TREASURE SPOT FINANCE CO LTD v. HO KUI LAI RICAHRD

HCA 2684/2018

[2019] HKCFI 2706

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2684 OF 2018

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D E C I S I O N

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Background

1.  The plaintiff (“P”) is a licensed money lender in Hong Kong (as evidenced by money lender licences for 2017-2018). The defendant (“D”) was P’s customer and the registered owner of domestic property known as All Those 550 equal undivided 26,830^th parts or shares of and in The Remaining Portion of New Kowloon Inland Lot No 1483 and the Remaining Portion of New Kowloon Inland Lot No 5475 (ie Flat A on 23^rd Floor of “10 South Wall Road”, No 10 South Wall Road, Kowloon, Hong Kong), (“Property”).

2.  Pursuant to a Facility Letter dated 16 October 2017 (“Facility Letter”), P agreed to lend a total sum of $2,300,000 to D (“Loan”). In consideration of the Loan, D agreed inter alia to enter into a Second Mortgage in P’s favour in respect of the Property as security for the Loan, and to pay interest on the Loan at the rate of 17% pa calculated on a daily rate basis and payable in arrears on the last business day of each month.

3.  By a Memorandum of Agreement dated 19 October 2017 signed by D (“Memorandum”), it was agreed that the Loan shall be repayable by D to P on demand and in any event no later than 19 October 2018 together with interest at the rate of 17% pa as aforesaid.

4.  The Loan was secured by a Second Mortgage dated 19 October 2017 made between P as lender and D as borrower and registered at the Land Registry by Memorial No 17103001730012 (“Second Mortgage”) whereby the Property was assigned and charged by D to P to secure the repayment of all monies in respect of the Loan granted to D together with interest thereon and all costs, charges and expenses incurred by P. D personally signed the Second Mortgage.

5.  Pursuant to the Facility Letter, Memorandum and Second Mortgage, P lent the Loan in the sum of $2,300,000 to D,[1] and the Loan was repayable on 3 October 2018. P claimed that interest on the Loan was payable at the rate of 17% pa in arrears on the last business day of each month (see paragraph 2 above), and the interest amount payable per month by D to P was $32,136.99.[2]

6.  By a letter dated 26 September 2018, P’s solicitors demanded D to pay all moneys due under the Second Mortgage on/before 3 October 2018.

7.  P claimed D paid a total sum of $112,172.07,[3] but failed to make any further payments since 8 November 2018 despite repeated requests/demands.

8.  On 15 November 2018, P commenced the present action to claim against D for the following reliefs:

(a)  repayment of the outstanding principal sum of the Loan in the amount of $2,300,000;

(b)  payment of interest accrued thereon as at 15 November 2018 in the sum of $311,728.76;

(c)  payment of further interest thereon at the rate of 17% pa or at the daily rate of $1,071.23;

(d)  vacant possession of the Property;

(e)  costs of the action.

9.  On the same day, P filed its Statement of Claim. It was pleaded that:

(a)  as at 15 November 2018, the entire principal sum of the Loan in the amount of $2,300,000 remained unpaid, and the amount of interest accrued due and unpaid on the principal sum of the Loan was $311,728.76;

(b)  P was entitled to enforce the Second Mortgage and to seek vacant possession of the Property subject to the First Mortgage;

(c)  P had not received nor to its knowledge, information and belief had any other person(s) by P’s order or to P’s use received the outstanding sums stated to be due on the security of the Second Mortgage or any part thereof or anything of value in or towards satisfaction of the same.

10.  On 21 December 2018, D filed acknowledgment of service giving notice of intention to defend.

11.  On 18 February 2019, P filed Notice of Intention to Enter Judgment.

12.  On 15 March 2019, P filed a summons pursuant to Order 83A rule 4 and Order 88 rules 4-6 of the Rules of the High Court (“RHC”) for the following reliefs (“15/3/19 Summons”):

(a)  P be at liberty to enter final judgment against D in default of Defence for the following reliefs:

(i)  repayment of all moneys and interest due and owing by D to P under the covenants of payment contained in the Second Mortgage as pleaded in the Statement of Claim;

(ii)  vacant possession of the Property,

(b)  further and/or other relief; and

(c)  costs of the present action and of such application.

13.  On 15 March 2019, P filed the affirmation of its senior manager Yu Chi Keung Danny (“Yu”). By such affirmation, Yu confirmed the aforesaid loan documents, the Loan and repayments made. Yu went on to give explanation on possible non-compliance with sections 21(1) and 27 of the Money Lenders Ordinance Cap 163 in respect of the Facility Letter and Memorandum which he said would not have affected their enforceability. By such affirmation, Yu confirmed the updated indebtedness as follows: (a) the amount of the outstanding principal sum of the Loan was $2,286,000 (being $2,300,000 less $14,000), (b) accrued interest to date was $403,259.83, and (c) interest in arrears as at the date of the Writ of Summons was $276,559.06. Thus, as at the date of Yu’s affirmation (14 March 2019), the total amount remaining due and owing by D to P was $2,869,259.83, and further interest would accrue on the outstanding principal sum of the Loan in the sum of $2,286,000 at the rate of 17% pa or at $1,064.71/day.

14.  By Yu’s affirmation, it was said the Property was used for domestic purpose, and to the best of P’s knowledge D was the only person entitled to occupy the Property. Yu said P had not given its consent to the granting of any licence/tenancy over the Property, and P had no knowledge of the particulars of any other person(s) who was/were or might be in possession of the Property.

15.  On 18 March 2019, P filed a Notice to Occupants in respect of the Property requiring the occupants thereof to appear at the hearing of the 15/3/19 Summons if they intended to oppose the same.

16.  On 8 April 2019, P filed the Solicitor’s Certificate to certify that up till then no Defence had been served.

17.  At the hearing of the 15/3/19 Summons on 10 May 2019, D who appeared in person did not dispute the outstanding amounts but asked for time until August 2019 to sell the Property to repay P from the sale proceeds. Master Lai granted the following order at the hearing (“10/5/19 Order”):

(a)  judgment be entered against D in the sum of $2,689,259.83 due by D to P as secured by the Second Mortgage together with interest on the sum of $2,386,000 at the rate of $1,064.71/day from 15 March 2019 to the date of the judgment and thereafter at judgment rate until full payment;

(b)  D do within 42 days from the date thereof deliver to P vacant possession of the Property;

(c)  upon D paying to P the monies thereby ordered to be paid and all other moneys (if any) secured to P by the Second Mortgage, P (subject and without prejudice to the due exercise of any power of sale for the time being vested in it) shall re-deliver to D vacant possession of the Property and release to D the security constituted by the Second Mortgage as D might agree or the court might direct;

(d)  liberty to apply;

(e)  D to pay P costs summarily assessed at $32,500.

18.  On 28 May 2019, the Director of Legal Aid (“DLA”) filed a Memorandum of Notification of an Application for Legal Aid that gave notice D had made application for legal aid in respect of the present action.

19.  On 14 June 2019, D filed a summons for extension of time to make repayment (“申請延長還款期限”), ie a stay of execution of the 10/5/19 Order (“14/6/19 Summons”). On the same day, D filed his own affirmation (“D 1^st Aff”) to state that he was in the process of selling the Property to repay the debt due to P, but because the market was weak due to the Sino/US trade war and political protests in Hong Kong, he was unable to sell the Property before the stipulated deadline. P exhibited 5 pages of documents in relation to estate agency matters to demonstrate he had urged for early sale of the Property. The exhibited documents included (a) an estate agency agreement dated 25 April 2019 by which D engaged Wung Kee Property (Hong Kong) Limited (“Wung Kee”) to market and sell the Property for $6,000,000, (b) a letter dated 14 June 2019 from Amy Wong of Wung Kee to D stating (i) there was a customer surnamed Ng who intended to purchase the Property at an agreed price but uncertainty caused by the trade war and political unrest led to hesitation by such customer over the intended purchase, (ii) the property market was very quiet, and (iii) she would work diligently to market the Property including promoting the Property by putting it up on a property website, and (c) 2 written offers to purchase the Property dated 16 May and 2 June 2019 by the aforesaid Mr Ng and a Mr Au respectively. On such basis, D urged the court to consider his circumstances and grant an extension of time for repayment (ie a stay of execution) for a further 60 days.

20.  On 28 June 2019, the DLA filed a Memorandum of Notification that a Party Has Been Refused Legal Aid to notify the court that the DLA had refused D legal aid.

21.  At the hearing of the 14/6/19 Summons on 3 July 2019, Master Lai directed P to serve the 14/6/19 Summons and the D 1^st Aff on P’s solicitors within that day, and adjourned the hearing to 17 July 2019. Master Lai also ordered D to forthwith pay P costs of the hearing on 3 July 2019 summarily assessed at $1,040. At the adjourned hearing on 17 July 2019, after hearing submissions by P’s solicitors and by D who acted in person, Master J Wong granted stay of execution of the 10/5/19 Order until 31 August 2019, and ordered D to pay P costs of the application summarily assessed in the sum of $2,080 (“17/7/19 Order”).

22.  On 28 August 2019, D filed a summons for extension of time to make repayment (“申請延長還款期限”), ie a further stay of execution of the 10/5/19 Order (“28/8/19 Summons”). On the same day, D filed his affirmation in support of such summons (“D 2^nd Aff”). By the D 2^nd Aff, D claimed he was in the course of selling the Property. He claimed there was an intended purchaser, but such intended purchaser turned hesitant because of the political unrest, so he asked for another 42 days’ extension of time to effect sale of the Property.

23.  On 10 September 2019, despite objection by P’s solicitors, Master Kot granted a further stay of execution of the 10/5/19 Order until 21 September 2019, and ordered D to forthwith pay costs of the application summarily assessed at $1,040 (“10/9/19 Order”). Master Kot also indicated to P this would be the last stay of execution of the 10/5/19 Order.

24.  On 10 September 2019, the DLA filed a Memorandum of Notification of an Application for Legal Aid giving notice that P applied for legal aid in respect of the present action.

Appeal

25.  On 18 September 2019, D filed Notice of Appeal against the 10/9/19 Order (“Appeal”). On the same day, D filed his affirmation in support of the Appeal (“D 3^rd Aff”). By the D 3^rd Aff, D urged the court to set aside the 10/9/19 Order, “理由是本人在2019年9月6日向法援處申請法援, 檔案編號LA/MLT/743/2019(K4D60), 法援處表示會在2019年9月9日通知高院, 延期本人2019年9月10日的聆訊, 以便批出法援, 由律師代表本人申辯, 很明顯 [Master Kot] 忽略了法援處的通知”.

26.  The Appeal was scheduled to be heard by this court on 18 October 2019 at 9:30am with 30 minutes reserved. On 2 October 2019, I sent written directions to both parties that pursuant to the Memorandum of Notification of an Application for Legal Aid filed on 10 September 2019, there was a legal aid automatic stay for 42 days (see section 15 of the Legal Aid Ordinance Cap 91 and regulation 7A of the Legal Aid Regulations Cap 91A), so I vacated the hearing on 18 October 2019 at 9:30am and adjourned it to 24 October 2019 at 9:30am. On 10 October 2019, I sent further written directions to inform the parties that due to clash of court diaries the hearing of the Appeal then scheduled to be heard on 24 October 2019 was further rescheduled to 30 October 2019 at 10:30am with half hour reserved (“Appeal Hearing”).

27.  On 25 October 2019, P filed affirmation of service to verify service of my written directions dated 2 and 10 October 2019 to D’s address for service by post on 2 and 10 October 2019 respectively.

Legal principles

28.  Appeal from master’s decision  It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.[4]

29.  Further affirmation evidence on appeal  Order 58 rule 1(5) of the Rules of the High Court (“RHC”) provides that “[no] further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”. The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[5] to be satisfied.[6] The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed.

30.  To rely on the D 3^rd Aff, D had to satisfy the Ladd v Marshall conditions. However, the Memorandum of Notification of an Application for Legal Aid filed on 10 September 2019 with the court registry could not been placed before Master Kot in chambers at the very hearing on 10 September 2019, and hence such Memorandum amounted to “evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made”. In any event, indeed, Mr Fu of P’s solicitors did not object to D’s deployment and use of the D 3^rd Aff for the purpose of the Appeal.

31.  Stay of execution Order 45 rule 11 of the RHC provides inter alia that “a party against whom a judgment has been given or an order made may apply to the Court for a stay of execution of the judgment or order or other relief on the ground of matters which have occurred since the date of the judgment or order, and the Court may by order grant such relief, and on such terms, as it thinks just”.

32.  According to Hong Kong Civil Procedure 2020,[7] “matters which have occurred since the date of the judgment or order” referred to “matters which went to the validity of the judgment and which, if established before the Court, might justify the court in saying that this was a judgment on which on the material now before it, it would not allow to be executed”.[8] In Credit Lyonnais v SK Global Hong Kong Limited, Ma CJHC (as he then was) made clear that the existence of an inherent jurisdiction to stay execution must not be confused with the exercise of it, and the exceptional nature of the jurisdiction to order a stay only arises in circumstances where inter alia new evidence emerges after the relevant judgment or order showing that it was not valid.[9]

Discussion

33.  The starting point is that there was no appeal against the 10/5/19 Order (see paragraph 17 above), which remained binding on D. Thus, application for stay of execution under Order 58 rule 1(4) of the RHC was not applicable. So P had to show good reasons for stay of execution.

34.  By the 10/5/19 Order, D already had 42 days (ie until 26 June 2019) to sell the Property if he were able failing which P would be free to execute the 10/5/19 Order to recover possession of the Property and to recover the judgment debt. However, by the 17/7/19 Order D obtained a stay of execution for just over 1 month (ie until 31 August 2019), and by the 10/9/19 Order D obtained a further stay of execution for 11 days (ie until 21 September 2019). But practically speaking, as at the Appeal Hearing on 30 October 2019, D had a de facto stay for about 5½ months after the grant of the 10/5/19 Order and 4 months of time extension for making payment of the judgment debt, and he had not been able to sell the Property or settle the judgment debt as yet.

35.  More importantly, there was no evidence before this court that D would now be able to sell the Property shortly or at all. Since the potential purchasers referred to in the D 1^st Aff had shied away from their offers to purchase the Property, there was no evidence before the court of any realistic potential sale. Indeed, D’s reference to adverse factors such as trade war and political unrest only added to the non-likelihood of any sale of the Property.

36.  In any event, D did not disclosure as to the status of the First Mortgage over the Property, eg who was the 1^st mortgagee, whether there was the indebtedness under the 1^st mortgage, what would be the remaining equity after discharge of any indebtedness due to the 1^st mortgagee upon any potential sale of the Property, and/or whether the 1^st mortgagee had given consent to any sale of the Property by D.

37.  In all the circumstances, there was little evidence before Master Kot at the hearing on 10 September 2019 of (a) any real likelihood of sale of the Property and/or (b) D’s ability to settle the judgment debt from any other source. In such circumstances, in granting a further stay until 21 September 2019 Master Kot was quite generous, and her indication to D that this would be the last stay of execution was not inappropriate.

38.  Even as at the Appeal Hearing, which was another 1½ months after the hearing before Master Kot, there was still no evidence that gave this court any confidence that D would be able to settle the outstanding judgment debt any time soon, whether from any sale proceeds of the Property to be sold and/or other source. At the Appeal Hearing, D urged for further stay of execution so that he could take charge of the sale of the Property instead of delivery of vacant possession to P to enable sale of the Property by P as 2^nd mortgagee. D so urged the court because he hoped to fetch a better price for the Property than under any forced sale so that there would be more remaining equity for him to settle his personal debts to other third parties. In my view, these subjective considerations did not amount to good and/or sufficient reason to further delay execution of the 10/5/19 Order, especially when time had been given to P to effect sale of the Property if he could.

39.  Further, since D did not seek to challenge/undermine the 10/5/19 Order, and had not deposed to any facts in this respect, I am unable to see how D would be able to bring himself within Order 45 rule 11 of the RHC. In my view, there were no substantive merits to the Appeal.

40.  But in the D 3^rd Aff, P took a procedural point, but I do not find it would assist D. First, D said that the Legal Aid Department assured him that the High Court would be notified of his application for legal aid on 9 September 2019. However, the DLA actually filed the Memorandum of Notification of an Application for Legal Aid on 10 September 2019 (which was the material date)[10] with the court registry by which time the hearing before Master Kot was being held or about to be held in chambers. Mr Fu of P’s solicitors submitted and D confirmed at the Appeal Hearing that D did not mention to Master Kot at the hearing on 10 September 2019 that he had applied for legal aid, so neither Master Kot nor P was aware of this. In such circumstances, it could not be said that Master Kot overlooked such the Memorandum of Notification of an Application for Legal Aid.

41.  Secondly, the effect of the Memorandum of Notification of an Application for Legal Aid filed on 10 September 2019 was to bring about the automatic legal said stay for 42 days. Even if Master Kot overlooked such Memorandum (which I disagree), D suffered no injury because the Appeal was by way of rehearing and by the time of the hearing of the appeal on 30 October 2019 the 42 days had run its course and expired. During such 42 days there was no progress/activity in the present action, and D had actual stay of execution until 21 September 2019 pursuant to the 10/5/19 Order and a de facto stay of execution up to the Appeal Hearing on 30 October 2019.

42.  Thirdly, an explained above, the Appeal was by way of rehearing. By the time of the Appeal Hearing, the 42-days’ legal aid stay had expired. Actually, D had practical stay of execution of the 10/5/19 Order until then. He had also applied for legal aid twice (see paragraphs 18 and 24). For all of the above reasons, there was little justification for further stay of execution which was opposed by P.

43.  Fourthly, notwithstanding D was refused legal aid on his first application (see paragraphs 18 and 20 above), D again applied for legal aid in September 2019 in the expectation that the Director of Legal Aid would notify the court on 9 September 2019 so that the hearing before Master Kot on the following day would be stayed. This reason no longer had relevance on the Appeal as the period of 42 days’ stay had expired. D did not raise any further contention in the D 3^rd Aff to support the 28/8/19 Summons, and repeated application for legal aid was not a good or sufficient reason.

44.  In my view, there was no merit to the Appeal.

Conclusion

45.  In light of all the circumstances, the Appeal is dismissed. There is no reason why costs should not follow event. I also grant a cost order nisi that D do pay P costs of and occasioned by the Appeal (including all costs reserved if any) to be taxed if not agreed.

46.  Should D require translation of this Decision into punti language, he can contact my clerk to arrange an appointment for a court interpreter to verbally translate this Decision to him at the High Court Building at a mutually convenient time.