WONG SAI HUNG v. WONG YU

DCMP 4039/2019

[2020] HKDC 747

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4039 OF 2019

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JUDGMENT

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1.  By purchase, the plaintiff became the co-owner of the property in question with the defendant. The former now applies for an order for sale of the property, which the defendant resists.

Background

2.  The property in question is Flat A, 7/F Pak Lok Building, Nos 322-326A Nathan Road, Kowloon (“the Property”).  The defendant and her mother (“the Mother”) used to the registered owners of the Property as tenants in common in equal shares since 1989.  The Mother passed away in 2007.  Pursuant to the Mother’s will, her interest in the Property was bequeathed to her husband, the defendant’s father (“the Father”), who was also the executor of the will.  The Father has obtained probate.  By way of assent dated 12 July 2017, the Property became vested in the Father and the defendant as tenants in common in equal shares.

3.  The common allegation of the parties is that the Property had been let out, and carved by the tenant into various units for further subletting.  There is dispute as to whether it was the Father or the defendant who was in charge of such tenancy and took the rental income.

4.  By a Chinese written provisional agreement dated 11 April 2019, the Father agreed to sell and the plaintiff agreed to purchase the former’s half share of interest in the Property subject to tenancy at the consideration of HK$1,440,000.  The English written formal sale and purchase agreement between the Father as the vendor and the plaintiff as the purchaser was dated 25 April 2019.

5.  Since late August 2019, the plaintiff has through solicitors made offers to the defendant to sell the former’s half share to the defendant or alternatively for the parties to sell the Property at the prevailing market price.

6.  The valuation report obtained by the plaintiff suggests that the fair market price of the Property should now be in the region of HK$6,300,000, if sold by private treaty, and HK$5,040,000, if sold by public auction.

7.  Failing to secure the agreement of the defendant one way or the other, the plaintiff commenced the present action in December 2019.

8.  Pursuant to section 3(2), the Director of Lands has been served with these proceedings.

9.  Whilst indicating intention to defend by her acknowledgement of service, the defendant had not filed any evidence in opposition by the time the application first came before this court on 25 May 2020.  Notwithstanding that, this court gave leave to the defendant to do so together with other consequential directions.  Amongst others, there should be no further affidavit evidence after the plaintiff’s reply without leave of the court.

10.  Immediately after the hearing in May 2020, the defendant applied for legal aid, which was refused in June 2020.  The defendant apparently applied for legal aid again in August 2020.  As explained by this court in the direction dated 18 August 2020, this court takes the view that the further proceedings of this action ought not to be deferred because of the automatic stay of proceedings pursuant to section 15 of the Legal Aid Ordinance, Cap 91 triggered by the repeated application by the defendant for legal aid.  Hence the lifting of the stay and direction to proceed by the power of this court under that section.

11.  The matter returned to this court on 31 August 2020.  Besides her affirmation in opposition, the defendant lodged a further letter dated 28 August 2020 making further assertions and enclosing further documentary evidence.  These were introduced other than by way of affirmation, and in any event without leave of the court.

The law

12.  Section 2 of the Partition Ordinance, Cap 352 provides that where a property is held by two or more persons as joint tenants or tenants in common, the court may make an order for the partition of the property pursuant to section 4 or for the sale of the property pursuant to section 6 or refuse to make an order.  Section 3(1) provides that any person interested in such property may institute proceedings in the court by way of an action for partition or sale.

13.  Section 3(4) provides that at the hearing, the court may direct such inquiries as to the nature of the property, the persons interested therein and such other matters as it thinks necessary and proper.

14.  Section 6 provides:-

“(1) In any proceedings under the Ordinance, 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 the persons interested or presumptively interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.

(2) The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.

(3) (a) Without prejudice to subsection (1), if any person interested in the property applies to the Court to make an order for the sale of the property instead of an order for partition, then, unless the other persons interested undertake to purchase the interest of the party applying for an order for sale, the Court may, if it thinks fit, make an order for the sale of the property.

(b) …

(4) On making an order under subsection (1) or subsection (3), the Court may direct a distribution of the proceeds of the sale and give all other necessary or proper consequential directions.

(5) On a sale under this section the Court may allow any of the persons interested in the property to bid at the sale, on such terms as the Court deems reasonable…”

15.  In the present case, the plaintiff consciously became the co-owner of the Property with the defendant.  That said, he is not therefore deprived of the right to extricate himself from the co-ownership and to realise his interest in the Property.  The court in Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 had this to say:-

“18. These passages from the cases cited above were relied upon … to support the following propositions, namely:

(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.

(b) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing c-owner(s)) that such an order will not be beneficial to all the co-owners.

(c) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.

19. Subject to adding the qualifications, “if he has no other remedy,” before the words “ask for an order for partition or sale” in proposition (1), and “or that it will result in very great hardship to one co-owner” to the end of proposition (2), I am satisfied that these propositions fairly and accurately state the law as regards the court’s jurisdiction when faced with an application for partition or sale under the Ordinance …”

16.  That the co-owners are strangers to each other is a relevant consideration: see for instance, Chan Kit Man v Kwan Lai Hung, DCMP 2766/2016 (17 October 2017).

Order for partition?

17.  It has been held that in the context of a residential unit in a multi-storey building, which is the common form in Hong Kong subject to regulated building control and mutual covenants of all the co-owners of the building, partition of a unit in the building is normally impracticable: see for instance, Liu Chung Hang & Ors v Liu Chung Leung Alfred, HCMP 1255/2007 (19 December 2007).  The Property is no exception.

18.  The Property is a 718 square foot residential flat in a typical multi-storey building.  This court doubts that the division of the Property into units by the tenant for subletting has been duly authorized.  There is in any event no evidence in this respect.  Nor is there suggestion by the defendant that the partitions within the Property could legitimately and ought to remain as they are or that they manage to accurately represent the respective share of interest in the Property of the parties.

19.  All circumstances considered, this court is not convinced that partition of the Property as a way out between the parties is practicable.  The question is whether an order for sale should be granted or refused.

The defendant’s allegations

20.  By way of her affirmation, the defendant raises the following points:-

(1)  It was the Father who was in charge of tenancy of the Property, and had kept most of the rental income.

(2)  Her brother moved into one of the partitioned units in the Property between 2018 and 2019.  She had paid for the management fees, rates, government rent and maintenance since mid-2018.  She moved into one of the partitioned units in the Property in mid-November 2019 after divorce from her husband.  She moved in alone[1].

(3)  She had no prior knowledge about the sale of the Father’s half share of interest in the Property.  She asked the Father in mid-2019 about that.  The Father allegedly gave a single-word response, which she took to be denial of the sale.  She suspects the Father was not aware of the nature of the transaction due to his old age of 92 and alleged physical and mental condition.

(4)  She used to work as restaurant captain and salesperson earning low income.  After an accident at work in 2014, she had to receive medical treatment. She now lives on public assistance and loans.

(5)  Acknowledging that the sale could yield half of the sale proceeds to her, the defendant however complains that she would be deprived of the continuous rental income as her financial support.

(6)  She also refers to her sentiment about the neighbourhood of the Property.

The rental income

21.  The plaintiff deposed to his understanding allegedly obtained from the Father during negotiation with him that it was the defendant who was in charge of the tenancy.  The Father and daughter were not in good terms with each other, and the former had also received no account of rental income from the Property from the defendant.  On behalf of the plaintiff, it is also pointed out that the defendant’s version is not likely, as the Father did not become entitled to anything in the Property until his wife died, and the Property was not vested in him by assent until 2017.

22.  However, the dispute in respect of whether it was the Father or the defendant who was in charge of the tenancy or took the rental income is actually immaterial to the determination of this action.  That would be a matter personal to the Father and the defendant, and the plaintiff did not become involved until after the purchase of the Father’s share of interest in the Property in 2019.  Personally the plaintiff has nothing to do with any rental income from the Property, which, according to the defendant, has also ceased by now.

The defendant’s payment of expenses

23.  The allegation of payment of expenses by the defendant will concern the plaintiff only since the latter became the registered co-owner of the Property in late April 2019.  However, no particular or evidence of such alleged payment has been provided by the defendant.  In any event, whether or not the defendant has a cause of claim against the plaintiff for contribution towards such expenses allegedly paid by her for the Property will be personal between the parties, but not a ground for resisting the application for an order for sale.

Validity of the sale and purchase

24.  He who asserts must prove by evidence with cogency commensurate with the seriousness of the allegation.  In respect of the query about the validity of the sale and purchase between the Father and the plaintiff, the defendant has not come up with any evidence in support from the Father himself.  The fact is that all she managed to raise is suspicion.  She managed to advance her assertion in this respect no further during the hearing.

25.  By her latest letter dated 28 August 2020, the defendant enclosed, amongst other documents, a copy of the snapshot of what appears to be some kind of scan image without description except for her handwritten remark that the Father suffered from brain bleeding and has been hospitalized since 28 July 2020.  The other documents include her appointment slips for outpatient treatment and photographs depicting presumably parts of the interior of the Property.

26.  First, these further assertions and documents were produced other than by way of affirmation, and in any event after the close of affirmation evidence without leave of this court.  The evidence is thus inadmissible.

27.  Second, the documents, even if admitted, amount to no comprehensible evidence of her assertion in respect of the Father.  If the defendant is in possession of medical documents relating to the condition of the Father at the material time, ie when he concluded the sale and purchase of his interest in the Property, there is no reason why all that she managed to produce was this copy of an apparently odd snapshot.  Further, the alleged condition of the Father relates to a time so long after the conclusion of the sale and purchase of his interest in the Property.

28.  Third, the further evidence, even if admitted, does not change the observation of this court about the lack of evidence from the Father himself in support of her allegation regarding the validity of the sale and purchase ever since this action was commenced at the end of 2019.

29.  The sale and purchase documentations recorded that the Father was legally and separately represented by solicitors.  The provisional sale and purchase agreement was in Chinese.  The Father also signed a Chinese declaration to expressly confirm his condition and ability to understand the terms of the transaction.  He also specifically confirmed the absence of any trust relationship or litigation with the defendant regarding his share of interest in the Property.  Payments by cheques to the Father of the agreed consideration for the sale were documented, of which the Father also acknowledged receipt in writing.

30.  In other words, what the defendant now asserts is nowhere near the threshold of properly raising the issue, while at the same time bluntly contradicted by contemporaneous documents executed by the Father.

Hardship

31.  The other points raised by the defendant may be categorized as allegations of hardship.

32.  There is no real issue between the plaintiff and the defendant, insofar as the price at which the plaintiff acquired the Father’s half share of interest in the Property is concerned.

33.  Whether or not the previous offer of the plaintiff to sell his half share of interest in the Property to the defendant was reasonable does not matter either.  The offer was made through solicitors in the open.  The defendant was quite entitled to reject such offer, and she did.

34.  In the present action, the defendant’s half share of interest will now be quantified by the fair market price at which the Property would be sold.  As to that, the plaintiff has adduced surveyor’s valuation evidence which suggests that the Property, if sold, would yield about HK$2 to 3 million representing the defendant’s share.  There is no contrary valuation evidence.

35.  The defendant’s reference to her reliance on rental income from the Property is misconceived and unmeritorious.

36.  First, even according to the defendant, the Property or the partitioned units in it are not let out and there is no rental income now.  There is no suggestion or evidence of any committed or forthcoming tenancy in respect of any part of the Property, or the amount of rental income.

37.  Second, any rental income from any part of the Property, if not sold, will have to be shared between the parties.  The defendant could not legitimately keep all.

38.  Third, this court is curious about how she could remain entitled to public assistance if she can subsist on the alleged rental income.

39.  Fourth, there is no factual basis for suggesting that keeping the Property for rental income will have an obvious advantage over sale in real terms, be it for the defendant alone or both parties.

40.  The defendant’s allegation of sentimental attachment to the neighbourhood, in my judgment, is exaggeration, if not untrue, in view of the fact that she moved to live in the Property only in November 2019 after divorce from her husband.

41.  For the avoidance of doubt, the defendant mentioned her brother in her affirmation, suggesting that he had moved into one of the partitioned units in the Property in 2018-2019.  The allegation is not corroborated by evidence.  In commencing the present action, the plaintiff has served notice to occupants of the Property in May 2020.  There is no reason why the brother has not come forward or brought into the present application by the defendant in support of her case, if there is any truth in what she says.

Conclusion

42.  All circumstances considered, including those discussed above, I am satisfied that discretion should be exercised in favour of granting the order, and that should be for the sale instead of partition of the Property.

43.  A draft order was submitted together with the plaintiff’s supplemental submissions on 31 August 2020, which is in line with sections 6 and 7 of the Ordinance.  An order is hereby made in those terms, subject to the follows:-

(1)  Under §6(d) of the draft order, the plaintiff’s costs of these proceedings are summarily assessed at the sum of HK$120,000.  Such assessment is nisi, which shall become absolute without further order of the court if there is no application to vary within 14 days after service of this order.

(2)  Under §7 of the draft order, the defendant shall execute the necessary conveyance and assignment in connection with the sale as well as the vesting of the Property in the purchaser(s), failing which the plaintiff’s solicitors be authorized to do so instead.

[If requested, interpreter will be arranged to assist the defendant in receiving this judgment.]