Hong Kong Ordinances

BANKRUPTCY ORDINANCE - SECT 59

Disclaimer of onerous property

(Past version on 30/06/1997).

(1) Where any part of the property of the bankrupt consists of land of any
tenure burdened with onerous covenants, of shares or stock in companies, of
unprofitable contracts, or of any other property that is unsaleable, or not
readily saleable, by reason of its binding the possessor thereof to the
performance of any onerous act or to the payment of any sum of money, the
trustee, notwithstanding that he has endeavoured to sell or has taken
possession of the property or exercised any act of ownership in relation
thereto, but subject to the provisions of this section, may, by writing signed
by him, at any time within 12 months after the first appointment of a trustee
or such extended period as may be allowed by the court, disclaim the property:
Provided that, where any such property has not come to the knowledge of the
trustee within 1 month after such appointment, he may disclaim such property
at any time within 12 months after he has become aware thereof or such
extended period as may be allowed by the court.

(2) The disclaimer shall operate to determine, as from the date of disclaimer,
the rights, interests and liabilities of the bankrupt and his property in or
in respect of the property disclaimed, and shall also discharge the trustee
from all personal liability in respect of the property disclaimed as from the
date when the property vested in him, but shall not, except so far as is
necessary for the purpose of releasing the bankrupt and his property and the
trustee from liability, affect the rights or liabilities of any other person.

(3) A trustee shall not be entitled to disclaim a lease without the leave of
the court, except in any cases which may be prescribed by general rules, and
the court may, before or on granting such leave, require such notices to be
given to persons interested, and impose such terms as a condition of granting
leave, and make such orders with respect to fixtures, tenant's improvements
and other matters arising out of the tenancy, as the court thinks just.

(4) The trustee shall not be entitled to disclaim any property in pursuance of
this section in any case where an application in writing has been made to the
trustee by any person interested in the property requiring him to decide
whether he will disclaim or not and the trustee has for a period of 28 days
after the receipt of the application, or such extended period as may be
allowed by the court, declined or neglected to give notice whether he
disclaims the property or not; and in the case of a contract, if the trustee
after such application as aforesaid does not within the said period or
extended period disclaim the contract, he shall be deemed to have adopted it.

(5) The court may, on the application of any person who is, as against the
trustee, entitled to the benefit or subject to the burden of a contract made
with the bankrupt, make an order rescinding the contract on such terms as to
payment by or to either party of damages for the non-performance of the
contract, or otherwise, as to the court may seem equitable, and any damages
payable under the order to any such person may be proved by him as a debt
under the bankruptcy.

(6) The court may, on application by any person claiming either to have any
interest in any disclaimed property or to be under any liability not
discharged by this Ordinance in respect of any disclaimed property, and on
hearing such persons as it thinks fit, make an order for the vesting of the
property in or delivery thereof to any person entitled thereto, or to whom it
may seem just that the same should be delivered by way of compensation for
such liability as aforesaid, or a trustee for him, and on such terms as the
court thinks just; and on any such vesting order being made, the property
comprised therein shall vest accordingly in the person therein named in that
behalf without any conveyance or assignment for the purpose: Provided that
where the property disclaimed is of a leasehold nature the court shall not
make a vesting order in favour of any person claiming under the bankrupt,
whether as under-lessee or as a person entitled to a mortgage except upon the
terms of making that person-

   (a)  subject to the same liabilities and obligations as the bankrupt was
        subject to under the lease in respect of the property at the date when
        the bankruptcy petition was filed; or

   (b)  if the court thinks fit, subject only to the same liabilities and
        obligations as if the lease had been assigned to that person at that
        date, and in either event (if the case so requires) subject only to
        the same liabilities and obligations as if the lease had comprised
        only the property comprised in the vesting order; and any under-lessee
        or person entitled to a mortgage who declines to accept a vesting
        order upon such terms shall be excluded from all interest in and
        security upon the property, and if there is no person claiming under
        the bankrupt who is willing to accept an order upon such terms, the
        court shall have power to vest the bankrupt's estate and interest in
        the property in any person liable either personally or in a
        representative character and either alone or jointly with the bankrupt
        to perform the lessee's covenants in the lease, freed and discharged
        from all estates, incumbrances and interests created therein by the
        bankrupt. (Amended 47 of 1984 s.10)

(7) Where on the release, removal, resignation or death of a trustee the
Official Receiver is acting as trustee, he may disclaim any property which
might be disclaimed by a trustee under the foregoing provisions,
notwithstanding that the time prescribed by this section for such disclaimer
has expired, but such power of disclaimer shall be exercisable only within 12
months after the Official Receiver has become trustee in the circumstances
aforesaid or has become aware of the existence of such property, whichever
period may last expire. (Amended 18 of 2005 s. 16)

(8) Any person injured by the operation of a disclaimer under this section
shall be deemed to be a creditor of the bankrupt to the extent of the injury
and may accordingly prove the same as a debt under the bankruptcy. [cf. 1914
c. 59 s. 54 U.K.]