Sqw v. Lpc
Read the full judgment text of FCMC 7628/2023 on BabelCite. This Family Court judgment was delivered on 19 March 2025 before Her Honour Judge Elaine Liu.
Matrimonial Causes – Joinder of Intervener – Charging Order – District Court – Family Court – Ancillary Relief – Order 15 Rule 6(2) RHC – District Court Ordinance s.52AB(3) – High Court Ordinance s.20B – Whether NRCL should be joined in ancillary relief proceedings – Whether District Court or Family Court is appropriate forum for charging order over matrimonial property – Joinder Application granted – NRCL joined as 2nd Respondent on issue of interest in matrimonial home – Costs orders made – 2nd Respondent pays Petitioner and 1st Respondent's costs of hearing – Petitioner and 1st Respondent's own costs taxed per Legal Aid Regulations – Court summarised legal principles on charging orders over matrimonial property – Family court can consider all circumstances including needs of children and spouse – Transfer to family court more prudent before civil court hears matter substantively – PMCL v AKK principles applied – Sino Billion Ltd v Lam Chok Wai principles on charging order effect – Leader Screws v Huang principles confirmed – Harman v Glencross and Kremen v Agrest guidance on forum – Chan Ting Wai, IISW v SDS-W, SJH v CYHC cited on protection of spouse and children – Case management directions given to expedite proceedings – Potential costs and proportionality considered – Matrimonial home estimated worth $2 million – Outstanding loan to NRCL over $1 million with 26% interest – W's DC Summons adjourned pending determination of Joinder Application – Undertaking from NRCL to stay execution of charging order until ancillary relief determined
Legal issues: Joinder Application · Forum for charging order
Outcome: Joinder Application granted; NRCL joined as 2nd Respondent; Costs orders made
Cites 6 cases
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FCMC 7628 / 2023 [2025] HKFC 56 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 7628 OF 2023 ________________________ BETWEEN
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________________________ REASONS FOR DECISION ________________________ A. The Application 1.This is NRCL’s application by a Summons dated 18 October 2024 (“the Summons”) for joinder in these matrimonial proceedings as intervener “on the issue of interest in and/or disposition of the matrimonial home property” (“Joinder Application”). 2.After hearing the parties’ substantive argument, I made the following orders in the Joinder Application:
3.These are the reasons for my decision. B. Background 4.The parties were married in February 2005. This is a long marriage of 18 years. They have a child born in December 2006, now aged 18. 5.The major family asset of the parties is the MH acquired by the Respondent (“H”) prior to their marriage. H is the sole legal and beneficial owner of the MH. Both parties and the adult child are residing in the MH. 6.NRCL is a moneylender who had lent a loan to H in the sum of $350,000 on 17 June 2019. Subsequently on four occasions, NRCL granted loans to H for refinancing of his then existing liabilities. According to NRCL, the latest one was granted in January 2023 in the sum of $980,000 (“the Loan”). 7.On 11 July 2023, the Petitioner (“W”) presented a petition for divorce on the ground of unreasonable behaviour (“FC Action”). She registered a Form 25[1] in the Land Registry against the MH on 1 August 2023. 8.About a week later (8 August 2023), NRCL sent H a demand letter for his defaulted repayment of the Loan. H did not make the repayment. On 16 August 2023, NRCL issued a writ in the District Court (“DC Action”) against H for recovery of the outstanding Loan and interest. 9.On 19 September 2023, H and W appeared in person at a first appointment hearing in the FC Action before Deputy Judge J Chow (as she then was). The Deputy Judge made orders for directions on their ancillary relief dispute and recorded in the Recital the following consent of the parties and H’s undertaking in Chinese (“September Consent”):
10.W contended that she did not consent to the settlement of the outstanding Loan from the sale proceeds of the MH. She (acted in person) took out a Summons in the FC Action on 3 April 2024 seeking to remove from the September Consent the phrase “及清還該物業的押記令負債後” (“April Application”). W also took issue of H’s failure to serve (while he acted in person) his evidence in opposition within the time allowed in the unless order given by Master TK Lam. H (through his counsel) submitted today that he will take out an application for relief from sanction. 11.In the meantime, NRCL continued its claim in the DC Action as follows:
12.As W is not an owner of the MH nor a party to the Loan, she did not have notice of the above proceedings in the DC Action. 13.W through her solicitors assigned by the Director of Legal Aid discovered in early June 2024 from the land search records of the MH a registration of the Charging Order Nisi. 14.W (with legal representation) took out a Summons in the DC Action (“W’s DC Summons”) on 24 July 2024, seeking orders that:
15.On 28 August 2024, DC Master J Chow granted an order to join W as an intervener in the DC Action and adjourned the argument of W’s DC Summons to 21 November 2024 before another DC Master. 16.As mentioned above, NRCL took out this Joinder Application in the FC Action in October 2024. 17.DC Master R Chu heard the parties’ substantive argument on W’s DC Summons on 21 November 2024, and made the following orders (“DC Adjournment Order”):
18.This Court was not provided with the transcript of the hearing before Master R Chu nor the reasons for his decision. For want of evidence, I declined to accept the parties’ submissions on the suggested reasons for the DC Adjournment Order. On a plain reading of the Order, its practical effect is:
C. NRCL’s Joinder Application 19.In the margin of the Summons, NRCL stated that it relied on Order 15 Rule 6(2) of the Rules of the High Court (“RHC”) and inherent jurisdiction. 20.This Court is a division of the District Court which was established by statute. Ms Leung for NRCL rightly confirmed at today’s hearing that NRCL could not rely on any inherent jurisdiction which this Court does not have. 21.The other legal basis advanced is Order 15 Rule 6(2) of RHC. NRCL has not made clear on papers, including its written submission[2], which limb of Order 15 Rule 6(2) it relied on. Upon the Court’s enquiry at today’s hearing, Ms Leung told the Court that NRCL relied on Order 15 Rule 6(2)(b)(ii) only, that is the joinder of :
22.I have set out the relevant legal principles in §§35 to 45 of PMCL aka LMC aka KLMC v AKK aka KAK & others [2023] HKFC 34 which I apply here. In gist, this Court shall be satisfied that:
23.To determine whether there is a proper question to be tried and whether the proposed joinder is just and convenient for resolution of the question, we have to consider NRCL’s intended scope of the joinder. 24.NRCL prayed in the Summons for joinder “on the issue of interest in and/or disposition of the [MH]”. In the FC Action, the interest in and/or disposition of the MH is to be determined in the ancillary relief dispute. 25.In NRCL’s supporting affirmation[3], it suggested that the issues of the validity and/or effect of the Charging Order Absolute (or the Charging Order Nisi) has arisen as a preliminary issue in W’s ancillary relief proceedings. NRCL had not made application for a hearing of the validity[4] or effect of the charging order as a preliminary issue. Even if it had, it is inappropriate in this case to hear and determine the validity and effect of the charging order separate from the determination of the ancillary relief dispute. 26.The Joinder Application was first heard on 25 November 2024 for call over (“Call Over Hearing”). Prior to the Call Over Hearing, H indicated his neutral stance on the Joinder Application, and W has no objection to the joinder provided that it was limited to NRCL’s interest in the MH. 27.Unexpectedly, at the Call Over Hearing, the Solicitor appeared for NRCL adamantly and repeatedly maintained that (1) NRCL did not want to participate in the April Application or the ancillary relief proceedings; and (2) the issues relating to the Charging Order Absolute has to be determined in the DC but not to be transferred to the FC. 28.This Court asked what exactly did NRCL want to join in this case as the competing claims between the parties and NRCL over the MH is a matter to be considered in the ancillary relief dispute, and the April Application would have a material impact on the manner in which the MH is to be dealt with. Regrettably, NRCL failed to give any meaningful answer. 29.It is in these circumstances that the Court has to adjourn the Joinder Application to today for substantive argument with directions for the parties to file evidence and submission. It was also because of NRCL’s stance at the Call Over Hearing that both H and W opposed the Joinder Application. 30.The above pertinent question of the Court was not answered in the submissions and evidence filed by NRCL (not prepared by Ms Leung). 31.It was only at today’s hearing and upon enquiry by this Court that we heard NRCL’s final position, that is, contrary to the submissions at the Call Over Hearing, NRCL is seeking to join in the ancillary relief proceedings on the question regarding NRCL’s interest in the MH; and is also seeking to participate in the April Application. 32.On this note and with consent of all parties, I made an order to join NRCL as a party to the ancillary relief proceedings in terms set out in paragraph 2.1 above. 33.Today’s hearing would not be necessary but for the ambiguous and shifting stances held by NRCL. It is fair that H and W’s costs of today’s hearing be paid by NRCL, hence my order at paragraph 2.5 above. D. Case Management 34.I fixed a Case Management Hearing to be heard immediately after the Joinder Application with a view to expedite the conduct of these proceedings, bearing in mind the potential costs and proportionality in the conduct of this litigation. 35.The parties’ substantial matrimonial asset is the MH which was estimated to worth about $2 million. The current outstanding principal and interest owed to NRCL accumulated to more than $1 million, with an interest of 26% per annum accruing until payment[5]. It is obvious that the parties have a pressing need to resolve their disputes in a cost effective manner. 36.One of the purposes for joinder is to avoid multiplicity of proceedings. In light of the procedural history outlined above, irrespective of my decision on the Joinder Application, the parties’ disputes remain to be heard in different courts as the parties will have to go back to the DC for a determination on the validity of the Charging Order Absolute which has been heard in the DC. 37.I have explored with the parties the possibility of an agreement to transfer the dispute on the Charging Order to this Court, hopefully to save some costs. The parties could not reach an agreement to transfer mainly, as I understand, because of the costs already incurred in the DC for the substantive argument of W’s DC Summons. 38.On case management, I made directions on the disputes relating to W’s April Application. I made clear to the parties that they shall restore the DC hearing as soon as possible so that the necessary information on the outstanding issues will be available at the next Case Management Hearing to enable this Court to give directions to advance the case in a more sensible and proportionate manner. E. Forum to decide the making of charging order over matrimonial property owned by a party in divorce proceedings 39.I have heard some submissions on the appropriate forum to deal with matters on third party charging order over a property owned by a party who has divorce proceedings on foot. I take this opportunity to summarise the relevant legal principles and approaches below. 40.Section 52AB(3) of the District Court Ordinance (equivalent to Section 20B of the High Court Ordinance) provides that a charge imposed by a charging order shall have the like effect and enforceable in the same manner as an equitable charge created by the debtor by writing. 41.Hence, a charging order, which has the effect of an equitable charge, does not confer any legal or equitable ownership of the property on the chargee. A charging order confers on the chargee rights to apply to the court for an order for sale or for the appointment of a receiver, but not the right to foreclose or take possession of the property, nor any proprietary right or title in the property. The rights conferred by the charging order are different from the rights enjoyed by a mortgagee. These principles on the effect of a charging order were set out in Sino Billion Ltd v Lam Chok Wai [2003] 2 HKC 167, §12; confirmed by the Court of Appeal in Leader Screws Manufacturing Company Limited v Huang Shunkui [2023] HKCA 1193, §43. 42.A charging order nisi, when made absolute, related back to the date of the order nisi, thus takes effect from the date of the order nisi. This does not detract from the fact the order is defeasible if sufficient cause was shown: Hong Kong Civil Procedure 2025 §50/9A/17. 43.In deciding whether to make a charging order, pursuant to Section 52A(2) of the District Court Ordinance (equivalent to Section 20(3) of the High Court Ordinance), the court has to take into account all circumstances of the case, in particular, any evidence before it as to (a) the personal circumstances of the debtor; and (b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order. 44.In cases where the property is owned by a party who has divorce proceedings on foot, the protection of the needs of the children and the interest of the spouse in the property are held to be circumstances ought to be considered when making a charging order. The need to consider such protection applies equally to cases where the property is held by one or both parties of the divorce proceedings. It is “all circumstances of the case” that the court has to consider before granting a charging order. See the English Court of Appeal decisions in Harman v Glencross [1986] 1 All ER 545 and Kremen v Agrest [2013] EWCA Civ 41; and the Hong Kong Courts decisions in Chan Ting Wai, William v Lam Sai Pak & ors, HCA 2587/1997, 8 December 1998; IISW v SDS-W & ors, FCMC 1399/2006, 23 July 2014; and SJH v CYHC, FCMC 4264/2012, 26 May 2016. 45.With the helpful guidance laid down by the English Court of Appeal and the Hong Kong Courts in the above decisions, I summarise below the appropriate forum in different scenarios:
Mr. Simon Wong of Lam, Lee & Lai, assigned by Director of Legal Aid, for the Petitioner. Mr. Esmond Wong instructed by Cheng & Co., assigned by Director of Legal Aid, for the Respondent. Ms. Sabrina Leung instructed by Gloria Chan & Co. for the Intended Intervener. [1] Notice of Intention to Proceed with an Application for Ancillary Relief. [2] Not prepared by Ms Leung. [3] 1st Affirmation of Wong for NRCL §9(e) : “It appears that the issue of the validity and/or effect of the Charging Order Absolute (or in the event that the Charging Order Absolute would be side (sic) aside, the related charging order nisi) made in favour of the Intended Intervener has arisen as a preliminary issue in the Petitioner’s application for ancillary relief in these proceedings. Therefore, it is necessary to join the Intended Intervener in these proceedings” [4] NRCL contended that the issue of validity should be determined by the DC which has heard the parties’ substantive argument. [5] DC Default Judgment §1. |
Cases cited in this judgment