NIC SANG FINANCE CO LTD v. TUNG WAI FUN

DCMP 4499/2021

[2022] HKDC 1475

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4499 OF 2021

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J U D G M E N T

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Introduction

1.  This is the plaintiff’s application for order for sale by way of amended originating summons dated 21 February 2022 under Order 83A and Order 88 of the Rules of the District Court, and sections 2, 3, 6 and 8 of the Partition Ordinance, Cap 352. The plaintiff relies on a total of six affirmations. Defendant did not participate in these proceedings and has not appeared in any hearings.

Background

2.  The plaintiff is and was a licensed moneylender under the Money Lenders Ordinance, Cap 163 at all material times. The defendant is and was one of the three registered owners holding 40% shares of the property known as Flat B on 4^th Floor, No. 28 Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong.

3.  By way of a loan agreement dated 19 April 2021, the plaintiff advanced a principal sum of HK$800,000 to be paid by the defendant in 36 instalments as per the repayment schedule annexed to the loan agreement.

4.  Pursuant to the loan agreement:

(1)  The defendant shall repay the loan with contractual interest at the rate of 28% per annum.

(2)  The loan shall be repaid with contractual interest by 36 monthly instalments and the first instalment shall commence on 19 May 2021 as listed in “attachment 1: schedule of instalments”, attached to the loan agreement.

(3)  Each of the said instalments shall be paid on the 19^th day of each and every of the calendar month, starting from 19 May 2021 until the final instalment, ie the 36^th instalment scheduled for 19 April 2024.

5.  Clause 3 of the loan agreement provides for contractual interest and clause 2 stipulates that the defendant shall pay all expenses and legal costs incurred as a result of default or any breach of the loan agreement.

6.  The defendant has failed to make any timely payments since the fifth instalment scheduled for 19 September 2021.

Legal Charge

7.  The defendant also executed a legal charge dated 19 April 2019 with the plaintiff. By way of the legal charge, the defendant mortgaged the property to plaintiff as security for due repayment of all monies and liabilities incurred under the loan agreement.

8.  The plaintiff is now relying on clause 6 to take possession of the property and it also gives the plaintiff the power to sell the property either together or in parcels by public auction or private contract.

Outstanding Indebtedness as of 29 November 2022

9.  According to the plaintiff, the total unpaid principal sum as of today is HK$740,252. The total unpaid interest on the outstanding principal sum accrued up to today is $265,192.74, ie 740,252 × 467 days ÷ 365 × 28%. The amount due and unpaid regarding the fifth and eighth instalments are HK$132,364. Therefore, as of 25 October 2022, the outstanding sum in total is HK$1,137,808.74, including:

(1)  HK$740,252 for principal sum;

(2)  HK$265,192.74 for outstanding interest on the principal; and

(3)  HK$132,364 for the unpaid scheduled instalments repayment.

10.  As of today, the particulars of payment and outstanding amount are as follows:

(1)  date on which the loan was made: 19 April 2019;

(2)  amount actually lent to the defendant: HK$800,000;

(3)  interest rate: 28%;

(4)  date when contract for repayment was made: 19 April 2019;

(5)  amount repaid: HK$132,364;

(6)  amount due but unpaid: HK$132,364, ie fifth to eighth instalments.

Prior Encumbrances

11.  The plaintiff’s solicitors have conducted land search and discovered that there are certain prior encumbrances, including five charging orders and other non-registrable instruments. The plaintiff’s solicitors wrote to the solicitors of one of the creditors, Messrs Wong & Co, to inquire their stance. According to the plaintiff’s solicitors, there is no reply. Besides, the plaintiff’s solicitors also wrote to other creditors, including Seaview Credit, Union Credit and United Asia Finance on the same day with no replies as well.

Order for Sale

12.  The plaintiff as a mortgagee has become a person holding an interest in the property. Therefore, the plaintiff is entitled to rely on section 3 of the Partition Ordinance to institute the present proceedings.

13.  Plaintiff cited the following authorities: Maxcolm Finance Ltd v Cheng Chi Man and Another [2019] HKCFI 2928 at paragraphs 22 to 32 and another authority: Moneysq Ltd v Liu Kit Ling and Another [2019] HKDC 860 at paragraphs 12 to 17. Besides, the power of sale is provided by clause 6 of the legal charge in the present case.

14.  The plaintiff submitted that according to the authority Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825 at paragraphs 16 to 19, when it was impracticable to make an order for partition, the court should make an order for sale unless it was persuaded that the sale would not be beneficial to all the co‑owners or that it would result in very great hardship to one co‑owner.

15.  The plaintiff further cited the following case: Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224. In this case, His Honour Judge Andrew Li held that common sense dictated partition in Hong Kong domestic flats was impracticable. In paragraph 32, it was held that in such situation, an original co‑owner would not be peculiarly worse off since he would be entitled to the sales proceeds.

16.  The plaintiff also inquired Director of Lands of his stance for this application, but there is no reply up to the hearing.

17.  The rateable value of the property for the year 2021-22 is HK$166,920, which is below the District Court’s jurisdictional limit of HK$320,000. Therefore, there is no jurisdictional problem in this application.

18.  As for the stance of the interested persons, the other two co‑owners as tenants in common are Yim Fung-ming Regina and Tung Yau‑hing Billy. Each of them is holding 30% of the shares of the property. Mr Chan Yu-ping, the affirmant of the plaintiff, was told by the defendant that Madam Yim and Mr Tung are the parents of the defendant. The parents have their own property. They are not living with the defendant. The defendant is now living with her boyfriend whose identity is unknown to the plaintiff. The defendant also told Mr Chan that the property was occupied by her and her boyfriend only.

19.  The plaintiff has served notice of these proceedings at the property’s address. The plaintiff also attempted to contact the defendant by sending a WhatsApp message on 29 March 2022, informing her about the present proceedings. However, the defendant has ignored to answer all telephone calls from the plaintiff’s solicitors and made no replies to all correspondence including WhatsApp messages sent by the plaintiff’s solicitors.

20.  According to the plaintiff, so far no interested persons have approached the plaintiff or made any suggestion as to repayment or to purchase the plaintiff’s interest of the property.

21.  The plaintiff undertakes to distribute 30% each of the net proceeds to Madam Yim and Mr Tung upon sale as first priority. According to the updated valuation report conducted by CS Surveyors Limited, with date of valuation on 4 November 2022, indicates that the current market value of the property is HK$6,400,000.

Disposition

22.  Having considered all the evidence before the court and the submissions by the plaintiff’s counsel, I accept that the order for sale is the last resort in the present case. It is impracticable to partition the property since it is a flat in a multi-storey residential building. To do so would deprive of the partitioned property of any practical use. Besides, the plaintiff as a limited company and the other interested persons are complete strangers and therefore it would not be practicable for the parties to co‑manage the property.

23.  Furthermore, given that the defendant’s unresponsive and uncooperative attitude, the plaintiff has no other viable means to enforce the outstanding sum other than order for sale. Besides, the two other interested parties are not residing at the property. An order for sale would not create any hardship for them at all.

24.  Lastly, the defendant and all other occupants should have had knowledge of these proceedings by reason of the plaintiff’s solicitor’s notice and notice of adjourned hearings and several notice of occupants posted up at the entrance of the property, but the defendant and other interested parties have taken no action to participate in these proceedings.

Conclusion

25.  For the above reasons, I enter judgment as per the amended originating summons against the defendant and I make the order in terms of the draft order as amended.

26.  Costs of these proceedings shall be borne by the defendant and summarily assessed at HK$98,650 after taxing down a total of 7 hours of attendance on clients and preparation of documents.