XCHRX RISEWAY INVESTMENTS LIMITED v. WONG KWOK GEE

1994, MP No. 603

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff is now the owner of 87 of the 100 shares in the property mentioned above. The defendant is the owner of the other 13 shares. On 22 March 1995, the Court of Appeal ordered that the property be sold by public auction. Any person having an interest in the property is at liberty to bid. The reserve price was to be fixed by the High Court. On 20 December 1995, I fixed that reserve price at $38 million. The sale is scheduled to take place on 13 February 1996.

2. The defendant now applies to me for an order that the sale take place later than 13 February 1996. The original summons asked for an order that the sale be held not before 30 December 1997, or 1 July 1996. The amended summons speaks of the lapse of "a reasonable time period". The reason for this application is that the defendant, on 27 January 1996, was given approval for building plans that permit development on the property to a plot ratio of 9.1135, and this might enable him to obtain finance so that he can bid at the auction, but he needs time to do this. The defendant says that he approached the Nanyang Commercial Bank at the end of November 1995. He told the manager that he wished to raise a loan to bid. The manager required him to submit approved building plans, an invitation to tender for construction works and a feasibility report. The manager said that it would take 6 weeks after the submission of these documents to approve a loan. The defendant says that he has been told that it takes 6 months to prepare an invitation to tender. He has already obtained a feasibility report. On 25 January 1996, the manager of the Nanyang told the defendant that the bank would not consider loans for the purchase and the development separately. In an earlier affirmation, the defendant said that he believed that the sale of the property should not be held within 24 months after the date of approval of the new set of plans [which was on 27 January 1996] in order to allow for redevelopment of the property to take place. He said he intended to bid at the auction, and was negotiating for a loan. He said he needed 6 months to negotiate the terms of the financing to obtain building approvals and comments.

3. Mr Mok says that, in deciding this matter, I must take account the interests of both the co-owners. That is true. On the face of it, it is in the interests of all the co-owners that the best possible price be obtained. On the other hand, if both owners intend to buy in the property to develop it, each will want to obtain it at the lowest possible price. The defendant, especially, will want to pay the smallest price because he has to pay out 87% of it to the plaintiff. The defendant, if bidding, will be able, economically, to pay more because he, and only he, will have the prospect of developing the property to the extent of a 9.11 plot ratio, whereas others will be limited to a ratio of about 7.

4. Mr Mok also argues that the defendant expended a great deal of effort in obtaining approval of his plans. This I accept, but he did that for his own benefit, and it is not the fault of the plaintiff if he is unable to reap that benefit.

5. Mr Mok says that each party has leave to bid, and I should ensure that this is realistic opportunity. I do not accept this. The parties have leave to bid, but this must be read as implying that, if one of them is unable to do this because he cannot afford to do so, that is unfortunate, but not something the court can remedy at the expense of the other party.

6. Mr Mok makes the point that the defendant is tenant in the premises and has his business there. He has been there a long time. His share in the property is his only major asset. That is true, but the other side of the coin is that the defendant has had, at the expense of the plaintiff, cheap accommodation since the plaintiff acquired part ownership of the property.

7. Mr Mok also says that it would a long time to obtain vacant possession of the premises because the property is subject to residential tenancies. I do not think it lies well in the mouth of the defendant to say that I should give him time to raise money because he will stick it out as a tenant of the premises as long as possible, and thus delay attempts to redevelop the property

8. The defendant asks for the sale to be delayed so that his application to his bank for financing can be considered. The evidence from the defendant establishes no more than the fact that the bank will consider the matter. I am not given any material on which I can assess the likelihood of his application being successful. Mr Mok points out that the sum the defendant is seeking is $38 million, which is a lot of money. But the defendant argued at the hearing to fix the reserve price that the property was worth a lot more than this; possibly $45 million. Is the defendant going to the auction equipped with $38 million, when the property may fetch much more than this? In addition, the defendant will require a lot more money in order to develop the property. He tells me that his bank will not lend him money to buy only; it will consider only a loan to buy and develop. So his application for a loan will have to be for a lot more than $38 million. Is it likely, I have to ask myself, in the absence of other evidence, that a bank will lend the defendant many millions of dollars, far exceeding $38 million, the defendant being an ordinary man with little money and only his share in the property as an asset and no special expertise in developing properties. I do not think this is likely. And if it is so desirable that this property should be developed, the defendant, with the asset of a 9.11 plot ratio to offer, should be able to interest a property developer with whom he could enter into partnership.

9. The original summons in this matter was issued on 10 March 1994. There has been a long delay to this stage. This is a commercial matter, and in these matters delays are costly. It is time the matter was brought to an end. I cannot think of any reason that might be reasonably acceptable to the plaintiff, by far the majority owner of the property, why I should compel it to wait any longer. The property market in Hong Kong is not always stable. If I order the sale to be delayed for 6 months, and, in the meantime, the market slumps, the plaintiff would be rightly indignant that I interfered. I do not think the defendant has said anything that would justify me in exercising my discretion in his favour to the prejudice of the plaintiff.

10. In the result, the defendant's summons is dismissed with costs.

JK FINDLAY

Judge of the High Court