WING HANG BANK LTD v. CHI SHING PLASTIC & MOULD TOOLING LTD AND OTHERS

HCMP 526/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 526 OF 2012

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D E C I S I O N

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Background

1.  The plaintiff commenced this Order 88 action in 2012 to obtain possession of the Property, with the intention to sell it, and then to use the proceeds to settle the debts owed to the plaintiff.

2.  With the Amended Order of Master Levy dated 19 June 2012, the plaintiff sold the Property on 7 January 2013 and received HK$4.9m.  After settling the debt owed to the plaintiff, the balance remaining was HK$1,581,020.06 (“the Surplus Proceeds”).

3.  On 11 March 2013, the plaintiff made an ex-parte application to have the Surplus Proceeds paid into court.

4.  The application was supported by the Second Affirmation of Siu Wai Han, which stated, inter alia, that: -

(a) There were 4 chargees which might have an interest or are entitled to the Surplus Proceeds, namely, Citibank (Hong Kong) Limited (“the 1^st Chargee” and the Intended Intervener), Hang Seng Bank Limited (“the 2^nd Chargee”), Standard Chartered Bank (Hong Kong) Limited (“the 3^rd Chargee”), and the Joint and Several Trustees of the property of the 2^nd defendant (“the 4^th Chargee”).

(b) The Surplus Proceeds was insufficient to pay up the alleged judgement debt due to the 1^st Chargee.

(c) However: -

(i) The 2^nd Chargee required “the Plaintiff to decide how the sale proceeds are to be distributed and does not have any comment on the Plaintiff’s….proposed release of the Surplus Proceeds to the 1^st Chargee”.

(ii) The 3^rd Chargee had no objection to the plaintiff’s release of the Surplus Proceeds to “the party entitled thereto”.

(d) As such, the Plaintiff concluded that: -

“…the positions of the 2^nd and 3^rd Chargees to the Plaintiff’s proposed distribution of the Surplus Proceeds are not clear. The 2^nd and 3^rd Chargees do not consent to the Plaintiff’s proposed distribution of the Surplus Proceeds.”

“The Plaintiff is not in a position to adjudicate both on the entitlement of the 1^st Chargee and on the quantum of the judgment debt owed to the 1^st Chargee.”

5.  The plaintiff also sought a further sum of HK$64,539.33 to be deducted from the Surplus Proceeds as their own costs in the ex-parte application.

6.  I made an order in terms of this application on 19 March 2013.  However, before the order was sealed, I received an urgent letter dated 22 March 2013 from the lawyers for the 1^st Chargee seeking the matter be put on hold for at least 14 days so the 1^st Chargee could apply to be joined as a party and be heard.

7.  The 1^st Chargee also drew my attention to the case of The Yien Yieh Commercial Bank Limited v Tam Sai Chun & Cheung Chun Tin (unreported, HCMP 4317 of 1999) in which Registrar C Chan, in dealing with a similar situation of surplus proceeds, stated that: -

“ 8. I do not think it right for the Court to do the distribution on behalf of the mortgagee. It is a statutory duty that has to be performed by the mortgagee and it is wrong for the Court to assume such duty unless there is a dispute where interpleader proceedings has been taken out …

12. … I find no reason for payment into Court. There is no authority for the Plaintiff to do so. If the Plaintiff finds that there is a dispute, an interpleader summons should be taken by the stakeholder. It is wrong to pay the money into Court and wait for the parties concerned to claim. The legal costs are unnecessarily incurred …

  15. … As I do not find that the Plaintiff has any right to pay the money into Court and neither do I find that the Court has the power to deal with the money paid in, I direct that the money be paid back to Messrs. Gallant Y.T. Ho & Co ...”

8.  Therefore, I gave an order on 26 March 2013 that the Order dated 19 March 2013 should not be sealed and directed the plaintiff to fix a date for a 30 minute hearing and to give notice of such hearing to all chargees.

9.  The 1^st Chargee, in the meantime, has taken out a Joinder Summons and both this and the 30 minute hearing were heard together on 24 April 2013.

10.  The Joinder Summons was listed for 3 minutes, but both the 1^st Chargee and the plaintiff have submitted Skeleton Submissions.

11.  During the hearing, the plaintiff raised concern whether it has been allowed adequate time to deal with substantive argument at the hearing because the Joinder Summons was only listed for 3 minutes.

12.  I therefore granted leave for the plaintiff to submit a detailed written submission within 21 days, and the 1^st Chargee to submit its reply 14 days thereafter, and for the matter to be dealt with “on paper”.

The matters in dispute

13.  I now have the benefit of hearing the parties’ oral submissions and reading all their written submissions.

14.  The plaintiff did not raise any dispute on the legal principles in the Yien Yieh case but maintained that, in this case, the payment-in was justified since it was wrong to say that there was “absolutely no dispute” as to where the money should go from the replies of the 2^nd and 3^rd Chargees.

15.  I disagree. Priority of where the money should go is a simple matter of looking at the land search to see which of the chargees registered their charging order nisi first on time (Wong Kam Wing v Cyril Murkin (HK) Ltd [1989] 1 HKLR 597).

16.  Purely as an observation, knowing how lawyers write their letters, I cannot see how any would commit their clients to the “absolute” abandonment of any rights, even if the hope of exercising that right amounts to no more than a glimmer in “Never Never Land”.

17.  More importantly, I do not think that the test concerns whether there are “absolute” commitments from the subsequent chargees to abandonment their rights before the mortgagee can distribute the surplus proceeds.  Rather, the test is whether there are interpleader proceedings.  There are none in this case: no other party is claiming the Surplus Proceeds besides the 1^st Chargee.

18.  The other arguments raised by the plaintiff were procedural arguments.

19.  The plaintiff sought to distinguish the Yien Yieh case: in that case, the payment-in was made without leave but here, the court had already granted leave.

20.  I think the plaintiff is wrong here: the Yien Yieh case was not decided because the payment-in was done without leave, but was decided because the court should not be dealing with surplus proceeds unless there was dispute as evidenced by interpleader proceedings.

21.  The leave for the plaintiff’s ex-parte application was granted without the court being made aware of this case, thus the argument is only whether the court should now reverse the order.

22.  The plaintiff argued that it was wrong for the 1^st Chargee to seek to convert an ex-parte application already granted into an inter-parte application and effectively seeking to re-open the order granted.  Instead, the 1^st Chargee should apply to set aside or vary the order.

23.  The plaintiff nevertheless agreed that the court has discretion to re-open its decision and reverse an order which had not been perfected, but argued that this discretion should not be exercised because the 1^st Chargee should make an application to set the order aside.

24.  I cannot understand the logic.  This is clearly a circular argument: the whole point of reversing the order now is to dispense with the need for another application to set aside the order!

25.  The plaintiff also quoted the case of Sun Jianqiang v. Trans-Island Limousine Service Limited [2004] 1HKC 533 and argued that the discretion to reverse an order before being sealed should only be exercised when there are “exceptional circumstances” or “strong reasons” to do so.

26.  I would think that the fact that the court’s previous decision was erroneously made without applying the established legal principles (as stated in the Yien Yieh case) was as strong a reason as any to reverse the order.

27.  Further, I agree with the 1^st Chargee’s submissions on the role of the lawyers when making an ex-parte application.  There must be a general requirement, if not a positive duty, for the lawyers making any applications before a master (especially in ex-parte applications when the master does not have the benefit of opposing submissions) to draw the master’s attention to all relevant authorities, whether these are in their clients’ favour or otherwise.

Conclusion

28.  I will therefore make the following directions: -

(a) The Order of Master Leong dated 19^th March 2013 on the Payment-In application be set aside and re-open for argument;

(b) The Payment-In Application be heard inter-partes by way of written submissions;

(c) Leave be granted to Citibank (Hong Kong) Limited (1) to be joined as a party of this action as “The Intervener”; (2) to participate in this action; and (3) to make written submissions on the Payment-In Application;

(d) The Payment-In Application be dismissed;

(e) The plaintiff’s costs of and incidental to the Payment-In Application be disallowed;

(f) The plaintiff is directed to pay the Surplus Proceeds in the sum of HK$1,581,020.06, and all interests accrued thereon, if any, to Citibank (Hong Kong) Limited via its solicitors, Tai, Tang & Chong, without deduction, forthwith; and

(g) There be Order Nisi for: -

(i) Costs of the Joinder Summons be in the cause; and

(ii) The costs of and incidental the Payment-In Application, including the costs for the hearing on 24 April 2013, and the costs of the written submissions, be paid by the plaintiff to Citibank (Hong Kong) Limited forthwith, to be summarily assessed by way of a written application to be made within the next 28 days if not agreed, with Certificate for Counsel.