NG AU YUEN NGAR, PAMELA v. NG KIT LING and Others

IN THE COURT OF APPEAL

1997, No. 16

(Civil)

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J U D G M E N T

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Nazareth V-P (giving the judgment of the Court) :

1. The matrimonial proceedings in the course of which this interlocutory appeal arises, have a long history. Fortunately not too much of that is relevant to the appeal. It suffices to say the following.

2. The petitioner/wife and the 1st respondent/husband were married in July 1975. They have one child, a son born in November 1976. In 1983 in order to obtain Unites States citizenship for the family, they divorced and the 1st respondent married a friend of the petitioner who had American citizenship. The plan failed. The parties cohabited in Hong Kong from about 1985 until 1987, when the petitioner went to Canada to qualify for citizenship. In 1989, they remarried in Canada. The 1st respondent visited the petitioner each year, until she returned in 1991. When she returned, the 1st respondent told her he was leaving her.

3. The petitioner commenced divorce proceedings in 1993. A decree nisi was granted on 13th October 1993 and made absolute on 15th December 1994. The petitioner made an application for ancillary relief which came before Barnett J in March 1995.

4. This is a convenient point at which to introduce the 2nd respondent. Accordingly to the 1st respondent, she came to Hong Kong from China in the 1980s. She worked hard and developed a successful business selling electronic and other goods from China to the United States of America. By 1992, according to the 1st respondent, she was rich. The 1st respondent had been going out with her since 1985 and since 1991 had begun a serious relationship with her. He told Barnett J that at the time of the trial, she was in Hawaii having his baby there because of medical complications best treated there. In consequence, although named in the proceedings, she was not served and did not make an appearance.

5. After a full hearing, Barnett J found that:

(1) The 1st respondent had not made full and frank disclosure of his financial affairs as required.

(2) The 1st respondent and not the 2nd respondent was behind three limited companies - Joyfine, Jannock, and Intermarine - and was the beneficial owner of these companies, their properties and of properties in the 2nd respondent's name.

(3) While he drew the interference that the 1st respondent was disposed of assets substantially in excess of those he admitted, the 1st respondent was not among that class of persons who had virtually unlimited access enabling him to meet any award the court might make against him. He was a solicitor and an entrepreneur of modest means and ability.

He estimated the 1st respondent's assets at between $30m and $40m and on that basis made an order that the 1st respondent pay the petitioner a lump sum of $16m.

6. Barnett J, understandably in the circumstances, was not able to identify the 1st respondent's assets. The petitioner has ever since been engaged in attempting to do so. The proceedings in which the order being appealed was made are proceedings in which the petitioner is seeking to identify the 1st respondent's assets. So far she appears to have recovered only a part of the judgment debt, i.e. about $4m, which, it does not appear to be disputed, is about the amount of the costs so far incurred. The amount outstanding is thus in excess of the $16m awarded, as it continues to swell with interest. Despite a prohibition order obtained by the petitioner on 27th September 1995 prohibiting the 1st respondent's departure from Hong Kong, he appears to have absconded and his whereabouts are apparently not known.

7. Of the three companies mentioned by Barnett J, the shares of which, it is not in dispute, are owned by the 2nd respondent and her sister, Joyfine Ltd and Jannock Ltd were joined as 3rd and 4th respondents by order of Barnett J dated 29th September 1995. Joyfine owns Flat No. 3404, Convention Plaza ("Flat 3404") and Jannock owns office A on the 3rd floor of the Centre Mark II in Hong Kong Central ("the Centre Mark Office").

8. On 29th September 1995 the petitioner obtained from Barnett J a Mareva injunction freezing assets of the 2nd respondent, Joyfine and Jannock (including Flat 3404 and the Centre Mark Office). However the Mareva injunction was varied on 13th December 1995, so that the only assets of the 2nd respondent, Joyfine and Jannock which remained frozen were Flat 3404 and the Centre Mark Office. In due course, Flat 3404 was found to be leased by Joyfine to Gosi Company Limited ("Gosi") under informal arrangements at a rent which was maintained at just enough to cover the increasing mortgage payments and outgoings.

9. On 24th December 1996 Rogers J upon the application of the petitioner ordered the 2nd respondent to disclose certain documents of Gosi. The order was amended on 23rd June 1997 under the slip rule. The 2nd respondent appealed to this Court against the order.

The additional evidence

10. At the hearing of the appeal, the petitioner sought and we granted her leave to adduce further evidence. This was a report prepared by her accountants Ernst and Young on 4th June 1997. The application was opposed by the 2nd respondent on the three Ladd v Marshall conditions. But the hearing before Rogers J, not having been on the merits, those conditions did not apply (see para. 59/10/11 p.1004 of Vol. 1 of the Supreme Court Practice 1997). In any case, Ernst and Young could not prepare the report in time for submission to Rogers J, because they received the necessary documents too late from the 2nd respondent. Second, the report comprised analyses of transactions between Gosi on the one hand and Joyfine and Jannock on the other, and resulting conclusions, which would obviously have an important influence in this appeal. And, third, by its very nature the report was apparently credible. Thus all three of the Ladd v Marshallconditions were met.

11. The 2nd respondent, as we have said, did not appear in the proceedings before Barnett J. As Rogers J mentioned, she hotly disputed the findings of Barnett J, that the 1st respondent was behind the companies mentioned and a beneficial owner of the shares in them and the properties they held. It was said on her behalf that the discovery sought could not have been in aid of the Mareva injunction (because the Mareva injunction as varied related only to Flat 3404 and the Centre Mark Office), and that Flat 3404 itself had appreciated in value to about $20m, which was sufficient to meet the petitioner's entire award including accumulating interest. That latter point, however, cannot be accepted as a material consideration, since it may be found that Flat 3404 is not one of the 1st respondent's assets, and the petitioner needs discovery to find out what other assets the 1st respondent may have. As for the former point, we agree that the discovery sought could not have been in aid of the Mareva injunction, but we see no reason why the discovery sought could not have been ordered in aid of the proceedings, which are simply proceedings to identify those assets against which the judgment may be enforced.

12. Mr Ronny Tong QC, who with Mr Jet Sew Tong, appears for the 2nd respondent, took the following two points:

(i) there was no valid ground upon which discovery of the documents could be ordered, and

(ii) even if there was, the exercise of discretion on the part of Rogers J to order discovery of the Gosi documents was oppressive.

The discovery order

13. As narrowed down by Rogers J on 24th December 1996, the substance of the order was as follows:

(i) That the 2nd respondent do produce the documents relating to Gosi Co Ltd as specified in the schedule for inspection by the petitioner or her representatives within 28 days from the date of the order.

(ii) That there be liberty for the petitioner or her representatives to take copies of the Gosi documents.

"	SCHEDULE
	'The Gosi documents'

(1) Financial Records

a. Audited financial statements since the date of incorporation i.e. 5 January 1988.

b. Accounting records since the date of incorporation i.e. 5 January 1988 up to and including May 1995 being management accounts for each financial period ended; trial balances; accounting journals recording its transactions (excluding supporting documents for journal entries); general ledgers; cash books.

(2) Banking information

All bank statements of all bank accounts opened by Gosi Company Limited since the date of incorporation i.e. 5 January 1988 up to and including 1990; copies of resolutions authorising signatories of such bank accounts; returned cheques (with information on both the front and back of the cheques) in so far as the same are in the possession of the 2nd Respondent and cheque stubs in so far as they are still available.

(3) Related Party Transactions

Documents relating to transactions between Gosi Company Limited and (1) the 1st Respondent, (2) the 3rd Respondent, (3) the 4th Respondent and (4) other companies in which the 1st Respondent had any involvement."

Legal basis of discovery order

14. Mr Tong argued that discovery could not be ordered against the 2nd respondent against whom there was no substantive cause of action. In response, Mr Patrick Fung QC, who with Miss Monica Chow appeared for the petitioner, relied squarely upon the decision of the English Court of Appeal in Mercantile Group (Europe) A.G v Aiyela and others [1994] QB 366. There, Hoffman LJ (as he then was) held that the court was entitled, ancillary to a post-judgment Mareva, to order discovery from a person against whom there is no substantive cause of action, and that all that is necessary to found the jurisdiction is that the third party should have become mixed up in the transaction concerning which discovery is required (at pp 374B-C, 375A-B). Steyn LJ and Sir Thomas Bingham MR (as they then were) agreed. We have no hesitation in applying their dictum. Although the discovery cannot be said to be ancillary to a post-judgment Mareva, the case falls squarely within the decision of the House of Lords in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133, on which the Court of Appeal relied.

Factual basis of discovery order

15. Applying the foregoing dictum, the question is whether the 2nd respondent was mixed up in the 1st respondent's financial affairs, in particular his disposal of his assets. It is only necessary to refer to the following features of those matters, touched on by Barnett J, to find the answer.

16. Although the 1st respondent said that it was about 1991 that he began a serious relationship with the 2nd respondent, he admitted that he lent her money to help purchase a flat as early as 1988. In the context of the purchase of another flat by the 2nd respondent, which only he occupied moreover rent free during her ownership, the 1st respondent in March 1992 received three cheques from the 2nd respondent, which he admitted that he had himself made out. It was put to him that one for $400,000 was for commission for his effecting the sale; another for $1.1m was part of the sale proceeds and the third for $410,000 was in respect of costs and disbursements. He denied that suggestion.

17. About the time that Joyfine made substantial payments for the acquisition of Flat 3404, the 1st respondent made very substantial payments, totalling $3.4m, to the 2nd respondent, very suggestive of a connection with that purchase, as Barnett J put it. The 1st respondent's explanation was that the payments were merely coincidence.

18. Another coincidence was that the 2nd respondent's sister executed a declaration of trust which was prepared by the 1st respondent's firm and witnessed by him on the day before the sale and purchase agreement was signed. The declaration was in favour of Intermarine Exports Ltd ("Intermarine"), which held 99% of the shares of Joyfine Ltd. Yet until confronted with those facts, the 1st respondent maintained that he knew nothing of Intermarine and his firm had never acted for it.

19. On 20th October 1994 the 1st respondent's bank account was credited with $2.4m being a refund by China National Aviation Corporation of the investment made in a failed joint venture. The 1st respondent said that the 2nd respondent had no connection with the matter. However, the cheque from the China National Aviation Corporation had originally been made out in the name of Joyfine. The 1st respondent's explanation was that the Corporation staff mistook him and Joyfine as being the same. That explanation, which Barnett J not unnaturally found difficult to swallow, pointed to a real connection between the 1st respondent and Joyfine.

20. There was also evidence that the 1st respondent bought and sold shares and that he and the 2nd respondent exchanged sums totalling several hundred thousand dollars when they bought and sold shares for each other.

21. As to Gosi itself, Mrs Tong, the 2nd respondent's solicitor, deposed that she was advised by the 2nd respondent and verily believes that Gosi is and was at all material times a trading company owned and controlled by the 2nd respondent and her sister, and that the 1st respondent had nothing to do with Gosi whatsoever. We pause here to mention that we do not accept that the affirmations made on behalf of the 2nd respondent are conclusive as contended by Mr Tong; that seems to us to be clear from the judgment of Mortimer JA in Pacific Link Communications Ltd v Melvyn Wong Man-him, Civil Appeal 189 of 1994, unreported.

22. Gosi appears, as Rogers J pointed out in his judgment, to date back a very long time to when the 1st respondent was giving substantial financial assistance to the 2nd respondent and helping her to become a wealthy woman. Gosi was incorporated in January 1988. As we have already indicated, Flat 3404 was leased by Joyfine to Gosi under an oral agreement, and Gosi paid a rent that was maintained at a rate that met the interest payments and increasing outgoings. Barnett J's finding was that the 1st respondent was behind and the beneficial owner of the 2nd respondent's companies, their shares and properties. Plainly the relevant records of the 2nd respondent's trading company could shed light upon the 1st respondent's interests in the shares and properties, particularly Flat 3404.

23. The foregoing does not constitute an exhaustive list of the matters that weigh in aid of such a conclusion, but they sufficiently and manifestly demonstrate that the 2nd respondent was mixed up in the matters mentioned. It follows, and we have no hesitation in concluding, that it was appropriate to order discovery of the Gosi documents, unless such an order would be oppressive.

Was the discovery order oppressive?

24. Rogers J, in making his order of 24th December 1996, did not expressly address the question whether the discovery he ordered might be oppressive. But it is implicit in the way he dealt with the several items he ordered to be discovered, that that question was very much in his mind. He set out, in his own words, to try and limit the discovery sought to something relatively simple for the 2nd respondent to provide. Thus, with reference to financial records, he observed that he did not think that there would be any difficulty in providing those. With reference to accounting records, although these were sought from the date of incorporation, i.e. the 5th January 1988, to the time he was addressing the matter, i.e. December 1996, he took the view that records up to May 1995 would be sufficient, and said that such should not cause any difficulties; likewise that he thought accounting journals would not cause any difficulty. Supporting documents for journal entries that were also sought, he thought, would cause difficulty and a substantial amount of work; likewise the general ledgers and cash books; and these he excluded from the order. It is not necessary to adumbrate his approach further.

25. Plainly, he gave careful consideration to the matter of oppression, and having done so, then exercised his discretion in ordering only the limited discovery that he did. It is well established that this Court will not interfere with the trial judge's exercise of discretion save in the limited way now well established (see e.g. Hadmor Productions Ltd and Others v Hamilton and Another [1983]1 AC 191; 220B-F). We cannot see any good reason which would entitle this Court to interfere with the exercise by Rogers J of his discretion, particularly on the ground that the discovery ordered is oppressive. Had there been some other ground for intervention, which resulted in this Court having to exercise the judge's discretion, it does not seem to us that this Court could properly have come to a significantly different conclusion.

Conclusion

26. So far as other aspects of Mr Tong's submission are concerned, we do not find it necessary to deal with them in this judgment having set out our foregoing conclusions. We are satisfied, for the reasons we have endeavoured to give, that the appeal fails and should be dismissed.

27. As to costs, we make an order nisi that the petitioner be paid her costs of the appeal by the 2nd respondent, leaving undisturbed the costs order below.