CHINA CITIC BANK INTERNATIONAL LTD v. DURRANT SIMON PATRICK MICHAEL

HCMP 3196/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3196 OF 2013

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D E C I S I O N

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INTRODUCTION

1.  This is the defendant’s application by summons dated 4 December 2017 (“the Summons”) seeking disclosure of information and documents, and payment by the plaintiff of at least 50% of the proceeds of sale of a mortgaged property which is being sold by the plaintiff as mortgagee.

BASIC FACTS

2.  The defendant is the registered owner of a property known as Unit 04, 42/F, Southorn Garden, No 2 O’Brien Road, Hong Kong (“the Property”).  It is subject to a legal charge in favour of the plaintiff dated 19 December 2000 to secure general banking facilities granted by the plaintiff to the defendant.

3.  On 11 February 2014, the plaintiff obtained an order from Master Leong in these proceedings for payment various outstanding sums due to the plaintiff and delivery of possession of the Property to the plaintiff.  Due to various appeals taken out by the defendant against the said order of Master Leong the details which it is not necessary to set out in this decision, the plaintiff only managed to obtain possession of the Property on 2 May 2017.

4.  On 31 October 2017, the plaintiff entered into an agreement to sell the Property to one Dou Cog for the consideration of HK$11,800,000.  Completion of the sale has not yet taken place, but is scheduled to take place on 18 December 2017.

5.  I am told by Mr Ip (for the plaintiff) that there are 8 subsequent encumbrances on the Property.  As can be seen from the land search of the Property, there are a number of charging orders in favour of different parties as well as a second legal charge in favour of Chan Wing Sun subsequent to the plaintiff’s legal charge.

6.  By the Summons, the defendant seeks the following relief, namely, that the plaintiff:-

(1) discloses the following information or documents relating to the sale of the Property within 7 days or 7 days prior to the completion date –

“a. Date offer was received and accepted.

b. Copy of the offer letter and provisional agreement of sale.

c. Amount of deposit and date it was received.

d. Proof of receipt of deposit.

e. Copy of formal agreement of sale and assignment documentation.

f. Projected (or actual if already occurred) Date of Completion of Sale.

g. If the sale has been completed, proof of sale completion. And copies of any other documents relevant to the sale.

h. Detailed final list of the amounts (with relevant calculations as to how each amount is calculated – excluding those in the disputed Bills of Costs) claimed due under Master Leong’s Order based on the above dates.

i. Detailed list of fees claimed incurred in the sale of the Unit.

J. Detailed list of the encumbrances (with explanation as to how the final figure for each amount is calculated) … charged against [the Property]”; and

(2) deposits a minimum of 50% of the proceeds of sale (after deduction of the outstanding amount secured by the plaintiff’s legal charge and the sums due under the encumbrances referred to in Item j above) to the defendant within 24 hours of the date of completion of the sale of the Property.

ISSUE1: DISCLOSURE OF INFORMATION AND DOCUMENTS

7.  Items a, b and j and the second part of Item g under paragraph (1) of the Summons: the defendant has not suggested any legal basis, and there is none that I can think of, to support the contention that the plaintiff is under a duty to provide to the defendant at this stage information such as the date when an offer for the purchase of the Property was received and accepted, or produce documents such as the offer letter, provisional agreement, or “other documents relevant to the sale”.   As pointed out by Deputy High Court Judge Linda Chan SC in 張秀琼及另一人v利星行信貸有限公司, HCMP 2721/2012 (24 March 2014), at paragraph 32, a “mortgagee is entitled to exercise the power of sale in the way it considers appropriate” and there is “no duty for the mortgagee to consult the mortgagor, let alone keep it informed of the progress of sale”.

8.  Items c, d, e, and f under paragraph (1) of the Summons:  the same comment applies to the information and documents sought under these items.  In any event, the information sought by the defendant is readily ascertainable from the formal sale and purchase agreement which, as pointed out by the plaintiff, has been registered in the Land Registry and is a public document.  The defendant has in fact already obtained a copy of the formal sale and purchase agreement which he annexed to his skeleton argument received by the court on 14 December 2017.  

9.  First part of Item g under paragraph (1) of the Summons: since completion has not yet taken place, this part of Item g does not arise for consideration.

10.  Items h and i under paragraph (1) of the Summons: the plaintiff is prepared to provide the information sought, but submits that it is entitled to a reasonable period to calculate the sums to be deducted from the proceeds of sale of the Property and provide the information to the defendant in one go after completion.  Again, I do not see any legal basis for the defendant’s demand that the plaintiff should provide the information sought at this stage prior to completion.

ISSUE 2: PAYMENT OF 50% OF THE NET PROCEEDS OF SALE

11.  Section 54 of the Conveyancing and Property Ordinance, Cap 219, states as follows:-

“Any money received by a mortgagee or a receiver from the sale or other dealing with the mortgaged land or any security comprised in the mortgage shall be applied according to the following priority—

(a) in discharge of all rent, taxes, rates and other outgoings due and affecting the mortgaged land;

(b) unless the mortgaged land is sold subject to a prior incumbrance, in discharge of that prior incumbrance;

(c) in payment of the receiver’s lawful remuneration, costs, charges and expenses and all lawful costs and expenses properly incurred in the sale or other dealing;

(d) in payment of mortgage money, interest and costs due under the mortgage,

and any residue shall be paid to the person who, immediately before any sale or other dealing, was entitled to the mortgaged land or authorized to give a receipt for the proceeds of the sale of that land.”

12.  Under this section, a mortgagee is required to apply the proceeds of sale of a mortgaged property in the order mentioned in sub-paragraphs (a) to (d) and pay the residue (if any) to “the person who, immediately before any sale or other dealing, was entitled to the mortgaged land or authorized to give a receipt for the proceeds of the sale of that land”.  Such person would generally be the next subsequent mortgagee or, if there is no subsequent mortgagee, the mortgagor (see Nield S and Da Roza AM, Hong Kong Conveyancing and Property Law Handbook (2007), paragraph CP54.10).  As mentioned above, there are a number of subsequent encumbrancers after the plaintiff.  The defendant says that some of those subsequent encumbrancres have been paid off, and there is one encumbrancer (Mr Chan Wing Sun) who has agreed to remove his encumbrance within 7 days of receipt of the sum of HK$250,000.  It is not necessary for the court in the present application to determine who would be the next encumbrancer to whom the plaintiff should pay the residue of the proceeds of sale, because it is the plaintiff’s duty to ascertain the person next entitled to the residue of the proceeds of sale.  There is also no evidence to suggest that the plaintiff will not apply the proceeds of sale of the Property in accordance with Section 54 of the Conveyancing and Property Ordinance.  I should mention that Mr Ip has, on behalf of the plaintiff, given an undertaking to the court to hand over the residue of the proceeds of sale to the next person entitled thereto within 14 days after completion of the sale of the Property.  The defendant has failed, in my view, to make out a case that he is entitled to be paid directly by the plaintiff 50% or more of the proceeds of sale (after deduction of the outstanding amounts due under the subsisting encumbrances) within 24 hours of the date of completion.

13.  Lastly, I should mention that, in the defendant’s skeleton argument received by the court on 14 December 2017, the defendant seeks some further relief, including injunction and vesting order, against the plaintiff.  However, such relief is not mentioned in the Summons, and it does not appear to me that there is any proper or sufficient basis for such relief to be granted by the court.

DISPOSITION

14.  For the foregoing reasons, the Summons is dismissed with costs to the plaintiff, to be taxed if not agreed.  The plaintiff’s undertaking to the court should be recorded in the sealed order.