FU SUM AND OTHERS v. FU SAN FAT

HCMP 1072/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1072 OF 2008

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REASONS  FOR  DECISION

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Introduction

1.  This is one of the numerous applications brought pursuant to s. 12A, Conveyancing and Property Ordinance (Cap. 219).

2.  At the end of the hearing on 3 July 2008, I directed the plaintiffs to make a payment into court.  The remainder of the application was adjourned; notice of the adjourned hearing was to be advertised once in a Chinese newspaper widely circulated in Hong Kong.

3.  As will be discussed further below, the above order in effect rejected the plaintiffs’ argument that final relief should be granted on 3 July 2008.

4.  For easy of reference, s. 12A(1) to (3), Cap. 219 is set out below:-

“(1)   Where land is subject to any encumbrance, whether immediately realizable or payable or not, and the encumbrancer is out of the jurisdiction, cannot be found or is unknown, or if it is uncertain who the encumbrancer is, the court may, if it thinks fit, on the application of the party for the time being entitled to redeem the encumbrance, direct or allow payment into court of a sum of money sufficient to redeem the encumbrance and any interest thereon.

(2)     Upon payment into court of the sum referred to in subsection (1), the court may, if it thinks fit, and either after or without any notice to the encumbrancer, as the court thinks fit, declare the land to be free from the encumbrance, and make any order for conveyance or vesting order as appropriate, and give directions for the retention and investment of the sum of money paid into court and for the payment or application of the income thereof, and for the payment of an amount certified by the court to be the reasonable costs of the applicant in making the application, such amount to be deducted from the sum of money paid into court.

(3)     On application by the encumbrancer or any person entitled to the money or fund in court, the court may direct payment or transfer thereof to the persons entitled to receive or give a discharge for the same, and generally may give directions respecting the application or distribution of the capital or income thereof” (emphasis supplied).

S. 12A(4), which essentially is concerned with jurisdiction, will be set out and further discussed below.

Background

5.  As is usual in applications of this kind, the Block Government Lease, executed in March 1905, in which the suit property is registered contains a remark in its Schedule that a mortgage has been registered as an encumbrance against it.  In the present instance, the mortgagee was the defendant and the mortgage sum was $76.

6.  In the supporting affirmation, the deponent says that the plaintiffs became the registered owners by way of a succession to property dated 15 February 1996.  They wanted to sell the suit property but have been advised that the mortgage might well constitute a “blot on title”.

7.  The deponent also says that despite due diligence, the plaintiffs have not been able to locate the defendant.  The plaintiffs cannot find anyone who knows anything about the defendant either.

8.  On the face of the above, this application therefore falls squarely within the terms of s. 12A(1) because:-

(a)     the suit property is subject to an encumbrance;

(b)    the encumbrancer cannot be found or is unknown.

What S. 12A Prescribes ?

9.  The court’s power under s. 12A(1) is clear.  It can, where appropriate to do so:-

“… direct or allow payment into court of a sum of money sufficient to redeem the encumbrance and any interest thereon”.

But s. 12A(1) per se does not confer any further or other power.

10.  In Re Cheung Chi Wang and Another [2002] 1 HKLRD 409, Deputy Judge Lam (as he then was) concluded that the provisions in s. 12A(1) and (2) envisage there should be three stages to such an application: see pp. 332-3; Man Chi Kan v. Man Tsak Lun [2003] 2 HKLRD489, para. 7.

11.  However, Counsel for the plaintiffs urged me to adopt a so-called “one-stage” approach.  That is, an order should be made immediately for the following relief:-

(1)     a payment into court of a specific sum of money on account of the principal and interest of the said mortgage;

(2)     a declaration that the suit property is free from the said mortgage upon the said payment-in (and other related directions for the sum’s retention and investment).

12.  He relied on the judgment in Harvest Development Ltd. v. The Personal Representative of the Estate of Liu Wa Fuk, deceased, DCMP No. 1367/2006, unrep. ( 19 September 2007) in support.

13.  The relevant part of the judgment in Harvest Development Ltd. reads:-

“It is suggested in Re Cheung Chi Wang that s. 12A application should consist of different stages. … However, I agree with Ms. Ngai, counsel for the Plaintiff, that a practical approach should be adopted in the present case, as it is highly unlikely that the court would be presented with new materials for the purpose of deciding whether a declaration under s. 12A should be made, …  In fact, a “one-stage” approach, ie. with the order for payment into court and the declaration to clear the title of the property made in one single hearing, had been adopted by Deputy High Court Judge Gill in Re Queen Cheers Development Limited, HCMP No. 2731 of 2003 (order made on 17 July 2003) and Deputy High Court Judge Saunders, as he then was, in Re Lung Cheung Development Company Limited, HCMP No. 960 of 2004 (order made on 5 May 2004), and I agree that the same should be applied in the present case.  I therefore granted the relief accordingly” (emphasis supplied) (para. 17 thereof).

14.  With respect, practicality, or efficiency (however much one thinks that is desirable), cannot be a sufficient reason for the court to go against what has been prescribed by legislation, or to ignore it.

15.  As stated above, s. 12A(1) only confers power on the court to direct or allow a payment into court to be made.  The court’s other powers under s. 12A have to be found in its other provisions.

16.  In relation to the making of an order for conveyance or vesting order, that discretion can only be exercised:-

“[upon] payment into court of the sum referred to in subsection (1) …”: s. 12A(2).

The Chinese version is equally clear:-

“在將第(1)款所提述的款項繳存法院後，法院如認為適當，可 … 發出適當的物業轉易令或歸屬令 … ”.

17.  There is therefore no escape from the conclusion that the court does not have power to make such orders before the payment into court has been effected.

18.  The scheme prescribed by s. 12A may not be entirely redundant.  What s. 12A(1) appears to provide for is a mechanism whereby anyone falling within its ambit can commence an application thereunder.  It may well be that, at that stage, he believes that the encumbrancer:-

“…is out of the jurisdiction, cannot be found or is unknown, or […] it is uncertain who the encumbrancer is … ”.

19.  But while there may be reasons for his belief, it does not necessarily reflect reality.  At a s. 12A(1) hearing, the court may well consider it appropriate that notice of the s. 12A(2) hearing (if it is appropriate for the power conferred by s. 12A(1) to be exercised) should be effected, for example, by advertising in a newspaper widely circulated (locally or otherwise).  The possibility of the 12A(2) application coming to the attention of whoever may be entitled to the encumbrance cannot be ruled out.

20.  I have perused the court files of the two High Court cases referred to in Harvest Development Ltd.  There were no written judgments in the files, but the skeleton submissions of the applicants therein show that practicality was again relied upon as the ground for seeking final relief at what should have been a s.12A(1) hearing.

21.  I pause here to observe that, in what effectively were ex parte applications, it is regrettable counsel did not see fit to draw to the courts’ attention the (at least potential) inconsistency between their contention and the express provision in s. 12A(1).

Other Matters

22.  Another matter discussed in Harvest Development Ltd. is the District Court’s jurisdiction in relation to applications brought pursuant to s. 12A, Cap. 219.

23.  While this does not arise in the context of this application, I propose to say a few words about it because it may have practical significance to litigants: the right of audience in the District Court is different from the High Court’s.

24.  Harvest Development Ltd. observed that:-

“ … the Plaintiff can only rely on the third claim which is one made pursuant to s. 12A of [Cap. 219].  Such claim is based on the premise that the Mortgage is still subsisting, but as the Mortgagee or his successor in title cannot be located, the Plaintiff is asking the court to discharge the Mortgage once the money owed under the Mortgage, including the interest, is paid into court.  Since this claim can be regarded as an action for the redemption of a mortgage and the annual rent of the Lots is nominal, the District Court has jurisdiction to entertain such claim under s. 37 of the DCO … ” (emphasis supplied) (para. 12).

25.  The judge also observed elsewhere in the judgment that the District Court’s jurisdiction to hear claims concerning title in land is limited:-

“… s. 36 of the District Court Ordinance, Cap. 336 (“the DCO”), which carries a rather misleading heading of “jurisdiction where title in question”, is not by itself a “jurisdiction-conferring” provision, and hence unless a plaintiff’s claim falls under one of the other “jurisdiction-conferring” provisions such as s. 32 (for actions of contract, quasi-contract and tort), s. 33 (for actions to claim for money recoverable by enactment), s. 35 (for actions for recovery of land) and s. 37 (for certain specified actions relating to equity jurisdiction) of the DCO … this court has no jurisdiction to make the order sought … ” (para. 7).

See also Wong Kum Chi v Lee Tit Ying [2002] 1 HKLRD 420.

26.  In addition to the provisions referred to in Harvest Development Ltd. and Wong Kum Chi, s. 3, Cap. 336 stipulates:-

“(1)   A court known as the District Court is established.

(2)     The Court shall be a court of record and shall have such civil and criminal jurisdiction and powers as are conferred upon it by this Ordinance and by any other enactment for the time being in force.

(3)     The jurisdiction and powers conferred by any other enactment for the time being in force shall be subject only to such limitations as such enactment may provide or may have provided” (emphasis supplied).

27.  In the context of s. 12A, Cap. 219, s. 12A(4) provides:-

“(4)   In this section, “court” (法院) means the Court of First Instance unless the party to the application submits to the jurisdiction of the District Court” (emphasis supplied).

It is to be noted the sub-section uses the word “party” which is singular.  At least before any encumbrancer enters a court appearance in the application, “party” must mean the applicant.

28.  A similar provision can be found in s. 12(2), Cap. 219 (vendor-purchaser summons), although that sub-section refers to “the vendor and purchaser” instead of “the party”.