Ng Kam Kuk v. Chan Fung Chun
Court of First Instance
High Court Action No 1432 of 2015
Peter Ng J in Chambers
23 January, 3 April 2018

Civil procedure — charging order — discharge — property jointly owned by plaintiff and defendant — order for sale of property — court had no power to order party to discharge charging order against property at own expense before completion of sale — O.31 rr.1 and 2 did not confer jurisdiction to make such order — Rules of the High Court (Cap.4A, Sub.Leg.) O.31 rr.1, 2, O.50

Land law — co-ownership — order for sale — charging order — court had no power to order party to discharge charging order against property at own expense before completion of sale — Rules of the High Court (Cap.4A, Sub.Leg.) O.31 rr.1, 2, O.50

[Rules of the High Court (Cap.4A, Sub.Leg.) O.31 rr.1, 2, O.50]

P and D, friends and joint tenants of a property, which was purchased with a mortgage loan from a bank, fell out. D served P with a Notice of Severance which was registered in the Land Registry. P sought inter alia a determination of the precise beneficial interest in the property to which each party was entitled. On D’s application, the Master ordered the sale of the property with the net proceeds to be paid into court pending determination of the parties’ beneficial interest; and, subsequently ordered that P shall, at her own cost and expense, discharge two charging orders made against P’s interest in the property with respect to an unrelated judgment debt in favour of W in HCA 1516/2016 (the Charging Orders), before completion of the sale (the Order). P appealed against the Order. Under O.31 r.2 of the Rules of the High Court (Cap.4A, Sub.Leg.) (RHC), “the Court may give such directions as it thinks fit for the purpose of effecting the sale …”.

Held, allowing the appeal and setting aside the Order, that:

  • The Master had no jurisdiction to make the Order. First, O.31 rr.1 and 2 of the RHC do not expressly empower the Court to order a party to discharge any encumbrance on the title of the property at his own expense. Second, O.31 r.2 was purely procedural in nature and only authorises the Court to give directions on the manner of carrying out a sale. By compelling P to discharge the Charging Orders at her own expense, the Order affected the parties’ substantive entitlement to the sale proceeds based on their respective beneficial interests, in a way which was adverse to P and favourable to D. (See paras.15–17, 25.)
  • Third, there was nothing in O.50 of the RHC, which governed charging orders in general and their discharge and enforcement in particular, which compelled a judgment debtor to apply to discharge a charging order against his land on the ground that he had satisfied the judgment debt. Nor could a judgment creditor seek such order. If O.50 did not confer jurisdiction on the Court to require a judgment debtor to discharge a charging order; or enable W, as the judgment creditor, to seek a court order to that effect, much less could D, as a non-party to HCA 1516/2016, do so. (See paras.19–20.)
  • Fourth, the Order was, effectively, one to compel P to pay off the judgment debt in HCA 1516/2016. W could only enforce the judgment debt by means prescribed in O.45 r.1 of the RHC or invoke the Court’s bankruptcy jurisdiction to pressure P for payment. W was not permitted to seek a further court order to compel P to pay up and it was difficult to see how or why D could do so, since he was not even a party to HCA 1516/2016. (See paras.21–23.)
  • Finally, the fact that a sale would could not proceed until all encumbrances over a property were discharged did not justify the “invention” of an otherwise non-existent jurisdiction to compel one co-owner, against his will, to discharge an encumbrance at his own expense to effect a the sale. In practice, encumbrances were normally discharged with the balance of the purchase price payable on completion and appropriate undertakings would be extracted from the vendor in this respect. (See para.24.)

Appeal

This was an appeal by the plaintiff against an order for in connection with the sale of a property jointly owned by her and the defendant made by Master Simon Kwang on 15 May 27 September 2017. The facts are set out in the judgment.

Jurisdictions: 

Thomson Reuters – Sweet & Maxwell are the publishers of the Authorised Hong Kong Law Reports & Digest ("HKLRD") and the Authorised Hong Kong Court of Final Appeal Reports ("HKCFAR"), and providers of Westlaw HK (www.sweetandmaxwell.com.hk / www.westlaw.com.hk).