Heraeus Ltd v. Chu Keng Ming
Read the full judgment text of HCMP 1324/2024 on BabelCite. This High Court CFI judgment was delivered on 21 May 2025.
1. By originating summons dated 15 February 2024 (“OS”), Heraeus Limited (“P”), as judgment creditor seeks
Cites 6 cases
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HCMP 1324/2024 [2025] HKCFI 2125 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1324 OF 2024 ________________________
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______________________________ REASONS FOR JUDGMENT _______________________________ 1.By originating summons dated 15 February 2024 (“OS”), Heraeus Limited (“P”), as judgment creditor seeks
Relevant background 2.D and his wife were directors and shareholders of Sing Kwong Jewellery & Gold Company Limited (“Sing Kwong”). 3.On 12 November 2002, they provided 2 guarantees to P (the “Guarantees”) in consideration of credit facilities P granted to Sing Kwong. As of 11 May 2021, the unpaid balance of the credit facilities totalled $8,321,486.94: see Heraeus Limited v Chan Yun Mui & Chu Keng Ming [2022] HKCFI 808 (“HCA 878”) at §151. 4.After obtaining judgment against D (as one of two joint and several debtors) in HCA 878 on 25 March 2022 (“the 1st Judgment Debt”), P obtained charging orders absolute, namely, Charging Order 1 over the 1st Property and the 2nd Property and Charging Order 2 over the 3rd Property. 5.On 25 November 2022, D lost his appeal and the costs of the appeal were summarily assessed on 10 February 2023 in the sum of $375,726 (“the 2nd Judgment Debt”). 6.On 9 April 2023, P obtained a charging order absolute in respect of the 1st, 2nd and 3rd Properties whereby D’s interest Properties stand charged with the 2nd Judgment Debt and interest thereon, together with the costs of the charging order application. 7.On 10 November 2023, P obtained an allocator in respect of the taxed costs in HCA 878 in the sum of $5,089,000.70 (“the 3rd Judgment Debt”). 8.On 25 March 2024, P obtained a charging order absolute, namely, Charging Order 4 over the 1st, 2nd and 3rd Properties whereby D’s interest in the Properties stand charged with the 3rd Judgment Debt interest thereon together with the costs of the charging order application. 9.At all material times, D is and was the sole registered owner of the 1st, 2nd and 3rd Properties. The 1st, 2nd and 3rd Judgment Debts remain fully unsatisfied. 10.As at the date of this hearing, the total amount due and owing stance at $22,934,624.14 (“the Total Outstanding Amount”). Professional valuations 11.The following table summarises the valuations obtained by the parties:
Applicable principles 12.The relevant principles are set out in the judgment of Linda Chan J in SKK (HK) Co Ltd v Tsui Po Hing [2021] HKCFI 1676 (at §§15-16):
Discussion 13.There is no dispute over the Total Outstanding Amount. 14.The dispute is over which of the Properties should be the subject of the order for sale to be made. P seeks an order that the 1st Property be sold. 15.D opposes P’s application and proposes to satisfy the Total Outstanding Amount by the sale of the 2nd and 3rd Properties and by the sale of D’s other assets, namely, stock securities currently[1] valued at $13,039,400. 16.P’s valuation of the 1st Property is $54.9 million. The land search record shows that it is subject to an “all-monies” mortgage in favour of Dah Sing Bank Limited dated 22 October 2019. The outstanding mortgage loan is said to be approximately $32 million[2]. 17.Mr Adrian Lai and Mr Raymond Tsang, counsel for P, submit that the exact amount of the remaining equity is uncertain given D’s failure to produce documents in support of the amount outstanding under mortgage loan although, based on the available evidence, it is likely to be not less than $22.9 million. Taking into account any expenses to be incurred in selling the 1st Property, the net proceeds should be more or less sufficient to be applied in full satisfaction of the Total Outstanding Amount. 18.Mr Ray Kwan, counsel for D, opposed P’s application on 4 grounds, namely:
19.Surprisingly, D’s grounds of opposition make no mention of D’s evidence[3] that he had a “mutual agreement and common intention” that his son Thomas would hold a 20% beneficial interest in the 1st Property. That allegedly arose as a result of Thomas’s assistance after the Asian financial crisis occurred in (a) successfully negotiating with the vendor to reduce the purchase price from $72.8 million to $45,000,160; (b) securing a mortgage for D from Chiyu Banking Corporation Limited for the purchase of the 1st Property; and (c) contributing $5 million to the purchase price. 20.D also obtained leave to serve, inter alia, Thomas’s affirmation dated 15 October 2024[4] which affirmation mirrors D’s evidence out of time. 21.It is therefore necessary to deal with the assertion of D and Thomas that Thomas has a 20% beneficial interest in the 1st Property. 22.P advanced various reasons why the claim to a 20% beneficial interest is to be rejected:
23.D made no submissions in response. I reject D’s claims that Thomas has a 20% beneficial interest in the 1st to Property. 24.I now turn to consider the four grounds of D’s opposition. 25.Ground (i) is partly based on a literal reading of § 11 of P’s skeleton without recognising that the date of the hearing therein mentioned (21.3.2025) is a typographical error for 21.5.25. There was no hearing listed for 21.3.25. 26.The point made in §12 of D’s skeleton concerning interest accruing on the Total Outstanding Debt between 21 March 2025 and 21 May 2025 (being an element rendering the available equity in the 1st Property insufficient to fully satisfy the Total Outstanding Debt) is thus a red herring. 27.At the hearing, when the Court inquired about the information specified in RHC Order 88, rule 5A (2)(e)[6], Mr Lai handed up a draft order which (in brief) provides, inter alia, for (a) the sale of the 1st Property with vacant possession by public auction or private treaty with a reserve price of $54.9 million in the open market; (b) the conveyancing procedure of the sale; (c) D’s delivery of vacant possession within 30 days; (d) the application of the proceeds of sale including, inter alia, payment of the estate agent’s commission not exceeding 2% of the proceeds of sale; (e) in the event of the proceeds being insufficient to satisfy in full the Indebtedness secured by the Charging Orders, liberty to apply for consequential directions; and (f) payment by D to P the costs of the OS, to be taxed on an indemnity basis if not agreed. 28.Mr Kwan’s objection is to the reserve price, said to be too low. He suggested that the reserve price be at $90 million. In other words, the Court was invited to adopt D’s valuation instead because of flaws in P’s valuation which are considered under Ground (ii) below. 29.He submitted that there is bound to be a shortfall if the sale is at the reserve price of $54.9 million: the 2% for the payment of the estate agent’s commission alone amounts to at least $1 million. Further, as the completion of any sale is likely to be a few months away, interest will continue to accrue between the date of the hearing and completion on the Total Outstanding Amount. The balance after the discharge of the prior encumbrance would be $22.9 million, an amount that is hardly sufficient to repay the Total Outstanding Indebtedness before factoring in the agent’s commission and interest mentioned above. 30.Following upon that reasoning, he submitted that D’s proposal (see Ground (iii) below) would offer a neater solution. 31.Ground (ii) seeks to highlight what D considers are flaws in CS’s valuation of the 1st Property such that it does not reflect its true market value. Essentially, D argues that the 1st Property is worth considerably more because, inter alia, CS’s valuation was based on 2 prior transactions within the same development[7] when those houses are materially smaller than the 1st Property in terms of saleable area, rooftop, garage and yard. In particular, CS’s valuation failed to recognise the value of the extensive basement area of over 4000 sq ft. 32.It is unclear how flaws (assuming there be any) in P’s valuation could be a ground for opposing P’s application. The thrust of D’s objection appears to be that if P succeeds in obtaining an order for sale of the 1st Property, it will be sold at a knockdown price, thereby causing significant prejudice to D. 33.That submission overlooks the duties imposed on a mortgagee exercising its power of sale over the mortgaged property. P does not have carte blanche to sell the 1st Property at whatever price it chooses. Rather, P is duty bound in good faith to take all reasonable steps to achieve the best price possible: see Fisher & Lightwood’s Law of Mortgage 15th Edn at §30.24. 34.So far as the Centaline valuation of $90 million is concerned, its reliability is highly questionable. The 6th paragraph of the valuation letter dated 22 October 2024 from Centaline reads:
Inexplicably, no sales transactions are identified and none can be found in the valuation letter. 35.In those circumstances, I do not accept that it is unreasonable to adopt the valuation given by P’s valuer of $54.9 million as the reserve price for the sale of the 1st Property. The market will determine the proper price for the 1st Property. It may fetch more than reserve price in which event the proceeds may be sufficient to discharge the costs of the sale, any additional interest and what is owed to the Bank and P. 36.Ground (iii) is D’s proposal for the sale of the 2nd and 3rd Properties (which on P’s valuation total $12.8 million and on D’s valuation, $13 million) as well as D’s stock securities said to be currently valued at $13,039,400 which D is willing to liquidate to satisfy P’s claim. This alternative was said to avoid the risk of any shortfall and would not occasion the disruption to D and his family that would inevitably follow on a sale of the 1st Property. 37.The evidence of the value of the stock securities consists of a single statement issued by Emperor Securities showing the position as at 30 September 2024 (the “Statement”). There is no up-to-date statement showing the current value of the stock securities. 38.D’s current willingness to liquidate his stock portfolio jars with the fact that he has not seen fit to repay Charging Order 1 obtained almost 3 years ago on 20 June 2022, much less any part of the 1st Judgment Debt which arose 14 years ago. 39.P submits that if D genuinely intends to liquidate his portfolio to repay his debts, it defies logic that he did not do so earlier. Instead, he did nothing and allowed substantial interest to be incurred. This shows that D is a person who does not even honour his legal obligations. 40.At the hearing, P provided the Court with recent correspondence commencing 15 May 2025 exchanged between P’s solicitors and D’s solicitors:
41.It is clear that P’s solicitors essentially carried out the work that D’s solicitors failed to do with a view to agreeing a consent summons that gives effect to D’s alternative proposal, which would dispense with this hearing. 42.D did not even reply to the draft consent summons sent on 19 May 2025. This demonstrates to the Court that D’s proposal is not meant to be taken seriously. 43.In light of the foregoing, Ground (iv) which states that a sale of the 1st Property would result in significant hardship to the occupants can be dealt with swiftly. 44.So far as D is concerned, a sale is unlikely to cause immense hardship on him, albeit with some inconvenience. It does not necessarily render him homeless as he is not without means with which to rent accommodation or, indeed, to purchase a property. 45.In the absence of any evidence as to Thomas’s own financial resources, there is no reason to believe that in order for sale of 1st Property would cause significant hardship on him and his family. Disposition 46.I have no hesitation in concluding that P is entitled to an order for sale of the 1st Property. D’s conduct (discerned from the recent correspondence described in §40 above) is reprehensible. Clearly, his alternative proposal was neither genuine nor serious. 47.Accordingly, I make an order for sale of the 1st Property in terms of the draft Order submitted. 48.The draft Order includes a provision for the payment of indemnity costs since under the Guarantees, D shall pay P’s costs on full indemnity basis in recovering monies due and owing to P from Sing Kwong: see Heraeus at §§13 (j) (m), and 154. 49.Mr Lai requested that the costs of the OS be summarily assessed and provided P’s statement of costs to the Court and to D. I granted D leave to file his list of objections (not exceeding 2 pages) within 7 days of the Order herein. 50.Summary assessment will be conducted in Chambers.
Mr. Adrian Lai and Raymond Tsang, instructed by Lam, Lee &Lai, Solicitors for the Plaintiff Mr. Ray Kwan, instructed by Johnnie Yam, Jacky Lee & Co., Solicitors for the Defendant [1] This figure is given in D’s skeleton submissions dated 13 May 2025 at §25 (3). [2] See D’s affirmation dated 15 October 2024 at §21(4). In a case such as the present, it is singularly unhelpful not to provide the Court with a precise amount. [3] See D’s affirmation at §§10-11. [4] It has not been explained why the hearing bundle includes another affirmation from Thomas dated 23 October 2024, the contents of which are identical to his affirmation dated 15 October 2024. [5] The 1st Property is an independent house comprising 3 residential storeys from ground floor to the 2nd floor (saleable area 3031 sq ft) plus a single-storey carport (of over 4000 sq ft) and a garden of just over 5000 sq.ft.: per Centaline’s valuation. [6] “5A. Action for the enforcement of charging order by sale (O. 88, r. 5A):
[7] House 30 sold for $53.8 million in October 2021 and House 21 sold for $57.7 million in April 2020. [8] This is in stark contrast to P’s draft Order for the sale of the 1st Property described in §27 above which provides a comprehensive mechanism for how the sale is to be conducted, the procedure to be followed, the application of the proceeds of sale and in the event of the proceeds being insufficient, liberty to apply for consequential directions.. [9] This is because the OS only covers the 1st Property and any settlement involving the sale of the 2nd and 3rd properties have to be done by way of a Tomlin order which stays the current proceedings and sets out the terms of the agreement in the schedule to the order. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCMP 1324/2024