Chak Hoi Finance Ltd v. Lam Fu Hing and Another

DCMP 3293/2025

[2026] HKDC 1220

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3293 OF 2025

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BETWEEN

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REASONS FOR DECISION

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1.By an Originating Summons filed on 20 June 2025 (“OS”), the Plaintiff applies under Order 83A and Order 88 of the Rules of the District Court (Cap 336H) (“RDC”) and sections 2, 3 and 6 of the Partition Ordinance (Cap 352) (“PO”) for inter alia:

(1) monetary judgment against the 1^st Defendant;

(2) an order for possession of the First Floor including the balcony adjacent thereto, the Remaining Portion of Lot No.4329 in DD124, No.126A Shek Po Tsuen, Hung Shui Kiu, Yuen Long, New Territories (“Property”) against the 1^st and 2^nd Defendant (collectively “Defendants”); and

(3) an order for sale of the Property against the Defendants.

2.The 1^st Defendant is the borrower of a loan advanced by the Plaintiff with the Property charged as security for the due repayment. The Property was held by the 1^st and 2^nd Defendants as tenants in common in equal share. According to the Plaintiff, the 2^nd Defendant is the nephew of the 1^st Defendant, who resided at the Property.

3.At the hearing on 10 April 2026, I granted the order and reserved my reasons for the decision which I now give.

Procedural Background

4.On 20 June 2025, a sealed copy of the OS was served to the Defendants at the Property by inserting the same into the letterbox of the Property. The OS was also posted up at the main entrance of the Property.

5.On 16 July 2025, the Plaintiff’s solicitors wrote to inform the Director of Lands Department of the present proceedings pursuant to section 3 (2) of the PO. On 3 December 2025, the Director of Lands replied that he had no comment on the Plaintiff’s application.

6.On 14 November 2025, the 2^nd Defendant’s solicitors filed an Acknowledgement of Service of the OS indicating that the 2^nd Defendant does not intend to contest the Plaintiff’s claims.

7.The Plaintiff then proceeded to file a Notice of Appointment to Hear the OS on 12 January 2026. The affirmation of Wong Kai Man, director of the Plaintiff (“Wong”), in support of the OS was filed on 19 January 2026 (“Wong 1^st”). A summons seeking retrospective leave for its late filing was taken out on 23 January 2026 which was served to the 1^st Defendant by ordinary post on the same day (“Leave Application”).

8.On 19 January 2026, copies of the said Notice of Appointment and Wong 1^st were sent to the 1^st Defendant by ordinary post and also by inserting into the letterbox of the Property (but without the exhibits to Wong 1^st) on 22 January 2026. Also on 22 January 2026, a Notice to Occupants was posted up at the main entrance to the Property.

9.The 1^st Defendant did not acknowledge service of the OS.

10.In Wong 1^st, it was disclosed that the 2^nd Defendant’s solicitors had on 13 November 2025 written to inform the Plaintiff’s solicitors that the 1^st Defendant was “mentally incapacitated” and was hospitalized in the Castle Peak Hospital. Despite the enquiries made by the Plaintiff’s solicitors with a view to verify the 1^st Defendant’s condition, no medical evidence or proper records were forthcoming from the 2^nd Defendant’s solicitors.

11.At the first call-over hearing on 5 February 2026, the 1^st Defendant was absent. The 2^nd Defendant’s solicitor, however, appeared[1] and confirmed that the 2^nd Defendant would not contest the Plaintiff’s claim.

12.I raised requisition with the Plaintiff regarding the 1^st Defendant’s alleged mental incapacity and was told that there were further correspondences relating to this matter subsequent to the filing of Wong 1^st. The substantive hearing for the OS and the Leave Application were then adjourned with direction given for the Plaintiff to file further affidavit evidence.

13.In the 2^nd Affirmation of Wong Kai Man filed on 11 February 2026 (“Wong 2^nd”), the 1^st Defendant’s medical certificate and discharge slip provided by the 2^nd Defendant’s solicitors were disclosed, showing that the 1^st Defendant was admitted to Castle Peak Hospital from 26 September to 27 November 2025 for treatment of Sedative Dependence Syndrome.

14.In other words, when the documents of the proceedings were served on the 1^st Defendant in June 2025 and January 2026, it was either before his admission into or after his discharge from hospital.

15.Pausing here, the Plaintiff has also explained in Wong 2^nd that the late filing of Wong 1^st was due to the time taken to make enquiries regarding the 1^st Defendant’s health issue. I would therefore allow the Leave Application.

16.Copy of the Order dated 5 February 2026 and Wong 2^nd were served on the 1^st Defendant by ordinary post on 24 February 2026 and a 2^nd Notice to Occupants was affixed at the main entrance to the Property on 2 March 2026. On 1 April, 2026, the written submissions, list and copies of authorities and the hearing bundle were served to the 1^st Defendant by leaving at the Property.

17.At the substantive hearing on 10 April 2026, the 1^st Defendant who did not file any acknowledgement of service nor respond to any documents served to him continued to be absent. I am satisfied that the 1^st Defendant should have notice of this substantive hearing and proceeded with the hearing in his absence.

The 1^st Defendant’s Mental Condition

18.The 1^st Defendant’s mental condition was only mentioned in a letter written by the 2^nd Defendant’s solicitors to the Plaintiff’s solicitors dated 13 November 2025 where it was alleged that the 1^st Defendant was “mentally incapacitated” (“Letter”). Enclosed to the Letter was a copy of a visitor card issued by the Castle Peak Hospital to one Lam Kam Pang (“LKP”), who, according to the 2^nd Defendant, is the 1^st Defendant’s younger brother.

19.The Plaintiff’s solicitors then made enquiries with the 2^nd Defendant’s solicitors for medical proof of the 1^st Defendant’s condition but to no avail. Further, they also wrote to LKP to see if he would consent to be appointed as the guardian ad litem of the 1^st Defendant for the purpose of the present proceedings in the event that he was indeed a mentally incapacitated person. However, there was no response from LKP.

20.By a letter dated 26 January 2026, the 2^nd Defendant’s solicitors provided to the Plaintiff’s solicitors the medical certificate confirming that the 1^st Defendant was in fact hospitalized at the Castle Peak Hospital for treatment of Sedative Dependence Syndrome at the time when the Letter was sent but was subsequently discharged two weeks later. There was also a discharge slip showing various medications prescribed to the 1^st Defendant upon his discharge. These are the only evidence before the Court.

21.Clearly, the 1^st Defendant has been discharged from hospital since 27 November 2025. There is no evidence to suggest that his failure to come to court to contest the Plaintiff’s claims has anything to do with the illness that he was suffering in September to November 2025.

22.In light of the evidence, I am of the view that the mere assertion made by the 2^nd Defendant’s solicitors in the Letter that the 1^st Defendant was “mentally incapacitated”, which was not even maintained by the 2^nd Defendant, was totally unsubstantiated and has no bearing on his mental capacity for the purpose of the present proceedings. Further, no formal challenge has been made by anyone on behalf of the 1^st Defendant, bearing in mind that LKP being the younger brother and the 2^nd Defendant being the nephew were fully aware of the present proceedings and the 1^st Defendant’s condition. In the circumstances, I do not find it necessary to go into the issue of the 1^st Defendant’s mental capacity and must allow the Plaintiff to proceed with its claim against him. (see Ho Po Chu v Tung Chee Wah & Ors[2])

The Plaintiff’s Case

23.The Plaintiff was at all material times and still is a licensed money lender under the Money Lenders Ordinance, Cap. 163 (“MLO”) in Hong Kong.

24.By a Chinese loan agreement dated 14 February 2025 (“Loan Agreement”), the Plaintiff agreed to lend, and the 1^st Defendant agreed to borrow, a sum of HK$1,200,000.00 (“Loan”). Under the Loan Agreement, interest at the rate of 20% per annum would be charged on the Loan to be repaid by way of 48 monthly instalments each in the sum of HK$36,516.00. The first instalment was payable on 14 March 2025 with the remaining instalments payable on or before the 14^th day of each subsequent month.

25.The terms and the contents of the Loan Agreement, including inter alia a Declaration of the borrower’s indebtedness and a Repayment Statement, and a Memorandum under section. 18 of the MLO have been explained by Wong to the 1^st Defendant who duly executed the same on 14 February 2025.

26.Following the execution of the Loan Agreement, the 1^st Defendant also executed a Legal Charge dated 14 February 2025 under which the 1^st Defendant mortgaged his interest in the Property in favour of the Plaintiff as security for due payment of all sums payable with HK$2,000,000.00 as the capped amount. (“Legal Charge”)

27.The Legal Charge contains the following express terms:

(1) It shall be an event of default if the 1^st Defendant fails to pay any sum to the Plaintiff on the due date or any money payable on demand (Clause 5.01(a));

(2) If an event of default has occurred, the Plaintiff may declare all loans and other monies secured to be immediately due and payable without further demand, notice or other legal formality of any kind (Clause 5.02); and

(3) The Plaintiff is entitled to recover possession and sell the Property in an event of default (Clause 6.01).

28.In breach of the Loan Agreement and the Legal Charge, the 1^st Defendant had failed to make punctual repayment on the 3^rd instalment. A letter of demand dated 12 June 2025 was issued by the Plaintiff’s solicitors to the 1^st Defendant, demanding for full payments of the outstanding principal and accrued interests of the Loan in the total sum of HK$1,203,821.04. The 1^st Defendant did not respond to the demand letter or make any repayment and the present proceedings was commenced on 20 June 2025.

29.Subsequently, the 1^st Defendant made three repayments to the Plaintiff in the sums of HK$76,000.00 on 12 July 2025, HK$38,000.00 on 15 July 2025 and HK$38,000.00 on 16 September 2025. Since then, there were no further repayments by the 1^st Defendant to the Plaintiff.

Money Judgment

30.In Wong 1^st, the state of account of the Loan was set out with particulars and the three aforesaid repayments made by the 1^st Defendant in July and September 2025 were account for. I am satisfied that the Plaintiff has complied with the requirements set out in Order 88 rule 5 and Order 83A rule 3 of the RDC and the Defendant has been duly notified of all necessary particulars of the outstanding indebtedness owed to the Plaintiff.

31.The interest rate of 20% per annum charged under the Loan Agreement is neither extortionate nor illegal under sections 25(3) and 24(1) of the MLO respectively. The claim for simple interest at the same rate on the outstanding principal of the Loan and the interest charged for the outstanding instalments are also permissible under section 22(1).

32.I have also considered the Loan Agreement and various loan documents executed by the 1^st Defendant. I am satisfied that the Plaintiff has complied with the requirements under section 18 of the MLO.

33.In the absence of any contradictory evidence, I accept that the 1^st Defendant has breached the Loan Agreement by his failure to repay punctually and fully the monthly instalments. The Plaintiff is entitled to recover the outstanding principal of the Loan together with all interest accrued.

34.For these reasons, money judgment should be entered in favour of the Plaintiff against the 1^st Defendant for the sum of HK$1,208,300.46, with interest on the sum of HK$1,165,511.81 at the rate of 20% per annum with a daily rate of HK$638.64 from 21 June 2025 to the date of payment in full.

Order for Possession

35.The 1^st Defendant’s failure to repay constituted an event of default under Clause 5.01 of the Legal Charge. Where such an event of default has occurred, the Plaintiff is entitled to seek possession of the Property under Clause 6.01. As mentioned, I am satisfied that the Plaintiff has complied with the requirements under Order 88 rule 5. In the circumstances, an order for possession should be granted.

36.Since the Property is for residential purpose, the 1^st Defendant would be allowed 28 days from the date of service of the court’s order to deliver vacant possession of the Property to the Plaintiff.

Order for Sale

37.Section 3 of the PO provides that a “person interested” has the locus standi to apply for an order for sale, whether the property in question is held by 2 or more persons as joint tenants or tenants in common. In the event of default by the mortgagor under a legal charge or mortgage, a legal chargee or mortgagee of a partial interest is held to be entitled to apply for an order for sale or partition of the entire land. (see Ego Finance Ltd v Poon Sau Han Joanna and Anr[3])

38.There is no doubt that the Plaintiff has the locus standi to apply for an order for sale of the Property. The question is whether the Court should exercise its discretion to make an order for sale under the PO. The principles relevant to the exercise of such discretion has been summarized by Mr Recorder Fok SC (as Fok PJ then was) in Wong Chun Kei v Poon Vai Ching[4]:-

“18. These passages from the cases cited above were relied upon by Mr. Fung SC to support the following propositions, namely:

(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.

(b) 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(s)) that such an order will not be beneficial to all the co-owners.

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

19. Subject to adding the qualifications, “if he has no other remedy,” before the words “ask for an order for partition or sale” in proposition (1), and “or that it will result in very great hardship to one co-owner” to the end of proposition (2), I am satisfied that these propositions fairly and accurately state the law as regards the court’s jurisdiction when faced with an application for partition or sale under the Ordinance and I shall proceed in this judgment to apply those propositions in resolving the plaintiffs’ application.”

39.The Property is the first-floor unit in a 3-storey village house in Hung Shui Kiu with a saleable area of around 622 square feet plus a balcony of around 56 square feet. According to the valuation report by Dudley Surveyors Limited dated 6 June 2025, the market value and the value for sale under repossession of the Property were respectively HK$3,500,000.00 and HK$2,800,000.00.

40.With this size, it might well be feasible to physically partition the Property into two sub-units. However, given its unique nature, namely a whole floor unit in a village house with one balcony in the New Territories, it could devalue the Property upon partitioning which would prejudice the 2^nd Defendant’s interest.

41.Most importantly, the 2^nd Defendant, who has been under legal advice, did not seek to contest the Plaintiff’s claim for an order for sale. This, in my view, carries much weight in the present case.

42.Further, the 1^st Defendant had failed to make any repayment since September 2025 and did not respond to the present proceedings. It is likely that the Plaintiff would suffer further delay in recovering the outstanding sums or even not be able to recover the same without an order for sale of the Property.

43.For these reasons, I find that it is not beneficial to the Defendants to make an order for partition and would therefore grant an order for sale of the Property.

Conclusion

44.By reason of the above, I made order in terms of the draft order submitted by the Plaintiff’s counsel at the hearing with minor amendments.

45.As to costs, I agree that pursuant to Clause 21.01(b) of the Legal Charge, the Plaintiff is entitled to claim “all reasonable expenses (including legal expenses on solicitors and own client basis)”.

46.Having perused the Plaintiff’s Statement of Costs, I noted that the hourly rates adopted for all the work done, most of which were completed before 1 April 2026, by the respective fee earners are the New Solicitors’ Hourly Rates for Party and Party Taxation in the District Court effective from 1 April 2026. I would only mention that for a case that the costs to be awarded is on party and party basis, solicitors must adopt the applicable new or old rates according to the time when the work was done. The fact that the Statement of Costs is prepared after 1 April 2026 does not justify the adoption of the new rates for work done prior to the effective date.

47.Bearing in mind that the Plaintiff is entitled to claim expenses which are reasonable, I am not prepared to allow some items of costs or part of those costs including costs for a partner of 32 years of experience to draft affirmations of service and court order and to prepare for a hearing which she did not even attend.

48.Adopting a broad-brush approach, I summarily assessed the Plaintiff’s costs including all costs reserved at HK$82,000.00 and order that the same be paid by the 1^st Defendant to the Plaintiff.

Miss Angel Wong, instructed by Pauline Wong & Co, for the Plaintiff

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

The 2^nd Defendant was represented by Leung Kin & Co and did not appear