STANDARD CHARTERED BANK (HONG KONG) LTD v. WONGGENOS ENTERPRISES CO LTD AND OTHERS

DCMP 878/2018

[2022] HKDC 1176

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 878 OF 2018

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DECISION

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1.  By a summons dated 5 September 2022 (“the Summons”), the 1^st and the 2^nd Defendants (“the Company” and “Madam Wong”) seek the following orders in these proceedings:

“(1)  a Declaration be made that the 1^st and 2^nd Defendants' legal interests in the Mortgaged Property (Unit 25C)  by way of the Mortgage dated 9 March 2007 which was registered on 28 March 2007 shall have priority over the 3^rd Defendant's interest under the Judgment dated 30 September 2016 in HCA899/2012 which was registered on 13 October 2016 and/or under the Judgment of HCA899/2012 dated 29 July 2022 both of which are under an appeal in CACV296/2022 dated 1 August 2022;

(2)  a Declaration that the Plaintiff's legal interest in the Mortgaged Property would be entitled to priority and ranks only ahead of the equitable interest of the 1^st and 2^nd Defendant in the Mortgage Property and that the Plaintiff shall take the legal estate i.e. the Mortgaged Property free of the said equitable interest of only the 1^st and 2^nd Defendants;

(3)  a Declaration that the 3^rd Defendant has no legal interest or equitable interest in the Mortgage Property by way of the Mortgage dated 9 March 2007 which was registered on 28 March 2007, and shall have no priority over the 1^st and 2^nd Defendants under the Judgment dated 30 September 2016 in HCA899/2012 which was registered on 13 October 2016 and/or under the Judgment of HCA899/2012 dated 29 July 2022 both of which are under an appeal in CACV296/2022 dated 1 August 2022;

(4)  the Bank (Plaintiff)  delivers the title, legal interest of the Mortgage Property to the 1^st Defendant Wonggenos Enterprises Company Limited upon payment and settlement of the Mortgage Loan of HK$885,593.05 outstanding in 2018 when the case of DCMP878/2018 was caused;

(5)  the Bank delivers the title, legal interest and net sales proceeds of the Mortgage Property to the 1^st Defendant in any event including in an event of a mortgagee sale rather than depositing the net sales proceeds into court;

(6)  as a remedy, the 3^rd Defendant and Director of Legal Aid pay the 1^st and 2^nd Defendants the excess amount of Mortgage Loan plus interests, i.e. the current outstanding amount of Mortgage Loan minus HK$576,793.05 ($885,593.05 - $308,800 paid in June 2022)  charged at Default Interest Rate;

(7)  as a remedy, the 3^rd Defendant and Director of Legal Aid indemnity and compensate the 1^st and 2^nd Defendants with an amount to be assessed by the Court as the total amount of other indebtedness and/or incumbrances plus interests and costs including DCCJ 5267/2018 and DCCJ 5731/2018 caused or charged on the Mortgage Property;

(8)  the Writ of Possession and Fieri Facias Combined dated 29 December 2021, and Notice to Quit be stayed execution pending appeal results;

(9)  the 3^rd Defendant and Director of Legal Aid pay the legal costs of the Plaintiff, and the 1^st and 2^nd Defendants in DCMP878/2018 and CAMP36/2020;

(10)  further and/or other relief;

(11)  costs of this application be paid by the 3^rd Defendant and Director of Legal Aid to the Plaintiff and the 1^st and 2^nd Defendants.”

2.  The hearing of the Summons is scheduled to take place on 20 October 2022.

3.  By a letter dated 6 October 2022, the Company and Madam Wong seek an order that the hearing of the Summons be adjourned pending the outcome of CACV 296/2022.  In the letter, the Company and Madam Wong have not informed the court the subject matter in that appeal.

4.  On 7 October 2022, I directed the other parties to provide their respective comments on the adjournment proposal made by the Company and Madam Wong in their letter dated 6 October 2022.  Subsequently, the Plaintiff (“the Bank”)  and the 3^rd Defendant (“Mr Wong”)  have provided their respective comments to the court.  Both the Bank and Mr Wong have taken the view that there is no need to adjourn the hearing of the Summons. The Bank’s position is that all the matters stated in the Summons have been dealt with by the court previously. Mr Wong’s position is that the Summons is unmeritorious and ought to be struck out.

5.  On 13 October 2022, I directed that the hearing of the Summons should take place as scheduled.

6.  In the hearing today, after hearing submissions, I come to the conclusion that no adjournment is necessary and the Summons should be dismissed for the following reasons.

7.  By a decision dated 3 September 2021[1], the Court of Appeal has dismissed the Company and Madam Wong’s application for leave to appeal against the judgment made by HHJ Winnie Tsui on 28 October 2019 in these proceedings (“the DC Judgment”).  In the Court of Appeal’s decision, the Court of Appeal has summarized the procedural history of these proceedings.[2] The Court of Appeal said:

“1.  This is an application by the 1^st and 2^nd Defendants for leave to appeal against the judgment of Her Honour Judge Winnie Tsui (the “Judge”)  dated 28 October 2019 (the “Judgment”)  whereby the Judge ordered, inter alia, (i)  the 1^st and 2^nd Defendants to pay an outstanding debt of HK$885,593.05 (plus interest thereon)  to the Plaintiff; and (ii)  the 1^st Defendant to deliver up vacant possession of the property known as Flat C, 25/F, St Louis Mansion, 20 MacDonnell Road, Hong Kong (the “Property”)  to the Plaintiff.

……

BACKGROUND FACTS

(i)  The 1^st, 2^nd and 3^rd Defendants

3.   The 1^st Defendant is a limited company incorporated in Hong Kong on 28 December 2006.  The 2^nd Defendant is the sole director and shareholder of the 1^st Defendant.  The 3^rd is the father of the 2^nd Defendant.

(ii)  The 1^st Defendant’s purchase and mortgage of the Property

4.  The 1^st Defendant entered into an agreement for the purchase of the Property on 25 January 2007.

5.  On 9 March 2007, the 1^st Defendant executed a mortgage (the “Mortgage”)  in respect of the Property for a loan granted by the Plaintiff.  The amount of the mortgage loan was $2,112,500.  The Property was assigned to the 1^st Defendant on the same day.

6.  The 2^nd Defendant executed a guarantee dated 8 March 2007 (the “Guarantee”)  in favour of the Plaintiff in respect of moneys and other liabilities owing by the 1^st Defendant to the Plaintiff, subject to a cap on the principal amount of the mortgage loan.

(iii)  The High Court Action

7.  The 3^rd Defendant commenced an action in the High Court in HCA 899/2012 (the “High Court Action”)  against the 1^st and 2^nd Defendants, alleging, inter alia, that the Property was held by the 1^st Defendant on constructive trust for him.

8.  After a contested trial, Recorder Lisa K Y Wong SC (as she then was)  (the “Recorder”)  gave a judgment dated 30 September 2016 (the “HC Judgment”)  in favour of the 3^rd Defendant holding, inter alia, that the Property was held by the 1^st Defendant on constructive trust for the 3^rd Defendant.  The HC Judgment was registered at the Land Registry on 13 October 2016.

9.  On 28 February 2018, the Court of Appeal dismissed the 1^st and 2^nd Defendants’ applications for (i)  an extension of time to appeal against the HC Judgment, and (ii)  a stay of execution of the HC Judgment ([2018] HKCA 109, the “CA Judgment”).

(iv)  The Mortgagee Action

10.  The 1^st Defendant failed to make repayment to the Plaintiff under the Mortgage since December 2017.  The outstanding sum owing to the Plaintiff was some HK$880,000 plus interest thereon.

11.  By an originating summons dated 23 March 2018 (amended on 4 December 2018), the Plaintiff commenced proceedings in the District Court in DCMP 878/2019 (the “Mortgagee Action”)  for payment of money due under the Mortgage and Guarantee by the 1^st and 2^nd Defendants respectively, and for delivery up of vacant possession of the Property by the 1^st Defendant. The action was originally against the 1^st and 2^nd Defendants only.  However, upon discovery of the HC Judgment, the Plaintiff joined the 3^rd Defendant as a party to the proceedings on 3 December 2018, and sought declarations that the Plaintiff’s interest in the Property under the Mortgage ranked ahead of the beneficial interest of the 3^rd Defendant in the Property as found in the HC Judgment.

……

13.  The 3^rd Defendant did not oppose the relief sought by the Plaintiff.  The 3^rd Defendant claimed that, in the event of a sale of the Property, the net sale proceeds after deduction of the expenses and indebtedness owing to the Plaintiff should be paid into court instead of being handed over to the 1^st Defendant.

14.  The Mortgagee Action came before the Judge on 28 October 2019.  In the Judgment:

(1)  The Judge held that following the dismissal of the application for extension of time to appeal against the HC Judgment, there was no outstanding matter in the High Court Action that needed to be resolved, except for the enforcement of the HC Judgment.

(2)  The Judge noted that the 1^st and 2^nd Defendants did not dispute the validity of the Mortgage and the Guarantee with the Plaintiff.  The contractual relationship between the Plaintiff and the 1^st and 2^nd Defendants was not altered by the HC Judgment and remained binding on the 1^st and 2^nd Defendants.  The 1^st Defendant had failed to make mortgage repayment and the Plaintiff was entitled to enforce its rights under the Mortgage and the Guarantee.

15.  Accordingly, the Judge made, inter alia, the following orders:

(1)  The 1^st and 2^nd Defendants do pay the Plaintiff the sum of $885,593.05 together with interest thereon;

(2)  The 1^st Defendant do within 28 days after service upon it of the order deliver to the Plaintiff vacant possession of the Property;

(3)  A declaration that the Plaintiff’s legal interest in the Property by way of the Mortgage shall have priority over the 3^rd Defendant’s interest in the Property as found by the Recorder in the HC Judgment; and

(4)  A declaration that the Plaintiff’s legal interest in the Property would be entitled to priority and ranks ahead of the equitable interest of the 3^rd Defendant in the Property and that the Plaintiff shall take the legal estate free of the said equitable interest of the 3^rd Defendant.”

8.  The appeal lodged by the Company and Madam Wong in CACV 296/2022 is an appeal against the judgment given by Master Kent Yee on 29 July 2022 (“the Accounts Judgment”)  in the High Court Action.

9.  In the HC Judgment, the Recorder held that, inter alia:

(1)  Madam Wong shall account for the sale proceeds of a flat and a car parking space in Kam Fai Mansion, 68A MacDonnell Road, Hong Kong (“Kam Fai Proceeds”);

(2)  The Company and Madam Wong shall account for the sale proceeds of Flat D, 1/F, St Louis Mansion, 20 MacDonnell Road, Hong Kong (“St Louis Flat 1D Proceeds”);

(3)  The Company and Madam Wong do pay to Mr Wong the sums found to be due on the taking of the said accounts; and

(4)  The Company do transfer the Property to Mr Wong.

10.  The accounts ordered by the Recorder took place before Master Kent Yee on 16 to 17 May 2022, and 2 June 2022.

11.  The Accounts Judgment was given on 29 July 2022.  In that judgment, the Master held that:

(1)  Madam Wong owed Mr Wong HK$1,896,765.21 for the Kam Fai Proceeds.

(2)  The Company and Madam Wong owed Mr Wong HK$3,014,200 for the St Louis Flat 1D Proceeds.

12.  By a Notice of Appeal filed on 1 August 2022, the Company and Madam Wong lodged an appeal against the Accounts Judgment.  This is CACV 296/2022.

13.  One can immediately see that the order sought by the Company and Madam Wong by the Summons is unrelated to the matters determined in the Accounts Judgment.  That being the case, there is no need to adjourn the hearing of the Summons pending the outcome of CACV 296/2022.

14.  Further, in my judgment, the Summons is an abuse of the process of the court.  By the Summons, the Company and Madam Wong are in fact seeking an order to challenge and to overturn the ruling made in the DC Judgment and the ruling made in the HC Judgment.  These are impermissible.  Both the DC Judgment and HC Judgment are binding upon the Company and Madam Wong.  Leave to lodge an appeal against the DC Judgment has been refused by the Court of Appeal.  Leave to lodge an appeal against the HC Judgment out of time has also been refused by the Court of Appeal.  The appeal channels against these judgments have been exhausted.  The Company and Madam Wong are now trying to launch a collateral attack against the DC Judgment and the HC Judgment by the Summons.  This is an abuse of the process of the court and cannot be allowed.

15.  I dismiss the Summons.

16.  Costs of the Summons should follow the event.  Since the Summons is an abuse of process of the court, the Company and Madam Wong have to pay indemnity costs to the Bank and Mr Wong.  I make the following costs order:

(1)  Costs of the Summons be paid by the 1^st and the 2^nd Defendants to the Plaintiff and to the 3^rd Defendant forthwith on an indemnity basis.

(2)  Costs payable by the 1^st and the 2^nd Defendants to the Plaintiff are summarily assessed at HK$10,000.

(3)  Costs payable by the 1^st and the 2^nd Defendants to the 3^rd Defendant are to be taxed on an indemnity basis if not agreed.  The 3^rd Defendant’s own costs are to be taxed in accordance with the Legal Aid Regulations.