EASY FORTUNE PROPERTY LTD v. YUNG CHUN HIM

HCA 1484/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1484 OF 2014

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D E C I S I O N

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1.  This is an application by the defendant for stay of execution of an order made by Mr Recorder Pow, SC, on 12 August 2016. 

2.  The defendant was the borrower of a loan.  He petitioned for his own bankruptcy and was adjudicated bankrupt on 1 April 2014.  The action was instituted by the plaintiff with leave of the Master on 1 August 2014 for recovery of the outstanding principal and interest on the loan and possession of the property known as Flat E, on the 7th Floor of Tower 11, No 11 Park Oasis Road, Park Oasis, Kowloon, Hong Kong, which had been charged as security for the loan in favour of the plaintiff.

3.  In March 2015, the plaintiff applied for leave to enter judgment for possession of the property under Order 88 of the Rules of the High Court (Cap 4A) and applied to strike out the defence and counterclaim.  In January 2016, Master J Wong, after a contested hearing, ordered inter alia:

(1)   that the defence be struck out except that leave was given to the defendant to continue to defend the claim for interest by the plaintiff over and above $40,000 per month from 27 January 2014 onwards;

(2)   that the defendant do pay the plaintiff the sum of $5.96 million, with interest, on the sum of $5 million; and

(3)   that the defendant do, within 28 days, deliver up to the plaintiff vacant possession of the property. 

4.  A stay was granted by the Master, pending the defendant’s appeal to a Judge in chambers.

5.  On 12 August 2016, Recorder Pow, SC, heard that appeal and allowed it in part and substituted an order that:

(1)   Judgment be entered in favour of the plaintiff in the sum of $4.16 million.

(2)   The “Defence and Further Defence” be struck out to the extent that it seeks to resist payment of the sum of $4.16 million.

(3)   Leave be granted to the defendant to defend any further claim by the plaintiff over and above the sum of $4.16 million.

(4)   The defendant do, within 28 days, deliver up to the plaintiff vacant possession of the property.

6.  A notice of appeal dated 8 September 2016 was duly filed and served by the defendant, who has also taken out a summons dated 22 September 2016 for a stay of execution of the learned Recorder’s order, pending the appeal.

7.  I have had regard to the principles stated by Ma J (as he then was) in the well-known case of Star Play Development Limited v Bess Fashion Management Company Limited [2007] 5 HKC 84.  Since the defendant has been adjudicated bankrupt, the order that is of real significance here is the order for possession of the property.  As pointed out in Star Play at paragraph 9(1), where the relevant order is one for the possession of premises, it can readily be appreciated that without a stay of execution, more often than not, it is likely that an appeal would be rendered nugatory.

8.  The property in question is a residential flat in which the defendant, his wife and his mother have been living as their home for some 16 years.  It has a gross area of approximately 650 square feet and a saleable or useable area of about 520 square feet.  It is not in dispute that the plaintiff has a first charge over the property.  Although there is no professional valuation evidence before me, the defendant has stated in his affirmation that the market value of the property is around HK$8 million which seems to me to be a credible rough estimate of the value of the property.  So, in this sense, the plaintiff is amply secured with respect to the existing partial judgment of $4.16 million.

9.  I am not prepared to say that the appeal is wholly unarguable, nor has the plaintiff advanced any argument with respect to the grounds set out in the notice of appeal to that effect.  The fact remains that even on Recorder Pow, SC’s, findings, there were multiple breaches of the Money Lenders Ordinance (Cap 163).  While the learned Recorder considered that because the defendant had received the principal amount of the loan of which $4.16 million remained outstanding and, on that basis it would be inequitable not to require him to be subject to the repayment obligation of that amount, there appears to me to have been no separate consideration of the question whether the security generated by the transaction which, on his findings, was in contravention of the Money Lenders Ordinance, should or should not extend to that repayment obligation. 

10.  There are matters which, in my view, warrant consideration by the Court of Appeal and for the reasons I have given, I consider this an appropriate case in which to exercise my discretion to order a stay, pending the appeal.

11.  Costs of the application be costs in the cause of the appeal.