ALDL v. FTFC AND ANOTHER

FCMC 13698/2013

[2020] HKFC 192

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 13698 OF 2013

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J U D G M E N T
( Specific Discovery )

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1.  This is the hearing of the Wife’s application by way of summonses dated 25 October 2018 against two 3^rd party banks for specific discovery of bank statements and documents of accounts belonging to the 1^st Respondent (the Husband) and 2^nd Respondent (R2) respectively. This includes:

(1)     the bank records of the Husband’s account with the Hong Kong Bank (a/c No. 119-XXXXXX-833) from 1 January 2001 to 13 February 2007;

(2)     R2’s bank accounts with the Hong Kong Bank. For the account numbered 541-XXXXXX-XXX, bank records are sought from 1 January 2001 to 18 July 2008 and for the account numbered 481-X-XXX311 for 1 January 2001 to 17 April 2008;

(3)     R2’s bank account No. 012-XXX-X-XXX629-4 for 1 January 2001 to 17 April 2008.

Background of the Marriage

2.  Both parties were born in 1964 and are now 56 years old. The Husband was born in Hong Kong to very humble beginnings. He was educated in Hong Kong until he completed matriculation. Although his matriculation results were not very good, an opportunity arose when he was in Form 6 where he and his elder sister could study high school in Australia. Because of financial constraints, his elder sister had to give up this opportunity. The Husband went to Australia alone to attend high school in 1983. He was subsequently offered a place to study medicine in a university in Australia. He began reading medicine in 1984. At the same time, he had to work part time to subsidize his expenses.

3.  The Wife and her family had emigrated to Australia. She met the Husband in 1984, when she was studying for her Honour’s degree in Occupational Therapy. The parties started serious dating in 1986 and the Husband was introduced to the Wife’s family. The Wife’s late father was very fond of the Husband and had great sympathy for him. Although the parties were not yet married, the Wife’s father invited the Husband to move in with them to alleviate the Husband’s financial burden. At the time, the Husband expressed his concerns about the political situation in Hong Kong after 1997. Although the Husband had yet to complete his studies, the Wife’s father suggested that the parties should get married to enable the Husband to become an Australian resident. As a result, the parties were married in October 1987. However, they only held their church wedding in 1990 after the Husband completed his studies.

4.  In the meantime, the Wife and her family continued to render assistance to the Husband and his family. The Husband wanted to bring his entire family to Australia under the “family union” category which required no investment. At the time, the requirement for “family reunion” was that at least two immediate members of the applicant’s family had to be Australian permanent residents or citizens. Upon the Husband’s request, the Wife’s father arranged for the Wife’s younger brother to marry the Husband’s younger sister. However, after the Husband’s family returned to Hong Kong after they obtained citizenship. The marriage between the Wife’s brother and the Husband’s sister also ended in divorce.

5.  The Wife graduated from university in mid-1988. She immediately started working. She became the sole bread winner and was responsible for the parties’ expenses, including mortgage repayments of their property in Australia. Although the Husband’s mother gave the parties a gift of AUD $120,000 as a down payment for their property in Australia, the parties continued to live with the Wife’s parents and used their own property for rental income.

6.  In 1991, upon the Husband’s request, the parties came back to Hong Kong to enable the Husband to receive specialist training and further his career. He obtained his qualification as a specialist in Anaesthesia in 1998.

7.  On the other hand, because of the move, the Wife gave up her place in a 3-year full time PhD programme with full scholarship assistance in Australia. She got an academic position in one of the Universities in Hong Kong. She enrolled in the PhD programme in Hong Kong in 1994 and received her PhD in 2000. She was promoted to Assistant Professor in 1995. Their income was deposited into their joint account.

8.  After their arrival in Hong Kong, the parties initially lived with the Husband’s mother. They later rented and bought a flat in the same estate. In 1992, the parties moved into quarters provided by the University which was 1,400 sq.ft. Their initial property was sold and the proceeds were used to purchase the former matrimonial home in their joint names in 1995. In 1997, they purchased a car park at the former matrimonial home in their joint names. Between 1993 and 1996, the parties also purchased 2 properties in Australia. These properties were soon sold.

9.  In about April 2006, the Husband left the employment of the Hospital Authority and received superannuation of over HK$2.3 million. At about the same time, he began to stay away from the former matrimonial home with increasing frequency. However, he would still return about once a week. They continued to sleep in the same bed and the Wife continued to cook and do laundry for him. The Wife says that she confronted the Husband about this and he admitted to having an extra-marital affair. This was denied by the Husband. Instead of paying his entire earnings into their joint account, the Husband began to pay HK$150,000 (which he alleged to be half of his income) into the joint account as maintenance for the Wife. The Wife says that the Husband was in fact earning a lot more than HK$300,000 per month at the time.

10.  The Wife says that in about 2007 or 2008, she contracted a chronic medical condition called “Myalgic Encephalomyelitis”, more commonly known as “Chronic Fatigue Syndrome” (CFS). The Husband accepts that this illness or condition exists but denies that the Wife is suffering from it. In June 2009, the Wife resigned from the University and basically became financially dependent on the Husband.

11.  In July 2012, the Husband ceased to return to the former matrimonial home. He alleges that the parties reached a full and final agreement on the distribution of assets. This is denied by the Wife. The former matrimonial home was sold to the Husband’s mother for HK$6.3 million (which the Wife alleges to be at an under value). The proceeds of sale of the former matrimonial home and other family properties were paid to the Wife. This was used by the Wife to purchase her present home in September 2012 for a consideration of HK$12,500,000. The purchase was completed on 2 January 2013.

These Proceedings

12.  In about March 2013, the Husband ceased to make any further payments into the joint account The Wife petitioned for divorce on 10 April 2013. Although the Husband was informed of the intention to take out these proceedings by both the Wife and her solicitors, and arrangements were made with the Husband for service, service was initially unsuccessful. The Husband was finally served on 23 April 2013.

13.  The Husband filed his Form E on 18 June 2013 where he failed to provide the requisite information and documents. From then on, the Wife was put through a protracted and arduous process of discovery. The Husband also denied that he has ever had an extra-marital relationship with M. His relationship was only admitted a year after the commencement of these proceedings.

14.  It was discovered that the Husband has been having an affair with R2 at the latest by 2002 and that he has been giving her substantial amounts of money over the years and those funds have been used to purchase at least the following properties:

(1)     On 9 December 2002 and 8 June 2001, the Husband paid HK$207,000 and HK$122,800 respectively to R2 with funds out of his joint account with the Wife (the Joint Account). On 27 August 2003, R2 entered into an agreement for the purchase of a property in 49A B Garden (49A) for a consideration of HK$2,002,000. On 8 September 2003, the Husband paid a further sum of HK$133,000 to R2 from the Joint Account. On 9 October 2003, the Husband paid HK$200,000 to R2. On the same day, the purchase of 49A was completed. The Husband changed his correspondence address to 49A and had some of his mail redirected from the former matrimonial home to this address (including the bank statements of the parties’ joint account);

(2)     On 15 July 2005 and 20 September 2005, the Husband paid HK$49,500 and HK$160,000 respectively to R2 from the Joint Account. In about April 2006, the Husband left the employment of the Hospital Authority and received superannuation of over HK$2.3 million. On 14 July 2006, R2 entered into an agreement for the purchase of a property at 52G of B Garden (52G) for a consideration of HK$3,950,000. The purchase was completed with the assistance of a mortgage on 15 August 2006;

(3)     On 20 December 2006, the Husband purchased a property in Metro Town (the Metro Town property) in joint names with his mother for a consideration of HK$7,048,000. This property was subsequently sold on 27 September 2012 for HK$9,100,000;

(4)     On 8 March 2007, a property in Lai Chi Kok (Flat H) was purchased with the assistance of a mortgage. The three party mortgage deed showed that R2 was the mortgagor whilst the Husband and R2 were the borrowers. This property was sold for a consideration of HK$5,400,000 on 8 October 2012;

(5)     On 4 February 2009, R2 entered into a provisional agreement for the purchase of a property (Flat E) for a consideration of HK$5,200,000. The purchase was completed on 31 March 2009 with the assistance of a mortgage. On 25 March 2011, the Husband signed a tenancy agreement as tenant with R2 as the landlord of Flat E for a monthly rental of HK$25,000 for the period 1 April 2011 to 31 March 2012. The purported tenancy was renewed for further periods of 2 years at a monthly rental of HK$25,000. These tenancy agreements were not stamped and there appears to be no dispute now that the Husband was in fact living here with R2;

(6)     Between April 2011 to March 2013, the Husband made regular payments to R2 (ranging from HK$50,000 to HK$200,000 each month) through bank transfers. Such payments totaled HK$2,310,000;

(7)     On 5 January 2012, a company called TF Co Ltd was incorporated. The Husband was the sole shareholder and director of this company;

(8)     In about July 2012, the Husband ceased to return to the former matrimonial home. On 10 September 2012, the car park at the former matrimonial home was sold for HK$888,000. The former matrimonial home was sold to the Husband’s mother and sister for a consideration of HK$6.3 million. The Wife says that this was sold at an under-value and that the market price at the time was HK$7 million;

(9)     The Husband and Wife signed a “Divorce Agreement” in about June or July 2012 in full and final settlement of the Wife’s claims for ancillary relief. The Husband is relying on this agreement. On the other hand, the Wife says that the Court should not enforce this agreement as it was entered into without proper legal advice and full and frank disclosure; 

(10)     Between 17 August 2012 and 3 October 2012, the Wife received sale proceeds of family properties amounting to about HK$12.8 million.

(11)     On 13 September 2012, the Wife signed a preliminary sale and purchase agreement in relation to her present residence (Flat B) together with 2 car parks for a consideration of HK$12,500,000. The purchase was completed on 2^nd January 2013;

(12)     Up to 7 February 2013, the Husband made a payment of HK$150,000 per month to the Wife for her maintenance. The monthly payments ceased for a period of 18 months, up to October 2014 and the Wife has had to rely on her own savings.

(13)     The Wife informed the Husband of her decision to divorce in early April 2013. The Petition was issued on 10 April 2013. The Wife’s solicitors spoke to the Husband over the telephone to arrange for service on 18 April 2013. However, the Husband failed to turn up on the appointed date. The Wife’s solicitors then attempted personal service on 19 April 2013 but to no avail. In the meantime and on 22 April 2013, the Husband allotted 9,999 shares in TF Co Ltd to M. The Petition was eventually served on the Husband’s solicitors on 23 April 2013 after they indicated that they had authority to accept service. On 26 April 2013, the Husband resigned as director of TF Co Ltd and R2 was appointed in his stead;

(14)     In the same month, the Husband transferred HK$2,880,310 from his HSBC account to the R2. In May 2013, he transferred US$412,252.43 and AUD $290,349.24 to R2. After he filed his Answer and Cross Petition and on 21 May 2013, he paid HK$525,000 to R2;

15.  On 10 June 2013, the Wife’s solicitors wrote to the Husband’s solicitors to arrange for the exchange their Forms E. On 17 June 2013, the Husband’s solicitors sought a time extension. The exchange of Forms E eventually took place on 18 June 2013. On 20 June 2013, the Wife’s solicitors wrote to the Husband’s solicitors complaining of non-disclosure. The Husband was subsequently ordered to provide the missing information on 24 June 2013.

16.  In a letter dated 2 July 2013, the Husband’s solicitors alleged that he was trading in his own name as a consultant for the period from 1 December 2008 to 31 March 2012 and that his monthly income was HK$516,000. He admitted that he was the holder of the only issued share in TL Co Ltd but alleged that he was holding half of the interest in that share for R2. He started working as the manager of TL Co Ltd since 1 April 2012 with a monthly income of HK$100,000. Copies of bank statements were provided to the Wife’s solicitors under cover of a letter dated 8 July 2013.

17.  On 9 August 2013, the Wife’s solicitors raised queries as to the whereabouts and destinations of the HK$2,880,310, US$ 412,252.43 and AUD$290,349.24. By a letter dated 14 August 2013, the Husband’s solicitors confirmed that those sums were transferred to R2. They further alleged that TF Co Ltd had always been used for trading and alleged that the company had nothing to do with the Husband’s medical practice. They also alleged that the business was conducted mainly by R2 and that the Husband was only assisting her. The Husband alleged that the proceedings had caused him great distress and he had therefore resigned as director of TF Co Ltd and transferred the share to his “business partner”, R2.

18.  After a round of questionnaires, the Wife issued an application under section 17 of the MPPO on 26 August 2013. Although the Wife’s s.17 application was disputed by both the Husband and R2, HK$2,880,310 was returned to the Husband on 29 October 2013. On 27 November 2013, R2 re-assigned the allotted 9,999 shares in TF Co Ltd to the Husband but she remained as a director. On 22 April 2014, R2 transferred HK$3,727,056 to TF Co Ltd.

19.  R2 was joined to these proceedings on 8 November 2013 for the purposes of the s.17 application. On 22 April 2014 (i.e a year after the commencement of these proceedings), the Husband finally admitted his relationship with R2. He further admitted that he had paid for the down payment and mortgage instalments of Flat 49A and 52G. He stated that 52G was intended to be his permanent home with M. He further alleged that R2 had contributed towards the bulk of the down payment for Flat E out of her savings but he admitted that he had paid for the mortgage instalments and acted as guarantor.

20.  The shares in TF Co Ltd and the above mentioned properties currently under R2’s name are now the subject matter of a preliminary issue trial.

21.  On 30 June 2014, the Wife’s solicitors wrote to the Husband’s solicitors, requesting for maintenance pending suit of HK$175,000 per month. This was refused by the Husband. The Wife then issued a summons for maintenance pending suit on 7 October 2014. On 11 February 2015, the parties filed a consent summons in respect of maintenance pending suit at HK$125,000 per month.

22.  This was followed by an application by the Husband under s.17 of the MPPO in respect of money paid by the Wife to her mentor and former colleague. This application was eventually withdrawn with costs to the Wife.

23.  In 2015 and as explained below, the Wife was diagnosed with endometrial cancer. The proceedings came to a stand-still to allow the Wife to receive treatment. Fortunately, the Wife is now in remission.

24.  By a summons dated 20 December 2017, the Wife asked for an upward adjustment of the maintenance pending suit from HK$125,000 to HK$230,000 per month and for legal costs contribution in the sum of HK$3.6 million or alternatively a monthly sum of HK$300,000 for 12 months for the period leading up to the FDR. The amount of the Wife’s maintenance pending suit was adjusted upwards and included a legal costs provision. The Husband is now appealing against that order.

25.  The present summonses were taken out on 25 October 2018 for specific discovery against 2 banks, namely HSBC and BOC.

The Wife’s Arguments

26.  The Wife explained that this application was made, given the relevance of the requested bank records to the trial of the preliminary issue and their necessity to the fair disposal of the disputes. The trial of the preliminary issue concerns the beneficial ownership of the 6 properties purchased in R2’s sole name:

(1)     49A, which was purchased on 27 August 2003 at HK$2,002,000 with a mortgage of around HK$1,800,000 under which he Husband and R2 were joint borrowers. The Husband says that he had paid for the down payment of HK$200,200 for this property as a gift to R2.  The Husband and R2 both alleged that R2 was responsible for the mortgage repayments. Any money that the Husband provided to R2 was a gift to her and could be used as she saw fit. This property was only rented out since May 2007;

(2)     Carparks No.12 and 13 were purchased on 15 October 2003 for a consideration of HK$456,000 with the assistance of a mortgage of HK$319,200. The Husband and R2 both asserted that R2 had paid for the down payment, mortgage repayments, stamp duty, estate agency, legal and other fees. These were only rented out since June 2009;

(3)      52G, which was purchased at HK$3,950,000 with a mortgage of around HK$2,370,000 where the Husband and R2 were joint borrowers. The Husband says that he contributed no more than HK$700,000 towards the down payment as a gift to R2 and that R2 contributed the remainder. He said that R2 paid for the stamp duty, estate agency, legal and other fees. It is also the Husband’s case that R2 was responsible for the mortgage repayments; any money given by the Husband to R2 was a gift to her and could be used as she saw fit. This unit was rented out since June 2009.

(4)     A property called Liberte was purchased on 22 January 2007 for a consideration of HK$2,580,000 with a mortgage under which the Husband and R2 were joint borrowers. The Husband and R2 alleged that R2 made the down payment, paid for the stamp duty, estate agency and legal fees and mortgage repayments. This property was sold at HK$4,270,342 on 8 October 2012.

(5)     Flat E was purchased for a consideration of HK$5,200,000 with a mortgage of around HK$3,640,000, guaranteed by the Husband. The Husband stated that he contributed HK$1,120,000 towards the down payment and R2 paid for the balance. He also stated that R2 paid for the stamp duty, estate agency, legal and other fees. R2 was also responsible for the mortgage repayments. It is the Husband’s case that any money provided by him to R2 was a gift to her and could be used as she saw fit.

27.  The Wife pointed out that both the Husband and R2 agreed that the Husband had contributed substantial funds towards 3 of the above mentioned properties. However, they characterized such contributions as “gifts”. The Husband and R2 further agreed that the Husband had transferred other funds to R2 but supplied no particulars of such transfers. They only provided broad explanations as follows:-

(1)   “Any money [the Husband] did provide to [R2] was for her personally as a gift and could be used by her in any way that she saw fit” (For 49A. 52G and Flat E)

(2)   “all the sums of money that [R2] received from [the Husband] or [TF Co Ltd] as referred to in the Amended Points of Claim were paid by [the Husband] to [R2] as gifts (out of love and affection), household expenses (out of those love and affection as well as being [the Husband’s] contribution when they cohabited), salaries from [TF Co Ltd] or profit as a beneficial owner of the Medical Consultancy Business/[TF Co Ltd’s] profit. These sums of money were given to [R2] without any condition and became part of [R2’s] own money, and [R2] was (and is) at liberty to decide how to use or apply the same solely according to her own wishes”  

28.  The above assertions are all disputed by the Wife. She pointed out that the nature of the transfers to R2 form the crux of the argument in the trial of the preliminary issue. The Wife argued that discovery of the bank statements is relevant and necessary to the following matters in the trial of the preliminary issue:

(1)     The actual movement of funds from the Husband to R2 at the material times, including the timing, amounts involved and pattern of transfers;

(2)     R2’s financial position at the material times.

29.  In respect of the movement of funds, the Husband and R2 now plead that their intimate relationship started in 2001, a year earlier than the Husband had previously confessed on affirmation. The Husband’s evidence is that he already knew, after maintaining his relationship with R2 for around half a year, that he “would need to divorce” the Wife. Further, since the extra-marital relationship began, R2 had on several occasions pushed for the Husband to formally end his marriage with the Wife.

30.  The Wife has discovered through her own efforts, that the Husband had been making substantial lump sum payments to R2 from the Husband’s joint account with the Wife since as early as December 2002. These were set out in a letter from Citibank dated 4 March 2014:

Date of Cheque	Amount
9 December 2002	HK$207,000
8 September 2003	HK$133,000
8 June 2003	HK$122,800
15 July 2005	HK$49,500
20 September 2005	HK$160,000

31.  When asked about these transfers, the Husband stated that he does not recall the reasons behind the transfers. However, he made a positive assertion that these transfers were unrelated to the disputed properties or mortgages [The Husband’s 9^th Affirmation §35 at 130-131].

32.  The Wife submitted that the Court should not accept at face value the Husband’s assertions as to the purported extent of his contribution to the down payments or mortgages. Rather, the Court is entitled to look at evidence of the actual amounts and timing of the Husband’s payments to R2, which will inform the Court as to their true purpose. For example, if the Husband’s payments to R2 were even more substantial than he claims, and/or that the timing of the transfers coincided with R2’s purchases/repayment of mortgages, then the legitimate inference would be that the Husband was funding the properties because he had a beneficial interest in them. The Wife submitted that the Court is entitled to verify whether the Husband had really paid nothing for R2’s purchase of Liberte as he claims. The Wife went on to point out that in cases (such as this case), where a spouse’s professed intention behind the relevant transactions is contested, the Court is often assisted by objective, contemporaneous and reliable evidence that will shed light on the intention.

33.  As for R2’s financial position, the Wife argued that:-

(1)     On R2’s case, she worked as a nurse in various hospitals, earning about HK$15,000 to HK$20,000 from 1989 to 1995, HK$30,000 from 1995 to 2005 and HK$40,000 from 2005 t 2006. She claimed that she was able to “accumulate a considerable amount of savings on her own through her various employments as a nurse and her own investments”

(2)     Even assuming that R2 was able to save as much as half of her income during the said period after tax and living expenses, she would only have accumulated savings of around HK$2,670,000.

(3)     However, from 2003 to 2006, M managed to purchase 2 apartments and 2 car parks. On her own case, apart from the Husband’s contribution towards the down payment, she funded the rest of the purchases and mortgage repayments on her own. These properties did not generate any rental income during this period. In January 2007, she proceeded with the purchase of yet another property, i.e. Liberte, allegedly using her own funds.

34.  R2’s purported financial position and ability will therefore be a crucial issue at trial. The Court is entitled to test and verify R2’s contentions by looking at her bank records at the material times. There is currently a dearth of documentary evidence to shed light on R2’s assertions that she was able to fund and had in fact funded the various purchases and mortgage repayments with her own monies.

35.  In short, it is the Wife’s case that the Husband had decided to end the marriage in 2001 or 2002. He then systematically siphoned off funds to R2 and TF Co Ltd and purchased properties under R2’s name to put assets out of the Wife’s reach in the divorce proceedings.

The Husband’s Arguments

36.  The Husband is opposing the Wife’s application on 2 grounds:-

(1)     That the documents are no longer in existence and are not in the possession, custody or control of the Husband and hence cannot be retrieved and provided to the Wife;

(2)     Even if HSBC were able to provide the requested documents, it is oppressive of the Wife to request for bank statements or records from so long ago especially when the requested documents will provide minimal probative value to the Court as to the beneficial interest of the disputed properties as compared to the onerous task of obtaining and analyzing the documents.

37.  The Husband also criticized the Wife for the delay in making the application. He argued that the Wife has had an abundance of time to apply for discovery of the documents but has failed to do so earlier. She has known since about 2014 when the Husband’s 2^nd Affirmation and 3^rd Answer to the Wife’s Questionnaire were filed that the Husband has been having an intimate relationship with R2 and that R2 had purchased the registered the disputed properties (except for the 2 carparks which were disclosed later) in her own name. She also knew that the Husband had contributed to the allowance of R2 since 2002. Yet, she did not issue any claim against the Husband and R2 until the matter was raised by the Court at the FDR hearing date in October 2015 nor apply for any specific discovery.

38.  The Husband also submitted that the procedure adopted by the Wife was unfair. Further, the Husband submitted that the documents sought by the Wife are no longer in existence.

M’s Arguments

39.  R2 also argued that the requested documents are no longer in existence. She also submitted that the Wife has failed to identify the relevance of the documents. She criticized the Wife for her failure to identify any specific transaction(s) or specific periods of time that she may suggest to be relevant to any of the issues in dispute, for example, periods close to the time of the purchase of any property or around the time when any sums of money in question already identified in pleadings were allegedly paid.

40.  R2 argued that given the prolonged period of time for which historical bank documents are now being sought by the Wife, the Court must also consider whether and to what extent the requested documents may be conducive to resolving the issues in dispute. It was pointed out that R2 had already admitted that the Husband had contributed to part the down payments for 49A and 52G by way of gifts. R2 also accepted that there were other sums given to her by the Husband out of love and affection. The issues at trial will be whether those were trust monies given by the Husband with an intention to acquire beneficial ownership in the disputed properties or were gifts made by the Husband to R2 when they were in a relationship. She submitted that the requested documents would not point to one way or the other and are only of marginal value but of great expense both in terms of time and money.

Procedure

41.  The Husband argued that the procedure adopted by the Wife was unfair. He submitted that it is now well established that when a party is not satisfied with discovery of the other party – such as the Wife in the present case – he/she should not directly apply to a non-party requesting for specific discovery against them. This will only raise costs, delay the proceedings and unnecessarily complicate the issue. He relied on the case of CLS v LPKP [2018] 1 HKLRD 786. Since that case is also relevant to the issue of necessity, it will be dealt with below.

Relevant Legal Principles

42.  The Husband referred to RHC Order 24 rule 7, whereas R2 referred Order 24 rule 7A of the Rules of District Court, Cap 336H. With respect to Counsel, I disagree with the Husband. In my view, Counsel for R2 rightly pointed out that the relevant rule is Order 24 rule 7 of the Rules of District Court, Cap.336H.

43.  The Wife’s 2 summonses are based on section 21 of the Evidence Ordinance Cap.8 (EO) and section 47B of the District Court Ordinance., Cap. 336 (DCO).

44.  Section 21 of the EO provides as follows:-

“Court or judge may direct copies of entries in banker’s record to be taken

(1) On the application of any party to any proceedings, the court or a judge may order that such party to be at liberty to inspect and take copies of any entries in a banker’s record for any of the purposes of such proceedings.

(2) An order under this section may be made other than with or without summoning the bank or any other party, and shall be served on the bank 3 clear days before the same is to be obeyed, unless the court or judge otherwise directs.

(3) The costs of any application to the court or judge under or for the purposes of this section, and the costs of anything done or to be done under an order of the court or judge made under or for the purposes of this section, shall be in the discretion of the court or judge, who may order the same or any part thereof to be paid to any party by the bank, where the same have been occasioned by default or delay on the part of the bank.

(4) Any such order against a bank may be enforced as if the bank were a party to the proceedings.”

45.  Section 47B of the DCO provides as follows:-

“Extension of powers of the Court to order disclosure of documents, inspection of property, etc.

(1) A party to proceedings in an action, in which a claim is made, may apply to the Court in accordance with rules of court for an order for discovery of documents against a person who is not a party to the proceedings and who is likely to have or to have had in his possession, custody or power documents relevant to an issue arising out of the claim.

(2) The Court may order the person, if it appears to it that the person is likely to have or to have had in his possession, custody or power any relevant documents-

(3) (a) to disclose whether those documents are in his possession, custody or power…”

46.  Guidance on the use of section 21 of the EO can be found in ITP Systems NV v Reichenbach & Anor [1985] 2 HKC 148 at 156B:-

“The authority for me to take action sought on the Nova Scotia Bank summons springs from s.21(1) of the Evidence Ordinance (Cap.8). It is a discretionary power and must be exercised as I see it in accordance with the following principles and I have listed four.

(1) The section carries no new power of discovery, it is simply a section to be applied in accordance with the normal rules for discovery – its only specialty being that it is applicable, within those rules, to banks. Authority for that is found in South Staffordshire Tramsways Co v Ebbsmith [1895] 2 QB 669.

(2) There have to be strong grounds for suspicion almost amounting to certainty that there were items in the account material on matters in issue. Authority for that is from Lord Esher MR in the same Staffordshire case at p.675. An example of such strong grounds are to be found in the William v Summerfield case where the criminality of the account of the account holder formed the basis for such strong grounds so as to enable the Court of Appeal to upheld a magistrate’s order for inspection and a further example could also be derived from the proven criminality of the account holders in the Court of Appeal case of Bankers Trust Co v Shapiro & Ors [1980] 3 All ER 353.

(3) Despite the fact that in the above examples sufficiently strong grounds have arisen from instances of proven criminality. Sufficiently strong grounds can provide the need for tracing monies simply arising from fault or even misappropriation from breach of trust.

(4)   Even when granting applications for tracing where fault or breach of trust are involved, it is not open to the court to make any order necessary to ensure justice and for this I find authority from Ackner LJ in Bekhor (AJ) & Co Ltd v Bilton [1981] 2 All ER 565 at 577 where he found such a proposition to be too wide and sweeping and a contention to be acceptable” 

47.  RHC Order 24 rule 7 provides as follows:-

“7. (1) Subject to rule 8, the Court may at any time, on the application of any party to a cause or matter, make an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is, or has at any time been, in his possession, custody or power, and if not then in his possession, custody or power, when he parted with it and what has become of it…

(3) An application for an order under this rule must be supported by an affidavit stating the belief of the deponent that the party from whom discovery is sought under this rule has, or at some time had, in his possession, custody or power the document, or class of document, specified or described in the application and that it relates to one or more of the matters in question in the cause or matter.

48.  The parties referred the Court to the decision in CLS v LPKP [2018] HKLRD 786 at 792, where the Court stated that:-

“23. Although the wife’s summons is taken out under s.21 of the Evidence Ordinance (Cap.8) and s.47B of the District Court Ordinance (Cap.336), both Mr. Jeremy Chan, counsel for the wife and Ms. Anita Yip, senior counsel for the husband, agree that the actual applicable rule in this application is in fact O.24 r.7 of the Rules of the High Court (Cap.4A, Sub. Leg) which is helpfully summarized by Ms Yip as follows:-

(1) To invoke Order 24 rule 7, there are 3 prerequisites, namely relevance, existence and possession of the documents sought for discovery. The applicant party bears the burden of showing these 3 prerequisites;

(2) Once a prima facie case has been made by the applicant party, the court has a discretion whether or not to order disclosure. The burden then shifts to the objecting party. The court will not order production unless it is satisfied that the production is necessary either for disposing fairly of the issues between the parties or for saving costs;

(3) 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;

(4) Discovery should not be oppressive and fishing is not allowed;

(5) Statements in party’s affidavit of the list of documents are conclusive…

24. Ms Yip SC also refers to a line of post CJR cases showing that the courts nowadays are more pro-active in case management for fulfilment of such underlying objectives under Order 1A rule 1 of the Rules of the High Court as cost-effectiveness, expeditious disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties. The case law also shows that active case management includes the increasing emphasis by the court to limit discovery…”

49.  With respect to counsel for the Husband, I disagree. It is obvious from the wording of that rule that O24 r7 applies only to specific discovery between the parties of the proceedings. It is evident from the wording of the Summonses and the relief sought, that the Wife is seeking specific discovery of banking documents against third parties, namely, HSBC and BOC.

50.  I a further reinforced in my view by O24 r7A of the Rules of District Court which provides as follows:-

“Application under section 47A or 47B(1) of the Ordinance (O24 r.7)…

(1) An application for an order under section 47A of the Ordinance for the disclosure of documents before the commencement of proceedings…

(2) An application after the commencement of proceedings for an order under section 47B(1) of the Ordinance for the disclosure of documents by a person who is not a party to the proceedings shall be made by summons, which must be served on that person personally and on every party to the proceedings other than the applicant

(3) A summons under paragraph (1) or (2) shall be supported by an affidavit which must –

(a) in the case of a summons under paragraph (1)

(b) in any case, specify or describe the documents in respect of which the order is sought and show, if practicable by reference to any pleading served or intended to be served in the proceedings, that the documents are relevant to an issue arising or likely to arise in the proceedings and that the person against whom the order is sought is likely to have or have had them in his possession, custody or power.

(3A) In the case of a summons under paragraph (1), paragraph (3)(b) shall be construed as if for the word “relevant”, there were substituted the words “directly relevant (within the meaning of section 47QA of the Ordinance)”

(4) A copy of the supporting affidavit shall be served with the summons on every person on whom the summons is required to be served.

(5) …

(6) …

(7) …

(8) For the purposes of rules 10 and 11 an application for an order under section 47A or 47B(1) of the Ordinance shall be treated as a cause or matter between the applicant and the person against whom the order is sought

51.  The terms of O24 r7A of the District Court are identical to those in RHC O24 r7A. The scope and operation of those rules are the same and are explained in the White Book at para 24/7A/6 to 24/7A/9 at p.672:

“24/7/6 Application for disclosure of documents by non-party

An application for an order for the disclosure of documents by a person who is not a party to the proceedings must be made by a summons in the action. The summons, however, must be directed to the person against whom the order is sought. It must be served on him as if it were an originating process; and it must also be served on every party to the action (para.(2)).

The summons should state that the application is made pursuant to O.24 r.7(2) and it should specify the document or documents in respect of which the order is sought.

The test for relevance in an application under s.42 and O.24, r.7A is the same test that is applied for other types of discovery under O.24; Cham Tam Sze v Hip Hong Construction Co. Ltd [1990] 1 HKLR 473 where Bokhary J considered that Brett J’s classic statement at paragraph 63 in the Peruvian Guano case applied). However, in Chan Yim Wah Wallace v New World First Ferry Services Ltd (unrep., HCPI 820-/2013, [2015] HKEC 762) the court noted that the test for relevance under r.7A(1) is narrowed to documents directly relevant to an issue arising or likely to arise, in that it is likely to be relied on in evidence by any party to the proceedings in support of its case or the document supports or adversely affects any party’s case. Background documents or “Peruvian Guano” documents are not considered to be directly relevant. The limitation of directly relevant documents, imposed on applications under r.7A(1), does not extend to applications under r.7A(2) for discovery from non-parties in proceedings which have already been commenced. In such applications, the test of relevance includes background documents and “chain of enquiry” documents in the Peruvian Guano sense…

24/7A/7 Affidavit in support

The summons for the disclosure of documents, whether before action under para.(1) or by a non-party under para.(2) must be supported by affidavit, a copy of which must be served on every person on whom the summons itself is required to be served (para.4).

The applicant ought normally to have already set out in writing the nature of his allegations (Shaw v Vauxhall Motors Ltd [1974] 1 WLR 1035; [1974] 2 All ER 1185, CA).

The supporting affidavit must fulfil the following requirements.

(1) It must specify or describe the documents in respect of which the order is sought.

(2) It must show that the person against whom the order is sought is likely to have or have had such documents in his possession, custody or power.

In the above respects, the supporting affidavit bears a close affinity to the supporting affidavit on an application for the discovery of particular documents under r.7…

24/7/8 Order for discovery before action or by non-party

An order for the disclosure of documents before action under para.(1) or by a non-party under para.(2) will not be for general discovery of documents as under r.3, but for discovery of particular documents as under r.7. The order should therefore specify or describe the documents to be disclosed with care and precision…

An order under para.(1) or para.(2) will not be made unless the discovery is necessary under r.8, which has been amended to apply to this rule. See Barrett v Ministry of Defence, The Independent, January 23, 1989. If the documents meet the criteria of relevance and necessity and are sufficiently identified so that there can be no doubt about what is being requested, discovery ought to be ordered even if the documents were in some instances described by reference to classes or groups of documents rather than individually (Cheung Kai Wing v Mok Sheung Shum & Tugu Insurance Co. Ltd (third party) [1993] 2 HKC 113, CA. The court has a discretion to decline to make an order which would be unnecessary or oppressive or not in the interests of justice or injurious to the public interest (Wong Siu Hing v Lo Che Keung [1991] 1 HKC 412).

A discovery order against a non-party is upon the discretion of the court instead of being “as of “right” or “entitlement” of the party seeking such order. It involves the court’s conventional considerations of “existence, relevance and necessity” under O24, 47A(2) and r8(2) and a balancing exercise of the need for disclosure in the interest of the administration of justice and countervailing factors such as the “duty of confidentiality” and “protection of personal data” under Personal Data (Privacy) Ordinance (Cap. 486. See Chan Yim Wah Wallace v New World First Ferry Services Ltd (unrep, HCPI 820/2013 HKEC 762)…

The power of the court to order a non-party to produce relevant documents is not fettered except as provided by the relevant provisions of statute and the rules, and is to be exercised so as to further the administration of justice. Where the issue of a subpoena duces tecum could compel production of the documents by a non-party at the trial of the action, the interests of justice are not served by forcing a party to wait until trial for their production. This would prevent him from deploying his full position in cross-examination until the documents became available to him and from fully preparing his case until after the start of the trial. These propositions are derived from the decision of the House of Lords in O’Sullivan v Herdmans Ltd [1987] 1 WLR 1047; [1987] 3 All ER 129, HL…”

52.  In summary, the legal principles governing the present application are as follows:-

(1)     The Court must be satisfied that the documents sought are in existence, in the possession, custody or power of HSBC or BOC and relevant to the issues in dispute.

(2)     In the context of seeking bankers’ records, there have to be strong grounds for suspicion almost amounting to certainty that there were items in the account material on matters in issue.

(3)     The Court will then have a discretion whether or not to order disclosure. The burden then shifts to the objecting party.

(4)     The court will not order production unless it is satisfied that the production is necessary either for disposing fairly of the issues between the parties or for saving costs.

(5)     Discovery should not be allowed if it is oppressive, fishing or too wide and sweeping in scope.

53.  In CLS v LPKP (supra), the learned Judge rightly pointed out that since the Civil Justice Reform, the Courts have been more pro-active in case management for the fulfilment of the underlying objectives under O.1A r1 of the Rules of the High Court, including cost effectiveness, expeditious disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties. The case law also shows that active case management includes the increasing emphasis on limiting discovery. Those underlying objectives also apply to the proceedings in the Family Court [see PD.15.12 (Part G)]

54.  The process of discovery and disclosure in the context of matrimonial proceedings is also explained in Rayden and Jackson on Relationship Breakdown, Finances and Children (2016) at para.13.104 as follows:-

“In financial remedy proceedings, disclosure and discovery begins with the service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E. Thereafter, disclosure and discovery is by means of a questionnaire served in advance of the First Appointment and considered by the court at that appointment, and if the court gives permission, by further questionnaire at a later stage of the proceedings. Questionnaires can, like interrogatories, request information as well as seek production of documents. As part of its case management role, the court should regulate the extent of the discovery of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.”

Existence and Possession of the Documents

55.  I will first deal with the question as to the existence and possession of the documents sought. In the event that this Court finds that the requested documents are not in existence and/or have never been in the possession, custody or power of the banks, all the other arguments would be academic.

56.  The Husband and M contend that the requested bank records no longer exist.

HSBC Accounts

57.  The Husband produced a letter from an Assistant Branch Manager of HSBC at the Festival Walk Branch dated 15 April 2014, which informed the Husband that:

“…we retained the records for only a seven-year period. After this period, all the documents in our archives, including vouchers, account statements, etc, are destroyed. Therefore, we are unable to offer further assistance about the details of your account transaction in question/retrieve the requested statement of 2006, as those records have been destroyed” [39 or 74]

58.  In response to the Wife’s summonses, M first approached both HSBC to make enquiries by herself [77/§9]. By a letter dated 20 November 2018 [81], HSBC Festival Walk branch replied, inter alia:

“We regret that no account statements of the above-named customers can be retrieved by the bank within year 2001 to 2008”

59.  M’s solicitors then made a written request to HSBC along the terms of the summons [86-88]. HSBC later issued a computer generated print-out to M stating that “the request document on or before Nov2011 is beyond the retention” [89].

60.  M argued that in terms of policy, this is in line with HSBC’s letter dated 15 April 2014 [74] in response to the Husband’s enquiries.

61.  The Wife does not suggest that the assistant branch manager’s statements in the letter are untruthful. She also accepts that different banks may have different policies (for example Citibank does retain records beyond seven years). She emphasized that the letter does not spell out the scope of the search – for example whether the archives referred to were those of the particular branch (which issued the letter), or the centralized systems of the bank. She argued that an Order from the Court will focus attention on what bank records should specifically be searched for. This is not accepted by M. She argued that the requests to obtain bank records in terms of the Wife’s summons in her 2 solicitors’ letters, including the account numbers, the requested period and also the nature of the bank records requested.

62.  Further, the Wife submitted that the Court is in any event entitled to a verifying affidavit from a bank officer to confirm that the records had been permanently destroyed and completely irretrievable (if such is indeed the position). This is the general requirement in discovery applications. The Evidence Ordinance (Cap.8) itself provides (at section 20(4) that certain matters relating to bank records may be proved by the affidavit of a bank officer. The Wife asserted that this must also apply to the existence or otherwise of such records.

63.  The Wife also relied on a letter from HSBC to her solicitors upon service of the summonses:

“We confirm that it is not the Bank’s intention to contest the above Summons and the Bank will comply with any Court orders which are served on it. Given the amount of documents/information you have requested, please note that the Bank may require more than 28 days to produce the same” [58,59].

64.  The Husband argued that his statement on affirmation as to whether he has or has had any of the documents sought are conclusive and the Wife is not entitled to bring this application. He relied on his 2^nd Affirmation (where he stated that the bank only keeps records for the past 7 years) and his 9^th Affirmation (where he stated that the requested documents are no longer in existence or in his possession. He also relied on the letter from the HSBC dated 15April 2014 which stated that they only retained records for a 7 year period and that “all documents in our archives, including vouchers, accounts statements, etc are destroyed” [See CTFF-20 and CTFF-34]. He argued that the Wife is asking the Court to disbelieve HSBC and she should not be allowed to do so.

65.  It appears that prior to the service of the Wife’s summonses on HSBC, the Husband and M were given standardized replies by the bank and that the Husband is relying on those replies to say that the documents are no longer in existence in total disregard of the subsequent letter from HSBC to the Wife’s solicitors.

66.  When the 2 summonses were served on the bank, a simple answer (in terms of the bank’s previous answers or in terms similar to the answer from BOC mentioned below) could have been given to the Wife’s solicitors. That would probably have been the end of the matter.  However, not only did the bank say that it will comply with the Court’s order for discovery of those documents, they asked for an extension of time for compliance in view of the volume of documents involved. 

67.  The Husband appears to have lost sight of the fact that the present summonses are directed towards the 2 banks and not against him or M. In such an application, the Husband’s statement on affirmation is not conclusive. In addition, he made no reference to the latest letter from HSBC. The Husband and M may not be in possession of the documents but HSBC appears to be now saying that the documents are in existence and the bank is in possession of them.

M’s BOC Account

68.  Initially, M approached BOC for the requested documents by herself. BOC branch told M that they did not keep bank statements for more than 7 years [77/§9] and supplied her with a “General Banking Services Charges” booklet [82-84], which reads:

“Request for savings/fixed deposit account records…More than 3 years (maximum 7 years)”.

69.  This was followed by a letter from M’s solicitors to BOC (headquarters) dated 16 November 2018 [91]. By a letter dated 23 November 2018, BOC informed M’s solicitors that:

“The account records cannot be furnished as the information had over 7 years and been purged permanently from our computer records.”

70.  Subsequently, BOC’s solicitors have written to the Wife’s solicitors that:

“We are instructed that the Bank is only required to keep records for a period of 7 years, and any records falling outside this period are not available or retrievable. As such, in the event that the Court is minded to grant a disclosure order we are instructed that there are no documents and/or records in the Bank’s possession, custody or power to be produced to the [Wife]” [311-313].

71.  It therefore appears that the documents were in existence and had been in the possession, custody and power of BOC but has now no longer available or retrievable.

72.  The Wife has no objection to the amended terms of the order proposed by BOC, which is as follows:-

“(1) The Bank of China (Hong Kong) Limited (“BOC” shall within 7 days of the service of this Order (or such other time and date as may be agreed in writing between the Petitioner and BOC) provide to the Petitioner’s solicitors , through BOC’s solicitors, copies of all documents or records (including documents or records that are stored electronically, on microfiche or by any other means) that are in the possession, custody or power of BOC, if any, relating to the savings account no …..for the period from 1 January 2001 to 17 April 2008 (both dates inclusive) (“the said records”) for the purposes of these proceedings…

(4)      In the event BOC claims the said records are not in their possession, custody or power, authorized representative from BOC or its solicitors shall provide the Petitioner’s solicitors an affirmation/affidavit confirming the same with reasons and/or explanations…”

Relevance

73.  The Peruvian Guano test remains the test of relevance [The White Book 667/para 24/7/2]. 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;

(iii)     Notwithstanding the Peruvian Guano test, “fishing” is not allowed, and discovery should not be oppressive;

(iv)     The respondent may answer an application for specific discovery by an affirmation stating that he does not have the documents, and this will be conclusive at the interlocutory stage. It is therefore not sufficient for the applicant to merely allege that the respondent has or had documents; a prima facie case must be made out for (a) existence, (b) possession, custody or power, and (c) relevance of the specified documents. 

74.  In relation to relevance, it is for the party seeking specific discovery to demonstrate a prima facie case for the relevance of the documents sought to the “matters in question”. The relevance of the documents under application is to be determined by pleadings. In the context of relevance, if a matter has not been identified in pleadings, it does not become an issue simply because it is hotly contested in affirmations in interlocutory proceedings, witness statements or expert reports. However, although the pleadings and particulars will usually determine relevance to a matter in question, it may be wider than this: “the obligation to provide discovery does not necessarily mean a matter on which issue has joined in the pleadings, but the documents must be matters to which an inference can properly be drawn that they are subject to controversy between the parties. Discovery must not relate solely to credit. Specific discovery will be deemed to be a fishing exercise if the allegedly relevant issue was never part of the issues identified in the listing questionnaire filed by the applicant’s solicitors or in the pleadings. When specific discovery is sought at an advanced stage of the proceedings and in the lead up to trial, the court may be more likely to be of the view that the discovery requests are not speculative and not a fishing exercise [The White Book/667-668].

75.  Neither the Husband nor M appear to argue that the requested documents are irrelevant. To the contrary, the Husband accepted in paragraph 30 of his submissions that:

“Here, the Husband accepts that part of the Documents which involved the dealings between the Husband and M (if they were in existence), would be relevant to the issues in dispute…”

76.  M only criticized the scope of the discovery sought by the Wife (see §§ 28-35 of her submissions). She asserted that in order to be relevant, the Wife must identify any specific transactions or specific periods of time that she may suggest to be relevant to any of the issues in dispute, for example, periods of time close to the purchase of any property or around the time when any sums of money in question already identified in pleadings were allegedly paid. In other words, like the Husband, M accepts that at least part of the documents sought are relevant (if they are still in existence).

77.  Contrary to what is alleged by M, the Wife has explained why she says the requested documents are relevant. The trial of the preliminary issue concerns the beneficial ownership of 6 properties which were all purchased in M’s name. In the Court’s judgment, the documents sought by the Wife are clearly relevant to the crux of the dispute in respect of the beneficial ownership of the properties. The dates, the amounts, the frequency of the payments by the Husband to M and the sums withdrawn by M are evidently material to the inferences that the Court may draw and the determination of the beneficial ownership. The Court finds that the Wife has demonstrated the 3 pre-requisites to invoke O.24 r.7A. There is no dispute that once a prima facie case has been made out by the applicant, the court has a discretion whether or not to order disclosure. The burden then shifts to the objecting party.  

Procedure and Necessity

Procedure

78.  I will first deal with the question of procedure. The Husband argued that the procedure adopted by the Wife was unfair. Both the Husband and R2 relied on the case of CLS v LPKP [2018] 1 HKLRD 786. In that case:

(1)     The parties were married in 1995 and have 2 teenage sons, who were in full time education.

(2)     The husband was an investment banker. According to his Form E, his total assets amounted to HK$24 million. The wife was a housewife. According to her Form E, her assets totaled HK$21 million.

(3)     Initially, both parties worked in the banking or financial industry. In 1999, the husband was offered better employment in Canada. As a result, the wife quit her job and has since been a housewife.

(4)     The family relocated to Hong Kong in 2003. The husband continued to work as an investment banker. At the time of the proceedings, he was working for Merrill Lynch with an average income of HK$1,450,000 per month.

(5)     There was no dispute that the husband has 2 major bank accounts in Hong Kong. They are both with the HSBC, namely Account 450 (in his sole name) and a joint account with the wife (Account 485). It was the wife’s case that before the separation of the parties, the husband’s monthly income and bonuses were paid into Account 485, from which she could freely withdraw money to pay for her and the sons’ expenses. The husband would also transfer money from Account 485 to Account 450 from time to time.

(6)     Unfortunately, the marriage began to break down after the parties relocated to Hong Kong. In May 2010, the then matrimonial home at Villa Rocha was sold for about HK$18,200,000. The sale proceeds were first paid into the joint Account 485. Thereafter, the husband transferred about HK$12,000,000 on divers dates into Account 450. The wife only kept HK$4,000,000 of the proceeds.

(7)     It was admitted by the Husband that he was having an extra marital relationship with C. There was no dispute that he met C in 2008. The only dispute was whether the relationship began in 2010 or 2012.

(8)     It was also indisputable that after the sale of Villa Rocha in May 2010 and between 2010 and 2011, C purchased a property in Shanghai (the Shanghai Property) for a consideration of RMB 4,700,000. She obtained a mortgage of about RMB 3,280,000 from ANZ Bank and the draw down took place on 28 April 2011. On the following day, i.e. 29 April 2011, the husband received an email from a sender called “the place where the dream commences” in which ANZ bank and its swift code, C’s full name and the mortgage account number were stated.

(9)     In early 2014, the wife discovered that the husband’s extra-marital relationship with C.

(10)     The husband moved out of the matrimonial home in October 2014. In December 2014, the wife filed her petition based on “unreasonable behavior”, including the husband’s adulterous relationship with C. A Decree Nisi was pronounced in January 2016.  On 10 August 2015 and by consent, the parties were granted joint custody of the sons, with care and control to the wife.

(11)     In normal circumstances, parties in ancillary relief proceedings are required to disclose their bank statements for the past 12 months under the statutory Form E. However, the parties of this case have previously agreed that the husband should disclose the bank statements for a period of up to 3 years prior to the petition, in recognition that the wife is entitled to a 3-year period presumption in her favour for any possible application to set aside transactions pursuant to s.17 of the MPPO (s.17 application). Thus a consent order to that effect was granted.

(12)     The wife discovered that the Husband had given very substantial sums to his parents and there was a pending s.17 application as well as a trial of the preliminary issue as to the beneficial ownership of 3 stock accounts against them. The trial of the preliminary issue was scheduled to take place in February 2018.

(13)     After consideration of the husband’s bank statements and answer to questionnaires, the wife discovered that the husband had also transferred about HK$6 million C. The wife then took out a s.17 application against C.

(14)     It was the wife’s belief that the husband and C were already in a relationship as early as 2010 when he introduced her to his parents during the Shanghai Expo. From the disclosure, it was clear that the husband had transferred money out of Account 450 to C as early as November 2011. The wife therefore wanted to ascertain how much the husband had given to C since April 2010 and more particularly if he had funded the purchase of the Shanghai Property, so that the wife can consider whether any further s.17 applications are necessary and assess the size of the matrimonial pot.

(15)     On 8 May 2017, the wife took out a summons for specific discovery not against the husband, but against his banker, namely HSBC, for the following relief:

“(1) For allowing her or her agent to enter HSBC premises for the purpose of inspecting and photocopying the banks records of the husband’s HSBC premier account (Account 450) for the period from 1 April 2010 to 16 December 2011 (Period); or

(2) Alternatively, for HSBC to produce the said statements of Account 450 for the Period.”

(16)     Prior to her application for specific discovery, the wife had already obtained the bank statements of Account 485 from April 2010. She worked out from those statements that the husband had transferred a total of HK$20,929,557.25 to his savings account and HK$940,394.30 to his current account under Account 450 during the Period. However, the opening balance of Account 450 as at 17 December 2011 was only HK$2,895, 507.88. After taking into account the HK$12,000,000 that the husband had transferred to the Merrill Lynch account registered in his late father’s name, the wife says about HK$6,900,000 in Account 450 was missing and into which she wished to further investigate.

(17)     HSBC does not oppose the wife’s application. It indicated that it will comply with whatever order the Court makes and its attendance has been excused by the Court.

(18)     The opposition of the wife’s application came from the husband, who argued that there was a delay in her application and that her request was a fishing expedition which is not only oppressive, but neither relevant nor necessary for the fair disposal of the issues.

(19)     Out of the 3 prerequisites, “existence” and “possession of the bank statements of Account 450 were not in issue. The Husband’s solicitors have informed the HSBC to preserve the bank records/statements of Account 450 for the Period. The only issue in dispute was the question of “relevance”.

(20)     According to the wife’s affirmations in support, her case was that she needed to see the bank statements of Account 450 to find out:

(a)     Whether any of the sale proceeds of Villa Rocha was transferred to C, particularly for the purpose of funding her purchase of the Shanghai Property;

(b)     The whereabouts of the HK$6,900,000 that had gone missing from Account 450;

(c)     Whether the husband had transferred more than he has already disclosed to C.

(21)     The wife relied on the proximity in time of the sale of Villa Rocha (May 2010) and the purchase of the Shanghai Property as well as the email dated 29 April 2010 in support of her belief that the husband might have transferred part of the sale proceeds of Villa Rocha to C to fund her purchase of the Shanghai Property.

(22)     The completion of the sale of Villa Rocha was in May 2010. Out of the sale proceeds, the wife received HK$4,000,000, whilst the husband received HK$12,000,000 which was transferred by him from the joint Account 458 to his sole Account 450 by May 2010. The husband confirmed by affirmation that he issued a cheque dated 10 June 2010 in the sum of HK$12,000,000 and paid the same into the Merrill Lunch account held in the name of his late father, which is the subject matter of both the preliminary issue trial and a s.17 application. He produced a copy of the cheque in support of his explanation. The wife did not seriously dispute this evidence. It was hence obvious that the sale proceeds of Villa Rocha was a non-issue.

(23)     Even if it were still an issue, and assuming the husband had funded the purchase of the Shanghai Property, the learned judge pointed out that the possible amount paid by the husband could be easily calculated by deducting the mortgage draw down from the purchase price, which came to RMB 1,420,000.

(24)     In those circumstances, the learned judge found that in respect of the sale proceeds of Villa Rocha, the bank statements sought by the wife falls foul of the necessity test for either disposing fairly of the issues or for saving costs [para.43].

(25)     The learned judge also found that the husband had already explained the whereabouts of the alleged missing HK$6,900,000:

(a)     Payment of his tax in early 2011 totaling about HK$1,800,000;

(b)     Gift to his late father in the sum of HK$2,100,000 and to his mother in the sum of HK$100,000 in 2011;

(c)     Payment to AXA in the sum of HK$272,085 to settle a life insurance premium;

(d)     Habitual transfer of around HK$500,000 to his ICBC (China) account to pay the mortgage of Lakeville property in Shanghai which he had purchased in 2009;

(e)     Expenses for moving home in the sum of HK$200,000 in early or mid 2011;

(f)     Transfer of HK$500,000 in about October 2010 and of HK$1,000,000 in about October 2011 to his friend, Mr. Leung who was living in China, to buy RMB for the husband.

(26)      Contrary to what was argued by the wife, the husband had produced documentary proof of his tax assessment, demand for provisional tax, 2 cheques issued to his parents, the AXA policy anniversary statement.

(27)     In those circumstances, the learned judge held that the documents requested by the wife were not necessary for fairly disposing of the matter or of saving costs [para 44-47]

(28)     The wife then tried to argue that there may be other funds paid to the husband’s parents and C. This was described by the judge as a “fishing expedition” as this was never part of the wife’s case in her application.

(29)     The wife argued that the amounts given to C by the husband should be added back to the matrimonial pot. The learned Judge referred to the case of MKKWH v RKSH [2013] HKFLR 540 where the wife on appeal sought to add back over HK$71,000,000 of non-marital expenditure incurred mainly by the husband for his 3 other families.

(30)     In his Judgment, Lam VP ruled:

“In the context of ancillary relief, bearing in mind the stricture against costly, indecent and time –wasting post mortem, only conduct which is so obvious and gross that it would be inequitable to disregard may (but not must) require adjustment on account of fairness…

Thus, not every item of non-marital expense can be added back though it could be said that such expense was a depletion of the matrimonial pot and as such it reduces the share of the spouse who was not benefitted from such expenditure…”

(31)     The learned Judge then commented on the nature of the application at paras 66-, parts of which are heavily relied on by the Husband and R2:

“66. Last but not least, I wish to say a few words on the approach of the wife’s application.

67. For the record, the wife originally invited this Court to issue a writ of subpoena to the HSBC by way of an ex parte application by letter dated 31 March 2017. Requisitions were then raised by this Court as to the basis of her application for a writ of subpoena when there was no hearing date fixed for receiving any evidence. By her further ex parte letter dated 11 April 2017, she clarified that she sought from the court to issue a writ of subpoena duces tecum. Again, I refused her request and asked her to consider taking out proper application for discovery pursuant to the relevant rule(s) or ordinance(s).

68. Pausing here, I note that from time to time, family judges do receive ex parte applications by letter to invite the court to issue a writ of subpoena to the banker of the opposite party for production of bank accounts during the stage of discovery when no trial has been fixed. For reasons which will become obvious below, I do not accept this is a proper and correct procedure to adopt.

69. Subsequent to this Court’s comment, the wife took out this application directed to the banker of the husband and provided the following explanation in her 10^th Affirmation:

21. In view of the [husband’s] uncooperative attitude in the disclosure of his own finances throughout the proceedings, he will have no hesitation in using each and every means and steps to delay the production [of his bank statements] by which time, many months of the bank statements could not be produced in view of ‘7 years rule’. As such, the cheapest and most efficient way to get the statements is to get the statements directly from the Bank.

70. During the hearing, Mr. Chan for the wife relied on Chan Wai Sun v Law Shiu Kai Andrew [2003] 3 HKLRD 954, in which Chu JA 9then Chu J) allowed the plaintiff’s application and granted an order for inspection of the bank records of a third party (General Profits). There, the plaintiffs claimed against the defendant for repayment of 2 loans made in 5 cheques in favour of General Profits. However, General Profits was not incorporated or registered in Hong Kong and therefore no record could be found. It emerged that the5 cheques were paid into a local bank account maintained by General Profits. The plaintiffs thus sought an order to inspect the local bank records, which was opposed by the defendant.

71. For the purpose of this judgment, there is no need for me to go into depth the reasoning and legal principles of Her Ladyship in her judgment. It is obvious to me that the case here before me is standing on a totally different ground, in that the wife here is not seeking disclosure of the bank accounts of a third party whose presence is not in Hong Kong.

72. Although the law allows a party to proceedings to seek discovery against a third party or a banker, I have to say bluntly that in the circumstances of this case, it is wholly inappropriate and unnecessary for the wife to direct the discovery against the banker, instead of the husband. The fact that the husband refused her discovery request is not a good and sufficient reason for her to trigger an application against the banker. To involve a third party, ie the banker, will achieve nothing but only complicate the procedures and escalate unnecessary costs. It is by no means the “cheapest and most efficient” way to achieve her request for discovery. Fortunately, Mr. Chan has not sought to advance his argument along that line and has accepted that the applicable rule should be the said O24 r7.

73. I thus remind the family practitioners that in similar situation like this, the applicant spouse should not attempt to achieve his/her discovery request by ex parte application for writ of subpoena/writ of subpoena duces tecum, nor by discovery directed to the banker. I hold the further view that this is a “back-door” tactic which should not be encouraged. And in saying so, I would make it very clear that neither party, especially the applicant spouse, should labour under the wrong impression that green light will automatically be given by the court, without hearing from the responding spouse, once the banker indicates that it would not object to the production of the bank statements.

74. The proper application in such circumstances is to take out a specific discovery summons pursuant to the said O24 r7 against the responding spouse. It is also suggested that the responding spouse should, as the husband here has done, write to his/her banker to have the bank records preserved pending the determination of the court”

79.  Counsel submitted that it is now well established that when a party is not satisfied with discovery of the other party – such as the Wife in the present case – he/she should not directly apply to a non-party requesting for specific discovery against them. This will only raise costs, delay the proceedings and unnecessarily complicate the issue.

80.  Counsel pointed out that the wife in CLS had instructed the same solicitors as the Wife in the present case. The Wife is now making an application to that in CLS. He argued the Court in CLS ultimately rejected the wife’s applications for discovery and in so doing also reprimanded the wife on her approach of seeking discovery directly against the Banker [§§72-74]. Counsel went on to say that:

“Yet, it seems that those instructing the Wife have not learned from their mistake nor have they heeded the Court’s guidance in CLS. They have once again adopted the same approach by issuing the Summons for discovery directly against the banker in this case. Such conduct should again be deplored as there is simply no reason why the Wife needed to make the application directly to HSBC save and except to try to “backdoor” the discovery process.

81.  On the other hand, Counsel for the Wife submitted that the present case is distinguishable from CLS. She submitted that:

(1)     the learned judge in CLS took the view that the wife was using a “back-door” tactic to seek discovery from the husband’s banker, when she ought to have done so against the husband under O.24 r.7. The husband in that case had written to his banker to have the bank records preserved (§§ 32, 73-74). There was no question that he, as the bank’s customer, could obtain the records from the bank if ordered by the court to give discovery.

(2)     In the present case, both the Husband and R2 concluded on Affirmation that the bank records no longer existed. Yet the evidence they have adduced left room for doubt as to the scope of the searches that have been conducted. Section 21 of the Evidence Ordinance provided a proper statutory basis to obtain discovery directly from the banks or at least an affidavit verifying that the records are indeed no longer in existence. There can be no objection, whether in principle or in practice, to the Wife’s use of this legitimate statutory mechanism in the circumstances.

(3)     The Wife cannot be accused of using any “back-door” tactic because she is not seeking to bypass the O.254 r.7 requirements at all. To the contrary, she readily accepted the need to show, and has amply shown, that the requested bank records are relevant and necessary to the trial of the preliminary issue.

(4)     In CLS, the wife requested bank records so that she could consider whether a s.17 application might have to be taken out. The learned judge held that the wife’s requests went to a non-issue, were unnecessary, or failed to identify a “fish” which she ought to have done before she was entitled to go “fishing in the Family Division within the limits of the law and practice”.

(5)     None of these is the situation in the present case. The preliminary issue is already on foot. On the parties’ pleaded cases, the requested bank records are clearly relevant, necessary and disclosable evidence for the Court’s eventual determination of the issue. The Wife here is not embarking on any fishing exercise.

82.  This Court agrees with the learned judge in CLS that after the CJR, judges have to be more proactive in case management to fulfil the underlying objectives under O1A r1 of the Rules of the High Court. The Court should regulate the extent of the discovery of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.

83.  This Court wholly disagrees with Counsel for the Husband. The submissions put forward were not in line with the learned judges ruling in CLS and is in complete disregard of the evidence. The case of CLS is not authority for a general principle that a party in matrimonial proceedings should in no circumstances be allowed to apply for specific discovery against a banker or third party.

84.  Firstly, the comments of the learned judge in CLS were not the ratio of the case at all. In that case, the wife’s application was dismissed on the ground that the requested documents were wholly irrelevant to the issues of the case and were unnecessary for the fair disposal of the matter between the parties. Contrary to what was submitted by the Husband’s Counsel, the learned judge in CLS made it clear that her comments were restricted to the circumstances in that case at §72:

“Although the law allows a party to proceedings to seek discovery against a third party or a banker, I have to say bluntly that in the circumstances of this case, it is totally inappropriate and unnecessary….”

85.  The “reminder” to family practitioners was also limited to cases with similar situations [§73].

86.  In fact, what prompted the comments from the judge in CLS was the wife’s ex parte attempts to issue a writ of subpoena and a writ of subpoena duces tecum against the husband’s banker before making the application under the Evidence Ordinance. In other words, the wife was trying to obtain the documents without giving the husband an opportunity to respond to or oppose her application. That was why the learned judge referred to these applications as “back-door” attempts. That was why the learned judge stated that “…neither party, especially the applicant spouse, should labour under the wrong impression that green light will automatically be given by the court, without hearing from the responding spouse, once the banker indicates that it would not object to the production of bank statements’(§73).

87.  Counsel for the Husband has also completely ignored the evidence and the learned judge’s findings in CLS. In that case, the existence and possession of the requested documents were not in dispute. The only issue was relevance. In the present case, relevance is either undisputed or indisputable. The question was existence and possession. The application in CLS was dismissed because the requested documents were irrelevant to the issues between the parties. The wife in CLS was hence unable to fulfil the prerequisites of O24.r7A. In contrast, there is little, if any dispute as to the relevance of the requested documents. The question was existence and possession. The Wife only has to demonstrate (and in my view has demonstrated) that there is a high chance that the requested documents are in existence and are in the possession of HSBC.

88.  Both the Husband and R2 argued that the proper approach is for the Wife to make an application for specific discovery against them. However, at the same time, they argued that they have already deposed that the documents do not exist and are no longer in their possession and that is conclusive evidence in the interlocutory stage.

89.  The Wife’s application is a demonstration that she accepts that the Husband and R2 are not in possession of the documents and that is conclusive. Her case is that there is now evidence that HSBC is prepared to comply with a discovery order and requested over 28 days to comply in the light of the volume of documents.

90.  In short, the situation in the present case is wholly different from the facts in CLS.

Necessity

91.  The Husband has admitted that he had decided to leave the Wife soon after the commencement of his relationship with R2. It is the Wife’s case that the Husband then systematically siphoned off his assets and earnings and placed them under R2’s name.   Unlike the husband in CLS, the Husband in this case did not come clean with the Wife or the Court. Prior to the proceedings, he persuaded the Wife to sign a separation agreement without any disclosure. When the Wife commenced proceedings, the Husband evaded service and delayed the filing and service of his Form E. In the meantime, he attempted to dispose of other assets under his name. He also denied that R2 was his girlfriend.  In fact, he lied to this Court for a year before he was forced to admit his extra-marital relationship with R2. Discovery was tortuous and the Husband has been playing a game of “catch me if you can”. He only admitted to making some payments to R2 when confronted with evidence that the Wife has found by her own efforts. When asked about other payments, the Husband and R2 both admitted that the Husband did make many other payments to R2 over the years but that they were all gifts of love which R2 was entitled to use as she sees fit. This a self-serving bare allegation. At least one of the properties had been sold for profit. Some of the properties have been let out for rental income. The requested documents would show whether any of the proceeds of sale and/rental went to the Husband. Another issue in dispute is R2’s financial ability to purchase the disputed documents.

92.  In conclusion, it is difficult to see how Counsel for the Wife would be able to cross-examine the Husband and R2 or how the Court could be expected to determine R2’s financial ability or the beneficial ownership of the disputed properties without the requested documents setting out R2’s financial circumstances, the destination of the proceeds of sale and rental, the extent, the dates, the amounts and the frequency of the Husband’s payments to R2. I find that the requested documents are necessary to fairly dispose of the issues between the parties.

Oppression

93.  The Husband and R2 argued that the Wife’s request is oppressive and out of proportion. The Court understands that bank statements are cheap to obtain but expensive to analyze. There is no dispute that the Husband has been making payments to R2 over the years. However, no particulars of these payments (neither the approximate dates or amounts) were given by the Husband or R2. They then turned round and alleged that the Wife’s requests were oppressive and submitted that she should specify the dates which are relevant. This is extraordinary. All the properties in dispute were purchased with mortgages. It was not only the down payments that are in issue, but also the monthly mortgage repayments. In the light of the circumstances of this case, it is difficult to see how the Wife can be more specific about the requested documents. In the circumstances of this particular case, I do not find the Wife’s request to be oppressive.

Conclusion

94.  By reason of all the above mentioned matters, I find that there is a high chance that the requested HSBC documents are in existence and are in HSBC’s possession. Those documents are relevant and necessary to fairly dispose of the matters between the parties. As for the BOC documents, it is quite clear that those documents did exist but are no longer in BOC’s possession, custody or power. The Wife is prepared to accept an Affirmation from BOC to confirm that.

95.  Lastly, whether the Wife’s approach is correct or not, it was unnecessary, inappropriate and distasteful for the Husband’s Counsel to launch a personal attack at or cause personal embarrassment to a fellow member of the profession.

AND I MAKE THE FOLLOWING ORDERS:

(1)     The Hong Kong and Shanghai Banking Corporation Limited (HK Bank) shall within 28 days of the service of this Order (or by such other time and date as may be agreed in writing between the Petitioner and the HK Bank) provide to the Petitioner’s solicitors copies of all documents or records (including documents or records that are stored electronically, on microfiche or by any other means) that are in the possession, custody or power of the HK Bank, if any, relating to:

(i)     the HSBC Premier Account No. 119-668317-833 held in the name of the 1^st Respondent for the period from 1 January 2001 to 13 February 2007 (both dates inclusive) for the purposes of these proceedings;

(ii)     the HSBC Premier Account No.541-224937-833 held in the name of the 2^nd Respondent for the period from 1 January 2001 to 18 July 2008 (both dates inclusive)

(iii)     the HSBC Savings Account No. 481-5-005311 for the period from 1 January 2001 to 27 June 2008 (both dates inclusive)

(2)     The documents and records referred to in paragraph 1 of this Order shall include:

(i)     Account statements;

(ii)     Withdrawal or deposit slips;

(iii)     Electronic transfer instructions; and

(iv)     cheques

(3)     In the event that HK Bank claims that the said records are not in their possession, custody or power, an authorized representative from the HK Bank shall within 14 days of the service of this Order file and serve an Affirmation or Affidavit stating whether any of the documents or records mentioned in paragraphs 1 and 2 above has at any time been in its possession, custody or power, and if not, then in its possession, custody or power, when it parted with them and what has become of them;

(4)     An representative authorized by the Bank of China (Hong Kong) Limited (BOC) shall within 14 days of the service of this Order file and serve an Affirmation or Affidavit, stating whether any of the following documents or records relating to the savings account number 012-680-1-007629-4 held in the name of the 2^nd Respondent for the period from 1 January 2001 to 17 April 2008 (both dates inclusive), including account statements, withdrawal and deposit slips, electronic transfer instructions and cheques (whether such documents or records are stored electronically, on microfiche or by any other means) have at any time been in its possession, custody or power, and if not then in its possession, custody or power, when it parted with them and what has become of them;

(5)     Liberty to apply;

(6)     The costs of the HK Bank in retrieving the above mentioned documents and records be reimbursed by the Petitioner on an indemnity basis;

(7)     The HK Bank’s and BOC’s costs of this application be borne by the Petitioner to be taxed if not agreed, such order to be in the form of a costs order nisi, to be made absolute unless objection is raised in writing within 14 days hereof;

(8)     There be no order as to costs of this application between the Petitioner and the 1^st and 2^nd Respondents.