RE WAN PO JUN MARY PAULINE

CACV 78/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 78 OF 2011

(ON APPEAL FROM HCB 144/2011)

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JUDGMENT

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Hon Cheung CJHC:

1.  This is an appeal from the bankruptcy order made by To J on 11 April 2011.

2.  The facts have been described in detail in paragraphs 2 to 7 of the judgment below.  Stated very briefly, Madam Wan Po Jun Mary Pauline, the bankrupt, was the long time cohabitee of Mr Au Yeung Wing Hong (“the deceased”) before he passed away in 2008.  By his will made in 2007, the deceased appointed Ms Au Yeung Yee Man, his natural daughter, as the sole executrix and trustee of his will.  In his will, he left everything to the daughter and her brother, to the exclusion of the bankrupt.

3.  Various proceedings have since been commenced by the bankrupt.  They include proceedings to challenge the validity of the will and to claim a half interest in the estate of the deceased; proceedings to claim financial provision under the Inheritance (Provision for Family and Dependants) Ordinance (“the Ordinance”) and proceedings to claim repayment of $3.5 million said to have been given by the bankrupt to the deceased to defray domestic and household expenses during their cohabitation when he was in financial difficulties.

4.  The courts have, in interlocutory applications, disposed of some of these claims summarily, whereas her claim for financial provision under the Ordinance (HCMP 1919/2010) and her claim for repayment of the sum of $3.5 million (HCA 1478/2009) are still pending before the court.  Besides, she also claims to have a half share in the “matrimonial home” in which she has been residing, possession of which is sought by the deceased’s estate in DCCJ 3315/2011.

5.  The bankrupt has also commenced two actions against a Mr Lo Kai Kwong based on two declarations of trust (HCA 1682 and 1689/2010).

6.  Importantly for our present purposes, various costs orders have been made against the bankrupt, some of which have already been taxed.  For the purposes of the present bankruptcy proceedings, we are concerned with unpaid taxed costs in the total sum of $24,343.30.

7.  The bankrupt lives on public assistance and has no immediate money to satisfy the outstanding debts.

8.  In his judgment, To J found that the debts were immediately payable and a statutory demand had been served on the bankrupt, which the bankrupt had failed to comply with.  He concluded, on the facts, that the court should not exercise its discretion to withhold the making of a bankruptcy order even though the amounts involved were small.

9.  In this appeal, the bankrupt has raised a number of grounds to challenge the bankruptcy order.

10.  She argues that the bankruptcy petition is premature and the debts involved are meagre in amount.  She also argues that the court has never made any order for immediate payment of costs, particularly when the relevant proceedings are still pending before the court.  She contends that costs should only be dealt with at the conclusion of all proceedings when their outcomes are known and accounts can be squared.

11.  These arguments must be rejected.  There is nothing premature about the bankruptcy proceedings.  The costs orders in question do not award the costs against the bankrupt “in any event”.  Upon taxation, they are payable forthwith.  As for the amount, the minimum amount stipulated in section 6(2)(a) of the Bankruptcy Ordinance (Cap 6) for the presentation of a creditor’s petition is $10,000.

12.  The bankrupt argues that the judge has wrongly exercised his discretion.  The bankruptcy order brings about an automatic stay of her pending claims.  The judge has also erred in under-estimating the strength of her case for claiming financial provision under the Ordinance.

13.  I do not agree.  The imposition of the automatic stay of proceedings is not the end of the world.  It only means that the proceedings are now in the hands of the trustees of bankruptcy, who are under a duty to decide whether to continue with the claims after considering, amongst other things, the merits of those claims.  In relation to the claim for financial provision under the Ordinance, it is a “personal” claim of the bankrupt, unaffected by her bankruptcy.  The bankrupt has already got legal aid for making the claim, and so far as I can see, the prosecution of her claim has not been affected by the bankruptcy order at all.

14.  As for her claim for the return of $3.5 million and for a half share in the matrimonial property, the judge cannot be faulted when he observed that “the Official Receiver will be able to take full instruction[s] from the Debtor and consider the chances of her success professionally” (para 27).

15.  What this court would not lightly do is to disturb the judge’s exercise of discretion in relation to whether to withhold the making of a bankruptcy order.  It is apparent from his judgment that the judge has taken into account all relevant considerations, including the total amount of debts in question, the chances of success of the bankrupt’s outstanding claims and what would likely happen if a bankruptcy order was to be made, before deciding how to exercise his discretion.  The judge was entitled, on the materials before the court, to reach the conclusion he did.  There is nothing which entitles this court to disturb his exercise of discretion.

16.  In the course of his judgment, the judge observed :

“These facts indicated a total lack of any sense of responsibility in her conduct of the litigation. It is not the function of the court in bankruptcy to protect a litigant from frivolous and vexatious litigation. However, the conduct of a debtor, who is unable to pay his debts and knowing he has no means to pay the costs of his opponent if he loses, in indulging himself in a series of litigation over the same subject matter against his opponent with no good cause and thereby incurring costs of his opponent is certainly a factor which the court should take into account in deciding whether to exercise the discretion not to make a bankruptcy order against him. If a debtor pleads a viable cause of action and conducts his litigation in a responsible manner, the court’s discretion may tilt in his favour. Having regard to the fact of the present case and the course the litigation has taken, I do not think it appropriate to exercise my discretion in favour of the Debtor. If a bankruptcy order is made, the Debtor’s claims will be assessed by the Official Receiver and conducted, if necessary, in a lawyerly manner and with a sense of proportionality and responsibility.”

17.  On the facts of the present case, the judge’s approach cannot be faulted.  In particular, it would appear that the bankrupt’s claims for $3.5 million and for an interest in the matrimonial home, and the estate’s claim for possession thereof, could all be dealt with under or together with the bankrupt’s claim for financial provision under the Ordinance (HCMP 1919/2010).  The bankrupt has got legal aid for her claim for financial provision, which is not affected by her bankruptcy.  It should be noted that under the Ordinance the court has power to order, amongst other things, the transfer of property.  In considering how to exercise its power, the court will consider various matters including the applicant’s past contribution.  The court’s view is shared by the trustees of bankruptcy, who, for obvious reasons, are leaving it to those representing the bankrupt in HCMP 1919/2010 to take the lead in applying for an order for consolidation or for other appropriate orders.

18.  As for HCA 1682 and 1689/2010, the trustees have taken the view that they should not be pursued.  The bankrupt disagreed and her challenge against their decision was dismissed by the bankruptcy court on 23 March 2012.

19.  This court is of course not concerned with all this as such.  But the development subsequent to the making of the bankruptcy order demonstrates and confirms the wisdom of the course taken by To J.

20.  For these reasons, I would dismiss the appeal with costs, to be taxed if not agreed.

Hon Cheung JA :

21.  I agree.

Hon Yuen JA :

22.  I agree.