Enforcement of Judgment or Order by way of Charging Order and recent decided cases31Jul2020
Where a creditor has obtained a judgment or order against a debtor, the creditor can enforce the judgment or order by imposing a charging order on the properties as set out in section 20A of the High Court Ordinance (Cap. 4) (“HCO”), which are:-
- an interest held by the debtor beneficially in land, securities or funds in court;
- an interest held by the debtor beneficially under any trust;
- an interest held by a person in land, securities or funds in court as trustee of a trust; and
- an interest held by a person as trustee of a trust under another trust provided that certain conditions in section 20A of the HCO are met.
Jurisdiction of the courts in imposing charging order
Both the Court of First Instance of the High Court and the District Court are conferred with the power to impose charging order on any such property of the debtor for securing the payment of any money due or to become due under the judgment or order.
In deciding whether to make a charging order, the Court shall consider all the circumstances of the case and in particular, any evidence before it as to the personal circumstances of the debtor and whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.
In Chan Miu Cheung v Prague Enterprises Ltd  3 HKLRD 414, the court held that it was not a proper exercise of discretion to make a charging order on an asset of considerable or substantial value in respect of a relatively small debt payable by the debtor.
In Tsui Yun Bun Barry v Law Wan Tung (formerly known as Law Siu Yi Biby)  HKCFI 2955, the court applied Rainbow and Another v Moorgate Properties Ltd  1 WLR 788, which held that a charging order should not be made when the court is aware of the fact that the debtor is, or is likely to turn out to be, insolvent and an exercise of the discretion of the court in making a charging order will give advantage to one creditor over other creditors.
Procedures for applying for a charging order
Order 50 of the Rules of the High Court (Cap. 4A) (“RHC”) sets out the procedures for applying for a charging order. An application may be made ex parte by the judgment creditor without notifying the judgment debtor by filing an affidavit and a draft order to show cause in the form specified by the court (the “Order nisi”).
The affidavit shall:-
- identify the judgment or order to be enforced and state the amount unpaid at the date of the application;
- state the name of the judgment debtor and of any creditor of his whom the applicant can identify;
- give full particulars of the subject-matter of the intended charge; and
- verify that the interest to be charged is owned beneficially by the judgment debtor.
The judgment debtor or any other person interested in the subject-matter of the charge may apply to the court to discharge or vary the charging order.
Can a charging order be imposed in a landed property held by a debtor and others as joint owners?
Where the judgment debtor owns land jointly with another person by joint tenancy or tenancy in common, his interest in the land may be charged.
In Ho Wai Kwan v Chan Hon Kuen  1 HKLRD 901, a bank obtained a charging order nisi, which was subsequently made absolute,against the judgment debtor in respect of a property which was owned in the form of joint tenancy and the court held that the charging order did not sever the joint tenancy.
Registration of charging orders in the Land Registry
Where a judgment creditor obtains a charging order on land, he shall register it against the land with the Land Registry in accordance with the Land Registration Ordinance (Cap. 128). The priority of the registered charging order is second to that of any prior registered mortgage or charge. Where there are two or more charging orders on land, their priority is determined by the date of the first registration of the Order nisi (Wing Hang Bank Ltd v Chi Shing Plastic & Mould Tooling Ltd  HKEC 911).
Enforcement of charging order on land by way of sale
If the judgment debtor still does not satisfy the judgment after the charging order on land has been imposed, the judgment creditor may enforce the charging order by selling the land charged through commencing proceedings by way of originating summons in accordance with Order 88 of RHC.
We are experienced in applying for Charging Orders and other enforcement proceedings. Please contact Pamela Mak if you have any enquiries on applying for charging orders or about debt recovery in Hong Kong.
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matter dealt with in this publication.