GOOD FORTUNE CREDIT LTD v. MAN KWAI HING AND OTHERS

DCMP 1510/2020

[2025] HKDC 1254

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1510 OF 2020

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BETWEEN

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JUDGMENT

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BACKGROUND

1.  Since 22 September 1999, the 1^st Defendant (“D1”) has been the registered owner of half share in the property known as All That piece or parcel of ground situated lying at Yuen Long, New Territories and registered in the Land Registry as Lam Hau Tsuen House Lot No 112 also known as Lam Hau Lot No 112 in Demarcation District No 120 (“the Property”).

2.  Between 29 April 2013 and 28 March 2022, the 2^nd Defendant (“D2”), who is the son of D1, was the registered owner of the other half in the Property.

3.  On 12 July 2013, the Plaintiff (“P”), a registered money lender, and D1 entered into a loan agreement whereby P agreed to lend D1 a sum of $800,000.

4.  On the same day, D1 executed a legal charge over his share in the Property (“the Charge”) in favour of P. By the Charge, D1’s share in the Property was mortgaged to P to secure repayment to P of all sums of money payable by D1 to P.

5.  On 1 August 2013, P and D1 entered into another loan agreement whereby P agreed to lend D1 a further sum of $200,000.

6.  D1 defaulted in repayment of the aforesaid loans. On 15 March 2020, P obtained a judgment in HCA 2638/2016 (“the High Court Judgment”), whereby D1 was adjudged to pay to P: (i) the sum of $800,000 together with interest thereon at the rate of 30% per annum from 12 December 2013 to the date of payment; (ii) the sum of $200,000 together with interest thereon at the rate of 30% per annum from 1 December 2013 to 31 July 2014 and thereafter at 8% per annum to the date of judgment and thereafter at the judgment rate until payment; and (iii) P’s costs summarily assessed at $64,857.

7.  On 27 May 2020, P commenced this action against D1 and D2, being the then registered owners of the Property. Apart from seeking an order for delivery of vacant possession, P also asks for an order for sale of the Property under section 6 of the Partition Ordinance (“PO”).

8.  On 28 March 2022, D2 assigned his half share in the Property to the 3^rd Defendant (“D3”), who is the wife of D1 and mother of D2. Since then, D1 and D3 have been the registered owners of the Property, each holding half of the legal interest.

9.  Subsequently, D3 joined as a party to these proceedings. These proceedings also continued as if begun by writ. In short, D3 claimed that D1 has been holding his half share in the Property on trust in her favour, and P had notice of D3’s such interest at the time of the execution of the Charge.

THE PARTIES’ CASES

10.  P’s case is simple. It is based on clause 6 of the Charge, which provides for P’s powers in the event of D1’s default. P relies on such a clause to enter and take possession of the Property.

11.  As to D3’s allegations that she had the beneficial interest in D1’s half share in the Property and P had notice of the same, P denies the same and puts D3 to strict proof.

12.  P further pleads that according to a report prepared by Goldrich Planners and Surveyors Ltd dated 13 June 2022, the property can be partitioned into 3 stories. However, since the staircase is inside the ground floor and there is no direct access to the 1^st and 2^nd floors from the front, substantial building work will be required to separate the floor area from the staircase so as to make it possible to access the upper floors of the house from the outside. P contends that due to the inherent nature of the Property, it would not be practicable for the Property to be partitioned into separate units. P pleads for an order for sale of the Property in the circumstances.

13.  D1 has never appeared in these proceedings.

14.  D2-3 filed a short joint defence. Factual averments are contained in paragraphs 2 and 4, which are set out in full below:

“2. Paragraphs 2 and 3 of the Statement of Claim are admitted except that [D1] has been holding 1/2 share of [the Property] on trust for the benefit of [D3] at all material times by allowing [D3] to have possession of all original title deeds and documents of the Property which [D1] agreed to transfer and assign his 1/2 share of the Property to [D3] for settlement of her claims for ancillary relief in divorce proceedings.”

“4. Since [D3] has become the beneficial owner of the 1/2 share of the Property previously owned by [D1] before [D1] executed [the Charge], and [P] had notice of [D3]’s interest for her possession of the title deeds and documents of the Property, so that [D1] did not validly charge or mortgage his 1/2 share of the Property to [P] but subject to [D3]’s prior interest, paragraphs 15 to 18 of the Statement of Claim are denied.”

15.  It is noted that while trust is pleaded in paragraph 2, it is unclear which type of trust D2-3 rely on.

16.  In her opening submissions, Ms Virginia Leung, counsel for D2-3, submitted that it was both a resulting trust and common intention constructive trust. She submitted that it was a resulting trust as D3 contributed to the Property by renovating the house on the Property and settling household expenses; and it was also a common intention constructive trust arising from the couple’s matrimonial arrangements and ancillary relief claims.

17.  It is also noted that while notice of D3’s interest is pleaded in paragraph 4, it is unclear which type of notice D2-3 rely on. In her opening submissions, Ms Leung submitted that it was both actual and constructive notice. The basis of such notice, as submitted by Ms Leung, is that, first, D3 has had in her possession the original title deeds of the Property, and secondly, P, having been aware that the Property was occupied by D1’s family, did not make proper inquiry regarding the title.

18.  In respect of P’s plea that it would not be practicable for the Property to be partitioned and there should be a sale of the Property, D2-3 made a bare denial without making any positive factual averments.

19.  In her opening submissions, Ms Leung submitted that the sale of the Property would create very great hardship to D3. She submitted that D3, a housewife, resides in the Property as her sole residence. Eviction would render her homeless, as she lacks income to secure alternative housing.

20.  Before I discuss the issues in the present case, I have to deal with two preliminary matters – the pleading issue and D2-3’s striking out application.

THE PLEADING ISSUE

21.  The significance of pleadings is well-established. As Ma CJHC (as he then was) explained in Wing Hang Bank Ltd v Crystal Jet International Ltd [2005] 2 HKLRD 795 at §6:

“(1) The purpose of pleadings is fairly and precisely to inform the other side of the stance of the pleading party so that proper preparation is made possible, and time and effort are not expended unnecessarily on other issues. The passage at p 297 para 18/12/1 of Hong Kong Civil Procedure 2004, Vol 1 sets out the rationale for proper pleadings.

(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped-in” when evidence is being given in the hope that the other side is not sufficiently alert to object. Much testimony given in the course of a trial may in truth relate to a number of possible aspects or may simply be background information. Obviously, counsel must be astute to object when necessary but the primary responsibility of ensuring that any issue is properly before the Court is on the party seeking to advance that issue. He must do so clearly and not ambiguously, and the usual way of doing so is through the pleadings. Care must be taken to plead issues clearly, and not draft pleadings either vaguely or ambiguously perhaps in the hope that the other side might not readily or easily understand a party's real case. While vaguely or ambiguously drawn pleadings may enable a party to escape a strike-out application (since striking out is only for plain and obvious cases), this is not to say that where a court has to decide whether or not an issue is to be permitted to be run, it will smile kindly on such types of pleading.”

22.  In my judgment, I disallow D2-3 to run the case of resulting trust arising from the alleged D3’s contributions to renovation costs or household expenses. Such case has not been pleaded. In Yip Siu Wah v Chan Yuen Ping [2023] HKCFI 2777, Mr Recorder Stewart Wong SC observed at §31: “The facts in support of a resulting trust (if alleged) must therefore be pleaded clearly and unambiguously”, citing Beijing Hantong Yuzhi Convention Centre Ltd v Lao Yuan Yi [2022] HKCA 869 at §§47.1 to 47.4. Had P’s such case of resulting trust been pleaded, P would have had the opportunity to conduct investigations, seek discovery on the alleged contributions or adduce evidence to refute the allegation. It would be unfair to P to meet such an unpleaded case at trial.

23.  I also disallow D2-3 to run their case of common intention constructive trust on the basis of anything exceeding what was pleaded. In paragraph 2 of the Defence, the trust was pleaded to have formed for settlement of D3’s claims for ancillary relief in divorce proceedings, but Ms Leung sought to expand the scope to also include some unparticularised “matrimonial arrangements”. It would be unfair to P to meet the case other than what has been pleaded.

24.  For the same reason, I disallow D2-3 to run the case of hardship. If D2-3 would like to run such case, they ought to have expressly pleaded the facts which allegedly create the hardship.

THE STRIKING OUT APPLICATION

25.  At the closing submissions, Ms Leung made an oral application for striking out. The basis of such application is duplication of legal proceedings and hence abuse of court process. Ms Leung contended that before P commenced the present action, P had already commenced HCA 2638/2016 (“the High Court proceedings”) making the same claim based on the Charge. P’s application in the High Court was heard by a Master on 15 August 2018 but the Master only entered monetary judgment against D1 without granting the order for possession against D1 and D2, ie the High Court Judgment. Ms Leung said P discontinued its claim against D2 in the High Court proceedings, but the claim for possession against D1 was still subsisting and unresolved.

26.  Mr Wong King Fai, solicitor for P, took issue with what Ms Leung told me about the High Court proceedings. He said P indicated to the Master that P only sought monetary judgment against D1. But he also said that the claim for possession against D1 was still subsisting and unresolved. Ms Leung disagreed with what Mr Wong told me.

27.  I was surprised that the parties’ legal representatives had a factual dispute as to what actually happened in the High Court. I was also confused as to the status of the High Court proceedings. In order to fully understand the basis of the alleged duplication of proceedings as well as the reasons of the lateness of the application, I gave directions for filing of affirmations and submissions. I indicated that I would make a decision on the application together with this judgment.

28.  However, D2-3 did not file any affirmation in support of the application. As D2-3 did not make good their application, I hereby dismiss D2-3’s oral application for striking out with costs to P to be taxed if not agreed.

ISSUES IN DISPUTE

29.  I now turn to the issues in dispute. As I told Mr Wong and Ms Leung at the beginning of the trial, issues are defined by pleadings, not by evidence: Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21.

30.  In my view, there are three issues which require me to determine:

(1) whether D1 has been holding the half share of the Property on trust in favour of D3;

(2) if yes, whether P had notice of D3’s interest in the Property at the time of the execution of the Charge; and

(3) whether the Court should order a sale of the Property under the PO.

WITNESSES

31.  In resolving factual disputes and considering witnesses’ credibility, I remind myself of the following well-established principles:

(1) In assessing the credibility of a party’s case on a particular issue, the court should take into consideration whether the party’s case is inherently plausible or implausible; whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable; where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests, which is relevant to the assessment of his overall credibility; and the demeanour of the witnesses: Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 at §53.

(2) Where there is a host of contemporaneous documentation, such documentation must assume a special importance. The truth can best be tested by reference to contemporaneous documentation where it exists, as well as to inherent improbabilities having regard to all the facts that are known: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §135.

32.  P called Mr Lo Shi Ki, who is a director of the Plaintiff.

33.  Mr Lo adopted his witness statement and gave evidence on a number of undisputed matters, including the two loan agreements between P and D1, the Charge, the High Court Judgment against D1, and that it was still wholly outstanding.

34.  Mr Lo also gave evidence on the following:

(1) To the best of his knowledge and belief, the Property was used for domestic purpose, and D1, D2 and D3 being members of the family have been residing in the Property.

(2) In respect of the alleged trust, Mr Lo asserted that P had no knowledge that the title deeds were being kept by D3. He explained that D1 was not required to surrender the title deeds to P when the Charge was executed, because D1 was just a co-owner holding the Property as a tenant in common with another co-owner. Mr Lo also said that P had no knowledge that D1 agreed to transfer his interest in the Property to D3 in settlement of her claim for ancillary relief in the divorce proceedings.

(3) As regards asking for title deeds, Mr Lo said in Court that he did ask P to provide the original title deeds, but P said they were not with him at that time and he needed to look for them. When it was pointed out to him that this explanation was not stated in his witness statement, he explained that usually what P would do was to conduct a land search and to conduct an inspection of the Property.

(4) Mr Lo continued to say that before the Charge was executed, P had inspected the Property together with D1. On that day, he entered the Property and found a woman and a man in the house, but he did not know and did not enquire who they were. He thought they should be D1’s family members.

(5) When being asked why he did not enquire with D1 who other occupants were, Mr Lo said the purpose of the inspection was just to know whether the Property was D1’s residence and whether D1 had the keys to the Property.

(6) He did not doubt about D1’s allegation that he had the beneficial interest in the Property, as he had already conducted the land search which showed D1 was one of the owners.

(7) He did not consider it necessary to enquire with D2 (the then co-owner) or D3 whether they agreed to the execution of the Charge.

(8) He did not think it necessary to request D1 to disclose anything relating to litigation or family disputes which may affect the title of the Property, because he did not care about D1’s family disputes.

(9) He agreed that he and P’s solicitors never received the original title deeds of the Property.

(10) He agreed that he and P’s solicitors never requested D1 to make an affirmation to explain where the title deeds were.

(11) He sought legal advice on the matter. P’s legal adviser informed him that there were no title deeds in this transaction and enquired whether P would still want to proceed. He replied that he agreed to proceed.

35.  The defence called D2 and D3.

36.  D2 adopted his witness statement. He said the following:

(1) At the time D1 signed the legal documents with P, D1 no longer resided at the Property, and D2 and D3 had exclusive possession of the Property.

(2) The original title deeds have all along been kept by D3.

(3) P should be aware of the occupation of the Property by D2 and D3, and D3’s retention of the original title deeds for reserving her claims for ancillary relief in divorce proceedings.

(4) P did not make any enquiry about the interest and claim of D3 for ancillary relief against D1 including the Property as the matrimonial home.

(5) On 28 March 2022, D2 sold and assigned his half share of interest of the Property to D3 at a consideration of $400,000.

(6) He sold his half share to D3 because the present litigation in which he was sued was recorded in his credit report. Further, his title in the Property would affect his intended purchase of a unit under the Home Ownership Scheme.

(7) After the sale, D2 moved out of the Property. However, he later moved back to the Property as he could not afford the rent for another unit.

37.  D3 first adopted her witness statement, in which she stated the following:

(1) After she got married with D1, they both had jobs and contributed to the family. In the beginning, there were only two stories in the Property. Subsequently, they paid to repair the Property and build one more storey.

(2) Later, D1 was so much indebted. She and D1 quarreled a lot. Hence, she engaged lawyers to petition for a divorce.

(3) As the Property was jointly owned by D1 and D2, D1 promised to her that upon divorce he would transfer his half share in the Property to her as maintenance and compensation. As a result, the original title deeds of the Property were passed to her and kept by her.

(4) She did not know that D1 had borrowed loans from P.

(5) Later, D2 sold his half share of the Property to her at a consideration of $400,000.

(6) D1 held his half share of the Property on trust in favour of her. That was the common understanding and common intention between them for the divorce. This was also because she made a lot of contributions to the Property over the years.

38.  In Court, D3 said the following:

(1) She orally raised the issue of divorce with D1 in 2012, and D1 consented to it. They went to a law firm together in 2014.

(2) Before going to the law firm, D1 said to her that he owed her so much and he agreed to pass his half share of the Property to her.

(3) Regarding the divorce proceedings which were commenced in February 2014, it had already ended but she did not know what the Court order was. Later in her evidence, she said that in fact there was never a divorce order. But she could not explain why she still could not get the divorce order in the past 11 years.

(4) After she proposed divorce, she started to work on a part-time basis for about 3 to 4 hours a day.

(5) Regarding the title deeds, before she got married, the original title deeds were kept by D1’s mother. After she got married, the title deeds were passed by D1’s mother to her, and she has kept them since then.

(6) When being asked why she did not request D1 to assign his half share of the Property to her, she said D1 was not cooperative.

(7) She initially said she was quite worried that D1 would go back on his promise as D1 was not cooperative. But later she said she was not worried, because she kept the original title deeds.

(8) When being asked whether there was any written record to show D1’s such promise, she answered in the affirmative but was unable to specify what document it was. She said she needed to ask her lawyers about this, because the document should have been given to her lawyers.

(9) However, later, she said she did request D1 to write down something to put on record his promise, but D1 did not do so. Nor did D1 give any reasons for not doing so. D3 however still accepted it because D1 orally said he would certainly transfer the Property to her. She said she chose to trust him one time (信佢一次).

ISSUE (1): TRUST

39.  It is trite that beneficial title is presumed to follow the legal title (Stack v Dowden [2007] UKHL 17) so D2-3 bears the burden of proving the existence of the trust at the time the Charge was executed (that is, on 12 July 2013).

40.  After considering the evidence and submissions, I find that D2-3 have failed to discharge such burden.

41.  First, in the Defence, D2-3 pleaded that D1 agreed to transfer and assign his half share of the Property to D3 “for settlement of her claims for ancillary relief in divorce proceedings”. However, as a matter of fact, the divorce proceedings were commenced and the ancillary reliefs were sought only in February 2014. There was no divorce proceedings at all at the time the Charge was executed on 12 July 2013.

42.  Secondly, the allegation of trust is a bare assertion without any supporting documents. There is not a single piece of documentary evidence which may support the alleged promise by D1 to D3, or the alleged common understanding and intention.

43.  D3’s evidence on the existence of any written evidence is evasive and illogical. At first, she said there was such a document and it should have been passed to her lawyers. She could not describe what the document was, and of course did not produce this document in this action. I find that there is no such written record at all.

44.  Later, D3 changed her evidence to say that she did request D1 to put his promise on record but D1 refused without giving any reasons. If there is any truth in this allegation, it would be inherently improbable that D3 did not protest or take further actions to protect her own interest, such as writing a letter or sending a message to D1 to put on record D1’s such promise. Oddly, D3 said she still trusted D1 one more time. However, D1’s such unexplained refusal must have led D3 to have great doubt on D1’s trustworthiness. It is inherently improbable that D3 would still choose to trust D1 unreservedly in such circumstances.

45.  Thirdly, if there was such a promise, there is no reason why D1 did not execute an assignment to transfer his half interest in the Property to D3. D3 explained in the Court that D1 refused to be cooperative. If this allegation is true, it makes D3’s evidence that she did not take any actions to protect herself even more improbable.

46.  Fourthly, the keeping of the original title deeds by D3 does not assist the defence case. According to what D3 said in the Court, she had the original title deeds since she got married even when she had no beneficial interest in the Property at all at that time. Hence, contrary to what she stated in her witness statement, D1 did not pass the original title deeds to her as a result of the alleged promise. Further, before D1 and D3 were married, it was D1’s mother, who had no beneficial interest in the Property, who kept the original title deeds. In the circumstances, D3’s possession of original title deeds does not evident any beneficial ownership.

47.  Fifthly, D2-3’s case is also inconsistent with the Petition for divorce. In the Petition, D3 prayed for, inter alia, a lump sum payment order, a periodical payment order and the transfer of the Property. If, as D3 alleged in the Defence, the transfer of the Property was for “settlement of her claim for ancillary relief in divorce proceedings” even before the Petition was issued, D3 would not have also claimed the lump sum payment order or the periodical payment order. Instead, some kind of document recording the settlement agreement would have been prepared and signed.

48.  To conclude, I find that D2-3 have failed to discharge their burden to show that D3 held D1’s share in the Property on trust in her favour.

ISSUE (2): NOTICE

49.  Given my factual finding on the first issue, the second issue does not arise. In case I am wrong on the first issue, I set out below my views and findings on the second issue.

50.  If there were a trust, P had to satisfy itself as a bona fide purchaser for value without notice (more particularly, constructive notice).

51.  The learned editors of The Law of Real Property (10^th ed.) stated at §5-018 that:

“A purchaser has constructive notice of a fact if he or she:

(i) had actual notice that there was some incumbrance and a property inquiry would have revealed what it was; or

(ii) deliberately abstained from. Inquiry in an attempt to avoid having notice; or

(iii) omitted by carelessness or for any other reason to make an inquiry which a purchaser acting on skilled advice ought to have made and which would have revealed the incumbrance.”

52.  In order not to be fixed with notice of a prior unwritten equitable interest, the purchaser must have made all usual and proper inquiries. In the mortgage of real property, this includes both inspection of the land and investigation of the title: Flying Mortgage Ltd v Chan Kuen Kwong [2010] 1 HKLRD 318, at §32.

53.  Mr Lo’s evidence has been summarised above. I am not impressed by Mr Lo’s evidence regarding the steps he took to enquire about D1’s beneficial interest.

54.  He said in Court that he did ask D1 about the original title deeds but D1 replied that they were not with him and he had to look for them. However, this was never mentioned in his witness statement. On the other hand, in his witness statement, he said he considered that D1 was not required to surrender the title deeds.

55.  If D1’s reply was that he would look for the original title deeds, there is no reason why Mr Lo did not require them to be delivered on a later date. D1 actually did not refuse to deliver title deeds but just needed time to look for them. Naturally, P should be happy to have in its possession the original title deeds. But oddly Mr Lo did not actively follow up on such request. Mr Lo accepted under cross-examination that D1 never told him the whereabouts of the original title deeds. Mr Lo also did not enquire further.

56.  Mr Lo further said in Court that he had inspected the Property and even entered the Property with D1. However, this important piece of evidence was missing in his witness statement. In fact, it was never even pleaded.

57.  Mr Wong argued that since D2-3 did not plead anything about the inspection of the Property in their Defence, P did not have to plead the same in the Reply nor mention it in the witness statement of Mr Lo.

58.  I do not accept these submissions. D2-3 pleaded in the Defence that P had notice of D3’s beneficial interest. P’s position is that it had no notice of the alleged trust. It would be for P to plead the factual averments for the denial. As stated in The Law of Real Property (10^th ed.) at §5-018:

“A purchaser would be able to plead absence of notice only if he or she had made all usual and proper inquiries, and had still found nothing to indicate the equitable interest. A purchaser who fell short of this standard could not plead that he or she had no notice of rights which proper diligence would have discovered.”

59.  D2 and D3 gave evidence that at the time the Charge was executed, D1 no longer resided at the Property and therefore D2 and D3 had exclusive possession of the Property. This is in direct conflict with Mr Lo’s evidence that D1 resided there and took Mr Lo to the Property for inspection. I note that when D2 and D3 were cross-examined by Mr Wong, it was not put to them that their evidence in this regard was false or incorrect.

60.  I find that Mr Lo merely relied on the land search and did not care to verify D1’s beneficial interest. What Mr Lo mostly cared about was D1’s legal title. He therefore did not ask for the original title deeds, and did not inspect the Property.

61.  Even assuming that Mr Lo did inspect the Property, the purpose of such inspection, as he said, was merely to check that D1 resided there. He had no intention to verify whether the Property was occupied or beneficially owned by other persons. He also did not follow up on his request to D1 to deliver the original title deeds, or require an explanation if D1 could not do so.

62.  According to Mr Lo, P’s solicitors already highlighted the fact of lacking original title deeds and enquired whether P would still want to go ahead, but P still chose to proceed with the execution of the Charge.

63.  In my judgment, what Mr Lo did is not enough to show that P has taken all reasonable steps to ascertain whether third party interests existed. Had Mr Lo properly enquired with D3, he would have discovered D3’s beneficial interest.

64.  Hence, had I found in favour of D2-3 on the first issue, I would have found in favour of D2-3 on the second issue, that P had constructive notice of D3’s interest in the Property and therefore P took the Charge subject to the beneficial interest of D3.

ISSUE (3): ORDER FOR SALE

65.  Section 2 of the PO provides that where any property in land is held by two or more persons, whether as joint tenants or as tenants in common, the court may either make an order for partition of the property under section 4, make an order for a sale of the property under section 6, or refuse to make any order.

66.  There is no dispute that P as a legal chargee of D1’s half share of the Property is a “person interested” in the Property within the meaning of section 3(1) of the PO, and is entitled to institute proceedings under the PO for an order for sale.

67.  In considering whether an order for sale is appropriate in this case, I am guided by the following:

(1) Under section 6(1) of the PO, the Court may make an order for the sale of the property when it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of the nature of the land to which the proceedings relate, the number of the persons interested or presumptively interested, the absence or disability of some of the persons interested or any other circumstances.

(2) Generally, in determining whether a sale is more beneficial than a partition, the Court considers only the pecuniary results, disregarding matters of sentiment, and has regard to the interest of all parties interested as a whole; but it can and will order a sale where, in its discretion, it thinks fit, unless the parties opposing a sale undertake to purchase the shares of those desiring sale: Law Chun Wai trading as Fu Tat Finance Company v Chu Suk Har [2016] 1 HKLRD 224 at §26.

(3) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively: Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 at §§18-19.

(4) The Court will also consider the size and design of the property: Law Chun Wai trading (supra) at §28.

(5) When it is impracticable to make an order for partition, the Court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner) that such an order will not be beneficial to all the co-owners, or that it will result in very great hardship to one co-owner: Wong Chun Kei v Poon Vai Ching (supra) at §§16-27.

68.  In my judgment, it is impracticable to partition the Property.

69.  The building on the Property is a three-storey structure. There is only one entrance to the structure on the ground floor. The staircase is inside the ground floor, and there is no direct access to the 1^st and 2^nd floors from the front. While it may be feasible to partition the Property into 3 stories as opined by Goldrich Planners and Surveyors Ltd by additional building works to make it possible to access the upper floors from the outside, there is no evidence that the three-storey structure can be physically cut into two halves. Further, as acknowledged by Goldrich Planners and Surveyors Ltd in its report, the value of each floor is different.

70.  In her closing submissions, Ms Leung argued that each floor of the Property can be partitioned into two halves by building dividing partitioning walls on each floor. However, there is no evidence that such suggestion is physically feasible in light of interior layout and plan. In any event, such proposal, even if physically feasible, no doubt will require substantial building works including installing an extra entrance on the ground floor, internal or external staircases to the 1^st and 2^nd floors, as well as partitioning walls on each floor. There will also be substantial alteration works for common facilities and utilities such as kitchen, bathrooms, pipes and so on. Considerable substantial time and costs will be incurred. Comparing to the value of the Property estimated at $6,000,000, these substantial time and costs to be incurred will make the suggestion entirely impracticable even assuming it is physically feasible.

71.  I am not persuaded that an order for sale will not be beneficial to all parties concerned. The Property was valued at $6,000,000. Upon its sale, P would be able to apply half of the sale proceeds representing D1’s share to discharge the debt owed by D1 to P. This will stop the interest from accruing on the debt, and D1 will probably have a remaining balance of sale proceeds to receive. D3 will also receive half of the sale proceeds, which is not an insubstantial amount of money.

72.  As to D3’s alleged very great hardship, such case was not pleaded and I disallow D3 to run such case. In any event, even if I am to consider the issue of hardship, I do not consider D3 has sufficiently discharged her burden in showing hardship. Apart from her bare assertion, no evidence has been adduced to prove her alleged hardship that she will be unable to secure alternative housing if the Property is sold. On the other hand, it is her evidence that she does have income from a job. Further, she will receive half of the sale proceeds, and there is no explanation as to why alternative accommodation will be impossible after she receives the same.

73.  Having considered the evidence, authorities and arguments, I exercise my discretion to make an order for the sale of the Property as sought by P.

COSTS

74.  P seeks costs against D1 on indemnity basis pursuant to Clause 14.01 of the Charge, while against D2 and D3 on party-and-party basis. I find it reasonable.

CONCLUSION

75.  Accordingly, I make the following order:

(1) Unless within 28 days after service of this Order D1 do satisfy the High Court Judgment, D1, D2 and D3 do deliver to P vacant possession and title deeds and documents (if any) in their possession of the Property.

(2) Subject to the delivery of vacant possession by D1, D2 and D3 as stated in the preceding paragraph, the Property be sold by P by public auction or private treaty in open market subject to a reserve price of not less than HK$6,000,000.

(3) The conduct of the sale of the Property be committed to P’s solicitors Messrs Tang, Wong & Cheung.

(4) D1 and D3 shall do all acts and things necessary for the transfer of the legal title and beneficial interest in the Property to the purchaser(s), failing which P’s solicitors be appointed to execute the necessary conveyance or assignment to give effect to this Order.

(5) The proceeds of the sale of the Property shall be paid to P’s solicitors and be applied upon completion in the following order of priority:

(a) in discharge of any cleaning costs, all government rent, taxes, rates and other outgoings due and affecting the Property;

(b) in discharge of all encumbrances affecting the Property having priority to the Charge, if any;

(c) in payment of the costs and expenses in connection with the sale of the Property including reasonable conveyancing costs, and the estate agent’s commission or auctioneer’s remuneration not exceeding 1% of the sale price;

(d) 50% of the remaining proceeds relating to D1’s interest in the Property be applied as follows:

(i) in discharge of the Legal Charge;

(ii) in payment of P’s costs of these proceedings as against D1; and

(iii) the balance (if any) be paid to the next encumbrancer, or if there is no such next encumbrancer, to D1;

(e) the other 50% of the remaining proceeds relating to D3’s interest in the Property be applied as follows:

(i) in discharge of all encumbrances affecting such D3’s interest in the Property, if any;

(ii) in payment of P’s costs of these proceedings as against D3; and

(iii) the balance, if any, be paid to D3.

(6) Upon D1 paying to P the money ordered to be paid under the High Court Judgment and all other moneys (if any) secured to P by the Legal Charge, P (subject and without prejudice to the due exercise of any power of sale for the time being vested in it) do redeliver to D1, D2 and D3 possession and title deeds and documents of the Property and release to D1 and the security constituted by the Charge as D1 may agree or the Court may direct but without prejudice to the validity of any contract made prior to or without notice of such redemption and payment;

(7) There be a costs order nisi that:

(a) D1 shall pay P’s costs of these proceedings against D1 on indemnity basis, to be taxed if not agreed.

(b) D2 shall pay P’s costs of these proceedings as against D2 on party-and-party basis, to be taxed if not agreed.

(c) D3 shall pay P’s costs of these proceedings as against D3 on party-and-party basis, to be taxed if not agreed.

(8) There be liberty to apply.