MAT NG AND ANOTHER v. HSU SHENG HSIANG

HCB 4944/2017

[2020] HKCFI 2045

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 4944 OF 2017

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D E C I S I O N

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A. Introduction

1.  The Applicants are the joint and several Trustees of the property of Hsu Song Chieh, a bankrupt (“Bankrupt”).  The bankruptcy order was made on 25 July 2018.  On 12 October 2018, the Applicants were appointed joint and several trustees of the Bankrupt’s estate.

2.  The present application relates to a residential property, Flat B, 20^th Floor, 78 Broadway, Mei Foo Sun Chuen, Kowloon (“Property”).  The Property is (and has been since 28 December 2001) registered in the names of the Bankrupt and the Bankrupt’s father, Hsu Sheng Hsiang (“Father”).

3.  The bankruptcy order was made against the Bankrupt on the petition of Madam Li Pik Ki, the Bankrupt’s former wife.  They had been married on 18 February 2001, and their marriage was dissolved by a Decree Absolute of Divorce on 19 October 2012, given in matrimonial proceedings FCMC 14402/2011.  The petitioning debt was the ancillary relief lump sum of HK$16,605,000 (“AR Lump Sum”) granted by the Family Court in those proceedings, together with the interest accruing on it.

4.  The order for ancillary relief (“AR Order”) was given by the Family Court on 27 October 2014, following a six-day trial.  From the ancillary relief judgment, it appears that the Father was the 2^nd respondent in the matrimonial proceedings, and that it was the Father (rather than the Bankrupt) who was the main contestant in the matrimonial proceedings.  The AR Order declared the Bankrupt to be the legal and beneficial owner of a half share of and in the Property, and required the Bankrupt to pay the AR Lump Sum to Madam Li within 14 days.  The costs of and incidental to the ancillary relief application were ordered to be paid by the Bankrupt and the Father jointly and severally.

5.  The Bankrupt has defaulted in payment of the AR Lump Sum and the taxed costs of the matrimonial proceedings.  As I understand it, neither has the Father paid the taxed costs for which he is jointly and severally liable.

6.  By summons dated 21 January 2020 (“Summons”), the Applicants seek an order for sale of the Property.  The application is made under section 6 of the Partition Ordinance Cap 352 (“PO”).

7.  Because of the joint-named ownership of the Property, the Father has therefore been named as respondent in the summons.

8.  The investigation of the Applicants (as trustees in bankruptcy) has revealed that the only valuable asset in Hong Kong of the Bankrupt is his half share in the Property.  It has also been discovered that shortly before Madam Li petitioned for the Bankrupt’s bankruptcy, the Father registered against the Property a Notice to Sever Joint captaincy dated 1 June 2017.

9.  On 14 November and 5 December 2018, the Applicants wrote to the Father to invite him to purchase the Bankrupt’s half share in the Property, or to sell the Property jointly with the Applicants.  Though the letters were recorded by the postal service as duly delivered, there was no reply from the Father.

10.  I previously gave directions that the application would be determined on the papers.  Submissions have been filed only on behalf of the Applicants.  It can be said that the application is not contested, as neither the Bankrupt nor the Father has appeared to contest it. This is perhaps not surprising in circumstances where, since their appointment as trustees in bankruptcy, the Applicants have been unable to locate the Bankrupt (and no Statement of Affairs has ever been submitted by him), and where the Father has failed to respond to the Applicants’ letters.

11.  I would also point out that neither the Bankrupt nor the Father have availed themselves of the opportunity that I gave by directions on 21 July 2020 that they might file evidence in opposition to the application by 7 August 2020.  Nor has there been any application for an extension of that deadline. My directions also made clear that, in the absence of any further evidence filed by the Bankrupt and/or the Father, the application would be dealt with on the papers as they then stand.

12.  Mr Jeremy Kwong, Counsel for the Applicants, also points to the fact that the Property is subject to the first charge of the Director of Legal Aid, who has confirmed that he has no intention to commence any legal action to enforce that charge, and that he agrees to the present application.  Though the Official Receiver has been served with the Summons, he has confirmed he has no comments on it, and would not attend the hearing of it.  The Director of Lands has also been served with the Summons, and he has indicated that the Government would not have objection to the proposed sale of the Property.

13.  Having considered the evidence and the submissions, this is my Decision.

B.     Applicable Principles

14.  Mr Kwong is obviously correct when he says that there is no issue in these proceedings as to the extent of the Bankrupt’s beneficial interest in the Property, as that has already been determined by the Family Court in the matrimonial proceedings. Hence, the only issue is whether the Court should order a sale of the Property in the present circumstances.

15.  Section 2 of the PO provides that, where any property in land is held by two or more persons, whether as joint tenants or as tenants in common, the Court may (a) make an order under section 6 for a partition of the property, (b) make an order under section 6 for a sale of the property; or (c) refused to make any order.

16.  As already indicated, the Summons makes an application under section 6 of the PO.  That section provides that the Court may make an order for sale of the property, 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 persons interested or presumptively interested, (c) the absence or disability of some of the persons interested, or (d) any other circumstances.

17.  The applicable principles are well-settled, and where stated in Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 at §§18 and 19.  A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, to ask for an order for partition or sale.  When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded that either (a) such an order will not be beneficial to all the co-owners, or (b) it will result in very great hardship to one co-owner.  The burden is on the opposing co-owner to demonstrate either of those points.  Whether an order for sale is beneficial to all the co-owners is not determined by the descent of the opposing co-owners or the assertion by them that it is not beneficial.  It is a question to be determined by the Court objectively.

18.  Mr Kwong has also properly drawn my attention to an apparent divergences of judicial opinion on whether the approach applied by the majority in the English Court of Appeal in Re Citro (a bankrupt) [1991] Ch 142 ought to be adopted in Hong Kong.  I note the summary of the divergence explained by Recorder Eugene Fung SC in Re: Lee Yik Kwong [2019] HKCFI 2485 at §66, but I agree with Mr Kwong that it is not necessary to address all resolved any divergence in the present application, where the Father has not appeared and has not filed any evidence to trigger any relevant argument on or consideration of the point.

C.     Analysis

19.  The starting point is that the Property is a residential flat.  It is not realistic or sensibly possible to divide the property into parts amongst the co-owners.  As it is impracticable, partition could not be beneficial to the co-owners.

20.  Where there is no dissent of the other co-owner, it might be thought the obvious appropriate relief is to grant the order for sale.  In any event, there is no suggestion that such an order would not be beneficial to all the co-owners, or that it would result in any great hardship to one co-owner.  It seems to me that disentanglement from the Property would be beneficial to the Father, who would also receive the value of his share of ownership.  The ability to use the Bankrupt’s share of ownership in partial settlement of the AR Lump Sum is also properly to be regarded as beneficial to the Bankrupt.  The evidence also demonstrates the Father is a person of substantial means, owning at least four other properties outside of Hong Kong and having only fairly recently sold another property in Hong Kong.  The Father also has valuable businesses and other assets, and during the marriage of the Bankrupt and Madam Li, he generously maintained them.  Therefore, there could be no realistic suggestion that the Father would suffer very great hardship if an order for sale is made.

21.  The market value of the Property was assessed as HK$20,860,000 as at 18 January 2020.  An updated valuation should now be obtained from an independent professional valuer. Clearly, even the half share of the value of the Property is insufficient to satisfy the AR Lump Sum.  But it is important that the asset is sold so as to satisfy, as much as possible, the debts owed by the Bankrupt.

D.     Result

22.  I am wholly satisfied that it is appropriate in the circumstances of this case to make an order for sale.  I therefore order that the Property be sold pursuant to section 6 of the PO.

23.  I further direct that:

 (1)  The conduct of the sale of the Property be given to the Applicants or their appointed agent.

 (2)  The Applicant shall obtain evaluation of the Property from an independent professional valuer for the purpose of determining the market value of the Property.

 (3)  The sale of the Property shall be at a price not less than the market value of the Property as determined by the independent professional valuer.

 (4)  The Respondent shall within 60 days deliver vacant possession of the Property together with all title deeds and other documents relating to the title of the Property which are in his possession, custody or power to the Applicants.

 (5)  The Respondent shall join in the sale and execute such agreement, conveyance or other document(s) necessary to assign the Property to the purchaser(s), failing which the Register of the High Court or such other person(s) as he may appoint be authorised to execute such agreement, conveyance or document(s).

 (6)  The proceeds of the sale of the Property shall be applied in the following priority: (i) in discharge of all government rent, rates and other outgoings due and affecting the Property, (ii) in payment of all legal costs, valuation fees, estate agents’ fees, charges and expenses incurred in connection with the sale, and (iii) the balance to be divided equally between the Applicants and the Respondent.

24.  I also grant liberty to apply for any further directions as might be necessary as to the manner of the sale of the Property, or generally.

25.  As to costs, I agree with Mr Kwong’s submission that the Summons has been necessitated by the refusal of the Father to engage with the Applicants as to the appropriate method of dealing with the Property.  Therefore, I order the Father (the respondent) to pay the Applicants’ costs of the Summons.  I shall assess those costs by way of summary assessment, with the Applicants to provide a Schedule or Statement of Costs within 7 days, and for the Father to provide his Objections, if any, within 28 days thereafter.