KONEW CAPITAL INTERNATIONAL LTD v. HO KUI LAI RICHARD

HCMP 98/2021

[2022] HKCFI 1159

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 98 OF 2021

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DECISION

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1.  This is the Defendant’s appeal against the order made by Master S. H. Lee dated 31 December 2021 (“the Order”) whereby he ordered the Defendant, inter alia, to pay the sum of HK$3,297,107.57 (with interests) under a second mortgage dated 27 December 2019 and to deliver Flat A, 23^rd floor, 10 South Wall Road, No. 10 South Wall Road, Kowloon (“the Property”) within 28 days after service upon him of the Order. This appeal is a rehearing de novo.

2.  The material facts are not in dispute:

(a)  The Plaintiff and the Defendant entered into a loan agreement dated 27 December 2019 (“the Loan Agreement”) and a Second Mortgage dated 27 December 2019 (“the Second Mortgage”).

(b)  Since 27 August 2020, the Defendant has failed and/or refused to pay to the Plaintiff the full or any monthly instalments in accordance with the repayment schedule in the Loan Agreement despite the Plaintiff’s demand letter dated 30 October 2020.

(c)  Under the Second Mortgage, the Defendant’s failure to comply with a demand for repayment under the Loan Agreement shall constitute an event of default entitling the Plaintiff to take possession and to dispose of the Property.

3.  The procedural history may be summarised as follows:

(a)  On 21 January 2021, the Plaintiff commenced these proceedings pursuant to Order 83A and Order 88, Rules of the High Court.

(b)  The Defendant did not file any Notice of Intention to Defend.

(c)  On 23 August 2021, Wong Kin Keung on behalf of the Plaintiff made an affirmation to support the Plaintiff’s application.

(d)  On or about 12 October 2021, the Defendant applied for legal aid.

(e)  On 15 October 2021, the Master adjourned the case to 10 December 2021.

(f)  On or about 16 November 2021, the Defendant’s legal aid application was refused.

(g)  On 10 December 2021, the Master further adjourned the case to 31 December 2021. The Master also made an order that, unless by 1 p.m. on 22 December 2021 the Defendant filed and served an affirmation opposing quantum of the Plaintiff’s claim, the Defendant shall be debarred from doing so.

(h)  The Defendant did not file any affirmation.

(i)  On 31 December 2021, the Master made the Order after hearing the parties.

(j)  On 6 January 2022, the Defendant lodged a notice of appeal against the Master’s decision with the support of an affirmation also dated 6 January 2022.

4.  The Defendant never disputed liability or quantum. In the affirmation made by the Defendant dated 6 January 2022 in support of this appeal, he stated that, in 2019, in HCA2684/2018 where he was sued by another finance company, the Master gave him 42 days to repay the outstanding debt (with multiple extensions of time); and hence, he was able to resolve the problem. He asked the Court to give him more time in view of the poor economy and the serious Covid-19 pandemic.

5.  In law, generally speaking, a mortgagee is entitled as of right to an order for possession of the mortgaged premises; that said, the Court can adjourn the hearing of the application for an order for possession for a short time to give the borrower the chance to pay off the mortgage in full, though that power should only be exercised if there is a reasonable prospect of payment being made (Chekiang First Bank Ltd v Ko Hoi Luen & Another [1993] 3 HKLRD 360 at 362G-I; Hong Kong Civil Procedure 2022, vol. 1, §88/5/11 at p. 1679) In Chekiang First Bank Ltd, supra, Keith J (as he then was) held at pp 362J-363A that:

“[The Master] was only entitled to adjourn the hearing to enable the defendants to pay off the whole of the outstanding amount due under the charge plus interest, and even then only if the defendants had demonstrated that they could do that in a short time. The defendants did not assert that they could have done that. Nor do they assert today that they could do that.”

More recently, in Fubon Bank (Hong Kong) Ltd v Ng Wai Kong [2021] HKCFI 1558, Au-Yeung J applied Chekiang First Bank Ltd, supra, and held at §10:

“The ordinary rule at common law is that where the whole of the sum advanced became due, a mortgagee is entitled as of right to an order for possession of the mortgaged premises (unless the mortgage deed provides otherwise). The court has no jurisdiction to decline the order or to adjourn an application for possession, with the exception of an adjournment for a short time to afford to the mortgagor a chance of paying off the mortgage in full, but this should not be done if there is no reasonable prospect of such payment occurring…”

6.  The burden falls squarely on the Defendant to show by credible evidence that there is a reasonable prospect that he can repay the outstanding debts in full within a short time. The Defendant said at the hearing that he was given about 5 to 6 months in total in a previous case. However, what happened in another case in the past is irrelevant. The Defendant has not adduced any evidence that there is a reasonable prospect that he may repay the outstanding debts in full within any period of time in the near foreseeable future. He has not even stated in his affirmation how he intended to repay the outstanding sums, what steps had already been or would be taken for repayment, or how much time he would need. The Defendant asked for more time in his affirmation dated 6 January 2022, which was about 3.5 months ago. At the hearing, he said that he tried to sell the Property since about February 2022. Although some potential purchasers asked about the price, no one has inspected the Property so far. Yet, he believed that the property market is improving, and he asked for 3 months’ time to sell the Property. I am afraid that his hope of selling the Property within 3 months is merely his wishful thinking, which is not supported by any concrete evidence. It must also be borne in mind that the Defendant has failed and refused to repay the outstanding loans since August 2020, and these legal proceedings were commenced back in January 2021. Further, if, as the Defendant admitted at the hearing, he has to sell the Property in order to raise sufficient funds to repay the outstanding debts, this would mean that it is inevitable to sell the Property. There is no practical reason why the Plaintiff should not obtain possession of the Property and then exercise its power of sale. In the circumstances, there is no basis not to grant the order for possession or to adjourn the application for such an order.

7.  As stated in Hong Kong Civil Procedure 2022, vol. 1, §88/5/9 at p. 1679, “The practice is to order possession 28 days after service of the order on the defendant in case of residential property…”. The Plaintiff’s undisputed evidence is that the Property has been in the possession of the Plaintiff for domestic use. The Order is in line with the said practice.

8.  I should point out that, under the Order, if the Defendant is able to repay the outstanding sums, it is still possible for him to retake possession of the Property so long as the Plaintiff has not yet exercised the power of sale. §3 of the Order provides that:

“Upon the Defendant paying to the Plaintiff the money hereby ordered to be paid and all other moneys (if any) secured to the Plaintiff by the said Second Mortgage, the Plaintiff (subject and without prejudice to the due exercise of any power of sale for the time being vested in it) do redeliver to the Defendant possession of the mortgaged property and release to the Defendant the security constituted by the said Second Mortgage as the Defendant may agree or the Court may direct.”

9.  For the above reasons, the Defendant’s appeal is dismissed with costs. I shall assess the Plaintiff’s costs of this appeal summarily. The Plaintiff claims a total sum of HK$74,754.00 in its Statement of Costs. Clause 15 of the Loan Agreement provides that the Defendant shall pay the costs of the Plaintiff incurred in any legal action for the Defendant’s breach hereof on an indemnity basis. Although the Plaintiff is entitled to claim costs on an indemnity basis, I found some of the items claimed by the Plaintiff to be unreasonably excessive. I assess the costs summarily at HK$50,000.00.