EGO FINANCE LTD v. CHAN LAP CHUNG AND ANOTHER

DCMP 339/2024

[2025] HKDC 1141

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 339 OF 2024

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

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

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

JUDGMENT

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

A.  INTRODUCTION

1.  The Plaintiff is a licensed money lender. The Defendants are the registered joint owners of the property known as Flat C7 on 6/F of Block C, Jade Plaza, No. 3 On Chee Road, Tai Po, New Territories, Hong Kong (the “Property”).

2.  This is the hearing of the Plaintiff’s application by way of originating summons dated 18 January 2024, seeking inter alia:

(a)  money judgment pursuant to Order 83A of the Rules of the District Court (Cap 336H) (“RDC”) against the 1^st Defendant; and

(b)  an order for delivery of vacant possession and an order for sale of the Property pursuant to Order 88 of the RDC and sections 2, 3 and 6 of the Partition Ordinance (Cap 352) (“Partition Ordinance”) against the 1^st and 2^nd Defendants.

3.  The Property was purchased in May 2001 at a consideration of $650,000 and registered in the joint names of the 1^st and 2^nd Defendants, who were husband and wife. The 2^nd Defendant applied for divorce in June 2023.

4.  On 13 February 2023:

(a)  The 1^st Defendant executed a notice of severance of joint tenancy in relation to the Property, following which the Defendants became tenants in common in equal shares.

(b)  The 1^st Defendant borrowed a sum of $700,000 from the Plaintiff pursuant to a loan agreement dated 13 February 2023 (the “Loan” and “Loan Agreement” respectively). The Loan is to be repaid by 120 monthly instalments. Interest of the Loan is 16.8% per annum, with default interest charged at the same rate.

(c)  The 1^st Defendant executed a legal charge in favour of the Plaintiff, charging his estate, right, title, benefit and interest in the Property to the Plaintiff, as security for due payment of all moneys payable or which may at any time become payable to the Plaintiff by the 1^st Defendant (the “Legal Charge”).

5.  On 9 January 2024, the 1^st Defendant was adjudged bankrupt on his self-petition. On 22 May 2024, leave was granted for the commencement of these proceedings against the 1^st Defendant. The trustees in bankruptcy do not contest this application and have chosen not to attend the hearing. I am satisfied that the matter can be dealt with summarily in the absence of the 1^st Defendant or his trustees in bankruptcy pursuant to Order 28 rule 4 and Order 35 rule 1(2) of the RDC.

B.  MONEY JUDGMENT UNDER ORDER 83A OF RDC

6.  I have considered the documents filed before me and am satisfied that each requirement of sections 18(1) and 18(2) of the Money Lenders Ordinance (Cap 163) (“MLO”) and Order 83A of the RDC has been complied with. The interest rate under the Loan Agreement is also permissible under the MLO.

7.  The 1^st Defendant has not made any repayment of the Loan since 18 October 2023. As a result of his default in payment, pursuant to Clause 3 of the Loan Agreement, the outstanding amount of principal and interest became immediately due and payable.

8.  On 22 November 2023, the Plaintiff issued a demand letter to the 1^st Defendant for the repayment of all outstanding balance under the Loan Agreement. However, the 1^st Defendant failed to make any repayment.

9.  Neither the 1^st nor 2^nd Defendants dispute the existence or validity of the Loan Agreement or the Plaintiff’s computation of the outstanding Loan amount and interest.

10.  In view of the 1^st Defendant’s default, I enter money judgment in favour of the Plaintiff. The total amount outstanding as of 30 June 2025 was $872,579.27. Interest on the principal sum of $678,368.79 accrues at the rate of 16.8% per annum (with a daily rate of $312.23) from 1 July 2025 until full payment.

11.  Pursuant to Clause 15 of the Loan Agreement, the Plaintiff is entitled to interest at the contractual interest rate of 16.8% per annum after judgment. See Honip Credit Limited v Asia China Tea Export Company Limited & anor (unrep, HCMP 399/2016, 2 June 2016), at §21.

C.  VACANT POSSESSION

12.  Pursuant to the Legal Charge, the 1^st Defendant’s interest in the Property is charged 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. The maximum amount secured under the Legal Charge is $1,400,000.

13.  There is no prior encumbrance registered in the land search record of the Property.

14.  Clause 5.01 of the Legal Charge provides that it is an event of default if the 1^st Defendant fails to make payment payable under the Mortgage on demand or fails to pay any principal, interest or instalment payment payable under the Mortgage. It is also an event of default if the 1^st Defendant becomes bankrupt or a petition is presented for a bankruptcy order against him. There is no question that an event of default has occurred within the meaning of the clause.

15.  Pursuant to Clause 6.01, the security under the Legal Charge 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.

16.  Having examined the original of the Legal Charge, 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 Legal Charge and obtain vacant possession of the Property.

D.  ORDER FOR SALE

17.  Section 2 of the Partition Ordinance 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.

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

19.  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 Partition Ordinance. See Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224, at §§22-23; Uplink Finance Ltd v Lee Sze Tai & ors (unrep, DCMP 794/2016, 16 March 2017), at §25.

20.  Since the Plaintiff is a legal chargee of the 1^st Defendant’s share of the Property, the Plaintiff is entitled to apply for an order for sale under the Partition Ordinance.

21.  The next issue is whether the court’s discretion should be exercised to order partition or sale.

22.  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. See Law Chun Wai (supra), at §§28 & 31; Uplink Finance Ltd (supra), at §31.

23.  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 or that making an order would result in very great hardship to one co-owner. See Re Lau Hiu Tuen (unrep, HCB 8430/2006, 20 August 2016) per G Lam J (as he then was) at §23-24; Re Cheng Kin Ching (unrep, HCB 47/2009, 8 May 2017) per Ng J at §28.

24.  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 262 sq ft with a bay window area of 17 sq ft. I am satisfied that it would neither be practical nor beneficial to the owners if a partition order were to be made. The 2^nd Defendant does not contend otherwise.

25.  The 2^nd Defendant contends that she had contributed to the entirety of the purchase price and mortgage repayments. However, since she has failed to keep sufficient documentary evidence, she does not contend that she is entitled to the sole beneficial ownership of the Property under any resulting trust.

26.  Instead, she raises two grounds of opposition to an order for sale of the Property:

(a)  She claims that she is entitled to a life interest in the Property under a common intention constructive trust; and

(b)  She will suffer very great hardship if the Property is sold.

Common intention constructive trust

27.  The legal principles of common intention constructive trust are well-established and have been set out in details by the Court of Appeal in Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, §5.16.

28.  The court notes that the 2^nd Defendant is not seeking to establish that she has more than 50% beneficial interest in the Property. Instead, she contends that she has an additional life interest in the Property.

29.  Under this ground of opposition, her evidence is that:

(a)  She and the 1^st Defendant purchased the Property because the latter did not get along well with her sons from her previous marriage. So they “decided that [they] should have a property of [their] own, where [they] can live undisturbed”.

(b)  “[I]t was the common intention of the 1^st Defendant and [her] that [the Property] was to be used as a permanent matrimonial home and not to be sold as long as one of the parties may need to use it as his/her residence”.

30.  As submitted by the Plaintiff’s counsel, the purpose of ascertaining the common intention of the co-owners is to determine the respective shares in which they intend to own the Property, but not whether the Property can be sold or otherwise disposed of.

31.  In any event, the 2^nd Defendant’s evidence falls short of establishing any common intention that she should have a life interest in the Property in addition to her 50% beneficial interest. As contended by the 2^nd Defendant, the Property was intended to be their “permanent matrimonial home”. That must be why it was registered in the 1^st and 2^nd Defendants’ names as joint tenants in the first place. But being a permanent matrimonial home is different from her contention that so long as one of them wants to reside in it, it cannot be sold. There is no evidence to support her contention as to any common intention or agreement not to sell or otherwise dispose of the Property so long as one of the co-owners intends to reside in it.

32.  Further, the 1^st Defendant has moved out of the Property since 2010 and the 2^nd Defendant has also filed for a divorce. In point of fact, the Property no longer serves as a “matrimonial home”, let alone a “permanent” one.

33.  In the premises, I find that the 2^nd Defendant has not shown that there was a common intention that the beneficial ownership of the Property was to be different from the legal ownership.

34.  In any event, as submitted by the Plaintiff, it is a bona fide purchaser for value without notice of the alleged life interest of the 2^nd Defendant. There is no evidence of any circumstances that could be said to have put the Plaintiff on notice of the alleged life interest.

35.  This ground of opposition therefore fails.

Very great hardship

36.  The 2^nd Defendant says that there will be hardship for her if the Property is sold. To assess this contention it is necessary to examine the relevant personal circumstances. The 2^nd Defendant is 65 years old. Prior to her retirement in June 2020, she earned $12,990 per month. After her savings had allegedly been depleted by loans made to the 1^st Defendant, she went back to work as a cleaner, earning $5,000/month. She however quit that job in December 2024 due to her back pain.

37.  She has no savings and depends on her two sons, who work as an electrician / casual worker and a chainman respectively. They give her around $7,000 per month for her living expenses, although such allowances may fluctuate. The 2^nd Defendant contends that whilst her sons have been filial, they might get married later and would then have their own families to support.

38.  The 2^nd Defendant’s counsel submits that if the Property is sold at the reserved price under repossession, ie $1.95 million, half share of the net sales proceeds will be less than $900,000. The 2^nd Defendant cannot use her half share of the net sales proceeds to buy another property, as she has no earning capacity and cannot secure a mortgage, or finance it even if she could get one. Using the proceeds to rent a subdivided unit or a basic housing unit will not last very long.

39.  However, it is the 2^nd Defendant’s evidence that she has planned to live on the comprehensive social security assistance when she could no longer work. Whilst she cannot use her half share of the net proceeds to purchase another property, she can use the same to rent alternative accommodation. Her counsel also accepts that she can apply for public housing. Further, there is no evidence that her sons will cease supporting her in the foreseeable future.

40.  Whilst she claims that her health is recently on decline, there is no evidence of any specific health problems. Further, she has three insurance policies, and one of them appears to cover hospital expenses.

41.  In these circumstances, while I have every sympathy for the 2^nd Defendant, I do not think she has sufficiently made out a case of very great hardship to oppose the application for an order for sale. I must not lose sight of the fact that the Property is owned as to one half by the 1^st Defendant, who is bankrupt and owes money to the Plaintiff who needs to be repaid.

42.  For the above reasons, it is in my view appropriate to make an order for sale.

E.  CONCLUSION

43.  For the above reasons, I accede to the Plaintiff’s application and make an order in terms of the draft Order submitted to me.

44.  The Plaintiff seeks costs on an indemnity basis and summary assessment of its costs. I am satisfied that under the Loan Agreement, the Plaintiff is entitled to costs on an indemnity basis.

45.  Having considered the Statement of Costs submitted to me, adopting a broad-brush approach, I summarily assess the Plaintiff’s costs of these proceedings on an indemnity basis at $100,000.