RE NG TZE CHING

HCB 5883/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 5883 OF 2006

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D E C I S I O N

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1. This is an application by the Joint and Several Trustees (“Trustees”) of the property of a bankrupt, Mr Ng Tze Ching (“Ng”), for an order for sale of a landed property (“Property”) pursuant to section 60 of the Bankruptcy Ordinance, Cap 6 (“Ordinance”) and section 6 of the Partition Ordinance, Cap 352.

2. The Property is a residential unit situated in Tin Shui Wai and built under the Home Ownership Scheme (“HOS”) operated by the Hong Kong Housing Authority (“HKHA”).  It is registered in the joint names of Ng and his wife, Ms Ma Lan Hing (“Ma”), who is the respondent in this application.  The Property was acquired by Ng and Ma in November 1993 and was held by them as joint tenants. 

3. There is no dispute on the applicable law.  The disagreement to the material facts is confined to matters of details.

4. Ng filed a bankruptcy petition by himself on 25 July 2006.  A bankruptcy order (“Order”) was made against him on 5 September 2006.  Upon the making of the Order and by operation of law, Ng’s interest in the Property became vested in the Trustees[1] and a severance took place whereby the joint tenancy was converted into a tenancy in common[2].  Accordingly, since 5 September 2006, the Trustees and Ma have each been holding 1/2 share of the Property as tenants-in-common.

5. Ng was automatically discharged from bankruptcy on 5 September 2010 (4 years after the Order was made) pursuant to Section 30A of the Ordinance.  However, the discharge does not have the effect of re-vesting in Ng any property that has been duly vested in the Trustees.  Further, the powers and duties of the Trustees in relation to the administration of Ng’s estate are unaffected by the discharge.  The Trustees are still bound to collect and realise the estate and to distribute the proceeds amongst the creditors[3].

6. As at June 2012 (this application was filed in November 2012), the total amount of claims under the proof of debts filed by Ng’s creditors stood at just over HK$270,000.  As at July 2012, the Property was valued at HK$2.3 million with the requisite premium paid to HKHA to remove the restrictions on alienation, or HK$1.78 million in the HOS secondary market.  In light of the value of the Property and the relatively modest amount of the outstanding debts, it is lamentable that the parties have not been able to resolve these matters amicably despite having been given the opportunity by the court to do so. 

7. The Trustees have tried to reach an agreement with Ma on a way to dispose of the Property in order to end the shackles of co-ownership and to realize Ng’s assets for the benefit of the creditors, but to no avail.

8. Given the disagreement between the Trustees and Ma over the disposal of the Property, the Trustees seek an order for sale of the Property pursuant to section 6 of the Partition Ordinance, which provides as follows :-

(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.

(3) (a) Without prejudice to subsection (1), if any person interested in the property applies to the Court to make an order for the sale of the property instead of an order for partition, then, unless the other persons interested undertake to purchase the interest of the party applying for an order for sale, the Court may, if it thinks fit, make an order for the sale of the property.

…

(4) On making an order under subsection (1) or subsection (3), the Court may direct a distribution of the proceeds of the sale and give all other necessary or proper consequential directions.

9. Section 2 of the Partition Ordinance is also relevant.  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.

10. Ma does not dispute the rights of the Trustees in making this application.  Nor does she dispute Ng’s (and thus the Trustees’) interest in the Property.  It is her case that she does not have the financial means to buy out the Trustees’ interest in the Property.  It is accepted by Ma that it would not be practical to make a partition order in this case.

11. Ng has not filed any evidence in this application.  Two affirmations have been filed by Ma. 

12. I have been informed that Ng will be 66 years old in December this year, and Ma will be 57 in January 2015. 

13. According to Ma’s evidence, she was married to Ng in 1978.  They have 2 sons, who were born in 1981 and 1983.  Ma has been working hard all her life.  She has been in different jobs, sometimes taking on more than 1 job.  However, her income has always been modest.  The Property is her biggest and only significant asset.  Ma’s evidence is that the lion share of the mortgage payments had been shouldered by her.  According to her, Ng was lukewarm about acquiring the Property and had not been discharging his fair share of the mortgage payments.  Ng had made no contribution to the mortgage payments after the Order was granted.  The mortgage was repaid in 2009. 

14. Currently, Ma only has a part-time job working as a tour guide.  She has kidney problems and suffers from hypertension. However, no detail has been provided in the evidence concerning such health issues.  Ma’s evidence is that the medical expenses for her kidney problems have been substantially covered by her medical insurance. 

15. The eldest son got married to a Mainland lady last year and has moved out of the Property.  He makes no contribution to support his parents.  However, Ma expects her eldest son to move back to the Property once his wife obtains the permission to live in Hong Kong.  The younger son still resides at the Property.  He only works on a casual basis with no stable income.  The only contribution he makes to the family is the payment of the premium for his mother’s medical insurance of about HK$24,000 per year.

16. Ma’s evidence is that the proceeds which she will be entitled to if the Property is sold will not allow her to buy another property or to rent one which is comparable with the Property over a long period of time. 

17. Ng is a taxi driver but it appears that he does not have a substantial or stable income.

18. Before I set out the applicable principles of law, which shall guide the court in making this difficult decision, I shall deal with Ma’s complaint that it has taken the Trustees 6 years to make this application.  There are 2 answers to the complaint.  Firstly, in January 2007, the Trustees had written to Ma informing her that Ng’s interest in the Property had become vested in them.  It was suggested that Ma might be interested to purchase Ng’s share in the Property and that she should seek independent legal advice over the matter. 

19. Secondly, I am informed by Ms Kwok, who appeared for the Trustees, that an application of the present type would require the agreement of the creditors’ committee because the funding would have to come from the creditors.  The committee was asked in 2008 to fund such an application, but no approval was given.  Such approval was only given in June 2012. 

20. In the premises, I see nothing in this complaint of delay.

The law 

21. In Pun Jong Sau & Ors v Poon Wing Kong & Ors [1977-1979] HKC 210, 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 Partition 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 pg 218E-F).

22. In Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825, Recorder Fok, SC (as he then was) summarised the authorities in this area and set out the following propositions as the guiding principles for the exercise of discretion by the court under the Partition Ordinance :-

(a) 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;

(b) 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;

(c) 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.

23. With respect, it must be remembered that Wong Chun Kei was a case where the co-owners of a 3-storey building consisting of 12 flats were in disagreement over the sale of the same.  The court would in those circumstances be in a position to determine objectively whether a sale would be beneficial to all the owners.

24. The present application presents a rather different picture.  In an application for sale by the trustees in bankruptcy, quite often an “innocent” spouse will stand to lose the benefit of the family home.  I am unable to envisage a situation where the sale would, objectively, be beneficial to all co-owners in such cases.  In my view, the “beneficial to all” element is not applicable to an application of the present type. 

25. I have also been referred by Ms Kwok to the English Court of Appeal authority of Re Citro (a bankrupt) [1990] 3 All ER 952, which was a decision in the context of bankruptcy.  It was held by majority that :-

“Where a spouse who has a beneficial interest in a matrimonial home has become bankrupt under debts which cannot be paid without the realization of that interest, the voice of the creditors will usually prevail over the voice of the other spouse and a sale of the property ordered within a short period. The voice of the other spouse will only prevail in exceptional circumstances.” (see pg 961h) [emphasis added]

…

“What then are exceptional circumstances? As the cases show, it is not uncommon for a wife with young children to be faced with eviction in circumstances where the realization of her beneficial interest will not produce enough to buy a comparable home in the same neighbourhood, or indeed elsewhere; and if she has to move elsewhere, there may be problems over schooling and so forth. Such circumstances, while engendering a natural sympathy in all who hear of them, cannot be described as exceptional. They are the melancholy consequences of debt and improvidence with which every civilized society has been familiar.” (pg 961j-962a)

26. For obvious reason, Re Citro was not referred to in Wong Chun Kei.  In a case of the present type, there are opposing interests of the “innocent” spouse and the creditors.  I believe that the approach in Re Citro reflects 3 things.  Firstly, in the event of bankruptcy, the interest of the bankrupt spouse in the jointly owned property no longer belongs to him.  By the same token, the “innocent” spouse can no longer expect to enjoy that property indefinitely. Secondly, the interest of the bankrupt spouse should normally be realised to pay off his outstanding debts.  Thirdly, there is a public interest in maintaining commercial disciplines.

27. With respect, I agree with the approach of Re Citro.

Analysis

28. The only issue here is whether Ma has made out a case of very great hardship to her if an order for sale is made.  I regret to say that, whilst this court has considerable sympathy for her predicament, such a case has not been established.

29. First of all, given that there is no dispute over Ng’s interest in the Property, I do not see much relevance in the fact that most of the mortgage payments were made by Ma.  I agree with Ms Kwok that in a family setting there is little point in trying to work out the respective contributions, whether in monetary terms or otherwise, of the husband and wife.  Further, there is agreement between the parties that Ma is entitled to an equitable accounting in her favour in respect of the post-Order mortgage payments by reason of the fact that she had paid the entirety of the same (assuming that it is properly established).

30. This court has no difficulty accepting that Ma will be considerably worse off after the sale of the Property.  She is getting older, and with aging there is the inevitable decline in her health and earning capacity.  The proceeds which she will get after the sale will not be sufficient for her to buy another property.  In all probability, she will have to rent a smaller place. 

31. In respect of Ma’s sons, I can understand the desire of a mother to live with her sons regardless of their age.  On the other hand, many people would think that it is high time for them to look after themselves.  If they wish to live together with their parents, they should shoulder the economic burden of the accommodation. 

32. Ms Lee, who appeared for Ma, relies upon the recent authority of Madam Justice M Chan in Re Leung Wang Fai, bankrupt, unrep., HCB 15328/2003, 17 March 2014.  However, I am unable to see that this case is of assistance to Ma.  Issues of hardship are necessarily facts sensitive.  In that case, the court was concerned with a co-owner (mother of the bankrupt) who was 82 years old.  She had to look after her husband who was 85 years old and was ill.

33. The circumstances of this case do not justify a finding of very great hardship.  If no order for sale is granted, the creditors would not be paid in the foreseeable future.  That cannot be a just result.

Conclusions

34. In the premises, I grant the order sought in the Summons dated 9 November 2012 (Ms Lee has fairly accepted that the terms are not controversial) subject to the following :-

(a) In para (2), the words following “(Cap. 4A)” are to be deleted;

(b) The parties are to agree the date for the delivery of vacant possession (para (7)) and the details concerning the distribution of proceeds (para (8));

(c) Failing any agreement as provided in (b), the matter(s) will be determined by the court;

(d) Paras (10) and (11) are to be deleted;

(e) Liberty to apply.

35. Last but not least, I am grateful to both Ms Kwok and Ms Lee for their assistance in these matters.