CKK v. WMYA

FCMC 10089 / 2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10089 OF 2007

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DECISION
(Specific Discovery)

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The Application

1.  Before me is an Amended Application taken out by the respondent wife for further and better particulars and production of documents on the petitioner husband’s financial situation.

2.  Since I have already set out the parties’ background in the Reasons for Decision dated 23 December 2014 on the petitioner’s application for trial of preliminary issues, it is not necessary for me to repeat the same here.  I only need to say that decree absolute for the dissolution of the marriage was granted on 10 June 2010.  The petitioner is now 61 years old and is running a successful electronics business.  He has remarried on 5 June 2011.  According to his Form E dated 14 November 2014, his net assets are worth about $105,692,000.  As for the respondent, she is also 61 years old.  She reported having net assets of about $19,944,000.

3.  I shall continue to refer the petitioner as “P” and the respondent “R”.

Legal Principles

4.  The relevant legal principles are not in dispute.  To invoke Order 24 rule 7, RHC, there are 3 prerequisites, namely, relevance, existence and possession of the documents sought for discovery.  Once a prima facie case has been made by the party seeking such order, the court has a discretion whether or not to order disclosure.  It is then for the other party objecting disclosure to show that it is not necessary for disposing fairly of the cause or issue in question or for the purpose of saving costs:  Paul’s Model Art GMBH & Co  KG v UT Ltd [2006] 1 HKC 238; also Hong Kong Civil Procedure (2015) at para 24/8/1. 

5.  Furthermore, pursuant to Rule 77(4) of the Matrimonial Causes Rules, Cap 179A, the court may order a party to give further information concerning any matter contained in any affidavit filed by or on behalf of the other party or any other relevant matter, or to furnish a list of relevant documents or to allow inspection of any such documents.

The Items in Disputes

6.  When it came to the argument hearing, not only that R’s requests were drastically different from those she originally set out in her summons, but also that many of the requests had already been dealt with.  Thus, I only have to deal with the outstanding ones.

Item no 3 of Schedule 1 and Item no 11 of Schedule 2 to the Amended Application

“Please state details of “liability owed to P&T, includes (sic) (1) the relevant sum; (2) date of incurrence of the liability; (3) state of repayment; (4) interest; and (5) term”

7.  By item no 11, R also seeks the production of the relevant documents.

8.  P&T is P’s major company.  In his Form E, P stated that he owed this company $3,379,776; that caused R’s present request for further and better particulars.

9.  P’s reply given prior to the hearing was that these liabilities are related to the company and the information does not need to be disclosed to R (“(P&T) 的債務乃是公司資料, 不須要向答辯人提供).

10.  R insists on knowing the particulars.  I agree with Ms Yip SC, who appeared together with Ms Yu for R, that the reply is ridiculous and is simply not properly dealing with the request. 

11.  Ms Tsui did not adopt her lay client’s line of argument.  She confirmed, on behalf of P, during the hearing that the amount of $3,379,776, that was said to be due to P&T, is exactly the figure stated on P&T’s audited account dated 30 April 2013.  She further submitted that P’s dealings with P&T have been properly audited.  It is not uncommon practice of company directors to owe loans or to lend loans to companies and is a matter of company audit management.  The information already provided is sufficient for the present purpose.

12.  In response, Ms Yip submitted that if P will swear that this was the liability as at the date of his Form E, that this remains the current liability from 30 April 2013 up till now, that P has made no repayment and that P&T has made no further lending, R will be perfectly happy with the answer.

13.  With respect, I fail to see why this is necessary.  P’s Form E was already made on oath and the figure was an audited figure. The audited report also stated that the amount due from P is unsecured, interest free and with no fixed date of repayment.  In any event, the parties are going to appoint an accountant to do the valuation of the relevant companies including P&T.  I do not consider that the further confirmation suggested by Ms Yip is necessary.  R should wait for the outcome of the valuation.

Item nos 4, 5, 6 and 7 of Schedule 1 to the Amended Application

14.  These items can be dealt with together. 

15.  In his Form E, P stated he requires $222,225 for his monthly expenses, of which his general expenses are $47,225 and his personal expenses are $175,000.  Out of this $222,225, he needs $30,000 for transportation and accommodation expenses in the Mainland, $20,000 for entertainment and gifts, $15,000 for holidays and $20,000 for maintaining his present wife’s relatives in the Mainland.  These 4 items, totalling $85,000 per month, attract 4 requests from R.

Item no 4 of Schedule 1 to the Amended Application

“Please provide the breakdown of “transportation to/from and accommodation in the Mainland” and explain which part relates to transportation and which part relates to accommodation”

16.  In his Answer dated 31 December 2014, P replied that he did not record or keep detailed information in respect of each and every transportation and accommodation in the Mainland.  

Item no 5 of Schedule 1 to the Amended Application

“Please explain why the petitioner spends $20,000 on entertainment/gifts. Please provide the particulars of entertainment/gifts for the last 3 months with documentary proofs attached”

17.  In his Answer, P replied that he did not record or keep detailed information in respect of each and every item of entertainment / gifts.  He said the question is meaningless (無聊) as this $20,000 is not worth a mention given his financial situation.

Item no 6 of Schedule 1 to the Amended Application

“Please list the location, period, and expenses incurred for personal use on travelling in the most recent two years. Please provide documentary proof”.

18.  P’s Answer was that he did not record or keep detailed information in respect of each and every travel.  He also did not know from which of the paragraph in his Form E the request came from and alleged that the question was meaningless.

Item no 7 of Schedule 1 to the Amended Application

“Please state how the petitioner paid this sum of money. Please state who the wife’s relatives are.”

19.  In response, P replied in his Answer that R is not entitled to ask.

20.  On the breakdown of P’s transportation to/from and accommodation in the Mainland, Ms Tsui argued that since P does not keep any record, he is simply not able to give an answer.  In any event, she argued that this is not necessary and she failed to see how the breakdown would help R’s case.  P travels a lot to the Mainland for business. The sum in question is merely a small sum compared to the means of P.

21.  As for the breakdown of $20,000 entertainment/gifts expenses, Ms Tsui relied on P’s answer that he does not have such records and that the sum of $20,000 is comparatively small.  She does not see the relevance and necessity of providing an answer.  She said that obviously P cannot provide an answer.

22.  As for the $15,000 on travelling, again Ms Tsui argued that she does not see the relevance and necessity of providing an answer.

23.  Finally, as regards the monthly maintenance of $20,000 that P said he has been paying his wife’s relatives, Ms Tsui submitted that R is not entitled to such information.  R can simply ask the court to disregard such expenses as unreasonable regular expenses in the proceedings if she really believes that it affects her case.  P does not see it necessary in the circumstances to answer the question.

24.  Ms Tsui also submitted that there should not be minute retrospective investigations into these matters.

25.  In response, Ms Yip submitted that all these items added up to $85,000 per month, save and except 3 monthly statements for one single credit card only, P has not produced a single piece of document in support of his expenditure.  She argued that the items pursued are relevant, highly necessary and would fairly dispose of the issues, namely, the spending level and standard of living of P.

26.  To start with, I need to comment that not only that P’s Replies as quoted above are unhelpful, they are also distasteful and arrogantly worded.  P is legally represented.  I would have thought that a degree of restraint and courtesy should have been exercised.

27.  $85,000 per month is not a negligible sum. No doubt, P is a man of means but I note Ms Tsui has not gone so far as to say that this is a ‘big money’ case where needs and standard of living would not be in issue.  As I referred to above, the total family assets are reported to be in the region of $125,636,000.  Further, as Ms Yip correctly pointed out, P&T enjoyed a modest profit of about $1,466,000 in 2011 and $531,600 in 2012 only.  Given all these and also the relative young age of the parties, it is not likely to be a big money case by today’s standard.

28.  Further, as has been said by Hartmann JA (as he then was):

“… It is not simply to be assumed that great wealth equates to great extravagance. Some married couples who enjoy great wealth spend with comparative modesty and with a discipline born of discretion, others enjoy consumption on a grand scale”: HJFG v KCY [2012] 1 HKLRD 95, para 36.

29.  What Hartmann JA said was in the context of an application for maintenance pending suit, but I see no reason why this comment does not apply here.  I agree that the requests are relevant to P’s needs and standard of living, if not also to his means and financial capacity.

30.  Though P claimed he does not keep record of each and every transportation, entertainment, gift and holiday, as the person who incurred the expenses, he must have some knowledge as to where he spent his money on.  Obviously, according to his Replies, he must have kept some of the records.  Indeed, in the modern digital era that we are in today, it is hard to believe that no records whatsoever, whether willingly or unwillingly, have been kept.  It is even harder to believe that being a successful entrepreneur he is not able to give any particulars such as where he went for holiday and for business, where he stayed, the transportation he used and the form of entertainments he enjoyed.  What he should have done was to give the particulars to the best he could.

31.  For the above reasons, R should be successful in her requests.

32.  The following 2 items can be dealt with together.

Item no 2 of Schedule 2 to the Amended Application

Please provide supporting documents in respect of each of the transactions below (which the petitioner claimed to be “self-use/expenditure” or expenses”) that can support the alleged use (eg the supporting documents which can show that the petitioner used the following transactions on what kinds of expenses / expenditures; and/or supporting documents which can show that the petitioner withdrew the sums for self-use).

Item no 3 of Schedule 2 to the Amended Application

In respect of the sums in the table below, please provide supporting documents which can support that these sums were used to exchange Renminbi (e.g. proofing documents for exchange of Renminbi) as claimed by the petitioner that these sums are used to “exchange to Renminbi for expenditures” (兌換人民幣用作消費):

33.  Ms Tsui argued that it is not helpful or meaningful to do a forensic analysis on P’s monthly expenses.  Taking into account of P’s means, it is not surprising at all or so outrageous that he spends cash in the region of an average of $100,000 a month.  This is not a question that P must provide an answer or can provide an answer when he prefers to spend cash. Also, his answer, if given, would not help to dispose of the matter or help saving costs.

34.  On the exchange of RMBs, Ms Tsui submitted that P has to travels to the Mainland, has business contacts and connection with his wife’s relatives in the Mainland.  He cannot provide proof of RMB expenses and especially for the period in 2013 and 2014.  This is not a question that needs to be answered.

35.  It has been submitted on R’s behalf that without a single piece of document in support, the figures that P claimed to be his standard of living or level of spending is no more than bare assertions. 

36.  P stated on his Form E that his monthly expenses are $222,225.  I note that in March 2014 he withdrew $120,000 on 7 March 2014 for alleged self-use spending, $130,049 on 5 March 2014 for exchanging RMBs for spending, and $150,376 on 26 March 2014 for exchanging to RMBs for spending.  A total of $400,425 was withdrawn within one month’s time for spending only. This alone calls for some explanations.  Apart from this, the total withdrawals, taking Hong Kong dollars and Reminbis together, are roughly the amount that P said he is spending each month but as has been pointed out by Ms Yip, some of the expenses such as tax payment do not need to be paid on a monthly basis.

37.  It would appear that according to P, he needs the money for his business travels in the Mainland.  If this is the case, then the question would be why P has to spend the money out of his own personal expenditure and why there is no reimbursement from his companies.

38.  My views on records as stated above are also applicable here.  Since P’s needs and standard of living are relevant in the ancillary relief of the present case, it is difficult to understand why the requests do not need to be answered.

Redaction of Documents Provided by the Petitioner

Item no 5 of Schedule 2 to the Amended Application

In respect of the sums in the table below, please provide supporting documents which can explain the alleged use of funds being “payments for goods for and on behalf of (P&T) to the suppliers” (代(P&T)匯款給供應商支付貨款).

Date	Withdrawals (HKD)	Whereabouts
20.5.2014	500,000.00	Payments for goods for and on behalf of P&T to the suppliers
10.4.2014	800,150.00	Payments for goods for and on behalf of P&T to the suppliers

39.  What P said in essence is that he had paid these two sums on behalf of P&T in favour of its suppliers.  Shortly before the hearing, P provided redacted copies of documents requested.  They are:

(1) the official receipts issued by P&T for the respective sums of $500,150 and $800,150;

(2) a Customer Advice of Remittance in respect of $800,150 issued by the Bank of China (Hong Kong) Limited; and

(3) Application for Remittance in respect of $500,000.

40.  As regards the official receipts, the name of the payee on each was redacted.  The official receipts stated that the relevant sums were received from P being in payment of “transfer to … ” with the name of the transferee redacted.  Apart from this, on the face of the copy provided, it is unclear as to whether other parts were also redacted.

41.  As for the Customer Advice, the copy produced by P is illegible.  It is not entirely clear as to what were redacted.  As far as I can see, at least the name and address of the beneficiary of the remittance were redacted.

42.  Likewise, for the Application for Remittance, the information regarding the name and the account particulars of the beneficiary were redacted.

43.  Upon R’s enquiry, P’s reply prior to the hearing was that the redacted parts contained trade secret information.  R insists that the unredacted copies should be produced.

44.  Ms Tsui stressed that P is just protecting his interest and in the present case, only 2 transactions are involved.  The amount involved is about $1,300,000 only. Compared to his means, it is not unreasonable for him not to disclose the names of his suppliers and it would not impact on the outcome.  P has done what is sufficient.  

45.  Ms Yip submitted that the supply of these documents is as good as being supplied with no documents.

46.  I agree.  The names of the supplier as such are not material. What is material is whether the documents support P’s assertion.  I agree with Ms Yip that there is nothing from the documents which suggest that the sums were for payments of goods.  For instance, if payments were made by P in favour of a supplier on behalf of P&T, then an explanation is needed as to why the official receipt would have stated that P&T had received the two sums from P.

47.  The only reason for redaction is ‘trade secret’.  It is trite that first, a party is entitled to seal up parts of a document on discovery if it is considered that they are irrelevant.  Secondly, the test in Peruvian Guano case (1882) 11 QBD 55 must be applied in respect of the information covered up.  Ms Yip referred me to Worldtrade Entertainment Limited & Anor v Starway Technology Limited & Anor, HCA 450/2000 (date of Judgment: 19 May 2000).  In page 3 of the judgment, Deputy High Court Judge S Kwan (as she then was) said:

“As mentioned earlier, the only reason advanced in the Plaintiffs’ affirmation for concealing parts of the agreement was the confidential nature of the information which was regarded as “trade secret”. If that was the only reason given by the Plaintiffs for non-disclosure, I would have little hesitation in rejecting that argument. If the Plaintiffs were worried that the “trade secret” might be misused, the Plaintiffs would be protected by the implied undertaking of the opposite side not to use information obtained in this action for collateral or ulterior purpose.”

48.  And in page 5, she said:

“In applying the test in the Peruvian Guano case (1882) 11 QBD 55 at 63, I bear in mind that the question of relevance was framed in wide terms. A document is relevant not only when it is evidence on any issue in dispute but “also which, it is reasonable to suppose, contains information which may –not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.” Brett LJ further had this to say: “A document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or damage the case of his adversary, if it is a document which may fairly lead him to a chain of inquiry, which may have either of these two consequences.”

49.  As I said, the point is not on the name of the beneficiary. The point is on the payment to supplier.  There is nothing to show that the payments were made to P&T’s suppliers.  At the end, Ms Tsui agreed that it is a matter of credibility but she maintained the request is oppressive and not necessary at all.  In my view, the identity of the recipients of the payments is clearly relevant to P’s assertions of payments to suppliers.  It is also relevant to the extent that it may fairly lead R to a chain of inquiry.

50.  Finally, there is no reason why the implied undertaking as to confidentiality does not apply to the present ancillary relief proceedings.

Item no 12 of Schedule 2 to the Amended application

“In respect of all the credit cards listed under Part 2.13 of Form E (including the credit cards which were not frequently used), please provide monthly statements for each of the same (other than the statements that the petitioner has already provided) for the latest 1 year.”

51.  In his Form E, P declared 12 credit cards in total; however, he only provided the latest 3 months statements for one credit card that he said he mainly used.  For the remaining 11 credit cards, he stated that he did not frequently use those cards without producing any documentary proof.

52.  Ms Yip argued that in the present case P has claimed a total monthly expenditure of $222,225.  This renders his expenses incurred on his credit cards a piece of critical information.  Further, the situation relating to P’s monthly expenses is compounded by his refusal to disclose relevant supporting documents purported to be expenses including large sums of funds allegedly to have been changed into RMBs for expenses. Disclosure of past 12 months credit card statements would provide insight into P’s self-asserted state of expenditure.  For this reason R seeks P’s credit cards statements for the past 12 months.   

53.  Ms Tsui submitted that for the reason that the cards have not been used, there are no statements received and P does not wish to spend unnecessary legal costs on obtaining the statements.  At the end, Ms Tsui conceded that if R insists on the production, this can still be done.

54.  I consider that P has to produce them.  It is relevant to the needs and standard of living of P.  If there was no spending on a particular credit card, the bank can simply issue a letter to that effect.  I believe the costs involved would not be substantial when compared to the stakes involved in the present case.

Conclusion

55.  For the reasons aforesaid, I give the following orders:

1. The petitioner do file and serve an affirmation within 21 days providing his replies and the documents requested under item nos 4, 5, 6 and 7 of Schedule 1 and item nos 2, 3 and 12 of Schedule 2 to the Amended Application;

2. The petitioner shall also exhibit in the same affirmation the legible and unredacted copies of the documents produced by the petitioner under item no 5 of Schedule 2 to the Amended Application.

Costs

56.  R’s application was taken out on 10 February 2015, the items that are now before me were not those first appeared in the initial application.  P gave his answers to some of the questions and there were new ones from time to time.  In deciding the costs issue, I may need to deal with the history of the application and how the items have come to the state as they are now.  Further, the parties have mixed success in the application.  I would therefore reserve the issue of costs.  This is the approach agreed to by counsel.