MALAHON CREDIT COMPANY LIMITED v. SIU CHUN WAH, ALICE AND ANOTHER

1987 M.P. No. 413

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. Three summonses lie before me for determination. They relate to two actions which have been consolidated. As the roles of the parties in the separate proceedings have been transposed, I will refer to the parties by their names i.e. Malahon, Madam Siu and Mr. Ng. Mr. Chain was representing Madam Siu and Mr. Ng and Mr. Chong was representing Malahon.

2. The first originating summons was taken out by Madam Siu and Mr. Ng. They sought a declaration that after a mortgage and further charge secured on property in their joint names was discharged Madam Siu was entitled to half of the proceeds of sale.  Malahon then issued an originating summons in Miscellaneous Proceedings 526 seeking a declaration that Madam Siu was holding as trustee all of Mr. Ng's interest in the suit premises, a flat in San Francisco Towers, Happy Valley.

3. The third summons was taken out by Madam Siu, seeking to strike out Malahon's originating summons on the ground that it disclosed no reasonable cause of action. The parties agreed that all three summonses could conveniently be dealt with together and I agreed to proceed on this basis.

4. The parties were also able to advise me that the suit premises had recently been sold with the agreement of all parties and that the issue which remained before me was how the proceeds of sale should be dealt with. Very shortly, the facts are as follows.

5. Malahon hold a mortgage and further charge secured on the suit premises which is jointly owned by Mr. Ng and Madam Siu. The mortgage and further charge were executed by both Madam Siu and Mr. Ng. Madam Siu has stated on affirmation that she and Mr. Ng were living together as common law man and wife. She also affirmed that she advanced the deposit for the purchase of the suit premises and that it was agreed between her and Mr. Ng that the property would be held by them equally i.e. fifty fifty. Mr. Ng is beyond the seas and although represented by Mr. Chain, he has not filed any evidence to contradict Madam Siu's evidence.

6. In April 1986 Malahon issued a writ against Mr. Ng and obtained at a default judgment in the sum of $783,836.41. Thereafter they obtained a charging order against Mr. Ng charging his interest in the suit premises.

7. The sale price of the suit premises was $1.58 million. The amount outstanding on the mortgage and further charge is $726,803.49 plus a small additional amount which will require adjustment.  Mr.Chain concedes that Malahon are entitled to the repayment of the mortgage and further charge. The problem which arises is what happens to the balance of the sale proceeds namely the surplus.

8. Mr. Chong for Malahon submitted that his clients could keep the balance of the monies and apply them towards the discharge of Mr. Ng's judgment due to them. His main argument was that Madam Siu had never properly established her interest in the premises. She only contributed 10% of the purchase price. As she and Mr. Ng were cohabiting rather than being man and wife there had been no question that her looking after "the family" conferred upon her a right to a larger interest. Alternatively there was no written instrument evidencing Mr. Ng's intention to make a gift of the equitable interest to Madam Siu.

9. I do not think that any of these arguments are persuasive. Mr. Ng's execution of the original deed of the assignment would have been sufficient evidence of the arrangement referred to Madam Siu's affidavit for the purposes of the Conveyance and Property Ordinance Cap. 219. It has also to be borne in mind that Mr. Chain is acting for Mr. Ng and he has not in any way opposed Madam Siu's assertion of her interest. Accordingly there could not be any question of Mr. Ng making a future claim against Malahon on the basis that they had not obtained a valid receipt for any moneys paid to Madam Siu.

10. On the other hand Mr. Chain's submitted that it was essential to keep both of these transactions separate and to have regard to the legal implications of each transaction. So far as Malahon was concerned the only transaction they had with Madam Siu was the mortgage and further charge. Also according to the affidavit evidence, all the monies which had been advanced had been paid to Mr. Ng. There was no suggestion that any of the monies had been paid to Madam Siu.

11. In addition to this, it was not open to Malahon to attempt to look into the equities as between Madam Siu and Mr. Ng. They were on the evidence before me not in the position to argue that Madam Siu held any of the monies or interest on Mr. Ng's behalf.

12. What was equally important was to have regard to the nature of the charging order absolute obtained against Mr. Ng. The law in Hong Kong was different to the law in England. Here the law governing charging orders derives from section 20 of the Supreme Court Ordinance Cap. 4. The Charging Order Act 1979 has not been enacted in Hong Kong and accordingly the pre 1979 position in England prevails. The law is conveniently set out in Irani Finance v. Singh.⁽¹⁾ This being the case Mr. Ng's interest only extended to the proceeds of sale and not to the interest in the land. I accept that this is indeed the law.

                    Mr. Chain then went on to consider the position as between Madam Siu and Mr. Ng.  He referred to the doctrine of the equity of exoneration as propounded in Re Pittortou.⁽²⁾ Although Re Pittortou is concerned with the situation arising between husband and wife, it is clear from a passage in Mr. Justice Scott's judgment at page 61 when he refers to ex parte Marley that the doctrine can extend to a relationship between father and son. Equally I am satisfied that the doctrine is applicable to a common law husband and wife as in the present case. It seems clear to me that Madam Siu's interest has on the facts available to me been exonerated and accordingly Madam Siu's interest in the property is such that she is entitled to receive half of the proceeds of sale after the mortgage and further charge has been discharged. I will hear the parties on costs.

(1) [1971] 1 Ch.59 C.A.

(2) [1985] 1 W.L.R.