WINLAND FINANCE LTD v. GREAT EARNS LTD

HCA 326/2025

[2025] HKCFI 3203

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 326 OF 2025

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.  The Plaintiff was and is a licensed money lender on divers dates covering 17 February 1998 and at the time of institution of this action. It lent money to the Defendant on the security of a property but the Defendant defaulted in repayment. The property was resumed by the Government with compensation payable.

2.  This is the Plaintiff’s application, as mortgagee in possession, for an order from the Court so that it can obtain the compensation and apply it to reduce the loan. Despite proper service of the unit at the registered office, the Defendant has not acknowledged service of the writ. I am satisfied that it is appropriate to proceed in the absence of the Defendant.

BACKGROUND

3.  Pursuant to a Loan Agreement dated 27 January 1998 (“the Loan Agreement”), the Plaintiff lent a principal sum of $13,000,000 to the Defendant, subsequently reduced to $12,350,000. The loan was granted on the security of:

(1) A Legal Charge dated 17 February 1998, whereby the Defendant’s property at Pak Sha Wan, Sai Kung, registered in the Sai Kung New Territories Land Registry as Lot No 522 in Demarcation District No. 210 together with the messuages, erections and buildings erected thereon (“the Property”) was mortgaged to the Plaintiff as security for the due payment of all moneys payable;

(2) An Assignment of Rental also dated 17 February 1998, whereby all rent received from the tenants of the Property was assigned to the Plaintiff as further security. The rent received by the Plaintiff had been used to set off the interest accrued.

4.  On 30 November 2023, the Government published Gazette No 7225, giving notice that the Property would be reverted to the Government at midnight on 29 February 2024.

5.  On 20 December 2023, the Plaintiff exercised its power under the Legal Charge and took possession of the Property.

6.  1 March 2024 was the date of resumption and reversion of the Property to the Government.

7.  On 12 April 2024 the Plaintiff’s solicitors, Lo & Lo, returned the acceptance letter and all the title deeds to the District Lands Office of Sai Kung to accept the Government’s compensation of HK$30,719,200 and interest in respect of the Property (“the compensation”)

8.  On 6 November 2024, the Director of Lands wrote to Lo & Lo, stating that the Plaintiff should obtain a court order if it were unable to obtain the consent of the Defendant to release the entire compensation to the Plaintiff.

9.  On 10 January 2025, Lo & Lo demanded the Defendant to repay the loan within one month.

10.  On 7 February 2025, Lo & Lo sought the Defendant’s written consent for the Government to release the compensation to the Plaintiff, but the Defendant has failed to respond.

11.  On 20 February 2025, the Plaintiff issued the writ in the present action and served it on the Defendant’s registered office on the same date. As of 16 December 2024, the amount owed by the Defendant amounted to HK$62,559,848.10 with interest at 3% per month.

Default judgment

12.  At the hearing, I gave leave to the Plaintiff to amend the Statement of Claim in 2 respects:

(1) One, to plead the contractual term that enabled the Plaintiff to take possession of the Property. That term had been referred to in the affirmation in support. The amendment is to tidy up the pleading to explain why the Plaintiff was entitled to take possession. There cannot be any prejudice to the absent Defendant.

(2) Amendment to the amount claimed from 62,559,838.10 to 62,559,848.10, wherever it appears in the Statement of Claim. This was to correct a clerical error.

13.  I am satisfied that the statement of claim and affirmation in support have met the requirements of Order 83A, rule 3 of the Rules of the High Court in setting out all the particulars required for the claim in respect of the loan and the security. The Plaintiff has produced the original Loan Agreement for the Court’s inspection. I accept the Plaintiff’s explanation that it cannot produce the original Legal Charge pursuant to Order 83A rule 4(2)(a) as the title deeds have all been surrendered to the Government.

14.  Accordingly, I grant money judgment to the Plaintiff on the outstanding sum, plus interest on the principal at the rate of 3% per month.

Entitlement to the compensation

15.  The Plaintiff seeks a declaration that, having entered into possession of the Property prior to the Government’s resumption, in exercise of its power as mortgagee, the Plaintiff is entitled to receive from the Government the compensation and interest thereon payable by the Government on resumption of the Property in partial payment of the total amount due and owing by the Defendant to the Plaintiff.

16.  Under section 32 of the Roads (Works, Use and Compensation) Ordinance, Cap 370 (“the Ordinance”):

“32. Payment to mortgagees

(1) Subject to subsection (2), a mortgagee of land which reverts to the Government or vests in The Financial Secretary Incorporated under this Ordinance shall, in so far as he has priority as against any other mortgagee, be entitled to be paid so much of any compensation as is required to discharge his mortgage debt including any interest thereon. (Amended L.N. 180 of 1985; 29 of 1998 s. 105)

(2) If compensation is payable under this Ordinance otherwise than for land resumed or if the land to which compensation relates is part only of the mortgage security a mortgagee shall, in so far as he has priority as against any other mortgagee, be entitled to be paid so much of the compensation as is necessary to reduce his mortgage debt to an amount which is adequately secured by the land or the remaining land as the case may be.

(3) The payment of compensation, as required by subsections (1) and (2), shall be made in accordance with the written agreement of the claimant and every mortgagee of the land or failing such agreement in accordance with an order of the High Court under subsection (4).

(4) The claimant or any mortgagee may apply to the High Court for an order as to the payment of unpaid compensation and on any such application the Court may make such order as it thinks just and equitable having regard to the requirements of subsections (1) and (2).”

17.  No written agreement could be entered into by the Plaintiff and the Defendant, who cannot be located, as its registered office remains unchanged, but the address is now occupied by another company. Hence the Plaintiff properly seeks an order in this application pursuant to s.32(3) of the Ordinance.

18.  The Plaintiff is entitled under section 32(1) to payment of the compensation to discharge its mortgage debt. The Plaintiff’s claim is HK$62,559,848.10 plus interest, whereas the compensation is only HK$30,719,200 plus interest.

19.  It is a general proposition that a declaration will not be granted when giving judgment without trial. However, it is a rule of practice and not of law, and will give way to the paramount duty of the Court to do the fullest justice to the plaintiff to which he is entitled: Hong Kong Civil Procedure 2025 , Vol 1, §19/7/14.

20.  The Plaintiff is the only unpaid mortgages according to land search record. As there is no prospect of recovering from the Defendant who remains uncontactable, and having regard to the statutory entitlement of a mortgagee to the compensation, it will do the fullest justice to the Plaintiff that the whole compensation and interest be paid to it.

Conclusion

21.  I give leave to the Plaintiff to amend the Statement of Claim as per paragraph 12 above.

22.  I grant leave to enter judgment as follows:

(1) That the Defendant do pay the Plaintiff the sum of HK$62,559,848.10, being the outstanding loan and accrued interest up to and including 16 December 2024;

(2) That the Defendant do pay the Plaintiff interest on the principal sum of HK$12,350,000 at the rate of 3% per month from 17 December 2024 until the date of judgment and thereafter at judgment rate until full payment.

(3) That there be a declaration along the lines of paragraph 15 above.

23.  Costs should follow the event. On a nisi basis, I give the Plaintiff costs of this action, to be summarily assessed.

24.  I thank Ms Lui for her assistance.