Hang Seng Bank Ltd v. Cheng Yin Shan Theresa

DCMP 344/2022

[2024] HKDC 1000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 344 OF 2022

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JUDGMENT

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Background

1.By way of a Legal Charge dated 8 May 2019 (“Legal Charge”), the Defendant as mortgagor charged to the Plaintiff as mortgagee the property known as Flat 20, 23^rd Floor, Block A of Hoi Lok Court (“Property”). The Legal Charge was to secure the loan facility agreement dated 15 April 2019 under which the Plaintiff advanced a mortgage loan in the sum of HK$2,416,585 (“Loan”) to the Defendant.

2.Since 8 October 2021, the Defendant has defaulted in making repayment of the Loan installments.

3.By Originating Summons issued on 21 January 2022 (“OS”), the plaintiff seeks monetary judgment and the delivery of vacant possession of the Property against the Defendant pursuant to Order 88 of the Rules of District Court (Cap 336H).

4.The Defendant was declared bankrupt on 22 February 2022.  Leave was granted by Master Rita So on 14 April 2022 for the Plaintiff to proceed with the present action against the Defendant.

5.By the order of Master Isabella Chu dated 29 June 2022, the Defendant’s husband Wong Rue Chiu Roy (“Intervener”) joined as the intervener in these proceedings.

6.The Defendant was absent in both the present hearing and the hearing before Master Kirby Lau. 

7.The Intervener objected to the OS.  In gist, the Intervener’s case is that he is and was the sole beneficial owner of the Property based upon a common intention constructive trust and/or resulting trust.  As the Intervener was not a Hong Kong permanent resident, it was agreed between the Intervener and the Defendant that the Property should be purchased and registered in the sole name of the Defendant, so as to avoid paying heavy stamp duty that might have been charged by the Inland Revenue Department.  The Defendant filed two affirmations aligning her position with the Intervener’s position.

8.Having considered the evidence, Master Kirby Lau in his decision dated 27 July 2023 (“Decision”) entered a monetary judgment against the Defendant in respect of the outstanding principal and interest of the Loan, and ordered the Defendant to delivery of vacant possession of the Property to the Plaintiff.

9.This is the Intervener’s appeal from the Decision.

The Intervener’s application to file further evidence

10.Shortly before the present hearing, the Intervener filed a summons on 25 March 2024, seeking to adduce two affirmations:-

(a)  The Intervener’s 7^th Affirmation dated 25 March 2024.

(b)  The 2^nd Affirmation of Cheng Bo Shui (“Mr. Cheng”) dated 25 March 2024.  Mr. Cheng is the Intervener’s father-in-law.

11.These two affirmations were sought to be filed to show Mr. Cheng’s willingness and ability to provide financial support for the redemption of the Property.  The Intervener proposed to make a payment into Court of HK$100,000 within 3 days of the Court’s judgment, and to pay the outstanding principal sum and interest within 3 months of the Court’s judgment.  

12.Upon the Court’s invitation, both the Plaintiff and the Intervener agreed that these two affirmations should be considered by the Court on a de bene esse basis.

13.For reasons to be elaborated below, I do not consider that the two affirmations will have any material impact on my decision, and I therefore refuse leave for them to be filed.

Analysis

The relevant legal principles

14.Under RDC Order 28, rule 8, the Court may make an order that the OS be continued as if begun by writ, where there can be shown on the available evidence genuine and/or substantial issues of fact. 

15.For proceedings under RDC Order 88, it is trite that the Court would summarily determine the case where there is no triable issue.  The burden of proof in an Order 88 application is on the Plaintiff.  The plaintiff must justify its entitle to summary judgment, upon which the burden shifts to the defendant, where a viable defence must be shown in order to prevent a judgment from being entered against the defendant.  See Wing Hang Bank Ltd v Liu Kam Ying & Ors[2002] 2 HKC 57 at 60H.   In practice, there may be little difference between a summary determination under Order 88 and an application for summary judgment.  See Joint Success (HK) Limited v Kamsh (PTC) Limited, HCMP 2/2022 (unreported, 30 June 2023).

16.It is trite that an appeal against a Master’s decision is a hearing de novo.  The relevant principles have been summarised in Hong Kong Civil Procedure 2024 at note 58/1/2:-

“An appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time, save that the party appealing, even though the original application was not by him but against him, has the right as well as the obligation to open the appeal…The judge ‘will of course give the weight it deserves to the previous decision of the Master; but he is in no way bound by it”…The judge in chambers is in no way fettered by the previous exercise of the master’s discretion…”

The parties’ respective case

17.According to the Affirmations filed by the Intervener, he had contributed to all of the monetary payment in respect of the purchase of the Property and the payment of mortgage instalments.  He provided direct contributions to the purchase by providing the payments to the Defendant in cash or via bank transfer, and some (although not all) of such transactions are supported by the relevant banks statements.  

18.The Intervener further said that the Defendant had no personal means to finance the purchase as she did not have any steady income.  

19.On the other hand, Mr. Chow for the Plaintiff submits that the Legal Charge is binding on the Intervener, even assuming that he is the sole or part beneficial owner of the Property.

20.In Mo Ying v Braille Development Limited & Anor [2015] 2 HKLRD 985, the Court of Appeal found that the plaintiff, who was the wife of the sole registered owner of the property, was estopped from asserting the sole beneficial ownership against a purchaser of the property, where she knew of the sale and purchase of the property but said nothing to the purchaser of her alleged beneficial interest.

21.In the present case, according to the Defendant’s own case, she knew that the Legal Charge had to be entered into in order to obtain the Loan from the Plaintiff, although the Defendant (in line with the Intervener’s affirmation) accepted that it was the Intervenor who funded the initial purchase price of the property and made repayments of the Loan.

22.This is analagous to the situation in Mo Ying.  The Intervener had essentially deliberately remained silent as to his beneficial ownership in the Property, and the Plaintiff would suffer great prejudice if it is not entitled to enforce the Legal Charge against the Property.   

23.Ms. Wong for the Intervener sensibly did not dispute that the Legal Charge is binding on the Intervener. 

24.Ms. Wong, however, relied on the Court of Appeal judgment in Shanghai Commercial Bank Ltd v Lee Yau Tai (Bankrupt) & Anor CACV 576/2021 (unrep, 31 March 2023) and argued that if the Court finds the Intervener to have a beneficial interest in the Property, then he is entitled to exercise his right of redemption to fully pay off the outstanding Loan and interest. 

25.Ms. Wong seeks an order for a payment into court to be made in respect of the full outstanding principal sum and interest as calculated by the Plaintiff, and that the Plaintiff’s claim to be continued as if begun by writ.

26.In Lee Yau Tai, similar to ours, the 1^st defendant (husband) was the sole legal owner of the property.  The 1^st defendant has gone bankrupt, and the 2^nd defendant (wife) claimed that she had a beneficial interest in the property under a common intention constructive trust. Chow JA (giving judgment of the Court) allowed the 2^nd Defendant’s appeal and found there to be sufficient evidence to raise a triable issue as to whether the 2^nd defendant had a beneficial interest in the property.

27.Chow JA further said:-

“35. Mr Ho (for the 2^nd Defendant) does not dispute the proposition that the 2^nd Defendant’s beneficial interest in the Property is subject to the right of the Plaintiff as mortgagee of the Property in the present case. He submits, however, that the right to redeem is not confined to the mortgagor or those claiming under him, but is exercisable by any person who has an interest in the mortgaged property, and the mortgagee is bound to release the mortgage in favour of any person having an interest in the Property who exercises the right to redeem (Pearce v Morris (1869) 5 Ch App 227, at 230. Thus, the Plaintiff, as a beneficial owner of the Property, is entitled to exercise the right of redemption of the Mortgage by payment of the secured indebtedness. We consider this submission to be correct as a matter of principle.

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38. As earlier mentioned, on 18 January 2023, the 2^nd Defendant issued a summons (“the 1^st Summons”) seeking leave to pay into Court the sum of HK$580,803.95 (the outstanding principal amount of the mortgage loan), such sum to be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff upon the appeal being allowed. Mr. Ho says that the proposed payment into court is for the “avoidance of doubt” and to reconfirm “actual tender” by the 2^nd Defendant so that the accrual of further interest shall cease.

39. On 20 February 2023, the 2^nd Defendant issued a further summons (the 2^nd Summons”) seeking leave to pay into Court the additional sum HK$419,196.05, such sum together with the aforesaid sum of HK$580,803.95 (making a total of HK$1,000,000) to be paid out to the Plaintiff in discharge of the indebtedness owed by the 1^st Defendant to the Plaintiff upon the appeal being allowed…The 2^nd Defendant offered to pay this additional sum into Court in light of the further information provided by the Plaintiff shortly before the hearing of the appeal (upon the Court’s direction) that the total indebtedness of the 1^st Defendant to the Plaintiff, inclusive of interest calculated up to 3 February 2023 but exclusive of costs, was HK$958,911.52.

40. With the proposed payments into court, the Plaintiff’s position should be reasonably secured.

41. The 2^nd Defendant’s appeal is allowed, and the order of Master Catherine Cheng dated 23 August 2019 and the order of the Judge dated 9 October 2020 are set aside.

42. The 2^nd Defendant shall pay into court the sums of HK$580,803.95 and HK$419,196.05 under the 1^st and 2^nd Summons within 7 days from the date of this judgment, with liberty to the parties to apply for payment out after judgment has been given in the Action or with the court’s leave. We do not consider those sums should be paid out to the Plaintiff at this stage, since the issue of whether the 2^nd Defendant is entitled to redeem the Mortgage has yet to be determined.

43. The Plaintiff shall pay the 2^nd Defendant the costs of the appeal…”

28.Thus, the question of whether there is a triable issue that the 2^nd Defendant is the sole or part beneficial owner of the Property is the critical issue to be resolved by this Court.

Whether there is a triable issue that the 2^nd Defendant is a beneficiary?

29.I have considered the evidence produced by the Intervener, including the bank account records showing many instances where amounts similar to the monthly repayment of the Loan was being withdrawn from the Intervener’s account and deposited into the Defendant’s account shortly before the Loan repayment was made from the Defendant’s account.  The total of such mortgage repayments allegedly made by the Intervener amounted to $189,500 according to the Intervener’s Supplemental Submissions dated 25 March 2024 filed pursuant to the Court’s direction. 

30.I have also considered the bank account records showing cash withdraws from the Intervener’s bank account, followed shortly by a similar amount being deposited into the Defendant’s bank account.   Those sums deposited into the Defendant’s account (HK$294,045 according to the Intervener’s Supplemental Submissions dated 25 March 2024) were allegedly used to fund the drawing of the cashier orders used to pay for the initial purchase price.

31.It must be noted, however, that even taken to their highest, these payments fell short of supporting the Intervener’s evidence (which the Defendant adopted) that the Intervener paid for “100% for the deposit of purchasing the Property” and “monthly repayments for the instalment of the mortgage made…was fully contributed by [the intervener]”, and that the Defendant lacked any stable income to fund the purchase.  

32.Indeed, in the mortgage loan application form dated 2 April 2019 submitted by the Defendant to the Plaintiff, it was stated that the Defendant was employed as a saleswoman with a monthly income of HK$20,000.  

33.In the same mortgage loan application form, it was stated that the source of funds for down payment were from the Defendant’s own savings/deposit, and the option that the source of finds is a gift/borrowing form Third Party was not selected.  This piece of contemporaneous document contradicts the Defendant’s and the Intervener’s case that it was the Intervener who had paid for the whole of the deposit and monthly repayments.

34.Further, the Defendant’s two Hang Seng Bank statements demonstrate that she had obtained substantial funds from different sources in her name, including a sum described as “SELL FCY/GOLD/INV FUND”.  

35.All these contradict the Intervener’s factual case that the Defendant had no means to fund the purchase, and therefore he was the sole funder of the purchase of the Property.  Once that fundamental basis of the Intervener’s factual case is gone, the Court cannot speculate what the Intervener’s case might have been if the Defendant did have a stable income, and both the Intervener and the Defendant had contributed to the purchase price of the Property. 

36.On the evidence presented before the Court, I do not find there to be a triable issue regarding the Intervener’s case that he was the one who was solely responsible for paying the purchase price of the Property, and that he is a beneficial owner of the Property.

Conclusion

37.In view of the above, I shall dismiss the Intervener’s appeal.  I shall also make a costs order nisi (which shall become absolute in the absence of an application to vary the same within 14 days)that the Intervener shall pay the Plaintiff’s costs to be summarily assessed.  The Plaintiff shall lodge its skeleton bill of costs for summary assessment within 3 days, and the Intervener shall lodge its objection within 3 days thereafter.

38.I think Mr. Chow and Ms. Wong for their assistance rendered to the Court.

Mr Tony Chow, instructed by P. C. Woo & Co., for the Plaintiff

The Defendant is acting in person and did not appear

Ms Hilda Wong, instructed by Jal. N. Karbhari & Co., for the Intervener