Easy One Finance Ltd And Others v Luk Wing Kee Andrew And Others

Judgment Date03 June 2020
Neutral Citation[2020] HKCFI 878
Judgement NumberHCA421/2020
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA421/2020 EASY ONE FINANCE LTD AND OTHERS v. LUK WING KEE ANDREW AND OTHERS

HCA 421/2020

[2020] HKCFI 878

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 421 OF 2020

____________

BETWEEN

EASY ONE FINANCE LIMITED
1st Plaintiff
ASIA PACIFIC FINANCE & FUND MANAGEMENT COMPANY LIMITED
2nd Plaintiff
CARLTON FINANCE LIMITED
3rd Plaintiff
and
LUK WING KEE ANDREW 1st Defendant
LUK CHIU KWAN HUNG ANGELA 2nd Defendant
WONG LUK WING YAN WINNIE 3rd Defendant
WONG WAI WING GEORGE 4th Defendant

____________

Before: Deputy High Court Judge Burns, SC in Chambers (Open to Public)
Dates of Hearing: 8 May 2020
Date of Decision: 8 May 2020
Date of Reasons for Decision: 3 June 2020

___________________

Reasons for Decision

___________________

Introduction

1. By a facility letter dated 2 April 2019, the plaintiffs, who are licensed money lenders, lent HK$75,000,000 (“the Loan”) to the defendants (“the Borrowers”).

2. Repayment of the Loan is secured by a mortgage on the house and grounds at 8 Price Road, Hong Kong (“the Property”) which is owned by the 1st and 2nd defendants (“the Mortgagors”).

3. It is not disputed that the Borrowers have defaulted in their repayment obligations under the Loan.

4. From about July 2019 until March 2020, the plaintiffs attempted to sell the Property pursuant to the power of sale reserved under the Mortgage first by appointing estate agents (5 in all) for that purpose and subsequently by way of 5 public auctions.

5. At length, on 27 March 2020, through the introduction of one of the estate agents appointed by the plaintiffs, the plaintiffs entered into a provisional sale and purchase agreement (“the Provisional Sale and Purchase Agreement”) for the sale of the Property at HK$76,800,000 (“the Sale”), with a completion date set for 26 May 2020.

6. Immediately prior to the entering into of the Provisional Sale and Purchase Agreement and thereafter, the Mortgagors objected to it and refused to allow the plaintiffs or their representatives to enter into the Property, arguing that the plaintiffs were not entitled to possession of the Property; that the power of sale under the Mortgage was not exercisable or not exercisable without a court order and that a sale under the Provisional Sale and Purchase Agreement would be at an undervalue.

7. As a consequence of the Mortgagors’ actions, the plaintiffs issued a writ on 21 April 2020 claiming the following relief:

(1) As against the Mortgagors:

(a) A declaration that the plaintiffs had lawfully exercised their power of sale under the Mortgage;

(b) An order that the Mortgagors do quit, vacate and deliver up vacant possession of the Property forthwith; and

(c) An order that each of the Mortgagors be restrained (whether acting by themselves and/or through others, including but not limited to their agents and/or nominees and/or servants) from:

(i) occupying or using the Property in any way;

(ii) impeding, obstructing or delaying, in whatsoever manner, the plaintiffs’ recovery of vacant possession of the Property and the completion of the Sale.

(2) As against all defendants (ie the Borrowers, including the Mortgagors):

(a) A sum to be assessed representing the difference between the net proceeds of sale and the defendant's outstanding indebtedness (HK$84,248,871 as at 20 April 2020, according to the plaintiffs’ calculations);

(b) Interest thereon;

(c) Costs; and

(d) Further or other relief.

8. On the same day as that on which the writ was issued (21 April 2020), the plaintiffs issued an inter partes summons by which application was made for orders against the Mortgagors substantially in terms of those sought against them by the writ (see paragraphs 7(1)(b)&(c) above).

9. The inter partes summons first came on for hearing on 24 April 2020 when directions were given for the further conduct of the application (including the filing of further affidavit evidence) and the matter was adjourned for argument, to be heard on 8 May 2020.

10. At the outset of the hearing of the argument on 8 May 2020, Mr Arthur Yip, counsel for the Mortgagors, stated that, solely for the purposes of the plaintiffs’ application made by their inter partes summons, the only point on which he proposed to address the court on behalf of the Mortgagors was the contention that the Sale was at an undervalue; that in entering into the Provisional Sale and Purchase Agreement at the alleged undervalue the plaintiffs had failed to comply with their duty as mortgagees and that therefore they were not entitled to the orders sought by the summons. Mr Yip expressly reserved the Mortgagors’ arguments that the plaintiffs were not entitled either to take possession of the Property or to exercise the power of sale under the Mortgage.

11. At the conclusion of counsels’ oral submissions at the hearing held on 8 May 2020 and on the plaintiffs giving a cross undertaking as to damages, I made the following order:

(1) that the Mortgagors do quit, vacate and deliver up vacant possession of the Property within 7 days;

(2) that until the conclusion of the trial or further order each of the Mortgagors be restrained (whether acting by themselves and/or through others, including but not limited to their agents and/or nominees and/or servants) from:

(a) occupying or using the Property in any way;

(b) impeding, obstructing or delaying, in whatsoever manner, the plaintiff’s recovery of vacant possession of the Property and the completion of the sale of the Property pursuant to the Sale and Purchase Agreement;

(3) that the costs of the application made by the inter partes summons (including the costs of the hearings on 24 April 2020 and 8 May 2020) be reserved, to be determined upon the handing down of reasons for the orders I had made (which reasons now follow).

Applicable legal principles for the grant of interlocutory injunctions

12. The applicable legal principles for the grant of interlocutory injunctions are well settled and not in doubt: see American Cyanamid Co v. Ethicon Ltd [1975] AC 396 and the commentary in Hong Kong Civil Procedure 2020, Vol 1, §29/1/18 - 29/1/46 at pp 747 - 761, - see especially§29/1/29 which sets out the approach of the court as regards applications for mandatory injunctions, viz:

“Mandatory injunctions – Where the plaintiff seeks a mandatory injunction, by which the defendant is compelled to act rather than prohibited from acting, the American Cyanamid principles are usually modified to require a higher standard of proof. This has been expressed as requiring the plaintiff to show ‘a strong prima facie case’ and that the court must feel a ‘high degree of assurance’ that at trial it will appear the injunction was rightly granted (Brave Venture Ltd v. Xinhua News Media Holdings Ltd (2017) 5 H.K.L.R.D. 153 (CA); Shepherd Homes v. Sand Ham [1971] Ch. 340 at 351; TKI Ltd v. New Happy Ltd [1995] 1 H.K.C. 551, (CA). The plaintiff need not, however, show that its case is so strong as to entitle it to obtain summary judgment Emagist Entertainment Ltd v. Nether Games (Hong Kong) Ltd [2013] 1 H.K.L.R.D. 898.

However, this more stringent test arises due to the typically more onerous effect of a mandatory injunction rather than the mere classification of an injunction as mandatory National Commercial Bank Jamaica v. Olint Corp Ltd [2009] 1 W.L.R. 1405, cited in Re Wako Giken (HK) Co. Ltd [2010] 4 H.K.L.R.D. 121; see also para. 29/1/8. The ultimate question is: what is the course to adopt that involves the least injustice in case of the grant or refusal of interlocutory relief, as the case may be Music Advance Ltd v. Incorporated Owners of Argyle Centre Phase 1 [2010] 2 H.K.L.R.D. 1041, as applied in China Shanshui Cement Group Ltd v. Zhang Caikui [2018] HKCA 409 (CA). Where the court cannot be satisfied that the plaintiff has a ‘strong prime facie case’, it may still grant a mandatory injunction where the balance of convenience is tilted so much in the plaintiff’s favour that justice requires the grant of an injunction, (Komal Pantel v. Chris Au [2015] 6 H.K.C. 389), or ‘where the injunction sought is not expensive to comply with, or is not irreversible or would not effectively pre-empt the trial’ (Wu Wei v. Liu Yi Ping (unrep., HCA 1452/2004, [2009] HKEC 139); Kwan Toi Ming v. Man Kit Construction Co. Ltd (unrep., HCA 3959/2002, [2003] HKEC 485), applied in TGI Friday’s Inc. v Perfect Wave Ltd (unrep., HCA 2376/2012, 09 April 2013). The higher risk of injustice typically associated with mandatory injunctions means the court must take extra care in weighting the balance of convenience (Rover International Ltd v. Cannon Film Sales Ltd [1987] 1 W.L.R. 670).

The duties of a mortgagee in exercising the power of sale under a mortgage

13. It is well settled that, in exercising a power of sale under a mortgage:

(1) a mortgagee is not a trustee for the mortgagor; that once a power of sale arises the mortgagee is entitled to exercise it for his own purposes whenever he chooses to do so and that it matters not that the moment may be unpropitious or that, by waiting, a higher price could or might be obtainable;

(2) the mortgagee is not required to obtain the mortgagor’s consent or to inform the mortgagor before he exercises the power to sell the mortgaged property and the mortgagee is not required to consult or advise the mortgagor of the sale of the property;

(3) the duty of the mortgagee is limited to the duty to act in good faith and the duty to take reasonable care to obtain the true market value of the property at the time he decides to sell it;

(4) the mortgagee cannot be expected to get the market completely right, nor is he...

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