REES TAYLOR FINANCE LTD v. CHEUNG YU TIN ALVIN

DCCJ 2081/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2081 OF 2006

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REASONS FOR DECISION

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The Present Application

1.  This is the plaintiff’s O.14 application for summary judgment against the defendant for repayment of a financial loan and the contractual interest.

2.  It was the plaintiff’s case that the defendant has obtained a personal loan of HK$30,000 from the plaintiff on 21/1/05 with a promise to repay the loan and the interest stated in the loan agreement.

3.  The defendant did not deny he has signed a loan agreement with the plaintiff on 21/1/05 nor did he seek to deny the fact that he has received the sum of HK$30,000 from the plaintiff on 21/1/05. The defendant opposed the plaintiff’s application for summary judgment for enforcement of the loan agreement on the ground that the loan agreement is unenforceable for being champertous in nature and that the plaintiff has failed to abide by some of the statutory requirements under the Money Lenders Ordinance, Cap 163. In the defendant’s contention, the said loan agreement is unenforceable.

Background Information about the plaintiff and the defendant

4.  Rees Taylor (H.K.) Limited (hereinafter called “Rees Taylor” for short) and Rees Taylor Finance Company Limited (the plaintiff in the present proceeding, hereinafter referred to as “Rees Taylor Finance” for short) share a common director Elaine Cheung.

5.  Rees Taylor and Rees Taylor Finance both traded at the same office premises. Rees Taylor Finance traded as a licensed moneylender whilst Rees Taylor operated the business of a recovery agent.

6.  Rees Taylor charged its customers a percentage of the compensation payments the customers received in their ultimate legal suits as the service charge due to Rees Taylor.

7.  The defendant was the employee of Rees Taylor from February 2003 to 28 February 2006. He worked as a claim officer for Rees Taylor. The defendant would be paid an introduction fee by Rees Taylor for each customer the defendant introduced to Rees Taylor when the customers ultimately succeeded in their compensation claims against their tortfeasors. The defendant would also be paid a 2.5% commission by Rees Taylor for the service fees Rees Taylor received from the customers introduced by the defendant. Thus the defendant’s salary from Rees Taylor comprised of a basic salary, the introduction fees and his commission.

Events in 2003

8.  In his affirmation in opposition to this O.14 application, the defendant deposed to the fact that he was the upper deck passenger of a bus on 4/3/03. In the course of his bus journey the bus had a collision with a taxi. It was the defendant’s case that he sustained personal injury as a result of the said collision.

9.  About 3 weeks after the accident, on 27/3/03, the defendant entered into a recovery agency agreement with Rees Taylor in which the defendant appointed Rees Taylor to be his recovery agent. In the recovery agency agreement Rees Taylor undertook to bear the legal costs of the defendant in the defendant’s personal injury claim against the taxi driver. In exchange, the defendant agreed to pay Rees Taylor 15% of the personal injury compensation sum the defendant would receive at the conclusion of his personal injury suit.

10.  Apparently the personal injury claim of the defendant concluded sometime in June 2006 and the defendant was awarded a sum of HK$27,260 compensation in respect of his personal injury compensation in the traffic accident of 4/3/03.

11.  The plaintiff therefore demanded the defendant to make repayment of the loan together with the contractual interest.

Suitability of granting an O.14 Judgment?

12.  Counsel acting on behalf of the plaintiff confirmed at the commencement of this hearing that the plaintiff is seeking enforcement of the loan agreement and not the alternative cause of action of money had and received.

13.  The 2 heads of objection raised by the defendant were:-

(i) the plaintiff acted in breach of section 18 of the Money Lenders Ordinance Cap 163 when documenting the loan agreement in question; and

(ii) the loan agreement ought not be enforced for being champertous.

14.  In respect of the 1^st ground of opposition, the plaintiff is said to have failed to abide by section 18 of the Money Lenders Ordinance in that the plaintiff has failed to supply the defendant with the following documents:

(i) a note or memorandum of the loan agreement made in accordance with subsection (2) within 7 days after the making of the loan agreement;

(ii) a summary of Part III and Part IV of the Money Lenders Ordinance which ought to have been annexed to the loan agreement or the memorandum evidencing the loan agreement.

In the signed loan agreement, the plaintiff has failed to set out:-

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

(iv) the rate of interest per annum; and

(v) the place of negotiation and completion of the loan agreement.

15.  The defendant is a University graduate. He was also a claim officer of Rees Taylor, an associated company of the plaintiff. The defendant would likely be familiar with the operation of the plaintiff. The defendant has been given a copy of his loan agreement. All essential terms of the loan agreement were stated therein. Though the yearly interest rate was not stated, monthly interest rate was clearly written from which parties could make calculation of the yearly interest rate with no uncertainty. None of the missing information would have misled the defendant about the nature and the details of the loan. Nor would the missing information affect the interest of the defendant when the plaintiff seeks enforcement of the same.

16.  The defendant’s objection for enforcement of the loan agreement on non-compliance with section 18 of Cap 163 would likely fail as this court could invoke section 18(3) to enforce the agreement to do justice between the willing and consenting parties to this loan agreement.

17.  The 2^nd limb of objection is the loan agreement is unenforceable for being champertous. It was the defendant’s contention that the loan agreement was entered into in furtherance and in support of the recovery agency arrangement he signed with Rees Taylor.

18.  According to the plaintiff the loan was a personal loan made to the defendant independent of and unrelated to the recovery agency agreement. The plaintiff pointed out the fact that the present loan agreement was entered into more than a year after the defendant and Rees Taylor has signed their recovery agency agreement. In the plaintiff’s submission this clearly showed the execution of the agency recovery agreement was not a condition precedent for the granting of the loan in question.

19.  The objective of the loan was not spelt out in the loan agreement.

20.  A translated version of clause 2 of the loan agreement reads (Ignoring one obvious writing error) :- 

“ Appointing the designated agent as the recovery agent was a condition to this agreement. The lender loaned to the borrower, and the borrower borrowed from the lender a loan for the duration specified in this loan agreement. The borrower cannot withdraw its authorization for the designated agent to act on his behalf, to enable the handling of this loan affairs.”

The clause in its original text reads: 以借款人委托代理人進行追索為絛件並在本協議條款之約束下，放債人向借款人放貸而借款人向放債人借入借款，借款期限為期限。借款人茲不可撤銷地委派代理人為其受權人，令其根據本協議條款來處理本借款事宜。

21.  A literal reading of Clause 2 suggested that the parties were imposing a contractual obligation on the borrower not to withdraw his agency authority granted to the recovery agent to act for the borrower in his legal suit.

22.  Elaine CHEUNG, director of the plaintiff, deposed in her affirmation that the plaintiff has inadvertently omitted to delete clause 2 when the standard loan agreement form was used to record the loan made to the plaintiff. To admit the plaintiff’s evidence to contradict the plain meaning of a contractual term infringes the parole evidence rule.

23.  The plaintiff has to bring itself within the exception of the parole evidence rule to be able to admit evidence to show the parties had in fact intended clause 2 to be deleted from the signed written agreement.

24.  A translated version of clause 7 of the loan agreement reads:-

“According to the terms of this agreement, the borrower must hand over to the lender a properly signed letter of authorization, authorizing the designated agent to represent (the borrower in) his legal suit from the commencement of this loan agreement.”

The clause in its original Chinese text reads: 根據本協議的條款，借款人將向放債人遞交一份妥為簽署的委任書，委任代理人自本協議之日起開始代理申索。

25.  The plaintiffs argued clause 7 indicated the recovery agent’s authority should commence from the date of the signing of the loan agreement; this is inconsistent with the fact that the recovery agent agreement has already been signed; and this further supported its argument that the parties had simply used a wrong standard loan form in recording the loan agreement between the plaintiff and the defendant.

26.  A translated version of clause (B) in the pre-amble of the loan agreement reads

“The borrower is about to or was involved in a personal injury compensation claim.”

The clause in its original text reads: 借款人將要或正涉及一宗人身傷害的損害賠償申索

27.  Clause 1 of the loan agreement defined the repayment day to be the earlier day of the following 2 days: either (a) 7 days after the receipt of compensation payment; or (b) when the borrower terminates the authority of the agent in the civil claim of the borrower. ( The clause in its original text reads: “償還日系指借款人將所有債項償還給放債人的日期，具體為下列兩者中較早者(a)收到補償后七天內；或(b)借款人停止委托代理人進行申索之時”)

28.  A number of the contractual provisions throughout the loan agreement showed direct correlation between the recovery agency agreement and the loan agreement between the parties. The purpose for which the loan was granted was not stated in the loan agreement. There is obviously room for argument that the loan agreement is granted to support the recovery agency contract, and is thus champertous in nature. This is an inappropriate case for summary judgment to be entered without giving the defendant a chance to be heard.

29.  Though the defendant has succeeded to oppose the present O.14 application, as the defendant has failed to disclose any defence until the filing of its affirmation of 19/9/06, costs of the present O.14 application is awarded in favour of the defendant from 19/9/06 onwards, with certificate for counsel. There is no order for costs for this application in respect of costs incurred by the parties prior to 19/9/06. The defendant’s own costs be taxed in accordance with Legal Aid regulations.