THE HONG KONG MORTGAGE CORPORATION LTD v. TSOI SIU CHING LEO

HCA 1653/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1653 OF 2006

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REASONS FOR JUDGMENT

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The application

1. This was an application for summary judgment, pursuant to the provisions of Order 14, RHC, which was issued by the plaintiff, the Hong Kong Mortgage Corporation Ltd against the defendant mortgagor, one Leo Tsoi Soi Ching.

2. At the conclusion of the hearing I gave judgment for the plaintiff against the defendant, and made an Order in the following terms :

1.	Judgment be to the plaintiff against the defendant in the sum of HK$1,330,630.51;
2.	Interest to be paid on the said sum from the date of judgment at the judgment rate from time to time prevailing until payment;
3.	Costs of this action, including the costs of this application, be to the plaintiff, such costs to be taxed if not agreed.
4.	I now give brief reasons for this judgment.

The facts

3. As the title of the action suggests, this is a collection action by an unpaid mortgagee against a defaulting mortgagor.  There is some history.

4. By an equitable mortgage made between the defendant as borrower and Hang Seng Bank Ltd as lender, made on 21 August 2001 (‘the 1^st mortgage’), the defendant mortgaged a property in the New Territories to secure a loan of HK$3,480,400.00.

5. By a second equitable mortgage made between the defendant as borrower and one Central More Ltd as lender and one Brilliant Oscar Ltd as agent for the lender, also dated 21 August 2001, Central More advanced a sum of HK$1, 243,000.00 to the defendant upon the defendant agreeing to repay the loan with interest thereon by 216 monthly instalments of HK$9,956.00, commencing on 3 August 2003.

6. Pursuant to the terms of the second equitable mortgage, the defendant executed a Second Mortgage on 25 September 2002 in favour of Central More Ltd, and by a Transfer of Mortgages dated 6 July 2005, all the estate, right, title, interest and benefit of Central More Ltd in and under the Second Mortgage was assigned to the plaintiff – hence the plaintiff’slocus in this action.

7. It is alleged that under this Second Mortgage in total the defendant has repaid only HK$99,528.01, and since 3 October 2005 has defaulted in payments due under the Second Mortgage.

8. Accordingly, the plaintiff, qua assignee under the Second Mortgage, has commenced the recovery action herein, and by summons dated 15 May 2007 took out the present application for summary judgment.

The Defence

9. The defendant filed a defence on 21 February 2007.

10. The fact of entry into the Second Mortgage is admitted, and at paragraph 4(a) of this document the defendant makes reference to, and purports to rely upon, an ‘Undertaking’ allegedly given by the 1^st mortgagee, Hang Seng Bank Ltd, to the 2^nd mortgagee, Central More Ltd, which ‘Undertaking’, it is alleged, thereafter followed the assignment of the right and title under the Second Mortgage from Central More Ltd to the current plaintiff.

11. As I understand the defendant’s case, this ‘Undertaking’, to which the defendant was not privy since allegedly it passed from the Hang Seng Bank Ltd to Central More Ltd, the 2^nd mortgagee, had the effect of restricting the ambit of the 2^nd mortgage (the enforcement of which constitutes the present cause of action) solely in connection with the repayment of the loan regarding a property in the New Territories (characterized as ‘Property A’) which had been the subject of the 1^st mortgage granted by the Hang Seng Bank.

12. At paragraph 8 of his affirmation sworn in opposition to this summary judgment application, the defendant puts the situation thus :

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Notwithstanding the First Mortgage being on all monies literally, I am given to understand that there is an oral or written undertaking given by the Bank to the Second Mortgagee that Property A is mortgaged to secure against the mortgage loan extended to me for the acquisition of Property A only but not otherwise…”

13. In the same affidavit the defendant says that the proceeds of sale of Property A, which was repossessed, is now with the Bank (by which I think is meant the 1^st mortgagee, the Hang Seng Bank), and the defendant says that it is the Bank that now “fails and/or refuses to release the surplus to the Second Mortgagee.  If the Bank had done so, there is nothing due by me to the Second Mortgagee at all…”

14. The Hang Seng Bank is, of course, not a party to this action, and has not been joined by the defendant; in this connection I know not whether the defendant has any residual right of action against that bank, in terms, for example, of a duty to account for any surplus monies which may have arisen pursuant to the sale of Property A, and I do not intend to speculate.

15. The short point, however, is that, for present purposes, namely the application by the plaintiff, as transferee of the rights of the 2^nd mortgagee, for repayment under the terms of the 2^nd mortgage, the thrust of the defence as put forward relies upon the terms of “an oral or written undertaking” the source of which the defendant is unable to identify – there is no document – which now is said to restrict the ambit of the 2^nd mortgage, notwithstanding that there is no reference in the 1^st mortgage or in the 2^nd mortgage to any such ‘Undertaking’; to the contrary, the 2^nd mortgage, which the plaintiff now seeks to enforce, is in clear and unambiguous terms.

16. Nor do I understand or accept the contention, made on the defendant’s behalf, that without the undertaking and the defendant’s consent for the transfer of the Second Mortgage, such transfer is void and ineffective against the defendant.

17. In the circumstances, whatever collateral rights of action against 3^rd parties the defendant may or may not have, I was and am unable to discern why this entirely straightforward mortgage claim, with effectively an undisputed primary debt thereunder, should be considered fit to go to trial, with consequent attendant further delay and costs implications.

18. The defendant’s protestations as to an account due to him from the Hang Seng Bank, in terms of a surplus arising after satisfaction of the mortgage debt, must be a matter between him and that bank, which apparently repossessed (and thereafter sold) Property A under court order (HCMP 2782 of 2005 refers). 

19. Whatever ‘understanding’ he may or may not otherwise have had with the Hang Seng Bank cannot, in my judgment, affect the rights of the present plaintiff, as transferee of the 2^nd mortgage from Central More; in fact, although this point was not taken by counsel, the argument that the rights transferred under the 2^nd mortgage are to be as regarded in some way as limited or trammelled by an ‘undertaking’ of the sort canvassed by the defendant, seems to me effectively to be an attempt to infringe the ‘parol evidence’ rule, there being no allegation or suggestion of the existence of a collateral contract with Central More to which the defendant was party, and which otherwise served potentially to limit the ambit and operation of this 2^nd mortgage.

20. Accordingly, I concluded that there was no defence to this claim as brought by this plaintiff, and that if and in so far as this defendant is aggrieved, he must be left to pursue such remedies as he may have against earlier mortgagees not party to this action. 

21. In the circumstances I gave judgment in favour of the plaintiff against the defendant in terms of the updated sum due and owing as at the judgment date, such updated computation, as I understand it, having been agreed between counsel at the hearing.