MAXCOLM FINANCE LTD v. LI MAN NGAN AND ANOTHER

DCMP 4769/2022

[2023] HKDC 387

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4769 OF 2022

--------------------------------

--------------------------------

--------------------------------

----------------------

REASONS FOR JUDGMENT

----------------------

A. Introduction

1.  This is the Plaintiff’s application by Originating Summons dated 14 December 2022, pursuant to Order 83A and Order 88 of the Rules of the District Court and Partition Ordinance Cap. 352, for money judgment together with possession and order for sale of the property known as Flat E on 8/F, Tower 4, Tai Hing Gardens Phase I, No. 11, Tsun Wen Road, Tuen Mun, New Territories (the “Property”).

2.  No notice of intention to defend has been given by the 1^st and 2^nd Defendants.  Despite the Defendants’ absence at the hearing today, I am satisfied on the affidavits of service filed by the Plaintiff that sufficient notice had been given to the Defendants of these proceedings and the hearing.  The fact that the Defendants have chosen not to take any action nor to appear is not a reason not to proceed with the hearing.

3.  Likewise, other interested parties like the Director of Lands and Occupants of the Property have also been served with notices of these proceedings.  As at the date of the hearing, no objection had been received from those informed parties.

B.  Factual Background and The Plaintiff’s Case

4.  The Plaintiff is a licensed moneylender.

5.  By a loan agreement dated 28 April 2022 (the “Loan Agreement”) and a mortgage dated 25 February 2022 registered in the Lands Registry under memorial no. 22030100780019 (the “Mortgage”), the Plaintiff agreed to lend the principal sums of HK$2,100,000 (the “Loan”) to the 1^st Defendant at the interest rate of 20.40% p.a.

6.  According to the valuation report dated 6 January 2023, the estimated market value of the Property is HK$4,100,000 and the value for sale under repossession is HK$3,500,000.

7.  The 1^st Defendant is the borrower of the Loan. The 1^st and 2^nd Defendants are co-owners of the Property originally as joint tenants.  They are now tenants in common pursuant to a Notice of Severance dated 20 April 2020 registered by memorial no. 20042400600014.

8.  The salient particulars of the Loan are summarised as follows:-

Particulars
Amount Lent to the 1st Defendant	HK$2,100,000
Date of the Loan	28 April 2022
Interest rate	20.40% per annum
Terms and Duration	24 monthly installments (HK$20,230.00 for 1st instalment, HK$35,700.00 for 2nd to 23rd installments and HK$2,135,700.00 for the 24th instalment)
Amount repaid	HK$20,230
Principal Outstanding
HK$2,100,000
Total Amount Outstanding
HK$2,425,973.94
Daily interest accruing on the principal outstanding
HK$1,173.70
Daily default interest accruing on the interest element of the arrears of installments	HK$99.76

9.  The Loan Agreement provides the following:-

(1)  The interest rate applicable pre-judgment and post-judgment shall be 20.40% per annum (Clause 6);

(2)  If the 1^st Defendant defaults in payment any of the monthly installments on its due date, the contractual interest rate of 20.40% per annum will be applicable to the principal and interest from date of default until full payment (Clause 7); and

(3)  The 1^st Defendant shall indemnify the Plaintiff on the litigation expenses on a full indemnity basis (Clause 14).

10.  The Mortgage provides as follows:-

(1)  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 (Clause 5.02);

(2)  The Plaintiff is entitled to enter into and take possession of the Property upon occurrence of any Event of Default (Clause 6.02); and

(3)  The 1^st Defendant is liable to pay or reimburse to the Plaintiff on demand all reasonable expenses (including legal expenses on solicitors and own client basis) incurred (Clause 18.01(b)).

11.  According to the Plaintiff, the 1^st Defendant has been in default of repayment since 15 June 2022.  By the demand letter dated 26 October 2022, the amount outstanding under the Loan Agreement also became immediately due and repayable.

C.  Whether the Plaintiff is Entitled to Money Judgment

12.  There is no evidence before this Court disputing that the Loan Agreement and the Mortgage were validly executed and that the 1^st Defendant has been in default.

13.  In all circumstances, I am satisfied that the 1^st Defendant has no defence to the Plaintiff’s claim for money judgment and the Plaintiff is entitled to the same.

14.  First, the calculation of the breakdown of indebtedness appears to be in order and there is no evidence to dispute the same.

15.  Second, I am also satisfied that the Loan Agreement is in compliance with the provisions of the Money Lenders Ordinance Cap. 163 (the “MLO”).

16.  In compliance with section 18 of the MLO, a memorandum setting out the requisite particulars together with a Summary of Provisions of the MLO in the prescribed form has been signed by the 1^st Defendant personally.

17.  Section 22 of the MLO prohibits the charging of compound interest or any increase in interest rate by reason of any default in the payment of sums due under the loan agreement.  However, there is a proviso that if default is made in the payment upon the due date of any sum payable to the money lender under the agreement, whether in respect of principal or interest, the money lender shall be entitled to charge simple interest on that sum from the date of the default until the sum is paid at an effective rate not exceeding the effective rate payable in respect of the principal apart from any default, and any interest so charged shall not be reckoned for the purposes of the MLO as part of the interest charged in respect of the loan.

18.  In the present case, the default interest charged by the Plaintiff over the overdue instalments at the date of 20.40% per annum does not exceed the effective rate payable in respect of the principal apart from any default.

19.  Third, the Plaintiff has in form and in substance complied with the requirements of a moneylender’s action under Order 83A.

D.  Whether The Plaintiff Is Entitled To An Order For Possession

20.  Likewise, the Plaintiff has also complied with the requirements of Order 88.

21.  In view of the terms of the Mortgage set out above and by reason of the default on the part of the 1^st Defendant, the Plaintiff is also entitled to an order for possession of the Property.

E.  Whether the Plaintiff is Entitled to An Order for Sale

22.   As the 1^st Defendant was in default, the Plaintiff as mortgagee became a person holding an interest in the Property under section 3 of the Partition Ordinance Cap. 352 and may institute the present proceedings for partition or sale: Field Finance Limited v. Seck King Chung and Anor[1].

See also: Maxcolm Finance Ltd v. Cheng Chi Man & Anor.[2]

23.  The Property is a residential flat in a multi-storey building.  I accept that it is impracticable to physically divide the Property into two halves.  It would also not be beneficial to the 2^nd Defendant.

24.  At the same time, neither the 1^st nor 2^nd Defendants has tendered any reason by way of affidavit evidence as to why an order for sale should not be granted.

25.  In any case, the 2^nd Defendant’s interest is protected as the 2^nd Defendant will be entitled to his half of the sale proceeds.

26.  Accordingly, I am satisfied that an order for sale ought to be made and I so order.

27.  I also accept the valuation set out in the valuation report and direct that the Property shall be sold either by public auction or private treaty with a reserved price at HK$3,500,000.

F.  Conclusion

28.  Based on the above reasons, I made the order in the terms of the Draft Order provided by the Plaintiff’s solicitors at the hearing.

29.  Insofar as costs is concerned, I make an order that the 1^st Defendant do pay the Plaintiff’s costs of this action on solicitor and own client basis summarily assessed at HK$80,000, payable forthwith.