JAPAN LEASING (HONG KONG) LTD v. SHIU TING KONG KEVIN

HCMP1042/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1042 OF 2004

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J U D G M E N T

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1. This is an appeal from the decision of Master de Souza when he made an interim payment order pursuant to Order 29 rule 12(c) for the defendant to pay $4,846,630.23 to the plaintiff within 28 days of the date of the hearing, namely 5 October 2005, failing which the defendant’s defence would be struck out.  The defendant appeals against this order.

2. The plaintiff and Shun Kai Finance Co. Ltd (“Shun Kai”) are both registered as money lenders under the Money Lenders Ordinance, Cap. 163.

3. There was an agreement between the plaintiff and Shun Kai whereby the plaintiff would lend moneys to Shun Kai who would in turn lend the moneys to customers.  The defendant was one such customer.

4. Shun Kai lent $2.2 million to the defendant.  These moneys were secured by mortgage on property at Battery Street, Kowloon, belonging to the defendant.  Shun Kai in turn entered into a sub-mortgage in the same sum in favour of the plaintiff.

5. Shun Kai defaulted on this sub-mortgage and the plaintiff issued a notice to the defendant informing him of the assignment of the mortgage and the requirement for him to pay the instalments payable under the mortgage to them in future.

6. The notice was in this form :

“Dear Sir,

       Re: Notice of Assignment of Mortgage Debt

       We act for Japan Leasing (Hong Kong) Limited.

We are instructed to hereby give you notice that by a Deed of Sub-Mortgage, Shun Kai Finance Company Limited (‘Shun Kai’) has assigned to our clients all rights title interest and benefit to and in any monies whatsoever payable to Shun Kai by you under a Deed of Mortgage/Legal Charge executed by you in favour of Shun Kai.  Under clause 9 of the said Sub-Mortgage, it shall be lawful for our clients upon a default being made by Shun Kai by notice in writing to you to direct you to effect payments of all future instalments to our clients until all sums due to our clients by Shun Kai have been fully paid.

Since Shun Kai has now been defaulted in payment to our clients, we are instructed to give you notice, which we hereby do that until further notice from our clients in writing, you are hereby required to pay directly to our clients payments of all further instalments and other monies due and to become due and payable to Shun Kai under the terms of the Deed of Mortgage/Legal Charge into our clients’ account as our clients shall direct or to such person and in such manner as our clients shall direct.

For your own benefit, please contact Ms. Louisa Lam of our clients by phoning Tel. No. 2878 5136 or 2526 6722 for the arrangement of all further payments.

Yours faithfully, (SIGNED) SIN, WONG & MUI

c.c. Clients”

7. The defendant paid three instalments which were payable to the plaintiff but thereafter discontinued making payments.

8. The plaintiff commenced the present proceedings by originating summons.  An order was subsequently made for the action to proceed by way of formal pleadings.

9. The amount presently being claimed by the plaintiff is the principal amount outstanding together with interest which has accrued thereon together with payments the plaintiff has had to pay for the essential upkeep of the property.

10. The basis of the defence which is being run by the defendant is that he did not realise that it was incumbent upon him to make payments to the plaintiff rather than Shun Kai.  Indeed, he says in one of his affirmations that he approached a Mr Wong who had been the person he had been dealing with in Shun Kai and Mr Wong had said that payments could be made to Shun Kai.

11. It has to be said immediately that this is no answer whatever to the claims being made by the plaintiff.  What is necessary for a person in the defendant’s position is to produce valid receipts from the person they are indebted to or from their duly authorised agent.  In this way they can prove that they have discharged their liabilities to their creditor.

12. There was also a reference in the defendant’s affirmations that the plaintiff’s bankers declined to accept payment on one occasion and that when he telephoned the plaintiff’s office he was told that the telephone line was out of order.

13. Again this is no acceptable excuse for non-payment.  Having regard to the clear terms of the notice the defendant should at least have written either to the plaintiff or their solicitors to obtain clarification of the matter.  Alternatively he could have sought legal advice.

14. There is also no merit in the defendant’s contention that the plaintiff acquiesced in the position or that their delay in pressing their claims constitute some form of defence.

15. The final matter to be dealt with is the approach which has been adopted by the plaintiff in pursuing this claim.

16. Mr Ng for the plaintiff places reliance upon the judgments of Kaplan J in Shenning International v. George Wimpy [1988] 3 All ER 375 and Paul Y Construction v. the Attorney General of Hong Kong, unreported, being Construction List No. 2 of 1992 for making an application to the Court for an interim payment to be made of the entire amount of the claim.

17. Although it may have been preferable for this matter to have been ventilated in an Order 14 application I am satisfied that the procedure which was adopted by the plaintiff is acceptable in all of the circumstances of this case.  I also accept that there are good procedural reasons why the plaintiff was unable to proceed under Order 14.  I have also had particular regard to the fact that the defendant has not advanced any serious defence to the claims which were being made by the plaintiff.

18. This being the case this appeal is dismissed.  As the payment ordered by the Master has not been paid I order that judgment be entered for the plaintiff in the sum claimed together with the other reliefs sought.

19. I order that the plaintiff will have their costs and that these will be taxed on an indemnity basis.  The reason for the taxation being ordered on this basis is that the parties have agreed to this contractually in the relevant mortgage documents.

20. In conclusion, I would like to thank Mr Ng for the assistance he has given me.