Re Lai Yat Sing

HCMP 2329/2019

[2020] HKCFI 1685

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2329 OF 2019

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D E C I S I O N

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Introduction

1.This is an application where the registered owner of a piece of property in the New Territories is concerned with the discharge of a stale mortgage in order to perfect his title.

2.The ex-parte originating summons was issued by the applicant (“Applicant”), and as amended, seeking essentially the following orders :

(i)  Leave to the Applicant to pay into Court a sum of HKD 51.32 for the discharge of section A of Lot No 257 in Demarcation District No 52 (“Property”) from the mortgage endorsed in the Block Government Lease Schedule registered in the Land Registry against Lot No 257 in Demarcation District no 52 in favour of Liu Wing Chung Tong (廖永春堂) with Liu Kau Hing (廖九興) as trustee (“Mortgage”) or such amount of principal and interest that the Court shall deem fit and/or sufficient to redeem the Mortgage;

(ii)  Upon payment into Court of the sum referred to in (i) above, there be a declaration that the Property is freed from the Mortgage and the Property do stand redeemed and accordingly the registration of the Mortgage be vacated from the Land Registry forthwith.

The law

3.The originating summons was issued under section 12A of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).  The jurisdiction of the court under section 12A has been analysed at length by DHCJ Lam, as he then was, in his judgment in Re an application by Cheung Chi Wang [2002] 1 HKLRD 409, HCMP 6097/2001, 31.12.01.  As pointed out by DHCJ Lam then, section 12A of the CPO came into operation in Hong Kong on 9 June 2000 and that in England, similar power had been vested in the courts since 1881 in the form of section 5 of the Conveyancing Act 1881, which was subsequently modified and eventually the final version was section 50 of the Law of Property Act 1925.

4.DHCJ Lam had highlighted the differences between our section 12A and section 50 of the 1925 Act and further set out a 3 stage approach :

(i)  Stage 1 – to obtain direction or approval of the court regarding payment into court under section 12A (1) of CPO at the 1^st hearing;

(ii)  Stage 2 – after money is paid into court pursuant to the above direction, the court will consider the exercise of its discretion under section 12 A (2) of CPO at a 2^nd hearing;

(iii)  Stage 3 – the 3^rd stage takes place when the encumbrancer or any person entitled to the money applies to the court for payment.  

5.As seen in the above judgment, the power under section 12A of CPO is predicated upon one of the following being established:

(i)  The encumbrancer is out of the jurisdiction;

(ii)  The encumbrancer cannot be found;

(iii)  The encumbrancer is unknown; or

(iv)  It is uncertain who the encumbrancer is.

6.DHCJ Lam has stressed that section 12A is only applicable when the property is subject to the encumbrance in question and that before it can be shown that the encumbrancer cannot be found or is unknown or uncertain, the applicant must take reasonable steps to find out who the encumbrancer is and to locate him and evidence as to steps taken by the applicant in this regard must generally be placed before the court[1].

7.Further, at the Stage 2, the power could be exercised “after or without any notice to the encumbrancer” and hence the court has a discretion in deciding whether notice should be given to the encumbrancer.  However, it was recognised by the then Deputy Judge that it is difficult to expect notice to be given to an encumbrancer who cannot be found, or who is unknown or whose identity is uncertain other than a general notice by advertisement in newspaper, and whether that is necessary is a matter for the discretion of the court to be exercised on the facts of each case.  The then Deputy Judge also indicated he saw no reason why initially proceedings could not be commenced by way of ex-parte originating summons.

8.Subsequently, in another judgment in Man Chi Kan and Man Tsak Lun, HCMP 4945/2002, unrep, 14/01/03, the Deputy Judge had also observed that section 12A implicitly authorised the mode of application by way ex-parte originating summons but that does not mean that a plaintiff will be allowed to proceed further on ex parte as of right.  As in that case, the plaintiff had satisfied the court that he had exercised due diligence in trying to locate the defendant or his successors, and in the circumstances of the case, the then Deputy Judge had allowed the proceedings at least up to the Stage 2 to be continued on an ex parte basis.

The facts in the present case 

9.The Applicant is the registered owner of the Property.  The Applicant purchased the Property from a Mr Liu Tin Chee (“Mr Liu”) on 12 September 2019 at a consideration of HKD 2,000,000.  Mr Liu is a solicitor and is the principal of a firm of solicitors Messrs Choi & Liu. In the assignment dated 12 September 2019, the purchase was to be subject to the covenants conditions and provisos contained in the Government Lease[2].

10.According to the Applicant, in early 2019, he instructed his solicitors to act for him in the purchase of the Property, and he was informed by his solicitors that there was a stale mortgage against the Property, namely the Mortgage, which was recorded in the Schedule of the Government Lessees annexed to the Block Government Lease relating to DD 52 and the Property is subject to the Mortgage, which reads “mortgaged to Liu Wing Chun Tong (廖永春堂) trustee Liu Kau Hing (廖九興) (illegible) for $5.00 in KS 25 mortgagee in possession”.  The Block Government Lease was made on 27 March 1905.

11.Further, according to land search record of Lot 257 in DD52 (“Whole Lot”), there was also a remark under the property particulars which reads “As stated in the Block Govt Lease the Lot is subject to mortgage in favour of Liu Wing Chun Tong (廖永春堂) with Liu Kau Hing (廖九興) as Trustee for $5”.

12.The Applicant has in his supporting affirmation set out all the relevant title documents.  In short, according to the Block Government Lease and the land search record, the Property was subject to the Mortgage and the consideration was $5.  There was no document evidencing any discharge or redemption of the Mortgage. 

13.Before the completion of the purchase of the Property, the Applicant had raised requisitions in respect of the Mortgage.  Messrs Choi & Liu, solicitors for Mr Liu (the vendor) wrote to the Tso Tong Registry officer-in-charge of the District Officer (North) on 26 July 2019 but the reply from the North District Office was that they did not have any record relating to the said Mortgage or the mortgagee.  The Applicant’s solicitors had also written to Messrs Choi & Liu who replied that say that Mr Liu (the vendor) confirmed, amongst other things, that he did not know the mortgagee and had not heard of the said Tong, and had never received any information from his predecessors-in-title as to the mortgagee.

14.The Applicant decided to go ahead with his purchase. According to the Applicant, after the purchase, he and his solicitors had conducted further investigations including that that his solicitors had conducted an enquiry from the Births and Deaths Registry and a probate search of the trustee Liu Kau Hing but the results were negative and no one seemed to have the slightest idea of the mortgagee, its trustee/manager nor beneficiaries. 

15.According to the Applicant’s calculations, the interests will be a sum of HK$46.32 which is arrived at by HK$5 x 114 years x 8.125% per annum interest payable on judgment debts in the High Court from the date of the Block Government Lease, ie 27 March 1905 (ie 2019 – 1905 = 114 years). Thus, the principal of $5.00 plus interests of HK$ 46.32 will be a total of HK$51.32.  He asked that he be allowed to make this payment into court for the discharge of the Mortgage.

Stage 1

16.The ex parte originating summons was fixed before this Court on 22 January 2020.

17.At the hearing, this Court raised certain queries, including what other steps had been taken by the Applicant to locate the mortgagee.

18.The Court was informed that the Property is a vacant piece of land and that no one is in physical possession of the Property. According to Mr Liu, since he became the owner of Property since 31 July 1981, he had not at any time been deprived of possession of the Property and that Mr Liu had been in possession or using the Property free from any disturbance, interference, claims and demand of the mortgagee or at all.

19.This Court granted leave to the Applicant to pay into Court the sum of HK$51.32 which was deemed to be sufficient to discharge the Property from the Mortgage. 

20.The Court directed that the notice of the amended ex-parte originating summons be given to the mortgagee by way of (i) advertising in a widely circulated Chinese Newspapers in Hong Kong, the draft of the advertisement to be approved by the Court and (ii) leaving a copy thereof at the Property. 

21.This Court further granted leave for the mortgagee to apply to join as a party to these proceedings within 28 days after the notice has been duly advertised.  Finally, the Court directed that the Stage 2 be dealt with by paper disposal unless otherwise directed by the Court.

Stage 2

22.On 2 June 2020, the clerk of the Applicant’s solicitors’ firm filed an affirmation confirming that the sum of HK$ 51.32 was paid into the Accounts Office of the High Court Registry on 23 January 2020. Further, on 6 March 2020, he arranged a Notice in Chinese settled by this Court to be advertised once in Sing Pao, a widely circulated Chinese newspaper in Hong Kong and that on the same day, he had also left a copy of the Notice at the Property.

23.There has been no response from anyone claiming to be the mortgagee.  Having considered the evidence filed by the Applicant, I am satisfied that the Applicant has exercised due diligence in trying to locate the mortgagee. 

24.In the above circumstances, I am prepared to grant a declaration that the Property is freed from the Mortgage and the Property do stand redeemed and accordingly the registration of the Mortgage be vacated from the Land Registry forthwith.  There be no order as to costs.

Miss Constance Leung of Leung Kin & Co, for the applicant