XCHRX MA WEI HUA v. NGAI MAN

1998, No. MP 172

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. The parties are the registered co-owners of a property in Yuen Long (the property). They purchased it in 1993. They own in the proportion of 38 parts by the plaintiff and 62 parts by the defendant.

2. On 13 January 1998, the plaintiff issued a summons seeking an order for the sale of the property under section 6 of the Partition Ordinance (Cap. 352). On 7 February 1998, the defendant issued a summons in which he asks for an order that the plaintiff sell her interest in the property to him at market value. The parties agree that I should deal with both summonses together.

3. Although, as I say, the plaintiff's summons seeks an order for the sale of the property, in her affirmation dated 23 February 1998, the plaintiff says that she and her husband "decided to oppose the defendant's said summons as we are interested in buying all the legal and beneficial interest in the defendant" in the property at market value. Because each party wishes to buy out the other, the plaintiff says that she should be allowed to bid at the sale of the property. It appears, therefore, that the plaintiff continues to seek an order for sale, at which she should be allowed to bid, but, as an alternative, would be prepared to buy out the defendant at market value.

4. The defendant says that the property was purchased with the plaintiff for the purpose of rebuilding on the property and leasing it to Chun Keen Property Consultants Limited (Chun Keen). At this time, Chun Keen was a business in which both parties were shareholders. Chun Keen continues to rent the property. The plaintiff is no longer involved in Chun Keen.

5. The plaintiff deposes that, in early 1994, the defendant and his wife and the plaintiff and her husband embarked on investment in property through Chun Keen. In about December 1995, however, the plaintiff and her husband resigned as directors of Chun Keen and the plaintiff's husband sold his shares to the defendant. The relationship between the plaintiff's husband and the defendant began to deteriorate in about February 1997 and the relationship between the plaintiff and her husband and the defendant and his wife broke down in April 1997. There is other litigation between the parties.

6. The plaintiff seeks to show that a sale by public auction would be the most beneficial for both parties. She says that her husband, who is a chartered surveyor, says that there are factors that would influence favourably the price at a public auction, but that, in making his valuation, "it is very unlikely that the surveyor will not consider" these factors. It was not explained in the evidence, and Mr Lee was unable to explain to me, why factors that would increase the price at a public auction would not influence a valuer who is seeking to assess a market value.

7. Section 6 of the Partition Ordinance (Cap.352) reads -

(1) In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of-

(a) the nature of the land to which the proceedings relate;

(b) the number of the persons interested or presumptively interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.

(2) The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.

(3) (a) Without prejudice to subsection (1), if any person interested in the property applies to the Court to make an order for the sale of the property instead of an order for partition, then, unless the other persons interested undertake to purchase the interest of the party applying for an order for sale, the Court may, if it thinks fit, make an order for the sale of the property.

(b) If an undertaking is given by the other persons interested, the Court may order a valuation of the interest of the person applying for an order for sale in such manner as it thinks fit.

(4) On making an order under subsection (1) or subsection (3), the Court may direct a distribution of the proceeds of the sale and give all other necessary or proper consequential directions.

(5) On a sale under this section the Court may allow any of the persons interested in the property to bid at the sale, on such terms as the Court deems reasonable as to-

(a) non-payment of deposit; or

(b) setting off or accounting for the purchase money or any part thereof instead of paying the same; or

(c) as to any other matters.

8. The interpretation of this section is not free from difficulties. Subsection (1) says that, before the court may order the sale of the property, it must appear to the court that a partition would not be beneficial to all the persons interested. In this case, both parties are at one that a partition would not be so beneficial, and I agree with that. That much is clear. Then subsection (3)(a) says that where, as here, one owner asks for an order for sale instead of an order for partition, the court may make an order for sale "unless the other persons interested undertake to purchase the interest of the party applying for an order for sale". That provision seems to say that the court may not make an order for sale where "the other persons interested undertake to purchase the interest of the party applying for an order for sale". This seems to be a limitation on the court's power to order a sale. Subsection (3)(a) does say that it "Without prejudice to subsection (1)", but, whatever this is meant to convey, I do not think it can be said to mean that, although the power to order a sale is expressly limited by the words of subsection (3)(a), this limitation is removed by the earlier "without prejudice" words. This would make no sense at all. The other difficulty is that the section does not, expressly, give the court the power to order that the interest of the party making the application for an order for sale be sold to the other person interested, although it might be argued that the fact that subsection (3)(b) provides, where an undertaking has been given, for a valuation of the interest of the person applying for an order for sale implies such a power. That, however, is not an implication adopted by Lord Blackburn in Pitt v. Jones 5 App. Cas. 651 when considering the equivalent and similar English provision, and North J in Richardson v. Feary (1888) 39 Ch. D. 45 agreed with that view.

9. What is clear from section 6 is that the person making an application for an order for sale cannot, at the same time, give an undertaking to purchase the interest of the other person interested; at least, not an undertaking that is effective for the purposes of the section.

10. The difficulties I have mentioned above; that is, the intended interaction between subsections (1) and (3)(a) and whether section 6 gives the court power to order one owner to sell to a willing co-owner, were not addressed by counsel at the hearing. Accordingly, I gave the parties the opportunity of submitting further written submissions. Both parties have accepted that opportunity.

11. Mr Lee submits that the majority decision in Pitt v. Jones should be followed. That decision was that an undertaking given under the equivalent of subsection (3)(a) did not prevent the court making an order for sale under the equivalent of subsection (1) if a case was brought within it. That case also decided that the owner seeking an order for sale could not be compelled to accept the undertaking to purchase.

12. Mr Barlow argues that Pitt v. Jones is right on the first point, but wrong on the second. He says that I am able to make an order for sale in spite of the undertaking, and I am also able to require the plaintiff to sell to the defendant.

13. I am satisfied that our legislation does not enable the court to oblige an owner to sell his share to the party giving the undertaking. This would be an extraordinary power and, in my view, it should not be implied readily. There is no necessity to read into section 6 a power to order that there be a sale by one owner to another to give the provision efficacy. There is nothing unreasonable in reading the legislation as saying that, where a court declines to make an order for sale of the property, the party applying for such an order has a choice; he may accept the undertaking to buy out his share or he may retain his ownership. If the legislature intended that the court should have the power to take that choice away, and compel the discontented owner to sell his share, it would have said so in clear terms. I am comforted in that conclusion by the decisions in Pitt v. Jones and Golden Bay Investment Ltd. v. Cheung Kam Moon [1992] 2 HKC 478.

14. I am not so sure that Pitt v. Jones and counsel are right in saying that subsection (1) gives the court an absolute discretion, unqualified by subsection (3)(a). It is a difficult matter of construction as was recognised in Pitt v. Jones and the cases that preceded it. However, it is not necessary to decide this question because it seems to me that where land is acquired by the owners for a particular purpose, that this purpose is still subsisting, that the majority owner wishes to continue this purpose and does not wish the property to be sold so that it is, possibly, acquired by strangers, and that majority owner has given the discontented owner the opportunity to sell his share at a fair valuation, it would not be appropriate to order that the property be sold.

15. Accordingly, the plaintiff's application is dismissed. If the plaintiff changes her mind about selling out, she may apply for directions regarding the valuation. I make an order nisi that the plaintiff pay the defendant's costs.

16. As I have said, I do not believe that I have the power to order that the plaintiff sell her share of the property. Accordingly, the defendant's application is also dismissed. I make an order nisi that the defendant pay the plaintiff's costs of the defendant's application.

JK FINDLAY

Judge of the High Court
Court of First Instance