LSY v . HTF

FCMC 2978/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.2978 of 2005

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REASONS FOR DECISION
(stay of completion of sale by public auction)

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Introduction

1.  This is the Respondent’s application for stay of completion of a sale by auction conducted on 5 June 2013 in respect of one of the two properties adjudged by this Court to be sold by way of public auction after the trial proper of the ancillary relief back in 2011.   I will refer to the property at stake as the Canton Road property.

2.  On 2 November 2011, this Court handed down its Judgment whereby, inter alia, it was directed that if the Canton Road property could not be sold by private contract, the Petitioner who was directed to have the conduct of sale, could arrange a sale by public auction at a reserve price of not less than 80% of the valued price set out in a valuation report adduced at the ancillary relief trial.   As at the date of trial in 2011, the valued price of the Canton Road property was 2.84 million.

3.  The Respondent succeeded in appealing against this Court’s decision on the ratio of 70:30 sharing of the matrimonial assets between the Petitioner and the Respondent.  The Court of Appeal varied to the ratio of 60:40 sharing but expressly stating that all other orders and directions on implementation including the conduct and process of sale granted by this Court to remain unchanged.

4.  On 5 June 2013, the Canton Road property was sold by public auction by the Petitioner through Chartersince Surveyors Limited at the value of 2.84 million.

The Respondent’s Application

5.  On 11 June 2013, the Respondent filed a Notice to Act in Person replacing his lawyers Messrs. Au, Thong & Tsang.    On the same day, he himself issued a Summons hand-written in Chinese in the following terms :-

“指示有關於本人物業廣東道xx號xx/F x暫停簽署雙方的買賣”

6.  There is also a supporting affirmation filed by the Respondent himself in Chinese with various exhibits.   

7.  On 25 June 2013, the Respondent again acting by himself filed 2 further Affirmations in Chinese.  In one of these further Affirmations, he produced a Valuation Report (apparently without any leave or directions) of Centaline Surveyors Limited dated 11 June 2013 on the valuation of the Canton Road property to worth 5.05 million.  

8.  On 26 June 2013 (that is, on the following day) and surprisingly, a Notice to Act was filed by another firm of solicitors Messrs. Simon C.W. Yung & Co. acting for the Respondent.   Counsel Mr. Ernest Koo was instructed to appear for this hearing.

Procedural Grounds of Application  

9.  Since the Summons was issued by the Respondent himself, I sought clarification from Counsel the procedural grounds of and the basis for the present application taken out by the Respondent himself.   I was informed by Counsel that this would either be under Order 45 rule 11 in the form of a stay of execution or under Order 29 rule 1 in the form of an injunction.

Factual Basis of Application

10.  In essence, the Respondent’s argument was that there is, prima facie, irregularity in the process of the auction for sale of the Canton Road property in that it was not conducted reasonably and to the best interest of the beneficiaries under the sale by auction, namely, the Petitioner and the Respondent.    The initial advertised upset auction price of 3.90 million adjusted downward to 2.84 million had, in the Respondent’s contention, precluded those bidders interested to buy below 3.90 million from participation in the auction.    It is the Respondent’s further contention that the Petitioner, having the conduct of sale and being a trustee for the sale, substantially lowered the upset auction price without further advertisement was in breach of her duties as trustee to secure the best and reasonable price for the sale to the benefit of the beneficiaries.

11.  Reference was made to the following documents produced as exhibits to the Affirmation of Mr. Gordon Chan, a partner of the Petitioner’s solicitors :-

(a)  Exhibit No.  “GC-1” of Auction Final Report;

(b)Exhibit No. “GC-3” of General Conditions of Sale.

12.  Reference was also made to one of the exhibits numbered 14 attached to the Respondent’s Affirmation dated 11 June 2013 which is a Notice of Public Auction in Chinese of the Canton Road property to be held on 5 June 2013 with an upset auction price of 3.90 million.

13.  It was further submitted that any stay of completion of the auction sale would not prejudice or affect the right of the successful bidder.  Clause 21 of the General Conditions of Sale provides the Petitioner  (as Vendor in the auction sale) with an ‘escape clause’ in that the successful bidder (as Purchaser) would only be entitled to the return of deposit paid without any right to claim for damages, costs and expenses if the Petitioner (Vendor) did not complete the sale as scheduled for 5 July 2013.

Discussion

14.  The central issue is whether there are any ‘irregularities’ in the process of the sale by auction which warrant a stay of completion of the sale. Counsel for the Respondent submitted that, prima facie, there are irregularities.

15.  First of all, there being no issue that the sale by auction was carried out by the Petitioner as directed by this Court for implementation of its Judgment dated 2 November 2011.   The Court of Appeal saw fit to expressly state in its Judgment not to vary this Court’s Judgment save and except the part on the ratio split from 70:30 to 60:40.   Thus the mode of sale by way of auction itself poses no irregularity.

16.  The next question then follows is what had constituted the alleged ‘irregularities’ ?  The Respondent contends that the downward adjustment of the upset auction price from 3.90 million to 2.80 million was done without considering the then current market value of the Canton Road property.  This had also deprived those interested bidders within the price range of 2.80 million to 3.90 million from participation in the auction.    The Petitioner was said to be in breach of her duties as trustee for so conducting the auction sale.     

17.  As to the downward adjustment of the initial upset auction price from 3.90 million to 2.80 million, Counsel Mr. Koo was unable to produce any cases or authorities suggesting that such adjustment should, under the law of public auction or otherwise, warrant a halt to the auction in order that further advertisement could be placed.      

18.   Counsel Mr. Koo was only able to refer me to the Privy Council case of Tse Kwong Lam v. Wong Chit Sen & others [1983] 3 All E.R. 54 which is a case concerning the rights and obligations of a mortgagee in the exercise of his power of sale under the terms of the Mortgage.    The mortgagee in that case held a large beneficial interest in the shares of the purchasing company.   With respect to Mr. Koo, I am not convinced the facts of the present case fit in the cited case.   There is no issue of mortgagee sale by auction in the present case.

19.  It is clear the Petitioner’s power of sale by auction in the present case derived from the Judgment of this Court which, in my view, differs from a power of sale by auction derived from the terms of a Mortgage.   The sale by auction in the present case was a procedural step to implement the terms of a Court Judgment which the Respondent had had the chance of challenging it by way of an appeal. I had no information as to whether the Respondent in his  earlier appeal had included such a challenge.   Suffice to say is that a power of sale imposed by the terms of a Mortgage would not be subject to the same right of challenge or appeal as the Respondent had in this case.

20.  Although the Respondent was present throughout the auction on 5 June 2013, he had not registered himself for bidding for the reason that the upset auction price was set at 3.90 million.   Accordingly, it was submitted by Counsel Mr. Koo that the Respondent had not been able to bid when the upset auction price was then adjusted down to 2.80 million.   In my judgment, this is a fallacy argument.   The Respondent having made his own decision, rightly or wrongly, for not registered for bidding would have nobody to blame had there been a change of the upset auction price which is not uncommon in auction sales.    

21.  Moreover, it is the Respondent’s contention that given the fact the valued price of 2.84 million was arrived at in 2011 and that property value had arisen in the past 2 years, the Canton Road property worth much more than it was.   The Petitioner in her solicitors’ 2^nd letter dated 4 June 2013 to Messrs. Tang & Lee, who had also acted for the Respondent as revealed by the exhibited correspondence, had proposed a sale of the Canton Road property to the Respondent at 4.38 million.  Putting these information together, it is thus unconvincing that the Respondent would not have registered for bidding upon notice of the upset auction price was set for 3.90 million only, which is 0.48 million less than the sale price offered by the Petitioner to him before the auction on 5 June 2013.   The latest valuation obtained by the Respondent even showed a much higher price of 5.05 million.

22.  The Respondent’s contention that a stay of completion would not prejudice the successful bidder is neither here nor there.   The Court is concerned with upholding contractual rights and obligations unless there are good and sufficient reasons for not doing so.   Mere allegation of a prima facie case of irregularity without sufficient proof would not pass the threshold for the Court to intervene or suspend contractual rights under a contract of sale, be it a private sale or a public auction.   Besides, the Respondent has not demonstrated by evidence as to what reliefs he is entitled to or will be seeking for had he been successful in obtaining a stay of the completion.    Thus, in my view, any stay of completion would lead the Respondent to nowhere but would only unjustifiably further delay the Petitioner from receiving the fruits of the Judgment.    This is apparently not within the spirit of the Civil Justice Reform.

23.  The Respondent’s contention that the eventual sale at 2.84 million was not in the beneficiaries’ best interest also fails.   Reason being that had there been an undervalue sale, the prejudicial effect of receiving less the proceeds of sale affect the Petitioner much more than the Respondent taking into account their ratio split is 60 % for the Petitioner and 40 % for the Respondent.

24.  For the above reasons, I find the Respondent’s application unsuccessful.  

25.  As a drawback, had there been any irregularities in conducting the sale (which I made no such finding), it is only appropriate for the Respondent to seek remedies and reliefs from the Petitioner and/or the auctioneer as opposed to suspending completion of the auction sale where the interests of the bona fide purchaser for value would be affected.     

Any other reasons a stay should be granted ?

26.  I have also given consideration to the procedural grounds submitted by Counsel that the present application being akin to a stay of execution application or an injunction application.  

27.  With due respect to Counsel Mr. Koo, I do not agree.   Given the fact the challenge focused upon irregularities allegedly to have occurred during the process of auction, there is no issue of the mode of auction itself which is the actual execution to be stayed.          

28.  As to the aspect of an injunction, it falls well apart since there is no basis for this Court to exercise its discretion to grant such equitable remedies.   The Respondent had not passed the requisite threshold of showing damages would not be sufficient compensation for him had completion of the auction sale was eventually found to be improper and ought not to proceed.   The agreement to provide an undertaking as to damages by the Respondent as submitted by Counsel Mr. Koo would, in my decision, only be needed when a substantive case for injunction was established.   The agreement to provide such an undertaking would not thereby provide a basis for granting a stay of the completion when the primarily facts so found and taking them to the highest merely established a prima facie case of ‘irregularities’ so alleged.

29.  There is also no question of any balance of convenience where a stay of completion ought to be granted.

30.  Accordingly, I will dismiss the Respondent’s Summons.

Costs

31.  Taking into account all the above reasons, I find there being no basis for exercising discretion to depart from the normal rule on costs.    I will so order accordingly.

Orders

32.  I now make the following Orders :-

(a) The Respondent’s Summons dated 11 June 2013 be dismissed;

(b) The Respondent do pay to the Petitioner the costs of and  occasioned by the Summons, to be taxed if not agreed.

33.  Unless any party applies for variation of the costs order within 14 days from the date hereof, such costs order nisi shall become absolute.

Dated the 4 day of July 2013