LY v. FF

FCMC 161/2017

[2018] HKFC 233

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 161 OF 2017

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D E C I S I O N
(Further and Better Particulars)

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Introduction

1.  On 29/12/2017, the Petitioner Wife (“W”) issued a Summons seeking leave to file and serve a 4^th Questionnaire on the Respondent Husband’s financial disclosures by way of Form E, supplemental affirmations and answers to W’s 2^nd questionnaire.  Attached to the Summons was a draft 4^th Questionnaire containing 10 questions.  The Summons was scheduled for a call-over hearing on 26/2/2018.

2.  At the call-over hearing, as H agreed to provide answers only to questions 1, 2 and 9, leave was granted to W to file and serve her 4^th Questionnaire limited to those agreed questions.  For those remaining questions 3, 4, 5, 6, 7, 8 and 10, leave was granted to W to file supporting affirmation with consequential leave for H to file affirmation in opposition.  W has leave to file a further affirmation in reply.  Direction was granted for substantive argument over those outstanding questions with 1 day reserved.

3.  On 12/3/2018, W filed her 5^th Affirmation in support of those remaining questions.

4.  On 23/4/2018, H filed her 4^th Affirmation in opposition.

5.  On 7/5/2018, W filed her 6^th Affirmation in reply.

6.  At the trial today, W’s lawyers confirmed not to pursue questions 5 and 6.  Thus the Court was only required to deal with questions 3, 4, 7, 8 and 10.

The applicable legal principles

7.  There is not much dispute over the applicable legal principles on discovery.  H’s Counsel in his written submissions referred this Court to Rule 77(4) of the Matrimonial Causes Rules, Cap.179A (“MCR”) and the following cases : FCP v. CJLY (FCMC No.6202/2012), YXY v. YYW (FCMP No.7/2013), K & L Gates v. Navin Kumar Aggarwal (HCA No.1061/2011) and CLS v. LPKP [2018] 1 HKLRD 786.

8.  Rule 77(4) of the Matrimonial Causes Rules, Cap.179A (“MCR”) reads as follows :-

“(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 other 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 other party, apply to the court for directions.”

9.  Order 24 Rule 7 of the Rules of the High Court (“RHC”) is applicable to matrimonial proceedings by virtue of Rule 3 of the MCR.  Given the fact that W is now pursuing for further and better particulars of answers already provided by H including production of documents, I will take into account the approach prevalently adopted in specific discovery applications in this Decision.

10.  The principles governing specific discovery have been summarised by Hon Ng J in the case of Jade’s Realm Ltd v. Director of Lands  (HCA No.1509/2012) dated 9 January 2015 as follows :-

“(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 Peruvian Guano test remains the test of relevance, A document is relevant if :

(i) it is reasonable to suppose that it contains information which may, not must, either directly or indirectly enable the party requiring the same either to advance his own case or to damage the case of his adversary; or

(ii) it is a document which may fairly lead the party to a train of inquiry which may have either of those two consequences.

(5)  For the purpose of discovery, the pleadings have to be looked at broadly.

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

(7)  Notwithstanding the Peruvian Guano test, ‘fishing’ is not allowed, and discovery should not be oppressive.

(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.”

11.  In the often cited case of B v. B (matrimonial proceedings: discovery) [1979] 1 All ER 801, Dunn J summarised the law on discovery in ancillary relief application at page 811 :

“I will conclude the part of my judgment by summarising my conclusions as to law.

(1)  A party to a suit must disclose all the documents in his possession, custody or power which are relevant to the matters in issue. The court has discretion whether or not to order him to make such disclosure, and also has discretion whether or not to order him to produce the documents for inspection by the other party or the court.

(2)  …………….

(3)  …………….

(4)  …………….

(5)  The discretion is a judicial discretion, and in exercising it the court will have regard to all the circumstances. The court will balance the relevance and importance of the documents and the hardship likely to be caused to the wife by the non-production against any prejudice to the Husband and third parties likely to be caused by production………..….. The court will not order production unless it is satisfied that production is necessary either for disposing fairly of the issues between the parties or for saving costs.”

12.  With these principles in mind, I will now consider W’s application.

The Wife’s Questions

13.  On question 3, W is seeking production of supporting documents of 2 separate sums of HK$6,000 withdrawn which H deposed was for payment of legal fees to Messrs. Yip, Tse and Tang and Messrs. Joseph Leung & Co. on 17/1/2017 and 18/1/2017 respectively.

14.  On question 4, W is seeking production of supporting documents for a sum of HK$6,000 withdrawn on 19/1/2017 which H deposed was for payment of electricity, water, internet, telephone and management fees.

15.  On question 7, W is seeking production of transaction records of H’s securities account no. 697-x-xxxx5000 with full transaction details for the period from 1/1/2016 to 31/3/2017.

16.  On question 8, W is seeking production of supporting documents in respect of purchases and redemption of financial products in his wealth management account no.601-x-xxx69-2 on 3/5/2016, 6/6/2016, 4/7/2016, 8/8/2016, 19/2/2017 and 23/1/2017.  W also sought for monthly account statements of H’s wealth management account no.601-x-32xxx-2 with Wing Lung Bank from 1/1/2016 to 31/3/2017 or until it was closed.

17.  On question 10, W is seeking production of H’s Staff Handbook or medical insurance plan or any other supporting documents in respect of the fringe benefits provided by H’s employer.

The Husband’s Contention

18.  First and foremost, H contended that those questions presently in issue are either repetitive or irrelevant and had been answered previously[1].

19.  H’s reply to question 3 was that he did not keep those receipts of payments to the 2 law firms whom he sought primary consultation. 

20.  H’s reply to question 4, similar to that of question 3, was that he did not keep those receipts for utilities payments.  He was only able to produce the management fees demand note but not others.  He would not be able to produce those receipts no matter how many times W insisted for them.  H opined that this was a waste of time and costs to delay the proceedings.

21.  H’s reply to question 7 was that he failed to see any relevance between the transaction records of his security account no.697-x-xxxx5000 with CITIC Bank and his financial situation.  He had already produced as exhibit “FF-3” in his earlier Affirmation dated 28/3/2017 the latest value of HK$205,200 in credit as at 27/2/2017.

22.  H’s reply to question 8 was that the investment account no.601-x-xxx69-2 had already been closed at the time of filing his Form E.  The amount which remained in credit in the investment account was remitted to another account no.601-xxx-xx21-5 which he had already produced records showing those remittances.

23.  H’s reply to question 10 was that the Staff Handbook is highly confidential and that he was not able to produce it even though W insisted for the production.  H believed the purpose behind was that W wanted to challenge his monthly medical expenses of HK$1,500.  He had already provided to W medical expenses which consisted of body check fee around RMB 6,000 a year and monthly clinic fee ranging HK$800 to HK$1,000 on average.

The Court’s Views

24.  I will start with the 3 pre-requisites under (i) relevance; (ii) existence and (iii) possession; and then followed by consideration as to whether disclosure was needed either for disposing fairly of the cause or matter in issue or for saving costs[2].

25.  I have also reminded myself of the underlying objectives of the Civil Justice Reform embodied in Order 1A, rule 1 of the Hong Kong Civil Procedure 2018 (“HKCP”).   

26.  Parties in litigation, including in matrimonial cases, are under a continuing duty of full and frank disclosure of documents and information, it is the Court’s discretion guided upon established principles as to the scope and extent of disclosure.  The burden always falls upon the party seeking disclosure to justify his or her application.

27.  W’s question 3 is unjustified both in terms of context and the amount involved.  Spending 2 separate sums of HK$6,000 each on legal fees to 2 different law firms on 2 consecutive days (17/1/2017 and 18/1/2017) for primary consultation fee is not unreasonable.  H was then represented by another law firm Messrs Yan lawyers by the filing of the Form 4 on 17/2/2017.  W’s divorce proceedings were commenced on 5/1/2017.  Apparently, those 2 sums were spent between the commencement of proceedings and the filing of the Form 4.  H to obtain separate legal advice seems sensible and credible even though eventually he decided to instruct the present law firm.  More importantly, the amount involved was not excessive.  It is neither costs effective nor proportionate for W to dwell upon the 2 sums totalling HK$12,000 at the present interlocutory stage.

28.  I find H had sufficiently answered W’s question 3 which will be conclusive at this interlocutory stage[3].

29.  W’s question 4 is also unjustified.  As correctly submitted by H’s Counsel in his written submissions[4], the evidence shows the monthly management fees were HK$2,249 which formed part of the monthly expenses of HK$6,000.  W is actually seeking documentary proof as to the balance of HK$3,751 (i.e. HK$6,000 – HK$2,249).  In my view, further discovery on such trivial sum is wholly disproportionate in the context of the family pool of assets which consists of a property in Hong Kong, though under H’s sole name, worth over HK$10 million which W was seeking financial reliefs.

30.  I find H had sufficiently answered W’s question 4 which will be conclusive at this interlocutory stage[5].

31.  W’s question 7 is justified.  Disclosure of the latest balance in an investment account is insufficient as it does not show how such latest balance came about.  H has disclosed his consolidated bank statements of his CITIC Bank account (which also shows the account no.697-x-xxxx5000) from February 2016 to January 2017[6] where the monthly balance remains more or less the same around HK$28,000 except for the months ending May at HK$43,081.05; from August to December 2016 and January 2017 which was around HK$26,940.

32.  H submitted that any securities transactions would be logged in the bank statements.  It was further submitted that unless there was any particular transaction that W thinks H had done to defeat her ancillary reliefs, there is no reason for H to disclose the transaction records[7]. 

33.  Transactions in and out within an investment account are important in that it does not merely show gains or losses, it is also indicia of one’s financial capability to invest.  It is noted that the account no.697-x-xxxx5000 was given the name of “NOW Account” in the consolidated statements.  It is unclear whether such “NOW Account” includes any portfolios other than stock investment.  Moreover, the discrepancies in balance; in particular, for the month ending May 2016 suggests that there might be some transactions undertaken. 

34.  Moreover, how would W be able to know any particular transaction that looks suspicious of H defeating her ancillary reliefs without having had sight of all the transaction records in the first place ?

35.  H’s submission of the case of CLS v. LPKP (supra) where it was said transaction records are “cheap to obtain but expensive to analyse”[8] does not assist H. Reason being that it was H’s case that there was no transactions or virtually none and if so, there would not be any costs issue for analysing the records.

36.  Having said, I find W’s question 7 justified on ground of relevance and existence.  H is readily able to obtain all the monthly records to show whether there are any transactions taken place for the period of time in question.  Thus, the ground of possession will be fulfilled even though H does not have the records on hand.  I am also satisfied that the transaction records sought for are needed for disposing fairly of the issue of ancillary reliefs.

37.  W’s question 8 is also justified.  Paragraph 5.1 of the Form E requires disclosure of any change in assets for 36 months preceding the Form E.  H’s Form E was filed on 6/3/2017 and the prescribed preceding 36 months runs from 6/3/2014. At paragraph 5.1 of H’s Form E, it was written “N.A.”[9] H is short of compliance with the prescribed disclosure.

38.  As to H’s answer that he had disclosed the wealth management account had already been closed and the remaining balance had been transferred to another account no.601-xxx-xx21-5 on 19/1/2017 and 23/1/2017, I find this is plainly an insufficient if not evasive answer.  Under the Form E, there is no exemption from disclosure of any bank accounts even though they were closed at the time of the Form E. 

39.  It is noted that nowadays financial products can be purchased and redeemed anytime on line at the tip of fingers.  However, there would be records kept by the bank on the transactions even though it was not reproduced on paper subsequent to the transaction as in the old days. 

40.  Mere disclosure of having bought and sold financial products or commodities without specifying any of the details of each of the transactions fall short of full and frank disclosure.  I find H’s answers as to where the proceeds had gone to be insufficient. The missing details, in my view, are much more important than the results of the investments as it is also indicia of one’s financial capability to invest. The missing details are also needed for disposing fairly of the issue of ancillary reliefs. 

41.  Same as transaction records under question no.7, I also find those records of purchase and redemption of financial products under question no.8 are relevant and in existence.  If H does not possess them, he is readily able to obtain from the Bank.

42.  With respect, I do not agree with H’s Counsel’s submission that it is oppressive to H for W to insist those supporting documents and records[10].  The further submission that it is unknown what sort of documents W was seeking is misconceived.  The documents sought are simply those purchase and redemption records.  This does not require H to prove anything or to prove closing of account so submitted by H’s Counsel[11].

43.  As to the non- disclosure of the monthly statements of H’s wealth management account no.601-x-xxx69-2 with Wing Lung Bank, I find against H in that closure of such account does not exonerate his duty of disclosure under established principles of discovery or as required by the Form E.

44.  Hence, I find in favour of W on question no.8 in its entirety.  H is required to produce all the transaction records of the purchase and redemption of financial products and also the monthly statements of his wealth management account no.601-x-xxx69-2 with Wing Lung Bank so requested by W.

45.  As to question 10 for disclosure of H’s Staff Handbook, the whole purpose was for W to ascertain what fringe benefits was provided by H’s employer including but not limited to any medical insurance coverage.  I also noted H’s contention of his duty of confidentiality to his Employer against such disclosure.

46.  In my view, whether H was entitled to any medical insurance coverage from his Employer is an issue since he was claiming medical fees as an expenses item. Without such Staff Handbook, W would have to take H’s words for whatever it is worth.  I noted that H had not provided any evidence from his Employer as to the confidentiality of the Staff Handbook.  Had the Staff Handbook been a confidential document, it would be incumbent upon H to seek approval from his Employer for such disclosure or to the very least for disclosure limited to fringe benefits such as any medical insurance coverage.  Falling short of any such evidence, I find it unacceptable for H to simply say outright that the Staff Handbook was confidential and would not be produced.

47.  Hence, I find W’s question 10 justified.         

Conclusion

48.  Given careful consideration to all the above, I find in favour of W on questions 7, 8 and 10. I find against W on questions 3 and 4.

Costs

49.  Since W is only successful on 3 out of 5 questions to be raised against H, I find it fair and reasonable not to make any costs order in respect of this application; save and except W’s own costs to be taxed in accordance with Legal Aid Regulations.

Orders

50.  I now make the following Orders :-

(a)  Leave be granted for W (Petitioner) to raise questions 7, 8 and 10 set out in the draft 4^th Questionnaire attached to the Summons dated 29/12/2017 as the 5^th Questionnaire within 3 days from today (that is, on or before 21/12/2018);

(b)  H (Respondent) do file and serve his answers to W’s (Petitioner’s) 5^th Questionnaire within 28 days thereafter (that is, on or before 18/1/2019);

(c)  No further Questionnaire be filed without leave of the Court;

(d)  There be no Order as to costs, including all costs reserved;

(e)  W’s (Petitioner’s) own costs be taxed in accordance with Legal Aid Regulations.

51.  This is a costs order nisi which would become absolute if no application is made by any party to vary the same within 14 days from today.