XCHRX UNION FINANCE LTD. v. LEUNG WAI LING AND ANOTHER

HCMP 3757/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3757 OF 1999

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J U D G M E N T

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1. This is the Plaintiff's appeal against the Order of Master Lau dated 7 January 2000 where he dismissed the Plaintiff's application by Originating Summons in essence for the enforcement of a Charging Order by sale pursuant to the Rules of the High Court, Ord. 50 rule 9A.

2. When the Plaintiff appeared before the learned Master on 7 January 2000, the Defendants failed to turn up. The Plaintiff's solicitors informed me that the learned Master dismissed the Plaintiff's application on the ground that the amount due to the Plaintiff (a judgment debt of $28,732.25 and estimated costs of $30,000) was relatively small compared to the value of the property charged. This was confirmed by the learned Master's indorsment on the back of the Originating Summons.

3. In the Plaintiff's affirmation filed in support of this action, the Plaintiff averred that: -

(a)	the purchase price offered by the Housing Authority for the property in question (a Home Ownership Scheme unit) is about $980,000;
(b)	the Defendants and their family are in possession of the property.

4. The said judgment debt was obtained by the Plaintiff against the Defendants on 7 January 1999 in High Court Action 20694 of 1998 when the Defendants failed to give notice of intention to defend (more than 1 year ago). A Charging Order nisi was made against the property on 4 February 1999. This was made absolute by the Court on 23 March 1999 when the Defendants failed to turn up at the hearing. Subsequent to these proceedings, in view that the judgment debt has not been satisfied by the Defendants, the Plaintiff took out the present action on 17 November 1999. A Notice to Occupants was also given on the same day.

5. As was stated in The Supreme Court Practice 1999 at para. 50/9A/18: "A Charging Order on the property or assets of the debtors is one of the modes of enforcement of a judgment or order for the payment of money to the creditor. It is, however, not a direct mode of enforcement in the sense ... it provides the creditor with security ... It makes the creditor a secured creditor, who having obtained his Charging Order must proceed ... to enforce his charge in order to obtain the actual proceeds of his charge to satisfy his judgment."

6. Under s. 20B(3) of the Supreme Court Ordinance (which is the same as s. 3(4) of the Charging Orders Act 1979 in England), a charge imposed by a Charging Order shall have the like effect and shall be enforceable in the same manner as an equitable charge created by the debtor by writing under his hand.

7. In the footnotes to the Rules of the High Court Ord. 88 r.5A, the learned editors of The Supreme Court Practice 1999 said: "The usual manner of enforcement [of a Charging Order] is by an order for sale".

8. There is no doubt that the court has a discretion over whether to make a Charging Order absolute, or to enforce a Charging Order by sale. However, this discretion must be exercised judicially. It has been said in a number of cases that a judgment creditor is prima facie entitled to enforce his judgment by a Charging Order unless the debtor establishes some good reason to the contrary: see, for example, First National Securities v. Hegerty [1984] 3 WLR 769, CA citing Robert Petroleum v. Bernard Kenny [1982] 1 WLR 301, 307.

9. In 2 decisions in England, that is, in: -

In re Holliday (A Bankrupt) ex parte Trustee of the Property of the Bankrupt v. Holliday [1981] Ch 405; and

In re Lowrie (A Bankrupt), ex parte Trustee of the Property of the Bankrupt v. Lowrie [1981] 3 All ER 353,

it was held that when a judgment creditor applies for an order for sale of a property subject to a Charging Order, the competing equities of the parties will be carefully weighed. Indeed, if necessary, s. 20B(4) of the Supreme Court Ordinance empowers Court to direct service of copies of the relevant documents to any interested person. Having said these, at the end, there must be a good reason to justify why the Court should on the one hand grant an order in a party's favour but on the other refuse to enforce that very order.

10. While the amount of judgment debt is a relevant factor in the weighing exercise, the Court also has to take into account other matters such as the conduct of the debtor.

11. In the present case, it can be inferred from the history of both the earlier court action as well as these proceedings that the Defendants must have had ample knowledge of the 2 sets of court proceedings. At no time did they indicate that they would satisfy the debt or the judgment sum, or ask for time to do so, or indeed give any reason as to why the judgment ought not to be enforced by way of a Charging Order or a sale order.

12. In these circumstances, I consider that the learned Master had erred in placing too much weight on the amount of the judgment debt relative to the value of the property charged, and placing too little (or no) weight on other matters. The appeal is therefore allowed. His order is set aside and an order is made in terms of the Originating Summons.