CHEUNG WAI SING JACKIE WALTER v. BILLION CREDIT FINANCIAL CO LTD

DCMP 3325/2018

[2020] HKDC 94

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3325 OF 2018

--------------------

--------------------

BETWEEN

--------------------

--------------------

JUDGMENT

--------------------

Introduction

1.  Mr Cheung brought this action by originating summons dated 23 November 2018 (“the Originating Summons”) due to the alleged repudiation of a loan agreement dated 5 June 2018 (“the Loan Agreement”) by the other party thereto, namely, Billion Credit Financial Company Limited (“the Company”).

2.  By the Loan Agreement, it was agreed between Mr Cheung and the Company that the Company would advance HK$500,000 to Mr Cheung (“the Loan”) and the Loan was to be repaid by 72 instalments. A legal charge dated 5 June 2018 (“the Charge”) was made in favour of the Company registered against a property of Mr Cheung (“the Property”) in the Land Registry.

3.  Mr Cheung alleges that the Company failed to advance the Loan on 5 June 2018 in breach of the Loan Agreement and so he asks for a declaration that the Loan Agreement has been rescinded and the Charge to be discharged. He further asks for a declaration to the effect that the Charge is not registrable and an order that the Charge be vacated, deregistered or otherwise removed. Lastly, he asks for damages.

4.  Mr Matthew Cheung (“Mr M Cheung”), counsel for Mr Cheung, accepts that there is no evidence of loss suffered by Mr Cheung and there can be no substantive damages recoverable.  

Key issues

5.  In their respective written opening submissions, both Mr M Cheung and Mr Lo, counsel for the Company, have raised a number of issues for my determination. After discussion with counsel, I am of the view that the fundamental issue is what exactly the payment obligations of the Company under the Loan Agreement were. The parties’ difference is whether the Company was obliged to advance the entire amount of the Loan on the very same day when the Loan Agreement was signed (5 June 2018) as contended by Mr Cheung or whether Mr Cheung was to receive the Loan only after the registration of the Charge as contended by the Company.

6.  If this court concludes that the former case prevails, the next issue is whether the breach was a repudiatory breach and if so when and how Mr Cheung accepted the repudiation and what loss he has suffered as a result.

7.  On the other hand, if this court concludes that latter case prevails, Mr Cheung has a fallback position. He alleges that the Company committed a repudiatory breach of certain implied terms to the effect that the registration of the Charge should be done within a reasonable time to be followed by the advancement of the Loan to Mr Cheung. Whilst the Company accepts the existence of such implied terms, its position is that there was no breach. The Charge was registered within a reasonable time and it was Mr Cheung who refused to accept the Loan.

8.  Thus, essentially the case turns on a construction issue. There are other minor issues and I would deal with the fallback position of Mr Cheung if necessary and those issues after resolution of the crux.

Background facts

9.  The following background facts evidenced by incontrovertible documentary evidence can be outlined as follows:

(1) Mr Cheung became the sole registered owner of the Property by succession in 1996 and it is located in Lantau Island.

(2) The Company is incorporated in Hong Kong carrying on business as a licenced moneylender.

(3) On 5 June 2018, Mr Cheung went to the office of Messrs. So, Ho & Co. (“D’s Solicitors”) acting for the Company to execute the Loan Agreement. In fact, the Loan Agreement is composed of several documents bearing the signatures of Mr Cheung. The first one which bears all the hallmarks of a formal legal agreement, signed by Mr Cheung as borrower and Mr Lee on behalf of the Company (“the Main Agreement”), contained, among other things, the following express terms concerning the Loan (“the Advancement Terms”):

(1) Principal Sum and Interest

In consideration of the Principal Sum now advanced by the Lender to the Borrower (receipt of which the Borrower acknowledged), the Borrower hereby confirm with the Lender that:-

1.1 Principal Sum: HK$500,000 (“the Principal Sum”)

1.2 Date of Principal Advanced: The 5^th day June of 2018

1.3 Security: The Property

1.4 Interest Rate: The Borrower (Mr Cheung) agrees to pay the interest at the rate of 42% per annum on the Principal Sum, but in any event not exceeding 60% per annum in compliance with the Money Lenders Ordinance, Cap.163, Laws of Hong Kong, and calculated and effected (sic) from the date of the 5^th day of June 2018.

(4) Mr Cheung, at the same time with the execution of the Main Agreement, also signed a few documents including two Chinese documents as supplemental agreements. All these documents should form part of the Loan Agreement. One of the supplemental agreements was concerned about the Charge and it contained an express term (“the Remittance Term”) which read,

“全數貸款會於按揭文件註冊之土地註冊處後，再以支票形式交給客戶。”

“The entire amount of the Loan would be given to the client by cheque after the registration of the charge document in the Land Registry.” (my translation”)

(5) Mr Cheung was given a cheque of the Company dated 4 June 2018 (“the Cheque”) in the amount of HK$50,000 (“the Paid Amount”) after signing the Loan Agreement.

(6) On 14 June 2018, Mr Cheung entered into another loan agreement with another moneylender company, namely, Forever Property Finance Company Ltd. (“the Other Moneylender”) for an amount of HK$800,000 at the interest rate of 1.6% for a term of 72 months (“the Other Loan”). The Property was charged in favour of the Other Moneylender by a mortgage of the same date (“the Other Charge”).

(7) On 15 June 2018, the Other Charge was registered in the Land Registry.

(8) On 19 June 2018, the Charge was registered in the Land    Registry.

(9) On 11 July 2018, Mr Cheung’s solicitors, Messrs. P.Y. Cheung & Co. (“P’s Solicitors”) sent a letter (“the Letter”) to the Company to make certain allegations. First, it was alleged that the Company was in wrongful breach of the Loan Agreement in that it failed or refused to advance the Loan in full on the same date of the Loan Agreement and only the Paid Amount was paid to Mr Cheung instead. It was also alleged that Mr Cheung made repeated enquiries about the remaining balance of the Loan but the Company failed or refused to reply to him. It was further alleged that in the middle of June, upon Mr Cheung’s enquiry, the Company represented to him that it refused to advance the remaining balance of HK$450,000 to Mr Cheung. Therefore, Mr Cheung on the same occasion notified the Company that he accepted its repudiation and the Loan Agreement was terminated on the same day.

(10) On 13 July 2018, the Company caused to be deposited a sum of HK$434,958.00 into a bank account of Mr Cheung (“the Deposit”) being      the balance of the Loan (“the Sum”).

(11) On 17 July 2018, P’s Solicitors wrote to the Company to reiterate Mr Cheung’s acceptance of the alleged repudiation by the Company and his refusal to accept the Sum.

(12) On 23 July 2018, D’s Solicitors sent a reply letter to P’s Solicitors to deny all the allegations of Mr Cheung in the Letter. They highlighted the Remittance Term and further reminded Mr Cheung to make the first repayment pursuant to the Loan Agreement.

(13) On 26 July 2018, P’s Solicitors sent to D’s Solicitors a letter to rebut the allegations in their letter enclosing therewith a cheque in the      amount of HK$50,000 drawn in favour of the Company to      repay to the Company the Paid Amount (“the Repayment Cheque”).

(14) D’s Solicitors by their letter dated 27 July 2018 (“the 1^st Reply Letter”) acknowledged the receipt of the Repayment Cheque and pointed out that it should be regarded as repayment. They also indicated that the Company should not discharge or release the Charge unless and until Mr Cheung settled the outstanding amount of principal and interest payable to the Company.

(15) Lastly, D’s Solicitors by their letter dated 3 August 2018 (“the 2^nd Reply Letter”) informed P’s Solicitors of the updated outstanding amount of principal and interest payable to the Company (HK$70,000 including the Paid Amount) the legal costs incurred in the amount of HK$3,500 for the purpose of the discharge or release of the Charge.

Analysis

10.  Both Mr M Cheung and Mr Lo made an effort to refer to this court the established principles of contract interpretation. I need not set all of them out here and, in my view, for the following reasons, it is clear that the Remittance Term must prevail.

11.  The Advancement Terms are seemingly inconsistent with the Remittance Term. I cannot accept Mr M Cheung’s submission that I should take a simple approach and reject the latter one as repugnant.

12.  When examined closely, the Advancement Terms actually represented Mr Cheung’s confirmation of the general terms of the Loan. It is noteworthy that this confirmation was made in consideration of the Principal Sum and not just the Paid Amount. Mr Cheung even acknowledged to have already received the Principal Sum, contrary to the undisputed facts.

13.  The Remittance Term was included in one of the Supplemental Agreements, which were signed by Mr Cheung on the same occasion. I should read all these contractual documents together for the purpose of construction: see Lewison, The Interpretation of Contracts (6^th edition, 2015) at §3.03.

14.  One of the functions of the Supplemental Agreements, as with all other supplemental agreements, was to include further terms in addition to those of the Main Agreement. Other additions include the provisions for early repayment charge and late payment charge and the reduction of interest rate as a reward for punctual repayments (contained in a Chinese document entitled [貸款條款協議增補書]).

15.  The purpose of the Remittance Term was to, in a similar vein, impose an actual payment obligation on the Company. The Principal Sum was to be advanced only after the registration of the Charge. This indeed makes perfect business sense and the Company has to protect itself against an invalid or a worthless charge. As is contended by Mr Cheung himself, the Company should, within a reasonable time, and not forthwith, register the Charge. It indeed took time for the Company to carry out proper investigation into the title to the Property and find out whether there were any pre-existing encumbrances so as to assess the effectiveness of the Charge. Furthermore, in the meantime, there could be other charges registered against the Property ahead of the Charge rendering the Charge worthless.

16.  I cannot accept Mr Cheung’s submission that the interest of the Company is well-protected by the Charge itself and the registration of the Charge is only a matter of priority. There is no reason why the Remittance Term should be rejected by reason of or subject to the Advancement Terms. It spelt out the actual payment obligation of the Company in clear terms.

17.  Mr M Cheung rightly points out that in the Main Agreement there are references to the date of 5 July 2018 as the date of the first repayment instalment. He then submits that it shows that the Principal Sum was indeed agreed by the parties to be advanced on 5 June 2018.

18.  I am of the view that in the event that the Principal Sum could not be released to Mr Cheung because of any delay in the registration of the Charge in good time before 5 July 2018, the parties should certainly agree on an adjustment of the repayment schedules. The first repayment date stated in the Main Agreement cannot avoid the contractual effect of the Remittance Term.

19.  Mr M Cheung further urges this court to take into the factual matrix leading to the execution of the Loan Agreement so as to strike out the Remittance Term. He underscores the uncontradicted evidence of Mr Cheung that his employment with the Marine Department had been suspended and had made no income for more than 16 months prior to the execution of the Loan Agreement. Further, as shown by documentary evidence, Mr Cheung was indebted to the Bank of China and United Asia Finance Limited and had to make monthly repayments to these two financial institutions. His financial plight makes it improbable that he could have agreed with the Company that the Loan would only be made available after registration of the Charge. Indeed, he alleges that he had made known to the staff dealing with him on behalf of the Company his personal circumstances.

20.  I have little doubt that Mr Cheung was in serious financial difficulties when he turned to the Company for assistance despite its high interest rate. I believe that most borrowers of private moneylenders, if not all, are under some kind of financial pressure. No matter how desperate they are, they still have to wait for the approval of their loan applications and the completion of all the usual and necessary work undertaken by the moneylenders in order to assess the effectiveness of the securities offered, if any, to protect their own position. Moneylenders are not charities. Mr Cheung’s dire monetary need cannot really lead this court to arrive at his conclusion. There is no evidence and not part of the factual matrix that there were other moneylenders which were ready to extend a similar loan to Mr Cheung forthwith upon his signing of a loan agreement before he executed the Loan Agreement.  

21.  In conclusion, I agree with Mr Lo that the Remittance Term should be upheld and given effect. The Company was obliged to make the advancement of the Principal Sum to Mr Cheung only after the registration of the Charge. The construction issue is, thus, resolved against Mr Cheung without any need to determine material factual disputes.

22.  I should add that even if this court were to hold that the Company was obliged to make the advancement of the Principal Sum on the same date when the Loan Agreement was signed and time was really of the essence, Mr Cheung clearly affirmed the Loan Agreement despite the breach of the Company on his own evidence. He accepted in cross-examination that he shortly afterwards presented the Cheque and spent the Paid Amount. He alleged that he had chased after the payment but in vain. There is no evidence that he had ever set another reasonable deadline for the Company to make the advancement before he secured the Other Loan. Mr Cheung actually agreed in cross-examination that once he acquired the Other Loan, he no longer needed the Loan.

23.  Mr M Cheung submits that the allegation of affirmation should not be raised in the absence of proper pleadings. I reject his submission. These proceedings were begun by the Originating Summons and there is no pleading. On his own evidence, the issue of affirmation inevitably arises.

24.  Before I turn to the alleged breach of the implied terms, which is a fact sensitive issue, I should first take a closer look of the credibility of the respective witnesses of the parties and make the necessary factual findings relating to the allegation.

25.  Mr Cheung called no witness and he alone testified in support of his claim. Madam Lee who was the sales officer of the Company was the only witness of the Company.

26.  Madam Lee was a forthcoming and straightforward witness. Her evidence was largely supported by documentary evidence. Her testimony was both logical and reasonable. I have little concern about the reliability of her evidence.

27.  The same cannot be said about Mr Cheung. I do not think I can rely on his testimony generally speaking and some of his allegations are plainly unbelievable. As an illustration, in order to paint the picture that he never expected to accept the Paid Amount in the Cheque instead of the Principal Sum on the date of the Loan Agreement, Mr Cheung testified that when he was at the lift lobby making his way out of the office of D’s Solicitors after signing the Loan Agreement, he was unexpectedly given the Cheque. He then found out that only the Paid Amount and not the Principal Sum was advanced to him.

28.  I find it incredible that Mr Cheung was ready to leave the office empty-handed without any advancement when his case is that he needed money desperately and the Company agreed to pay him the Principal Sum on the very day he signed the Loan Agreement. He should have insisted on the advancement of the Principal Sum and reasoned with the Company before leaving the office at all. After receiving the Cheque, it is inexplicable that he did not even raise any issue with the Paid Amount.

29.  Madam Lee’s evidence that the Paid Amount was requested by Mr Cheung on the day before the signing of the Loan Agreement, i.e. 4 June 2018, over the phone. She then caused the Cheque to be prepared for the collection by Mr Cheung upon his signing of the Loan Agreement on the following day. Indeed, the Cheque was dated 4 June 2018 and it bore an acknowledgment of receipt signed by Mr Cheung. Her evidence is clearly more credible and preferable.

30.  Upon acceptance of the evidence of Madam Lee, I make the following material factual findings:

(1) Madam Lee was the frontline contact person dealing with Mr Cheung’s application for the Loan on behalf of the Company throughout. There is no one called Kelvin Lee in the Company or any other male handling the Loan Agreement;

(2) Mr Cheung contacted Madam Lee on the phone on 4 June 2018. Madam Lee told him that his application was approved and the full sum would be released to him upon checking of the title deed and registration of the Charge. She explained to him that this might take 3 to 4 weeks and after registration of the Charge she would contact Mr Cheung again.

(3) Mr Cheung then asked Madam Lee for an advancement of some tens of thousands first. Madam Lee agreed that the Company could advance the Paid Amount first pending the registration of the Charge as a gesture of goodwill. She therefore instructed the   Accounting Department of the Company to prepare the Cheque on the same day. This was the usual practice of the Company indeed.

(4) On 5 June 2018, in the office of D’s Solicitors, Madam Lee handed the Cheque over to Mr Cheung in the presence of a solicitor and one Ms Luk who was a witness to the Main Agreement. Mr Cheung signed on a photocopy of the Cheque to acknowledge his receipt of the same. Mr Cheung raised no objection to the Paid Amount at all.

(5) Madam Lee (and the Company) heard nothing from Mr Cheung since he left the office of D’s Solicitors on 5 June 2018. She never told Mr Cheung that the Company would not issue him a cheque for the remaining amount of the Principal Sum in mid-June or at all. Nor did anyone on behalf of the Company.

(6) On the contrary, on 20 and 22 June 2018, Madam Lee telephoned Mr Cheung to ask him to collect the cheque for the balance. Mr Cheung gave no response.

(7) On 11 July 2018, by a voice message, Madam Lee advised Mr Cheung to provide his bank account details for the direct remittance of the balance to his account. She further urged Mr Cheung to resolve the matter with her if he did not want the balance as soon as possible.

(8) On 12 July 2018, by another voice message, Madam Lee advised Mr Cheung that the Deposit would be made into his account with HSBC.  

(9) On 16 July 2018, Madam Lee sent to Mr Cheung a payment advice by Whatsapp to evidence the Deposit.

(10) The Company only received the Letter on 16 July 2018, which unequivocally indicated Mr Cheung’s intention to repudiate the Loan Agreement.

31.  Confronted with the evidence of Madam Lee including the whatsapp records and her denial of making any refusal to advance the balance to him on behalf of the Company in mid-June, Mr Cheung said in his 3^rd Affirmation that he had in fact communicated with another male staff in respect of the Loan Agreement, seeking to avoid a head-on collision with her evidence. In cross-examination, he disclosed for the first time that the male staff was called Kelvin Lee.

32.  I have no hesitation in rejecting his evidence. He said he clearly remembered the name of the male staff.  All the more, there is no reason why he had to wait until the trial to disclose his name and made no mention about the same in his three affirmations. Moreover, Kelvin Lee must be an important witness to support his case of the repudiation by the Company. There is no reason why Mr Cheung made no effort to adduce evidence from him or secure his attendance to testify.

33.  This last minute fabrication of the male staff by the name of Kelvin Lee speaks volume for the flexibility with the truth of Mr Cheung.

34.  In light of these factual findings, I find no merit in the allegation of the breach of the implied terms by the Company even given the reasonable concession by the Company that the alleged implied terms should be incorporated into the Loan Agreement.

35.  As mentioned, it was reasonable for D’s Solicitors to carry out proper investigation before registration of the Charge. The Charge was eventually registered on the 9^th business day after the signing of the Loan Agreement. Mr Cheung did not hurry the Company in respect of the registration of the Charge during the nine days and he kept radio silence. Nor has he adduced any evidence to the effect that nine days are more than reasonable for the professional work to be completed. Indeed, when Madam Lee told him that registration process would take 3 to 4 weeks, he raised no objection. In the circumstances, I can find no breach of the implied terms at all.

36.  The true picture is abundantly clear. Once Mr Cheung managed to secure the Other Loan with more generous terms, he simply brushed aside his contractual obligations under the Loan Agreement and decided to repudiate the same.  

37.  In my judgment, Mr Cheung’s persistent refusal to accept the balance of the Loan by the Letter amounts to his repudiation of the Loan Agreement. The Company accepted the repudiation by the 1^st and/or 2^nd Reply Letters. Mr Lo confirms that the Company has not made any counterclaim for damages or other relief pursuant to Order 28 r.7, Rules of the District Court.

38.  I can dispose of the two remaining issues raised by Mr M Cheung briefly. First, he argues that the Charge should no longer be registrable after the repudiation of the Loan Agreement and hence the discharge of the contractual obligations of Mr Cheung thereunder.

39.  I accept Mr Lo’s submission that according to the terms of the Charge, in particular, the definitions of “loan” and “secured indebtedness” can respectively cover the Paid Amount and the interest thereon and all other monies and obligations in respect of monies which Mr Cheung covenants to pay to the Company under the Charge. The latter should include the costs of discharge under clause 4.01 of the Charge.

40.  In the premises, I conclude that Mr Cheung is liable to pay the Company 2 months’ interest on the Paid Amount in the sum of HK$3,500 and 1 month’s interest on the Sum for 1 month in a sum of HK$15,750. The Sum was made available to Mr Cheung and interest should be accrued irrespective of whether Mr Cheung accepted the Deposit.

41.  Together with the costs or disbursement of the discharge of the Charge in a sum of HK$3,500, Mr Cheung is liable to pay the total sum of HK$22,750 to the Company. The said sum is secured indebtedness under the Charge and so I hold that the Property stands charged with the repayment of the said sum.

42.  Lastly, Mr M Cheung raised an argument out of the Money Lenders Ordinance, Cap. 163 (“the MLO”). It is alleged that the Loan Agreement was unenforceable by virtue of section 24 of the MLO.

43.  This issue was not debated at trial. Mr M Cheung sensibly did not address me on this issue in his closing submissions at all.

44.  In any event, I agree with Mr Lo that there is nothing in this argument and it is based on a misunderstanding of the actual interest rate that the Company is seeking to charge.  In fact, the contractual interest rate of 3.5% per month still applies and there is no issue of any excessive interest rate. Section 2 of the MLO is not engaged.

Conclusion and order

45.  For the reasons given, Mr Cheung’s claim by the Originating Summons falls to be dismissed. Mr Cheung has clearly repudiated the Loan Agreement. The Company has not sought damages. Mr Cheung could almost wriggle out of the transaction by a payment of the said outstanding sum to the Company so that the Charge could be discharged. It is most unfortunate that Mr Cheung refused to pay the modest amount and these proceedings have been necessitated. The actual dispute has been blown out of proportion.

46.  Costs should follow the event. Mr Cheung should pay the costs of the Company including any costs previously reserved with certificate for counsel, to be taxed if not agreed. Mr M Cheung has indicated there would be arguments about costs. It is high time that the parties have taken a realistic and reasonable approach to handle this dispute. Complicated legal arguments may not help the cause. Further legal costs should only be incurred after sensible deliberation.

47.  The costs order made herein is on a nisi basis.

48.  Finally, I thank Mr M Cheung and Mr Lo for their impressive effort and thorough submissions.