XCHRX HONG KONG HOUSING SOCIETY v. TANG KONG AND ANOTHER

HCA 2846/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2846 OF 2001

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D E C I S I O N

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1. This is an appeal by the Plaintiff against the costs order of 14 September 2001 made by the Registrar. The Plaintiff is the second chargee under a second legal charge of the Defendants' property. The Defendants had defaulted in payment of the monthly instalments under the second legal charge since November 2000. On 29 May 2001, the 1st Defendant surrendered the property to the first mortgagee. On 22 June 20001, the Plaintiff issued a writ of summons against the Defendants to recover the loan secured by the second mortgage. As the Defendants did not file any notice of intention to defend, on 26 July 2001 the Plaintiff took out a summons under Order 88 rule 6 to apply for judgment. At the hearing, the Registrar entered judgment for the Plaintiff in respect of the outstanding debt and fixed costs. The Plaintiff contends that the costs should have been awarded on a party and party basis.

2. This appeal raises a short point. If the Plaintiff has properly commenced action in accordance with Order 88, then it is entitled to have costs on a party and party basis, otherwise, it is only entitled to fixed costs. This depends on what is provided by Order 88 rule 1. The rule provides as follows:

"(1) This Order applies to any action (whether begun by writ or originating summons) by a mortgagee or mortgagor or by any person having the right to foreclose or redeem any mortgage, being an action (other than an action to which rule 5A applies) in which there is a claim for any of the following reliefs, namely -

(a) payment of moneys secured by the mortgage,

(b) sale of the mortgaged property,

(c) foreclosure,

(d) delivery of possession (whether before or after foreclosure or without foreclosure) to the mortgagee by the mortgagor or by any other person who is or is alleged to be in possession of the property,

(e) redemption,

(f) reconveyance of the property or its release from the security,

(g) delivery of possession by the mortgagee.

(2) In this Order "mortgage" includes a legal and an equitable mortgage and a legal and an equitable charge, and references to a mortgagor, a mortgagee and mortgaged property shall be construed accordingly.

(3) An action to which this Order applies is referred to in this Order as a mortgage action.

(4) These rules apply to mortgage actions subject to the following provisions of this Order."

3. The question is whether at the time of issue of the writ of summons the Plaintiff was claiming "payment of moneys secured by the mortgage or charge." The mortgaged property has been surrendered to the first mortgagee on 29 May 2001. But as at the date of issue of the writ of summons, it has not yet been sold. According to a land registration search conducted on 14 September 2001, the 1st Defendant is the registered owner of the property. Thus as at the date of issue of the writ or even as at the date of the Plaintiff taking out mortgage action under Order 88, the Plaintiff still has a charge on the property which has not yet been extinguished by a sale by the first mortgagee. What that security is worth in the light of the prevailing market condition is another matter and is not anything which the Court should be concerned. If the Plaintiff so desires, it may even redeem the property from the first mortgagee and hence improve its security. In my view, the crucial consideration is whether as at the date of the Plaintiff taking out mortgage action, the security has been extinguished by sale or otherwise and not whether possession of the mortgaged property has been delivered to a prior mortgagee. I find as at the material time, the loan is still secured by the mortgage.

4. The present action is therefore well within the meaning of rule 1(1)(a), i.e. an action by a mortgagee claiming payment of moneys secured by the mortgage and the Plaintiff's second mortgage is also within the meaning of sub-rule (2). The action is therefore a mortgage action within the meaning of sub-rule (3). Rule 6(1) requires leave of the Court before judgment in default of notice of intention to defend can be entered. The Plaintiff was obliged to seek leave by way of summons under rule 6(2). I therefore consider it fit and proper that the Plaintiff should take out mortgage action under Order 88 and should be awarded party and party costs.

5. Accordingly, I allow the appeal and set aside the order of the Registrar and substitute it with an order that the Plaintiff shall have costs of the proceedings on a party and party basis. I also order that the Plaintiff shall have costs of the appeal. All costs are to be taxed, if not agreed.