LEE PO WING v. SEE WAH FAN

DCMP 2897/2014

[2022] HKDC 950

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2897 OF 2014

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

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

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

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

DECISION

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

1.  Introduction

1.  By her summons dated 27 May 2022 (“Summons”), the defendant seeks to appeal against an order made by Master Joycelyn Leung on 13 May 2022 (“Subject Order”). By the Subject Order, the master made absolute a charging order nisi obtained by the plaintiff on 15 June 2021 (“Charging Order Nisi“) against the defendant’s beneficial interest in a property known as Ground Floor and Garden Yard, Block 5, the Remaining Portion of Lot No 1807 in DD121, Yuen Long, New Territories, Hong Kong (640/8960 shares of and in the Remaining Portion of Lot No 1807 in DD121, Yuen Long, New Territories) (“Property”).

2.  The Charging Order Nisi is premised on two orders made by HHJ H Au-Yeung respectively on 12 April and 3 May 2021, by which the defendant was ordered to pay costs to the plaintiff which were summarily assessed at HKD 2,500 and 56,000 (collectively “Costs Orders”).

3.  The present appeal operates as a hearing de novo. Her arguments in support of the appeal are contained in her 28^th affirmation filed in support of the Summons. I was told by the defendant that, as opposed to lodging skeleton arguments as in the ordinary course, she wanted to leave a formal record on the court file. The course taken by the defendant represents a misunderstanding of the relevant practice directions, but there was in the event no objection by the plaintiff against my consideration of the defendant’s 28^th affirmation for being not compliant with RDC Order 58, rule 1(5).

4.  As I understand the defendant’s 28^th affirmation, her arguments are as follows.

5.  First, it is said that the master did not take into account of the fact that the plaintiff is a practising solicitor. Premised on the foregoing, she reasons that RDC Order 50, rule 1(3)(d) does not apply to the plaintiff. That sub-rule provides that an application for a charging order nisi shall be supported by an affidavit verifying that the interest to be charged is owned beneficially by the judgment debtor.

6.  Secondly, she contends that the master did not expressly hold that the evidence in the defendant’s 27^th affirmation amounted to false representations. By that affirmation, she asserted that she no longer retained any beneficial interest in the Property.

2.  The Charging Order Nisi

7.  The plaintiff’s application for the Charging Order Nisi was supported by the plaintiff’s affirmation dated 4 June 2021. In that affirmation, it was specifically mentioned that the Property was subject to a provisional sale and purchase agreement dated 2 August 2014 (“Provisional Sale and Purchase Agreement”). By the Provisional Sale and Purchase Agreement, which may be seen from the land search records, the defendant purportedly agreed to sell the Property to one Ms Sze Mui (“Madam Sze”) at a consideration of HKD $2,000,000.

8.  Also according to the land search records of the Property, whether before or after the Agreement, a number of charging orders absolute have been registered against the Property. Pertinently, on 23 May 2019 and 29 March 2021, the plaintiff had already registered two charging orders absolute against the Property in CACV 90 of 2019 and the present proceedings.

9.  The plaintiff’s ex parte application for the Charging Order Nisi was considered by the master. In response to the master’s requisition, the plaintiff filed another affirmation dated 10 June 2021 exhibiting the Costs Orders. As stated above, the master eventually granted the Charging Order Nisi on 15 June 2021.

3.  The Subject Order

10.  On 10 November 2021, the master gave an evidential timetable in respect of the hearing to make the Charging Order Nisi absolute. The defendant filed her 26^th affirmation on 8 December 2021 and the plaintiff his affirmation in reply on 31 December 2021.

11.  In her 26^th affirmation, the defendant raised, inter alia, the issue of whether Madam Sze, the purported purchaser of the Property, enjoyed priority over her other creditors in respect of the Property. In fact, she contended that she longer had any beneficial interest in the Property, as Madam Sze had already paid the purchase price of the Property.

12.  In his skeleton submissions lodged for the purpose of the hearing before the master on 21 January 2022, the plaintiff made a submission to the effect that, according to the land search records, nothing further was done following the Provisional Sale and Purchase Agreement, in that there was no subsequent registration of a formal agreement or an assignment.[1] The plaintiff further made a submission that Messrs Carol Lam & Co (“CLC”), the solicitors representing Madam Sze (ie the purported purchaser of the Property) had on 22 January 2018 indicated that they had no objection to a court order for the public auction of the Property.[2] At the hearing on 21 January 2022, the master directed the plaintiff (1) to file and serve a supplemental affirmation exhibiting the Provisional Sale and Purchase Agreement and stating his communication with CLC and (2) to serve on CLC the Charging Order Nisi and other relevant documents and a notice of the adjourned hearing and to file an affirmation of service. This affirmation of service was filed by the plaintiff on 1 March 2022. The affirmation of service also exhibited the Provisional Sale and Purchase Agreement but it is to be noted that it did not state any communication which the plaintiff had with CLC.

13.  On 12 May 2022, one day prior to the resumed hearing on 13 May 2022, the defendant filed her 27^th affirmation, in which she contended that the defendant knew full well that Madam Sze had paid HKD 1,827,346.19 by 22 January 2018 towards the purchase price of the Property.

14.  At the hearing on 13 May 2022, the master observed that CLC did not appear and the application to make the Charging Order Nisi absolute was not opposed by CLC. The master further rejected the other grounds raised in the defendant’s 26^th affirmation as being irrelevant, for example issues raised in respect of separate proceedings. The master therefore made the Subject Order.

4.  The present appeal

15.  At the hearing of the present appeal, the defendant confirmed that she has not appealed against the Costs Orders. The main issue between the parties is whether the defendant holds any beneficial interest in the Property.

16.  Under RDC Order 50, rule 3(1), on the further consideration of the matter, the court shall either make a charging order nisi absolute, with or without modifications, or discharge it. The proper approach is that stated at Hong Kong Civil Procedure 2022 Note 50/3/1, namely as follows:

“Although O.50, rule 3 suggests that the only choice available to the Court on the further consideration of the case is to impose a charging order absolute or discharge the charging order to show cause, in Po Kwong (China) Stone Ltd v Cheung Wai Wah, CACV 157 of 2004, [2004] HKEC 1379, the Court of Appeal adopted the approach of the English courts and interpreted O.50, rule 3 of the District Court Rules (identical to RHC O.50, r.3) in such a way as to allow the court to direct an issue to be tried on whether the judgment debtor in fact holds any beneficial interest in the property sought to be charged. The Court held that in a usual case, unless the matter is clearly unarguable, the question as to whether the registered owner of a piece of land is holding the beneficial interest on trust for someone who provided the purchase price can only be resolved at trial and there should not be any difference in approach when the judgment creditor was applying for a charging order.”

17.  In my view, the defendant has not raised any arguable issue on her beneficial interest in the Property which warrants a trial on the matter, for the following reasons.

(1)  The defendant confirmed at the hearing that Madam Sze is her sister. It seems to me that the Provisional Sale and Purchase Agreement was not an arm’s length transaction.

(2)  The above is fortified by the fact that the defendant has not offered any explanation on the lack of progress beyond the Provisional Sale and Purchase Agreement, for example the execution of a formal agreement or an assignment.

(3)  Apart from an assertion in a letter of CLC dated 22 January 2018 made on instruction that Madam Sze had paid HKD 1,827,356.19 towards the purchase price of the Property, the defendant has not pointed to any documentary evidence supporting the allegation that Madam Sze had completed the transaction. Indeed the alleged payment of HKD1,827,356.10 is not consistent with the payment terms of the Provisional Sale and Purchase Agreement, which provided that HKD 200,000 would be paid as initial deposit and the remaining HKD 1,800,000 by 1 August 2015 or at completion.

(4)  Following the registration of the Provisional Sale and Purchase Agreement at the Land Registry in August 2014, a number of charging orders absolute were registered against the Property on 24 November 2017 (HCA 2519 of 2016), 14 June 2018 (CACV 151 of 2017), 23 May 2019 (CACV 80 of 2017) and 29 March 2021 (the present action). All the foregoing charging orders absolute were dated after the purported completion date under the Provisional Sale and Purchase Agreement (latest by 1 August 2015). There has been no explanation from the defendant as to why, had the beneficial interest in the Property completely passed to Madam Sze pursuant to the Provisional Sale and Purchase Agreement, no steps have been taken by Madam Sze in relation to the above-stated charging orders absolute.

(5)  Indeed, on the evidence before me, on 15 September 2017, CLC had issued a cheque to the plaintiff in the sum of HKD 218,486.19 for satisfaction of various court orders made prior to those mentioned in the preceding paragraphs. The source of such funds was stated in CLC’s official receipt dated 14 September 2017 as being from Madam Sze as payment of judgment debts payable to the plaintiff but not as deposit money or balance of purchaser price of the Property.

18.  At §§107-119 of her 26^th affirmation, the defendant pointed to the fact that the unsatisfied charging orders registered against the Property amounted to at least HKD [113,400 + 225,306.70 =] HKD 338,706.70. Taking into account the HKD 1,827,346.19 already paid by Madam Sze, she questioned whether there was any residual value in the Property. As I understand the defendant, her submission is premised on the assumption that the foregoing amounts already exceeded the value of the Property.

19.  The defendant has not adduced any evidence on the value of the Property. I do not regard her reliance on the price stated in the Provisional Sale and Purchase Agreement is justified. First, as noted above, I am of the view that the Provisional Sale and Purchase Agreement was an arm’s length transaction. Secondly, the Provisional Sale and Purchase Agreement was made in August 2014 and any value stated therein cannot represent the current value of the Property.

20.  In so far as it is the defendant’s evidence that the selling price of the Property is somewhat constrained by its unauthorized building works, no evidence has been adduced on whether it is possible to sell the Property “as is” or how much it would cost to remove the unauthorized structure. In any event, I note from the land search records that no building order has been registered against the Property.

21.  In any event, it seems to me that the matters stated at §§18-20 above are, as noted by the master, in substance a question of priority between the defendant’s creditors and do not prevent the court from making the Charging Order Nisi absolute.

22.  Finally, the defendant also made a number of attacks on the conduct of the plaintiff. For example, as stated at §12 above, the plaintiff did not state his communication with CLC pursuant to the order made on 21 January 2022. Another example is her complaint against the amount of costs to which the plaintiff was entitled when he was acting in person although a practising solicitor. However, I am of the view that none of the complaints or allegations now raised by the defendant has any effect of impeaching the Costs Orders against which no appeal was pursued or preventing me from making the Charging Order Nisi absolute.

23.  For avoidance of doubt, I reject the arguments made by the defendant in her 28^th affirmation (and summarized at §§5-6 above) in so far as it has not been made clear by the above analysis.

5.  Conclusion

24.  For the above reasons, the master was right in making the Charging Order Nisi absolute. The defendant’s appeal is dismissed.

25.  There is no reason why costs should not follow the event. On a nisi basis, the defendant is to pay to the plaintiff the costs of this appeal to be assessed summarily. Absent an application to vary, the foregoing costs order shall become absolute within 14 days hereof.

26.  Absent an application for variation of the costs order, the assessment will be conducted on paper. The plaintiff has already provided his statement of costs. Whilst the defendant had indicated at the hearing that she did not want to comment on it, the defendant is to confirm to the court by letter whether her position remains the same, and if not, her comment on the statement of costs within 7 days after the expiry of the 14-day period for her to take out an application for variation.