TANG SAK HO v. CREDIT ONE FINANCE LTD

HCMP 3422/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3422 OF 2016

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REASONS FOR DECISION

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1.  At all material times, the plaintiff and his wife Man Ho Ching were/are the owners (as joint tenants) of Flat 14, 26/F, Block G, Kam Fung Court, No 638 Sai Sha Road, Shatin, New Territories, Hong Kong (“Property”).

2.  The defendant was a money lender under the Money Lenders Ordinance Cap 163.

3.  By a Deed of Loan dated 31 March 2016 made by the plaintiff as “Registered Owner”, the plaintiff, Lee Kar Wah John and Nguyen Thi Mai as “Borrower” and the defendant as “Lender”, the Borrower through the Registered Owner applied to the Lender for the grant of a loan to the Borrower for the sum of $1,185,000 with interest at 32% pa[1] to be repaid by 120 consecutive monthly instalments of $31,964 on the 1^st instalment and $33,003 on each of the 12^th to 120^th instalments (each including principal and interest), the first of such instalments to be paid on 30 April 2016 and the subsequent instalments to be paid on the 30^th day of each calendar month until full repayment thereof (“Deed of Loan”).

4.  The First Schedule to the Deed of Loan specified there was no security for the loan. The Deed of Loan did not mention the Property (or anything else) as security for any loan made pursuant to the Deed of Loan, and did not contain any negative covenants or anything of that nature in relation to the Property.

5.  On 18 April 2016, the defendant caused its solicitors Cheung & Choy to deliver the Deed of Loan to the Land Registry under memorial no 16041801440049 (“Deed of Loan Memorial”). The registration of the Deed of Loan was withheld by the Land Registry. It was said that the Deed of Loan Memorial bore an introductory page warning its readers that the Deed of Loan was a “Stopped Deed” (“Deed of Loan Introductory Page”), but such introductory page was not placed before the court.

6.  On 25 October 2016, the plaintiff’s solicitors wrote to Cheung & Choy to demand removal of the Deed of Loan from the register of the Property at the Land Registry. The caption of such letter was “HCA1587/2016”. The letter also referred to a Statement of Claim that in turn referred to a Loan Agreement dated 31 March 2016 but not the Deed of Loan of the same date. Query was raised to clarify the relation between the Loan Agreement and the Deed of Loan (if any). However, no further information in relation to HCA1587/2016 was placed before this court.

7.  On 15 November 2016, the defendant served a Form 162 Statutory Demand under section 6A(1)(a) of the Bankruptcy Ordinance Cap 6 (debt or liquidated sum payable immediately following a judgment or order of the court) (“Statutory Demand”). The debt stated in the Statutory Demand was $1,353,775.55 being “[unpaid] balance of principal and interests thereon under the Loan Agreement dated 31^st March 2016” and further interest as from 11 November 2016 at 32% pa. In the annexed Particulars of Debt, it was stated that by a Loan Agreement dated 31 March 2016 made between the defendant as the Lender and the plaintiff as one of the Borrowers, the defendant lent to the plaintiff a principal sum of $1,185,000 repayable by 120 instalments with interest at 32% pa. The plaintiff claimed such principal sum and interests corresponded to those as stated in the Deed of Loan, but there was no specific denial of any Loan Agreement apart from the Deed of Loan.

8.  The plaintiff claimed the Statutory Demand was erroneous and wrongly served on him as there was no judgment or order of the court against him whatsoever for the principal sum and interests in relation to the Deed of Loan. Indeed, the Statutory Demand did not comply with the statutory form in Form 162 in the Schedule of the Bankruptcy (Forms) Rules Cap 6B in that it did not contain the following:

“By a Judgment/order of the _________________ court in proceedings entitled Number _________________ between Plaintiff and ______________ Defendant it was adjudged/ordered that you pay to the Plaintiff creditor the sum of $___________ and $_____________ for costs”.

9.  On 15 November 2016 the defendant caused its solicitors H Y Leung & Co to deliver to the Land Registry the Statutory Demand under memorial no 16111501290019 (“Statutory Demand Memorial”) for registration at the register of the Property. The Statutory Demand Memorial bore an introductory page warning its readers that the Statutory Demand was a “Stopped Deed”, and registration of the Statutory Demand was withheld by the Land Registry.

10.  Since the Statutory Demand was served on the plaintiff and attempt was made to register it at the register of the Property at the Land Registry after the plaintiff demanded the defendant to withdraw the registration of the Deed of Loan, the plaintiff believed such moves were made by the defendant to cause him nuisance, difficulties and embarrassment by making available to the public what was factually wrong and unrelated to the Property.

11.  The plaintiff claimed that on 14 November 2016 the defendant’s solicitors Lui & Law wrote to the plaintiff threatening that they would write to the solicitors acting for the purchaser in the upcoming sale and purchase of the Property to draw their attention to the alleged loan between the plaintiff and the defendant “which may be relevant to the intended sale and purchase transaction”. However, such letter was not placed before me.

12.  There was also no further information about the sale and purchase of the Property save that Mr Wong (and Mr Lam with him), counsel for the plaintiff, in their submissions referred to a completion date on 21 December 2016. However, it appeared from the land search records in respect of the Property that a letter of nomination in favour of a Hei Hau Lee dated 19 October 2016 and a sale and purchase agreement dated 28 October 2016 for sale to a Hei Hau Lee (“SPA”) were registered on 7 November 2016.

13.  At the hearing on 15 December 2016, a copy of the SPA dated 28 October 2016 between the plaintiff and Man Ho Ching as vendor and Hei Hau Lee as purchaser was produced. The SPA provided that the completion date would be on or before 21 December 2016.

14.  On 16 November 2016, the plaintiff’s solicitors by letter to Cheung & Choy again demanded withdrawal of the registration of the Deed of Loan.

15.  On 23 November 2016, Cheung & Choy replied that the defendant was prepared to withdraw the registration of the Deed of Loan only on condition that the plaintiff undertook that all money received from the purchaser in respect of any sale of the Property be stakeheld by the purchaser’s solicitors until the plaintiff fully settled all outstanding sums (including costs and interest) due and payable to the defendant.

16.  The plaintiff argued that by reason of such reply the defendant knew he and his wife were planning to sell the Property, and it was an abuse of the registration system of the Land Registry to use it as a means to coerce him into repayment of “a loan [he has] never received”.

17.  The plaintiff claimed that on 2 December 2016 Cheung & Choy wrote to the plaintiff’s solicitors to confirm that the defendant would not withdraw the registration of the Deed of Loan unless the plaintiff’s solicitors undertook to use the sale proceeds of the Property to repay the defendant “some uncertain alleged outstanding sum”. But such letter was not placed before me.

18.  The plaintiff alleged that (a) the Deed of Loan and Statutory Demand were personal against him and wholly unrelated to the Property or any land at all so they were not registrable against the Property, (b) the Deed of Loan and Statutory Demand were registered so as to keep them as instruments pending registration in the register of the Property that were available to the public, (c) such pending registrations (even if void) might be considered as encumbrances on the Property, and (d) there was risk that the sale of the Property might fall through which would cause substantial loss to the plaintiff. The plaintiff suspected the defendant sought registration of the Deed of Loan and Statutory Demand in order to create a false impression of encumbrances on the Property to jeopardise the sale of the Property in order to put pressure on him.

19.  On 8 December 2016, the plaintiff commenced the present proceedings by originating summons to seek the following reliefs:

(a)   declarations that the Deed of Loan and Statutory Demand were not registrable at the Land Registry against the Property;

(b)   orders that the Deed of Loan and Statutory Demand be withdrawn and forthwith removed from the register of the Property at the Land Registry, including any reference to their registration as pending and/or being withheld;

(c)   costs on indemnity basis; and

(d)   further and/or other relief.

20.  On 9 December 2016, the plaintiff filed a summons to seek the same reliefs as in the originating summons (“Summons”), and also filed his own affirmation in support of the application.

21.  At the hearing on 15 December 2016, Ms Yeung of Cheung & Choy appeared for the defendant. She undertook to file Notice to Act, but had no submissions to make on behalf of the defendant except to indicate that the defendant wished to seek counsel’s advice.

22.  Mr Wong submitted that there was urgency in the matter as (a) the Property was in the course of being sold and the completion was due on 21 December 2016, and (b) the plaintiff and his wife as vendors might be liable for default of they were unable to deliver the Property free from encumbrances.

23.  Mr Wong submitted that the court had inherent jurisdiction to vacate the registration or purported registration of any instrument in the Land Registry which did not affect or which no longer affected land.[2] Since unsecured personal loans would not create any interest in land, the Deed of Loan was not registrable.[3]

24.  In light of the matters set out in paragraph 4 above, I have no doubt the Deed of Loan concerned an unsecured personal loan. I also note that no stamp duty was payable on the Deed of Loan as it did not have anything to do with the Property. In such circumstances, the Deed of Loan was not registrable and ought to be removed.

25.  As regards the Statutory Demand, it was embarrassing as there was no judgment/order in respect of the debt specified in the Statutory Demand, and at best it was merely a personal matter against the plaintiff that did not relate to any land or the Property at all. Again, the Statutory Demand was not registrable and ought to be removed.

26.  In the view of the imminent completion date, I am also satisfied there was urgency in the matter. Given the nature of the aforesaid documents pending registration and the pending completion date, I do not consider it would be appropriate to adjourn the matter for the defendant to seek counsel’s advice. Indeed, Ms Yeung confirmed she had already advised the defendant on the nature of the documents and the consequences of delivery of such documents to the Land Registry for registration.

27.  In the circumstances, at the hearing on 15 December 2016, upon the undertaking by the plaintiff through counsel to file and serve a further affirmation to exhibit copies of the SPA with corresponding memorial delivered to the Land Registry for registration of the SPA on or before 4:30pm on 15 December 2016 (“Undertaking”), I granted the declarations and orders set out in paragraph 19(a)-(b) above.

28.  After the hearing on 15 December 2016, Cheung & Choy filed their Notice to Act for the defendant on the same day. Likewise, the plaintiff filed the affirmation of his solicitor Lo Hing that exhibited copies of the SPA and its corresponding memorial also within the same day pursuant to the Undertaking. Without leave of the court, such affirmation also exhibited copies of the Deed of Loan Introductory Page and the letters referred to in paragraphs 11 and 17 above. Since these documents were not considered or taken into account in coming to the decision in paragraph 27 above, I place no reliance on them for rendering my reasons for decision herein.

29.  As for costs, the Deed of Loan and Statutory Demand were patently not registrable, and should not have been delivered for registration in the first place. So at the hearing on 15 December 2016, I also ordered the defendant to pay the plaintiff’s costs (ie costs of the present proceedings and the Summons) on indemnity basis.[4] Mr Wong did not seek certificate for two counsel.