5. If the judgment debtor does not have any cash but owns a property/flat, can I (as the judgment creditor) take legal action against the debtor's flat?
In such a case, a charging order may be considered.
For the purpose of enforcing the judgment in your favour, the court may make an order imposing on any such property of the judgment debtor as may be specified in the order, a charge for securing the payment of any money due or to become due under that judgment. Such an order is known as a "charging order". The effect of a charging order is similar to the creation of a mortgage on the debtor's flat, and your position is thus similar to a "mortgagee".
The types of property that a charging order can be imposed on include land/real estate, securities, or funds in court (section 20A(2) of the High Court Ordinance).
As a judgment creditor, you should note that a charging order is an indirect mode of enforcement as it provides you with security only. If the judgment debtor fails to pay you pursuant to the charging order, you have to take further action to apply for an order to take over the subject property and sell it before you can recover the fruits of your judgment. If the relevant property is a flat (and it is already mortgaged to a bank), the charging order would be treated more or less the same as a second mortgage.
The judgment creditor's application for a charging order in respect of the judgment debtor’s beneficial interest may be made ex parte (without notifying the debtor). The application must be supported by an affidavit or affirmation:
- identifying the judgment or order to be enforced and stating the amount unpaid at the date of the application;
- stating the name of the judgment debtor and of any creditor of his whom you (as the applicant) can identify;
- giving full particulars of the subject-matter of the intended charge; and
- verifying that the interest to be charged is owned beneficially by the judgment debtor (i.e. the debtor has contributed whole or part of the purchase price of the flat).
Unless the court otherwise directs, the supporting affidavit or affirmation may contain statements of information or belief together with the sources and grounds for such information/belief.
Any order made on such an application must at first be an order nisi. That is, an order directing the debtor to show cause (to give any reasons for objecting to the application). The order specifies the time and place for further consideration of the matter, and imposing the charge in any event until that time. The order nisi must be made on Form No 75 in Appendix A of the Rules of the High Court or Form No 75 in Appendix A of the Rules of the District Court as appropriate.
On the making of the order nisi, notice of the order must, unless the court otherwise directs, be served as follows:
- a copy of the order, together with a copy of the affidavit or affirmation in support, must be served on the judgment debtor;
- where the order relates to securities other than securities in court, copies of the order must also be served:
- in the case of stock of any company incorporated within Hong Kong (usually a limited company), on that company;
- in the case of stock of any company incorporated outside Hong Kong, being stock registered in a register kept in Hong Kong, on the keeper of the register; and
- in the case of units of any unit trust in respect of which a register of unit holders is kept in Hong Kong, on the keeper of the register.
- where the order relates to a fund in court, a copy of the order must be served on the Registrar at the Registry; and
- where the order relates to an interest under a trust, copies of the order must be served on such of the trustees as the court may direct.
(NB (i) The court may also direct the service of copies of the order nisi, and of the affidavit or affirmation in support, on any other creditor of the judgment debtor or on any other interested person as may be appropriate in the circumstances. (ii) Documents to be served must be served at least seven days before the time appointed for the further consideration of the matter.)
On the further consideration of the matter, the court must either make the charging order absolute (finalized order), with or without modifications, or discharge it. In deciding whether to make the order, the court must consider all the circumstances of the case and, in particular, any evidence before it as to:
- the personal circumstances of the judgment debtor; and
- whether any other creditor of the judgment debtor would be likely to be unduly prejudiced by the making of the order.
(NB Where the order is made absolute (finalized), it must be made using Form No 76 in Appendix A of the Rules of the High Court or Form No 76 in Appendix A of the Rules of the District Court as appropriate.)
On the application of the judgment debtor or of any person interested in any property to which a charging order relates, the court may make an order discharging or varying the charging order.