URBAN PROPERTY MANAGEMENT LTD AND ANOTHER v. TSANG WING LAM

   DCMP 2185/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2185 OF 2004

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D E C I S I O N

1.  Tsang, the Defendant, is the registered owner of the property at Flat 5, 23^rd Floor, Block C, King Tin Court, Shatin, New Territories (“the Property”). The 1^st Plaintiff is the manager and the 2^nd Plaintiff is the owners’ corporation of the building where the Property is.

2.  On 11 September 2001, the manager registered in the Land Registry the captioned Memorandum of Charge against the Property for unpaid management expenses (“the MOC”).

3.  These proceedings were commenced to recover the amount in arrears and to enforce the MOC by way of possession and sale. On 4 August 2006, HH Judge HC Wong granted the order sought by the Plaintiffs (“the 4/8/06 Order”).

4.  On 23 December 2008, Tsang applied for the release of the Property from the security constituted by the MOC on the basis that the amount secured by the MOC has been paid. The Master dismissed the application. Tsang appealed to this court.

5.  On 3 November 2009, this court handed down the decision allowing Tsang’s appeal and ordering the release (“the Decision”).

6.  The Plaintiffs now seek leave to appeal against the Decision. They also ask for stay of execution of this court’s order pending the appeal, if leave is granted.

7.  Leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard: section 63A of the District Court Ordinance, Cap.336.

8.  The long history of this case was summarised in paragraphs 4 to 28 of the Decision. The Plaintiffs basically intend to challenge this court’s discussion in paragraphs 33 to 41 of the Decision. I do not repeat the same here. The draft grounds of appeal annexed to the summons raise the points:

(1)  This court erred in holding that the amount secured by the MOC did not include the costs of these proceedings.

(2)  This court erred in holding that the order for possession has been validly executed and that possession has been resumed.

(3)  This court erred in holding that the amount secured by the MOC has been settled by way of the garnishee order.

(4)  This court has failed to give any or proper consideration to the Plaintiffs’ interest in terms of priority if the MOC is vacated.

9.  I am prepared to consider the intended appeal as one concerning questions of construction. Nevertheless, for the purpose of section 63A, the Plaintiffs are expected to explain to this court how and why the above points are reasonably arguable. For the following reasons, I do not think they have managed to do so.

10.  The Plaintiffs intend to argue “all other expenses in or in connection with the recovery or attempting to recover the same” in clause 6(e) of the DMC include the costs to be incurred as a result of the civil action yet to be commenced (to recover such expenses). In view of the wordings of clause 6(e), this is unarguable: see para.34 of the Decision. The terms of the 4/8/06 Order are no different: see para.36 of the Decision.

11.  The major argument is that the costs of these proceedings are secured by the MOC. I agree that the MOC, if read literally and in isolation, may carry the meaning that it covers any further moneys that may be due by the owner to the Manager under the DMC than the principal debt of HK$12,870 with interest. But the MOC was supposed to be based on the very notice served pursuant to clauses 6(f) of the DMC. There is no way that the MOC could legitimately be created for a scope beyond what this clause permits: see paras.34-35 of the Decision.

12.  If the costs of these proceedings were always secured by the MOC, it would have been wrong for the Registrar, as he then was, to order the return of the keys and vacant possession of the Property to Tsang upon payment of the sum specified in the order which obviously did not include the costs of these proceedings: see paras.16 to 21 of the Decision. Not only have the Plaintiffs not appealed against the Registrar’s order, but they have also kept and presented the cheque tendered by Tsang. Only that the cheque was subsequently dishonoured.

13.  Contrary to what is suggested in the draft grounds of appeal, this court did not hold that the order for possession has been validly executed. This court merely stated the fact that the order for possession has been executed and, rightly or wrongly, the Property has been resumed by Tsang: see para.40 of the Decision. Though the Plaintiffs contend that Tsang’s resumption of the possession of the Property was a mistake, they did not reject the cheque tendered by Tsang and seek the Registrar’s clarification or direction upon at the material time. What the Plaintiffs did only afterwards was somewhat strange: see para.22 of the Decision.

14.  The garnishee order referred to in the Decision was that made absolute on 30 May 2008 whereby the Plaintiffs managed to obtain payment in satisfaction of the principal and interest payable. It did not cover the costs of these proceedings. This court never suggest otherwise: see para.25 of the Decision. This is how this court’s reference to the amount secured by the MOC having been settled by that garnishee order should be understood: see para.40 of the Decision.

15.  If the costs of these proceedings were already secured by the MOC and, according to the Plaintiffs, the MOC remains intact as long as the costs remain unpaid even after the resumption of the possession by Tsang, that seems to suggest that the Plaintiffs may now initiate another set of proceedings to obtain an order for possession and sale for the unpaid costs. They did attempt that but that ended up with no result: see para.26 of the Decision.

16.  What the Plaintiffs eventually did was to impose another charge on the Property in 2009 in respect of the same indebtedness: see para.41 of the Decision. Miss Poon seemed to suggest that the charging order in 2009 was rightly imposed while the MOC should remain for the purpose of “preserving the Plaintiffs’ priority”. Neither counsel appearing for the Plaintiffs in the last hearing nor Miss Poon could really assist this court in understanding such contention as there were undeniably two encumbrances both enforceable as equitable charges on the same property in respect of the same debt. In my view, this contention cannot be right.

17.  Indeed, after a notice has been served and the memorandum of charge has been registered pursuant to clause 6 of the DMC, the owner may continue to default. Other expenses and legal costs may have to be incurred to recover the amount specified in the notice and the memorandum of charge. Miss Poon questioned what if such further moneys become due and payable.

18.  In my view, the answer is simple. Nothing prevents the Plaintiffs from serving another notice and registering another memorandum of charge for the further amounts due and payable against the property of the owner. In view of the wordings of clause 6 of the DMC, what the Plaintiffs cannot do is to purport to create a memorandum of charge for a scope covering any amount already as well as yet to be due and payable and specified in the notice served.

19.  I refuse leave to appeal and dismiss the summons. It follows that costs of and occasioned by the application shall be to Tsang to be taxed, if not agreed.

20.  As before, the hearing was conducted in Chinese for the benefit of Tsang but this decision is handed down in English.