CLS v. LPKP

FCMC 17127/2014
[2018] HKFC 6

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 17127 OF 2014

----------------------------

----------------------------

-------------------------------------

DECISION

(Discovery directed to the banker

for bank statements)

-------------------------------------

Introduction  

1.  This is another piece of acrimonious litigation of the ancillary relief matters in the family court, this time between the petitioner wife (“wife”) and the respondent husband (“husband”).  Since she came to learn that the husband has an affair with a woman, the Third Party herein (“Madam C”), and thus filed her petition for divorce in December 2014, the wife has taken out the following applications against the husband and/or other parties:

(1) For maintenance pending suit/interim maintenance for herself and the 2 sons of the family;

(2) For discovery against the husband by way of her amended summons dated 22 August 2016, to which this court has, by its judgment of 3 January 2017, granted her an order for discovery of the documents set out more particularly at §2 of the said judgment;

(3) For setting aside dispositions made by the husband to Madam C, now his present girl-friend, pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance (“MPPO”);

(4) For setting aside dispositions made by the husband to his parents pursuant to section 17 of MPPO;

(5) For determination of the preliminary issue against the estate of the husband’s late father (represented by the sister of the husband), the Intervener herein, over the beneficial ownership of 3 stock accounts registered in the late father’s name, the trial of which will take place in February 2018.

2.  By her summons dated 8 May 2017, which is the 6^th application initialled by her so far, the wife now seeks specific discovery not against the husband, but against his banker, namely HSBC, for the following:

(1) For allowing her or her agent to enter HSBC premises for the purpose of inspecting and photocopying the banks records of the husband’s HSBC premier account (“Account 450”) for the period from 1 April 2010 to 16 December 2011 (“Period”); or

(2) Alternatively, for HSBC to produce the said statements of Account 450 for the Period.

3.  In normal circumstances, parties in the ancillary relief proceedings are required to disclose their bank statements for the past 12 months under the statutory Form E. However, the parties of this case have previously agreed, and thus a consent order dated 10 August 2015 was made to that effect, that the husband should disclose more extensively of his bank statements up to a period of about 3 years prior to the petition (ie commencing from 30 December 2011) (“Agreed Discovery Period”), in recognition that the wife is entitled to a 3-year presumption in her favour for any possible application for setting aside any dispositions pursuant to section 17 of MPPO.

4.  Having obtained, considered and administered questionnaires on the husband’s bank statements within the Agreed Discovery Period, the wife comes to know that he had not only transferred substantial sums to his parents, and thus a section 17 application is already taken out against them, but that he had also transferred about $6,000,000 to Madam C between November 2011 and February 2016, and hence another section 17 application against her.

5.  However, it is the wife’s belief that the husband and Madam C were already in a relationship as early as 2010 when he introduced Madam C to his parents during the Shanghai Expo, and since it is a fact that from the available disclosure, he had transferred moneys out of Account 450 to Madam C as early as 29 November 2011, the wife wishes to ascertain how much the husband had transferred to Madam C since April 2010 (because the banker usually keeps records for 7 years only) and more particularly if he had funded the purchase of Madam C’s property in Shanghai in 2010 (“Shanghai Property”), as she says that such transfer is a clear dissipation of family assets and further applications including section 17 application(s) may need to be taken out, so that the actual size of the family pot can be determined.  All these investigation, the wife explains, can only be possible by letting her have sight of Account 450 for the Period.

6.  Pausing here, I wish to point out at this stage that the wife does not dispute that the husband has 2 major bank accounts in Hong Kong. They are both with the HSBC, namely Account 450 (in his sole name) and a joint account with the wife (“Account 485”). It is her own case that before the separation of the parties, the husband’s monthly income and bonuses were paid into Account 485, from where she could freely withdraw money to pay for her and the sons’ expenses. The husband would also transfer moneys from Account 485 to Account 450 from time to time.

7.  It is also worthy to note that the wife has already obtained the bank statements of Account 485 commencing from April 2010. She thus works out the sums that the husband had transferred from Account 485 to Account 450 during the Period, which she has reduced into a table attached to her 10^th affirmation (“Wife’s Table”). It shows that the husband had transferred a total sum of $20,929,557.25 to the saving account and $940,394.30 current account under Account 450 during the Period.[1] Yet, the opening balance of Account 450 as at 17 December 2011 is $2,895,507.88 only. After taking account the $12,000,000 that the husband had transferred to the Merrill Lynch account registered in his late father’s name, about $6,900,000 in Account 450 had gone missing,[2] into which the wife would wish to further investigate.

8.  For reason that needs no elaboration, HSBC does not oppose to the wife’s application. It has indicated that it will comply with whatever order this court is going to make. Therefore, its attendance has been excused by this court.

9.  The opposition to the wife’s present application comes from the husband, who argues that there is a delay in her application and that her request is a fishing expedition which is not only oppressive, but also it is not relevant nor necessary for the fair disposal to the case.

Some background facts

10.  The husband and the wife are now both aged 49. They were married in 1995. They have 2 sons, now aged about 19 and 16 respectively and are still in full time education.

11.  The husband is an investment banker. His declared total assets, according to his Form E dated 24 March 2015, are about $24 million. The wife is a housewife, but her Form E dated 3 March 2015 states that she possesses total assets of about $21 million.

12.  At the beginning of their marriage, both parties worked in the banking/financial field in Hong Kong. In 1999, the husband was offered a better post in Canada. As a result, the wife quitted her job in Hong Kong and the whole family moved to live in Toronto, Canada. She has not worked since then and has become a full time housewife up to now.

13.  The family relocated back to Hong Kong in 2003.  The husband continues to work as an investment banker. He is now working at Merrill Lynch with a very attractive income. According to his Form E, his average income is about $1,450,000 per month.

14.  Sadly, their martial relationship became conflictual after they were relocated back to Hong Kong. They started to have a lot of argument over different family issues, such as selling/purchase of their residence, child care and education, and parenting styles.  

15.  In May 2010, their then matrimonial home at Villa Rocha (“Villa Rocha”) was sold for about $18,200,000. The said sale proceeds were first paid into their joint account of Account 485, after which the husband transferred about $12,000,000 on divers dates into his sole account of Account 450. The wife kept only $4,000,000 out of sale proceeds.

16.  In early 2014, the wife had to consult psychiatrist for her emotional problem and the husband was invited to participate in the treatment sessions, hoping to salvage the marriage.  But she later came to know that the husband has been engaging in an extra-marital affair with a woman (Madam C) for years, which she is totally unable to accept.  Subsequently, the husband moved out of the matrimonial home in October 2014. Two months later in December 2014, the wife filed her petition for divorce, claiming “unreasonable behaviour” on the part of the husband, including an adulterous relationship with Madam C. The petition was later amended by watering down the particulars of the husband’s behaviour. Decree Nisi was pronounced in January 2016.  By then the marriage lasted for over 20 years.

17.  By a consent order dated 10 August 2015, the parties are granted joint custody to their sons, with care and control to the wife while the husband has access to the sons.  

18.  Since April 2016, the husband has been paying maintenance pending suit/interim maintenance for the wife and the sons in the sum of $150,000 per month. On top of that, he is also paying for their rent (of about $80,000 per month), car-related expenses, school and related fees and other ad hoc expenditure of the sons.

19.  As said, a trial on the preliminary issue over the beneficial ownership of the 3 stock accounts under the name of the husband’s late father will take place in February 2018. The parties will still have a long way to reach the stage of the financial dispute resolution (FDR).

Madam C & the Shanghai Property

20.  In so far as Madam C is concerned, there seems to be of little dispute that the husband first met her in 2008. The husband claims that they were then just good friends in 2010 and that they started to have a serious relationship since 2012.

21.  However, the wife believes that their intimate relationship began in 2010 or earlier. Her side of the story is that when the Shanghai Expo was held in 2010, she suggested that the husband’s parents should join them (the husband, the sons and the wife herself) to visit Shanghai together. But this was rejected by the husband who said that he would make his own arrangement to take his parents to the Shanghai Expo. It turned out that the husband actually arranged Madam C to act as the “tour guide” of his parents. In the eyes of the wife, this is the husband’s hidden agenda to introduce Madam C, who was already her girl-friend, to his parents.

22.  On the other hand, it is indisputable that after the sale of Villa Rocha in May 2010, Madam C purchased the Shanghai Property at RMB4,700,000 in/about 2010 or 2011. She obtained a mortgage with ANZ Bank in the sum of about RMB3,280,000, and the drawn down took place on 28 April 2011. On the following day, ie 29 April 2011, the husband received an email from a sender called “The place where the dream commences” (夢開始的地方) in which ANZ bank and its swift code, Madam C’s full name and the mortgage account number were stated therein.  The husband explains that this is an enquiry from Madam C via her friend about how to transfer US dollars to the mortgagee bank. However, the wife suspects that it is the husband who funds the purchase of the Shanghai Property, and that the source of funds may have come from the sale proceeds of Villa Rocha.

Applicable legal principles

23.  Although the wife’s summons is taken out under section 21 of the Evidence Ordinance and section 47B of the District Court Ordinance, both Mr Jeremy Chan, counsel for the wife, and Ms Anita Yip, senior counsel for the husband, agree that the actual applicable rule in this application is in fact Order 24 rule 7 of the Rules of the High Court, which is helpfully summarised by Ms Yip as follows:

(1) To invoke Order 24 rule 7, there are 3 prerequisites, namely relevance, existence and possession of the documents sought for discovery. The applicant party bears the burden of showing these 3 prerequisites;

(2) Once a prima facie case has been made by the applicant party, the court has a discretion whether or not to order disclosure. The burden then shifts to the objecting party. The court will not order production unless it is satisfied that the production is necessary either for disposing fairly of the issues between the parties or for saving costs;

(3) Where discovery is sought in relation to a class of documents, it is important that the class should not be defined or described too widely, and should not be defined so as to include documents which are not relevant;

(4) Discovery should not be oppressive, and “fishing” is not allowed;

(5) Statements in party’s affidavit of documents are conclusive.

See: Paul’s Model Art GMBH & Co KG v UT Ltd [2006] 1 HKC 238; Jade Realm Ltd v Director of Lands, HCA 1509/2012, date of judgment 10/6/2014; Hong Kong Civil Procedure 2017 at §24/8/1.

24.  Ms Yip SC also refers to a line of post-CJR cases showing that the courts nowadays are more pro-active in case management for fulfilment of such underlying objectives under Order 1A rule 1 of the Rules of the High Court as cost-effectiveness, expeditions disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties. The case law also shows that active case management includes the increasing emphasis by the court to limit discovery (See: Billion Lead Investment Ltd v Union Joyce Limited, HCMP 2145/2011 date of judgement 14/12/2012 per Mimmie Chan J at §8; HSBC Private Bank (Suisse) SA v Mission Bridge Ltd & Anor, HCA406/2008, date of judgement 18/6/2012 per Lok J at §16-18).

25.  I would add that the underlying objectives under the said Order 1A are applicable to the proceedings in the family court (See: PD15.12 (Part G)).

26.  The process of discovery and disclosure in the context of matrimonial proceedings is also explained by the authors of Rayden and Jackson on Relationship Breakdown, Finances and Children (2016) at §13.104 as follows:

“In financial remedy proceedings, disclosure and discovery begins with the service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E. Thereafter, disclosure and discovery is by means a of questionnaire served in advance of the First Appointment and considered by the court at that appointment, and if the court gives permission, by further questionnaire at alter stage of the proceedings. Questionnaires can, like interrogatories, request information as well as seek production of documents. As part of its case management role, the court should regulate the extent of the discovery of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.” (my emphasis added)

Delay

27.  On behalf of the husband, Ms Yip SC submits that the wife’s summons should be dismissed merely on the ground of delay.

28.  Senior counsel explains that all the contents stated in the wife’s 10^th affirmation, which is her supporting affirmation for this application, have been revealed for a long time. For example, she knows about the Shanghai Property as early as Madam C’s affirmation dated 15 July 2016. She always has access to the bank statements of the joint Account 485 for the relevant period. She knows how the sale proceeds of Villa Rocha were distributed between herself and the husband. Hence, the wife could have issued such an application at any time much earlier than 8 May 2017 (date of present summons). Yet, she chooses not to do so and gives no explanation for such delay. It is suggested that this may be a tactic of the wife to prolong the proceedings and to use the husband’s maintenance pending suit/interim maintenance payments including the undertaking payments as a blank cheque to fund her disproportionate request for information.  

29.  With the greatest respect to Ms Yip SC, the allegation of delay has not been mentioned in the husband’s affirmation in opposition for this application. The wife has not been put on alert and thus no opportunity has been made available to her for explaining or replying to the same. In such circumstances, it is thus quite inappropriate to say that she offers no explanation for the delay.

30.  Importantly, although this summons was taken out on 11 May 2017, the wife has made her request for the bank statements in question much earlier by way of her solicitors’ letter of 16 March 2017. The husband rejects her request on 30 March 2017. Given that the next court hearing since 30 March 2017 is 22 May 2017 but not earlier, the wife cannot be faulted in taking out her summons only until 11 May 2017.

31.  It is thus my conclusion that there is no serious delay on the part of the wife to take out this application that would warrant this court to dismiss her application without considering the merits of her application.

Basis of her application

32.  Of the 3 prerequisites mentioned above at §[23], the prerequisites of “existence” and “possession” of the bank statements of Account 450 should not be of any issue in this hearing, since the husband’s solicitors have, by their letter of 29 May 2017, informed the HSBC to preserve the bank records/statements of Account 450 for the Period. Of dispute is whether the prerequisite of “relevance” is satisfied.

33.  It is trite law to state that the documents sought must be relevant to the issues stated in the pleadings.  However, unlike general civil ligation where each party’s case would premise on their respective pleadings, there is no pleading in so far as ancillary relief matters are concerned, save and except for the preliminary issue on the beneficial ownership involving third party where the procedures of the chancery division should be adopted (See: TL v ML & Other (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263; Leung Wing Yi Asther v Kwok Yu Wah & others (2015) 18 HKCFAR 605).  In such case, this court can only resort to the supporting affirmations of the applicant spouse, ie the wife of this case.

34.  Upon reading her 10^th and 11^th affirmations in totality, I understand it to be the wife’s case that she needs to see the bank statements of Account 450 for the Period so as to find out:[3]

(1) Whether any of the sale proceeds of Villa Rocha was transferred to Madam C, in particularly for the purpose of funding her purchase of the Shanghai Property;

(2) Whereabouts of the total sum of $6,900,000 (deduced by her and set out in the Wife’s Table) that was gone missing in Account 450 during the Period;

(3) Whether the husband had transferred more than he has already disclosed to Madam C.

35.  I shall address to each of them one after one in the below.

Sale proceeds of Villa Rocha

36.  I shall be very brief on this topic, because it is clear to me that it is now a non-issue that the sale proceeds of Villa Rocha may have transferred by the husband to Madam C, in particularly to fund the purchase of the Shanghai Property.

37.  The wife relies on the proximity in time of the sale of Villa Rocha (May 2010) and the purchase of the Shanghai Property (initial deposit in late 2010 and drawn down of mortgage on 28 April 2011), as well as the email sent on 29 April 2010 by the sender called “the place where the dream commences” (夢開始的地方) to the husband to support her belief that he might have transferred the sale proceeds of Villa Rocha to Madam C and/or to fund her purchase of the Shanghai Property.

38.  As said in the above, the completion of the sale and purchase of Villa Rocha was in May 2010. Out of the sale proceeds, the wife received $4,000,000, while the husband got $12,000,000 which was transferred by him from the joint Account 485 to his sole Account 450 by May 2010.

39.  The husband, through his 7^th affirmation in opposition to the wife’s summons, confirms that he issued a cheque dated 10 June 2010 in the sum of $12,000,000 and paid the same into the Merrill Lynch account held in the name of his late father. He produces a copy of the relevant cheque that he has obtained from the HSBC to support his case. Notably, the said cheque was issued about 1 month after the completion of the sale of Villa Rocha, the proximity in time of which shows more likely than not that this $12,000,000 is the sale proceeds of Villa Rocha. As a matter of fact, the wife does not seriously dispute this part of the husband’s affirmation evidence in her reply affirmation (11^th affirmation).

40.  That said, of course, whether the said sum of $12,000,000 is the gift from the husband to his late father is a different matter likely to be further explored in the upcoming preliminary issue trial. But due to the matters aforesaid, it is obvious to me that the whereabouts of the sale proceeds of Villa Rocha is no longer an issue that the wife can rely on in this discovery application.

41.  For completeness and in the case that the wife would insist on arguing that she needs to see the bank statements of Account 450 of the Period in order to find out if the husband had transferred other moneys to fund the Shanghai Property, I would refer to the purchase price and mortgage arrangement of the Shanghai Property set out in §[22] and make 2 further observation as follows.

42.  First, the husband was/is an investment banker with very high income. Had he really wanted to buy the Shanghai Property for Madam C, he was not lacking of the financial ability to pay for the whole purchase price. Thus, it is very telling that the Shanghai Property was purchased by servicing a mortgage.

43.  Second, even if (just assuming) the husband had really provided the funding to Madam C in purchasing the Shanghai Property, the wife does not need to see the bank statements of Account 450 of the Period in order to work out the amount he had allegedly paid. A simply subtraction of the drawn down amount of the mortgage (RMB3,280,000) from the purchase price (RMB4,200,000) will show that the down payment is RMB1,420,000. Her request for the Period of Account 450, in my view, cannot pass the necessity test for either disposing fairly of the issues or for saving costs.

Whereabouts of $6,900,000

44.  How this sum of $6,900,000 is computed is already set out in §[7] above and I shall not repeat here.

45.  The husband has explained in his 7^th affirmation that the said sum of about $6,900,000 was spent/used as follows:

(1) Payment of his tax in early 2011 in the sums of $1,477,430 and $308,518, totalling about $1,800,000;

(2) Gift to his late father in the sum of $2,100,000 and to his mother in the sum of $100,000 in 2011;

(3) Payment to AXA in the sum of $272,085 to settle life insurance premium;

(4) Habitual transfer of around $500,000 to his ICBC (China) account to pay the mortgage of the Lakeville property in Shanghai purchased by him in 2009 and which property the wife has all along been aware of;

(5) Expenses for moving home in the sum of about $200,000 in or around early or mid-2011;

(6) Transfer of $500,000 in or in or about October 2010 and of $1,000,000 in or about October 2011 to his friend, Mr Leung who was living in China at the material times, for helping him to buy renminbi.

46.  In her reply affirmation, the wife indicates that she does not accept the husband’s explanation, which, in her view, is self-serving and without documentary proof.

47.  I have to point out that it is not true that the husband has not provided some documents in support of his explanation. He has produced as exhibits documentary proof such as his tax assessment return of the year 2009-2010 and demand for provisional tax for the year of 2010-2011; 2 cheques copy issued to his parents of $2,100,000 and $100,000 respectively; AXA policy anniversary statement showing that the commencement date of the policy is 2 March 2010.  If the wife is not satisfied with such explanation and/or proof, she may administer further questionnaires on the same. If she is of the view that the husband has not come up with proof on the said sum of $6,900,000 or any part thereof, it may also be a submission point on his credibility and/or the weight to be given on these documents in the final ancillary relief trial.  In such premises, to seek disclosure of the bank statements of Account 450 for the whole Period is unnecessary for fairly disposal of the matter and certainly not for saving costs. 

48.  The wife also argues that she does not know the opening balance of Account 450 as at April 2010, and thus it is unfair and incorrect for the husband to “make his own ‘calculations’ on the assumption that the opening balance of his 450 Account in April 2010 is ZERO.” Furthermore, she says that between April 2010 to December 2011, he might have received other funds which she has not been included in her calculations, as he had other sources of income/deposits, such as money received from the sale of vested Barclays stocks on 21 January 2013 in the total sum of about $4,870,000.

49.  I do not accept this explanation advanced by the wife. The alleged missing fund of about $6,900,000 from Account 450 is first brought up by her from her calculation set out in the Wife’s Table. The husband merely replies to her allegations. But when he has offered his explanation, she then comes up with another attempted excuse of “not knowing the opening balance of Account 450 as at April 2010”. I agree with Ms Yip SC that the wife should have identified the “fish” before she is entitled to “fishing in the Family Division within the limits of the law and practice” (See: B v B [1979] 1 All ER 801 at 810b; Zakay v Zakay [1998] 3 FCR 35 at §40). If this explanation put forward by the wife can stand, it would probably lead to a never-ending pursuit of the opening balance of an even earlier date. In my view, that is a disguised fishing expedition which should not be encouraged.

Any more transfer to Madam C and/or his parents

50.  Mr Chan, counsel for the wife, argues in this way. The parties are in the stage of First Appointment governed by PD 15.11. The court, with the objective of “defining the issues”, shall determine the extent of questionnaire and/or request for particulars to be answered, and give directions as to production of future and up-dating documentations. The wife here is seeking to define the issue of how much of the family pot have gone to the parents and the mistress of the husband, without which she is unable to tell the court what further directions that she would seek. Yet, she is hampered by the limitation of the Agreed Discovery Period, in that she is unable to see and consider the bank statements of Account 450 beyond the Agreed Discovery Period.

51.  Mr Chan asks me to take note of the following backdrop, which should lead me to the conclusion that the wife is entitled to find out if any more moneys were transferred to Madam C and/or the parents of the husband:

(1) Out of the total sum of $6,000,000 that was transferred by the husband to Madam C on divers dates, he concedes that about $4,000,000 should be added back to his side of the balance sheet.  Further, on his own admission, he transferred money to Madam C as early as 29 November 2011, when according to his own case, they were just good friends;

(2) On his own confession, the husband says that that a sum of $12,000,000 was transferred to his late father’s Merrill Lynch account in/about June 2010 and that further sums of about $2,200,000 (out of $6,900,000 referred to in §[7] above) were allegedly gifted to his parents in/about early 2011. These moneys were all paid prior to the Agreed Discovery Period.

52.  There is some dispute from Ms Yip SC in that senior counsel submits that this hearing is not a first appointment hearing (where PD15.11 applies) but an argument hearing of the wife’s specific discovery application, so that her application must be considered within the relevant legal principles under the said Order 24 rule 7 and the basis of her application which is set out in §[3] of her 10^th affirmation.   

53.  With respect to Mr Chan, I am not allured by his argument that the wife needs to see the bank statements of Account 450 of the Period for the purpose of defining the issue of how much the husband had allegedly transferred to his parents. This never forms any part of the basis of her application. It is also pertinent to take note that on her own case, the wife agrees that throughout the marriage, the husband had supported his parents financially and paid them regular monthly sums or occasional presents, though it is her view that he would not be so generous to give his parents several hundred thousands or millions dollars.[4] Further, pending the determination of the beneficial ownership of the stock accounts registered in the sole name of the husband’s late father, the wife would be able to know any and if so, how much, was transferred from Account 450 to the said stock accounts if she is the winner of the trial.

54.  As to the wife’s request to find out if and if so, how much, was given to Madam C during the Period by the husband, this court at this stage is unable to determine on mere affirmation evidence whether the husband had started an affair with Madam C as early as 2010 or so. However, even if (just assuming) the wife’s case is taken to its highest, I will have the following to say.

55.  First, the starting point of the discovery is always the Form E which stipulates disclosure of bank statements of 12 months. Where appropriate, eg when, upon disclosure in the Form E, there is some evidence of money/asset having been transferred by a spouse to a third party, the discovery period may be extended to 3 years prior to the petition. This is in recognition that the law provides a presumption in favour of the other spouse in setting aside any disposition within 3 years prior to the petition (See: section 17 of MPPO). In my view, there must be a reason or reasons for the law to set the statutory presumption period at 3 years. The court should pay regard to this statutory presumption period when considering the extent of period of discovery, in order to guard against unnecessary and/or over-extensive discovery under the new regime of the CJR.

56.  Second, the extent of discovery in matrimonial proceedings must be understood and governed by the principles expounded by Ribeiro PJ in the landmark case of LKW v DD [2010] 13 HKCFAR 537, in particularly the 4^th principle of avoiding minute retrospective investigations which is often costly but futile and may hinder settlement:

“E.1.d Rejection of minute retrospective investigations

62. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties (and the court’s) resources and to increase antagonism and discourage settlement.

63. Such attempts have been encountered in various contexts, including disputes over the extent of a party’s assets’ over the contribution made to the welfare of the family’ over the parties’ conduct; over claims to be compensated for having suffered some disadvantage, and so forth.”

57.  Ms Yip SC also refers me to what Mr Justice Mostyn (then Mostyn QC) said in Ancillary Relief: A Guide to the New Rules (Butterworth, 2000) about why judges should guard against excessive disclosure requests under the FDR Pilot Scheme, in particularly when the learnt judge commented, and I beg to agree with him, that “bank statements are cheap to obtain, but they are expensive to analyse”:

“5.13 Already under the Pilot Scheme we have seen the tendency on the part of the judges to ‘clamp down’ on excessive questionnaires and lists of documents. In the early days of the Pilot Scheme there still existed a tendency to press a couple of keys on a word processor, generate the standard issue Rule 2.63 questionnaire and then tinker with it at the margins to adapt it to the case in hand…

5.14 …Nevertheless, many firms have been guilty of considerable thoughtlessness when seeking further disclosure. We have no doubt that judges will be assiduous in linking questions asked and documents requested to the matters which remains in issue.

5.15 If there is no argument about the wife’s budget other than whether it can be sustained on the family’s income, why does the husband necessarily need to produce his credit card statements? If is a different matter if the wife is alleging that he has higher income than he has declared, but if this is the case, it should appear on the statement of issues.

5.16 If the wife wants more than a year’s worth of bank statement, what is her reasoning? True, copy bank statements are cheap to obtain, but they are expensive to analyse. If there is a particular transaction, for example the sale of a property eighteen months earlier, which the wife thinks may have been dealt with through an undisclosed bank account, then the request is not reasonable. But every request must relate to an issue and the issue must be both relevant and most importantly, proportionate in the context of the case.

5.17 Sometimes, practitioners are put under considerable pressure by clients to ask for broader disclosure than they consider necessary. …Nevertheless, the client should be warned that a length battle for inappropriate disclosure may well result in an adverse costs order being made, especially if a judge takes the view that the possibility of using the First Appointment as an FDR has thereby been lost. This behaviour is not in the spirit of the Pilot Scheme or the Amended Rules, and it is to be hoped that the practitioners will not encourage it.” (my emphasis added)

58.  Hence, I hold the view that a spouse will need very strong reason(s) or evidence to persuade the court to embark on a discovery period which is beyond the statutory 3-year presumption period.     

59.  Third, the wife of this case is now seeking disclosure up to almost 5 years prior to the petition. Her rationale is that the husband had a history of making transfer to Madam C as early as 29 November 2011. So far, about $6,000,000 was transferred to Madam C, of which the husband has conceded to add back about $4,000,000 into the family under his ledger. She thus needs to ascertain how much the husband has given to Madam C since 2010 (because the bank usually keeps records of 7 years only) in order to consider what to do next, including taking out further application under section 17 of MPPO, or seeking an “add back”.

60.  The law on adding back is set out in the Court of Appeal judgment in MKKWH v RKSH [2013] HKFLR 540. There, the wife on appeal sought to add back over $71,000,000 of non-marital expenditure incurred mainly by the husband for his 3 other families. Her appeal on adding back was rejected.

61.  Lam VP in the judgment explained that not every item of non-marital expenses, even though it might lead to depletion of the family pot and thus reduced the wife’s share to the pot, can be added back. His Lordship rejected the wife’s argument that the non-marital expenses that were stemmed from the husband’s conduct which went to the destruction of the marriage should be added back. His Lordship had these to say:

“1. …In respect of the adding-back of non-marital expenditure, I would arrive at the same result by a different route. There are two alternative ways to achieve a fair result in dealing with non-marital expenses,

(a) Adding back of specific sums as in Norris and Vaughan;

(b) Departure from equal distribution as in ARAV.

No matter which route one pursues, the ultimate goal is to achieve fairness.

2. In the context of ancillary relief, bearing in mind the stricture against costly, indecent and time-wasting post mortem, only conduct which is so obvious and gross that it would be inequitable to disregard may (but not must) require adjustment on account of fairness.

3. No matter which route one is pursuing, fairness should lead to the same result in terms of whether any adjustment should be made.

4. Thus, not every item of non-marital expense can be added back even though it could be said that such expense was a depletion of the matrimonial pot and as such it reduces the share of the spouse who was not benefited from such expenditure.  By way of example, in the present case, the wife had spent substantial sum by way of legal costs in her litigation with the company concerning the ownership of the property.  The husband did not derive any benefit from it.  There is no suggestion that the expenses should be added back.

…

10. …In ARAV both Cheung JA and Fok JA considered the submissions of add-back under the umbrella of misconduct.  In that case, it was held that it is a matter of the discretion of the judge to decide what would be the appropriate relief in light of a finding of such misconduct.

11. Following that approach, whether the conduct is so obvious and gross that it would be inequitable to disregard must be the threshold.  The Norris route can be regarded as a means to deal with such misconduct.  But it suffers from the drawback that one may lose sight of the overall assessment on fairness in light of other factors since in adding-back one would usually focus on the nature of the expenditure.  For this reason, a higher threshold is adopted for this approach in the English cases where the frittering away of assets was described as “wanton”, “reckless” or “extravagant”.  Thus, the English cases suggested a cautious approach is to be adopted: Vaughan; H-J and BJ. The rationale was explained by Mostyn J in N v F (cited at para 50 of BJ) in terms of the separate ownership of property between husband and wife,

‘In this country we have separate property.  If a party disposes of assets with the intention of defeating the other party’s claim then such a transaction can be reversed under s 37 of the MCA 1973.  Similarly, where there is ‘clear evidence of dissipation in which there is a wanton element)’ then the dissipated sums can be added back or re-attributed … But short of this a party can do what he wants with his money. …’

12 In the present case, the wife conceded before the Judge that the spending in question was not reckless, see para 20 of Mr Pang’s closing submissions.

13 In light of that, the Judge can hardly be criticized for not granting any relief by way of adding-back.

14 Before us, Mr Fung did not feel able to characterize these expenses as wanton, reckless or extravagant.  Instead, he contended a wider doctrine of adding back of non-marital expenses.  Whilst he accepted (as he had to) that not every item of expenditure of non-marital nature has to be added back, he tried to persuade the court to add back the expenditure in question because they stemmed from conducts which goes to the destruction of marriage.  

15 With respect, such an approach is wrong in principle because it would necessitate the court to examine whether the conducts in question caused the destruction of marriage.  This is precisely what the authorities said the court should not do.

16 Nor can this objection be met by formulating it in terms of conduct which is so obvious and gross that it would be inequitable to disregard.  For reasons set out above, if one were to restrict one’s consideration to the nature of spending as opposed to an overall assessment of fairness, a higher threshold and a more cautious approach should be adopted.

17 For these reasons, I would reject Mr Fung’s submissions for adding-back non-marital expenditure.” (my emphasis added)

62.  In the same judgment, Fok PJ (then Fok JA) expended on the relevant legal principles, which I humbly beg to agree:

“103. I add a few words of my own simply because of the difference in approach between Lam VP, whose judgment I have also read in draft, and Cheung JA on the question of whether the non-marital expenses should be added back into the pool of matrimonial assets for division.

104. As Lam VP has observed, in the present case, the wife did not seek the adding back of specific items of non-marital expenditure. Instead, she relied on that expenditure in support of a departure from equal distribution.

105. That was an acceptable stance for the wife to take, as supported by this court’s judgment in ARAV. However, whether there should be a departure from equal distribution (as the wife sought at trial) or an adding back of the non-marital expenditure (as she now seeks on appeal), one must identify the principle on which the court can act to do either.

106. In the present case, the non-marital expenditure was conceded by the wife’s counsel at trial (not Mr Fung SC) not to be reckless and therefore it was not necessary for the judge to analyse the individual items of expenditure. Given the concession that the expenditure was not reckless, I do not see how, in the light of ARAV (which Mr Fung did not suggest was not binding on us), the judge can be faulted for not departing from equality or we can now add back the expenditure in question. As was held in ARAV, which examined various English authorities on the type of expenditure that would result in an add back or departure from equality, to qualify as relevant financial misconduct, there would need to be financial irresponsibility and clear evidence of “dissipation of assets” that is “reckless” or “wanton” or “extravagant”.

107. Like Lam VP, I agree that Mr Fung’s invitation to add back the non-marital expenditure here on the grounds of fairness because they arose out of conduct which went to the destruction of the marriage is one which requires the court to examine the conduct of the parties as regards the causes of the breakdown of the marriage and this is an exercise which the court should not embark upon in ancillary relief proceedings: see, in this context, LKW v DD (2010) 13 HKCFAR 537 at §100.

108. I therefore agree with Cheung JA’s conclusion that the non-marital expenditure should not be added back but I do so on the basis that, on the facts of this case, the expenditure does not constitute evidence of “dissipation of assets” that is “reckless” or “wanton” or “extravagant”. Like Lam VP, I reject the wider doctrine of adding back urged on the court on behalf of the wife.” (my emphasis added)

63.  I invite the wife here to bear the above principles in mind in her ancillary relief claim way forward. I think she has to accept that since the bank statements sought are outside the 3-year statutory presumption period, it is difficult for her to show that the money transfer from the husband to Madam C (if any) was done with an intention to defeat her ancillary relief. Notably, if (just assuming) the husband had already willed to dispose of his assets by transferring the money in his Account 450 to Madam C behind the back of the wife as early as 2010, it would make no logical sense for him to tell the wife in/about September 2010 (and this is the wife’s own case) that he had transferred about $10,000,000 into the Merrill Lynch account held under the name of his late father for him,[5] nor would it make any logical sense for him to tell her about the 2^nd will of his late father which was made in 2011.

64.  Further, the husband is a high-income earner with an average monthly income of $1,450,000 a month. With such a high level of income of over $17,000,000 per year, he transferred only about $6,000,000 to Madam C over a period of some 51 months (from November 2011 to February 2016). Importantly, such period of time is closer or even after the breakdown of the marriage of the parties.[6] The proper question then to ask is this: would it be more likely than not that he would transfer significantly more to Madam C between April 2010 and November 2011, the period of which is farther from the breakdown of the marriage with an intention to defeat her ancillary relief claim? Upon due consideration, my reply is in the negative. 

65.  It is thus my conclusion that this ground of the wife’s request should be rejected because it is unnecessary for fair disposal of the matter or for saving costs.

Discovery against banker?

66.  Last but not the least, I wish to say a few words on the approach of the wife’s application.

67.  For the records, the wife originally invited this court to issue a writ of subpoena to the HSBC by way of an ex-parte application by letter dated 31 March 2017. Requisitions were then raised by this court as to the basis of her application for a writ of subpoena when there is no hearing date fixed for receiving any evidence. By her further ex-parte letter dated 11 April 2017, she clarified that she sought leave from the court to issue a writ of subpoena duces tecum. Again, I refused her request and asked her to consider taking out proper application for discovery pursuant to the relevant rule(s) or ordinance(s).

68.  Pausing here, I note that from time to time, family judges do receive ex-parte application by letter to invite the court to issue a writ of subpoena to the banker of the opposite party for production of bank accounts during the stage of discovery when no trial has been fixed. For reasons which will become obvious below, I do not accept this is a proper and correct procedure to adopt.

69.  Subsequent to this court’s comment,the wife takes out this application directed to the banker of the husband and provides the following explanation in her 10^th affirmation:

“21. In view of the [husband’s] uncooperative attitude in the disclosure of his own finances throughout the proceedings, he will have no hesitation in using each and every means and steps to delay the production [of his bank statements] by which time, many months of the bank statements could not be produced in view of ‘7 years rule’. A such, the cheapest and most efficient way to get the statements is to get the statements directly from the Bank.”

70.  During the hearing, Mr Chan for the wife relies on Chan Wai Sun $ Anor v Law Shiu Kai Andrew [2004] 1 HKC 180, [2003] 3 HKLRD 954, in which Chu JA (then Chu J) allowed the plaintiffs’ application and granted an order for inspection of the bank records of a third party (General Profits). There, the plaintiffs claimed against the defendant for repayment of 2 loans made in 5 cheques in favour of General Profits. However, General Profits was not incorporated or registered in Hong Kong and therefore no record can be found. It emerged that the 5 cheques were paid into a local bank account maintained by General Profits. The plaintiffs thus sought an order to inspect the local bank records, which was opposed by the defendant.

71.  For the purpose of this judgment, there is no need for me to go into depth the reasoning and legal principles of Her Ladyship in her judgment. It is obvious to me that the case here before me is standing on a total different ground, in that the wife here is not seeking disclosure of the bank accounts of a third party whose presence is not in Hong Kong.

72.  Although the law allows a party to proceedings to seek discovery against a third party or a banker, I have to say bluntly that in the circumstances of this case, it is totally inappropriate and unnecessary for the wife to direct the discovery against the banker, instead of the husband. The fact that the husband refused her discovery request is not a good and sufficient reason for her to trigger an application against the banker.  To involve a third party, ie the banker, will achieve nothing but only complicates the procedures and escalate unnecessary costs. It is by no means the “cheapest and most efficient” way to achieve her request for discovery. Fortunately, Mr Chan has not sought to advance his argument along that line and has accepted that the applicable rule should be the said Order 24 rule 7.

73.  I thus remind the family practitioners that in similar situation like this, the applicant spouse should not attempt to achieve his/her discovery request by ex-parte application for writ of subpoena/writ of subpoena duces tecum, nor by discovery directed to the banker. I hold the further view that this is a “back-door” tactic which should not be encouraged. And in saying so, I would make it very clear that neither party, especially the applicant spouse, should labour under the wrong impression that green light will automatically be given by the court, without hearing from the responding spouse, once when the banker indicates that it would not object to the production of bank statements.

74.  The proper application in such circumstances is to take out a specific discovery summons pursuant to the said Order 24 rule 7 against the responding spouse. It is also suggested that the responding spouse should, like what the husband here has done, write to his/her banker to have the bank records preserved pending the determination of the court.

Conclusion

75.  Due to the matters set out above, I will dismiss the wife’s summons. As I see no reason why costs should follow the event, she should not be made to bear the costs.

76.  I will thus make an order as follows:

(1) The wife’s summons is dismissed;

(2) There be a costs order nisi that the wife do bear the husband’s and the HSBC’s (if any) costs of and incidental to this summons, to be taxed if not agreed, with certificate for senior counsel;

(3) The costs order nisi shall be made absolute 14 days from the date of this decision;

77.  This order shall also be served on the HSBC by the wife.