CHAU SIU KEUNG v. THE PERSONAL REPRESENTATIVE OF THE ESTATE OF KONG HING YUNG DECEASED

DCMP 840/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 840 OF 2016

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D E C I S I O N

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Introduction

1. The Plaintiff has been the registered owner of Lot No.393 in Demarcation District No.36 (“the Lot”) since 18 November 2015.

2. The root title to the Lot is a Block Government Lease dated 27 June 1906 (“the Block Government Lease”).  In the Schedule to the Block Government Lease, the Lot was stated to be subject to a mortgage in favour of a Kong Hing Yung in the sum of HK$6.00 (“the Mortgage”).

3. In the present application, the Plaintiff seeks leave to pay into court a sum of HK$1,000.00 pursuant to section 12A of the Conveyancing and Property Ordinance (Cap.219), and for a declaration that the Lot be discharged from the Mortgage.

Section 12A

4. Section 12A provides as follows:-

“(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 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’ means the Court of First Instance unless the party to the application submits to the jurisdiction of the District Court.”

5. Ms Gwilt, counsel for the Plaintiff, referred me to the following cases on the legal principles applicable to s.12A: Re Cheung Chi Wang & Another [2002] 1 HKLRD 409; Lau Chi Wan & Another v Shing Kai Kwan HCMP 601/2010 (Deputy District Judge Geoffrey Chan; 10 May 2010); Fu Kin Chow & Others v Ip Kat Fan DCMP 1314/2007 (HH Judge Leung; 1 April 2008); Harvest Development Ltd v The Personal Representative of the Estate of Liu Wa Fuk DCMP 1367/2006 (HH Judge Lok; 19 September 2007); and Re Cheung Ting Fan Tso DCMP 2731/2010 (Deputy District Judge H Au-Yeung; 12 September 2011).  The legal principles are well rehearsed, and there is no need for me to set them out exhaustively.

6. In re Cheung Ting Fan Tso, Deputy District Judge H Au-Yeung (as he then was) summarised the three stages involved in an application under s.12A:-

(a)  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 that it is shown that the encumbrancer is out of jurisdiction, cannot be found or is unknown, or if it is uncertain who the encumbrancer is.

(b)  At 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.

(c)  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.

The present case

7. In the Block Government Lease, Kong Hing Yung was said to be in possession of the Lot. This shows that the Mortgage was a Chinese customary mortgage.  As stated in Re Cheung Chi Wang & Another, if there is evidence showing that the possession of the land was given back to the mortgagor or his successors, a reasonable inference is that the Chinese customary mortgage was discharged.  This inference could be reinforced by the lack of action on the part of the mortgagee to enforce the mortgage.  As such, section 12A does not come into play.

8. But I accept the Plaintiff’s submissions that, due to the effluxion of time, it is difficult to produce clear evidence to show that the Mortgage was indeed discharged.  Since the Plaintiff is content to treat the Mortgage to still be subsisting, I am satisfied that I have the power under section 12A to consider the Plaintiff’s application.

9. First, I am satisfied that the Plaintiff has shown that the mortgagee cannot be found.  I accept the his affirmation evidence that despite enquiries made with the local people and the village management of the Lot, no one ever heard about Kong Hing Yung or was acquainted with him or his descendents.  No one ever approached the Plaintiff or his predecessor in title claiming to be the mortgagee of the Mortgage, or the successor thereof.  Further, a search at the Probate Registry revealed no information as to Kong Hing Yung, or his personal representatives.

10. Next, I am to consider what shall be the payment to be made by the Plaintiff into court. 

11. The principal of the Mortgage was HK$6.00.  Adopting a notional interest rate of 20% per annum (as in cases such as Man Chi Kan v Man Tsak Lun [2003] 2 HKLRD 489, Fu Kin Chow, and Re Cheung Ting Fan Tso), the total amount of principal plus interest should be HK$147.60 from the commencement of the Block Government Lease (i.e. 1 July 1898) up to 2016.  The Plaintiff proposes to pay HK$1,000.00 into court.  I am satisfied that HK$1,000.00 is sufficient for the purpose of s.12A.

12. At the hearing, Ms Gwilt submitted that I could compress the first two stages into one, as was done in some previous cases.  She submitted that the Mortgage was over 100 years old, and it was unlikely for there to be any person to be claiming under it.

13. Ms Gwilt confirmed that the Plaintiff did not advertise or otherwise make known to the public the fact that he took out the present application, and time for hearing of the same.

14. In my judgment, justice is better served if the approach adopted in Re Light time Investments Limited HCMP 326/2010 (Deputy High Court Judge L Chan; 25 March 2010) and Re Cheung Ting Fan Tso is followed, namely that the Plaintiff is to advertise a notice making known the fact that payment has been made and he is seeking a declaration to be granted by the court under s.12A, and a declaration to be sought by paper application consequent upon such advertisement.  Although I agree that it is unlikely for any person to come forward to claim as the successor of the mortgagee, the approach in these 2 cases ensures that proper notice will be given to those who may be interested in the outcome of this application.

15. In addition, I am told by the Plaintiff that there is no urgency for him to obtain a declaration under s.12A as there is no transaction pending.  Thus, I see no prejudice to the Plaintiff in having to give such notice by way of an advertisement.

The Order

16. I therefore make the following order:-

(1)  Leave be granted to the Plaintiff to pay into court a sum of HK$1,000.00 being the principal and interest due under the mortgage created in favour of Kong Hing Yung with respect to the land known as Lot No.393 in Demarcation District No.36, as stated in the Block Government Lease dated 27 June 1906;

(2)  Within 7 days after the payment into court is made, the Plaintiff do advertise in a widely circulated local Chinese newspaper a notice making known this Order and the fact that payment having been made into court pursuant to this Order and stating that any person interested in the mortgage and/or the payment aforesaid may apply within 14 days to be joined as a respondent to these proceedings;

(3)  The Plaintiff 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 Conveyancing and Property Ordinance (Cap.219) for a declaration that the aforesaid land be free from the aforesaid mortgage; and

(4)  There be no order as to costs.