Fook Sun Enterprises Co Ltd v. Cromwell Investment Co Ltd and Others
Read the full judgment text of HCMP 118/1974 on BabelCite. This High Court CFI judgment.
1. This originating summons concerns certain land and buildings situated at Nos. 136 and 138 Queen's Road (Central), Hong Kong. This property is registered as sections A and B of Inland Lot 161.
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HCMP000118/1974 IN THE SUPREME COURT OF HONG KONG (ORIGINAL JURISDICTION) MISCELLANEOUS PROCEEDINGS NO.118 OF 1974 -----------------
Coram: Briggs, C.J. Date of Judgment: 12th March 1975. ----------------- JUDGMENT ----------------- 1. This originating summons concerns certain land and buildings situated at Nos. 136 and 138 Queen's Road (Central), Hong Kong. This property is registered as sections A and B of Inland Lot 161. 2. The plaintiff is the registered owner of 448 equal undivided 720th parts of this property. The first defendant is the registered owner of 252 equal undivided 720th parts; the second defendants are the registered owners of 20 equal undivided 720th parts. 3. The first defendant company has mortgaged their 252 equal undivided 720th parts to Yien Chi Ren, one of the second defendants, who is the managing director of the first defendant company. 4. The second defendants have mortgaged their 20 equal undivided 720th part in the property to the fourth defendant. And have also granted a second mortgage of that property to the fifth defendant. These figures mean that the plaintiffs own 62% of the premises and the first and second defendants own 38%. 5. The plaintiff asks for an order of sale of the property under section 6(1) of the Partition Ordinance. This is opposed by all the defendants. 6. The premises are occupied by a well-known tea house who have sublet part of the ground floor as two shops. I was told that the tea house is a very profitable concern and that the premises are protected premises under the Landlord and Tenant Ordinance, having been built before the war. 7. The plaintiffs do not ask for an order of partition. They wish the premises to be sold by auction and they also pray that they may be allowed to bid for the premises. They own No. 140 Queen's Road, Central, and if they are successful in this application their intention is to redevelop Nos. 136, 138 and 140 as a block. 8. The defendants do not want an order of partition either. They wish the status quo to be maintained. However, there have been certain negotiations between the plaintiffs and the first and second defendants each being desirous to acquire the share of the other in the property. The mortgagees do not want a partition because they say that a sale would alter, and might decrease, the value of their security. 9. Though none of the parties ask for an order of partition, there is evidence that it would be physically possible to partition the premises but that to do so would be impractical. It would not only be a most expensive undertaking but the result would be premises which could no longer be fit for the purposes for which they are now being used. 10. I have, therefore, no hesitation in stating that a partition would not "be beneficial to all the persons interested" in the words of section 6(1) of the Ordinance. 11. The plaintiffs acquired their interest in the premises from the former owners who were a family with the surname WU. Early on at the hearing it was suggested that because the former owners had not sought for an order of partition or sale under the Ordinance, the plaintiffs should not be granted such an order. 12. I do not think there is anything in this point. The fact that the former owners did not seek such an order is totally irrelevant to these proceedings. The plaintiffs are co-owners and have all the rights of co-owners. 13. It was suggested that this was not a case for the court to make an order for sale under section 6 of the Ordinance: but that the proper course for the court to take was to make no order under section 2(c) of the Ordinance. 14. I do not agree. I agree with Mr. Litton's interpretation of section 2(c) of the Ordinance. I think that a court would only make no order, neither an order for partition nor an order of sale, when the interests of all the parties would be better served by their continuing to remain co-owners, or where the facts show that to make such an order would result in very great hardship to one co-owner. 15. There are no such facts here. And to make no order would be a hardship for the plaintiffs because it has been shown that the low rental due to the premises being protected premises means that the plaintiffs' income from the property is very small indeed when compared with their capital outlay. 16. I think, therefore, that this is a case where it is proper for the plaintiffs to pray for an order of sale under section 6 of the Ordinance. 17. I will first deal with the mortgagees. Section 3(1) and (2) of the Ordinance read as follows:-
18. It was suggested for the defendants that this means that where there is a mortgage of part of the premises even of a very small part, no order for sale could be made by the court under the Ordinance, unless or until such mortgagee concurred. 19. This would mean that a co-owner could always prevent proceedings being brought under this Ordinance by executing a mortgage of part of his share of the property, and ensuring that the mortgagee refused to concur in an order being made. This would be an absurd result. 20. In my view this is not a correct interpretation of the section. What the section deals with is a mortgage or a charge on the property: that is on the property which is the whole subject matter of the proposed order for partition or sale. 21. This is clear, I think, from a proper reading of section 2 and section 3(1) and (2) of the Ordinance. The reference back to the wording of section 2 in section 3(2) makes this clear. 22. In the present case the plaintiffs and defendants own the entire premises. In section 2 of the Ordinance the reference to "any property" must mean the entire premises. The phrase "any property" is used again in section 3(2) and it must likewise refer to the entire premises. 23. The Ordinance does not allow for an order for the partition or sale of part of the property of the co-owners only. The defendants could not secure such an order as among themselves and in respect of those portions only of which they are co-owners, namely the 38% of the property. Any proceedings from an order of partition or sale must be in respect of the whole property owned by all the co-owners. 24. However, Mr. Ching, who appeared, inter alios, for the mortgagees, said that section 3(2) applied to the mortgages in this case which are mortgages of only part of the premises. 25. Section 3(2), I was told, has never been part of the law of England. It is only to be found in the law of Hong Kong. 26. Various English authorities were quoted to me in support of Mr. Ching's submission. They are of some antiquity which is not surprising because the Partition Acts were repealed in England in 1925. 27. Swan v. Swan(1) was relied upon but all this case says is that in an action for partition the court has no power to compel a mortgagee of the whole property to join in the action. The case is not authority for the proposition that a mortgagee of part of the property can prevent such an action from proceeding unless he concurs in the action being brought. 28. The report is itself unsatisfactory and the decision is almost wholly concerned with a point of procedure. 29. In Gibbs v. Haydon(2) a tenant in common mortgaged his share to another tenant in common. He applied to the court for an order of partition but the court refused to grant such an order unless the mortgage was paid off. 30. Fry, J. said:-
31. Again, this is not a very satisfactory report. But, with respect, I do not think that it helps us in any event. The plaintiffs are seeking an order. Not the defendant-mortgagors. Perhaps the mortgagees in this case would have actionable rights against their mortgagor if their mortgagor was seeking an order. But their mortgagor is not. I do not doubt that the mortgagees have all their remedies under the mortgages but I do not see how they can interfere with the right of the plaintiffs to obtain an order under the Ordinance. The plaintiffs were not parties to the mortgages. The mere fact that part of the property is mortgaged does not affect the plaintiffs. Nor do I see that the mortgagees will suffer. They can be satisfied out of the proceeds of any sale - or a sale may be ordered subject to their existing mortgages. 32. The case of Sinclair v. James(3) was quoted also. This, again, is a case where the plaintiff tried to bring a partition action against his own mortgagee. And it does not carry the matter any further. 33. The second leg of Mr. Ching's argument was that the court cannot order a sale unless a partition is physically possible. This may well be true. In the present case, during the hearing, it was, I think, conceded by all the parties that it would be physically possible to effect a partition of the premises. Though it would be very impractical. 34. Mr. Ching said that the plaintiffs must show that a partition was physically possible. In my view this is a question of fact. The photographs and the documents concerning valuation before the court speak for themselves. And undoubtedly show that physical partition would be possible. 35. Mr. Swaine's argument was chiefly directed to one point. He said that a plaintiff who prays for an order of sale or partition must have an estate in possession. In the present case, neither the plaintiffs nor the defendants are in physical possession of the property. Therefore, the plaintiffs cannot succeed. 36. In my view the position is governed by the provisions of the Ordinance. What the plaintiffs have to prove is, in the words of section 2 of the Ordinance, that they are joint tenants or tenants in common of the land in question. There is no requirement that they must be in possession. In this case, it is agreed that both the plaintiffs and the defendants except for the third, fourth and fifth defendants are tenants in common. They own the land in undivided shares: and therefore are tenants in common. And I think that that is enough. 37. Mr. Swaine quoted various cases to bolster up his point. But I do not think that they help here. They are cases where one or more of the tenants in common were tenants in common in reversion at the time of the commencement of the action. They are not cases as here, where all the co-owners were equally entitled to the rents and profits from the premises and where there is unity of possession. The premises have been leased by the co-owners but that does not mean that the co-owners have ceased to be tenants in common. 38. In Cass v. Wood(4), a testator left land to his wife for her life with the proviso that it should then be sold and the proceeds divided up among the daughters of the marriage. The daughters brought an action for partition, the widow consenting. It was held that this was not possible. The reason is obvious. The daughters were not entitled to anything until the death of the widow. There was no tenancy in common with the mother, and no unity of possession. 39. Mr. Swaine also quoted the case of Evans v. Bagshaw(5) which is another illustration of the same point. Finally, Morrison v. Morrison(6) was mentioned. It is enough to say that that case was decided under the particular statute law of Ontario and that I have derived no assistance therefrom. It is principally concerned with the right of a wife to dower, an interest in succession. It did not appear to me from my reading of the report that the case dealt with tenants in common, rather, is it authority for saying that a person who has a right of dower in certain lands in Ontario cannot obtain an order for partition of those lands. 40. The premises are let to a certain partnership which carries on the business of a tea house, as I have already said. One of the exhibits to one of the affirm-ations shows that this partnership is an illegal partnership. This, though it raises interesting legal questions, need not concern us here since that partnership is not a party to these proceedings. However, the premises are protected under the Landlord and Tenant Ordinance. It was, at one time, suggested that the tea house had, I think it was called "a status of immovability". The position is that the tea house retains the protection of the Landlord and Tenant Ordinance until proceedings for the exemption of the premises under that Ordinance are successfully taken. If there is a sale, that sale will be subject to any rights the tea house may have in the premises at that time. 41. Mr. Swaine also said that the discretion given to the court by section 2 of the Ordinance should not be exercised in favour of the plaintiffs because of their "oppressive" tactics. I can find no evidence of oppression. There were negotiations and the defendants wished to buy out the plaintiffs but the latter were not satisfied with the price. Hence these proceedings. There are no oppressive tactics here. It has not been suggested that the plaintiffs paid other than a fair price for their share of the premises and for 140 Queen's Road. 42. Section 6(3)(a) of the Ordinance reads as follows:-
I agree with counsel that this subsection and section 3(1) (which gives the court the power to order a sale) are mutually exclusive. 43. At the very end of his address, Mr. Swaine gave an undertaking, on his clients' behalf, to purchase the shares of the plaintiffs in the premises. This was given under section 6(3)(a) of the Ordinance. No sum of money has been paid into court. No sum was mentioned and no terms of the proposed purchase, the method of payment etc. have been referred to. There have been extensive negotiations between the plaintiffs and the first defendants as to the possibility of each party buying the other party out. These negotiations broke down over the price. I do not think that I can make an order under section 6(3)(a) in these circumstances. I have not enough to go on. In my view there must, at least, be evidence of a genuine offer of so much money for the shares and an indication of how that sum is to be paid before the court can make an order under this subsection. 44. In the event, I order that the premises be sold. The sale will be by public auction. For reasons into which it is unnecessary to enter I order that each and every party to these proceedings, other than the Attorney General, may bid at the auction. 45. I will hear counsel on the precise directions which I should give as to the order of sale. And I will hear counsel on the matter of costs.
Representation: H. Litton Q.C. & D. Chang (Yuhg Yu Yuen & Co.) for Plaintiff. J. Swaine (W.I. Cheung & Co.) for 1st Defendant, 1st & 2nd named 2nd Defendant. C.W. Lee c.c. for Crown/3rd Defendant. C. Ching Q.C. & C.Y. Lee (Lau Chau Ko) for 3rd named 2nd Defendant, 4th and 5th defendants. (1) (1820) 146 E.R. 1281. (2) (1882) 30 W.R. 726. (3) (1894 3 Ch. 554). (4) (1874) L.T. 670. (5) (1870) 5 Ch. 340. (6) (1917) 54 D.L.R. 677. |