AK v. MYNT

FCMC 16285 / 2017

[2019] HKFC 280

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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J U D G M E N T
(Costs)

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1.  On 10^th January 2019 the Petitioner/Wife (“W”) applied by summons (“the Discovery Summons”) for orders requiring the Respondent/Husband (“H”) to discover and produce documents relating to his accounts with the Bank of China (“BoC”) and HSBC (paras 1 and 3), “all relevant documents and correspondence” relating to a mortgage of the property situated at J8 Grenville House, 1 Magazine Gap Road, HK (“Grenville House Property”) (para 2) and copies of all tenancy agreements for H’s place of residence from 13^th December 2017 to date (para 4).  The Grenville House Property is the former matrimonial home of the parties.

2.  By further summons filed 8^th April 2019 (“the Banker’s Books Summons”), W applied for orders enabling access to and inspection of the documents held by BoC relating to H’s accounts. Paragraph 1 of that summons sought the same documents as paragraph 1 of the Discovery Summons. 

3.  Both summonses were originally set down for argument on 17^th January 2020.  On 26^th August 2019 the Court gave a direction under Order 1B r1(2)(b) expediting the hearing to 18^th October 2019.

4.  On 16^th October 2019 a consent summons was signed by W and the BoC (which had, by order dated 13^th June 2019, been granted leave to be joined as Intervener) resolving the Banker’s Books Summons.  The terms of the consent summons provided for W to be at liberty to inspect and take copies of the bank’s records in relation to H’s accounts including (para 2) “any documents submitted by or on behalf of [H]” to BoC and “any records of information and representations given by or on behalf of [H]” to BoC in connection with the mortgage taken by the bank over the Grenville House Property.  The consent summons further provided for the costs of the Banker’s Books Summons and consequential costs to be paid by W to BoC.  Upon the filing of the consent summons, on 17^th October 2019, an order in terms of the consent summons was made, and BoC was excused from attending the hearing.

5.  In W’s Skeleton Submissions dated 30^th September 2019, W stated that she was satisfied with the documents disclosed by H in response to paragraphs 1, 3 and 4 of the Discovery Summons and would not be seeking any order relating to those paragraphs, but wished to continue with paragraph 2.  In fact, at a hearing on 21^st June 2019, the Court had already made an order that there be “No order” on paragraphs 2 and 4 of the Discovery Summons, leaving only paragraphs 1 and 3 to be argued at the contested hearing.  The decision not to pursue the remaining paragraphs 1 and 3 therefore had the effect that W was no longer seeking any order on the Discovery Summons.  At the hearing on 18^th October 2019, the Court was asked to make, and did make, an order that there be “No order” on paragraphs 1 and 3 of the Discovery Summons.  This had the effect of disposing of the Discovery Summons, leaving only the issue of costs. 

6.  W sought her costs of the Discovery Summons, and in addition, asked for a further order that H reimburse her for the costs of the Banker’s Books Summons including the costs which, pursuant to the consent order on that summons, she will be required to pay for the inspection and copying of the banker’s records held with BoC.  Both parties agreed that this question can be reserved and be dealt with later.  This matter is not one which can properly form part of the question of costs of the Discovery Summons.  I will simply note that the W intends to claim her costs of and incidental to the Banker’s Books Summons as part of her costs of these proceedings.

7.  Mr. Lai for the Petitioner submitted that although the application was not ultimately pursued, W should have her costs of the Discovery Summons at least up to the point when it became clear that the BoC indicated its consent to provision of documents from its records in relation to the loan to H.  He submitted that in all the circumstances the most appropriate order for the hearing itself was No Order as to costs. 

8.  Mr. Chan for the Respondent sought costs of the hearing, saying that it could and should have been avoided, given the earlier order of 21^st June 2019 which disposed of paragraphs 2 and 4 of the Discovery Summons and the subsequent decision announced in W’s Skeleton Submissions not to pursue the remaining relief in paragraphs 1 and 3.  He also sought on H’s behalf costs of the summons itself, on the ground that it had been prematurely filed and H had already indicated his willingness to provide disclosure to W of all relevant documents.  In the alternative, he argued that W should be deprived of her costs from the time when it became clear that H had provided to W either in correspondence from his solicitors (JML) or through exhibits to his affirmations, everything in his possession, custody or power and there was nothing more he could supply. 

9.  Order 62 rule 3(2A) of the District Court Rules provides that:

If the Court in the exercise of its discretion sees fit to make an order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.

10.  Rule 3(2A) was introduced as part of the Civil Justice Reform package and implemented a change in the approach to costs orders on interlocutory applications, so that the principle that costs should follow the event would no longer be the usual order but would be one of the factors to be considered in the exercise of the discretion under O. 62, r 3.  The Court is also required to consider the reasonableness of the conduct of the parties, including for example whether it was appropriate for a party to pursue an application, having regard to the underlying objectives in Order 1A rule 1 of the Rules: see Hong Kong Civil Procedure, 2019, Vol 1, para 62/3/3B.

11.  The genesis of both summonses was the disclosure by H in a letter dated 12^th December 2018 from JML to those acting for W (OLN) that he had taken out an “all-monies” mortgage on the Grenville House Property during the previous month, and that the sum of nearly HK$62 million had been drawn down and deposited into an account with BoC he had opened for that purpose.  A copy of the bank’s facility letter dated 19^th November 2018 and a repayment schedule dated 29^th November 2018 were provided with the letter from JML.

12.  This disclosure prompted W’s request through OLN for the monies to be held in escrow. Upon H’s refusal to agree, W obtained an interim injunction, by ex parte application, on 21^st December 2018.  The same day OLN notified JML of the injunction and requested documents including those relating to the BoC loan.  BoC was also notified by OLN of the injunction and in response advised W of other accounts held with the bank in H’s name.

13.  On 3^rd January 2019 OLN wrote to JML repeating the request for documents and expanding it to other documents relating to the previously undisclosed accounts.  The letter also commented upon H’s failure to disclose the existence of the BoC account in his Form E. On 8^th January 2019 JML replied, noting that the account did not exist when the Form E was filed and that H had never banked with BoC until the loan was taken out.  No additional documents were attached with that letter nor were any promised by it. In particular, the letter did not say that H was actively seeking documents from the banks, including BoC or would do so without delay and supply them to W once obtained. 

14.  No further inter-solicitor correspondence took place before the Discovery Summons was filed on 10^th January 2019.

15.  On 11^th January 2019 the Court extended the interim injunction.  Leave to appeal against that extension was refused by this Court on 11^th March 2019 and on 23^rd May 2019 by the Court of Appeal.

16.  On 25^th January 2019 H filed an affirmation (his 4th) in response to the Discovery Summons.  This was filed prior to the return date of the summons, and not pursuant to any order of the court or, as far as can be ascertained, any agreement between the parties.  He indicated in the affirmation that he would not oppose the summons, save as to costs: paragraph 4.  He exhibited 3 letters each dated 16^th January 2019 to BoC, HSBC Private Bank (Suisse) SA, and to HSBC in which he asked for documents relating to his accounts including records of enquiries made by him or instructions given by him in respect of his accounts with each of the banks.  He further exhibited those documents he had already obtained from HSBC on 22^nd January 2019, and a copy of the tenancy agreement for his apartment.

17.  W filed an affirmation (her 9th) on 21^st February 2019, which was principally in support of the continuation of the interim injunction but also responded to H’s 4th affirmation.  She commented on the materials provided by H to that point, and stated what remained outstanding, including “any pre-mortgage application communication record” (paragraph 8).

18.  On 11^th March 2019 the Discovery Summons was before the Court.  At that hearing the following exchange took place between the counsel for the parties:

MR TODD: Your Honour, I think that despite the controversy that there has been between our notes, I think the only real issue that we have is interpretation of the discovery summons that the wife has.  My learned friend said that they’re just dealing with HSBC.  We need them to confirm that there is nothing else from the Bank of China, if that’s what the position is, because we’ve asked for those attendance notes and when I was on my feet a moment ago I was emphasising it’s those attendance notes the Bank of China have is something that one might apply for under a banker’s books application.  And if they’re not going to say, “Well, there aren’t any and they’re not available”, they need to know that we will be seeking third party discovery against the Bank of China, but it is something that they should deal with in the first instance.

MR J CHAN: Well, I can confirm that we don’t have those.  We can write again to the Bank of China to ask but we don’t have them.

MR TODD: I’m grateful.  So if that can be formally recorded that that is the position and then we will simply have to deal with the Bank of China ourselves.  (Core Bundle 200T to 201H)

19.  On 25^th March 2019 OLN wrote to BoC referring to documents requested from H but, as asserted, not supplied by him, and requested that the bank provide them. 

20.  On 8^th April 2019 W filed the Banker’s Books Summons. 

21.  Also on 8^th April 2019 H affirmed his 6th affirmation attaching a number of exhibits, including further documents relating to the mortgage and his accounts with BoC: exhibits MYNT-6-9 to MYNT-6-12. 

22.  On 13^th June 2019 the parties attended on the first return date of the Banker’s Books Summons.  Directions were given for W, H and BoC to file further affirmations on that summons. 

23.  On 4^th July 2019 a senior partner in OLN filed an affirmation deposing to what documents were likely to be in the possession of the BoC including documents supplied by H to the bank when he applied for the loan.  One of the aspects of these proceedings is the extent to which certain off-shore trusts of which H is a beneficiary may constitute a “financial resource” to which he may look.  It is apparent from the papers and the parties’ submissions that at least part of the motivation for both summonses was the desire by W to obtain evidence of the representations made by H to the BoC of his financial position at the time he applied for the loan, including whether he disclosed to the bank the existence of these trusts and his interest in them. 

24.  In response to this further affirmation, the Principal of JML filed an affirmation on 25^th July 2019 in which it was asserted that having regard to H’s earlier promise to provide such further documents if and when they became available to him, the Banker’s Books Summons was premature.  It was stated that “the Respondent has already produced all the documents requested by the Petitioner”. 

25.  On 13^th September 2019 the solicitor for BoC, Mr. Ng made an affirmation which included a revised proposed wording of an order the BOC would agree to.  This then formed the basis for the consent Order on the Banker’s Books Summons.

26.  In matrimonial finance litigation both parties are under a duty of providing full and frank disclosure of their respective financial position.  The MCR and Practice Directions provide for structured opportunities to comply with this duty post-Petition, including the Form E Financial Statements and Answers to Questionnaires. Neither of these formalities detract from what is a continuing duty owed by each party to the other, and to the Court, to make full disclosure:  L v L [2006] HKFLR 121, at [198] (Lam J as he then was); GW v RW (Financial Provision: Departure from Equality) [2003] 2 FLR 108, at [17] (Mostyn J).  JML’s letter of      12^th December 2018 disclosing the existence of the loan acknowledged this continuing obligation: see third paragraph thereof. 

27.  The disclosure by H of what on any analysis is a substantial loan secured against the former matrimonial home justified the making of immediate enquiries by OLN for details and documents.  There was some delay on H’s part in responding to the request for documents over and above those supplied with the 12^th December 2018 letter.  H asserts, in his 6th Affirmation, that there was “insufficient time” from the initial request for documents in OLN’s letter dated 21^st December 2018 until 10^th January 2019 when the Discovery Summons was filed.  It is understandable that H was occupied with other matters, including a response to the injunction leading up to the further hearing on 11^th January 2019, but the need for urgency in responding to W’s request for further documents must have been apparent to him.  At the very least it was open to H to instruct his solicitors to communicate to W that he would supply all relevant documents in his possession in relation to the BoC loan and supply others when these became available and to say that he would take immediate steps to obtain them.  There was sufficient time for him to do so, even taking into account the intervening Christmas/New Year holidays.  He did not.  In my view W’s Discovery Summons was not premature or filed without good reason. 

28.  The question is then whether it was reasonable for W to continue pursuing her Discovery Summons to the point of only abandoning it at the hearing on 18^th October 2019.  By this time H had filed three affirmations in response to the summons and deposing (twice himself and once through his solicitor) that he had disclosed all documents he had or could obtain from BoC.  After the hearing on 21^st June 2019 – when “No Order” was made on paragraphs 2 and 4 of the Discovery Summons – W was no longer pursuing H for anything other than entries in banker’s records, and when BoC’s solicitor’s affirmation dated 13^th September 2019 was served on her, she was assured she would be able to obtain those she was still seeking directly from the BoC.  There would seem to be no reason why she could not, allowing for a reasonable period to consider and take appropriate advice, say 14 days, have announced her intention not to pursue any further order on the Discovery Summons and seek H’s consent to the vacating of the hearing on 18^th October 2019, at least insofar as argument on the Discovery Summons was concerned.  It is of note that the substantive paragraphs of the consent summons (and consent order) on the Banker’s Books Summons are identical to those proposed by Mr. Ng in his affirmation on behalf of BoC (para 6 thereof).

29.  In my view, after obtaining the offer from the BoC which ultimately resolved the Banker’s Books Summons in the precise terms proposed by the bank, W should not have continued with her Discovery Summons to the point of only withdrawing it at the hearing fixed for its argument.  The ‘event’ – the ultimate non-pursuit of the Discovery Summons – should properly be reflected in the order as to costs.

30.  I therefore make an order that the costs of the Discovery Summons up to 27^th September 2019, being 14 days after the filing and service of the affirmation of Ng Kwok Wing dated 13^th September 2019 be paid by the Respondent to the Petitioner and that the costs of the Discovery Summons thereafter, including the costs of the hearing on 18^th October 2019, be paid by the Petitioner to the Respondent.  In both cases, such costs be taxed in default of agreement.  There will be certificate for counsel.