United Asia Finance Ltd v. Wong Po Ling

DCCJ 5731/2018

[2021] HKDC 361

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5731 OF 2018

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BETWEEN

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Coram: His Honour Judge Harold Leong in Chambers

Date of Hearing: 5 January 2021

Date of Decision: 5 January 2021

Date of Reasons for Decision: 26 March 2021

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Reasons for Decision

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1.This is an appeal by the defendant against the Absolute Charging Order Absolute made by Master W. Y. Ho on 18 September 2020.

2.At the hearing, I have already dismissed the appeal and ordered the cost of the appeal be paid by the defendant to the plaintiff summarily assessed at HK$30,000 to be payable forthwith.

3.The following are the reasons for the decision.

Background

4.The plaintiff is a licensed money lender and Wonggenos Enterprises Company Limited (“Wonggenos”), a private company incorporated in Hong Kong, entered a loan agreement with the plaintiff for HK$1,000,000 on 10 October 2014 (“the Loan”) (Hearing Bundle page 62).

5.Wonggenos was also the registered owner of Flat C, 25^th Floor, St. Louis Mansion, No. 20 MacDonnell Road, Hong Kong (“25C”). The Loan was secured by a second mortgage on 25C (“the Second Mortgage”) (Hearing Bundle page 315).

6.The defendant was a director and shareholder of Wonggenos and also a guarantor of the Loan by way of a guarantee dated 10 October 2014 (“the Guarantee”) (Hearing Bundle page 64). The defendant is the registered owner of Flat A on 24^th Floor of the same building (“24A”).

7.The defendant’s father, Wong Yuk Tung (“Wong”), had commenced action against Wonggenos and the defendant under HCA 899 of 2012 but the lis pendens was only registered on 10 September 2015 after the registration of the Second Mortgage.

8.According to the plaintiff, it had no notice of such an action before entering into the Loan.

9.The Court in HCA 899 of 2012 granted a declaratory judgment on 30 September 2016 against Wonggenos and the defendant in favour of Wong, which inter alia, declared that 25C was held on constructive trust by Wonggenos and the defendant for the benefit of Wong and that Wonggenos should transfer 25C to Wong (Hearing Bundle page 201 paragraphs 95-96).

10.Wonggenos and the defendant defaulted repayment of the Loan after 15 March 2018. According to Clause 8.03 of the Guarantee, the plaintiff is entitled to enforce the Guarantee against the defendant alone without instituting proceedings against Wonggenos, which they did in the current action.

11.The reason given by the plaintiff was, in view of the judgment in HCA 899 of 2012, there would be difficulties for the plaintiff to attempt to enforce the Second Mortgage in recovering possession and selling 25C and at worst, the Second Mortgage might be declared void ab initio.

12.In any case, a summary judgment in the current action was granted by Registrar Lui on 15 May 2020 and the plaintiff applied for a Charging Order against 24A by way of enforcement. The Charing Order was made absolute as stated above.

13.The defendant is appealing for the Charging Order Absolute to be dismissed.

Legal principles

14.This is an appeal from the master to the judge in chambers and is therefore dealt with by an actual rehearing of the original application (Hong Kong Civil Procedure 2021 Vol 1 58/1/2).

15.The legal principle regarding an application by a judgment creditor for a charging order is trite and need not be repeated here. Suffice to say that the question for whether a charging order nisi be made absolute is one for the discretion of the court and the burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor (Hong Kong Civil Procedure 2021 Vol. 1 50/9A/23).

The defendant’s case

16.The defendant’s main argument appeared to be that there was “double protection” or “over-securitization” which was unfair. In other words, she alleged that making a Charging Order Absolute on 24A was unjust and unnecessary because the plaintiff had already taken 25C as a security.

17.However, the burden lies with the defendant to show that this is so.

18.As stated above, the judgment in HCA 899 of 2012 meant that there would be clear risks and difficulties in enforcing the Second Mortgage and the Guarantee allowed the the plaintiff to opt to enforce the Guarantee against the defendant alone.

19.The defendant suggested that HCA 899 of 2012 was under appeal. This is clearly not the case: the defendant and Wongennos had made an application for an extension of time for appeal and for a stay of execution of the judgment but this was dismissed by the Court of Appeal on 28 February 2018 (Hearing Bundle pages 230-243). There was even a further application to the Court of Appeal to “reconsider” its decision which was firmly turned down in a decision dated 11 September 2018 (Hearing Bundle pages 244-247).

20.The defendant still claimed that this was not final because there was still ongoing litigation regarding 25C. However, she failed to produce any evidence to suggest how this would support the adequacy of security of the Second Mortgage. As pointed out by the counsel for the plaintiff, the outstanding action concerned with the first mortgage on 25C which is not relevant to the current case.

21.Thus the defendant failed to adduce any evidence to show that the Second Mortgage would provide adequate security under the circumstances.

22.The defendant also disputed the plaintiff’s claim that it had no notice of HCA 899 of 2012 when the Loan was made. She now claimed that there was a telephone conversation when she informed such to the plaintiff. However, the defendant failed to provide any further particulars of such a conversation in court and, more importantly, this alleged telephone conversation was never mentioned in any of the defendant’s affirmations. The court would therefore place no weight on such evidence.

23.The defendant also claimed that the Charging Order Absolute would undermine the presentation of 24A to potential buyers. In fact, a related company of the plaintiff had exercised the power of mortgagee and successfully sold 24A by auction on 25 November 2020. The defendant has simply adduced some text messages showing estimated prices by some online valuation website. This was no evidence of actual offer received nor any evidence showing how reliable these online valuations would be. In any case, I find the defendant’s complaint insufficient to justify refusal of a Charging Order Absolute.

24.The defendant raised additional arguments which amounted to her concern with whether the sale proceeds of 24A would be properly distributed between all the creditors. There is no need to go into such arguments which are not only speculative but, in any case, irrelevant in the current application.

25.Lastly, the defendant also objected to the costs taxing scale. Indemnity costs are justified in light of Clause 1 and 2.01 of the Guarantee (Hearing Bundle page 103) and Bank of China (Hong Kong) Ltd. V Twin Profit Ltd. & Ors [2011] 3 HKC 59. I see no reason why I should order otherwise.

26.On this basis, I have also summarily assessed the costs of this application to be HK$30,000 payable forthwith by the defendant to the plaintiff.

Mr Siu Fai Lau, of Foo & Li, for the plaintiff

The defendant appeared in person