RADIANT FORTUNE INTERNATIONAL LTD v. THING ON CAPITAL LTD AND ANOTHER

HCMP 1354/2021

[2021] HKCFI 2931

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1354 OF 2021

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D E C I S I O N[1]

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1.  Upon the undertakings given by the 1^st defendant and the senior receivers as set out in annex 1 to the 1^st defendant’s skeleton submissions (reproduced below), I dismiss the plaintiff’s summons. I also order that the plaintiff do pay half of the 1^st defendant’s costs of the summons. I further order that the plaintiff do pay the entirety of the 2^nd defendant’s costs of the summons[2].

2.  My brief reasons are as follows. 

3.  The foundation of the plaintiff’s injunction application is its alleged right to redeem the first mortgage[3].  In the short space of time since the summons was taken out, the parties have been providing the court with authorities in this regard in a rather piecemeal manner.  This is not meant to be a criticism of those involved.  That is probably the case because of the urgency of the situation.  Having said that, however, needless to say, the burden is squarely on the plaintiff to satisfy the court on this point of law which serves as the very foundation of the application.

4.  The present position is this.  I am not in a position to rule on this point of law today.  Also, I am not going to accede to Mr Chan’s suggestion[4] that this point of law should be reserved for determination on a later date.  This is an application brought on an urgent basis.  Normally speaking, this type of applications should be disposed of expeditiously rather than be dragged on.

5.  Further, I do not think this point of law is a straightforward one.  The authorities so far provided by the parties are not definitive authorities on this particular point of law.  There are textbook references which go to support Mr Chan’s submission but they also say that the right to redeem is not an absolute one.  There is no particular detailed discussion in the authorities cited.

6.  I am also of the view that it is not immediately clear to me, as a matter of logic and rationale, why the 2^nd mortgagee should be treated in exactly the same position as the mortgagor in terms of the right to redeem the first mortgage. 

7.  So, in the circumstances, I think it would be wrong for me to reach a conclusion today on this point of law.  But I will proceed on the basis that the plaintiff has established that it has a good arguable case on its right to redeem the first mortgage.

8.  The other foundation of the plaintiff’s application is the concern it had on whether there was collusion between the 1^st defendant and the 2^nd defendant with a view to selling the property at an undervalue, which, if happened, would of course undermine or be a detriment to the financial interest of the plaintiff.  The concern has arisen out of the 1^st defendant’s refusal of the offer made by the plaintiff to redeem the first mortgage with the price to be fully paid immediately.  Mr Chan submitted that the refusal is unreasonable, uncommercial and does not make sense, and it legitimately gives rise to the suspicion that something is going on between the 1^st defendant and the 2^nd defendant.

9.  I do agree that on the basis of the refusal, there is some ground for this concern to arise in the minds of the plaintiff. But now with the undertakings offered by the 1^st defendant and the senior receivers, I would think that the concern which the plaintiff had should be fully addressed.  The content of the undertakings is that if the 1^st defendant proceeds to or wishes to sell the property at a price below HK$300 million, it would give the option to the plaintiff to redeem the mortgage.  Where that is the case, there is simply no chance that the property would be sold at an undervalue. 

10.  But that proposal was not accepted by the plaintiff.  I have to say I am surprised that the plaintiff has up to now insisted on pressing on with the injunction application.  All I can detect from Mr Chan’s submissions made this morning is that the plaintiff had genuinely felt that their right has been breached.  Unfortunately, today is not the occasion for me to make a definitive ruling on that right.  In fact, as I have said, I do not think it is a straightforward and uncontroversial issue.  The passage cited by Mr Chan in Fisher and Lightwood’s Law of Mortgage at paragraph 47.19 just says that there is such a right but that right is not an absolute one. So there is clearly uncertainty in the legal position.

11.  In that context, with the uncertainty in the legal right of the plaintiff, and when the court is dealing with an urgent interlocutory application, my primary concern is to do practical justice in the present case.  Here, the practical reality is that the plaintiff has now made it clear that it would agree that the sale should proceed as per the original timetable[5]. It also now has the comfort of the undertakings given by the 1^st defendant and the senior receivers.  There seems to be no reason why the court should still intervene in the commercial dealings of the parties in the present case and to compel the redemption of the first mortgage when the underlying right asserted by the plaintiff is not yet certain and cannot be determined as of now.  The status quo should be kept.

12.  For those reasons, I refuse to grant the injunction.  I should also add that there is some doubt on whether the plaintiff has satisfied the adequacy of damages requirement.  The plaintiff’s right, if established and if breached, certainly gives rise to a cause of action but that would be purely a monetary claim and there is no evidence whatsoever before me that the 1^st defendant may not be able to pay up the damages.

13.  As far as costs are concerned, I have apportioned the 1^st defendant’s costs for the following reasons.

14.  I have said that the concern that the plaintiff has as to whether there was collusion on the part of the 1^st and 2^nd defendants was, at that point, well founded.  It was only after the summons was taken out by the plaintiff that the 1^st defendant and the senior receivers offered the undertakings.  In other words, it was only by reason of the taking out of the summons that the plaintiff got what it gets today, ie the undertakings.  Therefore, I apportion half of the costs as far as the 1^st defendant is concerned.

15.  As for the 2^nd defendant, it has done nothing to bring suspicion on it on the collusion point.  I fail to see why the 2^nd defendant should not get full costs of the summons.

16.  Lastly, I grant certificate for two counsel.

(Discussion re quantum)

17.  The 1^st defendant’s costs be summarily assessed at $360,000.  The plaintiff should pay half of that sum. The 2^nd defendant’s costs be summarily assessed at $450,000. 

18.  Recognition must be given to the fact that it is a very urgent application and, obviously, time has been spent on both the research and the review and preparation of the evidence.

Annex 1

Undertakings by the 1^st defendant and the senior receivers

1.   If, following the closing of the tender on or before noon on 27 September 2021, it is the intention of the Senior Receivers to accept any tender with a price of less than HK$300,000,000 (“the Tender”), the Senior Receivers undertake that they will inform in writing the solicitors for the Plaintiff and the 1^st Defendant respectively of such intention forthwith, and in any event on or before 5 p.m. on 27 September 2021 (“the Letter”).

2.   Upon the receipt of the Letter, the Plaintiff shall have the option of redeeming the First Mortgage from the 1^st Defendant in the following manner:

(a)  On or before noon on 29 September 2021, the Plaintiff shall pay to the 1^st Defendant the outstanding sum under the First Mortgage as calculated in accordance with the table in exhibit “WFY-1” to the Affirmation of Wong Fung Yuen up to and including 29 September 2021 for the redemption of the First Mortgage;

(b)  The 1^st Defendant undertakes that, upon receipt of such payment in full, it shall on or before noon on 30 September 2021 (a) deliver to the Plaintiff’s solicitors, Messrs. Stevenson, Wong & Co., the title deeds in its possession pertaining to the Mortgaged Property, (b) execute all such documents as are necessary to effect a discharge of the First Mortgage and (c) procure the resignation and removal of the Senior Receivers and provide the Plaintiff with the relevant documentation to confirm such resignation/removal.

3.   The Senior Receivers undertake that they will not take any steps to accept the Tender until the earlier of (a) after 4 p.m. on 30 September 2021 and (b) after the Plaintiff shall have informed the Senior Receivers in writing that it does not wish to redeem the First Mortgage.

4.   For the avoidance of doubt, these undertakings do not apply if it is the intention of the Senior Receivers to accept any tender with a price of HK$300,000,000 or more.