RE TAM MEI KAM

CACV 197/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 197 OF 2016

(ON APPEAL FROM HCB 3777/2011)

____________

____________

_____________________

__________________

J U D G M E N T

__________________

Hon G Lam J (giving the judgment of the Court):

1.  The appellant, Madam Tam, was a bankrupt who has since been discharged on 25 April 2016. Prior to her discharge there had been proceedings on foot (in HCMP 2981/2004) in which she had applied for maintenance to be paid to her out of her deceased daughter’s estate, pursuant to the Inheritance (Provision for Family and Dependants) Ordinance (Cap 481), to which we shall refer as the “maintenance proceedings”. Those proceedings were conducted primarily between Madam Tam and HSBC International Trustee Limited, the executor and trustee of the will of the deceased daughter. In 2015 Madam Tam applied in those proceedings for an order that future maintenance to be paid to her should be paid in a lump sum rather than in periodic payments as it had hitherto been paid.

2.  The trustees in bankruptcy of Madam Tam, who were also 5^th respondents to the maintenance proceedings, took a neutral stance towards that application but expressed the view, in correspondence, that such a lump sum payment to Madam Tam, if made before her discharge, “may well be considered” after‑acquired property under s 43A of the Bankruptcy Ordinance (Cap 6), which means it would fall within the bankruptcy estate. 

3.  In response, Madam Tam argued that the nature of maintenance paid under the Inheritance (Provision for Family and Dependants) Ordinance, whether periodically or in a lump sum, was income, which could be made the subject of an income payments order under s 43E of the Bankruptcy Ordinance, as Barma J held in Re Tam Mei Kam (bankrupt) [2012] 4 HKLRD 345 in relation to periodic payments.  She contended that, since s 43A(5) of the same Ordinance specifically excludes “any property which, as part of the bankrupt’s income, may be the subject of an income payments order under section 43E” from the scope of after‑acquired property, a lump sum payment could not possibly be said to fall within the bankruptcy estate as after‑acquired property under s 43A.  There may well be reasonable arguments in support of this contention but it is unnecessary to decide this question here, which does not arise on this appeal and on which we express no view.

4.  In subsequent letters to Madam Tam the trustees maintained their view that lump sum payments “may” be regarded as after‑acquired property but stated that unless the court actually ordered a lump sum in Madam Tam’s favour, the question was irrelevant and need not be considered.

5.  Madam Tam was not satisfied with the trustees’ stance.  By a motion issued on 23 February 2016, she applied to the Court of First Instance for an order under s 83 of the Bankruptcy Ordinance to impugn the “determination/view/contention/stance” of the trustees stated in their letters as described above.  S 83 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.”

6.  The motion was heard on 8 March 2016 and, by his decision dated 14 September 2016, L Chan J dismissed it on two grounds: first, the application was unnecessary because it was “extremely unlikely” lump sum maintenance would be ordered in favour of Madam Tam prior to her discharge from bankruptcy which was expected on 25 April 2016; secondly, the application was based on a hypothetical situation because a lump sum order may or may not be made in the maintenance proceedings.  Madam Tam now appeals against the dismissal of her application.

7.  At the outset it may be noted that the same judge had on 1 September 2016 dismissed Madam Tam’s application in the maintenance proceedings for a lump sum order.  So what was hypothetical below has become academic.  The outcome of this appeal can only have relevance for costs.  This is evident from paragraph 11 of Madam Tam’s skeleton argument, which demonstrates that the real order being sought is one to overturn the order below on costs.

8.  Mr Hew for the trustees accordingly raised the point that the complaint against the judge’s dismissal of the motion was merely a platform for Madam Tam to challenge the costs order, and the appeal is in substance an appeal on costs only which requires leave under s 14(3)(e) of the High Court Ordinance (Cap 4): Wheeler v Somerfield [1966] 2 QB 94 at 107; Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd & Others (unrep, CACV 90, 91, 93–96/2012; 17 September 2013) at §141.  It does seem to us that the appeal in substance concerns only costs but we accept Madam Tam’s submission that no leave is required in this instance because by s 98 of the Bankruptcy Ordinance “[e]very order of the court … shall be subject to appeal to the Court of Appeal” and the order below is one to which s 98 applies.

9.  Nevertheless we consider the appeal to be without merit.  It is plain that the trustees had not taken a concluded view on the question whether any lump sum maintenance paid before discharge would fall within the scope of after‑acquired property under s 43A.  They expressed their position using phrases such as “may” and “may well” and indicated that the question “need not be considered for the time being”.  They stated expressly that they had not formed a definitive view or obtained legal advice on the question.  In these circumstances there was simply no decision by the trustees that a lump sum award of maintenance “would be caught by s 43A”, contrary to Madam Tam’s assertion in her affirmation filed in support of the motion, not to mention any notice commencing a claim under s 43A.

10.  Nor can the trustees’ position be said to be an “act” imposing a “threat” to Madam Tam as she contended.  Effectively all that the trustees were doing was reserving their right to contend, if the need did arise, that any lump sum maintenance paid to Madam Tam before her discharge would be property falling within the bankruptcy estate as after‑acquired property.  In reality what Madam Tam complained about was that the trustees’ stance had inconvenienced her in conducting the maintenance proceedings.  She wished to have certainty as to whether a lump sum order would be caught by s 43A before deciding how to pursue or settle those proceedings.  But it does not follow that the trustees came under an obligation to commit themselves unnecessarily and irrevocably to a legal position.  On the facts of the present case there was in our view no relevant act at the time with any legal effect that could properly be the subject of challenge under s 83.

11.  In any event, it cannot be said that the trustees were wholly unreasonable in reserving their rights.  The question might or might not arise.  Most probably it would not arise, for the reasons given by the learned judge.  To defer incurring expense in obtaining legal advice on the question seems to us to be a rational course quite open to the trustees.

12.  For these reasons the appeal must be dismissed, with an order nisi that Madam Tam has to pay the costs.