Konew Capital International Ltd v. Lam Chi Tat and Another

DCMP 1325/2026

[2026] HKDC 1000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1325 OF 2026

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BETWEEN

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REASONS FOR DECISION

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A. INTRODUCTION

1.This is a moneylender and mortgagee action commenced by originating summons dated 24 February 2026 (the “O/S”) under Orders 83A and 88 of the Rules of the District Court (Cap 336H) (“RDC”).

2.At all material times:-

(1) the plaintiff was and is a licensed money lender; and

(2) the 1^st and 2^nd defendants were and are the registered owners and tenants in common in equal shares of the property known as ALL THAT one equal undivided 8^th part or share of and in ALL THAT piece or parcel of ground registered in the Land Registry as SUBSECTION 5 OF SECTION A OF NEW KOWLOON INLAND LOT NO 20 And of and in the messuages erections and buildings thereon now known as NO. 270 TAI NAN STREET (the “said Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT the FIRST FLOOR of the said Building (the “Property”).

3.On 17 August 2020, the plaintiff and the 1^st defendant entered into a loan agreement (the “Loan Agreement”), under which the plaintiff advanced a loan of $1,500,000 to the 1^st defendant (the “Loan”) at the interest rate of 24% per annum.

4.Pursuant to the Loan Agreement, the Loan was to be repaid together with interest by the 1^st defendant in 84 monthly instalments with the final instalment to be paid on 17 August 2027. The Loan was immediately used to pay off the 1^st defendant’s existing loans to the plaintiff that was outstanding on 17 August 2020.

5.The plaintiff claims that the 1^st defendant has defaulted on the monthly repayments since 17 March 2025, has not complied with the demands for repayment issued by the plaintiff, and that the entire sum of the loan has become due and payable. To date, the amount of principal owed under the Loan is $887,251.28.

6.The Loan is secured by a Mortgage previously executed by the 1^st defendant in favour of the plaintiff on 17 March 2020 (the “Mortgage”), whereby the 1^st defendant charged his interest in the Property to the plaintiff as security on an “all monies” basis up to the maximum sum of $1,500,000.

7.By a Notice of Appointment to Hear Originating Summons dated 26 March 2026 (the “Notice of Hearing”), the plaintiff seeks (among others) orders as follows:-

(1) payment of all monies by the 1^st defendant that are due to the plaintiff under the Mortgage;

(2) delivery of vacant possession of the Property by the 1^st and 2^nd defendants;

(3) that the Property be sold with the sales proceeds to be distributed.

B. SERVICE OF PROCEEDINGS ON THE DEFENDANTS

8.Based on the affirmations of service filed by the plaintiff, I am satisfied that:-

(1) the plaintiff has duly served the O/S on the defendants on 27 February 2026 by inserting the O/S through the letter box of the Property, being the usual and last known address of the defendants;

(2) the plaintiff has also served the O/S on the 1^st defendant’s other last known address in Tseung Kwan O (“D1’s Other Address”) by inserting the same through the letter box on 27 February 2026;

(3) a copy of the O/S was also posted up at a conspicuous place of the main entrance of the Property on 27 February 2026;

(4) copies of the Notice of Hearing were served on the 1^st and 2^nd defendants by insertion into the letter box of the Property on 11 May 2026;

(5) a copy of the Notice of Hearing was also served on the 1^st defendant by insertion into the letter box of D1’s Other Address on 11 May 2026;

(6) a Notice to Occupant dated 8 May 2026 (“Notice to Occupant”) was posted at entrance to the Property on 11 May 2026;

(7) copies of the affirmation of Lee Oi Ling dated 21 May 2026 and filed on 22 May 2026 (“Lee Affirmation”) in support of the O/S together with exhibits were served on the 1^st and 2^nd defendants by insertion through the letterbox of the Property on 22 May 2026;

(8) a copy of the Lee Affirmation was also served on the 1^st defendant by insertion into the letter box of D1’s Other Address on 22 May 2026;

(9) a copy of the O/S was served on the Director of Lands (the “Director”) on 26 March 2026;

(10) copies of the Notice of Hearing and the Notice to Occupant were served on the Director on 11 May 2026;

(11) a copy of the Lee Affirmation was served on the Director on 22 May 2026; and

(12) the hearing bundle and the plaintiff’s skeleton submissions for the hearing were served on the defendants and the Director on 26 May 2026.

9.The 1^st and 2^nd defendants have failed to file any Acknowledgement of Service.

10.Therefore, I am satisfied that the relevant documents have been served on the defendants and reasonable steps have been taken to notify the defendants of the present hearing. Pursuant to RDC O 28 r 4(1), it is appropriate for the court to proceed to determine the O/S notwithstanding the absence of the defendants.

C. DISCUSSION

C1. Compliance with RDC O 83A & 88 and Money Lenders Ordinance

11.As the O/S is an action by a moneylender to enforce the Mortgage which secures the Loan, both RDC O 83A and O 88 apply to these proceedings.

12.In the present case, the requirements under RDC O 83A rr 3- 4 and O 88 rr 4-5 are satisfied:-

(1) as noted above, the Notice of Hearing was duly filed and served;

(2) the Lee Affirmation contains the requisite particulars and information pursuant to RDC O 83A rr 3-4 and O 88 r 5; and

(3) the original Loan Agreement and the Mortgage were provided to the court for inspection at the hearing.

13.Having perused the Loan Agreement, I am satisfied that the requirements under section 18(1) and (2) of the Money Lenders Ordinance (Cap 163) (“MLO”) concerning the form of a moneylender’s agreement for repayment of money have been complied with. As the interest rate of the Loan Agreement is only 24% per annum, the transaction is not subject to reopening under section 25 of the MLO.

C2. Money judgment

14.As held by Deputy District Judge Alexsander Wong in Konew Capital International Limited v Ho Wai Han & ors [2026] HKDC 920 at §§16-18, although RDC Order 83A rule 2(1) provides that every money lender’s action may be begun by writ, this is not a mandatory requirement. Where proceedings were commenced by way of originating summons, it is sufficient that the requisite information under O 83A r 3 are set out in an affirmation in support.

15.I am satisfied on the basis of the Lee Affirmation and the exhibits thereto that the plaintiff has established its claim that the 1^st defendant failed to fully repay the Loan despite written demands from the plaintiff.

16.Next, I am also satisfied that the plaintiff is entitled to interest at the contractual rate of 24% per annum. According to the breakdown of indebtedness including interest up to 21 May 2026:-

(1) The principal of the Loan due and owed by the 1^st defendant was $887,251.28.

(2) The amount of interest accrued on the principal was $191,627.74.

(3) Pursuant to Clause 7 of the Loan Agreement, the 1^st defendant is also liable to pay interest on the interest element of the arrears of instalments at the contractual rate of 24% per annum. The amount of such interest accrued was $30,285.50[1].

17.Hence, the total amount of principal together with interest payable as at 21 May 2026 is $1,109,164.52. Further interest shall accrue at the contractual rate of 24% per annum from 22 May 2026 onwards until payment on the sums of: (i) $887,251.28 (being the principal sum) at the daily rate of $583.40; and (ii) $80,717,00 (being the outstanding interest element) at the daily rate of $53.07.

C3. Possession of the Property

18.The Loan falls within the definition of “Secured Indebtedness” under the Mortgage, which covers all sums from time to time advanced by the plaintiff to the 1^st defendant and all interest thereon and all other moneys and obligations in respect of moneys which the 1^st defendant covenants to pay the plaintiff under Clause 2.01 of the Mortgage but subject to Clause 2.02 of the Mortgage which provides that the amount recoverable shall be limited to the principal sum of $1,500,000.00 with interest, commission and all relevant costs, charges and expenses.

19.Under Clause 2.01, the 1^st defendant covenants to pay to the plaintiff on demand (amongst others) the following sums:-

(1) all sums of money which at the date of such demand may be outstanding and according to the books of the plaintiff payable by the 1^st defendant (Clause 2.01(a));

(2) all principal, interest and any other moneys outstanding and payable by the 1^st defendant under any term loan account maintained with the plaintiff in the name of the defendant (Clause 2.01(h));

(3) all costs, charges and expenses which may be incurred under or in connection with any other matter arising under or in consequence of the Mortgage or in connection with the Property (Clause 2.01(j))

20.Under Clause 5.01 of the Mortgage, an event of default occurs if (among others): (i) the 1^st defendant defaults in the payment of the Secured Indebtedness or any part thereof following demand duly made (Clause 5.01(a)); or (ii) the 1^st defendant defaults on the due date and in accordance with the terms and conditions relating thereto of any principal or interest or other moneys outstanding and payable by the 1^st defendant (Clause 5.01(b)).

21.Under Clause 6.01 of the Mortgage, upon the occurrence of an Event of Default, the plaintiff as mortgagee may enter into and take possession of the Property and to (amongst others) exercise any powers or rights incidental to the ownership of the Property.

22.Hence, the plaintiff is entitled to enter into and take possession of the Property upon the 1^st defendant’s failure to comply with a demand for repayment of the Loan.

23.Accordingly, it is appropriate for the court to make an order of possession of the Property against the defendants such that the plaintiff would be allowed to obtain vacant possession of the Property.

C4. Order for sale of the Property

24.The relevant principles are well established and were helpfully summarised by Deputy District Judge Kay Seto in Konew Capital International Limited v Lau Kwan Pak & Another [2024] HKDC 624 at §§21 to 26:-

(1) Section 2 of the PO provides that, where any property in land is held by two 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;

(2) Section 3(1) of the PO provides that any person interested in such property may institute proceedings under the PO for an order for sale;

(3) An interested person includes a mortgagee of a partial interest for the purposes of section 3(1) of the PO, and is thus entitled to apply for an order for sale of the property;

(4) Section 6(1) of the PO empowers the court to 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 land to which the proceedings relate, (b) the number of persons interested or presumptively interested, (c) the absence or disability of some of the persons, or (d) any other circumstances;

(5) A co-owner has the basic right to rid himself of the shackles of co-ownership, and if he has no other remedy, ask for an order for partition or sale;

(6) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner) that such an order will not be beneficial to all the co-owners, or that it will result in very great hardship to one co-owner;

(7) Whether an order for sale is beneficial to all co-owners is not determined by the dissent of the opposing co-owner, or the assertion of them that it is not beneficial. It is to be determined objectively;

(8) An order for sale would not be refused unless all the co-owners would be benefitted by its refusal, or an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner.

25.Having considered the materials before me, I find that it is appropriate to make an order for sale:-

(1) The Property is a unit in a multi-storey building with a saleable area of about 631 square feet for domestic usage. There is nothing to suggest that physical partition is practicable and in any event it would likely have a negative effect on the value of the Property;

(2) According to the land search record provided, there are no prior encumbrances;

(3) None of the defendants or the Director of Lands has indicated any opposition;

(4) The reserve price of $2,630,000 is set by reference to a valuation report of a qualified surveyor having regard to 10 comparable sale transactions;

(5) The plaintiff, as mortgagee, will have priority to the distribution of the sales proceeds, after discharge of all rent, taxes, rates and other outgoings due affecting the Property;

(6) In respect of the 1^st defendant’s share, the residual sum (if any) after application of the proceeds towards the costs of sale and repayment under Mortgage shall be paid to the 1^st defendant;

(7) The interest of the 2^nd defendant (as the other co-owner) is protected by an entitlement to the pro rata share of the sales proceeds.

D. COSTS

26.In respect of the plaintiff’s costs against the 1^st defendant, there is no reason why costs should not follow the event. I award to the plaintiff its costs up to the date of this hearing, such costs are summarily assessed at $65,000.

27.I make no order as to costs in respect of the 2^nd defendant.

E. DISPOSITION

28.In light of the above, I made the following order at the hearing which was based on the plaintiff’s proposed draft order as amended in light of my discussions with Ms Ma at the hearing:-

1. The 1^st Defendant do pay the Plaintiff the sum of HK$1,109,164.52 as secured by a Mortgage dated 17 March 2020 and registered in the Land Registry by Memorial No 20031801010046 (“the Mortgage”) together with: -

(1) interest on the sum of HK$887,251.28 at the rate of 24.00% per annum from 22 May 2026 at the daily rate of HK$583.40 until payment; and

(2) interest on the interest element of the arrears of instalments of HK$80,717.00 at the rate of 24.00% per annum from 22 May 2026 at the daily rate of HK$53.07 until payment;

2. Unless the 1^st Defendant do pay up the sums as mentioned in paragraph 1 hereinabove and the costs of these proceedings as mentioned in paragraph 7 hereinbelow within 28 days after the service of this Order on him/her, the 1^st Defendant and 2^nd Defendant do within 28 days after service of this order on them deliver to the Plaintiff vacant possession and the title deeds and documents in their possession (if any) of the property known as First Floor, No 270 Tai Nan Street, Kowloon (“the Property”);

3. Subject to the delivery of vacant possession of the Property by the 1^st Defendant and 2^nd Defendant as stated in paragraph 2 above, the Property be sold either by public auction or private treaty with a reserved price at HK$2,630,000.00;

4. The Plaintiff’s Solicitors, Messrs Siao, Wen and Leung, be appointed to conduct the sale;

5. The money raised by such sale of the Property be applied upon completion in the following manner and priority: -

(1) in discharge of all government rent, taxes, rates and other outgoings due and affecting the Property, if any;

(2) in discharge of all encumbrances affecting both the 1^st and 2^nd Defendants’ interests in the Property having priority to the Mortgage, if any, including costs for discharge of such encumbrances;

(3) in payment of all the costs and expenses incurred by the Plaintiff in taking enforcement proceedings for recovery of possession of the Property (where necessary);

(4) in payment of all auctioneers’ remuneration and/or estate agent’s commission, charges and expenses properly incurred in the sale or other dealing of the Property not exceeding 1% of the selling price of the Property;

(5) in payment of all the conveyancing costs, charges and other expenses not exceeding HK$18,000.00 excluding disbursements properly incurred in the sale of the Property;

(6) 50% of the remaining proceeds relating to the 1^st Defendant’s interest/share in the Property be applied in the following manner and priority: -

(i) in discharge of all encumbrances affecting only the 1^st Defendant’s interest/share in Property having priority to the Mortgage, if any, including costs for discharge of such encumbrances;

(ii) in payment of the Plaintiff’s costs of these proceedings on solicitor and own client basis;

(iii) in discharge of the Mortgage;

(iv) the balance, if any, after deduction of the costs and disbursements for handling the same, be paid to the next incumbrancer of the encumbrance affecting the 1^st Defendant’s interest/share in the Property and ranking immediately after the Mortgage; or if there is no such next incumbrancer, to the 1^st Defendant; and

(v) if the 1^st Defendant cannot be located after reasonable enquiry, such balance, if any, after deduction of the costs and disbursements for handling the same, be upon application by the Plaintiff, be paid into in Court to stand credit to this action until further order of the Court;

(7) the other 50% of the remaining proceeds relating to the 2^nd Defendant’s interest/share in the Property be applied in the following manner and priority: -

(i) in discharge of all incumbrances affecting the 2^nd Defendant’s interest/share in the Property after deduction of the costs and disbursements for handling the same, or if there is no such next incumbrancer, be paid to the 2^nd Defendant; and

(ii) if the 2^nd Defendant cannot be located after reasonable enquiry, such balance, if any, after deduction of the costs and disbursements for handling the same, be upon application by the Plaintiff, be paid into Court to stand credit to this action until further order of the Court;

6. The 1^st Defendant and 2^nd Defendant do take all necessary steps for the transfer of their legal title and beneficial interest in the Property to the purchaser thereof, and in default of their so doing, either Mr. Leung Tat Kin Anthony, Miss. Au-Yeung Suk Foon Ellen or Miss. Lam Yee Ling, a Partner of Messrs. Siao, Wen and Leung, Solicitors for the Plaintiff, be appointed pursuant to Section 38A of the District Court Ordinance, Cap.336 to execute the necessary agreement for sale and purchase, conveyance and/or assignment on behalf of the 1^st and/or 2^nd Defendant(s) to give effect to the Order herein;

7. The costs of these proceedings be paid by the 1^st Defendant to the Plaintiff on solicitor and own client basis, assessed by summary assessment at HK$65,000.00;

8. There be no order as to costs of these proceedings between the 2^nd Defendant and the Plaintiff; and

9. There be liberty to apply.

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

The 1^st and 2^nd defendants were not represented and did not appear