and control to the wife and reasonable access to the husband.

20.In other words, what remain unsolved are the ancillary relief matters. The parties are still at the discovery stage. FDR (financial dispute resolution) hearings are yet to be fixed.

The discovery history leading to the wife’s application

21.After the parties have separated, the husband sent out the audited accounts for 2010-2011 of some of the family companies to the wife on 28 August 2012 for her signature. The wife did not accede to the request for want of books of accounts to verify the accuracy of the audited accounts.

22.Later, Form E of respective parties was filed on 9 January 2013. To the surprise of the wife, the husband gave a different version of 2010-2011 audited accounts of at least 2 family companies in his Form E (p305-309/bundle P1). Of most concern to the wife, I would say, is the inconsistent audited accounts of FC Ltd (ie one of the 3 Major Companies) as follows:

FC Ltd	8/2012 Version	1/2013 Version
Operating expenses	($68,240,187)	($66,244,651)
Profit for the year	$2,745,077	$4,740,613
Due from director from [the wife]	NIL	$  960,049

23.By her solicitors’ letter of 8 February 2013, the wife requested the husband to provide copies of general ledgers, management accounts and outstanding audited accounts of the family companies (p12/bundle P1). She made her same request again on 26 February 2013 (p18/bundle P1) and by way of her questionnaire of 12 April 2013.

24.On 29 April 2013, the wife formally made her request to inspect the books of accounts and underlying records of the 3 Major Companies.

25.Unfortunately, the husband chose not to give any or any substantive reply to the wife’s request. As a result, the wife issued her 1^st Summons in May 2013.

26.On 17 July 2013, the husband disclosed the management accounts and audited accounts ended 31 March 2012 of the 14 family companies. Yet, it turns out that neither the auditor nor the husband have apprehended their signature in the so-called audited accounts ended 31 March 2012 of the 3 Major Companies.

The Wife’s Argument

27.In her submission, Ms Yip for the wife is very adamant in saying that the wife, as the director of the family companies, has an almost “absolute” right under section 121 of the Ordinance as well as under common law to inspect the underlying records and books of accounts of the family companies, and she is not obliged to provide a reason for the inspection. Such right cannot be interfered with and is not subject to the discretion of the court, unless it is shown with clear proof by the opposing party (ie the husband) that the wife intends to abuse the confidence in relation to the company’s affairs and injury the company in a material way.

28.Ms Yip relies on cases such as H v M [2000] 2 HKLRD 306 (CA judgment dated 19 May 2000), Re Boldwin Construction Co Ltd & Another [2001] 3 HKLRD 430 (CA judgment dated 7/9/2001); Ng Yee Wah v Lam Chun Wah [2012] 4 HKLRD 40 (decision dated 28/6/2005); Re Alvarez & Marsal Asia Ltd [2009] 4 HKLRD 727 (CA judgment dated 24/3/2009). In particular, Ms Yip draws my attention to §29 of the decision of Kwan J (as she then was) in Ng Yee Wah (supra) which set out succinctly the relevant legal principles.

29.Ms Yip goes on to submit that the affidavit evidence of the husband and his witness (Mr Chow) is unable to provide “clear proof” that the wife has an ulterior intent of taking over FC Ltd or setting up similar business in competition with the family companies at this stage.

30.As a fall-back argument in case the “as of right” argument is not accepted by this court, Ms Yip submits that the wife has passed the threshold required under Order 24 rule 13 of the RHC. In particular, she takes me through the discrepancies in the audited financial statements of FC Ltd. She pinpoints that it is the wife’s intention to seek an order for transfer of the shares of FC Ltd to her in the ancillary relief proceedings. In order to fairly dispose of this matter, the court should be supplied with “a clear and accurate picture of the financial health of the family companies.”

The Husband’s Argument

31.It is pertinent to point out that Mr Pang SC’s written submission was lodged with this court 2 days after Ms Yip has filed hers. In his written submission, Mr Pang SC does not seem to touch on Ms Yip’s argument of a director’s “as of right” to inspect under the common law and/or section 121 of the Ordinance.

32.This prompts me to ascertain from Mr Pang SC in the hearing if the husband is conceding on this point. Rather vague in reply (without disrespect), Mr Pang SC at first concedes that the Family Court is not precluded from considering section 121 of the Ordinance, but later adds that the wife should have exercised her right as a director to inspect company’s documents in the Companies Court only with the relevant company/companies joining as a party to the proceedings.

33.Mr Pang SC then goes on to submit that even if the Family Court is not precluded from considering section 121 of the Ordinance, I should take into account of (i) the wife’s meeting with other operators of the logistics industry (including the husband’s witness, Mr Chau) in May 2013; (ii) her express indication that she would like to take over FC Ltd or to engage in logistics business on her own; and (iii) the documents requested in respect of the 3 Major Companies are more extensive and specific than those relating to the rest of the 11 family companies. All these, Mr Pang SC says, constitute a clear pointer that the wife’s request is not made for the purpose of carrying out her duties as a director, but for the improper purpose such as in preparation of carrying on businesses in competition with one or more of these family companies (See: Oxford Legal Group Ltd v Sibbasbridge Services Ltd [2008] Bus LR 1244).

34.Further, Mr Pang SC argues that disclosure of these documents at this interlocutory stage is pre-mature, over extensive and unnecessary. The wife should have referred to the audited accounts disclosed so far and raised her requisitions in a more focused manner by way of questionnaires. 

“Absolute” right of a director to inspect in the Family Court

35.Having heard and considered the submission made by counsel for respective parties, I think that the primary underlying issue here is whether the Family Court has the jurisdiction to grant the wife such “absolute” right to inspect under the common law and/or section 121 of the Ordinance. If so, according to the established legal principles, I do not have the discretion to interfere with or disallow such right of the wife, subject to any ulterior intent that can be proven by the husband.

36.Ms Yip submits that the wording of section 121 of the Ordinance poses no restriction that the section must be within the exclusive jurisdiction of the Companies Court. Further or in the alternatively, the Family Court can recognise and enforce the director’s right of the wife under the common law. She says that in matrimonial proceedings, the Family Court has very wide power and, very often, may exercise the power enjoyed by the Court of First Instance.

37.To begin with, I reiterate what I have pointed to Ms Yip in this hearing. Section 2 of the Ordinance defines “Court” in the Ordinance to mean “the Court of the First Instance”; Family Court is not included in the definition section. In my view, it is quite clear that only the Court of First Instance can give an order under section 121 of the Ordinance.

38.Support is lent to my above proposition from Ng Yee Wah (supra) and Re Boldwin (supra), both quoted by Ms Yip herself. Though set in a matrimonial background, the application for inspection of company’s books of accounts under section 121 of the Ordinance in both cases was made to the Court of the First Instance. In Ng Yee Wah, there is a concurrent ancillary relief proceedings pending at the time when the application under section 121 of the Ordinance was made.

39.There is, of course, the case of H v M (supra) which Ms Yip submits is the authority (being an appeal from the Family Court) to show that the Family Court have the jurisdiction to make the order sought. 

40.In H v M, the husband appealed against the decision of the Family Court ordering him to produce, inter alias, copies of all invoices, accounts, receipts and vouchers of his company. On appeal, the order was set aside by Godfrey JA (as he then was) on the basis that the requests were oppressive and unnecessary; but the husband (coincidentally represented by Ms Yip on appeal) was ordered to make the books of accounts of the company available for the wife’s inspection, because the wife in her capacity as a director of the company, was entitled to inspection under section 121 of the Ordinance. Godfrey JA (as he then was) commented that,

“The Court does not favour unnecessary technicality and formalism. To send the wife away to make a formal application against Hip Wall for that purpose (which Hip Wall would be unable to resist) would, in our view, be pointless…”

41.Ms Yip adds that being the counsel involved in H v M, she is in a position to add that the husband in that case eventually produced the company documents for the wife’s inspection in the ancillary relief proceedings, pursuant to the order of the Court of Appeal.

42.The case of H v M, in my opinion, does not come to the assistance of the wife in so far as the jurisdictional point is concerned. The comment expressed by Godfrey JA (as he then was) when he made an order for inspection is obiter only. The order so made, in my view, is the result of His Lordship’s exercise of his discretionary power.  It is a non-pointer that the production/inspection of the company documents took place subsequently within the ancillary relief proceedings in the Family Court. It is plain and clear that in this context, the Family Court just provided a venue for carrying out the order made by the Court of Appeal. It is too far-fetched to conclude that H v M is the authority to show that the Family Court per se has the jurisdiction to make an order under section 121 of the Ordinance.

43.Further, the District Court (of which the Family Court is a part) is a court created by statute, which jurisdiction is set out clearly in and thus limited by the District Court Ordinance. It exercises no inherent jurisdiction that may be comparable to the Court of First Instance.

44.In John Arthur Wright v Hampton Winter & Glynn (a firm) & Another, DCMP 3233/2007, Lok DJ (as he then was) explained the jurisdiction of the District Court at §3 of his ruling as follows (which I humbly beg to agree):

“In the case of Wong Kam Chi v Lee Tik Ying [2002] 1 HKLRD at 420, I have already made the following points about the jurisdiction of the District Court:

(i)   the District Court is a court created by statute, its jurisdiction and power are limited by the provisions in the District Court Ordinance, Cap 336, and the Court has no inherent jurisdiction to hear all kinds of claims;

(ii)   the main provisions in the District Court Ordinance which confer jurisdiction on the District Court are ss 32, 33, 35 and 37;

(iii)   ss 48(1) and 52 of the District Court Ordinance, which deal with the power of the Court to grant various relief, redress and remedy, only provide ancillary jurisdiction to the District Court to make various kinds of orders once the jurisdiction to hear a particular case has been established, and the wordings of those provisions are not to extend the primary jurisdiction of the District Court. “

45.Having perused the aforesaid sections set out by the learnt judge, I cannot find any section that would give the District Court (and thus the Family Court) the power to make an order under section 121 of the Ordinance and/or under the common law.

46.Of a peripheral point, I note that in her 2^nd affirmation dated 29 July 2013, the wife admits that she is the director of 3 Major Companies and 10 out of 11 of the other family companies; she is not a director of LS Transportation Ltd. She is thus not entitled to rely on section 121 or the common law in seeking inspection of the books of accounts of LS Transportation Ltd.  

47.To conclude this part of the discussion, I have to say that despite her eloquent submission, I am not persuaded by Ms Yip’s “as of right” argument. I am bound to conclude that the Family Court does not have the jurisdiction to grant an order for inspection pursuant to section 121 of the Ordinance and/or under the common law.

48.I would also beg to say, with the greatest respect to Mr Pang SC, that given the above analysis, his concession (that the Family Court is not precluded from considering section 121 of the Ordinance) does not seem to me to be a correct concession in law, and thus will be disregarded.  

49.In view of the above conclusion, I do not find it necessary to elaborate or make any ruling on the alleged ulterior motive of the wife, albeit both counsel have expanded much on this topic in their written submission.

50.I will now come to the 2^nd limb of the wife’s argument on Order 24 rule 13 of the RHC.

Order 24 rule 13 & other applicable legal principles

51.Order 24 rule 13(1) of RHC provides that no order for the production of any documents for inspection shall be made

“…unless the Court is of the opinion that the order is necessary either for the disposing fairly of the cause or matter or for saving costs.”

52.Also relevant for consideration is the English authority of B v B (Matrimonial Proceedings: Discovery) [1979] 1 All ER 801, to which both counsel have referred me. In B v B, Dunn J set out succinctly the law relating to discovery of documents, in particular company’s documents, in ancillary relief applications at 811c-g:

“I will conclude the part of my judgment by summarizing my conclusion as to law.

(1) A party to a suit must disclose all the documents in his possession, custody or power which are relevant to the matters in issue. The court has discretion whether or not to order him to make such disclosure, and also has discretion whether or not to order him to produce the documents for inspection by the other party or the court.

(2) The documents of a company are in the legal possession of the company. If they are or have been in the actual physical possession of a director who is a party to litigation they must be disclosed by that director, if relevant to the litigation, even though he holds them as servant or agent of the company in his capacity as an officer of the company.

(3) Whether or not documents of a company are in the power of a director who is a party to the litigation is a question of fact in each case. “Power” in this context means “the enforceable right to inspect or obtain possession or control of the document”. If the company is the alter ego of such a director so that he has unfettered control of the company’s affairs, he must disclose and produce all relevant documents in the possession of the company.

(4) Where relevant documents in the possession of a company are disclosed by a director as being in his custody or power, the court has a discretion whether or not to order production of them.

(5) The discretion is a judicial discretion, and in exercising it the court will have regard to all the circumstances. The court will balance the relevance and importance of the documents and the hardship likely to be caused to the wife by non-production against any prejudice to the husband and third parties likely to be caused by production. It has not hitherto been the practice of the court to order production of company documents to which the board of directors objects on affidavit, provided that the court is satisfied that the objection is not contrived for the purpose of frustrating the powers of the court. The court will not in exercise of its discretion order parties to do that which they have no power to do. The court will not order production unless it is satisfied that production is necessary either for disposing fairly of the issues between the parties or for saving costs.”    

53.In so far as the disclosure of company books and documents is concerned, Dunn J made the following comment at 810 c-e:

“In many, perhaps most, cases audited accounts of companies of which the husband is a shareholder will be sufficient, together with full disclosure of all the husband’s personal financial records. But there are cases when the court will go behind company accounts and order discovery of company books and documents, if it has the power within the law and within the rules to do so. It is not usual, however, for the court to take this course unless there is evidence before it from the accountants or other experts that the published accounts of the company cannot be relied on.” (my emphasis)

Possession, Custody and Control

54.During the hearing, Mr Pang SC concedes, rightly and fairly so in my view, that the documents sought after by the wife are within the control of the husband.

55.I take note that the husband alleges in his affirmation (p37-38/bundle P1) that the underlying documents are not within his possession now, because the companies do not keep such records, or the documents have been destroyed after 3 months, or are now stored in a godown in China.

56.However, I agree with Ms Yip that the above explanation offered by the husband is so against common and business sense that it cannot possibly be capable of believing. Further, in stark contradiction to what he has deposed in his affirmation that the family companies in question do not keep the profit and loss accounts, the husband has now conceded in this hearing that copies of the same can be provided to the wife; the existence of such profit and loss accounts are thus indirectly confirmed.      

57.On balance, I will conclude that the documents sought after by the wife are within the possession, custody and control of the husband.

Relevancy

58.No point is taken on the irrelevancy of the documents by Mr Pang SC in his submission. I therefore do not see it as an issue that requires any ruling.

Necessity for fairly disposal of the matter or for saving costs

59.Since the husband has conceded in this hearing that copies of profit and loss accounts, balance sheets, general ledgers and bank statements of the 14 family companies will be provided to the wife, what remains to be determined is whether inspection of the following remaining underlying documents (collectively “Contested Items”) is necessary for fairly disposal of the matter or for saving costs:

(i)   items (1) – (10) and item (13) of Schedule 1 in relation to the 3 Major Companies; and

(ii)   unspecified underlying records of the other 11 family companies.

(i) items (1) – (10) and item (13) of Schedule 1 in relation to the 3 Major Companies

60.It is pertinent to note, as I have also pointed out to Ms Yip in the hearing, that the period of inspection sought by the wife is from 1 April 2011 up to date. This covers primarily the period leading to the 2011-2012 audited accounts. Yet, all the wife can point out in her affidavits is the discrepancies in some of the 2010-2011 audited accounts; she is not able to tell this court if, and if so, why the 2011-2012 audited accounts cannot be relied on (see B v B (supra)).

61.In reply, Ms Yip submits that the wife is not able to tell if the 2011-2012 audited accounts must be wrong, because the husband has not provided such audited accounts to the wife. Here, Ms Yip must be referring to the un-signed 2011-2012 audited accounts of the 3 Major Companies.

62.Mr Pang SC is basically silent to my above observation and to Mr Yip’s above submission.

63.In my view, Ms Yip’s above submission does bear some truth and logic. It is hard to understand why the husband and the auditors have appended their signatures in the 2011-2012 audited accounts of the 11 other family companies, but not the 3 Major Companies which account for major family income.  It is also worrying to note the obvious and unexplained discrepancies of audited accounts of FC Ltd from “no debt from the wife” to “a debt of $960,049 due from the wife”. Given the quasi-inquisitorial role of the Family Court in ancillary proceedings guided by the 4 legal principles propounded by the Court of Final Appeal in its landmark case of LKD v DD (2010) 13 HKCFAR 537, I do not think that it would be fair to deny the wife’s request simply because she is unable to pinpoint why the 2011-2012 audited accounts of the 3 Major Companies cannot be relied on.

64.The authorities are clear that the wife (not the husband) bears the burden of proof in showing, by way of affidavit evidence, that inspection of the Contested Items are necessary for fairly disposal of the matter or for saving costs (See Hong Kong Civil Procedures 2013, Vol One, p568 at §24/13/1). 

65.However, in my view, the wife has not explained in her affirmation why and how inspection of each of the Contested Items is necessary for the purpose(s) required by the law. Lack of such evidence at this stage, I can only say, in a broad brush manner, that documents such as items (1) – (7) of Schedule 1 seem to cover daily operational records of the 3 Major Companies which, in my view, are too wide and petty. Moreover, from the wife’s limited explanation by way of affidavit, it seems that some of the information contained in items (1) – (7) may be part and parcel of item (8) (to be discussed below). If these items (1) – (7) are allowed, the husband would have to dig out every single invoice or debit note which is likely to be voluminous. The wife has not persuaded me by way of affidavit evidence that such documents may help to shed any direct light on the value of the family companies. The balancing exercise does not favour the wife’s request for these items.

66.As to the item (10) of Schedule 1, I agree with Mr Pang SC that the same can be gleaned from the bank statements to be made available by the husband to the wife in due course and are thus unnecessary.

67.I shall consider items (8), (9) and (13) of Schedule 1 together, as the wife has given more details in her affirmation as to their nature and/or importance (p300-301/bundle P1):

(i)   Item (8) (客戶對賬表) is a monthly statement of each customer who may be asked to make payment to the companies’ staff in China who would receive payment on behalf of the relevant companies.

(ii)   Item (9) (數簿) is a record book made contemporaneously of the daily transactions of HY Enterprises Ltd and HY Logistics Ltd and payments received in China.

(iii)   Item (13) is a monthly summary of accounts payable to and receivable from the customers of HY Enterprises Ltd and HY Logistics Ltd.

68.I have no reason not to accept the wife’s explanation on the importance of these documents. Her explanation shows that a lot of the transactions of and payments received by HY Enterprises Ltd and HY Logistics Ltd take place in China (not in Hong Kong); and that such payments are not directly received by the companies, but rather by the companies’ staff in China. It is not moonshine to say that such payments are vulnerable to be manipulated. Disclosure of these underlying documents, in my opinion, will more likely than not assist in showing a direct and true picture of the businesses and payments of the 3 Major Companies, or any one of it, in China, which in turn will shed light on the value of them. Besides, since these documents are mainly monthly records or simply contain in a booklet, the disclosure cannot be said as oppressive and disproportionate. Having considered all the circumstances, I am of the view that inspection of items (8), (9) and (13) of Schedule is necessary for fair disposal of the matter.

(ii) unspecified underlying records of 11 family companies

69.Although the wife is entitled to go “fishing” for information in the family division within the limits of the law and practice (B v B (supra) at 810b), her request for unspecific underlying records is simply too wide in the circumstances. Further, it has to be noted that among these 11 family companies, it is the wife’s own affidavit evidence (p294/bundle P1) that at least 3 of them are either merely landed property holding companies or dormant companies. Since the audited accounts for the year of 2011-2012 (already signed by the auditor and the husband) were already disclosed to the wife, she needs to pass the hurdle of showing to me why such audited accounts cannot be relied on. I do not find she has overcome that hurdle.

70.Having regard to all the circumstances and balancing the relevance and importance of the documents and the hardship likely to be caused to the wife by non-production against any prejudice to the husband, I come to the conclusion that to allow inspection by the wife on the underlying records of the 11 family companies at this stage will not help to dispose the matter fairly or save costs. I will thus dismiss the wife’s 2^nd Summons (save and except the concession made by the husband).

Giving copies or inspection?

71.There remains necessary for me to say a few words on whether I should allow the husband to simply provide copies of the conceded documents (ie profit and loss accounts, balance sheets, general ledgers and bank statements of the 14 family companies) instead of letting the wife enter the office premises for inspection.

72.The husband’s contention is that he does not want the inspection to interrupt the office operation.

73.In my view, there is simply no basis for such fear of the husband. In any event, the husband can arrange to set aside a room for inspection to take place during office or non-office hours.

Time Frame

74.Both counsel have addressed me in the hearing as to the time frame to comply with the order to be given by me should inspection be allowed. Mr Pang SC says that in case inspection of all the documents sought by the wife is to be allowed by me, he asks for 42 days to make the arrangement. Ms Yip, on the other hand, objects on the ground that the husband has been put on notice of the wife’s (intended) application as early as February 2013. She thus insists that only 14 days should be allowed.

75.I think the correspondences between the solicitors of the respective parties show that the wife’s first and formal written request for the underlying and primary documents of the family companies was made on 29 April 2013. It is thus not quite true that the husband has been put on notice since February 2013. Given the extent of the documents that need to be arranged for inspection, and allowing leeway for communication and logistics to set up, I think 35 days would be reasonable and sufficient in the circumstances.

Costs

76.In view of the husband’s belated concession and the wife’s partially succeeding in getting what she wants, I opine that the husband should pay 50% of the wife’s costs of this application.

Conclusion

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

78.I will thus make an order as follows:

(1) The husband (respondent) do within 35 days from the date of this decision allow the wife (petitioner) and/or her representative to enter the office of the companies (set out in the 1^st Summons) for the purpose of carrying out an inspection of the items (8), (9), (11) – (14) of Schedule 1 of the 1^st Summons covering the period from 1 April 2011 up to date;

(2) The husband (respondent) do within 35 days from the date of this decision allow the wife (petitioner) and/or her representative to enter the office of the companies (set out in the 2^nd Summons) the purpose of carrying out an inspection of the profit and loss accounts, balance sheets, general ledgers and bank statements of the 11 companies only;

(3) There be a costs order nisi that the husband (respondent) do bear 50% of the wife’s (petitioner) costs of the said 2 summonses, together with certificate for counsel, to be taxed if not agreed; such costs order nisi shall be made absolute 14 days from the date of this decision.

(4) The next first appointment be fixed for 7 November 2013 at 2.30 pm in Court 1.

Ms Anita Yip instructed by Messrs Chaine Chow & Barbara Hung for the Petitioner (Wife)

Mr Robert Pang, SC and Ms Fiona Nam instructed by Messrs Johnny K K Leung & Co for the Respondent (Husband)

Schedule 1

List of supporting documents to be made available for inspection

1.   Order Book

·      which is the faxes from customers filed in chronological order

·      for HY Enterprises Ltd and HY Logistics Ltd

·      both hard and soft copy

2.   司機功課表

·      daily record of orders prepared by drivers

·      for FC Ltd

·      both hard and soft copy

3.   拚櫃資料

·      filed in chronological order

·      for FC Ltd

·      both hard and soft copy

4.   落船發票

·      record of containers transported to China by ship through agents in China filed in chronological order

·      for HY Enterprises Ltd and HY Logistics Ltd

·      both hard and soft copy

5.   Invoices (per container)

·      each container has one invoice to debit the customers

·      for HY Enterprises Ltd and HY Logistics Ltd

·      both hard and soft copy

6.   Invoices from FC Ltd debit to HY Enterprises Ltd and HY Logistics Ltd

7.   Debit notes from various agents in China

·      there are records per container and in chronological order

·      for HY Enterprises Ltd and HY Logistics Ltd.

·      Hard copy only

8.   Statements for each customers

·      i.e. Account Receivable

·      for All three companies

·      both hard and soft copy

9.   數簿 (record of payments received from customers in China)

·      filed in chronological order

·      for HY Enterprises Ltd and HY Logistics Ltd

·      Hard copy only

10.     Daily Cash Flow record

·      record of cash flow of all the three companies’ bank accounts in Hong Kong

·      both hard and soft copy

11.     Bank statements (sent by the banks)

·      record of all bank-in and bank-out of all the three companies’ bank accounts in Hong Kong

·      Hard copy only

12.     Voucher and Ledger

·      supporting documents of all transactions of all the three companies

·      both hard and soft copy

·      Note (the companies use [xxx] as Accounting Software)

13.     Summary of account payable and account receivable

·      this is required to prepare each month

·      for HY Enterprises Ltd and HY Logistics Ltd

14.     P/L account (profit and loss accounts)

·      which would be printed out from [xxx accounting software] each month

·      for all three companies

·      both hard and soft copy