Konew Capital International Ltd v. Hui Yuk Ming and Another

DCMP 6839/2024

[2025] HKDC 921

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 6839 OF 2024

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REASONS FOR JUDGMENT

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A.  Introduction

1.By Originating Summons dated 9 December 2024 (“OS”), the plaintiff applied for a money judgment against the 1^st defendant pursuant to Order 83A of the Rules of the District Court, Cap 336H (“RDC”) and for an order for delivery of vacant possession and an order for sale against the 1^st and 2^nd defendants of the property known as Flat D on 1^st Floor, and Flat roof appertaining thereto of Tower 2, Metro City, Phase II, 8 Yan King Road, Tseung Kwan O, Sai Kung, New Territories (“the Property”) pursuant to Order 88 of the RDC and Sections 2, 3 and 6 of the Partition Ordinance, Cap 352 (“PO”).

2.The OS was heard by Deputy District Judge Damian Wong on 20 March 2025 (“the 1^st Hearing”) where the hearing was then adjourned for the plaintiff to file a supplemental affirmation to update the 1^st defendant’s indebtedness to the plaintiff upon the 1^st defendant making a partial repayment of HK$90,000.00 on 19 March 2025, i.e. one day before the 1^st Hearing (“the Supplemental Affirmation”). During the 1^st Hearing, the 1^st defendant was present. He was explained the nature of the plaintiff’s claim, and was reminded to discuss the matter with the 2^nd defendant who is the 1^st defendant’s wife with interest in the Property and of their right to seek legal advice (including the right to file affirmation to indicate his/her position regarding the OS) during the adjournment.

3.Despite the reminder given by the Court during the 1^st Hearing, neither the 1^st nor the 2^nd defendant has filed any affirmation in response or in opposition. They have not filed any Acknowledgement of Service and there is no notice of intention to defend given by any of them.

4.The 2^nd defendant was absent again at the adjourned hearing on 28 May 2025. During the hearing, I was notified by the plaintiff’s solicitors that the 1^st defendant had made another partial repayment of HK$50,000.00 on 23 May 2025. The same was confirmed by a further supplemental affirmation of the plaintiff’s solicitors dated 27 May 2025 (which includes a summary of a further updated indebtedness to the plaintiff by the 1^st defendant) (“the Further Supplemental Affirmation”). After hearing from the plaintiff’s solicitors and the 1^st defendant who did not object to the application (other than asking for more time for repayment and whether he could also attempt to sell the Property in the meantime), I granted an order in terms of the draft order sought by the plaintiff as amended. Here are my reasons for my Judgment.

B.  Service

5.The OS and supporting affirmation as well as the Supplemental Affirmation were served on the 1^st and 2^nd defendants at the Property, being their usual and last known address. The notice of appointment to hear the OS, the Order made by the court at the 1^st Hearing and the notice of adjournment to hear the OS (for this adjourned hearing) were also served to the said usual and last known address of the 1^st and 2^nd defendants.

6.The OS and Notice to Occupants had also been posted up at a conspicuous place at the main entrance of the Property.

7.Having considered the affirmations of service filed by the plaintiff’s solicitors, I am satisfied that the 1^st and 2^nd defendants have had due notice of these proceedings and hearing, and the 2^nd defendant has chosen not to take any action nor to appear. There is no reason that the hearing should not proceed in her absence.

8.Further, according to the affirmation of service filed by the plaintiff’s solicitors, notice of these proceedings had also been served on the Director of Lands and the other encumbrancers, namely Fubon Bank (Hong Kong) Limited (formerly known as International Bank of Asia Limited), the First Mortgagee of the Property (“Fubon Bank”). As at the date of the adjourned hearing, no objection had been received from those informed parties.

C.  Background

9.The plaintiff is a licensed money lender.

10.The 1^st and 2^nd defendants are the registered owners of the Property as joint tenants.

11.By a Second Mortgage dated 4 April 2022, the 1^st defendant as borrower on one part and the plaintiff as the lender on the other part, the 1^st defendant charged his interest in the Property to the plaintiff to secure the repayment of the general credit facilities to the extent of HK$2,500,000.00 together with interest and cost accrued thereon (“the General Credit Facilities”).

12.By a previous loan agreement also made on 4 April 2022, the plaintiff agreed to lend a sum of HK$2,000,000.00 subject to the terms and conditions set out therein (“the Previous Loan”). The Previous loan was then settled and refinanced by a loan evidenced by a loan agreement made on 2 August 2022 where the plaintiff agreed to make available to the 1^st defendant a loan in the sum of HK$2,250,000.00 subject to the terms and conditions set out therein (“the 2^nd Previous Loan”).

13.Such 2^nd Previous Loan was then later settled and refinanced by another loan evidenced by another loan agreement made on 16 February 2024 where the plaintiff agreed to lend a sum of HK$2,254,587.00 (“the Loan Agreement”) to the 1^st defendant for a term of 96 months, at the interest rate of 25.20% per annum (with the 1^st instalment of HK$53,167.00 payable on or before 15 March 2024, the 2^nd to 95^th instalments of HK$54,799.00 and the last instalment of HK$54,747.00 each payable on or before the 15^th day of each subsequent month)(“the Loan”). The Loan Agreement was also evidenced in writing by a Memorandum dated also on 16 February 2024 which was signed by the 1^st defendant at the time of entering into the Loan Agreement.

14.The Loan, the Previous Loan and the 2^nd Previous Loan were all granted pursuant to the General Credit Facilities.

D.  Money Judgment

15.It is the plaintiff’s case that the 1^st defendant defaulted in repaying the monthly instalments of the Loan since 15 October 2024. Pursuant to Clause 8(a) of the Loan Agreement, the plaintiff through its solicitors issued a demand letter to the 1^st defendant on 12 November 2024 for the repayment of all outstanding principal and interest due under the Loan Agreement within 7 days, failing which the plaintiff would institute legal proceedings against him for recovery of the same and enforcement of the Second Mortgage. Despite such written demand, the 1^st defendant only made partial repayments (including the one made on 19 March 2025 and 23 May 2025) to the plaintiff. The outstanding amount of the Loan and the interest accrued remained unpaid. According to the Further Supplemental Affirmation, as of 27 May 2025, the outstanding principal and accrued interest were HK$2,321,482.65.

16.Having taken into account the documents filed before me:-

(1)  I am satisfied that the statutory requirements under section 18(1) and 18(2) of the Money Lenders Ordinance, Cap 163 (“MLO”) have been complied with. The interest rate under the Loan is permissible under the MLO and there is no evidence before this Court disputing the validity of the Loan Agreement and the Second Mortgage; and

(2)  There is no dispute that the 1^st defendant has been in default in the repayment of the Loan despite the request by the plaintiff and there is also no dispute that the latest calculation by the plaintiff of the breakdown of indebtedness appears to be in order.

17.The plaintiff has also in form and in substance complied with the requirements of a moneylender’s action under Order 83A of the RDC.

18.In the circumstances, I consider that this is an appropriate case for money judgment to be entered in favour of the plaintiff against the 1^st defendant for the outstanding principal and interest under the Loan Agreement.

E.  Vacant Possession of the Property

19.Clause 7.1 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 amount payable on the due date or comply with a demand for repayment under the Second Mortgage, and pursuant to Clause 8 of the Second Mortgage, the security under mortgage has become enforceable and the plaintiff is entitled to enter into, take possession or dispose of the Property.

20.It is stated in the Second Mortgage that the Property was mortgaged or charged to Fubon Bank for securing general banking facilities/general credit facilities granted by Fubon Bank to the 1^st defendant back on 8 March 2001. By letters dated 17 February 2025 and 24 April 2025, the plaintiff’s solicitors informed Fubon Bank, being the First Mortgagee, of these proceedings and this hearing. According to the plaintiff’s solicitors, no reply has been received by the plaintiff or its solicitors from Fubon Bank.

21.Having considered the documents before me, I am satisfied that the requirements of Order 88 of RDC have been complied with, and by reason of the default of the 1^st defendant, the plaintiff is entitled to an order for possession of the Property, subject to the rights of Fubon Bank.

F.  Order for sale

22.Section 2 of the PO provides that, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the court may make an order for partition of the property under section 4 of the PO, an order for sale of the property under section 6 of the PO, or refuse to make any order.

23.Section 3 of the PO, provides that any person interested in property held in the manner referred to in section 2 (namely property in land being held by 2 or more persons whether as joint tenants or as tenants in common) may institute proceedings in the Court under the said Ordinance by way of an action for partition or sale.

24.As helpfully summarised by Deputy District Judge Kay Seto in Konew Capital International Limited v Lau Kwan Pak [2024] HKDC 624 at §23, it is well established that:-

(1)  An interested person is confined to a person holding an interest in possession: Fortis Bank Asia HK v Yu Kam Hoi and Anor, (HCMP 134/2002, 4 March 2004), per Reyes J at §56; and

(2)  A mortgagee of a partial interest is considered a “person interested” within the meaning of section 3(1) of the PO, and is thus entitled to apply for partition or sale of the property: Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224, per HH Judge Andrew Li at §§22-23 and cited by DHCJ Jenkin Suen SC in Ego Finance Limited v Poon Sau Han Joanna and Anor [2023] HKCFI 868 at §21 and DHCJ Jonathan Wong in Maxcolm Finance Limited v Pun Lap Shing and Anor [2024] HKCFI 603 at §6.2.

25.As the 1^st defendant was in default, the plaintiff as mortgagee became a person holding an interest in the 1^st defendant’s share of the Property. As to whether discretion should be exercised to order partition or sale of the Property:-

(1)  Section 6(1) of the PO provides that the court may make an order for the sale of the Property where it appears to the court that a partition of the property would not be beneficial to all the persons interested by reason of:-

(a)  The nature of the land to which the proceedings relate;

(b)  The number of the persons interested or presumptively interested;

(c)  The absence or disability of some of the persons interested; or

(d)  Any other circumstances.

(2)  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 (HCB 8430/2006, 20 August 2015) per G Lam J (as he then was) at §§23-24; Re Cheng Kin Ching (HCB 47/2009, 8 May 2017) per Ng J at §28.

26.In this present case:-

(1)  It is the plaintiff’s case that given the nature of the property, partition of the property is impracticable and not beneficial to the co-owner. The Property is a residential flat in a multi-story building, with a saleable area of about 538 sq ft. I have considered the floor plan of the property, and I accept that it is impracticable to divide the Property. It would also not be beneficial to any owners; and

(2)  Neither the 1^st nor the 2^nd defendant has filed any evidence that an order for sale would not be beneficial or would cause great hardship to any of them.

27.Accordingly, I am of the view that it is appropriate to make an order for sale, but such an order is subject to the rights of Fubon Bank. In that regard, the plaintiff’s proposed reserve price is set by reference to a valuation report of a professional surveyor Citiland Surveyors Limited dated 27 February 2025 (“Valuation Report”). I accept the valuation is fair and reasonable, and in the absence of evidence from the 1^st and 2^nd defendants to suggest otherwise, I direct that the Property shall be sold either by public auction or private treaty with a reserved price at HK$5,500,000.00 (as proposed by the plaintiff and set by reference to the Valuation Report).

G.  Conclusion

28.For the above reasons, I make an order in terms of the Draft Order as amended attached to the written skeleton submissions of the plaintiff’s solicitors. These draft orders are broadly in line with the usual orders made in proceedings of the present nature and contain sufficient provisions to safeguard the interests of Fubon Bank and the 2^nd defendant.

29.Insofar as costs are concerned, the plaintiff only seeks costs against the 1^st defendant. I allow the plaintiff’s claim for costs against the 1^st defendant on an indemnity basis (as it is expressly agreed by the 1^st defendant under Clause 21 of the Second Mortgage and Clause 14 of the Loan Agreement), summarily assessed at HK$82,000.00.

30.There shall be no order as to costs between the plaintiff and the 2^nd defendant.

31.At the hearing, I have told the 1^st defendant that my Reasons for Judgment would be prepared in English, but he can arrange with my clerk to have it interpreted to him when it is handed down.

Miss Annie Ma of Siao, Wen and Leung for the plaintiff

The 1^st defendant appeared in person

The 2^nd defendant was not represented and did not appear