XCHRX STANDARD CHARTERED BANK v. KWOK FAT

2000, No. 3555

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3555 OF 2000

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JUDGMENT

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The Facts

1. This case raises the question of whether or not the District Court has power to enforce a charging order absolute on landed property granted by the Court of First Instance. Both at the date of the present Originating Summons and that of the supporting Affidavit, the net amount of judgment debt due to the Plaintiff was less than $3,000,000. The Plaintiff seeks to enforce the charging order absolute by way of sale, claiming that the District Court has jurisdiction under sub-section 37(1)(c) and s.52AB of the District Court Ordinance ("DCO").

The Law

2. "A charge is a security whereby real or personal property is appropriated for the discharge of a debt or other obligation, but which does not pass either an absolute or a special property in the subject of the security to the creditor, nor any right to possession, but only a right of realization by judicial process in case of non-payment of the debt. With the exception of the charge by way of legal mortgage, which is for all intents and purposes equivalent to a legal mortgage, and maritime hypothecations, charges are enforceable only in equity." [See Fisher and Lightwood's Laws of Mortgage, 10th edition, at page 22.] Order 50, rule 9A provides for a mode of enforcement by way of sale.

3. Section 52AB of the DCO provides that:

"(3) A charge imposed by a charging order has the same effect and is enforceable in the same courts and in the same manner as an equitable charge created by the judgment debtor by writing under his hand.

(4) The Court may at any time, on the application of the judgment debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order."

4. Section 37(1)(c) DCO provides for the equity jurisdiction of the District Court:

"(1) Subject to the maximum limits in amount or value set out in subsection (2), the Court has the jurisdiction of the Court of First Instance to hear and determine ... ... proceedings ... for enforcing a charge ... ;

(2) The maximum limits in amount or value referred to in subsection (1) for -

(c) in the case of subsection (1)(c), the amount owing under the ... charge ... ;

are ...

(ii) $3,000,000, where the proceedings wholly involve or wholly relate to land; ..."

5. According to Mr. Lui, the words "enforcing a charge" under section 37(1)(c) should be construed as giving the District Court jurisdiction to enforce, inter alia, a charging order provided the amount owing under the charge is less than $3,000,000. Such jurisdiction should be the same as that of the Court of First Instance.

Enforceability of the Charging Order

6. At first glance, section 37(1)(c) of the DCO supports the Plaintiff's averment. However, that sub-section must be read together with s.52AB of the DCO. That section makes a charge "enforceable in the same courts" as a charge created by the judgment debtor by writing under his hand. It is noteworthy that the word "courts" is in small letters, unlike the word "Court" which is defined in the DCO as "The District Court established by section 3." Sub-section 52AB(3) only came into force on 1st September 2000, at a time when there was only one District Court in Hong Kong. The word "courts" can bear no other meaning but "courts within the District Court". Following from that, logically "the same courts" can bear no other meaning but "the same courts within the District Court which granted the charging order". Hence, the District Court can only enforce a charging order if it is granted by it.

7. I find support for this view from the High Court Ordinance ("HCO"), Cap. 4. Section 20B(3) of the HCO (which is in substance the same as s.52AB of the DCO) provides as follows:

"Subject to the provisions of this Ordinance, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor in writing under his hand." (emphasis added)

8. In my view, the words "shall be enforceable in the same courts" should be given the same construction as for s.52AB(3) of the DCO. A charging order can only be enforced by the Court which granted it and no other Court, be it inferior or superior.

9. There is good reasoning behind this procedure. First, the words in italics in s.20B(3) do not appear in s.52AB. A charging order absolute granted by the Court of First Instance is clearly subject to the HCO and the District Court has no power to enforce the HCO. Second, under s.20B(4) of the HCO, "The Court of First Instance may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order." If the District Court were to enforce a charging order absolute granted by the High Court, the discretion of the High Court under s.20B(4) would be usurped by an inferior court. In the absence of a proper order of transfer of proceedings from the Court of First Instance to the District Court, I do not think that state of affairs should be allowed to happen.

10. Mr. Lui submitted that since there is no law which prohibits the District Court as a lower court from enforcing an order made by the Court of First Instance which is a superior court, the District Court can enforce the present charging order absolute. I respectfully disagree. His view cannot be reconciled with s.20B of the HCO cited above. Moreover, the District Court is a statutory creation. All its powers are derived from statute. Section 37(1)(c) gives the District Court the like powers of the Court of First Instance but it does not empower the District Court to do the work on behalf of the Court of First Instance.

11. In the premises, despite the able submission of Mr. Lui, I am of the view that the District Court has no jurisdiction to enforce a charging order absolute imposed by the Court of First Instance. I therefore order that the present proceedings should be transferred to the Court of First Instance.

Costs

12. This matter has been adjourned for the Plaintiff to consider the question of jurisdiction. In the meantime, another Master has ordered a similar case (also handled by the Plaintiff's solicitors and involving, inter alia, the same Defendant) to be transferred to the Court of First Instance. The Plaintiff had ample opportunity in the interval to ask for a transfer order but they argued the issue of jurisdiction again in the hope of getting a written authority. Although it was well-motivated, I see no good reason why costs should not follow the event.

13. The Defendant has told me about his expenses and loss of income for coming to court to attend the hearing. I accept what he has told me to be truthful. I make a gross sum assessment and order the Plaintiff to pay the Defendant costs of and incidental to this hearing in the sum of $600.

Conclusion

14. The District Court has no power to enforce a charging order absolute imposed by the Court of First Instance. I therefore order as follows:

(i) Case be transferred to the Court of First Instance;

(ii) Costs of and incidental to this hearing fixed at $600 be to the Defendant.