FOSHAN CITY COMMERCIAL BANK v. CHEN YONG YI AND ANOTHER

HCA 15922/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

NO. 15922 OF 1998

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REASONS FOR DECISION

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1. There were 4 applications before this court:

(1) paragraph 1 of a summons dated 15 March 2002 in HCA No. 15922 of 1998 ("HCA 15922") asking in effect for the registration of lis pendens as set out in the schedule attached thereto to be vacated;

(2) paragraph 3(2) of a summons dated 6 February 2002 in HCA 15922 asking in effect for the balance of $1,384,830.00 paid into court by the Director of Lands to be paid out to the defendants;

(3) paragraph 1(2) of a summons dated 31 January 2002 in HCA No. 2202 of 1999 ("HCA 2202") asking for the same relief set out in (2) above;

(4) paragraph 1(2) of a summons dated 31 January 2002 (mistakenly stated as 31 January 2001) in HCA No. 8877 of 1999 ("HCA 8877") asking for the same relief set out in (2) above.

At the end of the hearing, I made an order in terms of the above mentioned applications; the following are the reasons.

2. The nature of the plaintiff's claim in HCA 15922 has already been summarised in the "Reasons for Decision" handed down on 17 April 2000. In short, the plaintiff claimed that it is a banking institution in the Mainland and had been deceived by the defendants into advancing loans to 2 companies in the Mainland. Unkown to the plaintiff, the funds so obtained were later used to invest in, develop or improve real properties in Hong Kong. At the end of the hearing on 13 January 2000, I made a number of orders including the discharge of the ex-parte Mareva injunction order dated 2 February 1999 and the re-grant of a Mareva injunction order in similar terms. The costs relating to the injunction orders were ordered to be paid by the plaintiff to the defendants forthwith. Those costs were later taxed and certified by the taxing master.

3. The defendants subsequently took out a summons asking for the plaintiff's action in HCA 15922 to be struck out on the ground that the plaintiff failed to pay the taxed costs relating to the injunction orders. At the hearing on 9 January 2002, the plaintiff indicated that it would pay those costs within 21 days. The plaintiff also did not object to the defendants' application for security for costs in the sum of $8,039,786.00 and accordingly an order (in the form of an "unless" order) was made for security for costs in that amount to be provided within 21 days.

4. Despite the plaintiff's said indication and the "unless" order of 9 January 2002, security for costs was not provided and taxed costs were not paid. As a result, on 5 February 2002, the action in HCA 15922 was dismissed. The plaintiff did not oppose the defendants' application for dismissal of its action.

5. Further, on 20 February 2002, the defendants successfully discharged the Mareva injunction order re-granted on 13 January 2000 on the ground that the underlying action, namely, HCA 15922 had earlier been dismissed.

6. It is undisputed that the said $1,384,830.00 was paid into court on 19 September 2001 by the Director of Lands by way of compensation for Government's resumption of parts of the real properties held in the defendants' name. Three matters should be noted:

(a) the nature of the claims in the 3 actions, namely, HCA 15922, HCA 2202 and HCA 8877 is similar although the plaintiffs in the 3 actions are different legal entities;

(b) 3 lots of land were resumed, namely, the remaining portions of receptively Lot Nos. 138, 181 and 191, all in DD No. 214, Sai Kung. These lots of land were referred to in all 3 actions as parts of the real properties allegedly purchased, developed and/or improved upon with the use of funds advanced by one or more of the 3 plaintiffs;

(c) because the funds advanced by the 3 plaintiffs have ready been mixed before they were allegedly used to invest in, develop and/or improve the real proprieties held in the defendants' name, there is no way (at least no readily available way) to differentiate the compensation paid by the Director of Lands among the real properties held in the defendants' name.

7. Solicitors for the plaintiffs in the 3 actions raised, in summary, 3 grounds for opposing the 4 applications:

(1) although HCA 15922 was already dismissed, the plaintiffs' claims in HCA 2202 and HCA 8877 are proprietary in nature, for example, the plaintiffs claim that there was a resultant equitable mortgage and/or lien over the real properties held by the defendants (including the 3 lots earlier resumed by Government) by reason of the defendants' fraud. The plaintiffs further argue that they have a good cause of action against the defendants;

(2) paragraph 4 of the consent summons dated 29 August 2001, in HCA 15922 states that:

"...no application shall be made for the payment out of the [$1,384,830.00] unless a written notice will have been served on the other parties through their solicitors 14 days in advance of such application."

The plaintiffs argue that the defendants have acted in breach of that paragraph because no written notice has been served on them before the aforesaid summonses were taken out;

(3) even though HCA 15922 has already been dismissed, the writs in HCA 2202 and HCA 8877 respectively were still registered as lis pendens against the real properties in question (including the 3 lots resumed by Government). Just as the defendants could not have disposed of those real properties because of the lis pendens, the defendants' position should not be any better merely because the real properties in question have been converted into compensation for land resumption by Government.

8. In relation to the plaintiffs' point (1) above, irrespective of whether their claims in HCA 2202 and HCA 8877 appear to constitute a good cause of action, these actions remain claims only. Whether the claims can successfully be established has to await the trial of those actions. The plaintiffs' argument that somehow because they appear to have a good cause of action, the compensation should be held in court is tantamount to arguing the defendants should be enjoined from disposing the sum

paid-into court in the absence of an injunction order. I do not agree with this argument.

9. In relation to the plaintiffs' point (2) above, the consent summons dated 29 August 2001 was executed by 3 parties, namely, the plaintiffs in the 3 actions, the defendants in the 3 actions and the Department of Justice representing the Director of Lands. The intention of that paragraph is obviously to require prior notice to be given to all parties concerned before an application for payment out of the compensation money is made. There is however no requirement regarding the form of the written notice. Bearing in mind the purpose of paragraph 4 of the consent summons, a summons taken out for the payment-out of the said sum should constitute a good and sufficient written notice. There is, therefore, no substance in the plaintiffs' point (2) above.

10. In relation to the plaintiffs' point (3) above, solicitors for the defendants produced, for the examination of this court and solicitors for the plaintiffs, copies of searches made at the Sai Kung Land Register on 20 April 2002. These records related to the 3 lots earlier resumed by Government and show that the writs in HCA 2202 and HCA 8877 were in fact not registered as lis pendens against those lots. Having seen the said lands search records, solicitors for the plaintiffs indicated that he was mistaken about the registration of the writs and abandoned the plaintiffs' point (3).

11. By reason of the above matters, I find that there is no valid ground for opposing the 3 summonses for payment out of the balance of the sum paid into court earlier. The application for vacating the lis pendens in HCA 15922 was not opposed.