STANDARD CHARTERED BANK (HONG KONG) LTD v. WONGGENOS ENTERPRISES CO LTD AND OTHERS

CAMP 36/2020

[2021] HKCA 1254

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 36 OF 2020

(ON AN INTENDED APPEAL FROM DCMP NO. 878 OF 2018)

________________________

________________________

________________________

DECISION

________________________

Hon Chow JA (giving the decision of the Court):

INTRODUCTION

1.  This is an application by the 1^st and 2^nd Defendants for leave to appeal against the judgment of Her Honour Judge Winnie Tsui (the “Judge”) dated 28 October 2019 (the “Judgment”) whereby the Judge ordered, inter alia, (i) the 1^st and 2^nd Defendants to pay an outstanding debt of HK$885,593.05 (plus interest thereon) to the Plaintiff, and (ii) the 1^st Defendant to deliver up vacant possession of the property known as Flat C, 25/F, St Louis Mansion, 20 MacDonnell Road, Hong Kong (the “Property”) to the Plaintiff.

2.  Having considered the documents lodged by parties, we are of the view that the application may properly be disposed of on paper without an oral hearing pursuant to Order 59, r 2A(5) of the Rules of the High Court (Cap 4A).

BACKGROUND FACTS

(i)   The 1^st, 2^nd and 3^rd Defendants

3.  The 1^st Defendant is a limited company incorporated in Hong Kong on 28 December 2006.  The 2^nd Defendant is the sole director and shareholder of the 1^st Defendant.  The 3^rd is the father of the 2^nd Defendant.

(ii)   The 1^st Defendant’s purchase and mortgage of the Property

4.  The 1^st Defendant entered into an agreement for the purchase of the Property on 25 January 2007.

5.  On 9 March 2007, the 1^st Defendant executed a mortgage (the “Mortgage”) in respect of the Property for a loan granted by the Plaintiff.  The amount of the mortgage loan was $2,112,500.  The Property was assigned to the 1^st Defendant on the same day.

6.  The 2^nd Defendant executed a guarantee dated 8 March 2007 (the “Guarantee”) in favour of the Plaintiff in respect of moneys and other liabilities owing by the 1^st Defendant to the Plaintiff, subject to a cap on the principal amount of the mortgage loan.

(iii)    The High Court Action

7.  The 3^rd Defendant commenced an action in the High Court in HCA 899/2012 (the “High Court Action”) against the 1^st and 2^nd Defendants, alleging, inter alia, that the Property was held by the 1^st Defendant on constructive trust for him.

8.  After a contested trial, Recorder Lisa K Y Wong SC (as she then was) (the “Recorder”) gave a judgment dated 30 September 2016 (the “HC Judgment”) in favour of the 3^rd Defendant holding, inter alia, that the Property was held by the 1^st Defendant on constructive trust for the 3^rd Defendant.  The HC Judgment was registered at the Land Registry on 13 October 2016.

9.  On 28 February 2018, the Court of Appeal dismissed the 1^st and 2^nd Defendants’ applications for (i) an extension of time to appeal against the HC Judgment, and (ii) a stay of execution of the HC Judgment ([2018] HKCA 109, the “CA Judgment”).

(iv)    The Mortgagee Action

10.  The 1^st Defendant failed to make repayment to the Plaintiff under the Mortgage since December 2017.  The outstanding sum owing to the Plaintiff was some HK$880,000 plus interest thereon.

11.  By an originating summons dated 23 March 2018 (amended on 4 December 2018), the Plaintiff commenced proceedings in the District Court in DCMP 878/2019 (the “Mortgagee Action”) for payment of money due under the Mortgage and Guarantee by the 1^st and 2^nd Defendants respectively, and for delivery up of vacant possession of the Property by the 1^st Defendant.  The action was originally against the 1^st and 2^nd Defendants only.  However, upon discovery of the HC Judgment, the Plaintiff joined the 3^rd Defendant as a party to the proceedings on 3 December 2018, and sought declarations that the Plaintiff’s interest in the Property under the Mortgage ranked ahead of the beneficial interest of the 3^rd Defendant in the Property as found in the HC Judgment.

12.  The defence of the 1^st and 2^nd Defendants in the Mortgagee Action was summarized by the Judge in [23] – [24] of the Judgment:

“23. As revealed in their opposing affirmations and in their written submissions, the 1st and 2nd defendants’ defence is, in essence, that the judge had reached the wrong decision in the High Court action and they are in the process of seeking an appeal from the decision. For that reason, the present action should ‘be set aside until the Court of Appeal has a hearing’ or, alternatively, it should be transferred to the High Court ‘to be dealt with all in one’. In her latest affirmation filed in January 2019, the 2nd defendant goes further and asks this court to declare that the 1st and 2nd defendants are the beneficial owner of the Property.

24.  In her oral submissions this morning, the 2nd defendant argued that the 1st defendant was in fact not in default under the mortgage.  In a normal situation, the 1st defendant would be considered as being in default when it stopped servicing the mortgage repayments.  However, here, it is now ruled that the 1st defendant has no interest in the Property, but only holds its title. The 1st and 2nd defendants therefore had to make the difficult choice of halting mortgage repayments, given that the 1st defendant no longer owns the property and therefore has no further role insofar as the mortgage is concerned.  As such, the 1st and 2nd defendants, they contend, are not in default.”

13.  The 3^rd Defendant did not oppose the relief sought by the Plaintiff.  The 3^rd Defendant claimed that, in the event of a sale of the Property, the net sale proceeds after deduction of the expenses and indebtedness owing to the Plaintiff should be paid into court instead of being handed over to the 1^st Defendant.

14.  The Mortgagee Action came before the Judge on 28 October 2019.  In the Judgment:

(1)  The Judge held that following the dismissal of the application for extension of time to appeal against the HC Judgment, there was no outstanding matter in the High Court Action that needed to be resolved, except for the enforcement of the HC Judgment.

(2)  The Judge noted that the 1^st and 2^nd Defendants did not dispute the validity of the Mortgage and the Guarantee with the Plaintiff.  The contractual relationship between the Plaintiff and the 1^st and 2^nd Defendants was not altered by the HC Judgment and remained binding on the 1^st and 2^nd Defendants.  The 1^st Defendant had failed to make mortgage repayment and the Plaintiff was entitled to enforce its rights under the Mortgage and the Guarantee.

15.  Accordingly, the Judge made, inter alia, the following orders:

(1)  The 1^st and 2^nd Defendants do pay the Plaintiff the sum of $885,593.05 together with interest thereon;

(2)  The 1^st Defendant do within 28 days after service upon it of the order deliver to the Plaintiff vacant possession of the Property;

(3)  A declaration that the Plaintiff’s legal interest in the Property by way of the Mortgage shall have priority over the 3^rd Defendant’s interest in the Property as found by the Recorder in the HC Judgment; and

(4)  A declaration that the Plaintiff’s legal interest in the Property would be entitled to priority and ranks ahead of the equitable interest of the 3^rd Defendant in the Property and that the Plaintiff shall take the legal estate free of the said equitable interest of the 3^rd Defendant.

16.  On 24 January 2020, the Judge dismissed the 1^st and 2^nd Defendants’ application for leave to appeal against the Judgment.

(v)     The present application

17.  By a summons dated 18 May 2020 (the “Summons”), the 1^st and 2^nd Defendants applied for:

(1)  leave to appeal against the Judgment; and

(2)  a stay of execution of the order for delivery up of vacant possession of the Property until the appeal is heard.

18.  In summary, the 1^st and 2^nd Defendants’ intended grounds of appeal against the Judgement are as follows:

(1)  In the High Court Action, on 8 September 2015, the Recorder allowed the 3^rd Defendant’s application to amend §32(2) of the Statement of Claim from “the SPC Mortgage Loan” to “part of the SPC Mortgage Loan” (the “Amendment”).  The HC Judgment was handed down based on the Amendment.  Since the 1^st and 2^nd Defendants did not concede or oppose the Amendment application, the Amended Statement of Claim in the HC Action is not binding on them;

(2)  The Amendment is wrong in law as it was made after the trial of the High Court Action.  The witnesses were not cross-examined on the Amended Statement of Claim.  The 2^nd Defendant also raised several questions about the correctness of the Amendment;

(3)  If the proceeds from the sale of the Property are paid into court, the 1^st and 2^nd Defendants would suffer further jeopardy because they will have to commence further litigation against the 3^rd Defendant for the return of the sale proceeds;

(4)  The 1^st and 2^nd Defendants did not have any contractual mortgage agreement with the 3^rd Defendant at any time; and

(5)  The outcome of the previous proceedings is unjust.  Legal aid should not have been granted to the 3^rd Defendant.  It is unconscionable for a daughter to shoulder the debt of her father.

19.  In the second affirmation of the 2^nd Defendant dated 12 May 2020 and filed on 18 May 2020, she explained her delay in renewing the application for leave to appeal to the Court of Appeal.  She claimed that the delay was caused by the closure of the High Court Registry due to the outbreak of COVID-19 in Hong Kong.  She made her renewed application for leave to appeal to the Court of Appeal in mid-May after the re-opening of the High Court Registry.  On behalf of the Plaintiff, Mr Adrian Leung has confirmed that the Plaintiff will not take any issue with the fact that the 1^st and 2^nd Defendants’ summons was issued out of time.

20.  On 29 May 2020, the Plaintiff filed a statement in opposition to the 1^st and 2^nd Defendants’ application for leave to appeal.  In substance, the Plaintiff’s submission is that the Court of Appeal should refuse to grant leave to appeal because the 1^st and 2^nd Defendants’ intended appeal amounts to an improper attempt to seek to re-open the HC Judgment, and the intended appeal has no reasonable prospect of success.  Accordingly, the stay of execution sought by the 1^st and 2^nd Defendants should also be refused.

21.  On 27 August 2020, the 3^rd Defendant filed a written statement in opposition to the 1^st and 2^nd Defendants’ application for leave to appeal.  The 3^rd Defendant adopted the Plaintiff’s statement in opposition.  The 3^rd Defendant has also provided a transcript of the hearing of the High Court Action to show that the Recorder in fact dealt with the amendment application before oral closing submissions, and thus it is incorrect for the 1^st and 2^nd Defendants to contend that the amendment application was only disposed of after trial.

DISCUSSION

22.  In our view, the 1^st and 2^nd Defendants’ application for leave to appeal can be disposed of on the simple basis that their intended appeal against the Judgment is plainly an improper attempt to seek to re-open the HC Judgment, which is final and conclusive against them in view of the Court of Appeal’s judgment on 28 February 2018 refusing to grant them an extension of time to appeal against the HC Judgment.  That the main object or purpose the 1^st and 2^nd Defendants’ intended appeal against the Judgment is to seek to re-open the HC Judgment is admitted by the 1^st and 2^nd Defendants in the “Written Statement of the 1^st and 2^nd Defendants seeking leave to appeal” dated 15 June 2020, on p 2:

“Purpose of the appeal

The 1^st and 2^nd Defendants seek leave from the Court of Appeal to hear the case of setting aside the 2016 Judgment (the root problem), and that the Bank (P) in DCMP 878/2018 delivers Unit 25C or the net sales proceeds of Unit 25C to the 1^st Defendant in any [event] after clearance of debts or in the event of the Bank (P) exercising a mortgage sale.”

23.  This is not the first time that the 1^st and 2^nd Defendants have attempted to seek to re-open the HC Judgment.  As mentioned in §26 of the Judgment:

(1)  On 6 March 2018, the 1^st and 2^nd Defendants issued a summons for “reconsideration” of the CA Judgment.  That summons was dismissed by the Court of Appeal on 11 September 2018 ([2018] HKCA 597).

(2)  In July 2019, the 1^st and 2^nd Defendants issued an application in the High Court Action to set aside the HC Judgment.  That application was dismissed by Deputy High Court Judge Leung on 8 August 2019 ([2019] HKCFI 1947).

24.  Of the intended grounds of appeal referred to in §18 above:

(1)  §§(1), (2) and (5) constitute impermissible attempts by the 1^st and 2^nd Defendants to seek to re-open the HC Judgment.

(2)  In respect of §(3), we consider it entirely appropriate that the net proceeds of sale of the Property (after deducting the necessary expenses for the sale of the Property and the debt owing to the Plaintiff) ought to be paid into court and not to the 1^st and 2^nd Defendants in view of the Recorder’s finding in the HC Judgment that the 1^st Defendant holds the Property upon a constructive trust for the 3^rd Defendant.

(3)  In respect of §(4), we also consider it to be clear that, as between the Plaintiff and the 1^st and 2^nd Defendants, the Mortgage and Guarantee are binding on the 1^st and 2^nd Defendants respectively.

25.  In short, none of the matters referred to in §18 above can constitute any viable grounds of appeal against the Judgment.

26.  The 1^st and 2^nd Defendants’ intended appeal does not have a reasonable prospect of success.  There is also no other reason in the interests of justice why the appeal shall be heard.

27.  Since we are of the view that the 1^st and 2^nd Defendants’ intended appeal is not reasonably arguable, there would be no basis to grant any stay of execution of the Judgment (see Star Play Development Ltd v Bess Fashion management Co Ltd [2007] 5 HKC 84, §9(6)).

DISPOSITION

28.  The 1^st and 2^nd Defendants’ summons dated 18 May 2020 is dismissed, with costs to the Plaintiff and the 3^rd Defendant, such costs to be summarily assessed.  The 1^st and 2^nd Defendants shall have leave to file and serve a statement of objection to the Plaintiff’s statement of costs dated 29 May 2020 and the 3^rd Defendant’s statement of costs dated 27 August 2020 (limited to 4 pages altogether) within 14 days from the date of this judgment.  The court shall summarily assess the costs of the Plaintiff and 3^rd Defendant thereafter without further reference to the parties.

29.  We consider that the application for leave to apply is totally without merit.  We therefore make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes, pursuant to Order 59, r 2A(8) of the Rules of the High Court.

30.  For the avoidance of doubt, we would waive any irregularity arising out of the fact that the 1^st Defendant, a body corporate, is represented by the 2^nd Defendant, being its sole director and shareholder, instead of by a solicitor, in these proceedings.