Re Chow Chung Kwan

HCB 2942/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGSNO 2942 OF 2005

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Re: CHOW CHUNG KWAN, Bankrupt

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DECISION
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I. INTRODUCTION

1.This is an application by the trustees in bankruptcy of Mr Chow Chung Kwan (“Chow”) made pursuant to section 6 of the Partition Ordinance Cap 352 (“PO”) and section 60 of the Bankruptcy Ordinance Cap 6 (“BO”) for an order for sale of a property known as Flat No 15 on 23^rd Floor of Block 3 (Yee Wai House), Tsing Yi Estate, No 10 Fung Shue Wo Road, Tsing Yi, New Territories (“Property”).

2.Chow filed his own bankruptcy petition on 20 April 2005. In List A of the Statement of Affairs sworn by Chow on 20 April 2005 (“Statement of Affairs”), he stated on oath that Bank of East Asia Limited (“BEA”) was his creditor to whom he owed $275,700, and the Property “是本人和[Madam Leung Lai Ping (“Leung”)](我的太太)共同擁有……”

3.A bankruptcy order was made against Chow by the court on 7 June 2005 (“Bankruptcy Order”). Pursuant to resolutions passed at the General Meeting of Creditors held on 26 August 2005 (“Resolutions”), Lee Yat Wah Walter (“Lee”) and Chick Tsz Kwan were appointed the joint and several trustees in bankruptcy in respect of the property of Chow (“Trustees”).

4.According to the land search records,

(a) by an assignment dated 7 February 2002 (“Assignment”), Chow and Chow’s wife Leung purchased the Property as joint tenants for a consideration of $278,200;

(b) the Property was mortgaged by Chow and Leung to BEA pursuant to a Legal Charge dated 7 February 2002 (“Legal Charge”);

(c) on 26 April 2005, a sealed copy of the Bankruptcy Order and certified true copies of the Resolutions were registered against the Property at the Land Registry;

(d) presently the Property is still held in the names of Chow and Leung as registered owners.

5.Clause 1 of the Assignment provides inter alia that:

“In consideration of [$278,200] paid by the Purchaser [ie Chow and Leung] to the Vendor (receipt whereof is acknowledged) the Vendor as beneficial owner ASSIGNS to the Purchaser the [Property] …… TO HOLD the same unto the Purchaser (in the event of the Purchaser being more than one person, as joint tenants) for the residue of the term of years created by the Lease referred to in paragraph (2) of the Schedule (“the Lease”) ……” (my emphasis)

6.Clause 4 of the Legal Charge provides inter alia that:

“In consideration of the Loan and as security for the repayment of the Loan and all other sums payable by the Borrower [ie Chow and Leung] to the Lender [BEA] hereunder the Borrower:

(a) as Beneficial Owner HEREBY CHARGES the Property to the Lender; and

(b) (as the case may be) HEREBY ASSIGNS or agrees to assign unto the Lender the full benefit and all rights of the Borrower contained in any agreement whatsoever in respect of or relating to the Property now subsisting to hold the same under the Lender absolutely SUBJECT nevertheless to the proviso for redemption hereinafter contained.

PROVIDED ALWAYS ……” (my emphasis)

7.The Property was under the Tenants Purchase Scheme, and the owners thereof must pay a premium to the Hong Kong Housing Authority (“HKHA”) before the Property could be sold in the Home Ownership Scheme Secondary Market (“HOS Secondary Market”).

8.As a result of Chow’s bankruptcy, (a) the joint tenancy between Chow and Leung over the Property was severed and converted into a tenancy in common by operation of law,[1] and (b) Chow’s interest in the Property became vested initially in the Official Receiver or provisional trustees, and subsequently in the Trustees upon their appointment.[2] The Trustees were persons interested in the Property, and had the statutory duty to realise Chow’s assets (including the Property) for the benefit of the creditors.[3]

9.Chow was automatically discharged from bankruptcy on 7 June 2009.[4] However, such discharge would not re-vest in Chow any interest he had in the Property (being an asset of Chow not yet realised and distributed), which was and remained vested in the Trustees.[5] In addition, the powers and duties of the Trustees in relation to the administration of Chow’s estate in bankruptcy remained unaffected by Chow’s automatic discharge from bankruptcy.[6]

10.According to Lee’s affidavit (“Lee Aff”) filed on 14 May 2012, Chow’s income disclosed in his annual statements was insufficient to meet his expenditure, so Chow did not make any monthly contribution to his bankruptcy estate during his bankruptcy. As at the date of the Lee Aff, the balance of Chow’s bankruptcy estate was $2,718.81. According to the Statement of Affairs, Chow had unsecured debts in an estimated amount of $1,197,556.36 before filing his own bankruptcy petition. As at 4 May 2012, the total amount of claims under proofs of debt filed by creditors (subject to adjudication) was $383,645.56.

11.According to a valuation report of the Property prepared by Allied Surveyors Limited (“Surveyor”) dated 3 April 2012, the then market value of the Property was $1,850,000 (assuming that the premium had been paid to HKHA to remove the restrictions on alienation), and the HOS Secondary Market value was $1,300,000, which meant the whole amount of the proceeds would be available to settle the mortgage loan of $8,150.30 as at 17 November 2011, and the balance would be available for Chow’s estate and Leung in equal shares with each share (based on the aforesaid valuation) being ($1,300,000 - $8,150.30) ÷ 2 = $645,924.85 (subject to expenses and incidental disbursements etc).

12.On 27 October 2011, the Trustees wrote to Leung to invite her to purchase Chow’s share of the Property or to agree to co-sell the Property together with the Trustees. Leung declined such proposals in her written reply dated 5 November 2011 on the basis that the Property was still under mortgage and “本人沒有能力購買餘下業權”.

13.In March 2012, members of the creditors’ committee for Chow’s bankruptcy[7] agreed for the Trustees to proceed with the application referred to in paragraph 1 above.

14.On 14 May 2012, the Trustees filed a summons in respect of the application in paragraph 1 above (“Summons”), and also filed the Lee Aff in support.At the hearing of the Summons on 18 June 2012, it was adjourned sine die with liberty to restore and costs reserved. When the Summons was restored to be heard before me on 29 May 2013, I granted directions for the Trustees, Chow and Leung to file their affidavits in support/opposition, and further adjourned the Summons for argument before a bilingual judge.

15.On 25 June and 16 August 2013, the Trustees filed the 1^st and 2^nd affirmations of their solicitor Jeremy Shek (石翱翔) (“Mr Shek”) (“Shek 1^st and 2^nd Affs”). On 18 July 2013, Chow and Leung filed their respective affirmations in opposition (“Chow 1^st Aff” and “Leung Aff”), and on 21 August 2013 Chow filed his 2 further affirmations in opposition (“Chow 2^nd and 3^rd Affs”).

16.Initially, Mr Shek objected to Chow’s reliance on the Chow 2^nd and 3^rd Affs (which merely exhibited his medical records from Yan Chai and Princess Margaret Hospitals) on the sole ground that Chow failed to apply for formal leave of the court before filing and serving the same. I cannot see how such procedural irregularity would cause prejudice to the Trustees when they had been served with copies of Chow’s medical records for about 2 years. Such technical objection did the Trustees little credit in the absence of any discernible prejudice and especially when Chow had already explained in the Chow 1^st Aff that he had applied for and was then awaiting receipt of his medical records from the Hospital Authority. At the Hearing, I granted retrospective leave for Chow to file and serve the Chow 2^nd and 3^rd Affs with no order as to costs.

17.Leung opposed the proposed sale of the Property on the grounds that Chow did not have any beneficial interest in the Property and was merely holding his half share in the Property on trust for her, and alternatively, that an order for sale of the Property should not be made as it would cause great hardship to Chow and/or Leung.

18.The Shek 1^st Aff exhibited an updated valuation report by the Surveyor in respect of the Property dated 5 June 2013. According to such valuation report, the then market value of the Property was $2,850,000 (assuming that the premium had been paid to HKHA to remove the restrictions on alienation), and the HOS Secondary Market value was $1,550,000, which meant the whole amount of the proceeds would be available to settle the mortgage loan of $8,150.30 as at 17 November 2011, and the balance would be available for Chow’s estate and Leung in equal shares with each share (based on the aforesaid updated valuation) being ($1,550,000 - $8,150.30) ÷ 2 = $770,924.85 (subject to expenses and incidental disbursements etc).

19.On 27 April 2015 the Trustees filed Notice of Intention to Proceed, and on 22 June 2015 they filed Notice of Adjourned Hearing that gave notice of the restored hearing for argument in respect of the Summons. The Summons came before me on 22 September 2015 (“Hearing”). Both Chow and Leung were unrepresented.

20.On 1 September 2015, the Trustees filed a summons (“Aff Summons”) to seek leave of the court to file Mr Shek’s 3^rd affirmation that was affirmed on the same day and annexed thereto (“Shek 3^rd Aff”). The Aff Summons was returnable at the same time as the Hearing.

21.By the Shek 3^rd Aff, the following documents were exhibited:

(a) the land search records of the Property, and the Assignment as well as the corresponding memorial that were registered against the Property at the Land Registry;

(b) an updated valuation report by the Surveyor in respect of the Property dated 17 August 2015, which gave the then market value of the Property (assuming that the premium had been paid to HKHA to remove the restrictions on alienation) as $4,100,000, and the HOS Secondary Market value as $2,850,000;

(c) an updated Proof of Debt index in relation to Chow’s bankruptcy which showed that as at 6 August 2015 the total amount of claims under proofs of debt filed by the creditors (subject to adjudication) was $475,000.56.

22.At the Hearing, without objection by Chow and Leung, I granted leave for the Trustees to file the Shek 3^rd Aff. I also ordered that service of the Shek 3^rd Aff be dispensed with, and that there be no order as to costs in respect of the Aff Summons.

23.In my view, the information contained in such affirmation and the exhibits thereto would not have caused any surprise or prejudice. The document in paragraph 21(a) above signed by Chow and Leung was already evident from the land search records exhibited to the Lee Aff. As regards paragraph 21(b)-(c) above, they only served to update the court and the other parties on the current position since the last adjournment, and the latest valuation would assist in setting a realistic reserve price should an order for sale be granted. Indeed, they were to Chow’s and Leung’s benefit as the latest valuation reflected an increase in the current market value and HOS Secondary Market value of the Property.

24.According to the latest valuation report by the Surveyor, the current market value of the Property was $4,100,000 (assuming that the premium had been paid to HKHA to remove the restrictions on alienation), and the HOS Secondary Market value was $2,850,000, which meant the whole amount of the proceeds would be available to settle the mortgage loan of $8,150.30 as at 17 November 2011, and the balance would be available for Chow’s estate and Leung in equal shares with each share (based on such further updated valuation report) being ($2,850,000 - $8,150.30) ÷ 2 = $1,420,924.85 (subject to expenses and incidental disbursements etc).

II.  ISSUES

25.The issues for determination are (a) whether prior to Chow’s bankruptcy Chow and Leung were the beneficial owners of the Property in equal shares or Leung was the sole beneficial owner of the Property by reason of the fact that she had paid the purchase price of the Property, and (b) if Chow was/is a beneficial joint owner, whether the court should refuse to make an order for sale on the ground of hardship to Chow and/or Leung.

III.  OWNERSHIP OF THE PROPERTY

26.If Chow had no beneficial interest in the Property and was a mere trustee for Leung, then clearly there would be no asset in the form of any interest in the Property that fell into the bankruptcy estate.[8] Hence, the primary task of the court was to ascertain the intention of Chow and Leung with regard to the ownership of the Property at the time when the relevant purchase/assignment of the Property was made.

27.The principles of common intention constructive trust are relevant, and recently the Court of Appeal in Mo Ying v Brillex Development Ltd extensively reviewed the authorities in this area.[9]  As the Property was purchased in joint names, it is only necessary to refer to the following parts of the judgment in Mo Ying:[10]

“5.16 In [Jones v Kernott [2012] 1 AC 776], Lord Walker and Baroness Hale in their joint judgment further elaborated on the applicable principles on disputes in respect of family homes in joint names and family homes in sole name. In respect of joint name homes, the principles are as follows. For ease of reading, I have arranged each of the five principles in separate paragraphs:

[51] In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct:

“the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party”: Lord Diplock in Gissing v Gissing [1971] AC 886, 906.

Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden [2007] 2 AC 432, para 69.

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, ‘the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property’: Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, ‘the whole course of dealing … in relation to the property’ should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions.

(5) Each case will turn on its own facts.  Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).”

28.Since the Property was purchased and thereafter held in the joint names of Chow and Leung, they were prima facie equal beneficial owners interested in the Property. The onus of proof lay on the party seeking to show that equity should not follow the law (ie Leung in the present context) and to establish (a) the joint owners intend their beneficial interests to be different from their legal interests and (b) in what way.[11] The burden is a heavy one “because it will almost always have been a conscious decision to put the property into joint names, and committing oneself to spend large sums of money on a place to live is not normally done by accident or without giving it thought”.[12]

29.Here, the Assignment and Legal Charge (both of which were signed by Chow and Leung) confirmed that not only were Chow and Legal the legal owners of the Property they were also the beneficial owners at the time of purchase. Indeed, even as late as in 2005, Chow confirmed on oath in the Statement of Affairs that he and Leung “共同擁有” the Property. These documents lent weight to Mr Shek’s suggestion that the Property was jointly held by Chow and Leung both legally and beneficially in equal shares.

30.Mr Shek reminded that in Re Superyield Holdings Ltd,[13] Recorder Kotewall SC said where the covenant to repay the mortgage is joint and several, each party to such covenant to repay is taken to have contributed to half of the sum raised for the purchase. But I bear in mind that the learned judge also accepted that whether any beneficial ownership is conferred by any given transaction depends on the intention of the parties at the time the transaction is undertaken. Here, at least document-wise, there was no contrary documentation, eg any written declaration of trust by Chow that he held Leung’s beneficial interest in the Property in favour of Leung.

31.Chow claimed he became a co-owner of the Property on the basis of “掛名性質” because “買樓當日房署一定要戶主有名在內才可購買這個單位，於是我們就以兩個人名字去買入這個單位，十年樓宇供款，雜費都是由[Leung]一人負責”. A similar argument was run by the co-owner in Re Lau Hiu Tuen, bankrupt,[14] and I gratefully adopt the analysis by G Lam J in that case as follows:

“11. In one of her affirmations, Madam Lam said that the purchase of the property was done in joint names because that was the requirement of HKHA and the bank. This in itself is not a basis for holding that there was no intention in 2003 for Mr Lau to be a beneficial owner of the property. As stated by Russell LJ in Crisp v Mullings [1976] 2 EGLR 103 (quoted in Wong Kwok Ki Stephen (as the joint and several trustee of the property of Lai Kam Po) v Lee Lai Ying (DCCJ 677/2013; 29 November 2013)):

“The crucial point in the judgment appealed from is that the judge, having quite correctly said that the plaintiff started, so to speak, with the advantage of being a joint tenant in law, concluded that this was entirely explained—and explained away—by the fact that her participation was necessary in order to persuade the building society to advance the £5,700. The judge said:

‘The plaintiff was accordingly made a party to the contract, the mortgage and the transfer in order to enable a sufficient loan to be obtained, and not with the object of making a gift to the plaintiff of any share of the beneficial interest.’

With all respect, we do not think that that demonstrates that the plaintiff was to be a mere nominee. It is, we think, a non sequitur. On the contrary, the fact that the house for the ‘family’ could not be bought without the plaintiff incurring liability, or potential liability, would be some ground for inferring that the plaintiff was to be beneficially interested.””

32.Turning to the monthly instalment repayments of the mortgage loan in respect of the Property made to BEA, Chow said “十年樓宇供款，雜費都是由[Leung]一人負責”. Leung produced copies of the passbooks for her bank account with BEA which she said would show that since 2002 the monthly mortgage instalment repayments were all debited from such bank account, and on such basis she contended it was she and not Chow who was responsible for mortgage repayments, rates and management fees in respect of the Property. Leung explained that the household expenses (eg water, electricity and gas utilities bills) were paid by her children.

33.However, a careful study of the passbook entries for Leung’s BEA bank account revealed that for most if not all debit entries for the mortgage instalment repayments, there was a deposit entry on the same day or a few days before in the same amount or in an amount just about sufficient to cover the corresponding debit entry for the mortgage instalment repayment. Whilst these transactions confirmed that the mortgage loan was serviced via Leung’s BEA bank account, it did not demonstrate the source of funds for the deposit entries from which withdrawals were made for the mortgage repayments. Thus, the passbook records did not speak to whether it was Leung or anyone else who actually repaid the mortgage loan. Indeed, there were very few other recorded transactions apart from the aforesaid deposits and mortgage withdrawals in Leung’s BEA bank account. Further, there was also no satisfactory proof of Leung’s earnings and/or savings (if any) prior to Chow’s bankruptcy that would have enabled her to accumulate sufficient funds to make initial payment(s) of the purchase price and/or to service the mortgage loan prior to 2005. In my view, there was insufficient evidence before me to establish Leung was the only one who serviced and repaid the mortgage loan and/or paid for the purchase of the Property as she and Chow alleged.

34.Chow claimed he was a businessman until his business failed, which ultimately led to his bankruptcy. He also said he had worked as a cross-border driver for 40 years. I find it strange (and unconvincing) that he would not have made any contribution to the family/household expenses whilst he was earning his living as a businessman/driver, and that it was Leung who made the mortgage repayments and their children who paid for household utilities/expenses. It might be Chow’s and Leung’s contributions were unequal or Chow’s contribution might have dwindled as he got into financial troubles, but in the family context, these matters would not support an inference of an intention to change the proportion of the couple’s beneficial interest in the Property.

35.In a family setting, if a married couple decides to buy a family home, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional and/or economic commitment to a joint enterprise. The fact that parties in a trusting personal relationship do not hold each other to account financially is underpinned by the practical difficulty, in many cases, of taking such account many years later of the ups and downs of living together as a married couple.[15]

36.A holistic approach should be adopted, and other than financial contributions for the purchase and usual outgoings, other relevant factors including how and why the property was acquired and the nature of the parties’ relationship would be considered in ascertaining the couple’s intention. In Stack v Dowden, Baroness Hale said:[16]

“69. …… When a couple are joint owners of the home and jointly liable or the mortgage, the inferences to be drawn from who pays for what may be different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also less likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. …… At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.”

Further, even though “[a] post-acquisition common intention that the beneficial ownership of the property should change can give rise to a constructive trust binding upon the legal owners, but there must be sufficient evidence to justify such an inference or conclusion: Ip Man Shan Henry v Ching Hing Construction Co Ltd [2003] 1 HKC 256 at §74; Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 at §§33-35”.

37.In my view, on the application of the established principles to the facts of this case, there was no common intention at the time of the acquisition of the Property for it to be held by Chow and Leung as trustees for Leung alone. A fair inference from the totality of the evidence was that both Chow and Leung made contributions to the overall expenses and outgoings of the family (including the mortgage repayments) from 2002 to the time of the Bankruptcy Order. Even though I accept Chow’s contribution might have decreased as his business floundered and eventually failed, this would be insufficient to support an inference of an intention to change the proportion of Chow’s and Leung’s beneficial interests in the Property. As G Lam J said in paragraph 17 of Re Lau Hiu Tuen, bankrupt, “[in] general, married couples do not intend that their beneficial ownership of a jointly-owned property varies from month to month depending on the precise monetary contribution each makes towards the mortgage loan repayments or the party’s overall expenses”.

38.Leung went further to explain that since 19 July 2005 (ie shortly after the Bankruptcy Order) she started to work as a part-time seamstress at Famous Garments Ltd. On average she earned less than $4,000 a month, and she used such income to pay the mortgage repayments and living expenses. Leung further claimed that by then Chow was a chronic patient and could not maintain a steady job or pay for household expenses (including the mortgage repayments). But by then Chow was a bankrupt and the Trustees became the co-owner of the Property with Leung. Given their statutory duty as explained in paragraph 8 above, the Trustees plainly had no intention to alter the proportion of beneficial interest in favour of Leung.

39.In all the circumstances, looking at all the evidence in the round, I conclude that the Trustees hold an equal beneficial interest/share in the Property together with Leung.

IV.  HARDSHIP

40.Sections 2 and 6 of the PO provide inter alia as follows:

“2. Subject to this Ordinance, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may-

(a) make an order under section 4 for a partition of the property;

(b) make an order under section 6 for a sale of the property; or

(c) refuse to make any order.

6. (1) In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of-

(a) the nature of the land to which the proceedings relate;

(b)the number of the persons interested or presumptivelyinterested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.

(2) The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.

(3) (a) Without prejudice to subsection (1), if any person interested in the property applies to the Court to make an order for the sale of the property instead of an order for partition, then, unless the other persons interested undertake to purchase the interest of the party applying for an order for sale, the Court may, if it thinks fit, make an order for the sale of the property.

(b) If an undertaking is given by the other persons interested, the Court may order a valuation of the interest of the person applying for an order for sale in such manner as it thinks fit.

(4) On making an order under subsection (1) or subsection (3), the Court may direct a distribution of the proceeds of the sale and give all other necessary or proper consequential directions.”

41.The court’s approach to an application for an order for sale has been summarised by Recorder Fok SC (as he then was) in Wong Chun Kei v Poon Vai Ching as follows:[17]

“18. ……

(a) A co-owner has a basic right to rid himself of the shackles of a co-ownership and ask for an order for partition or sale.[18]

(b) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners.

(c) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.[19]”

42.In respect of (b) above, Anthony Chan J in Re Ng Tze Ching, bankrupt explained as follows:[20]

“23. With respect, it must be remembered that Wong Chun Kei was a case where the co-owners of a 3-storey building consisting of 12 flats were in disagreement over the sale of the same. The court would in those circumstances be in a position to determine objectively whether a sale would be beneficial to all the owners.

24. The present application presents a rather different picture. In an application for sale by the trustees in bankruptcy, quite often an “innocent” spouse will stand to lose the benefit of the family home. I am unable to envisage a situation where the sale would, objectively, be beneficial to all co-owners in such cases. In my view, the “beneficial to all” element is not applicable to an application of the present type.”

Recently, G Lam J in Re Lau Hiu Tuen, bankrupt further clarified as follows:

“21. What is meant by the phrase “such an order will not be beneficial to all the co-owners” in (b) above seems to me to be that the order will be beneficial to some only of the co-owners, not that the order will be beneficial to none of the co-owners.  Accordingly, an order for sale would not be refused unless all the co-owners would be benefitted by its refusal or, in other words, an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner.  See also Beautiglory Investment Ltd v Tang Moon Sum & others, HCMP 531/1989, 10 December 2003, at §32.

22.The same approach was stated earlier in Fook Sun Enterprises Co Ltd v Cromwell Investment Co Ltd & Ors [1973-1976] HKC 335 at 337H-I, where Briggs CJ said:

“It was suggested that this was not a case for the court to make an order for sale under section 6 of the Ordinance: but that the proper course for the court to take was to make no order under section 2(c) of the Ordinance.

I do not agree. I agree with Mr. Litton’s interpretation of section 2(c) of the Ordinance. I think that a court would only make no order, neither an order for partition nor an order of sale, when the interests of all the parties would be better served by their continuing to remain co-owners, or where the facts show that to make such an order would result in very great hardship to one co-owner.””

43.Mr Shek referred me to Re Citro (a bankrupt)[21] which appeared to suggest that where a spouse who has a beneficial interest in a matrimonial home has become bankrupt under debts which cannot be repaid without the realisation of that interest, “the voice of the creditors will usually prevail over the voice of the other spouse”, ie the difficulties arising from evicting the other spouse from the matrimonial home generally will not prevail. But in Re Cheung Chan Hong (a bankrupt),[22] Ng J declined to follow the approach in Re Citro (a bankrupt). The learned judge held there is no requirement for exceptional circumstances in order to resist an application for sale in cases like the present one, and that although the interests of the creditors cannot be ignored, they do not necessarily or usually prevail over the interests of a co-owner.

44.Since then, Anthony Chan J in Re Liu Yi Fang (a bankrupt)[23] disagreed with Re Cheung Chan Hong (a bankrupt) and followed the approach in Re Citro (a bankrupt). Then, in Re Chen Jui Hsiang, the Bankrupt[24] Ng J maintained his views in Re Cheung Chan Hong (a bankrupt), and in Re Ng Tze Ching, bankrupt Anthony Chan J maintained his agreement with the approach in Re Citro (a bankrupt).

45.Mr Shek also referred to my decision in Re So Ming Wai[25] in which I followed Re Ng Tze Ching, bankrupt and Re Citro (a bankrupt). However, at that time my attention had not been drawn to the countervailing views of Ng J in Re Cheung Chan Hong (a bankrupt), which the learned judge still maintained in Re Chen Jui Hsiang, the Bankrupt. In my view, by now there is a clear divergence in judicial views on the subject.

46.But such difference in judicial views had not been fully argued before me (since Chow and Leung were not legally represented). In the circumstances, it is inappropriate for me to deal with such divergence in any detail. For the present purpose, I prefer to follow the approach adopted by G Lam J in Re Lau Hiu Tuen, bankrupt:[26]

“24. In the absence of argument it would not be appropriate for me to deal in any depth with this recent divergence of judicial opinion. I propose to proceed on the basis of the authorities decided under the Partition Ordinance which establish the principle that the court will make an order for sale on the application of a co-owner unless it is satisfied that all the co-owners would be better served by the refusal of the order or that making an order would result in very great hardship to one co-owner.”

47.Here, in the Chow 1^st Aff, Chow explained he self-petitioned for bankruptcy in 2005 because his business failed. During the bankruptcy period, Chow did not have a stable job and was only able to secure casual work to pay for his own personal expenses, but he was unable to shoulder the household expenses in full. Chow was grateful for Leung’s wholehearted financial and caring support for him and the family during the bankruptcy period, and said “本人因這次生意失敗，連累[Leung]在心理，生理極受困擾。故此本人希望可將[the Property]歸給[Leung]，可與妻子度過晚年”.

48.Chow said that in 2007 he was discovered to suffer from cardiac problems, and had to undergo inpatient investigation at Yan Chai Hospital on 7 June 2007. He was discharged the following day with medication, and the working diagnosis was “chronic ischaemic heart disease” and “chest pain”. In September 2008, Chow underwent coronary arteriography and dilation/stenting of single coronary vessel. Chow could not afford to pay for such operation, and the medical social worker at Yan Chai Hospital referred him to apply for financial assistance from the Samaritan Fund.

49.Chow claimed that his health deteriorated after the operation such that he could no longer work for long periods of time. In just a few years he had changed from being a businessman to a chronic patient. Further, his work as a long-time cross-border driver with demanding working hours had caused wear and tear of the articular cartilage of the knee which adversely affected his mobility. He had to take analgesics for pain relief, and to ask Leung for money to have injection at the hospital when the pain became too severe. Chow said his medical records from Yan Chai and Princess Margaret Hospitals evidenced his poor health.

50.As explained above, since 19 July 2005 Leung worked as a part-time seamstress at Famous Garments Ltd earning less than $4,000 a month, which she contributed to the family’s living expenses. On 30 November 2008, Leung was dismissed by her employer. Thereafter, she worked as a temporary packing worker. She produced salary certificates by Famous Garment Limited and related MPF and tax return documents in evidence her employment and earnings during the bankruptcy period.

51.Leung said she and Chow had been married for over 30 years, and she would support him in good times or bad. She hoped to keep the Property so she could look after Chow who suffered from various illnesses. By the end of 2007, Leung herself underwent investigation for diabetes mellitus at a government clinic, and found she suffered from such disease. Leung had to attend regular follow up at the nearby clinic and take medication for her condition. Leung claimed that if the Property were sold/auctioned, she would lose a stable home for her ailing husband and also for herself who also suffered from chronic illness. Leung further claimed she and Chow were elderly and could no longer earn their own living. The Property was important to them not because of its value but because it offered a secure residence for them in their old age.

52.At the Hearing, with admirable responsibility, Chow acknowledged that whilst he would prefer to remain at the Property, he had unpaid creditors whose interests should also be considered, and he would abide by the decision of the court. In my view, although Chow’s less than satisfactory health condition deserved sympathy, it was fortunate that his medical records did not reveal any serious and/or immediate life-threatening concerns. Likewise, although Leung had diabetes mellitus, medication and close monitoring by regular follow up appeared to keep her condition under control. Even though Chow and Leung might not find it easy to find work at their age and given their overall health status, no evidence had been placed before me as to whether they would have any financial or practical support from their children if the Property were sold. Their 2 sons 鄒志乾 and 鄒志嵐 were 17 years old in 2005, so by now they should be about 27 years old and, hopefully, independent and working. Their daughter accompanied them to attend the Hearing, and the Leung Aff referred to “家庭開支方面(包括水, 電, 煤), 由本人子女(鄒志梅)承擔”.

53.The current open market price of the Property is $4,100,000 and the HOS Secondary Market price is $2,850,000. Assuming the Property were to be sold in the HOS Secondary Market on a vacant possession basis, the Trustees estimated that the sum due to Leung would be around ($2,850,000 – remaining balance of the mortgage loan of $8,150.30) ÷ 2 = $1,420,924.85 before deducting expenses incidental to the sale and legal costs. The sum due to Chow (before deducting such expenses and costs) would be $1,420,924.85 – total amount of claims under proofs of debt filed by creditors $475,000.56 = $945,924.29 (but such sum would have to adjusted pursuant to (a) adjudication of the proofs of debt filed by the creditors, (b) deduction pursuant to further proofs of debt that might be filed (since the Statement of Affairs indicated outstanding debts to be $1,197,556.36), and (c) deduction of expenses incidental to the sale and legal costs).

54.In such circumstances, although the prospect of the sale of the Property would be unwelcome to Chow and Leung against a background of declining health and earning capacity as well as advancing age, such are the “melancholy consequences of debt and improvidence with which every civilized society has been familiar”,[27] and I am not satisfied there was such great hardship on the part of Chow and/or Leung as to justify a refusal of an order for sale. Because of the increase in the value of the Property over the last few years (as evident from the various valuation reports by the Surveyor), a sale of the Property now would yield respectable proceeds for Leung alone.  Assuming the amount of claims under the proofs of debt filed or to be filed by the creditors would not significantly increase, Chow’s debts would be paid off. Then the combined net sum due to Leung and/or net sum (if any) due to Chow would enable them to rent a modest place.

55.I also do not lose sight of the fact that the interests of the creditors of Chow cannot be ignored. They are prima facie entitled to be paid out of what can be realised from Chow’s assets. Chow owned one half of the Property and he made no contribution to his bankruptcy estate at all. Without an order for sale, his creditors would remain wholly unpaid.

56.In all the circumstances, this court is of the view that there should be an order for sale of the Property.

V.  DISPOSITION AND COSTS

57.For the above reasons, I agree with the Trustees’ application and grant the order as set out in the Schedule annexed to this Decision (“Order”). In granting the Order, I bear in mind section 84 of the BO provides as follows:

“(1) The court shall take cognizance of the conduct of trustees, who shall act in a fiduciary capacity and deal with property under their control honestly, in good faith, with proper skill and competence and in a reasonable manner, ……

(1A) Without limiting the generality of the duties imposed on a trustee by subsection (1), in realizing the assets of a bankrupt’s estate it shall be the duty of a trustee to take all reasonable care to realize the best price reasonably obtainable in the circumstances.”

I rely on the Surveyor’s latest valuation report and the valuations set out in paragraphs  21(b) and 24 above in setting the reserve price.

58.There is no reason why costs should not follow event. Opportunity was given to Leung either to agree to purchase the Trustees’ share of the Property or to co-sell the Property, but such offer was declined which necessitated the present application.

59.The Trustees had lodged their statement of costs for summary assessment.  For the purpose of the summary assessment of costs, I grant the following directions:

(a) if no application is made to vary the costs order nisi in the Order within 14 days from the date hereof, Leung do within 21 days from the date hereof lodge and serve succinct summary of objections of not more than one page in respect of the Trustees’ statement of costs;

(b) unless otherwise directed, the summary assessment of costs will be by paper disposal;

(c) if application is made to vary the costs order nisi in the Order within 14 days from the date hereof, (i) the directions in (a) above shall stand and apply, and (ii) the application for variation of the costs order nisi in the Order and (where appropriate) summary assessment of costs shall be heard before me in chambers (open to the public) on a date not before 35 days from the date hereof with half hour reserved.

60.The Trustees are reminded that the Order together with the above directions in their entirety should be drawn up in Chinese.

61.My clerk will inform Chow and Leung that if they so require, a court translator will be arranged to verbally translate this Decision into the punti language for them at the High Court Building at a mutually convenient date and time.

Mr Jeremy Shek, of Gallant Y T Ho & Co, for the joint and several trustees of the property of the bankrupt (applicants)

The bankrupt (Chow Chung Kwan) appeared in person

The respondent (Leung Lai Ping) appeared in person

The respondent (Leung Lai Ping) appeared in person

Schedule

(1) 宣告申請人為第一方及梁麗萍(“答辯人”)為另一方， 以分權共有的形式持有新界青衣楓樹窩路10號青衣邨3座(宜偉樓)23樓15室(Flat No 15 on 23rd Floor of Block 3 (Yee Wai House), Tsing Yi Estate， No 10 Fung Shue Wo Road, Tsing Yi， New Territories)(“該物業”)的相等份額；

(2) 答辯人須於此命令日期起98天內交付該物業的空置管有權及所有有關該物業的業權契據文件(title deeds) 予申請人；

(3) 該物業需根據分劃條例(第352章)第6條及高等法院規則(第4A章)第31號命令被出售；

(4) 命令由申請人及/或其代表律師處理該物業的出售， 並經香港地產代理監管局認可的持牌地產代理以私人協議方式售賣該物業；

(5) 該物業以私人協議方式售賣， 在公開市場的最低售價為港幣4,100,000 元， 在租者置其屋二手市場的最低售價為港幣2,850,000元。

(6) 答辯人必須加入與申請人合作及作出任何可能需要作出的行動以使得該物業在空罝情況下的售賣；

(7) 如前述段落(6)不被遵從，高等法院司法常務官或其所委任的人有權力簽署及簽立任何因該物業售賣而所需的文件；

(8) 出售該物業後所得售後款項(sale proceeds)按以下方式及優先次序處理：

(a) 支付因出售該物業所招致及與出售該物業有關的費用及開支;

(b) 支付所有需要的開支以解除破產令日期2005年6月7 日之前針對該物業所涉及的所有產權負擔(incumbrances);

(c) 繳付補價及費用予香港房屋委員會(如適用)，支付所有地產代理的費用/佣金，支付稅金，支付該物業所積欠的及/或影響該物業的差餉、管理費及地租及其它雜項收費及費用(如有)、支付所有因該物業售賣而擬備及簽立的交件所衍生的法律收費及費用;

(d) 在扣除前述段落8(a) 的所有費用後， 該物業售賣的淨餘款(net sale proceeds)由申請人與答辯人平均攤分， 其中50%的售賣淨餘款支付予申請人， 剩餘的另外50%的售賣淨餘款在扣除申請人在本申請人中所得的被評定的訟費後，支付予答辯人；

(9) 暫准命令答辯人需支付申請人在本申請中的訟費（包括所有保留待決的訟費）；

(10)答辯人需就其由該物業而產生並收到的租金及利潤（如有的話）提供帳目或查訊； 及

(11)任何一方均可提出申請。