KONEW CAPITAL INTERNATIONAL LTD v. WONG LIK HOI AND OTHERS

DCMP 4372/2021

[2022] HKDC 883

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4372 OF 2021

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JUDGMENT

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Introduction

1.  This is an application by the plaintiff for, inter alia, a money judgment, together with an order for possession and an order for sale of the property known as Unit F, 12^th Floor, Tower T-3, Miami Beach Towers, No 268 Wu Chui Road, Tuen Mun, New Territories (“the Property”), being the security for a loan granted by the plaintiff to the 1^st defendant. The 1^st, 2^nd and 3^rd defendants are the registered owners of the Property.

2.  By a Loan Agreement dated 26 August 2019 (“the Loan Agreement”) and a Mortgage dated 23 May 2019 registered in the Lands Registry under memorial No 19062001160028 (“the Mortgage”), the plaintiff agreed to lend the principal sums of HK$400,000 (“the Loan”) to 1^st defendant at the interest rate of 36% per annum.

3.  The defendant has breached the Loan Agreement by defaulting in repayments since 20 April 2020 and the plaintiff therefore commenced the present proceedings.

4.  No notice of intention to defend has been given by the 1^st, 2^nd and 3^rd defendants.

5.  The 1^st, 2^nd and 3^rd defendants were absent at the hearing. Having read the affirmations of service, I am satisfied that the 1^st, 2^nd and 3^rd defendants were informed of these proceedings (including the present hearing) and were served with the relevant documents.

6.  Notices of these proceedings have also been served on the occupants and the other incumbrancers of the Property. There is no objection from any of the aforesaid parties.

7.  According to a valuation report dated 29 November 2021, the estimated market value of the Property is HK$5,800,000 and its value for sale under repossession is HK$4,930,000.

The Loan Agreement

8.  The Loan Agreement provides, inter alia, as follows:-

(a)  The plaintiff would lend the 1^st defendant a loan of HK$400,000 at the interest rate of 36% per annum.[1]

(b)  The term of the loan is 60 months.[2]

(c)  The 1^st defendant would repay the plaintiff the loan together with interest thereon at the rate of 36% per annum by 60 monthly instalments.[3]

(d)  The 1^st defendant would pay to the plaintiff interest on any outstanding principal amount at the rate of 36% per annum until full settlement of the Loan, and that the judgment rate is not adopted.[4]

(e)  If the 1^st defendant defaults in paying any of the monthly instalments by its due date, the contractual interest rate of 36% per annum would be applicable to the principal and interest from date of default until full payment.[5]

(f)  If any instalment is overdue, the plaintiff could give notice to 1^st defendant to demand payment. If after 7 days from the date of issuance of the said notice the 1^st defendant still fails and/or refuses to repay all the outstanding monthly payments, the remaining balance of the loan and interest would become immediately due and payable. The plaintiff would be entitled to take legal action against the 1^st defendant for the recovery of the remaining balance of the loan and interest.[6]

(g)  To ensure, inter alia, punctual repayment by the 1^st defendant, the 1^st defendant agreed to have the Property mortgaged to the plaintiff as security.[7]

The Mortgage

9.  The Mortgage provides, inter alia, as follows:-

(a)  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.[8]

(b)  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.[9]

(c)  The 1^st defendant is liable to pay or reimburse to the plaintiff on demand all expenses (including legal expenses on solicitors and own client basis).[10]

Money Judgment

10.  The plaintiff now claims the following sums:-

(a)  HK$710,458.23, being the aggregate of the outstanding principal, interest and default interest calculated up to 28 January 2022;

(b)  Interest on the sum of HK$386,668 at the rate of 36% per annum (ie daily interest of HK$375.45) from 29 January 2022 until payment; and

(c)  Default interest on the sum of HK$189,522, being interest element of the outstanding instalment(s) at the rate of 36% per annum (ie daily interest of HK$186.93) from 29 January 2022 until payment.

11.  I am satisfied that the plaintiff has duly complied with section 18 of the Money Lenders Ordinance (Cap 163) (“MLO”). I am also satisfied that the Originating Summons was duly issued under Order 83A r3 and Order 88 r5(6) of the Rules of the District Court (Cap 336H).

12.  In the circumstances, the plaintiff is entitled to the money judgment against the 1^st defendant as claimed.

Order for possession

13.  I am satisfied that the requirements under Order 88 have all been complied with. The plaintiff is entitled to an order for possession of the Property.

Order for sale

14.  Section 3(1) of the Partition Ordinance (Cap 352) (“PO”) provides as follows:-

“Section 3 Institution of proceedings and parties thereto

(1) Where any property in land is held in the manner referred to in section 2, any person interested in such property may institute proceedings in the Court under this Ordinance by way of an action for partition or sale.”

15.  A legal chargee/mortgagee of a partial interest is entitled to apply for an order for sale or partition of the entire land. The underlying reason is that, upon an event of default, such chargee/mortgagee would be entitled to possession of the property, making itself a person interested within the meaning of the PO: Konew Capital International Limited v Tsang Shar Wing & Another DCMP 3893/2019 (unreported, 8.3.2021) at §30; Maxcolm Finance Limited v Cheng Chi Man (unreported, 3.12.2019) at §§21 to 32.

16.  The considerations relevant to the court's exercise of discretion under the PO was succinctly summarized by Mr Recorder Fok SC (as His Lordship then was) in Wong Chun Kei v Poon Vai Chung [2007] 1 HKLRD 825 at §§18-19:-

“18. These passages from the cases cited above were relied upon by Mr. Fung SC to support the following propositions, namely:

(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.

(b) 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(s)) that such an order will not be beneficial to all the co-owners.

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

19. Subject to adding the qualifications, "if he has no other remedy," before the words "ask for an order for partition or sale" in proposition (1), and "or that it will result in very great hardship to one co-owner" to the end of proposition (2), I am satisfied that these propositions fairly and accurately state the law as regards the court's jurisdiction when faced with an application for partition or sale under the Ordinance and I shall proceed in this judgment to apply those propositions in resolving the plaintiffs' application.”

17.  I think the discretionary factors in the present case are in favour of the grant of an order for sale. The Property is a domestic flat. Partition of the Property is impracticable and would not be beneficial to 1^st, 2^nd and 3^rd defendants. There is also no evidence suggesting that an order for sale would cause great hardship to the 1^st, 2^nd or 3^rd defendants.

Conclusion

18.  In the premises, I order as follows:-

(1)  The 1^st defendant do pay the plaintiff the sum of HK$710,458.23 secured by the Mortgage together with interest on the sum of HK$386,668 at the rate of 36% per annum with a daily rate of HK$375.45 and default interest on the sum of HK$189,522 at the rate of 36% per annum with a daily rate of HK$186.93 both from 29 January 2022 to the date of payment in full;

(2)  Unless the 1^st defendant do make payment of the sums as referred to in paragraph (1) hereinabove within 28 days after service of this Order, the 1^st, 2^nd and 3^rd defendants do deliver to the plaintiff vacant possession and title deeds and documents in their possession (if any) of the Property;

(3)  Subject to delivery of vacant possession by the 1^st, 2^nd and 3^rd defendants as stated in paragraphs (2) hereinabove, the Property be sold by the plaintiff by public auction or private treaty in open market at the price not less than HK$4,930,000;

(4)  The plaintiff’s Solicitors, Messrs V Hau & Chow, be appointed to conduct the sale;

(5)  The proceeds of the sale of the Property shall be paid to the plaintiff’s Solicitors and be applied upon completion in the following order of priority:-

(a)  in discharge of all government rent, taxes, rates and other outgoing due and affecting the Property, if any;

(b)  in discharge of all encumbrances affecting the Property having priority to the Mortgage, if any, including costs for discharge of such encumbrances;

(c)  in payment of all the costs and expenses incurred by the plaintiff in taking enforcement proceedings for recovery of possession of the Property (where necessary);

(d)  in payment of all the auctioneers’ remuneration and/or estate agent’s commissions, charges and expenses properly incurred in the sale or other dealing of the Property not exceeding 1% of the selling price of the Property;

(e)  in payment of all the conveyancing costs, charges and other expenses not exceeding HK$16,000 excluding disbursements properly incurred in the sale of the Property;

(f)  1/3 share of the remaining proceeds relating to the 1^st defendant’s interest/share in the Property be applied in the following manner and priority:-

(i)  in discharge of the Mortgage;

(ii)  in payment of the plaintiff’s costs of these proceedings on solicitor and own client basis;

(iii)  the balance, if any, after deduction of the costs and disbursement for handling the same, be paid to the next incumbrancer of the encumbrance affecting the 1^st defendant’s interest/share in the Property and ranking immediately after the Mortgage; or if there is no such next incumbrancer, to the 1^st defendant; and

(iv)  if the 1^st defendant cannot be located after reasonable enquiry, such balance, if any, after deduction of the costs and disbursements for handling the same, be paid into court to stand credit to this action until further order of the court;

(g)  the other 1/3 share of the remaining proceeds relating to the 2^nd defendant’s interest/share in the Property be applied in the following manner and priority:-

(i)  in discharge of all the incumbrances affecting the 2^nd defendant’s interest/share in the Property after deduction of the costs and disbursements for handling the same, or if there is no such next incumbrancer, be paid to the 2^nd defendant; and

(ii)  if the 2^nd defendant cannot be located after reasonable enquiry, such balance, if any, after deduction of the costs and disbursements for handling the same, be paid into court to stand credit to this action until further order of the court;

(h)  the other 1/3 share of the remaining proceeds relating to the 3^rd defendant’s interest/share in the Property be applied in the following manner and priority:-

(i)  in discharge of all the incumbrances affecting the 3^rd defendant’s interest/share in the Property after deduction of the costs and disbursements for handling the same, or if there is no such next incumbrancer, be paid to the 3^rd defendant; and

(ii)  if the 3^rd defendant cannot be located after reasonable enquiry, such balance, if any, after deduction of the costs and disbursements for handling the same, be paid into court to stand credit to this action until further order of the court;

(6)  Upon such sale, the 1^st, 2^nd and 3^rd defendants do take all necessary steps for the transfer of their legal title and beneficial interest in the Property to the purchaser thereof, and in default of their so doing, Mr Hau Wing Shing Vincent, Partner of Messrs V Hau & Chow, Solicitors for the plaintiff be appointed pursuant to section 38A of the District Court Ordinance, Cap 336 to execute the necessary agreement for sale and purchase, conveyance and/or assignment on behalf of the 1^st, 2^nd and/ or 3^rd defendant(s) to give effect to this Order; and

(7)  The 1^st defendant do pay the plaintiff’s costs of this action forthwith, summarily assessed at HK$70,000.