THE HONGKONG CHINESE BANK LTD v. HUNDRED HEALTH LTD AND ANOTHER

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDING

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JUDGMENT

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The new evidence

1. First of all, I will admit the second affidavit of the 2^nd Defendant. This is a re-hearing of the matter that was before the Master and the practice is that new evidence is generally admissible. In any event, the new evidence contains only elaboration of the first affidavit and does not raise an entirely new defence.

The appeal

2. In this mortgage action the Plaintiff bank has recovered money judgment against the 1^st Defendant, the mortgagor of the property, and an order for possession against the 1^st and 2^nd Defendants. The 1^st Defendant has taken no part in the proceedings, the 2^nd Defendant now appeals against the decision made by the Master against her.

Beneficial interest of 2^nd Defendant

3. The property was purchased by the 1^st Defendant in 1990. The 1^st Defendant was controlled by a Mr Wong. The 2^nd Defendant and Mr Wong lived as man and wife in the property between 1991 and 1994. Mr Wong left the 2^nd Defendant in 1994. A child was born of this union.

4. According to the 2^nd Defendant, Mr Wong asked her to cohabit with him, and told her that the property would be bought and that the property would belong to her and her children born of the union. The 2^nd Defendant had acted to her detriment in relying upon Mr Wong's words. After the property was purchased, the 2^nd Defendant had contributed in the fittings and improvements of the property.

5. If the 2^nd Defendant's contention can be substantiated, then on the authorities of Eves v. Eves [1975]1 WLR 1338 and Grant v. Edwards [1986]2 All ER 426, she would have a beneficial interest in the property. The 1^st Defendant, which was effectively controlled by Mr Wong, was the constructive trustee of the 2^nd Defendant's interest.

Position of the bank

6. The property was initially mortgaged to the Security Pacific Asia Bank. In August 1993 the mortgage was discharged and on the same day the property was charged to the Plaintiff. As the charge to the Plaintiff only came afterwards, the Plaintiff is deemed to have constructive notice of and bound by the beneficial interest of the 2^nd Defendant, see Wong Chim Ying v. Cheng Kam Wing [1991]2 HKLR 253 and Williams & Glynn's Bank Ltd. v. Boland [1981] AC 487.

Trial on facts

7. Mr Ng, Counsel for the Plaintiff argued that these cases would only apply if the 2^nd Defendant had no knowledge of the mortgage in favour of its client. Mr Ng referred to the 1^st affidavit of the 2^nd Defendant in which she said that the Plaintiff had attended the property for valuation. The 2^nd Defendant has since explained that she was not aware of the transfer of mortgage to the Plaintiff until the end of 1994 when the relationship broke down. She further said that the valuer came at a time when Mr Wong said that he would change a new flat if the property could fetch a good price.

8. I am unable to conclude from what the 2^nd Defendant said regarding the valuation that she must have knowledge of and consented to the new mortgage. This is a matter I cannot effectively resolve on affidavit evidence. On this ground alone, there should be a trial of the issues.

Imputation

9. Mr Ng further relied on Bristol and West Building Society v. Henning [1985]1 WLR 778 and Equity and Law Home Loans Ltd v. Prestige [1991]1 All ER 909 and argued that the 2^nd Defendant must be imputed with agreeing to this new mortgage being granted because she had agreed to the first mortgage in the first place.

10. I think Mr Chan was right when he said that the beneficial interest of the 2^nd Defendant was not created by imputation but by express agreement between the parties, namely the 2^nd Defendant and Mr Wong. Hence, the imputation should not be made. In any event, the Plaintiff has not confined its claims to the money secured by the first mortgage as was done in Equity and Law Home Loans. The implication of that case must be fully examined.

Other matters

11. There are other matters raised by Mr Ng, namely that one should adopt the test in Order 14 proceedings as enunciated in Ng Show Chun v. Hung Chung San [1994]1 HKC 155 to an Order 88 proceedings.

12. I am not prepared to make such an assumption. In an originating summons proceedings, unless the matter can be dealt with summarily, then directions for the further conduct of the case must be given. Clearly in terms of fact and law, the matter cannot be decided summarily.

13. Mr Ng also referred to the undertakings of the 2^nd Defendant and what her counsel said to the court in the guardianship proceedings in relation to the child of the union. In short the 2^nd Defendant was saying in that proceeding that she would not assert any interest in the property. These are matters raised in a proceedings to which the Plaintiff was not a party. Breach of the undertaking, if indeed it had occurred, may entitle Mr Wong to seek a variation of the order or other remedies, but I cannot see how it would assist the Plaintiff at this stage of the proceedings.

Conclusion

14. All in all, I think the matter should not be decided in favour of the Plaintiff. Instead I would order the Plaintiff's claim against the 2^nd Defendant to be tried. I would set aside the judgment and allow the appeal. I will now hear the parties on directions.