WWGW v. CSKL AND ANOTHER

CAMP 308/2022, [2023] HKCA 521

On Appeal From [2022] HKFC 86

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 308 OF 2022

(ON AN INTENDED APPEAL FROM FCMC NO 10898 OF 2019)

____________________

____________________

___________________

J U D G M E N T

___________________

Hon Yuen JA (giving the Judgment of the Court):

Introduction

1.     (1)   In a Determination (Preliminary Issues) given by HH District Judge KK Pang (“the judge”) in the Family Court on 12 April 2022 ([2022] HKFC 86) (“the Determination”), the judge dismissed the summons of the 1^st Respondent (“the Wife”) filed on 27 October 2020 in divorce proceedings FCMC10898/2019 (“the Divorce proceedings”).

(2)   In the summons, the Wife had sought a declaration that she is the sole beneficial owner of a property (“the Property”) of which the surviving registered owner is her husband’s mother (“Madam Lee”).   The declaration sought was expressly “subject to the [Wife’s] interest therein being vested in the Official Receiver pursuant to a Bankruptcy Order dated 25 June 2019”.

(3)   The Wife applied for leave to appeal the Determination.  The judge refused leave to appeal, and the Wife renewed her application for leave in this court.

Background

2.  The petitioner (“the Husband”) and the Wife were married in 1989.  There is one child of the family who is an adult.

3.  On 11 September 2019, the Husband filed a petition for divorce in the Divorce proceedings based on 2-years separation.  It should be noted that he has not made any claim for ancillary relief.  On 27 November 2019, the Wife applied for ancillary relief.  On 3 December 2021, a decree absolute was granted.

4.  As mentioned earlier, the Wife was adjudicated bankrupt on 25 June 2019.  Her trustee-in-bankruptcy Messrs Fred Lee and Christine Chow has issued two letters dated 24 October 2019 and 11 April 2022 regarding the Divorce proceedings and applications therein, the contents of which will be discussed later in this Judgment.

5.  On 27 October 2020, the Wife issued a summons (“the Declaration Summons”) for an order to join Madam Lee in the Divorce proceedings, and for a declaration that she (the Wife) is the sole beneficial owner of the Property and Madam Lee is holding the Property on trust for her, subject to her interest being vested in the Official Receiver (presumably meaning her trustee-in-bankruptcy).

6.  By an order dated 29 December 2020, Madam Lee was joined as the 5^th Respondent.  The issue of the beneficial interest of the Property was listed for determination by way of a preliminary issue. The court also gave directions to the parties to file pleadings and exchange witness statements in relation to the preliminary issue.  The Wife and Madam Lee were represented by counsel at the hearing of the preliminary issue.  The Husband was unrepresented but appeared via VCF.

The Wife’s case

7.  Very briefly, the Wife’s case is that in the 1990’s, she asked the Husband’s parents (Madam Lee and her husband) to submit an application to purchase a flat under the Home Ownership Scheme (“HOS”) as they were eligible as tenants of a public housing unit.   She alleged that there was an oral agreement and/or common understanding between them that she would pay for the purchase of the HOS flat, and would be its sole beneficial owner, and her mother would live in it.

8.  Madam Lee and her husband acquired the Property as joint tenants in 1996.

9.  The Wife claimed she was responsible for the down payment, mortgage instalments and incidental expenses in relation to the Property.  Her mother lived in the Property until she died in 2012.  Thereafter she allowed her friends to stay there until 2017 when she herself moved into the Property.

10.  Pausing there, it is clear that (on the Wife’s own case) her right of action against Madam Lee existed before she became bankrupt.

Madam Lee’s case

11.  Madam Lee denied that she and her husband (who died in 1998) had made any oral agreement with the Wife, or that there was any common understanding as the Wife alleged.  As public housing unit tenants, she and her husband were eligible to acquire an HOS unit at a substantial discount by giving up their public housing unit.  As she and her husband lived part of the time in the US, she agreed with the Husband’s suggestion (made on behalf of the Wife) to let the Wife’s mother stay in the Property and in return, the Wife would pay the mortgage instalments and incidental expenses.  She alleged that it would have cost the Wife more to rent or purchase similar premises for her mother to live in.  The title deeds were kept by her younger son (the Husband’s brother).

12.  Madam Lee (who is now in her 90’s) alleged that she made a will in 2015 bequeathing the Property to the Husband solely.  She claims the Wife was aware of this as she (the Wife) kept her company at the solicitors’ firm as the Husband was not available.

13.  Pausing here, a will may of course be revoked before death, and a legatee has no interest in any property bequeathed to him before the will takes effect on the testator’s death.  Accordingly, the Husband has not acquired any present interest in the Property by reason of Madam Lee’s bequest, although in considering ancillary relief, the court can take into account, in appropriate circumstances, the likelihood of financial assistance from third parties such as a party’s parents (KEWS v NCHC (2013) 16 HKCFAR 1).

14.  In her affirmation made in the US on 11 September 2021 and filed on 23 September 2021, Madam Lee said that she had commenced proceedings in HCMP607/2019 against the Wife, which was stayed by the High Court and remitted to the Family Court to be dealt with together.

15.  However, this does not appear to have featured in the hearing of the preliminary issue before the judge (where both the Wife and Madam Lee were legally represented) and so we shall say no more about it.

The Husband’s case

16.  The Husband does not assert any interest in the Property and alleges that he has no knowledge of any oral agreement and/or common understanding and/or his mother’s will.

The Judge’s Determination

17.  In the Determination, the Judge dismissed the Declaration Summons, primarily for the reasons set out in [13] – [16]:

(1)  The Wife’s interest in the Property which is vested in the trustee-in-bankruptcy is unavailable for distribution in the ancillary relief application.  Accordingly, the Wife’s claim is irrelevant to the Divorce proceedings.

(2)  The letters of the trustee-in-bankruptcy show that their consent is restricted to the Wife’s engagement in the Divorce proceedings and does not cover her claim against Madam Lee for non-matrimonial property.

(3)  The Wife’s interest, if any, in the Property is vested in the trustee-in-bankruptcy and thus she does not have capacity to issue the Summons.

(4)  It is not clear if the Wife’s claim is within the District Court’s jurisdiction.

Application for leave to appeal 

18.  On 6 June 2022, the Wife issued a summons for leave to appeal the Determination.  She proposed 10 grounds of appeal (some relying on fresh evidence).

19.  The judge refused to consider the fresh evidence on the ground that it did not satisfy the conditions set out in Ladd v Marshall [1954] 1 WLR 1489.

20.  The Wife’s summons for leave to appeal was refused for reasons set out in the judge’s decision dated 9 August 2022 (“the Refusal of Leave Decision”).

The renewed application

21.  On 22 August 2022, in a summons filed in the Court of Appeal, the Wife in [1] renewed her application for leave to appeal the Determination; in [2] applied for a stay of execution of the Determination; and in [4] applied for leave to appeal the Refusal of Leave Decision.  Paragraph [3] of the summons related to costs.

22.  We have read the Wife’s submissions in support of the summons, as well as written submissions from the Husband, Madam Lee’s solicitors, and a letter from the trustee-in-bankruptcy to the court dated 18 October 2022 which will be discussed later in this Judgment.

Discussion

23.  First, the judge was clearly right in ruling that the Wife should not be allowed to adduce fresh evidence including evidence of her debts as declared in the petition for bankruptcy (which may or may not be all the debts proved in the bankruptcy), as well as the present value of the Property.  These were matters which were available to her at the hearing, and thus fails the first condition in Ladd v Marshall (ie the fresh evidence could not have been obtained at the hearing with reasonable diligence) (Refusal of Leave Decision [9(2)(ii)]).

24.  In the Wife’s submissions to this court, she has not challenged the fact that evidence of her debts and the value of the Property could have been obtained at the hearing with reasonable diligence.  That is really the end of the matter.  Insofar as the Wife is appealing the judge’s ruling above in [4] of her summons to this court, it should be dismissed.

25.  As for the Wife’s argument in her submissions to this court that the judge was wrong in deciding that her application was out of time as she had applied for legal aid which entitled her to an automatic stay of 42 days, it is not clear on the papers before us when the legal aid application was rejected.  In any event, (a) the judge dismissed her application for leave to appeal on the merits and not for delay, and (b) it is not material to her renewed application for leave to appeal, so we need say no more about it.

26.  That leaves the proposed appeal against the Determination (some grounds of appeal are repetitious and will be discussed together below).

27.  Essentially, the Wife submits that the judge was wrong to hold that the Family Court had no jurisdiction to decide her claim against Madam Lee in the Divorce proceedings by reason of her bankruptcy.

28.  Our views are as follows.  Of course, in ancillary relief proceedings, the court has to determine what assets are available for distribution.  However, in this case, the Husband has not made any claim against the Wife for ancillary relief.  It is only the Wife who has made a claim against the Husband, who (as noted in [12] above) has no present interest in the Property.  Even if the Wife succeeds in her claim against Madam Lee, (subject to the point discussed in the following paragraphs), that would not assist her application for ancillary relief against the Husband.  If anything, it would increase the size of the matrimonial pot so that she would get a smaller net share (but, as noted in [13] above, the Husband is not asserting that the Wife owns the Property).

29.  Secondly, and more importantly, on the evidence before the judge at the hearing, there was nothing to suggest that if the Property belonged to her, she could pay off all her debts and the bankruptcy could be discharged.  In the absence of such evidence, the judge was entitled to find that by reason of the Bankruptcy Order, the Wife would have no interest in the Property which would be available for distribution in the ancillary relief exercise.  As the judge puts it, the bankruptcy order made the Property (or the claim for it) a “non-matrimonial asset”. Accordingly, the claim against Madam Lee would not fall for determination in proceedings under the Matrimonial Proceedings and Property Ordinance (Cap.192).

30.  Pausing here, it was settled in Chung Kau v Hong Kong Housing Society & Others [2004] 2 HKLRD 650 at [6] – [8] that pursuant to s.12 and s.58 of the Bankruptcy Ordinance Cap. 6, a bankrupt person’s rights of action vests in the trustee-in-bankruptcy, subject to one exception being the right to bring claims which are personal to the bankrupt. It was held that by “personal” are meant claims which relate to the bankrupt’s body, mind or character.  Thus, personal claims include claims for damages for personal injuries and defamation.  In our view, a claim for beneficial ownership of a property such as the Wife’s claim against Madam Lee is clearly not a “personal” claim.

31.  In its letter dated 18 October 2022 to the court, the trustee-in-bankruptcy said that “since matrimonial issues are matters personal to the Bankrupt, we are of the view that the trustees are not in a position to grant the right of action to the Bankrupt”.  This statement is not understood. If a matrimonial claim is personal (say, the right of access to a minor child), there is no right of action of the trustee-in-bankruptcy to give.  If by that statement, the trustee-in-bankruptcy means to say that because the Wife’s claim against Madam Lee was taken out in matrimonial proceedings, the trustee-in-bankruptcy has no right of action, then that general statement is not correct.  The Wife’s claim to beneficial ownership of the Property by reason of the alleged oral agreement and/or common understanding in the 1990’s is clearly a right of action within the purview of the trustee-in-bankruptcy. As such, the Property (or the right to claim it) is an asset in the bankruptcy, not an asset in the matrimonial pot.

32.  As for the trustee-in-bankruptcy’s earlier letters dated 24 October 2019 and 11 April 2022, the first said that “if [the Wife] does require our consent to proceed with the [Divorce proceedings], we would be prepared to grant the same to her” but asked the Wife’s then solicitors to “note the estate’s interest in the matrimonial assets in which the Bankrupt is claiming an interest”.  The second letter said that it confirmed that consent had been given to the Wife to proceed with the Divorce proceedings including all necessary applications therein.

33.  In neither of these letters has the trustee-in-bankruptcy waived the bankruptcy estate’s claim to the Property. They do not turn the Property (or the right to claim it) from an asset in the bankruptcy into an asset in the matrimonial pot.

34.  In light of the above, it is not necessary to consider the judge’s district court jurisdiction point.

Order

35.  For the reasons set out above, we would refuse leave to appeal the Determination with costs to the Husband which we would summarily assess at $3,000 pursuant to the rules for costs of a litigant in person (Order 62 rule 28A of the Rules of the High Court).

36.  We would also order pursuant to Order 59 rule 2A (8), that no party may request this determination of the renewed application for leave to appeal to be reconsidered at an oral hearing inter partes.