PACIFIC ACE FINANCE LTD v. DELAY, GILDA H. AND ANOTHER

DCCJ 3298/2018 & DCCJ 3299/2018

(Heard Together)

[2025] HKDC 1161

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3298 OF 2018

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BETWEEN

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3299 OF 2018

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BETWEEN

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JUDGMENT

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I. INTRODUCTION

1.  By the order made by Master Ross Li dated 20^th December 2023, these two actions are to be heard and tried together.

2.  Both DCCJ 3298/2018 and DCCJ 3299/2018 are money lenders’ actions, pursuant to Order 83A of the Rules of the District Court, Cap 336H, for recovery of the principal sum with interest of two loans. Both loans were advanced by the Pacific Ace Finance Limited as lender (“the Plaintiff”) to the defendants as borrowers in the respective actions with details alleged by the Plaintiff as follows:

Loan Agreement	DCCJ 3299/2018 (“Loan 1”)	DCCJ 3298/2018 (“Loan 2”)
Date	28 March 2015	4 May 2015
Loan Principal	HK$10,000.00	HK$13,000.00
Principal Borrower	Villasfer, Rosalina J., D1 (“Rosalina”)	Delay, Gilda H., D1 (“Delay”)
Co-Borrower	Delay, D2	Villasfer, Andrenee M., D2 (“Andrenee”)
Interest rates	2.5% per month 30% per annum	2.4% per month 28.8% per annum
Instalments	4	6
Repayment Amount for each Instalment	HK$2,750.00	HK$2,479.00
Total Repayment Amount (including interests)	HK$11,000.00	HK$14,874.00
Actual Amount repaid to the Plaintiff	HK$2,750.00	HK$13,432.00
The date upon which such unpaid sum became due	5 June 2015	17 January 2018

3.  It is not disputed that the Plaintiff was at all material times a registered and licensed money lender under the Money Lenders Ordinance, Cap 163 (“the Ordinance”). At the time of entering into the agreements of Loan 1 and Loan 2 specified above, the Plaintiff was duly licensed as money lender under the Ordinance.

4.  All defendants in both actions were domestic helpers at the time when Loan 1 and Loan 2 (collectively called “the Loans”) were taken out. Besides Delay who is still working in Hong Kong at the time of the trial, both Rosalina and Andrenee had returned to the Philippines before the commencement of these two actions.

5.  Loan 1: It is the Plaintiff’s case that Delay and/or Rosalina had only repaid the first out of a total of four instalments on 4^th May 2015, and thus the whole of the balance of the Loan 1 together with interests, default interests and late charges would become immediately due in default of repayment for one month.

6.  Loan 2: It is the Plaintiff’s case that Delay and/or Andrenee had paid a total of HK$13,432.00 in respect of Loan 2 but such sum was made over 11 tranches of payments on various dates later than the due dates specified in the Loan Agreement. Moreover, the amount of each tranche of repayment was less than the agreed instalment, ie HK$2,479.00. The Plaintiff therefore avers it is entitled to default interest at the same rate from the due date of payment until actual payment.

7.  For the purpose of these two actions, the Plaintiff foregoes the claim over the late charges.

8.  Since Andrenee and Rosalina are both not in Hong Kong since the commencement of these actions, only Delay filed the homemade Defence and Counterclaim (“D&CC”) for both cases.

9.  The defence case can be summarised as follows:

(a) The Plaintiff ran a debt-trapping scam by having a principal borrower and co-borrower in the Loans. It is averred by Delay that the co-borrower was ‘fake’ in the sense that the loan money was not received by the co-borrower but who was made to enter into the loan agreement to act as a ‘human form of securities’ over the principal borrower (“the Debt-trapping Scam”);

(b) The promissory note of the Loans were forged because the principal borrower did not sign the promissory note together with the co-borrower on the same day, but the Plaintiff forged the signing date. The promissory note for the respective Loans are therefore illegal documents, hence invalidate the Loans (“Forgery”);

(c) The Plaintiff and its staff was in breach of Condition 10(a) and (c) of the Licensing Conditions of Money Lenders License (“the Licensing Conditions”) by adopting unlawful debt collection practices to recover debts of the Loans from Delay, which included “criminal intimidations, death threat, intrusion, public humiliations, and torments” against Delay and “disturbed and harassed” Delay’s employer who was not indebted to the Plaintiff (“Unlawful Debts Recovery Practice”);

(d) The Plaintiff charged effective interest rate exceeding 60% per annum and thus violated the Ordinance (“Excessive Interest Rate”);

COUNTERCLAIM:

And due to the Unlawful Debts Recovery Practice, Delay averred to have “suffered tremendously for 6 years of fear”, thus counterclaiming the Plaintiff “punitive damages” of HK$10 million but reducing it to HK$3 million thus within the jurisdiction of the District Court.

The Plaintiff’s Evidence

10.  The Plaintiff tendered two witnesses, including Mona Liza Q Bautista (“Bautista”) and Aldrin R Samoza (“Samoza”). Bautista is the Director and Loan Approving Officer of the Plaintiff, and has worked for the Plaintiff for 28 years at the time of the trial. Samoza is a collection supervisor of the Plaintiff and has worked for the Plaintiff for 29 years at the time of the trial.

11.  Bautista explained the usual procedure of loan applications with the Plaintiff, which involved in essence, a loan application form to be filled in by the applicant(s) (“Application Form”), a briefing session with the applicant(s) followed by an interview by a loan approving officer. Should the application be approved, the applicant(s) will be provided a promissory note which is equivalent to a loan agreement (“Promissory Note”) with contents fully explained to them in English and/or Tagalog (“the Loan Application Procedure”). Bautista was not the officer who interviewed the Defendants but she believed the Loans were approved under the Loan Application Procedure, and the Defendants must understand the terms of the Loans as the Promissory Note were written in both English and Tagalog.

12.  Samoza gave evidence that the Plaintiff instructed him to collect debts from Delay in September 2017. He therefore went to the address that was provided by Delay on her Application Forms for the Loans on 1^st September 2017 (“the First Visit”). He explained the purpose of the First Visit was to verify if Delay was still residing at such address, and he disagreed that he had ever harassed her at the First Visit. He gave evidence that the person from inside the premises did not open the front door but sent Delay to the lobby where they had a meeting. During the meeting, Samoza said Delay promised she would pay the overdue debts owing to the Plaintiff and with her consent, Samoza took a photo of her to show to the Plaintiff that they had a meeting.

13.  Subsequent to the First Visit, Delay made two repayments each at HK$500.00 on 5^th October 2017 and 5^th December 2017.

14.  Samoza paid another visit at Delay’s address on 14^th December 2017 (“the Second Visit”) since the Plaintiff received no further repayments from her. He agreed that he had left Delay a notice in the letterbox (“the Notice”) because Delay told him via the intercom that she could not meet him at the lobby. This was the second and last time of his visit at Delay’s address and the Plaintiff received no further repayments from her subsequent to the Second Visit.

The Defendants’ Evidence

15.  Notwithstanding an unless order made by Master Timon Shum on 14 June 2023, Delay and other defendants did not file any witness statements in these actions but rather, chose to rely on a witness statement prepared by Steven Tam-Ang (“TamAng”) as the only defence witness in these two cases. TamAng was not present at the time when Delay applied for the Loans and/or signed the Promissory Notes, neither had he witnessed the alleged harassment. In gist, he has no personal knowledge about the allegations made by Delay but all his understandings were based on information relayed to him. Moreover, his witness statement was prepared in a style akin to legal submissions, which involved his own analysis of the Plaintiff’s pleaded case, and credibility of various witnesses.

16.  In dealing with hearsay evidence in civil proceedings, s 49 of the Evidence Ordinance, Cap 8, provided a list of considerations that the Court could take into account when assessing how much weight, if at all, to be placed on the hearsay evidence. The Plaintiff’s solicitors urged the Court not to place any weight on TamAng’s evidence, and I agreed based on the following reasons:

(i) Opportunities were given to Delay to file her witness statements as evidence of her cases;

(ii) The presence of Delay at the trial demonstrated her availability of being a witness in these cases;

(iii) Delay, who was unrepresented, was perfectly capable in making her opening and closing submissions, and cross-examining the Plaintiff’s witnesses. This demonstrated her ability in preparing witness statements and giving evidence at the trial;

(iv) The information was relayed to TamAng by Delay in July 2016, that is more than a year after the Loans were taken out and at least 6 months after the last repayment was due. There was no evidence showing TamAng knows or has any contact with Rosalina or Andrenee. This demonstrated his inability to discern the truthfulness in Delay’s account of the Debt-trapping Scam;

(v) TamAng was not present when the alleged harassment took place, including the allegation of the Plaintiff sending debt collector to Delay’s employment address and calling her employer’s workplace. There was no evidence showing TamAng knows or has contacted Delay’s employers, and thus he would not be in a position to discern the truthfulness of the alleged incidents;

(vi) The allegations of Forgery and Excessive Interest Rate were matters of legal discussion, and TamAng was not in any position to provide his opinions as a factual witness.

17.  It would be prejudicial to the Plaintiff should the Court put any weight on TamAng’s evidence without having Delay being cross-examined. Since Delay gave up on her rights being a witness, all accounts of incidents which TamAng referred as told by Delay should therefore be rejected.

18.  On the other hand, I found both the Plaintiff’s witnesses gave evidence in a straightforward and honest manner. Their evidence was unshaken under cross-examination and was supported by various contemporaneous documents which I will explain in the paragraphs below.

The Debt-trapping Scam

19.  By rejecting TamAng’s evidence, Delay’s allegation of the Plaintiff’s Debt-trapping Scam was nothing more than a bare assertion. None of the principal borrowers or co-borrowers gave evidence, and even taking the defence case to its highest that the co-borrower was simply a ‘human form of security’ and no loaned money was ever passed into the hands of the co-borrower is not in itself a breach of any law. First, what Delay described as ‘human form of security’ in her D&CC is commonly known as surety or guarantor who provides ‘financial backing’ to the borrower’s repayment obligation. Most financial institutions require borrowers to nominate a surety or guarantor especially when borrowers could not provide any collaterals for their loans. Pursuant to section 12 of the Money Lender Regulations, Cap 163A (“MLR”), there are only three forms of security for loan is prohibited, namely identity card of a person, bank savings or deposit account book or photograph of the borrower or surety or that of their family member. As such, should the co-borrowers of the Loans be in fact acting in the capacity as a surety, the Court does not see how this violated the MLR as alleged by Delay.

20.  Secondly, while it was the Defendants’ case saying these co-borrowers were fake, it was not her pleaded case that Delay and/or Andrenee as the respective co-borrower in Loan 1 and Loan 2 were misled or coerced into entering in the loan agreement and signed on the Promissory Note(s). Nor was their case that the signatures on the Application Form and/or Promissory Notes were forged. It is well-worthy to note that Delay took out another loan from the Plaintiff on the same terms and conditions just few months before Loan 1 with one Madam Balbontin acting as the co-borrower. It signified Delay’s understanding of the Loan Application Procedure, and both her voluntariness and willingness in accepting the terms and conditions of Loan 1 and Loan 2.

21.  So even if the co-borrower was in fact a surety of the principal borrower (which the Defendants failed to prove), I accept the evidence of Bautista that all loan applicants, including Delay and Andrenee were properly advised before they accepted the terms and conditions of the Loan Agreement, and in these circumstances, no criticism could have attached to the Plaintiff in requiring a co-borrower to assume the principal borrower’s liability when he or she fails to repay the loan.

Forgery

22.  The allegation of Forgery simply has no groundings. It was pleaded that the date of the Promissory Note of the Loans did not reflect the actual date when the principal borrower and co-borrower signed on the forms, thus such Promissory Note was forged, hence unenforceable.

23.  No legal authorities were submitted by the Defendants in support of her proposition, and the Court does not see how and where the forgery occurred. The Application Form would only be processed and approved when both the principal borrower and co-borrower signed on the requisite documents, it is not a condition nor a legal requirement that all interested parties must sign the documents at the same time and/or place. Should one of these borrowers went to the Plaintiff’s office to sign the documents, the approval of the loan would be pending on the signature of the other borrower. The significance of the date is not about when the documents were signed, but when the contract was duly executed and the Promissory Note became effective. The argument on forgery must therefore fail.

Unlawful Debts Recovery Practice

24.  As to the allegations of Unlawful Debts Recovery Practice, since neither Delay nor her employer gave evidence, the averred telephone calls made to her employer in 2016 and the screenshots captured from allegedly Delay’s mobile phone showing threatening messages were all bare assertions without any supporting evidence. Again, taking the Defendants’ case to its highest, the so-called life-threatening message read as follows:

“no more just bullshit here, lets start now! I am exciting of yr harassment!”

“are you still alive bullshit everyday? HK no need the trash walk around like u, where is the police? arrested U?”

“u try x care, let see u stay hk longer than me or not, all will 100% make u know …”

25.  Not only I saw no threats between these lines of nonsensical messages, but there was also not a single word about repayment of the Loans or any kind of implications that Choi being a staff of the Plaintiff (in fact there was no proof of the identity of sender). It was also telling that Delay only reported to the Police almost two years after receiving these threatening messages, and no charges were made against anyone by the Police. As such, I do not consider there is any substance in Delay’s allegation.

26.  It is also the defence case that a demand letter and the Notice were placed inside the letterbox of Delay’s employer’s address as well as the First Visit and Second Visit amounted as harassment, and misuse of Delay’s personal data.

27.  Samoza admitted that he placed a Notice inside the letterbox at his Second Visit after seeking permission from both Delay and the security guard of the building. The Notice was simply a card addressed to ‘GILDA DELAY” bearing the Plaintiff and collection officers’ names, address and contact telephone numbers. There was no mention of the Loans or repayment but printed with the following statement:

“Please report to the office or contact us through hotline no 2532-5800 during office hour 9:00AM – 6:00PM. before we take further action that may cause inconvenience to you or to your employer.”

28.  A demand letter dated 29 December 2017 addressing to Delay (“Demand Letter”) was allegedly placed inside an envelope addressing to Delay’s employer ‘戴小姐’. There was no evidence before me confirming Delay’s employer’s name but let us assume so for the purposes of legal analysis.

29.  My attention was first drawn to the following clause in the Application Form in relation to the personal data provided by applicant, which was acknowledged and signed by Delay (“the Personal Data Clause”):

“The undersigned acknowledges and understands the contents of the Circular to Customers relating to the Personal Data (Privacy) Ordinance, Terms and Conditions of loans and agrees that the Company is authorized to contact all relevant parties for verification and to disclose any information concerning the undersigned to and third parties for the purpose of exchanging credit information, debt collection or any other reasonable purpose(s). The undersigned also acknowledges that, whether the said application is approved or not, this application form belongs to the property of Pacific Ace Finance Limited.” (Emphasis added)

30.  On the other hand, Condition 10 of the Licensing Conditions sets out the obligation of licensees in connection with debt collection activities:

Condition 10

(a) The money lender and his debt collectors shall not try to recover debts, whether directly or indirectly, from anyone unless such person is in law indebted to him;

(b) The money lender shall take all practicable steps and measures to ensure that personal data collected in the course of his business are protected against unauthorized or accidental access, processing, erasure or other use by any debt collectors, and shall at all times comply with the Personal Data (Privacy) Ordinance, Cap 486, Laws of Hong Kong, in the collection, use, holding and processing of such information or personal data;

(c) The money lender and his debt collectors shall not, while trying to locate the whereabouts of debtors, harass anyone, adopt unlawful or improper debt collection practices;

(d) The money lender shall, so far as reasonably practicable, maintain and monitor proper systems and procedures for handling complaints and/or inquiries relating to the loans lent by him in the ordinary course of business and the debt collection activities arising therefrom;

(e) The money lender shall, so far as reasonably practicable, keep updated and accurate records of the debt collection activities of his debt collectors during the term of the licence.

31.  It is clear that the Licensing Conditions Condition 10 (a) specifies money lenders and/or debt collector can only try to recover debts from the borrowers, but Condition 10(c) also allows money lender and his debt collectors to locate the whereabouts of the debtors but not through any improper or unlawful practices.

32.  Bautista gave evidence that while employer is not a ‘relevant party’ to collect a loan of a borrower, the employer is a relevant party for verification of the borrower’s address and employment status. Both Bautista and Samoza also gave evidence about the debt recovering practice of the Plaintiff that demand letters will only be sent out after the Plaintiff failed to contact the borrowers after SMS and follow-up calls, and any face-to-face meeting at the address provided by the borrower was to confirm if he or she was still under the same employment.

33.  Bearing in mind the Demand Letter was sent out after Delay stopped making any repayment and refused discussing the Loans with the Plaintiff, and taking into consideration that while the envelope was addressed to allegedly Delay’s employer, the Demand Letter was addressing to Delay. I incline to think such arrangement was reasonable for the Plaintiff to locate and to confirm if Delay was still under the same employment as specified in her Application Form and to make demand for repayment from Delay. I do not consider there has been any breach of the lenders’ obligations under the Licensing Conditions Condition 10.

34.  The Court has the benefit of reading the contents of the Demand Letter and it was inconceivable how a standard, formal and courteous demand letter been perceived as a source of threats and harassment. Equally, the Notice was nothing more than an appeal asking for contact, which was sent to an address voluntarily provided by Delay.

35.  Since Delay did not give evidence in these actions, the evidence given by Samoza about the First and Second Visits could only be challenged by Delay under cross-examination. As explained earlier, I found Samoza’s evidence is to be preferred. He denied his First Visit had terrified a little girl who opened the front door for him and he was adamant that he only spoke to someone over a closed door and was later invited to meet Delay in the lobby. Should the version of event suggested by Delay be accepted, it would imply her leaving her employer’s daughter, who was in a terrified state alone in the house while she went down to the lobby meeting Samoza. I found this to be inherently improbable. Further, I could hardly detect any distress from Delay in the photo taken by Samoza at the Lobby; her smile in the photo might not be as genuine as it seemed, the chance of it taken without her consent in a public place with security guards was seemingly odd.

36.  Quite apart from the fact that I cannot see any threats, harassment or misuse of personal data from the Plaintiff, it seems to me that the Plaintiff had all along acted reasonably in its effort to recover the debts, and there in any event no basis at all for the complaints identified in paragraphs 24 – 35 above.

Excessive Interest Rate

37.  In the D&CC filed by Delay for the respective cases, she took TamAng’s view that the interest rate the Plaintiff was charging over Loan 1 and Loan 2 was in excess of the legal requirement of 60% per annum (which is now lowered to 48% per annum from 30^th December 2022). As such, the Loans are unenforceable under section 24(1) and 24(2) of the Ordinance.

38.  The Defendants’ calculations were premised on two beliefs she held. First, the interest for the subsequent month’s installment was calculated based on the remaining balance of the loan instead of the loan principal, secondly for all those late repayments she made in respect of Loan 2, she treated them as settling the total loan amount without calculating the default interest for late payment.

39.  There are different repayment schedules depending on the type of loan. The repayment schedule suggested by Delay is often called the ‘amortized loan’ where lenders and banks set a regular payment schedule that includes both the interest and principal, and monthly payments will chip away at the principal amount as well as the interest accrued. The interest on an amortized loan is calculated based on the most recent ending balance of the loan, and thus the repayment amount fluctuates each month.

40.  Contrary to Delay’s averment, Loan 1 and Loan 2 (so as an earlier loan she took out from the Plaintiff) were not amortized loan but a simple fixed interest loan, which is also a type of loan commonly available amongst financial institutions (and certainly legal). Instead of having a repayment schedule splitting the monthly payable interest and principal, lenders using the loan principal and the fixed interest rate to calculate the total amount of interest to be paid over the entire the installment period. This is exactly what being shown on the “Installment Schedule” provided to Delay by the Plaintiff, which has clearly indicated the number of installments and amount payable for each installment.

41.  The formula for calculating simple interest is:

Principal x annual interest rates (%) x duration of the loan (years)

100

42.  For Loan 1

Principal Loan: HK$10,000.00

Annual Interest Rates: 30%

Duration of the loan: 4 months, ie 0.333 years

Therefore the simple interest for Loan 1 is:

($10,000.00 x 30% x 0.3333) / 100 = $999.9

Rounding off to the nearest number will therefore give us a simple interest at $1000.00, and thus the total amount payable being $10,000 + $1,000 = $11,000.00

Since the total amount payable be repaid in 4 installments, $11,000/4 = $2,750.00 is the monthly payable installment.

These figures match with the repayment schedule provided to Delay by the Plaintiff.

43.  For Loan 2

Principal Loan: HK$13,000.00

Annual Interest Rates: 28.8%

Duration of the loan: 6 months, ie 0.5 years

Therefore the simple interest for Loan 2 is:

($13,000.00 x 28.8% x 0.5) / 100 = $1,872.00

Thus the total amount payable being $13,000 + $1,872 = $14,872.00.

Since the total amount payable be repaid in 6 installments, $14,872/6 = $2,478.66 is the monthly payable installment. Rounding off to the nearest number will therefore give us $2,479.00 that matches the repayment schedule provided to Delay by the Plaintiff.

44.  The repayment schedules for both Loan 1 and Loan 2 showed that the Plaintiff charged the Defendants the interest rates as described in their respective Promissory Notes, which did not exceed the statutory limit.

45.  For the sake of completeness, I reminded myself that since the rate in interest was stated as an actual rate of interest in the Promissory Notes, it is therefore not necessary to resort to Schedule 2 of the Ordinance which was used to ascertain the ‘deemed rate’. (See Kwok Ying Lung v Ko Chu Hung [2001] 3 HKC 480) Lord Denning in Askinex Ltd v Green [1969] 1 QB 271 at 282B-E used the following example to illustrate a case of an actual rate of interest:

“... To illustrate the first alternative (a) [ie the actual rate], I would take the case where a moneylender makes a loan of £24,000 repayable over 10 years at £200 a month, and meanwhile interest to be payable at the rate of 25 per cent per annum on the balance outstanding from time to time. Under such a contract, the principal is reduced by £200 a month. So the interest gets less each month. The interest payable for the first month is £500 (25 per cent per annum on £24,000 for one month). The interest payable for the second month is £495 16s 8d (25 per cent per annum on £23,800 for one month). And so on. The interest is reduced by £43s 4d(25 per cent per annum on £200 for one month). The total sum payable for interest over the 10 years comes to £30,250. That is the “interest charged on the loan”. But it is capable of being expressed in terms of an actual rate per cent per annum, namely, 25 per cent per annum. The moneylender satisfies the statute by expressing the interest as 25 per cent per annum.”

46.  In the case before me, the total interest payable during term of Loan 1 and Loan 2 were clearly calculated (being $1,000 and $1,872 respectively) and capable of being expressed in terms of an actual rate of interest per cent per annum. Such rate would be accepted by the court as the effective rate of interest for the Loans for the purpose of section 25.

47.  On the same note, since Delay and other Defendants received and signed on the Promissory Notes showing the precise interest rates and amount payable for each instalment, there was simply no room for them to argue they were in any way misled or uncertain as to what those terms were.

48.  The words ‘compound interests’ were used by Delay describing how Plaintiff calculated the default interest. She presented to the Court various algorithms in calculating the interest rate, which some of them were as high as 300%. I regret to say that there is not much point in demonstrating here how she arrived various interest rates as she muddled the concept of ‘compound interest’ with ‘default interest’, and has fallen in the error of calculating the interest without taking into account of the number of days overdue (or allocated random arbitrary number as the number of days overdue). Her whole computation was wholly misconceived.

49.  It is not disputed that Delay, Rosalina and Andrenee, being either or both the principal borrowers and co-borrowers in Loan 1 and Loan 2 defaulted in repayment. Only one repayment at HK$2,750.00 was made for Loan 1 by the first due date on 4^th May 2015 and the other three instalments were all in default. In respect of Loan 2, the tables below compare the actual date of repayment and its amount vis-à-vis the agreed repayment schedules:

Due Amount	Due date	Actual Repayment date	Actual Amount of Repayment
$2,479	10/06/2015	27/06/2015	$1,000
$2,479	10/07/2015	04/07/2015	$1,559
$2,479	10/08/2015	28/07/2015	$2,545
$2,479	10/09/2015	18/09/2015	$1,500
$2,479	10/10/2015	22/11/2016	$2,000
$2,479	10/11/2015	07/01/2016	$1,500
		25/02/2016	$1,000
		05/04/2016	$828
		27/04/2016	$500
		05/10/2017	$500
		05/12/2017	$500
Total: $14,874			Total: $13,432

50.  The 6 instalments payable in 6 months were made over 11 repayments over 30 months, and not a single repayment was made by the due date. The total amount of repayment was also less than what was agreed under the Promissory Note.

51.  According to the Promissory Note for both Loans, default interests will be applied in the event of default payment. The relevant clause read as follows:

“… if any payment be not made on its due date, interest on such payment at the rate applicable to the capital amount hereof from the date it becomes due until payment thereof.”

52.  The Plaintiff is therefore entitled to default interest at the same rate the due date of payment until actual payment, and the outstanding amount depends on the number of days overdue. Contrary to Delay’s averment in the D&CC and/or submissions, such computation is different from compound interest which allows the borrower to enjoy interest accumulated from previously accumulated interest and the principal sum. Rather, any default gives rise to the borrower the right to charge interest on the outstanding payment until full payment on top of the simple interest over the principal loan.

53.  The charge on default interest is permitted under s 22 of the Ordinance:

“Provided that provision may be made by any such agreement that if default is made in the payment upon the due date of any sum payable to the money lender under the agreement, whether in respect of principal or interest, the moment lender shall be entitled, subject to Part IV, to charge simple interest on that sum from the date of the default until the sum is paid at an effective rate not exceeding the effective rate payable in respect of the principal apart from any default, and any interest so charged shall not be reckoned for the purposes of this Ordinance as part of the interest charged in respect of the loan.”

54.  The Defendants were therefore contractually obligated to pay default interest on the overdue amount from its due day until payment. In respect of Loan 1, only one payment was made by the due date of 1^st instalment, and it is reasonable for the Plaintiff to apply the amount of the 1^st instalment to first discharge the interest accrued on the overdue amount, with surplus goes to reduce the then overdue principal and further default interest would accrue on the reduced principal until next payment.

55.  As such, the HK$2,750 paid on 5^th May 2015 should apply to discharge the total payable interests of Loan 1 which was HK$1,000. The surplus of HK$1,750 should go to reduce the total overdue loan principal of HK$10,000, and thus the amount due but unpaid was HK$8,250. Since the whole of the balance of Loan 1 became due and payable since 5^th June 2015 (upon default of payment for one month), the default interest should therefore be payable on HK$8,250 from 5^th June 2015 onwards at 30% per annum until the date of judgment, and judgment rate thereafter until full payment.

56.  Regarding Loan 2, since the defendants had made various repayments since 27 June 2015, I agree that the Plaintiff could first apply these subsequent payments to discharge interest accrued on the overdue amount until the date(s) of the relevant payments. Likewise, surplus in any payment should go to reduce the then overdue principal and further default interest would accrue on the reduced principal until next payment. Since the last payment was made on 5^th December 2017, the default interest at 28.8% per annum should therefore be payable on the balance of the overdue principal from the deadline the Plaintiff set on their Demand Letter, i.e. 8^th January 2018 instead of 17^th January 2018 as pleaded in the Plaintiff’s Statement of Claims until the date of judgment, and judgment rate thereafter until full payment.

57.  As such, the total amount paid by Delay in respect of Loan 2 was HK$13,432, this sum should apply to discharge the total payable interests of Loan 2 which was HK$1,872. The surplus of HK$11,560 should apply to set-off the total overdue loan principal of HK$13,000. After giving credit to such payment, the sum of $1,440 remained due as well as all default interest accrued from 10^th June 2015 to 8^th January 2018. Default interest would be payable on this total overdue amount from 8^th January 2018 onwards at the rate of 28.8% per annum until the date of judgment, and at judgment rate until full payment.

58.  The Plaintiff’s current calculations of the default interest accrued between 10^th June 2015 and 10^th November 2015 is HK$3,067 but without providing any explanations in their computation. My observation is that such pleaded amount was not calculated in accordance with my ruling in paragraphs 57-58. I therefore direct the Plaintiff to work out the outstanding due from the defendants to the Plaintiff following my above ruling within 21 days from the date hereof. Bearing in mind the amount of default interests accrued before the sum was due would unlikely be substantial, and given the repayments made by the defendants between June 2015 and December 2017 were sporadic, the costs of having the Plaintiff’s solicitors re-calculating the accrued default interest during that period would potentially be higher than the interest itself. The Plaintiff is therefore at liberty to waive that part of claims.

Conclusion

59.  In light of the above, I order that for DCCJ 3299/2018 be entered against Rosalina and Delay in favour of the Plaintiff for the outstanding sums as ruled under paragraphs 54 and 55 above. With DCCJ 3298/2018, I order that after the outstanding amounts are ascertained as aforesaid, judgment be entered forthwith against the Delay and Andrenee in favour of the Plaintiff for such outstanding amounts.

60.  As explained in my rulings above, I do not accept there was any misconduct in the Plaintiff’s debt recovery exercise against Delay, and there was no basis at all for Delay’s counterclaim. The amount of damages she sought reflects not only her ignorance in law but sheer greed. The counterclaim against the Plaintiff in DCCJ 3298/2018 is dismissed.

61.  I see no reason why costs should not follow the event. I therefore grant a costs order nisi that all Defendants do pay the Plaintiff costs of these two actions (including all costs reserved if any) to be summarily assessed and paid forthwith. However, part of the Plaintiff’s calculation of the outstanding amounts in DCCJ 3298/2018 is not accepted by this court and I am of the view that the costs in preparing the outstanding due should be borne by the Plaintiff.

62.  Accordingly, I grant the following directions for summary assessment of costs:-

(a) The Plaintiff do within 21 days from the date hereof file with court and serve on the Defendants of both DCCJ 3298/2018 and DCCJ 3299/2018 a statement of costs for summary assessment;

(b) The Defendants of both DCCJ 3298/2018 and DCCJ 3299/2018 do within 21 days after receipt of the D’s statement of costs file with court and serve on D a succinct summary of objections to D’s statement of costs of not more than 3 pages; and

(c) Unless otherwise directed, the summary assessment of costs will be dealt with by way of paper disposal.