HANG SENG BANK LTD v. CHENG YIN SHAN THERESA

DCMP 344/2022

[2023] HKDC 833

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 344 OF 2022

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DECISION

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I.  Overview

1.  By Originating Summons issued on 21 January 2022 (the “OS”), the plaintiff seeks monetary judgment and delivery of vacant possession against the defendant pursuant to Order 88 of the Rules of the District Court (Cap 336H).

2.  Pursuant to a Legal Charge dated 8 May 2019 (the “Legal Charge”), the plaintiff was and is the mortgagee, and the defendant was and is the mortgagor, in respect of the property known as Flat 20, 23^rd Floor, Block A of Hoi Lok Court (“Property”). The Property was and is held under the sole name of the defendant.

3.  By the order of Master Isabella Chu dated 29 June 2022, the defendant’s husband Wong Yue Chiu Roy (“Intervener”) was joined as intervener in these proceedings.

4.  This is the substantive hearing of the OS. At issue is whether the reliefs sought should be granted (as proposed by the plaintiff), or whether an order should be made for the OS to continue as if begun by writ, with consequential directions (as proposed by the intervener).

II.  Background

5.  The plaintiff entered into a loan facility agreement with the defendant dated 15 April 2019 (the “Loan Agreement”) for P to advance a mortgage loan in the sum of HK$2,416,585.00 (“Mortgage Loan”) to be drawn on or before 31 July 2019. The Mortgage Loan was secured by the Legal Charge.

6.  The terms of the Loan Agreement provided, inter alia:

6.1.  Interest rate for the Mortgage Loan shall be 2.3750% per annum on the basis of the ‘Best Lending Rate’ – 2.7500% whereby the ‘Best Lending Rate’ shall be as quoted by P from time to time (Clause 2).

6.2.  The Mortgage Loan shall be repaid by 300 monthly installments (Clause 3).

7.  On 8 May 2019, the defendant signed and executed an assignment for purchase of the Property in her sole name from the Hong Kong House Authority.

8.  On the same day, the plaintiff entered into the Legal Charge with the defendant whereby the Property was charged by the defendant to the plaintiff as security for due payment of the sums owing under the Facility Agreement.

9.  The terms of the Legal Charge provided, inter alia:

9.1.  The defendant covenants with the plaintiff to repay the Mortgage Loan by 300 succeeding instalments of HK$10,689.80 each, the first to be paid on 8 June 2019 and thereafter on the 8^th day of each month failing which D shall pay to P on demand the whole of the Mortgage Loan (Clause 1(a)).

9.2.  In consideration of the Mortgage Loan and as security for repayment thereof and of all sums payable, D as beneficial owner of the Property charges the Property to P (Clause 4(a)).

10.  Pursuant to the Loan Agreement, the plaintiff duly advanced the Mortgage Loan proceeds to the defendant who used the sum to pay for the balance of the purchase price in respect of the Property.

11.  Since 8 October 2021, the defendant has defaulted in repaying the Mortgage Loan installments, in breach of the Loan Agreement.

12.  By a demand letter dated 24 December 2021, the plaintiff demanded the defendant to effect payment of the then outstanding sum due as at 22 December 2021.

13.  The amount remaining due under the Legal Charge as at the date of the OS is HK$2,269,252.03 (“Outstanding Sum”).

14.  The Property is a domestic property occupied by the defendant.

III.  Legal Principles

15.  For proceedings commenced by originating summons (including a mortgage action under RHC Order 88), it is trite that the court would summarily determine the case where the court is satisfied that there are no triable issue.

16.  Under RHC Order 28, rule 8, the court may make an order that an originating summons be continued as if begun by writ, where “there can be shown on the available evidence genuine and/or substantial issues of fact”. For such inquiry, it is “necessary to consider whether there were significant factual issues requiring determination”: Li Fung Kai v Fung Sau Lin, HCMP 919/2013 (unrep, 9/9/2013), §41.

17.  In this regard, “[w]hen faced with conflicting affidavits from both parties, the court will be failing in its duty if it should take the assertions in the affidavits on their face value in isolation and jump to the conclusion that there is a triable issue without first considering whether the assertions in the affidavits are believable… [T]he test… whether the assertions are believable is a question to be answered not by taking the assertions in isolation but by taking them in the context of so much of the background as was either undisputed or beyond reasonable dispute”: Li Fung Kai (ibid), §44.

18.  “In an originating summons procedure, it is only when the court is satisfied after having undertaken that exercise that factual disputes could not be resolved on affidavit evidence that oral evidence or trial should be considered”: Li Fung Kai (ibid), §44

19.  The burden of proof for an Order 88 application is on the plaintiff. The plaintiff must justify its entitlement to summary judgment. Only when this is made out does the burden shift to the defendant, where they must show they have a defence to the claim: Wing Hang Bank Ltd v Liu Kam Ying & Ors [2002] 2 HKC 57 at 60H (per Ma J as his Lordship then was). In practice there may be little difference between an application for summary judgment in originating summonses and an application for summary judgment under Order 14: Joint Success (HK) Limited v Kamsh (PTC) Limited, HCMP 2/2022 (unrep, 30/6/2023) at §19.

IV.  The Parties’ case

20.  The plaintiff has established a prima facie case to judgment. It is not disputed that the defendant failed to make any repayment since 8 October 2021.

21.  On that basis, the plaintiff claims for the following:

21.1.  Repayment of the Outstanding Sum, together with interest on the principal sum of the Mortgage Loan (ie, HK$2,244,761.49) at the contractual default rate of 0.5% over the ‘Best Lending Rate’ per annum up to the date of judgment and thereafter at judgment rate until full payment;

21.2.  Delivery of vacant possession of the Property.

22.  The defendant, who has been declared bankrupt on 22 February 2022, has not appeared at the substantive hearing. Leave was granted by Master Rita So on 14 April 2022 for the plaintiff to proceed with the present proceedings against the defendant.

23.  On the other hand, the intervener has filed 5 affirmations in opposition to the plaintiff’s claim, and submissions have been submitted on its behalf. The defendant has also filed 2 affirmations adopting and agreeing with what was set out in the intervener’s affirmations.

24.  In gist, the intervener’s case is as follows:

24.1.  The intervener was the breadwinner of the family who was also the sole financial contributor to the purchase price and payment of mortgage instalments.

24.2.  The intervener was and is the sole true beneficial owner of the Property based upon common intention constructive trust and/or resulting trust, and that the defendant was only holding the Property on trust for him. On the other hand, the defendant had no personal means to finance the purchase of the Property.

24.3.  The intervener’s case is that since the intervener was and am not a Hong Kong permanent resident, it was agreed between the intervener and the defendant that the Property shall be purchased and registered in the sole name of the defendant so as to avoid paying heavy stamp duty for acquisition of the Property.

24.4.  The OS should be dismissed. Alternatively, the present Originating Summons should be continued as if the matter had been begun by writ given the genuine or at least substantial issues of facts would need to be adjudicated.

V.  The issue in the present case

25.  The issues to be determined at this hearing are as follows:

25.1.  Whether the OS can and should be determined summarily without trial, or whether it ought to be continued as if begun by Writ, with consequential directions (“Issue 1”).

25.2.  If the OS is to be determined summarily, what substantive reliefs are the plaintiff entitled to (“Issue 2”).

VI.  Issue 1: Analysis

26.  The plaintiff claims damages for 2 periods:

A.  Whether the Mortgage Loan and the Legal Charge are binding on the defendant

27.  At the hearing, Mr Chow for the plaintiff submits that even assuming the intervener was the sole or part beneficial owner of the Property, this does not avail the defendant or the intervener of any defence, since the Mortgage Loan and the Legal Charge will still be binding on the intervener. In this regard, Mr Chow relies on the doctrine of estoppel as set out in Mo Ying v Brillex Development Limited & Anor [2015] 2 HKLRD 985[1].

28.  In this regard, there is no dispute by the Intervener that (i) the Mortgage Loan and the Legal Charge were valid; (ii) he was aware of the Mortgage Loan being obtained from the plaintiff (and the Legal Charge being granted) in order to purchase the Property, and that he did not raise any opposition to it. After all, the intervener’s case was that it was he who paid the monthly mortgage instalment repayments all along. Further, in his 1^st Affirmation, he states that he is willing to continue making the mortgage instalment payments.

29.  At the hearing, Ms Wong for the intervener very fairly confirmed that the intervener does not dispute that the Legal Charge would bind the Property even if the intervener was the beneficial owner.

30.  Having considered the evidence and submissions of both parties, I am of the view that even if the defendant can prove that he was the sole or joint beneficial owner of the Property, the monetary obligations pursuant to the Mortgage Loan would still be binding, and the Property would still be subject to the Legal Charge:

30.1.  In Mo Ying v Brillex Development Limited & Anor [2015] 2 HKLRD 985, the Court of Appeal found that the plaintiff (who was the wife of the sole registered owner of the property) was estopped from asserting sole beneficial ownership against a purchaser of the property, where she knew of the sale and purchase of the property but said nothing to the purchaser of her alleged beneficial interest.

30.2.  At §8.7, Cheung JA observed as follows:

“In my view the wife must have a duty to speak up once she realized that the husband had agreed to sell the property to the purchaser and further agreed with the purchaser to lease back the property. As a result of her silence the purchaser had completed the sale. The purchaser must have been prejudiced by the wife’s conduct when they could have sought to rescind the sale if the wife had informed it of her interest.”

30.3.  At §11.9, Yuen JA similarly noted:

“The evidence in the present case was that the wife had been informed of the husband’s sale of the property some four weeks before completion. Yet she had stood by and let her husband complete the sale and receive the proceeds from a third party who had parted with the purchase money in good faith. Her explanation was that she had wanted to save her marriage; in other words, she chose to go along with the husband’s decision to sell the property and in return (to comply with her wish to continue living in North Point) he rented the property back for her to continue living there. That was a course that the wife chose with knowledge that the sale had not yet been completed and despite her belief that she had a beneficial interest in the property.”

30.4.  The same reasoning applies in the present case. The intervener in this case had a duty to speak up if he did not consent to the mortgage as soon as he knew that the defendant was taking up the mortgage. He did not do so, and is now therefore estopped from asserting any interest contrary to the plaintiff’s right as mortgagee.

31.  At the hearing, Ms Wong drew the court’s attention to the case of Shanghai Commercial Bank Ltd v Lee Yau Tak (Bankrupt) & Anor CACV 576/2021 (unrep, 31/3/2023). She submits that in that case, the Court of Appeal held, based on what Ms Wong submits are similar facts and arguments raised in the present case, that there was a reasonably arguable case of common intention constructive trust, such that the issue ought to be determined in a full trial instead of being determined summarily: at §§28 to 30 therein.

32.  Having considered the case in detail, I agree with Mr Chow that the Shanghai Commercial Bank Ltd case is distinguishable from the present case:

32.1.  In that case, the main issue was whether the 2^nd defendant in that case was entitled to exercise the right of redemption for the property. On the evidence the 2^nd defendant was willing to repay the entire outstanding mortgage loan and interest in one go. Further, the evidence suggests that the 2^nd defendant had the means and ability to redeem the property, by issuing 2 summonses seeking to pay the entire outstanding amount owed to the plaintiff on the mortgage loan: see §§38 to 40.

32.2.  The Court of Appeal found that the Judge erred in holding that even if the 2^nd defendant had a beneficial interest in the Property and thus had a right to redeem the Mortgage, the outcome of the case would inevitably be the same: at §33. In other words, the issue of whether the 2^nd defendant had beneficial interest in the property in that case would have affected the results directly.

32.3.  It is trite that to exercise the right of redemption and discharge the mortgage debt, a mortgagor must tender to the mortgagee the full amount that is due, including principal and interest and all proper costs: at Halsbury’s Laws of Hong Kong, Vol 35 at §230.745, §230.751. In the present case, there is no suggestion by the intervener in the numerous affirmations he filed that he was willing or able to exercise the equity of redemption by repaying all the outstanding liabilities on the Mortgage Loan in one go. At the hearing, Ms Wong very fairly did not suggest that the intervener was ready or willing to exercise the right of redemption.

32.4.  Unlike in the case of Shanghai Commercial Bank Ltd, in the present case, in light of my findings set out above, even if the intervener does prove that he is sole or joint beneficial owner of the Property, this would not affect the plaintiff’s rights against the Property and/or for repayment of the Mortgage Loan.

33.  In light of the aforementioned, on this ground alone, I find that the OS ought to be summarily determined in favour of the plaintiff, and that there is no need for trial.

B.  Whether the defendant’s evidence was sufficient to raise a triable issue

34.  In case I am wrong above, I shall now go on to consider whether the affirmations filed by the intervener raise any triable issues.

35.  The intervener’s case is that the understanding between the defendant and himself was that since he would be, and was in fact, the one who “contributed 100% for the deposit of purchasing the Property”, and the “monthly payments for the installment of the mortgage made at the plaintiff was fully contributed by [the intervener]”, in return he would be the sole beneficial owner of the Property. However, having considered the evidence and submissions of parties, I agree with the plaintiff that such a claim is incredible and contrary to the cotemporaneous evidence.

36.  The starting point is the document titled “Hang Seng HOS/BRO/TPS Mortgage Loan Application Form” (the “Application Form”) executed and submitted by the defendant to the plaintiff dated 2 April 2019, based upon which the plaintiff granted the Mortgage Loan to the defendant:

36.1.  Under the heading “D. Source of Funds for Downpayment”, the defendant declared that the funds for downpayment were from her savings/deposit and left section (I) “if the source of funds is a gift/borrowing from Third Party” blank;

36.2.  Under the heading “E. Source of Loan Repayment for Hang Seng Bank Autopay Account”, the defendant declared that the source of repayment was her “Payroll in Hang Seng Bank”; and

36.3.  The defendant stated she was employed as a saleswoman by “友富鮮果” with a monthly income of HK$20,000. She was therefore in a position to contribute to the deposit and/or the mortgage payments, which casts further doubt as to whether the intervener contributed 100% to the Property.

37.  At the hearing, Ms Wong for the defendant very fairly and sensibly confirmed that the intervener does not go so far as to say that the defendant was lying on the Application Form; the intervener’s case at the highest was that no contemporaneous supporting evidence for the statements made in the Application Form by the defendant had been adduced, such that the matter ought to be further explored at trial after full discovery.

38.  I reject such a suggestion. The statements and representations made on the Application Form are made by the defendant. Any supporting evidence ought to have been produced by the defendant and/or the intervener, bearing in mind that the defendant has essentially adopted the intervener’s case herein. No meaningful discovery as to the income of the defendant or payment arrangements between the defendant and intervener could be obtained as against the plaintiff.

39.  Further, the defendant has also produced two Hang Seng Bank statements in respect of her account no 288-205800-668 (“D’s 1^st Account”) and 777-406448-888 (“D’s 2^nd Account”) demonstrate she obtained substantial funds from different sources in her name (apart from the fact she also had stable income as stated in the Application Form):

39.1.  At least four substantial deposits into D’s 1^st Account in the sum of HK$70,000.00 on 27 March 2019, HK$50,000.00 on 28 March 2019, HK$49,850 on 28 August 2019, and HK$80,000 on 2 September 2020 which were described to be transfers from “Promise (HK) C”, “LOAN DRAWDOWN”, “CASHING PRO LIMITED” and “FINANCEONE LIMITED” respectively;

39.2.  Two deposits into D’s 2^nd Account in the sum of HK$103,115.71 and HK$53,375.00 on 2 April 2019 and 23 May 2019 which were described to be transfers from “SELL FCY/GLOD/INV FUND” and “HSB RES BONUS PEN MTG BONUS” respectively.

40.  The intervener has also adduced various bank statements. On proper analysis however, the bank statements do not support the intervener’s case:

40.1.  In his 5^th Affirmation, the intervener claimed that he withdrew RMB 90,000.00 on 31 March 2019 and RMB 80,000.00 on 7 April 2019, both purportedly to hand to the defendant for the payment of the deposit. These were the only 2 transactions referred to specifically by the intervener.

40.2.  The only material the intervener produced as ‘evidence’ of his contribution to the deposit is the statements of his PRC bank account. However, there is no contemporaneous evidence of matching deposits of those sums paid into the defendant’s bank accounts.

40.3.  According to the statements, shortly before the first withdrawal on 31 March 2019, the PRC bank account was only put into funds by two transfers of RMB 50,000.00 each on 29 March 2019. Before that, the bank account only had a balance of RMB 296.54.

40.4.  Shortly before the second withdrawal on 7 April 2019, the account was only put into funds by a transfer of RMB 97,000.00 on 2 April 2019. Before that, the bank account only had a balance of RMB 2,008.61.

40.5.  The deposit of the Property was HK$412,045.00. The evidence shows that exchange rate of RMB to HKD was around RMB 1 = HK$1.15 in April 2019. Even if the intervener’s evidence were to be taken to the highest, the RMB 170,000 withdrawn (≈HK$195,500) could have only contributed to less than half of the deposit.

41.  Further, the intervener has produced no direct income proof and/or any other evidence of substance to begin to make out his contention that he was the sole source of funds to those mortgage repayments. On the contrary, the Average Daily Relationship Balance (ADRB) of the intervener account no 015-267-88-10881-0 with the Bank of East Asia from around 1 March 2019 to 31 May 2019, which was around the time the Property was purchased, ranged only from HK$1,367.87 to HK$2,844.76.

42.  In addition, there is evidence that showed that contrary to the intervener’s assertion, the defendant paid the deposit. The following are three clear examples:

42.1.  The defendant’s bank account no 288-205800-668 (“D’s 1^st Account”) was put into funds by a transfer of HK$70,000.00 on 27 March 2019 and a loan drawdown of HK$50,000.00 on 28 March 2019. These transfers/loan drawdowns enabled the defendant to draw from D’s 1^st Account on 2 April 2019, the sum of HK$118,000.00 to pay for “CASHIER ORDER 377527”, which was one of the cashier orders used to pay the deposit.

42.2.  The defendant’s bank account no 777-406448-888 (“D’s 2^nd Account”) was put into funds by a cash deposit of HK$60,000.00 and a transaction marked “SELL FCY/GLOD/INV FUND” of HK$103,115.71 both on 2 April 2019. On the same day, HK$156,440.00 was drawn from D’s 2^nd Account to pay for “CASHIER ORDER 377532”, which was the other cashier order used to pay the deposit.

43.  In the premises, even if I am wrong to find that the OS ought to be summarily determined taking the intervener’s case at its highest, I find that the intervener has not adduced sufficiently credible evidence to support his assertion that he was the one who was solely responsible for paying the purchase price of the Property.

C.  Other matters

44.  In light of my findings above, it is unnecessary for me to proceed to deal with the other arguments raised by the plaintiff or the intervener, including in particular the doctrine of illegality relied upon by the plaintiff.

VII.  Issue 2: Analysis

45.  There is no dispute that the Outstanding Sum is due and owed to the plaintiff. There is also no dispute as to the outstanding interest due as calculated by the plaintiff.

46.  At the end of the hearing, the plaintiff submitted a draft order for the court’s consideration. Ms Wong confirmed that in the event I rule in favour of the plaintiff, she has no comments or objections in relation to the terms of the draft order proposed by the plaintiff.

VIII.  Costs

47.  I see no reason why costs should not follow the event, and I shall therefore make an order accordingly.

IX.  Disposition and Orders

48.  I therefore make the following orders:

48.1.  The defendant do pay to the plaintiff:

(a)  the outstanding principal sum of $2,304,430.03;

(b)  interest on the principal sum of $2,244,761.49 calculated as per the draft order handed up to the court by the plaintiff on 29 May 2023.

48.2.  The defendant do within 28 days after service upon her of this Order deliver to the plaintiff vacant possession of the Property.

48.3.  Upon the defendant paying to the plaintiff the moneys hereby ordered to be paid and all other moneys, if any, secured to the plaintiff by the Legal Charge, the plaintiff (subject and without prejudice to the due exercise of any power of sale for the time vested in it) do re-deliver to the defendant possession of the charged Property and release to the defendant the security constituted by the Legal Charge.

48.4.  An order nisi that costs of and occasioned by these proceedings (including all costs reserved) be paid by the defendant and the intervener to the plaintiff, to be taxed if not agreed.

49.  I thank both Mr Chow and Ms Wong for their helpful assistance rendered to this court.