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HCMP 1904/2005
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO. 1904 OF 2005
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BETWEEN
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CHAN CHUI MEE（陳翠美） |
Plaintiff |
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and |
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MAK CHI CHOI, NELSON
（麥智才）（又名麥子才） |
1st Defendant |
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WONG SAU KIN（黃秀堅） |
2nd Defendant |
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MAK SZE YIN, MATHEW (麥思研) |
3rd Defendant
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Before: Hon Lam J in Court
Dates of Trial: 26, 27 and 28 February 2008 and 27 and 28 August 2008
Date of Judgment: 19 September 2008
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J U D G M E N T
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1. The Plaintiff in these proceedings is the ex-wife of the 1st Defendant. Though no document has been produced before me, I was told that the Plaintiff and the 1st Defendant were divorced in proceedings in the Family Court commenced in April 2005. The 3rd Defendant is their son. The subject matter of the proceedings is a property known as Flat No.1, 1st Floor, Block A, Pang Ching Court, No.6 Chui Chuk Street, Kowloon [“The Property”]. The Property is held in the name of the 1st efendant. Both the Plaintiff and the 3rd Defendant claim to have beneficial interest in the Property based on their contributions to the mortgage payments. The Plaintiff also said she paid for the deposit for the acquisition of the Property. It is their case that the 1st Defendant has no beneficial interest at all.
2. The 2nd Defendant is not a family member. She is a creditor of the 1st Defendant. She obtained a default judgment against the 1st Defendant in her favour in HCA 19521 of 1998 on 10 December 1998 in the sum of $481,500 plus interest and costs. The total amount of the judgment debt, according to her calculation, runs up to $800,000 odd by now.
3. The 2nd Defendant obtained charging orders in respect of the Property by way of enforcement of the default judgment: charging order nisi was obtained on 8 July 1999 and charging order absolute was obtained on 19 August 1999. These orders were registered at the Land Registry.
4. By way of enforcement of the charging order, the 2nd Defendant commenced Order 88 proceedings against the 1st Defendant in DCMP 4229 of 2002 which was subsequently transferred to the High Court as HCMP 2100 of 2003. The 2nd Defendant sought order for possession and order for sale in respect of the Property. The 1st Defendant resisted the application. In the course of those proceedings, the 1st Defendant suggested he had decided to transfer his interest in the Property to his son, the 3rd Defendant and a Deed of Trust was executed on 1 January 1995. That document was not registered at the Land Registry. Nor was it stamped.
5. The 1st Defendant said nothing about the Plaintiff having any beneficial interest in the Property in HCMP 2100 of 2003.
6. At the trial of HCMP 2100 of 2003 before Yam J on 9 June 2005, after some cross-examination by counsel for the 2nd Defendant, the 1st Defendant through his lawyer informed the court that he would agree to an order for possession and order for sale being made in respect of the Property.
7. The 3rd Defendant was outside court at that hearing. He was originally asked to attend court to give evidence for the 1st Defendant to resist the 2nd Defendant’s application under Order 88. He said he had not been consulted before the 1st Defendant consented to the order for possession and order for sale and he was only told that his evidence would no longer be required. He said he was informed by the solicitor acting for 1st Defendant as regards the order for possession and order for sale after the hearing. He had considered to lodge an appeal but he did not do so in view of the present proceedings.
8. Long before the trial of HCMP 2100 of 2003, notice of the proceedings was given to occupants of the Property. The Plaintiff and the 3rd Defendant were residing at the Property at that time and they should be aware of the same. The 3rd Defendant cannot deny he had notice since he was asked by the 1st Defendant to give evidence in the proceedings and he had made an affirmation for such purpose. The Plaintiff admitted in her oral evidence at the trial of the present proceedings that she was aware of the notice as the 3rd Defendant had explained it to her.
9. Neither the 3rd Defendant nor the Plaintiff applied to be joined as a party or otherwise made application to Yam J to oppose the application for order for possession and order for sale on the basis of their beneficial interest in the Property.
10. Instead, the Plaintiff issued the present proceedings on 8 September 2005 naming only the 1st Defendant as defendant. The relief sought by the Plaintiff is declaratory relief concerning her ownership of the Property.
11. In view of the charging orders and the consent order of Yam J, this court considered that it is necessary to join the 2nd Defendant as a party and ordered the joinder on 28 September 2005. I should mention that there are other third parties’ interest registered at the Land Registry. The Property is mortgaged to a bank. The Plaintiff, the 1st and 3rd Defendants accept that no matter how this court decides on the question of beneficial ownership, they cannot contend that the mortgage is not binding on them. Thus, there is no need to join the bank to the present proceedings. There is also another charging order in favour of another party. It was however suggested that the debts had been settled. Hence, that chargee has no further interest in the Property.
12. In the course of the trial of the present proceedings, the 3rd Defendant (at that stage giving evidence as a witness) testified to the effect that he should have a beneficial interest in the Property. In order to have the question of beneficial ownership of the Property to be finally resolved once and for all, this court acceded to his application to be joined as the 3rd Defendant. The trial was adjourned to enable the 3rd Defendant to file supplementary evidence.
13. The trial resumed on 27 August 2008.
14. As a chargee under the charging order absolute obtained against the 1st Defendant, the 2nd Defendant’s right in respect of the Property is circumscribed by the beneficial interest of the 1st Defendant in it because,
(a) Under Section 20A of the High Court Ordinance, a charging order can only be imposed on the beneficial interest of a debtor;
(b) If there are other beneficial owners in the Property, a chargee under a charging order has no right to possession and cannot seek an order for the sale of the Property: see Chan Ching Kit Katherine v Lam Sik Shi HCMP 2239 of 2000, 24 June 2002, Kwan J and Fortis Bank v Yu Kam Hoi HCMP 134 of 2002, 4 March 2004, Reyes J. However, it is open to such chargee to apply for the appointment of a receiver to receive the income or profit attributable to beneficial interest of the debtor in the property by way of equitable execution, see Chan Ching Kit Katherine.
15. Therefore, the main issue that I have to decide is who has or have the beneficial ownership in the Property: the Plaintiff, the 1st Defendant and/or the 3rd Defendant. If I reach the conclusion that more than one of them are the beneficial owners, I shall also have to determine the extent of their beneficial ownership. Depending on the extent of the 1st Defendant’s beneficial ownership, I may need to address the question whether anything needs to be done regarding the consent order of Yam J.
The law on beneficial ownership
16. In the recent case of Stack v Dowden [2007] 2 AC 432, the House of Lords re-examined the law in this area. That was a case on beneficial ownership when the property was held under joint names. It was held that since Lloyds Bank v Rosset [1991] 1 AC 107, the law has moved on. The key is to identify the common intention of the parties. Baroness Hale said at para. 60,
“The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.”
17. It was also held that in the search for common intention, a holistic approach should be adopted in the quantification of the beneficial interest by undertaking a survey of the whole course of dealing between the parties and taking account of all conduct which throws light on the question what shares were intended.
18. At para. 69 of the judgment in Stack, Baroness Hale identified many factors in addition to financial contributions that the court should take into account in a domestic context to divine the parties’ true intentions. Her Ladyship further said at paragraph 70 that the list is not exhaustive.
19. In Abbott v Abbott [2007] UKPC 53, the Privy Council applied the approach in Stack v Dowden [2007] 2 AC 432 in a context where the property in question was registered in the sole name of a husband.
20. In the past, the common intention constructive trust was based on actual or inferred common intention. It was held by the majority of the House of Lords in Pettitt v Pettitt [1970] AC 777 and subsequently accepted by Lord Diplock in Gissing v Gissing [1971] AC 886 that the court cannot impute an intention or understanding on the parties when the evidence shows that they had not thought about the matter. This was clearly set out by Lord Diplock at p.904E to F of his judgment in Gissing. This led to Lord Bridge’s dicta regarding the sort of evidence that is necessary to enable the court to draw an inference of common intention in Lloyds Bank v Rosset [1991] 1 AC 107 at p.132-3.
21. In Ip Man Shan Henry v Ching Hing Construction Co Ltd [2003] 1 HKC 256 at para. 86, I suggested that it is too restrictive to read Lord Bridge’s dicta as laying down a rule of law. Ultimately, it is a matter of inference to be drawn from the facts and circumstances of each case and the...
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