HKCB FINANCE LTD v. ROBERTANN LTD AND ANOTHER

HCMP883/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.883 OF 2003

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D E C I S I O N

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1. The matter before me arose in this way. The 1st defendant is the purchaser of a property in Wan Chai. The 1st defendant is a company owned and controlled by the 2nd defendant as can be seen from the name of the 1st defendant. The 1st defendant on the purchase of the property obtained a mortgage from one Hong Kong Building and Loan Agency Limited on 24 January 1998. Subsequently that mortgage was taken over by the present plaintiff HKCB Finance Limited. The 1st defendant paid mortgage repayments required under that mortgage which I understand was about $12,000 per month. Starting from about September 2002, the 1st defendant defaulted in the payments under the mortgage.

2. The 2nd defendant who appeared in person on her own behalf and on behalf of the 1st defendant today told me that in September 2002 she wrote a letter to the plaintiff asking for the mortgage payment to be reduced from $12,000 per month to $6,000 per month as she was not able to afford the original amount required. She said that a Mr Tang from the plaintiff told her orally that there was no problem with the application, the plaintiff would execute a re-mortgage with her but he could not reduce the interest rate. In passing I would note that the interest rate was at a relative high rate of 13% and was probably on account of the status of the defendants. Be that as it may, the 2nd defendant claimed that after that conversation she waited for the plaintiff's reply but nothing happened. She thought that her request was accepted and she would be able to pay $6,000 per month with her various occupations.

3. She also said today that even in July 2003, Mr Tang still called her and asked her for her ID number for the purpose of her application for re-mortgage. She duly sent her ID number to Mr Tang for processing but she never got any positive reply.

4. Then in February 2003, the plaintiff issued the present originating summons against the defendants for possession of the property as well as for repayment of all outstanding under the mortgage. The defendants acknowledged service of the originating summons and indicated their intention to contest these proceedings. The originating summons was fixed to be heard on 2 September 2003 at 3:00 p.m. before a master. However, on 2 September, unfortunately for the defendants, there was a typhoon signal number 8 on that day and the hearing therefore did not proceed. In accordance with the provisions of the Juridical Proceedings (Adjournment During Gale Warnings) Ordinance, Cap.62, the hearing was adjourned to the following day, 3 September 2003.

5. The 2nd defendant today informed me that naturally she did not know of the provisions of that Ordinance, but, be that as it may, the proceedings were therefore adjourned and resumed on the following day on 3 September, on which day the defendants did not show up.

6. The master noted that previously on 1 September, the defendants had filed a motion to quash the mortgage on various grounds including the ground that the mortgage was illegal because the mortgaged property contained illegal structure. The learned master considered that motion as well, but nevertheless in her opinion the defendants had no defence to the originating summons and she entered judgment in favour of the plaintiff. The sealed order of Master Au-Yeung made on 3 September 2003 was then served on the defendants by ordinary post on 24 September 2003, and I have before me an affidavit of service to that effect. There is no evidence that the order was returned by post.

7. Before me today when I made enquiries of the 2nd defendant, she informed me that she might have received that notice, but having said that she did not think that there was any difference from any of the other documents that she had received in relation to these proceedings and, in her own words, these documents were not meaningful to her any more.

8. The matters then rested until November of last year. The bailiffs attended the premises to serve the Notice to Quit. That triggered the defendants to apply for a stay of execution on 20 November 2003. The matter went before Master Woolley on 26 November 2003. The learned master found the application to be procedurally wrong but he ordered a stay of execution on condition that the defendants took steps to set aside or appeal against the order of Master Au-Yeung. On 24 December 2003, the defendants took out the summons to set aside the order of Master Au-Yeung.

9. The matter eventually went before Master S. Cheung on 27 February this year. At that hearing the application to set aside was dismissed with costs to be paid by the 2nd defendant. The defendants now appeal against the order of Master S. Cheung to this court.

10. Having set out the procedural history, it will be clear that the order that was made by Master Au-Yeung on 3 September was a regular order. The proceedings were adjourned by reason of the typhoon signal, and in accordance with the provisions of the Juridical Proceedings (Adjournment During Gale Warnings) Ordinance, it was properly adjourned to the following day. The absence of the defendants or their absence of knowledge of the Ordinance is not an excuse. The order is therefore valid, and the defendants have to show before me a defence with real prospect of success before I am in the position to set aside the order.

11. Having heard from the 2nd defendant, I am afraid to say that there is no defence with a real prospect of success. All she has said was that the plaintiff gave her some hope that her application for re-mortgage would be approved. However, unless and until the new mortgage was approved the existing mortgage remained and the obligation to pay the mortgage payments under the existing mortgage continued.

12. I have tried to ascertain from the 2nd defendant today what would have happened had she been told at an early stage that her application was not acceptable. She told me that she would not have been able to continue to pay the mortgage repayments under the original mortgage. In the circumstances, I am afraid that I cannot see any arguable defence to the plaintiff's claim.

13. I also bear in mind that she has contended that the mortgage should be set aside on account of the illegal structure. In my judgment that point has nothing to do with the validity of the mortgage. Under the mortgage, she obtained the loan and she mortgaged the property as a security for that loan. It is her obligation to repay the loan whether or not the property contained an illegal structure.

14. Although I have every sympathy for the defendants I am afraid that this appeal has to be dismissed.