Re Chu Wai Tung (a bankrupt) (No 2)
Court of First Instance
Bankruptcy Proceedings No 4839 of 2016
Deputy Judge Marlene Ng in Chambers
30 November, 13 December 2017

Bankruptcy — bankrupt’s estate — whether property subject to living trust agreement and excluded from bankrupt’s estate — whether new evidence to be adduced on appeal — Bankruptcy Ordinance (Cap. 6) s. 43(3)

Trusts — family trust — living trust agreement executed by husband and wife — whether created present trust in favour of son

Civil evidence — appeal — adducing further evidence — self-created document made between hearing and decision below — failed to satisfy first condition in Ladd v. Marshall

B and his wife, W, were joint owners of a flat (‘the Property’). B was made bankrupt on 16 August 2016 (‘the Bankruptcy Order’). Under a Living Trust Agreement (‘the Agreement’) made in June 2010, the couple were named as “grantor” and “trustee” and their son (‘S’) as the sole “beneficiary”; and only on the death of the Grantor and his/her spouse, would the trust assets be distributed to S. B’s application for a determination against the trustees in bankruptcy (‘Ts’) to validate the Agreement and thereby exclude the Property from his Estate was dismissed on 24 August 2017 (‘the Decision’). B applied for leave to appeal, seeking to adduce a Resolution passed by B, W and S on 18 August 2017, after the hearing and before the Decision was handed down, in which they agreed that “Upon approval by all trustees “Unanimously” with signatures on this Resolution, … [S], shall be entitled to the “Distribution” effective immediately, and extending, throughout the lifetime of the Grantors”; and claiming that his entitlement was effective “since the commencement and execution of the [Agreement] June 2010” and he was “a present beneficiary, not a future one”.

Held, dismissing the application, that:

  • B’s proposed grounds of appeal had no reasonable prospect of success. (See para. 26.)
  • The Resolution was inadmissible. P had failed to satisfy the first condition in Ladd v. Marshall that such new evidence could not have been obtained with reasonable diligence for use at the hearing below. The Resolution was self-created after the hearing and might have been prompted or coloured by what had happened then. In any event, it was B’s duty to advance his case at once and not piecemeal as he found out the objections in his way (Ladd v. Marshall [1954] 1 WLR 1489 applied). (See para. 10.)
  • B had also failed to satisfy the second condition in Ladd v. Marshall that the Resolution must be relevant and would, as far as could be foreseen, be a determining factor. B’s claim that the Resolution took effect in June 2010 was inconsistent with its express term that it was effective on 18 August 2017, which was too late to have any legal effect. Whether any interest in the remaining equity of the Property fell within B’s Estate and thus vested in Ts depended on the status of the interest at the time of the Bankruptcy Order, ie 16 August 2016, not any later date. (See paras. 11–15, 25.)
  • Even if the Agreement was valid and/or recognised, under s. 43(3) read with ss. 12 and 58 of the Bankruptcy Ordinance (Cap. 6), the question was, assuming B was a trustee, whether at the time of the Bankruptcy Order he held the Property on trust “for any other person”. Further, the effect of the Agreement was determined not by the Grantors or Trustees’ subjective intent or motive, but on an objective reading of its terms which did not create any present trust in favour of S. The Trustees could distribute the trust assets for the benefit of the couple, not only S as their successor; and during the couple’s lifetimes, they, as both Grantor and Trustees, would enjoy the trust assets (in particular the Property) and the beneficial interest in the Property would not vest in S, despite being the beneficiary and being allowed to live with the couple in the Property. (See paras. 19–24.)


This was an application by the bankrupt for leave to appeal against the dismissal by Deputy Judge Marlene Ng of his application for a determination to validate a living trust agreement (see [2017] 4 HKLRD 610). The facts are set out in the judgment.