XCHRX WONG WAI CHUN v. AU YEUNG FUNG SIM AND OTHERS

HCA5038/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5038 OF 2000

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REASONS FOR DECISION

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The appeal

1. This is an appeal against the order of Master Mary Yuen dated 23 February 2001 in which the defendants were ordered under Order 24, rule 7 to provide specific discovery by affirmation or affidavit of the following classes of documents (as set out in paragraphs (4) and (5) of the Schedule thereto), namely :

1) the tax returns of Hung Kee Water and Electric Works ("Hung Kee") for the periods from April 1987 to March 1989 and April 1992 to March 1993 ("the Tax Returns"); and

2) the divorce petition and all maintenance claims and settlement relating to the divorce between 1st and 2nd defendants under FCMC 297/2000 ("the Divorce Petition and Maintenance Documents").

The action

2. The action between the parties involves a dispute over the property known as Shop No.12 (formerly Shop No.995F) on Ground Floor and Cockloft of Tak Lee Building, No.993 King's Road, Hong Kong ("the Property"). The plaintiff claims an 85% beneficial ownership of the Property (now represented by the proceeds of sale).

3. The defendants' position is that the Property was, at all material times, wholly owned by the 2nd defendant. The 1st defendant is the daughter of the plaintiff and the 2nd defendant is the 1st defendant's former husband. It is the defendants' case that the purchase price of the Property ($400,000) was provided by the 2nd defendant by means of his paying $200,000 of his own money and the balance provided by a mortgage loan of $200,000 advanced by the Nanyang Commercial Bank to the 2nd defendant. It is also their case that the 2nd defendant redeemed the mortgage in October 1992 with his own money. The plaintiff's case as regards the mortgage is that it was she who paid approximately $140,000 in October 1992 to redeem the mortgage.

4. The Property was registered in the joint names of the plaintiff and the 1st defendant. The defendants' explanation for this is contained in paragraph 6(c) of the Defence of the 1st defendant :

"But the 2nd Defendant was afraid the Inland Revenue Department would query him why he had money to purchase the Shop Premises [the Property], therefore he decided that the Shop Premises be registered in the names of the Plaintiff and the 1st Defendant. The Plaintiff, the 1st Defendant and the 2nd Defendant fully understood that the 2nd Defendant was the sole beneficial owner and the arrangement was just to use names of the Plaintiff and the 1st Defendant to hold the Shop Premises for him."

Law

5. The principles relevant to applications for specific discovery are summarized in paragraph 24/7/1 of Hong Kong Civil Procedure 2001. Essentially, the party seeking discovery must demonstrate a prima facie case for :

a) possession custody and power; and

b) relevance of the specified documents.

6. For both classes of documents in the present case, Miss Jennifer Ng, for the defendants, submits that the plaintiff's request is both irrelevant and amounts to no more than a fishing exercise. What she really meant was that the plaintiff was unable to show conclusively that such documents in fact existed and in fact were relevant to the issues in the case. This is however not the test : the plaintiff is only required to make out a prima facie case.

7. Has the plaintiff made out such a case?

The Tax Returns

8. In view of the defendants' defence, this class of documents is clearly relevant in two respects. First, it is relevant to the allegation in paragraph 6(c) of the 1st defendant's defence. Secondly, it is also relevant to the means of the 2nd defendant to pay for the Property and to the discharge of the mortgage as he has alleged. With the critical issue in the present case being who paid for the Property, the question of the 2nd defendant's financial capability is clearly relevant. Here, it is suggested by the plaintiff that Hung Kee was the 2nd defendant's only business, therefore, any documents which would tend to show Hung Kee's financial position must be relevant. Included in such documents would be the Tax Returns. The Tax Returns which are sought relate to two periods of time, between April 1987 to March 1989 and between April 1992 to March 1993. These particular periods have been chosen since the purchase of the Property was completed on 6 April 1988 and the mortgage was discharged in October 1992.

9. I am, therefore, satisfied that a prima facie case on relevance has been made out by the plaintiff.

10. As far as the requirement to demonstrate possession custody and power is concerned, I am likewise satisfied that a prima facie case has been made out. These are the usual documents that one would expect to exist for a business such as Hung Kee's.

The Divorce Petition and Maintenance Documents

11. In an affidavit of the 2nd defendant dated 26 July 2000 relating to an application of summary judgment taken out by the plaintiff against the 1st defendant, he says this at paragraph 13 :

"In or about 1999, I separated with the [1st] Defendant and I commenced the divorce proceedings several months ago. I intended that part of the sale proceeds be treated as maintenance for the Defendant."

12. This immediately raises the possibility, if not the probability, that in the relevant divorce proceedings between the 1st defendant and the 2nd defendant (FCMC 297/2000), the 2nd defendant must have dealt with the question of the ownership of the Property. In my view, these documents are clearly relevant to this issue, as well as to the issue of the whereabouts of the proceeds of sale of the Property (as to which see paragraph 10 of the Statement of Claim).

13. I am also satisfied that a prima facie case has been made out for possession custody and power.

14. During the hearing, I indicated to the parties that in respect of this class of documents, the order ought to be made clearer in the following way, "The divorce petition in FCMC 297/2000 and all documents relating to the aspect of maintenance in the divorce whether or not such documents have been filed in court in the said proceedings". The reason for the order to include all documents in relation to maintenance "whether or not such documents have been filed in court in the said proceedings" is to deal with the possibility that some relevant documents may not have been filed into court. I have been informed of the possibility that the 1st and 2nd defendants may have settled the question of maintenance. The settlement agreement, if any, may not necessarily have been filed into court.

Conclusion

15. For the reasons given above, I dismiss the appeal from the order of Master Mary Yuen dated 23 January 2001 save that paragraph (5) of the Schedule thereto is amended as set out above.

16. There will also be an order that the defendants pay the plaintiff's costs in any event, such costs to be taxed if not agreed. In addition, if necessary, the plaintiff's costs are to be taxed in accordance with the Legal Aid Regulations.