PLOUTO CAPITAL LTD v. TSAI KAM WAH AND ANOTHER

DCMP 4424/2023

[2024] HKDC 1951

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4424 OF 2023

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BETWEEN

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REASONS FOR JUDGMENT

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1.  This is an application by the plaintiff by originating summons filed on 20 September 2023 for a money judgment against the 1^st defendant, and for an order for sale of the Property, pursuant to Order 83A, rule 4 and Order 88, rule 4 of the Rules of the District Court (Cap.336H) (“RDC”).

2.  After considering the evidence put before me, and having heard the parties, I gave Judgment at the hearing in terms of the draft order submitted by the plaintiff as amended. I indicated that I should hand down the reasons for my Judgment.

3.  These are the reasons for my Judgment.

Background

4.  The plaintiff is a licensed money lender. The 1^st defendant and the 2^nd defendant own the Property, i.e. 8/F Wing Tai Mansion, 9 Sands Street as joint tenants.

5.  On 21 April 2023, the plaintiff and the 1^st defendant entered into a loan agreement (“the Loan Agreement”), under which the plaintiff agreed to lend a sum of HK$690,000.00 (“the Loan”) to the 1^st defendant for a term of 12 months, at the interest rate of 24% per annum.

6.  On the same day, the plaintiff and the 1^st defendant also executed a mortgage (“the Mortgage”), under which the 1^st defendant charged to the plaintiff all of his estate, right, title, benefit and interest in the Property to secure the repayment of his indebtedness to the plaintiff.

7.  According to the plaintiff’s case, the 1^st defendant defaulted in repaying the monthly instalments of the Loan to the plaintiff since 21 August 2023. Despite a written demand by the plaintiff’s solicitors dated 11 September 2023, the outstanding amount of the Loan and the interest accrued remained unpaid. As at the issue of the originating summons, the outstanding principal and accrued interest came to HK$717,683.18.

Procedural history

8.  The plaintiff filed the originating summons on 20 September 2023 and duly served the same on the defendants on 20 September 2023 by inserting the originating summons through the letter box of the Property, being the usual and last known address of the defendants, pursuant to Order 10, rule 1(2)(b) of the RDC.

9.  Only the 2^nd defendant filed an Acknowledgement of Service of the originating summons on 3 October 2023.

10.  The hearing of the originating summons was adjourned for several times with directions given on the filing of evidence, as the 2^nd defendant indicated to the court that she would oppose to the plaintiff’s application. She also applied for legal aid, but the Director of Legal Aid refused her application. Up to the date of the hearing before me, the defendants did not file any affidavit in opposition of the plaintiff’s application. I am satisfied that the defendants were duly informed that they had to file affidavit evidence should they wish to oppose to the plaintiff’s application at the hearing before me.

Money judgment

11.  Having reviewed the Loan Agreement, I am satisfied that the statutory requirements under section 18(1) and (2) of the Money Lenders Ordinance (Cap.163) (“MLO”) as to the form of a moneylender’s agreement for repayment of money have been complied with.

12.  As the effective interest rate of the Loan Agreement does not exceed 48%, this is not a case for the transactions to be reopened under section 25 of the MLO: Celerity Special Situations Fund I, L.P. v China Linkage International Limited [2018] HKCFI 259 (Deputy Judge Le Pichon; 7 February 2018) at §§24-26.

13.  Based on the affirmation evidence filed by the plaintiff, I am satisfied that the 1^st defendant has defaulted in repayment of the Loan since 21 August 2023. Thus, pursuant to Clause 3 of the Loan Agreement, the entire outstanding sum is due and payable by the 1^st defendant.

14.  The plaintiff has complied with the requirements prescribed in RDC Order 83A, rule 4(2) and (3) in its claim for money judgment against the 1^st defendant.

15.  I consider that this is an appropriate case for a money judgment to be entered in favour of the plaintiff against the 1^st defendant.

Vacant possession of the Property

16.  Pursuant to Clauses 13.01 and 13.02 of the Mortgage, the plaintiff is entitled to enter into and take possession of the Property on the 1^st defendant’s failure to comply with a demand for repayment of the Loan.

17.  I am satisfied that the plaintiff has complied with the requirements in RDC Order 88, rules 4 and 5 in its claim of possession of the Property against the defendants. In the light of the evidence filed before me, I consider that this is an appropriate case for an order of possession of the Property to be made in favour of the plaintiff against the defendants.

Order for sale of the Property

18.  Section 2 of the Partition Ordinance (Cap.352) (“PO”) 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 of the property under section 4 of the PO, an order for sale of the property under section 6 of the PO, or refuse to make any order.

19.  Section 3(1) of the PO provides that any person interested in such property may institute proceedings under the PO for an order for sale.

20.  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 HCMP 134/2002 (Reyes J; 4 March 2004) at §56. A mortgagee of a partial interest is considered an interested person for the purposes 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 [2016] 1 HKLRD 224 at §§22-23, applied by the Court of First Instance in Ego Finance Limited v Poon Sau Han Joanna and Anor [2023] HKCFI 868 (Deputy Judge Jenkin Suen, SC; 28 March 2023) at §21; Maxcolm Finance Limited v Pun Lap Shing and Anor [2024] HKCFI 603 (Deputy Judge Jonathan Wong; 1 March 2024) at §6.2.

21.  Since the plaintiff is a mortgagee of the 1^st defendant’s share of the Property, it is entitled to apply for an order for sale under the PO.

22.  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 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, or (d) any other circumstances.

23.  In Re Lau Hiu Tuen, HCB 8430/2006 (G Lam J; 20 August 2015) at §§20-24, the court summarised the relevant principles as follows:-

(1) A co-owner has the basic right to rid himself of the shackles of co-ownership, and if he has no other remedy, ask for an order for partition or sale.

(2) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner) that such an order will not be beneficial to all the co-owners, or that it will result in very great hardship to one co-owner.

(3) Whether an order for sale is beneficial to all co-owners is not determined by the dissent of the opposing co-owner, or the assertion of them that it is not beneficial. It is to be determined objectively.

(4) An order for sale would not be refused unless all the co-owners would be benefited by its refusal, or an order for sale would be detrimental to all the co-owners, or unless it will result in very great hardship to one co-owner.

24.  The plaintiff’s case is that, given the nature of the Property, it would not be practicable or beneficial to physically partition the same, and therefore an order for sale under section 6(1) of the PO is warranted.

25.  In all the circumstances of this case, I consider that it would be just and reasonable for an order for the sale of the Property to be made for the following reasons:-

(1) The Property is a residential unit in a multi-storey building with a saleable area of 534 square feet. If the Property were to be partitioned, it would likely devalue the Property substantially, which would in turn prejudice the financial interests of the plaintiff.

(2) None of the defendants has filed any evidence suggesting that an order for sale would not be beneficial or would cause great hardship to one or both of them.

(3) The reserve price is set by reference to a valuation report of Prudential Surveyors (Hong Kong) Limited dated 19 October 2023. The plaintiff agrees that the sale of the Property would be conducted on a fair and reasonable basis.

26.  At the hearing, the 2^nd defendant submitted that she should be allowed to stay in the Property until the completion of sale by the plaintiff. I do not consider this a reasonable condition to be imposed on the sale. First, the plaintiff was entitled to take immediate possession of the Property (at least insofar as the 1^st defendant’s share was concerned) on the basis of the Mortgage. Further, the 2^nd defendant’s proposal would, in my judgment, bring risks to the proposed sale, which would be prejudicial to the interests of both the plaintiff, and indeed the 2^nd defendant herself.

Disposition

27.  At the hearing, I ordered the 1^st defendant to pay the plaintiff’s costs in this action on indemnity basis (as agreed by the 1^st defendant under Clause 4 of the Loan Agreement). I summarily assessed the plaintiff’s costs at HK$70,000.00. There shall be no order as to costs between the plaintiff and the 2^nd defendant.

28.  I am satisfied that the terms of the revised draft order, as amended, are in line with the usual orders made in proceedings of the present nature and contain sufficient provisions to safeguard the interests of the 2^nd defendant. Hence, I made an order in terms of the revised draft order as amended.

29.  I thank Ms Yeung for her assistance.