CHU KAR YIN CATALINA v. AMTD RISK MANAGEMENT LTD

HCMP266/2010

   IN THE HIGH COURT OF THE

   HONG KONG SPECIAL ADMINISTRATIVE REGION

   COURT OF FIRST INSTANCE

   MISCELLANEOUS PROCEEDINGS NO.266 OF 2010

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BETWEEN

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J U D G M E N T

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1.  The applicant applied to vacate the lis pendens registered by the respondent by way of a Writ of action in HCA2225/2008 against the Property. The applicant is the wife of one Kong King Ong, Alexander (江慶恩). On 25 May 2007, the husband and wife entered into a sale and purchase agreement to purchase the Property. The husband was holding 60% whereas the wife was holding 40% as tenants in common.

2.  However before the sale and purchase agreement was entered into the respondent commenced the action DCCJ1966/2008 and the applicant’s husband was a defendant.

3.  Thereafter on 18 July 2008, the husband then executed the nomination in favour of the wife and the sale and purchase of the Property was completed by an assignment on the same date to the wife only. The wife became the sole owner/purchaser of the Property. Thereafter on 5 September 2008, the respondent as the plaintiff in the District Court action entered judgment against the husband in the sum of $790,622.40.

4.  However, by that time it was not open to the respondent to apply for a charging order against the Property since the husband was no longer a owner. Consequently, the respondent issued the aforesaid Writ of HCA2225/2008 on 6 November 2008 and the lis pendens was registered the next day.

5.  On 10 December 2008, the respondent filed the bankruptcy petition against the debtor husband. There was quite a number of hearings and procedures in the bankruptcy petition and I will not go into the detail. Suffice it for me to say by 27 August 2009, i.e. more than eight months later, the husband being the debtor, was adjudged bankrupt under the order of Hon Barma J. I was told by one Mr Chow Ping Leung for the respondent in his 1^st affirmation herein that there was a long and tedious negotiation with the debtor and up to now there is no final report of the Official Receiver, being the trustee of the bankruptcy.

6.  The Writ in the HCA2225/2008 therefore expired in November last year. It was not renewed yet. The reasons given by Mr Chow for the respondent was that they involved all their times and efforts in the negotiation and dealings with the debtor and there is no firm result so far.

7.  Then on 11 February this year, we have this HCMP266/2010 for the vacation of the lis pendens as aforesaid. Should the lis pendens be vacated? Ms Queenie Ng, counsel for the applicant submitted that it should be vacated under section 19 of the Land Registration Ordinance, Cap.128 on the grounds that :

(1)  the litigation is not prosecuted bona fide; or

(2)  for other good cause shown.

8.  I do not consider that the HCA2225/2008 is not prosecuted bona fide by the evidence now before me. In the affirmation of the applicant Madam Chu, she did not state her status and it was confirmed this morning through counsel that she was a housewife. She did not inform the court in her affirmation where the deposit of $1.6504 million in the purchase of the Property came from; what was the size of the mortgage, what was the total down payment for the Property which they purchased at first as husband and wife for the consideration of $16.504 million. It might well be, and I cannot say anything higher than that, that the money for the initial deposit came from the husband and therefore the 40% given to the wife could be by way of gift and there is a presumption of gift anyway in their relationship. If it is a gift then it could be fraudulent preference over the other creditors because of the bankruptcy law. Who paid the balance of the purchase price? The wife is also silent in this respect.

9.  She went on to say that the mortgage was taken out by her, which must be the case since she was the sole owner of the Property. However, not even the size of the mortgage, the mortgage deed, and the bank involved were disclosed in the affidavit. She alleged that she was responsible for the mortgage repayment for the Property in the sum of $170,000 per month. Her husband did not make any contributions. Whether that is true or not will be the bone of contention in HCA2225/2008.

10.  The respondent, being the plaintiff in that case is entitled to discovery, interrogatories, and cross-examination eventually at the trial. The applicant, being the defendant in that case, will have to disclose as to how she could manage to pay this princely sum of $170,000 per month.

11.  I have no concrete evidence as to their arrangement of the purchase and the repayment for the mortgage. Theoretically, and I am speaking only on theoretical basis, it may be a case that the husband paid for all the down payment and the mortgage repayment from his money. In that case the respondent is entitled to a declaration that the wife was holding the Property on trust for the debtor, and eventually it will become assets under the assets of the debtor in bankruptcy.

12.  The wife is desirous for vacating the lis pendens because she managed to sell the Property for the consideration of $19,600,000 and the sale and purchase agreement was entered into on 30 January 2010 with completion date on 8 April 2010. The respondent stated clearly that they did not intend to obstruct the sale. They just asked for payment into court or an undertaking from the applicant for 60% of the initial payment together with interest and the amount came up to $990,240.00. In other words, they would like the applicant’s solicitors to stakehold this sum out of the proceeds of the upcoming transaction, pending the resolution of HCA2225/2008.

13.  In fact the respondent also pointed out that the profit in the sale of the Property would amount to $3.096 million and if the debtor husband still have 60% of the beneficial interest in the Property then the amount would come up to $1.176 million. Eventually the respondent submitted that the Writ of HCA2225/2008 shall not be vacated unless the applicant is willing to undertake that a sum of $1.176 million from the proceeds of sale be stakeheld or alternatively that a sum of $1.176 million be paid into court. However the applicant refused to do so.

14.  It is up to the respondent but on my analysis unless there is clear evidence to support that the mortgage repayment was and the other balance downpayment all came from the wife, it is open to the respondent and also the Official Receiver to investigate and trace the money. If the wife was only holding the Property on trust for the husband then all the profits belongs to the husband and therefore could be shared by the creditors. It is a matter for the respondent company.

15.  On my part I do not see any mala fide intention on the part of the creditor respondent in the prosecution of HCA2225/2008. On my analysis there is no other good cause shown as to why this lis pendens registered on the strength of the Writ in HCA2225/2008 should be vacated.

16.  For that reason I dismiss the applicant’s application herein, with costs to the respondent to be taxed if not agreed. Having dismissed the application, I think I would take the rare exception to give liberty to the parties to apply since there is an incumbent completion of sale in April. If the parties can agree on a formula of the sale which may benefit both parties, they can apply further to me. The respondent may succeed in getting a share in the profit for the payment of the debt. Therefore I leave it open to the parties and if you have any application under liberty to apply, you can always come before me on short notice. Just inform my clerk that you are coming and she will give you a time of the date you can come. I do not know how the plaintiff in HCA2225/2008 will proceed the case. They may blow hot and hotter in this High Court action but it is really up to them.

17.  In respect of HCA2225/2008, on the ex parte application of the plaintiff therein, I would exercise my discretion under rule 8 of Order 6 of the Rules of High Court and grant leave to the plaintiff therein to extend the validity of the Writ for 12 months from its expiry on 6 November 2009. Obviously the plaintiff is entitled to amend the Writ once without leave.