TKCC v. CCWI AND OTHERS

FCMC 15101/2018

[2021] HKFC 90

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 15101 OF 2018

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D E C I S I O N

(DISCOVERY)

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1.  This is a hearing of the Petitioner (“the wife”)’s application for discovery against the 1^st Respondent (“the husband”) and 2^nd Respondent (“R2”).

Brief Introduction

2.  The wife is aged 56 and the husband aged 55. They were married in 1993.  Within wedlock, they have 2 sons, both of them have now reached majority (aged 25 and 24 respectively).

3.  The wife is all along a housewife and the husband a medical doctor operating his own clinic.

4.  There is no dispute that the husband has formed a romantic relationship with R2 in 2006, from which they have given birth to a daughter, now aged 5 (born on 10 February 2016).

5.  There is no dispute that the husband and R2 started to plan to have a child in 2014, and it is now the case of the wife that at least from that time the husband started to take strategic and measured steps to dissipate matrimonial assets in order to to defeat or undermine her claim for ancillary relief in case of a future divorce.  Such dissipation included the purchase of a Shenzhen property at RMB 1,463,000 by the husband for R2 on 26 March 2015. 

6.  In around November 2015, R2 moved to Hong Kong permanently and gave birth to the daughter on 10 February 2016.

7.  According to the wife, there were further dissipation of matrimonial assets by the husband by way of transferring shareholdings in 2 limited companies which hold 2 landed properties in Shamshuipo and Mongkok.  As admitted by the husband in his 1^st Affidavit, he had transferred no less than $30,448,997 to R2.

8.  Against this backdrop, the wife applied for financial discovery by issuing an inter-parte summons dated 8 July 2020, asking for leave to issue the 2^nd Questionnaire against the husband and the 1^st Questionnaire against R2.  As the contents of the 2 Questionnaires were very extensive (containing 36 pages, with 91 main questions and numerous sub-questions and hundreds of bank entries) and I do not think it would serve any useful purpose by repeating them in this decision.  But as submitted by Mr Jeremy Chan for the wife, what really requires the court’s decision is just 2 discrete issues, namely the financial disclosure period (“the cut-off period”) and the monetary limit on the bank transactions (“the cut-off quantum”) for discovery.  According to Mr Chan, after the answering of the Questionnaires by the husband and R2, the wife is content to move on to have a FDR even if the answers might not be complete. 

9.  Although Mr Herbert Leung for the husband and R2 held a different view in that he requested the court to rule on each and every question as contained in the 2 Questionnaires, it was my view and decision that such course of action was not practical and therefore, not conducive to the just and expedient resolution of the parties’ disputes, at least not at this pre-FDR stage.  In the circumstances, it was my preliminary ruling that I would only give a quick and short decision on the 2 issues of cut-off period and cut-off quantum for the purpose of this summons.

The Law on Discovery in Matrimonial Proceedings

10.  Discovery in matrimonial proceedings is governed by Rule 77(4) of the Matrimonial Causes Rules, Cap.179A (“MCR”) which is as follow:

“(4) Any party to an application for ancillary relief may by letter require any other party to give further information concerning any matter contained in any affidavit filed by or on behalf of that other party or any relevant matter, or to furnish a list of relevant documents or to allow inspection of any such document, and may, in default of compliance by such party, apply to the court for directions.”

11.  Although the Court has a wide discretion in giving directions on discovery, the principles on which the Court is to exercise that discretion are not spelt out in the said rule.

12.  In this regard, I think much assistance can be gained by referring to O.24 of the Rules of the High Court, Cap.4A (“RHC”) which governs the issue of discovery.  However, I do not intend to go into details of O.24 because I do not think the principles as contained therein are in dispute. The principles governing discovery are relevance and necessity.  Orders for production of documents will only be made if the materials sought are relevant to the issues and they are also necessary for the fair disposal of the matter or for saving costs (O.24 r.13, RHC).

13.  Parties in matrimonial cases are also under an absolute, positive and continuing duty to give full and frank disclosure of his or her means.  In L v C [2007] 3 HKLRD 819, Stock JA (as he then was) confirmed this duty by reciting the following passage in Rayden and Jackson on Divorce and Family Matters (18^th ed., 2005) at paragraph 69 at p.855:

“69. The effect of the authorities has been summarised thus:

The importance of the duty of both husband and wife to make disclosure of their assets which is full, frank and clear cannot be over emphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which…it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by [the statue]. The duty of each party is absolute, and it must be discharged regardless of whether the application for ancillary relief is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one; a party must not mislead the other party and the court into assuming that his financial situation is unchanged if it [in] fact has changed…. A Party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.

   Rayden and Jackson on Divorce and Family Matters (18^th ed., 2005) para.17.28.”

14.  I do not think the above general principles are in dispute.

The 2 disputed issues

The cut-off period

15.  For the cut-off period for discovery, the difference between the parties was not really that big.  The wife asked for the disclosure period to start from November 2014, being one year before R2 moved to Hong Kong and 3 years before the date of separation (which occurred in November 2017).

16.  On the other hand, the husband and R2 asked for the disclosure period to start from October 2015, saying that they have already agreed to give financial disclosure up to 3 years prior to the date of Petition in the light of the statutory presumption period of 3 years under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap.192.

17.  On the 3-year presumption period under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap.192 (“MPPO”), I have already pointed out at the hearing that for the so-called section 17 presumption period, it actually refers to 3 years before application, instead of before Petition or separation (s.17(3) of MPPO).

18.  Coming back to this summons, it is noted that for the cut-off period, the actual difference between the parties is in fact very small, as it only involves a period of 11 months (November 2014 vs. October 2015). After giving some thoughts to the matter, I am minded to allow discovery to start from November 2014.  I came to this conclusion mainly because there was undisputed evidence that not insubstantial amounts of money or assets were placed under R2 by the husband.  There may be a strong argument that most of these moneys or assets, if not all, were taken from the matrimonial pot.  In particular, the Shenzhen Property was purchased in the name of R2 for RMB 1,463,000 on 26 March 2015.  The wife suspected that the purchase price might also come from the husband.  This suspicion might not be totally groundless.  Therefore, I am satisfied that it is reasonable to allow the discovery period to be pushed back a few months to November 2014, namely 4 months before the purchase of the Shenzhen Property in March 2015.

The cut-off quantum

19.  As far as the cut-off quantum is concerned, it is the case of the wife that all transactions over $10,000 should be answered (paragraph 21 of counsel’s skeleton submissions).  It is not clear what transactions she was referring to, and I can only assume that she was talking about banking transactions.  I have not actually counted the number of banking transactions as appeared in the monthly statements of various banks, but they are likely to be in hundreds.

20.  Mr Leung submitted that in requiring the husband and R2 to answer those hundreds of banking transactions is certainly too onerous and oppressive a task for them, bearing in mind that they have already attempted to answer the wife’s previous questionnaires by providing over 1900 pages of documents.  The costs of preparing the answers will also be disproportionate to the ancillary relief claim.

21.  I think there is some force in Mr Leung’s submissions and a proper balance has to be struck in order to keep the answers to be given to a more manageable level.  In this regard, I will set the cut-off quantum to $50,000.  In view of the rather large number of questions to be answered, I will give the husband and R2 42 days to answer, instead of 21 days as prayed for by the wife.

Conclusion and Orders

22.  Based on the above discussion, I hereby make the following orders:

  (1)  Leave to the wife to file and serve her 2^nd Questionnaire for the husband and 1^st Questionnaire for R2 as set out in Schedule A annexed to the summons dated 8 July 2020 within 7 days, but for all bank transactions, the monetary limit is set at HK$50,000 or above.

  (2)  The husband and R2 do answer the Questionnaires within 42 days from the date of this order.

  (3)  The husband and R2 do provide the wife with all the information and documents from November 2014 to present as requested in the Questionnaires within 42 days from the date of this order.

Costs

23.  Both sides asked for and have made submissions on costs.  After hearing their submissions, I do not see a clear winner in the application at this stage and therefore, I think a fair order is for the costs of this application to be in the cause of the wife’ ancillary relief application, with certificate for one counsel.