CWC v. KSCG

FCMC 15082/2017

[2019] HKFC 178

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 15082 OF 2017

________________________

________________________

________________________

J U D G M E N T

(DISCOVERY)

________________________

The application

1.  This is the substantive hearing on the Petitioner wife (“Wife”)’s application for discovery against the Respondent husband (“Husband”) by a summons filed on 3^rd January 2018 (“Discovery Summons”). 

2.  The Wife seeks an order that the Husband do answer questions raised by the Wife and to produce a number of documents, essentially contained in the Wife’s questionnaire dated 23 February 2017 raised upon the Husband’s Form E (“Wife’s Questionnaire”).  The Husband has filed the answer to the Wife’s Questionnaire on 11 October 2017 (“Husband’s Answer”).  The Wife was not satisfied of the Husband’s Answer and took out the Discovery Summons, returnable on 16 January 2018.

3.  At the 1^st Appointment hearing on 16 January 2018, it was ordered that the Husband do :-  

(a)  supply bank statements outstanding under the original Form E; and

(b)  answer item (1)(c) of the Discovery Summons.

As a result, the Husband had filed the bank statements and answer on 23 March 2018.  The remaining items in the Discovery Summons had been adjourned for argument hearing. 

4.  On 23 March 2018, the Husband also filed his 6^th affidavit (“6^th Affidavit”), which is the affidavit in opposition for the present argument hearing.  In the 6^th Affidavit, the Husband had, inter alia, indicated his stance as to providing answers to items (1)(a), (1)(b), (1)(f) and (1)(g) of the Discovery Summons.

5.  At the argument hearing, Counsel for the Wife, Mr. Chan, had confirmed that the only outstanding matters for the Court’s determination are items (1)(d) and (1)(e) of the Discovery Summons.

Background

6.  The Wife was born in December 1976, and she is now 42 years old.  She is now a housewife.

7.  The Husband was born in March 1966, and he is now 53 years old.  The Husband is a director of a number of companies.

8.  According to the Wife, the Husband is a grandson of the founder of the TS group of companies.  He has all along worked in the family business and he has been a director.  It is the Wife’s stance that as the Husband is a descendent of a local wealthy Chinese family, he has been receiving financial assistance from his parents through the family trusts arrangement.

9.  The parties were married in 2003.  Two children were born out of the wedlock, with the elder daughter and the younger son now 10 and 5 years old respectively (“Children”).

10.  It is not in dispute that the Wife had been working in equity trading / investment banking.  Since about 2009, she became a housewife.  It is also not in dispute that the Wife had been involved in helping the Husband and the Husband’s family with some financial affairs in the past.

11.  The Wife petitioned for divorce on 17 November 2017.

12.  The parties have subsequently agreed that care and control of the Children be granted to the Petitioner.  Access of the Children has also been agreed.  The custody matter of the 2 Children could not be agreed and the matter has been adjourned for trial.   

13.  For the ancillary matters, parties had filed their respective Form Es.  There were 1^st Appointment hearings and no Financial Dispute Resolution hearing had been conducted yet.

14.  The companies involved in the present hearing are :-

(a)  TSI Company Limited;

(b)  FHD Company Limited;

(c)  FSLM Company Limited and

(d)  SS Limited.

The Husband holds directorship in TSI Company Limited, FHD Company Limited and FSLM Company Limited, which are the 3 companies as stated in item (1)(d) of the Discovery Summons (collectively “3 Companies”).  Both parties agree that these 3 Companies are family business of the Husband’s family and could be regarded as family companies.

15.  The trusts involved in the present hearing and as stated in item 1(e) of the Discovery Summons are :-

(a)  S Hei Trust;

(b)  W Trust;

(c)  S Hing Trust; and

(d)  H Trust

16.  The Husband is the settlor and the primary beneficiary of the S Hei Trust.  He is the settlor of the W Trust.  SS Limited is a company owned by the S Hei Trust, holding some shares of the Husband’s family businesses.  SS Limited is also one of the shareholders of all 3 Companies, which the Husband is one of the directors of these 3 Companies.

17.  According to the Wife, the S Hing Trust is the trust of the Husband’s father, and the H Trust is the trust of the Husband’s mother.  The Husband has worked in his family companies and his monthly earnings are not substantial, but the Wife alleges that he receives an annual distribution of around USD 600,000 per annum from the family trusts.

The applicable legal principles

18.  The Court has jurisdiction to make order for disclosure and discovery pursuant to Order 24 of the Rules of the High Court, Cap. 4A and Rule 77(4) of the Matrimonial Causes Rules, Cap. 179A. 

19.  The Honourable Mr Justice Ng has summarised the law on discovery in the case Jade’s Realm Ltd v Director of Lands (HCA 1509/2012), as follows :-

“21. I shall first remind myself of the principles which are germane to the present application.

(1) There is no jurisdiction to make an order for specific discovery under RHC O 24 r 7 unless there is sufficient evidence or prima facie case that: (a) the documents or classes of documents exist which the other party has not disclosed; (b) the documents relate to a matter in issue in the action; and (c) the documents are in the possession, custody or power of the other party.

(2) Once it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order discovery.

(3) The Court will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.

(4) The order must identify with precision the documents or categories of documents which are required to be disclosed, for otherwise the person giving discovery may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.

(5) Where discovery is sought in relation to a class of documents, it is important that the class should not be defined or described too widely, and should not be defined so as to include documents which are not relevant.

(6) Despite the Peruvian Guano test for relevance, “fishing” is not allowed, and discovery should not be oppressive.

(7) Statements in a party’s affidavit of documents are conclusive e.g. on the question whether he has or has had any documents other than those disclosed, as to their relevancy or as to the grounds stated in support of a claim for privilege from production.

(8) The respondent may answer an application for specific discovery by an affidavit stating that he does not have the documents, and this will be conclusive at the interlocutory stage.

See: Hong Kong Civil Procedure 2014 Vol. 1 para. 24/7/1; Berkeley Administration Inc v McClelland [1990] FSR 381 at 382-3; Lee Nui Foon v Ocean Park Corp (No 1) [1995] 2 HKC 390 at 391-3; Paul’s Model Art GMBH v UT Ltd [2006] 1 HKC 238 at paragraphs 24 & 32; Tai Fook Futures Ltd v Cheung Moon Hoi Jeff [2006] 4 HKC 81 at paragraphs 33 to 35.”

20.  In view of the cases cited by Mr. Chan and Senior Counsel for the Husband, Ms Yip, I have also considered O24, rule 15A of the Rules of the High Court, in relation to the power of the court to limit discovery for the purpose of managing the case, and also O.1A of the Rules of the High Court, in relation to active case management.

21.  In relation to other cases referred to, including Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414, in relation to trusts, and KEWS v NCHC (2013) 16 HKCFAR 1, in relation to third party assistance, the applicable legal principles are not in dispute.

Discussion

Wife’s requests – item (1)(d) (about companies)

22.  The Wife made the following requests under item (1)(d) in the Discovery Summons :-

“(1)(d) In respect of the companies comprising (1) TSI Company, (2) FHD Company Limited, (3) FSLM Company Limited of which the Respondent is a director, the Respondent do answer the following and provide supporting documents as set out under Request 15 to 29 :-

1. Please state the purpose of incorporation;

2. Please provide a copy of the company’s audited financial statements since July 2014. If the same is not available, please explain the reasons and provide the management account in support instead;

3. The Respondent to confirm whether he has ever held any beneficial shareholding, whether directly or indirectly in the company. If so, state the period in which he was a shareholder and the reason for being removed as a shareholder, and provides supporting document;

4. Please confirm whether this company owns any real properties in Hong Kong or elsewhere in the world. If yes, please identify these real properties and provide details of their purchase (ie. date of purchase, consideration and source of funding) and their present values and provide documentary evidence in support;

5. Please confirm whether this company has any subsidiaries.  If yes, please identify the subsidiaries and provide copy of bank statements and audited financial statements since its date of incorporation;”

23.  These items are identical to those requests made in the Wife’s Questionnaire (Q15 to 19 for TSI Company Limited, Q20 to 24 for FHD Company Limited and Q25 to 29 for FSLM Company Limited), save and except she no longer asks about details of the directors and shareholders in the Discovery Summons now.

24.  As to sub-items (1), (2), (4) and (5) of item (1)(d) of the Discovery Summons, it is the Husband’s stance that he has already provided answers and all the information and documents he has or could obtain through the public record.  His answer and the provision of documents could be found in the Husband’s Answer, as follows :-

(a)  For TSI Company Limited :-

“Answer 15-19

The Respondent does not have these documents and has requested the same from the board of directors of TSI Company Limited, and has instructed his lawyers to make inquiry with the Board of Directors by way of a letter dated 14 July 2017, which is annexed to this answer as <KSCGA1-2>. The Respondent is currently waiting for their reply.

For the documents that can be obtained through public record, the Respondent has obtained them and annexed herein a copy of the annual return of the Company dated 7 July 2016 as <KSCGA1-3>.

The Respondent does not hold any shares in the company.”

(b)  For FHD Company Limited

“Answer 20-24

The Respondent does not have these documents and has requested the same from the board of directors of FHD Company Limited, and has instructed his lawyers to make inquiry with the Board of Directors by way of a letter dated 14 July 2017, which is annexed to this answer as <KSCGA1-4>. The Respondent is currently waiting for their reply.

For the documents that can be obtained through public record, the Respondent has obtained them and annexed herein a copy of the annual return of the Company dated 17 March 2016 as <KSCGA1-5>.

The Respondent does not hold any shares in the company.”

(c)  For FSLM Company Limited

“Answer 25-29

The Respondent does not have these documents and has requested the same from the board of directors of FSLM Company Limited, and has instructed his lawyers to make inquiry with the Board of Directors by way of a letter dated 14 July 2017, which is annexed to this answer as <KSCGA1-6>. The Respondent is currently waiting for their reply.

For the documents that can be obtained through public record, the Respondent has obtained them and annexed herein a copy of the annual return of the Company dated 3 September 2016 as <KSCGA1-7>.

The Respondent does not hold any shares in the company.”

25.  The Husband has produced the Annual Returns of the 3 Companies and 2 rounds of letters which he wrote to the Boards of the 3 Companies requesting for the information and documents.  In the Annual Returns of the 3 Companies, it is shown that the Husband is one of the many directors of each of the 3 Companies.  

26.  Besides, the Husband’s has supplemented his position in paragraphs 16 and 17 of his 6^th Affidavit :-

“16.  I had already provided all the information I had to the best of my knowledge in the Answers 15-19, 20-24 and 25-29 in my previous Answer dated 11 October 2017.

17.  As stated in my answer, I had written to the Board of the various companies to request for this information.  The Boards had declined my request and also refused to provide me nor those representing with me a written reply.  The Boards also indicated to me that I must not release any company documents and accounts that may be in my possession for my own personal purpose.  Most importantly, I do not have, nor ever have had possession of these requested documents and information.  Hence, I do not have any means to further accede to the Petitioner’s request.”

27.  Ms Yip submitted that the Husband stated in the Husband’s Answer and the 6^th Affidavit that he does not have the documents other than those which he has already disclosed.  In other words, he has confirmed on affidavit that he does not have the information or documents in his possession, power and custody for requests (1), (2), (4) and (5) of item (1)(d) of the Discovery Summons and that should be conclusive for the purpose of this hearing.

28.  Mr. Chan disagreed that the Husband had answered adequately and he submitted that the Husband should be ordered to answer with his best endeavour.  He pointed out that as the Husband is a director of the 3 Companies, he can ask for the relevant documents, which he did, but the Husband alleges that the Boards have refused, without providing any reasons or written replies.

29.  Mr. Chan submitted that the Husband has not attempted to ask for the documents via S Hei Trust or SS Limited, of which shareholders, even minority shareholders, are entitled to company documents as of right.  The 3 Companies cannot possibly deny SS Limited those documents as shareholders are entitled as of right.

30.  I agree that the documents the Wife requested are within the Husband’s “power” because as a shareholder, company documents could be obtained.  By looking at the documents produced by the Husband showing how he has asked the Boards, he did ask as a director, but he has not asserted his rights as a shareholder when making the request.

31.  Mr. Chan further submitted that the way the Husband has answered, in particular in relation to sub-item (3) of (1)(d) of the Discovery Summons, shows that he is evasive. For example,

(a)  The Husband carefully says he “does not hold any shares in the company” (with details referred to paragraph 24 above), by using the present tense and refrains from explaining whether or not he held shares in the past, which may or may not have been recently transferred away. 

(b)  The Husband ignores the word “beneficial” and merely refers to himself not “holding” any shares, without explaining whether or not he has, or indeed had, beneficial shareholding held in the names of others.

(c)  The Husband ignores the words “directly or indirectly”, given that he does not even bother referring to the fact that SS Limited is a shareholder of the 3 Companies and the Husband himself is the Primary Beneficiary of S Hei Trust, which in turn owns SS Limited.     

32.  Mr. Chan further submitted that a straightforward and simple answer could have been made.  Ms Yip commented that the Husband’s answer may not be in a way desired by the Wife and it may not be that organised, but there is no attempt to hide information and the Husband has answered the Wife’s requests already. 

33.  I notice that the answer was not as desired by the Wife and it could have saved much trouble if the Husband has answered in the way suggested by the Wife.  But the crust is, with the H’s answer, whether it is sufficient and whether he should be asked to answer further.

34.  Ms Yip submitted that the requests by the Wife should not be allowed.  From the answers the Husband has provided, it is clear that he :-

(a)  does not own any shares directly in the 3 Companies;

(b)  has owned shareholdings indirectly through S Hei Trust and SS Limited;

(c)  is one of the many directors of the 3 Companies;

(d)  has written 2 times to the Boards; and

(e)  has confirmed in the Husband’s 6^th Affidavit that the Boards made no reply and told him not to release documents which he may once have possession.

35.  Besides, the Wife has knowledge about SS Limited, as she received bank statements of SS Limited and was apprised of its valuation from time to time.  The Husband is of the view that the Wife is being oppressive.  She could have written to Husband and ask him directly, instead of taking out Discovery Summons.  Given the stance of the Boards and the background of the case that the 3 Companies are all family businesses, it is shown that the Boards have turned hostile against the Husband, and there is no point in writing to the Boards again as the likely outcome is that the 3 Companies would refuse without even a written reply in the same way as how they reacted to the Husband’s previous request.  By allowing the Wife’s request would only unnecessarily incur further costs.

36.  I can see the strength of Ms Yip’s submissions.  However, I am of the view that the court should not guess on the reaction of the board.  When the Husband wrote to the Boards asking for the information and documents, he was asking in the capacity as a director.  If request is made in the capacity as a shareholder, a shareholder is entitled to company documents as of right.  The 3 Companies may well take a different stance.  As indicated by Mr. Chan during submissions, there are further steps that the Wife could take in the event that the 3 Companies refuse to answer, such as taking out discovery applications and issue writ of subpoena against third parties, which the Court will not look into further at this stage.  But at least, the Husband, should make request for those information and documents as a shareholder.

37.  I agree with Mr. Chan’s submissions and I am of the view that the Husband should at least make request in the capacity as a shareholder to show that he has answered to his best endeavour. 

38.  For these sub-items, I am of the view that they are relevant in relation to the parties’ financial circumstances.  In fact, relevance had not been disputed by the Husband all along.  It is not the Husband’s case that the requests made are irrelevant and in fact it has always been the Husband’s position that he has answered and should not be ordered to answer further.

39.  In viewing the answers in relation especially to sub-item (3) of (1)(d), the Husband should answer directly “whether he has ever held any beneficial shareholding, whether directly or indirectly” in the 3 Companies.  With the answer that the Husband has already given, confirming that he “does not hold any shares”, I am not satisfied that he has answered fully.  The question asked is within his knowledge and he should answer directly.

40.  Having considered the legal principles, the evidence before the Court and the circumstances of the case, I am of the view that these requests are clearly relevant, and the documents asked to be produced are at least in the power, if not custody and control, of the Husband.  I do not think these requests are oppressive or fishing in nature.  Therefore I allow all the sub-items (1) to (5) of item (1)(d) be asked. 

Wife’s requests – item (1)(e) (about trusts)

41.  The Wife made the following requests under item (1)(e) in the Discovery Summons :-

“(1)(e) In respect of each of the following Trusts, namely S Hei Trust, W Trust, S Hing Trust, H Trust :-

1.  confirm the identity and contact particulars of the Settlor, Trustee and Protector of each Trust, or to the best of the Respondent’s information and belief;

2.  particulars, extent and nature of the Respondent’s interest of or in each Trust together with documentary evidence in support, or to the best of the Respondent’s information and belief;

3.  identity and contact particulars of all other Beneficiaries, and the particulars, extent and nature of their respective interest of or in each Trust together with documentary evidence in support, or to the best or the Respondent’s information and belief;

4.  provide copies of the Trust Deed and all other Trust Documents, including but not limited to Letters of Wishes, Trust Accounts (since July 2013), Distributions (since July 2013), List of Schedule of Properties and Assets (since July 2013) with valuations where available, Income Statements (since July 2013), Bank Statements (since July 2013), including all companies within each Trust, and their audited, unaudited and management accounts and bank accounts (since July 2013);

5.  together with documentary evidence in support, provide particulars and breakdown of all monies, distributions, incomes, salaries, dividends, loans, advantages or benefits of any kind (whether monetary or non-monetary) that the Respondent has received or obtained since July 2013, whether directly or indirectly (including via companies within each Trust, e.g. SS Limited), together with breakdown and itemisation, and explain the particulars and nature of each of the same as well as whether consideration was provided in exchange;

6.  if and insofar as the Respondent alleges that he does not have any of such documents (in relation to (1) to (5) above), kindly make requests to and provide documentary evidence showing that the Respondent has asked all relevant persons for the same – including inter alia Trustees, Settlors, Protectors, Beneficiaries, Directors, Banks and family members or relatives;”

In relation to S Hing Trust and H Trust

42.  These questions had largely been asked but framed differently from those in the Wife’s Questionnaire, taking those of S Hing Trust as an example, with Q 38 to 45, :-

“S Hing Trust

Request 38: Produce copies of the Trust Deed.

Request 39: Produce copies of the Annual Accounts of the Trust from July 2014.

Request 40: Produce copies of all Letters of Wishes or their equivalent by the Settlor and/or Protector of the Trust to the Trustees.

Request 41: State whether there have been any, and if so what, changes in the Beneficiaries under the Trust.

Request 42: Give particulars of all advances and/or other amounts paid to or on behalf of all or any of the Beneficiaries by the Trustees.

Request 43: In respect of all amounts under 42 above which were paid to the Respondent directly or indirectly:-

(a) State into which bank account(s) the same were paid, identifying the date and amount of each payment;

(b) Identify all such amounts in the bank statements produced or to be produced.

Request 44:  In respect of all amounts under 42 above which were paid on behalf of the Respondent directly or indirectly :-

(a)  State to whom and for what purpose each of the amounts were paid;

(b)  Identify the date and amount of each payment.

Request 45:  The Respondent to confirm whether S Hing Trust has since July 2014 held or is holding any landed property in Hong Kong or elsewhere in the world, whether directly or indirectly.  If the answer is in the affirmative, give full particulars of these landed properties and produce copies of the relevant title documents as well as valuations or estimated value.”

43.  For the H Trust, the questions, which had been framed in the same way and correspondingly as those of the S Hing Trust (refer to paragraph 42 above), are in the Wife’s Questionnaire from Q 46 to 53 therein, which I am not going to repeat here.

44.  The Husband has answered in the Husband’s Answer as follows :-

(a)  For S Hing Trust,

“Answer 38-45

  The Respondent does not have the requested information.  It was suggested by the Petitioner in her Form E that the said trust was held by the relevant division of the HSBC.  Hence, the Respondent has instructed his lawyer to issue a letter dated 1 August 2017 to the HSBC International Trustee Limited for the requested information.  The Respondent’s lawyer has received a reply form the HSBC International Trustee Limited dated 28 August 2017.  Copy of the letters are annexed herein as <KSCGA1-10>.”

(b)   For H Trust,

“Answer 46-53

  The Respondent does not have the requested information.  It was suggested by the Petitioner in her Form E that the said trust was held by the relevant division of the HSBC.  Hence, the Respondent has instructed his lawyer to issue a letter dated 1 August 2017 to the HSBC International Trustee Limited for the requested information.  The Respondent’s lawyer has received a reply dated 28 August 2017 form the HSBC International Trustee Limited.  Copy of the letters are annexed herein as <KSCGA1-11>.”

45.  Ms Yip submitted that it is not accepted that the S Hing Trust and the H Trust are relevant to these proceedings.

46.  It is the Wife’s case as shown in her Form E that she learnt about the S Hing Trust and the H Trust from assisting the Husband’s parents in the administration and operation of their respective trusts.  She recalls from reviewing the letter of wishes of the S Hing Trust that upon the demise of the Husband’s father, the trustee, being HSBC International Trustee Limited, is to consider the wishes of the Husband’s mother.  Upon the death of the Husband’s mother, the trustee is to divide the assets of both the S Hing Trust and the H Trust into four shares and distribute them to the Husband and his three sisters.

47.  The Wife further added that the S Hing Trust and the H Trust are irrevocable discretionary trusts established by the Husband’s parents.  The Husband’s mother, the Husband and his three sisters are the beneficiaries.  The S Hing Trust and the H Trust are of worth of US$30 million and US$10.5 millions respectively.

48.  Ms Yip submitted that even on the Wife’s case, these trusts are discretionary trusts. There is no certainty that the Husband will receive any benefit from it, and thus it is not an “asset” that can be readily taken into account for these proceedings and for the Wife’s claim for ancillary relief.

49.  Besides, it is the Husband’s stance that he does not have the requested information. The Husband approached the relevant division of the HSBC based on the suggestion of the Wife in her Form E.  The Husband even wrote to the HSBC to request information but was refused.  The Husband’s case of his lack of knowledge and denied access to the information is conclusive for the present Discovery Summons.

50.  From the submissions and the evidence provided before me, I take note of the following :-

(a)  It is not in dispute that the Husband’s Solicitors have written to HSBC International Trustee (“HSBC Trustee”), who have confirmed that it is the trustee of both the S Hing Trust and the H Trust.

(b)  From the 2 reply letters from the HSBC Trustee both dated 28 August 2017, it is not shown whether the Husband is a beneficiary of the trusts or not.  What is more alarming is that, in the last paragraph of both letters, it was stated that “In any event, it does appear that much of the requested information will already be known to your client……”.

(c)  The Wife is privy to some information.  She learnt about these 2 trusts because she assisted the Husband’s parents to review documents in relation to the 2 trusts in the past.  The Wife believes that S Hing Trust was settled by the Husband’s father and that the beneficiaries are the Husband, his mother and his 3 sisters. To the Wife’s knowledge, it has about US$30 million.  According to the Wife, she has seen the Letter of Wishes. 

(d)  Further, the Wife believes that H Trust was settled by the Husband’s mother and that the beneficiaries are the Husband and his 3 sisters.  To the Wife’s knowledge, it has about US$10.5 million.

51.  I agree with Mr. Chan’s observation that the Husband has not denied the above. 

52.  I agree that the trusts are relevant because historically, it is the Wife’s evidence that the Husband has received distributions of about US$600,000 per annum from the family trusts.  It is not in dispute that the Wife had been assisting the Husband and his family with some financial affairs in the past. According to the Wife, she had been assisting the Husband’s parents, upon the request by the Husband’s father, in the administration and operation of their respective discretionary trusts, and she had spent sufficient time reviewing through their trust documents to understand the structure and operation.  The legal principles as stated in KEWS v NCHC (2013) 16 HKCFAR 1 at paragraph 36 about third party assistance is relevant.  The questions of :-

(a)  What is the extent of the financial assistance provided by the third party to the husband or wife? and

(b)  What is the likelihood of such financial assistance continuing in the foreseeable future?

are critical and relevant to be considered and taken into account in relation to ancillary relief matters of this case.

53.  For the reasons aforesaid, I am of the view that the sub-items (1) to (5) of (1)(e) of the Discovery Summons for S Hing Trust and H Trust are relevant and should be allowed. 

54.  For sub-item (6) of (1)(e), I will adopt the same analysis as for the S Hei Trust (see paragraph 67 below).  Therefore, sub-items (1) to (6) of (1)(e) of the Discovery Summons for S Hing Trust and H Trust are allowed. 

In relation to the S Hei Trust

55.  These questions had largely been asked but framed differently from those in the Wife’s Questionnaire, with Q54 to 60, :-

“S Hei Trust

Request 54: Produce copies of the Trust Deed.

Request 55: Produce copies of the Annual Accounts of the Trust from its establishment in September 2011.

Request 56: Produce copies of all Letters of Wishes or their equivalent by the Settlor and/or Protector of the Trust to the Trustees.

Request 57: State whether there have been any, and if so what, changes in the Beneficiaries under the Trust.

Request 58: Give particulars of all advances and/or other amounts paid to or on behalf of all or any of the Beneficiaries by the Trustees.

Request 59: In respect of all amounts under 58 above which were paid to the Respondent and/or the Petitioner directly or indirectly:-

(a)  State into which bank account(s) the same were paid, identifying the date and amount of each payment;

(b)  Identify all such amounts in the bank statements produced or to be produced.

Request 60: In respect of all amounts under 58 above which were paid on behalf of the Respondent and/or the Petitioner directly or indirectly :-

(a)  State to whom and for what purpose each of the amounts were paid;

(b)  Identify the date and amount of each payment.

56.  These questions had been answered in the Husband’s Answer, as follows :-

“S Hei Trust

Answer 54-56: Please find the Trust Deed, Annual Accounts of the year ended 2015, which is the only one available to the Respondent, and the Letter of Wishes as annexure <KSCGA1-12>.

Answer 57: MYW Ko was added as a beneficiary by a deed of addition dated 24 December 2014. Please find the said deed as annexure <KSCGA1-13>.

Answer 58: Over the past years, SS Limited, a company owned by the S Hei Trust, holds some shares of the Respondent’s family businesses. The dividends of the same are deposited into the SS Limited’s HSBC account. Subject to the terms of the trust and the discretion of the trustee, in the past, the Respondent was permitted to have access to the SS Limited’s HSBC account and to use the approved sums for various purposes, including family expenses, purchase of the US property in which the Petitioner is currently residing, and the renovation fees for the 3C and 4C, Clovelly Court and the US property.

However, since the commencement of the divorce proceedings, the Trustee of the S Hei Trust has become uncooperative and had allowed the Respondent’s authorisation to operate the HSBC account to lapse, hence effectively removing the Respondent’s role as an authorised signatory. Furthermore, SS Limited took issue with the Respondent’s withdrawals from the SS HSBC account and classified those withdrawals as loans advanced by SS Limited to the Respondent. It is the Respondent’s understanding that SS Limited is in the process of closing its HSBC account. Copy of an email sent to the Respondent by a JG of Ocorian, who manages SS Limited, is annexed as <KSCGA1-14>. It is not known to the Respondent whether SS Limited or Ocorian would take further action in light of the circumstances.

Answer 59-60: The Respondent has not kept detailed record of the transactions in relation to the SS Limited’s HSBC account. The Respondent is also not in the position to provide the requested information. Please refer to Answer 7 and 58 of this Answer.

57.  For completeness and easier reference, Request 7 and Answer 7, as referred to in Answer 59-60, are quoted as follows :-

“Request 7: Please confirm whether the Respondent is currently holding other bank accounts and deposits (including time deposits), either in his sole name or joint names with others, or in which he has beneficial interest, in Hong Kong or elsewhere which are not disclosed under Part 2.3 of his Form E made on 23^rd February 2017, which should include HSBC Private Bank Account no. 8038-362681-0001 in the name of SS Limited.”

“Answer 7: The Respondent does not have any undisclosed bank account.”

58.  Ms Yip submitted that the Husband has already provided the information.  For sub-item (1) of (1)(e), by looking at the Husband’s answer 54 to 56 and the attached annexure, ie. the Settlement of the S Hei Trust, I notice that the Settlement for the S Hei Trust had been enclosed, which stated therein the identity and address of the settlor and the trustee at the beginning of the document.  From the Settlement of the S Hei Trust, it does not appear that there is a protector for S Hei Trust.  I am of the view that the Wife is entitled to ask for confirming the identity and contact particulars of the protector, if any.

59.  For sub-item (2) of (1)(e), I notice that in the Husband’s answer 54 to 56 and the Settlement of the S Hei Trust, the Husband’s interest of the S Hei Trust had been stated in clause 5 therein.

60.  For sub-item (3) of (1)(e), I notice that in the Husband’s answer 57, the Settlement of the S Hei Trust, and the annexure document, ie. the Deed of Addition to the S Hei Trust, it could be shown that other than the Husband, the Wife and the Children of the parties are the only other beneficiaries. The interest of the beneficiaries had been stated in clause 6 of the Settlement of the S Hei Trust.

61.  For sub-item (4) of (1)(e), Ms Yip submitted that the following had been provided by the Husband, which I quote :- 

“i.  The Husband has already provided the original trust document for the creation of the trust [B220], the unaudited financial statement for the year ended 31 December 2015 [B264] (and that of 2014 not included in the bundle but provided to the Wife by correspondence);

ii.  The Memorandum of Wishes signed on 8.9.2011 can be found in [B275].

iii.  The unaudited financial statement has already provided an overview of the trust account [B268-270, B272-274].

iv.  The unaudited financial statement for the year ended 2015 states the distribution from June 2014 to June 2015 [B274]; and the unaudited financial statement for the year ended 2014 states the distribution from June 2013 to June 2014;

v.  The unaudited financial statement states the net asset of the trust to be US158,235 [B268] and the value of the subsidiaries wholly owned by the trustee; SS US$11,294,894 and R Limited US$6,516,977 [B272];

vi.  The income is also stated in the unaudited financial statement [270];

vii.  The bank statement of the SS Limited HSBC account is already provided under (1)(b) of this summons.

viii.  The Husband has not provided the audited, unaudited and management accounts and bank accounts (except that of the SS Limited) of all companies (SS Limited and R Limited).”

62.  I have considered the submissions and the documents before the Court, especially the Husband’s Answer and the annexure documents.  I notice that the following documents had been provided, including the original trust document for the creation of the trust (ie. the Settlement for S Hei Trust), the unaudited financial statement for the year ended 31 December 2015 and the memorandum of wishes signed on 8 September 2011.

63.  I notice that the Settlement for S Hei Trust had been provided in annexure <KSCGA1-12>, which is not a Deed signed, sealed and delivered.  The Husband should be required to provide the Trust Deed.  I can see the strength of Ms Yip’s submissions, especially in view of the documents already disclosed by the Husband.  However, in view of the legal principles of discovery and the evidence before the Court, I am of the view that sub-item (4) of (1)(e) had not been fully answered.  For example, the income stated in the unaudited financial statement for one year is not the same as providing the income statements since 2013.

64.  Therefore, I rule that sub-items (1) to (3) of (1)(e) are not allowed (save for asking about the Protector in sub-item (1)).  Sub-item (4) of (1)(e) is allowed.

65.  For sub-item (5) of (1)(e), Ms Yip submitted that “the unaudited financial statement for the year of 2015 has already listed out the income distributions of the S Hei Trust from June 2014 to June 2015, and that of 2014 has listed out the same from June 2013 to June 2014”.  She further submitted that “the document provided by the Husband also listed out the withdrawal the Husband made from the SS Limited’s bank account from February 2017 to May 2017, the withdrawals of which the trustee took issue with.”

66.  I can see the strength of Ms Yip’s submissions.  However, I am of the view that the questions asked in sub-item (5) are the normal and general areas of inquiry in relation to trust issues, which are relevant and necessary for the consideration for the present hearing and for consideration of the third party assistance to the parties which will be relevant for ancillary relief matters.  I therefore allow sub-item (5) of (1)(e).

67.  For sub-item (6) of (1)(e), it is the Husband’s stance that the request is not justified. It is opposed on ground of necessity and he is of the view that the request is vexatious.  I cannot disagree with the Husband’s view.  With my ruling for items (1) to (5) above, I am of the view that the documents ask for are within the possession, custody or control of the Husband.  Even if the Husband does not have physical custody of the documents, he is in a position to make inquiries to such relevant parties in order to comply with the Court order for discovery and production of documents.  But I am of the view that extending the request to relatives is too wide.  I therefore allow sub-item (6) of (1)(e), with “or relatives” deleted.

In relation to the W Trust

68.  For the W Trust, the questions, which had been framed in the same way and correspondingly as those of the S Hei Trust (refer to paragraph 55 above), are in the Wife’s Questionnaire from Q61 to 67, which I am not going to repeat here (with the only difference being the date of establishment of W Trust in January 2014).

69.  These questions had been answered in the Husband’s Answer, as follows :-

“S Hei Trust

Answer 61-63:  The available documents are annexed herein as <KSCGA1-15>. The Respondent does not have the requested annual account.

Answer 64:  No.

Answer 65-67:  The Respondent is not aware that there were any advances or sums paid to any of the Beneficiaries or there were any advances or sums paid by the Trustee on behalf of the Beneficiaries.

The W Trust holds the W Limited and which holds MLLC for holding XXX, the US property. The Respondent would pay money to the Trustee of the W Trust (Ocorian), which in turn, would pay money to the Petitioner’s father RC as the property manager of the US Property, for paying the maintenance and outgoings of the US property.

70.  Ms Yip submitted that the Husband has already provided the information. For sub-item (1) of (1)(e), in Husband’s answer 61 to 63 and the attached annexure, ie. the Trust Instrument of the W Trust, I notice that the identity and address of the settlor and the trustee had been disclosed in the Trust Instrument of the W Trust.  From the document therein, it does not appear that there is a protector for the W Trust.  I am of the view that he Wife is entitled to ask for confirming the identity and contact particulars of the protector, if any.

71.  For sub-item (2) of (1)(e), I notice that the Husband’s answer to question 64 is no.  From the schedule of the Trust Instrument of the W Trust, I notice that the settlor, ie. the Husband, is not one of the beneficiaries, and I accept he has answered item (2) already.

72.  For sub-item (3) of (1)(e), I notice that in the Trust Instrument of the W Trust, it is stated therein that the Wife and the parties’ children are the beneficiaries, and the interest of them are stated in the document therein. I accept that sub-item (3) had been answered already.

73.  For sub-item (4) of (1)(e), Ms Yip submitted that the Husband had provided the Trust Document and the letter of wishes.  I have considered the submissions and the documents before the Court, especially the Husband’s Answer and the annexure documents.  I notice that the following documents had been provided, including the original trust instrument and the letter of wishes dated 1 November 2014.

74.  I notice that the trust instrument for W Trust had been provided in annexure <KSCGA1-15>, which is not a Deed signed, sealed and delivered.  The Husband should be required to provide the Trust Deed.  I can see the strength of Ms Yip’s submissions, especially in view of the documents already disclosed by the Husband.  However, in view of the legal principles of discovery and the evidence before the Court, I am of the view that item (4) of (1)(e) had not been fully answered, with analysis similar to that for S Hei Trust explained above. 

75.  Therefore, I rule that for the W Trust, sub-items (1) to (3) of (1)(e) are not allowed (save for request for Protector as in sub-item (1)).  Sub-item (4) of (1)(e) is allowed.

76.  For sub-items (5) and (6) of (1)(e), Ms Yip submitted that they are not applicable.  I cannot agree with Ms Yip’s view.  Ms Yip further submitted that the relevance of this trust is of its value, which concerns the parties’ claim for ancillary relief. As valuation has already been conducted by the parties, all further disclosure is unnecessary.  Further, the Husband has continuously provided documents in relation to the Trustee Ocorian to the Wife, and the Wife’s father, being the property manager, has direct (and even better) access to all information in relation to the US property. 

77.  I am aware of the fact that the main purpose of the W Trust is to hold the US property.  However, as the Husband is the settlor, comparing to the Wife’s father, who, according to the Husband, is the US property manager, I am of the view that the Husband is in a position to disclose documents as requested.  I am of the view that the areas of inquiry asked for sub-item (5) are relevant and necessary in relation to ancillary matters.  I therefore allow sub-item (5) of (1)(e).

78.  For sub-item (6) of (1)(e), I adopt the same analysis for the S Hei Trust (see paragraph 67 above).  I therefore allow sub-item (6) of (1)(e).

Conclusion

79.  To conclude, for the reasons aforesaid, I am of the view that the questions allowed are relevant and the documents requested are in the power, if not possession or custody of the Husband.  The requests are not oppressive or fishing in nature.  Having considered the submissions, circumstances of the case, the evidence before the Court and with the legal principles in mind, I am of the view that the questions should be asked so as to enable parties to have full and frank disclosure to facilitate the coming Financial Dispute Resolution hearing, which will be beneficial to both parties, especially in view of the legal costs already spent by the parties, as shown in their respective Form H.

80.  I grant the following orders :-

(1)  The Husband do within 21 days from the date hereof file and serve an affidavit in reply to :-

(i)  (1)(d) sub-items (1) to (5) as stated in the Discovery Summons;

(ii)  (1)(e) sub-items (1) to (6) as stated in the Discovery Summons for the S Hing Trust and the H Trust, with “or relatives” deleted in sub-item (6);

(iii)  (1)(e) sub-item (1) as stated in the Discovery Summons, only allow asking for “confirmation of the identity and contact particulars of the Protector of the S Hei Trust and the W Trust”; and

(iv)  (1)(e) sub-items (4) to (6) as stated in the Discovery Summons for the S Hei Trust and the W Trust, with “or relatives” deleted in sub-item (6);

(2)  There be liberty to apply in relation to the implementation of the order.

81.  I see no reason why costs should not follow the event.  Although I did not allow the entirety of all the questions asked by the Wife, looking at the questions allowed, I am of the view that the Wife has got most of the items requested and costs should be awarded to the Wife.  I order that the Husband pays the costs of the Wife in any event, to be taxed if not agreed.  This is a costs order nisi which shall be made absolute within 14 days.