RE CHEN JUI HSIANG

HCB 7501/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 7501 OF 2009

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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 Chen Jui Hsiang (“Chen”) 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 03, 26/F, King Kwai House (Block 2), Shan King Estate, No. 1 Ming Kum Road, Tuen Mun, New Territories (“Property”), together with consequential orders.

2.  The Property is in a public housing estate. Originally, Mr Chen was a tenant of the Property and resided in it with his wife Madam Lee Hau Ling (“Madam Lee”) and two sons. On 11 August 2005, the Property was assigned into the joint names of Mr Chen and Madam Lee for a consideration of HK$110,300. 

3.  The application is opposed by Madam Lee on the ground that, although the Property is registered in the joint names of Mr Chen and herself, it was she who had paid for the entirety of the purchase price when they bought the Property from the Hong Kong Housing Authority. She also pleads with this court to help her on the ground that a sale of the Property would cause serious hardship to her.

Background

4.  The following are facts pertaining to Mr Chen’s and Madam Lee’s personal and financial circumstances which the Trustees said they are prepared to accept.

5.  On 29 May 2009, Mr Chen filed a petition for his own bankruptcy. On 14 July 2009, he was adjudicated bankrupt.

6.  In his Statement of Affairs dated 29 May 2009, Mr Chen stated, inter alia, that he had 50% rights over the Property which was jointly owned by him and his wife.

7.  The Property is unencumbered. According to a valuation report dated 26 June 2015 prepared by C S Surveyors Limited, the value of the Property is as follows:

(1)	Open Market Value (on a vacant possession basis)	HK$2,550,000
(2)	Secondary Market Value (on a vacant possession basis)	HK$1,350,000

8.  Mr Chen, Madam Lee and their younger son are currently residing at the Property. Mr Chen’s elder son is about 30 years old. He is married and has moved out of the Property.

9.  Mr Chen is about 56 years old. He used to and still works as a casual labourer in construction sites. He said back in 2005, he used to earn around HK$10,000 a month. Now, he earns about HK$900 a day. Madam Lee is about 52 years old and works as a cleaning lady. She earns approximately HK$13,000 a month. The younger son is about 25 years old and works in the computer field. Mr Chen and Madam Lee said they did not know what his younger son’s monthly income is. The Trustees estimate his income to be around HK$10,000, which is more or less achievable even if he is only earning the minimum wage of HK$32.5 an hour.

10.  The Trustees have received proofs of debt from HSBC, BOC Credit Card (International) Ltd and AEON Credit Service (Asia) Co. Ltd of around HK$232,000.

First Issue

11.  The first issue before this court is whether the Property was, prior to the bankruptcy of Mr Chen, beneficially owned by Madam Lee and him in equal shares, or whether it was beneficially owned by Madam Lee solely, by reason of the fact that she had paid the entire purchase price of the Property.

12.  Since the Property was conveyed to Mr Chen and Madam Lee as joint tenants, the starting point is that they have both legal and beneficial interests in the Property, unless and until the contrary is proved: Stack v Dowden [2007] 2 AC 432, at [58] (Baroness Hale of Richmond). At [68], Baroness Hale of Richmond said:

“The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way. This is not a task to be lightly embarked upon.”

13.  Notwithstanding directions from the court at the call‑over hearing, Madam Lee has failed to file any affirmation evidence in support of her case. At the invitation of the court, both Madam Lee and Mr Chen testified at the hearing on 16 July 2015. They claimed it was Madam Lee who alone paid for the purchase of the Property and Mr Chen had paid nothing. Madam Lee told this court that the source of her funding was a loan from her mother of approximately HK$30,000, “lai see” monies of her two children together with her own savings. When asked whether she had proof that she paid the entire purchase price, Madam Lee told this court she had lost her old passbook issued by the Bank of China (Hong Kong) Limited (“BOC”) which recorded the payment.

14.  It should immediately be pointed out that the claims made by Madam Lee and Mr Chen are bare assertions and are entirely self‑serving in nature. As such, they must be looked at with some circumspection and reservation. For one, there is no satisfactory explanation as to why the Property should be conveyed to Madam Lee and Mr Chen jointly if Madam Lee alone had indeed paid for the purchase price and had intended that she herself should have the entire beneficial interest in the Property. There is also no satisfactory proof of her earnings in the past which would enable her to accumulate enough savings to fund part of the purchase price.

15.  In support of Madam Lee’s testimony, the Bankrupt produced a photocopy of a cashier order issued by BOC in the sum of HK$107,800. The cashier order was dated 10 August 2005 and made payable to the Hong Kong Housing Authority. Judging from the amount involved, the date of the cashier order and the identity of the payee, this court accepts that the cashier order was used to settle the purchase price of the Property. But what is still missing from the evidence is whether the money used to pay for the BOC cashier order came entirely from Madam Lee.

16.  Both Mr Chen and Madam Lee told this court that the number “036‑722‑1‑026583‑1” which appeared on the cashier order was the account number of Madam Lee’s BOC account. In order to enable Madam Lee to locate documentary evidence to verify the account number as hers, this court adjourned the hearing to 21 July 2015.

17.  At the adjourned hearing, Madam Lee brought along her BOC savings deposit passbook but the account number shown in the passbook did not match the number appearing on the cashier order. Days  after the hearing on 21 July 2015, Madam Lee again submitted several documents to this court which apparently show that in April 2010, she had closed her savings account no. “036‑722‑1‑026583‑1” and opened a new one with BOC. So, at last, there is some evidence that the number “036‑722‑1‑026583‑1” which appeared on the cashier order was the account number of Madam Lee’s BOC account.

18.  This court must however weigh that piece of evidence against other documentary evidence which contradicted the testimony of Madam Lee and Mr Chen ie an official receipt dated 11 August 2005 issued by the Hong Kong Housing Authority, Mr Chen’s Statement of Affairs dated 29 May 2009 and a letter in Chinese dated 27 November 2013 and signed by Mr Chen. All these documents tend to suggest both Mr Chen and Madam  Lee have contributed to the purchase price and/or regarded themselves as having equal rights and interests in the Property. At the very least, the credibility of Mr Chen is severely dented by the last two documents since they were signed by him.

19.  Looking at all the evidence in the round, this court is not satisfied that Madam Lee has discharged the burden of showing she alone had paid for the entire purchase price of the Property in 2005 or that the intention of the parties was she would enjoy the sole beneficial interests in it. It follows that this court finds Madam Lee and Mr Chen were, prior to Mr Chen’s bankruptcy, joint legal and beneficial owners of the Property.

Second Issue

20.  The second issue is whether the court can and should make an order for sale of the Property.

21.  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.

22.  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 V‑C as he then was); Re Cheung Chan Hong [2015] 2 HKLRD 1.

23.  Section 6 of PO provides that:

“(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.”

24.  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]; Cheung Chan Hong supra.

25.  In Re Leung Wang Fai unrep., HCB15328 of 2003, Mimmie Chan J, 17 March 2014, at [27], the learned Judge affirmed the principle that the court should make an order for sale unless it is persuaded, the burden being on the opposing co-owner, that such an order would not be beneficial to all the co-owners or that it would result in very great hardship to one co-owner. On the facts of the case, the learned Judge, after balancing the interests of the trustees in bankruptcy and the other co‑owner, declined to make an order for sale.

26.  On the evidence before this court, it is plain and obvious that the Property is the only asset of Madam Lee which is of any significant value. It is also the only place of residence for her and her family. However, Madam Lee is only in her early 50s and has stable employment and hence income. Her younger son is in his 20s and is also in employment. Assuming he earns only minimum wage, his monthly income can reach HK$10,000. Mr Chen himself is a casual labourer earning HK$900 a day. Assuming he works only 10 days a month, his income will be around HK$9,000. On a conservative estimate, the combined household income of the family is around HK$32,000 (HK$13,000 + HK$10,000 + HK$9,000).

27.  Assuming the Property is sold in the open market on a vacant possession basis, the Trustees estimate that, after deducting the premium payable to the Government and expenses incidental to the sale and legal costs, the net sum due to Madam Lee is in the region of HK$1 million, and the net sum due to Mr Chen is around HK$600,000. Assuming the Property is sold in the secondary market on a vacant possession basis, the Trustees estimate that, after deducting expenses incidental to the sale and legal costs, the net sum due to Madam Lee is around HK$660,000, and the net sum due to Mr Chen is around HK$280,000.

28.  In these circumstances, while the prospect of having to vacate her family home of some 17 years will be very unwelcome and stressful, this court is not satisfied that there is such great hardship to Madam Lee as to justify a refusal of an order for sale. After the sale, Mr Chen’s debts will be paid off in full. The combined net sums due to Madam Lee and Mr Chen should be sufficient to enable them to pay the deposit for an alternative accommodation, modest though it may be. Given Madam Lee’s and her younger son’s employment, it should not be too difficult for them to arrange a mortgage to fund the balance of purchase price. They will no doubt have to keep working in the foreseeable future in order to service the mortgage, but that is the stark reality of living in Hong Kong faced by almost everyone (save for the very lucky few who have inherited wealth).

29.  Last but not least, the interests of the creditors of Mr Chen, though they do not necessarily or usually prevail over the interests of a co‑owner: Re Cheung Chan Hong supra, cannot be ignored. They are prima facie entitled to be paid out of what can be realised from Mr Chen’s assets.

30.  To conclude, balancing the interests of the Trustees (representing the creditors) and the interests of Madam Lee, this court is of the view that there should be an order for sale in the present case.

Disposition and costs order nisi

31.  This court hereby grants a declaration that the Property is vested in and held between the Trustees and Madam Lee as tenants in common in equal shares.

32.  This court further grants an Order for Sale in terms of paragraphs 3 to 7 of the draft submitted by the Trustees save that

(1) under paragraph 3, the sale shall be by way of public auction only, which shall not take place earlier than 60 days from the date of this order;

(2) under paragraphs 5 and 6, the words “30 days” be replaced by the words “60 days”.

33.  Liberty to apply.

34.  There shall be an order nisi that each party shall bear his own costs of and occasioned by this application. The costs of the Trustees shall be paid out of the estate of the Bankrupt, to be taxed if not agreed.