Case Document

100%Judiciary

HCB 3142/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3142 OF 2007

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	IN THE MATTER OF the property known as Flat 10, 28/F, Block D, Yan Shing Court, No.15 Wah Ming Road, Fanling, New Territories
	AND IN THE MATTER OF Section 60 of the Bankruptcy Ordinance (Cap 6)
	AND IN THE MATTER OF an application for an order for sale under Section 6 of the Partition Ordinance (Cap 352)
	AND IN THE MATTER OF Order 31 of the Rules of the High Court (Cap 4A)

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Re : NG SHING, the Bankrupt

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Before: Hon Ng J in Chambers

Date of Hearing : 19 October 2016

Date of Judgment : 12 May 2017

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J U D G M E N T

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Introduction

1.There is before this court an application by the Trustees of the property of Mr Ng Shing (“Mr Ng”) for an order for sale under s 60 of the Bankruptcy Ordinance, Cap 6 (“BO”) and s 6 of the Partition Ordinance, Cap 352 (“PO”), in respect of the property known as Flat 10, 28/F, Block D, Yan Shing Court, No 15 Wah Ming Road, Fanling, New Territories (“Property”), together with consequential orders.

2.The Property is in a Home Ownership Scheme Development. On 12 October 1993, it was assigned into the joint names of Mr Ng and his wife Madam Chan Sin Ping (“Respondent”), at the consideration of HK$524,200. The saleable floor area of the Property is about 401 sq ft. In her affirmation dated 11 August 2015, the Respondent said Mr Ng, her and a grandchild resided in the Property. At the hearing, she said only Mr Ng and her resided in it.

3.The application is opposed by the Respondent in the sense that she hopes the Property will not be sold. Her affirmation in opposition consists of only 1 page, plus another page of exhibit setting out Mr Ng’s wages in June 2015. According to the exhibit, Mr Ng worked as a temporary repairs worker in an engineering company earning HK$7,000 a month.

Background

4.On 4 April 2007, Mr Ng filed a petition for his own bankruptcy. On 5 June 2007, he was adjudicated bankrupt. In his statement of affairs, Mr Ng admitted he owed 11 unsecured creditors approximately HK$1.07 million. The debts were almost all credit card debts. The Trustees said the total of adjudicated claims amount to HK$1,077,898.01. Thus far, Mr Ng has made no contribution to his bankruptcy estate account.

5.According to an updated valuation report dated 7 September 2016 prepared by Allied Surveyors Limited, the value of the Property is as follows:

(1) Current Open Market Value (on a vacant possession basis)[1] HK$3,300,000

(2) Current Secondary Market Value (on a vacant possession basis)[2] HK$2,150,000

6.The Respondent is 60 years old and is unemployed. The household expenses have been and are paid for by Mr Ng. She said her 3 grown‑up daughters took her out for dim sum lunch from time to time but did not give her any money.

7.Mr Ng is 65 years old. He told this court he worked on construction sites doing odd jobs and earned HK$400–500 per day and between 15 and 20 days a month ie HK$7,500 to HK$10,000 per month.

Deliberation

8.When a property is conveyed to two persons as joint tenants without any declaration of trust, the prima facie case is that their legal and beneficial interests in the property are joint and equal, unless and until the contrary is proved — the onus of proof lies upon the party seeking to establish that equity should not follow the law and that both of them had a common intention that their beneficial interests be different from their legal interests and in what way: Stack v Dowden [2007] 2 AC 432.

9.In the present case, there is no dispute as to the beneficial interest of Mr Ng in the Property. The only question for this court is whether it can and should make an order for sale of the Property.

10.Upon the making of a bankruptcy order and the appointment of a trustee in bankruptcy, a bankrupt’s interest in his property is vested in the trustee by operation of law: s 58(2) of BO.

11.Further, upon the making of a bankruptcy order, any property of the bankrupt held in joint tenancy is severed automatically and the severance creates a tenancy‑in‑common as between the trustee on the one hand and the other co‑owner on the other: Re Dennis [1993] Ch 72, 74, per Sir Donald Nicholls VC (as he then was).

12.S 2 of PO provides:

“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 s 4 for a partition of the property;

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

(c)  refuse to make any order.”

13.S 6 of PO provides:

“(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 presumptively interested;

(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.”

14.In Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 at [16]–[19], Recorder Joseph Fok SC (as he then was) held that in proceedings under the PO, where 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, that such an order will not be beneficial to all the co‑owners or that it will result in very great hardship to one co‑owner. Hardship, for the present purpose, includes pecuniary as well as practical detriment. Whether an order for sale is or is not beneficial to all the co‑owners is to be determined by the court objectively, balancing the interest of the one against the other: Wong Chun Kei v Poon Vai Ching at [106]–[108]; Re Cheung Chan Hong [2015] 2 HKLRD 1 at [13].

15.The Trustees urge this court to adopt the guideline by Nourse LJ in Re Citro (A Bankrupt) [1991] Ch 142, 157, that, save in exceptional circumstances, the voice of the creditors will usually prevail over the voice of the other co‑owner (usually the spouse) and a sale of the property will be ordered within a short period of time. The Re Citro guideline was followed in Hong Kong in inter alia Re Ng Tze Ching,unrep, HCB 5883/2006, 29 August 2014 and Re Liu Yi Fang [2015] 3 HKLRD 668.

16.In Re Cheung Chan Hong at [20]–[35], this court explained why the Re Citro approach is inappropriate in the legal and social context of Hong Kong and that the authorities decided under the PO do not compel this court to follow the Re Citro guideline. In Re Liu Yi Fang, A Chan J, disagreed with Re Cheung Chan Hong for reasons stated in the judgment.

17.Subsequently, in Re Lau Hiu Tuen, unrep, HCB 8430/2006, G Lam J, 20 August 2015, at [23], the learned Judge summarised the divergence in judicial opinion on this issue:

“23. On behalf of the trustees, Mr Justen Li, who gave much assistance to the court, referred to certain passages in the English authorities of Re Citro (A Bankrupt) [1991] Ch 142 and Re Bremner [1999] BPIR 185 which might be read as suggesting that the difficulties arising from the eviction of the bankrupt’s family from their home are ordinarily not to be regarded as sufficient reason to prevail over the creditors’ interests in seeing the family home sold and the proceeds of sale distributed. In Re Cheung Chan Hong (a bankrupt) [2015] 2 HKLRD 1, however, Ng J declined to adopt the approach in Re Citro and held that there is no requirement for exceptional circumstances in order to resist an application for sale in the kind of cases under discussion. Since then, in Re Liu Yi Fang, HCB 5613/2013, 30 June 2015, Anthony Chan J has, disagreeing with Re Cheung Chan Hong, held that Re Citro should be adopted as laying down the proper approach in Hong Kong to an application by a trustee in bankruptcy for an order for sale of a co‑owned property.”

18.At [24], the learned Judge further opined:

“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.” (emphasis added)

19.In the present case, in the absence of arguments from both sides, this court does not propose to resolve the recent divergence of judicial opinion on the issue. Suffice it to say that whether one takes the stricter approach of Re Liu Yi Fang or the more benevolent approach of Re Cheung Chan Hong,after giving due weight to the Respondent’s personal and family circumstances, this court is of the view that an order for sale should be made. The reasons are these.

20.On the Trustees’ calculation, the total of Mr Ng’s indebtedness together with the costs and expenses of his bankruptcy is as follows:

(1) Unsecured debts proved: HK$1,077,898

(2) Interest[3]: HK$1,228,885 (estimated)

(3) Costs and expenses of Mr Ng’s bankruptcy: HK$282,677 (estimated)

21.Having said that, the Trustees only propose to distribute to the unsecured creditors, after the sale, an estimated sum of HK$774,863 (approximately 72% of the unsecured debts) and make no provision for payment of interest to them.

22.If an order for sale is granted and the Property is sold in the HOS secondary market, the estimated gross sale proceeds will be around HK$2.15 million. After deducting estate agents’ fees/commission and conveyancing costs, the estimated net sale proceeds will be around HK$2,112,500.

Sale Price of the Property (if the HOS secondary market value on 7 September 2016 is adopted): HK$2,150,000.00 (estimated)

Less:

(i) Estate agents’ fees/commission HK$21,500.00 (estimated)

(ii) Conveyancing costs and disbursements HK$16,000.00 (estimated)

Net sale proceeds: HK$2,112,500.00 (estimated)

Half of the net sale proceeds (ie HK$2,112,500.00 ÷ 2) HK$1,056,250.00 (estimated)

23.Half of the net sale proceeds will be payable to Respondent while the other half will be payable to the bankruptcy estate. The net amount available to the bankruptcy estate can only cover the bankruptcy expenses in full and part of the unsecured debts.

24.The Trustees submit that this creates a win‑win situation for the unsecured creditors, whose debts will, almost 10 years after Mr Ng’s bankruptcy, be partially repaid, and the Respondent herself who stands to receive a relatively large sum of cash.

25.As stated above, Mr Ng is 65 years old. According to his testimony, he earned somewhere between HK$7,500 and HK$10,000 a month which of course can hardly be regarded as high‑paid. But given the constant complaints of employers in the construction industry of shortage of labour, it seems Mr Ng should have no difficulty finding work for more than 15 to 20 days a month, if he is prepared to work. His wife is 60 years old and is not working. Again, given the shortage of labour in the service and/or food and beverage industry, she should have no difficulty finding work. Even if the Respondent earns only minimum wage, her monthly income can reach HK$10,000. Provided both Mr Ng and her have the willingness to work, the combined household income can reach HK$20,000 at least.

26.Once the Property is sold in the secondary market on a vacant possession basis, the amount payable to the Respondent will be in excess of HK$1 million. This amount may or may not be sufficient to make the down payment for the purchase of alternative accommodation, and even if it is sufficient, the alternative accommodation will probably be smaller than their present residence. This outcome is far from ideal from the Respondent’s point of view. But this court must bear in mind that Mr Ng has credit card debts which remain wholly unpaid for almost 10 years. This court must also bear in mind that Mr Ng has made zero contribution to his bankruptcy estate account and he has been automatically discharged from his bankruptcy. Without the sale of the Property, the Trustees will have no funds to make any distribution to the creditors or cover the costs and expenses of his bankruptcy.

27.In these circumstances, while this court has great sympathy for the Respondent in that her situation is not of her own making, it cannot be described as exceptional. Further, looking at the facts objectively, balancing the interest of the creditors against the Respondent, this court considers it should accede to the Trustees’ application.

Disposition and costs order nisi

28.This court hereby grants an Order in terms of paragraphs 1 to 8 and 11 of the draft order submitted by the Trustees, save that

(1)  under paragraph 2, the words “28 days” be replaced by “90 days”;

(2)  under paragraph 5, the reserve price for sale of the Property in the open market and HOS Secondary Market be set at HK$3.3 million and HK$2.15 million;

(3)  paragraph 8(b) of the draft order be deleted and replaced by the following:

“after deduction of the sums mentioned in paragraph 8(a) above, if any, from the sale proceeds, the net sale proceeds of the Property be divided equally between the Applicants and the Respondent. The Applicants shall pay the Respondent’s half share to her as soon as practicable after the sale, and the remaining balance shall form part of the bankruptcy estate.”

29.There shall be an order nisi that each party shall bear its own costs of and occasioned by this application. The Trustees’ costs of this application shall be paid out of the bankruptcy estate, summarily assessed at HK$120,000.