Bank of China (Hong Kong) Ltd. v. Tower Property Ltd. and Others
Read the full judgment text of HCMP 3254/2002 on BabelCite. This High Court CFI judgment was delivered on 6 November 2002.
1. On 16 August 2002, the plaintiff commenced the present proceedings by an originating summons under Order 88, Rules of the High Court against the defendants, claiming for money judgment in the excess of HK$972 million and delivery of vacant possession of :
Cited by 2 cases
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HCMP003254/2002 HCMP3254/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO.3254 OF 2002 ---------------------------
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--------------------------- Coram: Deputy High Court Judge Poon in Chambers Dates of Hearing: 5 and 6 November 2002 Date of Decision: 6 November 2002 Date of Handing Down Reasons for Decision: 29 November 2002 ------------------------------------------------------ REASONS FOR DECISION ------------------------------------------------------ INTRODUCTION 1.On 16 August 2002, the plaintiff commenced the present proceedings by an originating summons under Order 88, Rules of the High Court against the defendants, claiming for money judgment in the excess of HK$972 million and delivery of vacant possession of :
pursuant to a mortgage dated 16 October 1996 ("the Mortgage"). The defendants filed an acknowledgment of service on 30 August 2002, intending to defend the claim. While these proceedings continued, the plaintiff separately appointed Messrs Stephen Liu Yiu Keung and Yeo Boon Ann as receivers on 18 September 2002 under the Mortgage ("the Receivers") to expedite recovery of possession of the 2nd Mortgaged Property. 2.On 10 October 2002, the 2nd defendant took out an ex parte application on notice for an order that the plaintiff do remove the locks it had attached to the 2nd Mortgaged Property and that the plaintiff be restrained from performing similar acts in future. The affirmation in support was filed by Ms Wong Sau Kuen, the personal assistant of the director and shareholder of the 2nd defendant, Mr Chan Yuek Pun ("Mr YP Chan"). While complaining that the Receivers had caused disruption to its normal business, the 2nd defendant, through Ms Wong, did not put up any substantial defence. At the hearing, the Receivers appeared by counsel. Ma J (as he then was) adjourned the application sine die upon the undertaking by the 2nd defendant to issue the inter parte summons for injunctive relief as soon as possible and the undertaking by the Receivers to take all necessary measures to allow the 2nd defendant reasonable access to the 2nd Mortgaged Property. In the event, the 2nd defendant's inter parte summons dated 17 October 2002 ("the 2nd defendant's injunction summons") came before me sitting as the summons judge on 25 October 2002. By then, the defendants had not filed any affirmations in opposition to the Order 88 application. (They had previously applied for an extension of time to do so and the deadline expired right on 25 October 2002.) Counsel appearing for the parties all agreed that the substantive Order 88 application should be heard by me together with the 2nd defendant's injunction summons as the merits of the defence would be canvassed at the same time. Having heard counsel, I discharged Ma J's order, gave consequential directions and adjourned the matters to 5 November 2002 for substantive arguments. 3.By a summons dated 1 November 2002, the Receivers formally applied to join as an intervener in these proceedings. By another summons of the same date, the Receivers applied for an injunction against the 2nd defendant that it should remove the locks it attached to the 2nd Mortgaged Property ("the Receiver's injunction summons"). 4.The joinder summons was not opposed and I allowed it accordingly. The substantive hearing of the Order 88 application and the two injunction summonses eventually took two days to conclude. On 6 November 2002, I entered judgment for the plaintiff on the Order 88 application for (1) its monetary claim and (2) possession of those floors in the 1st Mortgaged that are tenanted and (3) vacant possession of the remaining floors in the 1st Mortgaged Property and the 2nd Mortgaged Property; allowed the Receiver's injunction summons and dismissed the 2nd defendant's injunction summons. I also ordered costs against the defendants on indemnity basis with a certificate for two counsel. 5.I had indicated that I would give my reasons in writing, which I now do. BACKGROUND 6.The background facts leading to the disputes now before me are summarised below. They are not seriously in dispute. 7.The defendants are all companies in the Ananda Group. On 15 October 1996, the 3rd and 4th defendants and Kwangtung Provincial Bank ("KPB") entered into a loan agreement. The aforesaid loan agreement was later varied by a supplementary loan agreement dated 15 September 1997and two facilities letters dated 17 November 1997 and 5 January 1998 respectively. On 16 October 1996, the defendants executed the Mortgage in favour of KPB. Under the Mortgage, KPB was the lender and mortgagee, the 1st and 2nd defendant were the mortgagor of the 1st and 2nd Mortgaged Property respectively and the 3rd and 4th defendants were the borrowers. The mortgaged properties stood as security of the loans advanced by KPB to the borrowers. 8.Originally, the 11th floor of the Safety Godown Industrial Building was part of the mortgaged property. It was released to the 2nd defendant (as mortgagor) on or about 8 October 1998 and part of the proceeds of sale of the property was applied to reduce the indebtedness of the 3rd and 4th defendant at the time. 9.Various banks in Hong Kong with mainland interests including KPB were merged with the plaintiff by virtue of the Bank of China (Hong Kong) Limited (Merger) Ordinance, Cap.1167 ("the Merger Ordinance") on 20 July 2001. As part of the merger exercise but before the coming into force of the Merger Ordinance, each of all the merging banks entered into separate sale and purchase agreement with Zhong Gang (Cayman) Company Limited ("Zhong Gang") in 1999, whereby the bank sold all its interests in all the loans and related securities as defined in the agreement to Zhong Gang whereas the bank undertook to continue to service and administer the loans and related securities, including administration of delinquent loans and the necessary enforcement actions. In KPB's case, the sale and purchase agreement was made on 14 June 1999 ("the SP Agreement"). 10.By another agreement dated 6 July 2002, Zhong Gang appointed the plaintiff as servicer to, in short, service and administer the loans and related securities under the sale and purchase agreements referred to above ("the Servicing Agreement"). Zhong Gang further executed a power of attorney of the same date in favour of the plaintiff ("the Power"), empowering it to, inter alia, do all such acts in its own name which are necessary and desirable for the efficient provision of the services under the Servicing Agreement. It is the case of both the plaintiff and the Receiver that under the Service Agreement and the Power, the plaintiff is entitled to commence the present proceedings to enforce the Mortgage in its own name. To date, KPB remains the registered mortgagee under the Mortgage in the records kept by the Lands Registry. 11.Defaults subsequently occurred. However, despite demands made by letters dated 30 May 2002, the defendants had not repaid the amount claimed to the plaintiff. The plaintiff in the event commenced the present proceedings in its own name. In the originating summons, it was stated that the plaintiff was "the successor corporation" of KPB. In the affirmation of Fung Cheuk Nam (the deputy manager of the plaintiff's assets recovery division) filed on 12 September 2002, the plaintiff was referred to as the lender under the Mortgage. APPROACH 12.Mr YP Chan, in his affirmations filed on behalf of the defendants opposing the plaintiff's claim, raised various matters in defence. Before going into these matters, I will preface my discussion with an observation on the approach in summary judgment applications under the originating summons including the Order 88 procedure. The approach was succinctly summarised by Ma J (as he then was) in Wing Hang Bank Limited v Liu Kam Ying & another, HCMP No.2519 of 2001, unreported, (6 March 2002), at paragraph 10 :
13.I will respectfully adopt and apply this approach in the present case. With this in mind, I now proceed to examine the defences in turn. DEFENCES
14.The defendants first disputed that the plaintiff is entitled to sue in its own name to enforce the Mortgage under Order 88. Order 88 applies to any action by a mortgagee within the meaning of the Order or by any person having the right to foreclose the mortgage : see rule 1(1). For the purpose of the Order, "mortgage" includes a legal and an equitable mortgage and a legal and an equitable charge, and references to a mortgagee shall be construed accordingly : see rule 1(2). Mr Cheung, counsel for the defendants, submitted that the plaintiff has no locus under Order 88 because it is not one of the classes of persons stated in rule 1(1). As I understand it, it is the first time after the merger exercise the plaintiff's authority to sue in its own name to enforce securities previously held by one of the merging banks is challenged in court. 15.As outlined above, the merger exercise involved in chronological order, a series of sale and purchase agreements between the merging banks and Zhong Gang including the SP Agreement in (1999), the Merger Ordinance (20 July 2001), the Service Agreement and the Power (6 July 2002). In order to understand the effects of the merger bearing on the present proceedings, it is necessary to set out some of the more pertinent terms of the documents and provisions of the Merger Ordinance. 16.I first start with the Mortgage. The definition of the lender in the Mortgage can be found in Clause 1.1(l). It reads :
It is common ground that "Lender" as specifically defined in the Mortgage is KPB. 17.Amalgamation is envisaged and its effect on the Mortgage is set out in Clause 28.2 :
18.In short, the Mortgage together with its rights and obligations thereunder survived any amalgamation that KPB might have with any other entity. Put bluntly, after amalgamation, that other entity (the plaintiff in the present case) steps into KPB's shoes as the lender. It is clearly entitled to enforce the Mortgage in its own name and commence proceedings under Order 88. 19.The position is the same under the Merger Ordinance. Section 8 provides :
20.The appointed time is, as noted, 20 July 2001. Thereafter, under section 8 of the Merger Ordinance, the plaintiff replaced KPB, as it were, as the lender/mortgagee under the Mortgagee. It is clearly entitled to bring an Order 88 application in its own name. 21.But relying on the SP Agreement and the Servicing Agreement, Mr Cheung, counsel for the defendants, submitted in essence that the above position had been displaced. This brings me to examine these agreements more closely. 22.The sale and purchase of the subject loan and the related security was dealt with under Clause 2 of the SP Agreement. In particular :
23.KPB's obligations to continue to administer the loans were found in Clause 4 of the SP Agreement. The relevant parts read :
24.Clause 8.5 of the SP Agreement is also relevant here. It provides that Zhong Gang shall not assign or transfer its rights and obligations under the SP Agreement without the prior consent of KPB. 25.Preamble (A) of the Servicing Agreement refers to firstly, the sales and purchases between Zhong Gang and the transferring banks including KPB and the latter's undertaking to service and administer the loans and the related securities and secondly the fact that the rights and obligations of each of the transferring banks under Clauses 4 and 5 (Servicing and Administration of the Loans) of the sale and purchase agreements, including KPB's under Clauses 4 and 5 of the SP Agreement, were vested in the plaintiff pursuant to the Merger Ordinance and the plaintiff is servicing and administering the loans and the related securities in accordance with those agreements. The essence of the Servicing Agreement is to appoint the plaintiff for the purposes of providing services which are expressly specified therein, including collecting all amounts receivable under the loans and the related securities, and which are reasonably incidental thereto. 26.Zhong Gang further appointed the plaintiff under Clause 10.1 as its attorney on its behalf, and in their own or the attorney's name. The terms of the Power are couched in very wide terms : Zhong Gang appoints the plaintiff as its attorney and as its agent on its behalf, and in its own or the attorney's name, to execute all such documents and do all such acts and things which in the reasonable opinion of the plaintiff are necessary and desirable for the efficient provision of the services under the Servicing Agreement provided that it shall not be authorised to dispose of, sell or create any encumbrance over any of the charged property without Zhong Gang's prior written consent. 27.There is no evidence before me to suggest that any subsequent assignment had actually been executed by KPB to assign the subject loan and the related security to Zhong Gang or that any notice of assignment, if any, had been given to the defendants. 28.Mr Cheung however submitted that Clause 2.1 of the SP Agreement constituted an absolute assignment of all KPB's interests in the Mortgage in favour of Zhong Gang. In the absence of notice of the assignment given to the defendants pursuant to section 9 of the Law Amendment and Reform (Consolidation) Ordinance, Cap.23 ("LARCO"), Zhong Gang cannot enforce it. The plaintiff is only a servicing agent. Its authority derives from Zhong Gang. Zhong Gang is not entitled to sue - neither is the plaintiff. He submitted that the Merger Ordinance only conferred on the plaintiff KPB's rights and obligations under Clauses 4 and 5 of the SP Agreement but not any proprietary interest to enable it to sue. 29.Mr Leong, SC, for the plaintiff naturally disagreed. He submitted that Clause 2.1 was not an assignment clause. It merely contemplated an assignment. Referring to clause 8.5, Mr Leong argued that within the group restructuring, the entities would still retain certain interest in the debts and related securities that enabled it to sue in its own name. KPB had not assigned all its interests while acting as Zhong Gang's servicing agent. Even assuming that there was an assignment under Clause 2.1, the absence of notice under section 9 of LARCO would render the assignment an equitable one. KPB as the assignor and the plaintiff as its successor can certainly sue on the Mortgage in their own name. As an alternative argument, Mr Leong relied on the provisions of the Servicing Agreement and the Power and contended that the plaintiff as the appointed servicer for Zhong Gang, is entitled to commence proceedings to enforce the Mortgage. As such, the plaintiff falls within the meaning of "mortgage" for the purpose of Order 88. 30.Mr Chang, SC for the Receivers, supported Mr Leong. He referred me to Chitty on Contracts, 28th edn, paras.20-37 and 20-38 to address my concern whether assuming that Zhong Gang is an equitable assignee, it should be joined in these proceedings. Mr Chang submitted that whether joining an assignee is a matter of principle and not a matter of law. As there is no question of double recovery and hence double jeopardy against its defendants. It is not necessary to join Zhong Gang. His view is shared by Mr Leong. 31.In reply, Mr Cheung submitted that Clause 8.5 of the SP Agreement did not confer any proprietary interest on KPB and that the plaintiff is only a servicer under both the Merger Ordinance and the Servicing Agreement and cannot possibly sue in its own name. He said if the plaintiff's contention were correct, a floodgate would be open whereby parties not to the dispute are allowed to litigate. He further contended that Zhong Gang was not entitled to sue in the absence of the statutory notice under LARCO although there was an absolute assignment. The propositions in Chitty on Contracts, 28th edn, paras.20-37 and 20-38 are not applicable. Lastly, he argued that if there was an equitable assignment, the plaintiff did not come to court with clean hands. It chose not to give notice to the defendants who were in turn deprived of the opportunity to transfer the facilities to some other banks. 32.As can be readily seen from counsel's submissions summarised above, the bone of contention between the parties is whether KPB retained any interest under the SP Agreement that enabled it to enforce the Mortgage in its own name. If the answer is in the affirmative, the next question is whether the plaintiff has by virtue of the merger acquired the same interest from KPB so that it can now enforce the Mortgage in its own name. In my view, these questions must be answered in the affirmative. 33.For my part, I have considerable doubt if Clause 2.1 was an assignment clause. Clause 2 did contemplate an assignment but Clause 2.1 only provided for the sale and purchase of the subject matters. It did not use the word "assign" or " assignment". If the parties did intend to assign by virtue of Clause 2.1, it should have been couched as such. The situation is similar to a case after the signing of a sale and purchase agreement of a landed property, no assignment is executed. The vendor retains the legal interest in the land. Here, in the absence of an assignment, KPB must have retained a special if not the legal interest in the subject loans and the related securities to enable it to enforce them in its own name. This is, I believe, with the parties' contemplation and indeed, it facilities KPB in servicing and administering the loans and the related securities for Zhong Gang. 34.Alternatively, even assuming that Clause 2.1 did constitute an assignment as alleged, KPB still retained legal interest in the Mortgage to enable it to sue in its own name. The absence of statutory notice under section 9 of LARCO did not have the effect as contended by Mr Cheung. The position is summarised in Chitty on Contracts, 28th edn, paras.20-20 :
KPB as the assignor and having retained the legal interest in the Mortgage, is entitled to sue on it in its own name. The defendants who did not have the requisite notice would be able to discharge the debt by making payment to KPB. This accords with the intention of appointing KPB as the servicer for Zhong Gang under the SP Agreement. 35.After the merger, by virtue of Clause 28.1 of the Mortgage and section 8 of the Merger Ordinance, KPB's interest in the Mortgage passed, as it were, to the plaintiff. Likewise, the defendants would be able to discharge the debt by making payment to the plaintiff. And the plaintiff is entitled to sue on the Mortgage in its own name. This is also consistent with the intention of appointing the plaintiff as Zhong Gang's servicer under the Servicing Agreement and the Power. 36.In my view, the lack of notice of the SP Agreement or the purported assignment of the Mortgage cannot possibly disturb the position. As rightly pointed out by Mr Chang, the absence of notice is quite understandable in the context of the merger exercise. Ordinary customers will not be concerned with the details of the merger and how the affairs of the Bank of China Group are to be structured as a result of the merger exercise. Insofar as they are concerned, they banked with the merging banks before the merger. After the merger, they bank with the plaintiff, which continues in the merging banks' place to deal with the customers in the usual manner and in the usual course of business. Other than that, the transactions that the customers are involved with the merging banks remain the same. The rights and obligations under the transactions just continue. The customers are entitled to enforce the transactions against the plaintiff as much as they were so entitled against the merging banks before the merger. Likewise, the plaintiff is entitled, as much as the merger banks were entitled before the merger, to enforce the transactions against the customers. Disruption to the ordinary course of business and inconvenience to customers are thus reduced to minimal. In my view, this is the effect desired and achieved by the SP Agreement and the Merger Ordinance. The absence of notice of the SP Agreement and the purported assignment thus accords with the good commercial sense behind the merger exercise. The defendants just continued to deal with KPB after the SP Agreement but before the enactment of the Merger Ordinance and thereafter with the plaintiff in KPB's place. Lack of notice is accordingly not a ground for any legitimate complaint. 37.Nor is the plaintiff's right to sue is affected by its appointment as Zhong Gang's servicer under the Servicing Agreement and the Power. It is part of the restructuring of internal affairs with the Group. Under those instruments, the plaintiff owed various duties to Zhong Gang when servicing and administering the loans and related securities, including taking action on the Mortgage. But neither the instruments nor the appointment deprived the plaintiff of its right to sue in its own name in law. 38.Lastly, the non-joinder of Zhong Gang is not detrimental to the plaintiff's case. As the authorities show, whether a joinder is necessary depends on the circumstances of the case. It is, I accept, a matter of principle and not a matter of law. I agree for the reasons advanced by Mr Leong and Mr Chang, it is not necessary to join Zhong Gang. The floodgate argument advanced Mr Cheung is in my view flawed. Contrary to his contention, after the merger, the plaintiff is a proper party to the Mortgage and hence these proceedings. 39.For these reasons, I do not see any substance in the challenge mounted against the plaintiff's authority to sue and this defence must fail. I now turn to the less technical matters.
40.The defendants alleged that in May and July 1998, two compromise agreements were made with KPB agreeing not to sue pending a debt restructuring. The relevant part of his first affirmation filed on 25 October 2002 read :
41.Both Mr Lam and Mr Tam denied that there was any compromise agreement concluded between the parties as alleged. In particular, Mr Tam exhibited to his affirmation filed on 1 November 2002 the contemporaneous documents at the material times. The effects of these documents are well summarized in his affirmation. The relevant paragraphs are set out below :
I note on the materials before me, it is the first time this compromise agreement defence is raised ever since the dispute has arisen. I further note that in paragraphs 21 and 23 of his first affirmation, Mr Chan referred to KPB agreeing not to sue the 3rd and 4th defendants and the related guarantors. He did not include the 1st and 2nd defendants who are the mortgagors. Mr Cheung submitted that the word "guarantors" should be given its ordinary dictionary meaning and that would include the mortgagors. I must confess I have considerable difficulty in accepting this submission. Mr Chan's affirmation is no doubt prepared with legal assistance. There is a marked difference between "guarantors" and "mortgagors". And there is simply no guarantor in these proceedings. I fail to see why any reference to "mortgagors" in this mortgage action is omitted. More importantly, the unchallenged contemporaneous documentations exhibited to and summarised in Mr Tam's affirmation, which provides the best proof of what actually transpired at the material times, flatly contradicts Mr Chan's allegations. In essence, they clearly show that the parties were then negotiating for a restructuring of the debts, that the further deposit of shares was to make up the shortfall in the value of securities and that KPB had taken the careful steps to make it abundantly clear in effect that no settlement agreement had been reached. Having reserved its rights, KPB would still resort to legal action if necessary. The conclusion reached by Mr Tam in paragraph 10 of his affirmation cannot be flawed and I accept it. The 1st and 2nd compromise assignments simply did not exist as alleged. 42.The defendants had failed to establish an arguable defence relating to the alleged compromise agreements with credible evidence. This line of defence must fail accordingly.
43.Mr YP Chan disputed the amount of indebtedness. In his first affirmation, he said he did not know the exact figure. In his second affirmation filed on 29 October 2002, he said it should be in the region of HK$500 million only. That admission alone, Mr Cheung conceded, would entitle the plaintiff to judgment on its possessory claim. 44.Clause 24 of the Mortgage provides that a certificate in writing signed under hand by any manager or any authorised officer of the lender stating the amount at any particular time due, owing or incurred to the lender under the Mortgage shall be conclusive evidence against the mortgagor and the borrower. Time and again, such a clause had been held to be valid and binding on the contracting parties. A certificate given pursuant to the clause is conclusive upon the parties of the amount and existence of the indebtedness : see Bache & Co. v. Banque Vernes [1973] 2 Lloyd's Rep 437, CA(Eng), Albaraka International Bank Ltd v. Sultan Mahmood Kurd & another, (unreported CA(Eng), 11 November 1993), Dobbs v. The National Bank of Australasia Ltd [1935] CLR 643, High Court of Australia, Lombard General Insurance Ltd v. Edwin Engineering Ltd & another [1989] 2 HKC 438. 45.Mr Cheung submitted that Clause 24 did not apply. The certificate was signed by the plaintiff who was not an original party to the Mortgage. The defendants only trusted the calculation of KPB (the Lender under the Mortgage) and not somebody else's. He further argued that the power of signing the certificate is not delegable from the mortgagee to anyone, including the plaintiff who was only a debt collector. 46.As ruled above, the plaintiff now stands in KPB's shoes as the lender under the Mortgage. There is no reason why an authorised officer of the plaintiff cannot issue the certificate pursuant to Clause 24. There is, with respect, no delegation. I have grave doubt if the contention that the defendants only trusted the calculation of KPB is genuine. In any event, it is simply immaterial. The defendants are bound by the terms of the Mortgage. The contention, even if accepted, is not a ground for disputing the applicability of Clause 24 and the validity of the certificate issued thereunder. 47.Incidental to the purported defence on the amount of indebtedness is the allegation that the plaintiff is not entitled to charge default interest at the rate of prime plus 6% per annum. Mr Chan complained that no advanced notice had been given on such interest rate. The plaintiff insisted that such notice had been given. It is not necessary, in my view, to make a determination on this factual dispute. Under Clause 3(b)(v) of the Mortgage, the lender is entitled to charge default interest at such rate as it may in its absolute discretion determine. No prior notice to the defendants is required. 48.For these reasons, this defence must also fail.
49.In paragraph 40 of his first affirmation, Mr Chan also complained that KPB or the plaintiff had negligently failed to realise the securities at the right time. He said the value of the properties was worth mort than the total indebtedness of the 3rd and 4th defendants a the time of default or repayment in or about November 1997 which could fully covered the outstanding indebtedness at the time. 50.This is a serious allegation but lacking hopelessly in particulars. I have no hesitation in rejecting it. In any event, it is trite that the plaintiff cannot be liable for a decline in value of mortgaged property : The China and South Sea Bank Ltd v. Tan Soon-gin, alia George Tan [1990] 1 HKLR 546, PC. This defence is untenable and must fail.
51.The defendants disputed that plaintiff's entitlement to appoint the Receivers. Mr Cheung first submitted that the plaintiff did not have the power under the Mortgage to appoint the Receivers. It is plainly wrong. The plaintiff, as the lender after the merger by virtue of Clause 28.2, is perfectly entitled to do so under Clause 11 to expedite the recovery of vacant possession of the 2nd Mortgaged Property. In light of my ruling, it is strictly not necessary for me to deal with Mr Cheung's other arguments advanced in this connection. However, for the sake of completeness, I will just briefly state my views on those points as follows. 52.Mr Cheung submitted that the plaintiff did not have the power to appoint the Receivers under the Servicing Agreement. He argued that the power is a discretionary power and is thus not delegable by Zhong Gang to the plaintiff. In this connection, he relied on Metling and Merton's Contract [1893] 3 Ch 269 for the proposition that a donee may delegate the performance of merely ministerial acts. In my view, it turns on the terms of the instrument in question. The Servicing Agreement and the Power are wide enough to empower the plaintiff to appoint receivers as a reasonable and necessary act to enforce the Mortgage. 53.Mr Cheung next took the point that section 8 of the Merger Ordinance did not vest in the plaintiff the powers of KPB to administer the Mortgage, which are mere administrative powers. Only KPB's interests were vested. With respect, his reading on section 8 is not only too narrow but is also contrary to the legislative intent. The Merger Ordinance does not make any distinction between interests and administrative powers. Section 8 is all embracing. All interests and powers are to be vested in the plaintiff. Indeed, the good commercial sense of the merger exercise as referred to in paragraph 36 above will be completely destroyed if KPB were to retain the so-called administrative powers relating to any of the subject matters covered by the merger. 54.Mr Leong relied on section 50 of the Conveyancing and Property Ordinance, Cap.219 as an alternative to support the appointment of the Receivers. In short, section 50 provides that, subject to any contrary intention in the deed, there shall be implied in any legal charge where the mortgage money has become due, a power exercisable in writing by the mortgagee and any person entitled to give a receipt for the mortgage money on its repayment to appoint a receiver. Mr Cheung submitted that section 50 did not apply because it is subject to contrary intention of the Mortgage. He said the definition of the lender did not include the plaintiff. I am unable to accept this submission which, as I have demonstrated earlier, is plainly wrong.
55.The defendants finally contended that it is an abuse of process to commence proceedings on the one hand and to appoint the Receivers on the other. Again, this contention is devoid of merits. It is trite that in the event of default, the plaintiff may simultaneously take proceedings to obtain possession and the appointment of a receiver : see Cousins on the Law of Mortgages, 2nd edn, para.16-09. CONCLUSION 56.For the above reasons, the defendants have been unable to establish any arguable defence to the Order 88 application. I accordingly entered judgment for the plaintiff. 57.It follows from my ruling above that the 2nd defendant's injunction summons must be dismissed. Mr Cheung, as I understand him, did not contest otherwise. Mr Chang insisted that the Receivers must have the injunction because the locks put up by the 2nd defendant were still there at the 2nd Mortgaged Property. I agree that the 2nd defendant, having failed to show any arguable defence to the Order 88 application, is not entitled to take such steps to frustrate the Receivers' discharge of their duty to recover possession. Accordingly, I allowed the Receivers' injunction summons. COSTS 58.Under Clause 16 of the Mortgage, both the plaintiff as the lender and the Receivers are entitled to costs on an indemnity basis. I see no reasons why it should not apply here. Further, in light of the enormous size of the claim, the importance of the challenge mounted against the plaintiff's authority to enforce the Mortgage in its own name and the implications arising from my ruling on similar transactions in the future, the plaintiff and the Receivers are entitled to engage two counsel. I thus ordered costs against the defendants on indemnity basis with a certificate for two counsel.
Representation: Mr Alan Leong, S.C. and Mr Melvin Wong, instructed by Messrs Tsang, Chan & Wong, for the Plaintiff Mr Cheung Kam Wing, Adonis instructed by Messrs Lau, Kwong & Hung, for the Defendants Mr Denis Chang, S.C. and Mr Michael Liu, instructed by Messrs Wilkinson & Grist, for the Intervener |
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