NG YIU CHU administratrix of the Estate of CHENG HAN CHI v. CHENG LUNG YAU

DCMP 1406/2022

[2023] HKDC 1240

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1406 OF 2022

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DECISION

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INTRODUCTION

1.  This is the plaintiff’s application by Originating Summons under section 6 of the Partition Ordinance (Cap 352) for sale of the property known as Flat C, 4^th Floor, Wing Shun Building, Nos 277A-277E Shun Ning Road, Nos 1, 3, 5, and 7 Wing Lung Street, Kowloon, Hong Kong (the “Property”).

2.  The plaintiff is the administratrix of the estate of her late husband Cheng Han Chi (the “Deceased”).  The Deceased and the defendant each held 50% in the Property, and now it is the plaintiff as the administratrix of the estate of the Deceased who hold the 50% while the defendant continues to hold the remaining 50%.

3.  In the course of the administration of the estate, the plaintiff makes the present application so that the Property could be realised and the sale proceeds may be distributed to the beneficiaries.

LEGAL PRINCIPLES IN RELATION TO APPLICATION UNDER SECTION 6 OF THE PARTITION ORDINANCE

4.  The legal principles in relation to an application under section 6 of the Partition Ordinance are well-established.

5.  Section 2 of the Partition Ordinance provides:

“Subject to this Ordinance, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may–

(a) make an order under section 4 for a partition of the property;

(b) make an order under section 6 for a sale of the property; or

(c) refuse to make any order.”

6.  Section 6 provides:

“(1) In any proceedings under this 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.”

7.  In Wong Chun Kei Johnny v Poon Vai Ching [2007] 1 HKLRD 825 at §§16-19, Recorder Fok SC (as he then was) set out the applicable principles as follows:

“(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and [if he has no other remedy,] 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 co-owner(s)) that such an order will not be beneficial to all the co-owners [or that it will result in very great hardship to one co-owner].

(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.”

8.  In other words, an order for sale would not be refused unless all the co-owners would be benefitted by its refusal or, in other words, an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner: see Re Lau Hiu Tuen,

bankrupt, HCB 8430/2006, 20 August 2015 at §§21-22 per Godfrey Lam J (as he then was).

9.  In relation to what constitutes “very great hardship”, recently, in Re Tong Chi Kit [2023] HKFCI 639, Ng J, having reviewed the relevant authorities at §§37-41, applied the test at §41 whereby the court would decide the question based on all the objective facts of the case and balancing the interest of the relevant parties.  This was what Godfrey Lam J did in Re Lau Hiu Tuen, bankrupt, supra, where at §§25-30, his Lordship considered all the relevant facts objectively to conclude that there would be no hardship in that case.

10.  Lastly, where the applicant does not have beneficial interest in the property in question, the defendant may argue that he is not a “person interested in such property” and thus may not “institute proceedings under [the Partition Ordinance]”: see section 3 of the Partition Ordinance; also Re Tsang Yin Hong [2016] HKCFI 1081 at §22 per Ng J.  The burden lies upon the one who alleges that the beneficial interest does not align with the legal title.

ANALYSIS

11.  In the present case, Ms Karen Wong, counsel for the defendant, submits that the Plaintiff (and the estate of the Deceased) does not have any beneficial interest in the Property.

12.  In the evidence filed by the defendant (namely, the affirmation of the defendant himself and the affirmation of Lam Chun Ming), it is alleged that the Deceased was a mere trustee in respect of the interest in the Property in his name for his daughter Cheng Lai Kuen, who passed away in 2020.  According to Ms Wong, it was a common intention constructive trust formed in 1987 in order to facilitate the plaintiff’s application for migration to Hong Kong from the Mainland.  It was formed with an agreement that the interest would be returned to Cheng Lai Kuen after the plaintiff’s application for migration to Hong Kong would be successful.

13.  If such allegation of trust is credible, I may have to consider whether to order that the present Originating Summons do proceed as if begun by writ. In order to assess whether such allegation is credible, I have to consider the allegation against the undisputed background facts and whether such allegation is inherently credible.

14.  Ms Wong initially submitted that the criminal allegation (namely, the Deceased did serious harm to his daughter Cheng Lai Kuen, but I should refrain from mentioning the details which are in my view scandalous and irrelevant) was a relevant background fact to assess the credibility of such trust allegation. However, upon exchange with the bench, Ms Wong fairly accepts that the trust (if any) was caused by the alleged need to facilitate the plaintiff’s application to migrate to Hong Kong but not by the criminal allegation.  She, however, submits that the criminal allegation would help the Court to assess credibility of the allegation of trust.  Ms Wong submits that if there was such harm done, it

would be more likely that Cheng Lai Kuen would be more ready to succumb to the Deceased’s demand for the transfer of her interest in the Property.

15.  However, there is no evidence that Cheng Lai Kuen was under any threat to transfer her interest.  The only evidence is a mere allegation by Cheng Lai Kuen’s husband (namely, Lam Chun Ming) that it was his belief that her interest was transferred under threat.  Put the highest to the defendant, the criminal allegation is neutral only. 

16.  As regards the credibility of the trust allegation, the plaintiff’s application for migration to Hong Kong, via One-Way Permit, was made in 1994 and was granted in 1996.  Putting aside my doubt over why the transfer of the interest in the Property to the Deceased would facilitate the plaintiff’s application to migrate to Hong Kong, if the defendant’s allegation of trust is true, it is inexplicable why the transfer had to be done 7 years before 1994.  Further, in 1996, Cheng Lai Kuen would have the right to demand the reversion of the interest to her.  However, there is no evidence of demand or even a slight mention of this trust for the whole 24 years until Cheng Lai Kuen’s death in 2020.  There is no evidence to explain why there was such long silence.  In particular, Cheng Lai Kuen’s surviving husband, while taking the trouble to make a short, general affirmation in opposition for the defendant, has apparently not taken any action in relation to the alleged trust, and he gives no explanation of why not.

17.  Therefore, I find that the allegation of trust is incredible.  Thus, I refuse to order that the Originating Summons proceed as if begun

by writ.  I also find that the plaintiff has standing to make the present application.

18.  Having read the evidence, I agree with Mr Mark Leung, counsel for the plaintiff, that the plaintiff is prima facie entitled to a sale order.  It is for the defendant to satisfy me why such an order should not be made.

19.  The defendant in his affirmation deposes to the following matters:-

(1)  Certain allegations which concern the administration of the estate of the Deceased; and

(2)  Hardship.

20.  For convenience, I shall refer to the above matters as “Matter (1)” and “Matter (2)”.

21.  Matter (1), if true at all, is a matter for another forum, namely, an application in relation to the administration of the estate of the Deceased in the High Court.  It is also not appropriate to take such matter as a counterclaim here in District Court, because whatever the determination of the counterclaim would be, it could not affect the outcome of the application under the Partition Ordinance.  Ms Wong urges me that in making the sale order, I should take into account that there is extant dispute over the administration of the estate, and thus, in the sale order, I should

provide that the sale proceeds belonging to the estate of the Deceased should be held over.  I do not accede to such request because (1) as said above, it is not an appropriate forum for me to decide any matter in relation to the administration of the estate; and (2) I see no urgency at all for such holding over given that it would take quite some months to execute the sale order.  Therefore, Ms Wong’s submissions in relation to the administration of the estate of the Deceased are rejected.

22.  The only relevant matter is Matter (3) – hardship.  This relevant matter takes up 1 page out of the 6 pages of the defendant’s affirmation.

23.  In his affirmation, the defendant alleges that:-

(1)  The defendant is of poor health.  The defendant produces some medical reports in support of his allegation of his poor health.

(2)  Since 2016 when the plaintiff moved out of the Property, his family and he started to occupy the Property fully.

(3)  His family included his son aged 24, his daughter aged 27, his daughter’s husband (whose age is unknown), and the son of the latter two (thus being the defendant’s grandson) aged 2.

(4)  His son is a security guard earning HK$13,000 per month.  Her daughter is the housewife responsible for taking care of their son and her husband was a baker earning about HK$18,000 per month.  (I note, however, that nothing is mentioned about whether the defendant himself is working and if so, how much he has been earning.)

(5)  His son and his daughter do not have any other landed property.  (I note, however, that nothing has been said about his son-in-law.)

(6)  If the Property is sold, they would have no place to live in.  This would cause a particularly difficult situation for his daughter because she has to take care of the 2‑year‑old son.  (I note, however, that nothing is mentioned about whether the defendant would have any other place to live in. In fact, according to the plaintiff’s evidence in reply, which is not denied, the defendant lives in a public housing in Tung Chung.  That said, I do not need to decide where the defendant lives.  The fact is that there is no evidence that the defendant would have nowhere to live in if he has to move out of the Property.)

(7)  If the Property is sold at a net sale proceeds of HK$4 million, the HK$2 million the defendant would obtain would not be sufficient for the defendant to purchase another property for his son and his daughter’s family.  Taking into account the earnings they make, it would be “extremely difficult” for them to rent another suitable property to live in.

(8)  His grandson would also need a larger space as he grows up, and a property suitable for them would be of a monthly rent at HK$18,000.

24.  First, as regards the defendant’s health conditions, I do not see how his health conditions would relate to any hardship caused by the sale of the Property when (1) there is no evidence to explain how the medical conditions would impose any hardship after the sale order is made and implemented; and (2) more importantly, there is no evidence that the defendant would have nowhere else to live in.

25.  Second, in respect of the alleged hardship to his son and his daughter’s family, there is no evidence that his son, his daughter and his son-in-law have any medical conditions that make them incapable of working for a living.  They are all capable adults.  In fact, both the son and the son-in-law have got proper jobs earning sums which most of the grassroots have been earning.  They well knew that the Property was co‑owned and in any event they have no interest in the Property at all.  Nor is there allegation that the Deceased or the plaintiff have made any promise that they would live in the Property for good.

26.  In my view, contrary to any hardship, the sale proceeds, if the defendant would distribute to his son and his daughter, would be good sums that could reasonably help them.  Take the HK$18,000 monthly rent as an example, as suggested by the defendant in his affirmation.  Assuming that the defendant, being so concerned with his son’s and his daughter’s living, would equally distribute the HK$2 million proceeds so that each of his son

and his daughter would get HK$1 million, then each of them could rent an apartment at HK$18,000 per month for about four and a half years.  Meanwhile, they would still be working and earning and making savings.

27.  There is no duty on anyone to make sure that the defendant’s son and/or the defendant’s daughter would have a comparable living for good, let alone providing for a larger space when the daughter’s kid is growing as apparently suggested by the defendant in his affirmation.  While of course, it would cause difficulty if they cannot live in the Property for free as in the past, I do not think that considering the above objectively, such difficulty amounts to the “very great hardship” in the context of an application under the Partition Ordinance.

28.  In the circumstances, I am not satisfied that the sale order would cause any hardship to the defendant.

CONCLUSION

29.  For the above reasons, I accede to the plaintiff’s application. However, in the course of oral submissions, it appears that the draft order submitted by the plaintiff has not been well thought through.  There also appears to be some concern over the asking price or the reserve price set for the Property in the current property market, while there is no proper valuation evidence put before me.  Thus, I would direct the parties to submit a revised draft order for the Court’s approval.  I shall now discuss with the parties the details of such directions.