XCHRX CHAN TING WAI, WILLIAM v. LAM SAI PAK AND ANOTHER

HCA 2587/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2587 OF 1997

(Heard together with HCMC 2/1999)

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J U D G M E N T

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1. The 1st and 2nd defendants are husband and wife. On 2 August 1996, the 2nd defendant petitioned for divorce. Seven months later, the plaintiff issued proceedings in debt action against the 1st defendant in respect of a loan of $300,000.00 advanced to the 1st defendant on 25 May 1996. Judgment was entered against the 1st defendant upon his admission of liability. The plaintiff obtained a charging order nisi against the matrimonial home of the defendants. On 26 March 1998, the 2nd defendant obtained leave to join the debt action in order to protect her interest in the matrimonial home. The charging order was made absolute on 30 July 1998. On appeal, Sakhrani, J set aside the charging order absolute on counsel's undertaking to apply to transfer the divorce proceedings to the High Court so that those proceedings could be heard at the same time as the application for the charging order to be made absolute.

2. In the course of hearing both the 2nd defendant's application for ancillary relief and the plaintiff's application for the charging order to be made absolute, the three parties came to settlement in relation to the plaintiff's application. By consent, the charging order was made absolute only to the extent of $300,000.00 and with no order as to costs as between the plaintiff and the two defendants. Also by consent, the 1st defendant's interest in the matrimonial home, subject to the above charge, is to be transferred to the 2nd defendant. The question of costs as between the 1st and 2nd defendants was left to be decided at the conclusion of the proceedings for ancillary relief.

3. Mr Clough, on behalf of the 2nd defendant, submitted that the loan was the 1st defendant's personal loan and by admitting liability, the 1st defendant put a threat to the 2nd defendant's home and the child's future. There is nothing to suggest that the loan was not a genuine one. If it is, there is nothing the 1st defendant could do than to admit liability. At the time the loan was made, the divorce proceedings have not started. It is impossible to separate between what is personal loan and what is family loan.

4. Alternatively, Mr Clough submitted that if the loan was for his business, the 1st defendant should not have mixed his personal affairs with business affairs which then put the matrimonial home at risk. I do not consider this argument tenable either. The 1st defendant was not a salary earner. He derived his income from his business. A loan made for the purpose of the business, which was intended to earn income for the family, must also be a loan made for the purpose of the family. If the loan was not repaid, the application for charging order will necessarily follow. In the circumstances, I do not think the 1st defendant should bear the 2nd defendant's costs in contesting the application for charging order.

5. Accordingly, I make no order as to costs as between the 1st and 2nd defendant.