GOOD FORTUNE CREDIT LTD v. KAN ON HANG AND OTHERS

HCA 2639/2016

[2026] HKCFI 4331

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2639 OF 2016

________________________

________________________

________________________

J U D G M E N T

________________________

A. INTRODUCTION

1.  This is an action by the Plaintiff (“P”), a licensed money lender, to recover the outstanding principal and interest on a loan of HK$4,900,000 (“Loan”)  made to the 1^st, 2^nd and 3^rd Defendants (“D1”, “D2”, “D3”, and collectively “Ds”)  as borrowers pursuant to a loan agreement dated 22 July 2016 (“Loan Agreement”), and to enforce the security for the Loan by way of a Legal Charge of even date (“Legal Charge”)  over a property registered under D1 and D2’s names and known as Lo Wai Lot No. 72 in Demarcation District No. 116, Yuen Long, New Territories (“Property”).

B.  BACKGROUND

B1.  THE PARTIES

2.  P, Good Fortune Credit Limited, is a licensed money lender under the Money Lenders Ordinance (Cap. 163)  (“MLO”).

3.  P’s claims against Ds are based on the Loan Agreement and the Legal Charge.  Ds are named as borrowers under the Loan Agreement and the Legal Charge, whereas D1 and D2 (who are the registered owners of the Property)  are named as mortgagors under the Legal Charge.

4.  D1, Kan On Hang, is the son of D2, Cheung Pui Fan and the father of D3, Kan Daniel Chuen Fai.

B2.  The Property

5.  The Property was originally owned solely by D2.  By a Deed of Gift dated 14 March 1995, D1 acquired an interest in the Property to hold with D2 together as joint tenants.

6.  According to the land search record over the Property as at 29 July 2025, the Property was subject to the following incumbrances:-

(1)  a Mortgage in favour of Honip Credit Limited (“Honip”)  dated 31 March 2011 for a sum of HK$2,000,000 (and a Release dated 30 August 2012);

(2)  a Sub-Charge/Sub-Mortgage and Debenture in favour of The Bank of East Asia Limited (“BEA”)  dated 21 July 2011 for “All Moneys” (and a Release dated 30 August 2012);

(3)  a First Legal Charge in favour of Preamble Properties Finance Limited (“Preamble”)  dated 30 August 2012 for “All Moneys”, which will be further discussed below;

(4)  a Second Legal Charge in favour of Trilane Management Consultant Limited (“Trilane”)  dated 28 October 2014 for “All Monies up to a maximum amount of $300,000.00” (and a Receipt on Discharge of a Charge dated 6 January 2015).

7.  By a Notice of Severance dated 7 May 2018, the joint tenancy in the Property was severed, which resulted in D1 and D2 holding the Property as tenants in common in equal shares.

B3.  THE LOAN

8.  P’s case is that on 16 July 2016, D1 visited P’s office to enquire about applying for a property mortgage loan.  D1 told P that the Property was mortgaged to Preamble at that time.  D1 and D2 however failed to repay the loan on its due date, thereby causing Preamble to commence proceedings against them for recovery of the outstanding debt and also an order to sell the Property.  Accordingly, D1 indicated to P that he and D2 wished to apply for a mortgage loan of HK$4,900,000 from P and to re-mortgage the Property to P in order to discharge the debt owed to Preamble.

9.  There is no dispute that D1 signed an application form at P’s office at Mody Road, Tsim Sha Tsui on that date.  The application form, entitled “樓宇按揭申請表”, contains the words “貸款人” which appear to signify that the application was made by D1 for both a loan and a mortgage over the Property.

10.  According to D1’s case, one Ms Chan introduced D1 to P and asked him to apply for the Loan from P.  D1 relies on the alleged involvement of Ms Chan in support of his allegation that there was collusion between P and Ms Chan which amounted to a breach of the MLO.  On the other hand, P’s case is that it had no knowledge of, or connection or business with, Ms Chan and/or her company at all material times.  Details in this regard will be further discussed later.

11.  After D1 made the loan application to P, Mr Lo Shi Ki (“Mr Lo”), P’s general manager, visited the Property. Mr Lo, according to his evidence, asked whether all Ds resided in the Property, and he saw all of them during the visit.  D3’s position however seems to be that he was not present during Mr Lo’s visit.

12.  According to Mr Lo, after the visit, he suggested that D3 be added as one of the joint borrowers for the Loan in view of D1’s unstable income and D2’s age.  D1 then spoke to D3, who agreed to do so.

13.  There is no dispute that at the material time, D1 required the Loan in order to repay the debt owed to Preamble.  The relevant documents show that in 2016, Preamble commenced a mortgage action (HCMP 449/2016)  against D1 and D2 apparently due to their failure to repay the debt secured by the legal charge referred to in §6(3)  above.  The amount outstanding in this respect as at 20 July 2016 was HK$4,657,681.02.

14.  It is P’s case that both the Loan Agreement and the Legal Charge were signed by Ds together on 22 July 2016 at the office of Messrs. David YW Man & Co., Solicitors (“DYWM”)  in Sheung Wan.  In fact, there is no dispute in any of Ds’ Defences and also D1’s witness statement that they all went to DYWM’s office together in the morning on that day although D1 and D3 at trial appeared to allege that D3 went there alone.  According to D1’s witness statement and D2’s Defence, D2 was asked to sign some kind of affirmation or declaration in another law firm for the purpose of confirming her mental capacity.  P denies this.

15.  According to the Loan Agreement, the sum borrowed was HK$4,900,000.  D1’s case is that he initially intended to borrow less but reluctantly agreed to borrow the said amount as Ms Chan told him that a sum of around HK$200,000 had to be paid for service fees and legal fees.

16.  The Loan Agreement provides, inter alia, as follows:-

(1)  D1, D2 and D3 are the “Borrower”, and P is the “Lender” (Clauses (a), (b)  of the First Schedule);

(2)  The loan amount is HK$4,900,000, at an interest rate of 15.6% per annum (Clauses (1), (4); and Clauses (c)  and (h)  of the First Schedule);

(3)  The security for the Loan is the Property (Clause (g)  of the First Schedule);

(4)  Repayment shall be made by 144 monthly instalments of HK$75,446 each, as set out in the loan calculation schedule (“Repayment Schedule”), with the first instalment payable on 22 August 2016 and thereafter on the 22^nd day of each month (Clause (3); and Clauses (f)  and (j)  of the First Schedule);

(5)  P shall have a right to demand immediate repayment by Ds of the Loan in the event of, inter alia, non-payment when due of the Loan, interest, fees or any other amounts due thereunder (Clause (6)(a));

(6)  Upon default, interest shall accrue on the sum payable at the default rate of 15.6% per annum from the date of default until full payment (including the period before and after the date of judgment in any proceedings instituted by P for recovering the Loan payable by Ds until the date of full payment of the Loan)  (Clause (4)(b); and Clause (l)  of the First Schedule);

(7)  If any legal dispute subject to adjudication in the court(s)  of Hong Kong arises as a result of any breach of the Loan Agreement, all legal costs incurred and miscellaneous expenses incidental thereto shall be compensated and borne by Ds (Clause (13)(a));

(8)  Ds shall indemnify P against all costs, charges and expenses, including legal costs assessed on the indemnity basis, incurred in connection with any legal action taken by P in suing for or recovering any sum due from Ds thereunder or otherwise sustained or incurred as a consequence of any default by Ds (Clause (13)(b));

(9)  The note or memorandum required under section 18 of the MLO is set out in the First Schedule thereto, which shall form part of the Loan Agreement (Clause (16));

(10)  Ds declare and acknowledge that they have been explained and advised by DYWM that they are the solicitors acting for P, and that although the contents of the Loan Agreement have been interpreted and explained to Ds, and Ds have also been requested and advised to seek independent legal advice thereon and on this transaction, Ds have chosen not to do so, and expressly declare and confirm that they do not see the need for any independent legal advice and/or separate representation despite every chance having been offered to them to do so (Clause (18)).

17.  The Loan Agreement contains an acknowledgment page in English (“Acknowledgement of Receipt of Copy of Loan Agreement”), which states that Ds acknowledged receipt of a copy of the Loan Agreement on 22 July 2016.  All Ds signed on the page.

18.  The Loan Agreement also has another acknowledgment page in both English and Chinese (“Acknowledgement on Explanation & Legal Advice”), which provides that DYWM had advised Ds that they were acting for P, explained the Loan Agreement to Ds, advised them of the risks of entering into it, and invited them to seek independent legal advice.  The acknowledgement page further states that Ds confirmed they understood the contents of the Loan Agreement and the advice given, and that they did not see the need for independent legal advice.  All Ds signed on this page.

19.  All Ds also signed on the “Form of summary of provisions of the Ordinance to be included in or attached to a note or memorandum of a loan agreement” (附於或載於借約提要書或備忘錄的放債人條例摘要), which is in both English and Chinese and attached to the Loan Agreement.

20.  Under the Legal Charge also executed by Ds on the same day (i.e. 22 July 2016), D1 and D2 charged the Property to P as security for the due payment of all moneys owing by Ds to P.  The Legal Charge contains, amongst others, the following:-

(1)  D1 and D2 are the “Mortgagor”, D1, D2 and D3 are the “Borrower”, and P is the “Lender”;

(2)  If Ds default in payment of the secured indebtedness or any part thereof following demand duly made, an event of default shall be deemed to have occurred (Clause 5.01(a));

(3)  If Ds default in payment on the due date and in accordance with the terms and conditions relating thereto of any principal, interest or other moneys outstanding and payable by Ds under any term loan account or instalment loan account (whether demanded or not), an event of default shall be deemed to have occurred (Clause 5.01(b));

(4)  If an event of default shall have occurred, it shall be lawful for P at any time thereafter, without any consent of D1 and D2 or of any person, to enter and take possession of the Property, to hold and enjoy the same, and to receive the rents and profits thereof without any lawful interruption or disturbance of D1 and D2 or any other person (Clause 6.01(a));

(5)  Ds shall keep P indemnified against all actions, suits, claims, costs and expenses which may be incurred or sustained on account of, inter alia, Ds’ breach or non-performance of the covenants, obligations and agreements contained in the Legal Charge (Clause 7.01(i)).

21.  P’s case is that on 22 July 2016, before the execution of the Loan Agreement and the Legal Charge, Mr Tang Tat Wai (“Mr Tang”), a legal executive of DYWM, explained the key terms of the two documents to all Ds in Cantonese, and Ds confirmed their understanding before signing.  Mr Tang gave Ds a copy of the Loan Agreement before they left DYWM’s office.  Ds deny this.

22.  In the afternoon on that day, Ds signed an irrevocable authorisation letter written in Chinese (不可撤銷的授權書)  (“1^st Authorisation Letter”)  as “借款人” (i.e. borrower), authorising and directing P to pay and distribute the Loan as follows:-

(1)  HK$200,000 to D1; and

(2)  HK$4,700,000 to DYWM to repay the mortgage loan owed to Preamble on behalf of Ds.

23.  At around the same time, two cheques dated 22 July 2016 were issued by P, one in the sum of HK$4,700,000 payable to DYWM and the other one in the sum of HK$200,000 payable to D1.  All Ds signed on a copy of the two cheques.

24.  P’s case is that before Ds signed the 1^st Authorisation Letter and a copy of the two cheques, Ms So explained the key terms of the 1^st Authorisation Letter to them in Cantonese.  This is denied by Ds.

25.  According to D1 and D2, all Ds visited DYWM’s office again on 23 July 2016 and P’s office again on 23, 24 and 25 July 2016 to sign further documents.  D3’s case is that they visited DYWM’s office on 23 July 2016 and P’s office on 25 July 2016.  This is denied by P.  It is noteworthy that there are no documents in the trial bundles which were dated or signed on 23, 24 or 25 July 2016.

26.  There is another document also named “不可撤銷的授權書”(“2^nd Authorisation Letter”)  which was apparently signed by all Ds on 26 July 2016.  None of Ds has referred to any event which happened on this particular day or disputed the signing of this document.

27.  The purpose of this 2^nd Authorisation Letter was essentially to authorise and direct DYWM to make the following payments:-

(1)  HK$4,659,977.21 to Preamble;

(2)  HK$3,250 to Messrs. Bobby Tse & Co. (“BT”), being the costs for preparing the discharge of the legal charge in favour of Preamble referred to in §6(3)  above;

(3)  HK$25,000 to BT, being the costs and disbursement for the mortgage action (HCMP 449/2016)  commenced by Preamble against D1 and D2;

(4)  HK$800 to DYWM, being the disbursement for handling the discharge of the said legal charge in favour of Preamble; and

(5)  HK$10,972.79, being the remaining balance, to D1.

28.  On the same date, Mr Tang prepared for DYWM four cheques all dated 26 July 2016 to the respective payees referred to in §§27(1)-(3)  and (5)  above.  According to Mr Tang, as Mr David YW Man was not in the office and had not signed the cheques when Ds signed the 2^nd Authorisation Letter, Mr Tang was unable to hand over the HK$10,972.79 cheque to D1.  He therefore arranged for D1 to collect it the following day, which D1 did and signed on a copy thereof on 27 July 2016 to acknowledge receipt.

29.  P’s case is that before Ds signed the 2^nd Authorisation Letter, Mr Tang explained its contents to them in Cantonese.  Ds again deny this.

B4.  P’S COMMENCEMENT OF PROCEEDINGS

30.  According to the Repayment Schedule for the Loan, the first repayment fell due on 22 August 2016.

31.  As no repayment was made by Ds, P through DYWM issued a letter of demand to Ds on 22 September 2016.

32.  There being still no repayment received, P issued the Writ of Summons and commenced these proceedings against Ds on 12 October 2016.  In the Statement of Claim, P sought the following relief against Ds:-

(1)  As against D1 and D2, delivery of vacant possession of the Property;

(2)  As against Ds:-

  (a)  a sum of HK$5,048,691.50, being the principal sum of the Loan plus accrued interest as at 30 September 2016;

  (b)  further interest accrued on the principal sum at 15.6% per annum from 1 October 2016 until payment in full; and

  (c)  costs.

33.  After the commencement of these proceedings, on around 24 October 2016, P received a one-off repayment in the sum of HK$226,338, settling 3 monthly instalments due on 22 August 2016, 22 September 2016 and 22 October 2016.

34.  Since then, no further payment was received by P in respect of the Loan or interest.

35.  On 15 July 2018, D2 passed away.

36.  By an Order dated 29 January 2021, Master Lai ordered that:-

(1)  the estate of D2 be substituted in place of D2 as a party to the present proceedings;

(2)  the proceedings be carried on in the absence of a person representing D2;

(3)  any judgment or order subsequently given or made in the proceedings shall bind the estate of D2 to the same extent as it would have been bound had a personal representative of D2 been present as a party to the proceedings; and

(4)  P do have leave to amend the Writ of Summons with Statement of Claim to reflect the above orders.

37.  On 4 February 2021, P filed the Amended Writ of Summons and the Amended Statement of Claim (“ASOC”)  pursuant to the said Order.  No other substantive changes were made in the ASOC filed by P.

C.  PARTIES’ RESPECTIVE CASES

38.  Against the factual background as outlined above, the parties’ respective cases can be summarised as follows.

39.  P’s case is that:-

(1)  Pursuant to the Loan Agreement, P advanced the Loan of HK$4,900,000 to Ds at an interest rate of 15.6% per annum, with the repayment obligation secured by the Legal Charge over the Property.

(2)  All Ds duly executed both the Loan Agreement and the Legal Charge, and also signed the following documents:-

(a)  the Repayment Schedule;

(b)  the Acknowledgement of Receipt of Copy of Loan Agreement;

(c)  the Acknowledgement on Explanation & Legal Advice;

(d)  the 1^st Authorisation Letter;

(e)  the 2^nd Authorisation Letter; and

(f)  the copy of the cheques referred to in §23 above.

(3)  Where a person of full age and understanding has signed a document which purports to have legal effect, it is not enough to show that he signed without knowing its contents for the document to be disavowed.  He will be held to it unless he shows a recognised legal basis for concluding that his apparent consent has in some way been vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.  To disown a signed legal document, facts constituting the particular vitiating factor relied on must be pleaded and established by the evidence: Ming Shiu Chung & Anr v Ming Shiu Sum & Anr (2006)  9 HKCFAR 334 at §§84-87 (Ribeiro PJ).

(4)  Accordingly, unless Ds can prove, by credible evidence, misrepresentation, undue influence or other vitiating factors, they are bound by the documents they have signed, irrespective of their alleged lack of knowledge of the contents.  None has been established on the evidence in the present case.

(5)  Pursuant to the 1^st and 2^nd Authorisation Letters signed by all Ds, the loan proceeds were disbursed partly to discharge the existing legal charge over the Property in favour of Preamble, and partly to D1.

(6)  Ds subsequently defaulted in repayment of the Loan, and P is accordingly entitled to enforce the Legal Charge and to recover all outstanding sums due under the Loan Agreement.

(7)  As clarified by P at trial, the amount of HK$5,048,691.50 claimed in its ASOC (being the principal sum of the Loan plus accrued interest as at 30 September 2016)  did not take into account the repayment of HK$226,338 received by P after the commencement of these proceedings.

(8)  P’s latest position is that, after taking into account the said repayment, according to the Loan Agreement and the Repayment Schedule, the outstanding principal owed by Ds is HK$4,864,301.92.  P therefore claims against Ds for:-

(a)  the outstanding principal of HK$4,864,301.92;

(b)  interest on that sum at the rate of 15.6% per annum from 22 October 2016 until payment in full;

(c)  as against D1 and D2, delivery of vacant possession of the Property; and

(d)  costs on an indemnity basis pursuant to the provisions in the Loan Agreement and the Legal Charge (§§16(8)  and 20(5)  above).

40.  D1 has acted in person throughout these proceedings.  His case is as follows:-

(1)  He signed various documents at DYWM’s office and P’s office, but no explanation was given at the time of signing and he was not provided with copies.  He did not even know the interest rate and only saw copies of the documents after P commenced these proceedings.  P thus failed to comply with section 18(1)  of the MLO, rendering the signed agreements unenforceable.

(2)  Ms Chan of 諾信管理顧問有限公司 (“Lokson”)  persuaded him to borrow HK$4,900,000 instead of HK$4,700,000, and told him that the additional HK$200,000 was for service fees and legal fees.  D1 reluctantly agreed.

(3)  On 25 July 2016, P’s staff member Ms So Lai Ying (“Ms So”)  handed D1 a cheque for HK$200,000 at P’s office.  He withdrew the sum in cash, accompanied by Ms Chan and her male colleague, who then took all HK$200,000 and claimed that a further HK$15,000 was still owing for service fees and legal fees.

(4)  He suspects that Ms Chan was P’s employee or was acting in collusion with P, and that the HK$200,000 paid to him was effectively returned to P through Ms Chan.  P was therefore in breach of sections 27(3)  and 29(10)  of the MLO.

41.  The case of D2, who was legally represented before she passed away, is that:-

(1)  She was born in 1927 and was about 89 years of age at the material time (i.e. 2016).  She was illiterate and unable to read or write any Chinese or English save for signing her name.  She was bedridden after a pelvic fracture sustained in a fall in or about 2015, and subsequently underwent amputation of her left lower limb due to infection.  She was at all material times wheelchair-bound and unable to take care of herself.  D1 was primarily responsible for taking care of her.

(2)  On or about 21 July 2016, D1 represented to her that he had “some personal matters” requiring her to sign some documents (“D1’s Alleged Representation”), without telling her any details about his alleged “personal matters” or the nature of the documents which she was required to sign.

(3)  Subsequently, she was brought to DYWM’s office and P’s office on multiple occasions, where she was asked to sign “usual documents”, documents for “merely procedural matters” or “usual procedural documents”, without knowing their nature or contents, and without any explanation, interpretation or copies being given.  She did not know she was signing the Loan Agreement or the Legal Charge until these proceedings.

(4)  P failed to give her any note or memorandum in writing of the Loan Agreement made in accordance with section 18(2)  of the MLO and signed personally by her.  The Loan Agreement is thus unenforceable against her under section 18(1)  of the MLO.

(5)  The Loan Agreement and the Legal Charge should also be rescinded by reason of misrepresentations. Specifically:-

(a)  Contrary to D1’s Alleged Representation, the documents she signed were not about D1’s personal matters but were the Loan Agreement and the Legal Charge.

(b)  Further, Mr Tang and Ms Chan represented to her on 22 July 2016 and 23 July 2016 at DYWM’s office that the documents to be signed were “usual documents” (“Mr Tang and Ms Chan’s 1^st and 2^nd Alleged Representations”)  but they in fact included the Loan Agreement and the Legal Charge.

(6)  Further or alternatively, her signing of the Loan Agreement and the Legal Charge was procured by undue influence of P through D1 over her, and should be rescinded or set aside:-

(a)  P had actual and/or imputed notice that she is D1’s mother, by reason of which there was a relationship of trust and confidence between them affecting her judgment in relation to D1’s Alleged Representation;

(b)  The transaction was manifestly disadvantageous to her and was not readily explicable by their relationship;

(c)  P failed to take adequate steps to explain to her the nature, effect and risks of the documents, to satisfy itself that she received independent legal advice and had the requisite mental capacity to understand the nature and contents of the documents.  P thus had constructive notice of the exercise of undue influence by D1 over her.

(7)  She also relies on the doctrine of non est factum and avers that:-

(a)  She was totally unaware of the nature or contents of the Loan Agreement and the Legal Charge, genuinely believing that they were about D1’s personal matters.

(b)  The documents were in English, a language she did not understand, and their contents and nature were not explained or interpreted to her before signing.

42.  D3 has acted in person all along.  His case is as follows:-

(1)  On or around 21 July 2016, D1 asked him to go to a law firm together on the following day to sign some documents.

(2)  On 22 July 2016, he attended DYWM’s office with D1 and D2. Mr Tang placed documents before them without explanation. Ms Chan and her male colleague were present.  D1 and D2 signed first, after which Mr Tang urged him to sign.  Being “exposed to the attentions” of D1, Mr Tang, Ms Chan and her male colleague (a phrase he did not elaborate upon), he reluctantly signed without knowing the contents.

(3)  Later that day, Ds were brought to P’s office, where Ms So placed further documents before them.  Again being “exposed to the attentions” of D1, Ms So, Ms Chan and her male colleague, he reluctantly signed without knowing the contents.

(4)  On 23 July 2016, at D1’s request, he went to DYWM’s office again to sign some other documents.  When he asked to see the contents first, Mr Tang said “吓？你老豆都簽咗喇喎” and urged him to sign.  Under D1’s influence, he reluctantly signed without knowing the contents.

(5)  On 25 July 2016, at D1’s request, he went to P’s office again and signed documents reluctantly under D1’s influence without knowing the contents.

(6)  The Loan Agreement is unenforceable as P failed to comply with section 18(1)  of the MLO by failing to provide him with a copy of the note or memorandum of the Loan Agreement, a summary in the form prescribed under section 18(1)(b), and any copy of the documents at or after signing.

(7)  The Loan Agreement and any other documents he signed are null and void as they were signed under the undue influence of D1, Mr Tang, Ms So and/or Ms Chan and her male colleague.

D.  EVALUATION OF THE PARTIES’ EVIDENCE

43.  I wish to first address the evaluation of the credibility of the parties’ evidence, which will be relevant to the determination of the other key issues in this case.

44.  As discussed above, the parties have presented conflicting accounts of the events at DYWM’s office and P’s office where the documents were signed by Ds.  For instance, according to P, steps were taken to explain the documents to Ds before signing on each occasion.  On the other hand, Ds contend that they were simply told to sign without any explanation.

45.  As to the alleged communications and interactions between D1 and Ms Chan, between D1 and D2, and between D1 and D3, P has no direct knowledge and the Court has only Ds’ own accounts.  There is no contemporaneous record of what was said between them.  Whether the Court will accept those accounts also boils down to a question of credibility.

46.  In evaluating the parties’ evidence, the Court shall bear in mind the following guidance in Hui Cheung Fai v Daiwa Development Ltd (HCA 1734/2009, 8 April 2014)  (Deputy High Court Judge Eugene Fung SC, as he then was):-

(1)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: §77.

(2)  In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: §78.

(3)  In determining a witness’ credibility, the court also attaches importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.  The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement: §79.

47.  At the trial, P called four witnesses: Mr Lo (P’s general manager), Ms So (P’s clerk), Ms Fung Wai Man (“Ms Fung”)  (P’s accounting clerk), and Mr Tang (DYWM’s legal executive).

48.  As regards Ds, on the first day of trial, only D1 was present at the beginning of the hearing.  D3 appeared after P’s counsel and D1 had made their opening submissions.  He initially sat in the public gallery but, upon the Court’s enquiry, he indicated that he wished to represent himself in person.  Since only D1 filed a witness statement, he was the only defendant who testified at trial.  D2 and D3 filed their respective Defences, each verified by a statement of truth, but did not file witness statements and testify at trial.  At the end of the first day of the trial, D3 indicated that he intended to apply for leave to file a witness statement.  The Court told him that if he decided to make an application, he had to come up with all supporting materials including the witness statement he sought to introduce and the explanation for the delay.  On the second day of the trial, D3 made the application with a document named as his witness statement.  However, during his submissions, D3 informed the Court that such document was only a summary of his case and he would need to substantially elaborate on it for the purpose of his oral testimony.  I told D3 that the Court could not entertain the application without a complete witness statement.  D3 then confirmed that he would not pursue his application in the circumstances.

D1.  D2 AND D3’S DEFENCES

49.  Before evaluating the evidence of the witnesses who testified at trial, the Court should first consider whether D2 and D3’s respective Defences, each verified by a statement of truth, are admissible as hearsay evidence and, if so, what weight should be given to them.

50.  Section 47(1)  of the Evidence Ordinance (Cap. 8)  (“EO”)  provides that:-

“(1)  In civil proceedings evidence shall not be excluded on the ground that it is hearsay unless—

(a)  a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(b)  the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice.”

51.  In the present case, P does not object to the admission of D2 and D3’s respective Defences as hearsay evidence, but submits that no weight should be given to them in light of the matters set out in section 49 of the EO.  I agree with this approach and shall proceed to consider the weight to be given to them by having regard to the following matters under section 49 of the EO:-

“(1)  In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2)  For the purposes of subsection (1), regard may be had, in particular, to the following—

(a)  whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b)  whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c)  whether the evidence involves multiple hearsay;

(d)  whether any person involved had any motive to conceal or misrepresent matters;

(e)  whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f)  whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g)  whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.”

D1a.  D2’s Defence

52.  Upon careful consideration, I am unable to give any weight to D2’s Defence for the following reasons.

53.  First, D2 (or her estate after her death)  is a party to these proceedings and has significant personal interests in this litigation.  There is no contemporaneous record of her defence which was only prepared for the purpose of the present action.  Although she did not file a witness statement or testify at trial as she passed away on 15 July 2018, she was then legally represented and no steps were taken for any deposition to be conducted prior to trial.  In the circumstances, P is clearly prejudiced as it had no opportunity to test D2’s assertions by cross-examination.

54.  Second, D2’s account that she was taken to another law firm for making a declaration of her mental capacity to understand the documents to be signed is inherently questionable.  D2 alleges that a solicitor at another firm, after a brief conversation with her, declined to attest to her declaration.  However, it is difficult to understand what utility could be gained by D2 making a self-serving declaration of her mental capacity before a solicitor.  It is not the role of a solicitor to assess mental capacity.  That is a matter for medical experts.  It is also noteworthy that D2’s Defence does not plead that she lacked mental capacity at the material time, or that she was suffering from any mental illness.  While she pleads that she was wheelchair-bound and unable to take care of herself, there is no suggestion of any mental incapacity.

55.  Third, D2’s apparent ability to give detailed instructions to her solicitors for her Defence (filed in November 2017), and to sign a statement of truth verifying its contents, also does not sit well with any suggestion of lack of mental capacity at the time when she signed the relevant documents in July 2016.  Further, one must not lose sight of the fact that D2, alongside D1, had previous experience in obtaining mortgage loans, first from Honip and then from Preamble, by way of mortgaging and re-mortgaging the Property and executing mortgage documents.  

56.  Fourth, Mr Tang’s unchallenged evidence is that he asked D1 to go to another law firm to sign a statutory declaration confirming that the Deed of Gift was personally signed by him.  Only after that was done did they return to DYWM’s office to proceed with the execution of the Loan Agreement and the Legal Charge.  Mr Tang’s evidence is supported by a Statutory Declaration signed by D1 and declared at the office of Messrs. Kong & Chang, Solicitors, on 22 July 2016.  D2’s account of events on 22 July 2016, however, omits that event and instead alleges she was asked to go to another law firm to make a declaration.  This casts doubt on the reliability of her evidence and recollection.

57.  Fifth, D2’s Defence alleges that on or about 21 July 2016, D1 told her that he had “some personal matters” requiring her to sign some documents, but gave no details about those matters or the nature of the documents.  However, if D1 only mentioned “some personal matters”, there is no explanation as to why D2 would consider that such matters would involve her or require her signature, and why she did not ask for further details.

58.  In fact, D2’s account is also questionable in light of the other evidence.  During cross-examination, D1 stated that he had told D2 that the matter requiring her signature concerned “money and borrowing money”.  This aligns with Mr Tang’s evidence in his witness statement that D2 confirmed her understanding by saying “知道，係借錢、轉按”.  D1 and D3 did not challenge this evidence when cross-examining Mr Tang.  This obviously contradicts any suggestion that D2 did not understand the nature of the documents she signed.

59.  Sixth, D2 alleges that she was told by Mr Tang, Ms Chan and/or Ms So that the documents to be signed by her were “usual documents”, “usual procedural documents” or documents for “merely procedural matters”.  However, no explanation is given by D2 as to what “usual” or “procedural” meant in context.  If she did not understand what they meant, it is difficult to understand why she failed to ask for any explanation, particularly when she was allegedly asked to attend DYWM’s office and/or P’s office on consecutive days (22, 23, 24 and 25 July 2016)  to sign various documents, despite her apparent immobility and difficulty in commuting.

60.  Seventh, D2’s account does not tally with the contemporaneous documents:-

(1)  D2 maintains that she signed the Loan Agreement on 22 July 2016 and the Legal Charge on 23 July 2016.  However, both documents are dated 22 July 2016 and stated to be made on that date.  The 1^st Authorisation Letter and the two related cheques are also dated 22 July 2016.  This is consistent with Mr Tang’s and Ms So’s evidence that Ds did not attend DYWM’s office or P’s office on 23 July 2016 at all.  There is no reason why the two documents had to be signed on different dates.

(2)  D2 alleges that she also went to P’s office on or around 25 July 2016, where Ms So allegedly said that “the application”, which D2 had never been informed of, had been approved.  However, had D2 not even known about the loan application, she would naturally have asked Ms So what she was referring to.  There is no suggestion that she did so.  It is also inherently implausible that Ms So would only inform Ds on 25 July 2016 that the application had been approved, when the contemporaneous documents show that Ds had already signed the Loan Agreement, the Legal Charge and the 1^st Authorisation Letter, and P had also already issued the cheques on 22 July 2016.

61.  In view of the above, it would be unreasonable, and also unfair to P, if the Court were to give any weight to the matters stated in D2’s Defence when P did not have any opportunity to cross-examine D2 on any of those matters.

62.  In the premises, I decline to give any weight to D2’s Defence.

D1b.  D3’s Defence

63.  For the following reasons, I am also unable to give any weight to D3’s Defence.

64.  First, apart from filing his Defence in November 2017, D3 did not file any witness statement as directed by the Court or otherwise take part in the proceedings until his appearance at trial.  While he claimed that he was not living at the address of 22 Shui Tsiu Lo Wai, Sha Pat Heung, Yuen Long (i.e. a village house erected on the Property), he himself provided such address on the backsheet of his Defence.  Even assuming that he later changed his address, there is no evidence that he notified either P or the Court of such change.  He further acknowledged that he did not make any enquiries about the progress of the case after his legal aid application in 2022 was refused.  In my view, D3 had the opportunity to file a witness statement as evidence of his case but failed to do so.  As a result, P is prejudiced by having no opportunity to cross-examine D3 and test his assertions at trial.

65.  Second, D3’s Defence is riddled with inherent vagueness and implausibility:-

(1)  D3 alleges that on or around 21 July 2016, D1 asked him to go to a solicitors’ firm to sign “some documents”. However, no explanation is given as to what those documents were, why D3 did not ask for details, or why his signature was required.  It is inherently improbable that D3, given his level of education, would agree to attend a solicitors’ firm to sign “some documents” without any inquiry.

(2)  This is particularly so given that D1, during cross-examination, admitted that he had told D3 they needed to go to a solicitor’s firm to sign documents because he needed to borrow money. Insofar as D1 had told D3 that the matter concerned borrowing money, D3 ought to have asked why D1’s borrowing of money would involve him or require his signature.  However, no such enquiry or explanation appears anywhere in D3’s Defence.

(3)  D3 alleges that he, “being exposed to the attentions” of D1, Mr Tang, Ms So and/or Ms Chan and her male colleague, signed documents on multiple occasions over several days (22, 23 and 25 July 2016), reluctantly and without knowing their contents.  It is unclear what “being exposed to the attentions”, which was not elaborated upon in his Defence, means when D3 himself agreed to attend a solicitors’ firm to sign documents in the first place.  More importantly, according to his account, he continued to attend and sign repeatedly without asking any questions.  Had he been reluctant to sign initially, it is inexplicable why he would have decided to return on subsequent days.

(4)  D3 asserts that he signed under the “undue influence” of D1, Mr Tang, Ms So and/or Ms Chan and her male colleague.  However, this is a bare assertion without any particulars regarding how the alleged undue influence was exerted on him.  Further, D3 is a mature adult who had received tertiary education in business marketing, previously worked full-time in Scotland as a licensed manager in the hospitality sector, and was working as a fitness trainer upon returning to Hong Kong.  

(5)  D3 maintains that Mr Tang appeared angry on 22 July 2016 as a solicitors’ firm had refused to make an affirmation for D2.  However, the need for such affirmation for D2 is highly questionable as stated in §54 above.  Moreover, as with D2, D3’s account completely omits D1’s attendance at another firm to sign a statutory declaration on that day, and instead alleges it was D2 who was requested to make an affirmation.  This also undermines the reliability of his evidence and recollection.

66.  Third, the documentary evidence tends to suggest that D3 knew or ought to have known the nature and effect of the documents he signed:-

(1)  The Loan Agreement and the Legal Charge are in English, and D3, who knows English, was able to read and understand their contents.  The signing pages of both documents state that they were signed by “the Borrower”, with the HKID card numbers of D1, D2 and D3 listed therein.  All three Ds signed next to those words, and D3 would have understood that he was signing as a joint borrower alongside D1 and D2.  The signing page of the Loan Agreement also sets out the loan amount of HK$4,900,000 in both words and figures, and states that the sum was received from the lender.  All three Ds signed next to those words as well.

(2)  Further, the Acknowledgement of Receipt of Copy of Loan Agreement bears the word “BORROWER” below the acknowledgement, and the Acknowledgement on Explanation & Legal Advice contains the words “the Borrower” and “The Borrower(s)” at the top and bottom respectively, in both English and Chinese.  The “Form of summary of provisions of the Ordinance” similarly contains the word “Borrower(s)” below the signature area.  All three Ds signed each of these pages.  The copy of the two cheques issued by P dated 22 July 2016 also bears all three Ds’ signatures, and D3 would have known that the cheques were issued in connection with the Loan.

67.  Fourth, D3’s account is inconsistent with the contemporaneous documents and other matters including his own Defence.  For instance:-

(1)  D3 claims that he signed documents on 22 and 23 July 2016 at DYWM’s office.  I repeat §60(1)  above.

(2)  D3 contends that Mr Lo was wrong to say that he was living at the Property at the material time.  This, however, contradicts D1’s evidence that D3 was living there.  It also does not sit well with D3’s Defence which still provided the address of the Property as his address: §64 above.

(3)  D3 states in his Defence that all three Ds attended and signed documents together at DYWM’s office and P’s office on 22 July 2016, but in the course of cross-examination he somehow put to Ms So that she was lying, claiming that he signed the 1^st Authorisation Letter at DYWM’s office separately from D1 and D2 because he was working at the time they signed.  This was not stated in his Defence at all and, if anything, reveals D3’s tendency to shift his account in order to advance his case.  Further, if D3 truly did not know the contents of the documents he signed, it is questionable why he could suddenly recall when and where the 1^st Authorisation Letter was allegedly signed.

68.  In view of the above, as with D2’s Defence, it would be unreasonble, and also unfair to P, if the Court were to give any weight to the matters stated in D3’s Defence when they have not been properly tested by cross-examination.

69.  I therefore also decline to give any weight to D3’s Defence.  I will now proceed to analyse the evidence of the other witnesses who gave oral testimony at trial.

D2.  MR LO

70.  Mr Lo, P’s general manager, provided a witness statement and testified at trial.  He was cross-examined by D1 and D3.  His evidence can be summarised as follows:-

(1)  He has been P’s general manager since its establishment in 2012.  His primary responsibilities include approving loans and handling client matters.

(2)  On 16 July 2016, D1 attended P’s office and applied for a mortgage loan in the circumstances set out at §8 above.

(3)  Following the application, Mr Lo visited the Property for an inspection.  During that visit, he saw D2 and D3.  He also learnt from D1 that D3 had recently returned from the United Kingdom and was then working in Hong Kong.  During cross-examination, Mr Lo stated that he had a brief conversation with D2 during the inspection and that she was able to respond and express herself clearly.  He also stated that had D2 been unable to do so, he would not have approved the loan.

(4)  After inspecting the Property and assessing its value, Mr Lo suggested to D1 that in order for P to approve the application, D3 needed to be added as a joint borrower alongside D1 and D2.  This suggestion was made because: (a)  the loan amount was not insignificant; (b)  D1 did not have a stable income; (c)  D2 was of an advanced age; and (d)  P’s position would be better protected if D3, who lived at the Property and was a close family member, shared liability with D1 and D2.

(5)  During cross-examination, Mr Lo fairly acknowledged that he had not conducted due diligence on D3’s income, employment or financial standing.  He explained that he considered it unnecessary to do so.  He stated that when assessing the loan applications, P would consider a host of factors in the round, including the amount applied for, the value of the security, and the number and relationship of the borrowers.  He stated that D1’s application was approved because it was a secured mortgage loan, the Property was valued at a sufficient amount to provide adequate security, and the inclusion of D3 as a joint borrower gave P additional protection without any downside.  He considered it unnecessary to further speak directly with D3 as D1 had already communicated with him, and he agreed to be a joint borrower.

(6)  Having approved the loan application on behalf of P, Mr Lo instructed Ms So to, amongst others, prepare the Loan Agreement and the Legal Charge for execution by Ds.  Mr Lo stated that the principal amount of the Loan was HK$4,900,000, and that no fees or charges were deducted from that sum.

(7)  Mr Lo also stated that neither he nor P had any knowledge of, or connection or business with, Lokson or Ms Chan as alleged by D1.  He had no knowledge of any alleged conversation or arrangement between D1 and Ms Chan.

(8)  Mr Lo further stated that, at D1’s arrangement, Ds made a repayment of HK$226,338 in October 2016 covering 3 monthly instalments, but no further payments were made thereafter.

71.  In my view, Mr Lo’s evidence is coherent, consistent with the contemporaneous documentary evidence, and commercially sensible.  He also gave candid and straightforward answers during cross-examination, including fairly acknowledging that he had not conducted due diligence on D3’s financial standing etc., which he considered unnecessary for the reasons summarised above.  I do not consider his explanation unreasonable.

72.  Moreover, there is no evidence from Ds to contradict Mr Lo’s account on the key aspects of the transaction.  D1’s witness statement did not cover what occurred on 16 July 2016 during his meeting with Mr Lo at P’s office or during Mr Lo’s subsequent inspection of the Property.  Meanwhile, D1’s own evidence during cross-examination confirmed Mr Lo’s account that D1 had visited P’s office on 16 July 2016, that the purpose of his visit was to apply for a mortgage loan of HK$4,900,000 by re-mortgaging the Property to P, and that the application was approved only after Mr Lo’s inspection of the Property.

73.  In the premises, I accept Mr Lo’s evidence.

D3.  MS SO

74.  Ms So, a clerk of P, provided a witness statement and testified before the Court.  She was also cross-examined by D1 and D3.  Her evidence can be summarised as follows:-

(1)  She has been employed by P since its establishment in 2012.  She handled general clerical work and assisted Mr Lo in accordance with his instructions and directions.

(2)  In around mid-July 2016, D1 attended P’s office to enquire about a mortgage loan and completed an application form.  Ms So passed the application to Mr Lo for consideration and arranged for Mr Lo to meet with D1.

(3)  After Mr Lo approved the loan application on behalf of P, Ms So arranged for solicitors to prepare the Loan Agreement and the Legal Charge for execution by Ds.

(4)  On 22 July 2016, following the execution of the Loan Agreement and the Legal Charge at DYWM’s office, Ds attended P’s office in the afternoon.  Ms So explained the contents of the 1^st Authorisation Letter to them, which was to authorise P to release HK$4,700,000 to DYWM to discharge the existing mortgage in favour of Preamble, and HK$200,000 to D1.  After they indicated their understanding, they signed the 1^st Authorisation Letter and copies of the two cheques dated 22 July 2016.  Ms So alone witnessed the signatures.  Immediately thereafter, Ms So handed the HK$200,000 cheque to D1.

(5)  Ds only attended P’s office for signing in the afternoon on 22 July 2016.  They were not required to attend on 23, 24 or 25 July 2016.  Ms So had no knowledge of Lokson or Ms Chan and did not see anyone accompanying Ds to P’s office on 22 July 2016.

(6)  During cross-examination, Ms So also confirmed that she had no authority to approve the loan application or to decide on the loan amount or terms.  She acted solely on Mr Lo’s instructions.

(7)  A discrepancy arose in Ms So’s evidence on D3’s capacity.  During cross-examination, Ms So initially stated that D3 was a “擔保人” (guarantor)  for D1.  However, when she was asked to read the 1^st Authorisation Letter during re-examination, she acknowledged that the document described all three Ds as “借款人” (borrower).  She clarified that she had confused the terms as she understood them to mean the same, and that D3 should be a “借款人” pursuant to the 1^st Authorisation Letter.

(8)  There was also a discrepancy as to who attended P’s office on 16 July 2016 when the application form was completed.  Ms So’s witness statement mentioned only D1 attending on that date. However, during cross-examination, she stated that all Ds attended together on that occasion.  Upon the Court’s enquiry and further cross-examination, Ms So explained that she had omitted to mention this in her witness statement and reiterated that all Ds were present on 16 July 2016.

75.  While there are some discrepancies which emerged during cross-examination as mentioned above, I do not consider them to be material to the overall credibility of her evidence.  It is understandable that Ms So was mistaken about the exact capacity of D3, given that over 9 years had passed since the documents were prepared and that D3 was only subsequently added as a joint borrower for the loan at Mr Lo’s request.  The number of attendees at P’s office on 16 July 2016 is likewise not of substantial significance, as the material events centred on 22 July 2016, when the loan documents and the 1^st Authorisation Letter were signed at DYWM’s office and P’s office respectively.

76.  In all other aspects, Ms So’s evidence is consistent with the contemporaneous documents and Mr Lo’s evidence.  Her account that the HK$200,000 cheque was handed to D1 immediately after Ds signed the 1^st Authorisation Letter on 22 July 2016 is also more reasonable and probable than D1’s allegation that the cheque was only given to him on 25 July 2016.  The cheque itself was dated 22 July 2016, and Ds had signed on a copy of it to acknowledge receipt.  There was no reason for P to have retained the cheque, particularly when all Ds had already executed the Loan Agreement and the Legal Charge in the morning of 22 July 2016.

77.  In the circumstances, I accept Ms So’s evidence and find her a truthful witness.

D4.  MS FUNG

78.  Ms Fung, an accounting clerk of P, also provided a witness statement and testified at trial.  D1 indicated that he had not seen her before and had no questions for her in cross-examination.  D3 only asked a few questions on the identity of her employer and her role in respect of the Loan.  Her evidence can be summarised as follows:-

(1)  She has been employed by P as an accounting clerk since its establishment in 2012.  Her duties include handling client accounts and accounting matters.

(2)  On 22 July 2016, Ds executed the Loan Agreement, under which P agreed to provide them with a mortgage loan of HK$4,900,000 at an interest rate of 15.6% per annum for a term of 12 years (i.e. the Loan).  Ds were required to repay the Loan by 144 monthly instalments of HK$75,446 each, as set out in the Repayment Schedule attached to the Loan Agreement.

(3)  Apart from a repayment of HK$226,338 made on 24 October 2016 which covered 3 monthly instalments, Ds have not made any further payments under the Loan Agreement.

(4)  As a result, Ds are now liable to repay the outstanding principal of HK$4,864,301.92, together with interest thereon at the rate of 15.6% per annum from 22 October 2016, pursuant to the Loan Agreement.

(5)  During cross-examination, Ms Fung confirmed that she was employed by P as an accounting staff, and stated that she was responsible for recording the payments received from the borrowers into P’s system.  She confirmed that she had not met D3 before.

79.  I accept the above evidence of Ms Fung which is unchallenged by Ds.

D5.  MR TANG

80.  Mr Tang, a legal executive of DYWM, also provided a witness statement and gave evidence before the Court. He was cross-examined by D1 and D3.  His evidence can be summarised as follows.

81.  Mr Tang has been employed by DYWM since around 2005, handling general documents and clerical work for clients.  In mid-July 2016, DYWM received instructions from P to prepare the Loan Agreement and the Legal Charge for execution by Ds.

82.  On 22 July 2016 at around 11am, Ds attended DYWM’s office together, accompanied by a woman whom Mr Tang did not know.  He asked Ds who she was, and they replied that she was a friend.  He asked her to sit on the sofa near the entrance.

83.  He then introduced himself to Ds that he was a legal executive of DYWM and represented P in the execution of the Loan Agreement and the Legal Charge.  He asked each of Ds to produce their identity cards for verification.

84.  As he discovered a potential issue with D1’s signature on the Deed of Gift dated 14 March 1995, he asked D1 to go to another law firm to sign a statutory declaration confirming that he had personally signed the Deed of Gift.  Thereafter, they returned to DYWM’s office for the signing of the Loan Agreement and the Legal Charge.

85.  During the signing process, he sat around a table with D1, D2 (who was in a wheelchair)  and D3.  He produced the Loan Agreement and the Legal Charge before them and declared in Cantonese that he and DYWM acted only for P and advised Ds to seek independent legal advice.  He then asked each of them whether they understood what he had said, and they each confirmed that they did and indicated that they did not intend to seek legal advice.

86.  He then explained the key terms of the Loan Agreement and the Legal Charge, and emphasised to Ds that if they failed to repay on time pursuant to the Loan Agreement, P would be entitled to demand immediate payment of all the outstanding sums and would have the right to sell the Property.

87.  After his explanation, he gave Ds the Loan Agreement and the Legal Charge to read.  D1 told him that he could not read English, whereas D3 could not read Chinese and could only read English.  D3 then picked up the documents and read them for a while. Afterwards, Mr Tang asked each of Ds whether they understood the contents, and all responded that they did.  D2 replied “知道，係借錢、轉按”.

88.  Upon confirming their understanding, Mr Tang reminded them again of the declaration regarding independent legal advice in the Loan Agreement, and told them that if they had any questions or doubts, they should not sign.  He also asked again if they wished to seek independent legal advice.  Ds indicated they had no questions and signed the Loan Agreement and the Legal Charge one by one in the appropriate places.  Mr Tang then signed as a witness.  After Mr David YW Man signed to verify his signature, Mr Tang gave Ds a copy of the Loan Agreement immediately at DYWM’s office.  He explained that although Ds had signed the acknowledgement of receipt of the principal in the Loan Agreement, the Loan would only be released later that day when they attended P’s office.

89.  On 26 July 2016 at around 3pm, Ds returned to DYWM’s office to sign the 2^nd Authorisation Letter, which was to authorise DYWM to make payments in connection with the discharge of the existing charge in favour of Preamble.  Mr Tang explained its contents in Cantonese and told them that DYWM would charge HK$800 for handling the aforesaid.  Ds indicated their understanding and signed.

90.  Pursuant to the 2^nd Authorisation Letter, Mr Tang prepared 4 cheques (§27 above).  As Mr David YW Man was not in the office to sign them, Mr Tang could not give the balance cheque (HK$10,972.79)  to D1 immediately.  He therefore arranged for D1 to return on the following day to collect it.  On 27 July 2016, D1 returned to DYWM’s office alone, signed on a copy of the cheque to acknowledge receipt, and collected the cheque.

91.  Mr Tang confirmed that Ds attended DYWM’s office only on 22 July 2016 (for the execution of the Loan Agreement and Legal Charge)  and 26 July 2016 (for the execution of the 2^nd Authorisation Letter).  D1 attended alone on 27 July 2016 to collect the cheque.  None of Ds attended DYWM’s office on any other date (including 23, 24 or 25 July 2016).

92.  Mr Tang confirmed that he alone was responsible for meeting Ds and handling the execution of the documents at DYWM’s office.  DYWM had no female staff member surnamed Chan, and Mr Tang did not know any “Mandy Chan”.

93.  Under cross-examination, Mr Tang maintained that all three Ds signed together at DYWM’s office on 22 July 2016, and that he gave them a copy of the Loan Agreement immediately after signing.  He rejected D1’s suggestion that D2 had been taken to another law firm for a mental capacity assessment, stating that such assessments are a matter for medical professionals, not solicitors.  He also confirmed that his explanations were given in Cantonese, as D1 and D2 did not understand English, and D1 had told him that D3 could understand spoken Cantonese.

94.  When asked by the Court, Mr Tang acknowledged that his witness statement mentioned that D3 could not read Chinese and could only read English, but did not mention that D3 could understand spoken Cantonese.  He confirmed that D1 had told him that D3 could understand Cantonese.

95.  I find Mr Tang an honest and reliable witness.  Although he did not mention in his witness statement that D1 had told him that D3 could understand spoken Cantonese, this does not contradict his witness statement which stated that D3 could not read Chinese.  It is not uncommon for a person, especially one who was educated abroad such as D3, to understand spoken Cantonese without being able to read Chinese.  Moreover, Mr Tang’s evidence on this point is consistent with D3’s own confirmation to the Court that he could understand basic spoken Cantonese (including D1’s cross-examination of Mr Lo in Cantonese), and with D1’s evidence during cross-examination that he communicated with D3 partly in Cantonese.

96.  Mr Tang’s account is also consistent with the contemporaneous record signed by Ds acknowledging that the Loan Agreement was explained to them.  Having considered also the credibility of D1’s evidence which will be discussed below, I am of the view that D1 fails to establish his allegation against Mr Tang on the balance of probabilities.

97.  In the circumstances, I accept Mr Tang’s evidence.

D6.  D1

98.  D1 provided a witness statement and testified at trial.  He was cross-examined by P’s counsel and also briefly by D3.  His evidence can be summarised as follows.

99.  D1 was born in 1964 and received education up to Primary 5.  He could read and understand Chinese.  He could also speak some simple English but could not read or write English.  He communicated with D3 partly in Cantonese, and D3 could understand basic spoken Cantonese.

100.  D2 was born in 1927 and had no formal education.  She could not read or write Chinese or English, save for signing her name.  During cross-examination by D3, D1 claimed that D2 spoke Hakka and that she could understand Cantonese but could not speak it.  This however has never been mentioned in his witness statement or any of Ds’ Defence.

101.  In 2016, D3 had just returned from the United Kingdom and was working as a fitness trainer in Hong Kong.  He was also living at the Property in July 2016.  During cross-examination, D1 claimed that D3 moved out of the Property about a month after returning to Hong Kong.  This was not stated in D1’s witness statement or D3’s Defence.

102.  According to D1, he was unaware that the Property changed from D2’s sole ownership to joint ownership with him in 1995.  He only learned of this later.

103.  In July 2016, Ms Chan of Lokson contacted him by telephone.  She said to him that she was from a finance company and had learned of his financial difficulties from a colleague.  D1 did not know Ms Chan before this.  Ms Chan suggested to D1 that a loan could be sought from P.

104.  On 16 July 2016, D1 attended P’s office and completed a mortgage application form.  During cross-examination, D1 acknowledged that the purpose of his visit was to apply for a HK$4,900,000 mortgage loan from P by re-mortgaging the Property to P in order to repay the outstanding debt owed to Preamble.  This was approved only after Mr Lo’s inspection of the Property.  D1 also admitted that he and D2 had previous experience with mortgage transactions with Honip and Preamble.  Even though D2 might not be able to read, the documents were explained to her on each occasion, and she should therefore know what she was signing.

105.  In his witness statement, D1 claimed that he only told D2 and D3 on or about 21 July 2016 that he had “some personal matters” requiring them to sign some documents, without giving any details or explaining the nature of the documents (“我只是對母親和兒子說我有一些個人的事宜需要他們簽一些文件，但我沒有告訴他們詳情或該些文件的性質”).  However, during cross-examination, D1 admitted that upon D2’s enquiry, he told her that those matters were about “money and borrowing money”.  He also told D3 that they needed to go to a law firm to sign documents because he needed to borrow money, and briefly explained why he had to do so.

106.  During cross-examination, D1 acknowledged that he knew all three Ds had to sign documents in connection with the Loan, and that because it was a re-mortgage, he and D2 had to sign.  However, he denied that P had required D3 to be added as a joint borrower.  He asserted that Ms Chan had told him given the age of D1 and D2, the Property would eventually be left to D3, and that D3’s signature was only to enable D3 to follow up on matters concerning the Property in the future, and not as a guarantor or borrower.  These were, however, not stated by D1 in either his witness statement or affirmations.

107.  According to D1, Ms Chan also told him that because of D2’s advanced age, a mental capacity assessment report would be required, and that he should take D2 to see a psychiatrist.  However, as such a report could not be obtained, Ms Chan said it would be fine and that a solicitor could arrange an affirmation instead.

108.  In his witness statement, D1 said that he, D2 and D3 went from  the Property to DYWM’s office together on 22 July 2016  (“我和兒子帶著坐輪椅的母親外出，一行三人由元朗住所到上環的文有為律師行”).  He also repeatedly referred to “我們家三人” when describing the events on that date.  However, during cross-examination, he asserted that “一行三人” actually meant D1, D2 and a domestic helper but not D3.  Nevertheless, at trial, he later appeared to resile from that position and accepted that all three Ds attended together.

109.  On 22 July 2016, Ms Chan and her male colleague met them at the building entrance of DYWM’s office and accompanied them upstairs.  D1 admitted that he knew they were there to sign documents relating to the Loan.  He claimed that before the signing, Mr Tang took them to another law firm, saying that it was to help D2 make an affirmation to prove that she could understand the documents she was about to be asked to sign.  The solicitor at that firm asked D2 two questions and then declined to proceed.  D1 believed it was because the solicitor was of the view that D2 could not understand the documents.

110.  D1 claimed that at DYWM’s office, Mr Tang produced a stack of documents and asked Ds to sign at various places.  Mr Tang and Ms Chan told them that the documents were “usual documents” and that all three of them were required to sign.  D1 admitted that all three Ds signed the documents, but claimed that their contents, nature or significance were not explained to them.  He did not understand what he was signing, and believed D2 and D3 did not either.  They were not given copies of the documents or advised to seek independent legal advice.  He did not even know the interest rate.

111.  According to D1, during the signing process, Mr Tang was impatient and remarked that there were too many of them, like a “military parade”.  He also claimed that Mr Tang said the other law firm could not handle the matter and that he would “handle it myself”.  Mr Tang then told D1 to keep quiet and asked D2 whether she was there for a loan of HK$4,900,000.  After D2 nodded, Mr Tang told all Ds to sign immediately, and they did so.

112.  D1 claimed that after signing at DYWM’s office, all Ds went to P’s office, where they were asked to sign “usual documents” without being explained about the contents.  The same occurred on 23 and 24 July 2016, when they attended DYWM’s office and/or P’s office to sign further documents.  D1 also claimed that all Ds attended P’s office on 25 July 2016.  However, as noted above, P’s evidence and the contemporaneous documents do not support that Ds attended on those dates.

113.  D1 also claimed that he initially did not intend to borrow HK$4,900,000, but Ms Chan told him that besides repaying Preamble, the additional HK$200,000 was for service fees and legal fees.  D1 reluctantly agreed, after Ms Chan said to him that if he did not accept her arrangement, there would be no time left and he might lose his home.  He believed that Ms Chan, her male colleague, Mr Tang and Ms So were all part of the same group.

114.  D1 admitted that he had signed the copy of the HK$200,000 cheque and confirmed that he had received it.  However, he claimed that when Ms So produced the HK$200,000 cheque at P’s office on 25 July 2016, she did not hand it directly to him but asked Ms Chan “點樣” (how), whereupon Ms Chan took the cheque, handed it to D1, and told him to check the amount.  D1 then checked it and gave it back to Ms Chan, telling her to keep it as it was for her.  He later withdrew the cash with Ms Chan and her male colleague, who took all HK$200,000 from him and demanded a further HK$15,000.

115.  D1 confirmed that Ds made a repayment of HK$226,338 in October 2016 covering 3 monthly instalments.  He said he had contacted Mr Lo to ask for more time to repay, but no further payments were made thereafter.

116.  In my view, D1’s evidence suffers from the following problems.

117.  To begin with, D1’s evidence on what he had told D2 and D3 on or about 21 July 2016 appears to be self-contradictory.  As noted in §105 above, D1 admitted telling D2 that it was about “money and borrowing money”, and telling D3 that he needed to borrow money.  This is at odds with D1’s witness statement, in which he alleges that he only mentioned that he had “some personal matters” requiring them to sign documents.  Such discrepancy undermines the credibility of D1’s evidence.

118.  Further, as observed in §108 earlier, D1’s account of events on 22 July 2016 shifted during his oral evidence.  He initially stated that Ds went to DYWM’s office together (as also stated in D2 and D3’s Defences), but during cross-examination he asserted that “一行三人” excluded D3, before eventually reverting to his original position.  D1’s shifting position in this regard further undermines the credibility of his evidence.

119.  D1’s claim that Mr Tang took D2 to another law firm to make a declaration to prove her mental capacity is also inherently questionable for the reasons discussed in §54 above. The contemporaneous documentary evidence shows that it was D1 himself who was asked to go to another law firm to make a statutory declaration to confirm his signature on the Deed of Gift.  Nonetheless, as with D2 and D3, D1’s account of events on 22 July 2016 never alluded to his signing of any document in another law firm on that date (§§56, 65(5)  above).

120.  D1’s claim that all three Ds signed documents at DYWM’s office and/or P’s office on 23, 24 and 25 July 2016 is unsupported by the contemporaneous documentary evidence.  As noted in §60(1)  above, the Loan Agreement, the Legal Charge and the 1^st Authorisation Letter signed by Ds are all dated 22 July 2016.  Moreover, the 2^nd Authorisation Letter signed by Ds is dated 26 July 2016.  These documents corroborate the evidence of Mr Tang and Ms So that Ds did not attend DYWM’s office and/or P’s office on 23, 24 and 25 July 2016.  I also repeat §76 above.

121.  Besides, D1’s assertion that D3 was only added as a signatory because of what Ms Chan allegedly told him (i.e. that the Property would eventually be left to D3)  was not stated in his witness statement or affirmations, and only emerged for the first time during cross-examination.  In his affirmations dated 9 June 2017 and 3 July 2017, he only asserted respectively that the Property was not in D3’s name but Ms Chan still required his signature, and that Ms Chan had asked about his family and required him to add the signature of D3 who had just returned from studying abroad.  He did not ever mention any alleged explanation about the Property being left to D3 or that D3’s signature was only to enable him to follow up on matters in the future.

122.  The documentary evidence also tends to suggest that D1 knew or ought to have known that D3 was signing as a borrower.  These include the Repayment Schedule and the 1^st Authorisation Letter, which are in Chinese and clearly identify D3 as a “共同借款人” or “借款人”.  Hence, if D1’s account of what Ms Chan told him were true, he would have realised that she had simply deceived him.  Yet, even on his case, he did not raise any query or objection but kept asking D3 to sign on consecutive days.  This tends to suggest that D1 actually knew that D3 was a joint borrower.

123.  For completeness, D1’s assertion that he was unaware of the change of ownership of the Property and only learned of it afterwards is not supported by the Deed of Gift which effected that change.  That document was signed by D1 and was also apparently interpreted by a clerk of Messrs. Wong Hui & Co., Solicitors.  D1 would have known of the change before it took place.

124.  For all the above reasons, I accept P’s account of events as true and reject Ds’ accounts insofar as they conflict with the evidence of P’s witnesses.  Even in respect of matters which are not within P’s personal knowledge, I would attach little weight to D1’s evidence where it is not corroborated by the contemporaneous documentary evidence.

E.  DISCUSSION

125.  Having considered the issues relating to credibility above, I will now proceed to analyse Ds’ defence below.

E1.  D1’S DEFENCE

126.  D1 does not dispute that he understood the purpose of the Loan, namely to borrow HK$4,900,000 by re-mortgaging the Property in order to discharge the outstanding debt owed to Preamble.  He and D2 also had previous experience with mortgage transactions with Honip and Preamble.  His primary defence is that P was in breach of the provisions of the MLO.

E1a.  Section 18 of MLO – failure to provide a note or memorandum

127.  D1 first alleges that the documents signed are unenforceable on the ground that P failed to comply with section 18(1)  of the MLO as it did not explain the contents of the documents or provide him with any copies.

128.  Section 18 of the MLO provides:-

“(1)  No agreement for the repayment of money lent by a money lender or for the payment of interest on money so lent, and no security given to any money lender in respect of any such agreement or loan, shall be enforceable unless—

(a)  within 7 days after the making of the agreement, a note or memorandum in writing of the agreement is made in accordance with subsection (2)  and signed personally by the borrower, and a copy of such note or memorandum is given to the borrower at the time of signing; and

(b)  there is included in or attached to such copy a summary, in such form as may be prescribed, of such provisions of this Part and Part IV as may be prescribed,

and no such agreement or security shall be enforceable if it is proved that the note or memorandum was not signed by the borrower before the money was lent or the security was given.

(2)  The note or memorandum shall contain all the terms of the agreement and in particular shall set out—

(a)  the name and address of the money lender;

(b)  the name and address of the borrower;

(c)  the name and address of the surety, if any;

(d)  the amount of the principal of the loan in words and figures;

(e)  the date of the making of the agreement;

(f)  the date of the making of the loan;

(g)  the terms of repayment of the loan;

(h)  the form of security for the loan, if any;

(i)  the rate of interest charged on the loan expressed as a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with Schedule 2; and

(j)  a declaration as to the place of negotiation and completion of the agreement for the loan.

(3)  Notwithstanding subsection (1), if the court before which the enforceability of any agreement or security comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable, the court may order that such agreement or security is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

129.  For reasons set out in Section D above, I accept P’s evidence and find that the documents were duly explained to Ds before signing, and that Ds were given a copy of the Loan Agreement before they left DYWM’s office on 22 July 2016.  I reject D1’s assertion to the contrary.

130.  Moreover, I accept P’s submission that the First Schedule to the Loan Agreement constituted the memorandum required under section 18(1), and that it was signed by Ds in the course of their execution of the Loan Agreement, with a copy thereof (being part of the Loan Agreement)  given to them after signing.

131.  Even assuming that P had breached section 18(1), the Court is given a discretion under section 18(3)  to enforce the agreements in question if it is satisfied that, in all the circumstances, it would be inequitable that they should be held not to be enforceable: see Emperor Finance Ltd v La Belle Fashions Ltd and Ors (2003)  6 HKCFAR 402 at §119 (Ribeiro PJ); and Strong Offer Investment Ltd v Nyeu Ting Chuang (2007)  10 HKCFAR 529 at §§19-20 (Chan PJ).  In the present case, I am satisfied that the Court would be entitled to exercise such discretion in favour of P for the following reasons:-

(1)  It is undisputed that D1 and D2 were in imminent need of a loan to repay Preamble, which had already commenced mortgage proceedings against them.  P’s loan discharged that debt and the associated costs.

(2)  The loan amount, interest rate, loan term, monthly instalment amount, number of instalments, repayment dates, total interest, and the names of the borrowers were all clearly set out in the Repayment Schedule, each page of which was signed by all three Ds.  As I have also found above, the Loan Agreement was duly explained to Ds before signing.

(3)  There is no evidence of any egregious or recurrent breach on the part of P, nor of any attempt by P to conceal any matter or to engage in any extortionate or objectionable conduct in connection with the alleged breach of section 18(1).  It has also not been suggested that the interest rate on the Loan is excessive for the purposes of the MLO.

132.  Thus, D1’s defence under section 18(1)  of the MLO fails.

E1b.  Sections 27, 29 of MLO – collusion with Ms Chan / Lokson

133.  D1 further contends that P was in breach of sections 27(3)  and 29(10)  of the MLO, as he suspects (懷疑)  that Ms Chan was P’s employee or was acting in collusion with P, and that the HK$200,000 paid to him was effectively returned to P through Ms Chan.

134.  Section 27 of the MLO reads:-

“(1)  Any agreement entered into between a money lender and a borrower or intending borrower for the payment by the borrower or intending borrower to the money lender of any sum for or on account of costs, charges or expenses (other than stamp duties or similar duties)  incidental to or relating to the negotiations for or the granting of the loan or proposed loan or the guaranteeing or securing of the repayment thereof shall be illegal.

…

(3)  Subject to section 33A(5), it shall not be lawful for any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender to charge, recover or receive any sum as for or on account of any such costs, charges or expenses (other than stamp duties or similar charges)  or to demand or receive any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof.

(4)   If any money or money’s worth is directly or indirectly paid or allowed to or received by any person in contravention of this section, the amount or value thereof, to the extent of such contravention and notwithstanding any agreement to the contrary, may be recovered by the borrower from such person or, if such person is the money lender or a partner, employer, employee, principal or agent of the money lender or is in any way acting for or in collusion with him, may be set off against the amount actually lent (and that amount shall be deemed to be reduced accordingly)  or may be recovered by the borrower from such person or from the money lender.”

135.  Section 29(10)  states that:-

“(10)  Any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender who charges, recovers or receives any sum as for or on account of any costs, charges or expenses (other than stamp duties or similar charges)  referred to in section 27(3)  or demands or receives any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof commits an offence.”

136.  In Skyline Credit Ltd v Leung Hing Chung [2022] 4 HKLRD 561, Chu JA at §33 summarised the meaning of “collusion” as follows:-

“33. … As this Court held in Gain Wealth Global Credit & Investment Ltd v Chan Suk Fong [2020] 4 HKLRD 831, [49], collusion has a broad meaning under s.27(3)  and (4)  and Ever-Long Finance Ltd v Yeung Wah Lung was correctly decided. It would be sufficient for the lender and the intermediary to co-operate with each other to do or abstain from doing something with a view to facilitate the conclusion of the loan transaction against the borrower’s interest or otherwise to his prejudice. Further, this Court has held in K Cash Ltd v So Wang Fung [2021] 4 HKLRD 796, [20] that the meaning of collusion is simply that parties are playing the same game or acting in concert as held in HKSAR v Wong Kwok Wai, supra, [6] to [8] and [11].”

137.  In the present case, in support of his allegation, D1 relies on the following documentary evidence:-

(1)  A business card of “Lokson Management Consulting Co., Ltd.” (諾信管理顧問有限公司)  bearing the name “Mandy Chan”;

(2)  A receipt dated 25 July 2016 issued by “Lokson Sumptuous Asset Limited” (諾信豐盛資産有限公司)  acknowledging receipt of HK$209,000 from D1 for the “loan service fees” (“貸款服務收費”), noting that it included legal fees and financial charges (“已包括律師費及財務雜費”), and thanking D1 for choosing its services (“感謝閣下選用本公司之服務”);

(3)  A deposit advice from HSBC dated 29 July 2016 showing a deposit of HK$6,000 to the account of “Lokson S A Ltd”.

138.  However, these documents at best demonstrate that Ms Chan was affiliated with Lokson and that D1 engaged their services.  They fall short of establishing any relationship between P and Ms Chan or Lokson.   The fact that Ms Chan, as alleged by D1, asked him to apply for a loan from P does not evince any relationship, business dealings or collaboration between P and Ms Chan or Lokson.  Even on D1’s own account, the communications and arrangements on fees were made solely between him and Ms Chan, without P’s involvement.  Although Lokson’s receipt dated 25 July 2016 contains words “貸款服務收費” and “已包括律師費及財務雜費”, it cannot show that any payment made by D1 to Lokson was collected on P’s behalf or otherwise with P’s knowledge and consent.  The receipt also stated “感謝閣下 [D1] 選用本公司之服務”, which suggests that the payment was for services rendered by Lokson to D1.

139.  For reasons set out in Section D above, and taking into account the matters above, I accept P’s evidence that it had no knowledge of, or connection or business with, Ms Chan and/or Lokson at all material times.  I reject D1’s allegation to the contrary, including any assertion to the effect that Ms Chan said that the fees were collected for P.

140.  Further, I accept Mr Tang’s account that Ds attended DYWM’s office on 22 July 2016 with an unknown woman.  Mr Tang said she was Ds’ friend and he asked her to sit near the entrance.  I also accept Ms So’s account that no one accompanied Ds at P’s office on 22 July 2016.  These matters seem to contradict Ds’ claim that Ms Chan and her male colleague were present with them during the signing process at DYWM’s office and/or P’s office, which I reject.

141.  Moreover, although D1 asserts his suspicion in his Defence that the HK$200,000 paid to him was effectively returned to P through Ms Chan, he does not dispute that he received the cheque at P’s office and signed on a copy of it to acknowledge receipt.  In this regard, the following dictum by the Court of Appeal in Gain East Investment Ltd v Chan Po Wing [2022] HKCA 156 at §51 is, in my view, apposite:-

“51. … Quite apart from the fact that the defendant is bound by his pleaded case, the point is that having received the money as acknowledged by the defendant by the Receipt, how he then disbursed it, whether by payment to Sze as introduction fees or otherwise, is not a matter that can thereby establish ‘collusion’ between the plaintiff and Sze, in the sense that they cooperated with each other to do or abstain from doing something with a view to facilitating the conclusion of the loan transaction against the defendant’s interest or otherwise to his prejudice: Gain Wealth at §49.”

142.  For the foregoing reasons, I am of the view that there is no sufficient evidence to demonstrate that Ms Chan (of Lokson)  was P’s employee or was acting in collusion with P, or that they were otherwise playing the same game or acting in concert.  There is also no evidence indicating that the sum of HK$200,000 was returned to P through Chan.  D1’s defence that P was in breach of sections 27(3)  and 29(10)  of the MLO is therefore rejected.

143.  For completeness, even assuming D1’s defence were made out, it would, in the circumstances of this case, only entitle Ds to set off the sums allegedly paid to Ms Chan and/or Lokson (totalling HK$215,000 according to D1)  against the Loan under section 27(4)  of the MLO.  In other words, the Loan Agreement and the Legal Charge would remain enforceable.

E2.  D2’S DEFENCE

144.  As held in Section D1a above, I am unable to give any evidential weight to D2’s Defence.  Hence, her factual assertions contained therein cannot be relied upon as a foundation for any of the defences she advances.  Her claims that she was unaware of the nature of the documents she signed, that she was told they were “usual documents” or “procedural documents”, and that she did not receive any explanation or copies, are all inconsistent with the contemporaneous documentary evidence and the testimony of P’s witnesses, which I have accepted as credible and reliable.  Nevertheless, I shall proceed to consider D2’s defences below on the basis of the available evidence.

E2a.  Section 18 of MLO – failure to provide a note or memorandum

145.  D2’s first defence is that the Loan Agreement is unenforceable against her under section 18(1)  as P failed to give her any note or memorandum in writing of the Loan Agreement made in accordance with section 18(2)  of the MLO and personally signed by her.

146.  This defence is identical to D1’s first defence, which has already been discussed above.  For the same reasons set out in §§127-132 above, I reject D2’s first defence.

E2b.  Misrepresentation

147.  D2’s second defence is that the Loan Agreement and the Legal Charge should be rescinded by reason of (i)  D1’s Alleged Representation that the documents requiring D2’s signatures were about D1’s “some personal matters”, and (ii)  Mr Tang and Ms Chan’s 1^st and 2^nd Alleged Representations that the documents to be signed were “usual documents”.

148.  In Joytex Development Ltd v Super Homes Ltd [2018] HKCFI 2286 at §77, Deputy High Court Judge Alexander Stock SC gave a useful summary of the general principles on the law on misrepresentation as follows:-

“77. … (1)  Generally, an actionable misrepresentation requires a false statement of past or present fact, as distinct from a statement of opinion or intention; though a statement of opinion/intention or as to the future may entail an implied statement of fact.

(2)  Where there is a dispute as to the meaning conveyed, the court interprets the relevant words or conduct. The approach is objective, viewing the communication from the perspective of a reasonable person in the position of the representee. The test is whether: (a)  the words or conduct in fact led the representee to believe the alleged false fact; and (b)  it was reasonable for the representee to believe it from the words or conduct as he perceived them. In applying the test, the characteristics of the representee, including level of sophistication, are taken into account.

(3)  Where an implied representation is alleged, the question is what a reasonable person would have inferred was being impliedly represented by the representor’s words and conduct in their context.

(4)  The statement must have the character of one upon which the representee was intended and entitled to rely.

(5)  The representee must have in fact relied on the statement; though this can sometimes be inferred. The representation need not be the only or main cause of the decision to contract. It is generally sufficient that it be a cause (in other words, a material inducement).” (emphasis added)

149.  Upon considering the available evidence, I find that D1 did not, as alleged by D2, represent to her that the documents requiring her signatures were about D1’s “some personal matters” without any details of his alleged “personal matters” or the nature of documents she was required to sign. I find it more likely that D1 had at least told D2, as he stated in his oral evidence, that when she asked him what they were going out for, he told her that it was about “money and borrowing money”.

150.  Moreover, as held in §129 above, I accept P’s evidence and find that the documents were duly explained to Ds before signing.  Accordingly, even if D1 had made the D1’s Alleged Representation i.e. that the documents requiring D2’s signatures were about D1’s “some personal matters” (which has been rejected), I am not satisfied that D2 relied on such representation in signing the documents in question given the explanations provided by P prior to that.

151.  As also held in §140 above, I reject Ds’ assertion that Ms Chan and her male colleague were present with them during the signing process at DYWM’s office and P’s office.  Moreover, I accept Mr Tang’s evidence that Ds did not attend DYWM’s office on 23 July 2016 and hence there is no basis for Mr Tang and Ms Chan’s 2^nd Alleged Representation said to have been made on 23 July 2016.  In any event, in view of my finding that the documents were duly explained to Ds before signing, I reject D2’s case on Mr Tang and Ms Chan’s 1^st and 2^nd Alleged Representations.

152.  In the premises, D2’s defence based on misrepresentation fails.

E2c.  Undue influence

153.  D2’s third defence is that the Loan Agreement and the Legal Charge should be rescinded or set aside on the ground that her signing of the said documents was procured by undue influence of P through D1 over her.

154.  In Wing Hang Bank Ltd v Liu Kam Ying & Ors [2002] 2 HKC 57, Ma J (as he then was)  held at §§17-18 as follows:-

“17. Where third parties such as banks are involved and it is alleged that the relevant contract (in the present case a guarantee)  came about as a result of undue influence being exerted on the party sued thereunder, there are three questions that the court must deal with:

(1)  Has it been proved that the transaction was affected by undue influence in the first place?

(2)  Was the third party put on inquiry?

(3)  If the third party was put on inquiry, did he take reasonable steps to satisfy himself that there was no undue influence?

See: Royal Bank of Scotland v Etridge at p.1054 at para.101 per Lord Hobhouse of Woodborough.

18. Only if all three questions are answered in favour of the party being sued, would the defence succeed. …”

155.  In Bank of China (Hong Kong)  Ltd v Wong King Sing & Ors [2002] 1 HKLRD 358 at §34, Recorder Ma SC (as he then was)  expressed that:-

“34. I should preface the discussion of this defence [of undue influence] with the observation that, as with all aspects of the law, one has to apply a large degree of common sense to the matter. … it is to be borne in mind that the defence of undue influence is ultimately a simple concept. It has all to do with informed consent. Once a court forms the view that consent was freely given with full knowledge of the consequences of entering into the relevant transaction, that is the end of the matter, however improvident the transaction may objectively appear. The rationale for the defence of undue influence is to prevent the victimization of the complainant. It is there to protect people from being forced, tricked or misled in any way by others into entering into a disadvantageous transaction … As Lord Nicholls of Birkenhead said in Royal Bank of Scotland v. Etridge (No 2) [2001] 3 WLR 1021 at 1029 paragraph 8, the unacceptable conduct lies in ‘a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage.’”

156.  As also summarised by G Lam J (as he then was)  in Bank of China (Hong Kong)  Ltd v Wong Kam Ho [2014] 1 HKLRD 41 at §§25-27:-

“25. Undue influence is a doctrine of equity that enables the court to strike down a transaction where the intention to enter into it had been procured unconscionably. This may arise where the claimant had been overborne or coerced by another person, or where a person in whom the claimant had reposed trust and confidence abused that relationship in procuring the claimant’s consent. The forms that undue influence can take are infinitely varied and cannot be exhaustively set out, but they all result in the conclusion that the consent and intention of the claimant is so vitiated that it “ought not fairly to be treated as the expression of a person’s free will”: Etridge, supra, [7] per Lord Nicholls.

26. Whether or not a transaction was brought about by the exercise of undue influence is a question of fact.  The burden of proving this fact lies with the person who asserts it, that is to say, generally, the person who claims to have been unduly influenced.  As with other matters of fact, this question can be determined by the court by reference to direct evidence, such as the oral evidence of the person complaining of undue influence that she signed the document in question as a result of being subjected to “excessive pressure, emotional blackmail or bullying”, or by inference from other, indirect evidence.

27. What facts can and should be found by inference is a question that depends on the circumstances of each case.  The question is “whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence, that is to say, by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party”: Li Sau Ying v Bank of China (Hong Kong)  Ltd (2004)  7 HKCFAR 579, per Lord Scott NPJ [34]”.

157.  In the present case, D2’s defence based on undue influence cannot stand for the following reasons.

158.  First, D2 contends that P had notice that she is D1’s mother, by reason of which there was a relationship of trust and confidence between them affecting her judgment in relation to D1’s Alleged Representation.  However, as discussed above, I have rejected D2’s case on D1’s Alleged Representation and find that D1 had at least told her that the transaction was about “money and borrowing money”.  While D2 seeks to contend she and D1 had a relationship of trust and confidence between them, apart from D2’s case on D1’s Alleged Representation (which I have rejected), there is no suggestion of any abuse of the relationship, or that D1 victimised, forced, tricked, misled, overborne or otherwise coerced D2 such that her consent or intention was vitiated and ought not fairly to be treated as the expression of her free will.

159.  Second, D2 derived commercial benefit from the transaction under the Loan Agreement and the Legal Charge.  A substantial bulk of the Loan was used to repay the outstanding debt owed by her and D1 to Preamble, which had already commenced a mortgage action against them at the material time.  There were therefore genuine reasons for D2 to accept and consent to the terms of the Loan Agreement and the Legal Charge.  I reject D2’s assertion that the transaction was manifestly disadvantageous to her, or that it was not readily explicable by the relationship between D1 and D2.

160.  Third, as held above, I accept P’s evidence and find that the Loan Agreement and the Legal Charge were duly explained to Ds before signing.  I also find that Ds were given the opportunity to seek independent legal advice but declined to do so.  I reject D2’s assertions to the contrary.  For the reasons set out in §§54-58 above, I also reject D2’s allegation that P failed to satisfy itself that she had the mental capacity to understand the documents.

161.  In light of the above, I am of the view that D2’s decision to enter into the transaction and execute the Loan Agreement and the Legal Charge was freely and voluntarily made, that her consent was given with full knowledge of the consequences of entering into the transaction, and that her mind was not unduly influenced by D1 as alleged.

162.  As D2 fails to establish that the transaction was affected by undue influence in the first place, the other questions, such as whether P was put on inquiry and, if so, whether reasonable steps were taken to satisfy itself that there was no undue influence, do not warrant consideration.

163.  D2’s defence based on undue influence is therefore rejected.

E2d.  Non est factum

164.  D2 also relies on the doctrine of non est factum.

165.  In Keswani Soshila v Keswani Motiram [2022] 2 HKLRD 822, Chu JA set out the relevant legal requirements at §34 as follows:-

“34. For the defence of non est factum to apply, it has to be established that (i)  the defendant was under a disability, whether permanent or temporary; (ii)  the document he signed was fundamentally different from what he thought he was signing; and (iii)  he was not careless in appending his signature to the document: Saunders v Anglia Building Society [1971] AC 1004. The defendant bears a heavy burden of proof and he must establish each of the three components.”

166.  In Re Soetrisno Farida v Industrial and Commercial Bank of China (Asia) [2019] HKCFI 2756, Ng J also summarised the principles at §§14-16 as follows:-

“14. In Bank of China (Hong Kong)  Ltd v Fung Chin Kan & Another (2002)  5 HKCFAR 515 at [51], Litton NPJ affirmed:

‘ … the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood. …’ (emphasis added)

15. The “key elements” for a successful plea of non est factum have been summarised in Chitty on Contracts 33^rd Ed Vol 1 at para 3-049:

a. the belief of the signer that the person is signing a document of one character or effect whereas its character and effect were quite different;

b. the need for some sort of disability which gives rise to that state of mind;

c. the plea cannot be invoked by someone who does not take the trouble to find out at least the general effect of the document.

16.  There is a heavy burden of proof on the person who seeks to invoke this defence — it will be a rare case in which a person who does not suffer from a disability will be able to invoke non est factum when he has signed a document without checking to see what it is, or in what capacity he is signing it: Chitty on Contracts 33^rd Ed Vol 1 at para 3-056.”

167.  Having regard to the matters stated in §§54-58, 144, 149-150 and 160 above, I reject D2’s defence of non est factum.  There is no evidence of any mental disability or incapacity to understand the documents.  The documents she signed were not fundamentally different from what she believed she was signing.  Even assuming, on D2’s case, she signed merely because D1 mentioned “some personal matters” and nothing more, she did not ask any questions or seek to ascertain why her signatures were required.  In that event, she was clearly careless in signing without ascertaining at least the general effect of the documents.  She would also not be entitled to the defence of non est factum, for which the burden of proof is an onerous one.

168.  D2’s defence based on non est factum accordingly fails.

E3.  D3’S DEFENCE

169.  As held in Section D1b above, I am also unable to give any evidential weight to D3’s Defence.  His factual assertions contained therein, still less those which are not stated in his Defence and only made in his written closing submissions, cannot be relied upon as a foundation for any of the defences advanced by him.  Further, his claims that no one explained the documents to him, that he was not given any copy, and that he signed each and every time without knowing the contents, are all inconsistent with the contemporaneous documentary evidence and the testimony of P’s witnesses, which I have accepted as credible and reliable.  That said, I shall consider D3’s pleaded defences below on the basis of the available evidence.

E3a.  Section 18 of MLO – failure to provide a note/memorandum etc

170.  D3’s first defence is that the Loan Agreement is unenforceable on the ground that P failed to comply with section 18(1)  of the MLO.

171.  D3 asserts that a copy of the note or memorandum in writing of the Loan Agreement was not given to him. This is identical to D1’s first defence, which has already been discussed above.  For the same reasons set out in §§127-132 above, I reject D3’s assertion.

172.  D3 further alleges that a summary in the form prescribed under section 18(1)(b)  of the MLO was not provided to D3.  However, all three Ds signed the “Form of summary of provisions of the Ordinance to be included in or attached to a note or memorandum of a loan agreement”, which is in the form prescribed under Schedule 3 of the Money Lenders Regulations (Cap. 163A)  and complies with section 18(1)(b)  of the MLO. I find that this form of summary of provisions formed part of the Loan Agreement, a copy of which was provided to Ds as found earlier above.

173.  D3 also claims that P failed to comply with section 18(1)  because no document or copy was provided to him at or after the time of signing.  In view of my finding that a copy of the Loan Agreement (which included the memorandum and the form of summary of provisions as required by section 18(1))  was duly provided, I also reject this complaint.

174.  Thus, D3’s defence based on section 18(1)  of the MLO fails.

E3b.  Undue influence

175.  D3’s second defence is that the Loan Agreement and other documents signed by him are null and void as he did so under the undue influence of, and upon “being exposed to the attentions” of D1, Mr Tang, Ms So and/or Ms Chan and her male colleague.

176.  I reject this defence for the reasons set out in §§65-67, 151 and 169 above and for the following reasons.

177.  First, while D1 is his father, there is no suggestion, still less any objective evidence, that D3 reposed trust and confidence in D1 such that D1 was in a position to influence him in entering into the transaction.  There is also no evidence of any abuse of the relationship, or that D1 victimised, forced, tricked, misled, overborne, or otherwise coerced D3 such that his consent or intention was vitiated and ought not fairly to be treated as the expression of his free will.

178.  Second, as to Mr Tang and Ms So, they were only representing P in handling the execution of the documents. Their role was to explain the documents and to witness the signatures.  For the reasons set out in Section D above, I find that the documents were duly explained by them to Ds and that D3 was also able to understand their explanations given in Cantonese.  I do not find that there was any coercion, excessive pressure or emotional blackmail by any of the individuals named by D3.

179.  In the premises, I am of the view that D3’s decision to enter into the transaction and execute the documents in question was also freely and voluntarily made, that his consent was given with full knowledge of the consequences, and that his mind was not overborne by any of the individuals he alleges.

180.  As D3 fails to establish that the transaction was affected by undue influence in the first place, the other questions, such as whether P was put on inquiry and, if so, whether reasonable steps were taken to satisfy itself that there was no undue influence, do not arise for consideration.

181.  D3’s defence based on undue influence is therefore rejected.

F.  DISPOSITION AND COSTS

182.  For the above reasons, P’s claim based on the Loan Agreement and the Legal Charge succeeds and judgment is entered in favour of P.  I make the following order:-

(1)  D1 and D2 do deliver vacant possession of the Property;

(2)  Ds do pay P a sum of HK$4,864,301.92 together with interest at 15.6% per annum from 22 October 2016 until payment.

183.  Costs should follow the event.  P asks for costs to be assessed on an indemnity basis by reason of the provisions in the Loan Agreement and the Legal Charge (§§16(8)  and 20(5)  above).  It is well-established that where a contract provides for costs to be payable on an indemnity basis, it provides the starting point for the court’s discretionary exercise and the court should be slow to disturb the parties’ agreement: Bank of China (Hong Kong)  Ltd v Twin Profit Ltd (2012)  15 HKCFAR 560 at §§19, 21 (Ribeiro PJ).  Having reviewed the provisions relied upon by P, I agree with P that it should be entitled to have indemnity costs. 

184.  Accordingly, I make an order nisi that Ds do pay the costs of this action to P, to be taxed on an indemnity basis if not agreed, with certificate for two counsel.

185.  The above costs order nisi shall become absolute unless an application to vary the same is made within the next 14 days.