STANDARD CHARTERED BANK (HONG KONG) LTD v. WONGGENOS ENTERPRISES CO LTD AND OTHERS

DCMP 878/2018

[2022] HKDC 534

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 878 OF 2018

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BETWEEN

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REASONS FOR JUDGMENT

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Background

1.  This is the 2^nd Defendant’s appeal[1] against the decision of Master B Mak made on 25 April 2022 dismissing her application by summons dated 17 January 2022 for a stay of execution of the Writ of Possession and Fieri Facias Combined issued on 29 December 2021 in respect of the property situate at Flat C on 25^th Floor, St. Louis Mansion, No 20 Macdonnell Road, Hong Kong (“the Property”), being the property forming the subject of this mortgage action.

2.  The Property was purchased in 2007 in the name of the 1^st Defendant, who executed a mortgage dated 9 March 2007 (“the Mortgage”) over the Property in favour of the Plaintiff to secure a loan of HK$2,112,500. At around the same time, the 2^nd Defendant executed a guarantee dated 8 March 2007 in favour of the Plaintiff as additional security for the money owing by the 1^st Defendant to the Plaintiff (“the Guarantee”).

3.  The 3^rd Defendant, the father of the 2^nd Defendant, commenced an action in the High Court in HCA 899 of 2012 (“HCA899”) against the 1^st and 2^nd Defendants claiming that the Property was held by the 1^st Defendant on constructive trust for him. By a judgment dated 30 September 2016[2], Recorder Lisa KY Wong SC (as she then was) ruled in favour of the 3^rd Defendant. The 1^st and 2^nd Defendants then sought an extension of time to appeal against the judgment, and for a stay of execution. The applications were dismissed by the Court of Appeal on 28 February 2018.

4.  Subsequent to the judgment in HCA 899, the 1^st Defendant had defaulted in repayment of the loan since December 2017. This mortgage action was then commenced by the Plaintiff by Originating Summons dated 23 March 2018 for recovery of the outstanding amount under the Mortgage.

5.  By the judgment given by Her Honour Judge Winnie Tsui in this action on 28 October 2019[3] (“the Judgment”), the learned judge ordered, inter alia, that (i) the 1^st and 2^nd Defendants do pay to the Plaintiff the outstanding amount of HK$885,593.05, together with interest thereon, and (ii) the 1^st Defendant do deliver up vacant possession of the Property to the Plaintiff.

6.  Insofar as the 3^rd Defendant is concerned, he was joined in the present action for the purpose of seeking declarations to the effect that the Plaintiff’s legal interest in the Property has priority over, and would rank ahead of the 3^rd Defendant’s beneficial interest. The Plaintiff’s claim was not opposed by the 3^rd Defendant. Based on her findings, the judge also made the declarations sought. The Plaintiff would thus take the legal estate free of the equitable interest of the 3^rd Defendant^[4].

7.  Upon the granting of the Judgment, the Plaintiff also undertook that in the event it exercises its power of sale, insofar as there will be any net amount after the sale of the Property and payment of the outstanding indebtedness and expenses owed by the 1^st and 2^nd Defendants to the Plaintiff, the Plaintiff will pay into court the net sale proceeds[5].

8.  Subsequently the 1^st and 2^nd Defendants’ application for leave to appeal against the Judgment was dismissed by the judge on 24 January 2020[6], and a further application for leave to appeal was also dismissed by the Court of Appeal on 3 September 2021[7].

9.  Following the disposal of the appeal, the Plaintiff proceeded with the enforcement of the Judgment to recover the outstanding debts, and for taking possession of the Property. The Writ of Possession and Fieri Facias Combined was eventually applied for and issued on 29 December 2021.

The present appeal

10.  On 17 January 2022, the 2^nd Defendant applied for a stay of execution of the Writ of Possession and Fieri Facias Combined. The application was dismissed by Master B Mak. By a Notice of Appeal dated 26 April 2022, the 2^nd Defendant lodged the present appeal against that decision.

11.  The appeal came before me on 27 May 2022. After hearing the parties, I dismissed the appeal and indicated that I would provide the reasons for my judgment, which I now do.

The 2^nd Defendant’s arguments

12.  The 2^nd Defendant filed further evidence for this appeal, updating information concerning her means, or expected means, and consolidating her position. The plaintiff has not objected to the filing of such further evidence, and I proceeded to consider the same under Order 58 rule 1(4) of the Rules of the District Court, Cap 336H (“RDC”) for the purposes of this appeal, which is dealt with by way of a re-hearing (see Hong Kong Civil Procedure 2022, Vol.1, para.58/1/2).

13.  According to the 2^nd Defendant, she is currently residing at the Property and has no other housing option available. The place is also her major workplace during the pandemic. She has written to the Plaintiff to inform them that as a guarantor of the mortgage loan, she intends to pay off the amount due from the 1^st Defendant to the Plaintiff. On 5 January 2022, she did repay an amount of HK$8,800. In the circumstances, she asked for a stay of execution until the end of June 2022 for her to “pay off and settle the outstanding mortgage loan amount and the sums stated in the Writ [of execution] dated 29 December 2021 by 30 June 2022”[8]. In her 2^nd Affirmation filed on 14 April 2022 in support of her application for a stay of execution, she proposed the following repayment schedule:-

“i. as a guarantor of the mortgage loan, the 2^nd Defendant would pay off HK$300,000 of the mortgage loan on or before 30^th May 2022. A copy of the cheque…is enclosed here, although it is post-dated. The 2^nd Defendant would deposit this cheque into the Bank’s designated bank account on or before 30 May 2022.

ii. the 2^nd Defendant would pay off another batch of HK$300,000 of the mortgage loan on or before 30^th August 2022, unless a new wave of Omicron variant breaks out hindering activities, and that the government institutes a shut-down of business, a restriction of people’s mobility or other stringent measures.

iii. the 2^nd Defendant to pay off the remaining sum of the mortgage loan by installment, or if the Bank wishes by 30 November 2022 except that a new wave of Omicron variant breaks out hindering activities, and that the government institutes a shut-down of business, a restriction of people’s mobility or other stringent measures not foreseeable.

iv. the 2^nd Defendant expects to pay off the legal costs of DCMP878/2018 and CAMP36/2020 as soon as possible when the 1^st and the 2^nd Defendants have obtained a hearing decision and an order of the account taking of HCA899/2012 fixed on 16-18 May 2022. The 1^st and 2^nd Defendants expect to fully settle all legal costs on or before 30 December 2022, and finish this matter with the Bank.”

14.  In her 3^rd Affirmation filed on 26 April 2022, the 2^nd Defendant indicated that the 1^st and 2^nd Defendants were preparing for an account-taking hearing in May 2022 in the High Court concerning monetary contributions paid by them in relation to certain properties including the Property in the present case, and that they were expecting a return of some HK$1.19 million to them as “legal cost charged as an Absolute Charging Order in the sale of Unit 24A…within 7 days in the account taking hearing on 16-18 May 2022”. On such claim, the 2^nd Defendant asked for a stay of execution until 30 July 2022, or at least 30 June 2022, for her and the 1^st Defendant to fully settle the outstanding sum under the Mortgage.

15.  By her 4^th Affirmation filed on 18 May 2022, the 2^nd Defendant provided a further update of her position, indicating to the court that closings submissions will be heard at the account-taking hearing in HCA 899 fixed on 2 June 2022. It is said that the 1^st and 2^nd Defendants have the intention and ability to settle the outstanding amounts due to the Plaintiff as soon as the Master has made a decision in the High Court.

16.  The 2^nd Defendant also indicated that she would be able to repay HK$300,000 to the Plaintiff first as soon as her bank approves a business loan for her company, Newstrak Intl Company Limited (“Newstrak”). According to her, the loan was applied for in early April 2022 and is expected to be forthcoming by the end of May 2022. She also submitted at the hearing a copy of a “Revised repayment schedule” dated 5 May 2022 issued by HSBC to Newstrak being a schedule showing repayable monthly amounts from 28 May 2022 to 28 August 2025 for the outstanding balance of HK$96,799.08 of a loan due from Newstrak to HSBC. I asked the 2^nd Defendant at the hearing as to the significance of this repayment schedule, and was given to understand that this is the loan account that was used to apply for a top-up loan from the HSBC, and the amount of the top-up loan expected to be forthcoming is in the region of HK$325,000. I further asked the 2^nd Defendant whether the loan has been formally approved yet, and whether she has produced the loan application documents she or her company has submitted, to which she responded by stating that the loan application has not yet been approved, and she has not arranged for a copy of the application to be made at the time, so that no such copy was available. She then asked for an adjournment of the hearing to allow her to liaise with HSBC to obtain a copy of the loan application. I did not accede to the application for adjournment, bearing in mind that (i) it is up to a party as to the manner in which the evidence for a hearing is to be compiled well before the hearing, and (ii) the loan application in question was, according to the 2^nd Defendant, made in early April 2022, and she has had ample time to obtain a copy of the application and produce it for the purpose of both the hearing before the Master, and this appeal. That was not done. I therefore disallowed her ad hoc application for an adjournment made in the middle of the hearing.

The plaintiff’s submissions

17.  Ms Hung for the Plaintiff submitted that since the Judgment was granted on 28 October 2019, the Defendants have only repaid a meagre amount of HK$8,800, whereas the total outstanding sum currently stands at over HK$1.2 million, with interest accruing on a continuous basis. Even if the 2^nd Defendant is able to procure repayment of what she described as the first batch of HK$300,000 by the end of May 2022, it is only a part of the outstanding amount. Any further delay in the execution process would be tantamount to an unjust curtailment of the Plaintiff’s right to have the fruits of the litigation, being the successful party who is entitled to enforce the Judgment (see e.g. China Citic Bank International Limited v Durrant Patrick Michael [2014] HKCU 1694; CACV 127 of 2014, 21 July 2014, Chu JA).

18.  In relation to HCA 899, it is submitted on behalf of the Plaintiff that that is strictly a dispute of the 1^st and 2^nd Defendants with the 3^rd Defendant, and that by the Judgment the court has already made a declaration that the Plaintiff’s interest shall have priority over the 3^rd Defendant’s interest in the Property. As such, the outcome of HCA 899 is irrelevant to the present proceedings for the enforcement of the Judgment.

19.  It was further submitted by the Plaintiff that the 3^rd Defendant may also have an interest in the proceeds of sale of the Property as a result of the judgment in HCA 899. As such, any further delay in execution in the present case would also have an impact on his interest at large.

The applicable principles

20.  Order 45 rule 11 of the RDC provides:

“Without prejudice to Order 47, rule 1, a party against whom a judgment has been given or an order made may apply to the Court for a stay of execution of the judgment or order or other relief on the ground of matters which have occurred since the date of the judgment or order, and the Court may by order grant such relief, and on such terms, as it thinks just.”

21.  Order 47 rule 1(1), which is only applicable to writs of fieri facias, provides:

“(1) Where a judgment is given or an order made for the payment by any person of money, and the Court is satisfied, on an application made at the time of the judgment or order, or at any time thereafter, by the judgment debtor or other party liable to execution—

(a) that there are special circumstances which render it inexpedient to enforce the judgment or order; or

(b) that the applicant is unable from any cause to pay the money,

then, notwithstanding anything in rule 3, the Court may by order stay the execution of the judgment or order by writ of fieri facias either absolutely or for such period and subject to such conditions as the Court thinks fit.”

22.  The reference in Order 45 rule 11 to “matters which have occurred since the date of the judgment” is a reference to “matters which went to the validity of the judgment and which, if established before the Court, might justify the Court in saying that this was a judgment which on the material now before it, it would not allow to be executed” – see the judgment of Hunter J in Tam Ho Man v Wong Kwok Tai, HCA 4736 of 1985, 20 October 1986, at paragraph 3.

23.  Tam Ho Man v Wong Kwok Tai was referred to in Credit Lyonnais v SK Global Hong Kong Ltd, CACV 167 of 2003, 30 July 2003 where Ma CJHC (as he then was) gave a useful exposition on the exercise by the court of its jurisdiction to stay execution under Order 45, rule 11, Order 47, rule 1 and Order 59, rule 13, being the corresponding rules in the High Court:

“4. Where, as in the present case, a party (the judgment creditor) has obtained a judgment against another party (the judgment debtor), the starting (and often, finishing) point is that the judgment creditor should be able to take all legitimate measures to enforce that judgment. That is, after all, his right. The various ways of enforcing a judgment, are of course set out in RHC O.45.

5. Exceptionally, however, the judgment creditor may be prevented from levying execution. I emphasize the exceptional nature of this, for the court is in these circumstances being asked to deprive a successful party of the fruits of the judgment he has obtained. The exercise by the court of its jurisdiction to stay execution under O.45, r.11, O.47, r.1 and O.59, r.13 demonstrates this. Thus, a stay of execution may be granted where:-

(1) New evidence emerges after the relevant judgment, showing that it was not valid: - see Tam Ho Man v Wong Kwok Tai, unreported, 20 October 1986 [1986] HKLY 705. This case dealt with the court's jurisdiction under RHC O.45, r.11.

(2) In certain circumstances, the judgment debtor has a claim against the judgment creditor yet to be determined. This may even include situations in which the corporate veil should be pierced: - see Burnet v Francis Industries Plc [1987] 1 WLR 802 (a case dealing with the UK equivalent of RHC O.47, r.1).”

24.  Further, the court preserves an inherent jurisdiction to order a stay of execution in suitable cases quite irrespective of the express rules of the court. Whilst the list is not exhaustive, in order for the jurisdiction to be activated and a stay ordered, the circumstances must be that an injustice would otherwise be caused, or that a stay would prevent abuse, preserve the dignity of the court or facilitate the administration of justice[9].

25.  Bearing the above principles governing the exercise of the court’s jurisdiction in mind, I would proceed to consider the 2^nd Defendant’s contentions.

Discussion

26.  In HCA 899, judgment has already been granted in favour of the 3^rd Defendant (being the plaintiff in that case) for, inter alia, the transfer of the Property by the 1^st Defendant to him, who has been held to be the beneficial owner under a constructive trust[10]. As mentioned at the outset, the 3^rd Defendant was subsequently joined in the present action to cater for his interest. The taking of accounts described by the 2^nd Defendant is apparently related to two other properties the subject of HCA 899 that have been held to be beneficially owned by the 3^rd Defendant, and referred to in the relevant judgments in HCA 899 as the “Kam Fai Flat” and “St Louis Flat 1D”, the proceeds of which are to be accounted for by the 1^st and 2^nd Defendants[11]. For present purposes, it is uncertain as to the amount, if any at all, the 2^nd Defendant allegedly claims she would be entitled to have returned to her as her “contributions to the Mortgage Loan”[12], upon the taking of such accounts. It is not a matter for this court to decide on, suffice for me to say that there are no materials before this court to substantiate her allegation. In fact, I note that the relevant order made by the court in HCA 899 was that “[the 1^st and 2^nd Defendants] should pay [the 3^rd Defendant] the sums found to be due on the taking of such accounts”[13].

27.  The 2^nd Defendant also referred in her written submissions to a sum of HK$1,195,441.21 being the amount of a cheque drawn in favour of the Director of Legal Aid (who was acting for the 3^rd Defendant) in HCA 899, said to be out of the proceeds of sale of “Unit 24A”. That would appear to me to be a reference to the proceeds derived from the sale of a property owned by the 2^nd Defendant, referred to in the judgment in HCA 899 as the “St Louis Flat 24A” (i.e. Flat A, 24/F St Louis Mansion[14]), under a Charging Order Absolute dated 9 April 2019. The Charging Order Absolute was made as a result of the 2^nd Defendant’s failure to pay the assessed costs of the 3^rd Defendant in HCA 899 of 2012[15]. However, it has not been clearly pointed out by the 2^nd Defendant as to what the amount drawn under the cheque mentioned above in favour of the Director of Legal Aid represents, and whether the Director of Legal Aid is to return the amount, or any part of it, to the 2^nd Defendant. It is not for me to make any conjecture in this regard.

28.  In relation to the 2^nd Defendant’s contention that she is in the process of an application for a business loan through her company, Newstrak, and once the loan comes through, she would be able to repay an amount of HK$300,000 first to the Plaintiff, I am not with the 2^nd Defendant. The lack of clarity as to the likelihood of success of the loan application, as well as the amount that would be approved apart, the 1^st or the 2^nd Defendant has obviously not sought to take the step to make any loan applications for the entire time after the date of the Judgment until April this year. Whatever the reason, the inaction on the part of the 1^st and 2^nd Defendants was not conducive to relief from their situation.

29.  In short, there is nothing to suggest that there have been any circumstances or evidence emerging after the Judgment that would suggest that the Judgment is invalid, or that the 1^st or 2^nd Defendant has any claim against the Plaintiff that is yet to be determined. Any alleged amount due to be returned to the 1^st or 2^nd Defendant, which is unrelated to the Plaintiff’s claim for recovery of the mortgage debt here, would not constitute a special circumstance to justify a stay (see Hong Kong Civil Procedure 2022, Vol.1, at paragraph 47/1/1; Yu Michael Tse Lim v Ngai Tik Yu, DCCJ 3211 of 2007, 31 December 2007, HH Judge Au (as he then was)).

30.  Further, the 2^nd Defendant has put forward her submissions in a way that she has or will shortly have, together with the 1^st Defendant, the ability to repay the adjudged amount. But even if her application had been on the ground of an inability to pay pursuant to Order 47 rule 1(3), she has not provided the required evidence disclosing her income, the nature and value of any of her property, and the amount of any other liabilities of hers, in compliance with rule 1(3). On the materials before me, and on the analysis of the factors stated above, I am unable to conduct any realistic assessment of a stay of execution of the writ of fieri facias[16] on condition of any payment by instalments or the repayment schedule proposed by the 2^nd Defendant. Thus, to the extent that the 2^nd Defendant’s application is based on Order 47 rule 1(3) on the ground of inability to pay, she has not succeeded either.

31.  Lastly, insofar as the inherent jurisdiction of the court is concerned, nothing can be discerned in the circumstances of this case that a stay would prevent a potential abuse of the process of the court, preserve the dignity of the court, or that the administration of justice would otherwise call for a stay.

Conclusion

32.  For the reasons stated above, I accept the Plaintiff’s submissions, and reject the contentions of the 2^nd Defendant. The appeal is therefore dismissed.

33.  In relation to costs, I ordered that the 2^nd Defendant shall pay the Plaintiff’s costs of this appeal on an indemnity basis pursuant to the terms contained in Clause 1(c) of the Guarantee, which provides for the recovery of legal costs on an agreed indemnity basis. The Plaintiff’s costs were summarily assessed at $11,000.

34.  As the 3^rd Defendant has not participated in this appeal, no costs order has been made as between him and the 2^nd Defendant or the Plaintiff.