SHANGHAI COMMERCIAL BANK LTD v. LEE YAU TAK AND ANOTHER

CACV 576/2021

[2023] HKCA 450

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 576 OF 2021

(ON APPEAL FROM DCMP NO 3066 OF 2016)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  There are before the Court the following appeal and applications:

(1)  the 2^nd Defendant’s notice of appeal dated 13 December 2021 against the order of Her Honour Judge Phoebe Man dated 9 October 2020 dismissing the 2^nd Defendant’s appeal against the Order of Master Catherine Cheng dated 23 August 2019, whereby the Master made (inter alia) an order for possession of the property known as the 1/F (including the Balcony adjacent thereto), 38B Kan Tau Tsuen, North, New Territories (“the Property”) in the Plaintiff’s favour against the 1^st and 2^nd Defendants;

(2)  the 2^nd Defendant’s summons dated 18 January 2023 seeking an order that (i) leave be granted to her to pay the sum of HK$580,803.95 into Court within 3 working days, and (ii) upon the present appeal being allowed, the said sum be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff; and

(3)  the 2^nd Defendant’s further summons filed on 20 February 2023 (after the hearing of the appeal on 3 February 2023) seeking an order that (i) leave be granted to her to pay the additional sum of HK$419,196.05 into Court within 3 working days, and (ii) upon the present appeal being allowed, and without prejudice to her right to seek an account of the actual sum due and payable by the 1^st Defendant to the Plaintiff, the said sums (HK$580,803.95 + HK$419,196.05 = HK$1,000,000) be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff.

BACKGROUND FACTS

(a)  The 1^st and 2^nd Defendants

2.  The 1^st Defendant was formerly a fireman working for the Fire Services Department. He had been working as such since 1986 until he reached the retirement age of 55 in 2018.

3.  In 1989, the 1^st and 2^nd Defendants were married. In August 2015, the 2^nd Defendant commenced divorce proceedings against the 1^st Defendant (FCMC 10354/2015). On 17 January 2016, a decree nisi was granted by the Family Court.

4.  On 1 March 2016, the 1^st Defendant filed a petition for his own bankruptcy (HCB 1378/2016). On 20 June 2016, the 1^st Defendant was declared bankrupt upon his own petition.

(b)  Purchase of the Property

5.  Shortly after their marriage in 1989, the 1^st and 2^nd Defendants purchased in their joint names a property in Shatin (“the Shatin Property”) under the Home Ownership Scheme. A few years later, upon the 1^st Defendant’s suggestion, the Shatin Property was sold and the 1^st and 2^nd Defendants moved to live in the Married Quarters of the Fire Services Department at Junk Bay. Later still, they moved to live in Government Quarters at Ngau Chi Wan.

6.  In early 2012, the 1^st Defendant proposed to the 2^nd Defendant, in view of his pending retirement from the Fire Services Department in September 2018, that they should acquire a private property to be used as their matrimonial home with the assistance of Government and bank loans. According to the 2^nd Defendant, the 1^st Defendant also proposed that the new property be purchased in his sole name in order to facilitate the obtaining of the Government and bank loans. The 2^nd Defendant agreed to the 1^st Defendant’s proposal because of her trust in the 1^st Defendant at that time.

7.  Eventually, the Property was purchased in the 1^st Defendant’s sole name in 2012 for the consideration of HK$2,000,000 with the assistance of:

(1)  a loan in the amount of HK$700,000 obtained from the Plaintiff secured by a first legal charge or mortgage over the Property dated 31 December 2012 (“the Mortgage”); and

(2)  a Government loan in the amount of HK$1,310,935 secured by a second legal charge or mortgage over the Property in favour of The Financial Secretary Incorporated dated 31 December 2012.

8.  According to the 2^nd Defendant, she also obtained a loan HK$200,000 from her brother-in-law to pay the deposits and/or estate agent’s commission for the purchase of the Property. Subsequently, in view of the fact that the loans obtained from the Plaintiff and the Government were sufficient to cover the entire purchase price and associated legal costs and disbursements, the excess amount of HK$200,000[1] was paid back to the 1^st Defendant, who then repaid the loan obtained from the 2^nd Defendant’s brother-in-law.

9.  The 1^st and 2^nd Defendants, together with their daughter, began residing in the Property in 2013.

(c)  The 1^st Defendant’s default

10.  According to the 2^nd Defendant, in or about 2015, following her discovery that the 1^st Defendant had an extra-marital affair, the 1^st Defendant asked her for permission to sell the Property. The 1^st Defendant’s request was refused by the 2^nd Defendant. In or about April 2015, the 1^st Defendant moved out of the Property, and told the 2^nd Defendant and their daughter that they could continue to live in the Property.

11.  Starting in about March 2016, the 1^st Defendant failed to pay any further mortgage instalment to the Plaintiff. As at 10 May 2016, the amount of the outstanding principal owing to the Plaintiff under the Mortgage was HK$585,803.95.

THE ACTION

12.  On 20 June 2016, the 1^st Defendant was declared bankrupt upon his own petition. According to the 2^nd Defendant, after 1^st Defendant’s bankruptcy, she approached the Plaintiff to discuss about payment of the mortgage instalments. However, the Plaintiff refused to provide the 2^nd Defendant with information concerning the amount of the monthly mortgage instalment, apparently because of some privacy concerns. The 2^nd Defendant also says that she told the Plaintiff that she was willing to repay the entire outstanding mortgage loan and interest thereon. However, her attempt to make repayment was not entertained by the Plaintiff.

13.  On 15 September 2016, the Plaintiff obtained the court’s leave to commence an action against the 1^st Defendant for recovery of vacant possession of the Property.

14.  On 7 October 2016, the Plaintiff commenced the present action (“the Action”) by way of an Originating Summons against the 1^st Defendant seeking an order for (i) delivery up of vacant possession of the Property, and (ii) payment of the outstanding principal and interest thereon under the Mortgage.

15.  On 26 October 2016, the 2^nd Defendant issued a summons in the Action seeking (i) an order that she be joined as a party to the Action, and (ii) a declaration that she was the (or a) beneficial owner of the Property. As further explained below, the 2^nd Defendant’s claim of a beneficial interest in the Property is based upon a common intention constructive trust.

16.  On 15 March 2018, the 2^nd Defendant was joined as a party to the Action pursuant to an order of Deputy District Judge W H Wong. The Originating Summons was amended accordingly on 23 March 2019.

17.  On 18 July 2018, the 2^nd Defendant wrote to the Plaintiff’s solicitors (Chow, Griffiths & Chan) stating that she was willing to repay the outstanding bank loan inclusive of interest in one go, and requested the Plaintiff’s solicitors to inform her of the total amount required to be paid, the repayment method, and the date of repayment.

18.  By a letter in reply dated 20 July 2018, the Plaintiff’s solicitors informed the 2^nd Defendant that, in view of the fact that the 1^st Defendant was the mortgagor of the Property and had been declared bankrupt, the Plaintiff could not receive money from her or reach any settlement arrangement with her in the absence of any consent form the 1^st Defendant and the Official Receiver’s Office. The Plaintiff’s solicitors further stated that since the 1^st Defendant was the legal owner of the Property and the Property was subject to a second mortgage in favour of the Government, the Plaintiff could not transfer any interest in, or the title deeds of, the Property to the 2^nd Defendant. In short, the Plaintiff refused the 2^nd Defendant’s request to repay the mortgage loan and redeem the Mortgage.

THE JUDGMENT

19.  On 23 August 2019, the Amended Originating Summons and the 2^nd Defendant’s application for declaratory relief came before Master Catherine Cheng. Having heard the Plaintiff’s lawyer and the 2^nd Defendant in person (with the 1^st Defendant being absent), the Master dismissed the 2^nd Defendant’s claim for a declaration that she had a beneficial interest in the Property, and made an order for possession of the Property in the Plaintiff’s favour against the 1^st and 2^nd Defendants.

20.  The 2^nd Defendant’s appeal against the Master’s order was heard by Her Honour Judge Phoebe Man on various dates in 2019 and 2020. The Plaintiff and the 1^st Defendants’ trustees-in-bankruptcy (“the Trustees”) were represented by their respective counsel, while the 2^nd Defendant appeared in person.

21.  On 9 October 2020, the Judge gave a judgment (“the Judgment”) dismissing the 2^nd Defendant’s appeal against the order of Master Catherine Cheng (save in relation to an issue on costs which is not material for the present purpose). In the Judgment:

(1)  The Judge accepted that a mortgagor and any other person with an interest in the Property (including a beneficial owner under a common intention constructive trust) could exercise the right to redeem the Mortgage[2].

(2)  However, the 2^nd Defendant failed to produce sufficient evidence to show that she had a beneficial interest in the Property under a common intention constructive trust, or had any right to redeem the Mortgage[3].

(3)  In any event, even if the 2^nd Defendant had a right to redeem the Mortgage, the outcome of the Action would be the same, ie the Plaintiff would still be entitled to an order for possession of the Property against her[4].

THE APPEAL

22.  The 2^nd Defendant was not satisfied with the Judgment, and applied to the Judge for leave to appeal. On 28 January 2021, the Judge dismissed the 2^nd Defendant’s application for leave to appeal.

23.  The 2^nd Defendant renewed the application for leave to appeal by a summons dated 9 February 2021 filed in the Court of Appeal. On 22 October 2021, Cheung JA granted the 2^nd Defendant leave to appeal.

24.  In the Notice of Appeal dated 13 December 2021, the 2^nd Defendant raised 4 grounds of appeal:

(1)  The Judge erred in holding that the Plaintiff had the right to “foreclose”[5] the Property when the 2^nd Defendant was a beneficial owner of the Property under a common intention constructive trust and had unequivocally offered to exercise the right of redemption by paying off the whole mortgage loan with interest (“Ground 1”).

(2)  The Judge erred in finding that the 2^nd Defendant had failed to show that she had a beneficial interest in the Property when (i) no oral evidence was received, (ii) the proceedings were not directed to be continued as if they had been begun by writ, (iii) no discovery was ordered, and (iv) no or no sufficient inquiries were made as to the 2^nd Defendant’s financial contribution to the family (“Ground 2”).

(3)  Had proper inquiries been made, the Judge should have held that the 2^nd Defendant had a beneficial interest in the Property (“Ground 3”).

(4)  The Judge erred in taking into account various irrelevant factors when considering whether the 2^nd Defendant had the right to redeem the Mortgage (“Ground 4”).

GROUNDS 2 AND 3: WHETHER THE 2^ND DEFENDANT HAS ADDUCED SUFFICIENT EVIDENCE TO SHOW THAT SHE HAS A BENEFICIAL INTEREST IN THE PROPERTY

25.  Grounds 2 and 3 concern the question of whether the 2^nd Defendant has adduced sufficient evidence to show that she has a beneficial interest in the Property under a common intention constructive trust, and may be considered together.

26.  The relevant principles for determining whether a common intention constructive exists are well settled. “Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom” (Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, at §38 per Ribeiro PJ).

27.  When considering the question of the parties’ common intention, the court should adopt what has been described as a “holistic approach” having regard to the context (Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, at §§6.1-6.3 per Cheung JA). In a domestic context, particularly in relation to a matrimonial home, “the court is not constrained in that exercise by pure direct monetary contributions to the purchase price … In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters” (Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, at §1.6 per Lam VP (as he then was); see also Mo Ying, at §§7.13-7.14). Once it is shown that there was a common intention that the claimant should have an interest in the property, any act done by the claimant to his/her detriment relating to the joint lives of the parties in reliance on the common intention is sufficient. The act done does not have to be inherently referable to the property (Grant v Edwards [1986] 1 Ch 638, at 657B-C).

28.  In the present case, the 2^nd Defendant’s evidence before the Judge in support of her case of common intention constructive trust included the following:

(1)  The 1^st and 2^nd Defendants had been married for over 20 years when the Property was purchased. During that period of time, there was substantial intermingling of their incomes and household expenses, and the 2^nd Defendant devoted all her earnings to the family.

(2)  After the marriage, the 1^st and 2^nd Defendants bought their first home (ie the Shatin Property) in their joint names.

(3)  Prior to the purchase of the Property, there was express discussion between the 1^st and 2^nd Defendants that (i) the new property was to be used as their matrimonial home, and (ii) the new property was to be acquired in the 1^st Defendant’s sole name to facilitate the obtaining of Government/bank loans.

(4)  The 2^nd Defendant assisted in paying the deposits and/or estate agent’s commission for the purchase of the Property by obtaining a loan of HK$200,000 from her brother-in-law, although the money was eventually repaid to him because the loans obtained from the Plaintiff and the Government were sufficient to cover the entire purchase price and associated legal costs and disbursements.

(5)  After the 2^nd Defendant had discovered the 1^st Defendant’s extra-marital affair, the 1^st Defendant asked the 2^nd Defendant for permission to sell the Property. The 1^st Defendant later moved out of the Property in April 2015, telling her and their daughter that they could continue to live in the Property.

29.  The Judge held that the 2^nd Defendant had failed to produce sufficient evidence to show that she had a beneficial interest in the Property under a common intention constructive trust mainly because of a lack of evidence that she had made any financial contribution to the purchase of the Property[6]. However, as mentioned in §27 above, direct financial contribution to the acquisition of the property is not the only relevant consideration, particularly in the domestic context. A proper consideration of whether a common intention constructive trust exists would require a careful, objective, consideration of the whole course of conduct of the parties. In our view, the matters referred to in §28 above are sufficient to raise a reasonably arguable case of common intention constructive trust, and the issue ought to be determined in a full trial. Having come to this view, it would not be appropriate for us to further discuss the merits of the 2^nd Defendant’s case of common intention constructive trust in this judgment.

30.  In short, we consider that the Judge should not have summarily determined against the 2^nd Defendant on the issue of whether she had a beneficial interest in the Property, but should have held that she had produced sufficient evidence for this issue to be tried.

GROUNDS 1 AND 4: WHETHER THE 2^ND DEFENDANT HAD A RIGHT TO REDEEM THE MORTGAGE

31.  The Judge accepted that any person with an interest in a property may exercise the right of redemption[7]. However, the Judge found that the 2^nd Defendant did not have any beneficial interest in the Property, whether under a common intention constructive trust or on any other basis. Thus, she had no right to redeem the Property[8]. The Judge further held even if the 2^nd Defendant had a right to redeem the Mortgage, it would not have made any difference to the outcome of the action, because:

(1)  The Trustees had to take into account the interests of the general creditors of the 1^st Defendant when deciding whether to transfer or sell the right of redemption to the 2^nd Defendant. The general creditors were owed more than HK$1,000,000, but the 1^st Defendant only had net assets of about HK$70,000 (excluding his interest in the Property). Further, even if the 2^nd Defendant could pay off the mortgage loan due to the Plaintiff, there was still the outstanding Government loan which had not yet been repaid[9].

(2)  The Property was the 1^st Defendant’s only asset, and the right of redemption was vested in his trustees upon his bankruptcy[10].

(3)  Even if the 2^nd Defendant had a right of redemption, such right of redemption would be jointly held with the Trustees, and the Trustees had indicated that they intended to apply to the court for a sale of the Property under the Partition Ordinance (Cap 352) to utilize the proceeds of sale to pay the 1^st Defendant’s creditors[11].

(4)  Unless the 2^nd Defendant could redeem the whole Property and pay off all the creditors of the 1^st Defendant, it was inevitable that the Property would be sold. The 2^nd Defendant had failed to adduce evidence to show that she could pay off all the debts and redeem the Property which had a market value of over HK$4,000,000 in one go[12].

(5)  In all, the 2^nd Defendant did not have any right to require the Trustees to transfer the right of redemption to her, and had failed to show that she had sufficient financial means to redeem the Mortgage[13].

32.  In our view, none of the matters referred to by the Judge would lead, or necessarily lead, to the conclusion that the Plaintiff is entitled to an order for possession of the Property against the 2^nd Defendant.

(1)  In respect of §31(1) above, if the 2^nd Defendant is a beneficial owner of the Property, she is entitled to exercise her right to redeem the Mortgage, and does not require the Trustees to transfer or sell such right to her. As regards the Government loan, the evidence of Mr Lee See Hang, one of the Trustees, indicates that the total outstanding amount of the loan (HK$991,718.55) had been repaid by deduction of the 1^st Defendant’s pension payable to him by the Government[14].

(2)  In respect of §31(2) above, if the 2^nd Defendant is a beneficial owner of the Property, she has a separate and independent right to redeem the Mortgage. We see no reason in principle why a beneficial owner may not exercise the right of redemption in the absence of consent from the other co-owner/mortgagor (or his successor in title) or the trustee of the beneficial owner, at any rate where their interests do not align.

(3)  In respect of in §31(3) above, on the footing that the 1^st and 2^nd Defendants are both beneficial owners of the Property, it is by no means clear that the Trustees’ wish to sell the Property under the Partition Ordinance would necessarily prevail over the objection of the 2^nd Defendant. There are two conflicting lines of first instance authorities which may require further consideration by the Court of Appeal in due course, but it is not necessary for this issue to be determined in the present case which concerns a mortgagee’s application for an order for possession and not an application for sale under the Partition Ordinance, and certainly not summarily without full argument (see Re Cheung Chan Hong (a bankrupt) [2015] 2 HKLRD 1 and Re Lo Yau Shing (a bankrupt) [2018] 3 HKLRD 540, both decisions of Ng J on one side, and Re Liu Yi Fang (a bankrupt) [2015] 3 HKLRD 668, a decision of Anthony Chan J on the other; see also Re Lau Hiu Tuen [2015] HKEC 1718, a decision of Godfrey Lam J (as he then was) who declined to resolve this divergence of judicial opinion in the absence of argument).

(4)  In respect of in §31(4) above, there was no reason why the 2^nd Defendant should be required to pay off the 1^st Defendant’s general body of creditors, or purchase the 1^st Defendant’s interest in the Property, before she could exercise the right to redeem the Mortgage. In relation to her ability to repay the mortgage loan owing to the Plaintiff, the 2^nd Defendant produced a letter from her employer dated 22 July 2020 showing that the employer was willing to lend HK$800,000 to enable her to repay the mortgage loan[15]. In this regard, it is of note that the outstanding principal due to the Plaintiff was HK$585,803.95 as at 10 May 2016[16], while the total outstanding amount, including interest and charges, was HK$695,036.93 calculated up to 29 March 2018 (according to the Plaintiff)[17]. Mr Cheung (for the Plaintiff) argues that the letter from the 2^nd Defendant’s employer dated 22 July 2020 was not sufficient to prove that the 2^nd Defendant had the financial ability to “purchase the equity of redemption”, since it did not “represent any intention to enter into such loan agreement” and the 2^nd Defendant still had to pass “the internal approval procedures” of the employer before a loan agreement with the employer could be secured[18]. However, the Judge’s view that the 2^nd Defendant did not have the financial means to redeem the Mortgage was not based on the reason(s) advanced by Mr Cheung. The Judge found against the 2^nd Defendant on the issue of financial means because she considered that the 2^nd Defendant was also required to pay off the debts owed by the 1^st Defendant to his general creditors amounting to over HK$1 million, and/or to purchase the interest of 1^st Defendant (held by the Trustees) in the Property which had a market value of over HK$4,000,000. As earlier mentioned, we see no reason why the 2^nd Defendant should be required to do so before exercising the right to redeem the Mortgage.

(5)  Lastly, in respect of §31(5) above, the Judge seems to have thought, mistakenly, that the 2^nd Defendant was seeking to require the Trustees to transfer the right of redemption to her. In fact, she was seeking to exercise her own right to redeem the Mortgage.

33.  In all, we are of the view that the Judge erred in holding that even if the 2^nd Defendant had a beneficial interest in the Property and thus had a right to redeem the Mortgage, the outcome of the case would inevitably be the same.

34.  Mr Cheung argues that even if the 2^nd Defendant has a beneficial interest in the Property, her interest ranks below the right of the Plaintiff as the mortgagee of the Property in the circumstances of the present case where the 2^nd Defendant knew of and supported the 1^st Defendant’s plan to borrow monies from the Plaintiff secured by the Mortgage over the Property, and the Plaintiff is perfectly entitled to apply for possession of the Property in circumstances when it is undisputed that the 1^st Defendant has committed an event of default by reason of his failure to make payments due under the Mortgage[19]. Mr Cheung further argues that in order to exercise the right of redemption, the 2^nd Defendant had to make repayment of the principal, interests, costs and expenses secured by the Mortgage, but she did not have the financial means to make such full repayment[20].

35.  Mr Ho (for the 2^nd Defendant) does not dispute the proposition that the 2^nd Defendant’s beneficial interest in the Property is subject to the right of the Plaintiff as mortgagee of the Property in the present case[21]. He submits, however, that the right to redeem is not confined to the mortgagor or those claiming under him, but is exercisable by any person who has an interest in the mortgaged property, and the mortgagee is bound to release the mortgage in favour of any person having an interest in the Property who exercises the right to redeem (Pearce v Morris (1869) 5 Ch App 227, at 230)[22]. Thus, the Plaintiff, as a beneficial owner of the Property, is entitled to exercise the right of redemption of the Mortgage by payment of the secured indebtedness. We consider this submission to be correct as a matter of principle.

36.  As for the question of whether the 2^nd Defendant is required to make full payment of the principal, interest, costs and expenses as claimed by the Plaintiff in order to redeem the Mortgage, Mr Ho submits that a mortgagor (and, by extension, any party having the right to redeem) has a right to know how much he (or she) is liable to pay: Fisher & Lightwood’s Law of Mortgage (15^th edn), §47.37, and a mortgagee is under an obligation not to impede or obstruct an entitled party from exercising the right of redemption. Mr Ho also refers the Court to evidence from the 2^nd Defendant to the effect that after the bankruptcy of the 1^st Defendant, she had made repeated attempts to make payment of the mortgage instalments, and informed the Plaintiff that she was ready and willing to repay the entire mortgage loan with interest[23], but the Plaintiff refused to provide information of the outstanding indebtedness or otherwise entertain her requests on the ground that the 2^nd Defendant had no interest in the Property[24]. Accordingly, the Plaintiff had unnecessarily prolonged proceedings by steadfastly refusing the 2^nd Defendant an opportunity to discharge the Mortgage at a much earlier stage, rendering it wholly unjust for the Plaintiff to claim interest (or costs): see Çukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 4) [2016] AC 923, at §§29-38[25].

37.  In our view, the issues of (i) whether the Plaintiff wrongfully or unreasonably impeded or obstructed the 2^nd Defendant from exercising the right of redemption, and (ii) the correct amounts of the principal, interest, costs and expenses which the Plaintiff is entitled to claim from the 2^nd Defendant upon redemption of the Mortgage, can only be resolved in a full trial.

38.  As earlier mentioned, on 18 January 2023, the 2^nd Defendant issued a summons (“the 1^st Summons”) seeking leave to pay into Court the sum of HK$580,803.95 (the outstanding principal amount of the mortgage loan), such sum to be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff upon the appeal being allowed. Mr Ho says that the proposed payment into court is for the “avoidance of doubt” and to reconfirm “actual tender” by the 2^nd Defendant so that the accrual of further interest shall cease.

39.  On 20 February 2023, the 2^nd Defendant issued a further summons (“the 2^nd Summons”) seeking leave to pay into Court the additional sum HK$419,196.05, such sum together with the aforesaid sum of HK$580,803.95 (making a total of HK$1,000,000) to be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff upon the appeal being allowed (without prejudice to the 2^nd Defendant’s right to seek an account of the actual sum due and payable by the 1^st Defendant to the Plaintiff). The 2^nd Defendant offered to pay this additional sum into Court in light of the further information provided by the Plaintiff shortly before the hearing of the appeal (upon the Court’s direction) that the total indebtedness of the 1^st Defendant to the Plaintiff, inclusive of interest calculated up to 3 February 2023 but exclusive of costs, was HK$958,911.52.

40.  With the proposed payments into court, the Plaintiff’s position should be reasonably secured.

DISPOSITION

41.  The 2^nd Defendant’s appeal is allowed, and the order of Master Catherine Cheng dated 23 August 2019 and the order of the Judge dated 9 October 2020 are set aside.

42.  The 2^nd Defendant shall pay into court the sums of HK$580,803.95 and HK$419,196.05 under the 1^st and 2^nd Summonses within 7 days from the date of this judgment, with liberty to the parties to apply for payment out after judgment has been given in the Action or with the court’s leave. We do not consider that those sums should be paid out to the Plaintiff at this stage, since the issue of whether the 2^nd Defendant is entitled to redeem the Mortgage has yet to be determined.

43.  The Plaintiff shall pay the 2^nd Defendant the costs of the appeal, including the costs of the application for leave to appeal by summons dated 9 February 2021, to be taxed if not agreed. In view of the fact that Mr Kwan (Mr Ho’s junior) acts for the 2^nd Defendant on a pro bono basis, it is not necessary to make any order concerning certificate for 2 counsel. The costs of the 1^st and 2^nd Summonses shall be in the cause of the Action. The 2^nd Defendant’s own costs shall be taxed in accordance with legal aid regulations.

44.  In relation to the hearings below before Master Catherine Cheng and the Judge, the 2^nd Defendant appeared in person while the Plaintiff was legally represented. We make no order as to costs (including the costs of the 2^nd Defendant’s application for leave to appeal which was dealt with by the Judge by way of written submissions only without an oral hearing) as between the 2^nd Defendant and the Plaintiff, while the costs of the Trustees shall be in the cause of the Action.