Sophie Tsui Yuk King (Aka Lee Tsui Yuk King Sophie) v. Registrar of Companies

HCMP 1076/2024

[2024] HKCFI 3057

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1076 OF 2024

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BETWEEN

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J U D G M E N T

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1.By the Originating Summons issued on 24 June 2024 (“the OS”), the Plaintiff seeks:

(a)  a declaration that the Mortgage dated 2 November 1965 registered by Memorial No UB509922 in favour of the Mortgagee Marsman Hong Kong China Limited (“the Dissolved Company”), which was dissolved in 2012, in respect of the Plaintiff’s property has been discharged, or was no longer subsisting, or was incapable of taking effect as a result of the operation of the Limitation Ordinance; and

(b)  an order that the Defendant, the Registrar of Companies (“the Registrar”), do execute a confirmatory assignment or reassignment to effect the discharge of the Mortgage.

2.The Registrar of Companies adopts a neutral stance in respect of the 1^st relief but opposes the 2^nd relief on the basis that it is no longer necessary after the declaration is granted.

3.At the hearing, the Registrar asked for and I gave it leave to lodge supplemental submissions.  I also directed that the matter be then disposed of on paper.  Upon considering the Registrar’s supplemental submissions dated 17 September 2024, I directed the Plaintiff to lodge and serve her supplemental submissions on a point which will be discussed below.

4.This is my judgment.

Established facts

5.The facts deposed to by the Plaintiff, as narrated below, are uncontested and I find them established by the documents proffered and by the Statutory Declaration of the Plaintiff dated 16 May 2024 exhibited to the affirmation of Por Keng Guan Catherine dated 24 June 2024.  As the Plaintiff is 98 years old and presently residing in Malaysia and is unfit to travel, and for the avoidance of doubt, at the hearing I formally gave leave to the Plaintiff to rely on her Statutory Declaration as evidence herein.

6.The facts so established are :

(a)  By an assignment dated 2 November 1965 registered by Memorial No. UB509921, the Plaintiff was assigned and became the sole registered owner of the subject property known as 7^th Floor of Block D, Ventris Terrace, Nos 25-27 Ventris Road, Hong Kong (“the Property”).

(b)  By a Mortgage of the same date, registered by Memorial No UB509921 (“the Mortgage”), the Property was mortgaged to the Dissolved Company to secure a loan of HK$53,000, which together with interest was repayable by 28 equal monthly instalments of HK$2,000 each payable on the first day of each calendar month and the 1^st instalment was payable on 1^st December 1965.

(c)  Upon execution of the Mortgage, the title deeds to the Property were deposited with the Dissolved Company as security.

(d)  The Plaintiff duly paid all the monthly instalments including paying the last instalment on 1 March 1968.

(e)  The title deeds of the Property were duly returned to the Plaintiff by Mr Joseph Yen of the Dissolved Company on 11 March 1968 as evidenced by a copy of a written receipt in which was listed the title deeds.  The original of the receipt, which was signed by the Plaintiff acknowledging receipt, was retained by the Dissolved Company.

(f)  The Dissolved Company, however, had not executed any reassignment of the Property to the Plaintiff, or any release or discharge.

(g)  Since March 1968 until now and throughout these years, the Plaintiff has been in possession of the Property and the title deeds thereto.

(h)  As mentioned, the Dissolved Company was dissolved in 2012.

P is entitled to the declaration sought

7.On the aforesaid evidence and materials before me, I am satisfied and find that the Plaintiff had duly repaid the mortgaged loan and interest by 11 March 1968 when all the title deeds were returned to her by the Dissolved Company and her right of redemption had duly crystalized thereafter.

8.I conclude that the Plaintiff is entitled to a declaration that the Mortgage has been discharged since 11 March 1968 and was no longer subsisting thereafter.

Is P entitled to an order against the Registrar for him to execute a confirmatory assignment or reassignment ?

9.It is common ground that under s.292 of the former Companies Ordinance Cap 32, which was in force at the material time, all property and rights vested in or held on trust for the Dissolved Company immediately before its dissolution were deemed to be bona vacantia and accordingly belong to the Government.

10.It is also common ground that while normally the Secretary for Justice would be the representative of the Government, in this kind of case concerning bona vacantia the Registrar of Companies has been given authority to act on behalf of the Government (Liu Yiu Keung Stephen v Registrar of Companies (HCMP 1098/2004, 11 June 2004); Li Keung Tsang v Registrar of Companies (HCCW 1174/2002 & HCMP 782/2010, 13 July 2010); and Yang Zhenghong v Registrar Of Companies (HCMP 3115/2013,  23 November 2015).

11.The Registrar initially contended that if the Plaintiff succeeded in establishing that the Mortgage had been fully repaid, there would not be any interest under the Mortgage that could have been passed to the Government as bona vacantia.

12.However, as rightly submitted by Mr Miao, counsel for the Plaintiff, and is well-established that prior to 1984:

(a)  A legal mortgage over a leasehold land was created by the mortgagor assigning, as security, the legal title of the residue of his lease to the mortgagee, subject to a proviso for the mortgagee to re-assign the lease on repayment of the loan.

(b)  Upon the debt fully paid off, the mortgagor was entitled to have the mortgaged property restored to him free from the mortgagee’s security, and the mortgagee became constructively a trustee for the mortgagor under an implied trust to surrender the estate to the person entitled to demand it (Fisher and Lightwood’s Law of Mortgage 15^th ed §47.51).

13.In his supplemental submissions, the Registrar relied on s.44(3)  of the Conveyancing and Property Ordinance Cap 219 and contended that the legal estate of the Property was deemed to have been re-assigned to the Plaintiff and the Mortgage was deemed to have been discharged and replaced by a legal charge.

14.Section 44(1)  to (3)  provide :

“ 44. Mortgage of legal estate

(1)  After the commencement* of this section, a mortgage of a legal estate, including any second or subsequent mortgage of that legal estate, may be effected at law only by a charge by deed expressed to be a legal charge.

(2)  Under a mortgage effected by a legal charge, the mortgagor and the mortgagee shall, subject to this Ordinance, have the same protection, powers and remedies (including but not limited to those relating to foreclosure and the equity of redemption but excluding the power of the mortgagee to enter into possession before any default by the mortgagor)  as if the mortgage had been effected by way of assignment of the legal estate before the commencement* of this section.

(3)  Upon the commencement* of this section, a mortgage of a legal estate effected by way of assignment of the legal estate before the commencement* of this section shall be deemed, for the purposes of this Ordinance, to be reassigned and discharged and replaced by a legal charge in the same terms and having the same validity and priority, subject to this Ordinance, as the mortgage which it replaces.”

15.The commencement date of section 44 was 1 November 1984.

16.I directed the Plaintiff to lodge, which she did, supplemental submissions concerning the question as to whether s.44(3)  applied to a mortgage that was not subsisting at the commencement of that section and whether the Mortgage was so subsisting as on 1 November 1984.

17.It is in my view clear that the legal framework provided by s.44 is such that all mortgages in existence and subsisting on 1 November 1984 would be automatically converted to legal charges by the deemed reassignments of the legal estate of the mortgagor and the deemed creation of new legal charges having the same validity and terms as the mortgages they replaced; and that after the commencement date, a mortgage of the legal estate may be effected at law only by a charge by deed expressed to be a legal charge (see Butterworths Hong Kong, Conveyancing and Property Law Handbook (6^th ed)  §44.18).

18.I accept Mr Miao submission and analysis as correct that as the Mortgage had been fully repaid on 11 March 1968, its mortgage term then ceased, and the Mortgage thereafter was no longer subsisting, the Dissolved Company then held the legal estate of the Property under an implied trust to surrender the same to the Plaintiff who was entitled to demand it.

19.In my judgment, therefore, s.44(3)  did not apply to the Mortgage, which was not subsisting on the commencement date, and therefore the Mortgage had not been converted to a legal charge, the Dissolved Company still held the legal estate to the Property under the said implied trust to surrender the same to the Plaintiff immediately before it was dissolved, which legal estate is now held by the Government as bona vacantia.

20.I thus conclude that the Plaintiff is entitled to demand for the execution of a reassignment for the discharge of the Mortgage.

Disposal

21.In the premises, I will make an order in terms of paragraphs 1, 2, 3, 4 and 6 of the OS as substantially revised as discussed with the parties at the hearing.

22.I provisionally consider appropriate the costs order sought by the Plaintiff and make it on nisi basis, namely, that there be no order as to the costs of this OS save that the Registrar do pay the Plaintiff the costs of and occasioned by the Registrar’s filing of its supplemental submissions.  This nisi order will become absolute in 14 days unless any party applies to vary within that time.

23.I thank Mr Miao and Mr Kwong for their assistance.

Mr Harrison Miao, instructed by Stevenson, Wong & Co., for the Plaintiff

Mr Elvin Kwong, Government Counsel of the Department of Justice, for the Defendant