HONG KONG FINANCE (PERSONAL LOAN) LTD v. LAW PIK HA PENNY AND ANOTHER

DCMP 1063/2024

[2024] HKDC 690

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1063 OF 2024

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J U D G M E N T

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1.  This is an application by the plaintiff by originating summons filed on 20 February 2024 to enter default judgment against the 1^st and 2^nd defendants (collectively the “defendants”) pursuant to Order 83A, rule 4 and Order 88, rule 4 of the Rules of the District Court (Cap 336H) (“RDC”).

A.  Background

2.  The plaintiff is a licensed money lender. The 1^st defendant and the 2^nd defendant were and are the registered owners of the properties situated at Flat E, 7^th Floor, Block 6 (“Property”) and Car Parking Space No. 81 on Car Park Level 2 (“Car Parking Space”) of Handsome Court, Nos. 362-388 Castle Peak Road, Castle Peak Bay, Tuen Mun, New Territories, Hong Kong, as joint tenants.

3.  On 7 March 2023, the plaintiff and the 1^st defendant entered into a loan agreement (“First Loan Agreement”), under which the plaintiff agreed to lend a sum of $300,000 (“First Loan”) to the 1^st defendant, to be repaid by the 1^st defendant in 120 monthly instalments at the interest rate of 28.8% per annum, and the 1^st defendant agreed to use the Property and the Car Parking Space as security for the First Loan.

4.  On the same day, viz. 7 March 2023, the plaintiff and the 1^st defendant also executed the Second Mortgage (“Second Mortgage”), under which the 1^st defendant charged to the plaintiff all of her estate, right, title, benefit and interest in the Property and the Car Parking Space to secure the repayment of the First Loan plus interest and costs.

5.  On 6 April 2023, the plaintiff and the 1^st defendant entered into a further loan agreement (“Second Loan Agreement”), under which the plaintiff agreed to lend a sum of $300,000 (“Second Loan”) to the 1^st defendant, to be repaid by the 1^st defendant in 102 monthly instalments at the interest rate of 31.2% per annum, and the 1^st defendant agreed to use the Property and the Car Parking Space as security for the Second Loan.

6.  On the same day, viz 6 April 2023, the plaintiff and the 1^st defendant also executed the Third Mortgage (“Third Mortgage”), under which the 1^st defendant charged to the plaintiff all of her estate, right, title, benefit and interest in the Property and the Car Parking Space to secure the repayment of the Second Loan plus interest and costs.

7.  According to the plaintiff’s case, the 1^st defendant defaulted in repaying the monthly instalments of the First Loan to the plaintiff since 7 December 2023 and of the Second Loan since 6 December 2023. Despite a written demand by the plaintiff’s solicitors dated 9 February 2024, the 1^st defendant only made a part payment of $7,644 under the First Loan Agreement and $8,414 under the Second Loan Agreement on 14 February 2024. She failed and still fails to repay the outstanding sums under the First and Second Loan Agreements to the plaintiff.

B.  Service of proceedings on the defendants

8.  The plaintiff filed the originating summons on 20 February 2024 and duly served the same on the defendants on 23 February 2024 by inserting the originating summons through the letter box of the Property, being the usual and last known address of the defendants, pursuant to Order 10, rule 1(2)(b) of the RDC. A copy of the originating summons was also posted up at a conspicuous space of the entrance of the Property and the Car Parking Space on 23 February 2024.

9.  The defendants have failed to give any notice of intention to defend within time or at all.

10.  On 25 March 2024, the plaintiff filed (1) the notice of appointment to hear the originating summons and (2) the supporting affirmation of Lai Tung Pok. On 27 March 2024, the same were served on the defendants by ordinary post.

11.  On 3 April 2024, the plaintiff posted up (1) the notice of appointment to hear the originating summons and (2) the notice to occupants at a conspicuous space of the entrance of the Property and the Car Parking Space.

12.  I am satisfied that the originating summons, the plaintiff’s supporting affirmation, the notice of appointment to hear the originating summons, and the notice to occupant were duly served on the defendants.[1] I therefore proceeded with this hearing in the defendants’ absence pursuant to RDC Order 28, rule 4(1) and Order 83A, rule 4(4).

C.  Discussion

C1.  Money judgment

13.  Having reviewed the First and Second Loan Agreements, I am satisfied that the statutory requirements under section 18(1) and (2) of the Money Lenders Ordinance (Cap 163) (“MLO”) as to the form of a money lender’s agreement for repayment of money have been complied with.

14.  As the effective interest rate of each of the First and Second Loan Agreements does not exceed 48%, this is not a case for the transactions to be reopened under section 25 of the MLO: Celebrity Special Situations Fund I, L.P. v China Linkage International Limited [2018] HKCFI 259, §§24-26, per DHCJ Le Pichon.

15.  Based on the affirmation evidence filed by the plaintiff, I am satisfied that the 1^st defendant has defaulted in repayment of the First Loan since 7 December 2023 and of the Second Loan since 6 December 2023, save and except for a part payment of $7,644 under the First Loan Agreement and $8,414 under the Second Loan Agreement on 14 February 2024. Thus, pursuant to Clause 4 of each of the First and Second Loan Agreements, the entire outstanding sums are due and payable by the 1^st defendant under the First and Second Loan Agreements.

16.  The plaintiff has complied with the requirements prescribed in RDC Order 83A, rule 4(2) and (3) in its claim for money judgment against the 1^st defendant, including the production of the original First Loan Agreement and Second Loan Agreement for the court’s inspection at the hearing.

17.  For the above reasons, I consider that this is an appropriate case for money judgment to be entered in favour of the plaintiff against the 1^st defendant in terms of §1 of the revised draft order as amended.

C2.  Vacant possession of the Property and the Car Parking Space

18.  Pursuant to Clauses 7.1 and 11.1 of each of the Second Mortgage and the Third Mortgage, the plaintiff is entitled to enter into and take possession of the Property and the Car Parking Space in case of the 1^st defendant’s failure to comply with a demand for repayment of the First Loan and the Second Loan respectively.

19.  According to the affirmation of Lai Tung Pok, the defendants had executed a prior mortgage dated 25 September 2020 over the Property and the Car Parking Space in favour of Dah Sing Bank, Limited (“First Mortgagee”). By two letters dated 14 March 2024 and 18 April 2024 respectively, the plaintiff’s solicitors informed the First Mortgagee of these proceedings and of this hearing. No reply has been received by the plaintiff or its solicitors from the First Mortgagee.

20.  In the present case, I am satisfied that the plaintiff has complied with the requirements in RDC Order 88, rules 4 and 5 in its claim of possession of the Property and the Car Parking Space against the defendants, including the production of the original Second Mortgage and Third Mortgage for the court’s inspection at the hearing.

21.  In the light of the evidence filed before me, I consider that this is an appropriate case for an order of possession of the Property and the Car Parking Space to be made in favour of the plaintiff against the defendants in terms of §2 of the revised draft order.

C3.  Order for sale of the Property and the Car Parking Space

22.  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.

23.  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.

24.  It is well established that an interested person is confined to a person holding an interest in possession: Fortis Bank Asia HK v Yu Kam Hoi and Anor, HCMP 134 of 2002 (4 March 2004), §56, per Reyes J. 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 partition or sale of the property: Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224, §§22-23, per HH Judge Andrew Li (applied by the Court of First Instance in Ego Finance Limited v Poon Sau Han Joanna and Anor [2023] HKCFI 868, §21, per DHCJ Jenkin Suen SC; Maxcolm Finance Limited v Pun Lap Shing and Anor [2024] HKCFI 603, §6.2, per DHCJ Jonathan Wong).

25.  Since the plaintiff is a mortgagee of the 1^st defendant’s share of the Property and the Car Parking Space, the plaintiff is entitled to apply for an order for sale under the PO.

26.  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.

27.  In Re Lau Hiu Tuen, HCB 8430 of 2006 (20 August 2015), §§20-24, G Lam J (as he then was) summarised the relevant principles as follows:

(1)  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.

(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) 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 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.

(4)  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.

28.  The plaintiff’s case is that, given the nature of the Property and the Car Parking Space, it would not be practicable or beneficial to physically partition the same, and therefore an order for sale under section 6(1) of the PO is warranted.

29.  In all the circumstances of this case, I consider that it would be just and reasonable for an order for the sale of the Property and the Car Parking Space to be made for the following reasons:

(1)  The Property is a residential unit in a multi-storey building with a saleable area of 710 square feet and a bay window area of 40 square feet. If the Property were to be partitioned, it would likely devalue the Property substantially, which would in turn prejudice the financial interests of the plaintiff and the First Mortgagee.

(2)  As for the Parking Space, there is no information available before me as to its exact size, but according to the floor plan of the Car Park of Handsome Court, it appears that the Car Parking Space could only accommodate one private vehicle. In my view, it would be infeasible to partition the Car Parking Space into two, since to do so would render each partitioned area too small to accommodate a private vehicle, and thus, losing its utility as a car parking space.

(3)  None of the defendants have filed any evidence suggesting that an order for sale would not be beneficial or would cause great hardship to one or both of them.

(4)  The reserve price is set by reference to a valuation report of Midland Surveyors dated 12 March 2024. The plaintiff agrees that the sale of the Property and the Car Parking Space would be conducted on a fair and reasonable basis, as set out in detail at §§3-7 of the revised draft order.

30.  I would therefore make an order in terms of §§3-7 of the revised draft order as amended.

D.  Disposition

31.  I am satisfied that the terms of the revised draft order, as amended, are in line with the usual orders made in proceedings of the present nature and contain sufficient provisions to safeguard the interests of the First Mortgagee and the 2^nd defendant. I shall therefore make an order in terms of the revised draft order as amended.

32.  On the issue of costs, the plaintiff only seeks costs against the 1^st defendant. By virtue of Clause 21(a) of the Second Mortgage and Clause 21(a) of the Third Mortgage, I would allow the plaintiff’s claim for costs against the 1^st defendant on a solicitor and own client basis, to be taxed if not agreed.