AMERICAN WILSON FINANCE LTD v. CHING YONG ANDY AND ANOTHER

HCMP 742/2022

[2023] HKCFI 1786

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 742 OF 2022

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REASONS FOR JUDGMENT

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INTRODUCTION

1.  By an originating summons filed on dated 13 June 2022 (“the Originating Summons”), the plaintiff applied for monetary judgment against the 1^st defendant, an order for possession against the defendants and an order for sale of the Property pursuant to Order 83A and Order 88 of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“the RHC”) and sections 2, 3 and 6 of the Partition Ordinance (Cap.352, Laws of Hong Kong) (“the Ordinance”).

BACKGROUND

2.  The following background is extracted from the Affirmation of Wong Scarlet which was filed in support of the Origination Summons[1] (“the Supporting Affirmation”).

3.  At all material times, the defendants were and are the registered owners of the Property, and Rise Honest International Limited (“Rise Honest”) was a licensed money lender.

4.  By a Second Legal Charge dated 16 July 2014 (registered in the Land Registry by Memorial No.14072100220016 (“the Second Legal Charge”)) executed between the 1^st defendant as the borrower and Rise Honest as the lender, the 1^st defendant mortgaged the Property to Rise Honest as security for due payment of all sums of moneys which might from time to time be or become payable by the 1^st defendant to Rise Honest with $900,000 as the maximum amount secured thereunder together with interest thereon and legal costs on full indemnity basis.

5.  Further, by a Further Charge dated 23 April 2015 (registered in the Land Registry by Memorial No.15042700210071 (“the Further Charge”)) executed between the 1^st defendant as the borrower and Rise Honest as the lender, the 1^st defendant mortgaged the Property to Rise Honest as security for due payment of all sums of moneys which might from time to time be or become payable by the 1^st defendant to Rise Honest with $600,000 as the maximum amount secured thereunder together with interest thereon and legal costs on full indemnity basis.

6.  By a loan agreement dated 23 April 2015 (“the 1^st Loan Agreement”) made between Rise Honest as lender and the 1^st defendant as borrower, Rise Honest lent the 1^st defendant a principal sum of $490,000 (“the 1^st Loan”) which shall be repaid by 60 monthly instalments on the terms and condition contained in the 1^st Loan Agreement.

7.  By a loan agreement dated 18 June 2015 (“the 2^nd Loan Agreement”) made between Rise Honest as lender and the 1^st defendant as borrower, Rise Honest lent the 1^st defendant a principal sum of $550,000 (“the 2^nd Loan”) which shall be repaid by 84 monthly instalments on the terms and condition contained in the 2^nd Loan Agreement.

8.  By a loan agreement dated 27 October 2015 (“the 3^rd Loan Agreement”) made between Rise Honest as lender and the 1^st defendant as borrower, Rise Honest lent the 1^st defendant a principal sum of $50,000 (“the 3^rd Loan”) which shall be repaid by 18 monthly instalments on the terms and condition contained in the 3^rd Loan Agreement.

9.  By a loan agreement dated 7 January 2016 (“the 4^th Loan Agreement”) made between Rise Honest as lender and the 1^st defendant as borrower, Rise Honest lent the 1^st defendant a principal sum of $60,000 (“the 4^th Loan”) which shall be repaid by 24 monthly instalments on the terms and condition contained in the 4^th Loan Agreement.

10.  In breach of the 1^st Loan Agreement, the 2^nd Loan Agreement, the 3^rd Loan Agreement and the 4^th Loan Agreement (collectively, “the Loan Agreements”), the 1^st defendant has failed to pay the plaintiff the monthly instalments under the aforesaid agreements punctually on their respective due dates despite repeated demands from early 2016 onwards.

11.  On 5 June 2020, Rise Honest assigned all the rights, title, interests, benefits and claims (including the right to demand, sue for, recover, receive and give receipts) in respect of the 1^st Loan Agreement, the 2^nd Loan Agreement, the 3^rd Loan Agreement, the 4^th Loan Agreement, the Second Legal Charge and the Further Charge to the plaintiff by way of Two Transfers of Mortgage registered by Memorial Nos.20061600190016 and 20061600190021 respectively (“the Assignment”)

12.  On the same day, the 1^st defendant was duly notified of the Assignment by way of a Notice of Assignment in writing.

ABSENCE OF THE 2^ND DEFENDANT

13.  The 1^st defendant informed the Court that, the 2^nd defendant who is his father, could not attend the hearing because of his health condition, but he is well aware of this hearing. In any event, I held the view that the hearing might proceed in his absence because it is evident that:

(1) the Court has posted a Notice of Hearing to the Property at which the 2^nd defendant is still residing. Such a notice was addressed to the 2^nd defendant;

(2) the plaintiff’s solicitors have posted a Notice of Appointment to Hear Originating Summons to the 2^nd defendant at the Property.

DISCUSSION

Monetary Judgment

14.  As the 1^st defendant did not dispute the plaintiff’s calculation of the outstanding principal and interest under the Loan Agreements as set out in the Supporting Affirmation, I was of the view that the plaintiff was entitled to monetary judgment against the 1^st defendant.

Order for possession

15.  By reason of the 1^st defendant’s default in repayment, an event of default has occurred under both the Second Legal Charge and the Further Charge. In such circumstances, under Clauses 6.01 of the aforesaid documents, the plaintiff was entitled to take possession of the Property.

16.  I was satisfied that the requirements under Order 88 of the RHC have been complied with.

17.  I therefore agreed that an order for possession should be made.

Order for sale

18.  It is evident that the defendants were and are joint tenants[2] of the Property.

19.  It is trite that a joint tenant’s act of tendering his or her share in the property to be mortgaged would result in a severance of the joint tenancy, thereby creating a legal charge over such a co-owner’s interest in the property. The co-owners would become tenants in common in equal share: Ma Wing Sum v Ma Choi Kee [1967] HKLR 177, at 195 – 196 and Ma Pui Ki v Ho Wing Ha [2020] HKCFI 2705, at [16] – [35] & [40].

20.  Hence, the 1^st defendant’s act in entering into the Second Legal Charge constituted severance of the joint tenancy. The Second Legal Charge and the Further Charge were thus created over the 1^st defendant’s interest as tenant in common having 50% share in the Property.

21.  Section 3(1) of the Partition Ordinance provides that:-

“Where any property in land is held in the manner referred to in section 2, any person interested in such property may institute proceedings in the court under this Ordinance by way of an action for partition or sale.”

22.  As aforesaid, an event of default has occurred under both the Second Legal Charge and the Further Charge. In such circumstances, the plaintiff has become a “person interested” in the Property under section 3(1) of the Partition Ordinance.

23.  Section 6(1) of the Partition Ordinance further stipulates that:-

“In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of—

(a) the nature of the land to which the proceedings relate;

(b) the number of the persons interested or presumptively interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.”

24.  In Wong Chun Kei Johnny & Others v Poon Vai Ching, Executrix of the estate of Poon Kam Chuen, Deceased [2007] 1 HKLRD 825, Recorder Fok SC (as Fok PJ then was) set out the following guiding principles which are applicable when the Court is faced with an application for partition or sale under the Partition Ordinance[3]:

(1) A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, ask for an order for partition or sale.

(2) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners or that it will result in very great hardship to one co-owner.

(3) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.

25.  The Property is a residential unit in a multi-storey building. It has a saleable area of 465 sq.ft. I agreed that normally it is very difficult, if not impossible, to find a buyer who would be willing to acquire the 1^st defendant’s share in the Property and to co-own the Property with the 2^nd defendant. In the present case, the defendants have not adduced any evidence to show that there is such a willing buyer.

26.  It is also the undisputed evidence adduced by the plaintiff that it is impractical to partition the Property into two flats.

27.  I therefore concluded that a partition of the Property would not be beneficial to all the persons interested.

28.  As the defendants have not filed any affirmation in opposition, they have not adduced any evidence to show that an order for sale will result in very great hardship to the 2^nd defendant.

29.  I therefore took the view that this is an appropriate case in which an order for sale should be made.

ORDER

30.  I therefore made an order in terms of the draft order submitted by the plaintiff’s counsel at the hearing, subject to the Court’s amendments thereto made in the hearing.