Maxcolm Finance Ltd v. Leung Ma Lee Mary and Another

DCMP 2824/2023

[2025] HKDC 126

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2824 OF 2023

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BETWEEN

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DECISION

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1.Although I granted leave to the plaintiff to amend the Summons for leave to appeal with the Amended Draft Notice of Appeal during the hearing, the plaintiff’s application for leave to appeal is now refused.

2.The judgment concerned was the one I made on 8 January 2024 with Reasons for Judgment handed down on 28 March 2024 (collectively, “the Judgment” or “my Judgment”).

3.Grounds (1) (a) to (c) are not the reasons for my Judgment and therefore bound to fail. This court did not express any disagreement with the usual 15% discount taken on the market value when determining the value for sale under repossession.

4.Grounds (1) (d) and (e) are not the exact reasons for my Judgment either. This court did not conclude that the Valuation Report itself constituted a material non-disclosure or an attempt to mislead the court. Rather, it was the conduct of the plaintiff and the plaintiff’s solicitors that counted. The court found that there was no reasonable basis in evidence for the plaintiff to put forward a case of loss of title deeds, and consequently, this court had been misled.

5.Grounds (1) (f) to (h) refer to the plaintiff's assertion that this court failed to consider each of the applications—namely Order 83A, Order 88, and the Partition Ordinance—individually and independently. I do not agree. The plaintiff’s case was dismissed outright due to the discovery of misleading information. All the plaintiff’s affirmations in support of the applications were immediately discarded. I did not see any reason why the plaintiff’s affirmations should be accepted in part. As there was no credible affidavit before the court, the Originating Summons was dismissed (see Judgment, paras 12 & 54). These grounds have no prospect of success.

6.Grounds (1) (i) and (j) must also fail because the plaintiff has misconceived the meaning and application of Order 1A, rule 1(a) and (c), and rule 2(2). I do not consider that the court’s own motion in dismissing the plaintiff’s applications on the ground that the plaintiff has misled the court should yield to considerations of proportionality or procedural economy in these proceedings. Furthermore, I do not believe that such dismissal will give rise to any issue of res judicata if the plaintiff attempts to apply for an order for sale again, as long as the plaintiff provides credible affirmations and candid submissions. Of course, it will be up to the judge hearing the case to decide if such an issue ever arises.

7.As to Ground (1) (k), the plaintiff said that the court was wrong in concluding that the plaintiff’s solicitors were in breach of duty in misleading the court. The plaintiff submitted that it was, at most, insufficient evidence in support of a claim of “loss of title deeds”, and it would not constitute an attempt to knowingly mislead the court.

8.I shall refer to my Judgment at paragraphs 36 to 53, supported by Transcript 9L-S, 10H-K, and 12H-P, and I do not intend to repeat them here.

9.In my view, the plaintiff should have recognized that claiming outright that the title deeds are lost is very different from merely asking the court to determine whether the title deeds have indeed been lost. Worse still, the plaintiff asked the court to grant an order for sale based solely on their assumption that the title deeds were lost, without informing the court that this might not be the case. Therefore, I believe this ground does not have any prospect of success.

10.As to Ground (1) (l), the plaintiff said that this court was wrong in finding that the plaintiff’s solicitors had asserted a matter of fact something for which there was no reasonable basis in evidence (namely, the loss of title deeds). The plaintiff said that this court erred in neglecting the efforts of the plaintiff or the plaintiff’s solicitors made to the 1^st mortgagee (Buddy Finance) and the 1^st defendant in ascertaining the whereabouts of the title deeds and that, if there was no evidence as to the whereabouts of the title deeds, the Property would have to be sold at a further discount.

11.The plaintiff relies on the Affirmation of Ma Sau Mei filed on 8 February 2024 (“the Affirmation”) pursuant to the Order of this court dated 8 January 2024 with an extension of time being given. I refrained from dealing with the issues raised in the Affirmation before delivering the Reasons for Judgment on 28 March 2024, as the Affirmation was only ordered for the purpose of costs. I will now address the points raised therein.

12.In the Affirmation, Ms Ma corrected herself that she did, in fact, receive a telephone call from a Mr Ng of Buddy Finance. She stated that Mr Ng informed her that Buddy Finance did not possess the title deeds; however, Mr Ng would not reply to the Plaintiff in writing (allegedly in order to save costs). Ms Ma produced the letter of the plaintiff’s solicitors regarding this inquiry, along with a copy of the email in which she relayed the details of the telephone conversation to the plaintiff.

13.Even if I were to allow this new evidence for the purpose of this hearing for leave to appeal, it would not further the plaintiff’s case.

14.First of all, it would be wrong for the plaintiff to suggest that this court had mistaken that the 1^st mortgagee, Baddy Finance, did not reply. The Judgment was based on Ms Ma’s confirmation to the court at the hearing of the Originating Summons (“the OS hearing”) that Buddy Finance did not make any response to the plaintiff’s enquiry of whether they were in possession of the title deeds. During the OS hearing, plenty of time was given to Ms Ma to search through her records. And it was her confirmation made to the court that Buddy Finance did not reply and that the plaintiff had treated their no response as a loss of title deeds.

15.Second, it revealed two other salient evidence in the Affirmation:

(1) A draft valuation report was made on 24 July 2023 without any discount for the loss of title deeds. The market value of the Property and the value for repossession were initially valued at HK$7.68 million and HK$6.53 million, respectively. Upon receiving the said telephone call from Buddy Finance and the plaintiff’s further instructions, the plaintiff’s solicitors instructed the surveyor Midland to revise its valuation on the basis of loss of title deeds; hence the two values were revised to HK$5.76 million and HK$4.9 million, respectively. This shows that the plaintiff’s solicitors knew that the reserve price was lowered significantly by the final report (see Judgment, para 37); and

(2) Neither the plaintiff nor the plaintiff’s solicitors made any enquiries with the original mortgagee (Citibank) or any other previous money lenders/mortgagees. There is still no evidence as to whether the title deeds had been collected from the original mortgagee when the 20-year mortgage was paid off. This has been discussed during the OS hearing as well. Therefore, I do not agree that the plaintiff has used its best endeavors to locate the title deeds of the Property. In my view, the Affirmation merely confirmed that there was no statutory declaration being made or finding of the court for the loss of the title deeds (see Judgment, para 49). That is, at all material times, no one has ever come forward to verify that the title deeds were lost.

16.The plaintiff seems to suggest that if a money lender does not require the borrower to surrender the title deeds of the property at the time of borrowing, the risk that the money lender being unable to sell the property at a normal price would automatically be covered by a court order. It is suggested that the court order would enable the property to be sold at a distressed price due to the loss of title deeds.

17.In my opinion, the money lender was fully aware that the “loss of title deeds” was not the actual situation. Rather, it was merely a problem they had created themselves at the time of the lending when they did not require the title deeds from the borrower.

18.This situation becomes even more problematic when a joint owner (i.e. the 2^nd defendant) is involved. The innocent joint owner would have no choice but to witness their property being sold at a distress price of 40% discount, instead of 15%. If the plaintiff were able to obtain the court order, the 2^nd defendant’s share of the sale proceeds would inevitably be significantly reduced.

19.Ms Yau submits that she was informed that setting the reserve price based on the loss of title deeds is probably the common practice for solicitors when they do not know the whereabouts of the title deeds. I hope this is not the case.

20.Therefore, this ground of appeal also does not have any prospect of success.

21.There is no Ground (2) in the draft.

22.For the above reasons, the plaintiff’s application for leave to appeal is refused.

Miscellaneous

23.The plaintiff took issue that the 2^nd defendant had filed an affirmation on 16 February 2024, without leave of the court, in opposition to the Appeal Summons originally scheduled for a hearing on 26 February 2024. Ms Yau asked the court to remove this affirmation, as it, along with the affirmation affirmed on 13 August 2024 under the court’s directions, introduced new evidence.

24.I consider that the 2^nd defendant, as a respondent of the Appeal Summons, was entitled to file an affirmation in opposition even without the court’s directions. If necessary, I would grant retrospective leave for the 2^nd defendant’s filing.

25.However, I agree with Ms Yau that this court would not consider the new evidence presented by the 2^nd defendant, as it does not concern the plaintiff’s current application.

Disposition

26.Both the plaintiff’s summons for leave to appeal dated 2 February 2024 and the plaintiff’s summons for leave to appeal against costs dated 23 April 2024 are dismissed with costs.

27.This is the costs order I make:

(1) There be no order as to costs between the plaintiff and the 1^st defendant; and

(2) The plaintiff shall pay the 2^nd defendant’s costs of the application for leave to appeal (including the costs of the hearing on 26 February 2024) and costs of the application for leave to appeal against costs, to be taxed if not agreed.

Ms Mandy Yau, instructed by Siao, Wen and Leung, for the plaintiff

The 1^st defendant was not represented and did not appear

The 2^nd defendant appeared in person