LCYP v. JEK AND ANOTHER

HCMC 3/2018

[2019] HKCFI 857

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO. 3 OF 2018

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D E C I S I O N
(On Costs)

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1.  On 11 October 2018, W issued a summons for specific discovery (“Discovery Summons”).  By the Discovery Summons, W sought from H 6 categories of documents/information.  The Discovery Summons was fixed for a directions hearing on 19 November 2018.

2.  Upon being served with the Discovery Summons, H’s solicitors sent a letter dated 18 October 2018 to W’s solicitors complaining, amongst other things, that W’s requests were piecemeal, and that W was seeking financial information which H had already provided and that H’s solicitors would be letting W’s solicitors know which questions H was prepared to answer (and that he had not already answered) as soon as possible, and certainly well before the hearing fixed on 19 November 2018.

3.  No further letters or answers were sent by H’s solicitors.  At the hearing on 19 November 2018, this Court ordered, amongst other things, that H was to provide the agreed information and/or documents requested by W in the Schedule annexed to the Discovery Summons (“Schedule”) within 21 days, and for all those requests not agreed adjourned for argument, and H was to file and serve his affidavit in opposition within 14 days.

4.  Thereafter, there was no further communications from H’s solicitors, nor did H file any affirmation in opposition, pursuant to the above directions.  However, instead of filing a proper affirmation in opposition, H in his 9^th affirmation of 7 November 2018 had commented on the Discovery Summons and said he had already answered some of the questions, and further produced a letter exhibited JEK9-4 a copy of email from C Kwok dated 8 October 2018 showing allegedly all the payments, including all “earn-ups” for FRC (“08.10.18 Email”). 

5.  It was only on 18 January 2019, the Friday before the substantive hearing on 21 January 2019 that H’s solicitors sent a letter dated 18 January 2019 purportedly to reply to W’s request for information and documents in the Schedule.  H’s solicitor, Mr Dearle, also lodged his skeleton arguments, claiming again that H had already explained his position in response to those same questions in the Schedule in his 7^th, 8^th and 9^th affirmations. 

6.  It was quite clear from the letter of 18 January 2019 that H’s answers were not adequate.  At the hearing of the Discovery Summons on 21 January 2019, W was prepared to withdraw her request under paragraph 6 of the Schedule, the order made by this Court made was as follows:

(i)   H shall provide the information and/or documents requested in paragraphs 1, 2, 4 and 5 of the Schedule by way of an affirmation within 28 days of the order;

(ii)   the application in respect of paragraph 3 of the Schedule be adjourned to the PTR fixed on 31 January 2019 for further argument;

(iii)   costs reserved

7.  As seen from above, the only outstanding matter on 19 January 2019 was in relation to the paragraph 3 of the Schedule, in relation to the funds paid for FRC.  For reasons submitted by Mr Yim, the Court agreed that the 08.10.18 Email was not sufficient and the matter was adjourned for Mr Dearle to obtain further instructions.  Eventually, at the hearing on 31 January 2019, the matter was resolved by an undertaking from H to obtain a written confirmation by 11 February 2019, in relation to all funds paid for the acquisition of FRC.  The matter of costs was directed to be dealt with by paper.

W’s position on costs

8.  Mr Yim submitted that as W had succeeded in obtaining substantially the disclosure she requested, costs should follow the event, and there was no reason why she should not be entitled to costs of and incidental to the Discovery Summons, with certificate for counsel.

H’s position on costs

9.  Mr Dearle submitted H’s position was that there should be no order for costs in respect of paragraphs 1, 2, 3, 4 and 5 of the Schedule, and that for paragraph 6, as W was forced to withdraw this question after the Court’s indication, W should pay H’s costs in this regard.

Discussion

10.  H pointed out that W only eventually issued the Discovery Summons for further disclosure and had produced a very short list of 6 remaining questions, and that this reflected that W had inaccurately informed the Court at the hearings on 13 and 17 July 2018 that his disclosure was “woefully inadequate”.  Further, W continued to ask questions which H had already provided answers.

11.  The background of these proceedings had been set out in this Court’s previous judgments/decisions.  In particular, as seen in paragraph 154 of this Court’s Costs Provision Decision of 16 August 2018, this Court found that H failed to comply with his obligation to make a full, frank and clear disclosure of his financial position.  His disclosures had been piecemeal.  His lack of clear disclosure as to his financial position, in particular the source of the payments for his legal costs in the past and the source for payment of his future estimated costs of another HK$5m had led the Court to come to the view that he had undisclosed financial resources.

12.  As further seen in paragraph 19 of this Court’s Variation Decision of 18 December 2018, that the duty is on H to make clear, frank and full disclosure voluntarily and that W is not expected to trawl through his bank statements to find answers and/or to raise queries.  I reiterated in that decision that H’s financial disclosure had been piece-meal and that he only provided answers/information when W raised the queries.  

13.  The Discovery Summons had thus to be considered in the background of H’s piecemeal and lack of clear disclosure.  In fact, notwithstanding the large amount of paperwork generated by H or his legal team, his answers were neither direct nor clear.

14.  By way of example, although H had provided large quantity of papers, he had not provided a clear disclosure as to the total payments he had received from the sale of his interests/share in what was collectively known as the business of FRC which had necessitated the request in paragraph 3 of the Schedule.  The 08.10.18 Email had raised further issues/questions from W, since it only set out various payments and there was never a confirmation that what were set out consisted of all payments and there would be no further payments.  Just this matter alone had resulted in paragraph 3 being adjourned at the hearing on 19 January 2019 to the PTR for Mr Dearle to take further instructions.

15.  As to paragraphs 4 and 5, even as late as Mr Dearle’s skeleton submissions of 18 January 2019, Mr Dearle only said H had agreed to answer and H’s answers were to be produced that day. 

16.  As for paragraphs 1 and 2, these consist of audited financial statements in respect of various companies and also trust accounts of the trusts.  H’s position was that there were no audited financial statements for those companies as they were non-trading companies and further no trust accounts had been prepared.  As pointed out to Mr Dearle at the hearing of 19 January 2019, H should provide clear and sufficient evidence from an auditor or an accountant in support of his statement that no audited financial statements are required to be prepared for non trading companies and to explain on what basis US tax returns were filed for those companies. Further, H should also provide supporting evidence from the trustee that no trust accounts/statements had ever been prepared.  As I have indicated to Mr Dearle at the hearing, normally a trustee has a duty to keep accounts.

17.  Thus, notwithstanding H’s case that he had provided W information with respect to paragraphs 1 and 2 and that it was W and her legal team who did not bother to read his answers, it was H who had in fact not answered those requests properly.

Conclusion

18.  Costs are in the unfettered discretion of the Court and the Court may take into account the matters under Order 62 rule 5 of RHC.

19.  It is quite clear that W had to come to Court to obtain answers under paragraphs 1 to 5. 

20.  W withdrew paragraph 6 at the hearing on 19 January 2019 after indication by this Court.  This question was in relation to emails between H and his mistress, and the time spent on this question was insignificant. I am only prepared to allow it 2% of the total time.

21.  Having considered all the circumstances of this case, I am of the view that W should be entitled to 98% of the costs of and incidental to the Discovery Summons, with certificate for counsel.  Costs are to be summarily assessed and paid by H within 14 days of assessment.  W is to submit her statement of costs within 7 days, and H is to submit his list of objections within 7 days thereafter.