KONEW CAPITAL INTERNATIONAL LTD v. LUK SIN TING AND ANOTHER

DCMP 1226/2025

[2025] HKDC 1325

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1226 OF 2025

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REASONS FOR DECISION

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1.  By an Originating Summons dated 27 February 2025 (“OS”), the Plaintiff applied for inter alia money judgment against the 1^st Defendant, possession order and an order for sale of the property known as 1^st Floor, No 172 Shanghai Street, Kowloon, Hong Kong (“Property”) against the 1^st and 2^nd Defendants pursuant to Orders 83A and 88 of the Rules of the District Court (“RDC”) and Section 6 of the Partition Ordinance, Cap 352 (“PO”).

2.  The Plaintiff is a licenced money lender and has advanced a loan of HK$600,000 to the 1^st Defendant at the interest rate of 30% per annum. A mortgage was created in favour of the Plaintiff by which the 1^st Defendant’s half-share interest in the Property was charged to secure her repayment of the loan. The 2^nd Defendant is the co-owner holding the other half share.

3.  The 1^st Defendant defaulted in repayment and the Plaintiff commenced the present proceedings. No acknowledgment of service was filed by the 1^st or 2^nd Defendants. The first hearing of the OS was returnable on 10 July 2025.

4.  On 7 July 2025, the Plaintiff filed the 2^nd Affirmation of Hau Wing Shing Vincent to update the 1^st Defendant’s indebtedness to the Plaintiff upon her making a partial repayment of HK$17,000.00 on 17 June 2025.

5.  At the hearing on 10 July 2025, both Defendants were absent. Mr Lo, solicitor appearing for the Plaintiff, asked the Court to summarily determine the OS and enter judgment for the Plaintiff pursuant to Order 28 r 4(1) of the RDC. I expressed my concern on the Valuation Report prepared by Citiland Surveyors Limited dated 29 April 2025 (“Valuation Report”) in that the different adjustments applied to each comparable in arriving at the unit rate of HK$5,209 per square feet were not shown. In other words, there was no analysis on how the market value of the Property was arrived at.

6.  Another matter that troubled me was that it was stated in the Valuation Report that the Property would be sold without title deeds “as informed by the instructing party”, which is the Plaintiff’s solicitors. On that basis, the market value of the Property would be discounted by 29.5%. Thus, the market value of the Property as assessed by the valuer would then be reduced from HK$2,150,000 to HK$1,520,000 and the value for sale under repossession from HK$1,830,000 to HK$1,440,000. I raised it with Mr Lo that the evidence as to whether the Plaintiff was in possession of the title deeds was equivocal. In the Affirmation of Lee Oi Ying, manager of the legal department of the Plaintiff, filed in support of the OS, it was stated, at §32:

“32. If the Plaintiff is not provided with title deeds of the Property, it is proposed that the Property be sold either by public auction or private treaty with a reserved price at HK$1,440,000.00 …” (emphasis added)

7.  Clearly, either the Plaintiff or its solicitors had failed to ascertain as a matter of fact whether the title deeds of the Property were delivered to the Plaintiff at the time when the mortgage was entered into, a check that could easily be done. Rather, the Plaintiff proceeded to apply for an order for sale from the Court with proposed terms catering for both scenarios, which is highly inappropriate.

8.  Having highlighted the above, I granted leave to the Plaintiff to file further affidavit evidence and adjourned the substantive hearing of the matter to 28 July 2025 before this Court.

9.  On 17 July 2025, the Plaintiff filed the 2^nd Affirmation of Lee Oi Ying to address the following matters:

(1)  The Property includes a flat roof which is shown and coloured pink in the floor plan annexed to the Assignment registered by Memorial No UB563799 notwithstanding that the description of the Property as recorded in the Land Registry does not refer to it;

(2)  A Supplemental Valuation Report prepared by Citiland Surveyors Limited dated 16 July 2025 (“Supplemental Valuation Report”) was exhibited thereto which set out the adjustments applied to the 6 comparables in arriving at the market value of the Property in the Valuation Report;

(3)  Upon further checking of the Plaintiff’s record, it is confirmed that the 1^st Defendant had in fact delivered the title deeds of the Property to the Plaintiff at the time when the mortgage was entered into;

(4)  The 1^st Defendant has made a part repayment of HK$16,546.00 to the Plaintiff on 4 July 2025 which was only shown in the Plaintiff’s record after the 2^nd Affirmation of Hau Wing Shing Vincent was filed and therefore not reflected therein;

(5)  According to the breakdown exhibited thereto, the amount remaining due under the mortgage and the loan agreement as at 16 July 2025 was HK$353,602.45 inclusive of accrued interest; and

(6)  Further interest continues to accrue on the outstanding principal of HK$341,479.53 at the rate of 30% per annum as from 17 July 2025 at a daily rate of HK$280.67.

10.  At the hearing on 28 July 2025, the 1^st and 2^nd Defendant were again absent. After hearing from the Plaintiff’s solicitor, I granted an order in terms of the draft order as amended. Here are the reasons for my decision.

Service

11.  The OS, the 1^st and 2^nd Affirmation Lee Oi Ying and the 1^st and 2^nd Affirmations of Hau Wing Shing Vincent were served on the 1^st and 2^nd Defendants at the Property, being their usual or last known address. The notice of appointment to hear the OS, the Order made by this Court at the 1^st hearing and the notice of adjournment to hear the OS (for this adjourned hearing) were also served to the said usual and last known address of the 1^st and 2^nd Defendants. In addition, the Plaintiff also served the aforesaid documents on the 1^st Defendant at another address in Tai Kok Tsui being the other usual or last known address of the 1^st Defendant.

12.  The OS and Notice to Occupants had also been posted up at a conspicuous place at the main entrance of the Property. Further, the Director of Lands has been duly notified of these proceedings with no objection received from it by the Plaintiff.

13.  Having considered the affirmations of service filed by the Plaintiff, I am satisfied that the 1^st and 2^nd Defendants have had due notice of these proceedings and hearing.

Facts

14.  The plaintiff is a licensed money lender. The 1^st and 2^nd Defendants are the registered owners of the Property as tenants in common.

15.  By a mortgage dated 4 February 2020, the 1^st Defendant as borrower on one part and the Plaintiff as the lender on the other part, the 1^st Defendant charged her interest in the Property to the Plaintiff to secure the repayment of the general credit facilities granted to her to the extent of HK$1,500,000.00 together with interest, cost and expenses thereon (“Mortgage”).

16.  By a loan agreement dated 4 February 2020, the Plaintiff granted to the 1^st Defendant general credit facilities and a principal sum of HK$600,000.00 was advanced to the 1^st Defendant by the Plaintiff at the interest rate of 30% per annum repayable by 96 monthly instalments (“Loan Agreement”).

Money Judgment

17.  It is the Plaintiff’s case that the 1^st Defendant defaulted in repaying the monthly instalments of the Loan since 4 November 2024. Pursuant to Clause 8 (a) of the Loan Agreement and on 6 February 2025, the Plaintiff through its solicitors issued a demand letter to the 1^st Defendant for payment of all outstanding amounts due under the Loan Agreement within 7 days, failing which the Plaintiff would institute legal proceedings against her for recovery of the same and an order for possession of the Property.

18.  By a letter dated 13 February 2025, the Plaintiff through its solicitors issued another demand letter to the 1^st Defendant for payment of the entire balance of the loan and interest within 7 days, failing which the Plaintiff would institute legal proceedings against her for recovery of the same and for enforcement of the Mortgage in which event the 2^nd Defendant would be joined for an order for sale of the Property.

19.  On even date, the Plaintiff through its solicitors also wrote and gave notice to the 2^nd Defendant that unless all outstanding amounts due under the Loan Agreement were paid by the 1^st Defendant within 7 days, the Plaintiff shall institute legal proceedings against the 1^st Defendant and apply to the Court for an order for sale of the Property in its entirety under Section 6 of the PO. The 2^nd Defendant was informed that he might be joined as a party to the proceedings and should he oppose to an order for sale, written objection should be provided to the Plaintiff’s solicitor within 7 days.

20.  Despite such written demands, the 1^st Defendant has defaulted in repaying the then overdue amount to the Plaintiff in full. There was also no response from the 2^nd Defendant.

21.  According to the 2^nd Affirmation of Lee Oi Ying, as of 17 July 2025, the outstanding principal and accrued interest were HK$353,602.45.

22.  Having taken into account the documents filed by the Plaintiff and examined the original of the Mortgage and the Loan Agreement, I am satisfied that:

(1)  The statutory requirements under section 18 of the Money Lenders Ordinance, Cap 163 (“MLO”) have been complied with. The interest rate under the Loan is permissible under the MLO;

(2)  Both the Mortgage and the Loan Agreement which were signed by the 1^st Defendant are valid;

(3)  The 1^st Defendant has been in default in the repayment of the Loan;

(4)  The latest breakdown setting out the indebtedness of HK$353,602.45 appears to be in order; and

(5)  The requirements of a moneylender’s action under Order 83A of the RDC have been complied with.

23.  In the circumstances, I grant money judgment in favour of the Plaintiff against the 1^st Defendant for the outstanding principal and interest under the Loan Agreement.

Possession Order

24.  Clause 5.01 of the Mortgage provides that it is an event of default if the 1^st Defendant makes default in payment of any principal, interest or any amount outstanding on the due date, and pursuant to Clause 6.01, the Plaintiff is entitled to enter into and upon and take possession or dispose of the Property.

25.  Having considered the materials before me, I am satisfied that the requirements of Order 88 rules 4 and 5 of the RDC have been complied with and that an order for possession of the Property in favour of the Plaintiff should be granted by reason of the 1^st Defendant’s default.

Order for sale

26.  The powers of the court to make an order for sale are provided for in the PO. Section 2 provides that, where any property in land is held by two or more persons, whether as joint tenants or as tenants in common, the court may make an order for partition under section 4 and an order for sale under section 6.

27.  Section 3(1) provides that any person interested in such property may institute proceedings under the PO for an order for sale. It is well established that an interested person is confined to a person holding an interest in possession: Fortis Bank Asia HK v Yu Kam Hoi and Anor[1]. A mortgagee of a partial interest is considered an interested person for the purpose of section 3(1) of the PO, and is thus entitled to apply for partition or sale of the property: Law Chun Wai v Chu Suk Har[2].

28.  As the 1^st Defendant was in default, the Plaintiff as mortgagee of the 1^st Defendant’s share of the Property is entitled to apply for an order sale.

29.  Section 6(1) of the PO empowers the court to make an order for the sale of the property where it appears to the court that a partition of the property would not be beneficial to all the persons interested by reason of (a) the nature of the land to which the proceedings relate; (b) the number of the persons interested or presumptively interested; (c) the absence or disability of some of the persons interested; or (d) any other circumstances.

30.  In Re Lau Hiu Tuen, bankrupt[3], G Lam J (as G Lam JA then was) cited Wong Chun Kei Johnny v Poon Vai Ching & Ors[4] in which Recorder Fok SC (as Fok PJ then was) set out the applicable principles for an application for an order for sale under section 6 of the PO. Having referred to a number of authorities concerning application by a trustee in bankruptcy for an order for sale of a co-owned property, the learned judge stated, at §24:

“24. In the absence of argument it would not be appropriate for me to deal with in any depth with this recent divergence of judicial opinion. I propose to proceed on the basis of the authorities decided under the Partition Ordinance which establish the principle that the court will make an order for sale on the application of a co-owner 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.”

31.  I would adopt the same approach.

32.  In the present case, neither the 1^st nor the 2^nd Defendant has filed any evidence. In exercising the discretion, I have taken into account that the Property a residential flat in a multi-story building with a saleable area of about 404 square feet, and have also examined its floor plan. I find that it is not feasible to physically partition the Property and in any event disproportionally high costs might be required in partitioning the Property into two separate units.

33.  In the circumstances, I do not see any reason why the 1^st and 2^nd Defendants would be better served by the refusal of the order and I find it an appropriate case for an order for sale to be granted.

34.  The Plaintiff asked for an order that the Property be sold either by way of private treaty or public auction. As mentioned above, it was confirmed that the Plaintiff was in possession of the title deeds. Based on the Valuation Report, the market value of the Property is HK$2,150,000.00 and the value for sale under repossession is HK$1,830,000.00. Having reviewed the Valuation Report and the Supplemental Valuation Report, I accept the valuation is fair and reasonable.

Conclusion

35.  For the above reasons, I made an order in terms of the Draft Order as amended.

36.  Insofar as costs are concerned, the Plaintiff asked for costs against the 1^st Defendant on solicitors and own client basis which was expressly provided for under Clause 18.01 of the Mortgage and Clause 14 of the Loan Agreement. Having considered the Statement of Costs prepared by the Plaintiff’s solicitors, I summarily assessed the Plaintiff’s costs at HK$96,000.00 to be paid by the 1^st Defendant forthwith.

37.  There shall be no order as to costs between the Plaintiff and the 2^nd Defendant.