Introduction

The issue of enforcement and remedies arises when the debtor defaults in repayment of the debt or otherwise fails to perform contractual obligations. In Hong Kong and China, the nature of the available remedy determines the enforcement process. Thus a creditor, at the outset, has to consider the types of remedy available in relation to the type of security device created over the encumbered personal property.

In both jurisdictions, remedies can be divided into two categories, namely personal and proprietary. The first is the right of the creditor to sue the debtor or a third party, if there is a personal guarantee/indemnity, for the debt, by way of a personal action. The second is a remedy against the secured property itself. This chapter will not discuss personal remedies as the focus of this book is concerned with secured property. It will, however, discuss the ancillary rights of the creditor to sue the debtor for any deficiency after the creditor has fully exhausted the appropriate proprietary remedy.

In Hong Kong, the proprietary remedies of a legal mortgagee strictu sensu, an equitable mortgagee, a chargee and a pledgee (‘traditional security holder’) comprise the following: (a) taking possession (if the creditor does not have possession), (b) appointment of receiver, (c) foreclosure and (d) sale. The general law defines the circumstances under which these remedies may arise and the procedure governing their exercise. However, in some cases they can be affected by special legislation, such as the Bills of Sale Ordinance.