MAXCOLM FINANCE LTD v. CHENG CHI MAN AND ANOTHER

HCMP 948/2018

[2019] HKCFI 1573

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 948 OF 2018

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R E A S O N S

(For adjournment and further directions)

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Introduction

1.  This is an application by the second mortgagee of the Property for, amongst other things, an order for sale of the Property under the Partition Ordinance, Cap 352 (“PO”) and to recover the outstanding loan due from the mortgagor/borrower, one of two registered owners of the Property.

2.  The 1^st defendant (“D1”) and the 2^nd defendant (“D2”) (collectively “Ds”) are the registered owners of the Property.  They purchased the Property on 15 July 2003 as joint tenants at a consideration of HK$1,040,000.  There was a Notice of Severance of Joint Tenants dated 19 June 2009 registered at the Land Registry. 

3.  Ds were absent at the hearing before this Court on 11 April 2019. There was also no response from the 1^st mortgagee Wing Lung Bank Limited (now known as CMB Wing Lung Bank Limited) (“Bank”).  

4.  At the hearing, this Court expressed certain concerns on amongst other things, the amount of the outstanding loan owed by Ds to the Bank, and directed further affirmation evidence and written submissions to be filed.  This Court also directed that P’s application to be determined on paper, unless further directed by the Court. 

5.  For reasons set out hereinafter, and as seen later, I am of the view that there should be further evidence and submissions.

The Originating Summons

6.  The Originating Summons was stated to be issued under sections 2, 3 and 6 of the PO (Cap 352) and Orders 83A and 88 of the Rules of the High Court (RHC).

7.  Order 83A of the RHC concerns “Money Lenders’ Actions” and Order 88 of the RHC concerns “Mortgage Actions”. 

8.  The Originating Summons essentially seeks 3 orders:

(i)   a money judgment against D1 (“Money Judgment”);

(ii)   delivery of vacant possession of the Property as against D1 and D2 (“Possession Order”);

(iii)   a sale order under the PO (“Sale Order”).

9.  The Originating Summons was supported by 4 affirmations filed by Mr Wong Kin Keung, now the Head of P’s Legal Department.

Service

10.  There have been no submissions made by P’s Counsel Mr Tommy Cheung in relation to service or procedures.

11.  What appears is that P is seeking summary judgment under Order 28 rule 4 of RHC, and in effect, a default judgment, as there has been no notice of intention to defend or defence filed by D1/D2 and Ds were absent throughout.  There was also no response from the Director of Lands or the Bank. 

12.  The first matter which P should satisfy this Court is that service has been duly effected on all necessary persons.  None of the affirmations of service were included in the hearing bundle.  

13.  Anyway, there were altogether four affirmations of service, three filed by a process server Mr Chan Wai Ting and one filed by another process server Mr Kwan Kin Wah, both of P’s solicitors firm.   

14.  Suffice to say at this stage, I am not satisfied that there has been proper service effected on D2.

15.  What Mr Wong has said in his 1^st affirmation was that[1]:

“To the best of [P’s] knowledge, information and belief, the Property remains in use and in the possession and control of the [D1 and D2] and for domestic self use. [P] has no record of any part of the Property having been let out or there being any other occupier.”

16.  However, apart from the fact that D2 is one of the registered owners of the Property, there was no evidence produced by Mr Wong as to the basis of his knowledge, information and belief stated above.

17.  There was no evidence produced by Mr Wong as to the relationship between D1 and D2.  D2, presumably a female from D2’s name, could be D1’s wife, or mother, or sister, or simply a cohabitant/relative/friend.  There was no information or evidence as to whether D2 was/is an occupant at the Property, or that D2’s usual address/last known address was/is the address the of Property.   

18.  Having considered the above, at the present stage, I am not satisfied that service of all the relevant documents has been properly effected on D2 or that service effected by ordinary post or insertion into the letter-box of the Property would have come to the knowledge of D2. 

The Money Judgment

19.  In the Originating Summons, P relied on both the 2^nd Mortgage and the Loan Agreement signed by D1 and Pin seeking the Money Judgment.  It was submitted on P’s behalf simply that P was entitled to final judgment for all reliefs set out in the Originating Summons and there were no submissions from Mr Cheung whether P was seeking final judgment for the Money Judgment under Order 83A or Order 88 of RHC.

20.  In Mr Wong’s 2^nd affirmation, he had said that the basis for P’s applications was the PO and he set out the relevant provisions under the PO. 

21.  However, there is no jurisdiction under the PO for this Court to grant the Money Judgment or the Possession Order.

22.  In any event, I am of the view that for P to succeed in obtaining the Money Judgment in default, P will have to comply with the provisions in Order 83A and further P has to satisfy this Court that the Loan Agreement does not contravene the provisions of the Money Lenders Ordinance, Cap 163 (“MLO”).

23.  There did not appear in Mr Wong’s affirmations a copy of the note or memorandum in writing, referred to in section 18(1)(a) of MLO, signed by D1 within 7 days after the making of the Loan Agreement.  It is not clear whether there was in fact a separate note or memorandum in writing or P is simply relying on the Loan Agreement and/or other contractual documents that the provision in that section has been complied with.  There was no submission on this.  

24.  Further, the “Completion Account” prepared by P’s solicitors and produced in Mr Wong’s 3^rd affirmation was only dated 1 April 2019.  It referred to an item of “redeem MFL” of HK$20,186[2], which according to Mr Wong was a “pre-existing debt”[3].  There was another document produced by Mr Wong in his 3^rd affirmation, namely “Addendum to the Arrangement for Drawdown of Loan” dated 16 November 2017, ie the same date as the Loan Agreement and thereon, D1 signed his consent to a sum of HK$20,186 being used to repay the outstanding balance of principal and interest due to P by D1 as at 30 November 2017 arising out of another loan agreement no 98/00622/S/0181 with P[4] (as opposed to the Loan Agreement which was of no 98/00622/S/0151). 

25.  There was no information in relation to this “pre-existing debt”.  There was no reference to this other loan agreement in the Loan Agreement. 

26.  The burden is on P to satisfy this Court that all the requirements under Order 83A have been complied with and further that the Loan Agreement does not contravene any of the provisions of the MLO.  Mr Cheung has however not addressed any of these matters in his written submissions. 

The Possession Order

27.  I assume that P is applying for the Possession Order under Order 88 of RHC. 

28.  Again, there were no submissions by Mr Cheung as to why P should be entitled to the Possession Order save that in connection with the Sale Order, he had referred to Clause 6.01 of the 2^nd Mortgage as to P’s rights in an “Event of Default” and Clause 6.01(i) reads as follows:

“enter into and upon and take possession of the [D1’s ½ share and interest of the Property] and for that purpose to take any legal proceedings and thenceforth to hold …,[5]”

29.  On my reading of Clause 6.01(i), P has to take proceedings first for the purpose to enter into and take possession.

30.  As said earlier, there was no evidence from Mr Wong as to the basis of his knowledge, information and belief that the Property remains in the use and in the possession and control of D1 and D2 and for domestic self use and there was no information as to the relationship between D1 and D2. 

31.  Unlike the case in Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224, where the 1^st defendant had declared under a clause in the legal charge that the property in question was occupied by her alone and that the whole of the property was in the sole physical possession and control of her[6], here this Court was not drawn to such declaration as to occupation/ possession/control of the Property.

32.  Under Order 88 rule 5, where a plaintiff claims delivery of possession, the affidavit must give particulars of every person who is to the best of the plaintiff’s knowledge is in possession of the mortgaged property.   There were no particulars given by Mr Wong in his 3 affirmations in respect of D1.  In Mr Wong’s 4^th affirmation filed after the hearing before this Court, he had exhibited a copy of D1’s application form for the Loan attaching the documentations sent by the Bank to show the amount of the Bank’s loan.  Although this Court could gather some information/particulars in relation to D1 from those exhibits, the purpose of producing those exhibits was to show the Court the amount of the Bank’s loan and not for compliance with Order 88 rule 5.

33.  In any event, there was no information or particulars about D2 at all.  Further, as said earlier, I am not satisfied that there has been proper service on D2.  

The Sale Order

34.  Mr Cheung submitted that P is a person “interested in the property” under section 3 (1) of the PO as upon an “Event of Default”, P as legal chargee/mortgagee will be entitled to possession of the property, making itself a person interested in the property within the meaning of the PO.

35.  Mr Cheung relied on Clause 6.01 of the 2^nd Mortgage and had referred to two District Court cases in support of his submission, namely (1) Uplink Finance Ltd v Lee Sze Tai and Others, DCMP 794/2016 (unreported), 16 March 2017 at paragraph 25, and (2) Law Chun Wai v Chu Suk Har [2016] 1 HKLRD 224 at paragraphs 22-23.  Neither decision is binding on this Court.

36.  In particular, the case Ashe v National Westminster Bank Plc [2008] 1 WLR 710 referred to by the Judge in the Law Chun Wai case has not been included in Mr Cheung’s authority and in so far as I can see, the case is in relation to adverse possession.  

37.  In any event, I would direct Mr Cheung to file further submissions that a 2^nd mortgagee in relation to a partial interest in the property falls within section 3 (1) of the PO.

38.  Further, in light of there being no response from the Bank as to whether it has any objection to the Possession Order and/or the Sale Order, I am presently of the view that the Bank should be added as a party under section 3(4) of the PO and I would like to hear further from Mr Cheung in this respect.

Directions 

39.  In light of the above, my directions are as follows:

(i)   the Originating Summons be fixed for an oral hearing before this Court (estimated length of hearing: 1 hour);

(ii)   P to produce the original of the Loan Agreement and the Second Mortgage at the above hearing.

(iii)   Leave to P to file further evidence in relation to the service on D2 and other matters raised by this Court within 21 days from the date hereof.

(iv)   Leave to P to file further submissions 14 days prior to the next hearing.

(v)   Costs reserved.