C v. C

cacv 410/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 410 of 2005

(on appeal from FCMC NO. 79 of 2002)

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REASONS  FOR  JUDGMENT

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Hon Rogers VP:

1.  This was an appeal in respect of paragraphs 4 and 5 of an order made by Deputy District Judge Jenkins on 24 October 2005.  Those parts of the order appealed from were that the petitioner should file and serve copies of documents relating to four companies namely Kotsu Ltd, Kambala International Ltd, Profit Harmony Ltd and Gold Star Assets Ltd (“Gold Star”) from their respective dates of incorporation up until the date of the order including bank statements, statements of all stockbrokers and fund managers and documents relating to the present whereabouts of two deposits totalling HK$4,315,472.49 which were remitted from Gold Star to the Shanghai Commercial Bank Ltd (London Branch) on 9 June 1992 and 27 April 1995 respectively.  The orders included the provision that the petitioner and respondent had to the file and serve copies of statements of all bank accounts whether in trust or in their own name going back to 1 January 1996.  At the conclusion of the hearing of this appeal, this appeal was allowed and paragraphs 4 and 5 of the order of the judge were set aside.

Background

2.  The parties were married as long ago as 1967.  Unfortunately the marriage broke down at the end of 1999 and the parties separated in February 2000.  The petition was presented in January 2002 based on one year’s separation by consent.  There was a decree nisi in March 2002.  Following that the parties filed their respective affidavits of means in April and May 2002.  After that there appears to have been a delay of some 2½ years during which, apparently, the parties sought to settle their differences.  It is fair to say that in this case both the parties appear, unfortunately, to have their suspicions of each other.  The husband, the respondent, has his suspicions that the petitioner, the wife, has not fully disclosed everything that should have been disclosed.  For her part, though, the wife considers that there has been a disposal of assets by the husband in the period when the negotiations were taking place and that appears to be the subject matter of a section 17 application which is due to be made.

3.  The matter came before HH Judge Geiser on 9 November 2004 upon a call-overhearing.  On that occasion the husband sought discovery of documents going back to 1998.  Judge Geiser was firm.  He said:

“

I also say straight away that I do not propose to go back to 1998.  There is no evidence before me that the petitioner was actually contemplating divorce in those days, the date of separation was 2000, and decree nisi pronounced in March 2002.  Nevertheless, I am satisfied that 42 days rather than 28 days for the information to be supplied is more appropriate due to the volume of discovery involved.” (See transcript page 20 L-O)

4.  He therefore limited the discovery to the year 2000.  On this appeal this court’s attention was drawn to the fact that there were good reasons why he should do so.  Our attention was drawn to the Practice Directions in respect of matrimonial proceedings and in particular to the standard forms of the affidavit of means which are prescribed under 15.5 of the Practice Directions.  These indicate that the standard period there would be two years.  Indeed under the Practice Directions under the Financial Dispute Resolution Pilot Scheme the period for provision of matters such as bank statements would be 12 months.  Even in respect of companies, the audited and unaudited financial statements which are required would only extend that to 2 years.  It is only if there is any significant change in assets during the previous 36 months that further disclosure is required.  No doubt in matrimonial cases the important question is to determine exactly how much money is available to each party.  Documents going back one or two years should be sufficient for that to be determined.  Only in exceptional circumstances would it seem necessary for the parties to have to go back further.

5.  The order in this case came to be made in what, it might be hoped, were slightly unusual circumstances.  There was a further call-over listed for a 15 minute hearing on Monday 24 October 2005.  There was no formal application for discovery but, on the previous Saturday morning before the hearing, the husband’s lawyers had served a copy of proposed directions.  These include the directions of which complaint is now made.  At the hearing the wife’s counsel objected to the court hearing that application on that date and said that it should be dismissed and in the alternative a proper hearing should be allocated for it.  The Deputy Judge appears to have brushed that aside.

6.  There was no evidence in support of the application for discovery which was made on behalf of the husband but there were innumerable affidavits and also answers to the financial questionnaires which had been raised by the two parties.  We have a transcript of the hearing of 24 October and, unfortunately, it would appear that the Deputy Judge was neither taken to any of the voluminous evidence nor was he addressed to any extent on the principles that are applicable to such an application.  Had the judge been taken to the evidence, he would have then been informed that in December 2004 the husband had filed an affirmation of means in which he had said amongst other things:

“

13.

One of the directions which I shall be seeking in future and before trial is for mutual discovery of financial records to be made by both parties dating back to 1st January 1998.”

7.  Perhaps even more pertinently, some three days before the hearing he had filed another affirmation in which he said in paragraph 25:

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I am advised and verily believe that in addition to my requested information particularized under the above paragraph 23, it is also reasonable and necessary for the Petitioner to disclose financial records for a period of at least two years prior to our separation in order to assess her to maintenance needs.”

8.  Had the Deputy Judge been reminded of the principles applicable to discovery, he might have been referred to the case of Berkeley Administration Inc v McClelland FSR [1990] 381 were Mustill LJ said at page 382 that the jurisdiction to make a discovery order for production of documents did not arise unless (a) there was sufficient evidence that the documents existed which the other party had not disclosed; (b) the document or documents relate to matters in issue in action; and (c) there is sufficient evidence that the document is in the possession, custody or power of the other party.  The Deputy Judge might also have been reminded of the various authorities that relate to discovery applications which have been classified as “fishing expeditions”.  These arise where what is sought is not evidence but information which may lead to a line of inquiry which would disclose evidence.  It is the search for material in the hope of being able to raise allegations of fact, as opposed to the solicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation.  See the judgment of Kerr LJ in Re State of Norway’s Application [1987] QB 433.

9.   The documents ordered in this case relate, in the first place, to Gold Star.  Gold Star was established in 1992.  Both the husband and wife have at all material times been directors of Gold Star.  The husband was the sole shareholder of Gold Star until the dilution of his interest in 2002.  Both the husband and wife were the authorised signatories of the bank accounts.  It would appear from the husband’s affirmation filed in December 2004 that he has all the accounts for Gold Star starting from March 1992 at least up until March 2004.  There was a period from 1992 until 1996 when the wife was in control of the management of the assets of Gold Star but the husband took the sole control of and responsibility for the management since about 1996 or 1997.  It is the wife’s evidence that in 1996 she transferred the assets to Kotsu Ltd, which was a company established in 1992.  It has been dormant since 1999 and was apparently dissolved and 2001.  The assets that were previously in Kotsu Ltd were transferred to Kambala International Ltd.  That was another of the wife’s companies.  It had been established in 1996.  The monies were divided into two accounts one for the wife and one for the children of the marriage.  The amounts for the children the marriage were transferred to Profit Harmony Ltd in 2001.

10.  It is the husband’s case and there is no dispute that after he took back control of Gold Star some $9 million was transferred out of Gold Star into Kotsu Ltd and invested.  Again, there does not seem to be very much dispute about the matter, the money which was taken out over a period of time from Gold Star was intermingled with money which the wife had received from her father.

11.  On this appeal Ms Leong SC, who appeared on behalf of the wife, took this court carefully through both the law relating to disclosure and such of the facts which were relevant to this application.  She established that the documents which had been ordered were not such as could be shown to be required for the purposes of these proceedings, at any rate without a great deal of further evidence showing why it was necessary for these documents to be discovered.  Quite apart from the fact that the husband had at all material times been a director of Gold Star, if there were any discrepancies in matters relating to Gold Star, he had been aware of those at least since about 2001.  It is unnecessary to dwell further upon the discovery ordered in respect of Gold Star since not only was it clearly unnecessary because the husband was in an equally good position to obtain any documents from banks in relation to Gold Star as the wife, and indeed probably in a better position, but in so far as there were any other documents there has been no reason given as to why such documents are needed at this stage.  Moreover, the report of the accountants filed on behalf of the wife has shown that Profit Harmony Ltd has assets of some US 1.7 million which are held for the children of the marriage and the report also shows that the wife’s interest in Kambala International Ltd is in the order of HK$20.5 million.  In those circumstances far from showing any obvious deficiency in what might be expected to have arisen from the $9 million which was taken out of Gold Star, these amounts would on the face of it indicate that there has been prudent investment.

12.  On this appeal Mr Egerton, who appeared on behalf of the husband, did not argue that the full extent of the order made by the Deputy Judge should be maintained.  His argument rested solely upon the suggestion that the documents including copies of bank accounts of Kotsu Ltd and Kambala International Ltd for the period of 1996 to 2000 should be provided.  I can see no basis for that being required.

13.  In my view, unfortunately, the Deputy Judge overlooked the fact that in ordering further discovery which went beyond the normal discovery which is considered appropriate in matrimonial proceedings, there was no evidence either that the discovery was relevant or that it was necessary for fairly disposing of the matter of the financial provisions between the parties.  This is quite apart from the fact that it would appear that the wife did not keep any records going back to 1996 relating to dealings with the sums involved.  In short, this is not a case that justifies the conclusion that there has been a lack of proper disclosure or that money has been secreted.  Although there have been oral assertions, unsupported by affidavit, which, at best, can be categorised as speculation but in reality are not even that.

14.  As Ms Leong submitted, there was also the further point that if the husband’s concerns about the details of the transactions in relation to Gold Star and the sums transferred therefrom are subjected to the minute examination which the husband apparently wishes, not only is any conclusion reached unlikely to affect the ultimate outcome but the attention given to what is a comparatively small part of the husband and wife’s total assets would be wholly disproportionate.

Hon Le Pichon JA:

15.  I agree.