Robert Chan v. Gilbert Ho Kwok Tsui and Another

HCMP000254/1973

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

MISCELLANEOUS PROCEEDINGS NO. 254 OF 1973

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Coram:

Date of Judgment:

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JUDGMENT

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1. In this summons the applicant claims against the 1st and 2nd respondents for a sum of $6,252 paid under protest in respect of solicitors' fees, auctioneers' fees, costs for advertisements and other disbursements on the redemption of property.

2. The facts of this case are as follows: On the 29th of May, 1972, the applicant mortgaged his property, the address of which is not relevant, for a sum of $400,000 due to be repaid on the 21st of May, 1973. The 1st respondent was the Mortgagee and the 2nd respondent the solicitor preparing the mortgage deed. The mortgage was extended for another month, namely, the 21st of June, 1973. On the 26th of June, 1973, the 2nd respondent wrote to a firm of auctioneers by the name of Hong Kong Auctioneers & Company Limited to put up the mortgaged property for sale. On the 10th of July this information must have reached the mortgagor who by that time had the solicitors John Ip & Company acting for him. On the 10th of July, John Ip and Company wrote to the 2nd respondent in these terms:-

3. On the 11th of July, the following day, the 2nd respondent replied to this letter to John Ip & Company in the following terms:-

4. Then on the 12th of July, 1973, John Ip & Company wrote to the 2nd respondent as follows:-

"Further to our letter of the 10th instant, we send you herewith our cheque for $404,602.00 made up as follows:-"

There follows the figures and it goes on to say:-

"Our said cheque is sent to you on your personal undertaking to return us within 7 days from the date hereof, the Reassignment of Mortgage Memorial No. 889652 relating to these premises duly executed by your client and attested together with signed Memorial thereof."

5. Pausing at this stage, I must observe that the sum tendered by John Ip & Company to the 2nd respondent on the 12th July was $6,252 short of the sum demanded. It only covered the principal, interest for one month up to the 21st of July, 1973, and disbursements payable on Reassignment in a sum of $202. It had not covered what was demanded originally, the auctioneers' fees and advertisement fees and some other disbursements. The 2nd respondent cashed the cheque on the 13th July and then on second thought postponed the auction and then on the second thought revived the auction to take place in the afternoon of the 13th of July, and at the same time sent another letter demanding a payment of the balance of $6,252 and threatened that the auction should take place in the afternoon if that was not paid. Subsequently there was a telephone conversation between Mr. John Ip of John Ip and Company and the 2nd respondent's clerk. There is contradictory evidence between the two parties. On the one hand, the 2nd respondent's clerk alleged that Mr. John Ip gave an undertaking to pay the balance so as to postpone or cancel the auction. On the other hand, Mr. John Ip said that he never gave such an undertaking at all but rather, in the course of the conversation, reminded this clerk of the 2nd respondent of the duty to reconvey without payment and said that he would hold the 2nd respondent responsible if the property was sold. In the end the auction was cancelled but the 2nd respondent refused to reconvey the property to the applicant unless the $6,252 was paid. Subsequently, this sum was paid under protest. As a result, this summons was taken out for the repayment of the $6,252 against the 1st and the 2nd respondents on the ground, mainly, that (1) that the costs of auctioneers' fees and advertisements were not contracted for in the mortgage deed and, secondly, by virtue of cashing the cheque the 2nd respondent had accepted the undertaking and had accepted payment.

6. A lot of legal authorities have been referred to me. I would consider first whether the cost of the auctioneers' fees and advertisement fees incidental to the mortgage must be provided for in a mortgage deed before it is recoverable. In the case of Jenkins v. Jones⁽¹⁾, it was held that the cost of the auction which took place was not recoverable. However, the facts of that case are different in the sense that although the sum due for principal and interest was tendered but the solicitors for the mortgagee never informed the mortgagor as to the costs in connection with the auction or in connection with the redemption. Indeed, solicitors for the mortgagee in that case denied the mortgagor's right of redemption, and then the auction took place. It was held that whatever fees and costs that were incurred since the date of redemption when the mortgagor tendered payment would not be recoverable. The learned Vice-Chancellor in that case said this:-

"Upon the weight of evidence, it is proved that the sum of 261 1.." (£261)" .. was offered by the plaintiff and refused by Mr. Williams. No sum was offered for costs, because they were not ascertained. The next day the property is offered for sale, and the mortgagor attends and endeavours to prevent the sale. This power of sale could only properly be exercised by the defendant, in order to repay himself the amount of his debt. As to any surplus that might arise from a sale properly effected, after payment of his principal, interest, and costs, the defendant would be a trustee for the plaintiff, and bound to account. It is well settled that, though a mortgagee's power of sale confers a clear right, it must be exercised with a due regard to the purpose for which it is given. A mortgagee, with such a power, stands in a fiduciary character, and, unlike an ordinary vendor, selling what is his own, he must take all reasonable means to prevent any sacrifice of the property, inasmuch as he is a trustee for the mortgagee of any surplus that may remain. Upon the weight of evidence in this case, I must hold that the power of sale was oppressively exercised, because, after the plaintiff had offered to pay the principal and interest, the defendant persisted in his determination to sell."

7. This, on the face of it, may seem to say that the mortgagor has done his part once he has tendered the sum of principal and interest due at the time when he intends to redeem the property. But the whole facts of the case centred on the subject that the exercise of the right was oppressive and that the mortgagee never let the mortgagor know of the costs in connection of the costs of the mortgage. There is also the fact that the mortgagee also denied the plaintiff's, mortgagor's, right of redemption.

8. As to the necessity whether any cost should be provided for in a mortgage deed, my attention has been brought to Fisher and Lightwood on the Law of Mortgage, 8th Edition. Page 573 reads that:-

"Costs, whether costs of the foreclosure or redemption action or included in 'costs, charges, and expenses', are not recoverable from the mortgagor personally .. , unless in the particular case he has become personally liable to pay them ... , but both as against the mortgagor and other persons interested in the equity of redemption, they are added by the mortgagee to the amount due upon his security, and must be paid as a condition of redeeming ... With the principal and interest they form a single debt and are payable in the same priority ..."

9. Coote on Mortgages at page 1911 - 1197 reads:-

"A mortgagee does not in terms contract for costs, but the rule is, that all costs which he, as mortgagee, properly incurs in relation to his security are to be allowed to him ... Such costs will be added to the principal and interest secured by the mortgage and form one debt, which, as between the particular mortgagee and other incumbrancers, will rank in priority as if such costs had formed part of the moneys originally secured by that mortgage."

Again, at page 1222 it says:-

"The costs of an abortive sale under the mortgage have been allowed without special order .. , even in a case where the sale went off from the dishonour of a bidder's cheque accepted by the auctioneer without inquiry as to his stability ..."

10. Thus, it is quite clear from these authorities that in order to recover costs in connection of a mortgage, it is not necessary that such mortgage deed should provide for payment of such costs.

11. The case of Farrer v. Lacy⁽²⁾ confirms the principle that if the costs were properly incurred then such costs would be recoverable.

12. I come now to the case of Rourke v. Robinson⁽³⁾. This is a case where the mortgagor enquired of the amount due and the amount due was given to the mortgagor. The mortgagor tendered the amount demanded on the day arranged for payment but the mortgagee's solicitor was not prepared to execute or to deliver the reconveyance. As this was the case the Court refused to allow any auctioneers' fees as from the date when payment was tendered. The fees incurred subsequent to the 17th of August was completely denied. At page 486, the judgment reads as follows:-

13. Pausing here, I find that it is not clearly indicated whether the £ 12.13.6d. were, in fact, costs incurred since the date when tender of payment was made or before. I go on with the judgment which reads as follows:-

"I have already said that I think the mortgagee misconceived her engagement with the mortgagor. The engagement of a mortgagee is to give a reconveyance to the mortgagor on repayment of the money secured. The mortgagee here did not do that. I can see no reason whatever why, if she did not choose to attend and execute in her solicitor's office proper reconveyances in the form already settled, if it was more convenient for her to do it in some other way, she should not have executed reconveyances as escrows."

That shows that the fees were denied in that case because the solicitor for the mortgagee acted wrongly in refusing when the whole payment was tendered and costs incurred after tender of payment made will not be recoverable. The judgment goes on to read that:-

"It has been contended that what took place on August 17 was a conditional tender and was therefore no tender at all. I doubt very much whether the technical rules relating to tender are of much importance in this case, but if they are, I should be prepared to hold that this was not a conditional tender. It was not, as in the cases which were referred to, a tender of a less sum than that which was claimed by the creditor, on condition that a discharge in full should be given for the debt, but it was a tender of all that the mortgagee claimed; all that the mortgagor asked for was that which he was entitled to have under his contract with the mortgagee."

This seems to touch upon the second point of the present case also in that on the 12th of July what was tendered to the 1st respondent's solicitor, namely, the 2nd respondent in the summons, was a sum less than the original sum claimed.

14. At this stage I would also like to observe that by the tenure of the letter dated the 10th July from the applicant's solicitor, namely, that he was enquiring for the purpose of redemption,

"... the amount of the interest due under the Mortgage ..... together with the amount of your costs and disbursements in connection with the public auction urgently by return."

I can hardly say that this is only a matter of routine or inquiry as is sworn in the affidavit of Mr. Ip. If such sum was not payable he had no interest in it. There would be no necessity for him to ask for this if there was no intention, no liability to pay at all. Although I would not construe this paragraph in the letter as an admission of liability, yet it clearly shows that in this solicitor's mind such costs would be payable otherwise he had no business to ask for this information. When this information was given to him and a sum was demanded, all he did, on the 12th of July was to send a cheque for a less amount and then asked for a personal undertaking. This is tendering a lesser sum than the sum due.

15. I am of the opinion that the plaintiff's solicitor - the 1st respondent's solicitor was perfectly entitled to demand for the balance of the costs. In short, in my opinion the cost is recoverable, provided it is properly incurred and is recoverable without any particular provision in the mortgage deed. Secondly, the tender of a less sum is not tender of payment, it is only in part payment, and the solicitor for the applicant was not entitled to ask for an undertaking and that encashment of a cheque did not imply an acceptance of such a demand of which the mortgagor was not entitled. Had it been so, then a person who owes another a debt of $10,000 can always send a cheque for $8,000 in part payment and say "I send you this cheque on your personal undertaking that you will not recover the $2,000." That is not payment. In that way there was no misconduct on the part of the plaintiff in proceeding with the auction, even in the morning of the 13th of July. When the auction had to be postponed ultimately after the telephone conversation, and I shall not decide whether there was such an undertaking on the telephone by either party because there is the conflict of evidence on affidavit of one against the other and neither has been cross-examined, the auctioneers' fees, advertisements were properly incurred after the date for redemption had passed. The mortgagee intended to exercise his right of sale, and when the mortgagor intended to redeem he had to pay for the costs properly incurred. In the circumstances the summons is dismissed.

Representation:

(1) (1860) (II) Giffard.

(2) 31 Chancery, 42.

(3) (1911) (I) Ch. 480.