RE CHEUNG FUK CHEONG AND OTHERS

HCMP 1294/2019

[2020] HKCFI 579

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1294 OF 2019

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D E C I S I O N

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Background

1.  This is an ex parte application by the 5 applicants, all brothers, under section 12A of the Conveyancing and Property Ordinance, Cap 219 (“the Ordinance”) for an order that the property known as all those pieces or parcels of ground registered in the Land Registry as Lot Nos 1923, 1930 and 2042 in DD 118, Yuen Long, New Territories (“the Lots”) be freed and discharged from a mortgage upon the applicants’ payment into court of a sum of $1,000.

2.  By a Succession to Property dated 17 January 1950, Cheung Ching-tseung (張禎祥) (“the Father”) succeeded, amongst others, the Lots from one Cheung Tai Po.

3.  By a Succession to Property dated 8 March 1971, Cheung Fuk Cheong (the first-named applicant) and the other 4 applicants with Man Ho as their trustee succeeded, amongst others, the Lots from the Father.

4.  By an Assignment dated 1 December 1993 made between Man Ho as trustee and the 2^nd-5^th named applicants as beneficiaries, the trusteeship was terminated and all the applicants have since held the Lots as tenants-in-common in equal shares.

5.  By a sale and purchase agreement dated 13 July 2018, Lot No 2042 and another Lot No. 2043 of DD 118 was sold by the applicants to one Wan Wai Ming.  It was then discovered from the land search records that the Lots are subject to a mortgage (“the Mortgage”) referred to in the Block Government Lease in favour of one Cheung Chiu Hing (張兆興) (“the Mortgagee”).  As the Block Government Lease was dated 24 January 1905, the Mortgage was presumably created in about 1905.

6.  The Schedule to the Block Government Lease showed that, in addition to the 3 Lots, the Mortgage also covered Lot No 2061 of DD 118. The total consideration for the Mortgage for the 4 Lots was $30.

7.  There is no written instrument to show discharge of the Mortgage.

8.  The applicants have made attempts to find the Mortgagee but to no avail.

(1)  As the predecessors in title of the applicants and the applicants themselves had lived in Tong Tau Po, a letter dated 18 January 2019 was issued by Shum Wong and Co, solicitors acting for the applicants) to the Village Committee of Tong Tau Po to enquire of the whereabouts of the Mortgagee;

(2)  A Notice to the Mortgagee (seeking to deal with the    Mortgage) was posted up on the notice board of the Village Committee for 14 days between 22 January and 4 February 2019 but no one came forward with information concerning the Mortgage or the Mortgagee;

(3)  An advertisement of the Notice has been placed in Sing Pao on 27 March 2019; and

(4)  Death search and probate searches for Cheung Chiu Hing have been conducted on 5 December 2018 and 3 July 2019, respectively, but no record of the Mortgagee has been found.

9.  The applicants therefore make the present application to pay $1,000 into court to discharge the Mortgage.  That sum is calculated with a notional interest rate of 20% per annum on the principal of $30 for 114 years ie from 1905 (the date of the Block Government Lease) to 2019 (the date of this originating summons).  There is a margin of $286. 

Legal principles under section 12A of the Ordinance

10.  Under section 12A of the Ordinance,

“(1) Where land is subject to any encumbrance, whether immediately realizable or payable or not, and the encumbrancer is out of the jurisdiction, cannot be found or is unknown, or if it is uncertain who the encumbrancer is, the court may, if it thinks fit, on the application of the party for the time being entitled to redeem the encumbrance, direct or allow payment into court of a sum of money sufficient to redeem the encumbrance and any interest thereon.

(2)  Upon payment into court of the sum referred to in subsection (1), the court may, if it thinks fit, and either after or without any notice to the encumbrancer, as the court thinks fit, declare the land to be free from the encumbrance, and make any order for conveyance or vesting order as appropriate, and give directions for the retention and investment of the sum of money paid into court and for the payment or application of the income thereof, and for the payment of an amount certified by the court to be the reasonable costs of the applicant in making the application, such amount to be deducted from the sum of money paid into court.”

11.  An application under section 12A of the Ordinance consists of 3 stages:

(1)  The first stage is to obtain directions or approval of the court regarding payment into court under section 12A(1);

(2)  The second stage is for the court to consider whether to exercise of discretion under section 12A(2) to declare the land free from an incumbrance; and

(3)  The matter would come back to court at the third stage, when the encumbrance, or any person entitled to the money, applies to the court for payment under section 12A(3).

See Cheung Chi Wang & Anor [2002] 1 HKLRD 409, at §§11 and 13, DHCJ Lam (as Lam VP then was); Man Chi Kan v Man Tsak Lun [2003] 2 HKLRD 489 at §7, DHCJ Lam (as Lam VP then was).

12.  The court cannot adopt a one-stage approach, that is to direct payment into court under section 12A(1) and at the same time declare that upon payment being made, the lot shall be free from the mortgage: Fu Sum v Fu San Fat [2008] 5 HKLRD 271, at §§11-17; Re Light Time Investments Ltd, HCMP 326/2010, 25 March 2010, at §§5-12, DHCJ      L Chan (as he then was).

13.  The application can be made on ex parte basis: Cheung Chi Wang, at §20.

Application of the legal principles

14.  This is the first stage of the application. 

15.  The Mortgage was an encumbrance to Lot No 2043.  There was no instrument showing its discharge or succession of interest thereunder.

16.  The steps stated in paragraph 8 above were reasonable steps taken by the applicants to find the Mortgagee.  I am satisfied that the Mortgagee cannot be found.

17.  Cheung Fuk Cheong, eldest brother of the applicants, was born in 1943 and is now aged 76.  He grew up in Tong Tau Po Tsuen. Despite being in occupation of the Lots for so long, he and the other 4 applicants have never heard of the name 張兆興. The Father had never mentioned to the applicants that name.  The Father had passed away.  Cheung Fuk Cheong had made enquiries of other villagers of Tong Tau Po Tsuen but no one knew anything about 張兆興 or whether he had successors in title.  I am satisfied that the encumbrancer is unknown.

18.  The affirmation of Cheung Fuk Cheong affirmed on 12 February 2020 disclosed that according to the land search record, the predecessor-in-title to Lot No. 2043 was a person named 張兆興 Cheung Shiu Hing (bearing the same transliteration for the Chinese name of the Mortgagee) whereas the Mortgagee was named Cheung Chiu Hing.  By a Succession to Property dated 28 July 1964, the Father succeeded Lot No. 2043 from Cheung Shiu Hing.  Paragraphs 3 and 4 above applied such that the applicants now become tenants-in-common to this Lot.

19.  By virtue of paragraph 18, there is a possibility that the applicants are the successors to the Mortgagee insofar as Lot No 2043 was concerned, but the difference in English names made it unclear if the predecessor and the Mortgagee were one and the same person. 

20.  In Man Chi Kan v Man Tsak Lun, at §9, DHCJ Lam held as follows:

“For the reasons I have set out in para.16* of my judgment in Re Cheung Chi Wan & Another [2002] 1 HKLRD 409, I have some doubt as to whether the mortgage is still subsisting. However, on reflection, I think I should adopt a liberal approach in construing the requirement of the land being subject to the encumbrance under s.12A … In view of the fact that the record at the Land Registry contained the remark set out in para.2 above, I think it would be against the spirit of the legislation if I were to hold that s.12A is not applicable in these circumstances.” [*Note: in paragraph 16, of that judgment, there was evidence showing that possession of the property had been given back to the mortgagor or his successors giving rise to a reasonable inference that the mortgage had been discharged.]

21.  On the evidence in paragraph 19 above, it is uncertain if Cheung Chiu Hing was the predecessor in title to Lot No. 2043.

22.  The applicants are the current registered owners of the Lots and are entitled to redeem the Mortgage over the Lots, including Lot No 2042. 

23.  The amount which the applicants offer to pay into court is reasonable having regard to the interest, the period over which the Mortgage extended and the margin.  The $1,000 is more than sufficient to cover the Mortgage even though the present application covers only 3 out of 4 lots.

Conclusion

24.  I am satisfied that the requirements in section 12A(1) of the Ordinance are met.  It is appropriate for the court to make an order for payment into court.  I therefore order as follows:

(1)  Within 14 days from resumption of business of the High Court Registry (which has been closed due to COVID-19), the applicants do pay $1,000 into court to redeem the Mortgage and any interest thereon;

(2)  Within 7 days after the payment into court, the Applicants do advertise in a widely circulated local Chinese Newspaper a notice making known this order and the fact of payment having been made into court pursuant to this order and stating that any person interested in the Mortgage and/or the payment aforesaid may apply within 14 days to be joined as a respondent to the proceedings;

(3)  The applicants may, after a lapse of not less than 21 days from the publication of the advertisement, make a paper application pursuant to section 12A(2) of the Ordinance for a declaration that the Lots  be free from the Mortgage;

(4)  There be no order as to costs; and

(5)  The affirmation of Cheung Fuk Cheong affirmed on 12 February 2020 shall be filed within 14 days of resumption of business of the High Court Registry.  This order shall not be sealed until after that filing.

25.  I thank Mr Alex YH Lai for his assistance.