RE TANG TIM CHUE alias TANG TIM CHU

[English Translation – 英譯本]

CACV 297/2021

[2022] HKCA 909

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 297 OF 2021

(ON APPEAL FROM HCB 7373/2020)

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JUDGMENT

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Hon Chu JA (giving the judgment of the court):

A.  Introduction

1.  On 28 January 2021, the court ordered that Tang Tim Chue (“the Bankrupt”) be adjudged bankrupt[1], and the Official Receiver was appointed the provisional trustee of his estate.

2.  On 24 February 2021, the Bankrupt issued a summons to apply for leave to proceed with the action in the Court of First Instance Case No. 1123 of 2020 (“HCA 1123/2020”).  The Official Receiver objected to the application.

3.  Upon hearing, K Yeung J of the Court of First Instance (“the trial judge”), in his judgment handed down on 14 May 2021[2], dismissed the application of the Bankrupt and ordered him to pay the costs of the Official Receiver.  The Bankrupt now appeals against the judgment.

B.  HCA 1123/2020

4.  The Bankrupt is the Plaintiff in HCA 1123/2020 and the Defendant in that case is Tang Wing Hong (a manager of Tang Kui Yik Tso (鄧居易祖)). The writ of summons in that action was issued on 6 July 2020. The trial judge summarised the Bankrupt’s claim in the case as follows[3]:

“(a) He is a member of Tang Kui Yik Tso;

(b) Tang Kui Yik Tso holds 30 shares of Tang Leuk Tso (鄧畧祖); Tang Leuk Tso is the owner of a piece of land located at Lot 1792 in D.D. 130 in Tuen Mun (hereinafter referred to as the “said land in Tuen Mun”);

(d) Tang Wing Hong (and two other persons) are not the managers of Tang Leuk Tso of Tuen Mun District. They privately and unlawfully signed a provisional agreement for sale and purchase to sell the said land in Tuen Mun in 2007, and received more than five million and six hundred thousand odd Hong Kong dollars;

(e) Tang Wing Hong, being one of the managers of Tang Kui Yik Tso, failed to fulfil the responsibilities of a manager in safeguarding the interests of Tang Kui Yik Tso;

 (f) the Bankrupt asked the court to annul the unlawful contract and order Tang Wing Hong to pay damages.”

5.  Tang Wing Hong filed a defence and counterclaim on 31 August 2020. The Bankrupt issued a summons on 30 December 2020 for an application to strike out the defence and counterclaim, and to enter judgment. The summons was fixed to be heard on 11 February 2021 before a master.

6.  The Official Receiver sent a letter to the court on 10 February 2021, informing the Bankrupt that he was adjudged bankrupt on 28 January 2021, and pointed out that according to sections 12(1) and 58 of the Bankruptcy Ordinance (Cap 6), the Bankrupt had no locus standi to proceed with the action in HCA 1123/2020 unless he obtained the consent of the Official Receiver or was granted the right of action by the Official Receiver.  The Official Receiver also stated that since she was not satisfied that the Bankrupt had a good claim in that case and that the Bankrupt’s estate was not sufficient to cover the costs involved, including potential adverse costs to the other party in the event that the claim in the action failed, she did not agree to allow the Bankrupt to proceed with the action in HCA 1123/2020 and did not intend to attend the hearing on 11 February 2021 to save costs.

7.  Before that, the Official Receiver had informed the Bankrupt through a letter delivered in person on 9 February 2021 that she would not proceed with the action in HCA 1123/2020 as the provisional trustee of the bankruptcy estate or allow the Bankrupt to proceed with the case.

8.  At the hearing on 11 February 2021, Master Man of the High Court dismissed the Bankrupt’s summons.

C.  The Trial Judge’s Decision

9.  On 24 February 2021, the Bankrupt issued the aforesaid summons in the bankruptcy case, applying for leave to proceed with the action in HCA 1123/2020.

10.  The Official Receiver submitted a report to the court on 27 April 2021 opposing the application on the following grounds:

(1)  The Bankrupt had no locus standi to make the application;

(2)  even if the bankrupt had locus standi to make the application, the decision of the Official Receiver was not perverse, clearly wrong or utterly unreasonable and absurd; and

(3)  the Bankrupt’s estate did not have sufficient funding, nor could the Bankrupt provide a useful and effective guarantee.

11.  After the hearing, the trial judge handed down judgment on 14 May 2021, dismissing the Bankrupt’s application. The reasons for the trial judge’s decision are as follows:

(1)  Even if the Bankrupt succeeded in the proceedings in HCA 1123/2020, there would be no evidence to show that he would benefit personally, or that he would definitely be given a share of the relief sought in the case out of his capacity as a “member” of Tang Kui Yik Tso, or to show the value of the share that might be distributed to him. The Bankrupt was therefore not a person “aggrieved” by any act or decision of the trustee as stipulated in section 83 of the Ordinance. He thus had no locus standi to make the application.

(2)  Even if the Bankrupt had the locus standi to make the application, the Official Receiver’s decision was not perverse, clearly wrong or utterly unreasonable and absurd given the factors already considered. The factors considered by the Official Receiver include the following:

(a) The Bankrupt had previously commenced the proceedings in HCA 1159/2018 to claim against Tang Wing Hong and others, alleging that Tang Wing Hong, being only the manager of Tang Leuk Tso of Yuen Long District, instead of the manager of Tang Leuk Tso of Tuen Mun District, sold the said land in Tuen Mun privately.  However, the Bankrupt’s claim had already been struck out (see [2019] HKCFI 1806 and [2020] HKCA 479).

(b)   Deputy High Court Judge Liu Man Kin in the Court of First Instance did not instruct the Bankrupt to claim against Tang Wing Hong (as a manager of Tang Kui Yik Tso) in his judgment in HCA 1159/2019[4], as the Bankrupt alleged.

(c)  The relevant sale and purchase documents of the land show that the sale of the said land in Tuen Mun was not completed. There was no document to show that Tang Wing Hong and the two other managers had received $5 million odd as alleged by the Bankrupt. Those pieces of land for which the sale had been completed were in Yuen Long.

(d)   The Bankrupt did not provide evidence to show that he had a genuine interest in Tang Kui Yik Tso or to show the value of the alleged interest, and whether it would be sufficient to cover the costs of the action in HCA 1123/2020.

(3)  The Bankrupt’s estate did not have sufficient funding, nor could the Bankrupt provide a useful and effective guarantee.

D.  The Bankrupt’s Grounds of Appeal

12.  The Bankrupt filed a notice of appeal on 8 June 2021 against the trial judge’s decision. The grounds of his appeal are as follows:

“This is a judgment that is contrary to common sense and factual basis.

In the case, Tang Wing Hong has admitted to having collected $5.6 million out of the illegal land contract transaction. The Official Receiver’s lawyer acted contrary to common sense and failed to identify the truth of the case. The Plaintiff was aggrieved and the lawbreakers were left unpunished.”

13.  The Bankrupt made the following submissions:

(1)  Tang Wing Hong illegally sold the said land in Tuen Mun in violation of the New Territories Ordinance (Cap 97).  Tang Wing Hong only had the right to sell the Tso Tong land (祖堂地) in Yuen Long District but not the Tso land in Tuen Mun District.  Tuen Mun District Office of Home Affairs Department replied that only the three managers including Tang Sum On had the right to apply for the sale of Tuen Mun Tso land.

(2)  Tang Wing Hong, through the tort of conspiracy, sold the said land in Tuen Mun privately, collected $5.6 million and distributed it on his own. In his defence in HCA 1123/2020, he admitted that he had received a huge sum of $5.6 million from the sale of the said land in Tuen Mun, and argued that it was done with the approval granted by Home Affairs Department.

(3)  The market value of the said land in Tuen Mun is $30 million. The Bankrupt and his son had interests in the property of Tang Kui Yik Tso, and had the full right to hold Tang Wing Hong accountable for his unlawful tort of conspiracy to sell the Tso land. If the Bankrupt was not allowed to proceed with the litigation, Tang Wing Hong and his conspirators would be connived.

E.  Reasons for Judgment of this Court

E1.  Does the Bankrupt have locus standi to make an application?

14.  Section 83 of the Bankruptcy Ordinance provides as follows:

“If the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order in the premises as it thinks just.”

15.  If the Bankrupt wishes to apply under section 83 for reversing the decision of the Official Receiver, namely, that she would not proceed with the action in HCA 1123/2020 as a provisional trustee or allow the Bankrupt to proceed with the case, and for leave of the court to proceed with the litigation, he must first prove that he has been “aggrieved” by the decision of the Official Receiver.  A well-established legal principle is that unless a bankrupt can prove that his estate would have had a surplus after paying all the debts but for the decision of the Official Receiver, he will not be regarded as “aggrieved” by the decision of the Official Receiver: see Re a Debtor, ex parte The Debtor v Dodwell (The Trustee) [1949] 1 Ch 236; Re Chu Wai Tung [2017] 4 HKLRD 610 [40]-[43]; Re Kwong Yuet Ping [2021] HKCFI 118, [11]-[14]; and Butterworth Hong Kong Bankruptcy Law Handbook (6th ed) [83.02].

16.  This court agrees with what the trial judge stated that, since the said land in Tuen Mun belongs to Tang Leuk Tso, even if the claim of the Bankrupt in HCA 1123/2020 was established, leading the court to order that the agreement for the sale of the said land in Tuen Mun be dismissed and that Tang Wing Hong should pay damages, the said land in Tuen Mun should be restored to Tang Leuk Tso as part of Tang Leuk Tso’s estate, and any damages awarded should be paid to Tang Leuk Tso and/or Tang Kui Yik Tso, not to the Bankrupt. Therefore, the Bankrupt would not have received any assets from the claim in HCA 1123/2020 to repay his debts, let alone achieve a surplus to his estate after repaying his debts.

17.  Moreover, even if the Bankrupt and his son were “members” of Tang Kui Yik Tso, and even if the said land in Tuen Mun was worth $30 million odd as the Bankrupt alleged, the evidence provided by the Bankrupt would not be sufficient to show that Tang Kui Yik Tso would inevitably distribute the money successfully recovered through the proceedings in HCA 1123/2020. In addition, Tang Kui Yik Tso only holds 30 shares of the 285 shares of Tang Leuk Tso.  The Bankrupt did not provide any evidence to show the amount he could receive from Tang Kui Yik Tso.  The Bankrupt submitted in the appeal hearing that in view of his efforts made for the Tso Tong (祖堂), the elders would undoubtedly give him at least $200,000 to $300,000. However, the Bankrupt did not provide any evidence, information or ground to support that allegation.

18.  Under such circumstances, the Bankrupt failed to prove that he was “aggrieved” by the decision of the Official Receiver and thus the requirements of section 83 were not met.  Therefore, the trial judge was right to rule that the Bankrupt had no locus standi to make the application.  For this reason alone, the application of the Bankrupt and this appeal should be dismissed.

E2.  Whether the Official Receiver’s decision was perverse,clearly wrong or utterly unreasonable and absurd?

19.  Even if the Bankrupt had locus standi to make this application, he would still be required to show that the Official Receiver’s decision was perverse, clearly wrong or utterly unreasonable and absurd; that is to say, no reasonable trustee would have so acted, and only then would the court interfere with and reverse her decision; and such jurisdiction would have to be cautiously exercised: see Re Chung Kau (unreported) HCB 581/2003 (23 February 2004) at paragraph 13; and Re Wan Po Jun Mary Pauline (unreported) HCB 144/2011 (26 February 2013) at paragraph 8.

E2.1  Whether the claim in HCA 1123/2020 had any reasonable prospect of success? 

20.  In assessing the claim in HCA 1123/2020, the Official Receiver had taken into consideration the following matters[5]:

(1)  The District Lands Office of Yuen Long gave approval for Tang Wing Hong to replace Tang Chiu Kau as the manager of Tang Leuk Tso, and for Tang Chi Cheung and Tang Sum Yuen to replace Tang Yu Chung and Tang Sum On as the managers of Tang Leuk Tso on 10 May 2004 and 22 December 2006 respectively.  In respect of the appointments of Tang Wing Hong and the other two people, no restrictions were imposed by the two letters of approval. It was not specified that they were only the managers of Yuen Long District.

(2)  The Court of First Instance and the Court of Appeal had adjudicated over the Bankrupt’s allegation that Tang Wing Hong sold the said land in Tuen Mun unlawfully without being the manager of Tang Leuk Tso of Tuen Mun District, including the case of HCA 1159/2018 in which the Bankrupt’s claim was struck out by the court (see [2019] HKCFI 1806 and [2020] HKCA 479).

(3)  Upon the invitation of the Official Receiver, the Bankrupt made two statements on 9 February 2021 and 10 February 2021 respectively.  However, in those statements, the Bankrupt simply repeated his allegations that Tang Wing Hong and the other two people were only the managers of Tang Leuk Tso of Yuen Long District but not the managers of Tuen Mun District and that they had unlawfully sold the said land in Tuen Mun and received the proceeds of the land sale.

21.  The Official Receiver had also taken into account a letter which was provided by the Bankrupt at a later stage.  The letter, which was dated 5 March 2021, was issued to him by Tuen Mun District Office.  As pointed out in the letter, the record showed that:

(1)  Tang Yu Chung, Tang Sum On and Tang Chiu Kau were still the managers of Tang Leuk Tso of Tuen Mun District and they were the only ones who had the right to apply for selling the land in Tuen Mun District.

(2)  The Tuen Mun District Office was still in the process of vetting the application to appoint Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong as the managers of Tang Leuk Tso of Tuen Mun District. There had been no progress in the application for selling the said land in Tuen Mun and no approval had been granted for the sale of the said land in Tuen Mun yet.  

(3)  The said land in Tuen Mun was still owned by Tang Leuk Tso.  

22.  In view of the aforesaid letter from the Tuen Mun District Office, the Official Receiver inspected the relevant record of the said land in Tuen Mun at the Land Registry, which showed the following matters:

(1)  As at 25 March 2021, Tang Leuk Tso was still the owner of the said land in Tuen Mun.

(2)  Pursuant to the provisional agreement for sale and purchase dated 2 August 2007 and the agreement for sale and purchase dated 22 October 2010, Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong, acting as the managers of Tang Leuk Tso, reached an agreement with Strong Cheer Limited (“Strong Cheer”) that subject to consent being obtained under the New Territories Ordinance, (i) certain pieces of land in Yuen Long and (ii) the said land in Tuen Mun would be sold to Strong Cheer at the price of $39,216,160 and $5,619,240 respectively. 

(3)  On 15 June 2010, the Yuen Long District Office gave approval for selling the land in Yuen Long District.  Subsequently, in accordance with a deed of assignment dated 22 October 2010, Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong, acting as the managers of Tang Leuk Tso, assigned the interests of the pieces of land in Yuen Long District to Strong Cheer at the price of $39,216,160.  

(4)  The said land in Tuen Mun was not included in the Deed of Assignment dated 22 October 2010. 

(5)  In the aforesaid provisional agreement for sale and purchase, the agreement for sale and purchase and the deed of assignment, there is no record stating that Strong Cheer had paid Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong the purchase price of the said land in Tuen Mun, nor was there any clause specifying that Strong Cheer should still be required to pay $5,619,240 to Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong even if the sale of the said land in Tuen Mun was not completed. 

23.  The Official Receiver took the view that there was no evidence to suggest that Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong, acting as the managers of Tang Leuk Tso, had received $5,619,240 without assigning the said land in Tuen Mun.  Accordingly, it was the view of the Official Receiver that the Bankrupt had failed to prove that Tang Leuk Tso or he himself suffered any loss; and that there was no prospect of success for the Bankrupt’s claim in HCA 1123/2020 even if the letter from the Tuen Mun District Office dated 5 March 2021 was taken into account. 

24.  In our view, the Official Receiver had considered and analysed the relevant evidence and materials correctly, including the responses and documents provided by the Bankrupt.  We agree that there was no evidence to show that (i) Tang Chi Cheung, Tang Sum Yuen and Tang Wing Hong, acting as the managers of Tang Leuk Tso, had assigned the interests of the said land in Tuen Mun to Strong Cheer; and that (ii) the three of them had received $5,619,240 as the proceeds of the land sale, without assigning the said land in Tuen Mun.

25.  The Bankrupt submitted that Tang Wing Hong had admitted in his defence filed in HCA 1123/2020 that he had received the proceeds of the land sale.  In that case, both the Bankrupt and Tang Wing Hong were unrepresented; the Bankrupt’s statement of claim was written in Chinese whereas the defence and counterclaim of Tang Wing Hong were written in English.  The defence and counterclaim, which we have read carefully, did not give a specific response to each and every paragraph of the statement of claim but simply raised the following five points:  

(1) Tang Wing Hong denied every allegation made in the statement of claim. (paragraph 1)

(2)  All the allegations made in the statement of claim had been dealt with in various High Court cases and they had all been dismissed; among them, in CAMP 276/2019, the Court of Appeal dismissed the appeal lodged by the Bankrupt and ordered him to pay costs.  (paragraph 2)

(3)  Tang Wing Hong was appointed the manager of Tang Leuk Tso and the District Officer had given approval in accordance with the New Territories Ordinance. Hence, the sale of the land could not have been illegal or unlawful.  (paragraph 3)

(4)  Tang Kui Yik Tso held 30 shares among the 285 shares of Tang Leuk Tso and the representatives of Tang Kui Yik Tso had attended a meeting and agreed to sell the land, and they had received the proceeds distributed from the land sale. (paragraph 4)

(5)  Tang Wing Hong asked the court to dismiss the claim and order the Bankrupt to pay costs. (paragraph 5)

27.  We agree with the submission of the Official Receiver that unlike what the Bankrupt claimed, Tang Wing Hong did not admit in his defence and counterclaim that he had received $5 million odd as the proceeds of the sale of the said land in Tuen Mun.  While it was stated in paragraph 4 that there was a land sale and the representatives of Tang Kui Yik Tso had received the proceeds distributed from the land sale, it did not specify which pieces of land were involved.  Nevertheless, based on paragraph 3 and the context, it appeared that what was referred to in paragraph 4 was the land sale in Yuen Long District and the proceeds thereof.

28.  In any event, what the Bankrupt had claimed in HCA 1123/2020 and had been asserting was that Tang Wing Hong and the other two people, despite not being the managers of Tang Leuk Tso of Tuen Mun District, had acted unlawfully by selling the said land in Tuen Mun to Strong Cheer, and they had received $5 million odd as the proceeds of the land sale.  However, in light of the letter from the Tuen Mun District Office dated 5 March 2021, the relevant record of the said land in Tuen Mun at the Land Registry, and the Official Receiver’s analysis of the evidence and the law, there was no objective evidence and ground to support the Bankrupt’s claim, which cannot be substantiated.  In our view, the assessment and conclusion of the Official Receiver that there was no reasonable ground and prospect of success for the Bankrupt’s claim in HCA 1123/2020, was reasonable and was not manifestly wrong. 

E2.2  Whether the Bankrupt’s estate was enough to cover the costs? 

29.  On the other hand, the Official Receiver had also assessed whether there was sufficient funding or indemnity in the Bankrupt’s estate to cover the costs that might be incurred in the case, including any potential adverse costs to the other party in the event that the claim in the action failed: see Wan Po Jun Mary Pauline, at paragraph 9; and Dr Vincent Kay Lo-Ip v Dr Andrew Kee-suan Koh (unreported) FAMV 8/2001 (24 April 2001).

30.  The trial judge held that the Bankrupt’s estate lacked sufficient funds.  The Bankrupt proposed that he could provide a guarantee in the form of his interest in the Tso land of Tang Kui Yik Tso.  Nevertheless, the trial judge took the view that there was no evidence to show the value of Bankrupt’s alleged interest, nor was there any evidence to show that it could be used to indemnify the relevant costs when necessary.  Hence, the guarantee proposed by him did not have any practical meaning or effect. 

31.  We agree with the ruling of the trial judge.  As stated above (see paragraphs 17 and 18), even assuming that the claim in HCA 1123/2020 was successful and that the said piece of land in Tuen Mun was worth $30 million odd as alleged by the Bankrupt, any amount that would be successfully recovered in the case would belong to Tang Leuk Tso rather than the Bankrupt himself.  Besides, Tang Kui Yik Tso only had 30 shares of the 285 shares of Tang Leuk Tso.  The Bankrupt had not provided any evidence to show that Tang Kui Yik Tso would distribute the amount that would be successfully recovered in HCA 1123/2020, thus benefitting the Bankrupt.  Furthermore, there was no evidence from the Bankrupt to show the amount he himself could receive from Tang Kui Yik Tso, nor was there any evidence to support his claim that he could get at least $200,000 to $300,000.  

E3.  The Order of this Court and Costs

32.  Based on the above, we agree with the ruling of the trial judge that the Official Receiver’s refusal to give consent to the Bankrupt to proceed with the claim in HCA 1123/2020 or to assign the right of action in those proceedings to him was not perverse, clearly wrong or utterly unreasonable and absurd. 

33.  None of the grounds of appeal advanced by the Bankrupt is made out.  The appeal is dismissed accordingly. 

34.  It is the usual rule that in the event that the Bankrupt’s appeal is not successful, he should pay the costs of the Official Receiver, which is to be assessed summarily, to be paid out of the Bankrupt’s property. We have considered the statement of costs submitted by the Official Receiver on 31 May 2022, with item B3 being the fees charged by Ms. Chan, for the hearing on 14 June 2022.  In view of the fact that it was a hearing lasting for 30 minutes, the amount under this item should be adjusted to $2,900 ($5,800 X 0.5 hour). As regards the amounts under the other items on the statement, we consider that they are reasonable and appropriate.  We assess the costs of the Official Receiver at $38,500. 

F. Conclusion

35.  We order as follows: 

(1)  The appeal of the Bankrupt be dismissed.

(2)  The Bankrupt shall pay to the Official Receiver and provisional trustee the costs of this appeal, which is assessed at $38,500, to be paid out of the Bankrupt’s property.