RE MOK WUT MAN

HCB 9264/2006

[2020] HKCFI 1357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 9264 OF 2006

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D E C I S I O N

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Introduction

1.  This is an application by summons by the trustees in bankruptcy (“Trustees”) of Mr Mok Wut Man (a discharged bankrupt) (“Mok”) for a declaration that a residential property is held by the Trustees and the respondent, Madam Yung Wa Yu (“Yung”), as tenants in common in equal shares, and for an order of sale under the Partition Ordinance (Cap 352).

2.  Mok and Yung were married on 24 September 1997.  The property in question, a Home Ownership Scheme flat in Tong Ming Court, 15 Tong Ming Street, Tseung Kwan O (“the Property”), was purchased in their joint names on 18 March 1999.

3.  On 9 November 2006, Mok presented a petition for his own bankruptcy.  The bankruptcy order was made on 6 February 2007.  The proofs of debt lodged by creditors amounted to $348,725.63.  Mr Mok was discharged from bankruptcy on 6 February 2011.  He had not made any contribution to his bankruptcy estate.  On 6 September 2019, the Trustees filed the present summons.

4.  According to a recent valuation report, as at 27 May 2020, the open market value of the Property was $5,250,000, and its value on the secondary market was $4,250,000.

The issue and the legal principles

5.  The primary issue that arises is whether Mok had any beneficial interest in the Property.  The principles for determining where the beneficial ownership of a family home lies in a case where, as here, the property has been purchased in the joint names of a cohabiting couple, have been summarised in the joint judgment of Lord Walker and Baroness Hale in Jones v Kernott [2011] UKSC 53 at §51 as follows (which have been adopted as part of Hong Kong law: see Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 at §5.16; Chen Lily v Yip Tsun Wah Alvan (CACV 4/2016, 28 October 2016), §16):

“ (1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct: “the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party” (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69.

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, “the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”: Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, “the whole course of dealing … in relation to the property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions.

(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).”

6.  Also, in Jones v Kernott at §25, it was stated that:

“ in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the deposit (or indeed the rest of the purchase) in unequal shares. The presumption is that the parties intended a joint tenancy both in law and in equity. But that presumption can of course be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resources.”

7.  In assessing the common intention of the parties, the court needs to take a holistic approach having regard to the context: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §1.6.

The evidence

8.  I turn to the evidence.  Mok has not filed evidence or appeared on the present summons but he had provided a statement of affairs in November 2006 and filed two affirmations in early 2007 prepared by solicitors in which he stated that he had no beneficial interest in the Property, that all the purchase price was provided by Yung, and that the Property should belong entirely to Yung by reason of resulting trust.

9.  Yung has adduced two affidavits handwritten by her dated November 2019 and January 2020 respectively.  This court also asked her certain questions at the hearing which she answered on oath.  She was born in Fujian Province in 1974, attended up to secondary education there, and came to Hong Kong in July 1991 to join her parents.  She had worked as a factory worker in Hong Kong and subsequently as a sales assistant in department stores.  In 1997 she married Mok who was only a few months older. 

10.  As a couple, they applied for a Home Ownership Scheme flat and were allotted one in 1999.  On 18 March 1999, they acquired the Property as joint tenants from the Hong Kong Housing Authority at the price of $768,000, with the help of a mortgage loan of $691,200.  The loan was secured by a legal charge on the Property entered into by both Mok and Yung as borrowers.

11.  Yung said that after their marriage, her finances were kept separate from Mok’s.  They did have a joint bank account at first but it was closed after he took away all the money in it.  She had to bear the family expenses as Mok was often in financial difficulties.  Yung’s own bank account at the time was an account she held with Liu Chong Hing Bank.

12.  Yung said that the down payment was paid by her with the severance pay of $77,809 she received when the Daimaru department store closed down.  She has produced in evidence a document issued by Daimaru recording the calculation of her termination payment, her bank account passbooks and the record of purchase of the cashier’s order for the down payment showing that the sum was sourced from the money she received from Daimaru in January 1999.  She has also produced documentary evidence that the legal fees of $7,111.50 for the conveyancing services were paid by her from her bank account.

13.  Yung said that at the time, because the flat was applied for in joint names, it was the Housing Authority’s requirement that the Property had to be assigned to them in joint names.  She therefore had no choice but to follow the requirement.  However, at the time, Mok had assured her that he would only be a nominal owner without any beneficial ownership.  They understood that she was the one paying for the acquisition of the Property.

14.  According to Yung, the mortgage loan instalment repayments were also subsequently paid from her bank account from 1999 until September 2013 when the loan was fully repaid (except two instalments in August 1999 and February 2000 respectively which were paid by Yung’s sister on her behalf).  Each monthly instalment initially amounted to around $6,200 to $6,600 until February 2001 and was changed to around $3,000 in March 2001 and then to around $4,500 from May 2001 onwards.  In January 2005, she had, out of her savings, made a lump sum partial repayment of $100,000.  She has produced her bank passbooks as well as the mortgage loan statements in support of her evidence. She said she also paid all the utilities bills, government rent and rates in relation to the Property. 

15.  Yung had a monthly salary of about $10,000 in 1999.  Her son with Mok, born in December 1999, was taken care of by Mok’s parents who lived in Tuen Mun, and only stayed with her when she was on leave, thus lowering her expenses.  Yung also received financial assistance from her eldest sister who lived in Indonesia, her second elder sister who lived in Australia, her parents, younger sister and godmother who lived in Hong Kong.

16.  Yung said that Mok worked as a casual worker in construction and renovation works but he ran a restaurant business in Dongguan and lost a lot of money.  This was already the case in 1999 and she recalled that, in 2000, shortly after the birth of their son, Mok had disappeared for half a year, during which creditors came to the Property to look for him. Although he emerged afterwards, he spent a lot of time in the Mainland and Yung knew little about his activities there.  In late 2006, it was only when she received certain court documents that she found out that Mok had applied for his own bankruptcy.  After his bankruptcy, Yung continued to bear all responsibilities for the family expenses and repaying the mortgage loan.

17.  In April 2012, Mok applied to the court in Hong Kong for a divorce with Yung.  By then he had entered into a relationship with another woman in Dongguan.  During the proceedings for ancillary relief in the Family Court, Mok again accepted that all the financial outlay in relation to the acquisition of the Property originated from Yung and that he did not have any beneficial interest in the Property.

Discussion

18.  I remind myself that in a case such as the present, the evidence of the bankrupt and the co‑owner of the property in question has to be approached with caution because their assertions of a common intention that the bankrupt had no beneficial interest in the property are often self‑serving, easy to make retrospectively, but difficult to refute with specific evidence.  Such assertions must be tested with regard to undisputed or established facts and events as well as the inherent probabilities in light of the circumstances at the time (see Primecredit, §1.4).

19.  Approaching the evidence in this manner with appropriate caution, it seems to me that Yung’s version is credible. 

20.  The evidence on their intention at the time of application to the Housing Authority is not very clear and I am prepared to assume against Yung that at the time when she and Mok applied for a flat, they might have considered it a joint enterprise, to be contributed to by both parties. However, on Yung’s evidence, which I accept, Mok was already in financial difficulties when the flat was allotted and acquired in 1999.  This is consistent with the fact that Mok failed to pay his taxes even for the year of assessment 1998‑1999 (payable in 2001), as shown by the evidence produced by the Trustees.  Yung’s testimony that Mok’s financial situation had soon become so bad that, to avoid creditors, he disappeared for half a year in 2000 shortly after their son’s birth, seems to me to be genuine and something that she can be expected to recall accurately.  Thus although Mok did have income in Hong Kong at the time, he had, more probably than not, spent and lost it in the Mainland as Yung said, rather than saved it or contributed to any significant extent to the family in Hong Kong.  In his preliminary interview with the Trustees, Mok claimed to have been responsible for the household expenses but one also needs to be cautious about this evidence for it could have been given by him in order to avoid the obligation to make a regular contribution to the bankruptcy estate out of his income.  The Trustees had not produced any evidence such as bank statements showing what Mok earned in the years prior to his bankruptcy and how he paid for the household expenses as claimed.  On the contrary, the proof of debt lodged by the Inland Revenue Department suggests that Mok did not have any assessable income for the assessment years 2000/01, 2001/02 and 2002/03, and did not pay his taxes for the years 1998/99, 1999/2000, 2003/04, 2004/05 and 2005/06.

21.  I also accept that the fact that the Property was acquired in the joint names of Yung and Mok was due to the requirement of the Housing Authority, which in my view reduces the force of the presumption that Mok had an equal share in the Property.  It is significant to note that the down payment for the Property and legal fees were paid with the termination payments Yung received from Daimaru, which were based on her service at that department store since March 1994.  In other words, it was a lump sum received in large part on account of her services before she was married.  If the Property were intended to be equally owned by both, in the circumstances of the couple at that time I would have expected that Mok would have been required to make a financial contribution towards the purchase.  Given that they had kept their finances separate and that Mok was in financial difficulties, Yung’s evidence that they had an express understanding at the time of the acquisition that the Property was to belong to Yung as she was putting up all the finance for it, seems to me to be credible and I accept it.

22.  The fact that Mok also entered into the legal charge over the Property as one of the borrowers seems to me to have been the consequence of the Property being placed in joint names, rather than an independent fact suggesting that he had any beneficial interest.  I am satisfied that in fact, he did not pay anything towards the discharge of the mortgage loan.

23.  In conclusion, Yung has in my judgment discharged the onus of showing that notwithstanding the Property was registered in joint names, it was intended by both Mok and her at the time that the Property was hers and that Mok had no interest in it.  She had acted on this basis throughout the years, lived frugally and tried to save money to repay the mortgage loan.  There is no beneficial interest in the Property that vested in the Trustees upon Mok’s bankruptcy. 

24.  This is sufficient to dispose of the present application.  I should mention, however, that the time elapsed from the bankruptcy (2006) until this application is made (2019) is a matter of concern and, had it been necessary, I would have asked to be addressed in detail on that matter: see, for example, Re Leung Man Yuen, trading as Wai Man Iron Works Engineering Company (unrep, HCB 582/1996, 20 September 2016), §§29‑41.

25.  For the above reasons, the summons is dismissed.