Bao Yuan Finance Ltd v. Luo Guiying and Others

HCMP 968/2019 & HCA 770/2019
[2020] HKCFI 2942

HCMP 968/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 968 OF 2019

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AND

HCA 770/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 770 OF 2019

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Before: Deputy High Court Judge MK Liu in Chambers

Date of Hearing: 16 November 2020

Date of Decision: 16 November 2020

Date of Reasons for Decision: 19 November 2020

REASONS FOR DECISION

1.The disputes in these proceedings concern a property known as Flat A (with A/C room(s) pertaining thereto which is/are accessible from the flat itself) on the 26^th floor of Tower 9, the Palazzo, No. 28 Lok King Street, Shatin, New Territories (“the Property”).

2.In the hearing on 22 October 2020, the following summonses were before the court:

(1)  a summons (“Zhang’s summons”) taken out by Mr Zhang Chuangrong (“Zhang”) in HCMP 968/2019 (“the MP Proceedings”) on 2 June 2020, for an order that Zhang be joined in the MP Proceedings as the 3^rd defendant and the MP Proceedings be converted to writ proceedings;

(2)  a summons (“Fang’s summons”) taken out by the 2^nd defendant (“Fang”) in the MP Proceedings on 22 September 2020, for an order that the MP Proceedings be converted to writ proceedings and for consequential directions;

(3)  two summonses (“Luo’s summonses”) taken out by Ms Luo Guiying (“Luo”, the 1^st defendant in the MP Proceedings and the defendant in HCA 770/2019 (“the Writ Action”)) on 12 October 2020, one in the MP Proceedings and the other one in the Writ Action, for an order that the Writ Action and the MP Proceedings be tried or heard together by the same judge.

3.In that hearing, Luo made it clear that she did not oppose the possession claim made by P in the MP Proceedings.  The possession claim therefore was an issue between P on the one hand and Fang and Zhang on the other hand.  I directed that there would be a hearing on 16 November 2020 for the purpose of determining the following issues:

(1)  whether it is arguable that Zhang has a beneficial interest in the Property as alleged by him (“Question 1”); and

(2)  whether it is arguable that the beneficial interest of Fang and/or Zhang in the Property as alleged by them (assuming the alleged beneficial interest is true) can bind the plaintiff in the MP Proceedings (“P”) (“Question 2”).

I also allowed Luo to be excused from attending the hearing on 16 November 2020.

4.At the end of the hearing on 16 November 2020, I ruled that the answers to the 2 questions are “No”.

5.Consequentially, I made the following order in the MP Proceedings:

(1)  There be an order that Zhang be added as the 3^rd defendant in the MP Proceedings.  Save that, Zhang’s summons be dismissed.

(2)  Fang’s summons be dismissed.

(3)  Luo, Fang and Zhang do deliver vacant possession of the Property to P within 56 days.

(4)  Costs of Zhang’s summons and Fang’s summons, including the costs of the hearing on 22 October 2020 and 16 November 2020 and all costs reserved, be paid by Fang and Zhang to P and be summarily assessed.  There be leave to P to file and serve a bill of costs for summary assessment within 7 days, and leave to Fang and Zhang to file and serve a written reply to that bill within 7 days thereafter.

(5)  There be a costs order nisi that costs of the 2 summonses, including the costs of the hearing on 22 October 2020 and 16 November 2020 and all costs reserved but except the costs of the hearing on 5 June 2020, be paid by Fang and Zhang to Luo and be summarily assessed.  There be leave to Luo to file and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute, and leave to Fang and Zhang to file and serve a written reply to that bill within 7 days thereafter.

(6)  Leave to Luo to withdraw her summons dated 12 October 2020, with no order as to costs.

(7)  Save and except the costs covered in the above, there be a costs order nisi that costs incurred by P in the MP Proceedings be paid by Luo to P on an indemnity basis and be summarily assessed.  There be leave to P to file and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute, and leave to P to file and serve a written reply to that bill within 7 days thereafter.

6.In the Writ Action, there be leave to Luo to withdraw her summons dated 12 October 2020 with no order as to costs.

7.These are my reasons for the decision.

BACKGROUND

8.I would first set out the essential facts, which are as follows:

(1)  On 10 March 2014, Luo signed a sale and purchase agreement, in which Luo agreed to purchase the Property at HK$27,500,000.  On 26 May 2014, the Property was assigned to Luo.

(2)  On 26 May 2014, Luo obtained a mortgage from Hang Seng Bank (“the HS Mortgage”) to complete the purchase.

(3)  On 8 June 2017, P’s representatives (ie, P’s manager, Ms Susanne Lai (“Lai”), and her two colleagues), inspected the Property.

(4)  On 9 June 2017, P as lender and Luo as borrower executed a loan agreement (“the 1^st Loan Agreement”), under which P lent a sum of HK$28,000,000 (“the 1^st Loan”) to Luo.  On the same date, Luo executed a legal charge (“the 1^st Charge”) to charge the Property unto P as security for the loan.

(5)  On 7 July 2017, a sum of HK$10,124,244.93 was taken from the 1^st Loan to pay off the HS Mortgage.

(6)  On 14 June 2018, the 1^st Loan Agreement was extended by a loan renewal agreement.

(7)  On 23 July 2018, another loan agreement (“the 2^nd Loan Agreement”) between P and Luo was executed.  Under the 2^nd Loan Agreement, P lent a second loan of HK$3,000,000 (“the 2^nd Loan”) to Luo.  The 2^nd Loan was secured by a second charge (“the 2^nd Charge”) on the Property executed by Luo in favour of P.

(8)  On 2 May 2019, Fang commenced the Writ Action against Luo.

(9)  On 3 July 2019, P commenced the MP Proceedings against Luo on the ground that Luo had defaulted on the said loan agreements. P sought monetary judgment against Luo and possession of the Property in the MP Proceedings.

(10)  On 5 June 2020, the court entered monetary judgment against Luo in the MP Proceedings.

9.As set out in the above, P’s remaining claim in the MP Proceedings is the claim for possession of the Property.  Luo is willing to deliver vacant possession of the Property to P.  However, P’s claim for possession is resisted by Fang.  At the same time, Zhang is seeking to join into the MP Proceedings as the 3^rd defendant to resist P’s claim for possession of the Property.  Both Fang and Zhang claims that they have beneficial interest in the Property which would bind P.

10.In the Writ Action, Fang is claiming that Luo is holding the Property on trust for Fang absolutely, and Fang is the sole legal and beneficial owner of the Property.  A key document relied upon by Fang in support of her claim is a written declaration of trust dated 19 June 2014 (“the DOT”), which according to Fang was executed by Luo as a deed before a solicitor.  In the DOT, Luo declared that she was holding the Property on trust for Fang.

11.Luo’s stance in the Writ Action is as follows:

(1)  Luo is the legal and beneficial owner of the Property.

(2)  Luo’s husband, Mr Cheung Fei Pang (“Pang”), knew Zhang for a long time.  Pang and Zhang were hometown friends from Chaozhou of Guangdong.  They came to know each other in Shenzhen in 1989.  They were in a business relationship from 2010 to 2016.

(3)  The purchase price of the Property was paid by Luo with Pang’s aid.  After acquisition of the Property, Luo continued to repay the mortgage loan until she obtained a discharge from the bank.

(4)  Zhang is Fang’s boyfriend and cohabitee. 

(5)  Luo granted a licence to Fang and Zhang, allowing them to occupy the Property from July 2014 to April 2019. Fang and Zhang remained in occupation of the Property as trespassers from May 2019 onwards.

(6)  At or about the time when Zhang and Luo were moved into the Property, Fang asked Luo to sign some documents to authorize Fang to handle the errands and miscellaneous matters with the management office.  Luo signed the papers as requested by Fang.

(7)  If Luo had signed the DOT, Luo was deceived by Fang to sign the same which was fundamentally different in the substance and in the legal effect from what Luo understood it to be.  It was never Luo’s intention to execute any trust document for the benefit of Fang.

(8)  For the reasons set out in her pleadings in the Writ Action, the DOT should not be given effect and Luo should not be bound by the same.

12.Having considered the papers, I took the view that the answers to Question 1 and Question 2 would affect the future conduct of the MP Proceedings and the Writ Action.  I therefore directed that these 2 questions should be determined first.

QUESTION 1

13.In his affirmation dated 29 May 2020 (“Zhang’s affirmation”), Zhang said the following:

(1)  He and Fang became a couple in 2005 and have been cohabiting at the Property since 2014.  He and Fang have 3 children, and his whole family is residing at the Property.

(2)  He and Pang were hometown friends since 1989. They were in a very close business relationship from 2009 to 2016.

(3)  In 2014, he and Fang decided to purchase a property in Hong Kong for their residence.  Since both of them were not Hong Kong permanent residents, they realized that there would be complications in purchasing a Hong Kong property.

(4)  Zhang provided finance to Pang to assist Pang in buying a resident in Hong Kong.  With the finance provided by Zhang, Pang bought the Property and another unit in the Palazzo (“the Other Unit”).  After knowing that Zhang and Fang would like to acquire a property in Hong Kong, Pang suggested to hold the Other Unit on trust for Zhang.  However, after visiting the Other Unit, Zhang told Pang that he preferred to take the Property instead of the Other Unit.  Finally, it was agreed that Luo would be the registered owner of the Property, and Luo would hold the Property on trust for Zhang and Fang.

(5)  Zhang caused his company to transfer HK$10,000,000 on 5 March 2014 to Pang’s bank account in Hang Seng Bank as part of the purchase price of the property.

(6)  To Zhang’s understanding, Luo had obtained a mortgage of HK$11,000,000 from Hang Seng Bank to complete the purchase of the Property.  Zhang would be responsible for repaying the mortgage loan.  At one time, Zhang transferred HK$400,000 to Pang solely for repayment of the mortgage loan.  Apart from that, there were transfers from Zhang to Pang from time to time, and part of the money transferred was for the repayment of the mortgage loan.

(7)  Pursuant to the agreement with Pang and Luo, Zhang and Fang started to occupy the Property.  Luo signed an authorization letter to the Guest Service Centre of The Palazzo on 14 July 2014, authorizing Fang to handle all the matters of the Property until further notice.

(8)  In [20] of the affirmation, Zhang said:

“On a date I cannot now recall clearly, [Fang] told me that in order to secure my beneficial interest in the Property, she though it better to have something in writing to confirm my beneficial interest in the Property. I said that the property was intended as a gift to her, but I did not agree to ask for proof in writing as that was not how we do business and Pang and I did business based on trust.” (Emphasis added)

(9)  At a later time, Zhang became aware that Fang had asked Luo to sign the DOT.  In [23] of the affirmation, Zhang said:

“It was only after the signing of the DOT that [Fang] informed me about it. I was unhappy because I placed trust in Pang and [Luo], and [Fang]’s conduct would suggest distrust against Pang. Nevertheless, I believe [Fang] had only done so to protect our family’s interest and I did not follow up the matter further.”

14.Counsel for P submits:

(1)  There is no believable evidence showing that Zhang paid any part of the purchase price or repaid the HS Mortgage.

(2)  Further, Zhang’s intention to gift the Property to Fang would preclude any resulting trust in Zhang’s favour.

Any contribution from Zhang?

15.Counsel for P has put forward the following points in his submissions:

(1)  The price for the purchase of the Property is a significant sum (ie HK$27,500,000) and one would expect that credible documentary evidence being readily available to show that payment was in fact made.  However, no credible evidence was produced by Zhang to show that he paid for the purchase price and/or the HS Mortgage.

(2)  Insofar as the purchase price is concerned, Zhang claims that he procured his company to transfer HK$10,000,000 on 5 March 2014 to Pang’s bank account as payment of part of the purchase price of the Property.  However, the documents produced by Zhang do not support this claim:

(a)  There is no documentary evidence showing that HK$10,000,000 was paid by Zhang’s company to Pang on 5 March 2014.  The documents produced by Zhang only shows (a) Bull Market Trade Co (“Bull Market”) and Hongkong Jelida Ltd (“Jelida”) respectively remitted HK$2,450,000 and HK$2,550,000 to Chong Hing Tai Co Ltd (“Chong Hing”), and (b) Chong Hing remitted HK$2,599,950 and HK$2,399,950 to Pang.

(b)  No documentary evidence was produced to show who the shareholders and directors of Chong Hing, Jelida and Bull Market were at the material time.  No attempt was made by Zhang to show that these companies were in fact his companies.  According to the investigation conducted by P, Chong Hing did not appear to be owned by Zhang and was deregistered on 28 October 2016.

(c)  There is also no documentary evidence showing that the payments made by Chong Hing, Jelida and Bull Market had anything to do with Luo’s acquisition of the Property.

(d)  HK$5,000,010 of the HK$10,000,000 purportedly paid to Pang remains unaccounted for.  In her 5^th affirmation dated 22 September 2020, Fang tried to say that a sum of HK$5,000,000 was paid to Pang on 5 March 2014 via “Brisk Limited”.  However, this is a bare assertion not supported by any document.

(3)  Insofar as the HS Mortgage is concerned: -

(a)  Zhang initially claims that he transferred sums to Pang to repay the HS Mortgage.  This is a bare allegation not supported by any document.  In fact, Zhang’s allegation is refuted by the documentary evidence produced by P showing that the 1^st Loan was used to pay off the mortgage.

(b)  Zhang then suggests that it does not matter that Luo repaid the mortgage given that Zhang has made himself totally and entirely responsible for the repayment of the same.  This cannot be evidence showing that Zhang has repaid the mortgage.

16.Counsel for Fang and Zhang submits that there is clear evidence showing that the sums from Chong Hing, Bull Market, and Jelida were all transferred to Pang’s account.  There is no evidence from Pang disputing that those sums were not used for the acquisition of the Property by Luo.  As to the transfer from Brisk Limited to Pang, Fang has explained in her 5^th affirmation that the transfer was conducted by Ms Li Ting Ting, a director of Brisk Limited.  Due to COVID-19, Ms Li was unable to come to Hong Kong to obtain a document from the bank to evidence the transfer.

17.Notwithstanding the submissions made by counsel for Fang and Zhang, there is no satisfactory answer to the absence of any documentary evidence showing that Zhang has made contributions to pay off the HS Mortgage.

18.However, there is one document which cannot be ignored, ie the DOT.  Whether the DOT is a document executed by Luo and binding upon Luo is the subject matter in the Writ Action.  I refrain from expressing any view on the merits of the parties’ (ie Fang and Luo) respective cases in the Writ Action.  I would only say that it is arguable that the DOT is binding upon Luo.

19.Assuming that the DOT is binding upon Luo, Luo would be holding the Property on trust for Fang, and the Property was indeed purchased by using Fang’ money.  Given the relationship between Zhang and Fang, in this scenario, it would be likely that all the funds would be from Zhang.

20.Bearing in mind that I shall not conduct any mini-trial on paper, in the light of the DOT and the relationship between Fang and Zhang, I would say that arguably Zhang might have made contributions to the acquisition of the Property.

Any resulting trust in Zhang’s favour?

21.Although it is arguable that Zhang might have made contributions to the acquisition of the Property, based upon the evidence before the court, there cannot be a resulting trust in Zhang’s favour.

22.The relevant evidence is as follows:

(1)  As said by Zhang at [20] of his affirmation, “the Property was intended as a gift to [Fang], but [Zhang] did not ask for proof in writing…”

(2)  In the DOT (relied upon by Fang in the Writ Action), it is provided that “[the Property] was in fact purchased by [Luo] in trust for and on behalf of [Fang] …… the whole of the purchase price therefor was in fact provided by [Fang]”.

(3)  Zhang knew the existence of the DOT and has never expressed any disagreement to the contents of the DOT.

(4)  Fang is claiming the she is the sole beneficial owner of the Property in the Writ Action.

23.In Westdeutsche Landesbank Girozentrale v Islington LBC[1], Lord Browne-Wilkinson said:

“Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A's intention to make an outright transfer …… (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest …… Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention. ……

…… It is true that the parties were under a misapprehension that the payment was made in pursuance of a valid contract. But that does not alter the actual intentions of the parties at the date the payment was made or the moneys were mixed in the bank account. …… the presumption of resulting trust is rebutted by evidence of any intention inconsistent with such a trust, not only by evidence of an intention to make a gift.” (Emphasis added)

24.By reason of the matters set out in [22] above, based upon the evidence produced by Fang and Zhang, it is clear that there was a common intention between them at the time of the acquisition of the Property, ie, the Property was in fact a gift from Zhang to Fang.  That is why Fang should be regarded as the sole beneficial owner of the Property.  In these circumstances, even if Zhang made contributions to the acquisition of the Property, Zhang could be not regarded as having beneficial interest in the same.

25.Zhang’s case that he has beneficial interest in the Property in fact is inconsistent with Fang’s pleaded case in the Writ Action.  Fang’s pleadings in the Writ Action have been verified by statements of truth signed by Fang.  The contradiction is fatal to Zhang’s claim that he is a beneficial owner of the Property.

26.Counsel for Fang and Zhang argues that:

(1)  There is no written instrument effecting the gift from Zhang to Fang.  By the operation of s.5(1) of the Conveyancing and Property Ordinance (“CPO”), the gift intended by Zhang to Fang would be invalid.

(2)  The fact that Zhang intended to make a gift to Fang does not prevent the presumption of a resulting trust between Zhang and Luo from arising.

27.With respect, I am unable to accept these submissions.

(1)  Since there was a common intention between Zhang and Fang at the acquisition of the Property that the Property would be a gift to Fang, the beneficial interest of the Property would have already been vested in Fang at the time of the acquisition.  No beneficial interest has ever been vested in Zhang.  As a result, it would not be necessary for Zhang to transfer any beneficial interest of the Property to Fang at any time.  S.5(1) of the CPO is irrelevant.

(2)  Based upon the evidence produced by Zhang and Fang, in particular the DOT, it is clear that both Zhang and Fang intended that Luo would hold the Property on trust for Fang only at the time of the acquisition of the Property.  In my view, there is no room to argue that Zhang is a beneficial owner of the Property.

28.In my judgment, even if Zhang has made any contribution to the acquisition of the Property, by reason of the aforesaid, Zhang cannot have any beneficial interest in the Property.

Answer to Question 1

29.For the reasons above, I held that the answer to Question 1 should be “No”.

QUESTION 2

30.As a result of my answer to Question 1, the scope of Question 2 would be whether it is arguable that the beneficial interest of Fang in the Property as alleged by Fang would be binding upon P.

31.Fang is claiming that she is the sole beneficial owner of the Property.  By reason of the DOT, that Fang is the sole beneficial owner of the Property is an arguable proposition.  For the purpose of discussing Question 2, I would assume that the DOT is a genuine document and is binding upon Luo.  For the avoidance of doubt, nothing said herein should be understood as any comment on the merits of the parties’ respective cases in the Writ Action.

Land Registration Ordinance (“LRO”)

32.LRO provides:

“3. Priority of registered instruments; effect of non-registration

……

(2) All such deeds, conveyances, and other instruments in writing, and judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes ……

4. Notice of unregistered instrument not to affect registered instrument

No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing, or judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.”

33.Counsel for Fang and Zhang submits[2]:

“51. In relation to [Fang], the applicability of the LRO depends on whether or not the Court makes a finding that the [DOT] is void for fraud and deceit.

52. Assuming that the answer is in the affirmative, [Fang]’s interest in the Property (as derived from [Zhang]) would be unregistrable as there is no registrable document evidencing the interest. Common law rules of priority would apply and the LRO would have no effect.

53. However, if the Court finds that the [DOT] is valid, then the question of priority is determined by the question of whether P can prove that it is a bona fide mortgagee under LRO s.3(2).”

34.In my judgment, Fang is bound by her own pleadings in the Writ Action and cannot say that the DOT is void for fraud and deceit.  Fang’s case is that the DOT is a genuine document and is binding upon Luo.  No argument put forward by Fang may contradict this position. 

35.No matter what would be the outcome of the Writ Action, it would not be arguable that Fang has a beneficial interest in the Property which may bind P.

(1)  If Fang succeeds in the Writ Action, for the reasons set out below, Fang’s interest in the Property would not bind P by the operation of s.3(2) of the LRO.

(2)  Luo’s case in the Writ Action is that the DOT, if signed by her, was obtained by Fang by fraudulent means.  Luo is claiming that she is the sole legal and beneficial owner of the Property.  If Luo succeeds, that would mean that Fang does not have any interest in the Property at all. 

36.Based upon the parties’ respective pleadings in the Writ Action, there is no room to say that the court may rule against Fang on the validity of the DOT, but at the same time may declare that Fang has an unregistrable beneficial interest in the Property.  This would not be a possible outcome in the light of the parties’ respective pleadings.

37.There is no dispute that the DOT has never been registered in the Land Registry.  There is also no dispute that for the purpose of determining the priorities of interests created by respective written instruments, notice is irrelevant[3].

38.Counsel for P submits that LRO s.3(2) is a complete answer to Question 2.  Fang’s beneficial interest in the Property (if any) as recorded in the unregistered DOT cannot bind P by the operation of LRO s.3(2), for P is a subsequent bona fide mortgagee.

39.Counsel for Fang and Zhang submits whether P is within the scope of LRO s.3(2) is an arguable issue, for it is arguable that P may not be a bona fide mortgagee.

40.In Zhang’s affirmation, Zhang said:

(1)  Zhang and Fang had never given the key to the Property to Luo and/or Pang.  Neither Luo nor Pang could enter the Property without Zhang’s or Fang’s permission.

(2)  In the morning on 8 June 2017, Fang went out with the children.  In the afternoon, Pang came to the Property to see the interior design of the Property, for Pang wanted to renovate the Other Unit and would like his renovation company to come to the Property to take photos as a reference.

(3)  Zhang and Pang had tea inside the Property. After some time, someone rang the doorbell.  Two or three persons (one was a woman) came to the Property.  Zhang thought that they were from the renovation company.

(4)  At [28] of the affirmation, Zhang said:

“The woman asked me for permission to take photos of the Property. Having thought they were only Pang’s renovation company’s staff, I allowed them to enter the Property and to take photos of the property. The whole visit and photo taking by the visitors lasted only five minutes.”

(5)  Zhang mentioned that the photos now produced by P showed that there was a photo in the living room of the Property, which was a family photo of Zhang’s family.  Zhang, Fang and their 3 children were in that photo, and no one else was in the photo.

41.As to the visit on 8 June 2017, Lai said the following in her 1^st affirmation dated 29 July 2020:

(1)  On 8 June 2017, Lai and two colleagues went to the Property to conduct an inspection.  When they arrived at the Property, Pang opened the door.  They saw a man sitting on the sofa in the living room. Pang told them that the man was his friend.  In the presence of Pang’s friend, Lai told Pang that they needed to take photos for the purpose of vetting Luo’s mortgage application.

(2)  Pang then allowed them to take photos.  They walked around the Property to take photos.  They stayed inside the Property for about 15 minutes.  During the whole visit, Pang’s friend did not say a word or followed them when they walked around the Property.

(3)  Save and except Pang, Lai did not ask any other person for permission to enter the Property and to take photos therein.

42.Counsel for Fang and Zhang submits that it would be arguable that P is not a bona fide mortgagee.  In counsel’s submissions, it would be necessary to investigate why Lai did not make any enquiry in relation to Zhang’s presence in the Property and the family photo displayed in the living room.  It is arguable that Lai is trying to conceal her true purpose of visiting the Property.

43.With respect, I refuse to accept these submissions.

(1)  It is indisputable that the loans advanced by P to Luo are genuine.  In fact, the HS Mortgage was paid off by using the 1^st Loan.

(2)  Although Zhang and Lai have given different evidence as to what happened during the inspection on 8 June 2017, it is clear that there is no suggestion in Zhang’s affirmation alleging that Lai or her colleagues did anything to mislead him in that inspection.  It is important to note that according to Zhang, it was his impression that Lai and her colleagues were from a renovation company.  Zhang did not allege that Lai or her colleagues had ever told Zhang that they were from a renovation company.

(3)  The points made by counsel for Fang and Zhang at most can only show that P may be considered as having constructive notice of Zhang’s and/or Fang’s interest in the Property.  However, for the purpose of LRO s.3(2), notice is irrelevant.

(4)  In my view, there is no evidence before the court demonstrating that P may not be a bona fide mortgagee.

44.I agree with P.  In my view, by reason of LRO s.3(2), Fang’s beneficial interest in the Property (if any) would not be binding upon P.

Answer to Question 2

45.For the reasons above, I held that the answer to Question 2 should also be “No”.

CONCLUSION

46.Both counsel have put forward some other arguments in their respective submissions.  With no disrespect to counsel, it would not be necessary to deal with the other arguments, for the analysis above would be sufficient for disposing both Question 1 and Question 2.

47.For the reasons set out in the above, I have ruled that the answers to both Question 1 and Question 2 are “No”.

48.P’s claim for possession of the Property is not opposed by Luo.  Since the answers to Question 1 and Question 2 are “No”, P’s claim for possession of the Property in the MP Proceedings must be allowed.  I therefore made the possession order as set out in [5(3)] above.  I gave Luo, Fang and Zhang to have 56 days as a grace period to deliver vacant possession of the Property to P.

49.I took the view that Zhang should be named as the 3^rd defendant in the MP Proceedings, so that the judgment for possession made in the MP Proceedings would also bind Zhang.  Save and except joining Zhang as a party in the MP Proceedings, Zhang’s summons should be dismissed.  Fang’s summons should also be dismissed.

50.Zhang and Fang resisted the possession claim made by P but failed.  Costs should follow the event.  Costs incurred by P in relation to Zhang’s summons and Fang’s summons should be borne by Fang and Zhang.  I therefore ordered that costs of the 2 summonses, including the costs of the hearing on 22 October 2020 and 16 November 2020 and all costs reserved, be paid by Fang and Zhang to P.

51.As to the costs incurred by Luo in relation to Fang’s summons and Luo’s summons in the MP Proceedings, counsel for Fang and Zhang put forward an argument that P should not bear Luo’s costs in relation to the hearing on 5 June 2020, for Luo did not make it clear that she did not oppose P’s possession claim in that hearing.  Since Luo has been excused from attending the hearing on 16 November 2020, I should give Luo an opportunity to be heard if she intends to refute the submission made by counsel for Fang and Zhang.  Save and except the costs of the hearing on 5 June 2020, counsel for Fang and Zhang did not oppose that costs incurred by Luo in relation to Fang’s summons and Zhang’s summons should be borne by Fang and Zhang.  I therefore made the costs order nisi in [5(5)] in the above. Since Luo has not attended the hearing on 16 November 2020, the 14-day period within which any party may apply for a variation of the costs order nisi should only start to run after the order made by the court is served on Luo.

52.As a result of my decision, it would not be necessary to make any ruling on Luo’s summons in the MP Proceedings.  I therefore granted leave to Luo to withdraw that summons, with no order as to costs.

53.P’s claim against Luo in the MP Proceedings succeeded.  Save and except the costs covered by the aforesaid costs order, costs incurred by P in the MP Proceedings should be paid by Luo to P.  As provided in the relevant contractual documents[4] between P and Luo, P should be entitled to have indemnity costs.  I therefore made the costs order nisi as set out in [5(7)] in the above.  For the reason given in [51] above, the 14-day period within which any party may apply for a variation of the costs order nisi should only start to run after the costs order nisi is served on Luo.

54.My decision would bring the MP Proceedings to the conclusion.  As to the Writ Action, Fang and Luo may take appropriate steps in that action to bring the proceedings forward.  As to what steps should be taken, this would be a matter to be considered by Fang and Luo, and I would not comment on the same.  For the avoidance of doubt, nothing said here should be understood as a determination of any issue in the Writ Action.

55.I thank counsel for the assistance rendered to the court.

Mr Terrence Tai, instructed by Kitty So & Tong, for the Plaintiff in HCMP 968/2019

Mr Tong Ko, instructed by Kent Tam & Co for the 2^nd Defendant and 3^rd Defendant in HCMP 968/2019 and the Plaintiff in HCA 770/2019