KONEW CAPITAL INTERNATIONAL LTD v. CHONG CHAK WONG AND OTHERS

DCMP 3230/2022

[2023] HKDC 19

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3230 OF 2022

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JUDGMENT

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Introduction

1.  This is the hearing of the plaintiff’s originating summons dated 26 August 2022, pursuant to Orders 83A and 88 of the Rules of the District Court and Partition Ordinance for money judgment together with possession and order for sale of the property known as Flat B1301, 12^th Floor, Whampoa Building, Nos 2A to H Bulkeley Street, Nos 1 to 29 Ming On Street, Nos 87 to 101 Baker Street, Kowloon.

2.  By a loan agreement dated 23 April 2021, the plaintiff agreed to lend the principal sum of HK$765,000.00 to the 1^st defendant at the interest rate of 30% per annum. The subject property was mortgaged on 11 April 2019 by a deed of mortgage registered in the Lands Registry.

3.  The 2^nd defendant is the guarantor for the loan agreement. The guarantee agreement was executed also on the same day of the loan agreement, ie, 23 April 2021.

4.  The plaintiff is a licensed moneylender. The 1^st defendant is the borrower of the abovementioned loan agreement. The 3^rd defendant is a co-owner of the subject property as a tenant in common with the 1^st defendant.

5.  According to the valuation report dated 6 December 2022, the estimated market value of the property is HK$3,600,000.00 and its value for sale under repossession is HK$3,060,000.00.

6.  According to the plaintiff, the 1^st defendant breached the loan agreement by defaulting in repayments since 20 December 2021. The plaintiff therefore commenced these proceedings.

7.  No notice of intention to defend has been filed by any defendants and no affirmation in opposition has been filed, but the 3^rd defendant appeared at today’s hearing. After explanation by the court and discussion with the plaintiff, the 3^rd defendant has no objection to the plaintiff’s application. The 3^rd defendant only asks for more time to give vacant possession.

8.  The plaintiff is asking the court to decide summarily and enter judgment pursuant to Order 28, rule 4(1) of the Rules of the District Court, as in the case Field Finance Limited v Seck King Chung & Another [2020] HKDC 514.

9.  I am satisfied that all the papers are in order and the court documents had been served on all defendants properly.

10.  I am also satisfied that notices of the proceedings have also been served on other interested parties, including Director of Lands and occupants of the property.

11.  The plaintiff submitted that no objection from any of the interested parties has been received.

The Loan Agreement and Mortgage

12.  The maximum amount of principal secured by the mortgage is HK$700,000.00 while the principal under the loan is HK$765,000.00. The loan is therefore partly secured by the mortgage and partly unsecured by the mortgage. The plaintiff apportions 700/765 of the outstanding principal and interest under the loan as well as the monthly instalments and other repayments from the 1^st defendant to the portion secured by the mortgage, and the remaining 65/765 of the same to the portion unsecured by the mortgage.

13.  The particulars of the loan are summarised as follows:

(i)	Amount lent to the 1st defendant:	HK$765,000.00
(ii)	Loan out date:	23 April 2021
(iii)	Interest rate:	30% per annum
(iv)	Terms and duration:	72 monthly instalments
(v)	Principal outstanding secured by mortgage:	HK$648,926.00
(vi)	Total amount outstanding secured by the mortgage:	HK$864,564.26
(vii)	Daily interest accruing on the principal outstanding secured by the mortgage:	HK$533.36
(viii)	Daily default interest accruing interest applicable on the interest element of the arrears of the instalment secured by the mortgage:	HK$122.01
(ix)	Principal outstanding unsecured by mortgage:	HK$59,636.00
(x)	Total amount outstanding unsecured by mortgage:	HK$79,435.63
(xi)	Daily interest accruing on the principal outstanding unsecured by the mortgage:	HK$49.02
(xii)	Daily default interest accruing interest applicable on the interest element of the arrears of instalment unsecured by the mortgage:	HK$11.33

14.  The loan agreement provides the following terms:

(a)  the interest rate applicable pre-judgment and post-judgment shall be 30% per annum;

(b)  if the 1^st defendant defaults in paying any of the monthly instalments on its due date, the contractual interest of 30% per annum will be applicable to the principal and interest from date of default until full payment;

(c)  the 1^st defendant shall indemnify the plaintiff on the litigation expenses on a full indemnity basis.

15.  The plaintiff also cites the following clauses in the mortgage, namely:

(1)  Clause 5.02: all term loans and other moneys, obligations and liabilities thereby secured not otherwise so repayable, shall become repayable immediately on demand, together with interest accrued thereon to the date of repayment in full upon occurrence of any event of default.

(2)  Clause 6.01(a): the plaintiff is entitled to enter into and take possession of the property and to sell, assign, call in, collect and convert into money the property upon occurrence of any event of default.

(3)  Clause 18.01(b): the 1^st defendant is liable to reimburse to the plaintiff on demand all expenses, including legal expenses, on solicitors and own client basis.

16.  The guarantee provides that the 2^nd defendant guaranteed unconditionally and irrevocably payment to the plaintiff on demand of all moneys, obligations and liabilities, whether present or future, actual or contingent, which are now or may at any time thereafter be or become from time to time due, owing or incurred to the plaintiff anywhere from or by the 1^st defendant under the terms of the loan agreement, together with interest to date of payment at such rates and upon such terms as may from time to time be payable by the 1^st defendant.

Legal Principles

17.  The plaintiff is relying on Honip Credit Limited v Leung Tak Sing Paul [2020] HKCA 879, which summarised how a plaintiff moneylender may comply with the requirements under Order 83A and Order 88 in an action commenced by originating summons.

18.  The plaintiff also submitted the case Maxcolm Finance Limited v Cheng Chi Man [2019] HKCFI 2928 and Field Finance Limited v Seck King Chung & Another [2020] HKDC 514. The plaintiff submitted the above two authorities are similar to the present case. The court in the above authorities granted the money judgment, possession order and order for sale as sought by the respective plaintiffs’ moneylenders as second mortgagees.

19.  The plaintiff submitted that, according to Maxcolm Finance Limited, paragraph 32, the plaintiff as a mortgagee is holding an interest in possession in the property for the purposes of Partition Ordinance and is thus entitled to take possession of the property after an event of default occurred at the date of the issue of the originating summons.

20.  The plaintiff cited the following paragraphs in Field Finance Limited:

Paragraph 27:

“A legal mortgagee of a tenant in common who can sue for possession and foreclosure of the mortgaged property is an interested person entitled to apply for partition (or sale) of the property…”

Paragraph 32:

“Where partition is impracticable, sale of the property is prima facie the only way for a co-owner to extricate himself from the co-ownership. In view of section 6(2) of the Partition Ordinance, this situation poses a strong case for the court to make an order for sale, unless the opposing interested person persuades the court that the sale of the property would not be beneficial to all the parties or that significant hardship would be caused to the other co-owner.”

Discussion

21.  There is no evidence from the defendants disputing the loan agreement, the guarantee or the mortgage, and the 1^st defendant has been in default. There is also no evidence disputing the calculation of the breakdown of indebtedness. Therefore, I am satisfied that the 1^st and 2^nd defendants have no defence to the plaintiff’s claim for money judgment.

22.  I am also satisfied that the plaintiff has complied with the requirements to give the requisite information and particulars under Order 83A and Order 88.

23.  Upon my examination of the original mortgage and original loan agreement at the hearing, I am satisfied that the plaintiff has already complied with all the requirements. The loan is in compliance with the provisions of the Moneylenders Ordinance, in particular, sections 18 and 22. A memorandum setting out the requisite particulars, together with a summary of provisions of the Moneylenders Ordinance in the prescribed form, have been signed by the 1^st defendant personally. Further, the default interest charged by the plaintiff over the overdue instalments at the rate of 30% per annum does not exceed the effective rate payable in respect of the principal, apart from any default, also at 30% per annum, which is permissible.

24.  In respect of the application under Partition Ordinance, it is trite that the plaintiff as the mortgagee in respect of the 1^st defendant’s share or interest of land in the property is an interested party entitled to apply for partition and sale of the property. After the 1^st defendant defaulted, the plaintiff has demanded the entire outstanding balance of the loan. It is the plaintiff’s case that it is impracticable to physically partition the property.

25.  The 1^st defendant has not tendered any reasons to oppose the application for order for sale. The 3^rd defendant who appeared at the hearing today eventually has no objection to the application for order for sale.

26.  I accept that it is impracticable to physically partition the property into two halves and a sale of the property would be beneficial to all parties. I do not see any significant hardship would cause to any parties. The 3^rd defendant’s interest will be protected as he is entitled to his share of the sale proceeds.

27.  The plaintiff undertakes the sale proceeds from the sale of the property would first be used to discharge all encumbrances affecting the property, having priority to the mortgage, and also 50% of the remaining proceeds relating to the 3^rd defendant’s interest or share in the property will be paid to the 3^rd defendant after discharging all encumbrances and after deduction of costs and disbursement.

28.  In the circumstances, I enter judgment against the 1^st and 2^nd defendants as per paragraphs 1 and 2 of the draft order, and I make the order for sale in accordance with paragraphs 3 to 7 of the draft order as amended. In particular, paragraph 3 of the draft order, the time to give vacant possession by the 1^st and 3^rd defendants, is amended to 49 days after service of the order.

Costs

29.  Having considered the statement of costs submitted by the plaintiff, I order the 1^st and 2^nd defendant do pay the plaintiff costs of this action, summarily assessed at HK$100,000.00.

30.  Lastly, the plaintiff’s solicitors shall draft the order in English and provide a Chinese translation to the 3^rd defendant.