Official Receiver, The Trustee of the Property of Wong Kwok Keung (A Discharged Bankrupt) v. Wong Kwok Keung

HCB 4672/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4672 OF 2001

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RE: Wong Kwok Keung

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D E C I S I O N

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1.This is an application by the Official Receiver, as trustee in bankruptcy of the property of the 1^st respondent, Mr Wong Kwok Keung, a discharged bankrupt, for an order of sale of the property at Flat 16, 29^th Floor, Block A, Tsz On Court, 10 Yan Wah Street, Kowloon, Hong Kong (“the property”).

2.The facts relevant to the application are largely not in dispute.

3.Mr Wong and the 2^nd respondent, Madam Fong Yuk Ying, are husband and wife.  They purchased the property under the Home Ownership Scheme together as joint tenants on 17 May 1994 at the price of $1,116,300. At that time, Mr Wong’s parents had given Mr Wong and Madam Fong the sum of $200,000 to help with the purchase of the property, but there is no suggestion that there was any intention that they were to acquire any beneficial interest in the property as a result.  Mr Wong and Madam Fong also obtained a mortgage loan of $1,060,000 from Hang Seng Finance Ltd for the purpose of the purchase of the property in 1994.

4.Over the years, until 2001, the couple both worked and contributed towards the household expenses including the monthly repayment instalments of the mortgage loan.  It seems clear that, up to that point in time, they had no intention other than to hold the property equally together as husband and wife.

5.In 2001, Mr Wong encountered serious financial difficulties.  In June of that year, he petitioned for his own bankruptcy.  The bankruptcy order was made on 9 October 2001.  The Official Receiver became the trustee of his property.

6.On 9 October 2005, Mr Wong was automatically discharged from bankruptcy. 

7.During the years in which he was an undischarged bankrupt, Mr Wong was, of course, unable to contribute directly to the payment of the mortgage loan.  The monthly repayment instalments were instead paid by Madam Fong, with some help from their son who worked part-time during his studies to help support the family.

8.After his discharge from bankruptcy, Mr Wong began making contribution again towards the monthly repayment of the mortgage loan.

9.To date, 28 proofs of debt have been lodged with the Official Receiver claiming a total of approximately $1,375,000.  A sum of $1,630 has been realised from Mr Wong’s property for the estate and he has made contributions from his income totalling $101,380 to the estate.  Dividends in the sum of $81,811.50 had been distributed to the creditors.

10.Since the property was purchased under the Home Ownership Scheme, it is subject to certain conditions of alienation as mentioned in the Housing Ordinance (Cap 283).  The property can be sold on the open market to anyone or in the secondary market to any person nominated by the Hong Kong Housing Authority (“HKHA”) or certified by HKHA as eligible to purchase the property.  If the property is sold on the open market, a premium will have to be paid out of the purchase price to the HKHA.  On the evidence in this case, the open market value of the property was $4,900,000 as at July 2014 and the secondary market value was $3,230,000 as at October 2013.  I am told that the mortgage loan on the property had been entirely repaid.

11.Madam Fong’s affirmations raise three main matters in opposition to the application for an order of sale.  First, she says that since the property was co-owned, any sale should require her consent as a co-owner.  Secondly, because her husband made no contribution towards repaying the mortgage loan during the period from 2001 to 2005, her share in the property far exceeds that of her husband and it would therefore be unjust for her to lose the use of the property because of her husband’s debts.  Thirdly, she says that selling the property would mean that the family, including Mr Wong’s elderly parents, would become homeless.

12.As to the first point, the established principle is 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: see Wong Chun Kei Johnny v Poon Vai Ching [2007] 1 HKLRD 825 at §§16-19; Fook Sun Enterprises Co Ltd v Cromwell Investment Co Ltd & Ors [1973-1976] HKC 335 at 337H-I.  The court’s power to order a sale under the Partition Ordinance is not limited to the case where all the co-owners consent.

13.The second point, in my view, is one that goes to the question of equitable accounting as between the co-owners with respect to the distribution of the proceeds upon a sale.  It is not as such a ground for opposing an order for sale.

14.The third point depends on the actual circumstances of the people concerned.  As it turned out on the facts, the bankrupt’s ailing parents in fact have their own public housing accommodation in Tsz Wan Shan and do not live in the property.  The bankrupt’s younger brother lives with them although he has to travel to the Mainland for work-related purposes from time to time. It is said that the elderly parents live only 10 minutes away from the property in question and that when they are sick and have to go for medical consultation they will come to the property first and the bankrupt or Madam Fong will then take them to the doctor.

15.The actual inhabitants in the property are the bankrupt and Madam Fong, both aged 57, and their two children – a son aged 28 and a daughter aged 26 both of whom have full-time or part-time occupations. The bankrupt has a decent salaried job while Madam Fong now works part-time by providing domestic help to other households.  Had the property actually been the residence of the bankrupt’s elderly parents I would have had great hesitation in ordering effectively their eviction from their home.  As it is, however, it is the bankrupt’s own family of four who live in the property and in all the circumstances, while I have no doubt it would be a highly unpleasant and unwelcome change for them to have to leave the property and find alternative accommodation, I am unable to find that there would be great hardship for them, financial or otherwise, arising from an order for sale: cf eg Re Ng Tze Ching (HCB 5883/2006; 29 August 2014); Re Lau Yuet Ming Daisy (HCB 10078/2003; 21 July 2014).  Juxtaposed against that is the fact that except from the proceeds of sale of the bankrupt’s interest in the property, it is unlikely that the creditors will obtain any significant recovery of their debts.

16.At the hearing, I expressed some concern about the time taken by the trustee in making the present application.  Mr Wong was adjudged bankrupt in 2001 and discharged in 2005.  The summons for an order for sale was not taken out until July 2014.  While it might be that, on the facts, because of the substantial rise in the capital value of the property over these years, the delay had not worked to the prejudice of the respondents, and the time lapse has also meant that the bankrupt’s two children are now well into adulthood, it is a matter of concern that an application by the trustee to realise property in order to repay creditors should have been taken out only 14 years after the bankruptcy order or 9 years after the discharge of bankruptcy.  In future cases, some explanation and justification would be expected if the time taken had been substantial.  Apart from everything else, the respondent could be potentially adversely affected by the high interest rate that applied to bankruptcy debts for all the time during which they were outstanding: see Re Yick Kin Chung (HCB 1187/2004; 1 December 2014) at §§27-35, per Mimmie Chan J.

17.In the present case, however, unfortunately for the respondents, on the established approach of the law there is no ground upon which I can properly refuse the application and there will therefore be an order for sale.  It will be in terms of the draft order attached to the trustee’s skeleton submission for the hearing, which inter alia requires vacant possession of the property to be given by the respondents within 3 months of the order.  I give liberty to apply generally but also particularly as regards the question of division of the proceeds of sale, as I have not ruled on how the equitable accounting as between the co-owners is to be conducted if necessary.

Miss Doris Tin, Senior Solicitor of Official Receiver’s Office, for the applicant

The 1^st and 2^nd Respondents appeared in person