HAO TIAN FINANCE CO LTD v. WIN AGAIN LTD AND ANOTHER

HCA 1955/2014

[2019] HKCFI 76

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1955 OF 2014

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J U D G M E N T

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1.  This is a simple case concerning a loan agreement. The Plaintiff is a licenced money lender. It advanced a loan of $8,000,000 to the 1^st Defendant with the mortgage executed by the 1^st Defendant and a guarantee executed by the 2^nd Defendant as security.

2.  After the execution of the mortgage, the Plaintiff discovered that the 1^st Defendant was in breach of clause 7.1(b).  Before the execution of this mortgage, the 1^st Defendant had already executed a second mortgage in favour of another finance company.  Under the said clause, the 1^st Defendant had agreed with the Plaintiff that he had the right to execute the mortgage only subject to the mortgage in favour of HSBC executed in March 2014.

3.  Since the 1^st Defendant was in breach of that covenant, the Plaintiff terminated the loan agreement and sought to recover the money advanced to the 1^st Defendant under the loan.  The 2^nd Defendant had executed a guarantee to guarantee the loan of the 1^st Defendant, and so the Plaintiff also sues the 2^nd Defendant as the guarantor. 

4.  Despite notice being given to the Defendants, they have not appeared in today’s hearing, and so it is only for the Plaintiff to prove his case against the Defendants.

5.  The Plaintiff has called a 3 witnesses to testify at the trial including the solicitor and the credit officer who were handling the transactions. 

6.  Based on the evidence, I am satisfied that the 2^nd Defendant had executed the mortgage on behalf of the 1^st Defendant.  I am also satisfied that the 1^st Defendant was in breach of the mortgage as he had executed a prior mortgage in favour of another finance company without disclosing to the Plaintiff.  The Plaintiff is therefore entitled to terminate the agreement and to sue for the money advanced to the 1^st Defendant. 

7.  Under such circumstances, I have no hesitation in granting a judgment in favour of the Plaintiff against the Defendants.  The 1^st and 2^nd Defendants have to jointly and severally pay back the Plaintiff the principal sum of $8,000,000.  The Plaintiff is also entitled to interest on the principal sum of $8,000,000 at the rate of prime rate for the loans offered by HSBC plus 24% per annum as from 12 September 2014 until judgment, and thereafter at judgement rate.

8.  This is the contract rate specified in the loan agreement, and so the Plaintiff is only enforcing the contractual interest rate as agreed in the contract. 

9.  I also have no hesitation in ordering the Defendants to pay the Plaintiff the costs of the action including all costs reserved up to the day hereof, and such costs should be taxed if not agreed. 

10.  The Plaintiff also asks for an order for sale of the property with the proceeds of sale first to be distributed to the first mortgagee and the second mortgagee.  However, since there are prior interests involved, I take the view that the first mortgagee and the second mortgagee should be informed about the proposed order for sale and be given the opportunity to make representation if necessary.

11.  In such case, I would adjourn the application for the order for sale pending notification be given to the first mortgagee and the second mortgagee in respect of the proposed order for sale.  

12.  These are the reasons for the judgment in this case.