TREASURE SPOT FINANCE COMPANY LTD v. LAI YUN TAK

HCMP 2079/2022

[2023] HKCFI 795

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2079 OF 2022

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JUDGMENT

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THE APPLICATION

1.  By an Originating Summons filed on 9 December 2022 (“the Originating Summons”) the plaintiff applied for an order pursuant to section 19 of the Land Registration Ordinance (Cap 128, Laws of Hong Kong) (“the Ordinance”) that the sealed copy Writ of Summons dated 22 July 2020 registered by the defendant in the Land Registry with memorial number 20072401490012 be vacated.

BACKGROUND

2.  The plaintiff is the mortgagee in possession of the property known as Section C of Lot No.104, Section A of Lot No.118, Section B of Lot No.119, Section A of Lot No.105 and Section A of Lot No.117 all in D.D. 292 and of and in the messuages erections and building thereon known as “No.73 Tai Tan, Tai Po, New Territories, Hong Kong” (“the “Property”).

3.  By virtue of an Assignment dated 6 April 2020 (“the Assignment”), Lam Yee Fung (“the Purchaser”) purchased the Property from the defendant herein.

4.  By a Mortgage dated 6 April 2020 between the plaintiff as the mortgagee and the Purchaser as the mortgagor, which was registered in the Land Registry against the Property on 25 May 2020, the plaintiff granted the Purchaser an all money mortgage loan (“the Mortgage Loan”).

5.  On 22 July 2020, Messrs. Fu and Cheng (“Fu and Cheng”) issued a Writ of Summons (“the Writ”) for and on behalf of the defendant herein against the Purchaser in HCA 1215/2020 (“the 1215 Action”), and prayed, inter alia, for an order that the Formal Agreement for Sale and Purchase dated 4 March 2020 and the Assignment, both made between the Purchaser and the defendant herein, be declared void and of no effect by reason of misrepresentations made on the part of the Purchaser.

6.  The Writ was registered against the Property on 24 July 2020 (“the lis pendens”).

7.  The Writ was subsequently amended on 5 August 2020 (“the Amended Writ”).

8.  On 11 December 2020, Fu and Cheng sent the plaintiff the Amended Writ.

9.  As the Purchaser defaulted in repaying the Mortgage Loan, the plaintiff commenced an action in HCA 270/2021 on 17 February 2021 and claimed against the Purchaser for the outstanding Mortgage Loan and an order for possession. Judgment was subsequently obtained by the plaintiff herein against the Purchaser on 4 May 2022 (“the HCA 270/2021 Judgment”).

10.  Although the plaintiff has obtained vacant possession of the Property with the assistance of Bailiff, sale of the Property has been hindered by the lis pendens, and as a result the plaintiff has had difficulty in enforcing the HCA 270/2021 Judgment.

11.  After the plaintiff has obtained vacant possession of the Property, a Mr Kan, claiming to be the representative of the defendant herein, has contacted the plaintiff and negotiated with the plaintiff on terms and conditions in exchange for vacating the lis pendens. During such negotiations, the plaintiff has requested the defendant to proceed with the 1215 Action as soon as possible, but the said Mr Kan did not give any concrete reply to the said request.

12.  According to the understanding of the plaintiff, the defendant has not taken much action in the 1215 Action since the issuance of the Writ and the registration thereof at the Land Registry.

13.  By letter dated 24 November 2022 sent to Fu and Cheng, the plaintiff’s solicitors demanded the defendant to vacate the lis pendens, and warned that failing which the plaintiff would make an application to the Court pursuant to section 19 of the Ordinance. However, both the defendant and Fu and Cheng failed to reply to the said demand.

14.  The plaintiff therefore commenced the action herein, and duly served the Originating Summons together with the supporting affirmation on the defendant.

15.  However, the defendant has failed to file any Acknowledgment of Service of the Originating Summons.

DISCUSSION

16.  Section 19 of the Ordinance provides that:

“The court or judge before whom any property sought to be bound is in litigation, may on the determination of the lis pendens, or during the pendency thereof, where the said court or judge is satisfied that the litigation is not prosecuted bona fide, or for other good cause shown, make an order for the vacating of the registration in the Land Registry of such lis pendens without the consent of the party who registered it, and may direct the party on whose behalf the registration was made to pay all the costs and expenses occasioned by the registration or the vacating thereof, including the costs of the application to vacate, or may make such other order as to such costs or any of them as to the said court or judge may seem just.”

17.  It can be seen that, pursuant to the said section 19 of the Ordinance, the Court has power to order the vacation of the lis pendens without the consent of the party who registered it upon its satisfaction that:

(1)  The litigation (as far as the present case is concerned, the 1215 Action) is not prosecuted bona fide; or

(2)  There is any other good cause.

18.  In Ho Yau-kong v Ho Cheng Kwai-ying and Others [1991] 1 HKLR 649, Bokhary J (as he then was) held, among other things, that:

(1)  The terms of section 19 of the Ordinance are very wide (at 652F);

(2)  As a matter of principle, long delay in the prosecution of an action which is unexplained can sometimes provide a foundation for an inference of bad faith (at 651H – I);

(3)  The formula “other good cause shown” in section 19 is unrestricted by any words of the statute. The courts may, and should, approach it by reference to what they normally do when dealing with interlocutory injunctive relief, however:

(a)  the position of somebody with a lis penden which he or she can register is stronger than that of someone seeking or seeking to maintain such relief, because registration may be made without reference to a court or without the burden of having first to make out a case;

(b)  the court should be even more reluctant to vacate a registration than to refuse or discharge an injunction which would have similar effect (at 652G – H).

19.  In the present case, apart from knowing that the defendant has commenced the 1215 Action and that the Writ has been amended on 5 August 2020, the plaintiff has no idea as to the progress of the 1215 Action. It was affirmed in the plaintiff’s supporting affirmation that no further steps have been taken thereafter, and such an allegation has not been disputed by the defendant at all.

20.  If there has really been no progress in the 1215 Action at all since August 2020, then such unexplained delay of 3 years would provide a foundation for an inference of bad faith on the part of the defendant.

21.  In order to protect the interest of the defendant and/or the second mortgagee, the plaintiff (through its solicitor Mr Poon) agrees to undertake to the Court that it shall pay the surplus of the sale proceeds of the Property (if any) into Court within 42 days after the completion of the sale, pending further application of the defendant and/or the second mortgagee of the Property.

22.  I therefore exercise my discretion under section 19 of the Ordinance to vacate the registration of the lis pendens against the Property.

ORDER

23.  By reasons of the aforesaid, upon the aforesaid undertaking given by the plaintiff, I make an order in terms of paragraph 1 of the Originating Summons.

24.  The plaintiff’s costs of the action shall be borne by the defendant. Such costs are assessed on gross sum basis at $46,400, which may be deducted from the sale proceeds of the forthcoming sale of the Property.