LI CHEONG HING v. CHAN LOK AND OTHERS

HCMP 3234/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3234 OF 2015

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D E C I S I O N

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Introduction

1.  The 3^rd defendant applies by summons dated 17 May 2016 for an order that the entirety of the Amended Statement of Claim be struck out as against the 3^rd defendant, and the action against the 3^rd defendant be dismissed pursuant to Order 18, rule 19(1) of the Rules of the High Court and the inherent jurisdiction of the court.

Background

2.  The plaintiff is one of the occupiers of Flat No 3 on the 5^th Floor of King Fat House, Cheung Fat Estate, No 6 Tam Kon Shan Road, Tsing Yi, New Territories, Hong Kong (“the Property”). The Property was a public housing unit previously owned by the Government, and the plaintiff was the named tenant with his family members, including the 1^st defendant (the plaintiff’s wife).  The plaintiff’s deceased son, Li Pui-tak, and his daughter, Li Lok-lam, were the registered occupiers.

3.  In 2006 the Hong Kong Housing Authority (“HKHA”) offered to sell the Property at the price of HK$201,100 which was paid by the plaintiff.

4.  It is the plaintiff’s case that the 1^st defendant agreed to hold the Property conveyed into her name as trustee for the plaintiff and the plaintiff owns the entire beneficial interest in the Property.

5.  In September 2012, allegedly without the plaintiff’s knowledge or consent, the 1^st defendant applied for and obtained the consent from HKHA to charge the Property for a mortgage loan of HK$650,000 from the 3^rd defendant.

6.  By a Deed of Legal Charge dated 28 June 2013 (“Legal Charge”) the 1^st defendant charged the Property to the 3^rd defendant for the mortgage loan.

7.  The obtaining of the Loan by the 1^st defendant and the Legal Charge were not done pursuant to any knowledge or consent of the plaintiff.  Allegedly, the plaintiff did not obtain any benefit from the Loan.

8.  On 4 June 2015, the 1^st defendant presented a bankruptcy petition on her own motion under bankruptcy proceedings HCB 4338/2015 (“the Bankruptcy Petition”).  The bankruptcy order on the 1^st defendant was eventually made on 14 July 2015 (“the Bankruptcy Order”).  The second-named defendant was subsequently appointed the joint and several trustees of the property of the 1^st defendant on 29 October 2015. 

9.  On 19 June 2015, the 3^rd defendant commenced proceedings by originating summons in DCMP 1638/2015 (“DCMP”) against the 1^st defendant, applying for, inter alia, payment of monies due to the 3^rd defendant under the Legal Charge and delivery of vacant possession of the Property which had been charged to the 3^rd defendant.

10.  DCMP was heard on 20 August 2015.  It was ordered by the court inter alia that the 1^st defendant had to deliver to the 3^rd defendant vacant possession of the Property.

11.  On 22 October 2015, the 3^rd defendant issued a Writ of Possession and Fieri Facias combined against the 1^st defendant.

12.  The plaintiff had no knowledge of the DCMP until he found that a “Notice to Occupier to Quit” was posted on the entrance door of the Property on 16 November 2015.  Upon inquiry made with the 1^st defendant, the plaintiff also came to know the matters relating to her Bankruptcy Petition and Bankruptcy Order.

13.  The plaintiff applied to join as a defendant in the DCMP which was granted on 16 December 2015.

14.  The plaintiff sought declaration from this court that he is the beneficial owner of the Property by the originating summons filed in these proceedings on 17 December 2015.

15.  Pursuant to the order of Master S Lo dated 26 February 2016, the Statement of Claim herein was filed on 24 March 2016.

16.  The Statement of Claim was amended and the Amended Statement of Claim was filed on 9 May 2016.

Relevant Legal Principles

17.  The principles governing a striking-out application are well settled.  In LY Group Development Limited v East Canton Limited [2015] 4 HKLRD 84, Anthony To J set out the following principles at paragraph 14:

“It is trite law that it is only in plain and obvious cases that the court should exercise its summary powers to strike out an endorsement on any writ or pleading under Order 18 rule 19...There should be no trial upon affidavit. Disputed facts are to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking-out proceedings. The claim must be obviously unsustainable, the pleading unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. If the court does not think the matter to be clear beyond reasonable doubt or if it fails to be satisfied that there is no reasonable cause of action or that the proceedings are frivolous or vexatious, then, there should be no striking-out. One must be careful not to drive a plaintiff from the judgment seat nor should the court decide difficult points of law. Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made.”

18.  In the present case, relying on Chan Kwok Chu T/A Ho Kee Motors Service v Gotland Enterprises Ltd, HCA 282/2015 (Decision of G Lam J dated 6 January 2016), the 3^rd defendant contends that the plaintiff as an occupier cannot start a separate independent action to assert his title to the Property as it would be an abuse of process. In short, the plaintiff should assert its title in the DCMP.

Discussion

19.  The crux of the complaint by the 3^rd defendant is that the Amended Statement of Claim, insofar as it concerns the 3^rd defendant –  asking for declaration that the second-named defendant holds the Property on trust for the plaintiff, orders to set aside the Legal Charge on the Property and to vacate the registration of the Legal Charge at the Land Registry – constitutes an abuse of process, because it is a collateral attack on the order for possession and the writ of possession issued in the DCMP, which are all based on the premise that: 

(1)   the 1^st defendant (the mortgagor who executed the Legal Charge) was the sole beneficial owner of the Property; and

(2)   that the Legal Charge is valid and binding on third parties.

20.  I agree with the 3^rd defendant’s submissions.  The authorities establish that where an order for possession of property is made in a set of proceedings:

(1)   The only way for an occupier of the property to assert his right in the property is to add himself as a party to that set of proceedings and to set aside the writ of possession as against him;

(2)   The occupier cannot start a separate, independent action to assert his title to the property, as it would be an abuse of process

[see: Chan Kwok Chu T/A Ho Kee Motors Service v Gotland Enterprises Ltd (Ibid), at paragraphs 20, 24-28; Yu Wing Kan v Lau Shuk Lan [1990] 2 HKLR 583(CA) at 594C].

21.  There is also clear authority that an occupier can be joined as a party to the possession proceedings even after judgment is given, and that is the proper approach to assert a right to remain in possession

[see: Minet v Johnson (1890) 63 LT 507; Chan Kwok Chu T/A Ho Kee Motors Service v Gotland Enterprises Ltd (Supra) at paragraph 25].

22.  Indeed, the plaintiff has already successfully added himself as a defendant in the DCMP on 16 December 2015.

23.  I agree that if the plaintiff wishes to assert his right in the property, he should continue to do so in the DCMP, and not to bring this separate action in the High Court.

24.  Finally, insofar as it is necessary to join the second-named defendant herein as a party in the DCMP, the plaintiff can apply to do so under Order 15, rule 3(1) and/or Order 15, rule 6(2)(b) of the Rules of the District Court, Cap 336H [see: Li Man Yuan v Kin Ming Holdings International Limited [2012] 3 HKLRD 550, paragraphs 15 and 16].

Conclusion

25.  For the reasons stated above, I order that the entirety of the Amended Statement of Claim herein be struck out as against the 3^rd defendant, and the action against the 3^rd defendant be dismissed.