FLYING MORTGAGE LTD v. CHAN KUEN KWONG AND OTHERS

DCCJ5004/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5004 OF 2006

D E C I S I O N

1.  This is an application by the Applicant to be joined as an additional defendant in the proceedings. 

2.  The existing Defendants are the registered owners of the subject property at Tuen Mun Centre in the New Territories (“the Property”).  By a second mortgage dated 1 June 2005, the existing Defendants mortgaged the Property to the Plaintiff as security for the loans granted by the Plaintiff to the Defendants.  As the Defendants defaulted in the repayment of the loans, the Plaintiff sought to exercise its rights under the second mortgage, and judgment for possession of the Property was obtained by the Plaintiff on 5 September 2007.  The writ of possession was subsequently issued by the court on 29 October 2007.

3.  On 16 January 2008, the Applicant filed the present summons applying to stay the execution of the writ of possession and to be joined as an additional defendant in the proceedings. 

4.  According to the affirmation filed by the Applicant, she was actually the beneficial owner of the Property as she provided the money for the purchase of the Property in 1985.  The existing Defendants were her son and daughter.  As she wanted to keep the public housing unit in her name, she asked the existing Defendants, who were by then still in their early 20’s, to purchase the Property in their names using the money left over to her by her deceased husband.  She has actually stayed as an occupier in the Property throughout the years, and it was she who paid for all the management fees of the Property.  During the period from 1989 to 2001, the Property had been mortgaged to 2 respective banks with her consent.  After the release of the last mortgage in 2001, she had kept the title deeds of the Property.  According to the records in the Lands Registry, the Property was mortgaged to one Freeway Finance Company Limited (“Freeway”) on 20 April 2005, and so the mortgage relied on by the Plaintiff in the existing proceedings was actually the second mortgage.  However, the Applicant claims that these 2 mortgages were taken out without her consent and she has no knowledge of these 2 mortgages until the commencement of the present proceedings. 

5.  Based on the evidence of the Applicant, it seems that Freeway did not obtain the title deeds of the Property when the first mortgage was executed on 20 April 2005.  This is quite astonishing.  The evidence at this stage also does not show that the Plaintiff had made any inquiry with Freeway about the custody of the title deeds.

6.  It is the Plaintiff’s case that its staff had conducted a site inspection of the Property before the execution of the second mortgage, and there was no evidence to show by then that person other than the existing Defendants was occupying the Property by that time.  This is disputed by the Applicant, and she produces evidence, including photographs and statements by her neighbours and the security guard of the building, to prove that she has all along been the occupier of the Property since the purchase in 1985. 

7.  It is trite law that the Applicant does not need to show a real prospect of success for her case before she is allowed be joined as a defendant in the existing proceedings.  In other words, the threshold test relating to the setting aside of default judgment is not applicable in the present circumstances (see: Wing Hang Bank Limited v Tsang Sze Yin & Others unreported, HCMP1689/1998, decision of Ribeiro J, as he then was, on 30 December 1999, paras. 9 to 13).

8.  In my judgment, the Applicant has managed to produce sufficient evidence to support her interest in the Property.  In this respect, the facts of the present case are no different from those in the case of Tsang Sze Yin, as there is some evidence to prove that the Applicant had provided the money for the purchase of the Property and she has been the occupier throughout the years.  A live issue now exists as to whether the Plaintiff was put on notice that someone other than the mortgagors Defendants might be in occupation of the Property when the second mortgage was executed.  In such case, the Applicant should not be shut out summarily for seeking to make good her claim to an equitable interest in the Property binding on the Plaintiff.

9.  I agree that there is some delay in the making of the present application.  The Applicant sought to give an explanation in her affirmation.  As she is an uneducated person and the existing Defendants tried to conceal the present proceedings from her, she did not appreciate the need to take out the present application until January 2008.  I accept her explanation in this regard and, in any event, I do not think that delay is by itself sufficient to deny the Applicant of her right to make good her claim.  I therefore allow her application to be joined as an additional defendant in the existing proceedings.