NG NGUN KUN AND ANOTHER v. YEUNG YAT CHING

HCMP 3154/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3154 OF 1994

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J U D G M E N T

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1. This is an Originating Summons for payment of moneys due to the Plaintiffs under a mortgage dated 21 April 1981 between the Defendant as borrower and the Plaintiffs as lenders and for possession of property known as Lots Nos. 1109A and 1109 Remaining Portion both in Demarcation District No. 118.

2. The mortgage was made on 21 April 1981 between the Plaintiffs and the Defendant. The Plaintiffs had lent $150,000.00 to the Defendant on the security of a mortgage by the Defendant of his land in the New Territories which appears, at least now, to be vacant land. The mortgage was made in the form of a Form B Mortgage under the New Territories Ordinance provisions. It was attested by solicitors and was registered on 4 June 1981.

3. The Mortgage stated that

"in consideration of $150,000.00 on this day lent (or now owing) the receipt whereof is hereby acknowledged [the Defendant] as mortgagor hereby assigns unto [the mortgagees] the lots in question subject to the incumbrances mentioned in the schedule [of which there were none] ... for securing payment on 21 April 1981 of $150,000.00 as the mortgage money with interest thereon at the rate of $25 per $1,000 per month, payable in advance monthly on the 22nd day of each month Provided that [the mortgagor] shall "before 21 April 1981" but after the expiration of 3 months from "22 October 1981" be at liberty to pay off the principal sum of $150,000.00 by giving to the mortgagees one month's previous notice in writing of such intention to do so and upon paying to the mortgagees one extra month's interest at the rate aforesaid and it is hereby further agreed and declared that the mortgagor shall pay all interest tax to the Government of Hong Kong chargeable in respect of all interest received by [the mortgagees] upon the security of these presents."

I shall return shortly to the repayment terms of this mortgage.

4. The Plaintiffs say on affidavit that no repayment had been received from the mortgagor and in 1990 (that is to say, 9 years after the mortgage was entered into) the Plaintiffs had lost contact with the Defendant. In 1994 proceedings were commenced by the Plaintiffs but no action was taken apparently until 1997 when there was a change of solicitors. There was then yet another delay in the prosecution of the proceedings until 1999 when the matter was revived. It would appear from the Plaintiffs' affidavit that this delay in the prosecution of this matter was due to their emigration to Canada.

5. In April 1999, the Plaintiffs' surveyors found that the land in question had been fenced off and was being used as a horticulture nursery. It was occupied by a company known as Bun Fun Floriculture Company and according to information received from the staff of this floriculture company, the land had been so occupied since 1989 and rent was paid to the village representative. Upon further enquiry with the village representative, he denied having entered into any tenancy agreement with the floriculture company and he denied having received any rent. No other information was available from the floriculture company whose proprietor has refused to provide any further information or even to see the Plaintiffs' solicitors.

6. As far as service is concerned, service on an old address of the Defendant has resulted in correspondence being returned, his property having been sold to new owners who did not know where he had moved to. The Plaintiffs have obtained various orders permitting substituted service, and service of the proceedings today has been effected by advertisement in a newspaper. There have also been notices given to the occupants of the land but no one has appeared today.

7. In view of the terms of the mortgage and in light of the fact deposed to in the affidavits of the Plaintiffs, it is clear that the Plaintiffs are entitled to possession of the property and I would so order. As far as payment of money due under the mortgage is concerned, the Plaintiffs have indicated that they would not be seeking interest as interest would be barred under section 19(5) of the Limitation Ordinance Cap. 347 which provides:

"No action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge or payable in respect of proceeds of the sale of land or to recover damages in respect of such arrears shall be brought after the expiration of 6 years from the date on which the interest became due."

8. The matter which concerned me this morning was the date when the right to receive the principal money accrued. This is relevant to section 19(1) of the Limitation Ordinance which provides that no action shall be brought to recover any principal sum of money secured by a mortgage after the expiration of 12 years from the date when the right to receive the money accrued. That is the current version of section 19(1), but by virtue of the transitional provisions in section 38A, the time for bringing proceedings in respect of a cause of action to recover a principal sum of money secured by a mortgage which accrued before 1 July 1991 shall, if it has not then already expired, expire at the time when it would have expired apart from the provisions of the Limitation (Amendment) Ordinance 1991. As I understand the effect of that section, it means that if the right accrued before 1 July 1991, the period of "12 years" should be "20 years".

9. I have previously read out the proviso of the mortgage because it did not appear on looking at it to make much sense. The proviso says that the mortgagor shall "before the 21st day of April 1981" but after the expiration of 3 months from "22nd day of October 1981" be at liberty to pay off the principal sum. However, the mortgage was itself made on 21 April 1981, so it could not possibly be the case that the mortgagor could before the date when the mortgage was made pay off the principal sum. Although there is no evidence from the Plaintiffs of the sort that would permit a court to effect a rectification of the mortgage, it seems to me that looking at the entirety of the proviso, it is likely that the words "April" and "October" were transposed because if the proviso were read as follows:

"... provided that the mortgagor shall before the 21st day of October 1981 but after the expiration of 3 months from the 22nd day of April 1981 be at liberty to pay off the principal by giving one month's notice and upon paying one extra month's interest"

the proviso would make perfect sense.

10. Be that as it may, it is not for me here to speculate on whether that was what the parties intended. It would appear that since the present proceedings were instituted in 1994, whatever the right date that ought to have appeared in the proviso, the Plaintiffs are safe and I would therefore also order that the Defendant pay the sum of $150,000.00 under the said mortgage.