FCP v. CJLY

FCMC 6202/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 6202 OF 2012

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J U D G M E N T

(Application for Specific Discovery)

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1. This is the Petitioner Wife’s application by way of a summons issued on 26^th March 2013 for specific discovery of the Respondent Husband’s financial means in particularly of his various businesses pursuant to her financial claims against him upon the dissolution of their 14 odd year marriage. 

2. The information and documents sought were at first listed in the Schedule originally attached to the summons but which has subsequently been revised and exhibited to the Wife’s supportive 5^th Affirmation filed on 25^th July 2013 (P9:3176, 3185-3195), and which the Wife argues as relevant and necessary due to the Husband’s failure to make proper disclosure in his Form E thereby poses difficulty in ascertaining the matrimonial pot and the resources of/or available to him in particularly as to his garment manufacturing business known as JH Limited (“JHL”), which was the family’s main financial resource during the marriage but which she suspects he may be disposing of or removing to Vietnam, so that her case may move forward to an FDR hearing or ancillary relief trial.

3. The Husband on the other hand denies any failure to make proper financial disclosure on his part, insisting that such allegation of the Wife is unjustified, and that he has already answered two very extensive questionnaires with huge amount of financial documents, followed by further voluntary disclosure comprising two bundles of additional documents requested under the said Schedule including shipping documents, bills of lading, invoices, sale contracts and bank statements of JHL as well as his own credit card statements which are well over and above what would normally be required for the purpose of these proceedings, hence her present application is unnecessary, excessive and not proportional to the disclosure exercise. Before going into details of her application, it would of course be necessary to first give some relevant factual background of the case.

Background

4. The Wife, now 51, is a locally born and raised Chinese, while the Husband, aged 55 is a French expatriate who has lived and worked in Hong Kong since about 1997. Both were then divorced from their respective previous marriage when they first met, and subsequently married on 9^th August 1998 in Hong Kong, with the Wife’s elder daughter from her previous marriage being accepted and treated as a child of this marriage, while the parties’ younger daughter was later born on 1^st May 1999. The elder daughter, now 22 is attending university in UK, and the younger daughter at aged 14 attends the French International School in Hong Kong and has been residing with her mother since the separation of her parents. 

5. After the marriage the Husband set up JHL in Hong Kong to run his business of garment trading with the manufacturing part located in China for export mainly to Europe. As noted above it became the main source of financial wealth to the family with an annual turnover of more than HK$54 million as recently as in 2009, thus providing the parties with a fairly comfortable standard of living during the marriage including paying HK$70,000 per month for a 2,000 sq ft flat as their home on the Peak, employing at least 2 domestic helpers in their household, enrolling their daughters in prestigious international schools, and the enjoyment of overseas holidays at least twice a year and membership in private clubs.  

6. In addition to JHL, the Husband also formed 2 other garment trading companies namely CP Limited in Hong Kong and JSL in Shenzhen, as well as a partnership with the Wife known as CH Company importing wine for wholesale in Hong Kong. In 2009 they purchased a property at The Palazzo, Shatin by means of a holding company known as CO International Limited for around HK$12 million with the assistance of a bank mortgage, and which the parties used to let out for rental income.

7. In about 2008 or 2009 the Husband started to consider moving the manufacturing part of his garment business from China to Vietnam allegedly due to decline of business after the economic downturn in Europe, and also began to spend more time away from Hong Kong in Vietnam. Sadly the marriage began to unravel in 2011, with the Husband eventually moved out of the matrimonial home in February 2012. Shortly thereafter the Wife sold all the securities in the parties’ joint account and transferred their proceeds and cash totalling almost HK$10 million into her own account, and issued a petition in these proceedings on 4^th May 2012 for divorce, custody of the younger daughter and general ancillary relief, followed by the mandatory filing of Financial Statement (Form E) by both sides and the inevitable further discoveries leading to the matter now before me.

8. One can easily see why the Wife found those further discoveries necessary given the stark contrast in the quantum of the marital assets and income disclosed by the parties’ respective Form E. In her Form E the Wife put her net worth at almost HK$20 million including HK$7.4 million in cash and securities, her interests in CH Company of about HK$8.5 million, and her half-share in The Palazzo property of HK$2.7 million, and claimed to require more than HK$230,000 per month from the Husband to maintain herself and the 2 daughters at the same standard of living as before.   

9. On the other hand, the Husband in his Form E (P1 : 254) put his total net worth at only a quarter of the Wife’s just below HK$5 million, with those of his business at only HK$2 million, from which he received an average monthly income of HK$44,200 with virtually no savings. He also stated under 5.5: “For the past 2 years, the performance of JHL is not good … as JHL is now losing significant amounts of money, the living standard of the family must be reduced in terms of expenses : flat rental, car, clubs, holidays expenses must be cut or reduced … if the economic situation is still bad in Europe, we might have to stop the activity of JHL” (P1 : 274)

10. While his lack of savings could well be explained by the fact that the Wife had transferred almost HK$10 million out of their joint account into her own shortly before she filed for divorce as noted above, it is quite clear that it was his account of the state of his business that must have aroused the Wife’s concern or suspicion, or that of her lawyers, that triggered off those very extensive discoveries referred to above.

11. Furthermore, according to those auditors’ reports of JHL annexed to his Form E, its turnover had dropped from HK$54.9 million in 2009 to HK$31.6 million in 2010, and further to HK$31.4 million in 2011, with a net loss of almost HK$3.3 million for that year (P2 : 331 – 439), of which the Wife made the following comments in her 4^th affirmation of 16^th April 2013 (P8 : 2617, 2620):

“14. Throughout marriage, our family relied entirely on the profits of JHL, to sustain our lifestyle. As far as I know, the business of JHL was running well throughout the past couple of years. It therefore surprises me when the Respondent states that the company now has a negative equity. Even according to the balance sheet of JHL as at 31 March 2011, the company is stated to have a turnover of HK$31,469,036. According to the audited financial statement of JHL for year ended 31 March 2009, the sales turnover was HK$54,981,203 with other income of HK$5,880,895, which meant that the company was worth around HK$60.8 million in 2009. I therefore do not understand why JHL is now said to be worth a negative equity of (HK$643,000) now. The Respondent gave no evidence or audited statements supporting this figure.

15. I have posed many questions in my 1^st and 2^nd Questionnaire to the Respondent about JHL and his operations in Vietnam, but the Respondent had given ambiguous and contradictory answers …

16. I have reasons to suspect that the business of JHL has been siphoned off to Vietnam. The Respondent travels frequently to Vietnam and often stayed there for weeks or as long as months. The Respondent claims that the business activities of JHL in Vietnam are part of the general business of JHL, and there is no separate entity formed in Vietnam. He claims that the employees in Vietnam are all freelance workers with no formal contract of employment. When asked to provide documents showing how the revenue of JHL are generated in past 24 months, the Respondent only provided a copy of 2 sale control forms in Vietnam in May and September 2011. Only one out of the two forms provided relates to orders for kidswear, despite the Respondent’s explanation that the business in Vietnam mainly concerns bulk orders on kidswear. According to the advice of my accountants, sale control form is a piece of secondary document which can be manipulated easily as it is merely an excel spreadsheet summarising the sale amount of each order. It cannot ascertain how the money received for each order were settled. It is therefore essential to review the primary documents such as invoices to customers, bills of lading, letter of credit, order contracts with customers and with factories, proforma invoices to customers, invoices from factories etc. to ascertain the real revenue from the Vietnam operations.”   

12. In her same affirmation the Wife also questioned how the Husband could afford to run up his monthly credit card spending close to HK$90,000 while he disclosed his monthly income from his business at only HK$30,000, or why the balance of his BEA account would fluctuate so much within such a short time from HK$1.8 million in April 2011 down to only HK$5,135 by July 2012, jumped to almost half a million dollars 2 days later, and then zero balance as of December 2012.

13. She gave more reasons and details of her suspicions over the Husband’s financial disclosure in her said 5^th Affirmation filed in support of her present application, such as his interests in a company in France known as JLL SARL which he used to run with his former partner and described as one of his personal investments but never disclosed in his Form E until she asked about it in her 1^st Questionnaire, and only then he claimed that it had been closed down and now on liquidation, and that he is bringing proceedings in France against his former partner for compensation, of which the Wife now argues that he should make full disclosure.

14. As noted above she exhibited to this affirmation the revised Schedule of information and documents sought from the Husband under the present application contained in an expert report by her accounts BDO dated 24^th July 2013 but which report she has agreed not to rely on for the purpose of her present application due to the Husband’s objection on the ground that it was obtained without leave of the court, and that he was not given any opportunity to challenge or respond to it.      

15. Nevertheless Mr Parker for the Wife submits that the primary target of this discovery application is the Husband’s business, and in particular JHL, which represents the majority of the Wife’s outstanding requests in the revised Schedule, and that in the context of this case, he argues that it is necessary to analyse the business at two levels, as an income stream and as a valuable asset, in that the final resolution of the case is going to involve necessarily questions not only about income but also of juggling various assets including landed properties and corporate assets to arrive at a fair and equitable distribution.     

Legal Principles

16. The principles relating to discovery in financial relief applications are well established and have been usefully summarised by Dunn J in B v B (Matrimonial Proceedings : Discovery) [1979] 1 All ER 801 at p811:

“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 power 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.”  

17. His Lordship also noted an important feature of the wife’s position in such proceedings at p809 of his judgment:

“It is another feature of such proceedings that one party, usually a wife, is in a situation quite different from that of ordinary litigants. In general terms, she may know more than anyone else about the husband’s financial position: she will know at first hand of the standard of living of the family during the marriage; she will know about the furnishing and equipment of the matrimonial home, and of the physical possession of the husband, and perhaps the approximate amount of cash kept in the house. She may also know, from conversation with the husband in the privacy of a matrimonial home, the general sources of his wealth and how he is able to maintain the standard of living that he does. But she is unlikely to know the details of such sources or precise figures, and it is for the reason that discovery now plays such an important part in financial proceedings in the family division.

Applications for such discovery cannot be described as “fishing” for information, as they might be in other divisions. The wife is entitled to go “fishing” in the Family Division within the limits of the law and practice.”

18. These principles are not disputed by the Husband, but his counsel Mr Yim argues that in the exercise of its discretion whether or not to order discovery, the court should clamp down on unnecessary requests that are not relevant to the matters in issue, citing Dunn J in his same judgment at p805:

“Although in practice it will often be convenient to deal with discovery in one piece, it is important to remember that under the terms of the rules discovery proceeds by stages, and different considerations may apply at each stage. The order in this case was an order under RSC Ord 24, r7, for the discovery by the husband of specific classes of documents and for their production for inspection by the wife’s solicitor. Before any question of discretion arises, however, the court has no jurisdiction to make an order for discovery or production unless, firstlt the person against whom discovery is sought is a party to the suit, secondly, the documents are in his possession, custody or power, and thirdly, the documents relate to matters in question in the proceedings. These requirements must be satisfied before discovery is ordered even if hardship is thereby caused to one party to the suit: see James Nelson & Son Ltd v Nelson Line (Liverpool) Ltd …”

19. This is particularly apt, Mr Yim submits, in today’s context in the light of LKW v DD [2010] 13 HKCFAR 537 where Ribeiro PJ in the Court of Final Appeal held at para62 of his leading judgment:

“62. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the court’s) resources and to increase antagonism and discourage settlement.

63. Such attempts have been encouraged in various contexts, including disputes over the extent of a party’s assets; over the contribution made to the welfare of the family; over the parties’ conduct; over claims to be compensated for having suffered some disadvantage, and so forth.

…

69. The essence of the fourth principle is reflected in Thorpe LJ’s illuminating comment in Parra v Parra:

“ … the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviates the need for the investigation of minute details and equally the need to make findings on minor issues in dispute. The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally he is not bound to adopt a conclusion upon which the parties have agreed. But his independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable. Judgments in this field need to be simple in structure and simply explained.”

70. The four principles discussed above should be borne in mind when embarking on the section 7 exercise …”  

20. Applying these principles, Mr Yim argues, it is clear that the Wife’s requests are either unnecessary, unjustified or excessive under the circumstances of this case or are not proportional to the disclosure exercise, and that in fact some of those requests are not specific discovery but rather for evidential explanation in relation to matters which have already been adequately answered, and that it is simply a matter of the Wife not accepting the answers already provided by the Husband which should rather be pursued by cross-examination and if necessary by way of submission at the trial.

21. As noted above the parties are at the stage of discovery in order to ascertain the size of the pool of assets for the purpose of FDR hearing, and it is clear that the major issue between them is over the financial state and account of the Husband’s main business of JHL, which Mr Parker has described as the primary target of this discovery application, but certainly the court does not require minute details or accounts of the business, at least not at the stage of FDR hearing, and should instead use a relatively broad brush approach to inter alia assess its profits/income and value. I should also note that this case has so far already generated 9 bundles of pleadings and 7 bundles of solicitors correspondence with more than 6,000 pages in total, the bulk of which no doubt relates to the parties’ financial disclosure, thereby risks giving weight to the Husband’s argument that the Wife’s present action is simply not proportional to proper or normal disclosure exercise.  

22. It is therefore with all these in mind that I shall now consider whether the Wife’s outstanding requests are necessary and essential, as set out in the 4^th column of the Revised Schedule (P9 : 3185-3195).

Schedule for Discovery

Husband’s Personal Bank Accounts : Items 1 – 4 (P9 : 3185-3187)

23. Under this head for items 1-4 the Wife seeks evidential explanation of various transactions of substantial sums in the Husband’s BEA account between 2011 and 2012, including withdrawals of more than HK$1.8 million from April to May 2011, the transfers of US$244,000 and US$210,000 respectively on 24^th and 29^th March 2011 to CO International Ltd, and of US$72,336.58 on 29^th March 2011 to CH Company, and the transfer of HK$7 million from JHL into this account in 2011.

24. Mr Parker on her behalf argues that the further information provided by the Husband since the hearing in the form of a letter dated 8^th October 2013 is unhelpful and deficient, and that his explanation in respect of the HK$7 million transferred from JHL was a dividend paid out to finance the family companies including the purchase of the Palazzo Property is simply not true.

25. Likewise, Mr Parker argues, that the Husband’s disclosure of 2 documents apparently relating to the French proceedings is derisory, and that he needs to give a proper explanation with documents to back that up.   

26. Mr Yim for the Husband however submits that before the court deals with these requests, it is pertinent to first note the following matters:

(a) That all bank statements sought, including some going well beyond the date of separation in February 2012 have been provided;

(b) That it is apparent from those bank statements that most of the transactions identified by the Wife represent transfers to and from the various companies held by the parties;

(c) Even according to the Wife’s case as admitted in her Form E that it was the practice of this family during the marriage to transfer funds whenever the parties wished amongst their personal accounts as well as those of their companies in particular JHL, CO and CH, such as transferring funds from CH to JHL between 2011 and 2012 to pay for the rent, or transferring HK$16 million between 2004 and 2009 from JHL to their joint BEA account for management and investment in the securities market, or the withdrawn of HK$7,995,305 from that joint account to pay for the Palazzo Property, investing into JHL and for the family expenses;

(d) That the Wife had had access to all documents related to JHL, CO and CH and should therefore have full knowledge of those transactions.

27. There is therefore nothing sinister or suspicious, Mr Yim submits, about these transfers from the Husband’s personal account to the parties’ own companies, in particular CH which was all along controlled by the Wife, and that it is most contrived in the circumstances for her to say in her 5^th Affirmation that the Husband should keep his personal bank accounts and the company bank accounts separate in order to justify her such requests.

28. It is clear, Mr Yim argues, that the Wife’s requests under this item are unnecessary or unjustified, but that in order to ease her mind, the Husband did following the hearing by the letter of 8^th October 2013 provide further information on voluntary basis in respect of items 1-4 except for the item in which the Wife asks for further explanation of significant withdraws listed in the Revised Schedule consisting of some 284 transactions which he argues as grossly excessive, highly time consuming, and hugely costs disproportionate.   

29. I agree that for those requests which the Husband has already answered, even if the Wife may not be happy with their contents, any question over their truthfulness should only be dealt with at the trial by way of cross-examination, and that the Wife is not entitled to another round of the same questions or requests for the purpose of specific discovery. Accordingly I refuse this request.  

JHL: Items 5 – 13(P9 : 3187-3192)

30. As noted above, and as submitted by Mr Parker, the nub of the dispute between the parties concerns this company, which is the family’s main asset run by family money and has had its loans secured against family property, but although it is based in Hong Kong, its real operations have since about 2011 been moved to Vietnam, and its current finances are according to Mr Parker for the Wife shrouded in opacity, which has in turn seriously affecting its true value necessary for the purpose of a proper FDR hearing.. 

31. The starting point, Mr Parker submits, is that the Husband has stated in his Form E that his shares in JHL are worth minus HK$643,000, which the Wife says as patent nonsense, and that the information contained in the disclosed audited accounts does not tally with the sales control forms used to record the trading transactions, as while the audited report for 2011 show a turnover of HK$31,469,036 (P8 : 2661) which closely matches the information in the sales control forms of HK$31,353,892, however for 2012 the audited accounts show a turnover of only HK$29,383,126, the sales control forms in fact show a much higher figure of HK$38,466,787, a discrepancy of more than HK$9 million which he argues raises an enormous question mark over the veracity of the audited accounts produced by the Husband.

32. More over, Mr Parker argues, the gross profit margin stated in the audited financial statements is far below that evidenced by the sales control forms, with huge discrepancy of 6.1% as against 26.2% for 2011, and 7.9% as against 32.2% for 2012.

33. Given such enormous discrepancies, he argues that the Wife should be entitled to see the underlying documents under these items of request, bearing in mind of the Husband’s extreme reluctance to provide the 2012 audited account to the Wife in the first place, that he replaced his regular accountant prior to the preparation of that account, and his extreme delay in producing that account.

34. In addition Mr Parker argues that there are other aspects of the audited financial statements that call for explanation, such as while JHL’s trade receivables within 30 days increased by 274.4%, trade payable within 30 days over the same period increased by 2246.2%, all of which he says call for explanation, hence he submits that the Wife’s requests relating to JHL in her discovery schedule are plainly properly made and justifiable.

35. Accordingly the Wife is essentially seeking almost all documents in respect of JHL, namely: a full set of all the contracts including kidswear showing the orders made to factories in Vietnam for the past 24 months, primary documents such as CMT invoices, details ledgers, purchasing orders, sales orders, bills of lading, shipping documents, invoices, packing list and exporting documents from Vietnam, proforma invoices from factories in Vietnam, proforma invoices to customers, letter of credit from customers, proof of payments to Vietnam and all costing related to kidwear orders such as fabric, accessories, transportation charges of shipment for fabric and accessories from Hong Kong and PRC to Vietnam for bulk production from January 2010 to date, monthly up-to-date management accounts up to the date of the SD Application that can reconcile the turnover and profit as per the Sale Control Form, copy ledgers and management statements of JHL from January 2010 to date, monthly overheads of JHL including its sampling room and operations in PRC and Vietnam, current debt JHL owe to the Husband with documentary evidence, and of course the financial statements/audited report for 2012/2013. In other words, as noted above, essentially all financial document of JHL, but is such drastic measure really justified?

36. It must first be pointed out that all of the figures and analysis of the sales control forms in the Wife’s submissions are taken directly from her expert BDO Report which is however not being relied upon in evidence by her in this application for the reason already referred to above, and hence while the Husband may have been aware of its contents and therefore the basis of the Wife’s argument, there is in effect no expert evidence before the court as such that she can validly rely on in her argument.   

37. Not surprisingly the Husband finds this request unjustified, unnecessary, and unreasonable, pointing out first that JHL being a company incorporated in Hong Kong is required by law to prepare and submit audited reports prepared by qualified accountants, of which those for the years 2009-2010, 2010-2011, and 2011-2012 have already been disclosed to the Wife, and that the one for 2012-2013 is expected to be ready soon and will then be produced to her as well, and while she may have complained that it had taken a long time to produce the report for 2011-2012, the Husband submits that such complaint is in fact most contrived in that the delay was caused by the sudden resignation of the company accountant Ms Sin and the subsequent hiring of her successor, of which he claims that the Wife was well aware of and had no cause to complain.

38. In addition, Mr Yim submits that the Husband has also already produced copies of sale control forms, which are JHL’s internal accounting documents recording all transactions under his answers (P5:1460 and P6:2038) to the Wife’s first 2 questionnaires, and has since the Wife’s application made further disclosure by providing some of the primary documents sought by her, but he argues that it is simply unreasonable, unnecessary and impractical to provide all the documents of JHL just to satisfy her curiosity.

39. On the issue over disclosure against companies, Mr Yim relies on the judgment of Dunn J in B v B supra at p810C-D:

“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 finance record. 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 accounts or other experts that the published accounts of the company cannot be relied on.”

40. Hence Mr Yim submits that the burden is on the Wife to justify why the audited reports of JHL cannot be relied upon and that why the court should allow such an extraordinary course of going behind these reports by ordering disclosure of all those other documents of JHL. However, the basis of her case are, he argues, inaccurate and misleading, and he has identified at least 5 areas of discrepancies or defects in her case.

41. Firstly, he submits, that her assertion that the Husband claimed that there had been a sudden and radical drop in the value of his shareholding in JHL in 2011-2012 is incorrect, as can be seen from the audited reports that the value has in fact been dropping since 2010 (P2:338).

42. Secondly, it is misleading for the Wife to allege that there is a discrepancy of HK$9 million in the total amount of turnover for the year of 2011-2012 between the figure of HK$29,383,126 recorded by the audited report and that shown by the Sales Control Forms of $38,466,787, the latter figure of which he claims that the Wife has never explained, and that in any event that figure is wrong, as the term “turnover” has clearly been defined in the report as “gross invoiced value of goods supplied to customers during the year”(P8:2672), while the Sales Control Forms for that year can in fact be found at P6:2045-2054:

Winter 2011 :  US$823,663.65 & US$438,559.05

Summer 2012 :  US$607,696.95, US$793,460.05 & US$1,163,701.44

Total : US$3,827,081.14 = HK$29,774,691.26

43. Contrary to the Wife’s suggestion, Mr Yim submits, this figure of HK$29,774,691.26 clearly tallies well with the audited report’s figure of HK$29,383,126, hence her suspicion over the recorded turnover in the Husband’s audited report is completely misconceived.

44. Thirdly, Mr Yim submits that it is also misleading for the Wife to claim that the gross profit margin of 7.9% stated in the audited report for 2011-2012 is far below that shown in the Sales Control Forms of 32.2% and hence the audited report is inaccurate and unreliable, as a closer look at the 2 sets of documents reveals that the term “cost” used in the Sales Control Forms refers to the cost of obtaining the garments from the suppliers (P6/2045-2054), whereas the term of “costs of sales” used in the audited report (P8/2661) includes not just those costs but also other costs in generally, hence he argues that the Wife was wrongly comparing 2 different sets of figures to arrive at her conclusion which is simply unhelpful and confusing.

45. Fourthly, the Wife claimed to have been startled by the huge increase to both the trade receivables and trade payables as revealed by the audited report for 2011-2012 as one of the reasons for her complaints against the said report, but Mr Yim submits that “trade receivables” and “trade payables” depend on a lot of different factors which vary from season to season, and given her 2 previous complaints are now shown to be unjustified, he argues that it is difficult to understand how and why the those increases are startling, or why they would justify the extent of her discovery.

46. Fifthly, the Wife complains that the Husband has given misleading account of his salary and expenses which are different between what he had disclosed in his Form E and those revealed in the audited report, which he argues as again incorrect, as she has wrongly mixed up his allowance with expenses, some of which such as the rental expenses of the parties’ former matrimonial home which were used to be reimbursed by the company have been excluded for various reasons, but true or not he argues that they cannot justify the Wife’s application.     

47. By now it is clear that the parties’ dispute over the various figures in the accounts goes further than just differences in their interpretation or analysis but one of methodology, as submitted by Mr Parker in his Reply dated 13^th November 2013, in that the figure of turnover obtained by the Wife’s accountants by adding up the sales control forms is much higher than the one stated by the Husband’s accountants in the audited accounts as explained by Mr Yim above, but in the absence of assistance or advice from an expert, it is not possible to resolve the issue of which methodology is the proper accounting approach to reconcile the differences or to arrive at the correct figure for the business turnover.    

48. Apart from this issue, I do however agree with the rest of Mr Yim ’s arguments as valid, made all the more convincing by the fact that JHL had moved its factory to Vietnam in recent years with obvious  and inevitable disruption to its manufacturing, while the alleged declines in business in the following years in 2011 and 2012 happened right in the middle of the European sovereign debts crisis, with the economy in countries like Greece, Spain and Portugal on the verge of collapsing, hence there is nothing suspicious to me that as a result the export business of JHL has been seriously affected as alleged by the Husband.

49. Whether this is in fact the case of course cannot be ascertained at this stage without the benefit of oral and/or expert evidence, but it is insufficient in my judgment to justify at this stage going behind the company accounts and to require such extensive disclosure of virtually every piece of document from JHL, pending perhaps the availability of the 2012/2013 audited report which I understand from the Husband will be forthcoming soon if not already produced, and that thereafter the parties will proceed to obtain a joint valuation report on JHL. I do however agree that the issue over the turnover figures referred to above should be clarified, and I direct that the Husband should do so through his accountants in writing within 1 month. Other than that and for the reasons aforesaid, I am not prepared to accede to the rest of this request at this stage.

JLL SARL: Items 14-15(P9:3193)

50. This request is for documents relating to the legal proceedings in France over the liquidation of JLL SARL and the Husband’s personal claims against his former partner, of which I understand that they will be provided upon their receipt from his lawyers in France, and accordingly I so order that they be disclosed to the Wife within 14 days of their receipt.

Credit Cards : Item 16(P9:3194)

51. The purpose of this request of the Wife for the Husband’s outstanding credit card statements going back to January 2011 is to show his expenditure in view of his claims to have no money, but which Mr Yim argues as unhelpful as most of the spending were in fact by the Wife, and that there is no dispute as to the parties’ living standard as well above average prior to the breakdown of their marriage. Nevertheless, as I understand, the Husband has since the hearing provided the outstanding statements as sought to the Wife.

52. That being the last of the outstanding requests under the Wife’s revised Schedule, what remains is of course the question of costs which I propose to deal with by way of an order nisi that it be in the cause of the ancillary relief application, to be made absolute at the expiration of 14 days.      

53. Last but not least, I must express my gratitude to both Mr Parker and Mr Yim for their most valuable assistance rendered to the court throughout the application.