WANG DIN SHIN v. NINA KUNG

CACV 1643/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1643 OF 2001

(ON APPEAL FROM HCAP NO. 8 OF 1999)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from an order of Deputy High Court Judge Muttrie dated 15 June 2001 following judgments given on 30 May and 15 June 2001.

2. The order made by the judge was that the defendant in these proceedings should provide discovery by answering a number of questions and by making available for inspection various documents.

Background

3. On 22 September 1999, the court gave the plaintiff leave to swear to the death of his son, Wang Teh Huei. The plaintiff propounded a will dated 15 March 1968. In that will the plaintiff is the sole beneficiary. The defendant, the wife of Wang Teh Huei, has herself propounded a will dated 12 March 1990. The trial of the action is at present in progress.

4. By order dated 15 March 2000, administrators pendente lite were appointed. That order was made by consent and was varied by a further consent order on 11 March 2000. By paragraph 1 of that order, the administrators were appointed to act in respect of the estate of Mr Wang comprising all real and personal property of whatever nature and wherever situated. Under paragraph 3, the defendant was required to provide the administrators as soon as practicable and in any event before 26 April 2000 with a list of all properties in the Estate. The defendant was also required, when requested by the administrators, to deliver, or transfer, to them all properties in the Estate and not to dispose of, or encumber, any of the properties of the Estate, without leave of the court.

5. Paragraph 4 of the order of 11 April is also relevant in that, in sub-paragraph (1), the administrators were authorised, pending the grant of Letters of Administration, to make such inquiries as they deemed reasonably necessary to investigate and identify the property in the Estate. Sub-paragraph (2) gave the administrators authorisation to take such steps as they were entitled in law for the purpose of getting in and preserving the Estate.

6. It can thus be observed, at this stage, that there can be no doubt that it was the administrators' duty to ascertain the assets within the Estate, hence to take all steps to identify what those assets were. Correspondingly it was the defendant's obligation to provide the administrators with details of the assets of the Estate.

7. On 19 December 2000, Chu J made a further order on an ex parte application by the administrators. Paragraphs 4 and 5 of that order were as follows:

"4. The Administrators are authorised to pursue such lines of enquiry as they consider to be appropriate, having regard to the likelihood of obtaining relevant material and to the costs of making such enquiries, to investigate whether there exist claims which ought to be pursued in the interest of the Estate.

5. Without prejudice to the generality of paragraph 4, the Administrators are directed to:

5.1 question the Defendant and demand disclosure of all relevant documents relating to:

(a) the allotment of 'B' shares in Chime Corporation Limited to the Defendant;

(b) any allotment of shares (including allotments to Parasia Limited) in companies of which Wang Teh Huei is registered as a shareholder; and

(c) bank accounts at any time in the (joint or sole) name of Wang Teh Huei and the manner in which funds in accounts have been dealt with,

and in the event the Defendant fails to produce any or any satisfactory response or fails to produce material documents which there is reason to believe are in her position, custody or control the Administrators have leave to issue an inter partes application to the Court requiring the Defendant to provide such information and documents;

5.2 seek from banks information and the documents relevant to accounts at any time in the (joint or sole) name of Wang Teh Huei and funds derived from any such accounts; and

5.3 take such steps as are necessary to ascertain whether transfers of properties by companies in which Wang Teh Huei has shares (including Chinachem Golden Plaza and University Heights) were at an undervalue by obtaining valuations of such properties and obtaining from the Defendant any relevant valuations in her possession, custody or control; and to seek from the Defendant such information or relevant documents as are within her possession, custody or control to ascertain the interest of Wang Teh Huei in the companies to which such properties were transferred."

8. On 23 January 2001, the administrators issued the summons in the present application. The order sought on that summons was that the defendant should provide the administrators, on oath, written answers to questions which were set out in a schedule and all documents which were requested in that schedule. The matter at the issue before the judge below and raised in this court concerned the questions for which answers were sought. The questions in the schedule related to three separate aspects.

9. In the first place there were questions which related to the shareholding in Chime Corporation Limited (hereinafter referred to as "Chime"). The background to the questions is explained in the schedule. Chime was a company which had a high asset value. Mr Wang and the defendant each had 40% of the 'B' shares with the other 20% of the 'B' shares and all the 'A' shares held on trust for Mr Wang. Not long after Mr Wang had been kidnapped there was an allotment of 'B' shares to the defendant which resulted in the defendant having 99.88% of all the 'B' shares and the 'A' and those 'B' shares that were held on trust for Mr Wang were transferred to British Virgin Island companies.

10. The next group of questions related to the dilution of Mr Wang's shareholdings in 29 other companies. There had been an allotment of shares in those companies to Parasia Limited which was another British Virgin Island Company. The defendant has made the declaration of trust in which it is stated that although one share in Parasia is held in trust for the defendant, she in turn holds one half of that share beneficially and the remaining half on trust for Mr Wang.

11. The final set of questions relates to various bank accounts.

12. In the reasons for decision handed down on 30 May, the judge ordered that the defendant should provide written answers to various questions and provide the documents which were requested and schedule.

13. It transpired that the list of questions identified in the draft order differed in some respects from that which had ultimately been sought on the application and the matter came back before the judge. It was in those circumstances that the judge gave his second reasons for judgment and revised the list of questions which had to be answered. As the judge explained on the second occasion, he had, in fact, worked through all the questions when preparing his first reasons for judgment and hence the discrepancy in the lists was not of any significance as regards the ultimate decision to which he came.

The appeal

14. The notice of appeal and the skeleton argument on behalf of the defendant raises the question that there was no jurisdiction to order the discovery by means of the questions for which answers were sought. At the hearing of this appeal Mr Scott SC, on behalf of the defendant, sought to pursue that argument only in respect of the first set of questions, those relating to Chime. Despite the concession by counsel that the court did have jurisdiction to order discovery, whether in the form of orders relating to documents or the asking of questions in relation to the assets of the estate generally, it is, in my view, appropriate for this court to observe that there is indeed such a jurisdiction vested in the court.

15. As explained by Lord Cross in Norwich Pharmacal v Customs and Excise [1974] AC 133 at page 191G onwards, in its origin discovery was an equitable relief which was sought almost as a matter of course in every chancery bill seeking relief in equity. There was, however, also a separate bill of discovery where the only relief sought was discovery. Discovery was thus a relief or remedy which, in appropriate circumstances, the court might enforce irrespective of whether any other relief were sought.

16. Without going into the details of discovery in its original form, there can be little doubt that it would be appropriate in the present circumstances for the court to use its inherent powers to order discovery. The administrators have become the trustees of the Estate. The court has ordered the transfer to them of all Mr Wang's assets. It is, therefore, of primary importance in the carrying out of their duties that the administrators should ascertain what those assets were. Indeed the trustees would not be fulfilling their duty if they did not attempt to identify the assets of the Estate. In those circumstances, it can hardly be doubted that if the administrators demonstrated to the court the need for the court's assistance in carrying out one of their primary functions, the court would use its power to assist the administrators.

17. The judge below illustrated the use of the court's inherent jurisdiction to order discovery by reference to the orders for discovery made which are ancillary to mareva injunctions. The matter was discussed in the case of A.J. Bekhor & Co. Ltd v Bilton [1981] 1 QB 923: see particularly the judgment of Ackner L.J. at page 942G.

18. The need for assistance in the identification of assets when they are transferred by operation of law or order of a court can be illustrated by reference to the case of bankruptcies: see section 26 of the Bankruptcy Ordinance, Cap. 6 and to the case of liquidation of companies: see section 221 of the Companies Ordinance, Cap. 32. In these instances specific statutory powers of examination are given. Even in relation to judgment debtors the rules of court provide for the examination of debtors to insure that all assets are made appropriately available.

19. In concluding that the court has inherent jurisdiction to order discovery for the purpose of identification of the assets I ignore for present purposes the fact that answers to many of the questions were provided by letter the day before the hearing of this appeal. That letter from the defendant's solicitors was without prejudice to the defendant's case that no order should have been made. Nevertheless, it does indicate, perhaps, the degree of difficulty, or absence thereof, in relation to answering the questions.

20. The point taken on this appeal was, however, that the discovery in relation to Chime should have been sought in proceedings which were likely to be brought. Indeed, subsequent to the hearing in the court below, the administrators have, on 31 July, presented a petition seeking relief under section 168A of the Companies Ordinance in relation to Chime. The matter of complaint is the dilution of the shareholding previously held by Mr Wang. In my view the judge was correct when he said:

"The Administrators' answer, from Mr Smith, SC, is briefly that this is not pre-action discovery but necessary for the Administrators to get in and preserve the assets under the specific direction of the court. He argues that the court has an inherent power to make an ancillary order to give effect to a remedy granted."

21. It may well be that discovery could be sought in the 168A petition but that does not, in my view, detract from the fact that the questions for which answers are sought are relevant to identify the assets of the estate. Indeed our attention was drawn by Mr Ma SC, on behalf of the administrators, to the fact that questions relating to another BVI Company, Christoban Enterprises S.A. were relevant not merely in relation to matters arising in relation to Chime but in relation to identifying the assets of the estate generally. In my view, the judge was correct in his approach to the jurisdiction of the court to order discovery and his reference to the case of A.J. Bekhor v Bilton was entirely apposite.

22. Objection was then taken to the fact that the order of 19 December 2000 was, in effect, a "Beddoe" order and should have been applied for, and made, in proceedings separate from the proceedings which were ultimately brought. Although it is correct that a Beddoe application should be made separately from the proceedings which are authorised by an order made on that application, in my view, that does not affect the validity of the order made here. I doubt in the first place that the application resulting in the order of 19 December was a true Beddoe application. But even if it were, or should be treated as such, the procedure here has not been defective. The original application resulting in the order of 19 December 2000 was made ex parte. There has been nothing of a confidential nature which has been revealed to those who were not parties to that application nor to the court which heard the present application. One matter which has been raised was that the judge below was aware that the order of 19 December 2000 had been made. I do not consider that that affects the position. Still less, when the reasons for judgment given by the judge below are examined, could it be said that it did affect the judge's decision.

23. Since the court below, in my view, had jurisdiction to make the order sought the matter was one of discretion. This court should only interfere with the exercise of a court's discretion if the decision was either made on wrong principles or it was clearly wrong or it had been made on a misapprehension of the evidence. None of those situations prevail in the present instance.

24. Specific complaints have been made in relation to the fact that some of the questions, for example, questions 17 and 31 asked for details of the source of funds. Clearly such questions have to be approached with common sense and what is sought is the identification of the immediate source of those funds. If the administrators deem it necessary to make further enquiries as to any ultimate source of the funds they would, no doubt, be at liberty to apply for further details.

25. Insofar as paragraph 2(a)(i) of the order made by the judge below refers to financial statements that was in the context of whether they were audited, or if not available, unaudited. That, in my view, makes it clear as to what sort of financial statements are referred to. That order does not seem to me to be oppressive or overly burdensome.

26. The point was raised that the discovery ordered under paragraph 2(c) of the order was too extensive and disproportionately burdensome. This was an aspect which was considered by the judge below. He exercised his discretion by excluding some matters which he considered were overly burdensome. I seen no grounds for interfering with his exercise of his discretion.

27. Neither do I consider that there is any merit in the objection that question 43 is designed solely to impugn the defendant's credit. As Mr Ma pointed out, the answer to the question as to why the existence of bank accounts was not at first disclosed, may put the administrators on a train of enquiry which may lead to further disclosure.

Time scale

28. It was argued that the time allotted for the provision of the answers to the questions and the other discovery was too short, particularly in view of the fact that the main action is at present underway and the defendant is likely to be giving evidence shortly. The defendant's evidence in the trial is likely to be concluded within a short time. As already observed, the defendant's solicitors have been in a position to prepare answers to many of the questions and, no doubt, the answers to others have already been considered. There would be no justification for delaying compliance with the judge's order until after the judgment in the trial let alone after any appeals there might be therefrom.

29. In my view, this appeal should be dismissed. There should be an order nisi of costs in favour of the administrators.

Hon Suffiad J:

30. I agree wholly with the judgment delivered by the learned Vice-President and have nothing to add.