Happy Mortgage Services Ltd v. Ho Yin Sang and Another

HCMP 1736/2017

[2025] HKCFI 1010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1736 OF 2017

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D E C I S I O N

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BACKGROUND

1.Before me is a Summon taken out by the Plaintiff for an order to vary the reserve price for the sale of a property which it had recovered from D1 (“the Summons”). 

2.The Plaintiff was a licensed money lender who, pursuant to a mortgage loan agreement dated 20 November 2015, lent HK$2,500,000 to D1.  D1 mortgaged his half share in a property then known as Lot No. 2322 in DD3, Tung Chung (“the Land”) to the Plaintiff as security.  The Land was co-owned by D1 and D2 in this case as tenants-in-common in equal shares.

3.In 2016, the Plaintiff obtained money judgment under HCA 716/2016 against the D1 upon the latter’s default in loan repayments.

4.As the judgment debt under HCA 716/2016 (“the Judgment Debt”) remained unpaid, the Plaintiff commenced the present action to enforce the mortgage.

5.As of 10 August 2023, the indebtedness owed by D1 to the Plaintiff was about HK$9.9 million.

6.On 17 August 2023, the Plaintiff obtained (in default of D1’s appearance) an order (“the Order”), which contained, amongst others, the following terms:

(1)  An order for partitioning the Land into 2 portions, one for D1, another for D2, as sole owners (§§1 and 2 of the Order);

(2)  An order for D1 to make payment of the Judgment Debt and deliver vacant possession to the Plaintiff (§6a);

(3)  An order that D1’s Property be sold with a reserve price of not less than HK$6,180,000 (§6b); [This is the subject of this variation application.]

(4)  Should D1 neglect and/or fail and/or refuse to execute such conveyance, contract or other documents or should D1 after reasonable inquiry not be found, Mr David Man be authorized to execute in place of D1 all such conveyance, contract or other documents as may be necessary to vest the title of D1’s Property to the purchaser (§9).

PROCEDURAL HISTORY AFTER THE ORDER FOR SALE

7.The Order was served on D1 on 28 August 2023 by way of ordinary post to D1’s address at the Land, being the usual and last known address of D1. 

8.The Land was partitioned into Lot No. 2322 SA (D2’s Property) and Lot No. 2322 RP (D1’s Property).

9.The Plaintiff recovered D1’s Property by writ of possession, which was executed on 13 August 2024.

10.No payment has been received from D1 to settle the Judgment Debt.  The Plaintiff thus proceeded to put D1’s Property for sale through an estate agent.

11.The first and only offer came in about September 2024 to purchase D1’s Property at HK$5 million and a preliminary sale and purchase agreement was signed by the intended purchaser with a proposed completion date of 26 March 2025.

12.Though the offer was lower than the reserve price, the Plaintiff still wanted to accept it as it had been kept out of its money for too long and there is no real prospect of full recovery from D1.

13.The updated valuation of D1’s Property as shown in the Plaintiff’s expert report dated 20 November 2024 was HK$4.75 million.

14.On 27 November 2024, the Plaintiff issued this Summons, seeking to reduce the reserve price to HK$4.75 million.  Alternatively, if no sale is concluded on or before 26 January 2025 but an offer of more than or equal to HK$5 million is received for D1’s Property from an independent purchaser, the Plaintiff (and/or the Plaintiff’s solicitors) shall be authorized and empowered to accept such offer to sell D1’s Property. 

SERVICE OF THIS SUMMONS

15.D2 has no interest in D1’s Property.  It is not necessary to serve D2.

16.With regard to D1, the Order and this Summons were served by post at the Land, “being the usual and last known address of D1”.  In my view, it was not valid service because the Plaintiff’s solicitors must have known that D1 could not have received notice at that address.  The reasons are that (i) it was plainly an outdated address after the partition; and (ii) the Plaintiff had already recovered possession of D1’s Property (as partitioned) through the bailiff.

17.When queried, the Plaintiff prayed in aid Order 65, rule 9 which excused the Plaintiff from serving D1, as the latter has never filed an acknowledgement of service and had been absent throughout the trial.

18.I do not consider this to be a valid answer as to service.  Properties (be it a piece of land or a unit in a multi-storey building) are valuable in Hong Kong.  No owner (or its descendants) would have lightly given it up.  The Court should not hastily deprive a judgment debtor of his property or enable solicitors to execute conveyancing documents pursuant to the power in paragraph 6(4) above before being satisfied that a judgment debtor having had notice of an order / judgment, but false and / or refused to comply.

19.In the present case, there is the added element that proceedings were started in 2017 and by now 7 years have lapsed.  The Court does not know if D1 is still alive. Accordingly, this Court directed the Plaintiff to make attempts to ascertain the whereabouts of D1 (including a probate search).

20.The 2^nd and 3^rd affirmations of Mr Yiu Tsz Hin now show that the Plaintiff does not have any other address or email of D1.  The telephone number once given by D1 to the Plaintiff could no longer reach D1, even after the last hearing of this summons.  The Plaintiff was not aware of any information of D1’s whereabouts from the goods and chattels found at D1’s Property at the execution of the Writ of Possession on 13 August 2024.  The Plaintiff has made enquiries of D2 but the latter could no longer contact D1.  The Plaintiff has done a probate search on 5^th February 2025 but it reaped no result as to D1.  With leave of the Court, the Plaintiff has, on 14 February 2025, placed an advertisement in a newspaper to give notice of these proceedings to D1. 

21.This Court is now satisfied as to service and I proceed to dispose of the Summons in the absence of D1.

VARIATION OF THE RESERVE PRICE

22.The Court has jurisdiction to give further directions to vary the reserve price under the “liberty to apply” limb in an order or on the ground that there are change of circumstances in order to effect the sale of the property: Lam Chok Lai v The Official Receiver and Trustees in Bankruptcy of Lam Chok Wai [2021] 1 HKLRD 1185, §18, DHCJ William Wong SC.

23.Giving further directions to meet the updated valuation of the Property in the light of failed attempts to sell in accordance with an order for sale may be an option compared to varying the order for sale: Morning Dew Finance Ltd v Wong Wing Yan [2020] HKCFI 2682, Keith Yeung J, §§9-10.  In that case, the learned judge authorized the immediate sale of the property at a reduced price of HK$9 million to start with, which may be lowered further to HK$8.8 million if the sale could not be effected within 3 months.

24.In the present case, I am satisfied that the Plaintiff has tried to D1’s Property but to no avail.  There has been change in circumstances since the Order was made in that the property market has fallen.  HK$5 million was the best offer the Plaintiff could get so far, but it was below the current reserve price.

25.D1 has been absent in these proceedings all along and has not made any payment to the Plaintiff since the Order.  It is highly unlikely that he would make any repayment to the Plaintiff in future.  As a judgment creditor, the Plaintiff has already suffered great loss from D1’s default since 2016.  Any further drop in the property market may further reduce the amount that the Plaintiff could recover, whilst interest continues to accrue on the Judgment Debt.

26.In the premises, I grant an order in terms of paragraph 14 above.

COSTS

27.The Plaintiff seeks over $120,000 on costs which are excessive for an application like this. Much of the delay and costs incurred were caused by the inadequate service on the part of the Plaintiff.  On a nisi basis, costs of this application shall be borne by D1, summarily assessed in the amount of HK$80,000.

28.I thank counsel for his assistance.

Mr Samuelson T.L. Choi, instructed by, David Y.W. Man, for the Plaintiff

The 1^st Defendant did not appear