LIU CHUNG HANG AND OTHERS v. LIU CHUNG LEUNG ALFRED

HCMP 1255/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1255 OF 2007

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J U D G M E N T

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1.  I have before me an application for an order for sale of a flat in co-ownership (“the property”) made under section 6 of the Partition Ordinance, Cap. 352 (“the Ordinance”).  The defendant contests the application on the ground that he would suffer grave hardship if an order is made.

2.  The property is about 900 sq ft.  It is situated in Prince Edward Road West.  The building is about 50 years old.  It is occupied by the defendant and his family of three.  I have before me a report by a firm of surveyors valuing the property at HK$3,950,000 as at 14 June 2007. 

3.  The plaintiffs are related to the defendant.  The four of them came to own the property as tenants-in-common as a result of a vesting assent made on 18 April 2000 by the executor of their aunt, Madam Liu Kam Tai, who passed away on 22 October 1991.

4.  The plaintiffs are all resident overseas.  They have not derived any benefit from the ownership of the property and now seek an order for its sale.  Mr Lam, who appears for the plaintiffs, produced a draft order, the terms of which have been explained to the defendant.

5.  The defendant resists the application.  He did not wish to sell the property and wished to continue living there.  He said that if the property were sold, he would have no where to live.  He told the Court that he is self-employed as a trader in garment and did not have a stable income.  His wife is a shipping clerk and they have a 9-year old child.  In reply, Mr Lam pointed out that if the property is sold, the defendant should be able to share about HK$1,000,000 from the proceeds, and since both the defendant and his wife are capable of earning an income, the sale of the property should not create any hardship.  On his part, he fairly pointed out that unless the Court orders a sale, the plaintiffs would be deprived of any benefits out of the co-ownership of the property, but would nevertheless have to share in the burden.

6.  As explained to the defendant during the hearing, the Court must apply the law.  The Court can only exercise a discretion to the extent that the law allow.

7.  The law is to be found firstly in the Ordinance.  Section 6 of the Ordinance provides (inter alia):

“	(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.”

8.  It is also necessary to refer to section 2.  This section provides:

“	Subject to this Ordinance, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may –
	(a)	make an order under section 4 for a partition of the property;
	(b)	make an order under section 6 for a sale of the property; or
	(c)	refuse to make any order.”

9.  As the subject matter of the property is a flat which in legal concept and parlance is one undivided equal 12^th part or share in the land together with the sole and exclusive right and privilege to hold use occupy and enjoy the unit, it is obviously impracticable to contemplate partition and partition cannot be beneficial to the owners.

10.  That being the case, the pre-condition for the exercise of the Court’s power under section 6(1) to order the sale of the property is satisfied.  The next question is whether the Court should exercise that power.

11.  By the use of the word “may”, section 6 confers a discretion on the Court whether to order a sale.  The Ordinance does not, however, set out the considerations which should guide the Court in deciding whether to order a sale.  One has to turn to case law.

12.  The first reported local case in this area is Fook Sun Enterprises Co Ltd v Cromwell Investment Co Ltd & Others [1973-1976] HKC 335, a decision of Briggs CJ.  The Chief Justice in that case accepted counsel’s submission as to the interpretation of section 2(c) of the Ordinance, saying that:

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I think that a court would only make no order, neither an order for partition nor an order of sale, when the interests of all the parties would be better served by their continuing to remain co-owners, or where the facts show that to make such an order would result in very great hardship to one co-owner.”

13.  His decision was reversed by the Full Court, see [1976] HKLR 1, although none of the judges suggested that this approach to section 2(c) was wrong.  Briggs CJ’s observation was applied by Yam J in Chow Doi Kwai v Chan Cho Yuk [2000] 2 HKLRD 235 when he refused to order a sale of a flat having been satisfied that to do so would create very grave hardship to the defendant and would not be of much benefit to the plaintiff.

14.  In Pun Jong-sau & others v Poon Wing-kong [1979] HKLR 662, Trainor J reviewed the history of the law pertaining to partition in England and the development of the law in Hong Kong.  He came to the view that the primary intention of the Ordinance was to enable an unwilling co-owner to rid himself of the shackles of co-ownership and to have either a physical division of the property into aliquot parts among the co-owners or a division of the proceeds of its sale (see p. 668).

15.  The authorities in this area were usefully summarised by Recorder Fok, SC in Wong Chun Kei Johnny and others v Poon Vai Ching and others, HCMP 4322 of 2002.  In a later decision, Fong Kai Po and Fung Kwok Hing v Yan Yee Wan DCMP 3150 of 2006, Deputy District Judge R Cheung articulated the following propositions:

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

16.  For the purpose of the present case, I am content to adopt the above as a guide.  I would only point out that the discretion in section 6 is not circumscribed by the statute and that whilst the Court must have regard to the primary object of the Ordinance and to the individual and collective interests of the co-owners, the laying down of elaborate rules may inhibit rather than facilitate the proper exercise of discretion.

17.  The present case is one where the plaintiffs are locked in co-ownership and are unable to derive any benefits from the fact of ownership unless an order for sale is made.  Prima facie, the discretion should be exercised in favour of making an order for sale.

18.  An order for sale would mean that the defendant can no longer live in the property in which he is a co-owner.  If the property is sold, it is likely that the defendant would be able to get just under HK$1,000,000 for his 1/4 share.  Since both he and his wife are in remunerative employment, with the money from the proceeds of sale, they should not have too much difficulty in securing a roof over their head.  I am far from satisfied that this is a case of great hardship.

19.  I note that the defendant has not been paying any rent for his occupation and has not indicated any willingness to do so.  This means that he has been enjoying the benefit of the whole of the property although he only has a 1/4 share interest.  If the Court were to refuse to make an order, the defendant would be able to continue to reap that benefit perhaps indefinitely.  That would not be fair.

20.  In all the circumstances, I am satisfied that I should exercise my discretion to order a sale.  I make an order in terms of the draft Order handed in Court on 11 December 2007 with the amendment of 1.5% in substitution for 1% in paragraph 2(3) as indicated by Mr Lam.

21.  As to costs, I see no reason why costs should not follow the event.  I make an order nisi that the plaintiff should have the costs of the application, such costs to be taxed if not agreed.  Either party has liberty to apply within 14 days to vary or set aside the order nisi.