RE LAU YUET TAI

HCB 25136/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCYPROCEEDINGS NO. 25136 OF 2002

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REASONS  FOR  DECISION

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1.  This is an application taken out on 5 September 2005 by the trustees in bankruptcy of Madam Lau Yuet Tai ("the bankrupt”) under section 6 of the Partition Ordinance, Cap. 352 and section 60 of the Bankruptcy Ordinance, Cap. 6.  The trustees seek the following declarations:

(1)	that the court is satisfied the interest in the property at Flat No. 5 17th Floor Block A Yan Tsui Court Nos. 10 to 12 Yan Tsui Street Chai Wan Hong Kong ("the Property”) is vested in and held in equal shares between Tsang Yiu Chung (" Tsang") and the trustees, as tenants in common;
(2)	that the bankrupt and the trustees have made all reasonable and practicable efforts to contact and/or locate Tsang but without success;
(3)	that a partition of the Property is not beneficial to all persons interested by reason of the absence of Tsang;
(4)	that a notice of these proceedings to be advertised once in a Chinese newspaper published and widely circulated in Hong Kong be deemed good and sufficient notice of the intended sale of the Property by the trustees.
The trustees also seek the following orders:
(5)	that the Property be sold in such manner as the trustees think fit by way of public auction or private treaty;
(6)	that the Registrar of the High Court is to execute any conveyance, contract or other document on behalf of Tsang in respect of the Property;
(7)	that the net proceeds of sale that may be effected, after discharge of all encumbrances (if any) and all other costs and disbursements arising from the sale of the Property, be distributed in the following manner:
	(a)	one half of the net proceeds be paid into the bankruptcy estate account of the bankrupt for the benefit of creditors under the bankruptcy;
	(b)	the other half be paid into the High Court under section 62 of the Trustee Ordinance, Cap. 29 with liberty to any person claiming that sum to apply to the High Court and otherwise to remain in the High Court until further order, with the Registrar of the High Court and the trustees having liberty to apply;
(8)	the costs of the application be provided for.

2.  The bankrupt passed away on 5 October 2005 after the summons was issued but before the first hearing on 19 October 2005.  She had made an affirmation in support of the application before she passed away.

3.  At the hearing on 19 October 2005, I made an order that the service of the summons filed on 5 September 2005 be effected on Tsang by advertisement once in a Chinese newspaper circulating in Hong Kong not less than 28 days before the adjourned hearing and that such advertisement be deemed good and sufficient service on Tsang.  This is in effect the declaration sought in paragraph 4 of the summons.  I also gave leave to place the seal of the court on a copy of the 1^st affirmation of the bankrupt filed herein on 5 September 2005 pursuant to section 119 of Cap. 6, the effect of this is that a copy of her affirmation so sealed shall be admitted as evidence of the matters therein deposed to.  A copy of the bankrupt’s affirmation was sealed on 26 October 2005.  The summons was adjourned for service to be effected on Tsang and to give him an opportunity to respond.

4.  The direction on service has been complied with.  Tsang did not contact the trustees at any time and he has not appeared at the adjourned hearing.

5.  According to the bankrupt's supporting affirmation, the matters giving rise to this application may be stated as follows.

6.  Tsang was formerly married to the bankrupt.  They registered their marriage at the Registrar's Office in Hong Kong on 19 April 1982.  On or about 12 May 1983, the bankrupt and Tsang purchased the Property from the Hong Kong Housing Authority for HK$216,700.00.  They are registered as owners of the Property as joint tenants.  On 16 November 1983, the Property was mortgaged to a bank limited to the extent of HK$195,000.00.  Tsang was responsible for the mortgage repayments until the mortgage was discharged on 6 June 1997.  The Property is unencumbered.

7.  Since the acquisition of Property and before the release of the mortgage, it was arranged between the bankrupt and Tsang that he would pay the mortgage instalments and part of the family expenses, and the bankrupt would pay other family expenses and take care of the children and perform domestic chores to enable her husband to work full time.  The bankrupt asserted that it was their common intention she should have an equal beneficial interest in the Property, as she had made an equal, if not greater, contribution to the maintenance of the Property.  Since 1998, the bankrupt had continued to live in the Property with the children of the family and was solely responsible for discharging all outgoings up to the time of her supporting affirmation made on 31 August 2005.

8.  The bankrupt and Tsang separated in 1998, when he left the matrimonial home.  They were divorced in 2000.  The decree absolute was made on 10 October 2000.  No order was made in respect of the Property in the matrimonial proceedings.

9.  Since their divorce, Tsang seldom contacted the bankrupt.  He would not give her his new address or contact information.  Although he was given full access to his children, he only visited them occasionally.  He made no financial contribution to the family thereafter.

10.  The last time the bankrupt met Tsang was in a restaurant in Central in 2002.  Tsang brought up the subject of the disposal of the Property and asked for a share of the proceeds after disposal.  The bankrupt requested Tsang to transfer his interest to her.  He appeared to agree, but no action was taken, nor did he contact the bankrupt again.

11.  Tsang used to work for restaurants in Beijing and Wuhan, prior to 2000.  The bankrupt had lost contact with all their common friends.  Tsang's mother used to live at Oi Man Estate.  The bankrupt tried to contact her but she had apparently moved away.  The bankrupt tried her telephone number, but it was changed.  The last contact she had with Tsang's mother was in 2001.  Tsang's mother had not contacted the grandchildren.

12.  Tsang has six siblings, but the bankrupt did not have the addresses or telephone number of any of them and they had never contacted her.

13.  Tsang has not contacted his three children, who are now all adults, since 2000, and they have no information of his whereabouts.  The bankrupt and her children had been living in Property continuously since 1983.  Their home telephone number was changed three times, the last time in 2002.  The reason for the changes was to avoid harassment by debt collectors.

14.  The bankrupt presented a petition for her own bankruptcy on 4 December 2002.  She was adjudged bankrupt on 17 February 2003.  She was prepared to vacate the Property so that her interest could be realised by the trustees to pay her creditors.

15.  According to the statement of affairs dated 26 November 2002, the estimated total indebtedness of the bankrupt was HK$570,950.00.  Her only assets were HK$100.00 in her bank accounts and the Property, the market value of which, as then estimated by the bankrupt, was HK$800,000.00.  At the time of the statement of affairs, the bankrupt’s income was HK$5,990.00 per month, and expenses were HK$9,218.00 per month.

16.  The bankrupt had made contributions of HK$2000.00 per month from July 2003 to April 2004 towards the discharge of her liabilities in the bankruptcy.  Since May 2004, she had not been able to make any contributions because of her low income, and the lack of financial support from one of her daughters.  The realisation of the Property would appear to be the only means by which any meaningful sum could be realised for the benefit of her estate.  The main obstacle to a sale of the Property is that the bankrupt was unable to contact Tsang.  According to the transaction records, 3 units in the same block where the Property is located were sold at the secondary market in 2003 between the price of HK$600,000.00 and HK$750,000.00.

17.  As a matter of law, upon a bankrupt being adjudicated bankrupt, a severance took place whereby a joint tenancy is converted into a tenancy in common by operation of law (In re Dennis [1993] Ch 72 at 74).  After severance, the bankrupt’s share in the property would be vested in the trustee in bankruptcy.  The present case is on all fours with Re Chow Yuet Lam trading as Wah Mei Weaving Factory, HCB No. 513 of 1990, Ribeiro J, 27 October 1999, in which similar declarations and orders were made.

18.  It is appropriate to grant the reliefs sought in the summons of the trustees.  I have made an order in terms of the draft submitted as amended, to provide for the payment of premium to the Housing Authority out of the proceeds of sale of the Property.  The trustees’ costs in this application are to be paid out of the bankrupt’s estate.