WA LEE FINANCE CO LTD v. FOK SHIU YING AND ANOTHER

HCMP 2074/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2074 OF 2003

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J U D G M E N T

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1. This is a vendor and purchaser summons taken out under section 12 of the Conveyancing and Property Ordinance, Cap. 219. The only issue raised in these proceedings is in relation to the continued validity of a mortgage dated 6 April 1972 between the registered owner of the suit property and a Mr Lau Tat Choy.

2. According to the memorial of the mortgage registered in the Land Registry, the mortgage loan secured by the mortgage was repayable on 5 October 1972. Subsequent to the mortgage, further legal charges were executed in respect of the property, some of which have since been discharged.

3. The Plaintiff is a chargee under a second legal charge dated 16 April 1998. Upon default of repayment of the monies secured under the second legal charge, the Plaintiff has sought to exercise its power of sale under the second legal charge by agreeing to sell the suit property to the Defendants in the present proceedings. An issue arose between the parties as to whether the mortgage dated 6 April 1972 is still valid and subsisting. In these proceedings, the Plaintiff contends that the mortgage is no longer subsisting or capable of taking effect because of section 19 of the Limitation Ordinance, Cap. 347, the relevant limitation period in the present case being a period of 20 years.

4. As mentioned above, the mortgage loan secured by the mortgage in question was repayable on 5 October 1972. In other words, the right to sue for the repayment of the mortgage loan accrued on 5 October 1972. In the absence of any written acknowledgment or payment of capital or interest in the meantime, according to section 19 of the Limitation Ordinance, the right to recover the mortgage loan would have become time-barred by October 1992.

5. There is no evidence before me that there was any such acknowledgment or payment of capital or interest during the period of 20 years between 1972 and 1992. In those circumstances, prima facie, a case under section 19 has been made out. In other words, even assuming that the mortgage loan has actually not been repaid or repaid fully by the mortgagor pursuant to the terms of the mortgage, the right of the mortgagee to recover the mortgage loan has become time-barred for over 10 years in the absence of any written acknowledgment or payment of capital or interest, as to which, as I mentioned, there is no evidence.

6. There are authorities to the effect that in this type of circumstances, the court may make a declaration to the effect that the mortgage in question is no longer subsisting or capable of taking effect: see Fung Kam Cheung v. Kwok Yiu Wing [1991] 1 HKC 321; Broada Limited v. Chow Cheuk Yin [1997] 3 HKC 168. I am satisfied, on the evidence before me, that this is a proper case for the making of a declaration that the mortgage in question is no longer subsisting or capable of taking effect.

7. Before parting with this case, I should mention that since 2000, there is now available an alternative type of remedy under section 12A of the Conveyancing and Property Ordinance whereby the court may, in various circumstances, on application and upon payment into court of a sum sufficient to redeem a possibly outstanding mortgage affecting land, make a declaration that the land in question be free from the outstanding mortgage, either after or without any notice to the mortgagee. That is, by and large, the modern equivalent of section 50 of the Law of Property Act 1925 referred to by Godfrey J (as he then was) in Fung Kam Cheung, supra, at page 323D-F. The provisions of the relatively new section 12A have received judicial attention: see Re Cheung Chi Wang [2002] 1 HKLRD 409; Man Chi Kan v. Man Tsak Lun HCMP 4945/2002 Lam DJ (14 January 2003).

8. In my judgment, that notwithstanding, the court's jurisdiction to make a declaration in a vendor and purchaser summons taken out under section 12 of the same Ordinance still remains; nothing in the new section 12A would seem to affect the court's jurisdiction to make a declaration in appropriate circumstances regarding the continued subsistence or otherwise of a mortgage as between a vendor and a purchaser pursuant to the authorities already referred to above. But that is not to say that there is no difference between the type of declarations that the Plaintiff is seeking in the present proceedings and the type of declarations that the court may now make under section 12A of the Ordinance.

9. One obvious difference is that, unlike the declaration that is sought in the present proceedings, a section 12A declaration is superior in the sense that it is binding on the mortgagee as has been pointed out in the authorities referred to above. The declaration that is being sought in the present case by the Plaintiff is only good as between the parties i.e. the vendor and the purchaser. It is not binding on the mortgagee (or indeed any subsequent purchasers). In other words, notwithstanding the making of the present declaration, it is always open to the mortgagee in the present case to come forward and challenge the title of the purchaser by asserting the validity of the mortgage in question. This may be conceivably done by the mortgagee if he claims that, for instance, the time of repayment of the mortgage loan has since the execution of the mortgage been changed by mutual agreement between the parties to a later date, or that there has been payment of capital or interest or a written acknowledgment between 1972 and 1992. The declaration granted in the present proceedings will not be binding on the mortgagee in the event of any such challenge. On the other hand, a section 12A application is predicated on the premise that the mortgage is still valid and subsisting, and a declaration would only be granted upon payment into court of a sum sufficient to redeem the mortgage. Depending on the amount of outstanding mortgage loan (and interest), this may or may not be an attractive option to a party interested in freeing the property from the mortgage.

10. Be that as it may, as the parties have chosen to proceed under the present route, and given my analysis of the case of the Plaintiff above, as I said, I am prepared to make the declaration sought, and a declaration is made accordingly.

11. As regards costs, the parties are in agreement that there should be no order as to costs. The matter is therefore left in that way.