Chan Kit Man v. Kwan Lai Hung

DCMP 2766/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2766 OF 2016

--------------------------

--------------------------

--------------------------

Before:  Deputy District Judge J. Chow in Court

Date of Hearing:  13 January 2017 and 4 October 2017

Date of Judgment:  17 October 2017

---------------------

JUDGMENT

----------------------

Introduction

1.The plaintiff, the registered owner of half share of the property, namely, Flat B, 4^th Floor, Choi Kam House, No 102 Prince Edward Road West, Kowloon, Hong Kong (“the Property”), applies for an order for sale of the Property pursuant to section 6 of the Partition Ordinance, Cap 352 (“the Ordinance”).

Background

2.The defendant and Fu Sau Hung were registered owners, joint tenants, of the Property.  On 23 September 2014, Fu Sau Hung was declared bankrupt.  On 8March 2016, the plaintiff bought Fu Sau Hung’s half share of the Property in a public auction in consideration of $700,000.  The purchase was completed on 21 April 2016.

3.Choi Kam House was a 6 – storeyed building built in 1972.  The ground floor and the 1^st floor was designated to be used as a shop and for commercial purpose.  The upper floors were designated for domestic purpose.  The Property was one of the flat in this multi – storeyed building with a size of 478 square feet.

4.Pursuant to section 3(2) of the Ordinance, the plaintiff served on the Director of the Lands Department with documents relating to this proceedings on 4 November 2016.  The Director of Lands replied on 21 December 2016 that he has no comment on this particular application.

5.On 29 June 2016, the plaintiff’s solicitors offered the defendant in writing to purchase his half share of the Property in consideration of HK$800,000 or selling the plaintiff’s half share to him at a price of HK$1,300,000.  On 1 September 2016, the plaintiff’s solicitors elevated the offer of purchase price to HK$1,680,000.  The defendant did not respond to the plaintiff’s offers.

6.For this reason, the plaintiff applied for an order for sale because a partition of the Property was inappropriate.  In support of the application, the plaintiff submitted a valuation report prepared by Kenneth CY Cheung of Citiland Surveyors Limited dated 18 August 2016 (“the valuation report”), in that the market value was assessed at $3.36 million.

Service on the defendant

7.On 15 September 2016, the plaintiff served on the defendant the originating summons by inserting the same into the letter box of the Property, being the last known address of the defendant.  The mode of service was done in compliance of Order 10 rule 1(1) and rule 5 of the Rules of District Court, Cap 336H where the Property was the last known address of the defendant. The originating summons was also posted up at the main entrance, being a conspicuous place of the Property on the same day.

8.The notice of appointment of hearing the originating summons, notice to occupants and the plaintiff’s supporting affirmation were served by the same manner. The same set of documents were posted up at the entrance of the Property.

9.On the hearing of 13 January 2017, the defendant was absent. Having considered the mode of service of all documents, including the originating summons, I have reservation the originating summons would likely come to the defendant’s attention by way of mere inserting into the letterbox of the Property.  

10.In Chung Chi Cheung v. Chung Kwan Wa (HCMP 1478/2016, 24 October 2016, Deputy High Court Judge Le Pichon), that plaintiff was also applying for an order for sale under the Ordinance, the mode of service was more than that in this present application.

“3. The plaintiff has not met the defendant personally, but is aware that the defendant did not have any children. None of the male members of the clan is able to shed any light on the whereabouts of the defendant. Searches have been done at the Births and Deaths Registry and also the Probate Registry, but nothing has come to light.

4. On 8 July 2016, an order for substituted service of the present originating summons was made by way of advertisement in two Chinese papers and one English paper in Hong Kong for a consecutive period of three days.

5.The plaintiff has complied with the service requirements, but no one has come forward.  The defendant is absent today.”

11.Whilst the impact of an order for sale of a property on an absent defendant would be beyond redemption, the service requirements should be more stringent. I am of the view the service requirements in Chung Chi Cheung should be followed. In situation where an order for sale of a property to be granted in absence of a defendant owner, the Court has to be more cautious to ensure the absent defendant was duly notified of such application and hearing dates.  The plaintiff shall also demonstrate efforts to locate the defendant.

12.I so directed the defendant, (i) to effect substituted service on the defendant; (ii) to conduct search result of KWAN LAI HUNG (關禮雄) with the Probate Registry and the Births and Deaths Registry; (iii) to conduct search for records of payment of government rent and rates from the date of purchase of the property until present, in particular whether there are any outstanding government rent and rates due and owing; and (iv) to check the physical condition of the property, if possible; and attempts to ascertain whether there are occupiers in the property.

13.The plaintiff has duly complied with all the above directions. In his second affirmation dated 3^rd July 2017, the plaintiff confirmed negative results from Probate Registry and Births and Deaths Registry.  The last payment of government rent was made on 29 November 2016.  On 27 June 2017, Mr Cheng, a staff of the plaintiff’s solicitors paid visit to the Property, Fu Sau Hung, the bankrupt, and her son were found to be living there.  Fu Sau Hung did not claim to be a tenant or has any interest.  She said the defendant was suffered from stroke few years ago and was not living there anymore.

14.I am satisfied the plaintiff has complied with the service requirements, to notify the defendant of this application. The plaintiff has also made his best endeavour to find the defendant’s whereabouts.

15.The hearing was resumed on 4^th October 2017, the defendant was still absent. I came to a conclusion that the defendant has elected not to contest the plaintiff’s application.

Legal principles

16.Section 2 of the Ordinance states “where any property in land is held by 2 or more persons, whether as joint tenants or tenants in common, the Court may make an order for partition for sale of the property, or refuse to make any order at all”.  Section 3 of the Ordinance states “any person interested in such property may institute proceedings in the Court under this Ordinance by way of an action for partition or sale”.

17.Section 6(1) of the Ordinance states “in any proceedings under this Ordinance, where it appears to the court that a partition of the property would not be beneficial to all the persons interested by reason of (a) the nature of the land to which the proceedings relates; (b) the number of the persons interested or presumptively interested; (c) the absence or disability of some of the persons interested; or (d) any other circumstance, the court may make an order for sale of the property. The court may exercise power under section 6(1), notwithstanding the dissent or disability of any person interested.

18.The test of making an order for sale is stated in Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825, Recorder Fok SC (as he then was) decided in paragraphs 16 – 19 in the judgment,

“16. As to the circumstances in which the court will exercise its power under section 2(c) of the Partition Ordinance to refuse to make an order for partition or sale, the test is that set out in the judgment of Briggs CJ, sitting at first instance, in Fook Sun Enterprises Co Ltd v Cromwell Investment Co Ltd & Ors [1973-1976] HKC 335 at 337H-I :

“I think that a court would only make no order, neither an order for partition nor an order of sale, when the interests of all the parties would be better served by their continuing to remain co-owners, or where the facts show that to make such an order would result in very great hardship to one co-owner.”

17. Although the decision in Fook Sun was overturned by the Full Court, see [1976] HKLR 1, none of the judges suggested that this approach to section 2(c) was wrong. It has since been endorsed by Yam J in Chow Doi Kwai v Chan Cho Yuk [2000] HKLRD 235 at 237D-G and by Deputy Judge Poon in Ip Sau Shu v Sham Lai Hing [2003] 4 HKC 528 at 540 §36. It was also endorsed, in substance, by Deputy Judge Muttrie in Beautiglory Investment Ltd. v Tang Moon Sum & Ors, HCMP531/1989, 10 December 2003, unrep. at §43.

18. These passages from the cases cited above were relied upon by Mr Fung SC to support the following propositions, namely :

(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.

(b) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners.

(c) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.

19. Subject to adding the qualifications, “if he has no other remedy,” before the words “ask for an order for partition or sale” in proposition (1), and “or that it will result in very great hardship to one co-owner” to the end of proposition (2), I am satisfied that these propositions fairly and accurately state the law as regards the court’s jurisdiction when faced with an application for partition or sale under the Ordinance and I shall proceed in this judgment to apply those propositions in resolving the plaintiffs’ application.”

Discussion

19.A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.  The plaintiff is a joint tenant of the Property and is indisputable a person interested in the Property.  Sections 2 and 3 of the Ordinance are satisfied.

20.The burden rests with the defendant to oppose an order of sale that such an order for sale of the Property would not be beneficial to all co-owners.  In this application, the defendant did not respond to both the plaintiff’s offer for sale and offer to purchase his share of the Property.  Whilst due notice (including substituted service, insertion of relevant documents in the letter box of the Property and posting up at a conspicuous place at the main entrance of the Property) has been given to the defendant, he chose not to oppose by failing to file the acknowledgment of service and to appear in both hearings.  No evidence has been tendered by the defendant to oppose the application.

21.Practically, the Property is a residential flat in a multi – storeyed building with 478 square feet in size.  In the valuation report, Mr. Cheung opined the Property could not be partitioned into two or more units because the occupation permit and the approved building plans stipulated there should only be two flats per floor for domestic use from the 2^nd to 5^th floor of the building.  It would be equally impracticable to construct a separate entrance in common lift lobby where the parties will incur further costs.

22.The plaintiff purchased half share of the Property in a public auction.  The defendant is a stranger to him.  For an order for sale be granted, the defendant would not be worse off when he is still entitled to half share of the proceeds of the sale.  In this regard, I find an order for sale is more beneficial than a partition.

Costs of this application

23.I opt for summary assessment on costs of the originating summons. Having heard Ms Ma’s submissions, I assessed the plaintiff’s costs of the originating summons, including both hearings on 13 January 2017 and 4 October 2017 at $40,000, inclusive of both solicitors and counsel fees, plus disbursement at $8,155.40.  

Conclusion

24.I allow an order of sale of the property. The costs of the originating summons be summarily assessed at $48,155.40, to be paid from the proceeds of the sale of the Property.

The orders sought in the originating summons

25.I therefore make the following orders:-

(i) The defendant do deliver vacant possession and title deeds and documents of the Property to the plaintiff for the purpose of the sale of the Property.

(ii) The Property be sold by the plaintiff in his capacity as a vendor or by an agent for and on behalf of the plaintiff by public auction or private treaty no less than HK$3,360,000.00 in open market.

(iii) The proceeds of sale be applied in the following priority:-

(a) in payment of all rent, taxes, rates and other outgoings due and affecting the Property;

(b) in payment of all auctioneer’s costs and estate agent’s commission in connection with the sale not exceeding 1% of the sale price of the Property;

(c) in payment of all other proper conveyancing costs, charges and other expenses incurred in connection with the said sale, with solicitors’ costs excluding disbursement not exceeding $10,000.

(d) in payment of the plaintiff’s costs in this proceedings, be summarized assessed at $40,000 and disbursement at $8,155.40.

(e) in payment of all costs and expenses incurred by the plaintiff in taking enforcement for recovery of possession of the Property, if necessary.

(f) The balance, be paid to the plaintiff and the defendant in equal shares.

(g) If the defendant cannot be located after reasonable inquiry, his half share in the balance mentioned in paragraph (f) above after deduction of the costs and disbursements for handling the same be lodged to court to the credit of the proceedings and subject to further order.

(iv) Upon such sale, the plaintiff be authorized to do all necessary acts necessary for the vesting of the Property in the purchaser(s) thereof.

Ms Belinda Ma, instructed by Liu, Chan & Lam, for the plaintiff

The defendant was not represented and did not appear