EGO FINANCE LTD v. JU LUI AND OTHERS

DCMP 1714/2020

[2021] HKDC 1002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1714 OF 2020

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DECISION

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1.  For the background of these proceedings, I refer to my reasons for judgment dated 15 October 2020 and my decision dated 4 June 2021. I adopt the same defined terms and abbreviations there for the present purpose.

2.  Suffice to say that this court summarily determined these proceedings in favour of the plaintiff after hearing on 9 October 2020, from which the defendants were absent.  The 1^st defendant applied to set aside the judgment in March 2021, which this court in its written decision on 4 June 2021 dismissed with costs (“the Decision”).

3.  By summons filed on the same day, 4 June 2021, the 1^st defendant applied for leave to appeal against the Decision (“the 4 June Summons”), and filed his affirmation in support.

4.  On 30 June 2021, the 1^st defendant filed another 2 affirmations (“the 30 June Affirmations”).

5.  One week before the present hearing, the plaintiff’s solicitors discovered and complained about the lack of service of the 30 June Affirmations on it, and sought leave to search the court file for these documents.

6.  Unbeknownst to the plaintiff, the 1^st defendant actually took out another summons on 19 July 2021 (“the 19 July Summons”), the exact nature of which could only be described by referring to its content below, with another affirmation in support dated the same date.

7.  Prior to the present hearing, this court gave leave to the plaintiff’s solicitors to search the court file for the above documents filed after the 4 June Summons.

The 4 June Summons

8.  Pursuant to section 63A of the District Court Ordinance, Cap 336, leave to appeal shall not be granted unless this court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interest of justice that the appeal should be heard. A reasonable prospect must be more than fanciful or just arguable, though not having to be probable: see SMSE v KL [2009] 4 HKLRD 125 (at §17); Wynn Resorts (Macau) SA v Mong Henry, HCA 192/2009 (10 August 2009) (at §19).

9.  As explained in the Decision, this court considered the question of the defendants’ (ie not just the 1^st defendant’s) notice of the hearing on 9 October 2020.  In the circumstances of this case, this court found that the 1^st defendant failed to discharge his burden of satisfying the court that he was disabled from attending the hearing on 9 October 2020 because of the alleged failure of the plaintiff to serve him notice of hearing.

10.  This court then considered the merits of the defence and, for that, the assertions of the 1^st defendant.  For the purpose of that application before this court, the 1^st defendant by affirmation demanded the plaintiff to disclose and adduce oral evidence (by calling all the plaintiff’s staff members concerned) and documentary evidence (CCTV recording) in respect of his signing of the loan documents.  That must be rejected, as it was his burden to substantiate his assertions and merits of his intended defence by evidence for the purpose of setting aside the judgment.

11.  This court also proceeded to consider what the 1^st defendant did not actually argue, namely whether it was unjust to enter judgment and make the order for sale in the first place.

12.  In view of the plaintiff’s understanding of the 1^st defendant’s application then as an application for leave to appeal against the judgment, this court expressed that even assuming that this were considered as such an application (and putting aside the issue of application out of time), the 1^st defendant would still have failed to discharge his burden to show that his intended appeal had a reasonable prospect of success or that there would be question that should be considered by the appellate court in the interest of justice.

13.  Now by the 4 June Summons, the 1^st defendant seeks leave to appeal against the Decision.  He set out no real grounds of appeal, but repeated his complaint about the plaintiff’s failure to answer his demand for disclosure and adducing of oral evidence of its staff members as well as documentary evidence (CCTV recording) in respect of his signing of the loan documents before this court for the purpose of the last hearing.  By his affirmation in support, the 1^st defendant complained that, as a result of the plaintiff’s default in meeting his demand, he had no chance of stating what had happened during the last hearing.

14.  During the present hearing, the 1^st defendant verbally represented that the plaintiff has forged different documents with a view to defrauding him since 2005.  He claimed that the application form for the loan produced by the plaintiff was over 80% forgery.  He claimed to have filed a report to the police on 19 July 2021.  Whilst the police allegedly accepted that this was a fraud or forgery case, they would need the court’s permission in order to investigate.

15.  Solicitor appearing for the plaintiff rightly pointed out that fraud and forgery are serious assertions, which may not be made lightly without clearly stated particulars and corroborative evidence.  He pointed out the fact that various loan and charge documents were signed by the 1^st defendant and thus binding on him in accordance with established legal principles.  The 1^st defendant’s repeated attack now focused on the application form but not specifically the others documents.  Whilst the 1^st defendant now disputes liability, the fact was that he did make some repayments.  Instead of raising all these issues about the alleged fraud and forgery, the 1^st defendant somehow stopped payment and petitioned for his own bankruptcy.  The assertion of fraud and forgery was raised only when the plaintiff commenced proceedings to enforce the security.

16.  As explained in the Decision, it is the burden of the 1^stdefendant to set aside the judgment, including by stating his case with sufficient particulars and substantiating the prospect of his case.  He failed to do so.  All circumstances considered, what, and the manner in which, the 1^st defendant put forward now hardly meets the threshold of section 63A.

The 30 June Affirmations

17.  Needless to say, it is against the rules and basic fairness of inter partes matters in legal proceedings for the 1^st defendant to have filed the 30 June Affirmations without serving copies of the same on the plaintiff.  More significantly, insofar as he intends to rely on these affirmations for the purpose of appeal, he may not do so unless he satisfies O59, r10(2) of the Rules of the High Court, Cap 4A, which applies to an appeal from the District Court.

18.  Pursuant to O59, r10(2), the Court of Appeal has the power to receive further evidence on appeal but no such further evidence (other than evidence as to matters which have occurred after the date of the decision being appealed) shall be admitted except on special grounds.  By special grounds, it means that such further evidence (i) could not have been obtained for use at the hearing below with reasonable diligence; (ii) would, if adduced, have an important influence on the result of the case, though it need not be decisive; and (iii) is presumably to be believed (or in other words, apparently credible though it need not be incontrovertible): see Ladd v Marshall [1954] 1 WLR 1489. It is the burden of the plaintiff to satisfy all three criteria.

19.  During the hearing, the 1^st defendant confirmed that the two 30 June Affirmations are duplicates with the same content and exhibits.  Doing my best, I understand that he makes the following allegations in these new affirmations:

(1)     The plaintiff conspired with third parties to defraud him with a view to seizing the Property.  He had no idea what documents he had signed in relation to the loan from the plaintiff.  He lost everything and would claim against the plaintiff for that.

(2)     Upon discovery of the fraud, he consciously stopped repayment to the plaintiff and petitioned for his own bankruptcy.

(3)     The plaintiff did not have notice of the hearing on 9 October 2020.

(4)     The plaintiff did not respond to his request for the CCTV recording (presumably referring to that mentioned in the Decision).

(5)     The plaintiff’s solicitors never produced proof of their authority to appear for the plaintiff in the previous hearings.

(6)     The plaintiff’s solicitors provided forged documents in this action to the Director of Legal Aid (presumably in relation to the 1^st defendant’s application for legal aid).

20.  Properly considered in the circumstances of this case, the above assertions hardly satisfy the three criteria under Ladd v Marshall for them to be received as further evidence on appeal.

The 19 July Summons

21.  By the 19 July Summons, the 1^st defendant demanded the plaintiff’s solicitors to stop proceeding with possession of the Property and alleged harassment until they provide all the evidence in this action, including evidence of the staff members of the plaintiff, documentary evidence and CCTV recording, to the court.  By the affirmation in support of that summons, the 1^st defendant repeated his allegation that the documents in this action provided by the plaintiff’s solicitors to the Director of Legal Aid were forgery, and he reserved the right to report the matter to the police and claim for all his loss over the past six years.  As mentioned, the 1^st defendant now claims that he did file report with the police on the day when he filed this summons, but the police allegedly requires the court’s permission to investigate.

22.  Appeal does not operates as stay of proceedings: see O58, r3 of the Rules of the District Court, Cap 336H.  The writ of possession of the Property consequential upon the judgment in this action was issued on 2 March 2021.  The 1^st defendant apparently applied for stay of execution of the writ in June 2021, which was already dismissed by the master on 13 July 2021.

23.  Even assuming that the 1^st defendant is seeking to repeat his attempt to obtain stay of proceedings by this summons, the request made of the plaintiff (or its solicitors) as per his summons for justifying the stay is not readily understandable by reference to recognised legal principles.

Conclusion and order

24.  The 4 June Summons and the 19 July Summons are dismissed.

25.  Following the event, I order that the 1^st defendant shall pay the plaintiff’s costs of and occasioned by these two summonses before me.  During the hearing, the 1^st defendant was given the chance to make representation about the statement of costs provided by the plaintiff.  He simply stated his objection to pay regardless.  I now summarily assess such costs to be in the sum of HK$10,000 payable within 14 days.

[The present hearing was conducted in punti for the benefit of the 1^stdefendant. Interpreter was there to assist him if necessary. If requested, interpreter will be arranged to assist him when he received this written decision.]

DCMP 1714/2020

[2021] HKDC 651

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1714 OF 2020

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DECISION

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1.  At the hearing on 9 October 2020, this court summarily determined these originating proceedings as well as entered judgment and granted the order against the defendants in their absence. Reasons for decision were handed down on 15 October 2020 (“the Reasons”). The 1^st defendant now applies to set aside the judgment and order.

Background

2.  This is a money lender’s action.  The plaintiff claims against the 1^st defendant for outstanding loan, which was secured by a legal charge of his interest in the property in question.  He is one of the three joint tenants of the property.  The other two joint tenants are his parents.  To enforce the security, the parents were joined as the 2^nd and the 3^rd defendants.

3.  Aware that the 1^st defendant had been adjudged bankrupt, the plaintiff took the course of applying for leave from the bankruptcy court to commence these proceedings against him.  Such leave was granted afterwards.

4.  The plaintiff’s claim was for the outstanding loan and contractual interest against the 1^st defendant pursuant to the loan agreement.  In enforcement of the legal charge, the plaintiff applied for an order against all the defendants for the sale of the property in question subject to the legal charge pursuant to the Partition Ordinance, Cap 352 (“PO”).

5.  Appointment was made for the hearing of this matter on 9 October 2020.  Hence the hearing on that day before this court.  As mentioned, none of the defendants appeared.

6.  Upon satisfaction with the evidence of service of these proceedings and notice of hearing, this court permitted the plaintiff to proceed in the defendants’ absence.

7.  For reasons explained in the Reasons, this court summarily determined the claim, and gave monetary judgment against the 1^st defendant and the order for sale against all the defendants.  The plaintiff was awarded costs, summarily assessed, against the 1^st defendant but not the other two defendants.

8.  Apparently the 1^st defendant failed to satisfy the monetary judgment.  Hence the plaintiff’s execution of the Order.  Writ of possession was issued in March 2021.

9.  The record shows that between dates of the order and the writ of possession, the 1^st defendant has applied for but been refused legal aid twice.

10.  On 18 March 2021, the 1^st defendant, in person, took out the present summons to set aside the judgment and the order. At the same time, he took out a summons for stay of execution of the judgment and order pending the determination of his summons to set aside.

11.  On 22 March 2021, the master granted the stay until the present hearing.  This court extended the stay until handing down of this decision.

The 1^st defendant’s application

12.  The action was commenced under O83A and O88 of the Rules of the District Court, Cap 336H together with an application under the PO.  In this action commenced by way of originating summons, the court had the power under O28, r4(1) to make summary determination of the claim, if this was appropriate: see Hong Kong Civil Procedure 2021 (Vol 1) at §88/0/2. This court did that.

13.  O28, r4(1) provides the jurisdiction of the court to vary or revoke the order made upon such summary determination against the defendant who did not appear at the hearing:-

“The Court by whom an originating summons is heard may, if the liability of the defendant to the plaintiff in respect of any claim made by the plaintiff is established, make such order in favour of the plaintiff as the nature of the case may require, but where the Court makes an order under this paragraph against a defendant who does not appear at the hearing, the order may be varied or revoked by a subsequent order of the Court on such terms as it thinks just.”

14.  Whilst summary determination pursuant to O28, r4(1) is not the same as entering judgment in default of appearance of the defendant, the defendant who subsequently applies for variation or revocation of the order has the burden to show that his contention has a real prospect of success.  Where he alleges that he was unaware of the hearing, the principles regarding setting aside default judgment may be borrowed.  See Hong Kong Civil Procedure 2021 (Vol 1) at §28/4/3.

15.  Indeed, in his summons, the 1^st defendant stated that he has not received notice of the hearing fixed on 9 October 2020.  There was however no elaboration of that by way of affirmation.

16.  In his first affirmation in support, the 1^st defendant stated his assertions in defence of the claim.

17.  In his second affirmation in support, the 1^st defendant made his demand for the plaintiff to disclose and to adduce evidence in respect of his signing of the loan documents in question.

Notice of hearing

18.  As mentioned, this court permitted the plaintiff to proceed at the hearing on 9 October 2020 upon satisfaction of the evidence of service of proceedings and notice of hearing.  The following facts should be noted.

19.  The originating summons were addressed to the defendants all of the same address, namely that of the property in question. This was also the address provided by the 1^st defendant in his own petition for bankruptcy in 2016 as well as in the summons now before this court.

20.  On 23 July 2020, the amended originating summons and affirmation in support were served by post to the 2^nd and the 3^rd defendants at the address of the property.  The mails were not returned.  The same set of documents were served by hand to the trustee in bankruptcy of the 1^st defendant, who acknowledged receipt thereof.

21.  On 26 August 2020, the plaintiff served the notice of hearing appointment by post to the 2^nd and the 3^rd defendants at the address of the property.  The mails were not returned.  The same was served on the trustee in bankruptcy of the 1^st defendant, who again acknowledged receipt thereof.

22.  On 2 September 2020, as required under O88, the amended originating summons, notice of hearing appointment and notice to occupants were posted up in a conspicuous place at the main entrance of the property.

23.  On 3 September 2020, the plaintiff again served the notice to occupants at the address by post.

24.  In the submission on its behalf, the plaintiff explains the propriety of service on the trustee in bankruptcy of the 1^st defendant.  Reference is made to the situation where the property of the 1^st defendant remained vested in the trustee, and the function of the trustee has not ceased, upon the discharge of the bankruptcy order.

25.  Putting aside whether or not service on the trustee must amount to good service on the 1^st defendant, one should not lose sight of the following reality.

26.  None of the defendants, including the 1^st defendant, asserts that they have received no document in these proceedings at all that were served as mentioned above.  The 1^st defendant, and only he, asserts that he has received no notice of hearing.

27.  The documents were served by post to the 2^nd and the 3^rd defendants at their address, which was the same address of the 1^st defendant.  Besides, the notice of appointment and notice to occupants have been posted up at the conspicuous space at the entrance of the property.

28.  Except for the one-liner assertion in his summons, the 1^st defendant has provided no factual basis for the court to question the steps taken by the plaintiff mentioned above or their effectiveness in bringing the documents to the attention of the defendants at the address of the property.

29.  It is inconceivable that the 1^st defendant at the same address would have failed to take notice of these documents including the notice of appointment and the notice to occupants.  Both notices, in which the appointment for the last hearing was stated, served the purpose of notice of hearing.

30.  The 1^st defendant therefore fails to discharge his burden of satisfying this court that he was disabled from attending the hearing on 9 October 2020 because of the failure of the plaintiff to serve him notice of hearing.

Merits of the 1^st defendant’s contention

31.  The 1^st defendant’s case apparently goes beyond mere dispute of liability.  In his first affirmation in support, the 1^st defendant asserted that the plaintiff misled him into signing the loan documents, conspired with another finance company to defraud him and failed to honour certain oral promise to him.  He attributed his bankruptcy to these wrongdoings of the plaintiff.  He also referred to his accident at work, and asserted reasons to believe that there was certain conspiracy to utilize these proceedings to force him to inflate his compensation claim.  He also indicated that he would claim for the loss of him and his family over the past 6 years.

32.  Not all of the above assertions of the 1^st defendant are readily comprehensible.  More importantly, they were neither particularised nor supported by any other form of evidence.  This is the least expected when the allegation is nothing short of conspiracy and fraud.  Had that been his stance, the 1^st defendant would have had to explain his nevertheless performance of the loan agreement by repayments, albeit irregular and partial, during the period between July 2015 and early 2016 before he defaulted altogether (as deposed to by the plaintiff).

33.  The 1^st defendant petitioned for his own bankruptcy right after his default.

34.  As to the evidence, the 1^st defendant by his second affirmation demanded the plaintiff to disclose and adduce oral evidence (by calling all the plaintiff’s staff members concerned) and documentary evidence (CCTV recording) in respect of his signing of the loan documents.

35.  The 1^st defendant’s demand is not justified, as it is his burden to substantiate his present application.

36.  As to whether it will be unjust to make an order for sale under the PO in the circumstances of this case, the Decision refers. The 1^st defendant made no mention of this in his affirmation.  The 2^nd and the 3^rd defendants also did not come forward to join hands with him in challenging this court’s decision in respect of this part of the plaintiff’s claim.

The plaintiff’s understanding

37.  The solicitors for the plaintiff views the present application as one for leave to appeal against the Order out of time pursuant to section 63A of the District Court Ordinance, Cap 336.  However, he was not quite able to explain to this court why this should be so whereas the above understanding of this court is wrong.

38.  Even assuming that this is considered as an application for leave to appeal (and putting aside the issue of application out of time), it would still be the 1^st defendant’s burden to show that his intended appeal has a reasonable prospect of success or that there is question that should be considered by the appellate court in the interest of justice.  For the above reasons, the 1^st defendant would be unable to discharge such burden as well.

Conclusion and order

39.  The 1^st defendant fails to satisfy this court that the judgment and order were irregular or that he has any real prospect of success in his defence.  The application is therefore dismissed.

40.  Following this event, the 1^st defendant should pay the plaintiff’s costs.  During the present hearing, the content of the plaintiff’s statement of costs was explained to the 1^st defendant.  I now make a nisi order that the 1^st defendant shall pay the plaintiff’s costs, summarily assessed at HK$11,000.  In the absence of application in 14 days to vary, the nisi costs order shall become absolute without further order, and upon that the 1^st defendant shall pay such assessed costs to the plaintiff within 14 days.

[The present hearing was conducted in punti for the benefit of the 1^st defendant. Interpreter was there to assist him if necessary. If requested, interpreter will be arranged to assist him when this decision is handed down.]

DCMP 1714/2020

[2020] HKDC 909

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1714 OF 2020

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REASONS FOR JUDGMENT

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1.  In this action, the plaintiff sought to recover from the 1^st defendant for outstanding loan, which was secured by a legal charge in respect of his interest in the property in question. The plaintiff also sought to enforce the security and, for that, joined the 2^nd and the 3^rd defendants as parties to its application for an order for sale of the property. None of the defendants appeared. This court summarily determined the application and gave the orders sought at the end of the hearing. As indicated, I now give my reasons.

Background

2.  The plaintiff was at the material times and still is a licensed money lender.

3.  The 3 defendants are the registered joint tenants of the property, namely Flat E, 26/F, Block 3, Elegance Gardens, Nos 4-8 King Fung Path, Tuen Mun, New Territories, Hong Kong (the “Property”).  As far as the plaintiff understands, the 1^st defendant is the son of the other two defendants who, as far as it knows, reside at the Property.

4.  By a loan agreement dated 24 June 2015 (“the Loan Agreement”), the 1^st defendant borrowed and the plaintiff lent a sum of HK$860,000 on the security of a legal charge in respect of the plaintiff’s interest in the Property to the plaintiff (up to a maximum of HK$1.75 million)[1] (the “Legal Charge”).

5.  The Loan Agreement contained the following essential terms:-

(1)  The interest rate was 27.6% per annum.

(2)  The loan was repayable by 120 monthly instalments of HK$21,171 each, which was payable on or before the 24^th day of each month commencing on 24 July 2015.

(3)  In default of punctual repayment, the whole sum of the outstanding principal and interest would become immediately due.  In that event, the plaintiff may recover all outstanding sums including default interest and administration fee (clause 2).

(4)  All the repayments would be apportioned between the settlement in the order of the accumulated default interest, accrued interest and last the principal (clause 3).

(5)  In default of repayments, the plaintiff might foreclose the Property and sell the same for repayment of the debt and interest (clause 6).

(6)  In case the 1^st defendant was declared bankrupt, the plaintiff would be entitled to terminate the Loan Agreement and that all outstanding principal and interest will become due (clause 11).

(7)  Default interest shall be payable by the 1^st defendant on any delay in repayment, which would be charged at the rate of 27.60% per annum from the date of default to the date of full payment (clause 16).

6.  The 1^st defendant has made irregular and partial repayments during the period between 24 July 2015 and 25 January 2016.  He defaulted altogether thereafter.

7.  On 29 March 2016, the 1^st defendant was adjudged bankrupt by order made pursuant to his own application (HCB 760/2016).

8.  As such, the 1^st defendant was for various reasons in breach of the Loan Agreement and committed events of default under the Legal Charge, which would entitle the plaintiff to recover the outstanding loan and interest as well as to enforce the security under the Legal Charge.

9.  On 20 May 2020, the plaintiff obtained leave in HCB 760/2016 to commence action against the 1^st defendant to enforce the secured loan.

10.  On 10 June 2020, the plaintiff commenced the present proceedings, seeking monetary judgment against the 1^st defendant and an order for sale against all the defendants pursuant to the Partition Ordinance, Cap 352 (“PO”).

11.  The evidence shows that the court documents and notice of this hearing have been served on the 1^st defendant c/o trustees in bankruptcy of his property, namely, Wong Ka Shek and Wong Ka Lam King, as well as the 2^nd and the 3^rd defendants at the address of the Property, being their address last known to the plaintiff.  Notice to Occupants has also been served on the 2^nd and the 3^rd defendants.

12.  As mentioned, none of the defendants has entered appearance.

13.  Upon service of the relevant documents on the Director of Lands, the Director indicated no objection to the present proceedings.

14.  I saw no reason why the plaintiff should not be allowed to proceed.

Summary disposal

15.  O28, r4(1) of the Rules of the District Court, Cap 336H (“RDC”) provides for the summary determination of originating proceedings:-

“The Court by whom an originating summons is heard may, if liability of the defendant to the plaintiff in respect of any claim made by the plaintiff is established, make such order in favour of the plaintiff as the nature of the case may require, but where the Court makes an order under this paragraph against a defendant who does not appear at the hearing, the order may be varied or revoked by a subsequent order of the Court on such terms as it thinks just.”

Statutory compliance

16.  I accepted the uncontested evidence in respect of the plaintiff’s compliance with the statutory requirements under sections 18, 22, 23, 24, 25 and 27 of the Money Lenders Ordinance, Cap 163 as well as O83A and O88 of the RDC, which were set out in counsel’s written submission.  Land search also reveals that prior to the execution of the Legal Charge in the present case, the 1^st defendant had previous experience of executing legal charges in respect of his interest in the Property in favour of different parties in 2013 and 2014.

The plaintiff’s contractual right

17.  As mentioned, the 1^st defendant defaulted after his last repayment made on 25 January 2016.

18.  In accordance with the contractually agreed order of apportionment of repayment mentioned above, the balance of outstanding principal and interest by then (25 January 2016) was HK$879,671.88[2]. Up to the date of the affirmation in support of these proceedings (4 June 2020), the total interest accrued to HK$1,022,491.48, thus the total sum of HK$1,902,163.36.  Further until the date of this hearing, at the effective daily interest rate of HK$640.69, interest in the further sum of HK$81,367.63 has accrued.  Hence the total outstanding principal plus interest in the sum of HK$1,983,530.99.  This was the amount of judgment sought by the plaintiff.

19.  As to interest from judgment, Clause 20 of the Loan Agreement expressly provided for contractual interest at the rate of 27.60% per annum.  There is no reason why the agreed contractual rate should not be given effect to from judgment until full payment[3].

20.  On the basis of the materials before this court, I gave judgment against the 1^st defendant for the outstanding debt with interest at the contractual rate until full payment.

Order for sale

21.  Section 2 of the PO provides:-

“Subject to this Ordinance, where any property in land is held by 2 or more persons, whether as joint tenants or as tenants in common, the Court may—

(a) make an order under section 4 for a partition of the property;

(b) make an order under section 6 for a sale of the property; or

(c) refuse to make any order.”

Section 3(1) provides:

“Where any property in land is held in the manner referred to in section 2, any person interested in such property may institute proceedings in the Court under this Ordinance by way of an action for partition or sale.”

22.  It is trite that a legal mortgagee of a co-owner who can sue for possession and foreclosure of the mortgaged property is an interested person entitled to apply for partition (or sale) of the property[4].

23.  The 3 defendants are joint tenants of the Property.  It is trite that attempt by a joint tenant to charge his interest in a co-owned property amounts to an act of severance of the joint tenancy.  As mentioned, the 1^st defendant had previously executed legal charges in respect of his interest in the Property.  Further, by the creation of the Legal Charge, the three co-owners of the Property became tenants in common in presumably equal shares[5]. None of the defendants has come forward to put forward any contrary case of their shares of the beneficial interests in the Property.

24.  The Legal Charge afforded the plaintiff with the contractual right to enter into, take possession of, sell and assign the Property in the event of default:-

“6.01 If any Event of Default shall have occurred then it shall be lawful for the Lender at any time thereafter without any consent on the part of the Borrower or of any person to:

(a) enter into and upon and take possession of the Property and for that purpose to take any legal proceedings and thenceforth to hold, possess and enjoy the Property and to receive the rents and profits thereof without any lawful interruption or disturbance by the Borrower or any other person;

…

(c) whether or not the Lender shall have made such entry or taken possession as aforesaid, sell, assign, call in, collect and convert into money the Property … with full power to sell the Property … either by public auction or tender or private contract … and with full power to compromise and effect compositions, and for the purposes aforesaid or any of them to execute and do all such assurances and things as the Lender shall think fit

 PROVIDED HOWEVER that where the Event of Default relates to the payment of any moneys payable hereunder no such sale, calling-in, collection or conversion into money shall be put into effect until the Lender shall have previously served on the Borrower (or any one of the Borrower where the Borrower comprises more than one person) a notice requiring payment of the Secured Indebtedness and default has been made in payment thereof for a period of one calendar month after such service”

25.  The default in payment and the act of bankruptcy by the 1^st defendant[6] constituted events of default under the Legal Charge, which entitled the plaintiff to exercise its contractual right of enforcing the security by foreclosure.

26.  The plaintiff has locus to invoke the court’s jurisdiction under sections 2 and 6 of the PO.

Whether an order for sale should be made

27.  Section 6 of the PO provides

“(1) In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of —

(a) the nature of the land to which the proceedings relate;

(b) the number of the persons interested or presumptively interested;

(c) the absence or disability of some of the persons interested; or

(d) any other circumstances,

the Court may make an order for the sale of the property.”

28.  The Property is a typical multi-storey residential building unit governed by a deed of mutual covenants that regulates, amongst others, the physical being of each part of the building.  Partition of the Property is impractical, if not legally impossible.

29.  The court has to assess objectively whether or not sale of the property in question will be beneficial to the interested parties[7]. However, where partition is impracticable, sale of the property is prima facie the only way for a co-owner to extricate himself from the co-ownership. In view of section 6(2) of the PO (above), this situation poses a strong case for the court to make an order for sale, unless the opposing interested person persuades the court that sale of the property would not be beneficial to all the parties or that significant hardship would be caused to the other co-owner[8].

30.  Prima facie, sale of the Property will bring to each of the defendants their respective shares of the proceeds.  According to the valuation evidence adduced by the plaintiff, the Property is valued in the open market at the price of HK$4.52 million.  The Property is not subject to prior encumbrance at the moment.  The share of the 1^st defendant will serve its purpose as security for his repayment of the loan, and thus his judgment debt, up to the maximum of HK$1.75 million, while the 2^nd and the 3^rd defendants would expect to receive together about HK$3 million out of a successful sale.  Not entering appearance, the defendants had no contention or evidence of hardship in other non-monetary terms before this court.

31.  I therefore made the order for sale in terms of the draft order as amended in court.

Costs

32.  The plaintiff shall have the costs of these proceedings.  Clause 13 of the Loan Agreement provides that the 1^st defendant shall bear all reasonable costs incurred by plaintiff and the incidental expenses in relation to the recovery of the outstanding sums under the Loan Agreement, including legal costs on indemnity basis.  Costs of these proceedings were summarily assessed at the sum of HK$90,000, which is payable by the 1^st defendant.  This shall come out of the 1^st defendant’s share of the proceeds of sale in accordance with the order.  No order as to costs was made between the plaintiff and the 2^nd and the 3^rd defendants.