Re Lo Yau Shing
Read the full judgment text of HCB 4968/2007 on BabelCite. This HCB judgment was delivered on 13 July 2018.
1. There is before this court an application by the Trustees of the property of Mr Lo Yau Shing (“ Bankrupt ”) for an order for sale under section 60 of the Bankruptcy Ordinance, Cap 6 (“ BO ”) and section 6 of the Partition Ordinance, Cap 352 (“ PO ”), in respect of the property known as Flat No.08, 29/F, Yee Kui House (Block 1) (including the planters/planter boxes appertaining thereto), Tsing Yi Estate, No.10 Fung Shue Wo Road, Tsing Yi, New Territories (“ Property ”), together with conseque
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HCB 4968/2007 [2018] HKCFI 1574 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 4968 OF 2007 ____________
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__________________ J U D G M E N T __________________ Introduction 1.There is before this court an application by the Trustees of the property of Mr Lo Yau Shing (“Bankrupt”) for an order for sale under section 60 of the Bankruptcy Ordinance, Cap 6 (“BO”) and section 6 of the Partition Ordinance, Cap 352 (“PO”), in respect of the property known as Flat No.08, 29/F, Yee Kui House (Block 1) (including the planters/planter boxes appertaining thereto), Tsing Yi Estate, No.10 Fung Shue Wo Road, Tsing Yi, New Territories (“Property”), together with consequential orders. 2.The Property is in a public rental housing estate subject to a Tenant Purchase Scheme. It was assigned by the Hong Kong Housing Authority into the joint names of the Bankrupt and his father, the Respondent (“Lo Senior”) on 13 August 2001. The purchase price was HK$165,000 and the purchase was financed by a mortgage loan of HK$60,000 from Bank of China (Hong Kong) Limited. The mortgage loan has since been paid off. 3.The saleable floor area of the Property is about 339 sq ft. Presently Lo Senior, his wife and the Bankrupt’s elder brother reside in it. The Bankrupt’s elder brother normally lives in the PRC. He now resides in the Property in order to look after Lo Senior and his wife. 4.The application is opposed by Lo Senior. Background 5.On 7 June 2007, the Bankrupt filed a petition for his own bankruptcy. On 7 August 2007, he was adjudicated bankrupt. The principal amount of the proofs of debt filed by the 7 unsecured creditors is HK$199,744.08. The amount of interest calculated up to 31 December 2018 is HK$328,313.83. Thus far, the Bankrupt has contributed HK$2,946 to his bankruptcy estate account. 6.The most up‑to‑date valuation report prepared by Allied Surveyors Limited shows that the value of the Property, as at 14 May 2018, was HK$3.7 million in the open market[1], and HK$2.3 million in the secondary market[2]. 7.Lo Senior is 94 years old and his wife is 87 years old. Both are unemployed and live on old age living allowance of about HK$3,400 each person per month from the Hong Kong Government as well as some assistance from their 4 adult children. Lo Senior suffers from a host of serious medical conditions. The following is an extract from a medical report dated 18 April 2018 from Dr Yeung Lok Ki, Resident, Department of Medicine and Geriatrics, Princess Margaret Hospital:
8.Recently on 11 June 2018, Lo Senior was admitted to Princess Margaret Hospital’s Orthopaedics Department for fracture neck of left femur and hemiarthroplasty was performed. The Bankrupt told this court that Lo Senior has since been discharged and is recovering at home. 9.The Bankrupt is 55 years old. He works as a maintenance technician of a commercial building and earns HK$17,500 a month. He is married with a 20‑year‑old son. His wife is unemployed while his son is still studying. The three of them previously lived in the Property as well but as the Property is too small, they have moved out and are now living in public rental housing in Tsing Yi. Deliberation 10.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. 11.In the present case, there is no issue as to the beneficial interest of the Bankrupt in the Property. The only question for this court is whether it can and should make an order for sale of the Property. 12.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 V‑C as he then was); Re Lau Yuet Tai, a Debtor unrep; HCB 25136 of 2002; 29 November 2005; Kwan J (as she then was) at [17]. Further, 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: section 58(2) of BO. 13.Notwithstanding the Bankrupt was automatically discharged on 7 August 2011 pursuant to Section 30A of BO, the discharge does not have the effect of re‑vesting in the Bankrupt any property that is duly vested in the Applicants: Official Receiver, the Trustee of the Property of Leung Man Yuen (a Discharged Bankrupt) v Leung Man Yuen and Lai Fung Yee unrep; HCB 582 of 1996; 20 September 2016; G Lam J at [3]. 14.Section 2 of PO provides:
15.Section 6 of PO provides:
16.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]. 17.The Trustees urge this court to adopt the approach 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 (frequently the spouse) and a sale of the property will be ordered within a short period of time. The Re Citro approach was followed in Hong Kong, for instance, in Re Ng Tze Ching unrep; HCB 5883 of 2006; 29 August 2014; Anthony Chan J. 18.In Re Cheung Chan Hong [2015] 2 HKLRD 1at [20]‑[30], 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 take up the Re Citro approach. 19.In Re Liu Yi Fang [2015] 3 HKLRD 668, Anthony Chan J, disagreeing with Re Cheung Chan Hong, held that the Re Citro approach should be adopted as the proper approach in Hong Kong to an application by a trustee in bankruptcy for an order for sale of a co‑owned property. 20.Subsequently, in Re Lau Hiu Tuen unrep; HCB 8430 of 2006, 20 August 2015, G Lam J, after summarising the recent divergence of judicial opinion on this issue at [23], proposed the following approach:
21.In this court’s view, the approach taken by Recorder Joseph Fok SC in Wong Chun Kei v Poon Vai Ching was adequately summarised in Re Cheung Chan Hong at [31]‑[32]:
22.Accordingly, this court shall decide the present application “on the basis of all the objective facts of the case, balancing the interest of” the Trustees (representing the interest of creditors) against Lo Senior. 23.On the Trustees’ calculation, the Bankrupt’s total indebtedness as at 21 June 2018 (assuming final dividend will be declared on 31 December 2018) is approximately HK$822,079.35 consisting of:
24.If an order for sale is granted and the Property is sold in the secondary market at HK$2.3 million, the estimated net sale proceeds will be around HK$2.261 million, after deducting estate agents’ fees/commission and conveyancing costs. 25.Half of the net sale proceeds ie around HK$1,130,500 will be payable to the bankruptcy estate while the other half will be payable to Lo Senior. The HK$1,130,500 available to the bankruptcy estate will cover the Bankrupt’s total indebtedness as aforesaid and there will be a small surplus of about HK$300,000 payable to the Bankrupt pursuant to section 74 of BO. 26.Lo Senior’s half share of the net sale proceeds is HK$1,130,500, but this amount will be reduced to around HK$877,759 should this court grant an order for sale and accede to the Trustees’ intended application that the costs of the present sale application (estimated to be HK$252,741) should be borne by Lo Senior. 27.Based on these estimates, the Trustees submit that an order for sale is beneficial to all parties viz (i) the bankruptcy estate (as all the unsecured creditors’ claims can be fully satisfied), (ii) Lo Senior, and (iii) the Bankrupt himself (with a surplus of around HK$300,000 payable back to him) and thus constitutes a “win‑win‑win” situation. 28.This court cannot and does not agree with the Trustees. 29.On the evidence before this court, his half share of the Property is Lo Senior’s only significant asset. It is also the place of residence for him and his wife for years. Lo Senior was previously an odd job worker in a textile factory but has stopped working for over 30 years. His wife previously worked in a garment factory manufacturing jeans and has similarly stopped working for a long time. Their present income of HK$3,400 per month can only be described as “meagre”. 30.As evident from the medical report quoted above, Lo Senior suffers from a variety of serious medical conditions so much so that “he required assistance to perform most of his basic activities of daily living”. His wife is unable to provide the assistance he needs. This is because, quite apart from her old age, according to the Bankrupt, she also suffers from ill‑health herself including dementia and needs to be taken care of. 31.If an order for sale is granted, the practical certainty is that Lo Senior and his wife can only resort to the meagre social welfare payouts from the Government and the HK$1,130,500, alternatively HK$877,759 left from the sale to cover their future costs of accommodation and living expenses. In view of their age and means, this court is certain that Lo Senior and his wife would not be able to purchase alternative accommodation since they would not be able to obtain mortgage finance. The Bankrupt told this court that Lo Senior would not be eligible for public rental housing again as he had already purchased a flat in a public housing estate ie the Property. This was not challenged by the Trustees in cross‑examination. 32.The choices faced by Lo Senior and his wife will be to rent a modest room as residence, move into a subsidised home for the elderly run by charities (if one can be found) or hope for a big rise in social welfare payouts from the Government, which is unlikely. 33.Balancing the interests of the Trustees (representing the voice of the creditors) and the interests of Lo Senior, this court is firmly of the view that the only just result, objectively speaking, is to refuse to order the sale of the Property. 34.Even if this court is found to be wrong to continue the Cheung Chan Hong approach, and that very great hardship is required to be shown in order to resist an order for sale, this court is also of the firm view that the making of an order for sale in the present case will cause very great hardship to Lo Senior and his wife. Lo Senior and his wife have already lived a modest life so far. This court finds it extremely harsh on them and is of the firm view that it would constitute very great hardship if this court were to make an order for sale which will have the effect of causing their living conditions to further deteriorate. In the words of Mimmie Chan J in Re Leung Wang Fai, Bankrupt unrep; HCB 15328 of 2003; 17 March 2014 at [28]:
35.For the same reasons, even if exceptional circumstances are required to be shown in the present case in order to resist an order for sale, this court is also of the firm view that Lo Senior’s personal circumstances are such as to constitute exceptional circumstances. 36.In Re Bremner [1999] BPIR 185, Jonathan Sumption QC, sitting as a deputy judge of the High Court (as he then was), said at 187H‑188B:
37.In Everitt v Budhram & another [2010] Ch 170 at [55], Henderson J summarized the English case law on this topic as follows:
38.Making a value judgment after looking at all the circumstances, and applying the approach of Jonathan Sumption QC in Re Bremner,this court regards the personal circumstances of Lo Senior, including his age and medical conditions as well as those of his wife, as circumstances lying outside the ordinary range of problems associated with a bankruptcy and thus are “exceptional”. 39.For all these reasons, this court is satisfied that it should not exercise its discretion to grant an order for sale. Disposition and costs order nisi 40.The Trustees’ application is hereby dismissed. 41.There shall be an order nisi that each party shall bear its own costs.
Mr J Shek, of Gallant, for the Joint and Several Trustees of the property of the Bankrupt The Respondent, Mr Lo Kwong Wa, was not represented and did not appear The Bankrupt, Mr Lo Yau Shing, was not represented and appeared in person Attendance of the Official Receiver was excused |
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