BANK OF COMMUNICATIONS CO LTD v. VICTORY SEASON LTD AND OTHERS

HCMP 292/2023

[2024] HKCFI 580

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 292OF 2023

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JUDGMENT

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I.  INTRODUCTION

1.  Victory Season (the Company), Chen Hong Tian (Mr Chen) and Mr Chen’s wife Chen Li Ni Yao (Ms Chen), respectively the 1^st, 5^th and 6^th Defendants, appeal against the Order of Master Lok dated 21 September 2023. In this Judgment, I shall refer to the Company and Mr and Ms Chen collectively as the “Appellants”. Master Lok’s Order was made pursuant to the Plaintiff Bank’s Originating Summons dated 22 February 2023.

2.  By paragraphs 1 to 3 of her Order, Master Lok entered money judgments against all the Defendants. By paragraph 4 of her Order, she directed that Mr and Ms Chen deliver vacant possession within 28 days of the property known as the 5^th Floor, Opus Hong Kong, 53 Stubbs Road, Hong Kong, along with Parking Spaces Nos 5 and 6 (collectively, the Property).

3.  By paragraph 5 of her Order, Master Lok stipulated:

“ Upon [the Defendants] paying to the Plaintiff the monies ordered to be paid and all other monies (if any) secured by the Mortgage and the Guarantees, the Plaintiff (subject and without prejudice to the due exercise of any power of sale for the time being vested in it) shall redeliver to [Mr and Ms Chen] possession of the Mortgaged Property and release to [the Defendants] the security constituted by the Mortgage and the Guarantees as [the Defendants] may agree or as this ... Court may direct.”

I understand from counsel this morning that the Property was sold by tender (without possession) in November 2023, fetching around HK$400 million.

4.  The Property was mortgaged to the Bank. The Bank granted loan facilities to the Company and the 2^nd Defendant (together, the Borrowers). The 3^rd and 4^th Defendants along with Mr and Ms Chen guaranteed the repayment of the loans. Mr and Ms Chen mortgaged the Property to the Bank as further security. At the date of the Originating Summons, the principal amount due to the Bank was HK$484,663,319.09, with interest in arrears of over HK$5.6 million. The Appellants do not dispute the amount of total indebtedness.

5.  By a Decision dated 30 October 2023, Master Lok stayed the execution of paragraph 4 of her Order granting vacant possession, pending the outcome of this appeal, but without prejudice to any other enforcement proceedings that the Bank might take.

6.  The Appellants raise two grounds of appeal. The Appellants first complain that the Bank insisted on a sale of the Property by tender. In so doing, the Appellants suggest that the Bank failed to obtain the best price reasonably obtainable for the Property. The Appellants allege that the Bank consequently failed to discharge the duty of reasonable care which the Bank owed as mortgagee to Mr and Ms Chen as mortgagors. Second, the Appellants say that the Bank actively engaged in discussions and negotiations with the Defendants on the debts owed by the Borrowers. They suggest that, as a result, the Bank is barred by promissory estoppel from enforcing the mortgage and guarantees against the Appellants without sufficient warning, notification, or consultation.

II.  BACKGROUND

7.  Mr Chen carries out business through the Cheung Kei Group (the Group) of companies. The Bank granted loan facilities to the Borrowers against the securities mentioned in the previous section.

8.  The Bank had concerns about the Group’s cashflow from about February 2022. In August 2022, the Bank found out that the aggregate net value of the investment products funded by the loan facilities granted to the Borrowers was less than their outstanding indebtedness. That was a breach of the terms of certain facilities. Between August and October 2022, the Bank requested the Group to rectify the breach by making partial payment or providing additional security. The Group offered to make a partial payment of HK$70 million by 12 instalments. However, in September 2022, while the parties were discussing such plan, Cheung Kei Centre Limited (CKCL) (a subsidiary of the 4^th Defendant) requested a reduction in the quarterly repayments due under the loan facilities. This highlighted the Group’s serious cashflow difficulties to the Bank.

9.  To alleviate the Group’s problems, the Bank offered to extend the maturity date of the loan facilities from 31 December 2022 to 25 April 2023 and to revise repayment details. The Bank sent a term sheet and a draft facility letter to the Group on 28 October and 10 November 2022 respectively. There was no feedback from the Group on the foregoing documents.

10.  On 29 November 2022, the Bank signed the draft facility letter and sent the same to the Group for execution. The Group, on the other hand, put forward a company known as Gesway Investment Limited as an additional corporate guarantor. The Bank agreed to this and sent two deeds of guarantee to the Group covering the loans to each of the Borrowers for Gesway's signature. But neither the facility letter nor the deeds of guarantee were ever returned in executed form to the Bank.

11.  As a result, the Bank instructed its solicitors to issue demand letters dated 20 December 2022 to the Defendants, seeking payment of the outstanding loan by 31 December 2022. The Bank stated in its demand letters that it would take appropriate action to protect its interest in the event of non-payment.

12.  Between December 2022 and January 2023, there were discussions between the Bank (represented by Mr Lam Siew Wah (Mr Lam) and Ms Fong Chong Chui (Ms Fong)) and the Group (represented by Mr Chen and his son Mr Vincent Chen). Mr Vincent Chen made various promises on repayment, but these were not fulfilled. The loan facilities accordingly expired on 31 December 2022 with payment overdue. In the discussions, Mr Lam repeatedly asked if the Group would consider surrendering the Property to repay the outstanding debt. He noted that the Bank might have to take legal action against the Defendants and the Property to enforce its rights.

13.  On 17 January 2023, the Bank issued another letter demanding payment of the then outstanding amount within 7 days. On 4 February 2023, Mr Lam again asked whether the Defendants were prepared to surrender the Property to the Bank. Mr Chen refused. Mr Lam warned that the Bank could not see improvement in the Group's cashflow situation and might have to enforce its rights by legal action against the Property.

14.  On 10 February 2023 the Bank appointed Receivers to commence enforcement against the Property. About two weeks later, the Bank took out the present Originating Summons.

15.  On 5 March 2023, Mr and Ms Chen signed a Surrender Memorandum undertaking to repay HK$135 million to the Bank by 8 April 2023, failing which they would deliver immediate vacant possession of the Property to the Receivers. The Surrender Memorandum declared that “nothing herein shall prejudice or affect the existence of any rights arising from the Legal Charges”. Mr and Ms Chen failed to make any repayment but refused to surrender the Property.

16.  By letter dated 18 April 2023, Mr Chen’s solicitors informed the Receivers that Mr Chen was working on a settlement plan to resolve the parties’ disputes. The solicitors requested that the Receivers refrain from taking legal action, pending receipt of the settlement proposal. The letter stated that it was:

“ [w]ithout prejudice to our client's rights to challenge the legality and validity of the power purportedly exercised by the Mortgagee under the Legal Charges and your purported appointment as the Joint and Several Receivers and Managers of the Property.”

17.  By letter dated 19 April 2023, Mr Chen’s solicitors informed the Receivers that Mr Chen “intends to sell the Property to a potential purchaser at market value” and “the consideration should be sufficient to cover all outstanding amount due and owing to the Mortgagee under the Legal Charges”. The Receivers were requested to “withhold taking any action for the time being pending the terms of the transaction to be finalised”. The “potential purchaser” was eventually revealed to be Mr Chen’s son, Mr Bill Chen.

18.  By letter dated 20 April 2023, Mr Chen’s solicitors told the Receivers that the sale price for the Property would be HK$620 million. Mr Bill Chen proposed to pay HK$50 million upon the signing of a provisional agreement, with the balance of HK$570 million being paid four months after the provisional agreement.

19.  In response, by letter dated 27 April 2023, the Receivers requested (among other matters) that a further payment of HK$12 million be made within 14 days from the signing of the provisional agreement, and the time for completion be reduced to 75 days. Further, given the substantial amount involved and the family relationship between Mr and Ms Chen (as sellers and mortgagors) and Mr Bill Chen (as buyer), the Receivers asked Mr and Ms Chen as mortgagors to provide (1) a written consent to the proposed transaction and a waiver of any possible claims against the Receivers and the Bank in relation to the same, and (2) a funds proof that Mr Bill Chen had the financial capacity to buy the Property.

20.  By letter dated 2 May 2023, Mr Chen’s solicitors offered to reduce the time for completion to 120 days. The solicitors wrote that they were taking instructions on a written consent and waiver of claim. There was no reply on the request for funds proof. The solicitors asked that the Receivers refrain from taking any action while negotiations remained pending.

21.  By letter dated 3 May 2023 to Mr Chen’s solicitors, the Receivers stated that they were prepared to agree to a sale to Mr Bill Chen on condition (among other matters) that (1) completion take place within 75 days and that (2) the mortgagors provide (a) the written consent and waiver of claim and (b) the funds proof. The Receivers wrote that the proposed terms were final and non-negotiable, and that the Defendants were required to confirm their agreement to the proposed terms by 5 pm on 8 May 2023. Absent agreement, the Receivers’ offer would automatically be withdrawn. The letter concluded:

“ For the avoidance of doubt, nothing herein shall be binding upon our clients unless and until all terms are agreed and the written agreement is signed by the parties and exchanged.

All our clients' rights powers and remedies are expressly reserved, and it is emphasized that neither the Mo1tgagee nor the Receivers will withhold any further or other action in the meantime. No admission, estoppel, acquiescence, or waiver whatsoever is to be inferred on the part of our clients.”

22.  By letter dated 4 May 2023, Mr Chen’s solicitors replied (among other matters) that:

“ the Intended Purchaser will obtain a loan from a mortgage bank(s) and/or financial institutions, for payment of part of the consideration. In this respect, funds proof of the Intended Purchasers is not necessary.”

23.  By letter dated 5 May 2023 to Mr Chen’s solicitors, the Receivers reiterated their request for a funds proof, observing that “the fact that the intended purchaser intends to obtain a mortgage loan is neither [here] nor there” since Mr Bill Chen:

“ will have to pay a substantial part of the purchase price, probably over 50% thereof, and as such our clients will have to be satisfied that the intended purchaser does have the ability to complete the transaction.”

The Receivers stressed that the Defendants should confirm their acceptance of the Receivers’ offer by 5 pm on 8 May 2023. Otherwise, the proposed terms would be withdrawn.

24.  By letter dated 8 May 2023, Mr Chen’s solicitors enclosed a revised draft waiver and stated that:

“ our clients are requesting the Purchaser to produce document(s) showing the payment of the initial and further deposit, i.e. HK$62,000,000 as fund proof. We shall let you have the said document(s) upon receipt of the same from our clients.”

25.  By letter dated 9 May 2023, the Receivers informed the Defendants that the proposed amendments to the draft waiver were not acceptable. Further, as no agreement to the Receivers’ terms had been confirmed by the deadline of 5 pm on 8 May, the terms were automatically withdrawn. The Receivers would accordingly take steps to exercise their rights and powers.

III.  DISCUSSION

A.  Ground 1: Alleged failure to take reasonable care

26.  Mr Tommy Cheung (appearing for the Appellants) contends that the Bank failed to take all reasonable care in the following respects:

(1)  The Bank failed to follow up with Mr and Ms Chen on Mr Bill Chen’s offer to buy the Property, but simply decided instead to proceed with a sale of the Property by tender.

(2)  The Bank did not consider the comparative disadvantages and benefits accruing to Mr and Ms Chen from the sale of the Property to Mr Bill Chen on the one hand and sale of the Property by tender on the other. Under the former, the Property could potentially be sold for HK$620 million, which would be significantly higher than the price obtainable through a sale by tender.

(3)  The Bank failed to take reasonable precautions to obtain a proper price or the best price reasonably obtainable for the sale of the Property by tender.

(4)  Accordingly, any sale by tender should be set aside or, alternatively, Mr and Ms Chen are entitled to counterclaim against the Bank for loss and damage suffered because of the sale of the Property by tender at an undervalue.

27.  I am unable to accept the Appellants’ contentions.

28.  I agree that, as a matter of Hong Kong law, when exercising its power of sale, a mortgagee owes an equitable duty of good faith and a duty to take reasonable precautions to obtain the true market value of the mortgaged property. See, for instance, Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 1 Ch 949, at 966B-F per Salmon LJ, among numerous authorities. But I do not see how in the present case the Bank has acted unreasonably or in bad faith. If anything, the evidence suggests that the Bank made every effort to accommodate the Defendants.

29.  The real issue is the Bank’s right to take vacant possession of the Property pursuant to Master Lok’s Order. Any claim that the Bank has not achieved the best price in selling the Property is a matter for some other forum in the future, for instance, if and when the Bank seeks enforcement against the Defendants for any outstanding balance of the loan monies.

30.  What the Appellants are really complaining about here (as Mr Cheung confirmed to me in submission) is that the Bank withdrew its offer to agree on a sale of the Property to Mr Bill Chen, because of the failure (among others) to provide a funds proof. That is said to have been unreasonable. I do not see why.

31.  The Bank was entitled to insist that Mr Bill Chen provide proof of his financial capacity to purchase the Property for a substantial consideration of HK$620 million. Absent such proof and faced instead with coyness from the Defendants about the provision of proof, the Bank was entitled to conclude that Mr Bill Chen’s offer to purchase at HK$620 million was not a credible proposal, but only empty talk. At that stage, the Bank cannot be faulted for taking the view that enough was enough, and there was no point in wasting further time on negotiations, which had been going on since mid-2022. The failure to provide a funds proof, despite repeated demands, was understandably a showstopper for the Bank.

32.  The Appellants suggest that the Bank failed to take account of the fact that Mr and Ms Chen currently reside in the Property. Had the Bank proceeded with Mr Bill Chen’s offer, Mr and Ms Chen (it is said) would be able to remain in the Property if sold to their son. In contrast, a sale by tender would have “a profound and irreversible impact” on the lives of Mr and Ms Chen, who would then have the challenging task of securing alternative accommodation which would be suitable for their needs, but not a strain on their financial resources.

33.  I am prepared to accept that moving house, especially when one is compelled to do so, can be difficult. But the fact remains that the Bank was prepared to consider the sale of the Property to Mr Bill Chen. What the Bank reasonably asked for was proof that Mr Bill Chen had access to the necessary funds or the financial capability to carry out the proposed transaction. All that was proffered in return was a bland statement that Mr Bill Chen intended to obtain a mortgage loan. Later, it was said that Mr Bill Chen was being asked “to produce document(s) showing the payment of the initial and further deposit, i.e. HK$62,000,000 as fund proof”. But such documents would not have established that Mr Bill Chen had the capacity to go through with the purchase of the Property for HK$620 million. In the absence of proof that Mr Bill Chen could undertake the proposed purchase, it is difficult to see why the inevitable hardship involved in Mr and Ms Chen’s moving house, should constrain the Bank from exercising its right to possession as mortgagee.

34.  In my view, the first ground of appeal is unarguable and raises no triable issue.

B.  Ground 2: Alleged promissory estoppel

35.  Promissory estoppel arises when:

(1)  a person A represents to another person B that A will not insist on enforcing A’s strict legal rights against B, and

(2)  B acts in reliance on that representation in a manner that would render it unconscionable for A to go back on A’s representation, without at least giving B reasonable notice that A will no longer abide by A’s earlier representation.

What is reasonable notice is fact-sensitive and will depend on the circumstances of each case. See for instance, Luo Xing Juan v Estate of Hui (2009) 12 HKCFAR 1, at [55]-[57], among numerous authorities.

36.  Mr Cheung submits that promissory estoppel arises as follows:

(1)  Multiple proposals, requests, and communications were exchanged between the parties to resolve the Defendants’ debt issues in negotiations. In that process, the Bank represented to the Defendants that it would cooperate with them and refrain from enforcing its charges without sufficient advance notification. This would be on the condition that the Defendants continued to work with the Bank to pursue a mutually acceptable solution to their debts. There was consequently an implicit promise or representation that the Bank would not enforce its strict legal rights as mortgagee while negotiations were ongoing.

(2)  The Defendants believed that the Bank would not enforce its strict legal rights under the Bank’s various securities. In reliance on the Bank’s promises, the Defendants engaged in conference calls and meetings; prepared detailed written replies and materials; and presented debt proposals to the Bank. The Defendants thus expended significant time, cost, expense, and other resources to review debt proposals, consult with financial advisors, and seek legal advice.

(3)  In breach of its promise, the Bank unexpectedly and unilaterally withdrew its proposed terms for the sale of the Property, without warning or consultation, alleging lapse of the 8 May 2023 deadline. This action contradicted the Bank’s representations that it would cooperate with the Defendants and not enforce its securities if the Defendants actively attempted to resolve their debt obligations. That was unconscionable conduct by the Bank.

(4)  As a result, the Bank’s right to enforce the mortgage and other securities should be considered as suspended on the basis that it would be inequitable for the Bank to go back on its promise without providing the Defendants with reasonable notice.

37.  In my view, the Appellants’ reliance on promissory estoppel is untenable.

38.  There is simply no evidence that the Bank made the alleged promise or representation. To the contrary, at every step of the way, the Bank made it clear that its willingness to negotiate was without prejudice to its legal rights and their enforcement.

39.  The Appellants are unable to point to a statement by any Bank representative to the effect that the Bank would refrain from taking enforcement action, provided the Defendants continued to negotiate. It is hard to see how merely conducting negotiations, while reserving one’s rights of enforcement if the negotiations go nowhere or do not progress, can give rise to a situation of promissory estoppel.

40.  Mr Damian Wong (appearing for the Bank) has also drawn my attention to the Surrender Memorandum signed by Mr and Ms Chen. That document expressly acknowledged that "[the Bank] have the right to exercise all the Mortgagee's rights arising from the Legal Charges, including the absolute right to determine the arrangements to sell the Charged Properties" and "[n]othing herein contained shall prejudice or affect any of the Mortgagee's rights and remedies set forth in the Legal Charges”. Mr Wong also refers to the repeated instances in correspondence when Mr Chen’s solicitors asked the Receivers to refrain from taking legal action, pending the making of a proposal or the doing of some act by the Defendants. These matters contradict the suggestion that the Defendants were proceeding on an understanding that, so long as the Defendants continued to negotiate, the Bank would not resort to legal action.

41.  The second ground of appeal raises no triable issues and fails.

IV.  CONCLUSION

42.  Subject to any variation of the period within which the Bank is to obtain vacant possession of the Property (on which I will hear counsel in a moment), the appeal is dismissed. I now invite counsel to address me on consequential matters and costs.

Mr Damian Wong, instructed by Tsang, Chan & Wong, for the plaintiff

Mr Tommy Cheung, instructed by Tung, Ng, Tse & Lam, for the 1^st, 5^th and 6^th defendants

HCMP 292/2023

[2023] HKCFI 2815

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 292 OF 2023

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D E C I S I O N

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Background

1.  On 22 February 2023, the plaintiff (“Bank”) commenced the present Originating Summons under RHC Ord 28 and Ord 88 claiming money judgment and delivery of vacant possession of the Mortgaged Property.

2.  The substantive hearing of the Originating Summons took place before me on 21 September 2023.  The Originating Summons was contested by the 1^st, 5^th, and 6^th Defendants (“Defendants”), who were represented by two Counsel at that hearing.  Upon considering the submissions and evidence before me, I granted an order substantially in terms of the relief sought by the Bank (“Order”), including that the 5^th and 6^th Defendants shall deliver vacant possession of the Mortgaged Property to the Bank within 28 days after the Order.  The prescribed deadline fell on 19 October 2023.

The Defendants’ application

3.  On 5 October 2023, the Defendants appealed against the Order to a Judge in chambers.  By Summons dated 19 October 2023, the Defendants applied for an order that the entire Order be stayed pending the determination of their appeal, further or alternatively, there be an extension of time of four months (from the date of the order to be made) to deliver vacant possession of the Mortgaged Property to the Bank.  In support of that Summons, the 5^th Defendant filed a Second Affirmation dated 19 October 2023.

4.  On 19 October 2023, I directed that the Summons be dealt with on papers. Counsel for the parties have filed written submissions in accordance with the directions made.

Stay of execution – applicable principles

5.  The Defendants rely on TangMoon Lam v Tang Ying Yeung[2019] HKCFI 2328, §8, which applied the well-established principles in Star Play Development Ltd v Bess Fashion Management Co Ltd[2007] 5 HKC 84, §9.  The Defendants emphasize that where the relevant order under appeal is one for the possession of premises, it can readily be appreciated that without a stay of execution, more often than not it is likely that an appeal would be rendered nugatory (as in the Defendants would have lost the possession of the Mortgaged Property even if they succeed in the appeal).

6.  The Bank relies on Bank of China (Hong Kong) Limited v Twin Profit Limited, HCMP 874/2010, 27 August 2010, §9, which applied Star Play, op cit, §6-10 and Wenden Engineering Co Ltd v Lee Shing Yue Construction Co Ltd, HCCT90/1999, 17 July 2002.

7.  In summary, it is for the defendant to justify a stay of execution by demonstrating good reasons for the stay.  There is no exhaustive definition of what would constitute good reasons, although commonly reference is made to the possibility of the appeal being rendered nugatory without a stay or to the merits of the appeal.  When considering the possibility of an appeal being rendered nugatory without a stay, it is necessary for the court to have regard to the nature of the order that is the subject matter of the appeal.  As to the merits of the appeal, the court should form a preliminary view of the merits and strengths of the appeal.  The existence of an at least arguable appeal is a minimum requirement for a stay.  The existence of a strong likelihood of success on appeal will usually constitute a good reason for a stay.  But where the appeal is merely arguable, some additional reason for a stay must be provided and this may be done by demonstrating that the appeal would be rendered nugatory if the stay were not granted.  It is also relevant to bear in mind any prejudice to the successful party from the grant of a stay.  Ultimately, the court embarks on a balancing exercise, bearing in mind the starting point that the successful party is not to be deprived of the fruits of his success.

8.  There is no dispute on the above principles, which I propose to apply in the determination of this application.

Order for payment of monies

9.  The Defendants argued in the affirmations filed that the subject charges did not cover the debts owed by them, however, that point was not pursued.  At the hearing on 21 September 2023, the indebtedness claimed by the Bank (both in terms of liability and quantum) was admitted by the Defendants.  The Defendants’ legal team reviewed the draft Order at the hearing and confirmed the calculation of the indebtedness including interests to be correct.

10.  The Defendants now argue that “whilst …Ds may not have as meritorious an argument for staying the monetary limb of the Order, this Honourable Court can stay the Order in its entirety on case management grounds, so that the appropriateness of the entire Order can be reviewed in one go at the hearing de novo.”  I reject that argument.  Given that there is no defence whatsoever to the Bank’s monetary claims, there is no good reason to stay the execution of those parts of the Order (being the 1^st to 3^rd paragraphs thereof). 

Order for possession

11.  At the hearing, two lines of defence was raised.  Subject to that, there was no dispute that the requirements under RHC Ord 88 were met, and the Bank was entitled to the possession order of the Mortgaged Property.

12.  The first line of defence was promissory estoppel.  The Defendants argued that during their negotiations with the Bank, the Bank made clear to them that it would cooperate and refrain from enforcing the subject charges and/or guarantees if the defendants continued to work towards a mutually acceptable solution for the debts. In reliance on this understanding, the Defendants were said to have invested significant time, costs, expenses and resources such that the Bank should not be allowed to enforce the charges and guarantees “without any warning, notification or consultation”. 

13.  After reviewing the evidence, I rejected that defence without hesitation. The objective contemporaneous records show that the Bank had been actively enforcing its rights.  In any event, there had been a sufficiently long time since the issuance of the demand letters in late 2022 and early 2023 by the Bank, and the appointment of the receivers on 10 February 2023, to revive the Bank’s legal rights (assuming that such rights were suspended).

14.  The second line of defence was breach of mortgagee’s duties.  The Defendants argued that the receivers unreasonably terminated or refused to accept an offer made by the 5^th Defendant’s son to purchase the Mortgaged Property for HK$620 million.  It is not in dispute that discussion over that offer ended in early May 2023, and nothing further happened in that regard.  The Defendants are not able to articulate how a potential claim for breach of mortgagee’s duties which may sound in damages (assuming that there is one, and none has been made) affects the Bank’s entitlement to the possession order at present.  The Defendants relied on Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 which in my view is not on point.  That case concerned the sale of a mortgaged property by a mortgagee to a company with which he was closely connected.  The Privy Council held that the mortgagee failed his duties but refused to set aside the sale on the ground of the mortgagor’s delay; damages were ordered.  

15.  In this application, the Defendants barely assert that they have an arguable appeal without elaboration.  Insofar as it is assumed by the Defendants that because an appeal to a Judge in chambers is a hearing de novo, it necessarily follows that for the purpose of the stay application, “it cannot be definitively concluded at this stage that Ds’ appeal in the re-hearing is plainly unarguable”, I find this assumption wrong in principle.  The Defendants bear the burden to demonstrate good reasons for the stay; if it is said that the appeal is arguable, it ought to be demonstrated properly in submissions. 

16.  In my view, the present case is very much a borderline case.

17.  Assuming in the Defendants’ favour that they have a merely arguable appeal, they need to provide additional reason for a stay, for example, by demonstrating that the appeal would be rendered nugatory if the stay were not ordered.  On the evidence before me, I am prepared to accept that the refusal of the stay would have a serious deleterious effect on the Defendants if and insofar as they have to lose the actual possession of the Mortgaged Property prior to the resolution of the appeal.

18.  I have considered the prejudice to the Bank.  I have been informed that (1) the appeal hearing has been fixed to take place on 20 February 2024; and (2) the Bank has not yet started any action to enforce the order for possession (such as writ of possession).  The Bank submits that given the Defendants’ uncooperative attitude, it is unlikely that the Bank would be able to recover the possession of the Mortgaged Property before the appeal hearing.  The Bank is concerned about the delay if it is only allowed to take enforcement action after the appeal. 

19.  Considering all the relevant factors as a whole, and following the approach in Star Play §14, I will order stay of execution of paragraph 4 of the Order pending the Defendants’ appeal to a Judge in chambers but only for the actual possession of the Mortgaged Property.  That is to say, like the plaintiff in Star Play, pending resolution of that appeal the Bank is free to complete all enforcement procedures up to but excluding the actual possession of the Mortgaged Property.  This addresses the prejudice to the Bank concerning delay and the prejudice to the Defendants concerning having to lose possession even if they succeed in that appeal.

20.  I dismiss the Defendants’ stay application in relation to the rest of the Order.  Paragraph 5 of the Order is the usual provision that the enforcement of the order for possession will be avoided by the payment by the defendants to the plaintiff of the judgment sum.  

Extension of time

21.  At the hearing on 21 September 2023, submissions were made on behalf of the 5^th and 6^th Defendants that they required 6 months to deliver vacant possession of the Mortgaged Property, on the ground that the Mortgaged Property was large.  I did not find that to be a good or sufficient reason and refused that request.

22.  Surprisingly, the Defendants simply applied again for time extension by the present Summons.  I agree with the Bank’s submissions that this is a second bite of the cherry.  There may be cases which justify a separate application for extension of time to comply with a possession order, for example, due to material change of circumstances after the Ord 88 substantive hearing.  Those cases aside, if a defendant has good reasons to ask for a longer than usual time to give vacant possession, such reasons should be substantiated and submitted at the substantive hearing.  I find it inappropriate for the Defendants to “spin-off” such arguments into a satellite interlocutory application which, in effect, is an attempt to re-argue the matter.

23.  Moreover, I have not been addressed by the parties whether there is any material difference in the test to be applied in the stay application (made pursuant to RHC Ord 58, r 1(4)) and the time extension application (the Defendants only cited “inherent jurisdiction” in their Summons, but the court also has the power to grant time extension on terms under RHC Ord 3, r 5). 

24.  It is assumed by the Defendants that the time extension application may still succeed solely based on discretionary considerations even if they fail in the stay application, which I do not think is correct.  If the Defendants failed on the stay application, it is wrong in principle that those considerations leading to the dismissal of the stay application can be circumvented in a renewed time extension application, be it based on the court’s inherent jurisdiction or Ord 3, r 5.

25.  In the 5^th Defendant’s Second Affirmation, he complained of substantial inconvenience and hardship suffered by himself, his wife, his children and grandchildren (all said to be residing in the Mortgaged Property) should they be required to deliver vacant possession in the prescribed time.  The 5^th Defendant referred to the senior age of himself and his wife and said that on occasions he felt seriously uncomfortable and needed medical supports, and that his wife suffered from reduction of mobility.  However, only a one-page receipt was produced by him which evidenced a visit he paid to the University of Hong Kong Shenzhen Hospital outpatient clinic.  The 5^th Defendant also referred to the need of his grandchildren, that there are a lot of bulky furniture in the Mortgaged Property which would require specialist care in relocation, and that he employed two domestic helpers who also require relocation which is not easy. 

26.  Despite a good many bare allegations being made by the 5^th Defendant in his Second Affirmation, no mention was made to any effort on his (or his family’s) part to locate any alternative residence or any genuine attempt to relocate, despite the Order made on 21 September 2023.  The suggested time extension of 4 months from the order to be made is not supported by any logical or evidential basis.  Had the Defendants’ assumption been correct (that they can still ask for time extension based on the matters stated in the 5^th Defendant’s Second Affirmation even if they fail in the stay application), I do not agree that the matters mentioned by the 5^th Defendant are good reasons to grant the time extension sought.

27.  For the reasons stated above, I dismiss the Defendant’s application for extension of time.

Disposition

28.  I dismiss the Defendants’ Summons dated 19 October 2023 save that I order stay of execution of paragraph 4 of the Order only for the actual possession of the Mortgaged Property pending the resolution of the Defendants’ appeal from the Order to a Judge in chambers.  For the avoidance of doubt, pending resolution of that appeal the plaintiff Bank is free to complete all enforcement procedures up to but excluding the actual possession of the Mortgaged Property.

29.  As the Defendants have largely failed in their applications, I order the Defendants to pay the plaintiff Bank’s costs of and occasioned by the Summons dated 19 October 2023, to be summarily assessed on paper.

30.  The plaintiff Bank has submitted a skeleton bill together with its submissions.  I direct that the Defendants shall file and serve their list of objections (limited to 1 page) within 3 days of the order herein.  The plaintiff Bank shall file and serve its written response (limited to 1 page) within 2 days thereafter.