KAISER FINANCEING COMPANY LTD v. CHEN JIARONG

HCA 1998/2023

[2026] HKCFI 851

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1998 OF 2023

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BETWEEN

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DECISION

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A. Introduction

1.  By summons dated 21 February 2025, the Plaintiff applied for summary judgment against the Defendant.

2.  On 29 May 2025, Master Adrian Wong granted unconditional leave to defend in favour of the Defendant[1].

3.  The Plaintiff took out a notice of appeal on 9 June 2025.

4.  It is trite that an appeal from a master’s decision to a judge in chambers is a de novo hearing, and the judge will deal with the matter in question as if it came before him or her for the first time: see Hong Kong Civil Procedure (2025) at para 58/1/2.

B. Material Background

B1 The Parties

5.  The Plaintiff is a registered money lender under the Money Lenders Ordinance (Cap 163).

6.  Mr Yan Kam Cheong (“Mr Yan”) is the sole shareholder and sole director of the Plaintiff.

7.  The Defendant is a businessman.

B2 The Plaintiff’s Case

8.  By a loan agreement dated 4 July 2017 (the “Loan Agreement”), the Plaintiff agreed to lend a principal sum of HK$148,000,000 to the Defendant at the interest rate of 12% per annum.

9.  Pursuant to the Defendant’s instruction on 4 July 2017, the Plaintiff paid the said principal sum of HK$148,000,000 into a bank account owned by Jubilee Prestige Investment Ltd (“Jubilee”).

10.  Under the terms of the Loan Agreement, the said sum of HK$148,000,000, together with the interest accrued thereon, was repayable on 3 July 2018.

11.  The Defendant did not make any payment on 3 July 2018.

12.  On 20 October 2023, the Plaintiff, through solicitors, issued a demand letter requesting the Defendant to pay the entirety of the outstanding indebtedness within 7 days. However, the Plaintiff still failed to make any payment.

13.  As of the day when the present action was commenced (ie 12 December 2023), the Defendant was indebted for (i) an outstanding principal sum of HK$148,000,000 and (ii) contractual interest of HK$113,960,000.

B3 The Defendant’s Case

Sham

14.  The Defendant asserts that the Loan Agreement was a sham agreement, and the parties did not have an intention that the same should be enforceable.

15.  According to the Defendant, he has known the Plaintiff’s Mr Yan since 2013, and they had a series of commercial dealings with each other.

16.  In gist, it is the Defendant’s case that he and the Plaintiff never intended that the advance of HK$148,000,000 in favour of Jubilee on 5 July 2017 would be repayable as a loan. Instead, this payment was part of the so-called “Acquisition Payment Arrangement”, whereby (i) the Defendant and his associates arranged funds to Mr Yan (and/or Mr Yan’s associates) in the Mainland and (ii) in return, the Plaintiff arranged the sum of HK$148,000,000 to be paid to the Defendant’s associate in Hong Kong.

17.  I do not intend to dwell on the Defendant’s dealings with Mr Yan in relation to UKF (Holdings) Ltd and Great Roc Capital Securities Ltd, which are explained in length in the Defendant’s defence and affirmations in opposition. For present purposes, it suffices to say that according to the Defendant’s case, the background relating to the sum of HK$148,000,000 is as follows:-

(1) In mid-2017, the Defendant and his associates intended to acquire additional shareholding in a company named Meitu Inc, whose shares were listed on the Hong Kong Stock Exchange (the “Meitu Investment”). This was to be done via Jubilee.

(2) For the purpose of effectuating the Meitu Investment, it was necessary for the Defendant to procure funds in the Mainland and then made available the same in Hong Kong.

(3) In the circumstances, upon liaising with his agent or middleman, namely Mr Simon Yiu Yu Cheung (“Mr Siu”) (who had a close connection with the Plaintiff and/or Mr Yan), it was decided that the parties would resort to the Acquisition Payment Arrangement. Funds were first paid into accounts designated by the Plaintiff, Mr Yan and/or their associates. Afterwards, the Plaintiff would procure the payment of the sum of HK$148,000,000 in favour of Jubilee.

18.  In the premises, the Defendant contended that contrary to the impression created by the contents of the Loan Agreement, no loan had been advanced to him, and the sum of HK$148,000,000 was, in reality, either set off or settled by the prior payments procured by the Defendant in the Mainland.

Section 18(1) of the Money Lenders Ordinance

19.  In the alternative, the Defendant contended that even if the Loan Agreement were not a sham, contrary to the requirement under section 18(1) of the Money Lenders Ordinance, the Plaintiff has failed to make and/or provide “a note or memorandum in writing” for him to sign, and, as such, the Loan Agreement is unenforceable.

C. Legal Principles on Summary Judgment

20.  In Guanghua SS Holdings Limited v Lim Yew Cheng & Another [2022] HKCFI 1052 at para 13, Peter Ng J set out a helpful and succinct summary of the proper approach to applications for summary judgments: -

(1) The order 14 machinery works on the basis that if the plaintiff’s application is properly constituted, it is prima facie entitled to judgment unless the defendant shows cause to the contrary.

(2) The mere assertion in an affidavit of a given situation by the defendant responding to an application for summary judgment does not, ipso facto, justify granting leave to defend.

(3) The burden is on the defendant to show a real or bona fide defence or some other reason for a trial. The defendant must satisfy the Court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence.

(4) In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible. Rather, the court must look at the whole situation.

(5) In assessing the credibility of the defendant’s factual case, while the court will not embark upon a mini-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate.

(6) If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so.

(7) If the defendant’s evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.

D. Deliberation: the Sham Defence

21.  As Diplock LJ (as Lord Diplock then was) pointed out in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802C-F, a sham in law means:

“… acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities … that for acts or documents to be a ‘sham,’ with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.” (emphasis added)

22.  It has been suggested that the court would not lightly find a transaction to be a sham as there is a strong presumption that the parties intended to be bound by the provisions of the agreements into which they entered: see A v A [2007] 3 FLR 467 at para 53 (per Munby J, as he then was).

23.  However, as Arden LJ pointed out in Hitch v Stone [2001] STC 214 at paras 64 and 64, in considering whether a document is a sham, the court will conduct a “careful analysis of the facts”, and the court “is not restricted to examining the four corners of the documents. It may examine external evidence. This will include the parties’ explanations and circumstantial evidence, such as evidence of the subsequent conduct of the parties”. After all, the court is concerned with the “subjective intention” of the parties.

24.  Having considered the inherent probabilities, the objective circumstances, the parties’ conduct and evidence, and counsel’s submissions, I am of the view that it is arguable that the Loan Agreement was a sham, and the Defendant’s case, though imperfect, is not incredible.

25.  First of all:-

(1) In their submissions, Mr Jose Maurellet SC, leading Mr Yip Chi Ho and Mr Charlie Liu, (for the Defendant) emphasized the fact that whilst the purported indebtedness under the Loan Agreement was due and repayable on 3 July 2018, there was no demand for repayment at all until 20 October 2023. There was a delay exceeding 63 months.

(2) Mr Maurellet’s contention was compelling.

(3) It is the Plaintiff’s case that it granted the loan of HK$148,000,000 to the Defendant in the course of carrying on its business of moneylending. It is inconceivable that a money lender who was involved in a genuine moneylending transaction would be contented to leave a very substantial amount of outstanding indebtedness exceeding HK$165,760,000[2] overhanding in the air for a period of 63 months.

(4) I do not lose sight of Mr Yan’s explanations that the inaction and/or delay were ascribed to, inter alia, (i) his good relationship with the Defendant’s father, (ii) his business dealing with the Defendant, (iii) his intention of preserving good relationship, (iv) the fact that Defendant’s financial position became precarious in late 2023, and (v) the Defendant’s willingness to sign a confirmation of balance on 28 February 2021.

(5) Insofar as explanations (i), (ii), (iii), and (iv) are concerned, I am not of the view that they are so cogent or compelling that the Defendant’s case should be rejected summarily on affidavits. In my view, the court can only form a conclusive view as to whether Mr Yan’s explanations are credible at trial upon hearing his live evidence, which would be tested during cross-examination.

(6) As regards explanation (iv), as will be elaborated in paragraph 31 below, the confirmation of balance dated 28 February 2021 does not even refer to the Loan Agreement at all, and it is, to say the least, arguable that the same cannot constitute an admission that the Defendant was indebted under the Loan Agreement. In any event, the inaction on the part of the Plaintiff during the 31-month period from 3 July 2018 to 28 February 2021 was still inexplicable.

(7) In my view, it is, to say the least, highly arguable that all along, the Plaintiff and/or Mr Yan did not treat the Defendant as being indebted under the Loan Agreement. Thus, the objective circumstances support, and are consistent with, the Defendant’s case that the Loan Agreement was a sham and that the sum of HK$148,000,000 had been set off or settled pursuant to the Acquisition Payment Arrangement.

26.  Second:-

(1) There is incontrovertible documentary evidence showing that on 30 July 2018, the Plaintiff and the Defendant entered into another loan agreement (the “Other Loan Agreement”), whereby the Plaintiff borrowed a sum of HK$68,000,000 from the Defendant at the interest rate of 2% per month.

(2) It is not in dispute that the transaction under the Other Loan Agreement was genuine.

(3) According to the Plaintiff’s case, as of the date of the Other Loan Agreement (ie 30 July 2018), the Defendant had already defaulted on the Loan Agreement. As mentioned, the principal indebtedness of HK$148,000,000, together with the interest accrued thereon, was repayable on 3 July 2018. However, not a penny was paid.

(4) Mr Maurellet submitted that had the Loan Agreement been genuine, it was unlikely that the Plaintiff would have granted another substantial loan of HK$68,000,000 in favour of the Defendant (who was a defaulting debtor according to the Plaintiff’s case).

(5) I see the force of Mr Maurellet’s submissions.

(6) More importantly, in stark contrast with the Plaintiff’s inaction about the transaction under the present Loan Agreement, the Plaintiff diligently took action in regard to the indebtedness under the Other Loan Agreement.

(7) As evidenced by the contents of a deed of settlement dated 21 April 2022 executed by the Plaintiff and the Defendant, it appears that (i) as of 21 April 2022, the Plaintiff had repaid part of principal indebtedness under the Other Loan Agreement, and the outstanding indebtedness at the time was HK$50,000,000; and (ii) the parties had previously executed a series of settlement deeds on 19 September 2019, 23 September 2020, and 29 April 2021, and the Plaintiff repeatedly granted time extension for the Defendant to make repayment. It is not in dispute that indebtedness under the Other Loan Agreement was repaid eventually[3].

(8) The aforesaid matters show that like any other money lender who carries on a business of moneylending, the Plaintiff did not have the habit of ignoring the outstanding indebtedness that it was entitled to recover.

(9) Even if (as Mr Yan alleged) the Plaintiff had concerns as to (i) the good relationship with the Defendant’s father, (ii) the business dealing between Mr Yan and the Defendant, (iii) the need to preserve goodwill, and (iv) the Defendant’s precarious financial position after late 2023, there was still no reason why the Plaintiff did not seek to enter into settlement deeds with the Defendant (thereby forcing him to admit liability) and to request the Defendant to pay, at least, part of the outstanding indebtedness. It appears that these were what the Plaintiff did in regard to the transaction under the Other Loan Agreement. In contrast, throughout the 63-month period from 3 July 2018 to 20 October 2020, no action was taken at all in regard to the present transaction under the Loan Agreement.

(10) In my view, it is, to say the least, highly arguable that the Plaintiff’s inaction and latitude were inexplicable. It is, to say the least, highly arguable that the inaction and latitude were ascribed to the fact that due to the Acquisition Payment Arrangement, the Plaintiff and/or Mr Yan did not treat the Defendant as being indebted under the Loan Agreement.

27.  Third:-

(1) The Defendant has produced a WeChat message from Mr Yan on 20 May 2020. In this WeChat message, Mr Yan indicated to the Defendant that upon carrying out some calculation, it was revealed that he owed the Defendant an outstanding sum of 2 million, and there would be interest thereon (算了出來，帳面上欠你二百萬再加利息回報)[4].

(2) It is the Plaintiff’s case that as of 3 July 2018, the Defendant had already owed a sum of 165,760,000[5] under the Loan Agreement, and the Defendant had not repaid a penny.

(3) Had the Defendant owed the Plaintiff a sum exceeding 165,760,000, Mr Yan (who wholly owned and controlled the Plaintiff) would not have indicated that he owed the Defendant a sum of 2 million as of 20 May 2020.

(4) In my view, it is highly arguable that Mr Yan’s WeChat message on 20 May 2020 supports, and is consistent with, the Defendant’s case that pursuant to the Acquisition Payment Arrangement, the parties had been conducting a setting off exercise on a continuous basis. This was why Mr Yan would carry out the calculation exercise and indicate that he owed the Defendant a net sum of 2 million.

(5) For reasons best known to himself, Mr Yan has chosen not to put forward any explanation in regard to his WeChat message on 20 May 2020. In my view, Mr Yan’s silence speaks volumes. This is a matter to be further investigated at trial.

28.  Fourth, there is an unusual feature in the Loan Agreement.

(1) The preamble of the Loan Agreement reads as follows:-

“This Loan Agreement made as of and dated for reference purposes this 4 July 2017” (emphasis added)

(2) The phrase “for reference purposes”, which saliently appears at the top of the first page of the Loan Agreement, is unusual. It should not have been included in a contractual document that is meant to be legally binding and enforceable. If the drafter intended that the Loan Agreement was made “for reference purposes” only, this would support the Defendant’s case that the same was not meant to be legally enforceable.

(3) I appreciate that one can argue that the phrase “for reference purposes” only refers to the date of the Loan Agreement. However, in this scenario, it is still puzzling as to why the date of the Loan Agreement is “for reference purposes” only. The doubt and uncertainty surrounding the Loan Agreement cry for an explanation, and there is an impression that the Loan Agreement was not prepared in a serious manner.

(4) In my view, the contents of the Loan Agreement and the circumstances in which it was prepared are matters that should be scrutinized by the court at trial.

29.  Fifth, the Defendant is able to produce some contemporaneous documentary evidence to substantiate his assertion that the Meitu Investment was real and that the Acquisition Payment Arrangement was carried out. Although the Defendant’s documentary evidence is far from perfect, I am not of the view that the Defendant’s case is so incredible that he should be deprived of his days in court:-

(1) Insofar as the Meitu Investment is concerned, the disclosure of interest forms show that in July 2017, the Defendant did acquire additional interests in Meitu Inc:-

(a) On 27 July 2017, the Defendant, via a company named Kingkey Enterprise Holdings Ltd (of which he is a 50% shareholder), acquired 102,500,000 shares in Meitu Inc at the average purchase price of HK$8.5002.

(b) On 17 July 2017, Jubilee (ie the recipient of the sum of HK$148,000,000), via a wholly owned subsidiary company, acquired 37,500,000 shares in Meitu Inc at the average purchase price of HK$10.5 per share.

(2) As regards the Acquisition Payment Arrangement:-

(a) As mentioned, the Defendant has produced a WeChat message from Mr Yan on 20 May 2020, which is a piece of contemporaneous evidence showing that the parties had conducted a setting off exercise.

(b) Furthermore, the Defendant also produced some bank records showing that on 4 July 2017, sums totaling RMB70,000,000 were transferred from various entities (which are said to be associated with the Defendant himself) to an entity (which is said to be designated by Mr Yan and/or the Plaintiff).

(3) The timing in respect of the payment of the aforesaid aggregate sum of RMB70,000,000 is consistent with the timing in respect of the Meitu Investment. However, it is obvious that the amount of RMB70,000,000 does not tally with the sum of HK$148,000,000.

(4) In this connection, it is the Defendant’s explanation that due to lapse of time and the fact that his staff who handled the matter had resigned, he had difficulty in retrieving the relevant documentary evidence, and the search process is still ongoing.

(5) The Defendant’s explanation may not be wholly satisfactory. However, having considered all the matters surrounding the transaction (including the matters canvassed in paragraphs 25 to 28 above), I am not of the view that the court is in a position to conclude that the Defendant’s case is concocted. At least, the Defendant’s case is supported by some contemporaneous documentary evidence and is consistent with the objective circumstances.

(6) For completeness, I do not lose sight of the fact that there is no direct evidence showing that the payers and the recipient of the aforesaid sum of RMB70,000,000 were associated with the Defendant and Mr Yan/Plaintiff. However, the Acquisition Payment Arrangement (which was said to be arranged by Mr Simon Yiu as a middleman) was an informal underground arrangement. This kind of arrangement often involves intermediates, who have cash offshore but not onshore (or vice versa). These intermediates, who are lined-up by the middlemen, are often strangers to the parties who are involved in the transaction. Having considered the objective circumstances and the inherent probabilities, I am unable to conclude that the Defendant’s case is wholly incredible.

30.  Sixth:-

(1) Mr Bernard Man SC, leading Mr Bryan Lee and Mr Thomas Yeon, (for the Plaintiff) pointed out that the Defendant was a seasoned businessman. They then went on to contend that had the Defendant’s assertions been true, he would not have signed the Loan Agreement at all.

(2) In this connection, it is the Defendant’s explanation that when the middleman, ie Mr Simon Yiu, assisted him in making funding for the purposes of the Meitu Investment, he was arranged to sign various documents, and the process involved some intermediaries. It appears that he did not pay attention to the documents that were signed, and he could not even recall signing the Loan Agreement.

(3) Having holistically considered the full circumstances surrounding the transaction (including the matters canvassed in paragraphs 25 to 29 above), I am not of the view that the court should summarily reject the Defendant’s explanation on affidavits.

(4) In my view, it is arguable that Mr Yan/the Plaintiff and the Defendant intended to deal with each other pursuant to the Acquisition Payment Arrangement. As such, whilst Mr Yan and/or the Plaintiff prepared the Loan Agreement to create a pretense for advancing the sum of HK$148,000,000 to Jubilee, the Defendant, assuming that the documents to be executed were for the purpose of effectuating the Acquisition Payment Arrangement (which was informal in nature), did not pay attention.

(5) I appreciate that there is room for criticizing the Defendant’s explanation. However, the question of credibility is plainly a matter for trial. The court is only in a position to form a conclusive view on the credibility of the Defendant’s explanation upon hearing his live evidence at trial.

31.  Seventh:-

(1) Mr Man also relied on the confirmation of balance signed by the Defendant on 28 February 2021. There, the Defendant acknowledged that as of 28 February 2021, he owed the Plaintiff a sum of HK$208,000,000.

(2) In this connection, it is the Defendant’s explanation that he did not know what the sum of HK$208,000,000 was about, and upon seeking confirmation with Mr Simon Yiu, he was led to believe that the balance was concerned with the transaction in respect of UKF (Holdings) Ltd.

(3) Having considered the full circumstances surrounding the case (including the matters canvassed in paragraphs 25 to 30 above), I am not of the view that the court should summarily reject the Defendant’s explanation on affidavits.

(4) As pointed out by Mr Maurellet, the confirmation of balance does not even refer to the Loan Agreement at all. This is consistent with the Defendant’s explanation.

(5) Furthermore, as pointed out by the Master, the amount of outstanding indebtedness under the Loan Agreement as of 28 February 2021 (ie approximately HK$212.8 million) does not tally with the amount of outstanding indebtedness as stated in the confirmation of balance (ie HK$208,000,000). In this connection, one must not lose sight of the fact that as evidenced by the deed of settlement dated 21 April 2022, the Defendant further owed the Plaintiff a substantial sum of no less than HK$50,000,000 under the Other Loan Agreement[6].

(6) Put simply, it is uncertain as to how the figure in the confirmation balance came about, and there are more questions than answers. Furthermore, having said that the Loan Agreement is not even referred to at all, it is also, to say the least, highly arguable that the confirmation of balance does not constitute an admission on the part of the Defendant that he was indebted to the Plaintiff under the Loan Agreement.

32.  Eighth:-

(1) Mr Man also took issue with the fact that the Defendant’s defence had undergone substantial changes after counsel was engaged.

(2) I accept that if an assertion is not put forward at the first opportunity, this may cast doubt on the credibility of such an assertion.

(3) However, depending on the circumstances, an amendment could be ascribed to legal representatives’ failure to formulate their client’s case properly and/or failure to appreciate the legal significance of the factual matters in question.

(4) This is plainly a matter to be investigated at trial. The court cannot dogmatically reject an assertion simply because it was not raised at the first opportunity.

(5) In any event, it is observed that the Acquisition Payment Arrangement was already pleaded in paragraph 5(e) of the initial version of the defence filed on 28 March 2024.

33.  For all the above reasons, I conclude that:-

(1) The Defendant has raised an arguable defence that the Loan Agreement was a sham.

(2) The Master was correct to grant unconditional leave to defend in favour of the Defendant.

E. Deliberation: section 18 of the Money Lenders Ordinance

34.  In light of the conclusion set out in section D above, it is unnecessary to deal with the Defendant’s alternative defence based on section 18 of the Money Lenders Ordinance. However, for the sake of completeness, I will set out my views.

35.  Section 18 of the Money Lenders Ordinance reads as follows:-

“(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 (Amended 69 of 1988 s. 15)

(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.” (emphasis added)

36.  Section 18(1) of the Money Lenders Ordinance effectively provides that unless (i) a note or memorandum in writing of the agreement is signed by the borrower within 7 days of the making of the agreement, (ii) a copy thereof is provided to the borrower at the time of signing, and (iii) the note or memorandum is signed before the money is lent, the agreement shall not be enforced. However, under section 18(3), if the court is satisfied that it would be inequitable not to enforce the agreement at all, the court may order that the agreement be enforced to such extent as the court considers equitable.

37.  In the present case, there is no dispute that the Loan Agreement is not accompanied by a document that is said to be a “note or memorandum” of the Loan Agreement.

38.  Relying on Easy Policy Finance Ltd v 陈海滨 [2025] HKCFI 4295 at para 50 (per Mimmie Chan J) and Strong Offer Investment Ltd v Nyeu Ting Chuang (2007) 10 HKCFAR 529 at paras 21 to 24 (per Chan PJ), Mr Man submitted that the Loan Agreement per se is the “note or memorandum” within the meaning of section 18(1).

39.  However, in Easy Policy Finance Ltd at para 50 and Strong Offer Investment Ltd at paras 21 to 24, the issue decided by the courts was whether a few documents could be read together to constitute the “note or memorandum” as required under section 18(1). In my view, it is arguable that these authorities may not support the proposition that the agreement can per se constitute the “note or memorandum” within the meaning of section 18(1).

40.  It seems arguable that there are valid reasons why the loan agreement itself shall not be treated as the “note or memorandum” within the meaning of section 18(1): -

(1) First of all, the suggestion that the agreement can be treated as the “note or memorandum” is arguably not consistent with the literal meaning of the words in section 18(1), which provides that there shall be a “a note or memorandum in writing of the agreement”. I cannot see how it can be said that the agreement is the “note or memorandum” of itself. This is bizarre.

(2) Second, the commercial reality is that some loan agreements are drafted by lenders in a very legalistic manner, such that borrowers may have difficulty in understanding the contents. Thus, arguably, the purpose of requiring borrowers to sign a “note or memorandum” is to protect them by ensuring that they will be able to understand the key terms of the loan transaction. In the premises, it seems arguable that the legislative intent is such that the “note or memorandum” shall be a separate document that contains the key information in respect of the loan transaction. This is why Section 18(2) stipulates the mandatory information that must be included in the “note or memorandum” in writing, and some of the mandatory information (such as the date of the making of the loan and the place of negotiation and completion of the agreement for the loan: see section 18(2)(f) and (j)) does not necessarily appear in the loan agreement itself.

41.  In the premises, I am of the view that it is arguable that section 18(1) was breached.

42.  Mr Man then went on to contend that even if section 18(1) were not complied with, the breach was technical in nature, and the court should exercise its discretion under section 18(3) to enforce the Loan Agreement. He emphasized that the provisions in the Money Lenders Ordinance must not be utilized to stifle a genuine moneylending transaction.

43.  In Vison Finance Ltd v Chu Qingzhu & Anor [2022] HKCFI 449 at para 22, Cheng J, who dealt with an application for summary judgment, stated:-

“Whilst the discretion can be exercised at this stage, the question is whether it would be right to do so.

(1) As Deputy High Court Judge Le Pichon held in Ontone Finance Company Limited v Leung Lai Ching Margaret, unreported, HCA 372/2011, 13 August 2012, at [34], whether the discretion should be exercised is necessarily fact-sensitive, and regard must be had to all the facts and circumstances of the particular case; the court must be satisfied it has sufficient evidence before it to warrant the exercise of the discretion.

(2) In Emperor Finance Ltd v La Belle Fashions Ltd & others (2003) 6 HKCFAR 402 at [119], Ribeiro PJ noted that in exercising its discretion under s.18(3), the court should examine the breach or breaches in question, their consequences for the parties to the transaction and any other circumstances which may make it inequitable to hold the agreement unenforceable.” (emphasis added)

44.  As to the reason why section 18(1) was allegedly not complied with, Mr Yan (who made 2 affirmations on the Plaintiff’s behalf) simply blamed the Defendant for not reaching out to the Plaintiff to raise inquiry and/or objection. This is not a satisfactory explanation.

45.  However, Mr Man was correct in pointing out that:-

(1) The Defendant was not an unsophisticated borrower.

(2) The terms of the Loan Agreement are succinct and easy to understand.

(3) The terms of the Loan Agreement (which are succinct and easy to understand) and the payment instructions coming from the Defendant effectively contain all the information that must be included in the “note or memorandum”.

(4) In the premises, it cannot be said that the Defendant has suffered any prejudice as a result of the alleged non-compliance with section 18(1) of the Money Lenders Ordinance.

46.  The matters identified by Mr Man are compelling reasons why the court should exercise its discretion under section 18(3) of the Money Lenders Ordinance in favour of the Plaintiff.

47.  Nevertheless, I would still take into account the facts that the Plaintiff has hitherto failed to put forward a satisfactory explanation for the alleged non-compliance and that there are some doubts and suspicion surrounding the Loan Agreement (see eg paragraph 28 above).

48.  In the premises, had I summarily rejected the Defendant’s defence that the Loan Agreement was a sham, I would have ordered that the Defendant shall have conditional leave to defend, and the condition that I would have imposed is that the outstanding principal indebtedness of HK$148,000,000 under the Loan Agreement (but not the interest accrued thereon) be paid into court within 28 days.

F. Disposition

49.  For the reasons set out in section D above, I dismiss the Plaintiff’s appeal.

50.  I make a costs order nisi that the costs of the present appeal be to the Defendant in the cause (with certificate for 2 counsel). For the following reasons, I am inclined to the view that it would be fair to make this costs order:-

(1) Whilst the present appeal is a hearing de novo, the reality is that the Plaintiff had an opportunity to pursue its application for summary judgment before the Master.

(2) Whilst I am of the view that the Defendant has raised an arguable defences or a triable issue, the question of whether the Defendant told the truth to the court is a matter to be determined at trial. I am not of the view that it was entirely unreasonable for the Plaintiff to take issue with certain aspects of the Defendant’s case.

(3) I do not fully accept the Defendant’s contention in relation to section 18 of the Money Lenders Ordinance.

51.  Lastly, I express my gratitude to Mr Bernard Man SC, Mr Bryan Lee, Mr Thomas Yeon, Mr Jose Maurellet SC, Mr Yip Chi Ho, and Mr Charlie Liu for their very able and helpful assistance.

Dated 29 January 2026