Tang Miu Wan v. Super King International Ltd and Others

DCCJ 1935 /2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1935 OF 2004

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BETWEEN

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Coram:  Deputy District Judge S. T. Poon in Chambers

Date of Hearing: 13^th March 2006

Date of Handing Down Judgment: 20^th March 2006

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D E C I S I O N

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Introduction

1.This is an application of the 2^nd, 3^rd, and 4^th Defendants (“the Applicants”) for discharge of a charging order made purportedly by consent of all parties. 

2.The word “purportedly” is used because as what was disclosed in the evidence, Messrs. Raymond Chan, Kenneth Yuen & Co. (“RCKYC”), the solicitors on court’s record acted for all the Defendants at the charging order application, had in fact received no express instructions or at all from the Applicants.

3.Apart from applying to discharge the charging order, the Applicants also sought to get RCKYC personally liable to all costs involved.

4.The Plaintiff (“P) and RCKYC, who appeared at the present hearing on behalf of the 1^st Defendant (“D1”) and themselves, objected to the applications. 

Background

5.P obtained a money judgment in the District Court for $65,000 and costs against D1 in November 2004.  D1 was all along represented by RCKYC.

6.As the judgment sum remained unpaid, in December 2004 P applied ex-parte to the Court for a charging order against a property described as “All That Sub-section 2 of Section A of Lot No. 741 in Demarcation District No. 125, Yuen Long, New Territories (also known as 413, San Wai, Yuen Long, New Territories)” (“the Property”).

7.The Property is a 3-storey domestic building with a garden surrounding it.

8.Upon a minor amendment as to the address, an Amended Charging Order nisi was made on 22^nd December 2004 and the relevant return date was scheduled to 21^st January 2005.

9.On 20^th January 2005, RCKYC filed a Notice to Act for the Applicants.  A summons was filed the next day seeking to join the Applicants as defendants and discharge the charging order nisi.  The Applicants were allowed to join as defendants and the application for discharge was adjourned to 18^th April 2005 for argument.

10.As can be seen from the 1^st and 2^nd affirmations of Mr. Jim Yiu Ming of RCKYC filed on 20^th January 2005 and 7^th April 2005 respectively, the ground relied on by D1 to discharge the charging order nisi was, put it in simple terms, that the Property was already sold to the Applicants before the charging order being made.

11.Two days before the adjourned hearing, on 16^th April 2005, a consent summons was filed to the Court in the following terms:-

1.     the Amended Charging Order: notice to show cause dated 22^nd December 2004 be made absolute and stand charged with payments of the judgment sum of HK$65,000.00 and taxed costs of HK$72,420.00 due from 1^st Defendant under the Allocatur dated 24^th March 2005 together with the costs of the charging order application, the said costs to be added to the judgment debt against the asset specified in the schedule hereto;

2.     the registration of the Amended Charging Order: Notice to Show Cause registered in the Land Registry by Memorial Nos. YL1112684 and YL1113409 against Sub-section 2 of Section A of Lot No.741 in Demarcation District No.125 save and except the Blue Portion referred to in the schedule hereto be vacated;

3.     the hearing on 18^th April 2005 be vacated forthwith;

4.     the 1^st Defendant do pay the Plaintiff’s costs of the charging order application in the sum of HK$20,000.00 within 7 days from the date of the order to be made herein; and

5.     there be no order as to costs of this application.

Schedule

A portion of All That piece or parcel of ground registered in the Land Registry as Sub-section 2 of Section A of Lot No. 741 in Demarcation District No.125 (No.413 San Wai, Yuen Long, New Territories) as shown coloured Blue (“the Blue Portion”) on three (3) Ground Floors Plans and each annexed to three 3 Agreements for Sale and Purchase registered in the Land Registry by Memorial Nos.1113809, YL1113810 and YL1113811 respectively and the Blue Portion is also shown on three (3) Ground Floors Plans and each annexed to three (3) Assignments registered in the Land Registry by Memorial Nos. YL1115266, YL1115265 and YL 1115263 and thereon coloured Blue.

12.A court order was made in the same terms and a Charging Order Absolute against the asset as described under the Schedule of the consent summons was issued on 16^th April 2005. 

13.It is against this Charging Order Absolute that the Applicants are now seeking to discharge.

14.One may notice that the Charging Order Absolute was made not against the Property, as was the case for the order nisi, but only a part thereof being described as “the Blue Portion”. 

15.The Blue Portion is an area originally forming part of the garden surrounding the Property.  This part of the land was defined on the plans in the course of the conveyance of the Property to the Applicants with a view to reserve the interest of it to D1.  One part of the garden was shaded in blue while the remaining part in green for identification.  The part occupied by the building was coloured pink.

16.The S & P Agreement, which was dated 30^th November 2004, provides, inter alia, the following terms:  

2 (i)   The Vendor shall sell and the Purchaser shall purchase the Property TOGETHER with the right in common with the Vendor or other person or persons claiming through under or in trust for the Vendor to use for the purpose of access to and egress from the Property the entrance hall staircases and landings (if any) in the Building and such of the passages therein as are not included in any of the other floors and the appurtenances thereto and together with all rights of way (if any) and other rights and all privileges easements and appurtenances thereto belonging or appertaining And all the estate right title interest property claim and demand whatsoever of the Vendor in and to the Property EXCEPTING AND RESERVING unto the Vendor his successors and assigns other than the Purchaser the right to the exclusive use occupation and enjoyment of the Building SAVE AND EXCEPT: -

(a)   the Property;

(b)   such area and facilities (if any) as may be designed as common areas or common parts and facilities in the Deed of Mutual Covenant or are intended for common use; and

(c)   the area shown on the Ground Floor Plan annexed hereto and thereon coloured blue (“the Space”).

2 (ii)  The Purchaser undertakes to, upon completion of the sale and purchase of the Property herein, duly sign and execute any deed(s) or deed poll (as the case may be) to divide the Land into parts (consisting of the Space) in order to assign, vest or allocate the Space unto the Vendor or the assignee(s) or nominee(s) of the Vendor if the District Lands Office, Yuen Long (“DLO”) shall consent or approve such division.

2 (iii)  To secure and ensure that the Purchaser shall comply with the undertaking given in Clause 2(ii) hereof above, the Purchaser do hereby irrevocably appoint and authorize each and all the Vendor and the Vendor’s directors for the time being as the lawful attorney of the Purchaser to act jointly or severally in the name of and on behalf of the Purchaser to : - (a) apply to the DLO or any relevant government authority or department for any necessary consent or approval for division of the Land into parts (consisting of the Space) as to title vertically or otherwise by modifying the relevant conditions(s) contained in the Building Licence; and (b) upon obtaining such consent or approval of the DLO, sign, seal, deliver and/or otherwise  execute all relevant documents or instruments, deed(s) or deed poll for division of the Land as aforesaid or assignment, vesting or allocation of the Space unto the Vendor or the Vendor’s assignee(s) or nominee(s) or in such other manner as the Vendor shall in its absolute discretion determine.

17.Under the S & P Agreement, “the Property” was defined under Part II of Schedule 2 as:

ALL THAT one equal undivided 3^rd part or share of and in ALL THAT piece or parcel of ground registered in the Yuen Long New Territories Land Registry as SUBSECTION 2 OF SECTION A OF LOT NO.741 IN DEMARCATION DISTRICT NO.125 And of and in the messuages erections and buildings erected thereon (“the Building”) TOGETHER with the exclusive right and privilege to hold use occupy and enjoy ALL THAT the GROUND FLOOR and the Garden appurtenant thereto of the Building as shown and coloured Pink and Green on the Ground Floor Plan annexed hereto.

18.It is stipulated under the Assignment, inter alia, that: -

1.  In consideration of the sum of HONG KONG DOLLARS TWO MILLION ONLY (HK$2,000,000.00) paid by the Purchaser to the Vendor (receipt whereof is hereby acknowledged) the Vendor as beneficial owner ASSIGNS to the Purchaser the property described in the THIRD SCHEDULE hereto (‘the Property”) TOGETHER with all rights rights of way interest privileges easements or appurtenances in over belonging or appertaining thereto TO HOLD the same unto the Purchaser as Tenants in Common in equal shares for the residue of the term of years created by the Government Lease referred to in the said Third Schedule (“the Government Lease”) SUBJECT to … the exceptions and reservations specified in the Second Schedule hereto…

Second Schedule

(c)  Except and reserved unto the Vendor the Space as defined in Clause 2(i)(c) of the Agreement for Sale and Purchase and shown on the Ground Floor Plan annexed thereto and thereon coloured blue.

Third Schedule

1.	The Property: -
	(a)	Description, land, building, undivided shares etc.: ALL THAT one equal undivided 3rd part or share of and in ALL THAT piece or parcel of ground registered in the Yuen Long New Territories Land Registry as SUBSECTION 2 OF SECTION A OF LOT NO.741 IN DEMARCATION DISTRICT NO.125 (“the Land”) AND of and in the messuages erections and buildings erected thereon now known as “NO.413 SAN WAI”, Yuen Long, New Territories, Hong Kong (“the Building”).
	(b)	Description of the floor of unit: the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT the GROUNG FLOOR and the Garden appurtenant thereto of the Building as shown and coloured Pink and Green respectively on the Ground Floor Plan annexed hereto.

19.The Assignment was executed on 3^rd January 2005.

20.A Deed of Mutual Covenant (“DMC”) was executed on the same day.  Under Paragraph (3) of the preamble, the Property was notionally divided into 3 equal undivided shares allocated to different parts as follows:-

FLOORS		NUMBER OF SHARES
The Ground Floor and the Garden appurtenant thereto		1
The First Floor		1
The Second Floor and the Roof thereabove		1
		3 =

It is provided under Paragraph 41 of the DMC that,

“Notwithstanding other provision herein contained, the area shown on the Ground Floor Plan annexed hereto and thereon coloured blue is reserved unto the First Owner for its sole use, occupation and enjoyment to the exclusion of the owners of the Ground Floor (and the Garden appurtenant thereto), the First Floor and the Second Floor (and the Roof thereabove) and the said Building and the said Land respectively.”

Issues

21.The determinative issue in the present application is, as agreed by all parties, whether the Blue Portion is capable of being charged under Section 52AA of the District Court Ordinance, Cap.336. (“DCO”)

22.Section 52AA provides as follows :-

(1)	Subject to section 25 (which provides that a writ of execution shall not issue against any partnership property except on a judgment against the firm) of the Partnership Ordinance (Cap 38), a charge may be imposed by a charging order under this Ordinance only on-
	(a)	an interest held by the judgment debtor beneficially-
		(i)		in an asset of a kind mentioned in subsection (2); or
		(ii)		under a trust; or
	(b)	an interest held by a person as trustee of a trust (in this paragraph referred to as "the trust"), if the interest is in an asset of a kind mentioned in subsection (2) or is an interest under another trust and-
		(i)		the judgment or order for which a charge is to be imposed was made against the person as trustee of the trust;
		(ii)		the whole beneficial interest under the trust is held by the judgment debtor unencumbered and for his own benefit; or
		(iii)		2 or more judgment debtors are all liable to the judgment creditor for the same debt and together hold the whole beneficial interest under the trust unencumbered and for their own benefit.
(2)	The assets referred to in subsection (1) are-
	(a)		land;
	(b)		securities of any of the following kinds-
			(i)		Government stock;
			(ii)		stock of any body incorporated in Hong Kong;
			(iii)		stock of any body incorporated outside Hong Kong or of any state or territory outside Hong Kong, being stock registered in a register kept in Hong Kong;
			(iv)		units of a unit trust for which a register of the unit holders is kept in Hong Kong;
	(c)		funds in court.

23.Under Section 2 of the Ordinance, land means “land of whatever description, any part or section thereof, and tenements and buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way)”.

24.Miss Lam, Counsel for P, submitted that the intention of D1 and the Applicants was obviously to reserve the ownership of the Blue Portion to D1.  The effect of the provisions under the S & P Agreements, the Assignments and the DMC is that only the part of the Property excluding the Blue Portion had been sold and assigned to the Applicants.

25.Miss Lam referred to me the above Sections of DCO and submitted that D1, as a judgment debtor, has a beneficial interest in the Blue Portion being a piece of land by definition under Section 2 and therefore, the Blue Portion is capable of being charged under Section 52AA(1)(a)(i).

26.On the other hand, Mr. Lui, counsel for the Applicants, relied on Jumbo King Ltd v Faithful Properties Ltd & Others [1999] 3 HKLRD 757 and submitted that D1 can have no beneficial interest in the Blue Portion as no share has been allotted to the Blue Portion and D1 has no share in the Property.

27.Mr. Lui said what D1 has is merely an undertaking from the Applicants to divide the Blue Portion from the Property conditional upon approval being given by the District Lands Office.

28.In countering Mr. Lui’s submission, Mr. Jim of RCKYC submitted that even if D1 has no beneficial interest in the Blue Portion, it can still be chargeable under 52AA(1)(b) as the Applicants are holding the interest in the Blue Portion on trust for the benefit of D1.

Discussion

29.There is no suggestion that the Blue Portion is not land under the definition of Section 2 of DCO.  But in the circumstances, does D1 retain some kind of beneficial interests in the Blue Portion while it has assigned all shares to the Applicants?

30.Under the S & P Agreement, what had been sold to the Applicants, as defined under Part II of Schedule 2, was the Property itself together with the exclusive rights to enjoy and occupy their respective units. 

31.What had been assigned under the Assignment was described under clause 1(a) of the Third Schedule of the Assignment as:  “ALL THAT one equal undivided 3^rd part or share of and in ALL THAT piece or parcel of ground…”.  Although the exclusive right to enjoyment and occupation of the Blue Portion was expressly reserved to D1 under clause 1(b), he retained no share to the Property.

32.Subsequent to the assignment, the Applicants owned the Property commonly in equal share subject to covenants including D1’s right to exclusive use and occupation of the Blue Portion.

33.As the legal interest of the Property had been completely conveyed to the Applicants, the only possible way that D1 might have retained a beneficial interest in the Blue Portion is by way of a trust.     In this light, the elements within Sections 52AA(1)(a)(i) and 52AA(1)(b) of DCO merge.

34.The Applicants are bound by their undertakings given under Paragraph 2(ii) of the S & P Agreement to divide the Property,subject to the approval of the District Lands Office (“DLO”), in order to assign, vest or allocate the Blue Portion unto D1.

35.Unless and until the DLO approved the said division, there is no obligation on the part of the Applicants to divide the Blue Portion from the Property.

36.Further, there was no undertaking given by the Applicants to assign the Blue Portion back to D1 even upon successful division.    The undertaking was “to divide in order to assign” rather than “to assign” as stipulated under Paragraph 2(ii) of the S & P Agreement.

37.In the premises, D1 would not be able to seek specific performance to compel the Applicants to reassign the Blue Portion back to D1.  On this footing, no trust was created on the Blue Portion for the benefit of D1 upon transfer of the Property to the Applicants.

38.Based on the above analysis, I am of the view that D1 retained no beneficial interest on the Blue Portion and the Applicants are not holding the Blue Portion on trust in favour of D1.

39.It must then follow that the Blue Portion is not chargeable under Section 52AA of DCO and the Charging Order in respect thereof shall be discharged and I hereby order as such.

40.It is agreed between all parties that in such event D1 shall bear all costs.  I make an order nisi that costs of this application for P and the Applicants be borne by D1 with certificates for counsel to be taxed if not agreed.  This order nisi will be absolute after 14 days.

41.I understand that the Applicants are seeking an indemnity costs order against RCKYC personally.  But I am of the view that it is in the interest of the Applicants, in any event, to oppose to the charging order application and there is no extra costs incurred by RCKYC’s acting without instructions, such order shall not be given.

Miss. Yanky Lam instructed by Messrs George Y. C. Mok & Co. for the Plaintiff.

Mr. Jerry Jim of Messrs Raymond Chan, Kenneth Yuen & Co. for the 1^st Defendant.

Mr. Simon K. M. Lui instructed by Messrs Kenneth C. C. Man & Co. for the 2^nd – 4^th Defendants.