PANG KA LEONG v. CHEUNG MEI PO

DCMP 2083/2017

[2019] HKDC 651

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2083 OF 2017

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JUDGMENT

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1.  This is the plaintiff’s application for an order for sale under section 6 of the Partition Ordinance, Cap 352 (“PO”).

The facts

2.  By a provisional agreement for sale and purchase dated 19 May 2011, the plaintiff and the defendant as purchasers agreed to purchase the 2/F and roof of No 140 Ma On Kong, Pat Heung, Yuen Long, New Territories (“the Property”) at the price of $2,185,000. 

3.  At that time, they were lovers.  According to the plaintiff, it was their arrangement that the defendant would pay the deposit and other outgoings in respect of the purchase (eg agency fees and legal fees) while the plaintiff would contribute to subsequent mortgage repayments.  Consequently, the defendant paid the down payment and other expenses in respect of the purchase totaling about $715,000.  They (as borrows) obtained a loan of $1,470,000 from Bank of China (Hong Kong) Limited on the security of the Property to pay for the balance of the purchase price.  Upon completion in August 2011, the Property was assigned to them as joint tenants.

4.  The parties did not move into the Property but had instead used it for storage purposes with each of them holding one set of keys.  Between August 2011 and September 2014, the plaintiff made monthly mortgage repayments totaling $223,949.30 in pursuance of the aforesaid arrangement.[1]

5.  The relationship between the plaintiff and the defendant began to deteriorate soon after the purchase of the Property.  They eventually broke up in late 2013 or early 2014.

6.  The parties then agreed, according to the plaintiff, to sell the Property and to distribute the net sale proceeds equally.  After two potential buyers had expressed their interest in purchasing the Property in about March 2014, however, the defendant refused to sell the Property and the plaintiff thereafter experienced difficulties contacting her.

7.  In May 2014, the plaintiff filed a complaint with the police after discovering that his personal belongings stored inside the Property had been discarded by the defendant.

8.  In October 2014, the plaintiff ceased making monthly mortgage repayment in the hope that the bank would repossess and sell the Property by reason of the parties’ default.  However, that did not work as the defendant took up the mortgage repayments.

9.  In November 2015, the plaintiff discovered that the defendant had moved into the Property and had changed the lock without giving him the new keys.  The plaintiff made another complaint to the police.

10.  On 26 February 2016, the plaintiff issued a Notice of Severance to sever the joint tenancy.  According to the terms of the Notice, the parties have since been holding the Property as tenants in common in equal shares.

11.  Despite the attempts of the plaintiff and his solicitors, the parties have not been able to resolve their differences amicably.

12.  On 19 July 2017, the plaintiff commenced these proceedings to apply for an order for sale and to claim for mesne profits or occupation rent.

The trial

13.  Pursuant to court’s directions, both parties have filed affirmation evidence.  The plaintiff’s case has been highlighted above.

14.  The defendant, according to her affirmation, opposes the application.  In the event that a sale is ordered, she claims to be entitled to 2/3 of the net sale proceeds.  She does not deny the fact that she has moved into the Property but she disputes the plaintiff’s claim for mesne profits or occupation rent alleging that the plaintiff has the keys to the Property and can always move in.

15.  The case was set down for a 2-day trial commencing on 14 May 2019 (Tuesday).  On the Friday preceding the trial, the defendant’s solicitors took out a Summons to cease to act for the defendant (“the Summons”) returnable on the first day of the trial.[2]

16.  The defendant did not attend court on 14 May 2019 and the Judge, after hearing the defendant’s solicitors, adjourned the Summons for further consideration.  As the Judge had heard submissions on the cease to act application, the trial was reassigned to me so as not to cause any prejudice to the defendant.

17.  The defendant also failed to attend court on 15 May 2019.  Her counsel (who appeared on limited instruction) confirmed that she had been informed of the trial dates albeit that she had given no instruction for the trial.  The trial therefore proceeded on that basis.

18.  Pursuant to the order dated 12 October 2018, the plaintiff’s evidence in terms of his three affirmations was received as evidence. His evidence was not challenged as the defendant’s counsel did not have instruction to cross-examine him.  I accept the plaintiff’s evidence.

19.  By the order dated 12 October 2018, the defendant’s affirmation was excluded from consideration by reason of her failure to attend trial.

20.  In his closing submissions, the plaintiff’s counsel fairly addressed me on three matters:–

(1)  Whether an order for sale should be granted?

(2)  Whether the net sale proceeds should be distributed equally?

(3)  Whether the defendant should pay the plaintiff mesne profits or occupation rent for ousting the plaintiff from the Property?

Whether an order for sale should be granted?

21.  The plaintiff is entitled to invoke the PO as the Property is a property in land held by the plaintiff and the defendant, initially as joint tenants and more recently as tenants in common: see section 2 of the PO.

22.  The District Court has jurisdiction to hear this application as the rateable value of the Property ($90,000) does not exceed the sum mentioned in section 35 of the District Court Ordinance, Cap 336: see section 9 of the PO.

23.  Under section 2 of the PO, the court may either make an order for sale under section 6 or refuse to make any order.

24.  Section 6 of the PO provides that:–

“(1)  In any proceedings under this Ordinance, 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;

(b) the number of the persons interested or presumably interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.

(2)  The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.

(3)  (a) Without prejudice to subsection (1), if any person interested in the property applies to the Court to make an order for the sale of the property instead of an order for partition, then, unless the other persons interested undertake to purchase the interest of the party applying for an order for sale, the Court may, if it thinks fit, make an order for the sale of the property.

(b) If an undertaking is given by the other persons interested, the Court may order a valuation of the interest of the person applying for an order for sale in such manner as it thinks fit.

(4)  On making an order under subsection (1) or subsection (3), the Court may direct a distribution of the proceeds of the sale and give all other necessary or proper consequential directions.

(5)  On a sale under this section the Court may allow any of the persons interested in the property to bid at the sale, on such terms as the Court deems reasonable as to–

(a)  non-payment of deposit; or

(b)  setting off or accounting for the purchase money or any part thereof instead of paying the same; or

(c)  as to any other matters.”

25.  In Wong Chun Kei Johnny v Poon Vai Ching [2007] 1 HKLRD 825 at [16]-[19], Recorder Fok SC (as he then was) set out the following principles for the grant of an order for sale under the PO:-

(a)  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.

(b)  When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners [or that it will result in very great hardship to one co-owner].

(c)  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.

26.  In the subsequent case of Re Lau Hiu Tuen, bankrupt, unreported, HCB 8430/2006, 20 August 2015, Godfrey Lam J elaborated (at [21]-[22]) that: “What is meant by the phrase ‘such an order will not be beneficial to all the co-owners’ in (b) above seems to me to be that the order will be beneficial to some only of the co-owners, not that the order will be beneficial to none of the co-owners. Accordingly, an order for sale would not be refused unless all the co-owners would be benefitted by its refusal or, in other words, an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner.”

27.  In the present case, it is the plaintiff’s wish to rid himself of the shackles of co-ownership in relation to the Property. That is understandable given the fact that the underlying personal relationship once existed between him and the defendant that had prompted them to purchase the Property has gone.  Whatever the rights or wrongs of the parties, they are now not on speaking terms and appear to have difficulties co-owning the Property.  In fact, it would be unfair to the plaintiff to maintain the status quo as he has been ousted by the defendant and unable to enjoy the Property as a co-owner.  An order for sale will be beneficial to the plaintiff.

28.  The plaintiff has opted for an order for sale, as opposed to partition.  His counsel explained that:-

(a)  The Property is a residential unit on the 2/F and roof of a three-storey village house.  The 2/F premises has two rooms and is about 700 square feet in size.  It is accessible via a single entrance through the common staircase of the building.  Given its size, design and setting, it is impracticable to physically partition the Property into two halves.

(b)  In legal concept and parlance, the Property is one equal undivided 3^rd part or share in the land together with the sole and exclusive right and privilege to hold use and occupy the 2/F premises and the roof.  It is not practical to contemplate partition and partition cannot be beneficial to its owners: see Liu Chung Hang v Liu Chung Leung Alfred, unreported, HCMP 1255/2007, 19 December 2007, per Recorder B Yu SC at [9]; and Chan William Lai Yee v Chan Yau Yuen Fun Therese, unreported, HCMP 1203/2011, 8 March 2012, per Deputy High Court Judge P Ng (as he then was) at [12].

(c)  Even if partition is possible, it would not be beneficial to the parties given their acrimonious relationship.

29.  There is no evidence that an order for sale of the Property will bring hardship (let alone great hardship) to anyone.

30.  The Director of Lands has expressed no comment on the application.

31.  In the circumstances, I would accede to the plaintiff’s request to make an order for sale under section 6.

Whether the net sale proceeds should be distributed equally?

32.  It is the plaintiff’s case that the net sale proceeds should be distributed equally to the plaintiff and the defendant.

33.  In Erwiana Sulistyaningsih v Tsui Yun Bun Barry [2018] 1 HKLRD 487, Recorder Stewart Wong SC derived the following principles from the UK House of Lords’ decision in Stack v Dowden:–

“28. First, on the question of the beneficial ownership of the Property, it is a matter of the parties’ … shared intention, actual, inferred or imputed, with respect to the Property in the light of their whole course of conduct in relation to it. But the starting point is that where there is joint legal ownership there is joint beneficial ownership, and the burden is on the party asserting otherwise … to show otherwise. See Stack v Dowden [2007] 2 AC 432 at [56], [58], [60] and [68], per Baroness Hale of Richmond (with whom Lord Hoffmann, Lord Hope of Craighead and Lord Walker of Gestingthorpe agreed). See also Lord Hope at [4]-[5] and Lord Walker at [14] and [33]. Stack v Dowden has been followed in Hong Kong: see for example Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985.

29. In other words, unless there is evidence on which the Court makes a finding of contrary intention (actual, inferred or imputed), and the burden is high, equity follows the law and beneficial ownership follows the legal ownership (Stack v Dowden at [54], per Baroness Hale). As stated in Snell’s Equity (33^rd ed, 2015) at para 24-049:–

‘Where an express trust has not been declared, then the starting point is that equity follows the law, and the beneficial ownership of the property is held in the same way as the registered legal estate in the property. If the property is registered in the name of one party only, then they will be presumed to be the sole beneficial owner. If it is registered jointly in the names of both parties, then it is presumed that they hold for themselves as beneficial joint tenants. This will be the case even where one party has made no financial contribution at all to purchasing the property.’

34.  It is noted that Stack and Dowden (as well as the local case of Erwiana Sulistyaningsih v Tsui Yun Ban Barry) was decided in a domestic setting.  In the present case, the plaintiff and the defendant were not married when they bought the Property and it is the plaintiff’s evidence that they purchased the Property “as investment because the property market was on the rise.” 

35.  In Marr v Collie [2018] AC 631, Lord Kerr explained that the principle elucidated in Stack v Dowden is not confined to the domestic context and applies where there is a commercial aspect to the parties’ personal relationship:

“30. … it is the Board’s view that to consign the reasoning in Stack v Dowden case to purely domestic setting would be wrong.

40.  At para 56 of her opinion in Stack v Dowden [2007] 2 AC 432 Baroness Hale expressed the fundamental principle in commendably clear and simple terms: ‘the starting point where there is joint legal ownership is joint beneficial ownership’. Although that statement was made in a case where the dispute between the parties was in relation to property which was a family home, there is no reason to doubt its possible applicability to property purchased by a couple in an enterprise reflecting their joint commercial, as well as their personal commitment.  When Baroness Hale said, in para 58, that, ‘at least in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved’, it is clear that she did not intend that the principle should be confined exclusively to the domestic setting.  Of course, when the conveyance occurs in circumstances where the parties are involved only in a personal relationship, the fact that they have elected to have the property in their joint names may make it easier to infer an intention that they should share the beneficial ownership.  But that does not mean that where there is a commercial dimension to the acquisition of the property, the decision to have the legal ownership declared to be jointly shared is bereft of significance.  The intention of the parties will still be a crucial factor.”

36.  In the present case, since the Property was purchased by the plaintiff and the defendant as joint tenants, they were prima facie equally beneficially interested in the Property.  The burden is on the defendant (who contends otherwise) to proof that the beneficial ownership of the Property is different from the legal ownership.

37.  In my view, there is nothing in the evidence to show that the beneficial interests in the Property should be divided other than equally.  The mere fact that the parties have contributed unequally towards the purchase of the Property does not mean that each should be entitled to an interest proportionate to their respective contribution.  In Stack v Dowden, Lord Walker has said (at [33])that:

“... where there are joint legal owners there will be a heavy burden in establishing to the court’s satisfaction that an intention to keep a sort of balance-sheet of contributions actually existed, or should be inferred, or imputed to the parties. The presumption will be that equity follows the law. In such cases the court should not readily embark on the sort of detailed examination of the parties’ relationship and finances that was attempted (with limited success) in this case.”

38.  The fact that the parties in this case did not take a detailed account of their respective contributions over the years speaks volumes against the existence of such an intention.  Their unequal contribution is more a reflection of an agreed inequality based on the parties’ then financial ability.  At that time, the defendant was running a business (operating an elderly home) and had the cash flow to fund the initial payments whereas the plaintiff was then heavily in debt (to the extent of about $700,000). On the other hand, the plaintiff had a stable income (as a fireman) and could make monthly contributions to repay the mortgage. 

39.  I therefore direct under section 6(4) of the PO that the net proceeds from the sale of the Property should be distributed equally to the plaintiff and the defendant.

Whether the defendant should pay the plaintiff mesne profit or occupation rent for ousting the plaintiff from the Property?

40.  In Chan Mei Lin v Lee Hong [2018] HKCFI 2441, Deputy High Court Judge To recited the following principles from Gray & Gray, Elements of Land Law, 5^th Edition:–

“7.4.32 As is true of joint tenants, the unity of possession enjoyed by tenants in common entails that each tenant is as much entitled to possession of the co-owned land as is any other. No co-tenant may physically demarcate any part of the land as his to the exclusion of his brethren. Instead, each co-tenant has ‘a right to exercise acts of ownership over the whole property, subject to the qualification that in so doing he must not interfere with the like right of any other co-tenant. …

7.4.33 It has long been clear that at common law each co-owner (whether joint tenant or tenant in common) has ‘a perfect right to possession of the entire co-owned land and to the ‘use and enjoyment of it in a proper manner.’ …

7.4.34 Save in cases of physical ouster of another co-tenant or gross interference with mutual rights of enjoyment, the notion of trespass has no meaning between co-owners. In this context an important distinction is drawn between exclusive use and exclusory behavior. …

7.4.36 A remedy for trespass is available against a co-tenant only in cases of ‘ouster’, it being settled law that non co-tenant may go so far as to turn another co-tenant off the land.  Ouster comprises any unequivocal and express ‘denial of the title and right to possession’ of a co-tenant and is wide enough to cover not merely instances in which one co-owner evicts or excludes another from the land, but also circumstances where he otherwise interferes with the common enjoyment of that land.”

and said (at [255]) that:–

“Ouster is a question of fact. Ouster could be physical or constructive. A use of the co-owned land by one co-owner to such an extent as to exclude the other co-owner from using the land would among to physical ouster. Where there has been such gross interference with a co-owner’s use and enjoyment of land by one co-owner as to prevent the other co-owner from use and enjoyment of co-owned land in a proper manner, it would among to constructive ouster. Any denial of a co-owner’s title to co-owned land would also amount to ouster.”

41.  Based on the unchallenged evidence of the plaintiff, I am satisfied that the plaintiff has been ousted from the Property since November 2015 when the defendant changed the lock without giving him the new keys and denied the plaintiff access to the Property.

42.  The parties have agreed that the market rent of the Property should be $10,000 per month.[3]

43.  In my view, the defendant should pay the plaintiff $5,000 per month from November 2015 until the date when the defendant shall deliver vacant possession of the Property for the purpose of the sale.

Disposition

44.  For the above reasons, I make an order for the sale of the Property under section 6 of the PO.  The plaintiff’s counsel has proposed detailed terms to bring about the sale.  Subject to the comments I made at the hearing, I make an order in terms of the proposed orders.

45.  I also order the defendant to pay the plaintiff $5,000 per month from 15 November 2015 until such time that the defendant shall deliver vacant possession of the Property for the purpose of the sale for ousting the plaintiff from the Property. 

46.  As the plaintiff has been successful in his claims, I order the defendant to pay him the costs of this action (including all reserved costs) to be taxed if not agreed.