Oriental Fa Ltd v. To Yuen Fang Louise and Another

HCA 919/2024

[2025] HKCFI 3886

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 919 OF 2024

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D E C I S I O N

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INTRODUCTION

1.This is the decision in respect of the summons taken out by the plaintiff (“P”) dated 15 July 2025 (“the Summons”) seeking default judgment against the 2^nd defendant (“D2”) for:

(a)  delivery to P of vacant possession of the properties known as (i) Units A and B on 27^th Floor of Century Tower I, Century Tower, Nos. 1 and 1A Tregunter Path, Hong Kong; and (ii) Car Parking Spaces Nos. 62 and 75 on Level 3, Century Tower, Nos. 1 and 1A Tregunter Path, Hong Kong (“Mortgaged Properties”); and

(b)  payment of (i) HK$131,248,000.00 being the aggregate of the outstanding balance of the loan in the sum of HK$130,000,000 (“the Outstanding Loan”) and accrued interest calculated up to 6 April 2024; and (ii) interest on the Outstanding Loan at the rate of 11.52% per annum (on the basis of actual number of days elapsed and a 365-day year) from 7 April 2024 until date of full repayment of the Outstanding Loan.

2.The Summons was taken out pursuant to the order and directions I made in the Decision handed down on 24 June 2025 in this case (“the Decision”) whereby (i) the 1^st Defendant (“D1”) and D2’s respective defence and counterclaim were struck out; and (ii) summary judgment was granted against D1.

BACKGROUND

3.The background of this matter has been set out in §§10-33 of the Decision. I shall not repeat them here.

DISCUSSION

4.The reason for the need of the Summons, consequent upon the Decision, is addressed in §§22-30 of the Decision. In gist:

(a)  Under Order 14 rule 1(3), there can be no summary judgment for a possession order of mortgaged properties. Therefore, the mortgagee would have to first apply to strike out the defence of the mortgagor, followed by an application for judgment in default of defence: Decision §§22-24.

(b)  Although typically default judgment would be sought in the same summons as the strike out (Decision §§25-26), such that the plaintiff in mortgage action would be able to obtain the possession order on the same occasion, at the call-over hearing on 28 October 2024, Master Maurice Lam took the view that the application for default judgment should take place as a further and separate step after the striking out, and made case management orders on that basis: Decision §27.

(c)  Although Master Lam’s views were, in P’s submissions, contrary to the authorities and the underlying objectives (Decision §28), the view was taken that the practical solution was to proceed with the summons before the Court as is, but have robust directions for a default judgment application after D2’s defence and counterclaim was struck out. I agreed that this as the best course forward: Decision §§29-30.

5.Since D2’s defence and counterclaim has been struck out, default judgment should follow as a matter of course: see the authorities cited at Decision §§25-26.[1]

6.In light of the procedural history outlined above, D2 already has had an opportunity to defend P’s request for summary determination. Its Unenforceability Defence was abandoned (Decision §33), and its Estoppel Defence was struck out by the Court (Decision §§55-103). It is clearly impermissible for D2 to seek to have a second bite on the cherry in the context of the Summons before the Court now.

7.In my view, the fact that at the previous hearing under the Order 14 summons, D2 had failed to replace its solicitors in time such that its submissions were ignored by this Court (Decision §§3-9) does not detract from this. I agree with P that D2 clearly cannot benefit from its own procedural blunder.

8.For P to obtain default judgment in a mortgage action, an affirmation in compliance with Order 88 rule 5 should be filed for the purpose of protecting inter alia the mortgagor: ETC Finance Ltd §§5-13. I am satisfied that this requirement has been met: see Ms Lui’s 3^rd Affirmation (“Lui 3^rd”) §§29-30. Other relevant statutory requirements are also satisfied at Lui 3^rd §§26-28, 31.

9.Mr Tang for P has drawn to the Court’s attention that Order 88 rule 5(2) and Order 83A rule 4(2)(a), (4) appear to contemplate that a default judgment application would be determined at a hearing. However, in my view, the Court clearly has power to dispense with the hearing: see Order 1B rule 1(2)(l), which states that the Court may “take any other step... for the purpose of managing the case and furthering the underlying objectives”. In Maxcolm Finance Limited v Cheng Chi Man and Another [2019] HKCFI 1573 (B Chu J), a similar application for inter alia money judgment and vacant possession was to be determined on paper, unless further directed by the Court: §4.[2]

10.I agree with Mr Tang that the direction for paper disposal, which promotes expediency, is plainly sensible in these circumstances given that D2 already has had an opportunity to defend against summary determination, and that there has been adequate protection for the mortgagor in light of §8 above.

Alleged non-compliance with Order 88 rule 5(4)

11.D2 submits that, pursuant to Order 88 rule 6(4), where a summons for leave under this rule (ie a summons for default judgment in a mortgage action commenced by writ) is issued in an action to which rule 5 would apply if the action had been begun by originating summons, the affidavit in support of the summons must contain the information required by Order 88, rule 5.

12.D2 alleges that it appears P has failed to comply with the relevant procedural requirements as required under Order 88 rule 5.

13.Pursuant to Order 88 rule 5(4), the affidavit in support must provide specific particulars of every person who, to the best of P’s knowledge, is in possession of the Mortgaged Properties.

14.If P has knowledge that other persons are in occupation of the mortgaged property instead of the defendant, then a notice of the application and hearing date should be given to each occupier by letter and copies of these letters should be produced at the hearing if not exhibited to the affidavit: see HKCP 2025, §88/5/7 and DBS Bank (Hong Kong) Ltd v Ngai Yim Shing and Another [2005] 2 HKLRD 740 §23 (“Ngai Yim Shing”).

15.D2 says that this requirement is a very important one, and failure to comply with this rule will not be waived because its purpose is to protect the rights of third parties: see HKCP 2024, §88/5/7.

16.In Ms Lui’s 1^st affirmation (“Lui 1^st”), she affirmed that she believes Unit 27A, Century Tower 1, 1 Tregunter Path, Hong Kong (“Unit A”) was leased to Lam & Co (“Lam & Co”) (Lui 1^st §57), and the same statement has been referred to in Lui 3^rd §29.

17.D2 submits that it is not aware of any evidence that:

(a)  P has taken any steps to investigate if Lam & Co continues to be in occupation of the Mortgaged Properties; or

(b)  P has given any notice to Lam & Co regarding the Summons or these proceedings by way of letter.

Alleged non-compliance with Order 88 rule 5(2)

18.Order 88 rule 5(2) also requires that the original mortgage be produced at the hearing of the Originating Summons.

19.While the Court have held in Bank of China (Hong Kong) Limited v Fu Ming Kong Michael and Another (unrep, HCA 7769/2000, 22.07.2005) §71 (“Fu Ming Kong”) that this requirement does not apply to the trial of an action commenced by originating summons but later ordered to continue as if begun by writ, D2 submitted that the decision was based on the particular facts of that case only.

20.D2 submits that the facts in this action is factually distinguishable from Fu Ming Kong. While this action was commenced by writ from the outset, there has not been any discovery carried out. Unlike Fu Ming Kong, where there was full discovery and there was also evidence adduced at trial that the original mortgage had been lost.

21.P has not indicated that it cannot produce the original mortgage. Accordingly, D2 submits that P should not be excused from the production of the original mortgage.

Ruling on alleged non-compliance with Order 88 rule 5

22.In my judgment, the technical objections raised by D2 above are futile and should be soundly rejected.

23.Insofar as the compliant of non-compliance is based on Order 88 rule 5(4), I am of the view that the particulars of those in possession of the Mortgaged Properties (being D1, Lam and/or Lam & Co) were addressed in Lui 1^st §57, to which Lui 3^rd §29 refers. It was stated that Unit A was, based on D2’s defence and counterclaim §23, purportedly leased to Lam & Co.

24.However, as Mr Tang has pointed out, (i) the tenancy was created in breach of the Mortgage (Lui 1^st §42.3); and (ii) D1 is in control of both D2 (Decision §13) and Lam & Co (being one of its two directors, and its sole shareholder): Lui 1^st §42.3;

25.The gist of D2’s complaint is that (i) P should have investigated whether Lam & Co continues to be in occupation; and (ii) notice should have be given to Lam & Co, because Order 88 rule 5(4) is designed to protect third party occupiers.

26.I agree with P that (i) is a misnomer: if Lam & Co no longer occupies Unit A, then it is not a third-party occupier which will be affected by the possession order. In any event, there is no positive duty on the mortgagee to ascertain the identity of the occupants before obtaining possession: Ngai Yim Shing §12.[3]

27.As to (ii), I agree with P that giving notice to a third-party occupier is not an immutable rule but a good practice only: HKCP 2025 §88/5/7; Ngai Yim Shing §23, (as the court would be “interfering unjustifiability” with the legislature’s policy if it were to insist on actual notice: Ngai Yim Shing §§15-16).

28.In my judgment, there is no need for any notice to Lam & Co because it is clearly not a “third party” occupier which requires protection under Order 88 rule 5(4), given that it and D2 are under D1’s common control. It is impossible that it does not have notice of these proceedings.

29.In any case, even if it were a third-party occupier, relief should not be denied. Persons in occupation as tenants of the borrower will usually only have rights binding on the mortgagee if either (1) their tenancy was created before the grant of the mortgage or (2) the mortgagee consented to the creation of the tenancy: HKCP 2025 §88/5/7. Otherwise, the tenancy would be created in breach of the legal charge and could not bind the plaintiff, and the third-party occupier’s opposition to the stay order would fail: Ngai Yim Shing §§10, 12. This is precisely the case for Lam & Co: Lui 1^st §42.3.

30.Insofar as the alleged non-compliance with Order 88 rule 5(2) is concerned, I agree with Mr Tang that this is a collateral attack on the Court’s direction for paper disposal in Decision §105(c)(iii). It is nonsensical to allege non-compliance with a requirement to produce the original mortgage “at the hearing of the [originating] summons” where there will be no physical hearing. If necessary, this can easily be addressed by the Court to have a short hearing for P to produce the original mortgage. However, given the particular circumstances of this case, I do not consider that is necessary. It will just be a waste of time and costs for all parties concerned.

31.In any event, the answer lies in the fact that the requirement under Order 88 rule 5(2) only applies to actions began by originating summons, but not actions commenced by writ like the present action: Fu Ming Kong §§65-67; GE Capital (Hong Kong) Limited v Lo Wai Man and Another (HCMP 1249/2009, 23.02.2016) §10; and HKCP §88/5/6.

32.Lastly, I agree with Mr Tang’s submissions that D2’s attempt to distinguish Fu Ming Kong must fail. There is no reason why the requirement to produce the original mortgage at a hearing should depend on whether the discovery has taken place. None of the above authorities have explained the disapplication of Order 88 rule 5(2) to writ actions on this basis.

Delivery of Possession

33.In the event that the Court is minded to grant default judgment, D2 invites the Court to grant a period of 42 days after service of the Order to deliver possession of the Mortgage Premises (which are residential property) instead of the usual 28 days: see HKCP 2025 , §88/5/9.

34.D2’s solicitors submit that D2, together with the borrower (D1), are actively seeking to sell the Mortgaged Properties and expect that the sale proceeds from such sale will be sufficient to pay all the outstanding sums in full: see Chekiang First Bank Ltd v Ko Hoi Luen & Another [1999] 3 HKLRD 360 at 362-363 (“Ko Hoi Luen”).

35.However, D2 has not produced any evidence to support the same.

36.D2 further submits that granting this suspension sough will not prejudice P as the value of the Mortgaged Properties exceeds the amount of the Outstanding Loan.

37.I do not see why this is relevant.

38.In my judgment, there is no reason to depart from the usual order of possession within 28 days after service: HKCP 2025 §88/5/9.

39.The Court will only afford more time to the mortgagor if there is evidence of “a reasonable prospect of payment being made”: Ko Hoi Luen, 362H-I; HKCP 2025 §88/5/11. D2 has adduced no evidence save a bare assertion that it is seeking to sell the Mortgaged Properties. The request for 42 days suspension must be rejected.

CONCLUSION

40.Based on the aforesaid, I will grant an order in terms of §1 of the Summons, with the words “within 28 days from the date hereof” to be added after the words “The 2^nd Defendant do”.

41.Costs of the Summons should be awarded to P on an indemnity basis, pursuant to Mortgage Clauses 2.01(j) & 20.01; Original Agreement Clauses 9.1-9.2: see Decision §105(d).

42.I so make the above orders against D2.

Mr Danny Tang, instructed by Iu, Lai & Li, for the plaintiff

Wellington Legal LLP for the 2^nd defendant