JAFOON PROPERTY FINANCE LTD v. KING PETER HICKSON SEETO SHEW

HCMP 859/2018

[2019] HKCFI 1819

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 859 OF 2018

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JUDGMENT

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1.  The plaintiff took out this application to address the difficulty arising out of the awkward situation where it has obtained vacant possession of the property in question from the defendant in exercise of its rights as the mortgagee but only to discover that it does not possess the title deeds in respect of the property.

Background

2.  The plaintiff lent a sum of HK$13,000,000 to the defendant upon the security of a mortgage executed by the defendant in respect of his property (Flat A2, 12 Floor, Block A, Fortune Gardens, No 11 Seymour Road, Hong Kong (“the Property”)) in September 2012.  The defendant defaulted in repayment of the loan in July 2013.  The plaintiff commenced action against the defendant in recovery of the outstanding debt and enforcement of the mortgage (HCA 648/2014).  Both parties were legally represented in that action.

3.  On the first day of the trial of HCA 648/2014, the action was settled essentially in terms that the defendant should repay the sum of HK$8,337,680.87 in settlement of the outstanding debt within 28 days (from 7 August 2017) or else he should deliver up vacant possession of the Property to the plaintiff.  The defendant eventually repaid a sum of HK$1,000,000 and no more.

4.  On 1 November 2017, the plaintiff obtained vacant possession of the Property.  In exercise of its power of sale, the plaintiff entered into provisional agreement in March 2018 and formal agreement on 11 April 2018 to sell the Property at HK$14,300,000, but only to discover in the course of title inspection that it was actually not in possession of the title deeds in respect of the Property.

5.  Enquiry with the solicitors acting for the prior encumbrancer of the Property[1] confirmed that the title deeds were last returned to the defendant as the registered owner of the Property on 25 June 2013, and the defendant acknowledged receipt of the same on the same day[2].  Upon that, the plaintiff’s solicitors wrote to the solicitors acting for the defendant in HCA 648/2014, Huen & Partners (“H&P”), on 8 May 2018 requesting for the title deeds.

6.  On 15 May 2018, H&P replied and conveyed the defendant’s instruction that he needed more time (14 days) to locate the title deeds.  In the meantime, the plaintiff’s solicitors also indicated to H&P the alternative of a statutory declaration of the loss of the title deeds by the defendant, in the event that he could not locate them.

7.  On 18 May 2018, H&P replied that they were still taking instructions from the defendant, and requested the plaintiff to withhold legal proceedings.

8.  There was no further correspondence between the parties.  Nor was any title deed delivered.

9.  Hence the commencement of these proceedings.

10.  Pursuant to previous directions, the parties have filed their respective affirmations.

11.  According to his affirmation, the defendant has allegedly delivered the title deeds to the plaintiff in 2013. This is denied by the plaintiff.

Re-amendment of the originating summons

12.  By the time of the last hearing, the plaintiff effectively sought the following relief by the amended originating summons:

(1)   declaration that the defendant has and holds the title deeds;

(2)   injunction restraining the defendant from dealing with the Property or the title deeds; and

(3)   order that the defendant delivers up the title deeds to the plaintiff.

13.  Whilst the court will have to find the fact that the defendant has the title deeds in order to found the relief that the plaintiff is seeking, a declaration of such fact, if so found, is unnecessary and superfluous.

14.  More importantly, the plaintiff should consider how its primary purpose of enabling the passing of title in, and thus the successful sale, of the Property could practically be achieved by the orders that it was seeking, particularly in the event that the defendant somehow does not or could not comply with them.  I therefore directed that any application to adjust the relief claimed by the originating summons, if so advised, should be taken out and returnable at the same time as the present hearing.

15.  Indeed, the plaintiff took out such an application to re-amend the originating summons on 21 May 2019. The amendments proposed are such that, apart from the injunctive relief:

(1)   the plaintiff now seeks a declaration that the Property has not been encumbered by any equitable interest or right by way of deposit of the title deeds by the defendant[3] save and except for the mortgage in favour of the plaintiff that it is enforcing; and

(2)   in the event that the defendant fails to or is unable to deliver up the title deeds to the plaintiff, he shall execute a statutory declaration in the proposed form effectively to confirm that he has not deposited the title deeds as security since his receipt of them in June 2013, except for the mortgage in favour of the plaintiff, but that both parties are just unable to locate the title deeds now.

16.  The application for amendment was not seriously opposed to by the defendant.  In any event, I saw no valid ground for opposing, when the proposed amendments would create no material impact on the basis of the plaintiff’s claim or the defendant’s readiness to answer the claim as so amended.  I therefore allowed the amendment with costs to the defendant.

17.  Therefore, the matters now before this court are whether the declaration and/or the injunction sought under the re-amended originating summons should be granted.

The Declaration

18.  In view of the contemporaneous document, namely, the acknowledgement of receipt of the title deeds signed by the defendant, there can be no dispute that the defendant received the title deeds on 25 June 2013.  The question raised by the plaintiff is whether or not the Property is encumbered by any interest or right created by way of deposit of title deeds since then, apart from the mortgage of the same to the plaintiff.  The defendant is adamant that the Property is not so encumbered.

19.  It is for the plaintiff to prove to the satisfaction of this court his entitlement to the declaration and that the declaration should be given.  In the circumstances of the present case, I am prepared to say that the materials available to this court do not suggest otherwise.  In line with his stance, the defendant also does not seem to challenge the basis for such declaration.  As a matter between the parties to these proceedings, I see no reason against granting the declaration.  Whether such declaration suffices to serve the plaintiff’s purpose, this may be a matter between it and the relevant third party(ies).

The injunctive relief

20.  In view of the background, I see no basis for questioning the plaintiff’s entitlement to the title deeds in respect of the Property.  Whether or not the defendant is liable to deliver up the title deeds or alternatively, if he is unable to do so, to make a statutory declaration as to the state of affairs depends on whether or not this court finds that he is, or should be, in possession of the title deeds.  Amongst the allegations raised in the defendant’s affirmation, the only really relevant one is that he has allegedly delivered the title deeds to the plaintiff back in 2013. As mentioned, the plaintiff denies that.

21.  Both sides made submission in respect of what I consider to be matter of inherent probability of their respective versions.

22.  The plaintiff argues that if what the defendant asserts were true, it would have made no sense for it to take upon itself the trouble of making this application.  To begin with, stalling the sale of the Property for no good reason would equally have been nonsense. Had the plaintiff been in possession of the title deeds but lost the same, it could and would have been in a position to make a statutory declaration to such effect for the purpose of proving title in the sale of the Property without reference to the defendant.

23.  The defendant argues that the successful sale of the Property by the plaintiff would have served his purpose as well both in terms of satisfaction of his indebtedness to the plaintiff and any surplus receivable as soon as practicable.  He argues that there is also no reason why he would cause difficulty to the plaintiff’s sale of the Property, when he could not regain possession of it in any event.

24.  In balancing the relative probabilities, I would also consider other evidence and the inference that should be drawn from it.  In this respect, what the plaintiff points out, in my view, are forceful.

25.  The plaintiff deposed to its practice that detailed written receipt setting out the title deeds received would be issued in its ordinary course of business.  Examples of a couple of such actual receipts issued are disclosed.  The defendant is not in a position to contradict that.

26.  In saying that he had delivered the title deeds to the plaintiff in 2013, the defendant provided no concrete details.  No receipt or other documentary evidence in support of his parting with such important documents as the title deeds, which comprised a whole list of items, has been produced.

27.  What is more telling is the inconsistency between the plaintiff’s case and his solicitors’ contemporaneous replies to the enquiries made by the plaintiff’s solicitors.  As mentioned, the plaintiff’s solicitors wrote to H&P on 8 May 2018 requesting for the title deeds.  H&P’s reply 7 days later did not deny the existence of the title deeds in the hands of the defendant.  Instead, H&P recited the defendant’s instruction that he needed more time and asked for 14 days to locate the title deeds.  During the telephone discussion between the plaintiff’s solicitors with H&P on the following day, the latter did not suggest otherwise than that as already stated in their letter.  That remained to be the case when H&P wrote further to the plaintiff’s solicitors on 18 May 2018.  Had what the defendant now says been true, he would have responded to what would have been a surprising and unwarranted request by the plaintiff for the title deeds.

28.  The explanation of the defendant came only by way of his affirmation filed in these proceedings.  He admitted receiving the letter from the plaintiff’s solicitors on 8 May 2018, and understood from H&P that the plaintiff requested for the title deeds in respect of the Property.  Then on 15 May 2018, ie, 7 days later, when he received the telephone call from H&P regarding that, he did not manage to listen clearly and just responded by saying “搵嗄” (or that he would search for the title deeds) and hanged up.  Then on 21 May 2018, ie, another 6 days later, he telephoned H&P to ask about the plaintiff’s request.  Then he allegedly informed the plaintiff on the telephone that the title deeds have been delivered to the plaintiff in 2013.

29.  The necessary inference from the defendant’s evidence summarized above is that he did not recall the delivery of the title deeds to the plaintiff in November 2013 during the time between his receipt of the letter from the plaintiff’s solicitors dated 8 May 2018 and his telephone conversation with H&P on 21 May 2018.  Even when the defendant knew how to answer the plaintiff’s request when talking to H&P on 21 May 2018, he somehow did not tell H&P.  Otherwise, one would have expected him to have instructed H&P to put on record that the plaintiff’s request was totally unjustified.  There is also no evidence from H&P to verify the defendant’s version.

30.  The evidence, including contemporaneous documents, are such that I do not believe that the title deeds had in fact been delivered to the plaintiff, contrary to the defendant’s belief as deposed to in his affirmation.  It is more probable than not that the title deeds were with the defendant since his receipt of the same in 2013.  Whether or not the defendant is able to deliver up the title deeds now is another question.  The alternative of the execution by the defendant of a statutory declaration as per the draft[4] attached to the summons should cater for that contingency.  I find basis for granting the injunctive relief against the defendant, including the mandatory injunction compelling him to deliver up the title deeds to the plaintiff.

31.  In court, whilst the defendant maintained his version of events, he expressly indicated readiness to co-operate by signing the necessary statutory declaration proposed by the plaintiff as the alternative, as he could not deliver up the title deeds.  We will see about that.     

Disposition

32.  I will make the order sought by the re-amended originating summons.

33.  All circumstances considered, I find it is appropriate to make a nisi order that the costs of these proceedings, including those reserved, shall be to the plaintiff.  Costs shall be taxed, if not agreed.  In the absence of any application within 14 days to vary, the nisi costs order shall become absolute without further order of the court.