YEUNG KWOK KIN v. YEUNG KWOK KEUNG AND OTHERS

HCMP1303/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1303 OF 2006

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J U D G M E N T

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Introduction

1.  By Originating Summons filed on 29 June 2006, the plaintiff applies for an order for sale under the Partition Ordinance, Cap.352. 

2.  The property in question is Nos.335, 335A, 337 and 339 Tai Hang Road, Hong Kong situate at Inland Lot No. 7735 (“the Property”). 

3.  The parties jointly own the Property as tenants in common.  Each of the plaintiff and the 1^st to 3^rd defendants holds one-eighth share in the Property.  The 4^th defendants hold one-half share in the Property. 

4.  The Property was initially acquired by Li Hang Fong and Poon Shun Ying as tenants in common in 1969.  Madam Li’s and Madam Poon’s husbands are brothers.  The plaintiff and the 1^st to 3^rd defendants derived their interest from Madam Li, who was their mother, upon her death on 11 March 1985.  The 4^th defendants are the sons and executors of the will of Madam Poon, who died on 2 June 1989. 

5.  The 2^nd defendants had in their Acknowledgement of Service indicated they do not contest these proceedings. 

6.  The other parties all agree that the property should be sold.  At one stage, the plaintiff and the 1^st and 3^rd defendants had reached agreement as to the manner and terms of sale.  Between them and the 4^th defendants, there were disagreements over: (1) the manner of sale; (2) the reserve price; (3) the solicitor to be appointed to conduct the sale; (4) whether the parties should be required to put up a deposit with the solicitor appointed and (5) the costs of this application. 

7.  However, Mr Lau, who appears for the 1^st and 3^rd defendants today, informs the Court that the latest position of the 1^st and 3^rd defendants is to adopt a neutral stance on the issues in dispute between the plaintiff and the 4^th defendants.  Additionally, the 4^th defendants produce to the Court a letter from the 2^nd defendants indicating they had no objection to the draft order  proposed by the 4^th defendants.

Manner of sale

8.  I deal first of all with the question of the manner of sale.  The plaintiff proposes to sell the Property by public auction whereas the 4^th defendants propose that the sale should be by public tender. 

9.  The 4^th defendants have adduced expert evidence from Messrs K T Liu Surveyors Limited on the merits and advantages of public auction.  I note also that the plaintiff’s previous surveyor, Messrs C Y Leung & Co. Ltd., also recommended that a sale by tender with reasons similar to those given by Mr Liu.  There was also one other expert who supports the sale by tender.  That was Jones Lang Wootton, although the opinion was given in the context of dealing with the estate of Madam Li.  Additionally, in a letter dated 2 May 1997 from Messrs Stevenson Wong & Co., who acted for the plaintiff previously, it was proposed that the sale should be by means of either private or public tender. 

10.  Mr Chong, in his submissions, criticized the reasons and views given by Mr Liu for recommending sale by tender.  The fact, however, remains that there is no contrary expert evidence before the Court.  I am unable to accept that the question of the mode of sale is only a matter of common sense such that the Court does not have to have regard to the experts’ views on it.  The views and reasons given by Mr Liu were shared by other experts, including the plaintiff’s previous surveyor.  In the circumstances, there is no proper justification for the Court not to accept the experts’ opinion that sale by public tender is more likely to obtain the best possible sale price, hence bringing the greatest benefits to the parties.  I will order that the sale is to proceed by public tender.

Reserve price

11.  I move then to the question of reserve price.  The plaintiff proposes that the reserve price should be set at the valuation given by Mr Liu back in August 2006 (“the August 2006 Figure”). 

12.  Shortly before the hearing, Mr Liu had provided an updated valuation, which has been referred to in the hearing as “Figure A”.  The basis of calculation for Figure A was primarily based upon the sale price of a flat in the neighbourhood completed in May 2007, plus a 15% upward adjustment to reflect the age difference between the neighbouring property, which was built in 1993, and the proposed development.  On top of that, Mr Liu added another 10% as what he called the “Hope Value”, which is to provide for the potential of a more intensive development with a lease modification and payment of a premium to the Government. The 4^th defendants propose that the reserve price should be set at Figure A.

13.  Plainly, the August 2006 Figure is outdated.  The materials before the Court, whether provided by the plaintiff or by the 4^th defendants, all show an upward surge in the property market since August 2006.  Figure A is the only latest valuation evidence before the Court.  It represents what the expert, Mr Liu, considers to be the best obtainable price as at June 2007. 

14.  I accept that a reserve price should be a realistic price so as to avoid the need of the parties having to come back to the Court for revision if there were no offer matching the reserve price.  I also accept that a reserve price is essentially to ensure that the Property is sold at a proper price, which is for all parties’ benefit.

15.  As I understand Mr Chan SC, he does not dispute that it would be appropriate for the reserve price to be slightly below the best saleable price or market price.  Mr Liu’s evidence indicates that the 10% he chose for the Hope Value is an arbitrary figure.  He also said that the calculations for Figure A had not taken into account the premium that would be levied upon a lease modification.  His evidence is that it is difficult to tell with any certainty as to what would be the level of the premium.  I also note Mr Chong’s submission that the reserve price should cater for a downward change in the market condition because of the volatile nature of the property market in Hong Kong. 

16.  Taking into account all these matters, I am of the view that the reserve price should be set on the basis of Mr Liu’s latest valuation, but discounting the 10% Hope Value, and round it up to the nearest ten-million place. The figure that I had determined (“the RP Figure”) had been put down on a piece of paper, copies of which had been given to all counsel by my clerk. The parties had asked that the RP Figure be kept confidential in order not to affect the impending sale. 

Choice of solicitor to be appointed

17.  I now deal with the question of the solicitor to be appointed to conduct the sale.  The plaintiff asks to appoint a firm of solicitors who has not been involved in these proceedings.  The 4^th defendants, on the other hand, propose to appoint Messrs Johnson, Stokes & Master (“JSM”).  JSM is the 4^th defendants’ solicitors in these proceedings.  It had previously also acted in the probate of Madam Li and Madam Poon.  

18.  It is neither necessary nor appropriate for the Court to engage in a comparison of the expertise of solicitors.  Indeed, I take the view that there is little doubt that JSM is a reputable and experienced firm of solicitors.  What is, however, in my view, more important, is to ensure that the appointment will not give rise to further grounds of dispute between the parties.  The materials before the Court show that since 1985, the parties had been canvassing the possibility of disposing of the property. Up to now, however, they have not been able to come to any concrete agreement, other than agreeing in principle that the property should be sold.

19.  In these proceedings, although they all agree to a sale, they have not been able to agree on the manner and terms of the sale.  It is not fanciful to think that even with the determination in this case, differences may arise between the parties in future as to, for instance, the conduct of sale and other things associated with the conduct of sale.  It is also not fanciful to think that, by reason of JSM having acted for the 4^th defendants in these proceedings, one or other of the co-owners may feel a sense of unease or may even harbour suspicions, whether justified or not, about the process or outcome of the sale.  All of these would not be conducive to an effective and efficient disposal of the Property and would not inure to the benefit of the parties. 

20.  In light of this and taking a pragmatic approach to the issue, it is more appropriate to appoint a firm of solicitors who has not been involved in these proceedings.  The parties have agreed that if JSM were not to be appointed, then Messrs Wilkinson & Grist should be appointed.  I will accordingly order that the conduct of the sale be committed to Messrs Wilkinson & Grist.

Deposit

21.  As to the question of deposit, despite initial differences, the parties have now agreed that a sum representing 1.2% of the reserve price should be put up by the parties in accordance to the proportion of their interest in the property, so as to defray the fees and disbursements of the estate agent and the solicitors and other incidental costs. This is to cater for the eventuality that either the sale is not successful, or somehow the sale proceeds cannot be received. 

Costs

22.  I deal finally with the question of costs of these proceedings.  The 4^th defendants have asked that the plaintiff be ordered to pay their costs on the basis that but for the plaintiff’s conduct, these proceedings would not have been necessary.

23.  In an application for order for sale under the Partition Ordinance, the general approach is to provide for the costs to come out from the proceeds of sale.  While I would say that the criticisms that have been levelled at the manner in which the plaintiff conducted these proceedings are not unjustified, I would not say that the Plaintiff’s conduct is such that the Court should depart from the general principle.  Further, the history of these proceedings demonstrates that it will be most difficult, if not impossible, to get all the parties together and to come to an agreement that will enable the sale of the Property to go ahead and in a smooth and efficient manner.  Among other matters, it is to be noted that notwithstanding that the 1^st and 3^rd defendants’ solicitors had after the commencement of this case put forward proposals of sale, the 4^th defendants, in as much as the plaintiff, had not responded to them.

24.  In my view, it is fair to say that it is a practical solution to resort to an application to the Court for an order for sale under the Partition Ordinance.  For this reason, I will order that the costs of all the parties in these proceedings to come out of the sale proceeds, to be taxed on a common fund basis.  In the event no sale proceeds were received by the parties, counsel agree that the parties’ legal costs should be paid out of the deposit to be put up by the parties. 

Other matters

25.  There will also be liberty to apply generally.

26.  I would ask that the parties endeavour to agree on a draft minute of order for the Court’s approval.