HE ZHONG FINANCE LTD v. THE PERSONAL REPRESENTATIVE OF THE ESTATE OF KO PING KUEN, DECEASED AND ANOTHER

DCMP 2920/2023

[2025] HKDC 1182

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2920 OF 2023

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BETWEEN

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DECISION

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1.  Before me is the joint application made by the Plaintiff and the 2^nd Defendant by way of consent summons dated 21 January 2025 (the “Consent Summons”) seeking, inter alia, an order for sale of Flat H, 8^th Floor, Maple Mansion, 37 Fuk Wa Street, Kowloon, Hong Kong (the “Property”) under section 6 of the Partition Ordinance, Cap 352.

2.  These proceedings were commenced by way of Originating Summons issued on 30 June 2023 (the “OS”), and extended for 12 months from 20 June 2024 pursuant to the Order of Master J Chow dated 19 March 2025.

3.  Pursuant to the OS, the Plaintiff sought, inter alia, vacant possession of the Property and an order for sale of the Property by way of public auction or private treaty.

RELEVANT BACKGROUND

The Property and the Charges

4.  On 16 December 2008, the Property was acquired by the late Mr Ka Ping Kuen (the “Deceased”) and the 2^nd Defendant as joint tenants.

5.  On 14 December 2011, the Deceased and the 2^nd Defendant took out a mortgage (the “First Mortgage”) with Public Finance Limited (the “1^st Mortgagee”).

6.  On 4 June 2019, the Plaintiff was granted a Money Lenders Licence under licence No. 0486/2019.

7.  On 5 June 2019:

(1) The Deceased’s and the 2^nd Defendant’s joint tenancy over the Property was severed and the Deceased and the 2^nd Defendant became tenants in common each holding a 50% interest in the Property respectively. A Notice of Severance was filed with the Land Registry on 25 June 2019;

(2) The Deceased and the Plaintiff entered into a loan agreement (the “Loan Agreement”) pursuant to which the Deceased borrowed from the Plaintiff the sum of HK$1,560,000 (the “Loan”). The Loan was to be repaid by the Deceased by way of 180 instalments;

(3) As security for the general credit facilities made available to the Deceased by the Plaintiff, the Deceased charged his interest in the Property in favour of the Plaintiff, pursuant to a second mortgage (the “Second Mortgage”).

8.  On 13 January 2021, the Deceased and Field Finance Limited (the “3^rd Mortgagee”) executed a legal charge whereby the Deceased charged his interest in the Property in favour of the 3^rd Mortgagee (the “2021 Legal Charge”).

DCCJ 266/2022 and the Judgment Debt

9.  On 18 January 2021, the Deceased passed away. At the time of his death, the Loan had not been fully repaid.

10.  Following the passing of the Deceased, an event of default under Clause 6 of the Second Mortgage was triggered by the Deceased’s and/or the 1^st Defendant’s failure to repay. The security then became enforceable by the Plaintiff under Clause 7 of the Second Mortgage.

11.  Subsequently, the Plaintiff commenced proceedings against the 1^st Defendant herein, in DCCJ 266/2022.

12.  On 23 May 2023, the Plaintiff obtained judgment against the 1^st Defendant in DCCJ 266/2022 and the 1^st Defendant was ordered to pay to the Plaintiff:

(1) The sum of HK$1,909,687.32;

(2) Further interest on the outstanding principal sum of HK$1,299,955.00 at a rate of 20% per annum starting from 24 May 2023 until full payment; and

(3) Costs, assessed at HK$13,600.00

(together, the “Judgment Debt”)

13.  Ms Lam, appearing on behalf of the Plaintiff, has, very helpfully, provided a breakdown of all sums due and owing in relation to the Judgment Debt, up to the date of this hearing.

14.  As of the date of this hearing, the Judgment Debt outstanding and due is HK$2,441,132.41 and broken down as follows:

Item	For Period from 24 May 2023 to 20 May 2025	HK$
(1)	The sum	1,909,687.32
(2)	Interest on the outstanding principal sum of HK$1,299,955.00 at the rate of 20% per annum starting from 24 May 2023 to 31 December 2023: HK$1,299,955.00 x 20% x (222/365) days	158,131.51
(3)	Interest on the outstanding principal sum of HK$1,299,955.00 at the rate of 20% per annum starting from 1 January 2024 to 31 December 2024: HK$1,299,955.00 x 20% x (366/366) days	259,991.00
(4)	Interest on the outstanding principal sum of HK$1,299,955.00 at the rate of 20% per annum starting from 1 January 2025 to 20 May 2025: HK$1,299,955.00 x 20% x (140/365) days	99,722.58
(5)	Assessed costs of DCCJ 266/2022	13,600.00
	Total:	2,441,132.41

15.  The assessed costs of DCCJ 266/2022 is also subject to interest, which is to be calculated at the judgment rate from 23 May 2023. Up to the date of the hearing, the calculation breakdown is as follows:

Item		HK$
(1)	8.583% per annum for the period from 23 May 2023 to 30 June (HK$13,600.00 x 8.583% x 39/365)	124.72
(2)	8.662% per annum for the period from 1 July 2023 to 30 September 2023 ($13,600 x 8.662% x 92/365)	296.93
(3)	8.798% per annum for the period from 1 October 2023 to 31 December 2023 ($13,600 x 8.798% x 92/365)	301.59
(4)	8.875% per annum for the period from 1 January 2024 to 31 December 2024 ($13,600 x 8.875% x 366/366)	1,207.00
(5)	8.622% per annum for the period from 1 January 2025 to 31 March 2025 ($13,600 x 8.622% x 90/365)	289.13
(6)	8.276% per annum for the period from 1 April 2025 to 20 May 2025 ($13,600 x 8.276% x 50/365)	154.18
	Total:	2,373.55

16.  Therefore, as at the date of the hearing, the total amount due and owing to the Plaintiff by the 1^st Defendant, arising out of the DCCJ 266.2022 proceedings is HK$2,443,505.96 (HK$2,441,132.41 + HK$2,373.55).

The 1^st Defendant

17.  I have been informed by the legal representatives of both the Plaintiff and the 2^nd Defendant that, as at the date of the hearing, no executor has ever been appointed in relation to the estate of the Deceased. The 1^st Defendant is therefore a vacant position with no individual/entity occupying such a capacity.

Service

18.  Pursuant to an Order made by Master Ross Li on 27 September 2024, the Official Solicitor was appointed to accept service of the OS on behalf of the 1^st Defendant.

19.  By way of another Order of Master Ross Li, also dated 27 September 2024, the Master ordered, inter alia, that:

(1) These proceedings be proceeded against the Defendants in the absence of a person representing the estate of the Deceased (the 1^st Defendant) under O 15, r 15 RDC;

(2) Any judgment or order subsequently made or given in these proceedings shall bind the estate of the Deceased to the same extent as it would have been bound had a personal representative of the Deceased been a party to these proceedings; and

(3) Service of all further documents in these proceedings be effected by leaving at the Property.

20.  The Plaintiff has filed numerous affirmations of service setting out the details surrounding the service of relevant documents in these proceedings on the 1^st Defendant, the 2^nd Defendant, the Director of Lands, the Official Solicitor, the 1^st Mortgagee and the 3^rd Mortgagee.[1]

21.  By two letters both dated 24 March 2025, the Plaintiff wrote to both the 1^st Mortgagee and the 3^rd Mortgagee informing them of the Consent Summons application and provided them a copy of the Court Memo dated 21 March 2025 issued by Master J Chow.[2] In these letters, the Plaintiff asked the 1^st Mortgagee and the 3^rd Mortgagee to attend the hearing (today’s hearing) and warned that court orders (which may include orders not in their favour) may be made in their absence.

22.  Up to the date of this hearing, no reply had been received by the Plaintiff from either the 1^st Mortgagee or the 3^rd Mortgagee. Neither the 1^st Mortgagee nor the 3^rd Mortgagee attended the hearing.

23.  A Notice to Occupants was filed by the Plaintiff on 16 May 2025 giving notice that the Plaintiff sough possession of the Property and set out the date, time and place of the present hearing. A copy of the Notice to Occupants was posted up by the Plaintiff on 16 May 2025 at a conspicuous place at the main entrance of the Property and separately served on the 1^st Defendant on the same day by leaving the same in a sealed envelope (together with other documents) at the Property.[3]

24.  In the present case, I am satisfied that the Plaintiff has complied with the requirements of Order 88, rules 4 and 5 of the Rules of the District Court (Cap 336H), including the production of the original Second Mortgage for the Court’s inspection at the hearing.

The Valuation

25.  A valuation report has been exhibited to the 2^nd Affirmation of Wong Wing Yee, filed for and on behalf of the Plaintiff on 9 May 2025. This valuation report was compiled by Allied Surveyor Limited and dated 6 May 2025 (the “Valuation Report”).

26.  The Valuation Report describes the Property as being a residential flat having a saleable area of 395 square feet and comprising one bedroom, a kitchen and a bathroom.

27.  The Valuation Report states that the Property’s value for sale under re-possession is in the region of HK$2,250,000 whereas its current market value is HK$2,500,000.

28.  The rateable value of the Property for the financial year 2023/24 (ie at the time of the OS) was HK$94,080.00.

THE DRAFT ORDER

29.  At the commencement of present hearing, the Plaintiff and the 2^nd Defendant submitted to the Court a draft order (the “Draft Order”), the terms of which are agreed by those parties and which provides as follows:

“UPON the application of the Plaintiff by way of Originating Summons renewed on 30^th June 2024

AND UPON reading the Consent Summons filed on 21^st January 2025

AND UPON the 2^nd Defendant’s undertaking to the Plaintiff and the Court that she shall, at her own costs, settle all outstanding payments under the mortgage with the First Mortgage with Public Finance Ltd dated 14 December 2011 which is registered with the Land Registry with Memorial No 12010502010324, including all costs and disbursements for handling such encumbrances within 35 days upon the date hereof

AND UPON hearing the Solicitors for the Plaintiff, the Solicitors for the 2^nd Defendant and the 1^st Defendant acting in person being absent

IT IS ORDERED that:

(1) Unless the 1^st Defendant, as executor (or administrator) of the estate of the above named Ko Ping Kuen do make payment of the Judgment Debt of DCCJ 266/2022, namely (a) the sum of HK$1,909,687.32; (b) further interest on the outstanding principal sum of HK$1,299,955.00 in respect of the loan at the rate of 20% per annum from 24 May 2023 until full payment; and (c) the assessed costs of DCCJ 266/2022 at HK$13,600.00, and further interest of the said HK$13,600.00 being the assessed costs of DCCJ 266/2022 at the judgment rate from 23 May 2023 until full payment within 28 days upon the date of the order to be made, the Plaintiff and the 2^nd Defendant do jointly at their best endeavors to procure sale of the property known as Flat H, 8/F, Maple Mansion, 37 Fuk Wa Street, Kowloon, Hong Kong (“the Property”) in accordance with the terms of this Order;

(2) The Property be sold by the Plaintiff and the 2^nd Defendant jointly in the capacity as vendors by private treaty to the 2^nd Defendant solely at HK$2,500,000;

(3) The conduct of sale be entrusted to the Plaintiff’s Solicitors, Messrs Huen & Cheung;

(4) The proceeds of sale be applied in the following priority:

4.1 In discharge of all rent, taxes, rates and other outgoings due and affecting the Property;

4.2 In payment of all other proper conveyancing costs, charges and other expenses incurred in connection with the said sale not more than HK$15,000;

4.3 The balance, be divided in the following shares:

4.3.1 50% of the balance shall be paid to the 2^nd Defendant;

4.3.2 The remaining 50% of the balance shall be paid to the 1^st Defendant (if any) after deducting:

4.3.2.1 The Plaintiff’s costs in these proceedings and all costs and expenses incurred by the Plaintiff in taking enforcement for recovery of vacant possession of the Property if necessary and payment to discharge the Judgment Debt of DCCJ 266/2022, namely:

(a) the sum of HK$1,909,687.32;

(b) further interest on the outstanding principal sum of HK$1,299,955.00 in respect of the loan at the rate of 20% per annum from 24 May 2023 until full payment; and

(c) the assessed costs of DCCJ 266/2022 at HK$13,600.00, and further interest of the said HK$13,600.00 being the assessed costs of DCCJ 266/2022 at the judgment rate from 23 May 2023 until date of completion; and

4.3.2.2 the next encumbrances affecting such 1^st Defendant’s interest in the Property.

4.4 Upon such sale, the Plaintiff be authorised to do all acts necessary for the vesting of the Property in the purchaser(s) thereof;

4.5 In the event that the 1^st Defendant neglects or refuses to execute any of the conveyancing documents, Mr. Cheung Chak Wai, solicitor and partner of Messrs. Huen & Cheung, be nominated and authorised to execute on behalf of the 1^st Defendant;

(5) Liberty to apply; and

(6) There be no order as to costs of these proceedings including this application.”

30.  Both the Plaintiff and the 2^nd Defendant have asked this Court to grant an order in terms of the Draft Order.

LEGAL PRINCIPLES AND ANALYSIS

31.  The legal principles relevant to an order for sale are well established. A summary of these principles has been helpfully set out in the judgment of Deputy District Judge Kay Seto in Konew Capital International Limited v Lau Kwan Pak [2024] HKDC 624 at §§21-23, 25-26:

(1) Section 2 of the Partition Ordinance (Cap 352) (“PO”) provides that, where any property in land is held by two or more persons, whether as joint tenants or as tenants in common, the court may make an order for partition of the property under section 4 of the PO, an order for sale of the property under section 6 of the PO, or refuse to make any order;

(2) Section 3(1) of the PO provides that any person interested in such property may institute proceedings under the PO for an order for sale;

(3) It is well established that an interested person is confined to a person holding an interest in possession. A mortgagee of a partial interest is considered an interested person for the purposes of section 3(1) of the PO, and is thus entitled to apply for an order for sale of the property;

(4) Section 6(1) of the PO empowers the court to make an order for the sale of the property 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 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, or (d) any other circumstances;

(5) A co-owner has the 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;

(6) 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) 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;

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

(8) An order for sale would not be refused unless all the co-owners would be benefited by its refusal, or an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner.

32.  It has been submitted by both the Plaintiff and the 2^nd Defendant that it would not be practicable or beneficial to physically partition the Property, and therefore they jointly seek an order for sale under section 6(1) of the PO.

33.  Additionally, the court may make a possession order in favour of a second mortgagee notwithstanding the existence of a first mortgagee as long as the is made subject to the rights of the first mortgagee, and to the rights of any other person deriving title from the first mortgagee: Fubon Bank (Hong Kong) Limited v Ng Wai Kong [2021] HKCFI 1558, §11, per Au Yeung J.

34.  Having considered the submissions and the materials before me, I find that it would be just and reasonable to grant an order for sale of the Property, to be made in terms of the Draft Order. I so find for the following reasons:

(1) Since the Plaintiff is a mortgagee of the Deceased’s 50% share of the Property, the Plaintiff is a “person interested” within the meaning of section 3(1) of the PO and is therefore entitled to apply for an order for sale under section 6(1) of the PO;

(2) The Property is a residential under in a multi-storey building having a saleable area of 395 square feet. I accept the submission of the Plaintiff that it would be impracticable to physically partition the Property. I also accept that, if the Property were to be partitioned, it would likely devalue the Property substantially, which would in turn prejudice the financial interest of the parties;

(3) The 2^nd Defendant has indicated her support/approval to an order for sale in the terms of the Draft Order. Given that the capacity of executor/administrator of the estate of the Deceased remains vacant, the 1^st Defendant has never been able to convey support or opposition to an order for sale in the terms of the Drat Order, or otherwise;

(4) The proposed private treaty sale price of the Property to the 2^nd Defendant of HK$2,500,000.00 has not been arbitrarily proposed, it has been set by reference to the Valuation Report, which was compiled by Allied Surveyor Limited and dated 6 May 2025;

(5) The interests of the 1^st Mortgagee are protected by the inclusion in the Draft Order of the undertaking of the 2^nd Defendant that she will, at her own costs, settle all outstanding payments under the First Mortgage with the 1^st Mortgagee, including all costs and disbursements for handling such encumbrances within 35 days upon the date hereof; and

(6) Clause 4.3.2.2 of the Draft Order further provides a mechanism for the 3^rd Mortgagee to receive payment out of the 1^st Defendant’s portion of the proceeds of sale (should any remain) following the application of such proceeds towards those items set out in Clause 4.3.2.1.

CONCLUSION

35.  In light of the above, I make an order in terms of the Draft Order.

36.  I wish to thank the legal representatives of the Plaintiff and of the 2^nd Defendant for their very able assistance.