LAU KOM WAH v. LAU KUN SAU

DCMP 181/2019

[2019] HKDC 267

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 181 OF 2019

-------------------------

-------------------------

-------------------------

---------------------

JUDGMENT

----------------------

1.  By an ex parte originating summons, the plaintiff applies for relief under section 12A of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).

Background

2.  The plaintiff is the registered owner of the Lots (as defined in the title).  According to the land search record at Exhibit “THSP-1”, he succeeded the land from his grandfather (Lau Yam Hing) in 1981 who, in turn, succeeded the land from one Lau Sz Yau in 1959.

3.  According to the Schedule to the Block Crown Lease respecting the Lots (at Exhibit “THSP-2”):-

(a)  Lau Sz Yau (劉四有) was the then owner of the Lots.

(b)  There is a remark entered against Lot 496: “mortgaged to Lau Kun Sau (刘官秀) with Lots 518, 592 & 594 for $35.00 […]: mortgagee in possession” [1].

(c)  Lots 518, 592 and 594 were respectively remarked: “see Lot 496”.

4.  In 1981 when the plaintiff was making arrangement to succeed the Lots, he made inquiries with several aged villagers of Sha Kok Mei Village as to whether they knew any person bearing the defendant’s name in Sai Kung.  No one knew anyone by that name.

5.  Recently, the plaintiff made similar inquiries in December 2018 to January 2019 for the purpose of this application.  Again, no one knew anyone by that name. 

6.  The plaintiff’s solicitors had conducted search at the Births and Deaths Registry and the Probate Registry and were told that there is no record of death of the defendant or grant of probate in respect of him.

7.  It is the plaintiff’s case that no one has ever demanded repayment of the mortgage from him or his family and that he has no information on the whereabouts of the defendant.

8.  According to his latest affirmation, he is seeking an order in the following terms:-

(1)  The plaintiff do pay $900 into court to redeem the encumbrance within 14 days of the order;

(2)  Within 7 days after the payment into court, the plaintiff do advertise in a widely circulated local Chinese newspaper a notice making known this order and the fact that payment having been made into court pursuant to this order and stating that any person interested in the mortgage and/or payment aforesaid may apply within 14 days to be joined as a party to these proceedings; and

(3)  The plaintiff may after the lapse of no less than 21 days from the publication of the advertisement make a paper application pursuant to section 12A(2) of the CPO for a declaration that the Lots be free from the mortgage.

Applicable law

9.  Section 12A of the CPO is in these terms:-

“(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.

(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.”

10.  In In the Matter of Fung Chi Hon (馮智漢) [2018] HKDC 1080 at [9]-[11], HH Judge Liu surveyed the relevant authorities and summarized the applicable law as follows:-

(1)  The purpose of s 12A is to give the court the power to declare land to be free from an encumbrance on payment of sufficient money into court.  It is not predicated upon a sale of land.

(2)  Section 12A is only applicable when the land in question is subject to an encumbrance.  Yet, if there is a doubt as to whether the encumbrance exists, s 12A still applies.

(3)  The first stage of an application under s 12A is to obtain the direction or approval of the court regarding payment into court.  Before an applicant can ask the court to exercise its discretion under s 12A, he has to establish that the encumbrancer could not be found, or is unknown.  The applicant must take reasonable steps to find out the encumbrancer and place the evidence of his efforts before the court.

(4)  After money is paid into court, the second stage is for the court to consider whether to exercise its discretion under s 12A to declare the land free from an encumbrance.  The court has a discretion as to whether notice should be given to the encumbrancer. In practice, such notice would often have to be given by advertisement in a newspaper.

(5)  In determining the amount to be paid into court, the court may take into account an additional amount on account of the contingency of further costs, expenses and interests.

(6)  The matter would come back to the court at the third stage when the encumbrancer or any person entitled to the money apply for payment under s 12A(3).  If there are other parties who might have an interest in the money, the court would require notice to be given to such parties before deciding on how to exercise its discretion.

(7)  It is not permissible to adopt a “practical one-stage approach”, that is to direct payment into court of a sum of money sufficient to redeem the mortgage of the lot in question pursuant to s 12A(1) and, on the same occasion or during the same hearing, declare that upon payment being made, the lot be free from the mortgage.  Nevertheless, the court may deal with the second stage on paper.

Discussion

11.  The plaintiff has submitted to the jurisdiction of the District Court by commencing his action here.

12.  In passing, the plaintiff’s solicitor submitted that the mortgage should be null and void for want of registration under the Land Registration Ordinance, Cap 128, albeit that the plaintiff still wishes to have an order to remove the slightest doubt on his title.  I do not quite understand the submission. The mortgage is evidenced in writing by the abovementioned remarks on the Schedule.  The copy of the Block Crown Lease (together with the Schedule) exhibited as Exhibit “THSP-2” bears a document label and the certification of the Acting Land Registrar of the Land Registry and the document should have been registered.

13.  Amongst the papers placed before me is a copy of an unsigned declaration of one Lau Kun (劉根) at Exhibit “THSP-3” containing the following statements:-

(a)  “I well knew the said Lau Yam Hing during his life time.  He was the son of Lau Sze Yau (劉四有) whom I also knew while I was a youth.”

(b)  “The said Lau Sze Yau owned and cultivated the said Lot No 166 in DD 213 which is located at Ngau Liu, Sai Kung and [the Lots] which are located at Hang Tau, Sai Kung.  As far as I can recall, all these properties (hereinafter called ‘the said Lots’) were paddy fields belonging to the family of the said Lau Sze Yau.  During the youth of my friend and kinsman Lau Yam Hing, he cultivated the said Lots together with his wife Madam Ho.”

(c)  “I remember that in 1959 the said Lau Yam Hing succeeded his father the said Lau Sze Yau as owner of the said Lots.  The said Lau Yam Hing continued to work on the said Lots until he passed away on the 11^th day of March 1971.  Before his death, the said Lau Yam Hing and Madam Ho were assisted by their daughter-in-law Madam Yuen Choi Ping (袁彩平) in the farming of the said Lots.”

(d)  “I can say that to the best of my knowledge, since 1959 the said Lots were occupied by the said Lau Yam Hing, his wife Madam Ho and the said Madam Yuen Choi Ping and presently by the said Lau Kom Wah.  No other person has occupied or was in possession of the said Lots.”

(e)  “I am also advised that a land search carried out in the District Office, Sai Kung reveals that [the Lots] are subject to a mortgage in favour of one Lau Kun Sau (劉官秀) for the sum of $35.00.  I did not and do not know a person called Lau Kun Sau in Sai Kung and to the best of my knowledge no inhabitants in Sai Kung are descended from the said Lau Kun Sau.”

(f)  “Since 1959 when my friend and kinsman Lau Yam Hing became owner of the said Lots, no one has demanded for payment of the mortgage money in respect of Lot No 166 in DD 213 or in respect of [the Lots].  The said Lau Yam Hing during his life time was never approached by any person in connection with the mortgages of the said Lots.”

14.  Nothing turns on the different Romanization of the Chinese name “劉四有”.  I have however questioned the evidential value of the unsigned declaration.  In response:-

(a)  The plaintiff has stated in his affirmation that the declaration was prepared in December 1981 by his then solicitors (Philip KH Wong & Co) for the purpose of his application to succeed the Lots.  He recalled that the declaration had been signed by the said Lau Kun before it was submitted to the Sai Kung District Office.  He was only given a copy of the unsigned declaration afterwards by his then solicitors.

(b)  The plaintiff’s present solicitors have written to the Sai Kung District Office to request for a certified copy of the signed declaration that had been submitted but to no avail.  On the other hand, the solicitors have confirmed with the Law Society that there is currently no law firm registered as “Philip KH Wong & Co”.  They have made enquiries with the firm “Philip KH Wong, Kennedy YH Wong & Co”, who replied that: “The Copy Unsigned Declaration is not prepared by us.  Please note that our firm is entirely distinct from the firm Philip KH Wong & Co, the name of which appears on the back sheet of the Copy Unsigned Declaration.”

15.  In the end, I do not think I need to dwell on my query.  To invoke s 12A, the plaintiff needs to establish that: (i) the Lots is subject to an encumbrance or there is a doubt as to whether the encumbrance exists; and (ii) the encumbrancer cannot be found or is unknown.

16.  On the first matter, the circumstances of this case is similar to that in Re Cheung Chi Wang [2002] 1 HKLRD 409.  In that case, the Schedule to the Block Crown Lease stated that the property in question was subject to a mortgage and the mortgagee was said to be in possession.  On that occasion, Deputy Judge Lam (as he then was) said this:-

“14. It seems to me that the mortgage would probably be a Chinese customary mortgage, under which the mortgagee entered into possession, when the mortgage was created. The mortgagee had the use and occupation of the land in lieu of interest. That kind of mortgage was subsequently given statutory recognition as Form C mortgage under the New Territories Ordinance (Cap 97) s 30 (which has since been repealed). The mortgagee would remain in possession until redemption.

…

16. It seems to me that the parties have overlooked the fact that the evidence suggested that the mortgage was a Chinese customary mortgage.  Hence, if there is evidence showing that possession of the Property had been given back to the mortgagor or his successors, a reasonable inference is that the mortgage had been discharged. This inference could be reinforced by the lack of action on the part of the mortgagee to enforce the mortgage.  Hence, on such material, the Property is no longer subject to the mortgage and s 12A does not come into play.”

17.  In the subsequent case of Man Chi Kan v Man Tsak Lun [2003] 2 HKLRD 489 at [9], the learned Judge revisited the issue and said:-

“For the reasons I have set out in para 16 in my judgment in Re Cheung Chi Wang [2002] 1 HKLRD 409, I have some doubts as to whether the mortgage is still subsisting. However, on reflection, I think I should adopt a liberal approach in construing the requirement of the land being subject to the encumbrance under s 12A, see paras 9 and 20 of my previous judgment. In view of the fact that the record at the Land Registry contained the remark set out in para 2 above, I think it would be against the spirit of the legislation if I were to hold that s 12A is not applicable in these circumstances.”

18.  As in Cheung Chi Wang, we are probably dealing with a Chinese customary mortgage here as the mortgagee was said to be in possession and there is no provision on the charging of interest.  I agree that it would be against the spirit of the legislation if the plaintiff cannot invoke s 12A here.

19.  On the second matter, the Block Crown Lease was dated 1905.[2] Given the long period of time that has elapsed (over 110 years), it is unlikely that the mortgagee (ie the defendant) is still alive.  In any event, the plaintiff has made inquiries back in 1981 and more recently in late 2018 and early 2019 and no one has heard of the defendant.  The death search and probate search have revealed no information on the defendant.  I am satisfied that despite the reasonable steps taken by the plaintiff the encumbrancer cannot be found or remains unknown.

20.  As such, I can dispose of the application based on the evidence of the plaintiff without reference to the unsigned declaration.  In any event, the unsigned declaration contains background information on the plaintiff’s family and their use and occupation of the Lots over the years which is not controversial and could have been recounted by the plaintiff.  The plaintiff had witnessed the signature of the declarant and provided a plausible explanation as to why the signed declaration is presently not available.  In the circumstances, I think it is safe for me to take the contents of the unsigned declaration into consideration.

21.  The plaintiff has proposed paying $900 into court, making provision for interest on the mortgage ($35 x 20% x (2019-1905) + $35). 

22.  It is indeed the practice to provide for interest at a notional interest rate of 20% per annum to satisfy whatever interest the mortgagee might be entitled to even in the absence of an interest-bearing clause in the mortgage: see Man Chi Kan v Man Tsak Lun at [10].

Disposition

23.  I am satisfied that the plaintiff is entitled to relief under s 12A of the CPO and make an order in terms of his application.