NATIONAL RESOURCES PROPERTIES LTD v. MA KWOK KEUNG

HCMP 1612/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1612 OF 2014

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JUDGMENT

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1.  The plaintiff seeks to enforce a lien over the defendant’s property by an order for sale.

2.  Pursuant to a sale and purchase agreement dated 27 December 2007 between the plaintiff and the defendant (“the Agreement”), the plaintiff agreed to purchase and the defendant agreed to sell a real property in Tseung Kwan O, New Territories (“the Property”).

3.  A sum of $350,000 was paid by the plaintiff to the defendant upon the signing of the Agreement.  Completion was scheduled for 21 June 2008, but the defendant failed to complete the transaction.

4.  The plaintiff then commenced proceedings in DCCJ 3062 of 2008 against the defendant (“the District Court Proceedings”).  On 13 July 2011, Deputy District Judge J Wong (as he then was) handed down the judgment, where he made the following orders and declarations:

(i)  the Agreement had been validly terminated by the plaintiff and the plaintiff was entitled as from 21 December 2007 to a lien on the Property (“the Lien”);

(ii)  the defendant do return to the plaintiff the deposit of $350,000;

(iii)  the defendant do pay to the plaintiff liquidated damages of $63,000;

(iv)  the defendant do pay interest to the plaintiff in respect of the said sums of $350,000 and $63,000 at the interest rate of 8.353% per annum from 16 July 2008 until 13 July 2011, and thereafter at judgment rate until payment; and

(v)  the defendant do bear the costs of the plaintiff in relation to the whole proceedings.

5.  To date, the defendant still owes the plaintiff the sum of $350,000 being the deposit plus interests thereon, and the plaintiff’s taxed costs of the District Court Proceedings in the sum of $495,471.

6.  It is clear that the defendant has no defence to such application.  In trying to oppose the application, the defendant is seeking to put forward a number of defences, but none of which has any merit.

7.  Firstly, Ms Mak, counsel for the defendant, submits that the present application is an abuse of the process of the court.  After the District Court Proceedings, the plaintiff had commenced bankruptcy proceedings against the defendant for the payment of the sums due under the District Court Proceedings.  Since the claim for the return of the deposit was secured by the Lien, the plaintiff withdrew the bankruptcy petition after the defendant paid damages in the sum of $63,000 and interests thereon to the plaintiff.  In such circumstances, Ms Mak submits that the plaintiff is now estopped from enforcing the Lien because of the principle of res judicata in the wider sense.

8.  Such argument is wholly misconceived.  There was no final determination of the plaintiff’s claim in the bankruptcy proceedings. There was also no agreement between the parties that the payment of the sum of $63,000 was made in full and final settlement of the plaintiff’s claim.  In such circumstances, the plaintiff is free to enforce the Lien on the ground that the defendant has failed to return the deposit to the plaintiff.  In fact, the plaintiff’s solicitors have made it clear to the defendant in the letter dated 4 June 2014 that the plaintiff maintains the claim for the return of deposit and costs of the District Court Proceedings against the defendant.

9.  Secondly, Ms Mak relies on the case of Wong Kam Fung & Anr v Smart Profit Enterprises Ltd [2014] 5 HKLRD 853 and argues that the Lien enjoyed by the plaintiff does not cover the claim for the costs.

10.  Again, such argument is wholly misconceived. According to para 28 of the judgment, the Court of Appeal was only saying that mere claim of the damages cannot give rise to an equitable lien.  However, where there is a claim for the return of the deposit, which is actually the case here, the purchaser has an equitable lien over the return of the deposit.

11.  Furthermore, the Super Keen Investments Ltd v Global Time Investments Ltd [1996] 4 HKC 355 and Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 are clear authorities that equitable lien also covers the legal costs incurred by the purchaser in claiming for the return of the deposit.

12.  At one stage of the proceedings, it seems that the defendant is advancing an argument that the Lien is not valid because it constitutes a voidable alienation within the meaning of section 17B of the Housing Ordinance.  However, Ms Mak very fairly does not seek to pursue such argument at the hearing.

13.  Finally, Ms Mak submits that there are interests of other chargees involved in the Property.  Ms Siu, counsel for the plaintiff, however, argues that the plaintiff enjoys priority over the interests of the other chargees in the enforcement of the Lien over the Property.

14.  In making the order for sale, the court certainly has to take into account the interests of the other chargees of the Property, but that does not provide a ground to the defendant to oppose the sale of the Property. The plaintiff has informed the other chargees of the present application, but it has not provided other details of the proceedings including the date of today’s hearing to the other chargees.

15.  As the plaintiff has not supplied the court with an updated valuation of the Property, there has to be a further hearing for the court to give directions for the execution of the sale of the Property.  I would therefore direct the plaintiff to notify the other chargees of such hearing.  The plaintiff is also required to inform the other chargees of the proposed directions for the sale of the Property and to supply them with the updated valuation report.  The plaintiff also agrees that, since the order for sale is made in their absence, the other chargees have the right to apply to the court to set aside the order for sale if necessary.

16.  For the above reasons, the defendant has no defence to the plaintiff’s application for an order for sale of the Property, and I therefore make the order accordingly.  I also direct a further hearing to be held with 30 minutes reserved for the giving of directions for the execution of the sale of the Property.