GOLDEN BAY INVESTMENT LTD AND ANOTHER v. WALLY TOWER INVESTMENT LTD AND ANOTHER

1992, M.P. No.554

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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BETWEEN:

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JUDGMENT

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1. These proceedings, High Court Miscellaneous Proceedings Nos. 554, 555, 556 and 557 of 1990 relate respectively to the properties at the remaining portion of Section D of Sub-Section 2 of Section C of Kowloon Marine Lot. No. 47 known as No. 30 Kam Fong Street, the remaining portion of Sub-Section 2 of Section C of the same known as 32 Kam Fong Street, the remaining portion of Sub-Section 1 of Section C of the same known as No. 28 Kam Fong Street and the remaining portion of Section C of Sub-Section 2 of Section C of the same known as No. 26 Kam Fong Street. For convenience I shall refer to the properties by their respective street numbers in this Judgment.

2. By these proceedings, the 1st and 2nd Plaintiffs who are the owners of the majority of the undivided shares in each of the properties seek an Order for sale under Section 6(1) of the Partition Ordinance ("the Ordinance").

3. The essential facts are not in dispute. The Plaintiffs have conveniently and helpfully set out in tabular form in a document marked "P2", the premises to which these proceedings relate, the lot numbers, the area of each lot, the action number, the respective floors which the building on each of nos. 26 to 32 Kam Fong Street had prior to demolition, their respective owners as at the date of the commencement of this hearing, the respective status of the parties in each action, the share in the lot of each owner and the total entitlement of the Plaintiffs in each of nos. 26 to 32 Kam Fong Street.

4. By order dated the 26th April 1990 served on the co-owners of each of nos. 26-32 Kam Fong Street under Section 26 of the Buildings Ordinance, the Building Authority had required the demolition of the buildings standing on each of the properties. This Order was followed by a closure order. The demolition work was certified to be completed on the 2nd December 1991, the Plaintiffs, having taken upon themselves, the task of employing contractors to carry out the works demolition and paying for them. I should point out that the Plaintiffs had commenced to acquire their interests in each of the properties some time after the date of the closure orders and that they apparently did not consult any co-owner before having the works carried out.

Jurisdiction

5. The jurisdiction which the court has when proceedings are brought under the Ordinance is set out in Section 2 of the Ordinance which provides:

"Subject to this Ordinance where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may

    (a) make an order under section 4 for a partition of the property;

    (b) make an order under section 6 for a sale of the property; or

    (c) refuse to make any order."

Section 3(1) provides:

"Where any property in land is held in the manner referred to in section 2, any person interested in such property may institute proceedings in the Court under this Ordinance by way of an action for a partition or sale."

6. It is clear from the opening words common to sections 4(1) and 6(1) namely, "In any proceedings instituted under this Ordinance", that irrespective of whether the person applying is applying for an order for the partition of the property or for the sale of the property, the Court has jurisdiction to order a partition or a sale or, under section 2, it can refuse to make any order.

7. Section 6(1) is the provision under which these Plaintiffs have applied for an order for sale. It provides:

    "In any proceedings under this Ordinance, where it appears to the Court that a a partition of the property would not be beneficial to all the person interested by reason of -

    (a) the nature of the land to which the proceedings relate;

    (b) the number of the persons interested or presumptively 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."

8. Notwithstanding the convenience occasioned by the consolidation of these proceedings, consolidation does not enable me to consider the 4 properties as one. Each property must be considered on its own and the interests of the co-owners in that property only must be considered. For example in considering what order to make if any in relation to no. 28 Kam Fong Street, I am not to have regard to the interests of co-owners in the adjoining or any other property. That does not of course mean that in considering the interests of co-owners of no. 28 Kam Fong Street, I am to ignore the surrounding circumstance, in particular, that it is now a vacant lot adjoining a number of other vacant lots. If hereafter in this judgment I appear to have referred to the properties globally, it will have been a mere slip as I expressly hold that I must and do consider each property and the interests of the co-owners in that property separately.

9. I have absolutely no hesitation in finding in respect of each of nos. 26 to 32 Kam Fong Street that a partition of the property concerned would not be beneficial to all of the persons interested in those properties. This is so because of the number of persons interested and the small area of each of the properties which makes partition either impracticable or which would render each divided portion so small that no sensible use or enjoyment could be had of it.

10. One has only has to refer to the table P2 to see that this is so. No. 26 Kam Fong Street has an area of approximately 852.33 sq. ft. and there are now 4 different co-owners although 2 are the 1st and 2nd Plaintiff' along with Wally Tower Investment Limited and Income Union Limited, each owning one undivided seventh share. No. 28 Kam Fong Street has an area of approximately 858.44 sq. ft. and there are 6 co-owners, the 1st and 2nd Plaintiffs among them. In this case, if it is possible for partition to be more impracticable, then it is so here for 3 of the co-owners, each own one-third of one undivided seventh share. No. 30 Kam Fong Street has an area of approximately 845.14 sq. ft. There are 4 co-owners Again 2 of the co-owners, the 1st Plaintiff, in addition to the other undivided shares it owns in this property, and the Defendant, Madam Lei Wai Ping, each have one-half of one undivided seventh share. No. 32 Kam Fong Street has an area of 871.83 sq. ft. with 2 co-owners, Wally Tower Investment Limited owning one undivided seventh share and the other 6 being owned by either of the Plaintiffs. None of the parties before me supported a partition of the property in which they were interested.

The Position of the Parties

11. The evidence before me was that the value of the properties if sold as one lot, "the marrriage value" as Mr. Ronny Wong, Q.C. for the Plaintiffs referred to it, would be very much greater than the value of the properties if sold separately. The Plaintiffs therefore sought an Order for sale by public auction of the properties as one lot. Initially, they were supported in this by Wally Tower Investment Limited, being interested in nos. 26 and 32 Kam Fong Street, Mr. Chou Hung, being interested in no. 30 Kam Fong Street, and Thrive Strong Enterprises Limited being interested in no. 28 Kam Fong Street. All the other owners were opposed to sale by public auction of the properties.

12. In the course of his argument, I raised with the Plaintiffs Counsel whether if the Court had no jurisdiction to make an order for sale of the 4 properties as one lot, he would still invite the Court to make an Order of the 4 properties as separate lots. He replied in the affirmative. At this stagd, Mr. Liu and Mr. Leong made it clear that their respective clients would only support a sale by public auction if the 4 properties were sold as one lot and not as 4 separate lots; they would oppose the latter.

13. Both Pearl Equities Development Limited, which was interested in no. 28 Kam Fong Street, and Income Union Limited, which was interested in nos. 26, 28 and 30 Kam Fong Street had made certain offers or were willing to give certain undertakings. Pearl Equities Development Limited had made an offer to buy out the Plaintiffs interests in no. 28 Kam Fong Street which offer had been declined. By paragraph 5 of the affirmation of its director, Mr. Wong Yuk Kwan, made on the 18th September 1992, the 3rd Defendant expressed willingness to purchase the interest of the Plaintiffs and all other owners in no. 28. Similarly, Income Union Limited was willing and prepared to give an undertaking to purchase the Plaintiffs interest in nos. 26, 28 and 30 and to purchase the interest of those other co-owners.

14. I therefore turn to consider my jurisdiction under section 6(3).

Section 6(3)

15. Section 6(3) of the Ordinance provides:

"(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."

16. Section 6(3) stands independently. Notwithstanding differences in wording between section 5 of the Partition Act, 1868 upon which section 6(3) is based, and section 6(3), I hold that the Plaintiffs are not compelled to part with its interests on a valuation. I have been referred to the case of Pitt v. Jones (1880) 5 App. Case 651 and I accept the principle there stated. The Plaintiffs are not willing to accept these offers and that is the end of the matter. Whether the position is that I have no jurisdiction to compel the Plaintiffs or the position is that I should not exercise my discretion to compel them to be bought out, I make no Order under section 6(3).

17. The remaining options therefore are:

1.          To order the sale of the 4 properties as one lot.

2.          To order the sale of the 4 properties as 4 separate properties.

3.          To refuse to make an Order.

Order for sale or no order

18. Mr. Wong, Q.C. urges upon me that once I have decided to order a sale, I may give directions to order that the 4 properties be sold as one lot. That, he says, is a mere matter of giving directions under section 6(4). I cannot accept that submission. It seems to me that I should construe section 6(4) as though the words "of the property" should be read in after the word "sale", and the words "for the sale of the property" after the word "directions" so that the whole would read:

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

19. There are difficulties here over distribution of the proceeds of sale and the giving of permission to any of the persons interested in the 4 properties to bid at any auction were I to direct that the 4 properties be sold as one. Firstly as to distribution of proceeds, if the 4 properties are sold as one lot, how are the proceeds of sale of each property identifiable? Some notional division may not represent the proceeds of sale of the property. Still more so, the division may not represent the interest enjoyed by each of the co-owners in each of the properties sold as one lot. I cannot, it seems to me, give a direction which is 'ultra vires' the powers that I have under the Ordinance. The difficulty I think is emphasised by the fact that the auctioneers and surveyors commissioned by the Plaintiffs to make a report have not in fact stated in their report how they envisaged the distribution of the proceeds of sale should be made, although the Plaintiff's have attempted some calculation of apportionment.

20. Section 6(5) provides:

        "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"

and certain matters, are then set out. It seems to me again that the words "of the property" have to be read into section 6(5) to follow the reference to the word "sale". Once the 4 properties are merged as one lot, it is no longer a question of allowing persons interested in the property to bid at the sale of that property. Again, it seems to me therefore that reading section 6(5) strictly, I have no power to direct that persons interested in, for example, no. 28 may bid at the sale of the property by auction since the property is no longer identifiable and the sale is no longer one under section 6(5).

21. There may also be title difficulties which may or may not be overcome if the properties are sold as one lot.

22. For those reasons I hold that I have no power to order sale as one.

23. That leaves the options to the Court of an order for sale of the 4 properties separately or no order at all.

24. Mr. Wong, Q.C. referred me to the case of Pun Jong-sau v. Poon Wing-kong [1979] H.K.L.R. 662 at pp.666 for the background to the enactment of the Ordinance in Hong Kong and to p.668 where Mr. Justice Trainor said this:

    "The primary intention was to enable an unwilling co-owner to rid himself of the shackles of the co-ownership and to have either a physical_. division of the property into aliquot parts among the co-owners or a division of the proceeds of its sale. It was foreseen that there would be occasions when it would be impossible equitably and sensibly to divide the property into aliquot parts and the Court was empowered to avoid making the order for partition which theretofore it would have been compelled to make..."

25. Mr. Wong, Q.C. also invites me to consider the interests of all the co-owners in each property. I have considered whether when the Court is dealing with the question whether to order a sale, the Court is to consider the interests of all the co-owners as a class or the Court may consider the individual interests and circumstances of each case and each co-owner. I hold that I am at liberty to do the latter, namely to consider the individual interests and the individual circumstances of each property and each coowner.

26. In relation to no. 28 Kam Fong Street and no. 30 Kam Fong Street, I consider the interests in particular of Mr. Ho Nim Yau and Madam Lei Wai Ping respectively. In the case of all the co-owners with the exception of Mr. Ho and Madam Lei, they acquired their interests after the Building Authority had made the closure order. Although I bear in mind that in respect of no. 28 and no. 30, the Plaintiffs between them hold the majority of interests in those properties, nonetheless, it seems to me that they themselves chose to put themselves in that situation. It seems to me to be an abuse of language in these circumstances to hold that they are unwilling co-owners since they extended their arms and invited the shackles to be put upon themselves. Therefore, when balancing their interests against the interests of those individuals who were in the premises before the closure orders_.were made, it seems to me that I ought to consider the interests of the individual owners.

27. Mr. Ho says that he acquired the interest in no. 28 Kam Fong Street with a view to renting out the premises and eventually to living in the premises himself. This of course is no longer possible since the premises have been demolished. Nonetheless, it seems to me that to order a sale by public auction would be for him, almost a form of forced resumption of his property. In those circumstances, I consider that it is proper to refuse to make an order for sale of no. 28 Kam Fong Street.

28. Similarly, in the case of no. 30 Kam Fong Street, I take into consideration that Madam Lei Wai Ping acquired the premises in 1989 in order to live in the premises herself which she did until the closure order was made. Similarly for her, an order for sale by public auction would be tantamount to a form of compulsory purchase. This may seem to be allowing the tail to wag the dog. Nonetheless, it seems to me that the Plaintiffs went into this situation, with their eyes wide open with all the risks attendant. They demolished the premises, thus presenting both of the individuals concerned with a 'fait accompli' and I should not put their interests above the interests of the individual co-owners, Mr. Ho and Madam Lei. I therefore refuse to make an order for sale in the case of no. 30 Kam Fong Street.

29. Turning to no. 26 Kam Fong Street and no. 32 Kam Fong Street, the position of all the co-owners are that they acquired their respective interests after the closure order and in some cases at a very late date. In that respect it seems to me that their respective interests are equally balanced. Even though in that sense none of them is an unwilling co-owner, nevertheless it seems to me that these properties cannot be enjoyed in any way until sale or redevelopment.

30. In this case I feel it is proper to have regard to the fact that the Plaintiffs hold the majority in each of nos. 26 Kam Fong Street and no. 32 Kam Fong Street and I therefore order that nos. 26 Kam Fong Street and no. 32 Kam Fong Street should be sold by public auction. I will hear the parties as to the appropriate directions.

31. In respect of those properties for which I make an order for sale, I consider that I have no jurisdiction to order that the charges for the demolition works carried out by the Plaintiffs be deducted from the proceeds of sale.

H.C.M.P. Nos. 554-557 of 1992