AWK v. MLTH

FCMC 2454/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2454 OF 2014

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

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

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

RULING
(Discovery)

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

Introduction

1.  This is an application by a petitioner wife for further discovery. The application arose as a result of the husband’s agreement to answer her third questionnaire save for Part A, Part D, questions 5 – 11 of Part B and Part F. Consequently at the second First Appointment hearing on the 12 March 2015 I ordered inter alia that:

1. The Petition do file and serve her 3^rd Questionnaire save for Part A, Part D, questions 5 to 11 of Part B, and Part F (the “Disputed Questions”) on or before 13^th March 2015;

2. The Respondent do file and serve his Answers to the Petitioner’s 3^rd Questionnaire (without the Disputed Questions) on or before 13^th April 2015;

3. Leave be granted to the Respondent to file his Affirmation and/or an Affirmation of his forensic accountant on the issue of whether the Disputed Questions are to be answered, and in response to the 2^nd Affirmation of SJA filed on 26^th February 2015, on or before 13^th April 2015;

4. The Petitioner be at liberty to file a Reply to the Affirmation(s) referred to in paragraph 3 above within 14 days if so advised;

5. No further Affirmation evidence on the Disputed Questions be filed without leave of the Court;

6. The hearing of the Petitioner’s Summons dated 25^th February 2015 in respect of the Disputed Questions is fixed for hearing on 9^th July 2015 at 10:30 am with one day reserved;

7. The Parties do file their respective Skeleton Submission by close of business on Monday 6^th July 2015.

Other orders were made in relation to the valuations of properties, companies and other valuable items.

2.  Thus the questions in dispute at that time were as follows:

A. GENERAL

It is noted that many of the Annexures and Exhibits filed in support of the Respondent’s answers have been redacted.  These proceedings are confidential to the parties themselves and accordingly there should be no valid reason for any documents to be so redacted and no reasons or explanations have been presented by the Respondent for such redaction Accordingly the Petitioner requests that all documents be re-submitted in their original form.

D. AFFIRMATION OF MTY

1. Further to the request in Section A above, please arrange for MTY’s exhibits to be provided in their original and unredacted form.

B. EXPERT REPORT OF MJT (“Mr. T and Mr T’s Report)

5. According to 3.3.4 of Mr. T’s report a structured note of US$10,000,000 was transferred in.  Please explain from which account this note was transferred from and the subsequent movement in this note and provide all supporting documents.

6. Please explain the subsequent movement of the funds of HK$39,000,000 that were transferred on 4^th October 2007 to the Respondent’s account with Citibank Singapore and provide supporting documents.

7. Please provide a schedule detailing the bank accounts, names, account numbers and amounts making up the net interbank transfers of HK$72,408,104, as referenced in 3.3.5 of Mr. T’s report and provide supporting documents.

8. Please explain the subsequent movement of the funds of HK$10,000,000 and HK$2,500,000 transferred to the Respondent’s account with “C Inc” and to LMK respectively as referenced in 3.3.6 of Mr. T’s report and provide supporting documents.

9. Please explain the subsequent movements in the investment in G limited of HK$78,182,820 and the amount of HK$100,000,000 transferred to the Respondent’s securities account with G as referenced in 3.3.7 and 3.3.12 of Mr. T’s report and provide supporting documents.

10. Please provide full particulars as to the subsequent sales of the properties acquired in 2008 at a total cost of approximately HK$174m being No. XX R, No.XXX, R and No. X, F and provide supporting documents including details of bank accounts in which the relevant sales proceeds were deposited.

11. Please explain the subsequent movements in the funds of HK$380,919,072 which were transferred to a new account the Respondent opened with Credit Suisse as referenced in 3.3.17 of Mr. T’s report and provide supporting documents.

Form E

1. Please now provide an update of the Respondent’s Form E dated 5^th June 2014 insofar as “TBC [To be determined]” was inserted (in Part 2.4 (No. 9)) in respect of the value of the Respondent’s shareholding/beneficial interest in V Limited and the subsequent figures to be included to the total figure at (D) and Summaries of Assets and Liabilities in Part 2.

3.  Since then the husband has filed his Answer to those parts of the questionnaire that he had agreed to answer (filed on the 21 April 2015). The wife is not happy with many of those answers and asks that this application be viewed in that context.

Background

4.  By way of background this is a big money case. The husband is a private equity investor and by all accounts a very successful one. He has historically done a lot of business with a previous employer who subsequently became a close personal friend and business mentor, a Mr PVK (P) and other family members, particularly his eldest and youngest brothers (Mr MTK his eldest brother otherwise known as K and Mr MTY his youngest brother otherwise known as M). Much of the difficulty in this case lies in the financial relationship between these four people and their respective shareholdings in various companies. We are told that a lot of the business done between them appears to have been conducted without any formal documentation making it difficult to ascertain the truth or otherwise of what is asserted. The husband maintains that he often holds very large sums of money on trust for each of these three people. The husband’s case is that much business is done on the basis of verbal agreements only. P, K and M have each filed affidavit evidence in support of the husband’s basic position. The wife for her part, perhaps understandably in the circumstances, is somewhat sceptical.

5.  Mr Coleman SC for the wife has spent a long time in his written submission setting out what he says are the deficiencies in the husband’s disclosure to date. I do not intend to go through those submissions point by point in this Ruling. Much of the argument strictly speaking lies outside the ambit of this application in any event. In a nut shell however it seems that the wife’s main concerns centre on two things:

a) The whereabouts of HK$945 million deposited into the husband’s account in 2007 and b) his involvement or otherwise in a large infra structure project in Macau.    

The HK$945 million

6.  In 2007 (about 4 years after marriage), the husband generated HK$945 million from a “deal” and that money was deposited into a U account. Putting aside other issues relating to the valuations of companies/properties etc, the husband’s case as set out in his Form E is that he now has net assets of approximately HK$600 million. The wife wishes therefore to have sight of the U statements relating to two accounts from 2007 to date. The husband has been very resistant in providing that information. In his affirmation of the 27 November 2014, in answer to one of the wife’s earlier requests he puts his case on this as follows:

3. I maintain my position that the Petitioner’s request for monthly statements of U Private Banking A/C No XXXXXX in the name of U Inc, in which I am one of the two shareholders, from March 2007 to date, save as already provided (Question 5(c)) and bank statements in respect of my sole name U account XXXXXX from 2007 onwards, save for those already provided (Question 10(c)) is a fishing exercise and is oppressive.

4. The rationale behind the request, as set out in their Affirmations, is also illogical, as I will explain below.

5. By way of background, I would like to point out that the Petitioner and I married in February 2003 and the children of the family were born in December 2009.  The disclosure that the Petitioner is seeking is from 2007; i.e. 2 years before the children were even born.  There was no way I was contemplating a divorce, nor were the Petitioner and I having any marital problems in 2007 otherwise we would not have had children 2 years later.  It came as a complete shock to me and caught me by surprise when I received the Petition for Divorce on 5 March 2014 as we had just returned to Hong Kong from Las Vegas after spending 10 days there for a family holiday over Chinese New Year in February 2014.  We were already planning our next holiday to Bali over Easter.

10. The Petitioner’s request for bank statements of the 2 U accounts has no basis and is merely a fishing exercise.  The production of these bank statements will not facilitate settlement negotiations as claimed by the Petitioner.  Accordingly, it would create more excuses for the Petitioner and her advisers to raise more questions which might not be at all useful for these Proceedings, at least at this stage.  The Petitioner’s request that I do answer Questions 5(c) and 10(c) of the Petitioner’s draft Second Questionnaire contained in her First Appointment Bundle filed on 10 November 2014 should therefore be dismissed.

7.  Subsequently it was agreed that the husband’s forensic accountant, Mr T would file an affidavit for and on behalf of the husband to deal in part with the issue of the U account. As can be seen above, it is the report from Mr T that has in part, now become subject to this further rounds of questions.

The Macau project

8.  The second issue relates to the husband’s involvement – or otherwise, in a big infrastructure project in Macau. The husband’s position put quite simply is that he has no involvement in this project. The wife does not seemingly accept this. In his affidavit of the 27 November 2014 the husband says that:

(f) I repeat again that I am not a director of L Investments Limited (“L”).  L belongs to my brother, M, and he will confirm the same in his Affirmation and to provide supporting documentation.  I have no control over incorrect information that is published by the press.

8. It is absurd that just because the Petitioner claims that I have an interest in a business in Macau with no evidence in support, and then because the project was launched in 2010, that I must have started paying monies into the project from 2007.  It is entirely a fabrication and speculation of the Petitioner and should not be a reason to justify the production of bank statement since 2007.

9. It makes no sense to request bank statements of over 7 years to see if monies were paid into the Macau project.  Obtaining the bank statements will be of little use, as it will not show anything other than numerous transactions thereon.  Such transactions are not unusual and are in fact, rational and on a regular basis which are normal business dealings for me prior to and during the marriage, and it is clear from the bank statements already provided, and my previous answers and explanations provided, that I have always had numerous transactions, including but not limited to those with K, M and P.  This will be further explained by them in their respective affirmations.  It is instead M’s affirmation, with supporting documentation, that will clearly explain the real ownership of the Macau project.

The law

Discovery

9.  The law is relatively straight forward and does not appear to be in dispute. It is of course correct that disclosure in ancillary relief proceedings should be both “proportionate and relevant” as pointed out by Mr Shieh SC in his written submission. Reference was also made to the general rules for discovery set out in Order 24 of the Rules of the High Court and to Practice Direction 15:11 which governs the general approach taken by the Family Court to discovery prior to and at a Financial Dispute Resolution hearing. The objective, again as rightly pointed out by Mr Shieh, is to define the issues and to save costs. 

10.  The 18^th edition of Rayden is of some assistance as to the correct approach to be taken and a summary can be found at paragraph 17:30 where it is stated as follows:

Discovery of documents: questionnaire

17.30 In ancillary relief proceedings discovery begins with 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 discovery is by mutual request by means of a questionnaire served in advance of the first appointment, and by further questionnaire at a later stage of the proceedings with the court’s permission. Questionnaires can, like interrogatories, request information as well as seeking production of documents.  As part of its case management role, the court should regulate the extent of the disclosure 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. An order for discovery can only be made against a party to the application.Discovery encompasses all documents which are or have been in a party’s possession, custody or power relating to matters in question in the application for ancillary relief; it is a two-stage process: where objection is taken to production of a document in the possession or power of a party, the proper course is for the existence of the document to be disclosed and objection then taken to its production.  A party giving discovery is not obliged to disclose any part of a document which is irrelevant to the issues, and it is established practice to redact irrelevant parts of the document provided that the irrelevant part could be covered without destroying the sense of the rest of the document or make it misleading.

Redaction

11.  In so far as the law on redaction is concerned I accept the submissions made by Mr Shieh on this point also as follows:

32. It is well established that a party is entitled to redact parts of a disclosed document on the basis that they are irrelevant to issues in dispute.  In GE Capital Corporate Finance Group Ltd v Bankers Trust Co & Ors [1995] 2 All ER 993 (CA), the UK Court of Appeal held (see headonote):

“It was well established that a party was entitled to seal up or cover up parts of a disclosed document on the ground of irrelevance just as it could withhold an entire document on that ground, provided that the irrelevant part could be covered without destroying the sense of the rest or making it misleading … The test to be applied in deciding whether material was relevant was not whether it was at least potentially relevant but whether it was unreasonable to suppose that the passages contained information which might either directly or indirectly enable the defendant either to advance his own case or to damage the plaintiff’s case. The Court would not ordinarily disregard the oath of the party that the parts concealed were irrelevant unless it appeared from the documents produced that that was not the case.”

(Emphasis added)

33. GE Capital has been applied in numerous cases by the Hong Kong Court, including in the context of matrimonial litigation:

(1) In H v T (Discovery: bank statements) [2011] HKFLR 533 where the Court dismissed the wife’s application for disclosure of redacted parts of bank statements disclosed by the husband, on the grounds inter alia that she had failed to demonstrate its relevance to the issues in the case.

(2) In SMSE v KL (No 2) [2009] 5 HKLRD 770 (CA) (which concerns, inter alia, redactions of documents disclosed by a third party), the Court of Appeal (per Tang VP as he then was) held that if a document contained materials which were immaterial to the issues in the case they should be redacted, and the burden was on the applicant for disclosure to show that the redaction had been done wrongly.  The Court of Appeal also emphasized the importance to maintain the principle that any intrusion on the privacy of a third party must be justified (see §§41-43).  Any requirement by a Court for disclosure of personal information against a third party is an interference with his privacy rights and it has to be justified for the protection of the rights of the applicant (see per Cheung JA at §52, applying M v M [2006] 2 FLR 1253).  In that case, the Court of Appeal held that to prohibit a third party company to redact the part of a document not relevant to the issues in the proceedings clearly impinges upon the company’s right to privacy (see per Cheung JA at §55).

34. Further, in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 (CA), the Court of Appeal applied GE Capital as regards the entitlement to redact irrelevant material in disclosed documents, and further confirmed the conclusiveness of an affirmation given by the party providing discovery as to the irrelevance of the redacted materials (see per Kwan JA at §51):

“The oath of the party giving discovery is conclusive, “unless the court can be satisfied - not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by [that party], or by any admission by him in the pleadings, or necessarily from the circumstances of the case - that the affidavit does not truly state that which it ought to state”⁴. The test is not whether the redacted parts are potentially relevant, and it is not enough that they might provide material for cross-examination as to credit. The test is whether it is not unreasonable to suppose that the parts redacted do contain information which may, either directly or indirectly, enable Ms Wong to advance her own case or to damage the defendants’ case⁵. A heavy burden lies on a party who seeks to challenge the veracity of the other party’s oath regarding redaction⁶.”

(Emphasis added)

Discussion   

Part A and Part D

12.  Both of these requests relate to the provision of unredacted documents. Part A is a general request centring on the husband’s Answers to the Wife’s 2^nd questionnaire and Part D relates to documents exhibited to M’s affirmation. I accept that the redacted information in the husband’s Answers consists of information that relates to third parties including inter alia confidential information pertaining to other directors, third party bank account numbers and third party involvement in M’s companies. The husband had confirmed on oath that the redacted information is not relevant and prima facie that stands. In his oral submission Mr Coleman said that：

Yes, my learned friend seemed to be saying -- the last thing he said almost was that the husband had himself looked at the redactions and then said on oath that none of them are related to him.  But what he -- what he says is “I’ve looked at the redactions.”  What he doesn’t say is “I’ve looked at the document unredacted,” and indeed in his paragraph 13 on page 4066, P17, 4066, he says, “The redactions were done by M himself.”  “I’ve looked at the redactions,” he says, “and the redactions only relate to X, Y and Z.”

Well, you can see that redactions relate to third parties’ addresses, bank accounts, ID numbers. I can see that by looking at the redacted document.  What he’s not done is said, “I’ve looked under the redactions and I can confirm that what has been redacted has got nothing to do with me.”

And, anyway, by virtue of the other material that I have identified, this is one of those cases where the oath on disclosure is not good until one gets to the trial or an FDR, as is the next target in our case.

13.  With respect this seems a little farfetched – especially in so far as M is concerned, who is not even a party to the proceedings. On the face of it the material that has been redacted does not appear to be of any import to the issues in hand. Nor does the redaction appear to have been done wrongly. Neither can it be inferred that the affidavits do not state truly what it ought to state.  In such circumstances it seems to me that there is no proper basis for insisting that unredacted material be produced. Thus parts A and D will not succeed.

Part B

14.  These questions arise out of Mr T’s report that was filed on the 1 December 2014. He says that the purpose of the report was as follows:

2. I have been engaged by the solicitors of the Respondent, Messrs Withers, to:

(a) review questions 5(c) and 10(c) of the Petitioner’s draft Second Questionnaire contained in her First Appointment bundle filed on 10 November 2014 in which a request was made for the statements of two U bank accounts, namely account #XXXXXX in the name of the Respondent and account #XXXXXX in the name of U Inc (together “U Accounts”), from March 2007 to date, save as already provided by the Respondent (I note that the Respondent has already disclosed to the Petitioner and to the Court the bank statements of the U Accounts for the period between April 2012 and July 2014);

(b) consider the Petitioner’s allegation that the Respondent has an interest in a Macau residential project namely “X” (“X Project”).

(c) review the affirmation of Mr SJA, the forensic accountant of the Petitioner, dated 19 November 2014; and provide my views on Mr A’s purported justification for the Petitioner’s requests for the U Accounts bank statements in paragraph 2(a) above, as set out in his Affirmation.

15.  He then goes on to make a number of findings based in part of information provided to him by the husband. The main difficulty is that the wife is being asked to believe Mr T’s assertions, without having sight of any of the original documents, which support what he says. This cannot be right. I agree with Mr Coleman when he said:

Now, that’s why I said Mr T has the advantage over us, because he’s said, “I’ve looked at these accounts and I can tell you that none of the money goes to Macau.”  But we should be entitled to do is say, “Okay, well, we want to check that and anyway we want to see where the money does go.”  And that is why we’ve asked these questions.

16.  With respect that must be right – notwithstanding the fact that that means that the disclosure will go back to 2007. In these particular circumstances I accept that that may be necessary.

17.  As indicated in court, it seems to me that in order for any Judge to attach any weight to a report of this nature, both sides must have access to the same information. That is not the case here.

18.  In any event I accept that the wife has made a case out in relation to the questions referred to in Part B questions 5 – 11.  

Part F

19.  This section has been overtaken by events and consequently is no longer relevant.

The order

20.  Consequently I will give leave for the wife to issue a fourth supplemental questionnaire to contain questions B 5 – 11 within the next 7 days. The husband shall provide the answers to those questions within 28 days thereafter. The wife’s summons dated the 5 May 2015 for maintenance for the children (presumably interim maintenance) has been set down for hearing on the 23 October 2015 at 2:30 pm with two hours reserved.  There shall be a further FA hearing returnable on the same date.

Costs

21.   Notwithstanding the fact that neither party has been wholly successful in their application, it seems to me that the wife has been more successful than the husband. Consequently I will exercise my discretion and make an order nisi to be made absolute in 14 days time that the husband do make a 50% contribution towards the wife’s costs of and occasioned by this discovery application, to be taxed if not agreed. There shall be certificate for all counsel involved.