LAM PO CHUN VIRGINIA v. KU KIN KWAN

DCMP 6780/2024

[2025] HKDC 677

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 6780 OF 2024

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DECISION

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I. INTRODUCTION

1.  This is an application by Originating Summons dated 5 December 2024 made by the Plaintiff (“P”), Lam Po Chun, for sales of the property situated at 5^th Floor, No, 60 Electric Road, Hong Kong (“the Property”) owned by P and Defendant (“D”) as tenants in common with consequential orders relating to the sales and the disposition of the proceeds of sale. 

2.  An Affirmation of P dated 2 January 2025 has been filed in support of the Originating Summons, setting out the background to the acquisition of the Property with Exhibits LPCV-01 being the Land Registry record of the Property; LPCV-02 being the Bank of China (“BOC”) Mortgage with memorial number: 14110502330100; LPCV-03 being the mortgage with Easy Finance Mortgage; LPCV-04 being the Easy Mortgage discharge document; LPCV-05 being the Parklane Mortgage with memorial number: 23010502300046; LPCV-06 being two demand letters dated respectively 3 August 2023 and 20 November 2024 issued by Messrs.  WTS lawyers for P in which: the 3 August 2023 letter detailed the background, the purpose of purchasing the Property, and the separate roles of P and D in the arrangement; and the 20 December 2024 letter detailed the complaints against D including the complaint of D’s mortgaging the Property without  the consent of BOC and P.

3.  By a Notice of Appointment dated 18 February 2025, the date to hear the Originating Summons was fixed on 28 March 2025.

4.  The Originating Summons and relevant documents were served on 3 January 2025 by registered post to D.

5.  The Notice of Appointment to hear the Originating Summons was served by post on 18 February 2025 to D.

6.  By an Affirmation of Service dated 26 February 2025, Cheung Ka Yu affirmed service of the Originating Summons and the Notice of Appointment to D and to the Director of Lands.

7.  A Skeleton Submission dated 19 March 2025 was lodged by P with P’s List of Authorities and P’s Statement of Costs for summary assessment.

8.  D did not respond at all and did not enter into an appearance at Court on 28 March 2028.

II.   BACKGROUND

9.  In this action, P and D are tenants in common in respect of the Property.  P claims against D for having mortgaged her share of the Property without the consent of BOC, the 1^st mortgagee, nor P to Parklane Mortgage Services Limited (“Parklane”) and despite repeated demands, D has failed to discharge the Parklane Mortgage, thus putting P at risk.

10.  P seeks to remove herself from the co-ownership with the following reliefs from the Court namely.

(1)  A declaration that the Defendant shall be the only party in breach of the 1^st BOC Mortgage of the Electric Road Property and be solely responsible for any loss and/or damages arising therefrom;

(2)  An order for sale of the Electric Road Property pursuant to sections 2, 3 & 6 of the Partition Ordinance (Cap 352) by way of private treaty or public auction to be conducted by agents and/or auctioneers;

(3)  An order that the conduct of the sale of the Electric Road Property shall be committed to a solicitors’ firm to be nominated by the Plaintiff’s solicitors herein (“Nominated Solicitors’ Firm”);

(4)  An order that the Defendant shall do all acts and things necessary for the sale of the Electric Road Property to the purchaser(s) and cause all documents and instruments as necessary to implement the sale of the Electric Road Property and convey its title to the purchaser(s) to be properly signed or executed within 7 days of the written request made by the Nominated Solicitors’ Firm;

(5)  An order that in the event that the Defendant neglect or refuse to sign or execute the documents and instruments as referred to in (4) above, a representative of a solicitors’ firm appointed by the Nominated Solicitors’ Firm, shall be appointed to sign and execute all documents and instruments (in place of the defaulting defendant(s)) as necessary to implement the sale of the Electric Road Property and convey its title to the purchaser(s);

(6)  An order that the proceeds of sale of the Electric Road Property shall be applied in the following orders of priority:-

(a)  first, in discharge of all taxes, rates, government rent, and other outgoings due and affecting the Electric Road Property, if any;

(b)  second, in discharge of the 1^st BOC Mortgage and other encumbrances affecting the Electric Road Property having priority to the 3^rd Parklane Mortgage, if any;

(c)  third, in payment of the reasonable costs, charges and expenses as necessarily incurred in the sale of the Electric Road Property (including conveyancing legal fees, estate agent’s commission and auctioneer’s fee, if any);

(d)  fourth, the net proceeds of sale to be split into two equal halves of which one half shall belong to the Plaintiff (“P’s half share”);

(e)  P’s half share shall be paid to the Plaintiff; and

(f)  As to the other half (“the Remaining half share”), it shall be distributed as the Court deems fit taking into account the encumbrance of the 3^rd Parklane Mortgage which the Defendant should use the Remaining half share for clearance.

(7)  An order to direct the Defendant to discharge the remaining 3^rd Parklane Mortgage and all other encumbrances, if any, affecting the Electric Road Property;

(8)  An order that the parties do have leave to bid at the auction;

(9)  An order that the parties be at liberty to apply;

(10)  Interest;

(11)  Costs; and

(12)  Further or other relief as this Court deems fit.

III.   LEGAL PRINCIPLES

11.  Section 2(b) of the Partition Ordinance Cap 352 (“PO”) empowers the Court to make an order under section 6 for a sale of the property where the property is held by 2 or more persons as joint tenants or as tenants in common.

12.  Section 3(1) of the PO provides where any property is held in the manner referred to in section 2, any person interested in such property may institute proceedings in Court under this Ordinance by way of an action for partition or sale.

13.  Section 6(1) of the PO provides where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of (a) the nature of the land to which the proceedings relate, then, the Court may make an order for sale of the Property.

14.  In Law Chun Wai and Chu Suk Har [2016] HKLRD 224, HHJ Andrew Li (as he then was) granted an order for sale as P, the licensed lender, was an “interested person” and in the circumstance of a small flat of 367 square feet held by D1 and D2 as tenants in common, it was impracticable to make an order for partition.  D1 had executed a legal charge over his half share as security to P and the charge was registered at the Land Registry.

15.  In Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825, Mr Recorder Joseph Fok SC (as he then was) adopted at §§18-19 the following propositions as fairly and accurately stating the law:-

(1)  A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, ask for an order for partition or sale;

(2)  when it was impracticable to make an order for partition, the court should make an order for sales unless it was persuaded, the burden being on the opposing co-owner, that such an order would not be beneficial to all the co-owners, or that it would result in very great hardship to one co-owner; and

(3)  whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial.  It has to be determined by the court objectively.

16.  In Silver Wealth Capital Investment Ltd v Lai Wai Chuen [2015] 4 HKC 191, Chow J (as he then was) considered the basic right of a co-owner to rid himself of the shackles of co-ownership and Wong Chun Kei v Poon Vai Chin was followed.

17.  In Re Inland Lot No.  476 [2010] HKCU 574 (unreported, HCMP 1273/2009, 12 March 2010), Bharwaney J summarized that:-

“10.  Underpinning these principles is the acceptance that the right of ownership must include the right of disposition, That right takes on more importance particularly when co-owners are uncooperative and unable to fully utilize opportunities for the letting out of commercial premises at favourable rates… ”.

IV.   FACT AND DISCUSSION

18.  To start with, P is holding an interest in the Property as tenant in common.

19.  D has failed to file any response to the Originating Summons and was also absent from the 28 March 2025 hearing.  As such, there is no evidence in opposition to the application for an order for sales to release the value of P’s half share of the Property.  There is also no evidence from D in opposition to the facts as stated in P’s Affirmation and the Affirmation of Service.

20.  As shown in the Land Register under Owner Particulars at Exhibit LPCV-01, each of P and D is a tenant in common, holding 1/2 share of the Property.  Under Incumbrances, there is (i) a mortgage dated 29 October 2014 in favour of Bank of China (Hong Kong) Limited, consideration $3,570,000.00 in which P and D signed as the borrower at Exhibit LPCV-02; (ii) a second mortgage dated 9 December 2021 in favour of Easy Finance Limited (“Easy Finance”) was executed in which the maximum amount secured was stated not to exceed $300,000.00.  The Easy Finance mortgage was secured by D’s 1/2 share and by an instrument dated 21 December 2022, it was discharged; (iii) a further second mortgage dated 21 December 2022 in favour of Parklane was executed to secure all moneys up to a maximum amount of $1,200,000.00.  The Parklane Mortgage is secured by D’s 1/2 share of the Property.

21.  At the hearing, Cheung Ka Yu, Associate of WTS Lawyers representing P, obtained instruction and withdrew P’s request for the declaration at §10(1) above.  So, this Court is left with the application for an order for sale of the Property and the consequential orders necessary to give effect to the order for sale, if granted.

22.  In view of D’s failure to honour its promise to repay Parklane Mortgage, as set out at §18 of P’s 2 January 2025 Affirmation, P’s concern that her interest in the Property may be at risk is reasonable.  It is common sense in this situation of a small flat, a sale would be beneficial to P, to unlock the value of her half share after repayment to BOC.  There is also no dissent from D that such a sale would result in very great hardship to D.

23.  The Property was for held by P and D for investment, not for D’s own residential purposes.  In WTS’s letter to D dated 8.3.2023 [Exhibit LPCV-06], nature of the investment and the roles of P and D were detailed at §§3 to 6 therein:-

“雙方之分工

3.  此物業在購入後，根據本所客戶及閣下之共識，本所客戶負責改建此物業成能容立兩戶人的間格（即分為A房及B房），閣下及閣下丈夫（　　閣下丈夫為地產經紀）則負貴尋找及聯繫潛在租戶，並由　　閣下丈夫負責安排簽署租務協議，指示租客將租金存入本所客戶及　　閣下在中國銀行開立的聯名戶口（下稱「聯名戶口」）內，所得的租金雙方共同享有，用於繳付每月第一按掲的還款及此物業之水費、電費、管理費及一齊此物業的其他支出。

擅自更改租務安排

4.  根據本所客戶會計記錄顯示，　　閣下突然從20l9年5月開始沒有計算B房的水費和電費及從2022年8月1日開始沒有計算A房的水費和電費，所有水費和電費唯有在聯名戶口內的餘額中扣除。

5.  閣下在沒有知會及得到本所客戶的同意下，於大約2019年起擅自要求部份租戶將租金存入　　閣下的其他銀行戶口．而不是聯名戶口 … .

6.  本所客戶自2021年起曾多次要求　　閣下及／或　　閣下丈夫存回租金收入以用於繳付第一按揭及此物業的全部支出，奈何每次　　閣下及／或　　閣下丈夫諸多推搪，… 此外，　　閣下未曾就有關計算及收取租客們之水費和電費向本所客戶清楚交齊證據文件，以致賬目出現混亂。”

24.  In the circumstances of this case, this Court would exercise its jurisdiction and grant an order for sale of the Property.

25.  However, as the Property is saddled with the BOC Mortgage and the Parklane Mortgage, unless P buys out D or D buys out P, by private treaty subject to the mortgages, any sale by public auction to be conducted by agents and/or auctioneers may be difficult.  This is especially so as P informed the Court it does not know the amount outstanding and owed by D to Parklane nor the terms of the Parklane loan.

26.  As such, I will not order in terms of the Originating Summons, but instead direct that:-

(1)  An order for sale of the Property pursuant to sections 2, 3 and 6 of the Partition Ordinance (Cap 352) firstly by way of private treaty between P and D within 30 calendar days of the date of this order,  or, failing sales by private treaty, by way of public auction;

(2)  If the sales is to be carried out by public auction, an order for each of P and D to repay their respective half share of the amount owed to BOC inclusive of all interests and charges prior to any public auction;

(3)  An order for D to repay the outstanding amount owed by D to Parklane inclusive of all interests and charges prior to any public auction;

(4)  An order that the conduct of the sale of the Property, if by public auction, shall be as directed and arranged by P’s solicitors herein and that P and D shall have leave to bid at the public auction;

(5)  An order that P and D shall cause all documents and instruments as necessary for the implementation of  the sale of the Property and the conveyancing of its title to the purchaser(s) be properly signed or executed by P and D within 14 days of the sale by public auction;

(6)  An order that the proceeds of sale of the Electric Road Property shall be applied in the following order of priority:-

(a)  first, in discharge of all taxes, rates, government rent, and other outgoings due and affecting the Property, if any;

(b)  second, in payment of the reasonable costs, charges and expenses necessarily incurred in the sale of the Property (inclusive of conveyancing fees, estate agent's commission and auctioneer's fee), if any;

(c)  third, the net proceeds of sale after (a) and (b) to be split into two equal halves, being “P’s half share” and “D’s half share”;

(d)  P’s half share shall be paid to P;

(e)  D’s half share shall be paid to D;

(7)  Liberty to apply for further directions, if necessary, as to manner of sale of the Property; and

(8)  As D has not participated in nor opposed P’s application for an order for sales, this matter is largely dealt with on paper, save for the time for the hearing 9:30 am forenoon on 28 March 2025.  As such, costs were incurred for the application for the order for sales only and I make an order nisi that there be no order as to costs of the hearing and the order nisi shall become absolute in the absence of any application to vary the same within 14 days of handing down.