YAN MEI and YAN DONG the Joint and Several Administrators of the Estate of FONG LAP CHUNG GEORGE, Deceased AND ANOTHER v. FONG LAP SHAN

HCA 1562/2022 and HCA 104/2023
(Consolidated)

[2024] HKCFI 3464

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1562 OF 2022 AND 104 OF 2023

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(Consolidated pursuant to the Order of Master David Chan dated 15 May 2023)

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____________________

DECISION

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A. INTRODUCTION

1.  This is the Defendant’s application (“the Interim Payment Application”) made by way of Summons (“the Summons”) filed on 11 June 2024 pursuant to O 29, r 12(b) of the Rules of High Court (“the RHC”) (Cap 4A) for an Order[1] that the 1^st Plaintiff be required to pay to the Defendant:

(1)  the sum of $95,983 (or such sum as the Court shall think fit) forthwith, by way of interim payment in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 (“House 10”), JC Castle, 18 Shan Tong Road, Tai Po, New Territories, Hong Kong (“JC Castle”) for the period of 1 February 2017 and 30 June 2024, to reimburse the Defendant for the monthly mortgage repayments paid for House 10; or

(2)  alternative to sub-paragraph (1) above, the sum of $3,402,600 (or such sum as the Court shall think fit) forthwith, by way of interim payment in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 for the period of 1 February 2017 and 30 June 2024, in accordance with the convention of Fong Lap Chung George, deceased (“the Deceased”) and the Defendant established by conduct; and

(3)  a monthly sum of $45,000 (or such sum as the Court shall think fit), by way of periodic payment 3 days in advance of the first day of each month until final judgment herein or such further order of the Court in respect of the 1^st Plaintiff’s and/or the 2^nd Plaintiff’s use and occupation of House 10, for the Defendant to effect monthly mortgage repayments of House 10 immediately after 30 June 2024; or

(4)  alternative to sub-paragraph (3) above, a monthly sum of $81,500 (or such sum as the Court shall think fit), by way of periodic payment 3 days in advance of the first day of each month until the mortgage loan of House 10 is fully discharged in December 2038 in respect of the 1^st Plaintiff’s and/or the 2^nd Plaintiff’s use and occupation of House 10, for the Defendant to effect monthly mortgage repayments immediately after 30 June 2024 in accordance with the convention of the Deceased and the Defendant established by conduct; and

(5)  the sum of $98,770 (or such sum as the Court shall think fit) forthwith, by way of interim payment in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 for the period of the first quarter of 2017 and the third quarter of 2023, to reimburse the Defendant for the rates and Government rent paid for House 10 for that period; and

(6)  the sum of rates and Government rent of House 10 as determined by the Rating and Valuation Department (“the RVD”) 14 days before the due date (or upon the Defendant’s instruction, directly to the RVD), in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 until final judgment herein or such further order of the Court, for the Defendant to effect quarterly payment of the rates and Government rent immediately after the first quarter of 2024.    

2.  The Plaintiffs and the Defendant are represented by their solicitors, Messrs Patrick Mak & Tse, Solicitors, and Mr Andrew H P Lau of counsel respectively.

3.  I have reserved my decision on the Interim Payment Application after the Hearing which I give now, with reasons including those related to costs in more details below.  

B.  PLAINTIFFS’ CASE

4.  The Deceased passed away on 25 December 2016.  Ms Yan Mei (“Mei”), the 2^nd Plaintiff herein, is the Deceased’s surviving wife, having given birth to their two children (“the Children”) on 25 November 2013.  Mr Yan Dong (“Dong”) is Mei’s elder brother.  Dong and Mei have become the co-administrators of the estate (“the Estate”) of the Deceased, the 1^st Plaintiff herein, from 14 October 2019.

5.  Mr Fong Lap Shan, the Defendant herein, is the Deceased’s younger brother.  The Defendant is the registered owner of House 10, the subject matter of the Interim Payment Application.      

6.  In respect of House 10, the Plaintiffs plead, among other matters, as follows[2]:

(1)  Mei is the registered owner of the property known as Garden Suite of House 31B (“House 31B”), JC Castle.  After the purchase of House 31B in 2011, the Deceased, the 2^nd Plaintiff, the 2^nd Plaintiff’s parents, Dong and his wife resided in it.

(2)  When Mei was pregnant in 2013, the Deceased purchased a bigger house, House 11 (“House 11”), JC Castle.

(3)  After the Deceased found out that House 10 was available for sale, he decided to purchase it so that he could combine it with House 11 for the whole family, including himself, the 2^nd Plaintiff, the Children, the 2^nd Plaintiff’s parents, Dong and his wife, to reside.  

(4)  In 2013, the Government implemented Doubled Ad Valorem Stamp Duty (“DSD”) on property transactions.  As both Mei and the Deceased were the registered owners of House 31B and House 11, JC Castle, the Deceased decided to purchase House 10 in the Defendant’s to save DSD. However, it was the Deceased who was the true owner of House 10.  Mei trusted the Defendant and did not object to such arrangement. 

(5)  The Defendant and the Deceased expressly agreed that House 10 did not belong to the Defendant but the Deceased (“the Agreement”).

(6)  Pursuant to the Agreement, the Deceased caused his company, then known as ICG Financial Services Limited (“ICG”), to issue documents to the Defendant to enable the Defendant to apply for mortgage (“the Mortgage”) from The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in his name.  Those documents included ones showing that the Defendant was employed by ICG before the purchase of House 10 when the Defendant had in fact never worked for ICG.  

(7)  The Deceased was responsible for paying, making or discharging all deposits, part payments, mortgage repayments and expenses incidental to the purchase of House 10 through means including by ICG. 

(8)  It was the common intention of the Deceased and the Defendant that House 10 was held on trust by the Defendant for the Deceased. 

(9)  The Deceased died intestate.  Mei and the Children are entitled to the Estate comprising House 10 under section 4(3) of the Intestates’ Estates Ordinance (“the Ordinance”) (Cap 73). 

(10)  However, the Defendant has, in breach of the Agreement, commenced action in the Lands Tribunal applying for vacant possession of House 10 and making various false statements that he was and is the true owner and landlord of House 10.  The Lands Tribunal proceedings and the present action have now been consolidated.

7.  In the above circumstances, the Plaintiffs seek:

(1)  a Declaration that House 10 is held by the Defendant on trust for the benefit of the Deceased, and after his death, the Estate, to which Mei together with the Children are entitled under the Ordinance;

(2)  an Injunction that the Defendant shall not encumber House 10 and/or increase the Mortgage and/or enter into agreement for and/or obtain additional loan using House 10 as security and/or otherwise dispose of House 10; and

(3)  an Order that the Defendant shall transfer House 10 to the 1^st Plaintiff at nil consideration.  

C.  DEFENDANT’s CASE

8.  The Defendant denies the Plaintiffs’ claims.  In gist, the Defendant’s case is that the Agreement did not exist and the common intention constructive trust is unenforceable on the grounds of illegality, breach of public policy, estoppel, laches and/or acquiescence, etc.  The Defendant alleges that the Deceased had made numerous representations to him, and avers as follows[3]:

(1)  The Deceased had caused ICG to employ the Defendant and pay the Defendant a monthly salary of $50,000.  ICG had contributed to the Defendant’s MPF as employer.  The Plaintiffs deny this. 

(2)  ICG had also signed a ‘Written Tenancy Agreement’ of House 10 with the Defendant for a term of 3 years, from 1 March 2014 to 28 February 2017, with a monthly rent of $30,000.  The Plaintiffs deny this.

(3)  From March 2014 to the fourth quarter of 2016, ICG had paid the Defendant a monthly salary of $50,000 and a monthly rent of $30,000.  The Plaintiffs deny this.

(4)  In reliance on the Deceased’s representations, the Defendant has continued to make mortgage repayments of House 10 to HSBC and paid the rate and Government rent.  The Plaintiffs dispute that the Deceased had made such representations.

9.  In addition, the Defendant counterclaims against the Plaintiffs[4] based on the matters below:

(1)  Since February 2017, the 2^nd Plaintiff and her family were living in House 10 pursuant to an ‘Oral Monthly Tenancy’ made between the 2^nd Plaintiff and the Defendant on 6 January 2017 subject to payment of a monthly rent of $45,000, exclusive of the rates and Government rent, management fees and utilities, etc.  This is denied by the Plaintiffs.

(2)  The 2^nd Plaintiff was in breach of the ‘Oral Monthly Tenancy’ in failing to pay the monthly rent promptly and in full, owing the Defendant a total sum of $2,790,000 for the period of 1 February 2017 and 31 March 2022.  By the time the ‘Oral Monthly Tenancy’ was terminated, the 2^nd Plaintiff had only paid $2,561,900.  As a result, the Defendant suffered loss and damages in the sum of $228,100 for that period.  This is denied by the Plaintiffs.

(3)  The 2^nd Plaintiff had persistently denied the Defendant’s agent access to House 10 for inspection of unauthorized building works. 

(4)  The Defendant gave the 2^nd Plaintiff formal notice to terminate the ‘Oral Monthly Tenancy’ on 25 February 2022, with effect from 31 March 2022.  The 2^nd Plaintiff had stopped paying the rates and Government rent after the quarter of January to March 2021.  The unpaid rates and Government rent for the period of April 2021 and September 2023 was $85,559.       

(5)  The 2^nd Plaintiff has refused to deliver vacant possession of House 10 to the Defendant and overstayed there since 1 April 2022.  The 2^nd Plaintiff is liable to pay the Defendant mesne profits of $720,000 from 1 April 2022 to 31 July 2023.  As the 2^nd Plaintiff has only paid $661,000, the Defendant has suffered loss and damages in the sum of $59,000.  This is denied by the Plaintiffs.       

(6)  As House 10 and House 11 are two separate, independent buildings, they should be reinstated according to the building plans.  The Plaintiffs should be ordered to grant access to the Defendant and his agent and servant to House 10 to carry out the requisite works. 

(7)  Alternatively, in the event that the Defendant is held by the Court to be a trustee holding House 10 for the Deceased, it has been agreed by conduct or convention that the alleged trust (pursuant to which the 2^nd Plaintiff stays in House 10) is subject to a monthly payment of $81,500 until the Mortgage with HSBC is discharged in December 2038.  The 2^nd Plaintiff is liable to pay a total sum of $6,356,000 for the period of 1 February 2017 and 31 July 2023.  As the 2^nd Plaintiff has paid $3,222,900, the Defendant has suffered loss and damages in the sum of $3,133,100.  This is denied by the Plaintiffs.      

(8)  Furthermore, the 1^st Plaintiff should be ordered to pay the unpaid DSD in the sum of $746,250, together with penalty. The 1^st Plaintiff should also be ordered to pay the outstanding buyer’s stamp duty (“BSD”) in the sum of $2,985,000, together with penalty.           

10.  The Defendant accordingly seeks:

(1)  damages for breach of the ‘Oral Monthly Tenancy’ against the 2^nd Plaintiff: (i) the rent in arrears of $228,100 (from 1 February 2017 to 31 March 2022); (ii) the unpaid rates and Government rent of $85,559 (from April 2021 to September 2023); (iii) the outstanding mesne profits of $59,000 (from 1 April 2022 to 31 July 2022); and (iv) the mesne profits of $45,000 per month (from 1 April 2022 onwards);

(2)  an Order for vacant possession of House 10 against the 2^nd Plaintiff;

(3)  an Order for contribution of at least 50% of the reinstatement works of House 10 and House 11;

(4)  damages suffered or to be suffered by the Defendant for failing to comply with the Buildings Ordinance (Cap. 123);  and

(5)  an interlocutory injunction to remove the unauthorized building works; or

(6)  in alternative, (i) damages for underpayments of $3,134,100[5] (from 1 February 2017 to 31 July 2023); (ii) damages for prospective loss for payment of $15,077,500 (from 1 August 2023 to 31 December 2038); (iii) an Order for payment of unpaid DSD of $746,250, together with penalty; (iv) an Order for payment of outstanding BSD of $2,985,000, together with penalty; and (v) interim payment of $103,762.

D.  APPICABLE LEGAL PRINCIPLES

11.  Against the backdrop of the ongoing dispute between the parties described above, the Defendant makes the Interim Payment Application.  In considering such application, I remind myself of the relevant material principles which are set out below.

12.  An interim payment means, in relation to a defendant, a payment on account of any damages, debt or other sum (excluding costs) which he may be held liable to pay to or for the benefit of the plaintiff.

13.  A defendant who counterclaims against a plaintiff can also seek an order for interim payment under O 29, r 18 of the RHC. 

14.  Under O 29, r 13(1) of the RHC, the amount of any interim payment ordered to be made shall be paid to the plaintiff, unless the order provides for it to be paid into Court.

15.  O 29, r 11 of the RHC provides for interim payment in respect of damages, whereas r 12 – pursuant to which the Interim Payment Application is made by the Defendant – provides for interim payment in respect of sums other than damages.

16.  Where a payment is ordered in respect of the defendant’s use and occupation of land, pursuant to O 29, r 13(4) of the RHC, the order may provide for periodical payments to be made during the pendency of the action.

17.  O 29, r 12(b) of the RHC provides:

“If, on the hearing of an application under rule 10, the Court is satisfied –

…

(b) that the plaintiff’s action includes a claim for possession of land and, if the action proceeded to trial, the defendant would be held liable to pay to the plaintiff a sum of money in respect of the defendant’s use and occupation of the land during the pendency of the action, even if a final judgment or order were given or made in favour of the defendant;…

the Court may, if it thinks fit, and without prejudice to any contentions of the parties as to the nature or character of the sum to be paid by the defendant, order the defendant to make an interim payment of such amount as it thinks just, after taking into account any set-off, cross-claim or counterclaim on which the defendant may be entitled to rely (emphasis added).”

18.  In the present case, the Defendant’s claim for interim payment is based on O 29, r 12(b) of the RHC, which provides so far as is material above, substituting “the Plaintiffs” for “the Defendant” and vice versa (see Car Po Ltd v Chan Pik Kuen, HCA 13517/1998 (unreported, 26 March 1999), at §7 per Keith J).

19.  §29/12/3 of the Hong Kong Civil Procedure 2024 (Vol 1) explains:

“…The object of this rule is to enable the court, during the pendency of the action, to order the defendant to make an interim payment to the plaintiff in respect of his continued use and occupation of the land, whoever should ultimately succeed on the claim for possession of the land itself.The underlying principle is that, during the pendency of the action, the plaintiff should not be deprived of money which he would be entitled to recover from the defendant in any event, and that conversely the defendant should not be enabled to retain money which he would be bound to pay the plaintiff in any event.

This rule operates by “decategorising” the payment by the defendant to the plaintiff during the pendency of the action and disregarding its nature or character, whether it be by way of rent, mesne profits, damages for use and occupation or for trespass or otherwise, by simply describing such payment as “an interim payment”… (emphasis added).”

20.  As set out in Maxon Investment Ltd & Another v Sino Leader (Asia) Ltd, HCA 2332/2003 (unreported, 6 July 2004), the two pre-conditions to be satisfied for an application under O 29, r 12(b) of the RHC are:

(1)  first, the plaintiff’s action includes a claim for possession of land; and

(2)  second, if the action proceeds to trial, the defendant would be held liable to pay to the plaintiff a sum of money in respect of the defendant’s use and occupation of the land during the pendency of the action, even if a final judgment or order were given or made in favour of the defendant.

21.  In respect of the first pre-condition, O 29, r 12 (b) of the RHC applies to an action for possession of land on whatever ground it is based (see Hong Kong Civil Procedure 2024 (Vol 1) at §29/12/3).

22.  With respect to the second pre-condition, the Court of Appeal in Hua Chiao Commercial Bank Ltd v Empire One Trading Ltd & Others, CACV 109/2000 (unreported, 17 May 2000) interpreted the words “even if a final judgment or order were given or made in favour of the defendant” as follows:

“6. But what if there is, as in the present case, a dispute as to what the plaintiff would be entitled to recover from the defendant in any event? In my view, the words “even if a final judgment or order were given or made in favour of the defendant” show that the interim payment should be calculated on the basis of what the defendant contends the plaintiff is entitled to recover…(emphasis added).”

23.  It is of importance that the Court cannot resolve, at an interlocutory stage, dispute of facts on affidavits, but is entitled to have regard to the apparent strengths and weaknesses of the parties’ case and evidence and to form a provisional view on the merits of the defence put up by a defendant (see Winsworld Properties Ltd v Chance Full International Development Ltd & Another, HCA 4161/2002 (unreported, 14 February 2003), at §12 per DHCJ Lam (as he then was); Wong Wai Ming v Sai Kung Flea Market & BBQ Paradise Co Ltd, HCA 2289/2008 (unreported, 20 March 2009),at §19 per Chu J (as she then was)).

24.  In Guo Jing Jing v Art Master Investment Ltd & Others, HCA 1008/2009 (unreported, 11 December 2009), Au J (as he then was) observed (at §88) that the test for granting interim payment is “a high one”.[6]

25.  It was held in Winsworld Properties Ltd (supra) that the Court has to consider the position taken by both parties when it exercises its discretion in order to reach a just decision. By way of illustration, the considerations taken into account by the Court when it reaches the second stage in the procedure for determining an application for interim payment and in exercise of its discretion were outlined in Car Po Limited (supra) (see §§11-12).

26.  In Chan Yin Man & Others v Lee Shu Man, HCA 3709/1994 (unreported, 27 February 1996), Le Pichon J (as she then was) made clear that:

(1)  O 29, r 12(b) of the RHC requires the postulation that a final judgment or order is made in favour of the defendant.

(2)  the underlying purpose of O 29, r 12 of the RHC is to mitigate the hardship or prejudice to a plaintiff which may exist during the period from the commencement of an action to the trial.

(3)  there is however no restriction implicit in the rule which prevents an interim payment order being made in the absence of evidence of need or prejudice. 

E.  INTERIM PAYMENTS

27.  After considering and applying the legal principles above to the facts of the present case, I am satisfied that the 1^st Plaintiff should make interim payment to the Defendant of:

(1)  the sum of $95,983 forthwith, in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 for the period of 1 February 2017 and 30 June 2024, to reimburse the Defendant for the mortgage repayments paid for House 10;

(2)  a monthly sum of $45,000 after 30 June 2024, in respect of the 1^st Plaintiff’s and/or the 2^nd Plaintiff’s use and occupation of House 10, 3 days in advance of the first day of each month and until final judgment herein or such further order of the Court for the Defendant to effect monthly mortgage repayments of House 10;

(3)  the sum of $98,770 forthwith, in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10 for the period of the first quarter of 2017 and the third quarter of 2023, to reimburse the Defendant for the rates and Government rent paid for House 10 over that period; and

(4)  the rates and Government rent of House 10 after the first quarter of 2024 as determined by the RVD, in respect of the use and occupation by the 1^st Plaintiff and/or the 2^nd Plaintiff of House 10, 14 days before the due date and until final judgment herein or such further order of the Court, for the Defendant to effect quarterly payment to the RVD, or where appropriate, the Plaintiffs may, as directed by the Defendant, make direct payments to the RVD.    

28.  First of all, in view of the Defendant’s counterclaim for possession of House 10 along with payment of rent in arrears, unpaid rates and Government rent and mesne profits, etc, in the present case, the first pre-condition of O 29, r 12(b) of the RHC is met.

29.  In view of the parties’ dispute, it is plain that the Defendant’s alternative claims for the sum of $3,402,600 and the monthly sum of $81,500 are not what, by their nature, the Plaintiffs would be held liable to pay the Defendant for their use and occupation of House 10 during the pendency of the action should the action proceed and final judgment or order be given to or made in favour of the Plaintiffs after trial.  In respect of these amounts, the second pre-condition of O 29, r 12(b) of the RHC is therefore not met.

30.  On the other hand, the Plaintiffs would still be held liable for the mortgage repayments and the rate and Government Rent of House 10 even if they obtain final judgment or order in their favour at the end of the day.

E1.  Mortgage Repayments

31.  As submitted by the Defendant, there can be no dispute about this, as it is part of the Plaintiffs’ case that the Deceased, as the true owner of House 10, had paid for the Mortgage (by various means including through ICG) and the rates and Government rent, etc.[7]

32.  At the Hearing, the Plaintiffs’ solicitor reiterates that the Defendant merely holds House 10 on trust for the Deceased pursuant to the Agreement[8], and the Deceased had caused ICG to issue documents showing that the Defendant was ICG’s employee to enable the Defendant to apply for the Mortgage from HSBC.

33.  It is clear that the Plaintiffs do not oppose liability and dispute only the quantum, arguing that the sums deposited by the Plaintiffs should exceed the deductions made by HSBC[9]:

(1)  Until 28 March 2017, ICG had made monthly repayment of the Mortgage by depositing into the Defendant’s HSBC account[10].

(2)  From April 2017 to June 2024, the total sum of mortgage repayments deducted by HSBC was $3,572,618[11].

(3)  From May 2017 to June 2024, the total sum of mortgage repayments made by the Plaintiffs was $3,687,900[12].

(4)  From April 2017 to June 2024, the total sum of mortgage repayments made by the Plaintiffs exceeded the total sum of deduction by HSBC ($3,687,900 – $3,572,618 = $115,282)[13].

34.  The Plaintiffs argue that the following 3 sums (“the 3 Sums”)should be excluded[14]:

Date	Description	Amount ($)
8 January 2020	REPAYMENT 12 NOV 2019 B42108150501	42,793.00
31 May 2023	REPAYMENT 12 APR 2023 006C31120301	38,583.00
10 November 2023	REPAYMENT 12 SEP 2023 FB0A10121701	44,341.00
		---------------------------
	Total:	125, 717

35.  According to the Plaintiffs, it is ‘possible’ that the 3 Sums related to some other loans and were not applied by the Defendant for repayment of the Mortgage:

(1)  The 3 Sums were described as “DEBIT AS ADVISED” in the Defendant’s monthly bank statements[15], as opposed to the ‘usual’ description of “LOAN REPAYMENT” as seen by the Plaintiffs from 2017 to 2024[16].

(2)  The processing date of the sum of $38,583 was 31 May 2023[17]. The sums deducted by HSBC ranged from over $41,000 to around $45,000 from 2017 to 2024.  No such sum of $38,000 ever appeared.

36.  The Plaintiffs’ argument is untenable, especially after considering that the monthly statements in question show no other item which could be remotely considered a deduction or withdrawal made by HSBC for mortgage repayment.  When asked, the Plaintiffs’ solicitor has simply been unable to identify such sums that she claims to be mortgage repayments in the monthly statements for these months.  It follows that the sum of $125,717 in total should not be excluded.

37.  Furthermore, as explained by the Defendant[18], the relevant period of his claim is from February 2017.  There is no evidence that the Plaintiffs had made mortgage repayments for February and March 2017.  On the other hand, there is evidence to show that the Defendant had repaid $42,774 each for the two months in question.

38.  Accordingly, if the sums of $125,717, $42,774 and $42,774 are added back to $3,572,618, it would lead to $3,783,883.  There was a shortfall of payments to the Defendant in the sum of $95,983.

39.  In addition, the Plaintiffs should be ordered to make periodic payment of $45,000 per month from 30 June 2024 onwards until final judgment so as to enable the Defendant to effect mortgage repayments of House 10.  The Defendant should not be deprived of money during the pendency of the present action which he would be entitled to recover from the Plaintiffs in any event, and conversely, the Plaintiffs should not be enabled to retain such money which they would be bound to pay the Defendant in any event.

40.  The Plaintiffs have not really identified any valid objections to this; all that the Plaintiffs say is that they have been making mortgage repayments for more than 7 years from May 2017 and no such order is ‘necessary’.  On the quantum, the interim payment ordered should not be less than the actual monthly mortgage repayment and the Plaintiffs have not proposed any alternative figure for consideration.  In any event, if the interim payment ordered exceeds the actual repayment or vice versa, any differences and discrepancies can be addressed at the stage when the Court makes the final judgment or order under O 29, r 17 of the RHC.  

E2.  Rates and Government Rent

41.  In respect of the sum of $98,770 claimed by the Defendant, the Plaintiffs’ argument is that the total sum of mortgage repayments made by the Plaintiffs to the Defendant exceeds the total sum deducted by HSBC by $115,282 (ie $3,687,900 – $3,572,618) and such excess can be applied to cover the deficit.

42.  Given my conclusion above that there is no such surplus there is no valid reason for the Defendant not to be reimbursed for the shortfall of $98,770.  In fact, the Plaintiffs’ own case is that they have been paying for the rates and Government rent of House 10 and there is an admitted default for the period of the first quarter of 2021 and the third quarter of 2023[19].

43.  Going forward, the Plaintiffs should be ordered to make quarterly payment of the rates and Government rent as determined by the RVD after the first quarter of 2024 to enable the Defendant to effect payment of the same.   

44.  Notwithstanding that the Court should have power to award interest to compensate for the period when the defendant has been deprived of the amount of an interim payment and the plaintiff has had the use of it[20], the Defendant has not actually sought interest of the interim payment in the Summons at this stage.

F.  COSTS

45.  After considering the matters below, I make the costs order nisi that there shall be no order as to costs[21].

46.  As can be seen from the solicitors’ correspondence disclosed before me:

(1)  On 3 May 2024, the Defendant’s solicitors wrote to the Plaintiffs, requesting for, among others, interim payment for the sum of $206,661, with references to the Defence and Counterclaim and the Witness Statement of the Defendant. 

(2)  On 7 May 2024, the Plaintiffs’ solicitors requested for 21 days to retrieve records and to check the calculations before reply.

(3)  On 27 May 2024, the Plaintiffs’ solicitors came back with a substantive reply,

(a)  setting out the rates and Government rent paid by the Plaintiffs and the discrepancies in the amount of rates and Government rent levied and the amount set out by the Defendant, etc;

(b)  raising that there was surplus after deducting the mortgage repayments from the amounts paid by the Plaintiffs to the Defendant; and

(c)  requesting the Defendant to provide the HSBC monthly statements for consideration.

47.  However, so far as it can be seen, the Defendant has not attempted to provide answers to the Plaintiffs’ queries about the mortgage repayments and the rates and Government Rent[22].  Mr Lau has also been unable to point to any evidence that contradicts this observation or to demonstrate that substantive replies were provided by the Defendant at any earlier point. 

48.  Instead, the Defendant took out the Summons for the Interim Payment Application on 11 June 2024, with the support of the 2^nd Affirmation of Kwok Hong Yee Jesse.  In opposition, on 24 June 2024, the Plaintiffs filed the 2^nd Affirmation of Yan Mei, reiterating those matters regarding the mortgage repayments and the surplus in the solicitors’ correspondence.  On 9 July 2024, the Defendant filed the 4^th Affirmation of Kwok Hong Yee Jesse in reply:

(1)  It was in the 2^nd Affirmation of Kwok Hong Yee Jesse that the Defendant set out in clear terms that the Plaintiffs should not have excluded February and March 2017 from the calculation of the mortgage repayments, or omitted the third quarter of 2023 from the calculation of the rates and Government rent.

(2)  In the 4^th Affirmations of Kwok Hong Yee Jesse, the Defendant provided substantive reply clarifying why there was no surplus in the mortgage repayments and payment for rates and Government rent. 

49.  There is no explanation, nor any good reason, for why these clarifications could not have been provided earlier by the Defendant.  Had they been addressed in full in a timely manner, the contention could have been reduced, saving both time and costs.  Such conduct is not conducive to the underlying objectives of the CJR and should be appropriately reflected in the costs order.   

50.  The above costs order nisi shall become absolute in the absence of application to vary within 14 days hereof; any such application, if made, shall be made by letter, and will be disposed of on paper.