REN WENLONG v. BOCI SECURITIES LTD

HCMP 1660/2021

[2021] HKCFI 3782

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1660 OF 2021

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BETWEEN

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J U D G M E N T

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Introduction

1.  The Plaintiff (“Mr Ren”) took out the present originating summons for a Norwich Pharmacal Order against the Defendant (“BOCI”) for discovery of monthly account statements in respect of the accounts of Madam 宋曉彥 (“Madam Song”). The purpose is to ascertain the quantity of shares owned by Madam Song in order to revive proceedings in Mainland China for division of assets upon divorce.

2.  Mr Ren and Madam Song were married between 10 November 2007 and 25 December 2018.

3.  Upon pronouncement of the divorce, the Hohhot City Saihan District People’s Court (“Hohhot PC”) also made an order, amongst others, for division of assets between Mr Ren and Madam Song. Mr Ren’s appeal against the asset division order was dismissed by a judgment dated 29 July 2019 of the Hohhot City Intermediate People’s Court (“Hohhot IPC”).

4.  According to Mr Ren’s understanding, Madam Song (i) joined China Mengniu Diary Co Ltd (listed on the Hong Kong Stock Exchange) (“China Mengniu”) soon after graduation; and (ii) is now the director of China Mengniu’s Information and Technology Department.

5.  China Mengniu has granted shares under its restricted share award scheme to its core management. China Mengniu has opened accounts for employees (including Madam Song) with BOCI.

6.  In the divorce proceedings, Madam Song did not disclose to Mr Ren and the Mainland Chinese Court the total amount of her shares, including those held with BOCI.

7.  Mr Ren had attempted to obtain information as to Madam Song’s shares by issuing proceedings in Mainland China (“Disclosure Proceedings”). However, his application was refused by the Hohhot PC on 27 January 2021 and, on appeal, by the Hohhot IPC on the ground that Mr Ren was not seeking a precise request for the division of family assets.

8.  Mr Ren now seeks discovery of the information as to Madam Song’s shares held with BOCI.

9.  BOCI maintains a neutral stance in this application but has given comments to narrow down the scope of discovery, which have been accepted by Mr Ren. It remains for Mr Ren to satisfy the Court that it is appropriate to grant a Norwich Pharmacal Order.

Legal principles

10.  The rationale for the provision of a Norwich Pharmacal order was explained by Ma J (as he then was) in A Co v B Co [2002] 3 HKLRD 111 at §10:

“Where innocent parties are caught up or have become involved in the tortious or wrongful activities of others, thus facilitating the perpetration (or continuation) of such activities, justice may require (and therefore the court may order) that such innocent persons come under a duty to assist the victim of the tort or wrongful activities, by the provision of full information even though such innocent persons cannot be shown to incur any personal liability at that stage. …”

11.  A recent statement of legal principles for the grant of a Norwich Pharmacal Order can be found in A v P company [2018] HKCFI 907 at §§4-5, Recorder Yvonne Cheng SC:

“4 A Norwich Pharmacal order is not a usual order. It is not lightly granted in the absence of powerful factors:

(1) It is made against an innocent party whose only involvement is to have become mixed up in the tortious or wrongful activities of others.

(2) The wrongdoing exists only on the part of a person or persons against whom no relief may be sought at the stage of the application and against whom there is probably insufficient evidence to found an action.

(3) There will usually be a legal relationship between the innocent person against whom a discovery order is sought and the alleged wrongdoer, and the relationship may involve strict duties to be observed on the innocent party’s part. Any discovery to be made will involve a breach of confidentiality and may expose the innocent party to civil liability and possibly even criminal liability.

(4) The court must accordingly balance the competing interests of the victim of the alleged wrongdoing and an innocent party caught up in the wrongdoing.

…

5. Given the extraordinary nature of the relief, in order for a Norwich Pharmacal order to be made:

(1) there must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place, the degree of proof required being commensurate with the seriousness of the allegations;

(2) it must be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff;

(3) the discovery sought must not be unduly wide; there is no entitlement to general discovery. The order must be specific, and be restricted to those documents or classes of documents that are necessary to enable the plaintiff to preserve or discover assets; and

(4) the plaintiff must have exhausted other proper and reasonable avenues for obtaining the information sought.”

12.  A Norwich Pharmacal order can also be granted in aid of potential foreign proceeding: Evergreen International Storage & Transportation Corp v Hong Kong and Shanghai Banking Corp Ltd [2008] 5 HKLRD 49 at §19, Deputy Judge Lisa Wong SC (as she then was)

Cogent and compelling evidence of tortious or wrongful activity

13.  According to the PRC legal opinion obtained by Mr Ren,

(a) Pursuant to section 1062 of the Civil Code of the PRC, “salaries” (工資), “bonuses” (獎金), “remuneration of labour” (勞務報酬), “profits from investment” (投資的收益) and “other assets that should be considered as jointly owned” (其他應當歸共同所有的財產) and obtained during marriage are considered as family assets.

(b) According to section 25 of the Interpretation issued by the Supreme People’s Court of the PRC, “profits from investments by a party using personal assets” (一方以個人財產投資取得的收益) is considered as “other assets that should be considered as jointly owned” (其他應當歸共同所有的財產) within section 1062 of the Civil Code of the PRC.

(c) The relevant parts of section 1092 of the Civil Code of the PRC provides, if, after divorce, it is discovered that a party, amongst others, concealed family assets, the other party may apply to Court to divide family assets again (夫妻一方隱藏、轉移、變賣、毀損、揮霍夫妻共同財產 …… 離婚後，另一方發現有上述行為的，可以向人民法院提起訴訟，請求再次分割夫妻共同財產).

14.  There is cogent and compelling evidence that Madam Song had concealed the existence of her shares in the divorce proceedings.

15.  Firstly, there is evidence that, during subsistence of the marriage, Madam Song had agreed to accept various quantities of shares from China Mengniu:

Date of acceptance by Madam Song	Quantity of shares	Subscription price (HK$)
28.11.2007	33,000	32.24
08.09.2008	61,000	22.03
15.12.2009	77,000	24.40
13.07.2018	5,000	14.812
Total:	176,000

16.  Secondly, China Mengniu has confirmed that a total of 18,687 shares of China Mengniu have been allotted to Madam Song from 2018 to 2020 (post-divorce), of which 5,000 shares have been reflected in the table above.

17.  Thirdly, in the divorce proceedings, Madam Song’s legal representative informed the Court that Madam Song did not know whether she held any account with BOCI.

18.  For the 3 reasons given, there is cogent and compelling evidence that Madam Song had committed wrongdoing in concealing the shares, such that the shares were not regarded as family assets available for division in the divorce proceedings.

Norwich Pharmacal Order likely to reap substantial and worthwhile benefits for Mr Ren

19.  Pursuant to section 1092 of the Civil Code of the PRC, Mr Ren may apply to reopen the trial for division of family assets in the Mainland Chinese Courts. Discovery of documents from BOCI will help him discharge the burden of proving that Madam Song had held shares during subsistence of the marriage. Just based on the table above, one can anticipate that the shares may be of a substantial value.

20.  I find that the Norwich Pharmacal Order is likely to reap substantial and worthwhile benefits for Mr Ren in Mainland proceedings.

Discovery not unduly wide

21.  The originating summons sought disclosure as to whether Madam Song holds (a) a named securities account and (b) any other account(s) with BOCI, and for an unlimited period.

22.  The parties have come to agreement as to the scope of discovery should the Court see fit to grant a Norwich Pharmacal Order. In essence, with regard to item (a), the discovery is (rightly, in my view) limited to the period of the marriage. With regard to item (b), as Mr Ren does not know if Madam Song holds other shares with BOCI, BOCI considers it to be a fishing exercise to ask if Madam Song holds any other account(s) with BOCI.

23.  With respect, I do not think Mr Ren is fishing as regards item (b). In real life, a securities account hardly holds only one type of shares for a customer. Shares may be bought and sold; dividends may be generated from the shares. There would be money relating to those transactions. It would not be surprising that a customer who holds a securities account also has, eg cash accounts in the same bank/securities company. If Madam Song holds shares other than of China Mengniu and other bank accounts in BOCI, they may be subject to division with Mr Ren in accordance with Mainland law. Accordingly, I make some adjustments to the agreed terms to better reflect the interests of justice.

Plaintiff exhausted other proper and reasonable avenues for obtaining the information sought

24.  The Disclosure Proceedings bore no fruit. There were no other steps or measures that Mr Ren could have taken in Mainland China to obtain information on the shares.

25.  Section 41 of the High Court Ordinance, Cap 4 (“HCO”) on pre-action discovery is not applicable as BOCI is unlikely to be a party to subsequent proceedings: Zhang Shouen v Standard Chartered Bank (Hong Kong) Ltd, HCMP 682/2015, 15 October 2015, at §21, G Lam J (as he then was).

26.  Section 42 of HCO is not applicable as there are no existing proceedings in Hong Kong under which Mr Ren can make an application for this type of discovery: Leung Yiu Ting v MTR Corporation Ltd [2019] 5 HKLRD 14, §§6-7 and 10, Chow J (as he then was).

27.  I am satisfied that Mr Ren has exhausted all avenues for obtaining the information sought.

Innocent party got mixed up in the wrongful activities of others

28.  The respondent to the Norwich Pharmacal Order must be “mixed up” so as to have facilitated the wrongdoing and is likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued: Evergreen, §54.

29.  The real test is whether or not the respondent was a “mere witness” or whether its engagement with the wrong was such as to make it more than a mere witness and therefore susceptible to the Court’s jurisdiction to order Norwich Pharmacal disclosure: Leung Yiu Ting v MTR Corporation Ltd [2020] HKCFI 460, §17.

30.  Mr Ren seeks no personal relief against BOCI itself. BOCI has a legal relationship with Madam Song which involves strict duties of confidentiality between them. Similar to A Co v B Co, §§24-25, BOCI innocently got mixed up with the wrongful activity of Madam Song in that shares of Madam Song which may well be subject to division as family assets have passed into her account(s) in BOCI. An order for discovery against BOCI would enable Mr Ren to trace the whereabouts of the shares.

Delay

31.  I have raised the issue as to whether Mr Ren has delayed in coming to Court. However, the last relevant judgment dismissing the Disclosure Proceedings on appeal was given on 19 June 2021. Mr Ren issued the present originating summons on 26 October 2021, with a legal opinion in support. I am satisfied that Mr Ren has not delayed in coming to this Court.

Conclusion

32.  For the reasons given above, Mr Ren has satisfied the requirements laid down in the authorities. I grant a Norwich Pharmacal Order in the following terms (with my amendments to the consented terms underlined for the parties’ reference):

(1) The Defendant do disclose to the Plaintiff’s solicitors whether 宋曉彥 has an account or accounts or is an authorized person of an account or accounts with the Defendant for the purpose of receiving employee share options and/or restricted shares from China Mengniu Dairy Company Limited and/or any other shares for the period from 10 November 2007 to 25 December 2018.

(2) The Defendant do disclose to the Plaintiff’s solicitors, and the Plaintiff’s solicitors be at liberty to inspect and take copies of all monthly account statements of the account(s) as stated in (1) hereinabove for the period from 10 November 2007 or the date or opening of the said account(s), whichever is later, to 25 December 2018 that are in the possession, custody or power of the Defendant.

(3) The Defendant shall comply with the order specified in (1) and (2) hereinabove as quickly as possible, but in any event no later than 14 days from the date of this Order (or such other time as may be agreed between the Plaintiff and the Defendant in writing).

(4) On a nisi basis, the Plaintiff do pay the costs of the Defendant of this Originating Summons including reimbursing the Defendant for its costs and expenses (including charges at standard rates stipulated by the Defendant) of complying with (1) to (3) hereinabove, to be taxed if not agreed, on an indemnity basis. (The draft paragraph (5) is not necessary)

(5) Liberty to apply.

33.  I thank Mr Nip for his assistance.