APEX MIGHT ENTERPRISES LTD v. WONG TAO LAP

DCMP 2013/2011

[2019] HKDC 810

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2013 OF 2011

________________________

________________________

________________________

________________________

D E C I S I O N

________________________

Introduction

1.  This is an application (the “Application”) of Apex Might Enterprises Limited (the “Plaintiff”) for summary determination against the defendant, Mr Wong Tao Lap (the “Defendant”) under Order 28, rule 4 of the Rules of the District Court, Cap 336H (“RDC”).  In these proceedings, the Plaintiff seeks an order for sale under Order 50, rule 9A and Order 88, rule 5A of the RDC, on the strength of two Charging Orders Absolute granted by the High Court on 23 February 2011 (the “1^st COA”) and 5 May 2011 (the “2^nd COA”) both under the action number HCA 928/2010 (the “HC Action”).  The property in question situates at 1^st Floor, No 9 Shek Tong Street, Kowloon (the “Property”).  The Defendant is the sole registered owner of the Property.

2.  At the substantive hearing, the Plaintiff was represented by counsel Ms Angie Yan (“Ms Yan”), and the Defendant was represented by counsel Mr Ronald Pang (“Mr Pang”).  At the end of the substantive hearing, I reserved my decision and gave directions to the Plaintiff to file and serve a supplemental affirmation exhibiting an updated valuation report, updated land search and updated rateable value of the Property.  The Plaintiff did so on 13 June 2018.[1]  I also invited the Defendant and the Plaintiff to lodge supplemental written submissions consequential to the said updated information.  Mr Pang and Ms Yan did so on 20 June 2018 and 28 June 2018 respectively.

Background

3.  The background facts of this case are largely undisputed.

4.  The Plaintiff is a company that was incorporated in January 1994, for the sole purpose of holding the property known as Ground Floor, Bright View Court, 151 Argyle Street, Kowloon, Hong Kong (“BVC”).  BVC was acquired on 28 March 1994.

5.  The Plaintiff was owned by 4 siblings in equal shares, namely Ms Wong Man Chung, Miranda, Ms Wong Chung Yan, Loratta (“Loratta”), Ms Wong Chuen Yan (“Chuen Yan”), and the Defendant. 

6.  BVC was initially acquired to house the said siblings and their mother, Madam Lee Shui Man (“Madam Lee”).  As the siblings grew up, they started their own families and moved out from BVC one by one, until only Madam Lee and the Defendant resided therein.

7.  Unfortunately, disputes amongst the siblings led to the Plaintiff being wound up and placed into liquidation pursuant to the order of Master Ho dated 13 February 2008.[2] Subsequently, on 24 December 2009, Mr Fok Hei Yiu (“Mr Fok”) and Mr Roderick John Sutton (“Mr Sutton”) became liquidators of the Plaintiff, and remain as such at the time of this Application (Mr Fok and Mr Sutton collectively referred to as the “Liquidators”).

8.  As part of the winding-up of the Plaintiff, the Liquidators, on behalf of the Plaintiff, sought the possession of BVC, but was unable to do so as it was occupied by the Defendant and Madam Lee.  This led to the HC Action, under which a final judgment dated 31 August 2010 was entered against the Defendant and Madam Lam as they did not give any notice of intention to defend.  The Defendant and Madam Lee were ordered to give vacant possession of BVC to the Plaintiff, to pay to the Plaintiff HK26,000 per month from 27 January 2010 up to the date when vacant possession of BVC is delivered, and fixed costs of HK$11,545 (the “Final Judgment”).

9.  By a summons dated 7 September 2010, Madam Lee and the Defendant applied to set aside the Final Judgment (“Setting Aside Application”).  The Setting Aside Application went before Master Hui and was dismissed on 23 November 2010, with costs in the sum of HK$15,000 awarded to the Plaintiff (the “Dismissal”).[3]

10.  Thereafter, the 1^st COA against the Property was obtained based on the Dismissal.  Under the same, it is ordered that the Defendant’s interest in the Property do stand charged with the payment of HK$15,134.79 (representing the outstanding costs with interest as at 3 January 2011), and interest on the outstanding principal sum of HK$15,000 from 4 January 2011 up to the date of payment in full at judgment rate.  Costs of the application for 1^st COA assessed at HK$7,000 is also awarded to the Plaintiff.

11.  As Madam Lee and the Defendant had not complied with the Final Judgment, the 2^nd COA was obtained against the Property.  Under the same, it is ordered that the Defendant’s interest in the Property do stand charged with:-

(1)  the sum of HK$361,527.48, including the mesne profits at the rate of HK$26,000 per month from 27 January 2010 up to 26 February 2011, in the total sum of HK$338,000 and fixed costs of HK$11,545 together with interest thereon from 1 September 2010 to 21 March 2011;

(2)  further mesne profits at the rate of HK$26,000 per month from 27 February 2011 to the date when vacant possession of BVC is delivered to the Plaintiff;

(3)  interest on HK$338,000 and further mesne profits referred to in (2) above at judgment rate from 22 March 2011 until the date of full payment;

(4)  interest on the fixed costs of HK$11,545 at judgment rate from 22 March 2011 until date of full payment; and

(5)  costs of the 2^nd COA in the sum of HK$7,000 plus interest.

12.  Vacant possession of BVC was finally delivered to the Plaintiff on 12 July 2011, and BVC was sold on 25 November 2011.  But the said sums covered by the 1^st and 2^nd COAs were not paid by Madam Lee and the Defendant.

13.  Pausing here, there is no dispute between the parties that Madam Lee’s share of monetary obligations under the Dismissal and the Final Judgment, a total sum of HK$287,442.86, have been cleared.  In recognition of her beneficial interest in the BVC, dividends from the sale of BVC were payable to Madam Lee, and HK$287,442.86 were deducted from her dividends before balance of the same was distributed to Madam Lee on 29 May 2012.

14.  By the order of Mr Justice Au (as he then was) dated 11 August 2011, leave was granted for the Liquidators to commence these proceedings in the District Court to enforce the 1^st and 2^nd COAs.

The Plaintiff’s case

15.  Against the aforesaid background, the Plaintiff now seeks an order for sale of the Property based on the 1^st and 2^nd COAs in these proceedings.

16.  From the 4^th affirmation of Mr Fok, the rateable value of the Property for the year 2017/2018 was HK$82,800.[4]  The Property was incumbered with 2 other incumbrances, namely an order by the Building Authority asking the Defendant to demolish a metal canopy, and a certificate issued by the Building Authority asking the Defendant to reimburse it for the work carried out and completed.[5]

17.  Also in his 4^th affirmation, Mr Fok explained the amount owed by the Defendant under the 1^st and 2^nd COAs.  Under the 1^st COA, there are 3 sums as set out in paragraph 10 above.  For the sum of HK$15,134.79, the Defendant is only liable for half of the same.[6]  Regarding the interest, again the Defendant should be liable for half of the same.  Thus Mr Fok took HK$7,500 as the basis of calculation for the interest.  From 4 January 2011 to 8 August 2017, a span of 6 years and 217 days, the interest payable by the Defendant amounted to HK$3,956.71.[7]  As to the costs of HK$7,000, similarly, the Defendant is liable for half of it in the sum of HK$3,500.  Together with interest on the same from 4 January 2011 to 8 August 2017, the amount owed by the Defendant was HK$5,346.47.[8]

18.  Based on the calculations above, the Defendant’s liability under the 1^st COA as at 8 August 2017 was HK$16,870.58.[9]  A daily interest of HK$2.41 would continue to accrue from 9 August 2017 onward until full payment.

19.  For the 2^nd COA, the 5 sums payable are set out in paragraph 11 above.  Regarding the sum of HK$361,527.48, half of the same is HK$180,763.74.  As to the further mesne profit at the monthly rate of HK$26,000 from 27 February 2011 to 11 July 2011, a span of 4 months and 15 days, Mr Fok adopted half of the monthly rate as the basis of calculation.  The mesne profits during the said period therefore amounted to HK$58,500.[10]  Regarding the interest accrued on the mesne profits during various periods and up to 8 August 2017, the total reached HK$115,440.[11]  For the interest on half of the fixed costs of HK$11,545, the amount of interest accrued from 22 March 2011 to 8 August 2017 was HK$2,947.93.[12]  Finally, half of the costs of the 2^nd COA and interest on the same amounted to HK$5,287.40 as at 8 August 2017.[13]

20.  Based on the calculations above, the Defendant’s liability under the 2^nd COA as at 8 August 2017 was HK$362,939.07.  A daily interest of HK$51.90 would continue to accrue from 9 August 2017 onward until full payment.

21.  The Defendant’s liability under both the 1^st and 2^nd COAs amounted to HK$379,809.65 as at 8 August 2017, with daily interest of HK$54.31 to be accrued thereafter.  Ms Yan, in her written submissions, had helpfully updated the figure to HK$393,604.39 as at the date of substantive hearing (19 April 2018).[14]

22.  As per the valuation report dated 4 June 2018, the market value of the Property with full vacant possession was HK$7,000,000.  The value for sale under repossession of the Property with full vacant possession was HK$5,600,000.[15]  In her supplemental written submissions, Ms Yan asked to adopt HK$5,600,000 as the reserve price of the Property in the auction for sale.

23.  Apart from the above, Mr Fok had, in his affirmations, made extensive refutations of the defences proffered in the affirmations filed by and for the Defendant. For reasons to be given below, it is unnecessary to set them out in this Decision.

The Defendant’s case

24.  The Defendant, Chuen Yan and Ms Wong Siu Yin (“Ms Wong”) filed their affirmations in opposition of this Application.[16]  They contain the grounds that the Defendant wishes to rely on to defend these proceedings.

25.  In a nutshell, the Defendant alleged that he had moved out of BVC in March 2010 and resided at Ms Wong’s place.  As such, the Final Judgment was wrongly entered against him.  He had no vacant possession to give at the time of the Final Judgment and he should not be liable to pay the mesne profits after March 2010.  It was Madam Lee, a beneficial owner of BVC, who refused to vacate the same until 12 July 2011 (“1^st Ground”).

26.  The Defendant accepted his defence under the 1^st Ground would mean that Madam Lee should be solely liable for almost all mesne profits payable under the Final Judgment and the 2^nd COA until she vacated BVC on 12 July 2011.  The HK$287,442.86 that was deducted from her dividends was therefore insufficient to cover her liability.  In this regard, both the Defendant and Chuen Yan, being shareholders of the Plaintiff, agreed to waive demanding Madam Lee to make up the shortfall (“2^nd Ground”).

27.  Apart from the above, Chuen Yan in her affirmation stated that she and Loratta had agreed to use their dividends in the proceeds of sale of BVC to help clear the mesne profits owed by the Defendant under the Final Judgment.  The Defendant had accepted their offers, but he disagreed with his liability to shoulder half of the mesne profits payable under the Final Judgment and 2^nd COA.  Chuen Yan accused the Liquidators have erred in believing that the Defendant had refused offer of help from Chuen Yan and Loratta, which ultimately led to these proceedings and this Application (“3^rd Ground”).

Discussions

28.  As I have explained in the above, this Application is made pursuant to Order 28, rule 4 of the RDC for summary determination.  A summary determination under Order 28, rule 4 is akin to a summary judgment application under Order 14 of the RDC, but with the difference that the burden is not cast upon a defendant, as in Order 14.[17]

29.  In support of this Application, Ms Yan in her written submissions has set out the powers of the court to make an order for sale based on charging order absolute under O 50, r 9A and O 88, r 5A of the RDC.  It is within the discretion of the court to grant such order, a discretion which must be exercised judicially.  She has also cited the case of So Yuk Ping v Tam Sum Shing[18] to emphasize on the point that a judgment creditor is prima facie entitled to enforce his judgment unless the debtor establishes some good reasons to the contrary. The competing equities of the parties should be carefully weighed.  These principles are trite and not disputed by Mr Pang.  I have no reservation to adopt them in this Decision.

30.  To start with, on the strength of the Final Judgment and the 1^st and 2^nd COAs, together with the leave granted by Mr Justice Au, I have no doubt that the Liquidators are entitled to bring these proceedings against the Defendant.

1^st and 2^nd Grounds

31.  Turning now to the defences raised by the Defendant, both parties have expended much effort in arguing on the 1^st Ground.  Ms Yan and Mr Pang have also in their written submissions devoted much time on this, and the principle of res judicata.  Notwithstanding, at the start of the substantive hearing, Mr Pang conceded that he would not pursue on the 1^st Ground.  In my view, this is a fair and appropriate concession to make.  The Defendant admits, and the documents contained in the hearing bundles have revealed,[19] that the 1^st Ground was raised as his defence in support of the Setting Aside Application.  The same must have been considered by Master Hui before the Dismissal.  If the Defendant was dissatisfied with the Dismissal, the proper course for him was to lodge an appeal against the same, but he had not done so.  As such, the question of res judicata is engaged.  It is, therefore, inappropriate for the Defendant to once again rely on the 1^st Ground as a defence to these proceedings.

32.  Despite his concession, Mr Pang in his submission asked this court to determine the extent of mesne profit owed by the Defendant under the 2^nd COA.  Mr Pang argued that the Defendant’s liability on mesne profits should be limited to the sum of HK$67,137.79 (covering the period from 27 January 2010 to late-March 2010 plus costs of the HC Action).  However, this submission would, if accepted, not only upset the Final Judgment, but also have the effect of varying the 2^nd COA.  The latter is clearly outside the jurisdiction of this court.  Pursuant to section 20B(4) of the High Court Ordinance, Cap 4, a charging order made by the Court of First Instance should be discharged or varied only by the Court of First Instance. 

33.  Come what may, the said submission has its roots in the 1^st Ground.  With the Defendant having abandoned on the 1^st Ground, it is futile to pursue on it.

34.  Equally, the 2^nd Ground, which is an extension of the 1^st Ground, is now untenable and need not be considered.

3^rd Ground

35.  As to the 3^rd Ground, Mr Pang has not elaborated on it in his submissions.  Regardless, I do not see how the 3^rd Ground could stand as a defence to these proceedings.  Notwithstanding Chuen Yan and Loratta’s willingness to help settle his judgment debts, at the end of the day, the Defendant is still denying such liability and refused to pay the same.  I see no fault on the part of the Liquidators in commencing these proceedings.

Over-security

36.  Mr Pang’s main contention to this Application is based on the classic defence of over-security.  In gist, Mr Pang argues that the judgment debts under the 1^st and 2^nd COAs are small compared with the value of the Property.  As at the time of his supplemental written submissions, the amount owed under the 1^st and 2^nd COAs was about HK$400,000.  This sum, as Mr Pang suggests, is miniscule relative to the updated market value of the Property (HK$7,000,000).  The outstanding debt represented only about 6% of the market value of the Property.  As such, this is clearly a case where the court should not exercise the discretion to make an order for sale.

37.  On this point, Ms Yan agrees that the updated market value of the Property is considerable compared to the judgment debts owed by the Defendant.  Nevertheless, over-security is only one of the factors that the court should consider when exercising its discretion.  The court also has to take into account other matters such as the conduct of the debtor.

38.  The above submissions from Mr Pang and Ms Yan are supported by authorities.  From Robinson v Bailey[20]and Oldham, Li & Nie, Solicitors Wong Lin Chooi[21], 2 cases cited by Mr Pang, the general principle is that it is not a proper exercise of discretion to make a charging order on an asset of considerable or substantial value in respect of a relatively small debt payable by the debtor.[22]  However, as submitted by Ms Yan and agreed by Mr Pang, this is not the decisive factor.  The court also has to take into account other matters such as the conduct of the debtor: see Union Finance Ltd v Leung Wai Ling,[23] and General Field Investment Limited v Chan Hoi Lam & Anor.[24]

39.  For the reasons below, I am of the view that an order for sale shall be made.

40.  I note the sizeable difference between the judgment debts and the market value of the Property, and this, in my view, is the only argument against an order for sale.  I cannot turn a blind eye to the conducts of the Defendant.  He has clearly no intention to comply with the Final Judgment and the Dismissal.

41.  First, he has not made any offer at all to settle the judgment debts covered by the 1^st and 2^nd COAs.  The 2^nd COA might be, in his mind, controversial, but the same could not be said about the 1^st COA.  He had failed in his Setting Aside Application, and he was ordered to pay costs for it.  The 1^st COA is to secure such costs.  There is nothing controversial about it.  Non-payment of such costs is a straightforward case of the Defendant disregarding a court order.

42.  Second, even if he disagreed with the Final Judgment, he already had his days in the court, making the Setting Aside Application, and also his subsequent repeated applications to set aside the Final Judgment and to delay its execution.  He had his chances to appeal against the Dismissal and other subsequent decisions unfavourable to him, but he never seized them. It is time for him to comply with the court orders.

43.  Third, the Defendant had more than enough time to settle the judgment debts, but he never did.  He also had the offers from Chuen Yan and Loratta to settle the judgment debts for him, but he simply refused to accept defeat and face the consequences.

44.  Fourth, when the Liquidators commenced these proceedings to enforce the 1^st and 2^nd COAs and ask for an order of sale of the Property, the Defendant chose to play the old tunes and rehearsed the same defences he had raised in the HC Action.  There is neither attempt nor mentioning of any plan by the Defendant to clear the judgment debts.

45.  Fifth, no evidence is adduced by the Defendant to show that he has other assets that could be used and sufficient to satisfy the judgment debts, for example personal assets which could be seized and sold under a writ of fieri facias.  Chuen Yan and Loratta’s offers to pay the judgment debts for the Defendant lend support to this.

46.  Sixth, the Defendant has not demonstrated any hardship that he may suffer if the Property is sold.  As per his own evidence, he does not reside at the Property.  The Property is left unoccupied and mostly unattended to.

47.  In his supplemental submissions, Mr Pang raised the argument that the Plaintiff is sufficiently protected by the 1^st and 2^nd COAs.  It is, therefore, unnecessary for the Property to be sold. I disagree.  The 1^st and 2^nd COAs only prevented the Defendant from selling the Property without making good of the judgment debts.  They do not, unless being enforced, enable the Plaintiff to recover the mesne profits, interest and costs owed under the Final Judgment and Dismissal.  It is not protection that the Liquidators now seek, but recovery of the judgment debts that the Defendant has never offered to settle.

48.  Apart from the above, Mr Pang also complained about the loss that the Defendant would suffer if the Property is sold at the reserved price of HK$5,600,000.  There would be a loss of HK$1,400,000 as compared to the market price of HK$7,000,000.  On this point, I agree with Ms Yan that this argument is based on speculation.  There is no guarantee that the Property would only be sold at the reserve price.

Conclusion

49.  In light of the above, I am satisfied that the Plaintiff is entitled to commence these proceedings to enforce the 1^st and 2^nd COAs, and that the Defendant has failed to establish any good reasons to the contrary.  Despite the market value of the Property far exceeds the amount of judgment debts, I rule in favour of the Plaintiff on the over-security issue, after weighing this with the conducts of the Defendant.

50.  I allow this Application and make an order of sale of the Property.  The costs of these proceedings including this Application shall be paid by the Defendant to the Plaintiff to be taxed if not agreed.  There be certificate for counsel for this Application.

Orders

51.  I therefore make the following orders on nisi basis:-

(1)  Unless within 28 days from the date hereof the Defendant redeems the 1^st and 2^nd COAs and pay the sum of HK$393,604.39 as at 19 April 2018 and further daily interest rate at HK$54.31 thereafter, the Defendant do deliver vacant possession and title deeds and documents of the Property to the plaintiff for the purpose of the sale of the Property without further reference to the court.

(2)  CS Auctioneers Limited (“CSAL”) be appointed to conduct the sale of the Property.

(3)  The Property be sold by public auction.

(4)  The Property be sold at a reserve price of not less than HK$5,600,000.00.

(5)  The remuneration in the total sum of not less than the total of auction fee of HK$3,000.00 and a commission of 1% of the sale price of the Property be allowed to CSAL and paid out of the proceeds of sale of the Property (“CSAL’s Remuneration”).

(6)  The costs, charges and other expenses incurred in connection with the said sale, with solicitors’ costs excluding disbursement not exceeding HK$15,000.00 (the “Costs of Conveyancing”).

(7)  The Defendant to execute the necessary conveyance for transfer of his legal title and beneficial interest in the Property to the purchaser(s) and in default of his so doing and pursuant to section 38A of the District Court Ordinance, the court hereby appoints Mr Wai Yip Hin, Partner of Messrs Henry Wai & Co, solicitors for the Plaintiff, to execute the conveyance.

(8)  The proceeds of sale be applied in the following priority:-

(a)  in payment of all rent, taxes, rates and other outgoings due and affecting the Property;

(b)  unless the Property is sold subject to prior incumbrance(s), in discharge of that/those prior incumbrance(s);

(c)  in payment of CSAL’s Remuneration;

(d)  in payment of Costs of Conveyancing;

(e)  in payment of the money, interest and costs due under the 1^st and 2^nd COAs;

(f)  in payment of the Plaintiff’s costs in these proceedings, including the costs of this Application, with certificate for counsel, to be taxed if not agreed;

(g)  in payment of all costs and expenses incurred by the Plaintiff in taking enforcement for recovery of possession of the Property, if necessary; and

(h)  the balance, if any, be paid to chargee of the incumbrance affecting the Property and ranked immediately behind the 1^st and 2^nd COAs or to the Defendant, if there is no such subsequent charge.

(9)  Upon the Defendant paying to the Plaintiff the money mentioned in paragraph 51(1) hereinabove and the costs of obtaining and executing this order (including what is due to CSAL and Messrs Henry Wai & Co), this order shall cease to have any further effect but without prejudice to the validity of any contract made prior to or without notice of such payments.

(10)  There be liberty to apply.

52.  The aforesaid orders nisi under paragraph 51 would become absolute within 14 days from the date hereof.