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DCMP 4501/2022
[2023] HKDC 1152
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MISCELLANEOUS PROCEEDINGS NO 4501 OF 2022
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IN THE MATTER OF the property known as ALL THOSE 45 equal undivided 104,020th parts or shares of and in ALL THAT piece or parcel of ground registered in the Land Registry as CHAI WAN INLAND LOT NO.148 And of and in the messuage erections and buildings thereon now known as “CHEERFUL GARDEN(富怡花園)” No.23 Siu Sai Wan Road, Hong Kong (the “Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT FLAT J on the 6th FLOOR of BLOCK 5 of the Building |
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and |
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IN THE MATTER OF a Second Mortgage dated 5th June 2021 and registered in the Land Registry by Memorial No.22080801910053 |
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and |
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IN THE MATTER of Sections 2, 3 & 6 of the Partition Ordinance Cap.352 and Order 83A and Order 88 of the Rules of the District Court, Chapter 336H |
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BETWEEN
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MAXCOLM FINANCE LIMITED |
Plaintiff |
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and |
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CHAN CHI KWONG |
1st Defendant |
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CAI LIJUN |
2nd Defendant |
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| Before: |
Deputy District Judge S. P. Yip in Court |
| Date of Hearing: |
20 July 2023 |
| Date of Judgment: |
20 July 2023 |
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JUDGMENT
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BACKGROUND
1. This is the substantive hearing of the plaintiff’s originating summons for money judgment together with possession and order for sale of the property known as Flat J, 6th Floor, Block 5, Cheerful Garden, No.23 Siu Sai Wan Road, Hong Kong (“the Property”), pursuant to Orders 83A and 88 of the Rules of the District Court (Cap 336H) and Partition Ordinance (Cap 352).
2. The 1st and 2nd defendants are at all material times the registered owners of the Property as tenants in common in equal shares.
3. The plaintiff is at all material times a licensed money lender under the Money Lender’s Ordinance (Cap 163). By a loan agreement made on 5 June 2021 (the Loan Agreement), the plaintiff agreed to lend the 1st defendant the principal sum of HK$800,000 at the interest rate of 20.40% per annum.
4. On the same day of the loan agreement, the 1st defendant as a borrower and the plaintiff as the lender entered into a second mortgage where the 1st defendant charged his interest in the Property to the plaintiff to secure the repayment of the general credit facilities to the extent of HK$1.2 million, including the aforesaid loan together with interest thereon. The second mortgage was subsequently registered in the Land Registry on 8 August 2022.
5. According to the plaintiff, the 1st defendant has been in breach of the loan agreement and second mortgage by defaulting in making monthly payments due to the plaintiff since 5 August 2022. Letters of demand dated 30 September 2022 and 11 October 2022 were sent to the 1st defendant by the plaintiff’s solicitors. The 1st defendant then paid a sum of HK$21,520 on 13 October 2022. The plaintiff then commenced these proceedings on 25 November 2022.
6. I am satisfied that all the papers are in order and the court documents have been served on both defendants properly.
7. No notice of intention to defend has been filed by any defendants and no affirmation in opposition has been filed.
8. I am also satisfied that notices of the proceedings have also been served on other interested parties, including Director of Lands, other encumbrancers or mortgagees and occupants of the Property.
9. By a letter dated 31 January 2023, the Director of Lands replied to the solicitors for the plaintiff that “the assigns of the purchaser would not be bound by the non-partitioning restriction”.
10. The plaintiff submitted that no objection from any of the interested parties has been received.
THE LOAN AGREEMENT & SECOND MORTGAGE
11. The loan agreement was evidenced in writing by a memorandum signed by the 1st defendant on the same day of the loan agreement which is now exhibited in the affirmation of Wong Kin Keung (“the Plaintiff’s Affirmation”).
12. The essential terms of the loan agreement are highlighted in paragraph 11(a) to (j) and the particulars of the loan are set out in paragraph 19 of the Plaintiff’s Affirmation.
13. The plaintiff also summarised the essential terms of the second mortgage in paragraphs 5 to 9 of the Plaintiff’s Affirmation.
14. According to the state of account between the plaintiff and 1st defendant in paragraph 20 of the Plaintiff’s Affirmation, the amount remaining due under the loan agreement and the second mortgage is HK$734,065.88 as at the date of the Plaintiff’s Affirmation, ie 10 February 2023.
LEGAL PRINCIPLES
15. Regarding a mortgagee’s rights under the Partition Ordinance, the plaintiff is relying on the case of Success Road Finance Limited v Mak Kon Sang and Chan Shuen Ying, CACV 68/1999, (unreported), 1 April 1999, Godfrey JA stated in the second paragraph:
“The relief claimed in the action should include a claim by the plaintiff that the mortgage is a valid and subsisting security for the amount outstanding by way of loan from the plaintiff; that an account be taken of what is due by the defendants to the plaintiff; and for a declaration that as against the defendants the plaintiff is entitled to possession of the mortgaged property (so that the plaintiff may commence proceedings if so advised for an order against the owner of the other half interest for sale of the property under the Partition Ordinance).”
16. The plaintiff also relies on the case MoneySQ Limited v Liu Kit Ling and Another [2019] HKDC 860, in support of the plaintiff being qualified as “a person interested” in the Property under section 3 of the Partition Ordinance, because the plaintiff’s rights as a mortgagee include the right in possession of the Property.
17. In Maxcolm Finance Limited v Cheng Chi Man and Chow Wai Kuen [2019] HKCFI 2928 at paragraphs 24 to 25, the Hon B Chu J considered Fortis Bank Asia HK (formally known as General Belgian Bank) v Yu Kam Hoi Herman and Another, HCMP 134/2002 (unreported), 4 March 2004, and Chan Ching Kit Katherine v Lam Sik Shi and Lam Sik Ying, HCMP 2239/2000 (unreported), 24 June 2002, and held that the relevant banks in the above two cases were equitable chargees without any right to possession or foreclosure and thus not eligible to apply for any order for sale under the Partition Ordinance.
18. The plaintiff submitted that the right of the plaintiff as a mortgagee in this case is different from the above two cases. According to paragraph 33 of Maxcolm Finance Limited, the plaintiff as a mortgagee is entitled to take possession of the Property after an event of default and thus the plaintiff is a person interested in the Property for the purpose of Partition Ordinance.
DISCUSSION
19. There is no evidence from the defendants disputing the loan agreement, the mortgage, and both defendants have been in default. There is also no evidence disputing the calculation of the breakdown of indebtedness. Therefore, I am satisfied that the 1st defendant has no defence to the plaintiff’s claim for money judgment.
20. I am also satisfied that the plaintiff has complied with the requirements to give the requisite information and particulars under Order 83A and Order 88.
21. Upon my examination of the original second mortgage and original loan agreement at the hearing, I am satisfied that the plaintiff has already complied with all the requirements. The loan is in compliance with the provisions of the Money Lenders Ordinance, in particular sections 18 and 22. A memorandum setting out the requisite particulars, together with a summary of provisions of the Money Lenders Ordinance in the prescribed form, has been signed by the 1st defendant personally.
22. The events of default are listed at clause 7.1 of the second mortgage which includes the default of the 1st defendant in the payment on the due date any principal or interest or other monies outstanding under any loan account. Upon default, the plaintiff is entitled to take the possession of the Property on its own or assign any receiver to take possession of or dispose of the Property, pursuant to clause 8.1 of the second mortgage.
23. According to the above authorities cited by the plaintiff, I am satisfied that the plaintiff, who is entitled to take possession of the Property, qualifies as a person interested in the Property under section 3 of the Partition Ordinance and therefore entitled to seek an order for sale of the Property.
24. Both defendants have not tendered any reasons to oppose the application for order for sale. I accept that it is impracticable to physically partition the Property into two halves and a sale of the Property would be beneficial to all parties. I do not see any significant hardship would cause to any parties. The 2nd defendant’s interest will be protected, as the 2nd defendant is entitled to share of the sale proceeds.
25. According to the valuation report dated 6 February 2023, the estimated market value of the Property is HK$5.4 million and its value for sale under repossession is HK$4.6 million.
26. The plaintiff undertakes the sale proceeds from the sale of the Property would first be used to discharge all encumbrances affecting the Property, having priority to the second mortgage, and also 50% of the remaining proceeds relating to the 2nd defendant’s interest or share in the Property will be paid to the 2nd defendant after discharging all encumbrances and after deduction of costs and disbursement.
Disposition
27. In the circumstances, I make the following orders:
(a) money judgment be entered against the 1st defendant as per paragraph 1 of the draft order;
(b) possession order be made against both defendants as per paragraph 2 of draft order;
(c) order for sale be made in accordance with paragraphs 3 to 6 of the draft order.
Costs
28. Having considered the statement of costs submitted by the plaintiff, I order the 1st defendant do pay the plaintiff’s costs of these proceedings summarily assessed at HK$110,280, with certificate for counsel. There will be no order as to costs as between the plaintiff and the 2nd defendant.
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(S. P. Yip)
Deputy District Judge
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Ms Mandy Yau, instructed by Siao, Wen and Leung, for the plaintiff
The 1st and 2nd defendants were not represented and did not appear
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