GOODWAY FINANCE LTD v. KWONG HONG WAI AND ANOTHER

DCMP 1193/2022

[2022] HKDC 1204

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1193 OF 2022

--------------------------

--------------------------

BETWEEN

--------------------------

--------------------------

JUDGMENT

--------------------------

1.  By an Originating Summons dated 19 April 2022, the plaintiff applied for a money judgment against the 1^st defendant, an order for possession and an order for sale of the property known as Flat No 15, 11/F, Block B, Hong Nga Court (the “Property”).

2.  The defendants acknowledged service of the Originating Summons on 1 June 2022, and indicated that they do not intend to contest these proceedings.

3.  By a Summons filed on 6 September 2022 (the “Summons”), the plaintiff applied to amend the Originating Summons.

4.  Shortly before the hearing, the plaintiff indicated that it no longer sought an order for possession and an order for sale of the Property. The plaintiff also applied to withdraw the Summons, as it only concerned the two orders now abandoned. These orders were abandoned because the plaintiff was notified by the Joint and Several Trustees of the Property of the 1^st defendant (the “Joint and Several Trustees”) on 30 September 2022 that the 1^st and 2^nd defendants had already surrendered the Property to the prior mortgagee, the Bank of Communication (“BoComm”), which would exercise its right to recover the possession of the Property and to dispose of it.

5.  The only order remains to be sought by the plaintiff is a money judgment against the 1^st defendant.

Background

6.  On 29 April 2021, the 1^st defendant obtained a loan in the amount of HK$1.85 million from the plaintiff, a moneylender, at an annual interest rate of 22% (the “Loan”). The 1^st defendant provided her half share in the Property as security in favour of the plaintiff.

7.  The Property was owned by the 1^st and 2^nd defendants as tenants-in-common in equal shares. Apart from the mortgage in favour of the plaintiff, the Property is also subject to a prior mortgage over the entire Property dated 12 February 2010 in favour of BoComm.

8.  The 1^st defendant subsequently defaulted in her repayment of the Loan.

9.  On 1 December 2021, the 1^st defendant petitioned for her own bankruptcy.

10.  On 11 January 2022, a bankruptcy order was issued against the 1^st defendant.

11.  On 31 March 2022, Fred Lee and Chow Wai Lan Christine were appointed the Joint and Several Trustees.

Preliminary Matters

12.  By the affirmation of Mok Ping Ting dated 12 October 2022, I am satisfied that the relevant court documents of this action were properly served on the 1^st and 2^nd defendants, the Director of Lands, BoComm, and the Joint and Several Trustees.

13.  Despite the 1^st defendant being a bankrupt, I am satisfied that it would not be necessary to join in the Joint and Several Trustees in these proceedings: s 12 of the Bankruptcy Ordinance (Cap 6); Field Finance Ltd v Seck King Chung [2020] HKDC 514 at [14]-[16]; Cotterell v Price [1960] 1 WLR 1097 at 1105 per Buckley J. This is so as the plaintiff is a secured creditor by virtue of the 2^nd legal charge over the Property. I was informed that the Joint and Several Trustees had not indicated any opposition to this action.

14.  I am also satisfied that the plaintiff has complied with s 18 of the Money Lenders Ordinance (Cap 163) (“MLO”) save and except s 18(2)(h), which requires the form of security for the Loan to be provided.

15.  Mr Alvin Tsang, counsel for the plaintiff, most fairly drew the court’s attention to the ‘Memorandum under Section 18 of the Money Lender Ordinance’ dated 29 April 2021 which states at sub-paragraph (h) that the form of security for the Loan was ‘NIL’.

16.  Mr Tsang therefore asked this court to exercise its discretion under s 18(3) of the MLO to treat the mortgage loan agreement to be enforceable despite the above mistake. Mr Tsang submitted that:-

“(1) The loan agreement is entitled Mortgage Loan Agreement;

(2) Clause 2 states that ‘The Borrower warrants that his legal title to the aforesaid property and entitled to mortgage the said property.’

(3) The Mortgage Loan Agreement contains a section entitled ‘Fire Insurance cover for the To-be-mortgage Property’.”

17.  The court also notes that:-

(a) In the ‘Second Legal Charge’ dated 29 April 2021, it provided at its recital that:-

“The [1^st defendant] has applied to the [plaintiff] to grant to the [1^st defendant] general credit facilities … the [plaintiff] has agreed to grant the same … charging the Property … as security for the due payment of all moneys …”

(b) Under clause 2 of the mortgage loan agreement, the 1^st defendant was asked to warrant her legal title of and entitlement to mortgage a property;

(c) In the undated ‘Acknowledge (sic) of Receipt’ signed by the 1^st defendant, it stated that:-

“I/We refer to the said Loan Agreement amounting of HK$1,850,000.00 in respect of the above premises made between your company as the Mortgagee and me/us as the Mortgagors of even date.”

18.  I am therefore satisfied that discretion should be exercised in favour of the plaintiff in holding that the mortgage loan agreement is enforceable.

19.  I am also satisfied that the interest charged by the plaintiff at 22% fully complies with sections 24 and 25 of the MLO.

Entitlement to Money Judgment

20.  The Originating Summons was duly issued under Order 83A and Order 88 of the Rules of the District Court (Cap 336H).

21.  Order 83A provides for the basis of a money lenders action, including an action for money judgment. The requirements under Order 83A have all been complied with and there was valid service of the relevant documents on the 1^st defendant.

22.  The plaintiff is therefore entitled to seek a money judgment against the 1^st defendant. The amount was not stated in the Originating Summons since the amount has been accruing after the issuance of the Originating Summons up until payment. However, the latest figure was provided at the Draft Order annexed to the plaintiff’s skeleton submissions.

23.  The plaintiff’s claim for a money judgment against the 1^st defendant is based on the 1^st defendant’s non-payment of the instalments of principal and interest as required by the mortgage loan agreement.

24.  Under the mortgage loan agreement, it was provided that:-

(a) The plaintiff would lend to the 1^st defendant a Loan of HK$1,850,000.00 at the interest rate of 22.00% per annum on 29 April 2021;

(b) The term of the Loan is 120 months;

(c) The 1^st defendant would repay the plaintiff the Loan together with interest thereon at the rate of 22.00% per annum by 120 monthly instalments;

(d) The 1^st defendant would pay to the plaintiff interest on any outstanding principal amount at the rate of 22.00% per annum until full settlement of the Loan, and that the judgment rate is not adopted;

(e) Costs of any court proceedings for the repayment of the Loan would be borne by the 1^st defendant on an indemnity basis.

25.  The 1^st defendant obtained the Loan on 29 April 2021 but had been in default in paying the full or any monthly instalments since the 7^th instalment on 29 November 2021.

26.  By a letter dated 8 December 2021 from the plaintiff’s solicitors to the 1^st defendant, the plaintiff demanded the 1^st defendant to pay off the outstanding instalment(s) of the Loan together with interest thereon, failing which the plaintiff would commence legal proceedings against the 1^st defendant for the recovery of the entire balance of the Loan and interest as well as for enforcement of the mortgage.

27.  Nonetheless, the 1^st defendant has failed to comply with the demand.

28.  The plaintiff is therefore entitled to judgment of the following money sums:-

(a) HK$1,822,849.00, being the outstanding principal;

(b) Interest on the outstanding principal of HK$1,822,849.00 charged at an annual interest of 22% per annum from 29 October 2021 up until full payment (whether before or after judgment); and

(c) Costs of these proceedings on an indemnity basis summarily assessed at HK$45,000.

29.  In these circumstances, the court would enter money judgment against the 1^st defendant in terms of the Draft Order provided by the plaintiff save for the summary assessment of costs as above.

30.  I thank Mr Tsang for his assistance.