CK v. TCH

FCMC 5240 /2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5240 OF 2011

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D E C I S I O N

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Background

1.  The Petitioner Wife (“Wife”) issued an Ex Parte Summons on notice on 16 November 2012 seeking, inter alia, an order for specific discovery under Order 24 rule 7 and a Mareva Injunction under Order 29 rule 1 of the Rules of the District Court.  I will respectively refer them as “discovery application” and “mareva injunction”.  A hearing was arranged for 19 November 2012.  The Wife filed her 5^th Affirmation in support of these 2 applications.  The Husband and his lawyers were present to oppose both the discovery application and mareva injunction.  The matter was thus turned into an inter partes hearing (see 29/1/52 of the Hong Kong Civil Procedure 2013). 

2.  At the 19 November 2012 hearing, directions were granted for the Wife to file and serve her 6^th Affirmation by 20 November 2012 (that is, the following day), the Husband to file and serve his Affirmation in Opposition by 26 November 2012 and the Wife to file and serve any Reply by 28 November 2012.  A hearing was fixed for 30 November 2012 and an interim mareva injunction was granted until the next hearing.

3.  The Wife issued an Inter Partes Summons on 20 November 2012 upon filing her 6^th Affirmation in substance repeating the discovery application and seeking continuation of the interim mareva injunction which was granted on 19 November 2012.  The Husband filed his 4^th Affirmation in Opposition to both applications of the Wife.

The Discovery Application

4.  The terms of the application sought in the Inter Partes Summons are as follows :-

“1. The Respondent do within 2 days from the date of the order to be made herein provide by way of affidavit the written terms of settlement with the Bank of China (Hong Kong) Limited in or related to the settlement of the Bankruptcy Proceedings HCB xxxx of 2012”

5.  It is obvious the Wife is seeking discovery of the terms of settlement allegedly reached by the Husband with his creditor The Bank of China which had commenced the bankruptcy proceedings.  The Wife was not seeking production of the actual Deed of Settlement allegedly entered into by the Husband with the Bank.          

6.  The Husband in his 4^th Affirmation opposed such discovery application on the ground that one of the terms of settlement with the Bank was that the terms of settlement should at all times be kept confidential (see paragraph 6 of the Husband’s Affirmation).  He had, however, written to the Bank’s lawyers for consent to disclose the terms but was refused (see paragraph 7 of the Husband’s Affirmation). There are no other grounds of opposition raised by the Husband in his Affirmation.

7.  I find the Husband’s contention of confidentiality unconvincing. It is trite law that confidentiality is no bar to disclosure unless the information sought is privileged.  It is of course a factor to be considered in the exercise of the court’s discretion (per To J. at paragraph 18 in Tullett Prebon (Hong Kong) Limited v. Chan Yeung Fong Nick & ors, HCA No.2197/2009). “Confidentiality” is not a separate head of privilege, but it may be a very material consideration to bear in mind when privilege is claimed on the ground of public interest ( per Lord Cross of Chelsea at p. 433 G to H in Alfred Crompton Amusement Machines Ltd v. Customs and Excise Commissioners (No.2) [1974] AC 405). 

8.  In the present case, it is even not required to consider the question of confidentiality since the Husband, with the benefit of full legal advice, had not raised as an issue any kind of privilege over the information sought by the Wife; whether it be legal, professional, litigation or otherwise, against disclosure nor had he claimed public interest against the disclosure. In my view confidentiality, if there exists, only binds the parties to the agreement containing such confidentiality clause.  For discovery in litigation, the notion of privilege comes into play and it matters not the information sought is confidential if there is no issue of privilege.  In any event, a party who obtained discovery may only use the documents disclosed for the purpose of conducting the legal proceedings involved and there is an implied undertaking by that party not to use the documents for any collateral or ulterior purpose (see Liu Hing Sang v. Estate of Li Kwan, deceased & anor , HCPI No.665/2009 per Master Ng at paragraph 56 of the Judgment). 

9.  Furthermore, as rightly pointed out by Counsel for the Wife, the mere allegation by the Husband of the existence of a clause on confidentiality in the Deed of Settlement, without disclosing the wordings of such confidentiality clause, one cannot even tell the nature and substance of the effect of such clause let alone any issue over interpretation or scope of confidentiality.  I believe the same principle applies to discovery of information as well as discovery of documents.

10.  I do not have to consider any issue of public interest against discovery as this had never been an issue.

11.  In relation to the alleged refusal to disclosure by the Bank’s lawyers, there is plainly no such evidence.  In the letter from the Bank’s lawyers which was exhibited as “TCH-10”, the reply given was :-

“We refer to your letter dated 19^th November 2012.

Our client has no knowledge or information about the matrimonial proceedings in FCMC No.5240 of 2011 nor the Ex-Parte Simmons filed on 16^th November 2012. Our client is not in a position to agree or disagree to the disclosure of the settlement terms of the Deed of Settlement. It is a matter for your client and your firm acting as his legal advisers.

No admission, estoppel or waiver whatsoever is to be inferred on the part of our client.

All our client’s rights are expressly reserved.”

12.  It is plain and obvious from the contents of the letter that the Bank’s lawyers did not see fit to agree or disagree with the disclosure.  It was left for the decision of the Husband and his lawyers.  Thus it is wrong for the Husband to twist the meaning in the letter and claimed the Bank had refused to give consent to disclosure.

13.  Therefore, I find the Husband is unable to provide any justifiable reasons or valid grounds of opposition to the disclosure sought by the Wife. Besides, I am satisfied that the information sought by the Wife are material and relevant in light of the Wife’s pending ancillary reliefs.  I will accordingly grant an Order in terms of paragraph 1 of the Wife’s Summons dated 20 November 2012 save and except that I allow the Husband to produce the Affirmation within 5 days from the date of this Decision.

The Mareva Injunction

14.  On 19^th November 2012, this Court granted an interim mareva injunction to take immediate effect until 2:30 p.m. on 30 November 2012 which is the returnable date for the substantive argument.  The terms of the interim injunction, in so far as the restrictive provisions are concerned, are as follows :-

“1. Restriction on disposal of assets

(1) The respondent must not –

(a) remove from Hong Kong any of his assets which are within Hong Kong, whether in his own name or not, and whether solely or jointly owned, up to the value of RMB 22,865,000 or its Hong Kong Dollar equivalent, or

(b) in any way dispose of or deal with or diminish the value of any of his assets, whether within or outside Hong Kong, whether in his own name or not, and whether solely or jointly owned up to the same value.  This prohibition includes the following assets in particular the properties known as –

(i) 深圳市福田區xx工業村xxx楝;

(ii) 深圳市福田區xxxx1座xxG;

(iii) 深圳市福田區xxxx1座xxH; and

(iv) 深圳市福田區xxxx花園x棟xxC.

or the net sale money after payment of any mortgages if they have been sold;

(2) If the total unencumbered value of the respondent’s assets in Hong Kong  exceeds RMB 22,865,000 or its Hong Kong Dollar equivalent, the respondent may remove any of those assets from Hong Kong or may dispose of or deal with them so long as the total unencumbered value of his assets still in Hong Kong remains above RMB 22,865,000 or its Hong Kong Dollar equivalent.

If the total unencumbered value of the respondent’s assets in Hong Kong does not exceed RMB 22,865,000 or its Hong Kong Dollar equivalent, the respondent must not remove any of those assets from Hong Kong and must not dispose of or deal with any of them, but if he has other assets outside Hong Kong the respondent may dispose of or deal with those assets so long as the total unencumbered value of all his assets, whether in or outside Hong Kong, remains above RMB 22,865,000 or its Hong Kong Dollar equivalent.”

15.  At paragraphs 8 (a) and (b) of the Husband’s 4^th Affirmation, he deposed, inter alia, to the following :-

- Property (ii) had been sold on 22 May 2012 at the price of RMB 1,537,597, the net proceeds of sale was around RMB 540,000 kept by him.  The relevant Sale and Purchase Agreement was exhibited as “TCH-11”.

- Property (iii) had been sold on 11 October 2012 at the price of RMB 998,574, the net proceeds of sale was around RMB 400,000 kept by him. The relevant Sale and Purchase Agreement was exhibited as “TCH-12”.

16.  However, at the hearing on 30 November 2012, it was noted by this Court that the dates appeared on exhibit sheet of “TCH-12”, the actual exhibit of Sale and Purchase Agreement and the attached Notarial Certificate were all dated 26 November 2012 (which is a date after the interim mareva injunction granted on 19 November 2012).  This is different from paragraph 8 (b) of the Husband’s Affirmation where he deposed to the sale having taken place on 11 October 2012 (which is a date before the interim mareva injunction).  Mr. Raymond Ng, the solicitor for the Husband and in charge of the case was, however, unable to provide this Court with any satisfactory answer to such discrepancies of dates nor was he in a position to confirm the exact date of sale of Property (iii).

17.  I must say such discrepancies, in the absence of any full and satisfactory explanation, had a significant bearing in deciding whether the interim mareva injunction granted on 19 November 2012 had been breached or, for the present application, whether such interim mareva injunction should be continued.  It is the Wife’s case that the Husband has been dissipating assets which she might have an interest in her ancillary reliefs claim.  It is also the Wife’s case that the bona fides of the Husband’s debt as to the terms of settlement with The Bank of China are in doubt; in particular, the Husband all along only had to pay HK$6,000 a month to the Bank for a judgment debt of HK$8,822,619.30 together with interest upon which the bankruptcy proceedings were issued.  The Husband at present had also persistently refused to disclose the terms of the settlement with the Bank.

18.  In addition, the Wife discovered the Husband had used false documents to procure the sale of Property (i) to his nephew in Mainland China allegedly at a consideration of RMB 3 million which, according to the Husband’s valuation in his Form E, such property worth RMB 40 million. As such, it is a grossly under-valued sale.  The Wife had reported the matter to the relevant authorities in Mainland China and in Hong Kong.   

19.  Moreover, the Husband in his Affirmation in Opposition failed to disclose the whereabouts of the net proceeds of sale of Property (i), (ii) and (iii) except by saying ‘the net proceeds are kept by me’.  There were no records to show any of the alleged sales had completed since the only documents disclosed so far are the Sale and Purchase Agreements.  There were no bank records either to show the net proceeds of sale.    

20.  As to the remaining Property (iv), it was and is being used by the Husband as his residence in Mainland China. 

The law

21.  Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap.192 (“MPPO”) empowers the Court to grant injunctions if the Court is satisfied that there is an intention on a party to defeat the other party’s claim for financial provision in making a disposition of property. Such powers are in addition to the inherent jurisdiction of the Court to grant mareva injunctions in appropriate cases to preserve matrimonial assets pending final determination of financial reliefs. 

22.  The present application was grounded upon Order 29 rule 1 of the Rules of the District Court.  Counsel for the Wife succinctly sets out the applicable legal principles in her skeleton submissions dated 16 November 2012 and referred this Court to some cases and authorities where mareva injunctions were obtained in the commercial context.  Mr. Raymond Ng, as solicitor acting for the Husband, had not challenged those general principles on mareva injunctions.  At the time of this hearing, it is undisputed that the Husband had already disposed of 3 out of the 4 properties in Mainland China.  Apparently the Wife, being legally advised, saw fit to seek a Mareva injunction as opposed to a section 17 injunction.  I believe this may be a sensible approach.

23.  However, I am not assisted by either party on any case law in respect of Mareva injunctions in the matrimonial context.  There are three cases which I find useful and of relevance. 

24.  In the English case of Shipman v. Shipman [1991] 1 FLR 250, the wife suspected the husband intended to dispose of a severance payment which he was expecting to receive thus defeating her ancillary relief claims.  The husband refused to give an undertaking to the extent and effect of freezing any part of his severance payment.  The wife applied for an injunction which was granted pursuant to section 37 of the Matrimonial Causes Act 1973 (the equivalent of such provision in Hong Kong is section 17 of the MPPO).  The husband appealed to the English High Court and the appeal was dismissed. 

25.  Quoting the words of Lincoln J at page 253E to F of the Shipman case :

“As in all such cases of injunctive process, the balance of convenience has to be considered. Counsel for the husband urges me to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunctions, and to assimilate the use of, and procedure for, injunctions in the Family Division to those in commercial law. In my view the matrimonial field calls for a different approach. To my mind the circumstances here call for the injunction to continue. If it were discharged, the husband could well change his intentions, however genuine and well-disposed to the wife his present state of mind may be……..”

26.  The Hong Kong Court of Appeal (Fuad VP, Penlington & Nazareth, JJA) in the case of MRW v. EWR and anor, CACV No.211 of 1992, where it was held :-

“Of course an injunction granted under section 17 of the Matrimonial Proceedings Ordinance can legitimately be described as a ‘Mareva type’ injunction for it certainly has some features in common with the Mareva relief, however there are differences and in my view they are important. For a Mareva injunction, the plaintiff need do no more than depose to objective facts from which it can be inferred that the defendant is likely to transfer assets abroad or otherwise dissipate them. Shipman v. Shipman demonstrates that no found jurisdiction under section 37(2)(a) of the English Act (section 17(1)(a) of our Ordinance), as dictated by the statutory language, the court must be satisfied that the other party, with the intention of defeating the claim for financial relief, is about to make any disposition etc of any property. This is a considerably higher threshold than that which has to be crossed when applying for ordinary Mareva relief. Moreover, it will surely be extremely unlikely that the spouse (usually the wife) will not have some legitimate claim to at least a part of the family assets involved. Since when exercising its powers under section 7 of the Ordinance (Cap.192) the court is required to have regard to the conduct of the parties, no doubt irresponsible, vindictive or unjustified procedural steps taken by a spouse which result in the depreciation of the family assets will be taken into account. Referring to slightly differently worded provisions in force in England (section 25(2)(g) of the Matrimonial Causes Act 1973) at p.583, para 29.64, the learned authors of Rayden and Jackson, 16^th Edition, Vol.1 say this :

“…..and there is no reason in principle why other procedural

misbehaviour should not also constitute ‘conduct which it

would be inequitable to ignore’ within the section.”

27.  In the later Hong Kong case of Tan Li Hui v. Tan Kian Chee [1997] 4 HKC 94 where the learned Madam Justice Le Pichon (as she then was) upheld Shipman.  Quoting the words of her Ladyship in the Judgment :

“The threshold of a section 17 application is different from an ordinary Mareva application inasmuch as the applicant has to satisfy the Court of the Respondent’s ‘intention of defeating the claim for financial provision’ : see Will v. Will & anor (supra)………

…….

For the purposes of the present application, it is unnecessary to come to any conclusion as to whether the presumption in s.17(3) has in fact been rebutted.  Apart from section 17, the Court clearly has inherent jurisdiction to grant injunctions in several proceedings to preserve assets.  See the English Court of Appeal decisions of Roche v. Roche [1981] 11 Fam. Law 243 and Shipman v. Shipman [1991] 1 FLR 250.  In deciding whether to exercise its inherent jurisdiction, the Court is not required to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunction and to assimilate the use of and procedure for injunctions in the Family Division to those in commercial law.  In Shipman the learned Judge held that the matrimonial field called for a different approach, I respectfully agree.………” 

Discussion

28.  The Shipman type injunction is meant to ensure that a party could not surreptitiously and irresponsibly squander away family assets which may be in that spouse’s name pending final determination of ancillary reliefs.  Injunctive reliefs, be in a Shipman type or Mareva, are equitable remedies which involve the exercise of the court’s discretion. 

29.  Although the many restrictions and safeguards surrounding the use of Mareva injunctions in the commercial context are not applicable in the matrimonial context, the applicant (which is the Wife in the present case) is still required to prove on balance of all probabilities that there exists a risk of dissipation of assets by the other party (that is, the Husband) which, unless properly restrained, may affect her ancillary reliefs claim. 

30.  On the readily available and undisputed evidence, 3 out of 4 properties had been disposed of by the Husband without the knowledge and consent of the Wife and within the last 6 or 8 months.  The need for such urgent disposal had not been fully disclosed by the Husband.  The bulk of the assets which is Property (i) was allegedly sold by the Husband to his nephew in the PRC at a grossly undervalued consideration of RMB 3 million (which was in fact worth around RMB 40 million as confirmed by the Husband at paragraph 12 of his 4^th Affirmation ).  The net proceeds of sale of all the 3 properties still had yet to be located if without the disclosure by the Husband.  On balance, I am satisfied that there is a real risk of dissipation of assets by the Husband.  The balance of convenience lies in favour of the Wife.

31.  Considering all the circumstances of this case, I decide that it is necessary and proper to preserve and maintain the status quo.  Therefore, I order that the interim Mareva injunction dated 19 November 2012 be continued until disposal of the Wife’s ancillary reliefs application or until further order. 

Costs

32.  The Wife has been successful in both applications for discovery and continuation of the Mareva injunction.  There is no basis for me to consider departing from the normal rule on costs.  I therefore order that the Husband do pay the costs of the 2 applications of the Wife including costs reserved in the Ex Parte Summons. 

33.  I also grant Certificate for Counsel.

Orders

34.  I now grant the following Orders :-

(a) The Mareva injunction dated 19 November 2012 be continued  until final determination of the Wife’s ancillary reliefs  application or until further order;

(b) The Husband (i.e. Respondent) do pay to the Wife (i.e. Petitioner) the costs of both the Ex Parte Summons (on notice) dated 16 November 2012 and the Inter Partes Summons dated 20 November 2012 including all costs reserved.  This costs order nisi will become absolute if no application for variation is made within 14 days.

(c) There be Certificate for Counsel.