Chu Wai Tung v. Wong Ka Sek and Another

HCB 4839/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4839 OF 2016

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Re: CHU WAI TUNG, a bankrupt

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D E C I S I O N

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Introduction

1.On 7 July 2016, Chu Wai Tung (“Bankrupt”) applied for his own bankruptcy on the basis that he was unable to pay his debts. On the same day, he filed his Statement of Affairs (Debtor’s Petition) (“SoA”). The Bankrupt was then legally represented.

2.The SoA contained the following information:

(a)  List A: $4,125,038.84 was owed to the secured creditor Bank of China (Hong Kong) Limited for a home loan in respect of Flat C, 1^st Floor, CNT Bisney, No 28 Bisney Road, Hong Kong (“Property”) in the joint names of the Bankrupt and his wife Wong Ha Wai Savoy (“Wife”) (then current value $7,200,000);

(b)  List B: $4,766,276.00 was owed to unsecured creditors being 5 banks and Wong Siu Lun; and

(c)  List C1: the Bankrupt’s assets included (i) bank balance of $17,661.94 and (ii) ½ share of the Property valued at $3,600,000.

3.According to land search records, the Bankrupt and the Wife (“Couple”) were joint owners of the Property, having purchased the same by assignment and mortgage dated 30 April 2010 and registered in the Land Registry on 24 May 2010.

4.On 16 August 2016, a bankruptcy order was made against the Bankrupt, and the Official Receiver (“OR”) thereby became the provisional trustee of the estate of the Bankrupt (“Estate”) (“Bankruptcy Order”).

5.The Bankrupt claimed the Wife was also made bankrupt on the same day in HCB4840/2016. On 11 October 2016, the Couple sought determination of a Living Trust Agreement in respect of the Property (a copy of which had been given to the OR) and exclusion of the Property from the Estate.

6.At the adjourned general meeting of creditors held on 26 October 2016, it was resolved unanimously that (a) Wong Ka Sek and Wong Ka Lam King (“Wong”) be appointed as joint and several trustees of the property of the Bankrupt (“TiB”) with immediate effect, (b) the creditors declared that any act to be done by the TiB was to be done by Wong Ka Sek and Wong jointly or any one of them singly, (c) there should be a creditors’ committee in the bankruptcy comprising 2 banks, and (d) the remuneration of the joint and several TiB be fixed by the creditors’ committee. On 25 November 2016, the OR filed the Memorandum to Court of Resolutions passed at the Adjourned General Meeting of Creditors.

7.Since 26 October 2016, the administration of the Estate had been conducted by the TiB.

8.The Bankrupt complained he had time and again tried to liaise with the TiB about the living trust over the Property, but they were unable to communicate directly with the TiB.

9.On 3 January 2017, the Bankrupt attended the TiB’s offices for an interview. According to the Bankrupt, the relevant officer Joe Chan (“Chan”) told him he would be considered as unemployed if he did not have permanent employment, but “[if] there was potential part time work compensation from hire” he should state his income and expense in the annual report. According to the TiB, the Bankrupt said he was unemployed, so he had not made any contribution to the Estate.

10.The Bankrupt claimed that at the meeting he asked Chan for an update by the TiB as regards the living trust in respect of the Property, but Chan indicated the TiB would like to see their supporting documents, and urged them to seek legal advice. The Bankrupt further claimed this was the first response they received on the living trust matter, but since it was given verbally by Chan it was unclear which aspect of the living trust matter was in question and what kind of supporting documents was required.

11.On 4 January 2017, the Couple wrote to request a meeting with the TiB to clarify and discuss the living trust matter and to identify the additional support that was required. The Bankrupt claimed there was no reply to their request.

12.On 4 January 2017, the Couple wrote to the officer who managed the Estate Wilson Lee (“Lee”) for 90-days’ extension to handle the matter of the living trust, and they would seek further evaluation and possibly provide additional documentary support.

13.On 2 February 2017, the TiB in HCB4840/2016 wrote to inform the OR about the meeting on 3 January 2017, and also their view that after considering the documents supplied by the Couple the alleged family trust was not effective or did not exist at all. The TiB added that the Couple told the TiB they would produce further documents for the TiB’s consideration.

14.On 8 February 2017, the Couple provided the TiB with a written opinion dated 8 February 2017 by Mr Patrick Hamlin of Withers (a legal expert specialising in trust law in an international law firm who had practiced in England and in Hong Kong for many years) that concluded the Property (less the amount secured in favour of the mortgagee) was not available to the Couple’s creditors (“Withers Letter”).

15.On 16 February 2017, the TiB replied by letter that they would maintain their view of not accepting the Living Trust Agreement. The Bankrupt complained that no reasons were given.

16.On 9 March 2017, the Bankrupt filed Notice to Act in Person. On the same day, the Bankrupt filed a summons against the TiB for (a) “a court determination to validate a Living Trust Arrangement, the effectiveness, the existence, and enforceable by law”, and (b) “a court order to reverse a decision by the TiB from holding the Living Trust Asset in HCB4839/2016 (Bankrupt) and HCB4840/2016 (Wong Ha Wai Savoy)” (“Summons”). Since the Summons was issued in HCB4839/2016, this court was not concerned with any request for reversal of decision by the TiB in HCA4840/2016.

17.In short, the Summons sought to reverse the TiB’s decision that the “family trust” in respect of the Property was not effective or did not exist at all, and to declare that there was a “family trust” by a Living Trust Agreement that vested the beneficial interest of the Property in the Couple’s son Chu Zen Wai Clarence (“Son”) with the result that the Property did not form part of the Estate.

18.On 9 March 2017, the Bankrupt filed his own affirmation exhibiting a “Summary of fact” and various documents (exhibits 1-9 with “Detailed statement”) in support of the Summons. On 15 March and 2 June 2017, the Bankrupt filed 2 witness statements. On 2 June 2017, the Bankrupt filed further affirmation in support of the Summons.

19.On 31 March 2017, the TiB’s solicitors filed Notice to Act. On the same day, the TiB informed the OR about the Summons.

20.At the hearing before Ng J on 11 April 2017, the OR noted the Bankrupt did not state the provision of the Bankruptcy Ordinance Cap 6 (“BO”) pursuant to which the Summons was filed, and brought to the attention of the learned judge possible query over the Bankrupt’s locus if application was made pursuant to section 83 of the BO. So at the hearing on 11 April 2017, Ng J granted leave for the TiB and Bankrupt to respectively file/serve affirmation in opposition or in reply, and directed the OR to file a report on the Bankrupt’s locus 7 days prior to the adjourned hearing for argument (“Ng Order”).

21.The Bankrupt had since confirmed the Summons was based on both sections 43D and 83 of the BO as supported by articles 11(a)-(b) of the Recognition of Trusts Ordinance Cap 76 (“RTO”) and the definition of the bankrupt’s estate in section 43(3) of the BO.

22.On 9 May 2017, the TiB filed Wong’s affirmation in opposition (“Wong Aff”).

23.On 8 August 2017, the OR filed the report on the Bankrupt’s locus pursuant to the Ng Order (“OR Report”).

24.The substantive hearing for argument in respect of the Summons came before me on 16 August 2017 (“Hearing”).

Affirmation/witness evidence: Estate

25.TiB’s case  The TiB conducted 2 bank on-line valuations, and both valuations showed the estimated value of the Property was $7,740,000 as at 6 May 2017. According to the Repayment Schedule of the mortgagee bank dated 30 July 2016, the outstanding balance of the mortgage in respect of the Property was $4,099,169.94 as at 30 August 2016, so the estimated net realisable value of the Estate was ($7,740,000 – $4,099,169.94) ÷ 2 = $1,820,415.03.

26.Up to the date of the Wong Aff, (a) the TiB received 5 proofs of debt from 5 unsecured creditors (ie 4 banks and Wong Siu Lun) in the total sum of $4,453,939.49, (b) no dividends had been distributed to unsecured creditors, and (c) no assets had been realised by the TiB. The OR’s office had not remitted to the TiB any balance of deposit, so the balance in the Estate was HK$0. The TiB estimated the outstanding fees and expenses of the bankruptcy would be $1,887,498.52, which together with liabilities of the Estate in the sum of $6,272,334.48 would result in outstanding contribution of $8,159,833.

27.Bankrupt’s case  The Bankrupt claimed the Couple were in stable financial positions prior to their bankruptcies. Due to unforeseen circumstances in which they suddenly lost their jobs, the Couple explored options with their creditors which were unsuccessful. After seeking legal advice, they decided the best option would be to petition for their own bankruptcies as they knew there would not be any available short‑term solution.

28.Wong Siu Lun filed proof of debt in the sum of $60,000, but the Bankrupt complained such proof of debt had inflated the original debt of $20,000 by 300%. The Bankrupt claimed (a) he had seen an email from Wong Siu Lun’s representative K C Wong confirming that “on Feb 8^th, 2017, Mr Wong Siu Lun had issued a cashier order by Hang Seng Bank Ltd in the amount of $29,950 [“Cashier Order”] payable to [the Estate] as payment for service provided to Wong”, and (b) on 8 February 2017 Wong Siu Lun requested to be removed from the list of creditors. The Bankrupt further claimed that on 10 May 2017 Chan confirmed to him by telephone the TiB’s office had received the Cashier Order payable to the Estate since February 2017. On 13 May 2017, K C Wong emailed the Bankrupt to say the Cashier Order had been made payable to the Estate since 8 February 2017, and to promise to write to and follow up with the TiB.

29.The Bankrupt said he had liaised with Wong Siu Lun about the inflation of the original debt, and Wong Siu Lun had since confirmed the debt had been settled and he had requested to be removed from the creditors list. Further, on 15 May 2017 the Bankrupt received a copy letter from Wong Siu Lun to Lee following up on Wong Siu Lun’s request to be removed from creditor list “on condition that the rental deposits are used to set off the two months of monthly rentals, as proposed earlier in our letter dated 8 February 2017 to you”.

30.The Bankrupt complained the Cashier Order in the sum of $29,950 and his bank balance of $17,661.94 had not been taken into account when the TiB claimed the balance in the Estate account was $0. The Bankrupt was concerned that such accounting errors would affect his future fund contribution to the Estate account.

Affirmation/witness evidence: Living Trust Agreement

31.Bankrupt’s case  The Bankrupt claimed that in 2009 the Couple felt that property values in Hong Kong would open an opportunity for them to purchase a residential home. When they researched and calculated whether they could afford such purchase, they already intended to create a living trust. On 28 February 2010, the Couple intended and agreed to create a living trust by purchasing and settling into such living trust a property known as 28 Bisney Road, 3D, Pokfulam, Hong Kong, but the vendor cancelled the sale and purchase transaction.

32.On 9 March 2010, the Couple agreed to purchase another property being the Property and to settle such Property into a living trust. The Bankrupt claimed the preliminary term for such living trust was that the Son would be the beneficiary, and the Couple spoke briefly on how they viewed the function of the living trust. According to land search records, the Couple purchased the Property as joint owners on 30 April 2010.

33.In May 2010, the Bankrupt (with the “direction” of a colleague who was counsel at one of the Couple’s work offices in the United States) prepared/modified a few draft versions of a home-made living trust agreement. On 9 June 2010, the Bankrupt printed/signed the Living Trust Agreement which he showed to the Wife, and they reviewed and further discussed its terms. On 29 June 2010, the Wife signed the Living Trust Agreement as Grantor, which meant the Couple both “had signed and accepted as Trustee of the Living Trust to manage the Trust Asset”. On the same day, the Couple asked the Son to write his name on blank paper, but they agreed that at that time the Son’s name was not “repeatable, and [they] have decided to file the agreement in the meantime”.

34.At the Hearing, the Bankrupt informed this court the Son was born in December 2001, so he was about 8½ years old when the Couple signed the Living Trust Agreement. It was unsurprising that the Son could not make any “repeatable” signature at that time.

35.The Bankrupt claimed that by the Living Trust Agreement he as grantor appointed the Wife as trustee, and the Wife as grantor appointed him as trustee, they as grantors “also appointed [the Son] as a member of the Trustee”, and the Son was the sole beneficiary. The Bankrupt said it was the Couple’s goal to preserve a home for the Son given the difficulty of home ownership in Hong Kong.

36.In early 2016, the Bankrupt had some discomfort with the Living Trust Agreement that the Couple executed in 2010. He felt it should be properly notarised, and they also made the following confirmations before the notary public:

(a)  the Living Trust Agreement dated 9 June 2010 was the original/true copy of such agreement;

(b)  the Couple signed the Living Trust Agreement “as grantor dated June 29^th, 2010”;

(c)  the Couple had signed the Living Trust Agreement “as grantor and fulfilled with [the Son] as trustee on the 2^nd day of April, 2016”; and

(d)  in 2010 the Son “did not have a signature to fulfil the signature requirement”, but in 2016 the Son was “capable to sign with a recognizable signature to complete the agreement”.

The Son (who was then almost 14½ years old) signed the Living Trust Agreement in 2016. As at the time of the Hearing, the Son was still a minor.

37.The Bankrupt claimed the Living Trust Agreement was binding and effective, and the TiB was clearly wrong. He said whilst it was perfectly usual for the grantor/settlor to be the beneficiary of a trust, under the Living Trust Agreement the Son (not the Couple) was the beneficiary who had “a reversionary interest”, so there was genuine third party interest.

38.The Couple felt they were discriminated because of their bankruptcies. People they spoke to discounted the function and enforceability of the Living Trust Agreement under Hong Kong law mainly or only because they are now bankrupts. The Couple had been anxious over the living trust matter, and the Bankrupt’s work opportunities had been postponed due to such uncertainty. The Couple’s living style had changed due to their bankruptcies, and their Son was affected too (but had been doing well in a new school). Some repayment plans had been developed and were pending further execution upon resolution of the living trust matter.

39.TiB’s case  The TiB claimed that by operation of law the joint tenancy of the Property was severed into tenants-in-common upon grant of the Bankruptcy Order. Wong claimed that pursuant to section 58 of the BO, the interest of the Bankrupt of and in the Property was vested in the TiB, and the Property appeared to be the only valuable asset that could be realised in order to make meaningful distribution of dividends to the creditors. The TiB was of the view that as a matter of law the Summons was devoid of merits.

Locus standi

40.The Bankrupt relied on both sections 83 and 43D of the BO.

41.Section 83  Section 83 of the BO provides as follows:

“If the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order in the premises as it thinks just.”

42.However, a bankrupt cannot be regarded as person “aggrieved by” any act or decision of the trustee unless he can show he would be entitled to a surplus if not for the trustee’s act or decision (see Butterworths Hong Kong Bankruptcy Law Handbook 5^th ed para [83.02] at p338).

43.In Re a Debtor, ex p the Debtor v Dodwell [1949] Ch 236, the bankrupt owned a large number of small houses which were mostly on short-term leases and mortgaged. It was impossible to realise the properties at a reasonable figure at the time of the bankruptcy, and the trustee carried on management of the properties as a business for a number of years. When the trustee accumulated a balance of £10,000, he proposed to sell the unmortgaged properties in order to repay the creditors in full. The bankrupt who had since been discharged complained against the trustee’s administration under section 80 of the Bankruptcy Act 1914 (substantially equivalent to section 83 of the BO). On the question of whether the debtor could call upon the trustee to account for his management and disposition of the estate, Harman J said as follows at pp 240-241:

“…… The point, of course, can only arise where the bankrupt can show that there is, or will, or might (but for the trustee’s action or inaction), be a surplus in the trustee’s hands after satisfying in full all the claims of the creditors. Where, as in the vast majority of cases, the estate is insolvent, the bankrupt has clearly no interest in it, and it matters not to him how it is administered, but the bankrupt has a statutory right to any surplus ……, and is, therefore clearly concerned to increase, if he can, its amount.

…… in other words, [the trustee] is not accountable to the bankrupt except for the surplus. It is the right and duty of the trustee to realize that which vests in him to the best advantage, and it is for him alone to decide (under sub-s. 6) with the consent of the committee of inspection how best the realization may be made. With all this notwithstanding his interest in the surplus (if any) the bankrupt is not concerned and has no right to interfere. ……”

44.On the affirmation evidence before this court, it did not appear the Bankrupt would be entitled to any surplus. According to the Wong Aff, the estimated value of the Bankrupt’s realisable assets would be $1,838,076.97 being (a) bank balance of $17,661.94 and realisable value of the Bankrupt’s share in the Property (if it were to be taken as part of the Estate) ($1,820,415.03) (see paragraphs 2(c)(i) and 25 above). However, the proving creditors claimed a total sum of $4,453,939.49. Even if (i) Wong Siu Lun’s proof of debt of $60,000 was to be entirely ignored and (ii) the Cashier Order in the sum of $29,950 was to be added to the Estate account, the Estate remained hopelessly insolvent.

45.But if the Bankrupt made the application not as the bankrupt but, say, as trustee of the alleged family living trust in respect of the Property, he still had to satisfy the court he was a person who had interest in the bankruptcy and was thereby aggrieved by any act or decision of the TiB in order to make an application under section 83 of the BO. On the Bankrupt’s case, none had been shown. Thus, the Bankrupt had no locus to apply for the reliefs in the Summons under section 83 of the BO.

46.Section 43D  Section 43D of the BO provides that:

“(1) Notwithstanding sections 43 to 43B –

(a) the bankrupt; or

(b) one of the creditors,

may apply to the trustee for the inclusion in or exclusion from the estate of a particular item and the trustee may grant the application or refuse it.

(2) Where the bankrupt or any of the creditors objects to the trustee’s decision under subsection (1), he may apply to the court and the court may affirm the trustee’s decision or reverse it or attach conditions to the original decision.”

47.Butterworths Hong Kong Bankruptcy Law Handbook 5^th ed para [43D.02] at p 242 explained this provision as follows:

“This section is based on the recommendation of the Report on Bankruptcy (May 1995) of the Law Reform Commission of Hong Kong, at p 132. The Law Reform Commission of Hong Kong expressed the view that a bankrupt or the creditors should be allowed to apply to the trustee or the court if they want any specific items of domestic property to be included or excluded from forming part of the bankrupt’s estate. It is submitted that if a bankrupt or the creditors want any item to be excluded from the bankrupt’s estate, they should bear the burden to establish that the items are necessary for domestic needs of the bankrupt.”

48.Mr Chan, counsel for the TiB, in his written submissions argued that section 43D of the BO was designed for domestic use and not for exclusion of a property from the Estate due to third party interest. He referred to Re Kwok Hiu Chun Damien CACV59/2017 (unreported, 8 August 2017), but I am unable to see how that case would assist as there was no discussion by the Court of Appeal in that case on the parameters/scope of section 43D of the BO.

49.As Barma J explained in Re Tam Mei Kam (bankrupt) [2012] 4 HKLRD 345, 355, “[section] 43D allows a bankrupt or a creditor to apply to the trustee for particular items of property to be included in, or excluded from, the estate”. As the OR explained in the OR Report, I am unable to see how section 43D of the BO concerned the locus of the Bankrupt. In my view, it rather went to the appropriateness of the Summons. At the Hearing, Mr Chan conceded the Bankrupt had locus to issue the Summons, but reserved his submissions in opposition on the substantive merits.

50.For all the above reasons, I consider the Bankrupt had locus standi to make the application in the Summons. But it would be incumbent upon him to establish the merits of the application.

Living Trust Agreement

51.Withers Letter  The Bankrupt relied on the arguments set out in the Withers Letter:

(a)  The Living Trust Agreement was based on a United States precedent and not professionally drafted. It was expressly provided to be subject to Hong Kong law.

(b)  Mr Hamlin opined that the Living Trust Agreement had all the characteristics of a valid trust under Hong Kong law, and in particular it complied with Article 2 of the Hague Convention on the Law Applicable to Trusts and on their Recognition (“Convention”) (incorporated into Hong Kong law pursuant to the provisions of the RTO) which provides that a trust has the following characteristics:

(i)   the assets constitute a separate fund and are not part of the trustee’s own estate;

(ii)  title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee; and

(iii)the trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law.

The assets of the trust, which were clearly described in the preamble to the Living Trust Agreement, were held by the Couple as trustees and the Couple were clearly bound to deal with them in accordance with the provisions of the trust.

(c)  Hong Kong law required a trust to be certain as to intention, the identity of the trust property and the objects of the trust (ie the beneficiaries). The Living Trust Agreement satisfied all these requirements. The intention to create the trust is unambiguously spelt out in clause 1; the identity of the trust property was contained in clause 2; and the beneficiaries were referred to in the preamble.

(d)  5 years had expired prior to the presentation of the Couple’s petitions for self-bankruptcies, and the relevant time under section 41 of the BO cannot exceed 5 years from the presentation of the petitions.

52.RTO  I am unable to see the relevance of the RTO and articles 2 and 11(a)-(b) of the Convention. The Convention is an international convention that deals with (a) choice of law[1] and (b) recognition of foreign trusts,[2] and for such purpose it defines “trust” in relation to which the Convention applies. The Convention and its implementing legislation (RTO) deal with international conflict of laws concerning trusts.

53.However, the Living Trust Agreement in this case was a domestic creature: (a) the named grantors and trustees were Hong Kong residents, (b) the named beneficiary was a Hong Kong resident, (c) the settled property was a Hong Kong property, (d) the Living Trust Agreement was executed in Hong Kong, and (e) clause 10 of the Living Trust Agreement expressly provided that Hong Kong law was the governing law. Since the “family trust” created by the Living Trust Agreement was domestic in nature, its validity and legal effect was to be construed according to Hong Kong domestic law without need to resort to Convention provisions.

54.Section 43(3) of the BO  The Bankrupt also relied on section 43(3) of the BO which provides that a bankrupt’s estate “does not apply to property held by the bankrupt on trust for any other person” (my emphasis). But even if the bankrupt is a trustee holding trust property, such provision still begs the question whether the bankrupt as trustee holds such trust property “for any other person”.

55.Interpretation of the Living Trust Agreement Although the Living Trust Agreement named the Couple as “Grantor” and “Trustee” and the Son as “Beneficiary”, it was plain it did not create any present trust in favour of the Son. The following were some relevant provisions of the Living Trust Agreement:

“PURPOSE. The purpose of this Agreement is to establish a Trust to receive and manage assets for the benefit of Grantor during Grantor’s lifetime, and to further manage and distribute the assets of Trust upon the death of Grantor.” (Clause 1)

“MANAGEMENT OF TRUST ASSETS. Trustee shall manage and distribute Trust assets for the benefit of Grantor and Grantor’s successor(s) in interest in accordance with the terms of this Agreement.” (Clause 3)

“PAYMENTS DURING GRANTOR’S LIFETIME. During Grantor’s lifetime, Trustee shall pay all of the net income of this Trust, and also such sums from principal as Grantor may request at any time in writing, to or for the benefit of Grantor, or as Grantor may designate. Such payment shall be made at Any-time. ……” (Clause 4)

“DEATH OF GRANTOR. Upon the death of Grantor, and after the payment of Grantor’s just debts, funeral expenses, and expenses of last illness, the following distributions shall be made:

A. Specific Distributions. The following specific distributions shall be made from the assets of the Trust. However, such distributions (other than distributions, if any, to Grantor’s spouse) shall be made only if the Grantor’s spouse does not survive Grantor. Assets shall be distributed to Chu Zen Wai Clarence, son of Grantor. If this beneficiary does not survive Grantor and Grantor’s spouse, this bequest shall be distributed with the residuary assets of this Trust.

……” (Clause 5)

(my emphasis)

56.It was plain from the above express provisions that during the lifetime of the Couple who were both the Grantors and Trustees of the living trust, they were the ones who would enjoy the trust assets (in particular the Property), and the beneficial interest in the Property had not been vested in the Son despite being named as the Beneficiary. Indeed, even on the express terms of the Living Trust Agreement, the Son would only be entitled to distribution after the death of the Grantor, and prior to that the Grantor could at any time request payment from the living trust from income/principal. Quite simply, the legal title remained with the Couple (and they are still the registered owners of the Property), and under the Living Trust Agreement they were the only persons to benefit during their lifetimes, and they were empowered to make directions for such purpose. In such circumstances, the Property being the trust asset would not be distributed and hence would not vest in any third party (ie the Son) until both the Bankrupt and the Wife had passed away.

57.As the Bankrupt submitted at the Hearing, the Living Trust Agreement was a convenience for the Couple as Grantor so that the procedure for distribution of the Property to the Son upon their death would be simplified, and the Couple’s intention was to protect the Son’s interest in the Property (ie the surplus of mortgagee sale proceeds after repayment of the mortgage loan) when they passed away. This showed quite clearly that at the commencement of the Bankrupt’s bankruptcy, the Son had no present beneficial interest in the Property.

58.The Bankrupt claimed the Son had a “reversionary interest”. It was at best a future interest that had no effect on present property in respect of Bankrupt’s Estate. In any event, the Son had not given any consideration for any future interest, and would not be able to enforce such voluntary benefit made without deed against the Grantors/Trustees.

59.For all of the above reasons, I find the TiB was correct in deciding that the Property was within the Bankrupt’s Estate. There had been much discussion in the affirmation evidence and witness statements in relation to Wong Siu Lun’s proof of debt and/or the TiB’s accounting inaccuracy in respect of the Estate account. I have carefully considered those matters, but they did not appear to be relevant for the determination of the Summons. Indeed, neither the Bankrupt nor Mr Chan canvassed those matters in their submissions.

Conclusion

60.In the circumstances, the Summons is dismissed. There shall be a costs order nisi that half of the costs of the Summons (including all costs reserved if any) be paid by the Bankrupt personally to the TiB to be taxed if not agreed. In coming to the view that the TiB should be entitled to only half of the costs of the Summons, I note (a) there was no cogent evidence before this court that the TiB had explained the reasons for their decision in relation to the Living Trust Agreement to the Bankrupt prior to Mr Chan’s written submissions, and (b) it was only at the Hearing (but not even in Mr Chan’s written submissions) that the TiB conceded the Bankrupt had locus to bring the application.

The bankrupt Mr Chu Wai Tung, acting in person and present

Mr Sunny Chan, instructed by Jimmie K S Wong & Partners, for the Respondent

The attendance of the Official Receiver excused