QL CREDIT GAIN FINANCE CO LTD, previously known as HONG KONG CREDIT GAIN FINANCE CO LTD v. BOK FAT YUEN SPENDER AND OTHERS

HCA 429/2016

[2021] HKCFI 679

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 429 OF 2016

____________

____________

_______________

J U D G M E N T

_______________

Introduction

1.  Before me are 2 consent summonses seeking to declare various documents null and void and to vacate registration of a Legal Charge/Mortgage.

2.  In February 2016, the Plaintiff commenced this action against the 1^st to 3^rd Defendants seeking money judgment on a loan and vacant possession of the property at Belvedere Garden owned by D1 and D2 (“the Property”) which was charged in favour of the Plaintiff.

3.  The Legal Charge/Mortgage was dated 11 May 2015 and registered under Memorial No. 15061200230164 with the Land Registry.

4.  The loan and mortgage were granted pursuant to the following documents:

(1)  2 General Powers of Attorney dated 22 April 2015 purportedly granted by D1 and D2 respectively (“the Parents”) in favour of D3 (“the Son”);

(2)  2 Instruction Letters in Chinese (委托書) dated 11 May 2015 purportedly executed by D1 and D2 respectively;

(3)  A Memorandum of Agreement dated 11 May 2015 issued by the Plaintiff and purportedly executed by the Parents; and

(4)  A Facility Letter dated 11 May 2015 issued by the Plaintiff and purportedly executed by D1 and D2 respectively.

(collectively “the Documents”).

5.  It transpired that it was the Son who had procured execution of the Documents and the Legal Charge/Mortgage and obtained a loan of $2,500,000 from the Plaintiff, secured by a charge/mortgage on the Property, without the knowledge and consent of the Parents.  The Son actually received a loan amount of $2,087,000 from the Plaintiff but defaulted in repayment.

6.  The Parents have filed a defence and counterclaim for declarations that the Documents and the Legal Charge/Mortgage are unenforceable, null and void.

7.  The Son has, on 6 March 2019, pleaded guilty to a charge of fraud under DCCC 516/2018 in the District Court.  He was sentenced to 28 months’ imprisonment.

8.  The parties have come to terms on settling this action amicably and have entered into a Deed of Agreement dated 18 December 2020.  In summary, they seek declarations that:

(1)  The Documents are unenforceable, null and void and should be set aside; and

(2)  The Legal Charge/Mortgage is unenforceable, null and void and should be set aside.

9.  The parties also ask that:

(1)  The 2 Powers of Attorney, the Facility Letter and the Memorandum of Agreement be cancelled and delivered up to the Parents upon the Plaintiff’s receipt thereof from the Commercial Crime Bureau of the Hong Kong Police Force;

(2)  Registration of the Legal Charge/Mortgage at the Land Registry be vacated;

(3)  The Legal Charge/Mortgage be delivered up to the Parents and cancelled forthwith; and

(4)  The claim and counterclaim be dismissed.

Legal principles

10.  If relief is to be granted without trial or evidence, the right course for the court is not to make a declaration but to state on what footing the relief is to be granted.  On the other hand, the rule of the court that a declaration will not be granted when giving judgment by consent is a rule of practice and not of law and will give way to the paramount duty of the court to do the fullest justice to a party to which he is entitled.  If the plaintiff has a genuine need for such relief and the court could properly grant it based on the merits of the case, declarations can be made.  See Hong Kong Civil Procedure 2021, Vol 1, §15/16/2.

Application of the legal principles

11.  Evidence has been provided to me through the joint letter of the Plaintiff and D1 and D2 dated 3 February and 2 March 2021.  I am satisfied that it was the Son’s fraud which had caused the loan and charge/mortgage to be created.  The Parents were innocent and should not be deprived of the Property (held by them since 1996).  Nor should they be asked to repay the loan.

12.  The parties have, upon the Son’s conviction, come to terms of settlement amicably, which are reflected in the consent summonses. 

13.  The Parents are concerned that the 2 General Powers of Attorney may still be used by fraudsters in other cases.  For obvious conveyancing purposes, the Parents also want to ensure that the Legal Charge/Mortgage will not be enforced against them and that it will be vacated from registration.

14.  In my view, the Parents’ concerns are genuine, their requests for the orders now in the consent summonses legitimate.  The declarations do serve useful purposes in terms of clearing any doubts over the Parents’ title to the Property.  As between the Plaintiff and the Parents, the declarations will also remove any question of the Defendants’ liability over the loan and mortgage. The declarations sought are appropriate to give the fullest justice to the Plaintiff and the Parents. 

15.  The Son’s solicitors have confirmed that the Son consented to the terms of the consent summonses.

16.  One of the consent summonses contains more terms regarding the parties’ settlement.  The consent summons with fewer terms just set out a declaration that the Legal Charge/Mortgage is unenforceable, null and void and that registration should be vacated.  The use of this shorter form consent summons facilitates registration of the Land Registry without disclosing terms of settlement unnecessarily to searchers of the Land Registry records and should be encouraged.

17.  I grant the application under the consent summonses in terms of the draft order handed up to me with clerical amendments.