ZHONGCAI FINANCE LTD v. SINGH BALWINDER AND ANOTHER

DCMP 3648/2018

[2020] HKDC 304

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3648 OF 2018

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REASONS FOR JUDGMENT

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Introduction

1.  This was the hearing of an originating summons taken out by the plaintiff Zhongcai Finance Limited (“ZFL”) on 28 December 2018.  ZFL is a money lender under the Money Lenders Ordinance, Cap 163 (the “MLO”) and was claiming against the 1^st defendant Singh Balwinder (“SB”) and the 2^nd defendant Kaur Rajinder (“KR”) for various reliefs including money judgment, possession of property, order for partition or sale of property pursuant to the Partition Ordinance, Cap 352 (“the PO”).

2.  After hearing the solicitors for ZFL on 8 August 2019, I granted the reliefs sought.  I said that I would give my reasons for judgment at a later stage.  This I do now.

Background

3.  SB and KR are joint tenants of a property situated at Flat H on 47^th Floor of Tower 6, Central Park Towers, No 2 Tin Yan Road, Yuen Long, New Territories (“the Property”).

4.  By a loan agreement dated 17 April 2018 (“the 1^st Loan Agreement”), SB borrowed HK$500,000 from ZFL (“the 1^st Loan”) which was to be repaid by 96 instalments.

5.  By another loan agreement dated 11 July 2018 (“the 2^nd Loan Agreement”), SB borrowed HK$30,000 from ZFL (“the 2^nd Loan”) which was to be repaid by 5 instalments.

6.  SB executed a Second Mortgage dated 17 April 2018 (“the Mortgage”) in favour of ZFL by which his interest in the Property was charged as security.

7.  SB paid the 1^st to 3^rd instalments under the 1^st Loan Agreement but defaulted in paying the 4^th instalment which was due on 17 August 2018. 

8.  Regarding the 2^nd Loan Agreement, SB had failed to make any repayment. 

9.  On 5 December 2018, ZFL issued a demand letter to SB requesting for payment of all the outstanding principals and interest under the 1^st Loan Agreement and the 2^nd Loan Agreement. 

10.  Due to SB’s failure to comply with ZFL’s demand, ZFL commenced these proceedings by issuing the Originating Summons on 28 December 2018.

11.  At the call over hearing before me on 14 June 2019, SB was present but KR was absent.  I adjourned the matter to 8 August 2019 for a hearing in open court and directed solicitors for ZFL to file further written submissions.

12.  At the substantive hearing, all parties were before me.

The issues

13.  The issues that I have to address are these:-

(a)  Whether money judgment should be entered against SB?

(b)  Whether there should be an order for partition or an order for sale under the PO?

Terms of the 1^st Loan Agreement

14.  The material terms of the 1^st Loan Agreement are as follows:-

(a)  Clause 1 and the repayment schedule of the 1^st Loan Agreement provide that the effective rate of interest on the 1^st Loan shall be 24% per annum, which is 19% per annum above the Hong Kong Dollar Best Lending Rate quoted by HSBC from time to time;

(b)  Clause 1 and clause 2.1 of the 1^st Loan Agreement provide that the 1^st Loan shall be secured by a mortgage to charge SB’s interest in the Property.

(c)  Clause 1 and clause 5 of the 1^st Loan Agreement provide that the 1^st Loan and interest accrued thereon shall be repaid by 96 monthly instalments with the first instalment of HK$11,757 commencing one month after the Drawdown Date.

(d)  Clause 7.1 of the 1^st Loan Agreement provides that SB shall strictly comply with all clauses of the 1^st Loan Agreement including repayment of the Principal Amount of the 1^st Loan and interest accrued thereon within the prescribed repayment period.  If ZFL does not receive payment of any amount on its due date, SB is required to pay default interest on the overdue amount at the effective interest rate stipulated in clause 1.  Default interest will accrue daily on a 365-day year basis.

(e)  Clause 7.2 of the 1^st Loan Agreement provides that all outstanding amounts, whether are due before or after judgment, shall be calculated and charged at the effective interest rate stipulated in clause 1.

(f)  Clause 8 of the 1^st Loan Agreement provides that SB is required to pay on a full indemnity basis, all costs and expenses of reasonable amounts and reasonably incurred by ZFL from time to time in connection with debt collection, preserving or enforcing ZFL’s rights with the 1^st Loan or the mortgage, including expenses for appointing debt collection agent and legal fees in case of default in payment, stamp duty and other expenses.

Terms of the 2^nd Loan Agreement

15.  The material terms of the 2^nd Loan Agreement are as follows:-

(a)  Clause 1 of the 2^nd Loan Agreement provides that the effective rate of interest on the 2^nd Loan and the overdue interest rate shall be 24% per annum.

(b)  Clause 1 and clause 2.1 of the 2^nd Loan Agreement provide that the 2^nd Loan shall be secured by a mortgage to charge SB’s interest in the Property.

(c)  Clause 1 and clause 5 of the 2^nd Loan Agreement provide that the first monthly instalment of HK$5,474 shall be paid on 17 August 2018; the subsequent monthly instalments of HK$5,356 shall be due and payable on the numerically corresponding day as the first instalment in each succeeding month.  Particulars of repayment including the outstanding principal amount and interest payable are particularized in the repayment schedule.  

(d)  Clause 7.1 of the 2^nd Loan Agreement provides that SB shall strictly comply with all clauses of the 2^nd Loan Agreement including repayment of the Principal Amount of the 2^nd Loan and interest accrued thereon within the prescribed repayment period.  If ZFL does not receive payment of any amount on its due date, SB is required to pay default interest on the overdue amount at the effective interest rate stipulated in clause 1.  Default interest will accrue daily on a 365-day year basis.

(e)  Clause 7.2 of the 2^nd Loan Agreement provides that all outstanding amounts, whether are due before or after judgment, shall be calculated and charged at the effective interest rate stipulated in clause 1.

(f)  Clause 8 of the 2^nd Loan Agreement provides that SB is required to pay on a full indemnity basis, all costs and expenses of reasonable amounts and reasonably incurred by ZFL from time to time in connection with debt collection, preserving or enforcing ZFL’s rights with the 2^nd Loan or the mortgage, including expenses for appointing debt collection agent and legal fees in case of default in payment, stamp duty and other expenses.

Amounts due under the 1^st Loan Agreement

16.  At the hearing before me, Ms Chan, for ZFL, took me through the repayment schedule attached to the 1^st Loan Agreement and the repayment history.  She explained to me the calculation of interest.  After settlement of 3 instalments in the sums of HK$11,788, HK$11,827 and HK$11,779 respectively on 23 May 2018, 27 June 2018 and 19 July 2018, the outstanding principal stood at HK$494,618.16. 

17.  Prior to the termination of the 1^st Loan Agreement by ZFL’s demand letter dated 5 December 2018, the 4^th, 5^th, 6^th and 7^th instalments for interest on the outstanding principal should become due on 17 August 2018, 17 September 2018, 17 October 2018 and 17 November 2018 respectively.  Each instalment for interest on the outstanding principal should be as follows:-

HK$494,618.16 x 24% pa x 1/12 = HK$9,892.36

18.  The 4^th, 5^th, 6^th and 7^th instalments for interest on the outstanding principal were not paid by SB.  ZFL is entitled to charge default interest on the same.  This is assessed from the date of default up to the date of the Originating Summons, 28 December 2018, as follows:-

4^th instalment:  HK$9,892.36 x 24% pa x 133/365 = HK$865.11

5^th instalment:  HK$9,892.36 x 24% pa x 102/365 = HK$663.47

6^th instalment:  HK$9,892.36 x 24% pa x 72/365 = HK$468.33

7^th instalment:  HK$9,892.36 x 24% pa x 41/365 = HK$266.69

19.  The interest on the outstanding principal from 17 November 2018, which is the due date of the 7^th instalment, to 28 December 2018, which is the date of issuance of the Originating Summons, should be as follows:-

HK$494,618.16 x 24% pa x 41/365 = HK$13,334.36

20.  As at the date of the issuance of the Originating Summons on 28 December 2018, SB was indebted to ZFL for a total sum of HK$549,785.57 under the 1^st Loan Agreement:-

(a)  Outstanding principal	HK$494,618.16
(b)  Outstanding interest for the 4th instalment	HK$9,892.36
(c)  Outstanding interest for the 5th instalment	HK$9,892.36
(d)  Outstanding interest for the 6th instalment	HK$9,892.36
(e)  Outstanding interest for the 7th instalment	HK$9,892.36
(f)  Interest on outstanding interest for the 4th instalment	HK865.11
(g)  Interest on outstanding interest for the 5th instalment	HK$663.47
(h)  Interest on outstanding interest for the 6th instalment	HK$468.33
(i)  Interest on outstanding interest for the 7th instalment	HK$266.69
(j)  Interest on outstanding principal from 17 November 2018 to 28 December 2018	HK$13,334.36
	______________
	HK$549,785.57

Amounts due under the 2^nd Loan Agreement

21.  Ms Chan also took me through the repayment schedule attached to the 2^nd Loan Agreement.  No repayment was made under the 2^nd Loan Agreement.

22.  Prior to the termination of the 2^nd Loan Agreement by ZFL’s demand letter dated 5 December 2018, the 1^st, 2^nd, 3^rd and 4^th instalments for interest on the outstanding principal should become due on 17 August 2018, 17 September 2018, 17 October 2018 and 17 November 2018 respectively.  These are in the respective sums of HK$718, HK$600, HK$600 and HK$600. 

23.  The 1^st instalment for interest in the sum of HK$718 is based on the repayment schedule attached to the 2^nd Loan Agreement.

24.  The 2^nd, 3^rd and 4^th instalments for interest is assessed at the interest rate of 24% per annum on the principal for which SB had not made any repayment:-

  HK$30,000 x 24% pa x 1/12 = HK$600

25.  As the 1^st, 2^nd, 3^rd and 4^th instalments for interest on the outstanding principal were not paid by SB, ZFL is entitled to charge default interest on the same. This is assessed from the date of default up to the date of the Originating Summons, 28 December 2018, as follows:-

1^st instalment:  HK$718 x 24% pa x 133/365 = HK$62.79

2^nd instalment:  HK$600 x 24% pa x 102/365 = HK$40.24

3^rd instalment:  HK$600 x 24% pa x 72/365 = HK$28.41

4^th instalment:  HK$600 x 24% pa x 41/365 = HK$16.18

26.  The interest on the outstanding principal from 17 November 2018, which is the due date of the 4^th instalment, to 28 December 2018, which is the date of issuance of the Originating Summons, should be as follows:-

  HK$30,000 x 24% pa x 41/365 = HK$808.77

27.  As at the date of the issuance of the Originating Summons on 28 December 2019, SB was indebted to ZFL for a total sum of HK$33,474.38 under the 2^nd Loan Agreement:-

(a)  Outstanding principal	HK$30,000
(b)  Outstanding interest for the 1st instalment	HK$718
(c)  Outstanding interest for the 2nd instalment	HK$600
(d)  Outstanding interest for the 3rd instalment	HK$600
(e)  Outstanding interest for the 4th instalment	HK$600
(f)  Interest on outstanding interest for the 1st instalment	HK$62.79
(g)  Interest on outstanding interest for the 2nd instalment	HK$40.24
(h)  Interest on outstanding interest for the 3rd instalment	HK$28.41
(i)  Interest on outstanding interest for the 4th instalment	HK$16.18
(j)  Interest on outstanding principal from 17 November 2018 to 28 December 2018	HK$808.77
	_____________
	HK$33,474.38

Potential breaches of the Money Lenders Ordinance

28.  ZFL admits that clause 1 of the 1^st Loan Agreement about the interest rate might be a potential breach of section 18(2)(i) of the MLO.  Clause 1 states the interest rate to be 19% per annum above the Hong Kong Dollar Best Lending Rate quoted by HSBC from time to time.  But section 18(2)(i) of the MLO requires interest rate to be expressed as a rate per cent per annum.

29.  Another potential breach of the MLO is clause 2.2 of the 1^st Loan Agreement which requires SB to pay “any fees associated with the loan” to ZFL.  Section 27 of the MLO makes it illegal for a money lender to require the borrower to pay “costs, charges or expenses (other than stamp duties or similar duties) incidental to or relating to the negotiations for or the granting of the loan”.

30.  ZFL submits that the aforesaid potential breaches are not real.  As to clause 1 of the 1^st Loan Agreement, ZFL all along is charging an interest rate of 24% per annum in accordance with the repayment schedule.  It has not sought to rely on the exact wording of clause 1 by charging 19% per annum above the Hong Kong Dollar Best Lending Rate quoted by HSBC.  As to clause 2.2, ZFL has never charged any fees associated with the 1^st Loan.

31.  Section 18(3) of the MLO gives the court a discretion to enforce a loan and security if the court is satisfied that “in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable.”

32.  In Emperor Finance v La Belle Fashion Ltd (2003) 6 HKCFAR 402, the Court of Final Appeal stated the following view at paragraph 119:-

“In exercising its discretion the court should examine the breach or breaches in question, their consequences for the parties to the transactions and any other circumstances which may make it inequitable to hold the agreements unenforceable.”

33.  In Uplink Finance Limited v Lee Sze Tai & Others DCMP 794/2016, Deputy District Judge Kam KL Cheung said this in the judgment:-

“19.  The MLO is not intended to stifle genuine money-lending transactions or to let the money lender lose all the money he has lent out and the security he has because of a failure to comply with all the requirements. The section 18 conditions are imposed to ensure that a borrower is fully aware of and freely agrees to all the terms and conditions of the loan, and in particular know how much money he has borrowed, and what interest he has to pay: Strong Offer Investment v Nyeu Ting Chuang (2007) 10 HKCFAR 529.

20.  In Brother’s Company (a firm) v Ah Puk Transportation (a firm) [1986] HKLR 821, at 825, it was held that the factors to be taken into account include: -

(1)  the relative status of the parties;

(2)  the nature and extent of the default;

(3)  the way in which the default arose;

(4)  the implications for the borrower;

(5)  the attitude of the lender;

(6)  the general appearance of the contract throughout.”

34.  Coming back to the case in front of me, I have no doubt that SB is aware of the interest rate under the 1^st Loan Agreement.  The rate of 24% per annum is clearly stated in the repayment schedule.  SB has not made any complaint that he is unaware of the interest rate or that the rate is unconscionable.  In fact, he had paid the first 3 instalments pursuant to the 1^st Loan Agreement.

35.  As to clause 2.2 of the 1^st Loan Agreement which requires SB to pay “any fees associated with the loan”, the reality is that ZFL has not resorted to this clause and demanded any payment of such fees.  There is no actual breach.

36.  On the whole, despite the wording of clause 1 and clause 2.2 being unsatisfactory, my view is that the 1^st Loan Agreement is a genuine commercial transaction under which a sum of HK$500,000 was advanced to SB. I am satisfied that it would be inequitable not to enforce the 1^st Loan Agreement and the Mortgage.

No defence to the 1^st Loan Agreement and the 2^nd Loan Agreement

37.  In his affirmation filed on 27 June 2019, SB has not raised any defence to ZFL’s claim under the 1^st Loan Agreement and the 2^nd Loan Agreement.  He explained that he defaulted in repayment because he got into the trouble with the law and was out of job for a while due to his medical condition.  He said he was willing to settle what he owed to ZFL by instalments.  But his proposal was refused by Ms Chan representing ZFL.

38.  Seeing that SB has no defence to the ZFL’s claim and being satisfied with Ms Chan’s explanation of the outstanding amounts under the 1^st Loan Agreement and the 2^nd Loan Agreement, I enter money judgment against SB for:-

Under the 1^st Loan Agreement

(a)  the sum of HK$549,785.57 together with interest on the sum of HK$534,187.62 at the rate of 24% per annum from 29 December 2018 until payment in full;

(b)  interest at judgment rate accrued on the sum of HK$15,597.96 from the date of judgment until payment in full;

Under the 2^nd Loan Agreement

(c)  the sum of HK$33,474.38 together with interest on the sum of HK$32,518.00 at the rate of 24% per annum from 29 December 2018 until payment in full; and

(d)  interest at judgment rate accrued on the sum of HK$956.39 from the date of judgment until payment in full.

Partition Ordinance

39.  Section 2 of the PO provides that where any property in land is held by 2 or more persons as joint tenants or tenants in common, the court may make an order for partition under section 4 or an order for sale under section 6.

Terms of the Mortgage

40.  Clause 3 of the Mortgage states that SB covenants with ZFL that he will on demand pay make good and discharge to ZFL all sums of monies obligations and liabilities which may be or become due owing or incurred to ZFL by SB.

41.  Clause 7 and clause 8.1 of the Mortgage provide, inter alia, that if SB be in default of payment of any principal or interest or instalment or other moneys outstanding, all term loans or instalment loans and other moneys, obligations and liabilities shall become repayable immediately whether demand shall be made or not. 

42.  Clause 8.2.2 of the Mortgage provides, inter alia, that if any event of default shall have occurred, it shall be lawful for ZFL at any time thereafter to enter into and upon and take possession of SB’s interest in the Property or any part thereof and to hold, possess and enjoy the same and to receive the rents and profits thereof without any lawful interruption or disturbance by SB or any other person.

43.  Clause 8.2.6 of the Mortgage provides that (whether or not ZFL shall have made such entry or taken possession as aforesaid), it shall be lawful for ZFL to sell, assign, call in, collect or convert into money SB’s interest in the Property or any part thereof or any interest therein subject to any prior estates, interest and rights to which the Property is subject, but free from the Mortgage and all other estates, interests and rights to which the Mortgage has priority with full power to sell the same either together or in parcels and either by public auction or tender or private contract or partly by public auction or tender and partly by private contract.

44.  Clause 16 of Mortgage provides, inter alia, that SB shall bear all costs, charges and expenses incurred and all payments made by ZFL or any Receiver on a full indemnity basis in the lawful exercise of all of the powers conferred upon him and all costs, charges and expenses incurred by ZFL in connection with the enforcement of the Mortgage.

45.  ZFL as a legal chargee has acquired an interest in possession when SB is in default.  With this interest in possession, ZFL qualifies as an “interested person” under section 3 of the PO and is entitled to apply for an order for partition or an order for sale: Uplink Finance Limited v Lee Sze Tai & Others DCMP 794/2016; Law Chun Wai v Chu Shuk Har [2016] 1 HKLRD 224.

The legal principles

46.  Section 6 of the PO provides as follows:-

(1)  In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of –

(1)  the nature of the land to which the proceedings relate;

(2)  the number of the persons interested or presumptively interested;

(3)  the absence or disability of some of the persons interested; or

(4)  any other circumstances,

the Court may make an order for the sale of the property.

(2)  The Court may exercise its powers under subsection (1), notwithstanding the dissent or disability of any person interested.

47.  When determining whether an order for partition under section 4 or an order for sale under section 6 should be made under the PO, I find His Honour Judge Andrew Li’s comments in Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224 instructive.  At paragraphs 26 to 30, the learned judge said this:-

“26.  “Generally, in determining whether a sale is more beneficial than a partition, the court considers only the pecuniary results, disregarding matters of sentiment, and has regard to the interest of all parties interested as a whole; but it can and will order a sale where, in its discretion, it thinks fit, unless the parties opposing a sale undertake to purchase the shares of those desiring sale.” (Halsbury’s Laws of Hong Kong, (2^nd ed.), Vol. 35, para. 230.826)

27.  In Wong Chung Kei v Poon Vai Ching [2007] 1 HKLRD 825, the Court held that:

(1)  when it was impracticable to make an order for partition, the court should make an order for sale unless it was persuaded, the burden being on the opposing co-owner, that such an order would not be beneficial to all the co-owners or that it would result in very great hardship to one co-owner; and

(2)  whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial.  It has to be determined by the court objectively.

28.  In considering whether it is impracticable to make an order for partition, the court would consider the size and design of the property:  See Chan Shee Yuen v Chan Shu Fong (unrep., HCA 93/2002, [2006] HKEC 777) (28 April 2006), per Deputy High Court Judge Anthony To (as he then was); Poon Yuet Chun v Tse So Kwun (unrep., HCMP 5662/2001, 29 April 2002), per Maria Yuen J (as she then was).

29.  While the Courts would pay regard to the difficulty of a co-owner in seeking alternative accommodation: (Chow Doi Kwai v Chan Cho Yuk [2000] 2 HKLRD 235), a co-owner’s sentimental attachment to the property is irrelevant;  (Chan Ching Kit v Lam Sik Shi (unrep., HCMP 2239/2000, [2002] HKEC 804 (24 June 2002), per Susan Kwan J (as she then was); Drinkwater v Ratcliffe (1875) LR 20 Eq 528).

30.  In Ip Sau Shu v Sham Lai Hing [2003] 4 HKC 528, [2002-03] CPR 655, per Deputy High Court Judge Jeremy Poon (as he then was); a two bedroom flat of about 600 sq ft in size was determined to be owned by the plaintiff and the defendant as tenants in common in equal shares.  The partition of the property was not suggested to be physically possible.  The Court held that even if partition were possible, because the parties had been in a personal relationship which had ended, it would be meaningless to do so.  The plaintiff had no savings and no assets other than the property.  Since the plaintiff had no way of realising the value of his half share in the flat unless there was a sale, the Court ordered the sale of the property.”

The Property in question

48.  The Property secured by the Mortgage in the present case is situated in a 48-storey residential building. According to valuation report dated 18 February 2019 (“the Valuation Report”) which was compiled by Dudley Surveyors Limited, it has a saleable area of approximately 494 sq ft plus a bay window area of approximately 19 sq ft.  The floor plan shows that there are 8 units on 47^th floor and the Property is situated in Flat H.

Order for partition or order for sale

49.  I come to a view similar to that of His Honour Judge Andrew Li in Law Chun Wai v Chu Suk Har, that it would not be reasonable to expect a potential purchaser to share the Property with KR.  If the Property is to be partitioned into 2 units (each with a saleable area of 256.5 sq ft), an extra entrance will have to be installed.  It is entirely unclear whether such a step is physically and legally possible. Given the size of the Property and the uncertainty, I believe it would be impracticable to order partition of the Property.

50.  Having come to the view that partition would not practicable, I proceed to consider whether an order for sale is beneficial to KR when she is not a party to the 1^st Loan Agreement, the 2^nd Loan Agreement or the Mortgage.

The 1^st defendant’s position

51.  SB opposed ZFL’s application for an order for sale and said he needed the Property as a shelter for his daughter.  He said he was willing to pay ZFL by instalments.  As indicated before, this proposal was rejected by Ms Chan on behalf of ZFL.

52.  In my view, SB has not given any sufficient reason for opposing ZFL’s application.  By entering into the Mortgage, he contractually gave a right to ZFL to sell his interest in the Property when an event of default has occurred.  It is now too late for him to regret.

The 2^nd defendant’s position

53.  KR is the wife of SB.  She was absent at the call over hearing on 14 June 2019.   Nevertheless, I gave her an opportunity to file an affirmation in opposition and directed ZFL’s solicitors to serve my order on her.  She has not filed any affirmation.

54.  At the substantive hearing before me, KR voiced out her opposition to ZFL’s application for an order for sale. She blamed her husband SB for entering into the Mortgage and ZFL for not informing her about the Mortgage before approving.  She said that she and SB had an argument as a result which required the police’s intervention.  She said she did not borrow from ZFL and did not sign any contractual document with ZFL.  She stated that she was the main purchaser and the main owner of the Property.  She said the Property should belong to her daughter.  Because of the dispute with SB, KR and her daughter moved out of the Property and are now living at the place of KR’s mother.  KR is working in a laundry shop and her income would not enable her to pay anything to ZFL.  But she pleaded that ZFL should allow SB to pay by instalments.

55.  In my view, there is no legal requirement for ZFL to inform KR before entering into the 1^st Loan Agreement, the 2^nd Loan Agreement and the Mortgage with SB.  KR alleged that she was the main purchaser and the main owner of the Property but she has not provided any proof.  She can only defeat ZFL’s application for an order for sale if she can show that it is not beneficial to all the co-owners or that it would result in very great hardship to her.  I believe an order for sale should be beneficial to all the co-owners as ZFL could use half share of the proceeds for settling the sums owed by SB.  At the same time, KR’s financial interest is safeguarded because she will still be entitled to the other half of the value of the Property.  KR has not discharged the burden to prove any great hardship on her part.  On the contrary, the fact that KR and her daughter are now staying at the place of KR’s mother gives me the impression that they do not have any immediate need for the Property for self-occupation.

Other considerations

56.  According to the land search record, there is another mortgage dated 6 October 2017 in favour of The Hong Kong And Shanghai Banking Corporation (“HSBC”) which has priority over the Mortgage in the present case.  Solicitors for ZFL informed HSBC about the present proceedings.  HSBC in their 2 letters of reply dated 7 March 2019 and 24 June 2019 respectively indicated that they do not have objection to the present proceedings provided that their legal interest under the mortgage will not be prejudiced.

57.  The Director of Lands has also been informed about the present proceedings.  In his letter of reply dated 25 April 2019, the Director indicated that he would have no comment on ZFL’s application.

Order

58.  After balancing the needs of ZFL and KR objectively, I come to the conclusion that an order for sale under section 6 of PO would be more feasible.

59.  Based on the Valuation Report, the market value of the Property should be HK$5,640,000 while the value for sale under repossession should be HK$4,510,000.

60.  Therefore, I order as follows:-

(1)  Payment of all monies that are due to the plaintiff from the 1^st defendant under and by virtue of the loan agreement dated 17^th April 2018 (“the 1^st Loan Agreement”) and the loan agreement dated 11^th July 2018 (“the 2^nd Loan Agreement”), secured by the Mortgage dated 17^th April 2018 (“the Mortgage”), for (a) the sum of HK$549,785.57 together with interest on the sum of HK$534,187.62 at the rate of 24% per annum from 29^th December 2018 until payment in full; (b) interest at judgment rate accrued on the sum of HK$15,597.96 from the date of judgment until payment in full; (c) the sum of HK$33,474.38 together with interest on the sum of HK$32,518.00 at the rate of 24% per annum from 29^th December 2018 until payment in full; and (d) interest at judgment rate accrued on the sum of HK$956.39 from the date of judgment until payment in full;

(2)  Unless within 28 days of the service of order, the 1^st defendant do make payments adjudged in paragraph (1) above together with costs for these proceedings, the 1^st and 2^nd defendants do deliver vacant possession and title deeds and documents of the Property to the plaintiff.  The Property be sold pursuant to section 6 of the Partition Ordinance, Cap 352, at open market value not less than HK$5,640,000.00 or at value for sale under repossession not less than HK$4,510,000.00;

(3)  The conveyancing procedure of the Property be committed to Cheung & Choy, solicitors for the plaintiff;

(4)  Upon such sale, the 1^st and 2^nd defendants shall do all necessary acts for the transfer of their legal title and beneficial interest in the said Property to the purchaser failing which Mr Choy Man, solicitor of Cheung & Choy, solicitors for the plaintiff is hereby appointed under section 38A of the District Court Ordinance, Cap 336 to execute the necessary conveyance or assignment to give effect to this Order;

(5)  The proceeds of sale of the Property shall be applied in the following manner and order of priority:-

(a)  in discharge of all rent, taxes, rates and other outgoings due and affecting the Property;

(b)  in payment for the discharge of all encumbrances having priority to the Mortgage (including the costs and disbursements for handling such encumbrances);

(c)  in payment of all reasonable costs and expenses of the sale (including conveyancing costs up to HK$25,000.00, estate agent commission up to 1% of the sale price);

(d)  the remaining net balance be split into two halves –

1.  as for the first half,

(i)  in payment to the 2^nd defendant, who owns half of the Property with the 1^st defendant as joint tenants.  If the 2^nd defendant could not be located, such sum to be paid into court for the credit of the 2^nd defendant.

2.  as for the second half,

(i)  in payment of the outstanding sum adjudged under paragraph (1) herein;

(ii)  in payment of all plaintiff’s costs of these proceedings summarily assessed at HK$94,580.00 and the fee for the Valuation Report for the Property in the sum of HK$5,000.00;

(iii)  the balance, if any, after deduction of the costs and disbursements for handling the encumbrances affecting the Property and ranking immediately behind the Mortgage, or if there is no subsequent encumbrance, to the 1^st defendant;

(6)  there be liberty to apply, including for (but without limitation to) directions on the terms and manner of the sale of the Property.