Universe Link Industries Ltd. and Another v. Liggars Ltd.

CACV 182/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 182 OF 1998

(On appeal from HCMP No. 4001/1997)

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J U D G M E N T

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Godfrey, J.A. :

1. This is an appeal from an order of Mr. Robert Ribeiro, SC, a Recorder of the Court of First Instance of the High Court, made on 18 June 1998. The parties to the proceedings before the judge were Universal Link Industries Limited ("the lender") as 1st plaintiff, Guangdong Finance Company Limited (the "sub-mortgagee") as 2nd plaintiff, and Liggars Limited ("the borrower") as defendant.

2. The proceedings were proceedings to enforce a mortgage of certain property in Des Voeux Road West, Hong Kong. The lender claimed payment of the principal and interest due from the borrower, and possession of the property. (The sub-mortgagee plays no relevant part in these proceedings.)

3. The borrower's defence consists of an allegation that the lender is a "money lender" for the purposes of the Money Lenders Ordinance. Cap. 163. It is common ground that the lender is not registered as a "money lender". So the question is : Is the lender here a "money lender" for present purposes?

4. I must at the outset refer to a number of provisions in the Ordinance to which counsel for the appellant helpfully drew our attention.

5. Section 2 of the Ordinance contains definitions. I shall refer to two of these. First, the definition of "loan" :

"'loan' includes advance, discount, money paid for or on account of or on behalf of or at the request of any person, or the forbearance to require payment of money owing on any account whatsoever, and every agreement (whatever its terms or form may be) which is in substance or effect a loan of money, and also an agreement to secure the repayment of any such loan, and 'lend' and 'lender' shall be construed accordingly;"

6. It is to be observed that this definition of "loan" does not include a reference to interest upon any such loan. (Interest is indeed separately defined.)

7. Secondly, the definition of "money lender" :-

"'money lender' means every person whose business (whether or not he carries on any other business) is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business, but does not include -

(a) a person specified in Part 1 of Schedule 1; or

(b) as respects a loan specified in Part 2 of Schedule 1, any person who makes such loan;"

8. Schedule 1 is divided into two parts. Part 1 lists "Exempted Persons". Part 2 lists "Exempted Loans". We are concerned here with Part 2. Part 1 lists persons who, although otherwise carrying on the business of a "money lender" as defined in the Ordinance are to be treated as exempted from the provisions of the Ordinance.

9. Part 2 refers to exempted loans. These include :-

"2. A loan made to a company secured by a mortgage, charge, lien or other encumbrance -

(a) registered, or to be registered, under the Companies Ordinance (Cap. 32); or

(b) which would, in the case of a company referred to in paragraph (b) or (c) of the definition of 'company' in section 2(1), be able to be registered under that Ordinance if that company were a company referred to in paragraph (a) of that definition."

10. The parties are agreed that the loan here was "a loan made to a company secured by a mortgage".

11. Our attention was also drawn to a number of other provisions of Ordinance. The first of these was section 23. Section 23 provides as follows :-

"23. Loan etc. not recoverable unless money lender licensed

No money lender shall be entitled to recover in any court any money lent by him or any interest in respect thereof or to enforce any agreement made or security taken in respect of any loan made by him unless he satisfies the court by the production of his licence or otherwise that at the date of the loan or the making of the agreement or the taking of the security (as the case may be) he was licensed:

Provided that if the court is satisfied that in all the circumstances it would be inequitable if a money lender who did not satisfy it that he was licensed at the relevant time was thereby not entitled to so recover such money or interest or to enforce such agreement or security, the court may order that the money lender is entitled to recover such money or interest or to enforce such agreement or security to such extent, and subject to such modifications or exceptions, as the court considers equitable."

12. Secondly, section 24(1), which reads :-

"24(1) Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an office."

13. Thirdly, section 25(1), which provides :

"15(1) Subject to section 24(2), where -

(a) proceedings are taken in any court by any person (whether a money lender or not) for the recovery of any money lent or the enforcement of any agreement or security in respect of any loan; and

(b) subject to subsection (3), there is evidence which satisfies the court that the transaction is extortionate,

the court may reopen the transaction ....."

14. Fourthly, section 33A, which provides for the making of general exemptions in relation to classes of persons "(whether money lenders or not)".

15. And fifthly, section 33B, which provides for specific exemptions for persons "(whether a money lender or not)".

16. Against this statutory framework, the Recorder had to decide whether the lender was entitled to recover the principal and interest due under its security. (The sums involved are considerable.) The view of the Recorder was that the lender was entitled so to recover. He rejected the contention that the lender's right to recover principal and interest was excluded by the provisions of the Ordinance to which I have already referred.

17. The primary case for the appellant on this appeal is that the words in the definition section referring to a "money lender", on the face of it, include every person whose business is that of a money lender. It is accepted that the definition excludes, in respect of a loan specified in Part 2 of Schedule 1, any person who makes such a loan. But it is said that the exclusion only applies in relation to somebody who is not a money lender.

18. There are three possible constructions of the words "any person" in the definition of "money lender". One is that the words "any person" apply to any person whether a money lender or not; but this cannot possibly be the right construction. When the draftsman wanted to include in the ambit of the expression any person, whether a money lender or not, he went out of his way expressly to say so. The other two possible constructions are (1) that exclusion applies to persons who would otherwise be money lenders; and (2) that the words refer only to any person who was not a money lender under the definition.

19. For my part, I have no hesitation in preferring, as did the judge, the first of those two constructions. It seems to me quite plain that the definition is designed to take out of the ambit of the provisions of the Ordinance a person or a loan who or which would otherwise be caught by those provisions. Here, we have a loan by a lender who, but for the fact that that loan is specified in Part 2 of Schedule 1 would be a money lender and therefore unable to recover the loan. The exclusion is plainly designed to protect a lender.

20. I would therefore reject the appellant's primary case.

21. The alternative case of the appellant (unheralded by its Notice of Appeal) is that by virtue of section 23 to which I have already referred, the lender here may not be a "money lender" as regards the loan, but he remains a money lender as regards the interest on it, so that any claim by the lender must be limited to principal only.

22. I see no warrant for that construction. It would produce, to my mind, a bizarre result. Why should a money lender be able to recover principal but not interest? The whole Ordinance is designed to stop a money lender recovering anything unless he has complied with the Ordinance or unless the court shows him mercy by making an order pursuant to the proviso to section 23.

23. For these reasons, we have, in my judgment, no option but to dismiss this appeal; and I would so order.

Leong, J.A.:

24. I agree. For my part, I would add this. S.2(b) of the Money Lenders Ordinance means a person who makes an exempted loan specified in Part 2 of Schedule 1 will not be considered as a money lender as regards that loan, whether or not he carries on a business of making loans, etc. It is not disputed that the loan is an exempted loan. The respondent is therefore not a money lender within the Money Lenders Ordinance. That being the case s.23 of that Ordinance does not apply.

25. For these reasons the appeal should be dismissed.

Rogers, J.A. :

26. I agree.

27. I would also say that I have no doubt that the judgment given by the Recorder below was correct.

28. The only new argument which has been raised has been in respect of Section 23. For my part, I cannot see how that argument can apply. The Section starts with the words "No money lender shall be entitled .....". Clearly, if this is a "fall back" argument and it is put on the basis that the Plaintiffs are not money lenders because they fall within the exception (b) in the definition of "money lenders", then Section 23 can have no application.

29. But, in any event, it is a matter which, in my view, is incomprehensible that a person who has lent a loan, which is recoverable, would not be able to recover interest because for some reason he would become a money lender of the interest. That is clearly not the intention of Section 2 nor Section 23.