FAIRBO INVESTMENT LTD v. LEUNG CHIT, THE PERSON APPOINTED BY ORDER DATED 22ND NOVEMBER 2017 TO REPRESENT THE ESTATE OF LEUNG TAI CHEUNG ALSO KNOWN AS LIANG TAI CHEUNG AND LIANG CHUN, DECEASED AND ANOTHER

LDCS 23000/2014

[2021] HKLdT 66

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

LAND COMPULSORY SALE MAIN APPLICATION NO. 23000 OF 2014

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REASONS FOR DECISION

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1.  This is an application made by the applicant to ask the tribunal to release the proceeds of sale apportioned to the 2nd respondent’s unit or interest, namely, half share of Flat C, 3rd Floor, No 23 Berwick Street, Kowloon (“the Property”), to the applicant.

2.  The original application was actually to ask the trustees to release this proceeds of sale to the applicant.  At the last hearing, I ordered the trustees to pay the proceeds of sale into the tribunal for the tribunal’s determination.  In fact, the trustees have no interest in the proceeds of sale.  As such, there was no reason for the trustees to argue with the applicant as to whether the proceeds should be released to the applicant or not.  So I released the trustees from further attending the hearing of this summons and I ordered them to pay the sum into the tribunal, which they did. 

3.  I also ordered the applicant to advertise the proceedings by way of the amended summons in the newspapers so as to inform the 2nd respondent about the proceedings.  The 2nd respondent has not been appearing at all in this case.  So I need to make sure that the 2nd respondent has been properly notified about the application made by the applicant for the release of the proceeds of sale.  The applicant did advertise, and I am satisfied that the 2nd respondent has already been duly informed about the proceedings herein.

4.  I have also asked the applicant to inform the Department of Justice to see whether they have any interest in the proceeds of sale, and that is because, if there is no owner who can claim the proceeds of sale, the same will be released to the general revenue.  So the Department of Justice might have some interest in the matter. The applicant has obtained firm reply from the Department of Justice that they have no interest in the proceeds and they have no objection to the applicant’s application.

5.  What remains for me to determine is whether legally I can release the proceeds of sale to the applicant.  The legal obstacle in this application is that, according to the ordinance and in normal circumstances, the proceeds of sale should be released to the owner of the lot, and in this case, it is the minority owner.  But there is a definition for “minority owner” in the ordinance.  Section 2 mentions that “minority owner” means “the person or persons who ... owns or own undivided shares in the lot otherwise than as a mortgagee”.  The problem here is that the applicant obtained the title of this half share interest in the Property through an assignment by a person called Ma Weineng, who obtained possessory title by way of adverse possession and that has been determined by the High Court in HCA 2237/2011.  This possessory title was obtained against the 2nd respondent in this case.  In law, Ma Weineng had no undivided shares allotted to him because he by right had only a possessory title.  The 2nd respondent still holds the paper title of the half shares in question. 

6.  That is why the trustees had this issue with the applicant and were trying to argue that the proceeds of sale should not be released to the applicant.  But, as I said, the trustees have no personal interest in the matter.  It is not right for them to argue as such with the applicant but should leave it to the tribunal to determine.  Now I have to determine whether the applicant, who holds only possessory title, can claim the proceeds of sale.

7.  This matter has actually been determined by Madam Chu J in HCMP 2384/2011, that is, the case of Chung Chiu Hing v The Personal Representative of Law Sam, Deceased and the Secretary for Justice.  In that judgment, Madam Chu J has already opined that there is no reason why the person who had possessory title cannot be deemed or regarded by the trustees to be the owner of the undivided shares in the lot, in particular where there was no appearance or objection on behalf of the paper owner.  She further held that, even if the paper owner still retained some rights to the property, the declaratory judgment in respect of the adverse possession must be at least an “incumbrance” affecting the lot.  Under section 11(2)(b) of Cap 545, the trustees are to apply the sale proceeds towards the discharge of any incumbrance affecting the lot.

8.  In fact, section 11(7)(a) of the Cap 545 says this,

“It is hereby declared that—

(a) the application of the proceeds of sale to discharge any liability or incumbrance referred to in subsection (2)(a) or (b) shall be on the basis that the majority owner or minority owner of the lot shall pay for the discharge to the extent that the liability or incumbrance, as the case may be, is attributable to that majority owner or minority owner, as the case may be”.

9.  Hence, Madam Chu J ruled that there is no reason why the entirety of the sale proceeds should not go to the person who had possessory title to discharge the incumbrance created by the possessory title.  

10.  In short, Madam Chu J in this Chung Chiu Hing’s case has already ruled that a person who has possessory title can be deemed or regarded as the owner of the undivided shares in the lot.  Alternatively, the possessory title would be an incumbrance affecting the lot, and hence the proceeds of sale should still be applicable to discharge this incumbrance.

11.  I agree with Madam Chu J and also adopt her ruling in this regard.  In other words, I can deem the applicant or his predecessor, Ma Weineng, who had the possessory title, the interest in question, as the owner of the undivided shares in the lot in question.  So, by virtue of section 11(6)(b)(i), I can order that the proceeds of sale in question be paid to the applicant.  Alternatively, the possessory title of the applicant is an incumbrance affecting the lot, and by virtue of section 11(2)(b), the trustees should have applied the proceeds of sale to discharge this incumbrance affecting the lot.

12.  According to section 11(6)(a), I am empowered to order the proceeds of sale to be paid to such person or persons as is or are specified in the directions concerned under section 4(6)(a)(iii)(A) and (B) upon the occurrence of the event referred to in that section, and then section 4(6)(a)(iii) says that the tribunal may give such directions as it thinks fit, relating to the application of the proceeds of sale, including the holding by the trustees of such part of those proceeds as is specified by the tribunal in view of any lis pendens affecting the lot and the payment of that part of those proceeds, upon the occurrence of an event specified by the tribunal, to such person or persons as is or are specified by the tribunal.  It is therefore my view that I am entitled to order the proceeds of sale in question to be paid to the applicant. 

13.  Since I have already ascertained that the Department of Justice has no interest in the proceeds and also the 2nd respondent has not appeared in the proceedings, I think the only person that will be entitled to the proceeds of sale is the applicant.

14.  Thus, I order that the proceeds of sale apportioned to the 2nd respondent’s unit or interest, namely, half share of Flat C, 3rd Floor, No. 25 Berwick Street, Kowloon, which has been paid by the trustees into the tribunal be released to the applicant, and there be no order as to costs in relation to the amended summons dated 15 May 2020.