DCMP673/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 673 OF 2001

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D E C I S I O N

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1.  The appellant/plaintiff, appealed against Master Pang’s order of 24 September 2010 refusing to approve the confirmation of the assignment dated 10 January 2002 on the basis that the said assignment was in breach of paragraph 2 of Master Chow’s order dated 22 May 2001.

2.  The property in question is known as Flat 10, 4th Floor, Block A, Wing Sing House, Yat Nga Court, No. 5 Yat Nga Lane, Tai Po, New Territories (“the suit property”). 

3.  As the present appeal is by way of re-hearing, the plaintiff sought by summons to adduce further evidence from a surveyor’s report dated 20 October 2010, prepared for the purpose of this appeal.  I allowed further evidence of the surveyor’s report of 20 October 2010 for the purposes of the appeal, for it gave a fuller background on the value of the suit property in 2001 and also further information on the background of the suit property.

Background

4.  The suit property was a Home Ownership Scheme flat.  The defendant in this action was the initial purchaser and the first registered owner of the property when this Home Ownership Scheme property was completed in 1991.  The purchase price at that time was $317,900. According to the assignment executed in 1991, the initial market value of the property was $460,900.

5.  There is a difference between the initial market value and the purchase price because there was a premium to be paid if the property was to be sold in an open market.  The reason for the reduced price sold to Home Ownership Scheme eligible applicants was because it is supposed to be a special scheme to assist home buyers of a certain class who could not afford to purchase a property in the open market because of the expensive land premium.

6.  In the year 2000, the defendant charged the suit property to the plaintiff to obtain a loan of $320,000.  It was not able to repay the loan and the plaintiff applied to the District Court for a charging order against the property.  On 30 January 2001, the charging order nisi was granted.  The order was made absolute on 23 February 2001. 

7.  On 22 May 2001, an order was made by Master Chow that unless the defendant repay the outstanding loan, plus interest of $360,000, plus further interest at 39 per cent per annum from 12 September 2000 and costs, the suit property would be sold by the plaintiff by public auction or private treaty or in the secondary market of the Home Ownership Scheme.  It was eventually sold on 10 December 2001 in the secondary market of the Home Ownership Scheme for $500,000 to the present registered owners.

8.  The plaintiff returned to court in September 2010 because queries had been raised recently on the assignment to the present registered owners, as the assignment was executed by the plaintiff’s own solicitor at that time.  Master Pang, on the plaintiff’s application to rectify the assignment, raised a number of queries including the purchase price to the present registered owners of half a million dollars, and eventually refused the application on the basis that the sale by private treaty was in breach of paragraph 2 of Master Chow’s order of 22 May 2001.

9.  According to the submission of Mr Chung who represented the plaintiff, Master Pang was not satisfied when paragraph 2 referred to the reserve price at $640,000, the property should be sold at half a million dollars in December 2001.   Paragraph 2 of the order stated the following:

“The said property be sold by the plaintiff by public auction with the reserve price at HK$640,000, or private treaty, or in the secondary market of the Home Ownership Scheme.”

Findings

10.  Mr Chung in his submission outlined the reasons for the appeal and the construction of paragraph 2 of 22 May 2001 order of Master Chow.  References were made to section 17 and schedule 1 of the Housing Ordinance, Cap 283.  Schedule 1 referred to a nominated person of the Housing Authority.  This refers, in fact, to the Home Ownership Scheme nominated person.  This nominated person is an eligible person under the Home Ownership Scheme list who had fulfilled the requirements to purchase a Home Ownership Scheme property.  Therefore, it is Mr Chung’s submission that a sale to a person who is an eligible person nominated by the authority to purchase a Home Ownership Scheme property is different from a sale by public auction or private treaty because a sale by private auction would be a sale in the open market.

11.  Mr Chung submitted that a sale in the open market would entail the full non‑encumbered property with the premium fully paid.  Therefore, the sale to a purchaser in the open market - meaning with the premium paid - must attract a higher price than a sale to someone in the secondary market of the Home Ownership Scheme, only an eligible person on the Home Ownership Scheme list is entitled to purchase a property in the secondary market without settling the premium.  As the latter would be a purchaser without payment of the premium, he pays with the condition that the premium has to be paid or he can only in future sell to another person in the secondary market of the Home Ownership scheme or to someone who is willing to pay up the premium; or he, alternatively, would have to pay the premium before he sells the flat in the open market.

12.  He relied on the support of the two surveyors’ reports of Centaline Surveyors Limited; namely, the original report obtained after the charging order was made and before Master Chow’s order of 22 May 2001 (“the 2001 report”) and the more recent October 2010 report.

13.  After considering all the documents and the two surveyor’s reports, in particular, after construing paragraph 2 of Master Chow’s order and section 17 and schedule 1B of the Housing Ordinance, I am satisfied with Mr Chung’s explanation that the sale price of half a million dollars in December 2001 was not below the market value in the secondary market of the Home Ownership Scheme.

14.  I also am satisfied that paragraph 2 of the order of Master Chow should be read with the background supported by the Ordinance - namely, section 17 and schedule 1B of Cap 283 - that the sale to an eligible person nominated by the authority forms the secondary market of the Home Ownership Scheme and the purchase price, therefore, is different from a public auction in the open market.

15.  I accept the valuation explanation supported by the two surveyors' reports.  For the aforesaid reasons, I allow the appeal and grant an order in terms of the summons.