RE TSUI (or TSU) KWONG LUN TSO with CHUI CHI KWONG and TSUI KA MING as managers

HCMP 13/2024

[2024] HKCFI 798

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 13 OF 2024

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DECISION

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APPLICATION

1.  This is an application under Section 12A of the Conveyancing and Property Ordinance (Cap 219) (the “Ordinance”), which provides:

“12A. Discharge of encumbrances by the court

(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.”

2.  In the present case, the Applicant is the registered owners of Lots Nos 1362 and 1365 in Demarcation District No 113 (the “Properties”). The Properties had all along been owned by the Applicant.

3.  The Properties were stated to be subject to a mortgage in favour of PO TUNG COMPANY with FUNG YIU LAU as trustee for $25 (the “Mortgage”). In the Mortgage, the particulars of incumbrances read: “For securing payment of HK$25.00 on three months’ notice of any date. Yearly interest of HK$7.50 payable by instalment of $3.75 at each crop.”

4.  The Applicant entered into a contract for the sale of the Properties with Jetkind Limited on 25 October 1997 (the “SPA”). Upon discovery of the existence of the Mortgage the SPA was cancelled on 13 July 1998.

5.  The Applicant submits that the Mortgage is a stale mortgage and now seeks to perfect the title to the Properties by paying into court a sufficient money for redemption of the Mortgage, relying on section 12A of the Ordinance.

6.  The Applicant seeks an Order that:

(1) Leave be granted to the Applicant to pay into Court a sum of HK$850.00 being a sum sufficient to redeem the Mortgage and interest thereon.

(2) Within 14 days after the payment into Court is made, the Applicant do advertise in a Chinese newspaper circulated in Hong Kong 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 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 Conveyancing and Property Ordinance (Cap 219) for a declaration that the said Properties be free from the Mortgage.

APPLICABLE PRINCIPLES

7.  Deputy High Court Judge Lam (as Lam PJ then was) had set out in detail the history and how Section 12A of the Ordinance should be applied in Re Cheung Chi Wang & Anor[1].

8.  The power under Section 12A is predicated upon one of the following being established[2]:

(1) the encumbrancer is out of the jurisdiction;

(2) the encumbrancer cannot be found;

(3) the encumbrancer is unknown; or

(4) it is uncertain who the encumbrancer is.

9.  The applicant needs to establish these with proper and sufficient evidence before he can ask the court to exercise its discretion under Section 12A. Further, before it can be shown that the encumbrancer cannot be found or is unknown or uncertain, the Applicants must take reasonable steps to find out who the encumbrancer is and to locate him. Evidence as to steps taken by the Applicants in this regard must generally be placed before the court[3].

10.  Section 12A(2) of the Ordinance contemplates that the power of the court to make declaration to free the land from the encumbrance would be exercised only after the money has been paid into court (see in Re Uplands, Portmore Road, Weybridge, Surrey [1948] WN 165). Hence, the first stage is to obtain direction or approval of the court regarding payment into court under Section 12A(1). Then, after money is paid into court pursuant to that direction, the court will consider the exercise of its discretion under Section 12A(2) at a second hearing[4].

11.  At the second stage, the power could be exercised “after or without any notice to the encumbrancer”. Hence, the court has a discretion in deciding whether notice should be given to the encumbrancer.

12.  The matter would come back to court at the third stage when the encumbrancer or any person entitled to the money applies to the court for payment. The court may require notice to be given to such parties before deciding on how to exercise its discretion[5].

DETERMINATION

13.  I am satisfied that the requirements of section 12A of the Ordinance have been satisfied in the present case:

(1) There is no evidence of the Mortgage having been discharged or redeemed.

(2) The Mortgagee PO TUNG COMPANY, the trustee FUNG YIU LAU, the witnesses 張復興 and 郭秀華 could not be found.

(3) A Business Registration search for the name PO TUNG COMPANY rendered no company by that name.

(4) After enquiry with the Births and Deaths General Register Office, it was found that FUNG YIU LAU had died on 7 September 1933 at No 177 Lin Fa Ti Village and a FUNG FO LUN of No 165 Lin Fa Ti Village was the informant of his death. However, the Applicant could not locate those addresses. The village representative of Lin Fa Tei Village told one of the managers of the Applicant that FUNG YIU LAU and FUNG FO LUN were his ancestors that had died some time ago but he had not heard of PO TUNG COMPANY.

(5) No grant of probate or letter of administration has been issued in relation to FUNG YIU LAU after conducting a probate search with the Probate Registry.

14.  I am satisfied that the mortgagee cannot be located, found or notified and it is appropriate in the present circumstances to proceed with the application without notice to the mortgagee.

15.  The figure of HK$850 was arrived at by HK$25 (principal) + HK$7.5 (yearly interest) x 110 years.

16.  This method of calculation is in line with the decided cases. I am satisfied that such amount should be adequate to satisfy any interest the mortgagee might have in the Mortgage. I will grant relief as sought.