Bankruptcy Proceedings2011

RE TAM MEI KAM

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105925-EN-2016-09-14

RE TAM MEI KAM

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HCB 3777/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 3777 OF 2011

____________

Re: TAM MEI KAM

____________

IN THE MATTER of an application under section 83 by TAM KEI KAM to set aside a decision of the Joint Trustees as last repeated in a letter dated 15 February 2016 in contravention of section 43A(5), both of the Bankruptcy Ordinance, Cap 6

____________

Before: Hon L Chan J in Court

Date of Hearing: 8 March 2016

Date of Decision: 14 September 2016

_____________

D E C I S I O N

_____________

1. This is an application by the bankrupt Madam Tam for an order to stop the trustees of her bankruptcy from arguing that a lump sum maintenance that may be ordered in her favour during the currency of her bankruptcy may be after-acquired property pursuant to section 43A of the Bankruptcy Ordinance, Cap 6.

2. As a matter of logistics, this application, which was issued on 23 February 2016, is unnecessary. Madam Tam has applied for maintenance including a lump sum maintenance in HCMP 2981/2004. No date was fixed on 23 February or has now been fixed for the hearing of that application.

3. Subject to rude awakenings, Madam Tam is expected to be discharged from her bankruptcy no later than 25 April 2016.

4. It could be anticipated on 23 February and can still be anticipated that it would be extremely unlikely that a lump sum maintenance would be ordered in HCMP 2981/2004 in favour of Madam Tam on or before 25 April 2016. Hence, it was unlikely as at 23 February and still is unlikely that there would be an occasion for the trustees to argue that the lump sum maintenance is after-acquired property. This application should not have been taken out for this reason alone.

5. Furthermore, Madam Tam’s application is for an order on a hypothetical situation, namely the court ordering a lump sum maintenance in her favour during her bankruptcy. Such an order may or may not be made. Hence, this application is also ill advised as it seeks an order to cover a hypothetical situation. If a lump sum maintenance should indeed be ordered in her favour during her bankruptcy and the trustees should then seek to appropriate the lump sum on the basis that such is after-acquired property, then Madam Tam and the trustees can argue the matter out then. But there is no such order yet and Madam Tam’s application is pre-mature.

6. For these reasons, I dismiss Madam Tam’s application. I also make a costs order nisi that Madam Tam do pay the trustees the costs of this application to be taxed.

(Louis Chan)
Judge of the Court of First Instance
High Court

The Applicant: Tam Mei Kam, appeared in person

Ms Leong Wai Sum, of ONC Lawyers, for the 5th Respondent

Attendance of Clifford Chance, for the 1st Respondent was excused

Attendance of the Official Receiver was excused

97847-EN-2015-04-01

RE TAM MEI KAM

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HCMP 2981/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2981 OF 2004

____________

	IN THE MATTER of the Estate of MUI YIM FONG, deceased (the “Estate”)
	and
	IN THE MATTER of Sections 4 and 7 of the Inheritance (Provision for Family and Dependents) Ordinance, Cap 481

____________

BETWEEN
	TAM MEI KAM	Applicant
and
	HSBC INTERNATIONAL TRUSTEE LIMITED	1st Respondent
	JOSEPH LO KIN CHING and DEREK LAI KAR YAN	2nd Respondent (Discharged)
	NEW HORIZON BUDDHIST ASSOCIATION LIMITED	3rd Respondent
	LAU KAI EDDIE	4th Respondent
	WONG TECK MENG and CHAN PUI SZE, JOINT AND SEVERAL TRUSTEES IN BANKRUPTCY OF TAM MEI KAM	5th Respondent

____________

HCB 3777/2011

IN THE HIGH COURT OF THE

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 3777 OF 2011

____________

Re:	TAM MEI KAM
____________

	(Heard Together)

Before: Hon L Chan J in Chambers

Date of Hearing: 30 March 2015

Date of Decision: 1 April 2015

_____________

D E C I S I O N
_____________

1. Madam Tam has filed three applications on 25 March 2015, two in HCMP 2981/2004 and one in HCB 3777/2011. The applications are for or related to payments of maintenance to her.

The 1^st application

2. The 1st application in HCMP 2981/2004 seeks two reliefs of special maintenance. The first one is for HK$301,000 to save her from being evicted by her landlord. The second is HK$170,500 being expenses for funeral and related religious service for her deceased 2nd son, Mr Mui Tak Ming. Mr Mui died of carcinoma on 21 March 2015. Madam Tam filed her 3rd affirmation to support this application.

3. Dealing with the 2nd relief first, Madam Tam confirmed that her 2nd son was the only financial support of his family and he was only able to make ends meet. In fact, he had been relying on Madam Tam for help for a long period before his death because of his illness. His children were only able to earn several thousand dollars per month and could not contribute to the family. Mr Mui is also survived by his wife but there are no assets or money in his estate. Madam Tam also confirmed in her 3rd affirmation that the other members of her family were unable to contribute to the funeral and religious service expenses.

4. Madam Tam also said that her deceased daughter Ms Anita Mui would certainly have shouldered these expenses were she still alive. I have no doubt about that. I am also of the view that such expenses do form part of the reasonable financial provision for Madam Tam under section 3(2) of the Inheritance (Provision for Family and Dependents) Ordinance, Cap 481 (“the Inheritance Ordinance”) (as referred to below).

5. Madam Tam has produced some receipts showing the expenses for funeral and related Chinese religious service totalling HK$170,500 had been incurred of which HK$150,700 is still unpaid. I am satisfied that these expenses are reasonable for a decent funeral with religious service.

6. All other parties in these proceedings adopt a neutral stance in relation to this claim.

7. In the light of Madam Tam’s need to arrange a decent funeral and religious service for her deceased 2nd son, I allow this application for special maintenance at HK$170,500.

8. For the payment of this sum, I direct the 1st respondent to issue one crossed cheque for HK$89,000 payable to Luk Fook Funeral Services and another crossed cheque for HK$61,700 payable to Shang Sin Chun Tong and hand them to Madam Tam for her to discharge the outstanding funeral and religious service expenses. For the balance of HK$19,800, the 1st respondent can pay it to Madam Tam in the usual course of payment.

9. Regarding the 2nd relief in this application at HK$301,000 to save Madam Tam from being evicted by her landlord, she had already applied for maintenance for the same purpose on a previous occasion earlier this year. I dealt with that application in paras 6 to 11 of my decision dated 15 January 2015 as follows:

“6. Regarding arrears of rent, I allowed the applicant a monthly rental of HK$20,000 in my decision of 21 February 2014. However, the applicant ignored my order and entered into a tenancy for HK$43,000 per month.
7. The applicant also did not apply the monthly sum of HK$20,000 as allowed in my order to pay rent. The HK$43,000 per month rental up to August 2014 was paid by one Mrs Li, a friend of hers to her landlord for her benefit. Mrs Li could not afford this sum from September 2014 onwards and the applicant simply let the payment be outstanding. She has been sued by the landlord for arrears of rent from September 2014 to January 2015 totalling HK$215,000.
8. The applicant said in her 2nd affirmation in support of the application that my order allowing her HK$20,000 rental per month was unrealistic. She said she had the needs to cater for pets, to continue her lifelong lifestyle and to live near St Paul’s Hospital, the food market and her familiar restaurants. For these reasons, she needed a bigger flat in Happy Valley. Hence, she entered into the tenancy for her present accommodation.
9. The applicant has ignored what I said in paragraphs 32 and 34 of my decision dated 21 February 2014 where I said:
‘32. … I agree with Barma J (as he then was) that it is reasonable to expect Madam Tam as a bankrupt to make some adjustments to her lifestyle after her bankruptcy by economising on her expenditure whenever possible (Re Tam Mei Kam (a bankrupt) [2012] 4 HKLRD 345 at para 24).
…
34. Regarding rental, Madam Tam said at the hearing that she was negotiating for a new tenancy for premises with a usable floor area of about 1,000 to 1,100 sq ft. However, I have on 6 January 2014 already directed that she should look for new premises with about 500 sq ft usable floor area only’
10. The applicant is a bankrupt. She should economise on her expenditure. I see no reason why she has to live near the food market and her familiar restaurants. There are also smaller and cheaper residential premises in Happy Valley which are just as close to St Paul’s Hospital as her present accommodation is. She should also modify her life style and her mode of keeping pets to fit into smaller premises.
11. On the whole, I see no justification for this claim for HK$215,000 and I dismiss it. The applicant will have to face the adverse consequence of not paying rent which is of her own making.”

10. I cannot see any change in Madam Tam’s circumstances except that her landlord has already obtained a writ of possession against her and the bailiff has given her final notice to deliver up vacant possession of the premises by 8 April 2015. However, this is not a change of circumstances but a development only to be expected. Hence, there is no basis for me to order payment of maintenance for her to discharge the outstanding rent. To do so would also be to nullify my order dated 15 January 2015 without justification.

11. I also consider that this is the occasion for Madam Tam to look for new accommodation of a rental of about HK$20,000 per month. Madam Tam should also have the resources to remove to new accommodation and to pay the deposit for the same as she has been receiving HK$20,000 per month for payment of rental since March 2014 but she has not applied the same for such purpose. I therefore dismiss her application for further rental allowance at HK$301,000.

The 2^nd and 3^rd applications

12. Madam Tam’s 2nd application under HCMP 2981/2004 as supported by her 4th affirmation is for two lump sums of HK$35,195,322 and HK$20,488,771. They are for her 15 years of maintenance and hospital and medical expenses respectively. Alternatively, she asks for HK$1,981,320 being maintenance for her for 13 months from April 2015 to April 2016 when she expects that her bankruptcy would be discharged.

13. Madam Tam’s application in HCB 3777/2011 can be considered together with this application for payment of lump sums. The application in HCB 3777/2011 is for the Income Payments Order (“IPO”). I made on 21 February 2014 to be varied to the extent that the monthly payments of HK$102,000 to her trustees in bankruptcy from April 2015 to March 2016, and the payment of HK$105,570 for April 2016 should be paid by her to her trustees directly and not by the 1st respondent in HCMP 2981/2004 on her behalf.

14. This application is predicated upon the success of her application for payment of lump sums. She stated in her 5th affirmation that if she should succeed in getting a lump sum of HK$35,195,322 for 15 years of her maintenance, which would include the monthly payments to her trustees under the IPO from April 2015 to April 2016, the IPO should then be varied so that the monthly payments would be paid by her to her trustees instead of by the 1st respondent on her behalf.

15. These two applications are opposed by all other parties.

16. Regarding the lump sums application, Madam Tam said in her 4th affirmation that her application is in accordance with sections 4(1)(b), 5(1), 5(3), 8(1) and 8(3) of the Inheritance Ordinance. I however consider that sections 3(1)(iv), 3(2)(b) and 4(1)(a) are also relevant.

17. These sections provide:

“3. (1) Where after the commencement of this Ordinance a person dies-
(a) domiciled in Hong Kong; or
(b) having been ordinarily resident in Hong Kong at any time in the 3 years immediately preceding his death,
and is survived by any of the following persons-
…
(iv) a parent of the deceased who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased;
that person may apply to the court for an order under section 4 on the ground that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant.
(2) In this Ordinance, ‘reasonable financial provision’ (合理經濟給養)-
…
(b) in the case of any other application made by virtue of subsection (1), means such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance.
4. (1) Where an application is made for an order under this section, the court may, if it is satisfied that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant, make any one or more of the following orders-
(a) an order for the making to the applicant out of the net estate of the deceased of such periodical payments and for such term as may be specified in the order;
(b) an order for the payment to the applicant out of that estate of a lump sum of such amount as may be so specified;
5. (1) Where an application is made for an order under section 4, the court shall, in determining whether the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is such as to make reasonable financial provision for the applicant and, if the court considers that reasonable financial provision has not been made, in determining whether and in what manner it shall exercise its powers under that section, have regard to the following matters-
(a) the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;
(b) the financial resources and financial needs which any other applicant for an order under section 4 has or is likely to have in the foreseeable future;
(c) the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;
(d) any obligations and responsibilities which the deceased had towards any applicant for an order under section 4 or towards any beneficiary of the estate of the deceased;
(e) the size and nature of the net estate of the deceased;
(f) any physical or mental disability of any applicant for an order under section 4 or any beneficiary of the estate of the deceased;
(g) any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant.
…
(3) Without prejudice to the generality of paragraph (g) of subsection (1), where an application for an order under section 4 is made by virtue of section 3(1)(iv), the court shall, in addition to the matters specifically mentioned in paragraphs (a) to (f) of that subsection, have regard to the age of the applicant and the contribution (if any) in money or money’s worth made by the deceased towards the needs of the applicant immediately before the death of the deceased.
…
8. (1) Where the court has made an order under section 4(1)(a) (in this section referred to as “the original order” (原有命令)) for the making of periodical payments to any person (in this section referred to as “the original recipient” (原收受人)), the court, on an application under this section, shall have power by order to vary or discharge the original order or to suspend any provision of it temporarily and to revive the operation of any provision so suspended.
…
(3) Where the original order provides that any periodical payments payable thereunder to the original recipient are to cease on the occurrence of an event specified in the order (other than the remarriage of a former wife or former husband) or on the expiration of a period so specified, then, if, before the end of the period of 6 months from the date of the occurrence of that event or of the expiration of that period, an application is made for an order under this section, the court shall have power to make any order which it would have had power to make if the application had been made before that date (whether in favour of the original recipient or any such person as is mentioned in subsection (2)(a) and whether having effect from that date or from such later date as the court may specify).”

18. Madam Tam’s reference to section 4(1)(b) is to show that the court can order maintenance in a lump sum under that section rather than in periodical payments under section 4(1)(a). Section 5(1) stipulates the matters that the court should consider in deciding an application for maintenance either for periodical payments or for a lump sum. Section 5(3) stipulates the additional matters to be considered when the person sought to be maintained is a surviving parent of the deceased. For sections 8(1) and 8(3), they empower the court to vary or discharge a periodical payments order.

19. I would however consider that section 3(2)(b) is the most important provision for consideration in the lump sums application. That section prescribes what is reasonable financial provision for Madam Tam to receive for her maintenance.

20. Madam Tam in her 4th affirmation produced a Chinese medical certificate issued by a registered traditional Chinese medical doctor dated 17 March 2015 and an English medical certificate by a cardiology specialist. Both certificates opine that Madam Tam may live for another 15 years or more. It is on the strength of these certificates that Madam Tam seeks lump sums for maintenance and hospital and medical expenses for 15 years commencing from April 2015.

21. In addition, she has also produced a bundle of invoices issued by St Paul’s Hospital to her covering the period from 11 December 2013 to 15 February 2015. The invoices show that the total hospital and medical expenses incurred by her in this period was at HK$1,061,837. She used this figure as her latest yearly expenses and extrapolated to the next 15 years with 3.5% annual inflation and came to the lump sum of HK$20,488,771.

22. Regarding the two medical certificates, I cannot accept the opinions therein by the doctors as expert evidence as Mr So for the 1st respondent has rightly pointed out that the certificates have not complied with O 38 rr 37A and 37C(1) and cannot be admitted in evidence.

23. O 38 rr 37A and 37C(1) provide:

“37A. An expert report disclosed under these rules must be verified by a statement of truth in accordance with Order 41A.
…
37C. (1) An expert report disclosed under these rules is not admissible in evidence unless the report contains a declaration by the expert witness that –
(a) he has read the code of conduct set out in Appendix D and agrees to be bound by it;
(b) he understands his duty to the Court; and
(c) he has complied with and will continue to comply with that duty.”

These medical certificates do not have the necessary statement of truth or declaration by expert. They are thus not admissible. There is therefore no expert evidence of Madam Tam’s longevity.

24. However, even if there is admissible evidence that Madam Tam may live long, there is still the question of whether a reasonable financial provision for her should be by way of the existing periodical payments or by the lump sum sought by her.

25. A reasonable financial provision should be a provision that is reasonable in all the circumstances of this case for Madam Tam to receive for her maintenance.

26. All the circumstances of this case must include those of other beneficiaries. There are five other beneficiaries whose interests have not been satisfied. Four of them are Madam Tam’s grandchildren for whom Madam Tam says that no objection would be made to this application. The 5th beneficiary is the 3rd respondent which is the final repository. Mr So for the 1st respondent confirmed that its position is similar to that of a residuary legatee.

27. Madam Tam is now 92 years old. To pay her a lump sum as maintenance for 15 years may prejudice the interest of the 3rd respondent in case the lump sum should turn out to be an overpayment. This is so with/without the medical opinions that Madam Tam tried to adduce.

28. On the other hand, the existing periodical payment at HK$158,000 per month is a reasonable financial provision for her in all the circumstances of this case. The fact that she is only getting Hk$50,000 out of HK$158,000 is because of her bankruptcy which necessitated HK$108,000 to be given to her trustees in bankruptcy under the IPO. However, I cannot order a lump sum to cover a long period of maintenance for her so as to relieve her from her difficulty which is consequential from her bankruptcy. I have observed above that it may prejudice the interest of the 3rd respondent.

29. Furthermore, I cannot deal with Madam Tam’s claims on the assumption that her bankruptcy would definitely be discharged in April 2016. There are still 13 months to go. It is too early to say if anything might happen in the meantime that could delay her discharge.

30. In the premises, I cannot entertain this application for a lump sum to cover her maintenance for 15 years.

31. Regarding the claim for hospital and medical expenses, such expenses are currently paid by the 1st respondent when incurred by Madam Tam. This arrangement has worked satisfactorily. There is no reason for change. However, Madam Tam asks for payment of a lump sum of HK$20,488,771 as her estimate of such expenses for the next 15 years. I am of the view that the reasoning against the payment of the 15 year maintenance claim also applies here. I therefore will not entertain this claim either.

32. Regarding her alternative claim for a lump sum of HK$1,981,320 as her maintenance from April 2015 to April 2016, I think the amount of this claim is slightly exaggerated. Putting aside the slight exaggeration, I cannot see how such lump sum can benefit her because it includes the monthly sums payable to her trustees in bankruptcy. If she gets the lump sum and pays off her trustees duly, she will still be left with HK$50,000 per month. Her deficiency will remain the same. I therefore decline this alternative claim as well.

33. Finally, her application made in HCB 3777/2011 is predicated upon the success of the lump sums application. The failure of that application thus defeats this application as well.

34. In the premises, I dismiss the 2nd application in HCMP 2981/2004 and the application in HCB 3777/2011.

35. I would also say that if Madam Tam would like to appeal against this decision, I do not think she would need leave to be granted first. The reasons are those that I have given in two decisions in these proceedings on 23 May 2014 and 26 January 2015.

Costs orders nisi

36. Since Madam Tam has only succeeded in a small claim which is not really opposed, I would make a costs order nisi that she has to pay 80% of the costs of these applications to the other parties (save and except the 4th respondent) to be taxed.

37. Regarding the 4th respondent, I understand that his interest as a beneficiary to the estate of Ms Anita Mui has been satisfied completely. Hence, his interest would not be affected by Madam Tam’s applications. There is therefore no need for him to attend to these applications. I would also add that the service by Madam Tam of her applications on the solicitors for the 4th respondent without more does not justify his incurring costs to oppose them as his interest would not be affected. His solicitors should be aware of this. Likewise, his intent to assist the court would not justify an order requiring Madam Tam to pay him the costs for providing such assistance. Therefore my costs order nisi for him is no order as to costs. If the 4th respondent still wishes to have costs of these applications, his solicitors should furnish the grounds within the next 14 days.

	(Louis Chan) Judge of the Court of First Instance
	High Court

HCMP 2981/2004

The applicant: Tam Mei Kam, appeared in person

Mr Kevin So, of Clifford Chance, for the 1st respondent

Mr Tak Wong, of Wong, Shum & Co, for the 3rd respondent

The 4th and 5th respondents, excused from attendance

HCB 3777/2011

The bankrupt: Tam Mei Kam, appeared in person

The trustees, excused from attendance

The official receiver, excused from attendance

91652-EN-2014-02-21

RE TAM MEI KAM

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HCB 3777/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 3777 OF 2011

____________

Re: TAM MEI KAM

____________

HCMP 2981/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2981 OF 2004

____________

	IN THE ESTATE of MUI YIM FONG, deceased (the “Estate)
	and
	IN THE MATTER of Section 4 and 7 of the Inheritance (provisions for Family and Dependents) Ordinance, Cap 481

____________

BETWEEN
	TAM MEI KAM	Applicant
and
	HSBC INTERNATIONAL TRUSTEE LIMITED	1st Respondent
	JOSEPH LO KIN CHING and DEREK LAI KAR YAN	2nd Respondent
	NEW HORIZON BUDDHIST ASSOCIATION LIMITED	3rd Respondent
	LAU KAI EDDIE	4th Respondent
	JOINT AND SEVERAL TRUSTEES IN BANKRUPTCY OF TAM MEI KAM	5th Respondent
____________
	(Heard Together)

Before: Hon L Chan J in Chambers

Date of Hearing: 11 February 2014

Date of Decision: 21 February 2014

_____________

D E C I S I O N

_____________

1. There are 4 applications. The first one is made by HSBC International Trustee Ltd. (“HSBC”) in HCMP 2981/2004 (“the maintenance proceedings”) on 26 August 2013 for an order to pay the applicant, Madam Tam accrued maintenance and future monthly maintenance.

2. The second one is made by Madam Tam’s trustees in bankruptcy (“the trustees”) in HCB 3777/2011 (“the bankruptcy proceedings”) on 2 September 2013 for an income payments order under section 43E of the Bankruptcy Ordinance, Cap 6 (“IPO”). By this application, the trustees seek to claim for Madam Tam’s estate the bulk of the accrued maintenance and a substantial part of the monthly maintenance until the discharge of her bankruptcy.

3. The third application is Madam Tam’s notice of motion in the bankruptcy proceedings and dated 12 November 2013 to strike out the trustees’ application for IPO, remove the trustees and for payment of the accrued maintenance. The application for payment should be made in the maintenance proceedings and I would consider it in the context of such proceedings.

4. The fourth application is a summons dated 19 November 2013 also made by Madam Tam and in the maintenance proceedings for payment of the accrued maintenance and monthly maintenance.

5. I will deal with the application by HSBC for an order to make payment first. The part of the Madam Tam’s notice of motion to strike out the application for IPO will follow. I will then deal with the trustees’ application for IPO and Madam Tam’s application for payments together. Finally, I will deal with the remaining part of Madam Tam’s motion for removal of the trustees.

Background

6. The late Madam Mui Yim Fong, an accomplished artist by her will left her estate to a discretionary trust and appointed HSBC as the sole executor of her will and trustee of the trust.

7. A Cheung J (as he then was) made an order on 20 November 2007 in the maintenance proceedings directing HSBC to pay out of Madam Mui’s estate a monthly sum of HK$120,000 to Madam Tam for her maintenance. The monthly sum was increased to HK$140,000 from 1 March 2012 by agreement between HSBC and Madam Tam to counter inflation.

8. The payment of the monthly sum was then suspended by order of Poon J on 26 June 2012 because of insufficient liquid assets in Madam Mui’s estate. Whilst Poon J’s order is in force, Madam Tam has no entitlement to and cannot demand HSBC to pay her any maintenance as ordered by A Cheung J as varied by her agreement with HSBC.

9. The liquidity of Madam Mui’s estate improved significantly in the latter part of August 2013. HSBC on 26 August 2013 applied by letter for an order that it may pay Madam Tam the maintenance that should have been paid but for Poon J’s order and also resume the future maintenance payment on a monthly basis.

10. Following the application by HSBC and before any order for payment was made, the trustees applied on 2 September 2013 for an IPO. As a result, no order was made to release the accrued maintenance and monthly maintenance to Madam Tam pending the determination of the trustee’s application. In the meantime, Madam Tam was paid HK$20,245 per month to cover her domestic needs with the actual amount payable to be determined in the IPO application. That has been the case for 5 months from October 2013 to February 2014. Hence, the accrued maintenance has been growing since 26 August 2013 when HSBC applied for an order to pay maintenance.

11. On 11 October 2013, I made an order allowing the trustees to join as the 5th respondent in the maintenance proceedings.

Adjustments for inflation, interest and extra item

12. Since the amount of accrued maintenance as calculated by HSBC is on the basis of HK$140,000 per month, I therefore suggested that there be an adjustment to counter the inflation since 1 March 2012. I further proposed that interest at 8% per annum be paid for 1 year on part of the accrued maintenance. HSBC then advised that as a result of the adjustment for inflation and accrual of interest, the amount of accrued maintenance now stands at HK$2,132,175 and the monthly maintenance is adjusted to HK$152,000.

13. There is however another sum claimed by Madam Tam that needs consideration. Madam Tam says that she had to pay HK$54,000 as legal costs and interest to her landlord pursuant to possession proceedings brought by her landlord against her for her failure to pay rent. She could not pay rent because the monthly maintenance was suspended and she had no resources to pay. As a result of her resisting the possession proceedings, she was able to remain in the premises until the expiry of the tenancy. But in doing so, she incurred this extraordinary expenditure of HK$54,000. I think it was reasonable for her to have incurred this expenditure as it would have been more difficult for her to rent new premises and arrange a removal at the time when the monthly maintenance was suspended. I therefore order that this sum be included in the accrued maintenance. Subject to the order that I will make on the IPO application, I will order HSBC to pay accrued maintenance and monthly maintenance as indicated above.

Motion to strike out the IPO application

14. Madam Tam’s motion states the ground for striking out the IPO application as the trustee’s dishonesty, recklessness and gross incompetence in taking out the IPO application and that the IPO application is without proper regard to the clear wording of section 43E of the Bankruptcy Ordinance. Madam Tam filed a 4th affirmation in the bankruptcy proceedings to support the motion, but has not given any evidence therein to support the application to strike out the IPO application. Her written submissions filed on 19 November 2013 and 8 February 2014 also do not argue why the IPO application should be struck out.

15. Section 43E of the Bankruptcy Ordinance provides:

“(1) The court may, on the application of the trustee, make an order (an income payments order) claiming for the bankrupt’s estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order.
(2) The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.
(3) An income payments order shall, in respect of any payment of income to which it is to apply, either-
(a) require the bankrupt to pay the trustee an amount equal to so much of that payment as is claimed by the order; or
(b) require the person making the payment to pay so much of it as is so claimed to the trustee, instead of to the bankrupt.
(4) Where the court makes an income payments order it may, if it thinks fit, discharge or vary any attachment of earnings order that is for the time being in force to secure payments by the bankrupt.
(5) Sums received by the trustee under an income payments order form part of the bankrupt's estate.
(6) For the purposes of this section the income of the bankrupt comprises every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment.” (Emphasis supplied)

16. It is the purpose of section 43E that income in excess of the bankrupt’s reasonable domestic needs should be paid to the trustee to benefit the bankrupt’s estate (Kilvert v Flackett [1998] BPIR 721 at 723F to H). Since Madam Tam will be receiving substantial income from HSBC, I see no reason why the trustees should not apply for an IPO. The application to strike out the IPO application has no merit and I dismiss it.

The IPO application

17. Madam Tam submits that the words “during the period for which the order is in force” in section 43E(1) qualify and limit the words “income which is from time to time made to him or which he from time to time becomes entitled” in section 43E(6) so that the words “from time to time” should mean “during the period for which the order is in force”.

18. Madam Tam further submits that her entitlement to the accrued maintenance is sourced from the order of A Cheung J dated 20 November 2007 which is merely suspended and not discharged by the order of Poon J dated 26 June 2012. She asserts that there is no question on HSBC’s liability to pay her the same. She further says that she has been entitled to this payment before there is any IPO. Hence, the IPO, which only covers income that she is entitled to during the period when it is in force, does not cover the accrued maintenance. The accrued maintenance is therefore payable to her in total. I have already said above that whilst Poon J’s order of suspension is in place, Madam Tam has no entitlement to payment of maintenance under the order of A Cheung J. I therefore disagree with these submissions of Madam Tam.

19. Madam Tam also said in her 3rd and 4th affirmations that the IPO should not cover any maintenance that she was entitled to prior to the trustees taking out the IPO application or alternatively any maintenance payable to her prior to her bankruptcy. She further submits that if the court should consider that the IPO should cover the accrued maintenance, then money covering her domestic needs during the period when the accrued maintenance was accruing should be taken out of the accrued maintenance and paid to her.

20. The trustees however submit that income should comprise all payments in the nature of income from time to time made to Madam Tam or to which she becomes entitled to from time to time and is not limited to income that she is entitled to during the period when the IPO is in force. Mr Hew, counsel for the trustees, submits that the words “income which is from time to time made to him or to which he from time to time becomes entitled” in section 43E(6) should not be qualified by the words “during the period for which the order is in force” in section 43E(1).

21. Mr Hew referred to Supperstone v Lloyd’s Names Association Working Party & Ors [1999] BPIR 832 at 836C to G, 836H to 837E, 837G to H and 840C to 841A where Evans Lombe J, when considering section 310 of the Insolvency Act 1986 (the part which is similar to our section 43E), was of the view that “from time to time” meant “at any time”.

22. Mr Hew also referred to Raithatha v Williamson [2012] 1 WLR 3559 where Deputy High Court Judge Bernard Livesey, QC decided in para 19 of the judgment that an IPO can be made in respect of income that has already been made to the bankrupt prior to the making of the IPO. However, this decision was made on section 310(6) of the Insolvency Act 1986 as amended and there is no similar provision in our section 43E.

23. Having considered the wording of section 43E, I disagree with Madam Tam’s submission that the income referred to in section 43E(6) should only mean income that the bankrupt is entitled to “from time to time during the period for which the order is in force”. The words “during the period for which the order is in force” refer to the period during which the IPO can be enforced and not the period during which the bankrupt is entitled to or in receipt of payment.

24. However, even the words “from time to time” may mean “at any time”, it cannot be without limit. An IPO certainly should not be made in respect of income that the bankrupt only becomes entitled to after his discharge from bankruptcy. It also should not claim income that has been paid to the bankrupt before his bankruptcy. If the bankrupt should still be in possession of the whole or part of such income upon his bankruptcy, such income or the remaining part will vest unto his trustee in bankruptcy as part of his estate as defined in section 43 of the Ordinance. However, an IPO can certainly be made to claim income that the bankrupt has received or is entitled to receive during his bankruptcy regardless of whether the entitlement to receive had commenced (but not satisfied) before his bankruptcy.

The accrued maintenance

25. The accrued maintenance was not paid because payment was suspended by Poon J on 26 June 2012. The suspension of payment likewise suspended Madam Tam’s entitlement to payment and she has no right to enforce the payment when the suspension is in place. She will only be entitled to payment upon an order being made for payment in the maintenance proceedings. The IPO, if now made, can certainly claim payment of this entitlement direct to the trustees.

26. Madam Tam has submitted that if I should order payment of the accrued maintenance to the trustees, I should deduct from the same her reasonable domestic needs for the period during which the same accrued. However, I do not think I am in a position to do so save for the period from October 2013 onwards when she was paid HK$20,245 per month pending the consideration of the IPO application. The reason being that the reasonable domestic needs should be current needs or the needs at the time when the IPO is made and not before. Furthermore, two sums of HK$260,000 and HK$353,200 had been ordered to be paid to her in May and September 2013 respectively and HK$20,000 per month had also been ordered to be paid to her for the months of June, July and August 2013 to cover her rental and household needs.

Reasonable domestic needs

27. Before I can decide how much of the accrued maintenance should be paid to the trustees, I have to consider Madam Tam’s reasonable domestic needs since October 2013 so that I can tell what adjustment, if any, I have to make to the monthly sum of HK$20,245 already paid to her since October 2013.

28. The Official Receiver conducted a review of Madam Tam’s reasonable domestic needs at the end of May 2012 and came to the view that Madam Tam needed HK$75,246 per month to satisfy her needs.

29. Madam Tam in the present application adopted the official receiver’s suggestion but added HK$500 for water charge and HK$16,000 for salary to his legal adviser/personal assistant making a total of HK$91,746 per month.

30. The trustees do not agree with either the official receiver’s proposal or that of Madam Tam. They assessed Madam Tam’s reasonable domestic needs at HK$50,245 per month and reducing to HK$40,245 from 21 February 2014 onwards. The reason for the reduction being the expiry of her tenancy at HK$30,000 per month on 19 January 2014. The trustees are of the view that the rental for her new tenancy should be no more than HK$20,000 per month. However, rental at HK$30,000 has already been paid to her existing landlord to cover the period from 20 January 2014 to 19 February 2014. Hence, the lower rental at HK$20,000 would only commence from 20 February 2014.

31. The trustees have prepared a table setting out the three proposals of Madam Tam’s reasonable domestic needs as proposed by Madam Tam herself, the official receiver and the trustees. I reproduce the table below:

ExpenditureItem Amount now claimedby Bankrupt
(HK$) Amount Assessedby theOfficial Receiver (HK$) Amount Assessedby Trustees (HK$)
Rent 30,000 30,000 30,000
(from March 2014 – 20,000
Water 500 0 450
Electricity 4,825 4,825 2,400
Gas 2,691 2,691 400
Telephone(residentialplus fax) 700 700 700
Telephone(mobile) 500 500 500
Food 5,050 5,050 6,375
Salary todomestichelpers 7,480 7,480 3,920
Familymiscellaneousexpenditure 2,000 2,000 2,000
Cap-parkrelatedcharges 0 0 0
Entertainingfriends 0 0 0
Salarytolegaladviser/personal assistant 16,000 0 0
Tonicfoodandacupuncture 18,500 18,500 0
Travellingexpenses 3,500 3,500 3,500
Total 91,746 75,246 50,245
(from March 2014 – 40,245)

32. I now consider the items the amounts of which are in dispute. I agree with Barma J (as he then was) that it is reasonable to expect Madam Tam as a bankrupt to make some adjustments to her lifestyle after her bankruptcy by economising on her expenditure whenever possible (Re Tam Mei Kam (a bankrupt) [2012] 4 HKLRD 345 at para 24).

33. I also agreed that the needs of each bankrupt must be decided by reference to all the circumstances of the individual bankrupt (see ReRayatt (a bankrupt) [1998] BPIR 495 at 5001D to E and 501G to H and Re Lau Nga Yee Christine, HCB 3486/2002 by Reyes J dated 30 September 2004 at paras 32 and 34).

34. Regarding rental, Madam Tam said at the hearing that she was negotiating for a new tenancy for premises with a usable floor area of about 1,000 to 1,100 sq ft. However, I have on 6 January 2014 already directed that she should look for new premises with about 500 sq ft usable floor area only.

35. For premises in the Happy Valley and Tai Hang areas with about 500 sq ft useable floor area, HK$20,000 per month should be a reasonable rental. I would therefore accept the trustee’s suggestion that the reasonable rental for Madam Tam should be HK$20,000 per month from 20 February 2014 onwards.

36. For water charge, Madam Tam claims HK$500 per month and the trustees assess it at HK$450 per month. The consumption of water has seasonal variation and I accept Madam Tam’s claim of HK$500 per month.

37. For electricity, the trustees’ assessment is based on bills and is therefore realistic. I accept the assessment at HK$2,400 per month.

38. For gas, I also accept the trustees’ assessment of HK$400 per month as it is based on bills.

39. For food expenses, the trustees’ assessment is at HK$6,375 which is higher than Madam Tam’s proposal and I accept it as reasonable.

40. For salary to the domestic helper, Madam Tam claims HK$7,480 for two helpers. The trustees say that there should only be one helper and the current minimum salary is HK$3,920. I agree with the trustees but round up the figure to HK$4,500 to cater for some miscellaneous expenses to be incurred for the helper like medical and employee insurance and air-tickets for home.

41. Madam Tam also claims HK$18,500 for tonic food and acupuncture. The trustees say that such is not a reasonable domestic need. I am of the view that a claim for tonic food may not be a reasonable domestic need for a young and healthy bankrupt. However, Madam Tam is already in her nineties. Some tonic food is important to keep her in good health. I assess her need at HK$3,000 per month.

42. Finally, Madam Tam claims a sum of HK$16,000 as salary to her legal adviser/personal assistant. The trustees object to it. The first objection is that nothing is known about the credential of the legal adviser/personal assistant and there is no employment contract produced. The further objection is that if Madam Tam had been assisted by legal professionals, there is nothing known about the fees and basis for the same.

43. However, these objections overlook the facts that Madam Tam is a senior citizen of over 90 years old and she does not speak a word of English. She would have difficulty in presenting her case in these applications even in Chinese if without the help of others. The fact that she has been assisted by someone conversant with the English language is obvious as all her applications, affirmations, submissions and letters are composed in fluent and clear English. This assistance provided by the personal assistant to Madam Tam has not only assisted Madam Tam but facilitated the work of the court and all parties to these proceedings. If Madam Tam were left to handle these applications all by herself, I doubt if she could have presented her case as it is.

44. In the circumstances, I think I should order HSBC to make some extra payment as extraordinary expenses to Madam Tam for her to pay for such services. But I would not order such payment on a regular basis. I would only consider such extraordinary expenses on the basis of need. Judging from the applications, the affirmations, submissions and letters written in the name of Madam Tam since 26 August 2013 when HSBC applied for order to pay maintenance, I consider a one-off payment of HK$35,000 as reasonable. I will add this sum to the accrued maintenance to be paid by HSBC.

45. I have thus assessed the total monthly sum to meet Madam Tam’s reasonable domestic needs at HK$43,875 with rental at HK$20,000 per month.

46. The trustees agree that this sum should be adjusted upwards by 9% to counter inflation as the monthly maintenance at HK$140,000 has been adjusted likewise to HK$152,000. The sum payable to Madam Tam per month from September 2013 onwards to cover her domestic needs should thus be HK$47,823.75. I round it up to HK$48,000.

The IPO for monthly maintenance

47. In respect of the monthly maintenance in the maintenance proceedings, I order that HSBC do pay Madam Tam a sum of HK$48,000 per month on the first working day of each month which is not a Saturday to cover Madam Tam’s reasonable domestic needs for the monthly period commencing from the 21st day of that month and the first payment shall be made on 3 March 2014.

48. For the balance of the monthly maintenance at HK$104,000, I order HSBC to pay the same to the trustees on the same day when payment is made to Madam Tam.

49. This order will continue until Madam Tam is discharged from her bankruptcy or further order.

Accrued maintenance

50. Regarding the accrued maintenance proceedings, it is at HK$2,132,175 after adjusting for inflation and interest but not include the two extraordinary items above-mentioned at HK$54,000 and HK$35,000.

51. The trustees say that they want HK$2,125,569 out of HK$2,132,175 after deducting HK$6,606 for Madam Tam to pay for a surgery to her pet dog. But this HK$2,125,569 is arrived at on the basis of giving Madam Tam only HK$20,245 per month to cover her domestic needs since October 2013. The sum of HK$20,245 is subject to adjustment upon making the IPO. Madam Tam’s monthly domestic needs are now assessed at HK$48,000 with rental at HK$20,000 per month. Furthermore, a one-off payment should be made to Madam Tam from the accrued maintenance to cover her rental for the period of 20 February 2014 to 19 March 2014. This sum should be adjusted upward by 9% to counter inflation. The adjusted sum is HK$21,800 and should come out of the accrued maintenance of HK$2,132,175.

52. The further sum to be paid Madam Tam for the period from October 2013 to February 2014 is the total sum payable to cover her domestic needs for this period less the sums paid or to be paid to her in respect of this period. It is calculated as follows:

(HK$53,875 (with rental at HK$30,000 per month) x 1.09 (to counter inflation) x 4 (months) + HK$48,000 (for February 2014)) – (HK$20,245 x 5 (months) + HK$21,800 (rental for 20/2/2014 to 19/3/2014) + HK$30,000 x 4 (rental paid to the landlord for 20/10/2013 to 19/2/2014))
= HK$282,895 – HK$243,025 = HK$39,870.

The sum payable to the trustees should thus be further reduced by HK$39,870 to HK$2,063,899. The sum payable to Madam Tam should then be HK$2,132,175 + HK$54,000 + HK$35,000 – (HK$2,125,569 – HK$21,800 – HK$39,870) = HK$157,276.

The IPO for accrued maintenance

53. I therefore order that HSBC do pay Madam Tam part of the accrued maintenance at HK$157,276 and pay the balance at HK$2,063,899 to the trustees direct.

Application to remove the trustees

54. I now due with Madam Tam’s application to remove the trustees. Section 96(2) of the Bankruptcy Ordinance provides:

“(2) If the court is of opinion-
(a) that a trustee, other than the Official Receiver, is guilty of misconduct or fails to perform his duties under this Ordinance; or
…
the court may remove him from his office and appoint another person in his place.”

55. Halsbury’s Laws of Hong Kong, para 45.247 refers to Edennote Ltd, Tottenham Hotspur plc v Ryman [1996] 2 BCLC 389 where the English Court of Appeal quashed an order for removal of trustees as the court will not lightly remove its own officer and will have regard to the impact of removal on his professional standing and reputation.

56. Muir Hunter on Personal Insolvency discusses the removal of trustees by the court at paras 3-834 to 3-835. The author refers to Smedley v Brittain [2008] BPIR 219, where Registrar Nicholls considered that if the trustee has gone about his or her action effectively, honestly, reasonably, without misconduct or maladministration, the court must think carefully and long and hard before deciding to remove him or her and especially in the case of an application made by a debtor. The test to be achieved by a debtor is a particularly high one.

57. The Law of Insolvency by Ian Fletcher at para 7-069 also states that it was well established under the bankruptcy legislation prior to the Insolvency Act 1986 that it is only where the trustee is acting in a manner which is so unreasonable and absurd that no reasonable person would act or fail to act in that way including fraudulent conduct that the court would interfere.

58. I agree with all these statements and bear them in mind in considering Madam Tam’s application for removal.

59. Madam Tam’s grounds of the application as stated in her notice of motion are the following:

(1) The Joint Trustees have acted dishonestly and/or recklessly and/or grossly incompetently in taking out the IPO application dated 2 September 2013, without proper regard to the express, clear, unambiguous and unequivocal words of section 43E(1) of Cap 6 and the judgment of Barma J (now Barma JA) dated 18 July 2012, guilty of deliberate abuse of process of the Court;
(2) The Joint Trustees have been dishonest and/or reckless and/or grossly incompetent in making and filing the 4 Reports in support of the IPO application; with an ulterior motive to confuse, mislead and deceive the Court;
(3) The Joint Trustees have acted in ill-faith in diverting the true focus in an IPO application from the Court but driving intensively at irrelevant matters; and
(4) The Joint Trustees wilfully spent and wasted time and resources unnecessarily to the detriment of the estate and without regard to the interest of the bankrupt.

These accusations are repeated in paras 11 to 19 of her 4th affirmation in support of the application and are related to the making and advancing of the IPO application by the trustees.

60. I am of the view that the trustees have conducted themselves properly in making and advancing the IPO application. I do not think the trustees are guilty of any misconduct or have failed to perform their duties under the Ordinance. This is also borne out by my order in favour of the application. Madam Tam has failed to establish any of her grounds for removal. I therefore dismiss her application.

Costs order nisi

61. I make the following costs order nisi for these applications. I order that the costs of the application by HSBC for payment order be paid by the estate of Madam Mui to all parties concerned to be taxed. I further order that the estate of Madam Tam do pay the trustees the costs of the application for IPO, the application to strike out the IPO application and the application to remove the trustees to be taxed.

(L. Chan)
Judge of the Court of First Instance
High Court

HCB 3777/2011

The bankrupt: Tam Mei Kam, appeared in person

Mr Hew Yang-wahn, instructed by ONC Lawyers, for the trustees

The official receiver, excused from attendance

HCMP 2981/2004

The applicant: Tam Mei Kam, appeared in person

Mr Kevin So, of Clifford Chance, for the 1st respondent

Mr Hew Yang-wahn, instructed by ONC Lawyers, for the 5th respondent

The 3rd and 4th respondents, excused from attendance

82705-EN-2012-07-18

RE TAM MEI KAM

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HCB 3777/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3777 OF 2011

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Re: TAM MEI KAM, a Bankrupt

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Before : Hon Barma J in Court

Date of Hearing : 6 July 2012

Date of Judgment : 18 July 2012

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J U D G M E N T

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1. This was an application by Madam Tam Mei Kam (“the Bankrupt”) by Notice of Motion dated 29 May 2012 seeking orders that:-

(1) the decision of the Official Receiver made on 21 May 2012 be set aside; and
(2) the monthly maintenance of HK$120,000 being paid by HSBC Trustee (Hong Kong) Limited (“HSBC Trustee HK”) to the Bankrupt under an interim order made by Andrew Cheung J (as he then was) on 20 November 2007 pursuant to the Inheritance (Provision for Family and Dependants) Ordinance (Cap 481) (“the Inheritance Ordinance”) be paid directly to the Bankrupt.

2. The background to the application can be summarised as follows:-

(1) The Bankrupt is the mother of the late Anita Mui Yim Fong, a well known Hong Kong singer and performer, who died at the end of 2003. Ms Mui left a will under which she bequeathed her residuary estate to a discretionary trust, called the “Karen Trust”, which was set up at the same time. The trustee of the Karen Trust was HSBC Trustee International Limited (“HSBC Trustee International”). The Bankrupt was a named beneficiary of the trust, but was not a beneficiary under the will. The Bankrupt sought unsuccessfully to challenge the will in probate proceedings, failing in the Court of First Instance, the Court of Appeal and the Court of Final Appeal. On 19 January 2012, Letters of Administration were granted to HSBC Trustee HK, as the lawful attorney of HSBC Trustee International.
(2) On 17 June 2011, a bankruptcy petition was presented against the Bankrupt by the solicitors who had acted for her in the first instance proceedings in the probate action, on the basis of outstanding unpaid fees. On 25 April 2012, I made a bankruptcy order against the Bankrupt. The Bankrupt has appealed to the Court of Appeal against the making of the bankruptcy order, but that appeal has not yet been fixed for hearing.
(3) On the making of the bankruptcy order, the Official Receiver became the provisional trustee of the property of the Bankrupt pursuant to section 12(1) of the Bankruptcy Ordinance.
(4) Prior to her bankruptcy, the Bankrupt had applied under HCMP 2981/2004 for an interim order for monthly maintenance to be paid to her out of Ms Mui’s estate, pursuant to sections 4 and 7 of the Inheritance Ordinance. Over a period of time, various interim orders were granted, by which an amount of monthly maintenance was awarded to the Bankrupt, and was from time to time increased. As at the date of the bankruptcy, the monthly amount payable to the Bankrupt was HK$120,000, pursuant to the order of Andrew Cheung J (as he then was) made on 20 November 2007.
(5) After the bankruptcy commenced, HSBC Trustee HK paid a cheque for HK$120,000 to the Official Receiver on 2 May 2012. The cheque represented the monthly maintenance payable to the Bankrupt, under Andrew Cheung J’s order, for the period from 21 May to 20 June 2012.
(6) The receipt of the cheque prompted the Official Receiver to look into the nature of the payment. Having considered the matter, the Official Receiver took the view that any maintenance payable by HSBC Trustee HK to the Bankrupt under orders made in HCMP 2981/2004 formed part of the Bankrupt’s assets which vested in her trustee in bankruptcy under section 43(1) of the Bankruptcy Ordinance, and hence vested in the Official Receiver as provisional trustee pursuant to section 58 of the Bankruptcy Ordinance. In other words, the Official Receiver considered that such payment (and any future payments that might be received by reason of orders made in HCMP 2981/2004) formed part of the Bankrupt’s estate in bankruptcy.
(7) Having discovered that HSBC Trustee HK had paid this maintenance payment to the Official Receiver, on 10 May 2012 the Bankrupt requested the Official Receiver to make an allowance to her to meet her domestic needs. On 21 May 2012, having considered the request, the Official Receiver decided to make an allowance of HK$75,246 to the Bankrupt for May 2012, pursuant to section 63 of the Bankruptcy Ordinance, which provides that a trustee in bankruptcy may make an allowance for the support of a bankrupt out of his bankruptcy estate.
(8) On 29 May 2012, the Bankrupt took out this application.
(9) On 4 June 2012, the Official Receiver received a second cheque for HK$120,000 from HSBC Trustee HK.
(10) On 12 June 2012, the Notice of Motion came on for its first hearing. Unfortunately, the Bankrupt was taken ill during the hearing, and the hearing had to be adjourned.
(11) Also on 12 June 2012, a creditors’ meeting was held, at which Mr Wong Teck Meng and Ms Chan Pui Sze of Messrs Briscoe Wong Ferrier were appointed as Joint and Several Trustees in Bankruptcy of the Bankrupt (“the Trustees”), to act without a creditors’ committee.
(12) On 22 June 2012, a directions hearing was held to fix a hearing date for the Notice of Motion. At the hearing, the Bankrupt complained that no further allowance had been paid to her although she was in need of it. I directed that pending the hearing of the Notice of Motion, an allowance should be paid to the Bankrupt of at least the same level as had been provided in May 2012. I also directed that notice of the hearing should be given to the Trustees, so that they could, if they wished, make submissions in relation to it.
(13) On 26 June 2012, the Official Receiver issued a further cheque for HK$75,246 to the Bankrupt, by way of allowance for her expenses for the month of June. This was provided to the Bankrupt via the Trustees.

3. At the hearing, the Bankrupt appeared in person, the Official Receiver was represented by Ms Joyce Lam of the Official Receiver’s Office, and the Trustees appeared in person. Skeleton arguments were filed by both the Bankrupt and the Official Receiver, while the Trustees lodged a report with the court setting out their position.

4. I was told at the hearing that in June 2012, the amount of the monthly maintenance had recently been ordered by Poon J to be increased to HK$140,000 per month. However, I was also told that subsequently, a few days before this hearing, Poon J had made a further order in HCMP 2981/2004 suspending the monthly maintenance payable to the Bankrupt, as Ms Mui’s estate did not have sufficient liquid funds to enable further payments to be made. It appears that consideration is being given (in those proceedings) to means by which funds may be raised for the estate, possibly by selling certain assets, such as an auction of Ms Mui’s concert costumes, or the sale of a property in Happy Valley. It is not at present known when the estate will again be in a position to resume monthly payments to the Bankrupt, but this appears unlikely to happen for some months.

5. As appears from the Notice of Motion, the application is based on three grounds:-

(1) That the monthly maintenance payments were excluded from the bankruptcy estate by section 43(2)(b) of the Bankruptcy Ordinance, which provides that “such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his/her family” fall outside the bankruptcy estate, because the payments were provisions within the meaning of section 43(2)(b), and the amount of the maintenance to be paid each month had been fixed by the court in HCMP 2981/2004 at HK$120,000 on the basis that these were the “basic domestic needs” of the Bankrupt as at November 2007. It was suggested that in assessing such “basic domestic needs” in HCMP 2981/2004, the court had had regard to a number of matters, including the Bankrupt’s frustration and disappointment at the terms of Ms Mui’s will and the setting up of the Karen Trust, her old age, her poor health, her long standing living standards, her need for domestic helpers and a personal assistant, and the possible adverse effects of a forced departure from her previously accustomed standard of living. Thus, the entirety of the maintenance payment constituted “provisions” for satisfying her basic domestic needs, and had to be excluded from her bankruptcy estate.
(2) Even if this were wrong, and the monthly maintenance payments formed part of the bankruptcy estate, they should be excluded from the bankruptcy estate pursuant to section 43D of the Bankruptcy Ordinance, which provides that a bankrupt may apply to the trustee in bankruptcy for the exclusion from the estate of a particular item, and, if he objects to the trustee’s decision, may apply to the court. This was said to be the case because (as the Bankrupt submitted) the Official Receiver was obliged to make allowance for the Bankrupt’s support and maintenance, and could not adjust the level of maintenance previously ordered by the court in the Inheritance Ordinance proceedings.
(3) If, contrary to the previous submission, the Official Receiver could (in principle) adjust the amount of such allowance, the allowance of HK$75,246 granted by the Official Receiver to the Bankrupt was too low, and in deciding on that level of allowance, the Official Receiver had failed to have regard to the factors mentioned in the last sentence of paragraph (1) above, which should have led the Official Receiver to make an allowance in the same amount as the maintenance payments.

6. Ms Lam, for the Official Receiver, submitted that:-

(1) The monthly payments by way of maintenance payable to the Bankrupt formed part of the bankruptcy estate, as they consisted of money, and as such was property within the definition in section 2 of the Bankruptcy Ordinance, which expressly includes money.
(2) Alternatively the right to receive such payments pursuant to the court’s order of 20 November 2007 in HCMP 2981/2004 formed part of the bankruptcy estate, being itself property (namely, a thing in action) vesting in the Bankrupt at the time of the bankruptcy order, as the Bankrupt had a present right to receive the maintenance subject to funds being available to make such payments out of Ms Mui’s estate, until such time as the order of 20 November 2007 was discharged or suspended. As this right was a present right vested in the Bankrupt at the time of the bankruptcy order, it formed property falling within the bankruptcy estate, and not income falling outside it. In support of this proposition, Ms Lam relied on Re Landau (a Bankrupt) [1998] Ch 223, Krasner v Dennison [2001] Ch 76 and Patel v Jones [2001] BPIR 919.
(3) Even if the amount of maintenance were varied in future, any increase would be an interest arising out of or incidental to property of the Bankrupt, namely the right to seek a variation of the maintenance order pursuant to section 8 of the Inheritance Ordinance.
(4) The monthly payments were not “provisions” within the meaning of section 43(2)(b) as such provisions were limited to domestic or household effects needed to satisfy the basic domestic needs of the Bankrupt and her family.
(5) If, contrary to the preceding submission, the monthly maintenance payments were excluded from the bankruptcy estate by reason of section 43(2)(b), the Official Receiver was entitled to claim it pursuant to section 43B of the Bankruptcy Ordinance, which provides that where property is excluded from the bankruptcy estate by virtue of section 43, the trustee may claim it for the bankruptcy estate if satisfied that its value exceeds the cost of a reasonable replacement.
(6) The maintenance payments were not income within the meaning of section 43E of the Bankruptcy Ordinance, so as to be claimable for the bankruptcy estate only by way of an application for an income payments order, as they derived from property (the rights under the court order of 20 November 2007) which formed part of the bankruptcy estate, for the reasons given in sub-paragraph (2) above.
(7) As for the Bankrupt’s suggestion that the monthly maintenance payments should be excluded from the estate under section 43D of the Bankruptcy Ordinance, this was inappropriate, because the Bankrupt should not be permitted to retain such payments in full, but only to the extent needed to meet her reasonable domestic needs. Such reasonable domestic needs, in circumstances in which she was a bankrupt, were to be assessed by reference to different factors from those taken in account by the court when making an interim order under the Inheritance Ordinance.
(8) Finally, in order to successfully challenge the Official Receiver’s decision as to the amount of the allowance to be made to the Bankrupt under section 63 of the Ordinance for the support of the Bankrupt, it was necessary for the Bankrupt to show that the Official Receiver’s decision was perverse or clearly wrong, which was not the case here.

7. The Trustees stated that they were not yet in a position to make submissions on the issue of whether or not the monthly maintenance payments formed part of the bankruptcy estate, as they had not had sufficient time (and did not have sufficient funds) to instruct legal advisers to advise them as to this. However, in their report, they offered their observations as to the amount that might be required each month to meet the reasonable domestic needs of the Bankrupt, suggesting that a sum of slightly over HK$50,000 (plus an unspecified amount to cover the costs of tonic foods – which the Bankrupt had put at HK$18,000 per month) should be sufficient.

8. At the hearing, I drew the parties attention to Whytte v Ticehurst [1986] Fam 64, where Booth J, in considering whether the right to apply for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 could survive the death of the surviving wife and be enforced by her estate, expressed the view (at p 69E-G) that, given that the legislative history of the Act and its predecessor statutes demonstrated that the relief available under it closely followed the relief from time to time available under legislation providing for financial provision for spouses on divorce or separation (the most recent of which at that time was the Matrimonial Causes Act 1973), it should be regarded as having, as one of its purposes, the object of enabling the court to place the surviving spouse in the same position as she would have been in had a matrimonial decree been granted during the other spouse’s lifetime. It seemed to me that this suggested that orders for maintenance under the Inheritance Ordinance might similarly be regarded as analogous or comparable to maintenance orders in the matrimonial context, and I requested the Official Receiver and the Trustees to ascertain whether there were any authorities dealing with the question of whether maintenance in the matrimonial context was regarded as part of the bankruptcy estate, or was regarded as income which had to be claimed by the trustee in bankruptcy by way of an application for an income payments order.

9. On 11 July 2012, the Official Receiver submitted a memorandum and a number of authorities on this point, of which the most relevant (in my view) were Re Landau [1934] 1 Ch 549, Re Tennant’s Application [1956] 1 WLR 874 and Re Cohen [1961] 1 Ch 246. On the same date, the Trustees wrote to the court enclosing certain materials that they had found as a result of their own research, including an extract from a manual entitled “Property Personal to the Bankrupt” which is one of a series of technical manuals produced by the United Kingdom Insolvency Service, which appears to be similar in function to the Official Receiver’s Office in Hong Kong. The Bankrupt was given the opportunity to comment on these materials, which she did by a submission dated 13 July 2012.

10. The first question for consideration is whether or not the payments made to the Bankrupt under the order of 20 November 2007 form part of the bankruptcy estate. The principal arguments advanced by Ms Lam in support of her contention that they do are those set out in paragraphs 6(2) and (6) above.

11. As to those submissions, it is relevant to note at the outset the very wide definition of “property” in section 2 of the Bankruptcy Ordinance:-

“ ‘property’ includes money, goods, things in action, land and every description of property, whether real or personal and whether situate in Hong Kong or elsewhere, also obligations, easements and every description of estate, interest and profit, persent or future, vested or contingent, arising out of or incident to property as above defined.”

12. It is also important, I think, to have in mind the structure of the provisions of the Bankruptcy Ordinance relating to the vesting of property and the ability of the trustee in bankruptcy to claim property acquired by a bankrupt during the period of the bankruptcy. These are to be found in sections 43 to 43F of the Bankruptcy Ordinance, and may be summarised as follows:-

(1) Section 43 provides that a bankrupt’s estate is (subject to that section and sections 43A to 43E) comprised of all property belonging to or vested in the bankrupt at the commencement of his bankruptcy, and any property which the Bankruptcy Ordinance provides is to form part of the estate or is to be treated as being so vested in the bankrupt. It provides (in subsection (2)) an exception for goods that are necessary for the personal use of the bankrupt in his work, and for satisfying the basic domestic needs of the bankrupt and his family.
(2) Section 43A provides that the trustee may, by notice in writing, claim for the bankruptcy estate any property acquired by the bankrupt during the period of the bankruptcy (other than property which would be excluded from the estate by the operation of section 43(2)). Section 43A does not, however, apply to any property which may be made the subject of an income payments order under section 43E – such property must, therefore, be claimed by a section 43E application and not by notice under section 43A.
(3) Section 43B enables a trustee by notice to claim property excluded by section 43(2) where he considers that the value of such property exceeds the cost of a reasonable replacement, subject to acquiring such a reasonable replacement at the cost of the estate in bankruptcy.
(4) Section 43C sets a time limit of 42 days for the giving of notices under sections 43A and 43B. Time runs for this purpose from the date when the trustee first had the knowledge necessary to enable him to lay claim to the property concerned.
(5) Section 43D allows a bankrupt or a creditor to apply to the trustee for particular items of property to be included in, or excluded from, the estate.
(6) Section 43E allows the trustee to apply for an income payments order claiming for the bankruptcy estate a part of the bankrupt’s income during the period of the bankruptcy. The amount claimed must leave the bankrupt enough income to meet the reasonable domestic needs of himself and his family. Subsection (6) provides that income comprises every payment in the nature of income which is made to the bankrupt, or to which he becomes entitled, from time to time, including payments in respect of the carrying on of any business or in respect of any office or employment.
(7) Section 43F provides that where the bankrupt’s residence forms part of the bankruptcy estate, the bankrupt may continue to live in it for a period of 6 months, which may be extended for up to a further 6 months.

13. In my view, the structure of these sections does suggest a demarcation between property falling into the bankruptcy estate, and property which may be made the subject of applications under (for present purposes) sections 43A and 43E, which apply to property or income not forming part of the bankruptcy estate. Thus, where income derives from property which forms part of the estate, such income is payable to the trustee without need for a further application under section 43E. For example, where real property which is the subject of a lease under which rent is payable forms part of the bankruptcy estate, the rent accruing thereafter likewise forms part of the estate. Similarly, where a bankrupt is entitled to a life interest in property (and thus to the income deriving from it), the life interest (being itself a present right to future property) will vest in the estate in bankruptcy, and the income deriving from it will likewise belong to the estate (see Re Cohen, [1961] Ch 246). In the case of pension payments which derive from rights already vested in the bankrupt at the time of the bankruptcy, even though these may only be payable after the date of the bankruptcy, the bundle of rights giving rise to the payments is present property vested in the bankrupt, which will vest in the trustee on the making of a bankruptcy order, and the later payments made in consequence of those rights will similarly belong to the estate (see Re Landau(a Bankrupt) [1998] Ch 223, Krasner v Dennison [2001] Ch 76 and Patel v Jones [2001] BPIR 919). In all of these cases, there is no need for the trustee to make an application for an income payments order under section 43E, although all the payments in question would appear to fall within the definition of “income”. The reasons for this are explained by Chadwick LJ in Krasner v Dennison, at paragraphs 54 to 67 of the judgment in that case.

14. It should be noted that a consequence of this treatment is that where income derives from property that falls into the bankruptcy estate, that income will remain payable to the trustee for the benefit of the bankrupt even after his discharge from bankruptcy, since property vested in the trustee does not re-vest in the bankrupt after discharge, and remains available to be used in satisfying the bankruptcy debts.

15. Although there do not appear to be any reported cases which have considered whether or not maintenance payments under the Inheritance Ordinance (or its equivalent in the United Kingdom) form part of the bankruptcy estate, it seems to me that guidance as to this may be obtained from the position in relation to matrimonial maintenance payments. As to this, the English authorities do appear to treat rights to matrimonial maintenance as not forming part of the bankruptcy estate, although the maintenance itself may be made the subject of an income payments order (see Re Landau [1934] 1 Ch 549 and Re Tennant’s Application [1956] 1 WLR 874). In Re Landau, Slesser LJ suggested (at pages 556-7) that an explanation for this might be that being an order that was capable of being varied by the court, it should not be regarded as permanent property of the wife, which could vest in her trustee in bankruptcy.

16. The manual provided to the court by the Trustees indicates, at paragraphs 30.118 and 30.119 respectively, that claims to maintenance under the United Kingdom equivalent of the Inheritance Ordinance, and to matrimonial maintenance in ancillary relief proceedings are personal to the bankrupt, and do not vest in the trustee. This would seem to be right in principle, and it seems to me to follow that in consequence, rights to enforce or vary orders made for such maintenance are similarly personal to the bankrupt.

17. I am therefore of the view that even though the right to receive maintenance pursuant to an order under the Inheritance Ordinance might arguably be characterised as a “thing in action” on the basis that it is something that is enforceable by court proceedings, it is, by reason of its personal nature, not something that forms part of the bankruptcy estate.

18. However, by reason of the analogy which I think can be drawn with matrimonial maintenance, I consider that payments of maintenance under the Inheritance Ordinance can be regarded as “income” within the meaning of section 43E of the Bankruptcy Ordinance, and as such, can be made the subject of an income payments order under that section. In the present case, however, no such order has been made, and the consequence is that the Official Receiver was not entitled to claim such payments as part of the bankruptcy estate, and the amount of such payments (less the amounts paid to the Bankrupt by way of allowance under section 63 of the Bankruptcy Ordinance) should be returned to the Bankrupt.

19. This deals with Ms Lam’s main ground for suggesting that the payments should be regarded as belonging to the bankruptcy estate. However, I would also add that I do not think that either of the other grounds which she put forward in support of the Official Receiver’s position (which I have described in paragraphs 6(1) and (3) above) assists the Official Receiver, for the following reasons:-

(1) As to the argument in paragraph 6(1), while the payments are clearly money, the money to be paid to the Bankrupt under the order of 20 November 2007 which was paid to the Official Receiver was not money held by the Bankrupt at the date of the bankruptcy order, but was only payable (and paid) to her after that date. Accordingly, it could not vest in the Official Receiver as provisional trustee on the date of the bankruptcy, but could only have been made the subject of an application for an income payments order under section 43E.
(2) As to the argument in paragraph 6(3), it seems to me that if there was to be (as there subsequently was in this case) an order varying the amount of the maintenance, any right to the new amount payable would arise under the later order, which was not in existence at the time of the bankruptcy. Thus, even if I am wrong in my conclusion that the benefit of the order of 20 November 2007 cannot be regarded as property of the bankrupt which vested in the bankruptcy estate on the making of the bankruptcy order, rights under an order for variation made after the bankruptcy occurred would have to be claimed separately by the trustee under section 43E of the Bankruptcy Ordinance (since the payments made under any varied order would be of the nature of income, in respect of which an income payments order could be made).

20. As a result of the point made in paragraph 19(2) above, it seems to me that the impact of the present decision is fairly limited, as it only affects the two payments which have been made since the bankruptcy commenced. Given that no further payments are likely to be forthcoming for some time, it seems likely that the HK$90,000 odd which will now have to be paid over to the Bankrupt would, in any event, soon have been exhausted by applications by the Bankrupt for an allowance out of the estate, which the Trustee would in all probability have acceded to, as the Bankrupt appears to have no other means by which to support herself.

21. In the light of the conclusion which I have reached, the questions whether the payments under the maintenance order should be excluded from the estate under section 43(2)(b) of the Bankruptcy Ordinance, and if so, whether they can be claimed by the Official Receiver under section 43B (these being the submissions described in paragraphs 6(4) and (5) above), do not arise for consideration. However, as the points have been argued, I shall explain briefly the conclusions to which I have come in relation to them.

22. In my view, the monthly payments cannot be regarded as “provisions” within the meaning of section 43(2)(b). The word “provisions” appears in the context of an enumeration of certain assets which are needed to satisfy a bankrupt’s basic domestic needs: “… clothing, bedding, furniture, household equipment and provisions”. Money would not appear to fit comfortably within this list. Further, the Chinese version of section 43(2)(b) uses the term “供應品”, which can be roughly translated as “supplies” or “consumables”, for “provisions”, which appears to support this view. In the circumstances, it does not seem to me that money or an order for the payment of money should be regarded as “provisions” for the purposes of this section. The necessity for the Official Receiver to have recourse to section 43B of the Bankruptcy Ordinance does not therefore arise.

23. Finally, in the light of my decision that the monthly maintenance payments do not form part of the bankruptcy estate, the submissions of the Official Receiver described in paragraphs 6(7) and (8) above similarly do not arise for consideration.

24. I would, however, observe in relation to the question whether the decision of the court, when making an interim order in HCMP 2981/2004 under the Inheritance Ordinance, defines the amount of the Bankrupt’s reasonable domestic needs which fall to be considered in the context of any income payments application which may be made by the Trustees in future, that it seems to me to be well arguable that it does not, as the factors that the court is required to take into account when making an order under the Inheritance Ordinance, which are set out in section 5 of that Ordinance would appear to go well beyond a consideration of the reasonable domestic needs of the applicant for such an order. In particular, the fact that regard is to be had to the size and nature of the estate, and the financial resources and needs of all applicants and other beneficiaries of the estate, suggests that there may be cases (of which this may be one) where the provision to be made under interim or final maintenance orders under the Inheritance Ordinance may be very generous, and be far more than is required for the reasonable domestic needs of a bankrupt. It must also be borne in mind that it will usually be reasonable to expect a bankrupt to make some adjustments to his or her lifestyle after bankruptcy, by economising on expenditure where possible.

25. That said, however, as the question is one that will only arise in the context of an application (if one is made in future) by the Trustees seeking an income payments order under section 43E of the Bankruptcy Ordinance, I think that it would be more appropriate for the question of what, for the purposes of such an application, the Bankrupt’s reasonable domestic needs are, to be left to be considered in the light of the circumstances prevailing at the time of such an application, as both the amount of the maintenance ordered, and the Bankrupt’s personal situation and needs at that time, may be rather different from the position now.

26. I therefore consider that the appropriate order to make would be to order that until such time as an income payments order is applied for by the Trustee, any payments received under the order of 20 November 2007, or any subsequent order, in HCMP 2981/2004 should be paid directly to the Bankrupt without deduction. So far as costs are concerned, although the Bankrupt acted in person, I see no reason why she should not be entitled to recover any costs that she may have incurred, and I therefore make a costs order nisi that the Bankrupt’s costs of the application are to be paid by the Official Receiver, to be taxed on the party and party basis if not agreed. So far as the Trustee’s costs of attending at the hearing of 6 July 2012 and of dealing with the court’s request for assistance in relation to the approach taken to matrimonial maintenance orders are concerned, I shall make an order nisi that there should be no order as to such costs.

	(Aarif Barma)
	Judge of the Court of First Instance
	High Court

Bankrupt: Tam Mei Kam (覃美金), in person (Present)

Ms Joyce Lam of the Official Receiver’s Office, for the Official Receiver

Mr Wong Teck Meng and Ms Chan Pui Sze (陳佩詩) of Messrs Briscoe Wong Ferrier, for the Joint & Several Trustees

81382-EN-2012-04-25

RE TAM MEI KAM

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HCB 3777/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3777 OF 2011

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CREDITOR’S BANKRUPTCY PETITION ON FAILURE TO
COMPLY WITH A STATUTORY DEMAND FOR A
LIQUIDATED SUM PAYABLE IMMEDIATELY

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Re :	TAM MEI KAM, the Judgment Debtor
Ex-parte :	CHIU, SZETO & CHENG, SOLICITORS (A FIRM),the Judgment Creditor

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Before : Hon Barma J in Court

Date of Hearing : 15 February 2012

Date of Judgment : 25 April 2012

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J U D G M E N T

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1. This was the hearing of a bankruptcy petition presented on 17 June 2011 by Messrs Chiu, Szeto & Cheng, a firm of solicitors (“the Creditor”) against Madam Tam Mei Kam (“the Debtor”), who was formerly its client. The petition is based on a judgment debt in the sum of HK$2,243,938.00, together with interest on that amount at the judgment rate from 5 November 2009 until payment and costs, which the Debtor was ordered to pay to the Creditor in HCA 2239/2009, and a further amount of HK$20,500.00 which the Debtor was ordered to pay to the creditor by way of costs assessed on a gross sum basis on 14 May 2010, also in HCA 2239/2009. The judgment debt was in respect of the outstanding balance of fees owed to the Creditor by the Debtor.

2. The background to the debt can be briefly summarised as follows:-

(1)  The Debtor is the mother of the late Ms Mui Yim Fong, or Anita Mui, a well known singer and actress, who passed away on 30 December 2003. Ms Mui left a will under which she left her residuary estate to a discretionary trust which she set up on 3 December 2003, the same day as she made her will. HSBC International Trustee Limited (“HSBC”) was appointed as the sole executor of the will, and it was also the trustee under the trust. Pursuant to the trust, a friend of Ms Mui (a Mr Eddie Lau) was appointed as a beneficiary, and a Buddhist organisation known as New Horizon Buddhist Association Limited (“New Horizon”) was appointed as the repository beneficiary. There was also a trust memorandum of wishes under which Ms Mui indicated that she wished to have certain assets distributed to Mr Lau, a sum of money set aside in order to assist her nephews and nieces to finance their education, and that the balance of the trust fund should be retained for the purpose of paying an allowance of HK$70,000 per month to the Debtor during her lifetime, after which the remaining balance of the trust fund should be distributed to New Horizon.
(2)  The Debtor issued proceedings (HCAP 2/2004) to challenge the validity of the will and trust, in which she sought a declaration that Ms Mui had died intestate and an order granting the Debtor letters of administration in respect of Ms Mui’s estate. At first instance, the Debtor did not advance any positive case, and simply put the defendants (HSBC, Mr Lau and New Horizon) to proof of the validity of the will and trust. The Creditor was the firm of solicitors acting for her in these proceedings, which were dismissed by Andrew Cheung J (as he then was). At the trial, the Debtor was represented by leading and junior counsel instructed on her behalf.
(3)  Thereafter, the Debtor dispensed with the services of the Creditor and counsel instructed by them. She appealed (unsuccessfully) to the Court of Appeal (CACV 200/2008) and then (again unsuccessfully) to the Court of Final Appeal (FACV 11/2010). In both the Court of Appeal and the Court of Final Appeal, the Debtor sought to raise an argument to the effect that there was collusion and conspiracy on the part of Ms Sheila Ho (Ms Mui’s godmother) and Ms Doris Lau (an employee of HSBC) in relation to the preparation and execution of the will and the trust deed. In both courts, her attempt to do so was rejected on the basis that this was a new point which could not properly be raised on appeal. The point was dealt with by Chan PJ in the Court of Final Appeal at paragraphs 29 to 32 of that court’s judgment, where it was pointed out that:-
(a)  The Debtor’s position at the trial was to put the defendants to strict proof of the will.
(b)  Such allegations as there were in her pleading that might vaguely suggest collusion or conspiracy were not properly pleaded or particularised, and were only aimed at raising doubt about the defendants’ case.
(c)  Any suggestion of undue influence on the part of Ms Sheila Ho was expressly abandoned by the Debtor’s senior counsel at the trial.
(d)  On the facts of the case, there was no evidence to suggest that either Ms Sheila Ho or Ms Doris Lau had anything to gain from any supposed conspiracy or collusion, a matter which pointed to there being no basis for any such suggestion.
(e)  An attempt to blame the Debtor’s senior counsel for not taking the point at trial was unfair, having regard to the fact that in her own submissions she had accepted that she had been convinced by counsel that this was the wisest course to take. In other words, she had agreed to the course taken.
(4)  While the appeal to the Court of Appeal was pending, the Creditor brought HCA 2239/2009 against the Debtor, seeking payment of the outstanding balance of fees owed to it. The Debtor resisted payment, claiming that there had been an agreement by which the Creditor had agreed to charge a lump sum of HK$1.3 million as legal fees (including counsel’s fees) for HCAP 2/2004, and that any fees beyond that amount should only be payable if the Debtor succeeded in those proceedings. This defence was rejected by the Master, who gave summary judgment in favour of the Creditor for the amount indicated in paragraph 1 above. The Master’s decision was upheld by Chung J in his judgment dated 6 May 2010. The Debtor took no steps to appeal against Chung J’s decision.

3. After the presentation of the petition, the Debtor filed a Notice of Intention to Oppose the petition dated 9 August 2011. There, she asserted that:-

“There have been elements of fraud and dishonesty engineered by the [Creditor] both in securing the purported judgment debt and in the proceedings in relation thereto and this is a proper and justified case for the Bankruptcy Court to look behind an earlier judgment made by the Court of First Instance.”

4. The Notice went on to suggest that:-

(1)  There had been a collateral agreement in respect of the professional fees payable to the Creditor.
(2)  The Creditor or senior counsel instructed by it had not acted in the Debtor’s best interests, and had been negligent or reckless in a way causing damage to the Debtor, such that the Debtor was not liable for the fees charged by the Creditor.
(3)  The Creditor had concealed material facts from Chung J, so as to mislead him into giving judgment in its favour.

5. In her affirmation in opposition to the petition, the Debtor referred to the probate action and appeals, and asserted that Ms Sheila Ho and Ms Doris Lau had fraudulently procured Ms Mui to execute the will and trust, pointing to what she suggested were inconsistencies as to what Ms Mui’s wishes were, and suspicious circumstances surrounding the will and trust. She repeated her claim that there had been an agreement to limit the fees payable to HK$1.3 million unless the probate action were successful, and complained that senior counsel had not put forward a case based on the fraudulent scheme which she alleged existed, but instead had advised her to advance different arguments, all of which failed, and which resulted in her being prevented from putting forward such a case on appeal.

6. In her written submissions lodged before the hearing, the Debtor submitted that it was open to the court, sitting in its bankruptcy jurisdiction, to go behind a judgment and inquire into the validity of the underlying debt, and that this should be done in the present case. She also submitted that the court should decline to make a bankruptcy order against her even if the judgment were a valid one, as justice demanded that no such order should be made. In essence, she again relied on her assertion that counsel representing her at the trial of the probate action had not advanced the case (of fraud and collusion) that she intended to advance, and went on to assert that because the Creditor had been involved in “causing, aiding and abetting” the alleged fraud of Ms Sheila Ho and Ms Doris Lau, the Creditor was not entitled to recover the outstanding fees from her. She also suggested that the Creditor had misled Chung J by concealing these matters from him. She also suggested that the court should find (on the basis of her affirmation) that Ms Sheila Ho and Ms Doris Lau had been guilty of perjury, and that there had been a gross miscarriage of justice in relation to the probate action.

7. In order to resist the making of a bankruptcy order, the Debtor must demonstrate, by sufficiently precise evidence, that there is a bona fide dispute in relation to the debt on which the petition is based. In my view, the Debtor falls far short of doing this, and there is no merit to any of the Debtor’s submissions.

8. The relevant judgment for present purposes is the judgment of Chung J, which confirmed the judgment debt on which the petition is based. It is that judgment which the Debtor has to show was tainted by fraud in order to justify this court in going behind it. However, an examination of that judgment shows quite clearly that there is no reason to think that it was in any sense obtained by fraud or deception on the part of the Creditor. It is clear from the judgment of Chung J that the only point raised by the Debtor to resist payment of the outstanding fees was the allegation of a collateral or side agreement along the lines described in paragraphs 2(4), 4(1) and 5 above. There was no suggestion that the Creditor (or senior counsel who had been instructed) had failed to have regard to the Debtor’s instructions, or had acted negligently or otherwise improperly in their conduct of her case. Nor is there any material before me to suggest that any such suggestion had been made to the Creditor up to that time. In these circumstances, it is fanciful to suggest that the Creditor should have been expected to draw these matters to the attention of Chung J at the hearing of the summary judgment appeal. There is nothing else to suggest that the Creditor had somehow obtained the judgment by fraud or by misleading the court.

9. I am therefore quite unable to see that there was any fraud or other taint to the judgment of Chung J such as to open up the possibility of going behind it.

10. Further, and in any event, I do not think that there is any merit in the Debtor’s suggestion that the Creditor should not be entitled to recover its fees on the basis of the allegations concerning the conduct of the probate action at first instance. There are several reasons for this:-

(1) It appears from the judgment of Chan PJ in FACV 11/2010 (to which I have referred above) that the Debtor accepted the advice of counsel as to the way in which her case should be put at first instance. This is not, therefore, a case of her legal advisers having ignored or failed to follow her instructions. Rather, her case must be that the advice given was negligent.
(2) However, there is no evidence to suggest that such advice was in fact negligent. It is well known that a party’s legal representatives should not advance a case of fraud unless satisfied that there is a sufficient basis for doing so. The mere fact that a client wishes to make such an allegation is not enough. As appears from Chan PJ’s judgment, the allegations which the Debtor made in her pleading in the probate action were vague and unparticularised, and were inherently improbable for the reasons there explained. There is therefore no reason to think that the advice which the Debtor was given, and accepted, was anything other than proper and appropriate.
(3) Still less is there even a scintilla of evidence to suggest that the Creditor had somehow caused, aided or abetted the supposed wrongdoing of Ms Sheila Ho and Ms Doris Lau. The addition of this point in the Debtor’s written submissions illustrates, in my view, the lengths to which the Debtor is prepared to go in her obstinate persistence in the views that she has formed.

11. Finally, in relation to the allegation that the Creditor had agreed to accept a cap on the total fees to be charged of HK$1.3 million, unless the Debtor’s claim was successful, this point was squarely raised by the Debtor in the course of the summary judgment application, and was rejected by Chung J for the reasons he gave in his judgment. There is no basis on which this matter can be reopened by the Debtor at this stage.

12. In all the circumstances, I am quite satisfied that the Debtor has failed to demonstrate the existence of any bona fide dispute of substance in relation to the debt asserted against her, and there is, in my view, no other reason to withhold the making of a bankruptcy order against her. I shall therefore make the usual bankruptcy order, with costs, against the Debtor.

(Aarif Barma)
Judge of the Court of First Instance
High Court

Mr Kam Cheung, instructed by M/s Chiu, Szeto & Cheng, for the Petitioner

Debtor: Tam Mei Kam, in person (Present)

Attendance excused for Official Receiver

Please refer to CACV87/2012 for the relevant appeal(s) to the Court of Appeal.

ExpenditureItem	Amount now claimedby Bankrupt (HK$)	Amount Assessedby theOfficial Receiver (HK$)	Amount Assessedby Trustees (HK$)
Rent	30,000	30,000	30,000
			(from March 2014 – 20,000
Water	500	0	450
Electricity	4,825	4,825	2,400
Gas	2,691	2,691	400
Telephone(residentialplus fax)	700	700	700
Telephone(mobile)	500	500	500
Food	5,050	5,050	6,375
Salary todomestichelpers	7,480	7,480	3,920
Familymiscellaneousexpenditure	2,000	2,000	2,000
Cap-parkrelatedcharges	0	0	0
Entertainingfriends	0	0	0
Salarytolegaladviser/personal assistant	16,000	0	0
Tonicfoodandacupuncture	18,500	18,500	0
Travellingexpenses	3,500	3,500	3,500
Total	91,746	75,246	50,245
			(from March 2014 – 40,245)