HANG SENG FINANCE LTD v. HO YUEN CHAK

DCCJ  771  /2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL JURISDICTION ACTION NO. 771 OF 2006

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DECISION

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1.  This is an application by the Plaintiff to strike out the Defendant’s defence and counterclaim on the ground that it discloses no reasonable defence and/ or it is frivolous or vexations and the Plaintiff be at liberty to enter judgment against the Defendant for

(i) possession of the property: -

A7, 11/F, Hang Wah Building, 71-85 Hennessy Road, Hong Kong. “the property”;

(ii) for a payment order for an outstanding sum.

2.  The Defendant is the registered owner of the property.  The Plaintiff is the mortgagee bank of the property.  The Defendant is over 80 years of age, due to his poor health and old age, his son represented him in this proceeding.

3.  By a facility letter dated 5^th October, 1995, the Plaintiff advanced a principle sum of 1 million to the Defendant who mortgage the property to the Plaintiff.

4.  The terms of payment are interest at 11.25% per annum (subject to fluctuation) by 180 equal monthly installments of HK$ 11,523.50 until fully paid up.

5.  The Defendant admitted defaulted in the monthly payment due to “short of floating cash”.

6.  The Plaintiff exercised its’ rights under the mortgage and the facility letter that: -

i) The Defendant shall pay on demand all moneys due to the Plaintiff of the mortgage. (clause  5.02 of the mortgage).

ii) The Plaintiff has the right to take possession of the property upon the Defendant’s default in making payment  (clause 6.01 of the mortgage).

iii) Defendant’s liability to pay costs and expenses incurred by the Plaintiff in the lawful exercise of its’ power under the Mortgage (para. 17.01 of the Mortgage).

7.  The Defence and Counterclaim filed by the Defendant admits that he has not make full payment of the sum claimed by the Plaintiff.

8.  The Defendant alleged that: -

1. It was an express and/ or implied condition of the loan alleged amount was seriously wrong and incorrected.

2. Further on alternatively, it is the practice and custom of the trade loan, we will pay the overdue installment after receiving the corrected installment but we have never received.

3. We will pay the overdue installment after we received the corrected statement and checked.”

9.  The Defendant disputed the Plaintiff’s claim.

10.  In his submission, Mr. Ho felt very aggrieve that over the year, the Defendant has already repaid the Plaintiff a total sum of about $1.7 million.  He described the Plaintiff as a “loan shark”.  It was not in dispute that the Defendant had recently made various repayments and the arrears of installments were paid off.  Mr. Ho disputes the calculation of the interest rate.  He said the current interest rate is about 3%, while the Plaintiff is still charging his father a high interest rate.  

11.  Although Mr. Ho disputes the actual outstanding sum, he has never states clearly as to what should be the outstanding amount the Defendant owes to the Plaintiff.

12.  On 23.11.2006, by an order of the Court, the Defendant was given another opportunity to file an up-dated affirmation to particularize the allegation of wrong calculation.  Again, the Defendant failed to do so.

13.  In respect of the interest rate, clause 2 (xii) of the “Covenant for repayment of secured indebtedness”:

(xii) interest on all sums advanced and all other moneys payable hereunder at such rate(s) per annum as is/ are applicable under the terms relating to any facility(ies) granted to the Borrower or at such other rate(s) as may from time to time be determined by the Lender which determination shall be conclusive and binding on the Borrower.”

14.  In the decision of Bache & Co. (London) Limited v. Banque Vernes ET Commerciale de Paris S.A. [1973] 2 Lloyd’s Rep. 437, Lord Denning has the following comment in respect of the conclusive evidence clause: -

I would only add this:  this commercial practice of (of inserting conclusive evidence clauses) is only acceptable because the bankers or brokers who insert them are known to be honest and reliable men of business who are most unlikely to make a mistake.  Their standing is so high that their word is to be trusted.

15.  In view of the conclusive evidence clause, prima facie, it is conclusive of the calculation of interest, I accepted that the Plaintiff’s calculation is accurate in accordance with its’ current interest rate.

16.  The current outstanding amount as per the Plaintiff’s latest calculation: -

17.  In CheKiang First Bank Limited v Ko Hoi Luen & other HCMP 1950 of 1998, the Court held that

“There is one well-recognized exception to the rule that where the whole of the sums advanced have become due, a mortgagee is entitled as of right to an order for possession of the mortgaged premises (unless, of course, the mortgage deed provides otherwise).  In Birmingham Citizens Permanent Building Society v. Caunt [1962] Ch. 883, it was held that the court can adjourned the hearing of the application for an order for possession for a short time to give the borrower the chance to pay off the mortgage in full, though that power should only be exercised if there is a reasonable prospect of payment being made.”

18.  In the present case, Mr. Ho alleged that there is a charging order from another case in this property since July, 2006.  The Defendant therefore is unable to raise any fund because of this charging order.  His prospect to raise further fund is when he has a successful application to set aside a default judgment in that case.

19.  Mr. Ho asks this Court to exercise discretion in the Defendant favour not to impose a possession order because this property is to house his elderly parents who are both in advance age.  He understands that the Plaintiff is exercising its’ right in accordance to the mortgage term and the facility letter.  He finds the situation very helpless.  Mr. Ho said that he might be able to raise the fund within a period of 2 to 3 months.

20.  In fact, the Plaintiff has commenced legal proceeding by issuing the writ in February, 2006.  The Defendant has enough time to do what he should do but he elects to wait until last minute. 

21.  Apart from the defence, the Defendant also counterclaims against the Plaintiff for “breach of the contract of sale” without any particulars.  In accordance to para. 88/5/12, Hong Kong Civil Procedure 2006, the counterclaim is no defence to the Plaintiff’s claim for possession.

88/5/12       Counterclaim – Because a mortgagee is entitled to possession of the mortgaged premise a counterclaim by the borrower for damages or a liquidated sum is no defence to the claim for possession (National Westminster Bank v. Skeleton [1993] 1 W.L.R. 72).

22.  For the above reasons, I conclude that the Defendant has raised no defence/ cause of action in his pleading.  Accordingly, I have to strike out his defence and counterclaim and enter judgment for the Plaintiff: -

i) an order for payment by the Defendant to the Plaintiff HK$384,819.25 as at 7^th December 2006.  Thereafter, at judgment rate until payment.

ii) an order for the delivery up by the Defendant to the Plaintiff of vacant possession of the premises within 28 days after service upon him of this order.

iii) Upon the Defendant paying to the Plaintiff the money hereby ordered to be paid, an order for the redelivery-up by the Plaintiff to the Defendant of vacant possession of the premises in the event of the Defendant paying to the Plaintiff all the sums secured by the mortgage and the facility letter, though that order for redelivery-up is subject and without prejudice to the due exercise by the Plaintiff of the power of sale for the time being vested in it.

iv) Costs order nisi be to the Plaintiff, if not agreed, to be taxed.  14 days to become absolute.