NG CHOI SANG t/a CHEUNG KONG CONSTRUCTION CO v. CHU YU TIN AND ANOTHER

HCA1922/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1922 OF 2005

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REASONS  FOR  JUDGMENT

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Introduction

1. In about 1994 or 1995, the plaintiff agreed to advance loans to finance sub-contracting works in Housing Authority Contract No. 24/93 (“the 1^st funding agreement”).  Interest was agreed at 13.5% per annum, or 4% above the then prime rate, to be adjusted in accordance with the prime rate, payable at monthly rests, and the loans were repayable upon receipt of payments from the contractor which sub-contracted the works, i.e. Shun Shing Construction & Engineering Co. Ltd (“Shun Shing”). 

2. Chun Wo Construction & Engineering Co. Ltd (“Chun Wo”) was the main contractor in Housing Authority Contract No. 133/93.  Sometime after the 1^st funding agreement, the plaintiff agreed to advance further loans to finance sub-contracting works in this project (“the 2^nd funding agreement”).  Interest was agreed at 13.5% per annum, to be adjusted in accordance with the prime rate, payable at monthly rests, and the loans were repayable upon receipt of payments from Chun Wo.  The plaintiff also charged a “management fee” which was equivalent to 2%. 

(1) On the plaintiff’s pleaded case, it was 2% “calculated on the progress payment received from Chun Wo”. 

(2) On the defendants’ pleaded case, it was “2% of the contracted sum payable to the 2^nd Defendant from Chun Wo under Project 133/93 and that the same be paid whenever the 2^nd Defendant receive (sic) payment from Chun Wo”. 

(3) On the documentary evidence it was 2% of the sums paid by the owner to Chun Wo, after deducting the sums paid to various designated sub-contractors. 

(4) The “management fee” was payable upon receipt of payments by Chun Wo.

3. The plaintiff advanced various loans since the making of the 2 funding agreements. 

4. In August 1998, the plaintiff agreed to vary the 2 funding agreements as follows (“the variation agreement”) :

(1) Unpaid management fee was reduced by half, i.e. from 2% to 1%. 

(2) With effect from 1 April 1998, the interest rate on unpaid principal of loans was reduced to 6% per annum. 

(3) Interest, the revised management fee, and the unpaid principal of loans were payable on demand. 

5. There was no dispute on quantum.  The total claim exceeded $6 million. 

6. The defendants pleaded a number of grounds to dispute liability. 

7. At the end of the trial I made the following order :

(1) Plaintiff’s claims be dismissed. 

(2) 80% of the costs of the 1^st defendant and 80% of the costs of the 2^nd defendant be taxed (unless agreed) and paid by the plaintiff to the respective defendants. 

8. My reasons follow. 

Main issues

9. I would formulate the main issues as follows :

(1) Whether the 2^nd defendant, not the 1^st defendant, was the party to the 2 funding agreements and the variation agreement. 

(2) Whether the plaintiff’s cause of action had accrued more than 6 years before the issue of the writ in this action on 30 September 2005 and was barred by section 4(1)(a) of the Limitation Ordinance, Cap. 347. 

(3) Whether the plaintiff was a money lender within the meaning of the Money Lenders Ordinance, Cap. 163. 

My assessment of the witnesses called

Ng Kwok Lun

10. Ng Kwok Lun is the plaintiff’s son.  It would appear from his witness statement that before about 2003 he had no real involvement in the matters leading to the dispute between the plaintiff and the defendants.  2003 was long after the making of the 2 funding agreements and the variation agreement and within 6 years before the issue of the writ.  His evidence was thus of no assistance. 

11. In any event and for the following reasons, I did not accept his assertion that in response to his enquiry in 2003 about payments by Chun Wo, the 1^st defendant asked for more time to pay and the plaintiff granted further indulgence :

(1) By 2003, the principals and interest had become payable on demand which meant that whether Chun Wo had paid the defendants was irrelevant. 

(2) If the plaintiff had made no demand, there was no reason for the defendants to ask for time and there was no question of the plaintiff granting indulgence. 

(3) He went to the 2^nd defendant’s office with his father in July 2004 to press for payment.  No reason had been given for the change in stance if no demand had hitherto been made. 

Ng Choi Sang, the plaintiff

12. The plaintiff and the 1^st defendant were required to give their own respective accounts on the issue of the parties to the 2 funding agreements and the variation agreement. 

13. The plaintiff started giving evidence in the afternoon of 6 July.  At the end of that day, he had finished his evidence-in-chief and had been crossed-examined for less than an hour by Ms Emma S.F. Wong, Mr Chong Kai Man being absent on the first day of trial.  It was adjourned to 8 July to allow the plaintiff to receive his regular medical treatment on 7 July.  He did not turn up in court on 8 July.  Mr David K.K. Tsang told me that he had been admitted to a hospital on 7 July and Mr Tsang produced medical certificates certifying his inability to attend court.  Mr Tsang applied for his release as a witness.  Neither defendant opposed the application.  I acceded to the application, reserving the questions of whether his evidence was to be excluded, and if not, the weight to be attached to his evidence. 

14. This was not a case of trial on witness statements.  There was a direct conflict on the facts, including the important issue on the party to the 2 funding agreements and the variation agreement.  The plaintiff’s own documents raised questions which should be answered by him.  In the absence of any cross-examination by the 2^nd defendant and any complete cross-examination by the 1^st defendant, I did not think it was just to make findings of fact in favour of the plaintiff on the strength of his witness statement.  I attached no weight to the plaintiff’s evidence. 

Chu Yu Tin, the 1^st defendant

15. He shifted his grounds in the course of this action, asserting what he thought was helpful to his case, irrespective of the truth.  He raised a number of red herrings and tried to belittle and smear the plaintiff. 

16. He started by saying that he had a higher diploma in surveying/building technology (quantity surveying) awarded by a technical college, but the plaintiff was or had been a building maintenance contractor.  In an attempt to argue that the plaintiff was a money lender, he asserted that one of the reasons why the plaintiff had “since 1992 ceased participating in building and construction works” was because of the “upgraded requirements by Architectural Services Department (‘ASD’) and Hong Kong Housing Authority (‘HKHA’)”.  This was calculated to confuse and mislead.  There was no allegation that the plaintiff had undertaken any works as the main contractor in ASD or HKHA construction projects.  There was also no allegation that the asserted “upgraded requirements” which were neither particularised nor proved prohibited the plaintiff from being a sub-contractor or 2^nd or 3^rd sub-contractor and so on down the line of sub-contractors.  The objective fact was that even on the 1^st defendant’s own case, the plaintiff was and remained a sub-contractor in projects listed by him in paragraph 17 of his witness statement.  In an attempt to get over this, he made a bare assertion that the plaintiff was appointed a sub-contractor merely for the purpose of money lending.  It was inherently improbable and I did not accept that the alleged “upgraded requirements” allowed the plaintiff to be a sub-contractor solely for the purpose of money lending. 

17. He was cross-examined on the letter dated 21 May 2005 written by his former solicitors to the plaintiff as recipient, defining Cheung Kong Construction Company as “Cheung Kong” 「收件人：吳立(又名吳再生)先生以長江建築公司螢商(下稱『長江』)」.  It was stated in the letter that the 2^nd defendant had been sub-contracted works in big development projects, including projects further sub-contracted to it by Cheung Kong as a sub-contractor 「勁毅曾承判多個大型發展項目的工程，其中包括承判由長江以承判商的身份所分判的工程」.  Continuing his attempt to deny that the plaintiff carried on construction business, he alleged that “Cheung Kong” referred to the well-known developer Cheung Kong.  In my judgment, it was clear from the context of the letter that “Cheung Kong” referred to the plaintiff’s construction business, not the developer.  His attempt to wrangle out of perceived difficulties did his credibility no good. 

18. Continuing with his attempt to argue money lending, he sought to make play of the fact that works were not carried out by the plaintiff himself but by the plaintiff’s sub-contractors.  With his professed knowledge, he ought to know that sub-contracting all the works under a construction contract or sub-contract was quite common.  This did not point to or evidence money lending. 

19. In paragraph 8(iii) of his Re-Amended Defence, he pleaded that the outstanding principal and interest and management fee “would be repaid by the 2^nd Defendant upon demand of the Plaintiff”.  Paragraph 46 of his witness statement was to the same effect, stating that the sums “would be repaid ‘upon demand’ instead of …”.  On such a case, the limitation period would not run before demand.  However, he shifted his grounds when he gave evidence in court and alleged more than once of repayment at any time.  I rejected his allegation in court because it contradicted his pleaded case and also on the ground that it was a recent invention. 

20. On his pleaded case, liability to pay under the 2 funding agreements and the variation agreement was not conditional upon ability to pay and difficulty in repayment was not a defence.  True, repayment under the 2 funding agreements was conditional upon receipt of money by Shun Shing and Chun Wo, but inability to pay was not in itself a defence.  In his witness statement, he went to great lengths to allege inability to pay.  This was an unwelcome attempt to complicate this relatively straight forward case and cloud the issues.  When he gave evidence in court, he changed his version to one of refusal to pay because the plaintiff owed him (which he immediately changed to his company) more than his company owed the plaintiff.  He was adamant that the plaintiff was dealing with his company, not him.  When it suited his purpose, he had no difficulty in lifting the corporate veil by alleging that the plaintiff owed “him”, which he immediately changed to “[his] company”, money because the plaintiff was allegedly liable to a company of which the 2^nd defendant was a shareholder.  None of this was pleaded and it was simply not open to him to allege what he thought suited his purpose. 

21. He devoted 3 pages of his witness statement to an allegation that part of the plaintiff’s claim was about a loan of $3 million.  The $3 million item had been repaid and did not form part of the plaintiff’s claims.  Such irrelevant allegation wasted the parties’ costs and had probably increased counsel’s fees and solicitors’ costs by reason of the complexity arising from the sheer number of issues raised by the defendants.  

22. He was wounded in the course of an attack on 19 January 2001 or the early hours of 20 January 2001.  In his attempt to smear the plaintiff, he asserted in paragraph 70 of his witness statement as follows :

“A report was then made to the Police under Case No. [number omitted here] and I named the Plaintiff as one of the prima [sic] suspects being the person responsible for the assault.”

23. For reasons given below, nothing was further from the truth.  I interpose to note that in paragraph 13 of his supplemental statement, he upgraded his accusation from a suspicion to a fact by making the following accusation :

“It was [the plaintiff’s] inability to obtain repayment of principal and interest from the 2^nd Defendant that precipitated in my personal attack in 2001 …”

There was no attempt whatsoever to substantiate this serious allegation.  It was irresponsible for him to make the accusation.  It was irresponsible for any solicitor or counsel to make such an accusation in his or her draft supplemental statement of the 1^st defendant.  If counsel had been retained in the drafting and settling of the witness statement or the supplemental witness statement, counsel should have known that counsel should not make an allegation of the commission of a serious criminal offence without clear instructions to make such an allegation and had before counsel reasonably credible material which, as it stands, establishes a prima facie case.  The following contemporaneous documents showed that the 1^st defendant and his co-shareholder were lying about their belief on the identity of the suspect : 

(1) On 23 January 2001, while he was still being hospitalised, a police officer took a statement from him.  There was no mention of the plaintiff at all in that statement.  In answer to the question whether he had any dispute with any company, he said no but went on to say that on 16 January 2001 he sent a demand letter in the name of his company to a named construction company (“the first named suspect”) to press for money due and owing to his company and he said he felt it appeared to be a co-incidence that he was chopped a few days later.  I did not see how he could have truthfully asserted that he named the plaintiff as a prime suspect. 

(2) His former solicitors sent a letter dated 9 February 2001 to the police officer in charge of the wounding case enclosing a memorandum.  Madam Ng Lai Shiu Woon and the 1^st defendant were the only shareholders and directors of the 2^nd defendant.  Madam Ng said this memorandum was prepared by her.  There were 3 points of importance in this memorandum. 

(a)  The first was that a company belonging to Ng Lap, i.e. the plaintiff, was a sub-contractor in Housing Authority Contract No. 133 of 1993 and that all the works had been completed and all responsibility had been satisfactorily discharged 2 years ago. 

(b) The second was that the post office estimated that 2^nd defendant’s letter of demand to the first named suspect would have been delivered on 18 January and Madam Ng noted that the incident occurred in the early hours of 20 January.  The memorandum went on to allege that the first named suspect angrily scolded the solicitors who sent a letter of demand to the first named suspect.  The memorandum went on to state that Ng Lap told the 1^st defendant that Ng Lap had a meeting with the first named suspect on 22 January 2001 and that Ng Lap telephoned the 2^nd defendant and spoke with unusual anxiety, anxious to speak to the 1^st defendant or Madam Ng, making it clear that Ng Lap knew that the 1^st defendant had not left Hong Kong.  The innuendo, as I interpreted this memorandum, was that, as a result of Ng Lap’s meeting with the first named suspect on 22 January 2001, Ng Lap was anxious to find out if anything untoward had happened to the 1^st defendant.  The innuendo was directed at the first named suspect, not the plaintiff. 

(c) The third point was that it made the allegation that the second named suspect (see the following paragraph) had paid to have the 1^st defendant killed. 

(3) In a statement which he gave to a police officer on 4 April 2001, he stated that he had a conversation with a named person who told him that the named person had heard that another named construction company (“the second named suspect”) which owed his company money had said that the second named suspect had spent a few hundred thousand dollars to have him killed.  The plaintiff was mentioned but only in the context of business dealing with the second named suspect and also in the context of the 1^st defendant’s own business dealings with the plaintiff.  The plaintiff had not been named as a suspect in this statement at all. 

24. For the reasons given above, I concluded that the 1^st defendant was not a credible witness and attached no weight to his evidence. 

Madam Ng Lai Shiu Woon

25. Madam Ng was called by the 2^nd defendant.  She went to great lengths to give an account of what the 1^st defendant told her, much of which was deleted by Mr Ernest Koo Chak Ming after I had raised the question with him.  In paragraphs 38 and 39 of her witness statement which was prepared before Mr Koo was instructed, she made the following assertions (written exactly as it stands in the original) :

“38. On the early morning of 20.1.01, while the 1^st Defendant were preparing for Chinese New Year holidays for Canada and I would go to New Zealand to visit our family members, the 1^st Defendant was attacked by a gangster with a knife when he was returning home resulting in serious injury to him and his hospitalization with … Hospital and … Hospital for about 20 days.  A report was made to the Police and I suspected that the Plaintiff was responsible as apart from him, no one had ever threatened to resort to violence.  The assault had resulted in our overseas visitaborted as I was worried of the 1^st Defendant’s injury.  Neither had the 1^st and 2^nd Defendants any grudge with anyone.  However, to avoid further risking the life of the 1^st Defendant, his injury and place of hospitalization were kept secret as had been so advised by the Police.

39.  On the morning of 23.1.01, the Plaintiff rang up the 2^nd Defendant’s office.  Instead of making threatening calls for repayment of loans, the Plaintiff’s tone in cheek was different and he was worried of unable to talk to the 1^st Defendant.  He asked me and my staff in a number of telephone calls so that he could contact and talk to the 1^st Defendant.  I told the Plaintiff that the 1^st Defendant had already gone to Canada as he used to do during Chinese New Year Holidays as it was a practice known to the Plaintiff.  However, the Plaintiff did not accept my explanation and, to my greatest surprise, he told me that he knew that the Plaintiff was in Hong Kong instead of in Canada.  He asked if I could cause the 1^st Defendant to talk to him.  The tone in cheek of the Plaintiff showed that he was very worried of being unable to contact the 1^st Defendant.”

26. It was not easy to understand what the draftsman intended to say.  But so far as the allegation of the plaintiff being a, or the only, suspect was concerned, this was contradicted by the contemporaneous documents.  Madam Ng was evasive about what the 1^st defendant had told the police.  It was inherently improbable that Madam Ng had not discussed with the 1^st defendant about the identity of suspects and the memorandum which she prepared evidenced that they had.  For the same reasons which I have given above on the 2 statements and memorandum to the police, I concluded that Madam Ng was not a credible witness. 

Consideration of the relevant issues in this case

27. I shall now consider the relevant issues by examining the objective facts, contemporaneous documents and inherent probabilities. 

28. In Kao Lee & Yip v Koo Hoi Yan and others [2003] 3 HKLRD 296 at paragraph 34, Ma J (as he then was) summarised as follows the principle on drawing of inferences in cases of absence of material evidence on matters peculiarly within the knowledge of a party and that party might be expected to have material evidence to give the issue :

“None of the Defendants gave evidence.  In these circumstances, adverse inferences may be more easily drawn against them and correspondingly, any inferences favourable to KLY can more confidently be drawn as well:- see Polaroid Far East Ltd v Bel Trade Co Ltd [1992] HKLR 447 at 454; Jones v Dunkel (1958-1959) 101 CLR 298.  This is of course providing that the rest of the evidence allows such inferences to be drawn and that such evidence is credible in the first place.”

In Wisniewski v Central Manchester HA [1998] Lloyd’s Rep Med 223 at p. 240 Brooke LJ derived the following principles from the line of authority he had cited :

“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. 

(2)   If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. 

(3)   There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. 

(4)   If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn.  If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect or his/her absence or silence may be reduced or nullified.”

Wisniewski v Central Manchester HA was applied by Chu J in Bank of China (Hong Kong) Limited v Wong Tang and others, HCMP 4222 of 2003, 24 August 2006, at paragraph 60. 

Party to the funding and variation agreements

29. A number of original documents were produced as exhibits at my request. 

(1) Exhibit D1 is a Memo from the plaintiff dated 22 August 1996 on Chun Wo shopping mall.  The subject matter was stated to be “Current Account with CS”「勁毅往來」, setting out the amount owed, amount of unpaid management fee and amount of unpaid interest.  If the 2^nd funding agreement was made with the 1^st defendant, the subject matter should have been “current account with the 1^st defendant” instead of “current account with the 2^nd defendant”. 

(2) Exhibit P2 was a statement written out in the name of  Cheung Kong Construction Company and addressed to “the 2^nd defendant (the 1^st defendant)”「勁毅建築工程有限公司(朱汝田)」.  This covered the period from 10 March 1995 to 21 August 1998 and came into existence at about the time of the variation agreement.  If the funding agreements were made with the 1^st defendant, the statement should have been addressed to the 1^st defendant himself instead of the 2^nd defendant.  All the loans and repayments were stated to be made by the 2^nd defendant.  The only mention of the 1^st defendant was the reference to the signed admission by “the 2^nd defendant’s (1^st defendant)” of the amount of reduced management fee and the amount of interest「勁毅(朱汝田)認簽133/93 1%管理費…」.

(3) Exhibit P3 was the plaintiff’s “management fee record” which came into existence at about the time of the variation agreement.  The hand-written heading was “133/93 Contract (Variation of CS’ management fee)” 「133/93合約〈勁毅管理費調整〉」.  Again this showed that the 2^nd defendant was, and was regarded by the plaintiff as, the party to the variation agreement.  Further the plaintiff himself signed and approved and “agreed variation of CS’ management fee”「同意勁毅管理費調整」.

30. These were the plaintiff’s documents and how they came to be made out were matters peculiarly within the plaintiff’s knowledge.  In the absence of any evidence from the plaintiff, whether orally or by his witness statement, or any of his (former) employees and based on what was stated on the plaintiff’s own documents, I concluded that the 2^nd defendant, not the 1^st defendant, was the party to the 2 funding agreements and the variation agreement. 

31. The plaintiff’s claims against the 1^st defendant failed and fell to be dismissed. 

Limitation defence

32. Neither the plaintiff nor the defendants had pleaded that despite payments by Shun Shing or Chun Wo to the 2^nd defendant, the 2^nd defendant had not repaid the principal of the loans or the management fee.  There was thus no allegation of accrual of cause of action under either funding agreement in respect of these items. 

33. A demand is necessary before accrual of any cause of action under the variation agreement.  It is not open to the defendants to contradict their own pleaded case by arguing that no demand was necessary. 

34. Put shortly, what the plaintiff agreed to under the variation agreement was to reduce interest and management fee in return for payment on demand instead of payment conditional upon payment by Shun Shing or Chun Wo.  In my judgment, it was inherently improbable that, having agreed to a reduction in interest and management fee, the plaintiff would have made no demand at all for more than a year from the date of the variation agreement in August 1998 and 30 September 1999 which was 6 years before the issue of the writ in this action on 30 September 2005. 

35. There was no explanation why the plaintiff and his son had gone to the defendants’ office to press for payment in July 2004 if the plaintiff had not hitherto demanded payment.  If there was a reason for the change in stance, this was a matter peculiarly within the knowledge of the plaintiff, and I would have expected the plaintiff or his son to tell me the reason. 

36. By paragraph 16 of his Re-Amended Statement of Claim, the plaintiff pleaded that :

“Despite repeated chasings, the 1^st defendant repeatedly represented that he needed more time.  The Plaintiff therefore did not demand for repayment and repeatedly gave him more time.”

Mr Tsang told me in his opening that “chasing” meant a demand, followed by the grant of indulgence. 

37. Based on :

(1) Mr Tsang’s concession;

(2) the variation agreement to make principal and interest and management fee payable on demand;

(3) the absence of any explanation for the plaintiff and his son going to the defendants’ office together to press for payment; and

(4) having regard to the inherent probabilities;

I concluded that the plaintiff had demanded payment before 30 September 1999. 

38. Section 4(1)(a) of the Limitation Ordinance, Cap. 347, provided that :

“The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say … actions founded on simple contract …”

39. Mr Tsang cited Moore v Shelley (1883) 8 App Cas 285 and argued that limitation did not accrue on demands made more than 6 years before the issue of the write because the defendants must have a reasonable time to get money etc. and before the expiry of reasonable time, the plaintiff had granted the defendants indulgence.  I disagree.  Moore v Shelly was not a case on the limitation period.  It was a case on the construction of a provision in a mortgage deed which provided that :

“It is hereby declared that such demand as aforesaid shall be made in writing for and on behalf of the said mortgagee, and delivered either personally to the said mortgagors or either of them, or left at their or his usual or last known place of abode in the said colony of New South Wales, or on the said station or run, or sent through the medium of any post-office addressed to them or either of them, as aforesaid.”

The demand in writing was made on 27 August 1879 and left at the station by the mortgagee’s agent.  The mortgagor was not there and he had no opportunity to judge whether the alleged authority to the agent was genuine or not.  The mortgagor’s wife was there but she had no authority to enter that question.  Because the sum demanded was not then paid immediately, the mortgagor being absent and the wife being there alone, the agent immediately seized all the sheep which were on the station.  The question was whether the non-payment of money when the notice was served upon the wife was a default.  Sir Barnes Peacock made it clear in his judgment at pp. 293-294 that it was a case on the construction of a deed.  He said :

“The deed must receive a reasonable construction, and it could not have meant that the plaintiff was bound to pay the money in the very next instant of time after the demand, but he must have a reasonable time to get it from some convenient place … There are other circumstances in the case.  When, as here, the person making the demand is not the person entitled to money, but his attorney, the person on whom the demand is made must have a reasonable opportunity to inquire into the authority of the person making the demand … if he bona fide doubted the truth of the statement, he would have been entitled to some opportunity to inquire into its truth before the defendants would be entitled to seize his good. 

Here the plaintiff … had no opportunity to enquire into the truth … He was not at the station when the demand was served on his wife, but he had gone down to look after the sheep, which the defendant, on the 31st of July 1879, told him he ought to do.  Their Lordships, therefore, are of the opinion that there was not a default which justified the defendant in entering the possession of the plaintiff and seizing the property.” [emphasis added]

40. Even if Moore v Shelley applied, it did not assist the plaintiff.  There was no question of the authority of the plaintiff to demand for payment himself and there was no complaint that the defendants did not have a reasonable time to get money from a drawer or from the bank. 

41. One of the general principles of the legislation on limitation, discernible as early as Prideaux v Webber (1661) 1 Lev. 31is that once time begins to run, it runs continuously, and that this principle can be ousted only by a statutory provision (per Megarry VC in Titto v Waddell [1977] Ch. 107 at p. 246. 

(1) Limitation Periods by McGee, 5^th edition, at paragraph 19.012, states that :

“… it was held as long ago as 1661 in Prideaux v Webber that once time has begun to run, nothing can interrupt it.  The case was strong, since the impossibility of bringing the action resulted from the suspension of the King’s Courts and their law during the period of the Commonwealth.  It was held that the defendant was nevertheless entitled to plead limitation.”

(2) Prideaux v Webber 1 Lev. 31 at p. 32 :

“And the Reafon they gave that the Statute of Limitations was a good Bar, (be it fo, as it was pleaded, that the Courts was not open) was, Becaufe there is not any Exception in the Act of fuch a Cafe; and infants had been bound (thereby) if they had not been excepted.”

42. Limitation of time began to run and ran continuously upon the failure of the defendants to pay on demand.  There is no statutory provision on the effect of giving of time to pay on the limitation period. 

43. The plaintiff’s claims against the 2^nd defendant were statute-barred. 

Money lender defence

44. Having decided in the defendants’ favour on the limitation defence, there was, strictly speaking, no need for me to deal with the money lender defence but I would do so for completeness. 

45. Section 2(1) of the Money Lenders Ordinance, Cap. 163, defines “money lender” to mean :

“… 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 … (b) as respects a loan specified in Part 2 of Schedule 1, any person who makes such loan.”

Paragraph 5 in Part 2 Schedule 1 exempts a loan made by a company or a firm or individual whose ordinary business does not primarily or mainly involve the lending of money, in the ordinary course of that business. 

46. Section 18(1) and (3) provide that :

“(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 … 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 …”

(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.”

47. Section 23 of the Money Lenders Ordinance, Cap. 163, provides that :

“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.”

48. Section 33(2)(b) provides that :

“When in any proceedings under this Ordinance against any person it is alleged that … that a loan alleged to have been made by such person is not a loan specified in Part 2 of Schedule 1, the fact so alleged shall in the absence of proof to the contrary be presumed.”

49. There was no dispute that the plaintiff was not a licensed money lender and that the plaintiff he had not complied with section 18, whether in respect of any of the funding agreements or the variation agreement.  Mr Tsang contended that the plaintiff did not carry on any money lending business and Mr Tsang also contended that the plaintiff was not a money lender in respect of loans to the plaintiff’s sub-contractors. 

50. The first question is whether the plaintiff’s business (whether or not he carried on any other business) was that of making loans. 

51. The 1^st funding agreement granted the defendants a line of loan facilities.  No loan was advanced under the 1^st funding agreement itself.  The defendants subsequently made numerous applications for loans and the plaintiff made numerous loans.  The same was true of the 2^nd funding agreement.  This was not a case of a one-off transaction.  The numerous loans by the plaintiff to the defendants had nothing to do with the plaintiff’s construction business.  The plaintiff was plainly a money lender. 

52. Exhibit P3 is a printed form called “Cheung Kong Management Fee Record” with columns on :

(1) “PC No.” (payment certificate number);

(2) “P C Amount” (payment certificate amount), subdivided into 3 columns on “Total”, “D S C” (designated sub-contractor) and “net”;

(3) “Management Fee Amount”, subdivided into 2 columns under “2%” and “Accum” (accumulated);

(4) “Settled Amount”, subdivided into 2 columns under “Amount” and “Accum” (accumulated); and

(5) “Remarks”.

53. How such a printed form came into existence was a matter peculiarly within the knowledge of the plaintiff, and I would have expected the plaintiff or his (former) staff to tell me about it.  In the absence of any evidence on it, I concluded that the plaintiff had charged management fee sufficiently frequently, resulting in the creation and use of a printed standard form.  The 2% was calculated on the payment certificate amounts, after deducting amounts paid to designated sub-contractors, irrespective of whether any loan had been made in respect of any particular payment certificate.  The management fee was irrespective of whether any amount had been lent or the amount of any loan.  In my judgment, it was a devise used by the plaintiff to boost his income from his money lending and was interest.  It was not “interest” only in the sense that it had no direct correlation with the amounts lent.  Money lending was so frequent that a form and a system had been devised to compute and record the amount due.  I concluded that the plaintiff was carrying on a money lending business. 

54. The plaintiff had not pleaded facts in support of his contention that loans to his sub-contractors were exempted loans.  It was not open to the plaintiff to rely on paragraph 5 in Part 2 of Schedule 1.  Whether the plaintiff’s ordinary business did primarily or mainly involve the lending of money was a matter of degree and whether such loans were in the ordinary course of that business a matter of evidence.  There is simply no evidential basis to bring such loans within the exemption. 

55. The loans were caught by the Money Lenders Ordinance which meant the loan agreements were not enforceable and the loans were not recoverable.  The loan agreements being not enforceable and the loans being not recoverable, the parties could not convert it to an enforcement agreement and covert the loans to recoverable loans by the variation agreement. 

56. Mr Tsang relied on section 18(3) and the proviso to section 22.  The circumstances relied on to invoke the saving provisions had not been pleaded and it was not open to the plaintiff to raise such a case at trial. 

57. In any event, I did not think the plaintiff had satisfied the inequitable test.  Exhibit P3 showed that management fee was computed on the principal amount of $87,911,194.86 whereas Exhibit P1 showed that the total amount lent under both funding agreements was merely $18,591,390.  No computation had been made to show the respective amounts lent under each funding agreement.  No computation had been made to show the period over which interest was charged and there was simply no computation of what the true annual percentage interest rate was.  I was not satisfied that the plaintiff had made good the inequitable requirement. 

58. Thus, the plaintiff’s claims failed also by reason of the Money Lenders Ordinance. 

Plaintiff to recover only 80% taxed costs

59. The defendants succeeded in this action.  The general rule is for costs to follow the event. 

60. However, the defendants had not succeeded on points put forward by them.  They were so carried away by irrelevant matters which they raised that they seemed to have lost sight of the real issues in this case. 

61. The defendants’ pleadings and witness statements were prolix and repetitive.  They raised a number of irrelevant, untrue and time wasting issues and the defendants mounted a smear campaign against the plaintiff.  These included the following :

(1) the allegation that the plaintiff ceased construction business by reason of the “upgraded” requirements of ASD and HKHA;

(2) the $3 million loan which formed no part of the plaintiff’s claims;

(3) the defendants’ alleged inability to pay;

(4) works done by Luckyplus and Talent Elite in projects;

(5) the alleged financial difficulty of a majority shareholder of a main contractor;

(6) suspicion of the plaintiff’s, and the plaintiff’s actual, participation in the wounding of the 1^st defendant;

(7) alleged “libel” (what was alleged was a slander) of the 1^st defendant and Madam Ng;

(8) the plaintiff’s alleged indebtedness to the 1^st defendant which he changed immediately to indebtedness to the 2^nd defendant;

(9) the allegation of the plaintiff being a “trustee” for Luckyplus; and

(10)    the liberal inclusion in Madam Ng’s witness statement of what the 1^st defendant allegedly told her. 

62. Mr Chong submitted that I had ruled on most of the irrelevant issues in the course of the trial and not much time was spent on those.  Had that not been the case, a costs order less favourable to the defendants would have been made. 

63. Taking a global view of the matter, I held that justice would be served by awarding the defendants 80% of their taxed costs and I so ordered.