URBAN PROPERTY MANAGEMENT LTD AND ANOTHER v. TSANG WING LAM

DCMP 2185/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2185 OF 2004

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D E C I S I O N

1.  This case has a long history. Tsang, the Defendant, is the registered owner of the captioned property at Flat 5, 23^rd Floor, Block C, King Tin Court, Shatin, New Territories (“the Property”). The 1^st Plaintiff is the manager and the 2^nd Plaintiff is the owners’ corporation of the building. On 11 September 2001, the manager registered in the Land Registry the captioned Memorandum of Charge against the Property for the management expenses owed by Tsang (“the MOC”).

2.  In 2004, the manager commenced the present originating proceedings to recover the amount due and owed by Tsang as well as to enforce the MOC by seeking an order for possession and sale of the Property. The owners’ corporation was subsequently joined as a plaintiff. Since then, many court hearings have taken place. As a matter of fact, there are still pending applications at the time of this decision. Besides this decision, I am also handing down my decision in respect of another appeal by Tsang against the Master’s decision.

3.  On 23 December 2008, Tsang applied for an order for the release of the Property from the security constituted by the MOC. The Plaintiffs opposed. The Master dismissed the application on 8 June 2009. Tsang now appeals against the Master’s decision.

The MOC

4.  To begin with, there is the deed of mutual covenant in respect of the building (“DMC”). Clause 6 of the DMC provides for the owners’ obligation to pay management expenses and the enforcement provisions including the following:

“(e)  All amounts which may be or become payable by any owner …… together with interest thereon …… and the said collection charge and all other expenses in or in connection with the recovery or attempting to recover the same shall be recoverable by civil action at the suit of the Authority.  The claim in any such action may include a claim for the solicitor and own client costs …… and the defaulting owner shall in addition to the amount claimed in such action be liable for such costs……

(f)  In the event of an owner failing to pay any sum due and payable by him in accordance with the provisions of this Deed within seven days from the date on which such sum becomes payable -

(i)  the Authority may serve upon that owner a notice specifying the amount due which shall include any interest payable thereon up to the date of the notice and any collection charge and all costs and expenses which may be incurred in recovery or attempting to recover the same including the legal expenses referred to in paragraph (e) above.

(ii)  Upon the service of a notice under (i) above the owner upon which whom such notice has been served shall be deemed to have entered into an agreement for a charge in favour of the Authority for the amount specified in the notice together with interest thereon at the rate stated and upon the terms and conditions therein set forth.

(iii)  The Authority may register in the District Land Office Sha Tin a copy of the said notice against the undivided share and interest in the said land of the owner upon whom the notice has been served and the said agreement to enter into a charge shall remain valid and enforceable as hereinafter mentioned notwithstanding that judgment may be obtained for the amount thereof unless such judgment has been fully satisfied.

(g)  Any notice registered in accordance with paragraph (f)(iii) of this Clause shall be enforceable as an equitable charge by action at the suit of the Authority for an order for the sale of the undivided share and interest of the defaulting owner of and in the said land together with the right to the exclusive use and occupation of the flat held and enjoyed therewith and the provisions of paragraph (e) of this Clause shall apply equally to any such action.”

(Emphasis added)

5.  According to the MOC, service and management fees in the total sum of HK$12,870.00 (calculated from July 1999 up to August 2001) were then due and owing by Tsang. The MOC is in the following terms:

“NOW THIS MEMORADUM gives notice …… that the said sum of HK$12,870.00 is outstanding and unpaid and that the said sum or further moneys that may be due by the said owner to the Manager under the said Deed of Mutual Covenant shall stand charged on the said premises until the same shall have been settled in full by the said owner.” (Emphasis added)

6.  By the time of the MOC, no civil action has been taken against Tsang for the unpaid management expenses pursuant to clause 6(e) of the DMC.

These proceedings

7.  These originating proceedings were commenced by the Plaintiffs for dual purposes: (1) to recover the amounts payable pursuant to clause 6(e); and (2) to enforce the MOC pursuant to clause 6(g) of the DMC.

8.  After numerous hearings, this case came to be heard before H H Judge HC Wong who made the following order on 4 August 2006 (“the 4/8/06 Order”):

“1.  The  1^st and the 2^nd Plaintiffs do recover against the Defendant all sums secured by the Memorandum of Charge dated 11^th September 2001 made pursuant to the DMC in favour of the 1^st and 2^nd Plaintiffs and registered in the Sha Tin New Territories Land Registry by Memorial No. 1244690 (“the Memorandum of Charge”);

2.  Unless the Defendant do within 28 days from the date of the Order to be made herein pay to the 1^st and 2^nd Plaintiffs all sums due to the 1^st and 2^nd Plaintiffs and secured by the Memorandum of Charge, the 1^st and 2^nd Plaintiffs may sell the property …… (“the Property”) to any purchaser in the open market or by way of private sale;

3.  The Defendant do within 28 days, after service upon him of the Order to be made herein deliver vacant possession of the Property to the 1^st and 2^nd Plaintiffs ……

4.  Upon such sale of the Property, the solicitors for the 1^st and 2^nd Plaintiffs appointed to conduct the sale and the Principal of the 1^st and 2^nd Plaintiffs may execute the necessary agreement for sale and purchase, conveyance and/or assignment to give effect to the Order to be made herein;

5.  The money arising from such sale of the Property be applied in the following manner and priority:-

(a)  ……

(b)  ……

(c)  ……

(d)  to pay the sums due and owing by the Defendant to the 1^st and 2^nd Plaintiffs under the Memorandum of Charge, i.e., the sum of HK$12,870.00 together with interest thereon and collection charge and all other expenses incurred in or in connection with the recovering or attempting to recover the said sum;

(e)  ……

(f)  ……

6.  Upon the Defendant paying to the 1^st and 2^nd Plaintiffs the money ordered to be paid and all other moneys secured to the 1^st and 2^nd Plaintiffs by the Memorandum of Charge, the 1^st and 2^nd Plaintiffs (subject and without prejudice to the due exercise of any power of sale of the time being vested in it) do deliver to the Defendant possession of the Property and release to the Defendant the security constituted by the Memorandum of Charge as the Defendant may agree or this Honourable Court may direct;

7.  The Counterclaim by the Defendant be dismissed with costs;

8.  The parties hereto do have liberty to apply; and

9.  Costs of these proceedings be to the 1^st and 2^nd Plaintiffs, to be taxed if not agreed.”

(Emphasis added)

10.  Paragraphs 1 and 2 of the 4/8/06 Order entitle the Plaintiffs to recover all sums due to them and secured by the MOC. Paragraphs 2 to 4 of the order provide for the order for possession and order for sale, in the event that Tsang did not pay such sums due and secured by the MOC. Paragraphs 7 and 9 of the order entitle the Plaintiff to costs of these proceedings.

11.  After numerous hearings whereby the execution of the 4/8/06 Order has been stayed, writ of possession of the Property was eventually issued on 7 March 2007 (“the Writ of Possession”).

12.  On 29 March 2007, H H Judge HC Wong dismissed Tsang’s application for leave to appeal against the 4/8/06 Order with costs.

13.  Since then, Tsang has taken out various applications in respect of the 4/8/06 Order and the Writ of Possession. The deadline for his compliance with paragraph 2 of the 4/8/06 Order has since been extended time and time again.

14.  On 10 July 2007, H H Judge HC Wong dismissed the various applications by Tsang with costs; and for the last time extended the deadline for compliance with paragraph 2 of the 4/8/06 Order to 23 July 2007.

15.  The deadline lapsed and Tsang has failed to settle the sums due. Tsang has chosen to tender cheques which were drawn in such a way that the manager and the owners’ corporation were named together as the payees. Without such a bank account in existence, the cheques simply could not lead to payment to the Plaintiffs.

16.  The Plaintiffs therefore proceeded with the execution of the Writ of Possession. Execution took place on 16 October 2007 when the bailiff took possession of the Property.

17.  Pursuant to Tsang’s application for the recovery of vacant possession of the Property from the Plaintiffs, the Registrar gave Tsang the last chance on 18 October 2007. He ordered that:

“1.  被告人須在今天下午4時30分前以支票支付欠款HK$27,002.50給原告人及支票抬頭寫上「梁溫律師事務所」；

2.  收取支票後，原告人須送達鎖匙予被告人作交還新界沙田大圍景田苑冰心閣23樓5號室管有權予被告人；

3.  被告人可自由處理門鎖；及

4.  申請的訟費不作出判令。”

18.  The order by the Registrar was effectively that Tsang should pay HK$27,002.50 being the sum due and owing (and secured by the MOC) by way of cheque drawn in favour of the solicitors for the Plaintiffs by 4.30 pm of that day. Upon receipt of the cheque, the Plaintiffs should return the vacant possession of the Property to Tsang by way of handing over the keys to the Property. Tsang had liberty to deal with the lock (to the Property) thereafter.

19.  Pausing here, it should be noted that a cheque does not amount to payment unless and until the cheque is honoured upon due presentment. It is upon payment when Tsang could really be said to have discharged his obligation to pay the amounts secured by the MOC. This is clear by referring to paragraph 6 of the 4/8/06 Order.

20.  However, while paragraph 1 of the Registrar’s order “以支票支付欠款” must mean payment rather than mere tendering of the cheque, paragraph 2 directed the return of vacant possession to Tsang upon the Plaintiffs’ receipt of the cheque. The risk of that, of course, would be the uncertainty of whether cheque received would be honoured.

21.  The risk mentioned above materialised. What Tsang drew in favour of the Plaintiffs’ solicitors and delivered to them was a cheque post-dated to 28 October 2007. Upon tendering of the cheque, Tsang somehow managed to get hold of the keys to the Property. The cheque was dishonoured upon presentment after the cheque has become due. Yet Tsang has resumed possession of the Property.

22.  Since late 2007 and early 2008, the Plaintiffs have been seeking the court’s order for the re-delivery of vacant possession of the Property to them by Tsang. I have doubt as to the legal basis for such request as much as what the Master had when he raised his requisitions in this regard. In the meantime, the Plaintiffs also turned to other enforcement alternative.

23.  On 31 January 2008, the Plaintiffs obtained a garnishee order nisi against Tsang’s money at the bank in respect of the sum of HK$24,155.95 (i.e., the principal sum of HK$12,870 and accrued interest secured by the MOC). Tsang has again made various attempts to rid himself of the order. But his application to set aside the nisi order and the subsequent appeal have all been dismissed by the court.

24.  Tsang has purported to tender payment. However, not only did Tsang again insist on tendering his cheque made payable to the manager and the owners’ corporation together as the payee (which as mentioned above would have disabled the Plaintiffs from obtaining payment), but he also drew the cheque for an amount different from the amount of the garnishee order. Not surprisingly, this ended up with the court’s disapproval.

25.  The garnishee order nisi was finally made absolute on 30 May 2008. The further appeals from the court’s decisions in this respect were all dismissed subsequently. Effectively this was when the Plaintiff managed to obtain payment in satisfaction of the principal and interest payable and secured by the MOC.

26.  Insofar as the application for re-delivery of vacant possession of the Property to the Plaintiffs is concerned, attempts were made in November 2007 and January 2008, notwithstanding the execution of the Writ of Possession on 16 October 2007. In January 2009, the Plaintiffs decided to apply for a new writ of possession of the Property. This again met with the Master’s requisitions as to the legal basis.

27.  By an Allocatur dated on 2 July 2008, the Plaintiffs’ costs pursuant to various costs orders adverse to Tsang made in these proceedings were taxed at the total sum of 411,012. Tsang has yet to pay such taxed costs.

28.  Prior to this hearing and in respect of the unpaid taxed costs of HK$411,012, the Plaintiffs has also obtained from the court a charging order against the Property which was made absolute on 27 August 2009; and a charging order against Tsang’s majority interest in the shares in a company which was made absolute on 4 September 2009.

Tsang’s application

29.  The application by Tsang for the release of the security by the MOC over the Property was filed on 23 December 2008. The Master handed down her written decision on 8 June 2009 dismissing the application with costs. By notice of appeal filed on 22 June 2009, Tsang appeals.

30.  In his affirmations, Tsang questioned what the Plaintiffs’ solicitors deposed in opposition to his present application. Though he spoke in terms of the solicitors’ authority to make the affirmation, I consider it to be nothing more than his disagreement with the Plaintiffs’ solicitors.

31.  Tsang mentioned the amount of his indebtedness by referring to the amount stated in the letter from the Plaintiffs’ solicitors to him on 10 July 2007. The might be the amount due and owing as at that day. However, the amount clearly kept on increasing with the overdue interest as long as the principal amount (HK$12,870) remained unpaid even after that date. This has been reiterated time and time again in the decisions of the court on the previous occasions.

32.  Mainly, Tsang argued that possession of the Property has been returned to him and so should the release of the Property from the security constituted by the MOC. He argued that the right to enforce the security has been exercised. He also argued that he has already discharged his obligation to pay the amount secured by the MOC.

33.  It was argued on behalf of the Plaintiffs that costs of these proceedings are secured by the MOC. Therefore the release should be refused. For the following reasons, I do not agree with the Plaintiffs.

34.  The notice under clause 6(f) is supposed to be served in the event of an owner failing to pay any sum due and payable by the owner within 7 days “from the date on which such sum becomes payable”. The notice served pursuant to clause 6(f)(i) is supposed to specify such sum due by then. According to clauses 6(e) and 6(f)(i), costs of the action are separate and distinct from the expenses in or in connection with the recovery or attempt to recover the amount due. However, by the time of the notice constituting the MOC subsequently registered pursuant to clause 6(f)(iii) came into existence, no civil action has been brought pursuant to clause 6(e), let alone these proceedings which were commenced in 2004. No legal costs of any civil action was due or payable by the time of the notice constituting the MOC.

35.  To be in line with these provisions of the DMC, the “further moneys that may be due” under the MOC could not be any amount than that specified. Tsang was deemed by clause 6(f)(ii) to have agreed to a charge for the amount specified in the notice together with interest. This did not include the legal costs to be incurred in these proceedings.

36.  I note paragraph 5 of the 4/8/06 Order which sets out the manner in which the proceeds of sale of the Property, if sold, should be distributed. Paragraph 5(d) refers to all other expenses incurred in or in connection with the recovering or attempting to recover the sums secured by the MOC. For reasons discussed above, they do not refer to the costs of these proceedings commenced pursuant to clause 6(e) of the DMC.

37.  Liability for costs at any stage of these proceedings arises upon the court’s order. That is when the same becomes payable. Costs of these proceedings were dealt with in paragraphs 7 and 9 of the 4/8/06 Order. Tsang became liable to pay such costs as a result of such order, and not already secured by the MOC.

38.  What remains to be considered is paragraph 6 of the 4/8/06 Order. Return of the possession of the Property and release of the Property from the security constituted by the MOC were supposed to happen upon “the money ordered to be paid and all other moneys secured to the 1^st and the 2^nd Plaintiffs by the Memorandum of Charge” having been paid. If the costs of these proceedings belong to the money secured by the MOC, as the Plaintiffs suggest, it becomes unclear what “the money ordered to be paid” in the same paragraph could mean.

39.  If on the other hand, the costs of these proceedings do not form part of the amount secured by the MOC but are part of the other money ordered to be paid, then payment of the costs of these proceedings pursuant to paragraph 6 of the order becomes effectively a condition precedent to returning possession and release of the security now imposed by the court.

40.  Even assuming that payment of costs was such a condition precedent imposed by the court, paragraph 8 of the 4/8/06 Order provides for the return of possession and release of the security by the MOC as the court may direct. The order for possession has been executed by way of the Writ of Possession. Rightly or wrongly, possession was in fact resumed by Tsang without actual payment. Nevertheless, the amount has been settled by way of the garnishee order against his money in the bank subsequently in May 2008. In the circumstances, I would direct that the Property be released from the security constituted by the MOC.

41.  Another reality is that by the time of this hearing, the Plaintiffs have separately obtained charging order against the Property in respect of the unpaid taxed costs of these proceedings. The actual position of the Plaintiffs could only be that the costs ordered to be paid in these proceedings are not secured by the MOC. Otherwise, there would be two enforceable charges against the same property in respect of the same indebtedness of Tsang to the Plaintiff.

42.  Lastly, Tsang made reference in his affirmations to various other extraneous matters such as his dealings with other third parties and other actions. They are irrelevant. So is what is apparently stated in his affirmation he managed to file and sought to rely on without leave of the court just before this hearing began.

Order

43.  The Master’s order dated 8 June 2009 is set aside. I order that the Property be released from the security constituted by the MOC. I make a nisi order that Tsang shall have the costs of the hearing below and this hearing. Costs shall be taxed, if not agreed. In the absence of an appointment within 14 days to argue costs, this costs order shall become absolute.

44.  The court documents filed by the parties have all along been in English. As indicated during the hearing, notwithstanding this hearing being conducted in Chinese for the benefit of Tsang, I am handing down this decision in English. If necessary, Tsang may request to arrange the assistance of the court interpreter in receiving this decision.