Konew Capital International Ltd v. Wong Chiu King and Another

DCMP 455/2023

[2024] HKDC 135

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 455 OF 2023

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JUDGMENT

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Introduction

1.This is the plaintiff’s application by Originating Summons dated 31 January 2023 (the “OS”):

(1)  against the 1^st defendant for money judgment under Order 83A of the Rules of the District Court, Cap. 336H (“RDC”);

(2)  and against the 1^st and 2^nd defendants for an order for delivery of vacant possession and an order for sale of the mortgaged property known as Flat B on 6^th Floor of Tower 2, Yuccie Square, No 38 Yuen Long On Ning Road (the “Property”) pursuant to Order 88 of the RDC and sections 2, 3 and 6 of the Partition Ordinance, Cap. 352 (“PO”).

Service on the defendants

2.The OS and the supporting affirmation were served on the defendants at their last known address, i.e. the Property, and both of them have not indicated that they intend to contest these proceedings.

3.The defendants did not appear at the hearing of the OS on 22 January 2024. Having considered the affirmations of service filed by the plaintiff’s solicitors, I am satisfied that due notice of the hearing has been given to the defendants and that the matter can be dealt with summarily in the absence of the defendants pursuant to Order 28 rule 4 and Order 35 rule 1(2) of the RDC.

Background

4.The plaintiff is a licensed money lender. The defendants are the registered owners of the Property as joint tenants.

5.On 12 April 2022, the plaintiff entered into a loan agreement (the “Loan Agreement”) with the plaintiff for a loan in the principal sum of HK$500,000 to be repaid by 72 monthly instalments. Interest of the loan is 30% per annum, with default interest also charged at the same rate.

6.The Loan Agreement provides, inter alia, that the 1^st defendant agrees to use the Property as security of the loan and execute a mortgage or other documents on the Property in favour of the plaintiff to secure repayment of the loan and interest thereon.

7.Pursuant to the Loan Agreement and by a Second Mortgage dated 12 April 2022 (the “Second Mortgage”), the 1^st defendant charged to the plaintiff all his estate, right, title, benefit and interest in the Property to secure the repayment of a loan to the extent of HK$700,000 plus interest and costs.

8.Prior to the Second Mortgage, the Property was, and still is, subject to a mortgage dated 17 May 2017 (the “First Mortgage”) in favour of Bank of Communications Co., Limited (“Bank of Communications”).

Money judgment under Order 83A of RDC

9.I have considered the documents filed before me and I am satisfied that each requirement of sections 18(1) and 18(2) of the Money Lenders Ordinance, Cap 163 (“MLO”) has been complied with. The interest rate under the Loan Agreement is also permissible under the MLO.

10.Under the terms of the Loan Agreement, two events of default have occurred and entitled the plaintiff to demand for the immediate repayment of the outstanding balance:

(1)  The 1^st defendant has defaulted in the repayment of the loan since 12 December 2022.

(2)  The 1^st defendant subsequently entered into two legal charges over the Property to secure his loans with another lender:

(i)  a Second Legal Charge dated 11 November 2022 (“Second Legal Charge”) in favour of Hong Kong Finance (Personal Loan) Limited (“HKFL”) in relation to the Property; and

(ii)  a Third Legal Charge dated 22 November 2022 (“Third Legal Charge”) in favour of HKFL in relation to the Property.

Since the Second Legal Charge and the Third Legal Charge were registered in the Land Registry before the Second Mortgage, they rank in priority above the Second Mortgage but below the First Mortgage.

11.On 23 December 2022, the plaintiff issued a demand letter to the 1^st defendant for the repayment of all outstanding balance under the Loan Agreement. However, the 1^st defendant failed to make any repayment.

12.In view of the 1^st defendant’s default, a money judgment should be entered into favour of the plaintiff. The total amount outstanding as of 14 April 2023 was HK$543,025.26. Interest on the principal sum of HK$480,926.74 accrues at the rate of 30% per annum (with a daily rate HK$395.28) from 15 April 2023 until full repayment. Default interest on the unpaid interest of HK$12,021 accrues at the rate of 30% per annum (with a daily rate of HK$9.88) from 15 April 2023 until full payment.

Vacant possession

13.The Second Mortgage is in the terms of a second legal charge over the 1^st defendant’s interest in the Property as security for the due payment of all moneys payable or which may at any time become payable to the plaintiff by the 1^st defendant.

14.Clause 7 of the Second Mortgage provides that it is an event of default if the 1^st defendant fails to pay any principal, interest or any other sum payable under the Mortgage. There is no question that an event of default has occurred within the meaning of the clause.

15.Pursuant to Clause 8, the security under the Second Mortgage has become enforceable and the plaintiff is entitled to, inter alia, enter upon and take possession of the Property as well as take any legal proceedings for that purpose.

16.The plaintiff’s solicitors have notified the Bank of Communications and HKFL of these proceedings and notices of hearing have been given in case any of the latter wishes to enter appearance at the hearings of the OS. However, no reply has been received from the Bank of Communications or HKFL and they have not appeared at any of the OS hearings.

17.Having examined the originals of the Second Mortgage and the Loan Agreement, and having considered the documents filed before me, I am satisfied that the requirements under Order 88 of the RDC have been complied with and the plaintiff is entitled to enforce the Second Mortgage and obtain vacant possession of the Property, but subject to the rights of the First Mortgage, the Second Legal Charge and the Third Legal Charge.

Order for sale

18.Section 2 of the PO provides that where any property in land is held by two or more persons, whether as joint tenants or tenants in common, the court may either make an order for partition, order for sale or refuse to make any order.

19.Under section 3(1) of the PO, any “person interested” in the property may institute proceedings for an order for sale.

20.It is well established that a legal chargee of a partial interest is considered a “person interested” within the meaning of section 3(1) of the PO: Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224 per HH Judge Li at §§22-23; Uplink Finance Ltd v Lee Sze Tai & Ors (unreported, DCMP 794/2016, 16 March 2017) per DDJ Cheung at §25.

21.Since the plaintiff is a legal chargee of the 1^st defendant’s share of the Property, the plaintiff is entitled to apply for an order for sale under the PO.

22.The next issue that needs to be considered is whether discretion should be exercised to order partition or sale.

23.When the court decides whether it is practical to partition a property, it will consider the size and design of the property, and make a judgment based on common sense without expert evidence: Law Chun Wai (supra) at §§28, 31; Uplink Finance Ltd (supra) at §31.

24.When it is impractical to make an order for partition, the court should make an order for sale unless it is satisfied that all the co-owners would be better served by the refusal of the order and that making an order would result in very great hardship to one co-owner: Re Lau Hiu Tuen (unreported, HCB 8430/2006, 20 August 2016) per G Lam J (as he then was) at §23-24; Re Cheng Kin Ching (unreported, HCB 47/2009, 8 May 2017) per Ng J at §28.

25.Here, the plaintiff is a money lender and it is impractical for the Property to be partitioned for it to be shared by the plaintiff and the 2^nd defendant. The Property is a residential flat of about 426 sq ft with a bay window area of 34 sq ft. It would neither be practical nor beneficial to the owners if a partition order were to be made.

26.As the defendants are not present in these proceedings, there is no evidence that making an order for sale would result in very great hardship to any of the co-owners.

27.For these reasons, it is in my view appropriate to make an order for sale.

Costs against the defendants

28.The plaintiff seeks costs against the 1^st defendant on a full indemnity basis and against the 2^nd defendant on a party-and-party basis.

29.I allow the plaintiff’s claim for costs against the 1^st defendants on an indemnity basis, as it is expressly provided under Clause 14 of the Second Mortgage.

30.However, as 2^nd defendant is not a party to any of the agreements and he/she did not contest these proceedings, I refuse to order costs against the 2^nd defendant.

Disposition

31.The plaintiff’s application is allowed. Subject to the amendments made at the hearing today, I make an order in terms of the draft order submitted to me.

Mr C. K. Ng of Ford, Kwan & Co. for the plaintiff

The 1^st and 2^nd defendants were acting in person and did not appear