紀德樓業主立案法團 v. CHEUNG SAI MUI

HCMP 1930/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1930 OF 2005

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J U D G M E N T

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1.  This is an Order 88 application for the enforcement of a charging order made by the Lands Tribunal in the context of a building management application.  The matter was originally commenced in the District Court as DCMP 81 of 2005.  When it came before the Acting Registrar, he was constrained by the decision of the late Judge Z.E. Li in Standard Chartered Bank v Kwok Fat DCMP 3555 of 2000, 14 August 2001 to hold that the District Court has no jurisdiction to entertain an application to enforce a charging order that was not made by the District Court.  The case was transferred to the High Court.

2.  At the hearing of 25 July 2006, I held that the District Court did have the jurisdiction to entertain the application.  However, in view of the history of the proceedings and to avoid unnecessary delay occasioned by the transfer of the case, I direct the matter, when it is restored, be heard by a Master of the High Court.

3.  I also directed the Defendant to file evidence in opposition within 7 days.  The Plaintiff's solicitors will need to take instructions from the Plaintiff before deciding whether to proceed with the matter in the light of the evidence in opposition.

4.  The following are my reasons for holding that the District Court has jurisdiction over the matter.

5.  In Standard Chartered Bank v Kwok Fat, Judge Li held that the District Court did not have jurisdiction to enforce charging order made by other courts.  The learned judge came to that conclusion by reason of the wordings of Section 37(1) of the District Court Ordinance.  Judge Li identified the relevant section relating to the jurisdiction of the District Court for the enforcement of a charging order as Section 37(1)(c).  It reads,

“Subject to the maximum limits in the amount of value set out in subsection (2), the Court has jurisdiction of the Court of First Instance to hear and determine the following proceedings –

…(c)  proceedings … for enforcing a charge …”

6.  In Paragraph 6 of his judgment, Judge Li gave the reason for holding that Section 37(1)(c) was not applicable for enforcement of charging orders granted in other courts.

“The distinguishing word is 'determine' which envisages decision on legal and factual issues.  For enforcement of a charging order within the meaning of section 52AB, the court is not required to make a determination.  The liability on which the charging order is based has been determined.  The charging order has been made absolute and so there can be no dispute over whether the property the subject of the charge is liable to be sold.  All that the court has to do for enforcement of a charging order is to consider whether and how to exercise its discretion.”

7.  In Paragraph 7, Judge Li went on to construe Section 37(1)(c) as referring to mortgagee action and said it did not encompass the enforcement of a charging order made after a successful mortgagee action.

8.  On the facts of Standard Chartered Bank v Kwok Fat, the charging order was made by the High Court pursuant to a monetary judgment entered in favour of the plaintiff obtained in a mortgagee action.

9.  Be that as it may, it does not mean that proceedings for enforcement of a charging order cannot be a mortgagee action, or more precisely an Order 88 application.  To answer that question, one needs to refer back to the nature of a charging order.  This depends on the applicable statutory provision empowering the courts to make a charging order.

10.  For charging order made in the High Court, the relevant statutory provisions are Sections 20 to 20B of the High Court Ordinance.  In particular, Section 20B(3) provides that a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.

11.  For charging order made in the District Court, similar provision can be found in Sections 52A to 52AB of the District Court Ordinance, in particular Section 52AB(3).

12.  As regards the Lands Tribunal, the power to grant a charging order stems from Section 10(1)(g) of the Lands Tribunal Ordinance.  By that section, the Lands Tribunal is given the same powers as that of the Court of First Instance in the exercise of its civil jurisdiction in the enforcement of decisions, judgments and orders.  This includes the power to grant a charging order.  The effect of such charging order will be the same as a charging order granted in the Court of First Instance, viz. as stated in Section 20B(3) of the High Court Ordinance.

13.  What is the nature of proceedings brought for the purposes of enforcing a charging order?  Usually the relief sought are possession of the property subject to the charging order and sale of the property.  It falls within the scope of a mortgagee action under Order 88 Rule 1 in both the Rules of the High Court as well as Rules of the District Court.  Rule 1(2) specifically provides that 'mortgage' in the Order includes an equitable charge.

14.  What are the issues that the court has to decide in proceedings for enforcement of charging orders?  Whilst Judge Li was correct in holding that the charge cannot be disputed since it is created pursuant to an order made by the court, there are other issues that the court will have to resolve before it can properly decide whether the relief sought can be granted.

15.  Judges or masters hearing mortgagee actions have to deal with many issues other than the validity of the charge in the context of an application for possession and sale of the property under Order 88.  Judge Li himself alluded to one example in Paragraph 8 of his judgment.  The court has a discretion to decide whether to give time to the defendant to satisfy the charge, the mode of sale, the person who has conduct of the sale.  With respect to Judge Li, I do not see why a decision made upon the exercise of a discretion cannot be regarded as a determination for the purpose of Section 37(1)(c) of the District Court Ordinance.

16.  Another example arises from the facts of the present case:  the Defendant alleges that there had been a settlement agreement between the parties and in accordance with that agreement, the Defendant had paid about $1,500 by way of monthly instalment to reduce the judgment debt since March 2006.  If that were so, the charge might not be enforced in breach of the agreement.  If the Plaintiff disputes that, it will become an issue in these proceedings and it has to be resolved.

17.  Hence, I do not agree with the decision in Standard Chartered Bank v Kwok Fat.

18.  As regards the reference to “the same courts” in Section 52AB(3), I agree with the submission of Mr Tsui that if Judge Li were correct in his analysis, the proper reference should be to “the Court” instead.  The reference to “courts” in plural suggests that charging orders could be enforced in different courts.

19.  In my judgment, the only criteria for determining the jurisdiction of the District Court with regards to enforcement proceedings related to charging orders should be the monetary jurisdictional limits set out in District Court Ordinance.  In the present case, the charging order is for the sum of $77,136.00 plus interest plus costs and the rateable value of the property is $72,960.  The enforcement of this charging order is within the jurisdiction of the District Court and I ruled accordingly.