MAXCOLM FINANCE LTD v. MA KA YU AND ANOTHER

DCMP 1942/2026

[2026] HKDC 1792

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1942 OF 2026

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DECISION

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A. Introduction

1.  By an Originating Summons dated 24 March 2026 (“OS”) [1], the Plaintiff applied, inter alia, for:

1.1 Money judgment against the 1^st Defendant for outstanding indebtedness under a Second Mortgage dated 6 October 2025 (“Second Mortgage”) and a Loan Agreement of the same date (“Loan Agreement”) pursuant to Order 83A of the Rules of the District Court (Cap. 336H) (“RDC”); and

1.2 An order for possession and an order for sale of the property known as 17^th Floor, Fife Court, No. 1096 Canton Road, Kowloon, Hong Kong (“the Property”) against the 1^st and 2^nd Defendants pursuant to Order 88 of the RDC and Sections 2, 3, and 6 of the Partition Ordinance (Cap. 352) (“PO”).

2.  The Plaintiff is a licensed money lender under the Money Lenders Ordinance (Cap. 163) (“MLO”). [2] The 1^st Defendant (“D1”) and the 2^nd Defendant (“D2”) (collectively “the Defendants”) are the registered co-owners holding the Property as tenants in common in equal (1/2) shares.

3.  Neither D1 nor D2 filed an Acknowledgment of Service or any affirmation in opposition to the OS. At the hearing of the OS returnable on 30 June 2026 before me (“the Hearing”), the Defendants were absent. I am satisfied on the affirmation of service filed by the Plaintiff that sufficient notice had been given to the Defendants of these proceedings and the Hearing[3]. The Court proceeded to hear the matter in their absence pursuant to Order 32, rule 5 of the RDC[4].

B. Factual Background and Procedural History

4.  On 6 October 2025, the Plaintiff, as lender and D1, as borrower, entered into the Loan Agreement[5], under which the Plaintiff advanced a principal sum of HK$500,000 to D1. The Loan Agreement provided for an interest rate of 28.80% per annum[6], repayable by 60 monthly instalments.

5.  To secure the repayment of general credit facilities extended to D1 up to a limit of HK$600,000[7], D1 executed the Second Mortgage on 6 October 2025, charging his undivided 1/2 share in the Property to the Plaintiff. The Second Mortgage was registered in the Land Registry on 3 November 2025 under Memorial No. 25110300360013[8], ranking behind an existing First Mortgage dated 8 January 2016 in favour of Bank of China (Hong Kong) Limited (“First Mortgagee”).

6.  In breach of Clause 9(a) of the Loan Agreement and Clause 7.1 of the Second Mortgage, D1 defaulted in making the monthly repayments due since 5 March 2026.[9] Furthermore, in breach of Clause 9(j) of the Loan Agreement[10], D1 executed an Agreement for Sale and Purchase dated 27 October 2025 registered by Memorial No. 25110601290013 (“ASP”)[11] to sell his interest in the Property to D2 and one Ma Ka Yee (馬嘉義) for HK$4,000,000 without the Plaintiff’s prior written consent.[12]

7.  By demand letters issued by the Plaintiff’s solicitors dated 6 March 2026 (to D1)[13] and 13 March 2026 (to D2)[14], the Plaintiff declared the entire outstanding balance immediately due and payable, and gave notice of its intention to enforce the Second Mortgage and apply for an order for sale under the PO. Both demand letters went unanswered.[15]

8.  On 24 March 2026, the Plaintiff commenced these proceedings.

9.  As set out in the Affirmation of Ng Shu Hung[16], sealed copies of the OS, the Notice of Appointment to Hear OS, and the supporting affirmations were served on the Defendants by insertion through the letterboxes at their usual or last-known addresses, as well as by affixing a sealed copy at a conspicuous place at the main entrance of the Property in compliance with Order 10, rules 4(2) and 5(1) of the RDC. Furthermore, a copy of the Notice to Occupants was posted up at the main entrance of the Property on 4 May 2026.[17]

10.  In accordance with Section 3(2) of the PO and Rule 4 of the Partition Rules (Cap. 352A), the Director of Lands was served with the relevant court documents. By a reply letter dated 28 May 2026, the Director of Lands confirmed that he had no comments on the present application.[18] In addition, written notifications of these proceedings were delivered on 22 June 2026 to the First Mortgagee (Bank of China) and to Messrs. Liu & Co., the firm of solicitors representing the parties under the ASP.[19] Neither party raised any objection or opposition to the Plaintiff’s application.

C. Discussion and Findings

C1. Money Judgment Against D1

11.  The Plaintiff’s claim for monetary judgment against D1 is brought under Order 83A of the RDC. Having inspected the original Loan Agreement and the Second Mortgage at the Hearing[20], and considered the Affirmation of Lee Oi Ying filed in support of the OS, I am satisfied that the Plaintiff has complied with the requirements under Section 18 of the MLO.[21] A written memorandum containing the material terms of the Loan Agreement was duly signed by D1 at the time of entering into the transaction[22], and a copy of the memorandum together with the Summary of the Provisions of the MLO was provided to D1.[23] The contractual interest rate of 28.80% per annum is also permissible under Section 24(1) of the MLO as it does not exceed the statutory ceiling of 48% per annum.

12.  On the evidence before me, I find that D1 duly executed the Loan Agreement and the Second Mortgage. He also received the principal loan amount and subsequently defaulted in making the monthly instalment repayments since 5 March 2026. According to the breakdown set out in Exhibit LOY-11[24], the total indebtedness due and owing by D1 under the Loan Agreement and Second Mortgage as of 12 June 2026 is HK$535,487.28, which consists of the outstanding principal of HK$484,612.34, accrued interest of HK$49,104.48, and default interest of HK$1,770.46.[25]

13.  The Plaintiff proved its money claim and the requirements of Order 83A of the RDC have been complied with. I accordingly grant money judgment in favour of the Plaintiff against D1 for HK$535,487.28, together with contractual interest continuing on the principal sum of HK$484,612.34 at the rate of 28.80% per annum from 13 June 2026 until payment in full.

C2. Possession Order and Order for Sale under the Partition Ordinance

14.  The Plaintiff also claims possession of the Property under Order 88 of the RDC. Pursuant to Clause 7.1 of the Second Mortgage[26], default in payment of principal or interest constitutes an event of default, whereupon all secured liabilities become repayable immediately on demand and the Plaintiff is entitled to take possession of the Property. Where the whole sum advanced has become due upon default, a mortgagee is entitled as of right to an order for possession of the mortgaged premises: see Chekiang First Bank Ltd v Ko Hoi Luen [1999] 3 HKLRD 360 at 362; applied in Konew Capital International Limited v Ho Kui Lai Richard [2022] HKCFI 1159 per DHCJ Paul Lam SC at §5.

15.  As deposed in the Affirmation of Lee Oi Ying, although D1 claimed in his loan application form dated 6 October 2025 that the Property was let at a monthly rent of HK$15,000, no documentary proof, such as tenancy agreement or stamp duty record, has ever been produced to support the existence of any such tenancy. In the absence of any proof of the alleged tenancy, the Plaintiff considers that the Defendants remain in actual possession and control of the Property. Moreover, the Notice to Occupants was posted at the main entrance of the Property on 4 May 2026, and no occupier or third party has come forward to assert any tenancy rights or to oppose these proceedings. I am satisfied that the requirements of Order 88 rules 4 and 5 of the RDC have been complied with and that an order for possession should be granted.

16.  As to the application for an order for sale, Section 3(1) of the PO provides that any person interested in co-owned land may institute proceedings for partition or sale. A mortgagee of an undivided partial share who is entitled to possession upon default is a person interested in the property under Section 3(1) of the PO, and is thus entitled to apply for an order for sale of the entire property: see Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224 per HH Judge Andrew Li at §23; see also EGO Finance Ltd v Poon Sau Han Joanna & Anor [2023] HKCFI 868 per DHCJ Suen SC (as he then was) at §§21-22; Fortis Bank Asia HK v Yu Kam Hoi HCMP No 134 of 2002, 4 March 2004, per Reyes J at §56; Konew Capital International Limited v Wong Kai Yin Ivo & Anor [2026] HKDC 99 per DDJ Lawrence K F Ng at §16.

17.  The principles governing the exercise of judicial discretion in granting an order for sale under Section 6 of the PO are established. A co-owner or a mortgagee holding an interest in possession has a basic right to rid itself of co-ownership. Where physical partition is impracticable, the court should make an order for sale unless 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 an opposing co-owner: Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 per Recorder Fok SC (as he then was) at §§18-19. Further, an order for sale would not be refused unless all the co-owners would be benefitted by its refusal or, in other words, an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner: Cheung Wing Kuen Samuel v Ip Chui Sum [2021] HKCFI 2535, per Au-Yeung J at §12; citing Re Lau Hiu Tuen HCB 8430/2006 (unrep, 20 August 2015), G Lam J (as he then was) at §21.

18.  In the present case, neither Defendant has filed any evidence. The Property is a residential flat in a multi-storey building with a saleable area of about 310 square feet.[27] Physical partition is not feasible. Without an order for sale, the Plaintiff would have no feasible remedy to enforce its security.

19.  I have considered the position of D2, who is a co-owner but not a borrower under the Loan Agreement or a mortgagor under the Second Mortgage. As set out above, by letter dated 13 March 2026[28], D2 was given written notice inviting him to substantiate any objection to an order for sale. D2 has neither filed an Acknowledgment of Service nor adduced any evidence demonstrating that an order for sale would cause him very great hardship. Furthermore, the proposed order properly protects D2’s financial interest, as 50% of the net sale proceeds relating to his half-share will be distributed to him without being subjected to D1’s debt or the Plaintiff's legal costs.[29]

20.  I have also considered the status of the ASP, under which D1 purported to sell his interest in the Property. As the Plaintiff’s Second Mortgage was dated 6 October 2025 and duly registered in the Land Registry within 1 month, on 3 November 2025, its priority relates back to the date of its execution pursuant to Section 3(1) of the Land Registration Ordinance (Cap. 128). It thus appears to me that the Second Mortgage takes priority over the subsequent ASP Further, Messrs Liu & Co, the solicitors acting under the said agreement, were served with notice of these proceedings on 22 June 2026, and the parties have raised no objection. I accept that realising the Property as a whole in the open market is the only practical means to discharge prior encumbrances, settle D1’s debt, and release the remaining balance to D2. I am minded to grant an order for sale in the absence of any evidence demonstrating that such an order would be detrimental to all co-owners, or evidence showing hardship to any co-owner.

21.  Based on the Valuation Report prepared by Citiland Surveyors Limited, dated 27 May 2026 (“the Valuation Report”), the market value of the Property is HK3,990,000, and the value for sale under repossession is HK3,390,000.[30] I accept the valuation as fair and reasonable and fix the reserve price at HK$3,390,000, ie approximately 85% of the market value. Insofar as the Plaintiff is a second mortgagee, the order for sale is made subject to the prior rights and encumbrances in the First Mortgagee: see Fubon Bank (Hong Kong) Limited v Ng Wai Kong [2021] HKCFI 1558 per Au-Yeung J at §§11-13.

D. Conclusion

22.  For the reasons set out above, I grant an order in the terms of the Draft Order as provided by the Plaintiff’s solicitors at the Hearing. I also direct that notice of this judgment shall be served by the Plaintiff on (1) Bank of China (Hong Kong) Limited (ie the First Mortgagee); and (2) Ma Ka Yee (馬嘉義) (i.e. the purchaser under the ASP), pursuant to Order 44, Rule 2 of the RDC.

23.  Regarding costs, the Plaintiff sought costs against D1 on an indemnity basis, which was expressly provided for under Clause 16 of the Loan Agreement and Clause 21 of the Second Mortgage[31]. Having considered the Statement of Costs prepared by the Plaintiff’s solicitors, I summarily assessed the Plaintiff’s costs at HK$60,000 to be paid by D1. There shall be no order as to costs between the Plaintiff and D2.

E. Remarks

24.  Before concluding, I feel bound to make a brief observation on the listing of this Hearing.

25.  The Notice of Appointment to Hear Originating Summons filed by the Plaintiff specified an estimated time of 15 minutes.[32] Where a plaintiff seeks final judgment before a judge under Orders 83A and 88 of the RDC and Section 6 of the PO, the hearing is a substantive one requiring the Court to be thoroughly taken through the affidavit evidence, statutory requirements, and legal authorities. Realistically, as observed by HH Judge MK Liu in Konew Capital International Ltd v Li Kwok Pan & Anor. [2018] HKDC 1131 at §§10-13, such an exercise can rarely be properly conducted within 15 minutes.

26.  While I am satisfied on the materials before me that final judgment ought to be granted, practitioners taking out originating summonses for mortgage enforcement and sale under the Partition Ordinance in future should ensure that a realistic estimate of the length of the substantive hearing is given to the Court.

27.  It remains for me to thank Ms. Ma for her assistance to the Court.