XCHRX MAYLUCK INVESTMENT LIMITED v. LEE YIH PING and Others

1995, No.MP1537

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an application by way of originating summons dated 9 July 1995 for an order under s.6 of the Partition Ordinance, Cap.352 for sale of land known as No.253 Apliu Street, Kowloon ("the Land") and for consequential directions. The Plaintiff, Mayluck Investment Limited, also seeks a declaration that the 6th Defendant does not have an interest in the Land and is not entitled to share in the proceeds of sale thereof.

2. The matter was listed as a Chambers application and it came before me in that form. The application should never have been brought on before me in Chambers. Rather, it should have been set down for substantive hearing in open Court. At the hearing, it was not practicable to adjourn the matter into open Court as two of the Defendants were represented by solicitors. I therefore informed the parties that I would proceed to hear the matter in Chambers but that I would adjourn and deliver the judgment in open Court.

Originating summons procedure

3. The practice regarding originating summonses is succinctly set out in judgments delivered by Godfrey J (as he then was) in 1988 and 1989. It is perhaps timely for the legal profession to be reminded of that practice and the applicable principles. In Pak Lan Ching v. Crown Great Co. Ltd., MP No.2253 of 1988 (at pp.4-5), the learned Judge stated :

"I appreciate that it is the usual practice in Hong Kong to treat all Originating Summonses as matters which ought to be heard in Chambers. That practice is wrong. An Originating Summons is a form of originating process which enables parties to commence an action in a summary and less expensive way than the institution of an action by writ. But the public interest in seeing that justice is done in open court is in general the same for an action commenced by Originating Summons as for an action commenced by writ.

Where matters of private concern only are being considered, such as the execution of trusts or the administration of estates, the proper practice is to deal with such administrative matters in Chambers. But hostile litigation is different. For example, a Construction Summons, that is to say, an Originating Summons which raises a question on the construction of a written instrument, can be and should be heard in open court. So also a Vendor and Purchaser Summons.

I express the hope that in future the court's Listing Officers and the profession will realise that unless an Originating Summons is concerned only with administrative matters it should be set down for substantive hearing in open court. This is in accordance with the practice in England; and in accordance with the fundamental principle of justice that it should be done in public and not behind closed doors. (None of this applies to hearings of the summons which are of a procedural nature, such as appointments for directions as to filing of evidence and matters of that sort, which should continue, to be held in Chambers.)" (emphasis supplied)

4. Two months later, in Yau Fook Hong Co. Ltd. v. The Commissioner of Inland Revenue MP No.1340 of 1988 (at p.3), Godfrey J had occasion to address this question again :

"There is a widespread failure to understand that an action commenced by originating summons is an action just like any other, although commenced by a different originating process, and that, unless there are some special reasons, the substantive hearing has to be in open court. Special reasons include the security of the state or the protection of the interests of infants or disabled persons, or the protection of trade secrets. Generally speaking, apart from such cases, actions commenced by originating summons, like, as I say, any other action, ought to be heard in open court : see Scott v. Scott [1913] AC 417."

See also Clough JA (sitting as an additional High Court Judge) in Cheung Kai-wei, Sandra v. Fuk Ka-pak [1992] HKLR 480 at 486 C-D.

5. For my part, I respectfully adopt those observations. I need hardly emphasise the importance of justice being done in public and not behind closed doors. I urge the legal profession to take note of and abide by originating summons procedure as explained above and refrain from perpetuating a practice that is inarguably wrong and which is not in the public interest.

Distribution of proceeds of sale

6. Having dealt with this preliminary point, I now turn to the substantive matters raised in this application. Prior to 1990, there was erected on the Land a five storey building. The building, which was deemed dangerous by the Building Authority, was ordered to be demolished. The current registered owners are as follows :

The 6th Defendant no longer has any interest in the Land but was originally the owner of the whole of the 4th floor. The 4th Defendant acquired a 1/15th equal undivided share in the Land and the exclusive right to the use, occupation and possession of Flat B on the 4th floor in 1986 from the 6th Defendant and sold this interest to the 5th Defendant in March 1995.

7. The parties who are entitled to the Land and the proceeds of sale thereof are accordingly the Plaintiff, and the 1st, 2nd, 3rd and 5th Defendants. It is common ground that the parties wish the Land to be sold. The dispute relates to the distribution of the net proceeds of sale of the Land. The position of the Plaintiff and the 2nd and 5th Defendants is that the proceeds should be divided in accordance with the undivided shares held by the registered owners of the Land. The 3rd, 4th and 6th Defendants did not appear. In fact neither the 4th nor the 6th Defendant has any subsisting interest in the Land, they having been previous owners who have sold on. The 1st Defendant disagrees with the proposed distribution of the proceeds.

8. It was submitted on behalf of the 1st Defendant that it would be unfair to the 1st Defendant for the proceeds to be distributed in accordance with the undivided shares held. A valuation report was put in evidence. It was prepared on the assumption that the original building is still in existence today which, of course, is not the case. On that basis, the surveyor assigned various values to the different floors of this, now imaginary, building. Not surprisingly, as the ground floor and mezzanine floor would normally consist of shop premises, a much higher value was assigned to them. In the surveyor's opinion, the ground and mezzanine floors would together have a value that represents 46.88% of the entire value of the building on the assumption that is still existing. It was submitted on behalf of the 1st Defendant that the proceeds should be distributed in accordance with that apportionment rather than in accordance with the undivided shares held by the co-owners.

9. Counsel for the 1st Defendant was unable to cite any authority in support of his proposal. Apart from the valuation report, he referred to the disparity in Crown rent that is payable by the various owners. The ground and mezzanine floors apparently attract a higher rent. However, counsel for the 1st Defendant did not go so far as to suggest that the proceeds ought to be divided in proportion to the amount of Crown rent payable by each of the co-owners.

10. Crown rent which is levied under the Crown Leases Ordinance is assessed on 3% of the rateable value the property, i.e. the rental that can be earned and assumes that the building is still there. It is a question between the Crown and the individual owners and has nothing to do with the rights of the owners in inter se. In the circumstances, I do not see how a difference in the amount of Crown rent levied can have any bearing on how the proceeds ought to be divided between the co-owners.

11. By way of analogy, Counsel for the 1st Defendant also referred to the Crown Lands Resumption Ordinance. Under s.10(1) of that Ordinance, the tribunal is authorised to determine the amount of the compensation payable on the basis of loss or damage suffered by the claimant due to the resumption of land. Subsection (2) sets out factors to be considered. Again, I do not see the relevance of this Ordinance to the present issue since we are not here dealing with the amount of compensation payable to each of the co-owners. The analogy to the Crown Lands Resumption Ordinance is inapposite.

12. It is relevant to bear in mind that the 1st Defendant acquired their interest in the Land after the building had been demolished. They never had exclusive possession to the ground and mezzanine floors because the building had ceased to exist several years before the 1st Defendant acquired an interest in an undivided share in the Land as a co-owner, initially, in 1992, an equal 1/15th interest and in 1994, a further equal fifth undivided share. The 1st Defendant never had any right to the exclusive use, occupation and enjoyment of the ground and mezzanine floors since the respective grants contained in the Deed of Mutual Covenant were and became extinguished when the building was demolished : see clause 12 of the DMC. What they acquired in 1992 and 1994 was simply the relevant undivided shares in the Land.

13. As no case has been made out for division of the proceeds other than in accordance with the undivided shares in which the co-owners hold the Land, I will order that the proceeds be so distributed.

14. So far as consequential directions are concerned, there is general agreement save as to the proposal that the Plaintiff's solicitors be appointed trustee under s.7 of the Partition Ordinance. Counsel for the 1st Defendant, on instructions, submitted that a firm not connected with the parties ought to be appointed instead.

15. The objection appears to be based on a misunderstanding of the role of a solicitor appointed trustee under s.7 of the Partition Ordinance. As trustee, that solicitor is in a fiduciary position and is fully accountable to all the parties interested. I accept the submission of the Plaintiff and the 2nd and 5th Defendants that it is wholly unnecessary to appoint a different firm. That would only increase costs and achieve nothing else.

16. I will order as follows :

(1) That the Land be sold by public auction;

(2) That the conduct of the sale be committed to the Plaintiff's solicitors;

(3) That in default of agreement, the reserve price and the remuneration of the auctioneer and the trustee appointed under s.7 of the Partition Ordinance be fixed by the Court;

(4) That any party to these proceedings including their servants, agents, nominees or companies to which they or either of them have an interest is to be at liberty to bid at the sale;

(5) The Plaintiff's solicitors be appointed trustee under s.7 of the Partition Ordinance;

(6) That the net proceeds of any sale that may be effected, after the discharge of all encumbrances (if any) and all other costs and disbursements arising from the sale of the Land be distributed by the Plaintiff's solicitors among the parties in the following manner but subject to the deduction of such encumbrances and all other costs and disbursements as are attributable to their respective undivided shares in and of the Land from the respective shares of the parties herein in the proceeds of such sale :

(7) It is declared that the 4th and 6th Defendants do not have any interest in the Land and are not entitled to share in the proceeds of sale thereof;

(8) Liberty to apply.

17. So far as costs are concerned, I make an order nisi that the 1st Defendant do pay the Plaintiff and the 2nd and 5th Defendants the costs of these proceedings.

(Doreen Le Pichon)

Judge of the High Court