H v. T

FCMC No. 7159/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7159 OF 2009

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BETWEEN

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J U D G M E N T
(Discovery)

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Introduction

1.  This is an application by the petitioner wife for direction in relation to the redacted bank statements provided by the respondent husband. In the summons dated 11 March 2011, the wife applied for an order that the husband do provide unredacted statements in general.

2.  The information redacted was said to be stock code and stock name in the open market.  The petitioner did not appear to argue to the contrary.

3.  The respondent said the information redacted is irrelevant to the cause of the matter and to provide the information would be out of proportion in term of time and costs.  The petitioner said the respondent is under an obligation to provide full particular of his financial position during all the material period of time and the information is, in any event, relevant to the cause of the matter.

Background

4.  The couple commenced their co-habitation as husband and wife since 1989 and married in January 2001.  They purchased their first matrimonial home as joint tenants in 1991.  The child of the family was born in July 2003.  Since late 2007 the relationship of the couple began to wane and the respondent has refused since November/December 2007 to inform the petitioner of his office address and/or his work telephone number. 

5.  In October 2008 the petitioner and the child were asked by the respondent to move out of the matrimonial home.  The respondent also moved to new accommodation in January 2009 and did not inform the petitioner of the details of his residential address.

6.  The petitioner filed her petition on 12 June 2009, the respondent indicated his intention to defend the case, parties subsequently came into agreement in regard to the divorce. The amended petition was filed on 17 August 2009 and the divorce suit proceeded under the undefended cause.

7.  Pursuant to PD15.11, the respondent filed his first Form E on 31 August 2009 enclosing among others:

·   Copies of bank statements of his HSBC account from September 2008 to August 2009.

·   Copies of investment account with HSBC Private Bank from September 2008 to July 2009.

·   Copies of investment account with UOB from June 2009 to August 2009.

8.  Pursuant to the questionnaire of the petitioner dated 12 October 2009 in relation to the Form E filed on 31 August 2009, the respondent provided among others the following:

·   Copies of bank statements of his HSBC account from August 2007 to June 2008, June 2009 and June 2010.

·   Copies of investment account with HSBC Private Bank for June 2010.

·   Copies of investment account with SCB from July 2008 to January 2009 (first half and unredacted).

·   Copies of investment account with American Express from June 2007 to June 2008 (first half and unredacted).

9.  Following the exchange of subsequent correspondence between the parties, the respondent provided the following:

·  Copies of investment account with UOB from December 2007 to July 2008(redacted).

·  Copies of investment account with SCB from July 2008 to January 2009(redacted).

·  Copies of investment account with American Express from June 2007 to June 2008(redacted).

10.  The respondent filed another form E on 28 December 2010 enclosing among others:  

·   copies of investment account of King Kathy with UOB from December 2009 to December 2010 (redacted)

11.  Further document provided by the respondent in August 2011 pursuant to the questionnaire dated 12^th October 2009:

·   Copies of bank statements of his HSBC account for August 2008 and from September 2009 to November 2009.

·   Copies of investment account with HSBC Private Bank from August 2009 to October 2009, and December 2010.

·  Copies of investment account with UOB from July 2008 to August 2009, October 2008 to May 2009, September 2009 to October 2009(redacted).

12.  Thus the statements concerned related to the securities accounts with American Express Bank Ltd, Standard Chartered bank (Hong Kong) Limited, and UOB Kay Hian (Hong Kong) Limited.  The account with American Express was closed in July 2008 while the account with Standard Charter was effectively closed in October 2008.

The case for the Petitioner

13.  Mr Lynn for the Petitioner submitted that according to PD 15.11, either party has a mandatory duty to provide all of his or her bank statements covering the last 12 months from the date of Form E for each bank account, and where the account was closed within the last 12 months, covering the preceding 12 months from the closure (referring to part 2.3 of form E).  Accordingly the statements concerned are within this stipulated period.  And in any event, the information redacted is relevant to the cause of the matter.

The case for the respondent

14.  Mr Chan for the respondent submitted that the statements concerned are not bank statements and do not fall within the stipulated period.  The accounts in concern are investment accounts and are governed by part 2.7, where one is only required to provide copy of the latest statement for each account.  Further, PD 15.11 is implemented for the Financial Dispute Resolution Pilot Scheme (FDR) and the present case has proceeded beyond the stage of FDR.  The petitioner is effectively asking for further discovery at the pre trial review stage and the Rules of High Court shall apply with the necessary modifications (Rule 3 Matrimonial Causes Rules).  It is for the petitioner to make out her case, yet her application is not necessary and the information redacted is irrelevant to the cause of the matter.   

Issues

15.  The following issues now need to be determined by the court:

1.  Meaning of bank account/bank statement?

2.  The scope of paragraph 2.3 of the Form E?

3.  Is the redacted information relevant to the cause of the matter?

4.  How should the issue of costs be determined?

Practice Direction 15.11

16.  It is common ground that saves for application for nominal maintenance and cases where parties have reached agreement on ancillary relief, parties are obliged to file and exchange Form E as annexed to the Practice Direction together with supporting documents specifically sought.  And this is a continuous obligation.  So for the latest unredacted statement for each investment account as at the date of the related Form E would in any event be required to be enclosed in the Form E.

17.  Part 2 of Form E dealt with assets, of which part 2.3 concerned bank accounts and part 2.7 concerned stocks, bonds and other quoted securities.  The level and extent of disclosure are not the same in these two parts.  Part 2.3 directs the parties to :-

“Give details of all bank accounts in Hong Kong or elsewhere, which you hold or in which you have an interest including those closed within the last 12 months. For joint accounts, state your interest and the names of the account holders. Attach copies of your bank statements covering the last 12 months for each account. For fixed or term deposits, attach copies of latest statements.”

While part 2.7 directs the parties to:-

“Give details of all stocks, bonds and other quoted securities and other investments in Hong Kong or elsewhere which you hold or in which you have a beneficial interest. (Do not include dividend income in this paragraph). Attach a copy of your latest statement for each account.”

Meaning of bank account/ bank statement within part 2.3

18.  Nowadays banks tend to diversify in their business.  Modern bankers do not only focus on conventional banking.  As in the present case, the accounts concerned are investment account with banks (American Express and Standard Chartered) and investment company (UOB).  The investment account and the bank account with the same bank are separate accounts as they are subject to different legislations and regulations.  I consider and agree with Mr Chan that account for securities dealing with a bank just like an account with a stock broker, it is not a bank account as such.

19.  It is further noted that part 2.3 referring to “bank statement”.  Having considering the distinction between a bank account and an investment account as mentioned above, I considered that a bank statement referring to statement of banking transaction which is distinct from securities transaction.  Otherwise one would have difficulty to reconcile the different disclosure requirement for investment account with bank and investment account with a stock broker.  Thus, the accounts in question are not bank accounts and they are not within the scope of part 2.3.

20.  With my ruling that the accounts concerned are not bank accounts, further consideration as to the scope of part 2.3 would be academic, however, for clarification I would go further to consider the extent of the period stipulated by part 2.3.  Mr Lynn submitted that the phase “the last 12 months’ meant the last 12 months from the date of the Form E for existing account and the last 12 months from the date of closure for closed account.  Mr Chan submitted that the phase meant the last 12 months from the date of the Form E for whatever account. 

21.  It noted that the requirement to provide details of closed account and the requirement to provide bank statements are put in separate sentence, and both sentence adopted the phase “the last 12 months”.  I consider and find that the same phase “the last 12 months” as adopted in two separate sentence, referring to the last 12 months from the date of the Form E.    

22.  The interests of the parties concerning disclosure are, however, protected under PD15.11.  Where parties consider further disclosure is necessary they can always request by way of questionnaire and PD15.11/5 provided that at the First Appointment the Judge, with the objective of defining the issues and saving costs shall determine the extent to which each such questionnaire and/or request for particulars shall be answered, and such documents produced, and shall give directions as to the production of future and up-dating documentation. 

23.  It is noted that despite a series of correspondence exchange, no formal application was made to court for unredacted statements until the present summons.  The redacted statements were provided by the husband voluntarily upon request and were not subject to any court order.  The husband has stated under oath that the redacted information is stock code and stock name and is irrelevant to the cause of the matter.  The wife does not agree that the redacted information is irrelevant, yet it is for the wife to show the redacted information is relevant.

The application of the Rules of High Court

24.  Matrimonial Causes Rules 3 provided that:

“Subject to the provisions of these rules and of any enactment, the Rules of the High Court (Cap.4 sub. Leg.) shall apply with the necessary modifications to the commencement of matrimonial proceedings in, and to the practice and procedure in matrimonial proceedings pending the Court of First Instance or in the District Court.”

As the majority of the redacted statements are not within the ambit of Form E, save except the latest statement of the investment accounts as at the date of the related Form E, the rules of High Court would apply as to discovery subject to modifications. 

25.  The underlying objectives of the rules of High Court are now set out in Order 1A rule 1:

(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes; and

(f) to ensure that the resources of the Court are distributed fairly. 

26.  It should be noted that PD15.11/5 also provided that at the First Appointment the Judge, with the objective of defining the issues and saving costs shall determine the extent to which each such questionnaire and/or request for particulars shall be answered, and such documents produced, and shall give directions as to the production of future and up-dating documentation.  Thus the concept of proportionality and relevancy come into play at the stage of First Appointment.

The law of discovery in matrimonial proceedings vs. ordinary civil proceedings

27.  Both parties referred me to the Court of Appeal decision in GE Capital corporate Finance Group Ltd v Bankers Trust Co and Others [1995] 2 ALL ER, though for different purpose, it was held that:

“It was well established that a party was entitled to seal up or cover up parts of a disclosed document on the ground of irrelevance just as it could withhold an entire document on that ground, provided that the irrelevant part could be covered without destroying the sense of the rest or making it misleading…. The test to be applied in deciding whether material was relevant was not whether it was at least potentially relevant but whether it was unreasonable to suppose that the passages contained information which might either directly or indirectly enable the defendant either to advance his own case or to damage the plaintiff’s case. The Court would not ordinarily disregard the oath of the party that the parts concealed were irrelevant unless it appeared from the documents produced that that was not the case.”

28.  Mr Lynn submitted that the regime of discovery in matrimonial proceedings is very different from ordinary civil proceedings; the issue of relevancy should be treated differently in ancillary relief cases as compare to general civil cases, and referred me to a passage by Dunn J in B v B [1979] 1All ER:

“It is another feature of such proceedings that one party, usually the 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 furnishings and equipment of the matrimonial home, and of the physical possessions of the husband, and perhaps the approximate amount of cash kept in the house. She may also know, from conversations with the husband in the privacy of the 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 this 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.”

29.  I was also referred to Imerman v Tchenguiz [2011] 2 WLR by both parties, this is a case concerns wrongful access to confidential information.  Relevance was not an issue in that case.  The mandatory duty as to disclosure related to Form E discussed in that case is accepted by the respondent.  Mr Chan drawn my attention to para.28 a reference to the “overriding objective” in dealing with ancillary relief cases, the relevant part is as follow:-

“(1) The ancillary relief rules are a procedural code with the overriding objective of enabling the court to deal with cases justly.

(2) Dealing with a case justly includes, so far as is practicable –

(a) ensuring that the parties are on an equal footing; 9b) saving expenses; (c) dealing with the case in ways which are proportionate – (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party; (d) ensuring that it is dealt with expeditiously and fairly; and (e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.”

The relevance of the unredacted statements to the cause of the issue

30.  It is submitted on behalf for the wife that she needs to tidy up her knowledge with the statements, if the statements do not reflect her knowledge, it would mean something is missing.  Having considered the wife’s affidavit dated 18 August 2011, it appears that the purpose of obtaining the details of the covered entries is to verify whether the husband has another share dealing account or whether he has hidden up another quantity of stock, and not to gather information directly relevant to the amount of assets owned by the husband.  So long as the husband has provided an opportunity for the verification, it would be sufficient for the wife’s purpose.  

31.  The husband has provided opportunity for the wife’s solicitor and counsel to inspect, this was refused.  It is submitted on behalf of the wife that the inspection offered was not practicable.  It is the wife’s case that she has knowledge of certain stocks that the husband should have in his possession at various period of time; if so she could have provided the details of such to her solicitor enabling her to do the verification with the checklist.  If the details were there, the verification is achieved.  If not, then the husband may well be hiding some of his assets. 

32.  It is a case of whether the stocks as alleged by the wife are there or not, it would not be opened for the husband to argue otherwise, therefore, there is no need for the wife to obtain the details of the relevant covered up entries.  Where the husband disputes the allegation of the wife that he is hiding some of his assets, it is a matter for trial, but the unredacted statement would not assist the wife’s case. 

33.  Mr Lynn submitted that where the information was covered up only on the ground of irrelevance, then it is simpler to disclose it, with the protection of collateral undertaking, which would provide sufficient protection; I do not agree, as this would against the objective of defining the issues and saving costs as stated in PD15.11/5.  Mr Lynn further submitted that without knowledge of the redacted information, the wife would not be able to know whether the husband was trading in certain sector of the stock and securities market, and that redacting the statement reduce the intelligibility.   

34.  Mr Chan submitted that knowledge of the stock code and stock name is not relevant to the cause of issue, I agreed.  Mr Chan also submitted that the trade history does not suggest any financial misconduct; to redact the statements was to avoid the wife making a case of financial misconduct only base on the losing transaction.  By financial misconduct, Mr Chan must be referring to irrational trading, as the duty of the family court is to ascertain the assets instead of making enquiry of any criminal activities.  The husband may be overcautious but this is not material, the redacted statements were provided voluntarily upon request, the husband has long maintained that the covered up information is not relevant to the cause of issue and an offer for inspection by a representative of the wife’s solicitor and counsel was made on 10 June 2011 after the issue of the summons. 

35.  I noted that all the investment transactions concerned were through the open market and there was a general growth in the investment accounts.  I considered that with only the stock code and stock name covered up the intelligibility of the statements would not be reduced and I also considered that if the wife is minded to make out a case of financial misconduct, namely irrational trading, on the part of the husband, the unredacted statements would not assist her any further, I would refer to this again. 

36.  Mr Lynn emphasised that because of the nature of the matter, the law of discovery to Ancillary Relief should be different from that of the general civil cases, and referred to a passage in “Resolution Guides to Good Practice” a publication about the practice of ancillary relief in UK:-

“Per Charles J in I v I [2008] EWHC 1167 (Fam), the duty of full and frank disclosure includes,: ‘a duty to provide information that would set the other side on a line of enquiry, or a thought process, on matters to which the court must have regard under s.25MCA 1973(equivalent to s.7of Cap.192) …it includes a duty to inform the other side of information that may (a) result in the removal of uncertainty as to the value of assets, or the amount of a part’s future income, or (b) inform the assessment of the income or earning capacity of a party to the marriage or the value of his or her assets.’ Negotiations relating to the sale of a property or shares whose value is relevant, or to existing or new employment that would have an impact on income, should generally be disclosed. It would also be prudent for estimates of discretionary bonuses or awards to be given. If there is any doubt about the effect of the information, disclosure should be given.”

37.  Mr Chan on the other hand referred to the preceding paragraph of the same publication, which dealt with the overriding objective applicable in the matrimonial proceedings:

“The Family Proceedings (Amendment No 2) Rules 1999…amended the Family Proceedings Rules 1991… and require the court process to be managed with reference to the ‘overriding objective’ defined at r2.51D(1) as ‘enabling the court to deal with cases justly’. At r2.51D(2) ‘justly includes…(b)saving expense and (c)dealing with the case in ways which are proportionate…’. Furthermore, r2.51D(4) states that ‘the parties are required to help the court to further the overriding objective’. As a matter of law and good practice, this must include an obligation to ensure that the court has been given full and frank disclosure by both parties, although r2.51D(6)(d)requires active case management by ‘regulating the extent of disclosure of documents and expert evidence so that they are proportionate to the issues in question’.

The President’s Direction on Ancillary Relief Procedure of 25 May 2000 [2000] 1FLR 1997 … and the pre-application protocol attached to that direction…  further underlines the obligation of the parties to make full and frank disclosure of all material facts, documents and other information relevant to the issues in the context of pre-application disclosure.”

38.  It should be noted that apart from the abovementioned purpose that transpired in the wife’s affidavit, other possible reasons for the discovery of the unredacted statements as suggested in the Petitioner’s submission would be to ascertain whether there is dissipation of assets or irrational trading on the part of the husband.  As the only information redacted is the stock name and code, for any dissipation of assets, if existed, this could be identified in the redacted statements.  For irrational trading, the wife would need to resort to expert evidence that no reasonable man would have entered into the same transaction, yet it is not dispute that there was a general growth in the investment accounts.  There is nothing suggesting that the husband was engaging in irrational trading.  I do not consider the unredacted statements would assist the wife’s case any further.

39.  For the aforesaid reasons, I refuse the wife’s application except for the latest statement of the investment accounts as at the date of the related Form E.  It is noted that the offer for inspection remained open after the hearing adjourned part-heard on 24 August and extended to the wife accompanied by a representative of her solicitor and her counsel but this was not taken up by the wife.

Costs

40.  In substance, the wife’s application for unredacted statements has been unsuccessful. However, I considered there is a justification for the wife to issue the summons in the first place, yet the wife has been unreasonable in refusing the offer of inspection made on 10 June 2011.  Hence I make an order nisi that parties to bear their own costs incurred before the petitioner turned down the offer of inspection, costs incurred thereafter from 21 June 2011 to the respondent, to be taxed if not agreed.  Counsel certificate allowed.