CHEUNG WING KUEN, SAMUEL v. IP CHUI SUM

HCMP 1981/2020

[2021] HKCFI 2535

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1981 OF 2020

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J U D G M E N T

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Introduction

1.  The parties (Mr Cheung and Madam Ip, respectively) were divorced in Australia in December 2017.  Neither party have applied to the Australian court to deal with the issue of ancillary relief.  The parties remain, amongst others, joint tenants of the subject Property in Taikoo Shing, which was purchased about 4 years into their marriage.

2.  There are 3 applications before the court:

(1)  The originating summons dated 4 November 2020 (“OS”), whereunder Mr Cheung applies for an order for sale of the subject Property;

(2)  Mr Cheung’s summons to adduce his 4^th affirmation; and

(3)  Madam Ip’s summons to file her 2^nd affirmation.

3.  The parties do not oppose each other’s summons.  I therefore give leave to adduce the 2 affirmations accordingly.

4.  The OS is opposed by Madam Ip.  Much of the evidence she has given on affirmation (whilst acting in person) was about the divorce proceedings and the parties’ respective contributions towards purchase of properties, or Madam Ip’s non-financial contribution upon the family’s relocation to Australia.  She also exhibited without prejudice correspondence.  Such evidence is irrelevant.

5.  Taken to the highest, Madam Ip’s only “defence”, raised in her 2^nd affirmation, is that the Property should be dealt with by a family court rather than under the Partition Ordinance, Cap 352 (“PO”), otherwise she will suffer very great hardship.

6.  Madam Ip only got representation since 12 August 2021.  At this hearing, her counsel, Ms Leung, seeks a 6‑week stay to enable Madam Ip to apply for financial relief in the Hong Kong Family Court.  This is opposed by Mr Cheung.

7.  The issues are whether an order for sale will cause very great hardship to Madam Ip and whether there should be a stay of the OS proceedings.

8.  Pursuant to section 3(2) of PO and rule 4 of the Partition Rules (Cap 352A), the documents in this case have been served on the Director of Lands.  By a letter dated 23 March 2021, the Director expressed “no comment on Mr Cheung’s application.

Legal principles

9.  Under section 2 of PO, the court may order a partition of the property under section 4, or a sale of the property under section 6, or refuse to make any order.

10.  Under section 6 of PO, where it appears to the court that a partition of the property would not be beneficial to all the persons interested, the court may make an order for the sale of the property.

11.  The principles for exercise of such power are that:

(1)  a co-owner has a basic right to rid himself of the shackles of co-ownership and if he has no other remedy, ask for an order for partition or sale;

(2)  when 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(s)) 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; and

(3)  whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial.  It has to be determined by the court objectively.

Wong Chun Kei and Poon Vai Ching [2007] 1 HKLRD 825 at §18-19, Recorder Fok SC (as he then was).

12.   An order for sale would not be refused unless all the co-owners would be benefitted by its refusal or, in other words, an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner: Re Lau Hiu Tuen (unrep, HCB 8430/2006, 20 August 2015), G Lam J (as he then was) (§21).

Application of the legal principles

13.  As a co-owner, Mr Cheung has a right to rid himself of the shackles of co-ownership. By a demand letter in January 2020, he has invited Madam Ip to consent to a sale before action, but to no avail.

14.  The Property is located in a multi-story building in Taikoo Shing.  It has a gross floor area of about 907 ft² and saleable area of about 795 ft². Given the nature of the Property, it is not practicable to make an order for partition and an order for sale is more appropriate.

15.  The market value of the Property is about $18,500,000.  There is no outstanding mortgage.  Madam Ip is entitled to half share of the net proceeds of sale after deducting conveyancing expenses and agency fees.

16.  The burden is on Madam Ip to prove that an order for sale will result in very great hardship to her or to justify a stay.

Very great hardship to Madam Ip

17.  Madam Ip has been residing at the Property since April 2017 for over 4 years for free.  She is aged 54 and has lost her job in mid-2021.  She has been receiving net rental income from a property in Australia after deducting mortgage repayments and related expenses.

18.  There are plenty of options in the vicinity of Taikoo Shing with an asking price of $8 million or less. It would not be difficult for Madam Ip to find appropriate accommodation for her and even the parties’ son (aged over 20).

19.  Madam Ip cannot show hardship in terms of loss of accommodation. According to her 2^nd affirmation, the hardship is really deprivation of her opportunity to enjoy other orders that may be deemed appropriate by a family court.  This leads to her application for stay.

Stay of proceedings

20.  Madam Ip seeks a stay of the present proceedings for 6 weeks so as to apply for ancillary relief.  Her affirmations do not say in which jurisdiction she would apply. 

21.  Insofar as the Australia jurisdiction is concerned, an application as to property or maintenance of a party to the marriage must be made within 12 months from the date upon which the divorce order took effect, ie 22 December 2017.  After that time such an application could not be made without first obtaining the leave of the court to do so.  See the divorce order of the Federal Circuit Court of Australia.

22.  Madam Ip instituted pre-action procedure in Australia, Ms Leung describes as akin to mediation. The parties engaged in some sort of negotiation (and for that matter, I disregard the without prejudice letters in exhibits CS-4 & -17).  The negotiation did not come to fruition and broke down in about mid-2019.  Madam Ip has not pursued the matter further in the Australian court. It is not clear whether, 3½ years since the divorce has taken effect and the parties’ domicile has changed to Hong Kong, the Australia court will grant leave to Madam Ip to do so.

23.  Insofar as the Hong Kong jurisdiction is concerned, in respect of a marriage dissolved in a foreign jurisdiction, section 29AB in Part IIA of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) provides that either of the parties to the marriage may, with leave granted under section 29AC, apply to the Family Court for an order for financial relief.  However, a party who has remarried is not entitled to make an application in relation to that marriage.  The court must not grant leave unless it considers that there is substantial ground for the making of an application for an order for financial relief.

24.  All financial and property disputes between husband and wife should be resolved in one court, ordinarily the Family Court with wide discretionary powers to do justice between the parties.  Ordinarily it would be appropriate to transfer financial and property claims that fall within its jurisdiction to the Family Court, provided that such a course will not do injustice to either party.  See Chan Man Ki v Yau Chun For [2021] 2 HKLRD 366, CA, §§53, 70.

25.  The court may even stay civil proceedings commenced by a party after decree absolute, to enable the other party to the marriage to commence proceedings in the Family Court: Chan v Yau, §72.

26.  In Chan v Yau, the wife petitioned for divorce but the petition did not include an application for ancillary relief.  The husband neither contested the petition nor applied for ancillary relief.  Subsequent to decree absolute, the wife instituted proceedings in the District Court requiring the husband to return gifts to her.  The husband asserted that the gifts formed part of the matrimonial assets and claimed that the wife was precluded by res judicata in the wider sense from making the claim in the District Court. The Court of Appeal upheld the judge’s decision not to strike-out the wife’s claim but stayed the DC proceedings pending the husband’s application to the Family Court for ancillary relief.

27.  In contrast, in the case of Matz v Matz [1984] FLR 392 (cited in Chan v Yau), the parties were business partners before breakdown of relationship.  A judge dismissed the husband’s application to transfer the partnership proceedings instituted by the wife first in time to the Family Division to be dealt with together with the ancillary relief proceedings.  The decision was upheld on appeal.  The reason was that there had been serious delay on the part of the husband in formulating his claim for property adjustment and the ancillary relief proceedings would not be ready for hearing for a considerable period.

28.  Applying these legal principles, this Court has power to stay the OS proceedings to enable Madam Ip to take out ancillary relief proceedings in the Family Court because matrimonial property is involved.  In the overall scheme of things, a period of 6 weeks’ stay sought by her is not long.  However, the greater concerns are as follows:

(1)  Madam Ip has not indicated in her affirmations whether she would institute ancillary relief proceedings in Australia or Hong Kong.  It was only through her counsel that she indicated at this hearing that she would do it in Hong Kong.  It is yet unclear whether Hong Kong or Australia is the more appropriate forum for her to seek ancillary relief.

(2)  Mr Cheung has remarried.  He is prohibited from applying for ancillary relief under section 29AB(2) of MPPO. He has no other remedy except to apply under PO.  His position will purely be defensive in the Family Court if Madam Ip were to proceed there.  That is a prejudice that this Court should not ignore.

(3)  Ms Leung submits that Madam Ip may be prejudiced in that equal division of Property may not be just and fair and she may be deprived of an order for transfer of the Property to her under the MPPO.  With respect, that is the result of Madam Ip’s own delay in applying to court.  Whilst enjoying occupation of the Property for the last 4 years for free, Madam Ip has not demonstrated a keenness to pursue a transfer order.  In any case, she has not started to show that she is, prima facie, entitled to a transfer order.

(4)  The parties had been married for about 23 years.  There are indisputably 3 major assets – 2 properties in Australia under each of the parties’ sole name and the Property in Hong Kong.  The Australian properties were purchased at A$560,000 in 2010 and A$1,350,000 in 2015.  At an exchange rate of A$1=HK$5.65, the 3 properties are worth a conservative value of A$1,910,000 x $5.65 + HK$18,500,000, ie about HK$29.3 million in total.  If the “sharing principle” is not disapplied, each party shall get half of the assets.  The sale of the Property now will not prejudice or cause hardship to either party.

(5)  An order for sale will achieve a “clean break” between the parties in terms of a joint property.  It will also achieve fairness because Madam Ip has been occupying the Property since 2017 whereas Mr Cheung has been denied his rights to reside in or receive benefits from the Property.

(6)  A stay of proceedings will move the milestone date of the hearing of the OS.  Madam Ip has failed to apply for ancillary relief for 3½ years since the divorce took effect in Australia.  The OS was issued only 10 months after the demand letter.  Madam Ip has not lost her job until mid-2021.  However, she has failed to apply to a family court or to apply for a stay in the 10 months since the OS was served on her.  Her only explanation was that Mr Cheung was not cooperative in making discovery.  However, that would precisely be the reason why she should have gone to court earlier.  She has simply failed to explain the delay or show that there are exceptional circumstances to justify moving the milestone date.

29.  In view of paragraph 28, it can be seen that Madam Ip has not yet formulated her claim in an appropriate jurisdiction and it will be some time before any ancillary proceedings will be heard.  Mr Cheung may be prejudiced. Applying Matz, there is no justification for a stay of the OS proceedings.

Conclusion

30.  Balancing both parties’ interests, an order for sale pursuant to section 6 of PO is beneficial to both co-owners and will not result in great hardship to Madam Ip.  The application for stay of proceedings is declined.  These orders will of course be without prejudice to Madam Ip’s future claim for ancillary relief, as confirmed by Mr Yeung.

31.  The terms of the sale are not in dispute and are annexed to this judgment.

32.  On costs, as Madam Ip has virtually no defence to this claim, costs should follow the event.  I make an order nisi that Madam Ip should bear the costs of Mr Cheung (including costs reserved and those under the 2 summonses), summarily assessed in the sum of $130,000.

33.  I thank counsel for their assistance.

Annex

It is ordered that:

1.   Pursuant to sections 2 and 6 of the Partition Ordinance (Cap 352), there be an order for sale of the property known as ALL THOSE 38 equal undivided 114000^th shares of and in ALL THAT piece or parcel of ground registered in the Land Registry as SUB-SECTION 5 OF SECTION K OF QUARRY BAY MARINE LOT NO. 2 AND THE EXTENSION THERETO together with the full and exclusive right to hold use occupy and enjoy ALL THAT Flat C on 22^nd Floor, Hoi Tien Mansion, Horizon Gardens, No. 15 Taikoo Wan Road, Taikoo Shing, Hong Kong (the “Property”);

2.   The Property shall be placed on the open market for sale forthwith at such price and on such terms as the Plaintiff thinks fit with a reserve price of HK$18,500,000 (the “Reserve Price”), by way of private treaty or public auction;

3.   On receipt of an offer for purchase of the Property, the Plaintiff shall be authorised to accept the offer on behalf of the Defendant forthwith as long as it is equivalent to, or in excess of the Reserve Price;

4.   The conveyancing procedure of the sale of the Property be committed to Messrs Boase, Cohen & Collins of 2303-7, Dominion Centre, 43-59 Queen’s Road East, Hong Kong (the “Conveyancing Solicitors”);

5.   The Defendant do within 14 days from the date of this Order take all necessary steps to enable the sale of the Property to proceed including but not limited to procuring delivery to the Conveyancing Solicitors of all title deeds and documents relating to the Property;

6.   The Defendant do deliver vacant possession of the Property to the Plaintiff by 30 November 2021 provided that the Defendant shall permit prospective purchasers to inspect the Property on reasonable notice given by the Plaintiff or an estate agent;

7.   The Defendant shall within 7 days of any request by the Plaintiff or his agents, sign and execute all necessary instruments and do all acts as are necessary to effect the sale of the Property to the purchaser under the offer accepted by the Plaintiff, failing which Ms Chan Chin Leung Fiona, partner of Messrs Boase, Cohen & Collins is hereby appointed pursuant to Section 25A of the High Court Ordinance (Cap 4) and/or Section 8 of the Partition Ordinance (Cap 352) and/or Section 51 of the Trustee Ordinance (Cap 29), to execute the necessary agreement, conveyance, assignment, and all other necessary documents (if any) to give effect to this Order and to convey the Property and all interest therein to the purchaser;

8.   The proceeds of sale of the Property shall be applied according to the following priority:

(1)  In discharge of all government rent, rates, taxes and other outgoings due and affecting the Property, if any;

(2)  In discharge of all incumbrances, if any;

(3)  In payment of all auctioneer’s remuneration and/or all estate agent’s commission not exceeding 1% of the selling price;

(4)  (i)   In payment of the legal costs and disbursements of the sale of the Property to Messrs Boase, Cohen & Collins capped at $25,000;

(ii)  In payment of any additional expenses (such as removal of unauthorised building works) as may be required to deal with any enquiries from prospective purchasers or agents;

(5)  The remaining balance of the proceeds of sale of the Property be paid to the Plaintiff and the Defendant in equal shares, subject to (6) below; and

(6)  Out of the Defendant’s share of the sale proceeds, the settlement of the Plaintiff’s costs of and incidental to these proceedings as set out in paragraph 10 below;

9.   There be liberty to apply for further directions as to the manner of sale of the Property and generally; and

10.   On a nisi basis, the Defendant do pay the Plaintiff's costs of and incidental to these proceedings (including all costs reserved), summarily assessed at HK$130,000.