SUSAN Q CLAVANO TSCHOEPKE v. ERNST-ULLRICH TSCHOEPKE

IN THE COURT OF APPEAL

1995, No. 11
(Civil)

Headnote

Rule 77 Matrimonial Causes Rules - Observations on the exercise of discretion - Family Court Judge's refusal of further discovery upheld by Court of Appeal.

IN THE COURT OF APPEAL

1995, No. 11
(Civil)

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J U D G M E N T

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Litton, J.A.:

1. This is an interlocutory appeal. The appellant is the wife in matrimonial proceedings. She is aggrieved by the refusal of His Honour Judge de Souza on 7 November 1994 to order that the husband be required to further particularise his affidavit of means as follows:

(1) that he produces the audited account of his former law firm in Essen Germany from 1990 to the present and

(2) that he discloses bank statements of the firm generally from January 1990 up to the present.

The background to the proceedings

2. There is a long history to this matter. The wife's petition for divorce and for ancillary relief was filed in August 1993. In October 1993 the husband lodged his affidavit of means. There was a request for particulars of that affidavit which was answered in January 1994. The wife was not satisfied with that so in April 1994 she sought more particulars and this was followed by a summons dated 3 May 1994. Pursuant to that His Honour Judge de Souza ordered the husband to give more information concerning his means and to provide copies of various documents. So the husband filed an affidavit on 27 September 1994 to comply with the judge's order. The wife was still dissatisfied and took out another summons for further discovery. The judge eventually dealt with this on 7 November 1994. He acceded to some of the wife's requests but in relation to the disclosure of information concerning the husband's former law firm in Germany the judge declined the wife's application. Hence this appeal.

The husband's case

3. The husband's case is simple. He says that from 1985 to the end of 1991 he practised law in Germany, at first as the sole proprietor of the firm which bears his name and subsequently with partners. At the end of 1991 he retired from that partnership and came to live and work in Hong Kong. Since January 1992 he has been employed as a consultant with Messrs Robert W.H. Wang & Co., concerned with developing European work. Whilst he has maintained an informal relationship with the firm - because he is practising in Hong Kong as a specialist in German law and needs to keep up his licence to practise in Germany - he is no longer in partnership and derives no income from the firm. He has no right of access to their accounts, bank statements or anything else. Moreover the firm is a third party to the proceedings and should not be vexed.

The wife's case

4. The wife says that despite his move to Hong Kong at the end of 1991 and taking-up full-time employment here in January 1992 with Messrs Robert W.H. Wang & Co. the husband has maintained an interest, perhaps as sole shareholder, in his old firm: at least until mid-1993.

5. The wife's case on this appeal is this. Since the husband has maintained a share in his old firm, or at any rate close links with the firm, there is no reason why the information she now seeks concerning the firm should not be supplied; the information if disclosed might show that he has far more financial resources than has so far been disclosed; the judge was wrong in principle in failing to order such disclosure; the disclosure is necessary to do justice to her claim for ancillary relief.

The judge's jurisdiction

6. Rule 77 of the Matrimonial Causes Rules deals with investigations by the court of applications for ancillary relief generally. Paragraphs 4 and 5 state as follows:

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

(5) At the hearing of an application for ancillary relief the court shall, subject to rules 78, 80 and 80A, investigate the allegations made in support of and in answer to the application and may take evidence orally and may order the attendance of any person for the purpose of being examined or cross-examined, and may at any stage of the proceedings order the discovery and production of any document or require further affidavits."

The exercise of discretion under paras (4) and (5) is not an easy matter. Often parties to matrimonial proceedings do not give full particulars of their income and property as required by rule 73(2). Without full particulars the judge may not be able to perform his function of granting ancillary relief properly. This may result in injustice. On the other hand the interlocutory process of investigation under r77 may itself be the cause of injustice. The requirement to give information may be difficult to comply with. It may be extremely oppressive. It is important that the investigation under r77 should not be turned into a mini-trial.

7. Here the judge has in the exercise of his discretion declined to make the orders sought, although he did on 7 November order as follows:

(1)	That the husband should verify certain particulars he gave on 29 April by affidavit.
(2)(a)	That he should ask the partners of the firm to declare by way of affidavit:
	(i)	whether he, the husband, has any interest in the firm;
	(ii)	the date when he ceased to have an interest;
	(iii)	any consideration paid to or received by him after his withdrawal;
	(iv)	whether audited accounts for the firm existed in 1990 and 1991.

Exercise of discretion

8. In the light of what I have just said has the judge erred in the exercise of his discretion in declining the wife's request?

9. The husband has, in the particulars given pursuant to the first request, said this:

6(i)	(I) do not know what bank accounts are maintained by the practice from 31st December 1991 and have no statements of any account maintained by that practice to which in any event I would not be entitled.

The wife says in argument that para 6(i) must necessarily be untrue and can be shown on the material before us to be untrue. She relies on a type-written document purporting to be an agreement for sale of the husband's shares in the firm which bears the date 30 April 1993. This, she says, establishes at least two things - (i) that he was the sole shareholder of his firm at least until April 1993 and (ii) that the husband must have access to at least the 1990 and 1991 balance sheets of the firm.

10. The husband's explanation for that document is as follows: It was a draft and was created simply to placate the wife, she having nagged him to enter into an agreement with his former partners so as to get a capital lump sum for selling his share in the partnership. He says that this draft was created in about March 1993 and remained in the database of his old computer kept at home to which his wife had access; no such agreement was ever entered into.

11. She says this is untrue and that he had himself sent her the document. The husband refutes this by pointing to the fact that the document is in English and unsigned; if it was truly intended to be a legal document to transfer his shares in his old firm, it would have been in German and signed by the parties.

12. Plainly the judge in the court below would not have been able to determine the truth of the matter without a trial, with the parties going into the witness box and being cross-examined. No court would welcome such a process at an interlocutory stage - a process which might have been very oppressive.

13. Has the wife then got in her hands sufficient material concerning the husband's income from his old German firm? What seems clear is this:

(1)	She has already got the firm's tax declarations showing income and expenditure for 1990 and 1991.
(2)	The audited accounts of the firm which she now seeks may not exist. The husband says that, in Germany, audited accounts only exist for very large corporations; his old firm never filed returns based upon balance sheets and profit and loss accounts; it did so only on the basis of income and expenditure accounts.
(3)	If what the husband says is true, he has no means of compelling the members of the firm to give the information sought.

Conclusion

14. Unless the judge had been able to resolve, in effect, that the husband was lying in his explanation he could not, in my judgment, have made the orders sought by the wife; there was simply no material before the court to justify such a conclusion. As regards the bank accounts of the firm the husband says he cannot produce them. He does not have them and he has no access to them: at least not unless he went to Germany and talked to the partners. Whether that is a wholly truthful statement or not cannot be judged at this stage. On the material before the judge there was nothing to indicate that it was intrinsically incorrect. The husband argues further: to require such bank statements to be produced would be very oppressive; no distinction is made apparently between the firm's moneys, client's moneys or moneys from other firms; so no useful information would in fact be gained by simply looking at the bank statements of the firm. To distinguish between the ownership of the credit balances one would need to look at the books of the firm; plainly, access to the books would not be possible. Moreover, he says disclosure of such statements would involve the disclosure of clients' affairs. These are cogent reasons and it seems to me that the conclusion reached by the judge is amply justified.

15. I would add this: by this judgment, which is simply on appeal from an interlocutory order, this court has made no pronouncements on the veracity of either of the parties to this unfortunate dispute. I would dismiss this appeal.

Power, V.-P.:

16. I concur and have nothing to add.

Mortimer, J.A.:

17. I agree.