CHU FU KEUNG v. WONG MEI YAN MIRANDA

HCA 1838 / 2019

[2024] HKCFI 2971

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1838 OF 2019

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DECISION

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1.  This is the application of Chu Fu Keung (the “Plaintiff”) by Summons dated 30 September 2024 (the “Summons[1]”) for an order that (a) the Order dated 6 September 2022 be set aside; (b) the Property be sold under the Partition Ordinance (“PO”) and RHC Order 31; and (c) an account for the rental income and expenditure the Property from April 2021 up to the calendar month of the assignment of the Property to the purchaser.

2.  The Defendant appeared in person, having filed a notice to act in person on 17 October 2024.

Relevant background

3.  P and Wong Mei Yan Miranda (the “Defendant”) are tenants in common of the Property which they acquired in 2012/2013 as part of a joint investment venture.

4.  The Property which is situated in Kwai Chung, New Territories, has an area of approximately 1300 ft.² and is designated for industrial use and the parties agreed that the Property would be leased out for rental income.

5.  As the Defendant is an estate agent, she was entrusted with the management and rental of the Property.

6.  It is common ground that disputes relating to the income and expenses of the Property led to a loss of mutual trust and confidence between the parties. It resulted in the Plaintiff issuing the writ in this action on 3 October 2019 seeking an order for sale and consequential relief.

7.  Shortly thereafter, the Plaintiff took out a summons for summary judgment (subsequently re-amended). After the filing of affirmations by the parties, the summons for summary judgment was scheduled to be heard on 8 September 2022.

8.  Shortly prior to the scheduled hearing, the parties reached a consensus that the Defendant would buy out the Plaintiff’s 50% share in the Property.

9.  Upon the joint application of the Plaintiff and the Defendant, Recorder William Wong SC ordered by consent that (1) the Defendant shall buy-out the Plaintiff’s share in the Property for HK$1.78 million within 120 days from the date of the Order; (2) each party shall pay their respective expenses; (3) the hearing scheduled for 8 September 2020 be vacated; and (4) upon the sale, the Defendant be fully discharged from any liabilities to the Plaintiff in relation to the Property and the present proceedings be discontinued with no order as to costs (the “2022 Order”).

10.  The Defendant failed to comply with the 2022 Order despite multiple letters sent by the Plaintiff’s solicitors to the Defendant’s former solicitors to follow up on the buy-out of the Plaintiff’s share in the Property. In their letter of 6 May 2024, the Defendant’s solicitors informed the Plaintiff that the Defendant has no financial resources to complete the transfer.

Jurisdiction to set aside the Order

11.  On 10 October 2024, the Defendant’s solicitors filed skeleton submissions which the Defendant adopted at the hearing.

12.  The principal issue that arises is whether this Court has jurisdiction to set aside the 2022 Order which was made by way of consent.

13.  Her opposition to the Summons is that this Court is functus officio and has no jurisdiction to set aside the 2022 Order, there being no challenge to the underlying settlement agreement. On that basis, the 2022 Order being a consent order is a contract and can only be set aside in exceptional circumstances such as unfair prejudice, fraud or undue influence.

14.  The Defendant relied on Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237D for the proposition that under the common law, when the judge’s order has been drawn up, entered or otherwise perfected, the court has no further jurisdiction over the case which is what happened in the present case.

15.  It was submitted that if the Plaintiff wishes to set aside the 2022 Order, he must start a separate action or bring an appeal.

16.  Mr Brian Tsui, counsel for the Plaintiff, disagreed. He submitted that §4 of the 2022 Order stipulated that all claims in the action would only be discontinued upon compliance with the buy-out provision in §1. As it is common ground that the Defendant has failed to comply with the 2022 Order, the Court is not functus in so far as the action is concerned.

17.  He referred to the following passage from Foskett on Compromise, 9^th Edn at § 8-11:

“When an agreement permits recourse to the original claim in the event of a breach then, provided the specified breach is committed, the innocent party may elect to pursue his original claim or proceed on the compromise.”

18.  In my view, the Plaintiff’s reading of the 2022 Order is clearly correct. Accordingly, this Court retains jurisdiction over the action.

19.  At the hearing, the Defendant told the Court that the Plaintiff only contributed 25% towards the acquisition of the Property. She appeared to deny that she and the Plaintiff are co-owners of the Property in equal shares.

20.  In her affirmation filed on 30 March 2021, she acknowledged that she and the Plaintiff each contributed $900,000 towards the down payment of $1.8 million, the balance of the purchase price of $1.8 million being paid for by a mortgage with the Shanghai Commercial Bank Limited (“SCB”) taken out in her sole name.

21.  The monthly mortgage payments were financed out of the rental income[2]. She also accepted that if the Property were sold, after repaying the outstanding SCB mortgage and any deficit in the outgoings, the sale proceeds would be divided equally[3].

22.  It is not the Defendant’s case that she had a 75% interest in the Property. In any event, apart from the absence of any evidence to substantiate that claim, by agreeing to the 2022 Order, she acknowledged that she and the Plaintiff are the registered joint owners of the Property and she agreed to acquire the Plaintiff’s legal and beneficial interests in the same for $1.78 million within 120 days of the 2022 Order.

23.  As it is common ground that the Defendant is in breach of §1 of the 2022 Order, I agree with the Plaintiff that the Court has jurisdiction to set aside the 2022 order. In all the circumstances, I have no doubt that it must be set aside.

The Summons

24.  I now turn to consider the other relief sought by the Plaintiff.

(a)  Order for sale

25.  The Plaintiff being a co-owner has the right to an order for partition or sale of the Property under the PO. Given the nature of the Property, I agree that it is impracticable to make an order for partition. An order for sale should be made unless the Defendant is able to show that it would not be beneficial to the parties or that it would result in very great hardship to the Defendant. It is an assessment that the Court has to make, objectively.

26.  The Property was valued at $4 million in November 2020. Given the current state of the property market and the fact of the outstanding mortgage with SCB, I accept that a sale by way of private treaty in the open market is likely to be most economical for both parties.

(b)  Incidental directions for the order for sale

27.  The Plaintiff proposes that its solicitors do have the conduct of the sale given the Defendant’s lack of cooperation and responsiveness in implementing the 2022 Order. As it would be in the Plaintiff’s interest for the Property to be sold as soon as possible at the best market price, that consideration would also necessarily safeguard the Defendant’s interest in the Property.

28.  In so far as the Defendant has created a 2^nd charge over her share of the Property in favour of Wah Chu Finance Limited on 20 July 2022, registered in the Land Registry on 1 August 2022 (the “2^nd legal charge”), the Plaintiff proposes that Mr Lo Kam Ting, partner of the Plaintiff’s solicitors be given power to apply the Defendant’s share of the sale proceeds to settle the debt created by the 2^nd charge and to secure a discharge of the same.

29.  The proposed distribution of the sale proceeds is set out in §5 of the Summons: they would first be employed to discharge all liabilities and expenses jointly incurred by both parties. Half of the net proceeds would then be paid to the Defendant after further deducting (i) the costs of the action; (ii) half of the profits derived from the Property to which the Plaintiff is entitled and (iii) costs in discharge of the 2^nd legal charge.

(c)  Order for account

30.  The Defendant’s account of the rental income and expenditure of the Property for the period from January 2013 to March 2021 show a net sum of $74,315.45 payable to the Plaintiff as the Plaintiff’s profit from his investment in the Property.

31.  The Plaintiff also seeks an account for the rental income and expenditure of the Property from April 2021 up to the calendar month when the Property is sold. Such an account follows on his entitlement to the sum mentioned in § 31 above.

Costs

32.  The Plaintiff submitted that as the Summons was necessitated by the Defendant’s non-compliance with the 2022 Order, he should be awarded the costs of this action. In the present case, costs must follow the event and the Defendant is not in a position to submit otherwise.

Conclusion

33.  As the Defendant made no submissions concerning the other relief that the Plaintiff seeks which I consider reasonable, and there is no reason for not granting an order in terms of the Summons[4].

34.  So far as costs are concerned, I make an order of costs in favour of the Plaintiff, with certificate for counsel, such costs to be summarily assessed and payable forthwith.

35.  I further direct that (i) the Plaintiff do lodge and serve his statement of costs today; (ii) the Defendant do lodge her list of objections (if any, limited to 3 pages) within 14 days thereafter; and (iii) the Plaintiff do lodge his reply (if any, limited to one page) within 7 days thereafter.