XCHRX MACHANAO CONSTRUCTION CORPORATION v. OCEANBALL INVESTMENT LTD.

HCMP 2224/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2224 OF 1999

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D E C I S I O N

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1. This is an application under Order 50 Rule 9A and Order 88 Rule 5A of the Rules of High Court.

2. The Plaintiff obtained a judgment against the Defendant for CAD$2,135,652.00 in High Court Action No. 11237/1998 on 18 August 1998, together with interest thereon at the rate of 12% per annum from 3 May 1993 to 18 August 1998 and thereafter at judgment rate until payment, together with fixed costs of HK$1,550.00 (hereafter referred to as "the judgment debt").

3. On 22 October 1998, the Plaintiff obtained a Charging Order Absolute on the Defendant's 40% of the assets of a trust of which a company called Comboom Development Ltd is trustee.

4. The land which was held by the trust was sold by the trustee on 17 December 1998. It was sold at a loss to the trust, but according to the affidavit of Anne Kober filed on 13 November 1999, it was sold at more than the market value.

5. The Plaintiff now wishes to sell the charged interest in the trust, such interest now being simply an interest in cash.

6. There is clearly jurisdiction on the part of the Court to make an order for sale. Section 20B(3) of the High Court Ordinance provides that 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 by writing under his hand.

7. Section 21D(1) of the same ordinance provides, amongst other things, that the following property is liable to attachment and sale in the execution of the judgment, namely "... or other property whatsoever whether movable or immovable belonging to the judgment debtor and whether the same is held in its own name or by another person in trust for him or on his behalf". The remedy is equitable and discretionary.

8. The relevant factors to be considered include in this case the fact that the amount outstanding under the judgment debt is more than the value of the Defendant's interest in the trust, the fact that there is no known prior encumbrance over that interest, that there is no record of any payment made by the Defendant, that there is no evidence of any other claims against the Defendant, that the Defendant has chosen not to appear and the Plaintiff is not aware of any other means of the Defendant to repay the judgment debt.

9. The issue that is slightly unusual in this case is that the chargee wishes to acquire the interest himself. However, it is not so unreasonable in this case because the interest charged is just cash, and it is therefore, unlikely that any other person would want to acquire that interest.

10. So I think with the additions which I have made to the draft order, the Defendant is sufficiently protected. I refer, in particular, to my requirement that the Plaintiff by its solicitors undertakes to the Court that it would forthwith inform the Registrar upon its becoming aware of any encumbrance, the fact that the Defendant still has 7 days from the day of service of this order to make payment and that the consideration for the acquisition should be a sum being 40% of the net asset value of the trust as at the Payment Date as defined so long as the value of the said interest at the said Payment Date does not exceed the judgment debt.