HCA 4216 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4216 OF 1998

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J U D G M E N T

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1. This is an appeal by the Defendant from an order of the Master, granting conditional leave. The claim in this action is by the Plaintiff, Get Nice Finance Company Ltd, a licensed money lender against the Defendant for an alleged loan connected with securities in relation to which the Plaintiff said there is an unpaid outstanding amount. Get Nice Finance Company Ltd is owned by the same shareholders as a Get Nice Investment, the stock broking company. It is clear from the evidence that the Plaintiff, Get Nice Finance is really the finance arm of the Get Nice stockbroker company.

2. The Defendant became a margin account client of what I will call “Get Nice Group”, that is the finance company and the stock broker company. Mr. Chu was the person in Get Nice Group who dealt with the Defendant and looked after the margin account. The case of the Defendant is that strict instructions were given by him to Mr.Chu as to the operation of the margin account and the loss now suffered by the Plaintiff was as a result of Mr. Chu of Get Nice Group, not complying with the mandate. That is the 1st triable issue. It is possible that was what happened. I can see no reason why unconditional leave to defend should not be given on that ground alone.

3. Mr. Kwan for the Defendant, however, has a far more formidable point in the shape of the breach of section 18(1) Money Lenders Ordinance. It is not in dispute that the Plaintiff is a licensed money lender and therefore in relation to a loan transaction, must comply with section 18(1) and (2) of the Ordinance. The point raised by Mr. Kwan is that no copy of the Loan Agreement had been given to the Defendant. I think this is a matterwhich is not capable of dispute by the Plaintiff, because the contemporaneous documents show that in fact the Defendant not only had to chase for that document but had to complain to the Securities and Future Commission of the non-receipt of the document. Eventually after complaint, the copy of the Loan Agreement was given to the Defendant. There can be no doubt that the second limb of section 18(1)(a) had not been complied with, that is the giving of the document to the borrower. The burden then is on the Plaintiff to satisfy the court under section 18(3), which says notwithstanding the breach of subsection 1, there is whether court can be satisfied that in all the circumstances, it would be inequitable that any agreement not complying with the section should be held not to be enforceable; then the court may have the power to enforce to such agreement. The difficulty for Miss Cheung who has argued the case ably before me is that this is an Order 14 Summons, where I do not have all the circumstances before me, and where that issue was not even properly addressed in affidavits. Mr. Justice Sears in the case cited to me of Shum Yip Wa Sheng v. Jing Far expressed the wholly obiter view that in some cases Order 14 can be obtained. That, of course, was in the context of a trial. In his usual robust manner, Mr. Justice Sears in attempting to resolve the loan dispute took the robust view. However, in most cases, under Order 14 it will be difficult for the Plaintiff to persuade the court that there can be no possibility of a defence by the Defendant to a loan enforcement where there had been admitted breach of section 18(1). So, I have no doubt that under this second limb of section 18(1)(a), the non-­delivery of the document does gives rise to unconditional leave to defend.

4. The matter however goes further because at the hearing, the Court raised the question of the interest rate not being recorded in the Loan Agreement. What happens is that the Plaintiff is seeking interest at 16% saying that was the agreed interest rate. The agreement however shows the interest at prime plus blank %, so there is no doubt to my mind that there was a breach of section 18(2)(i), where it is required that the memorandum should show the rate of interest charged on the loan expressed at the rate of percentage per annum. So this is a breach of section 18(1)(a), the first limb, that is to say the memorandum must express all the information required under section 18(2). Of course, section 18(3) can also come into operation but then the burden again is on the Plaintiff, although all the circumstances in relation to this breach might be somewhat different from all the circumstances under the second limb’s breach of no document being given. The fact is that notwithstanding that this point had not been directly raised by the Defendant, this is a matter that the court is now aware of. It is a criminal offence under section 29 and I do not see how in these circumstances, I can possibly give summary judgment to the Plaintiff in relation to that breach.

5. There is, finally, also a minor point raised by Mr. Kwan that there had been no written demand for the payment, which is a condition precedent to liability.

6. My conclusion is that conditional leave should not be given and the Defendant is entitled to unconditional leave to defend. The Master’s order must be varied and I allow the appeal with costs to the Defendant.

7. In relation to the costs below, after having heard argument, I order that the costs below be varied so that the proper order is that the costs of the Order 14 hearing before the Master be costs in the cause.