WONG HING v. NG LEUNG FA

DCMP 165/2018

[2022] HKDC 636

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 165 OF 2018

---------------------------

BETWEEN

---------------------------

---------------------

DECISION

---------------------

INTRODUCTION

1.  This is the defendant’s appeal against the order of Master Jacqueline Lee dated 4 February 2021 and for leave to appeal out of time.

Background

2.  The following factual background is relevant.

3.  Under HCA 13651/1999, the plaintiff obtained a judgment against the defendant on 24 September 1999 for the sum of $275,500 together with interest and fixed costs.

4.  Based on the said judgment, a charging order absolute dated 29 October 2004 was granted imposing a charge on the property known as Flat 8, 14/F, Block C, Siu Shan Court, Nos 2/26 Wu Shan Road, Tuen Mun, New Territories, Hong Kong (“the property”).

5.  The plaintiff instituted the present proceedings in January 2018 for the purpose of enforcing the said charging order absolute for an order for sale of the property.

6.  Master Jacqueline Lee made an order on 4 February 2021, which is the subject of this appeal.

Legal principles on appeal against Master’s decision and appeal out of time

7.  An appeal from the master to a judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time: 58/1/2 Hong Kong Civil Procedure 2022 Vol 1

8.  In considering whether to extend time to appeal, the court has to consider all relevant factors, particularly, (1) the length of the delay; (2) the reasons for the delay; (3) the merits of the proposed appeal; and (4) the degree of prejudice to the other party: see 58/1/9 Hong Kong Civil Procedure 2022 Vol 1

The Defendant’s reasons for the delay

9.  The defendant said that she moved to the USA in July 2004 and did not return until 2014. Between 2014 and 2019, she visited Hong Kong once a year and stopped doing so since 2019 due to the pandemic. On 21 December 2021, she was told by her cousin’s relative that a notice to quit was posted on the property. She immediately instructed a law firm to act for her in the matter.

10.  The charging order absolute was made on 29 October 2004 when the defendant had already moved to the USA. When these proceedings were taken out in 2018, the defendant only visited Hong Kong once a year, which she stopped doing so from 2019 onwards.

11.  I see no reason to doubt the defendant’s version that she only came to notice of these proceedings in December 2021.

12.  Having said that, however, I need to consider the merits of the defendant’s appeal.

The defendant’s argument

13.  The thrust of the defendant’s argument is not on the validity of the charging order absolute, but on the amount the plaintiff is entitled to recover due to the long lapse of time between date of the charging order absolute and the enforcement thereof in 2018.

14.  Mr Gavin Wan, counsel for the defendant, placed reliance on Chevalier Property Management Ltd v Yu Chau Yeung [2007] HKCLRT 667. Mr Wan submitted that the Court of Appeal held that s 19(1) of the Limitation Ordinance applied to the plaintiff’s claim for management fees, collection charges and other expenses and the time was to run from the moment when the charge was created, ie 30 days after the date on which the defendant is required to make payment. Applying the principle in Yu Chau Yeung to the present case, Mr Wan submitted, that any action to recover the principal sum secured by the charging order absolute, ie $275,500, is subject to the limitation of time under s 19(1) of the Limitation Ordinance. The time limit of 12 years should begin to run from the date of the charge created, ie 29 October 2004. Therefore, the plaintiff’s claim of the principal sum is time-barred by 29 October 2016.

15.  Mr Wan drew a distinction between the decision in England in Yorkshire Bank Finance v Mulhall [2009] 1 P & C R 16 on the application of s 20(1) and s 20(5) of the Limitation Act 1980 (which is comparable to a 19(1) and s 19(5) of the Limitation Ordinance) and Yu Chau Yeung (supra) to a charging order absolute. Mr Wan submitted that although Mulhall (supra) was decided after Yu Chau Yeung, it is persuasive authority only. Yu Chau Yeung is not overturned by other Hong Kong authorities and Mulhall was not applied by any Hong Kong authorities in relation to s 19(1) and s 19(5) of the Limitation Ordinance in terms of an equitable charge. Therefore, Mr Wan submitted, Yu Chau Yeung should be the binding authority.

16.  Mr Wan submitted that the plaintiff’s originating summons herein was an action to enforce the charging order absolute dated 29 October 2004. Any action to recover the principal sum secured by the charging order absolute is subject to the limitation of time under s 19(1) of the Limitation Ordinance. The time limit of 12 years should run from the date of the charge order absolute. Therefore, the plaintiff is barred from claiming the principal sum of $275,500 by 29 October 2016.

17.  In respect of interest, Mr Wan submitted that the plaintiff was not seeking to recover interest on the basis of the security, but from the judgment in HCA 13651/1999 dated 24 September 1999. Section 19(5) of the Limitation Ordinance is applicable. Therefore, the time limit for the plaintiff to recover interest start from the date of the charging order absolute, ie 29 October 2004. The plaintiff is only entitled to recover interest on the principal sum within 6 years before the date of the originating summons (ie 18 January 2012). As the plaintiff is time-barred from claiming repayment of the principal sum from 29 October 2016, no interest should be payable from that day. According to Mr Wan’s calculation, therefore, the plaintiff is only entitled to interest at 8% per annum for the following periods:-

Period	Amount (HK$)
18/1/2012 - 31/12/2012	21,073.86
1/1/2013 - 31/12/2013	22,040.00
1/1/2014 - 31/12/2014	22,040.00
1/1/2015 - 31/12/2015	22,040.00
1/1/2016 - 28/10/2016	18,235.84
Total:	105,429.70

The plaintiff’s argument

18.  On the other hand, Mr Danny Lee, counsel for the plaintiff, submitted that this court is not bound by Yu Chau Yeung.

19.  Mr Lee pointed out that Yu Chau Yeung concerned a charge created by the provisions of a Deed of Mutual Covenant whereas a charging order is under consideration in the present case, albeit both of them are equitable charges in nature.

20.  Mr Lee submitted that the English authorities of Ezekiel v Orakpo [1997] WLR 340 and Mulhall dealt with the issues as in the present case and therefore should be applied. In short, that there is no provision in the Limitation Ordinance that governs the enforcement of a charging order so that it remains enforceable despite the lapse of time.

Discussion

21.  In my view, there is no inconsistency between Yu Chau Yeung and the English authorities of Ezekiel (supra) which was followed by Mulhall. Yu Chau Yeung was decided in the context of a charge created pursuant to the terms of a Deed of Mutual Covenant. In fact, the principle in Ezekiel was applied (at para 24) that the plaintiff is not only a “judgment creditor” but also a “secured creditor”.

22.  Cheung JA took the view (also at para 24) that when the plaintiff applied to court for an order for vacant possession and sale of the charged property, it is not a civil action to recover the arrears because he is recovering the arrears on the basis of the security (ie the charge). This was the view of Millett LJ in his speech in Ezekiel at 350F-G.

23.  Mulhall is a case precisely on the issue in dispute in the present case. There, the English Court of Appeal considered the effect of s20(1) of the Limitation Act 1980 (the Hong Kong equivalent of s19(1) of the Limitation Ordinance) on a charging order. Lloyd LJ (at para 31), applying the principle in Ezekiel, held that despite the lapse of time since the making of the charging order, s 20(1) does not apply to the enforcement of the charging order.

24.  In Ezekiel, the English Court of Appeal in allowing the plaintiff’s appeal, considered the effect of s20(5) of the Limitation Act 1980 (the Hong Kong equivalent of s 19(5) of the Limitation Ordinance) and held that the plaintiff’s application to enforce the charging order was not an action on the judgment debt or enforcement of execution of that judgment, but action to recover what was due to him as a secured creditor, that there was nothing in the Limitation Act 1980 restricting a secured creditor from recovering more than six years’ interest out of the proceeds of enforcing his security. Therefore, the plaintiff was able to rely on his security to recover all the money due to him irrespective of the running of any limitation period.

25.  In view of the above, it seems clear that there is no divergence of jurisprudence between Hong Kong and English courts on the effect of the limitation provisions on charging order.

26.  Accordingly, despite the industrious submission of Mr Wan, the argument of the defendant must be rejected.

27.  I would hold that s 19(1) and (5) of the Limitation Ordinance are not applicable and the plaintiff is entitled to recover the principal sum of $275,500 and interest as stated in the charging order absolute dated 29 October 2004.

Appeal against costs order

28.  The defendant also sought to appeal against the basis of taxation, ie to vary from an indemnity basis to a party and party basis.

29.  Mr Wan submitted that the defendant had never acted unreasonably or caused any undue delay. The long delay of enforcing the charge order was not caused by the defendant because she was unaware of the matter.

30.  The judgment was entered in September 1999 when the defendant was residing in Hong Kong. She only moved to the United States some 5 years later. She alleged that she was not aware of the High Court proceedings and had never received any court documents thereof.

31.  The plaintiff is required to serve the writ of summons on the defendant. The High Court must be satisfied that the writ of summons had been effectively served on the defendant before a judgment was allowed to be entered.

32.  Common sense dictates that the plaintiff would use his best endeavour to make known to the defendant that a judgment was entered against her in his favour and to demand payment from her. To enforce the judgment by applying to court for a charging order would necessitate extra costs on the part of the plaintiff.

33.  I do not accept that the defendant had never received any court documents of the High Court action. Rather, she was adopting a “let the sleeping dog lie” attitude when faced with the High Court action and the judgment that was subsequently entered.

34.  Accordingly, the submission of Mr Wan is rejected.

35.  Regarding the costs orders dated 3 April 2018, 5 June 2018 and 27 May 2020, they were all reserved costs orders made prior the Order of Master Jacqueline Lee dated 4 February 2021. Mr Wan submitted that they were unnecessarily incurred and no order as to costs should be ordered.

36.  By the order dated 3 April 2018, the plaintiff was ordered to file supplemental affirmation to clarify the interest charged and the valuation report should be updated with the endorsement of a declaration of truth and re-service of the originating summons and all supporting affirmations was required.

37.  By the order dated 5 June 2018, the hearing was adjourned and the plaintiff was required to re-serve the originating summons and all supporting affirmations on the defendant.

38.  By the order dated 27 May 2020, the hearing was adjourned and the plaintiff was required to file and serve a supplemental affirmation.

39.  They were procedural steps to be taken by the plaintiff before an order was granted by the court. They must be regarded as part and parcel of the proceedings. I do not see why the plaintiff should be deprived of the costs thereof.

Conclusion and order

40.  By reasons of the aforesaid, I find that the defendant’s appeal is unmeritorious. Her application for leave to appeal out of time is dismissed.

41.  I also lift the stay of execution ordered by Master June Cheung on 14 April 2022.

Costs

42.  Costs to follow the event. I order that the defendant doth pay the plaintiff the costs of this appeal with certificate for counsel, to be taxed if not agreed.

43.  The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.