RE LEE YUET MEI

HCB 3304/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 3304 OF 2008

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D E C I S I O N

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1. This is the application by the Trustees of the bankruptcy estate (Estate) of Ms Lee Yuet Mei to have a landed property (Property), which belongs to the Estate and Mr Law, sold in order to pay the debts owed to Ms Lee’s creditors.

2. The sole issue in this application is whether the co-owner of the Property, Mr Law, is the sole beneficial owner of the Property as he contends.

3. The Property was purchased in January 2007 by Ms Lee and Mr Law, her son, as joint tenants at the price of HK$152,000.  They obtained a mortgage loan of HK$149,500 from Bank of China (Hong Kong) Ltd for that purpose. 

4. In April 2008, Ms Lee petitioned for her own bankruptcy.  In her Statement of Affairs (Statement) dated 23 April 2008, it was stated that the mortgage was outstanding in the amount of HK$132,468. It was secured against the Property, which was owed by Ms Lee and Mr Law in equal share. 

5. A bankruptcy order was granted against Ms Lee in June 2008, and the Trustees were appointed in April 2009.  Between August 2013 and January 2015, there was an unsuccessful attempt by the Trustees to elicit an agreement from Mr Law to either purchase Ms Lee’s share of the Property or the sale of the same (there was no response from Mr Law).  This application was made in February 2016. 

6. One short affirmation has been filed by Mr Law. In it he asserted that all the mortgage payments were made by him by direct debit from his personal account.  However, he was unable to provide all the bank records because they would not be kept from more than 7 years.  He said that the Property was purchased in joint names because: (a) he did not have a steady job (as a transportation worker) and (b) he feared that he would sell it. 

7. The exhibit produced by the affirmation contains an annual statement of the mortgage account which suggests that the mortgage was paid off with the last instalment made in January 2012.  This was confirmed by Mr Law in court.  However, the transaction history of Mr Law’s account only covers the period from January 2010 to February 2012, which shows that the monthly mortgage payments of HK$2,722.65 were deduced from his account. 

8. Mr Law also told the court that Ms Lee was a vegetable hawker prior to her bankruptcy, and she is now 60 years old. According to Mr Chiu[1] representing the Trustees, Ms Lee had informed them that she was unemployed during the 4 years of her bankruptcy. 

9. The law is that in a dispute over the beneficial ownership of land, the starting point is that the beneficial ownership is the same as the legal title.  The onus is on the person seeking to show that the beneficial ownership is different from the legal ownership: Re Liu Yi Fang [2015] 3 HKLRD 668, §§ 13 and 14, referring to Stack v Dowden [2007] 2 AC 432.

10. The facts of this case are relatively simple.  I accept that Mr Law had discharged all the mortgage payments between the period from January 2010 to January 2012 as shown by the bank records.  The likelihood is that he had been doing so since April 2008 when his mother petitioned for bankruptcy.  It was stated in the Statement that she was unemployed and had no asset. 

11. It is important that Ms Lee stated in the Statement that she was a 50% owner of the Property.  The address of the Property was given as her address.  She was probably residing there at the time. 

12. It is also important that Mr Law said in his affirmation that 1 of the reasons for the joint purchase was that he did not have a steady job.  It suggests that Ms Lee had a financial obligation over the purchase, which reflects the fact that the mortgage was taken out by the mother and son jointly.  More likely than not, the assumption of the entire repayment obligation by Mr Law was due to the financial problem of his mother. I am unable to accept the bare assertion of Mr Law that all the mortgage payments were made by him. 

13. In these circumstances, I am not satisfied that the beneficial ownership of the Property differs from the legal title. However, the discharge by Mr Law of the entirety of the mortgage payments from April 2008 should be taken into account by way of equitable accounting. 

14. Based on the draft order provided to the court, I grant the following relief :

   (i)  It is declared that the property at Flat 17 on 19^th Floor of Shin Mei House (Block 5), Fu Shin Estate, No. 12 On Po Road, Tai Po, New Territories, Hong Kong (“Property”) is vested in and held in equal shares between the Trustees and the Co-owner, as tenants in common.

   (ii)  The Property be sold by way of public auction with a minimum price to be agreed between the Trustees and the Co-owner in writing within 14 days from the date of this Order, failing which the minimum price be determined by the Court on paper.

  (iii)  The Bankrupt and the Co-owner are to execute any conveyance, contract or other documents in respect of the Property (“Conveyancing Documents”) and if the Bankrupt or the Co-owner refuses to execute the Conveyancing Documents, the Registrar of the High Court is to execute such documents.

  (iv)  The Bankrupt and the Co-owner are to deliver the original title documents relating to the Property in their possession, power or control to the Trustees within 30 days from the date of this Order.

   (v)  The Bankrupt and the Co-owner are to deliver vacant possession of the Property to the Trustees within 90 days from the date of this Order.

  (vi)  The net proceeds of sale that may be effected (“Proceeds”), after paying all Government rents, taxes, rates and other outgoings due, discharge of all encumbrances and all other costs and disbursements arising from the sale of the Property, be paid into court pending the determination of an equitable accounting in favour of the Co-owner to reflect his payment of all the mortgage instalments since April 2008.

  (vii)  In the absence of written agreement between the Trustees and the Co-owner as to the proportions in which the Proceeds are to be shared, a date is to be fixed before this Court for the equitable accounting with an estimate of 1 hour.

  (viii)  Liberty to apply.

  (ix)  The costs of the Trustees be paid out of the estate of the Bankrupt to be taxed by the Court.