KONEW CAPITAL INTERNATIONAL LTD v. CHIU MEI LING

DCMP 4449/2021

[2022] HKDC 656

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4449 OF 2021

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BETWEEN

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DECISION

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Introduction

1.  At the hearing on 22 June 2022, I granted the reliefs sought by the plaintiff and made no order as costs of these proceedings. Here are my reasons.

Factual background

2.  The plaintiff is a licensed money lender.

3.  The defendant was one of the registered owners of Flat A, 37^th Floor, Tower 2, The Pacifica, No 9 Sham Shing Road, Kowloon (“the property”).

4.  On 19 October 2020, the plaintiff received a mortgage loan application from a female who claimed to be Chiu Mei Ling (“the suspected imposter”) for the amount of HK$1,500,000.

5.  The plaintiff approved the application on the basis of a mortgage to be taken out in respect of the defendant’s interest in the property. A loan agreement and a mortgage was executed by the suspected imposter on 20 October 2020. A sum of HK$1,500,000 was advanced to the suspected imposter by the plaintiff on the same day.

6.  On 20 November 2020, the defendant called the plaintiff saying that she lost her Hong Kong identity card in August 2020 and according to the credit report from TransUnion Ltd, a mortgage loan application was made in her name to the plaintiff in October 2020. She requested the plaintiff not to approve the loan.

7.  The defendant said she never personally, nor authorized any one to apply for the loan or to execute the mortgage, nor did she receive the loan money.

The plaintiff’s stance

8.  The plaintiff does not seek to dispute the defendant’s allegation.

9.  The plaintiff therefore took out the present proceedings to rectify the embarrassment caused by the mortgage.

The defendant’s stance

10.  The defendant indeed has no objection to the declaratory reliefs and the vacation order sought by the plaintiff.

11.  The defendant is saying that she should be granted the costs of these proceedings.

Legal principle on declaratory relief

12.  Order 15 rule 16 of the Rules of the District Court provides:-

“No action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.”

13.  The following principles were summarized by Deputy High Court Judge Jin Pao SC in Equis (Hong Kong) Ltd v George Allen Cowan [2021] HKCFI 768:-

(a) The power to grant declaratory relief is derived from the inherent jurisdiction of the court. The broad power to grant declaratory relief is reflected under Order 15 rule 16.

(b) An application for declaratory relief is not necessarily required to have a cause of action against the adverse party, but needs to establish that he has a real interest in the subject matter of the declaration. In determining whether an applicant has the necessary interest, the court adopts a practical utility approach by asking whether the court’s jurisdiction is properly exercisable instead of applying nice legal tests. An applicant must also show that he has a real interest of a material character to be enforced or to protect a genuine and legitimate interest in obtaining a decision against an adverse party: Kuo Ming Kown v Mok Kong Ting [2018] HKCFI 967 at paras 16-19 per DHCJ To.

(c) If a declaration would not serve any practical purpose, this will weigh heavily in the scales against the grant of declaratory relief. A practical purpose means that the declaration should “solve a real difficulty” with which the claimant is faced, but there is no requirement that a claimant must be in a position to demonstrate that he will benefit in a material or tangible way as a result of the declaration: Zamir & Woolf: The Declaratory Judgment (4^th ed) at paras 4-99 & 4-104.

Reliefs

14.  I am satisfied that the declaratory reliefs sought by the plaintiff are necessary to rectify the embarrassment caused by the mortgage and the loan agreement so that the defendant’s title to the property would not be affected by the mortgage and the defendant would not be made liable to the loan agreement.

15.  Accordingly, I would grant the following reliefs:-

(a) A declaration that the Mortgage dated 20 October 2020 and purportedly made between the defendant as Borrower of one part and the plaintiff as Lender on the other part and registered in the Land Registry by Memorial No 20102200540070 (“the Mortgage”) is null, void and of no effect against the defendant;

(b) A declaration that the Loan Agreement dated 20 October 2020 purportedly made between the defendant as Borrower of one part and the plaintiff as Lender of the other part is null, void and of no effect as against the defendant;

(c) An order that the registration of the Mortgage in the Land Registry against the property by Memorial No 20102200540070 be vacated.

Costs

16.  The defendant asked for the costs of these proceedings.

17.  Miss Chung for the defendant submitted that the plaintiff in approving the loan, had failed to take reasonable due diligence measures to verify the identity of the imposter and the information provided by her. Further, the defendant was troubled by the debt collection actions of the plaintiff. Lastly, the defendant complained of the time required to have the situation rectified.

18.  With respect, none of the matters complained of by the defendant is relevant in considering the costs of these proceedings.

19.  It is not in dispute that the plaintiff did advance a loan of $1,500,000 to the suspected imposter. Realizing that it might have fallen prey of a fraudulent scheme, the plaintiff rightly took out the present proceedings to rectify the situation.

20.  The defendant indeed has no quarrel with the reliefs sought.

21.  In my view, both the plaintiff and the defendant are the victims of fraud. These proceedings are necessitated by the misdeed of the suspected imposter. Neither the plaintiff nor the defendant is to be blamed in being involved in these proceedings.

22.  Therefore, I am driven to the conclusion that there should be no order as to costs of these proceedings and I so ordered.