HUI SHUI KAY v. HON TO AND ANOTHER

HCMP 3399/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3399 OF 2016

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D E C I S I O N

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1.  This hearing is for the trustees to show cause under paragraph 40 of my judgment dated 26 October 2017 (“the judgment”).

2.  The trustees accepted this court’s finding that there had been no settlement reached between the plaintiff and the bankrupt’s estate on 24 March 2014. 

3.  The trustees explained that in their experience, the registration of bankruptcy orders at the Land Registry could not be vacated upon the trustees’ request.  Unlike a lis pendens, a bankruptcy order is registered as an incumbrance and a court order is required to vacate it.  If a property is held on trust, the trustees simply have no locus to vacate.

4.  One method of negating the effect of the registration of the bankruptcy order against a jointly owned property is to assign all or any interest the bankrupt’s estate has to the co-owner on an as-is basis.  This would guarantee that, whether or not the bankrupt’s estate has any interest in the property, the co-owner would have full legal and equitable ownership over the property. 

5.  Accordingly, before action, the trustees proposed the “settlement” by executing an assignment in favour of the plaintiff, which was not accepted.

6.  For present purposes, it is not necessary to go into the legislative provisions in support of such a view.  Suffice to say that, I accept that the trustees’ explanations in paragraphs 3-5 were what they in good faith believed.

7.  After commencement of this action, the plaintiff’s solicitors have invited the trustees to procure the 1^st defendant to agree and sign a consent summons to dispose of the action.

8.  It was not possible for the trustees to do so if the property was really held on trust by the 1^st defendant.  Moreover, the 1^st defendant has not been contactable despite various attempts to contact her between February 2015 and October 2017.  It appeared from what the 1^st defendant’s mother told the trustees that the 1^st defendant has left Hong Kong on 8 February 2016 and could not be located.  I accept the explanation. 

9.  The present action would have been inevitable for the reasons given in paragraph 8.  However, the most appropriate way for the trustees to handle this action remained this: they should have told the plaintiff and the court that they would not contest the action, leaving the court to make the appropriate orders against the 1^st defendant.  Instead they have asserted a settlement which had never existed.  Such conduct was wholly unreasonable, lacked legal basis, wasted the court’s time and caused the plaintiff to incur more costs for the hearing.

10.  Accordingly, the trustees should only be allowed to recover costs of this action from the estate limited to costs for perusal of the court documents (which effectively repeated the plaintiff’s stance in correspondence), writing a letter to the plaintiff and the court indicating their neutral stance and seeking to be excused from court attendance, perusal of the court order granted by the court and applying to the Land Registry to vacate the registration pursuant to the court’s order.  I summarily assess the costs at $12,000 payable out of the estate.

11.  On the other hand, the trustees should bear the costs of the plaintiff:

(i)  For the correspondence from 25 March 2014 up to the date before issue of the originating summons, summarily assessed at $10,000. 

(ii)  Part of the costs of the hearing (including part of counsel’s fees) wasted by the trustees in advancing a wholly unmeritorious position, summarily assessed at $90,000.

12.  The trustees should not be allowed to recover these costs from the bankrupt’s estate.