Dao Heng Bank Ltd v. Attorney General and Another

Case No.HCMP 196/1969

Court

High Court CFI

Date03 Dec 1969

Judge—

Case Document

100%Judiciary

HCMP000196/1969

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

MISCELLANEOUS PROCEEDINGS NO.196 OF 1969

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In the matter of Order 17 Rule 32 of the Code of Civil Procedure

and

In the matter of a mortgage registered in the Land Office by Memorial No.486998

and

In the matter of Section 10 of the Land Registration Ordinance Cap.128

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BETWEEN
	Dao Heng Bank Ltd.	Plaintiff
	AND
	The Attorney General	1st Defendant
	Chan Kwok Ping trading as Tai Yuen Timber Company	2nd Defendant

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Coram: Mills-Owens, J. in Chambers

Date of Judgment: 3 December 1969

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JUDGMENT

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1. This application concerns immovable property against which there is registered, first a legal mortgage, and secondly a prohibitory order made under Order 17 of the former Code of Civil Procedure. The mortgage was executed and registered in priority to the making and registration of the prohibitory order. The mortgagee, in exercise of his power of sale entered into an agreement to sell the property and in due course presented a memorial of the assignment in favour of the purchaser to the Land Office for registration under the Land Registration Ordinance (Cap.128). The Land Officer, whilst not opposing the registration of the assignment and making it clear that he had no discretion to refuse such registration, raised the questions whether the prohibitory order prohibited the assignment and whether the transaction might constitute a contempt of court. In those circumstances the mortgagee makes the present application seeking the determination by the court of the following questions, namely:-

	"1. Whether the Plaintiff could, at all material times, validly exercise its power of sale under a mortgage over one equal undivided thirty-third part or share of and in that piece or parcel of land registered in the Land Office as Kowloon Inland Lot No.9144 together with that part of the building thereon known as Flat A, 3rd floor, Walton Mansion and car parking space No.2, which mortgage was executed on the one part by one Cheng Chung as mortgagor and on the other part by the Plaintiff as mortgagee on the 17th day of May, 1965 and which was registered in the Land Office by Memorial No.486998 on the 19th day of May, 1965 notwithstanding a prohibitory order obtained under Order 17 rule 32 of the Code of Civil Procedure and registered against the said property by the 2nd Defendant by Memorial No.584230 on the 13th day of June, 1967.
	2. Whether the Plaintiff, by itself, its servants and/or agents or otherwise howsoever, were in breach of any part of the aforesaid prohibitory order in selling or causing to be sold by public auction on the 6th day of May, 1969, the aforesaid property as a result of the said Cheng Chung being in default of certain payments under the said mortgage.
	3. Whether the Registrar General or any officer in his department would be in breach of any part of the aforesaid prohibitory order in registering or allowing to be registered the aforesaid sale by Memorial No.679597."

The summons also claims the following relief:-

"(a)	If it be found that the Plaintiff was in breach of the aforesaid prohibitory order by selling or causing to be sold the said property as set out in paragraph 2 hereof, the Plaintiff will seek the sanction of this Honourable Court for such sale.
(b)	That the costs of this application be provided for."

2. On the face of it, it is unthinkable that the rights of a prior mortgagee should be affected by a prohibitory order subsequently obtained and registered against the mortgagor as a judgment debtor. But a difficulty arises because of the wording of o.17 r.32 of the Code, which provided as follows:-

"32. Where the property consists of immovable property or any interest therein, either at law or in equity, the attachment shall be made by a written order prohibiting the judgment debtor from alienating the property by sale, gift or in any other way, and all other persons from receiving the same by purchase, gift or in any other way."

In particular, the difficulty is that the latter part of the rule does not, in terms, restrict the 'receiving' of the property by any other person to a receiving from the judgment debtor.

3. It is argued by Mr. Ching for the mortgagee applicant, that it is to be implied in the rule that the prohibition is against a receiving from the judgment debtor; further, that the rights of a prior mortgagee cannot have been intended to be affected; alternatively, that it is a proper case for sanction of the sale by the court. Mr. Ching makes the following points: no interest in the land is created by the prohibitory order; the order cannot extend to bind any greater interest in the land than the judgment debtor had at the time of the order; clearly, no injunction would be granted at the instance of the judgment creditor to restrain a sale by the mortgagee in exercise of his rights as such.

4. Mr. Kevin Lee, for the A.G. as nominal defendant representing the interests of the Land Officer and the Registrar General, does not oppose the application and is concerned only to secure that no question of contempt of court would arise if the assignment were to be registered.

5. Mr. K.K. Chu, for the judgment creditor, also does not oppose the application but submits that the circumstances fall within the contemplation of rule 38 of Order 17 of the Code which provides that after attachment by prohibitory order any alienation without the leave of the court shall be null and void; thus, Mr. Chu submits, it is a case for the sanction of the court to the sale.

6. I am not aware of any authority directly in point; the Indian Code, to which Mr. Ching referred, was substantially different in its wording. But, in principle, I have no doubt that the arguments for the mortgagee are entirely sound. Clearly, in my view, the prohibitory order took effect subject to the prior mortgage which was executed and duly registered in priority to the order; secondly, the prohibitory order could bind only the interest of the judgment debtor as it then subsisted, that is to say his equity of redemption; thirdly, a sale by the mortgagee in such circumstances is the exercise of a power conferred by a title paramount to the interest of the judgment creditor, dependant as that interest is on the limited interest in the land of the judgment debtor. It is a well-established principle that vested proprietory interests are not to be affected except by plain enactment, and there was nothing in Order 17 of the Code to suggest that prior rights of third parties such as a mortgagee are to be affected by a prohibitory order obtained against the mortgagor, judgment debtor. The latter part of o.17 r.32 is to be read, in the context, as extending only to bind the interest of the judgment debtor. It would be contrary to justice if the prior rights of third parties were to be held to be affected by such an order and I have no doubt that the rule did not so intend.

7. Accordingly, I answer the questions raised by the summons, as follows:-

1. Yes.

2. No.

3. No.

Ex abundante cautela, I will make an order as prayed under sub-paragraph (a) of the final paragraph of the summons, namely in terms sanctioning the sale by the mortgagee applicant.

8. Costs: The A.G. is content to bear his own costs and there is no question of ordering costs against him; the Land Officer acted entirely properly in raising the questions posed by the summons. With regard to the costs of the mortgagee applicant and of the defendant judgment creditor, I note that the sale produced a surplus, i.e. over and above the amount due on the mortgage, of which surplus therefore the mortgagee is a trustee for the mortgagor or subsequent incumbrancers subject to any proper claim the mortgagee may have for the costs of these proceedings. In the case of the mortgagee it is a question as between himself and the mortgagor, and also as between himself and the judgment creditor, whether the costs of the application may properly be added to the sums due on the mortgage and recovered from the surplus. As the judgment creditor agrees that it was proper for the application to be brought, the mortgagee is, as between himself and the judgment creditor, entitled to take his costs out of the surplus. It remains a question as between the mortgagee and the mortgagor whether the mortgagee may obtain his costs out of the surplus; likewise as between the judgment creditor and the mortgagor. The mortgagor is not a party to the proceedings and any order I may make will therefore not bind him; prima facie, both the mortgagee and the judgment creditor were rightly concerned to protect their securities and may properly resort to the surplus for their costs, which I direct should be taxed. If they do so resort and the surplus is insufficient to provide for both sets of costs, i.e. those of the mortgagee and of the judgment creditor, and they are unable to agree on the proportions payable to them respectively they are at liberty to apply to the court. If a surplus remains after payment of the two sets of costs the judgment creditor will have to take further attachment proceedings; I am not asked to deal with that but it appears he may apply under rule 39 of Order 17.

	(R.H. Mills-Owens)
	Puisne Judge

Representation:

Judgment read.

Charles Ching (Patrick Poon & Co) for Plaintiff

Kevin Lee, c.c., for 1st Defendant

K.K.Chu (Lau, Chan & Ko) for 2nd Defendant

3.12.69.