RE TSANG KING TIM

DCMP 1410/2018

[2018] HKDC 938

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1410 OF 2018

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D E C I S I O N

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1.  This is the plaintiff’s application under section 12A of the Conveyancing and Property Ordinance, Cap 219.

2.  The plaintiff is the current owner of the Remaining Portion of Section A of Lot No 375 in DD 184.  He bought the land from his uncle, Tsang Min Steve, formerly known as Tsang Kwok-wing, under a Memorandum of Agreement for Sale and Purchase.  According to the Memorandum, the sale and purchase was completed on 24 September 2015 and supposedly on a “free-from-encumbrances” basis.  

3.  However, land search has revealed that the land is still subject to a mortgage dated 2 November 1967 in favour of one M & I Limited.  According to the Memorial evidencing the mortgage, a sum of $3,000 was lent by M & I Limited to the plaintiff’s uncle, which sum was repayable on 31 October 1968 together with interest thereon at the rate of $15 per $1,000 per month.

4.  According to the plaintiff’s uncle, he has repaid the loan in full within one year of the loan and certainly before 31 October 1968 although it is not apparent from the land search that the mortgage has been discharged.

5.  Further investigation has revealed that M & I Limited was voluntarily wound up and dissolved in 1993.  According to the liquidators’ statement of account for the winding-up, all the properties of the company had been disposed of and the surplus assets returned to the contributories.  Significantly, there was no mentioning of any outstanding mortgage in the statement.  The plaintiff’s solicitors made enquiries with the liquidators and there was no response.  

6.  On 18 May 2018, the plaintiff commenced these proceedings by means of an ex parte originating summons to apply for a declaration that the land be freed and discharged from the mortgage.  The plaintiff’s solicitors have advertised these proceedings in a local newspaper, inviting any interested parties to contact them.  So far, no one has come forward.   

7.  On 13 June 2018, I set down the summons for hearing and invited the plaintiff to address me on whether the land is subject to any encumbrance for him to invoke section 12A. Materially, subsection (1) of that section provides that:

“Where land is subject to any encumbrance, whether immediately realisable 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.” (underline supplied)

8.  Today, the plaintiff’s counsel argues that notwithstanding the plaintiff’s case that the mortgage has been fully repaid, there is no documentary evidence to properly or sufficiently prove that the mortgage has actually been released or discharged.  He refers me to the judgment of Deputy High Court Judge Johnson Lam (as he then was) in Re Cheung Chi Wang[2002] 1 HKLRD 409 and Man Chi Kan v Man Tsak Lun[2003] 2 HKLRD 489 and invites me to adopt a liberal approach to facilitate the conveyancing of the land.  He submits that since there may be a doubt as to whether the mortgage still exists, section 12A should apply. He further submits that granting the application will not affect the mortgagee in anyway and the only party that would suffer a prejudice would be the plaintiff but the plaintiff is content to accept that the mortgage is still subsisting and is willing to pay money into court as directed.

9.  Despite his valiant attempt, I am not convinced by the argument.  In Re Cheung Chi Wang, the parties overlooked the fact that the mortgage in question might be a Chinese customary mortgage under which the mortgagee would enter into possession of the land when the mortgage was created and would have the use and occupation of the land in lieu of interest for the duration of the mortgage.  If there was evidence showing that possession of the land had been given back to the mortgagor or his successor, a reasonable inference could be raised that the mortgage had been discharged.  For that reason, the learned judge invited the plaintiff to reconsider whether it was appropriate to proceed under section 12A.  See paragraphs 14, 16 and 23 of that judgment.

10.  In the later case of Man Chi Kan, the learned judge accepted that it would be against the spirit of the legislation if he were to hold that section 12A was inapplicable in similar circumstances given the record at the Land Registry that the mortgage was still subsisting.  He adopted a liberal approach and granted the plaintiff’s application.  See paragraphs 6 and 9 of that judgment.

11.  In my view, the circumstances of this case are very different.  There were uncertainties in the two cases cited and the court could only infer (without certainty) that the mortgage might have been discharged.  In the present case, we have direct evidence from the plaintiff’s uncle (ie the mortgagor) that the mortgage has been repaid.  There is nothing to contradict his evidence.  To the contrary, the fact that there was no mentioning of any outstanding mortgage in the final statements of the liquidators of the mortgagee goes to support the plaintiff’s case.  In my view, the plaintiff’s doubt as to whether the mortgage still exists is self-inflicted and without basis.

12.  As Deputy High Court Judge Lam explained in paragraph 9 of Re Cheung Chi Wang, section 12A is only applicable when the land in question is subject to an encumbrance.  Hence, if the evidence shows that the encumbrance has been released or discharged, the section does not apply. 

13.  In the circumstances of this case, I am not satisfied that the land is subject to any encumbrance.  The plaintiff is not entitled to invoke section 12A, and the ex parte summons is dismissed.