HONG KONG FINANCE (PERSONAL LOAN) LTD v. SIN SO FONG AND ANOTHER

DCMP 3837/2024

[2025] HKDC 2027

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3837 OF 2024

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BETWEEN

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JUDGMENT

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1.  By Originating Summons dated 18 July 2024 (“OS”), the Plaintiff (“P”), a licensed moneylender, seeks, inter alia:

(a) against the 1^st Defendant (“D1”) the payment of all money due from D1 to P under the 2 loan agreements and the mortgage dated 17 November 2023 registered in the Land Registry by Memorial No 23112200520011 (the “Mortgage”) pursuant to Orders 83A and 88 of the Rules of the District Court (Cap 336H) (“RDC”) and;

(b) against both Defendants (“Ds”) an order for delivery of vacant possession and an order for sale of the mortgaged property situate at Flat E on 6/F, Fu King Building, No 422 Shau Kei Wan Road, Hong Kong (the “Property”) pursuant to the Mortgage, Order 88 of the RDC and sections 2, 3 and 6 of the Partition Ordinance (Cap 352) (“PO”).

2.  D1 filed the acknowledgement of service. She did not file any affirmation nor make any submission in opposition. The 2^nd Defendant (“D2”) opposes P’s OS on the ground that an order for sale is not beneficial to all the co-owners and such an order will result in very great hardship to D2.

3.  The substantive hearing was fixed to be heard on 31 March 2025. P applied for adjournment to enable them to serve the relevant documents on the Director of Land which has now been done. By consent, the said hearing was adjourned with costs reserved.

4.  P has, after the last adjourned hearing, filed an affirmation made by Yeung Chun Yip in which Yeung deposed to matters relating solely to the dealings between P and D1, without the involvement of D2. Counsel for P and D2 agree that given D1’s default of her repayment obligations appear not in dispute, it is not necessary for the Court to make any findings on the allegations raised in Yeung’s affirmation.

Background

5.  D1 is D2’s elder sister and they are, at all material times, the registered owners of the Property.

6.  By a loan agreement dated 17 November 2023 (the “1^st Loan Agreement”), P agreed to lend the principal sum of HK$300,000 (the “1^st Loan”) to D1 at the interest rate of 22.8% per annum to be repaid by 72 monthly instalments. The 1^st Loan Agreement provides, inter alia, that D1 agrees to use the Property as security for the Loan and to execute a mortgage or other necessary documents on the Property in favour of P to secure repayment of the 1^st Loan and interest thereon.

7.  By the Mortgage, D1 charged her interest/share in the Property to P to secure the repayment of the general credit facilities to the extent of HK$1,050,000 together with interest thereon. There is a Notice of Severance to sever the joint tenancy executed on 12 August 2024. However, there is no dispute that a joint tenant’s act of tendering his or her share in the property to be mortgaged in itself already amounts to a severance of the joint tenancy: EGO Finance Ltd v Poon Sau Han Joanna and Anor [2023] HKCFI 868 per DHCJ Suen SC at §20. Thus, Ds have been holding the Property as tenants in common since 17 November 2023 (ie, the date of the Mortgage).

8.  By another loan agreement dated 24 May 2024 (the “2^nd Loan Agreement”), P agreed to make available to D1 another loan in the sum of HK$200,000 (the “2^nd Loan”) at the interest rate of 26.4% per annum to be repaid by 72 monthly instalments. The 2^nd Loan Agreement provides, inter alia, that D1 agrees to use the Property as security for the Loan and to execute a mortgage or other necessary documents on the Property in favour of P to secure repayment of the 2^nd Loan and interest thereon.

9.  D1 defaulted in making the monthly payments due to P under the 1^st Loan since 17 June 2024, and under the 2^nd Loan since 24 June 2024.

10.  P commenced these proceedings against Ds on 18 July 2024. There is no dispute that a mortgagee who is entitled to possession of the subject property is a “person interested” for the purpose of s 3(1) of the PO and thus entitled to apply for partition or sale of the property. As D1 defaulted in her repayment, P as mortgagee became a person holding an interest in the Property under s 3 of the PO and has locus to seek an order for sale under the PO: EGO Finance Ltd v Poon Sau Han Joanna and Anor [2023] HKCFI 868 at §§21-22.

11.  As of 21 March 2025, the amount remaining due under the 1^st Loan Agreement is HK$343,675.14 and the amount remaining due under the 2^nd Loan Agreement is HK$244,459.62.

Details of the Property

12.  The Property’s details are as follows:-

(a) The saleable area of the Property is approximately 200 square feet.

(b) According to the updated valuation report, the open market value of the Property is about HK$1.9 million. The value for sale under re-possession is in the region of HK$1.6 million.

(c) P has proposed that the Property be sold either by public auction or private treaty with a reserved price at HK$1,600,000.

13.  The parties agreed that physical partition of the Property is impracticable in the present case.

14.  The only issue in dispute requiring this Court’s determination is whether an order for sale should be granted and whether that would result in “very great hardship” to D2. The parties have no dispute on the applicable law and principles.

15.  S 2 of PO provides:

“Subject to this Ordinance, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may-

(a) make an order under section 4 for a partition of the property;

(b) make an order under section 6 for a sale of the property; or

(c) refuse to make any order.”

16.  S 6 of PO provides:

“(1) In any proceedings under this Ordinance, 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,

the Court may make an order for the sale of the property.

(2) The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.”

17.  In Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 at §§16- 19, Recorder Fok SC (as he then was) held that in proceedings under the PO, where 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. Hardship, for the present purpose, includes pecuniary as well as practical detriment. Whether an order for sale is or is not beneficial to all the co-owners is to be determined by the court objectively, balancing the interest of the one against the other.

18.  These principles have also been applied to applications for an order for partition or sale of a co-owned property by a trustee in bankruptcy of a co-owner (see: Re Cheung Chan Hong (a bankrupt) [2015] 2 HKLRD 1; Re Leung Pui Pui Maggie (a bankrupt) [2017] 1 HKLRD 83) and a legal chargee/mortgagee of a partial interest (see: Konew Capital International Ltd v Lai Siu Fun & Ors, DCMP 1143/2016 (unreported, 24 March2017) at §50 per HH Judge MK Liu; Konew Capital International Ltd v Wong Li Hoi & Ors [2022] HKDC 883 at §16 per DDJ Kenneth Lee).

D2’s evidence

19.  D2’s evidence can be summarized as follows:

(1) The property was previously owned by D1’s and D2’s mother. After she passed away in February 1998, they became owners of the Property. The Property was purchased by their mother in June 1979 using the money inherited from their father’s estate. Since then, the Property has been the sole residence of their family.

(2) D1 is currently unemployed and has been suffering from a range of health issues since 2015 (ie obesity, cellulitis (to the extent that it required hospitalization for 3 weeks for treatment in August 2015) and sleep apnoea etc), preventing her from working as a general assistant in the Registration and Electoral Office in Kowloon Bay International Trade & Exhibition Centre (ie her last full-time job) since September 2021. Now, she can only work on various part-time jobs and her income is unstable. When employed, her monthly income is about a few thousand HK dollars only. D1 is currently receiving disability allowance from the Social Welfare Department in the sum of HK$2,070 per month and HK$335 per month. The said allowance is for a period of 35 months.

(3) D2 was only educated up to the HKCEE level. His results were very poor. Given his relatively low education level, D2 could only find low-income jobs in the market.

(4) D2 has been working as a clerk in Prudential Mall (BVT) Limited since 10 August 1989 and has held this job for the past 35 years. D2 has been responsible for carrying out simple clerical and administrative works. D2 produced his Employer’s Return for the years 2020 to 2024 showing his monthly salary from HK$12,800 to HK$13,610 per month with one-off yearly bonus from HK$6,400 to HK$17,688. If D2 is made redundant, given his age and his low education level, it is unlikely for him to find another employment.

(5) D2 has been solely responsible for paying all household expenses relating to the Property, i.e. management fees, utilities and government rents. D2 has been giving D1 HK$2,000 per month to assist her since her unemployment in September 2021.

(6) D2 has not been able to accumulate any meaningful savings over the years. D2’s main asset is his half interest in the Property. He has held an insurance policy with a value of HK$66,307 and stocks worth about HK$21,030.

D2’s Discovery of the Mortgage

(7) On 3 August 2024, D1 suddenly informed D2 that she would bring him to meet a social worker, a Mr Ng. In the presence of Mr Ng, D1 informed D2, inter alia, that she had (without D2’s knowledge) borrowed substantial amount of money from P and she would not be able to make repayment. Also, she had mortgaged her half share in the Property as security for such debts. P has commenced these proceedings, seeking for an order for sale of the Property and applying D1’s share of the net sale proceeds for settlement of her debts. That was the first time D2 came to know of these proceedings. Mr Ng then explained that:-

(a) Given the situation of D1, Caritas Hong Kong would try to provide temporary accommodation for her. D1 might be allowed to stay in a hostel (which is for female residents only) known as Caritas Jockey Club Hostel; and

(b) Given that D2 was employed, Caritas Hong Kong would not have any accommodation arrangement for him. Ng advised D2 that he might rent a partitioned flat and in the long run both D1 and D2 might consider applying for public housing.

(8) The aforesaid news was a big shock to D2 as he faced the prospect of being forced out of his own residence and living apart from D1. He cried in front of D1 and Mr Ng on that occasion.

(9) D1 confessed that she borrowed such substantial amounts of money because (1) she lost money in horse betting, (2) as a result of her unemployment, she was unable to make ends meet despite the monthly HK$2,000 given to her by D2 and (3) she has been a victim of fraud and was defrauded an amount of HK$198,000 in May 2024. She reported the fraud to the police. D1 has so far not been able to recover any money from the fraudsters.

(10) D2 is deeply tormented and distressed by D1’s situation, he has “serious concern” that the sale of the Property will aggravate D1’s ill health and that living away from D2 would be a painful experience for D1. It would be heart-breaking for D2 to see D1 in such a situation.

20.  Mr Chen, counsel for D2, submits that an order for sale is not beneficial to all the co-owners and such an order will result in very great hardship to D2 for the following reasons:

(1) Assuming that the Property would be sold at HK$1,600,000, which is what P is currently proposing, D2 would be entitled to half share of the sale proceeds. After deducting costs and expenses, the amount of the net sale proceeds would be less than HK$800,000. D2 would then be forced to vacate the Property, leaving his home which he has resided for more than 45 years, basically his entire life.

(2) The emotional attachment to the Property aside, realistically, D2 cannot possibly afford to purchase any landed property in Hong Kong using the remaining sale proceeds from the Property. Given his low monthly income and his age, it is impossible for him to secure any mortgage loan or to shoulder any additional mortgage repayments each month. Effectively, he would be forced to rent a partitioned flat for the rest of his life.

(3) D2 has produced statistical data from the Rating and Valuation Department showing that from April to June 2024, the median monthly rents for renting a partitioned flat in Hong Kong, Kowloon and the New Territories were respectively HK$6,700, HK$5,100 and HK$4,600. Given that D2 is currently working in Tsim Sha Tsui and taking into account the additional transportation costs if D2 is to move to the New Territories, the most sensible and reasonable option is for D2 to rent a partitioned flat in Kowloon, paying roughly an additional HK$5,100 per month.

(4) The current monthly income of D2 is HK$13,680. Even without any burden to pay rent, D2 has been unable to accumulate any savings in the past. D2 has disclosed his HSBC passbook record showing that from July 2023 to August 2024, D2 was unable to accumulate any meaningful savings. The financial reality for D2 is that he needed every penny of his monthly income to make ends meet, bearing in mind that D2 also needs to take care of D1 who is currently unemployed and is unlikely to be fully employed in the future.

(5) Given D2’s financial condition, it is just impossible for him to fork out another HK$5,100 to rent a partitioned flat in Kowloon.

(6) Any suggestion that D2 could use the net proceeds from the sale of the Property to rent a partitioned flat must also be rejected. This argument was raised and rejected by Ng J in Re Tong Chi Kit [2023] HKCFI 639.

Discussion

21.  Cases of this nature are facts sensitive. Each case has to be considered on its own facts. In the present case, the evidence is that D2 is currently earning HK$13,680 and that he has approximately HK$520,000 in his two MPF accounts as of November 2024 which he can withdraw upon retirement or upon reaching 65.

22.  P had earlier argued that D2 would also be entitled to a long service payment at the end of his employment with Prudential (D2’s current employer). D2 argued that it would be subject to a set-off. The parties have now agreed that D2’s employer is entitled to set off the amount of MPF from the long service payment payable under s 31Y of the Employment Ordinance, Cap 57. In essence, D2 is unlikely to obtain another lumpsum by way of long service payment.

23.  P contends that on the basis that the Property were to be sold for a sum of HK$1,600,000, D2 stands to receive around HK$700,000 proceeds net of expenses upon the sale. Dividing HK$700,000 by HK$5,100 (ie the median monthly rental for a partitioned flat in Kowloon), it works out to be more than 137 months (ie 11.4 years).

24.  I am told that the statutory requirement for applying for public housing for a family of 2 is that the applicant’s total asset value cannot exceed HK$387,000. On a simple mathematical calculation, the net proceeds of sale of the Property will be reduced when being applied towards the rental payment of HK$5,100 for a partitioned flat and that in about 5 years’ time Ds will be eligible to apply for public housing.

25.  D2 is currently 54. There is no evidence that he will be made redundant in the near future. Even if D2 is to be made redundant in his present employment, there is no suggestion that he is suffering from any serious illness which may prevent him from obtaining another employment. As P submitted, D2 may secure alternative employment through schemes such as the Labour Department’s “Employment Programme for the Elderly and Middle-aged”（「中高齡就業計劃」）.

26.  I do not consider the fact that D2 may use up the net sale proceeds by renting a partitioned flat for long years and by then he will meet the net asset limit for applying for public housing is “a very harsh suggestion” and will cause very great hardship to him. I agree that the fact that Ds may end up having to live in public housing presents some inconvenience or difficulty but it does not amount to very great hardship.

27.  According to D2, he is deeply tormented and distressed by D1’s situation; he has serious concern that the sale of the Property will aggravate D1’s ill health and that living away from D2 would be a painful experience for D1; it will be heart-breaking for D2 to see D1 in such a situation.

28.  D1’s “ill health” consists of obesity, sleep apnoea and cellulitis. There is no evidence to show how the sale of the Property could aggravate D1’s ill health.

29.  No doubt, they will have to live apart for a long while before they obtain public housing. D2 can always visit D1 after D1 moved into the dormitory provided by Caritas. There is nothing to prevent them from getting together and spending time together. D2’s inability to continue to live with D1 does not amount to any great hardship for D2 in the present case.

30.  In respect of the sentimental attachment issue, I agree with P that in deciding whether an order for sale should be ordered, a co-owner’s sentimental attachment to the property should not be taken into account, see the judgment of Kwan J (as she then was) in Chan Ching Kit Katherine v Lam Sik Shi and Anor, HCMP 2239/2000, 24 June 2002, at §50.

31.  Although, I have much sympathy for the predicament that Ds are in, the Court should also consider the interest of the creditor. The Court must not lose sight of the fact that the debtor owes his or her creditor money which needs to be repaid. This is particularly so where it is practically certain that without an order for sale, the creditor would remain wholly unpaid: Re Lau Hiu Tuen (HCB 8430/2006, 20 August 2015) per G Lam J (as he then was) at §30. They are prima facie entitled to be paid out of what can be realised from the debtor’s assets, including his or her interest in the property.

32.  P’s latest land searches in August and September 2025 reveal that (1) UA Finance has registered a charging order nisi against D1’s share of the property on 22 April 2025; (2) There are also two charging orders nisi pending registration in favour of K Cash (registration withheld) and Hang Seng Bank.

33.  Given D1’s situation, she is not likely to be able to repay her debt to P and P would have no other feasible remedy to pursue.

34.  Having considered the interest of the parties involved, I am of the view that it is appropriate to make an order for sale in the present case. I am not satisfied that an order for sale will cause very great hardship to D2.

35.  The parties are directed to submit, within 14 days from the date hereof,

(a) an agreed draft order for the Court’s approval, failing an agreement, their respective proposed order; and

(b) their respective submissions on costs and their proposed costs order.

36.  Lastly, I thank both counsel for their helpful submissions.