HUNG TUK YEE v. HONG KONG HOUSING SOCIETY

[English Translation –英譯本]
CACV 147/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 147 OF 2011

(ON APPEAL FROM HCB NO 7770 OF 2010)

________________________

JUDGMENT

Hon Chu JA (giving the Judgment of the Court):

1. Pursuant to the bankruptcy petition filed by the creditor, the Hong Kong Housing Society (“HKHS”), on 2 November 2010, To J (“the trial judge”) made a bankruptcy order on 7 July 2011 against Mr Hung Tuk Yee, the debtor. Mr Hung now appeals to the Court of Appeal against this bankruptcy order.

HCB 7770/2010

2. In 1999, Mr Hung and his wife, Madam Mo On Na (transliteration), purchased the unit situated at 3C, Luen Fat Mansion, Johnston Road, Wanchai (“unit 3C”) under the Home Starter Loan Schemeof the HKHS.

3. On 20 June 1999, the couple entered into a mortgage agreement with the Asia Commercial Bank to borrow $887,600 from the Bank with unit 3C as the security for the loan.

4. On 20 July 1999, the couple entered into a loan agreement with the HKHS to borrow $380,400 from it to be repaid (principal and interest) in 120 instalments. It was agreed that the first repayment was to be made 3 years later (that is, 1 August 2002). On the same day, the couple entered into a mortgage agreement with the HKHS to pledge unit 3C to the latter in the form of a second mortgage as security for the repayment of the said loan.

5. As the couple did not repay the Bank according to the schedule, the Bank instituted proceedings before the District Court (DCMP 4492/2004) on 30 December 2004 to claim the money due and owing and to apply for an order for sale. The Bank later obtained an order for sale from the Court and sold unit 3C for $1,050,000 on 26 January 2006. There was a balance of $174,379.16 left after deducting the sum the couple owed the Bank and other expenses.  The Bank handed this remaining sum to the HKHS on 15 March 2006.

6. In April 2006, after deducting the said $174,379.16, the debt the couple owed the HKHS was reduced to $251,123.23.

7. As at 30 April 2007, the couple owed the HKHS $264,458.74 in principal and interest in total.

8. On 8 May 2008, the couple entered into a repayment agreement with the HKHS, agreeing to repay the said $264,458.74 in principal and interest (calculated at 2% per annum) in 63 months commencing from 1 May 2007.

9. Since 2008, the couple began to default in repaying the HKHS according to the schedule. As at 18 March 2010, the amount of instalment payment in arrears reached $90,324, besides owing $137,142.57 in principal.

10. On 29 June 2010, the HKHS served a statutory demand on the Mr Hung to demand for the repayment of the outstanding sum of $230,887.92 (that is, the $90,324 unpaid instalment payment + the $137,142.57 outstanding principal + $3,421.35 being interest from 1 March to 26 May 2010).

11. Mr Hung neither paid the HKHS the said sum nor applied to the court for setting aside the statutory demand. The HKHS therefore petitioned the Court of First Instance on 2 November 2010 for a bankruptcy order in HCB 7770/2010.

12. Mr Hung filed with the Court of First Instance a total of three affirmations, in which he mentioned: (1) that he had financial difficulties and could not repay the money due to cash flow problems in the business, his wife suffering from cancer and the passing away of the brother-in-law, and, therefore, asked to be given 6 months’ time or allowed to repay the money owed by way of instalments; and (2) that the HKHS miscalculated the money owed in the demand.

13. After a number of mention hearings, the matter was heard before the trial judge on 7 July 2011. He was satisfied that Mr Hung owed the HKHS a debt no less than the aforesaid unpaid instalment payment of $90,324 and that he was insolvent. The bankruptcy order was therefore made.

Grounds of appeal

14. In the notice of appeal, Mr Hung pointed out that the Bank and the HKHS had shared the proceeds of $1,050,000 obtained from the sale of unit 3C between themselves. He asked that the money left after paying back the Bank and the HKHS be returned to him. Mr Hung also said that as the Asia Commercial Bank was later acquired by the Public Bank, he could only obtain the information regarding the sale of unit 3C shortly before lodging the appeal. He hoped to clarify the matter in the appeal.

15. In the two affirmations dated 8 April 2013 and 4 March 2014, Mr Hung mentioned (1) that based on erroneous, inaccurate and fictitious data, the HKHS overstated the debt he and his wife owed to mislead and pressurize him into entering into the repayment agreement dated 8 May 2007; and (2) that the HKHS was grossly negligent and remiss in its duty during the course of the sale of unit 3C by the Bank, and the unit was consequently sold at an undervalue.

The application to have someone else acting on his behalf and addressing the court in the action

16. Before considering the merit of the grounds advanced by Mr Hung in support of the appeal, this court should deal first with two matters.

17. The first was that Mr Hung submitted to the court on 8 August 2014 a document entitled “submission for the appeal hearing [by Tsui Ka Kit (transliteration) for and on his behalf]”. The document contained a request to allow Mr Tsui Ka Kit to represent him to address the court and to make submission for the case.

18. The Court of Appeal had in the past made clear that a litigant who was a natural person in court proceedings could not have anyone other than a qualified barrister or solicitor acting or addressing the court on his behalf. The Court of Appeal said the following in paragraphs 27 to 30 of Tam Kam Mei and another and Deloitte Touche Tohmatsu and eight others CACV 14/2011 (date of judgment: 9 March 2012):

“ 27. Finally, the court must make one point. At the trial, the plaintiff was represented by someone not legally qualified. The trial judge explained in paragraph 3 of the judgment that as Madam Tam was old, he made an exception to allow a ‘friend’ of Mr Mui to address the court and to cross-examine the witnesses on her behalf. This person claimed ‘to have legal knowledge and experience in dealing with legal matters’ but was not a practising barrister/solicitor.

28. In our view, the trial judge should not have allowed a lay person to represent the plaintiff in court to address the court in the same manner as a legally qualified practising barrister/solicitor does. If a litigant is incapacitated, there is civil procedure to appoint a ‘guardian ad litem’ to ensure that the interest of the litigant is protected. If, however, a litigant is not incapacitated, he can only act in person or appoint a barrister/solicitor to be his legal representative. A litigant acting in person can, in the course of the court hearing, invite the court to exercise its discretion to allow someone to sit next to him to be his ‘McKenzie friend’ to take notes or to advise him. But generally speaking, the court will not allow someone not legally qualified to address the court or ask questions in court on behalf of the litigant (Lobo v Kripalani [1998] 2 HKLRD 325, 328).

29. The reason for this is not only because barristers and solicitors possess professional knowledge, but also because they are accountable to the court and the professional bodies they are members of. Should there be any misconduct on their part, they will be subject to the penalty to be imposed by the court and the relevant professional body. Besides, the interest of both the litigant and the court are protected with all parties conducting the matter properly.

30. If the court allows people who are not legally qualified to address the court and to ask questions, this is tantamount to granting the ‘right of audience’ to people who are not licensed to practise. Not only will the aforesaid protection to the litigant and the court be lost, it will also encourage people who are not licensed to practise to run this kind of unregulated ‘pseudo-legal’ business. The harm this brings to the community is obvious, and it is also the reason why the legislature enacted sections 44 and 45 of the Legal Practitioners Ordinance, Chapter 159, Laws of Hong Kong, criminalizing the act of practising while not being qualified.

19. In the present case, Mr Tsui made it clear that he was not a professional lawyer. He was therefore unable to act for Mr Hung or to be heard in court in legal proceedings. In the directions hearing on 11 March 2014 before a master, in the absence of objection raised by the legal representative of the HKHS, Mr Tsui was allowed to make submission on behalf of Mr Hung. However, it was not correct to do so. This court did not allow Mr Tsui to represent Mr Hung to address us or to make submission. As Mr Hung had adopted the written submission submitted on 8 August 2014, we will treat it as the written submission of Mr Hung.

New evidence

20. The other matter that this court has to deal with is in relation to the various sets of new documentary evidence that Mr Hung submitted in this appeal. Although the Master had reminded Mr Hung that he needed to take out summons to apply for introduction of new evidence during the appeal, he did not make such an application.

21. The HKHS opposed Mr Hung’s introduction of new evidence during the appeal on the ground that he failed to meet the legal requirement in this regard. At the same time, the HKHS also took out a summons to apply for leave to submit new evidence to rebut Mr Hung’s allegations and evidence should this court allow him to submit new evidence.

22. In the hearing before this court, the new evidence submitted by both sides was admitted on a de bene esse basis to be considered alongside with the points raised in the appeal.

23. The disputes raised by Mr Hung in this appeal can be grouped under two headings:

(1)  Whether or not the 8 May 2007 repayment agreement was valid; and

(2)  Whether or not the HKHS was in breach of its legal responsibility to Mr Hung when unit 3C was sold in January 2006.

24. We shall deal with these matters in turn.

The repayment agreement of 8 May 2007

25. Put simply, Mr Hung’s case is that in April 2007, he and his wife did not owe the HKHS $264,458.74 as it alleged. Therefore, they were misled and pressurized into signing the repayment agreement. Mr Hung also claimed that they had all along been making repayments to the HKHS but the payments were not included in the calculation made by the HKHS.

26. It can be seen from the documents and the information before this court during the appeal that the situation after Mr Hung had signed the $380,400 repayment agreement with the HKHS was as follows:

(1)  According to the repayment agreement of 20 July 1999, Mr Hung and his wife should make the first instalment payment in the sum of $3,713 on 1 August 2002. As at 1 August 2002, the accrued interest of the loan was $23,767.59. The total amount outstanding was $404,167.59 (principal of $380,400 + interest of $23,737.59).

(2)  On 14 November 2002, the couple entered into a supplementary agreement with the HKHS. The parties agreed to postpone the making of the first instalment payment to 1 August 2003.

(3)  Pursuant to an application made by the couple, on 20 August 2003, the HKHS allowed them to further postpone the making of the first instalment payment to 1 August 2004. As at 1 August 2003, they owed the HKHS $412,263.26 in total.

(4)  The couple failed to make the first instalment payment on 1 August 2004. As at 31 July 2004, they owed the HKHS a total of $420,508.50 (inclusive of both principal and interest).

(5)  The couple made the first repayment in the sum of $4,836 on 11 October 2004. The sum included $100 of overdue interest. They made the second repayment in the sum of $4,736 on 13 September 2005. They made no further repayment up till the time when the Asia Commercial Bank sold unit 3C.

(6)  On 28 March 2006, the HKHS received $174,376.16, being the balance of the sale proceeds of unit 3C, from the Asia Commercial Bank. Therefore, as at 1 April 2006, the amount the couple owed was reduced to $251,123.23.

(7)  As the couple did not make any further repayment since then, the amount they owed was $256,585.74 as at 30 April 2007. Coupled with the legal expenses in the sum of $7,873 incurred by the HKHS in recovering the amount owed from them, the total amount they owed it became $264,458.74, viz, the outstanding amount stated in the repayment agreement of 8 May 2007.

(8)  From 8 May 2007, the day on which the repayment agreement was entered into, to 18 March 2010, the couple had repaid a total of $49,690, with 18 instalments of repayment still outstanding.

27. Judging by the situation set out above, as the couple had postponed the first instalment repayment to 1 August 2004 and paid only two instalments after that, they therefore owed the HKHS a total of over $400,000 (inclusive of interest) as at January 2006. This court does not agree that the HKHS had overstatedthe amount owed or that it was a fictitious amount.

28. Similarly, there is also basis for the amount stated to be outstanding in the repayment agreement of 8 May 2007. It is not, as alleged by Mr Hung, inaccurate or fictitious.

29. This court does not accept Mr Hung’s allegation that he was misled or put under undue pressure to enter into the repayment agreement.

30. Mr Hung also alleged that the repayments he made had not been included in the calculation the HKHS made. However, all the repayments shown on the repayment receipts that he had produced had been entered into the repayment record of the HKHS (see pages 129 and 130 of bundle B). Besides, he alleged that he had repaid $100,000 of the principal and $17,500 of the interest between August 2002 and December 2004, but produced no document whatsoever in support of this. On the contrary, it can clearly be seen from the documents the HKHS produced that the couple only made the first instalment repayment in the sum of $4,736 and paid an overdue interest of $100 on 11 October 2004. Mr Hung alleged that the document issued by the HKHS on 27 June 2013 (pages 96 and 97 of bundle B) reflects that as at October 2004, he had made 25 instalment repayments. This is not correct. The document in question is a record of the repayments made from 1 September 2002 to 1 April 2007. It clearly shows that the first instalment repayment was made on 11 October 2004, and it was for repaying the 25^th instalment. This document does not show that there were other instalment repayments made between September 2002 and October 2004. Further, if Mr Hung had made instalment repayments to the HKHS according to the schedule, this document would not have shown that he and his wife had made an overdue interest payment to the HKHS.

31. This ground of appeal advanced by Mr Hung fails.

The sale of unit 3C

32. Mr Hung said after the Asia Commercial Bank had sold unit 3C for $1,050,000 in January 2006, the purchaser resold it on 29 April 2006 for $1,220,000. And the second purchaser sold the property later on 15 May 2006 for $1,380,000. He argued that unit 3C was being sold at an undervalue, and the Asia Commercial Bank and the HKHS were grossly remiss in their duty in the course of its sale.

33. Mr Hung’s argument contains a number of flaws. Firstly, unit 3C was resold at a better price after its initial sale by the Bank. This does not necessarily mean that the Bank had sold it at below market price. This is because there are many causes for property market fluctuations. They include a booming market and rising property prices etc. This court notes that before the Bank sold the unit, it had appointed a surveyor to estimate its price. The surveyor’s report is dated 16 December 2005[1].

34. Secondly, the Asia Commercial Bank was in charge of the sale of the unit in the capacity of first mortgagee pursuant to an order for sale the court had made.  Generally speaking, the HKHS, being the second mortgagee, had no right to participate in or influence the decision to sell the property, including its sale price. In the present case, there is no evidence either to show that the HKHS had taken part in deciding the sale price of the unit or its sale. Mr Hung’s allegation that the HKHS had the duty to fight for the best sale price for him lacks legal basis.

35. Further, in view of the fact that the Bank was the only party making the decision to sell unit 3C and was in charge of the matter, and the HKHS had nothing to do with it at all, even if Mr Hung can prove that the unit was sold at below the reasonable market price, this does not make the HKHS grossly negligent or in breach of its duty, less so to have any effect on its right to recover the debt from him.

36. Similarly, in the affirmations, Mr Hung mentioned that a deposit of $20,000 was paid when purchasing unit 3C and complained about various matters, including that the Bank had overcharged interest and muddled the figures etc. None of these affects the right of the HKHS to seek to recover the unpaid debt Mr Hung owed pursuant to the agreement entered into between the HKHS and him.

37. This ground of appeal advanced by Mr Hung fails too.

Conclusion

38. This court is of the view that the appeal lodged by Mr Hung lacks merit. The new evidence he puts forward does not help him in defending the bankruptcy petition either. This court rejects it and dismisses his appeal. We order that the costs of the HKHS (including those of the application made by way of summons on 7 August 2014) to be paid out of estate of Mr Hung. If the parties cannot agree on the amount of the costs, the matter can be referred to the court for assessment.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr P.Y. Lo, Barrister-at-law