FORTUNE HOUSES DEVELOPMENT LTD v . CHEUNG CHEE CHAI AND ANOTHER

HCMP 1599/2023

[2023] HKCFI 2770

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1599 OF 2023

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JUDGMENT

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THE APPLICATION

1.  By an Ex Parte Originating Summons filed on 20 September 2023, the applicant applied for an order pursuant to section 12A of the Conveyancing and Property Ordinance (Cap 219, Laws of Hong Kong) (“the CPO”) that the land known as The Remaining Portion of Lot No.383 in D.D.433 (“the Land”), upon payment into Court of a sum of money, be free from (i) the Mortgage dated 25 April 1931 registered in the Land Registry by Memorial No. TW33242 in favour of Cheung Chee Chai (“the Mortgage”), (ii) the Sub-Mortgage dated 11 September 1934 registered in the Land Registry by Memorial No. TW36914 in favour of Chow Wai Ki (“the Sub-Mortgage”) and (iii) the Vesting Order of Cheung Chee Chai’s benefit of mortgage vide action No.189/1935 in favour of Chow Wai Ki and registered on 21 November 1935 (“the Vesting Order”).

THE LAW

2.  Section 12A of the CPO provides that:

“(1) Where land is subject to any encumbrance, whether immediately realizable or payable or not, and the encumbrancer is out of the jurisdiction, cannot be found or is unknown, or if it is uncertain who the encumbrancer is, the court may, if it thinks fit, on the application of the party for the time being entitled to redeem the encumbrance, direct or allow payment into court of a sum of money sufficient to redeem the encumbrance and any interest thereon.

(2) Upon payment into court of the sum referred to in subsection (1), the court may, if it thinks fit, and either after or without any notice to the encumbrancer, as the court thinks fit, declare the land to be free from the encumbrance, and make any order for conveyance or vesting order as appropriate, and give directions for the retention and investment of the sum of money paid into court and for the payment or application of the income thereof, and for the payment of an amount certified by the court to be the reasonable costs of the applicant in making the application, such amount to be deducted from the sum of money paid into court.

(3) On application by the encumbrancer or any person entitled to the money or fund in court, the court may direct payment or transfer thereof to the persons entitled to receive or give a discharge for the same, and generally may give directions respecting the application or distribution of the capital or income thereof.

(4) In this section, court (法院) means the Court of First Instance unless the party to the application submits to the jurisdiction of the District Court.”

3.  Guidance on the procedure to be adopted in relation to an application made under section 12A of the CPO has been given by Deputy High Court Judge Lam (as Lam PJ then was) in Re Cheung Chi Wang & Another [2002] 1 HKLRD 409. There are three stages in this application:

(1)  The first stage is for the party for the time being entitled to redeem the encumbrance to obtain a direction or approval of the court regarding payment into court provided it is shown that the encumbrancer is out of the jurisdiction, cannot be found or is unknown, or if it is uncertain who the encumbrancer is.

(2)  In the second stage, on the basis that payment into Court is made pursuant to the Court’s approval, the Court will consider the exercise of its discretion and declare the land to be free from the encumbrance. At this stage, the Court has the discretion to decide whether notice should be given to the encumbrancer.

(3)  The matter would come to its third stage when the encumbrancer or any person entitled to the money paid into Court applies to the Court for payment.

DISCUSSION

4.  Having considered the affirmation filed in support of this application, I am satisfied that:

(1)  The applicant is the registered owner of the Land;

(2)  The Land is still subject to the Mortgage, the Sub-Mortgage and the Vesting Order;

(3)  The applicant is entitled to redeem the Mortgage, the Sub-Mortgage and the Vesting Order.

5.  I am also satisfied that reasonable steps have been undertaken to locate Cheung Chee Chai and Chow Wai Ki but in vain. Since they cannot be found, section 12A(1) of the CPO is engaged.

6.  In respect of the payment to be paid into Court, Mr Law for the applicant proposed that the sum be fixed at $58,000. Having regard to the amount owed (including interest) and the notional annual interest rate of 20% which was adopted, I agree that the proposed sum is reasonable.

ORDER

7.  By reasons of the aforesaid, I make the following orders as proposed by the applicant:

(1)  Leave be granted to the applicant to pay into Court a sum of $58,000 being a sum sufficient to redeem the Mortgage, the Sub-Mortgage and the Vesting Order and any interest thereon;

(2)  Within 14 days after the payment into Court is made, the applicant do advertise in a widely circulated local Chinese newspaper a notice making known this Order and the fact of payment having been made into Court pursuant to this Order and stating that any person interested in the Mortgage, the Sub-Mortgage and the Vesting Order and/or the payment aforesaid may apply within 14 days to be joined as a defendant to these proceedings;

(3)  The applicant may after the lapse of no less than 21 days from the publication of the advertisement make a paper application pursuant to section 12A(2) of the CPO for a declaration that the Land be free from the Mortgage, the Sub-Mortgage and the Vesting Order; and

(4)  There be no order as to costs.