Thousand Fortune Credit Service Ltd v. Yu Kim Hung and Another

DCMP 1912/2022

[2022] HKDC 1504

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1912 OF 2022

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Before:  Deputy District Judge B Mak in Chambers

Date of Hearing:  14 November 2022 & 7 December 2022

Date of Decision:  22 December 2022

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DECISION

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Introduction

1.At the adjourned hearing on 7 December 2022, I reserved my decision which I now hand down.

Service

2.The originating summons was served on the 1^st and 2^nd defendants by insertion into the letter box of their usual and last known address on 21 June 2022.

3.The notice of appointment to hear originating summons was served on the 1^st and 2^nd defendants by leaving at their usual and last known address on 3 October 2022.

4.The 2^nd defendant did enter an acknowledgment of service on 12 July 2022.

5.I am satisfied that the 1^st and 2^nd defendants have had due notice of these proceedings and hearing and they have chosen not to take any action nor to appear.

The plaintiff’s case

6.The plaintiff is a licensed money lender.

7.The 1^st and 2^nd defendants are the registered owners as joint tenants of Flat F, 3^rd Floor, Kwai Do Building, No 139 Tai Loong Street, Kwai Chung, New Territories, Hong Kong (“the property”).

8.The joint tenancy was severed by a notice of severance dated 22 June 2017.

9.The 1^st defendant was adjudged bankrupt on 17 December 2021. As the plaintiff is suing as a secured creditor, the present proceedings are unaffected by s 12(1) of the Bankruptcy Ordinance (“BO”): see s 12(2) of BO and Field Finance Ltd v Seck King Chung [2020] HKDC 514.

10.By a loan agreement dated 6 October 2020, the plaintiff lent a sum of HK$1,000,000 (“the loan”) to the 1^st defendant at the interest rate of 22% per annum.

11.By a Mortgage dated 6 October 2020 (“the Mortgage”), the 1^st defendant as borrower of one part and the plaintiff as the lender of the other part, the 1^st defendant charged his interest in the property to the plaintiff to secure the repayment of the loan.

12.The 1^st defendant had only repaid the first 9 monthly instalments and made default from then onwards. The outstanding principal as at 8 July 2021 is HK$910,030.

Money judgment

13.The plaintiff’s case is not controverted and I accept it at its face value.

14.I am satisfied that the plaintiff has in form and in substance complied with the requirements of a moneylender’s action under Order 83A. The plaintiff is entitled to recover the outstanding principal of $910,030 and interest.

Order for possession

15.Clause 6.01 of the Mortgage provides, inter alia, that if the Borrower makes default in the payment on the due date of any principal or interest or other moneys outstanding and payable by the Borrower under the loan document (whether demanded or not), an event of default shall have occurred.

16.Clause 7.01 of the Mortgage provides that if an event of default has occurred, the Lender shall have the right, inter alia, to enter into and upon and take possession of the property and for that purpose to take any legal proceedings and thenceforth to hold possess and enjoy the property and to receive the rents and profits thereof without any lawful interruption or disturbance by the Borrower or any other person.

17.I am satisfied that the requirements of Order 88 have been complied with.

18.By reason of the default of the 1^st defendant, the plaintiff is entitled to an order for possession of the property.

Order of sale

19.As the 1^st defendant had made default in payment, the plaintiff as mortgagee became a person holding an interest in the property under s 3 of the Partition Ordinance and may institute the present proceedings: see Maxcolm Finance Ltd v Cheng Chi Man and another [2019] HKCFI 2928 and Moneysq Ltd v Liu Kit Ling and another [2019] HKDC 860.

20.The property is a residential flat in a multi-storey building with a saleable area of approximately 283 sq ft with only one entrance. I accept that it is impracticable to divide the property into two halves and construct a separate entrance. Moreover, neither the 1^st nor the 2^nd defendant has tendered any reason by affidavit as to why an order for sale under the Partition Ordinance should not be granted; why it is not impracticable to physically partition the property into two halves; why a sale of the property would not be beneficial to all the parties or that significant hardship would be caused to the 2^nd defendant.

21.In any event, the 2^nd defendant shall be entitled to half of the proceeds of sale.

22.Accordingly, I am satisfied that an order for sale ought to be made and I so order.

Reserved price

23.The plaintiff has produced a valuation report which opined that the value for sale of the property under repossession as at 4 May 2022 is in the order of HK$2,160,000.

24.I accept the said valuation and direct that the property shall be sold with a reserved price of HK$2,160,000.

Entitlement of PrimeCredit Ltd

25.A charging order nisi was granted in favour of PrimeCredit Ltd (“PrimeCredit”) against the 1^st defendant’s share in the property on 27 April 2021 which was made absolute on 30 September 2021. They were registered in the Land Registry on 4 May 2021 and 7 October 2021 respectively.

26.The 1^st defendant took out self-bankruptcy petition on 18 August 2021 which was registered in the Land Registry on 1 September 2021.

27.It is well established that when a charging order nisi is made absolute, it is related back to the date of the order nisi: see Asparouh Ianev Dimitrov v Dominic Tak Ming Lau [2020] HKCFI 2517 as confirmed by the Court of Appeal in the same case ([2022] HKCA 1146).

28.S 45 of BO provides that:

“(1) Where a creditor has issued execution against the property of a bankrupt or has attached any debt due to him, he shall not be entitled to retain the benefit of the execution or attachment against the trustee of the bankrupt unless he had completed the execution or attachment before the date of the bankruptcy order and before notice of the presentation of any bankruptcy petition by or against the bankrupt.

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(2) For the purposes of this Ordinance ---

…

(c) an execution against land is completed … by the making of a charging order under the said section 20.”

29.As the charging order nisi was registered in the Land Registry well before the presentation of the 1^st defendant’s self-bankruptcy petition (and the registration thereof in the Land Registry), PrimeCredit is entitled to the proceeds of sale after the plaintiff. The balance, if any, shall be paid to the trustees-in-bankruptcy of the 1^st defendant by PrimeCredit.

Costs of the sale

30.The estate agent’s commission/the auctioneer’s remuneration and the legal costs for the conveyancing shall be capped at 1% of the selling price and $12,000 respectively.

Costs

31.For a simple application as the present one, I do not think engagement of counsel is justified. I also do not grant costs to the plaintiff for the adjourned hearing as it was necessitated due to the inadequacy on the part of the plaintiff.

32.By summary assessment, I order the 1^st defendant to pay the plaintiff the costs of this action in the sum of HK$60,000.

Mr Alvin Tsang, instructed by Chan & Ho, for the plaintiff

The 1^st and 2^nd defendants were not represented and did not appear.