DRAGON RISE FINANCE LTD v. CHEN DIHAN AND ANOTHER

DCMP 4918/2023

[2024] HKDC 91

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4918 OF 2023

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JUDGMENT

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Introduction

1.  This is the plaintiff’s application by Originating Summons dated 20 October 2023 (the “OS”):

(1)  against the 1^st defendant for money judgment under Order 83A of the Rules of the District Court, Cap. 336H (“RDC”);

(2)  and against the 1^st and 2^nd defendants for an order for delivery of vacant possession and an order for sale of the mortgaged property situate at Flat C2 on 11/F, Kam Ping Mansion, Nos. 63-69 Kam Ping Street, Hong Kong (the “Property”) pursuant to Order 88 of the RDC and sections 2, 3 and 6 of the Partition Ordinance, Cap. 352 (“PO”).

Service on the defendants

2.  The OS and the supporting affirmation were served on the defendants at their last known address, i.e. the Property, and both of them have not indicated that they intend to contest these proceedings.

3.  The defendants did not appear at the hearing of the OS on 9 January 2024. Having considered the affirmations of service filed by the plaintiff’s solicitors, I am satisfied that due notice of the hearing has been given to the defendants and that the matter can be dealt with summarily in the absence of the defendants pursuant to Order 28 rule 4 and Order 35 rule 1(2) of the RDC.

Background

4.  The plaintiff is a licensed money lender. The defendants are the registered owners of the Property as tenants-in-common.

5.  The 1^st defendant entered into a loan agreement dated 10 July 2020 (the “Loan Agreement”) with the plaintiff for a loan in the principal sum of HK$1,900,000 which was secured by a mortgage dated 10 July 2020 (the “Mortgage”) in relation to the 1^st defendant’s half share of interest in the Property. Interest of the loan was 18% per annum, with default interest also charged at the same rate. The loan was to be repaid by 12 monthly instalments.

6.  The Loan Agreement was subsequently amended by a Supplemental Loan Agreement dated 10 July 2021 (the “Supplemental Loan Agreement”) whereby the tenor of the repayment of the loan was extended for a period of 12 months. The Supplemental Loan Agreement was secured by the same Mortgage.

Money judgment under Order 83A of RDC

7.  I have considered the documents filed before me and I am satisfied that each requirement of sections 18(1) and 18(2) of the Money Lenders Ordinance, Cap. 163 (“MLO”) has been complied with. The interest rates under the Loan Agreement and the Supplemental Loan Agreement are also permissible under the MLO.

8.  The 1^st defendant has defaulted in the repayment of the loan on 10 January 2022. Between July 2022 and March 2023, he has on and off made partial repayments to the plaintiff.

9.  On 30 June 2023, the plaintiff issued a demand letter to the 1^st defendant for the repayment of all outstanding principal and interest due under the Supplemental Loan Agreement. However, the 1^st defendant failed to make any repayment despite repeated requests by the plaintiff.

10.  In view of the 1^st defendant’s default, there is no reason why a money judgment should not be entered in favour of the plaintiff. The total amount outstanding as of 20 December 2023 was HK$2,476,578.51. Interest on the principal sum of HK$1,900,000 accrues at the rate of 18% per annum (with a daily rate HK$936.99) from 21 December 2023 until full repayment. Default interest on the unpaid interest of HK$140,478.21 accrues at the rate of 18% per annum (with a daily rate of HK$69.28) from 21 December 2023 until full payment.

Vacant possession

11.  The Mortgage is in the terms of a legal charge over the 1^st defendant’s interest in the Property as security for the due payment of all moneys payable or which may at any time become payable to the plaintiff by the 1^st defendant.

12.  Clause 12.01 of the Mortgage provides that it is an event of default if the 1^st defendant fails to pay any principal, interest or any other sum payable under the Mortgage. There is no question that an event of default has occurred within the meaning of the clause.

13.  Pursuant to Clause 13 of the Mortgage, the security under the Mortgage has become enforceable and the plaintiff is entitled to, inter alia, enter upon and take possession of the Property as well as take any legal proceedings for that purpose.

14.  Having examined the originals of the Mortgage, the Loan Agreement and the Supplemental Agreement, and having considered the documents filed before me, I am satisfied that the requirements under Order 88 of the RDC have been complied with and the plaintiff is entitled to enforce the Mortgage and obtain vacant possession of the Property.

Order for sale

15.  Section 2 of the PO provides that where any property in land is held by two or more persons, whether as joint tenants or tenants in common, the court may either make an order for partition, order for sale or refuse to make any order.

16.  Under section 3(1) of the PO, any “person interested” in the property may institute proceedings for an order for sale.

17.  It is well established that a legal chargee of a partial interest is considered a “person interested” within the meaning of section 3(1) of the PO: Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224 per HH Judge Li at §§22-23; Uplink Finance Ltd v Lee Sze Tai & Ors (unreported, DCMP 794/2016, 16 March 2017) per DDJ Cheung at §25.

18.  Since the plaintiff is a legal chargee of the 1^st defendant’s half share of the Property, the plaintiff is entitled to apply for an order for sale under the PO.

19.  The next issue that needs to be considered is whether discretion should be exercised to order partition or sale.

20.  When the court decides whether it is practical to partition a property, it will consider the size and design of the property, and make a judgment based on common sense without expert evidence: Law Chun Wai (supra) at §§28, 31; Uplink Finance Ltd (supra) at §31.

21.  When it is impractical to make an order for partition, the court should make an order for sale unless it is satisfied that all the co-owners would be better served by the refusal of the order and that making an order would result in very great hardship to one co-owner: Re Lau Hiu Tuen (unreported, HCB 8430/2006, 20 August 2016) per G Lam J (as he then was) at §23-24; Re Cheng Kin Ching (unreported, HCB 47/2009, 8 May 2017) per Ng J at §28.

22.  Here, the plaintiff is a money lender and it is impractical for the Property to be partitioned for it to be shared by the plaintiff and the 2^nd defendant. The Property is a residential flat of about 550 sq ft with a single entrance. It would neither be practical nor beneficial to the owners if a partition order were to be made.

23.  As the defendants are not present in these proceedings, there is no evidence that making an order for sale would result in very great hardship to any of the co-owners.

24.  For these reasons, it is in my view appropriate to make an order for sale.

Costs against the 1^st defendant

25.  The plaintiff relies on Clause 22(ii) of the Mortgage and seeks costs against the 1^st defendant to be assessed on a solicitor and own client basis.

26.  Under Clause 22(ii), the 1^st defendant has agreed pay to the plaintiff all reasonable costs, charges and expenses (including legal expenses on solicitor and own client basis) incurred by the plaintiff in suing for or recovering any sum due from the 1^st defendant or in connection with the enforcement of the Mortgage.

27.  The present proceedings arose out of the 1^st defendant’s default by failing to make repayment of the loan and the plaintiff’s claims herein are the lawful exercise of its rights under the Mortgage. I am satisfied that the plaintiff is entitled to enforce Clause 22(ii) of the Mortgage and the costs of these proceedings should be paid by the 1^st defendant to the plaintiff on a solicitor and own client basis.

Disposition

28.  The plaintiff’s application is allowed. Subject to the amendments made at the hearing, I make an order in terms of the draft order submitted to me.