OFFICIAL RECEIVER, THE TRUSTEE OF THE PROPERTY OF LAU YUET MING DAISY v. LAU YUET MING DAISY AND ANOTHER

HCB 10078/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 10078 OF 2003

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Re:  LAU YUET MING DAISY (劉月明)

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D E C I S I O N

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1.  This is an application by the Official Receiver as the trustee of the property of Lau Yuet Ming Daisy (a discharged bankrupt) for an order for sale of the property at Flat E, 4^th Floor, Wah Lok Mansion, 2 Tsing Shan Square, Tuen Mun, New Territories, pursuant to section 6 of the Partition Ordinance (Cap 352) and section 60 of the Bankruptcy Ordinance (Cap 6).

2.  The 1^st respondent is Madam Lau, the discharged bankrupt herself, and the 2^nd respondent is her husband, Mr Ma Siu Ming.  Together they are the registered owners as joint tenants of the property.  The property was acquired by them on 22 December 1992 at a consideration of HK$860,000.  A bankruptcy order was made against Madam Lau on her own petition on 8 July 2003.  It is clear that upon the making of the bankruptcy order, Madam Lau’s interests in the property, if any, became vested in the Official Receiver as the trustee of her property pursuant to section 58 of the Bankruptcy Ordinance and that a severance occurred by operation of law whereby the joint tenancy was converted into a tenancy in common: In re Dennis [1993] Ch 72.

3.  Four years after the bankruptcy order on 8 July 2007, Madam Lau was automatically discharged from bankruptcy.  The discharge, however, did not re-vest in Madam Lau any property which had vested in her trustee.  The trustee is still bound to collect and realise such property and to distribute the proceeds among the creditors.

4.  To date, 3 proofs of debt have been lodged with the Official Receiver for a total of HK$151,944.01.  No asset has been realised for the bankruptcy estate and no contribution has been made by Madam Lau to the estate.  As a result, no dividend has been declared or distributed to any creditors.

5.  The Commissioner of Rating and Valuation has given an opinion that the market value of the property with vacant possession is HK$2,000,000 as at 13 May 2014.  The mortgage loan has been fully repaid and the property is unencumbered.  On the basis that Madam Lau has a 50% interest in the property, a sale would clearly generate sufficient money for all admitted creditors to be paid in full.

6.  Mr Ma, however, opposes the application.  The first ground put forward by Mr Ma by an affirmation in opposition dated 2 May 2014 is that Madam Lau’s name was added in the purchase of the property for her to hold 50% of the property on trust.  Since the property was conveyed to Mr Ma and Madam Lau as joint tenants in 1992, the burden lies on Mr Ma to show that the beneficial interests in the property were not held by them as joint tenants in equal shares: Stack v Dowden [2007] 2 AC 432.  Mr Ma accepts that he has no documentary record of any form to prove that Madam Lau was a mere trustee of the property.

7.  In 1992, when they purchased the property, Mr Ma and Madam Lau were boyfriend and girlfriend intending to get married.  According to Mr Ma, Madam Lau was added as a purchaser of the property in order to give comfort to her, so that she would have more confidence in him as a prospective husband and so that it would facilitate the borrowing of a mortgage loan.  The first two reasons are inconsistent with there being any common intention for Madam Lau to hold her moiety in the property merely on trust.  The third reason would suggest that there would have been an attempt to deceive the mortgagee bank if Madam Lau were not in truth a beneficial owner with a half share.

8.  The purchase price of HK$860,000 was paid as to 30% from the savings of Mr Ma and as to the rest by a mortgage loan in the amount of HK$600,000 from Standard Chartered Bank. The mortgage loan was taken out in the name of both Mr Ma and Madam Lau, which means Madam Lau was equally liable with Mr Ma on the personal covenant to repay.

9.  In addition, the problem with Mr Ma’s case of trust is that not only is it unsupported by any documentary record, but it is also contradicted by what Mr Ma said in his other affirmations.  In his affirmation made on 11 January 2014, Mr Ma said that he and Madam Lau each had a 50% interest in the property, although he also said that because he had been solely responsible for paying the mortgage loan repayment instalments, he had a larger share than 50%.  In his affirmation dated 2 May 2014, Mr Ma said that although he made the down payment of 30% for the property at the time of purchase, Madam Lau’s name was added as a purchaser for her protection and the 50% interest in the property was a gift to her.  Mr Ma also informed the court that immediately after the purchase of the property, they moved in to live there and eventually got married to each other in January 1995.  Mr Ma confirmed the truth of these two affirmations at the hearing.

10.  In these circumstances, I cannot place weight on the statement by Mr Ma that Madam Lau merely held the property on trust, which can be regarded as no more than a self-serving and unsubstantiated assertion.  I find that Madam Lau did have a 50% interest in the property, as is indicated by her being a joint tenant with Mr Ma.

11.  It is trite that the court will make an order for sale on the application of a co-owner unless it is satisfied that such an order would not be beneficial to all the co-owners or that it would result in very great hardship to one co-owner: Fook Sun Enterprises Co Ltd v Cromwell Investment Co Ltd & Ors [1973-1976] HKC 335 at 337H-I; Wong Chun Kei Johnny v Poon Vai Ching [2007] 1 HKLRD 825 at §§16-19.

12.  In this context, Mr Ma pleads with the court that it would be very hard on him and Madam Lau if an order was made for the sale of the property.  I have every sympathy for Mr Ma, but being evicted from one’s home is, I am afraid, in the words of Nourse LJ in In re Citro (Domenico) (A Bankrupt) [1991] Ch 142 at 157D, simply one of the “melancholy consequences of debt and improvidence with which every civilized society has been familiar”.  Mr Ma is 55 years old and Madam Lau 48 years old.  They have no children.  They are the only two occupants of the property.  Mr Ma is working as a senior security officer and Madam Lau a security officer, earning HK$13,000 and HK$10,500 a month respectively.  They made a total monthly payment of HK5,000 to their parents as a contribution for their maintenance, but otherwise they have no dependants.

13.  In these circumstances, while the prospect of being evicted from their home will no doubt be very unwelcome and cause some difficulty, I am not satisfied that there is such great hardship as to justify a refusal of an order for sale.  The interests of the creditors of Madam Lau cannot be ignored.  They are, prima facie, entitled to be paid out of what can be realised from Madam Lau’s assets, and these include her interests in the property.

14.  I shall therefore make an order for sale in terms of the draft order submitted at the hearing by Ms Chan on behalf of the Official Receiver, except that (i) vacant possession is to be delivered within 60 days, instead of 28 days as sought; (ii) I shall leave any equitable accounting to a later stage, if necessary; and (iii) the costs order in favour of the Official Receiver at paragraph 8 of the draft order shall be made as an order nisi, with Mr Ma being at liberty to apply to vary it within 14 days if he is so advised.