HANG SENG BANK LTD v. CHAN WAH KUNG AND ANOTHER

HCMP 166/2020

[2026] HKCFI 135

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 166 OF 2020

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J U D G M E N T

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A.  OVERVIEW

1.  The Plaintiff (“the Bank”) made 3 loans to Mr Chan (“Mr Chan”) secured by legal charges over properties owned by Mr Chan. Upon Mr Chan’s default in repayment on the loans, the Bank brought an action to recover the outstanding principal and interest and possession of the Properties. D2 is Mr Chan’s mother (“Mother”). She claimed to have a beneficial interest in the Properties based on constructive trust and was thus joined as a party pursuant to the Amended OS.

2.  This is the hearing of the Bank’s claim only for monetary judgment against Mr Chan under the Amended Originating Summons re-filed on 28 January 2022 (“Amended OS”) pursuant to the order of DHCJ Andrew Li on 14 May 2025. The rest of the Banks’ claims, for possession of the Properties, and D2’s allegations of constructive trust, will be dealt with at the substantive hearing from 18 to 22 May 2026.

B.  BACKGROUND

3.  The Bank is a licenced bank in Hong Kong.

4.  Mr Chan was and is the registered owner of (1) Flat H, 5^th Floor, Block 2, Parkside Villa, No. 23 Town Park Road South, Yuen Long, New Territories and (the “Flat”) (2) Carpark No. 71 on Basement 2/F, Parkside Villa, No. 23 Town Park Road South, Yuen Long, New Territories (collectively, “the Properties”).

5.  The Bank made 3 Loans to Mr Chan, each secured by a legal charge upon the Properties:

Date of Facility Letter	Amount of Loan HK$	Date of Legal Charge
8 June 2004	$1,785,000 (“1st Loan”)	9 June 2004
26 June 2012	$1,600,000 (“2nd Loan”)	13 July 2012
19 April 2013	$879,000 (“3rd Loan”)	25 April 2013

6.  The interest on each of the 3 Loans was to be stipulated by the Bank from time to time in accordance with the terms of each of the Facility Letters.

7.  Mr Chan defaulted in making instalment payments due since 9 September 2019; 13 August 2019 and 25 August 2019 under the 3^rd Loans respectively.

8.  Following Mr Chan’s default, the Bank sent a letter through its solicitors (then known as Mayer Brown) dated 23 December 2019, demanding repayment of the whole outstanding amount under the 3 Loans plus default interest at a rate of 4.75% per annum. As of 29 December 2021, the outstanding amount under the 3 Loans was HK$3,513,021.62.

9.  Mr Chan only paid a further sum of HK$7,940, and failed to settle the rest of the sum demanded. The Bank therefore commenced these proceedings on 9 March 2020.

10.  D2 alleged that she has been an occupant of the Flat and that the Properties are held by Mr Chan on trust for her as the beneficiary.

C.  SERVICE ON MR CHAN

11.  Mr Chan has not filed an acknowledgement of service to the Amended OS, but he has filed various affirmations, indicating his knowledge of these proceedings.

12.  I am also satisfied that Mr Chan has been served by the Bank by ordinary post in June 2025 and the letters were not returned; and by a Chinese advertisement in Sing Tao Daily on 30 October 2025 pursuant to the substituted service order obtained by the Bank on 23 October 2025. The Court has also sent a Notice of Hearing dated 24 June 2025 to Mr Chan’s address at the Flat. Mr Chan has not responded. So I proceeded in his absence.

D.  LEGAL PRINCIPLES

13.  The principles governing summary disposal of proceedings commenced by originating summons are similar to those governing applications for summary judgment under Order 14 of the RHC.

14.  Once the Bank has shown a prima facie entitlement to summary judgment based on the evidence, the burden falls on Mr Chan to show that he has a defence to the claim (Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2010] 2 HKLRD 1065, Fok J (as he then was) at §8.

15.  The Court will apply the following principles when considering whether a defendant has a defence to a prima facie case for summary judgment:

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

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

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

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

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

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

See Yung Wai Man v Leung Kwok Pong [2021] HKCFI 896, Ng J at §9.

E.  THE BANK’S CASE

16.  There is no dispute that Mr Chan has defaulted in repayment under each of the 3 Loans. Under the 1^st, 2^nd and 3^rd Legal Charges:

(1)  Pursuant to §2.02 of each of the Legal Charges, in the event of Mr Chan’s failure to pay any periodic instalment due, the periodic instalment or the 1^st Loan, the 2^nd Loan and the 3^rd Loan (as the case may be) so remaining unpaid shall bear interest from the due date for payment until actually paid at such rate as P shall from time to time determine and shall be deemed to be part of the sum owed; and

(2)  Under §2.03 of each of the Legal Charges, the Bank shall have the right to demand repayment of the 1^st, 2^nd and 3^rd Loans at any time and Mr Chan shall upon demand in writing of the Bank repay the whole of the sum owed under the 3 Loans to the Bank forthwith.

(3)  Under Clause 6.01 of each of the Legal Charges, if Mr Chan makes default in the payment of any instalment then, whether Mr Chan has notified the Bank of the occurrence of such event, an event of default shall have occurred.

(4)  Under Clause 7.01 of each Legal Charge, it shall be lawful for the Bank at any time thereafter without consent of Mr Chan to take possession of the Properties and for that purpose to take proceedings.

17.  According to Clause 2 of the 1^st Facility Letter, Clause 14 of the 2^nd and 3^rd Facility Letters, the default interest rate is 4.75% per annum over the Hong Kong dollar prime rate quoted by the Bank from time to time (“the Prime Rate”), to be calculated from the date of default.

18.  The Bank has established, with evidence, that it is prima facie entitled to judgment against Mr Chan for the outstanding principal and interest under the 3 Loans, together with default interest at the rate of 4.75% per annum over the Prime Rate (together, the “Debt”).

F.  MR CHAN’S CASE

19.  Mr Chan has, through his 5 affirmations, raised the following issues that:

(1)  The Bank’s action against Mr Chan is against national security law;

(2)  There is an employment dispute between Mr Chan and his then employer, Xinhua News Agency (“the Ex-Employer”), which has caused his failure to make timely repayments. The damage caused by the Ex-Employer has allegedly contravened the national policy of poverty relief and credibility of the PRC Central Government, so the Bank should claim against Xinhua News Agency instead;

(3)  The Bank misled Mr Chan into entering into the Legal Charges by choosing a more onerous interest scheme;

(4)  The Bank misled Mr Chan into executing multiple Legal Charges and therefore more fees and interest; and

(5)  That Mr Chan only wanted a personal loan but the Bank misled him into charging the Properties.

G.  ISSUE 1: BREACH OF NATIONAL SECURITY LAW

20.  Mr Chan alleges that his default in repayment of the loans was caused by Xinhua News Agency’s wrongful withholding of salary from him. The PRC has a ‘national law’ guaranteeing the trustworthiness of the country. Allowing the Bank to enforce the Debt and the legal charges, despite the Ex-Employer’s default, would be to undermine the social contract and citizens’ general expectation that those who study and work hard will have a good livelihood. Mr Chan makes a sweeping statement that the Court has a general duty to ‘nullify any incident which damages the credibility of the PRC as a country’ and so the Court should reject the Bank’s claim because it would cause Mr Chan and his family allegedly unwarranted economic hardship. In addition, Mr Chan made vague references to PRC public policy on alleviating poverty.

21.  However, Mr Chan has not identified which aspect of national security law that he is relying on. PRC national security law as it applies to Hong Kong takes effect through the Safeguarding National Security Ordinance (the “SNSO”), Instrument A305. However, the SNSO does not seek to regulate the enforcement of civil legal rights between civilians. Its main operative part provides for various specified offences and penalties, such as the theft of state secrets, insurrection, and treason, none of which apply in this case.

22.  There is no provision in the SNSO that relate to the enforcement of a loan and mortgage between private individuals, nor does the SNSO impose any general duty on banks to guarantee individual citizens’ livelihoods.

23.  There are no grounds to engage national security law in this case. This line of defence is neither real or bona fide nor triable.

H.  ISSUE 2: MR CHAN’S EMPLOYMENT DISPUTE WITH EX-EMPLOYER WHICH CAUSED HIS DEFAULT IN REPAYMENT

24.  Mr Chan asserts that but for his Ex-Employer’s failure to pay his salary, he would not have defaulted in repaying the 1^st, 2^nd and 3^rd Loans.

25.  This allegation, even if true, is plainly irrelevant because there is nothing to show that the Bank had caused the Ex-Employer to default in paying salary to Mr Chan. It does not constitute a real or bona fide defence to the Bank’s claim.

I.  ISSUE 3: MR CHAN BEING “MISLED” IN RELATION TO THE INTEREST CHARGED ON THE LOANS

26.  Mr Chan alleges that the Bank “misled” him in relation to the interest charged on the loans, in that he expressed to the Bank a wish to use the HIBOR rate, but the Bank’s “professional team” told him that the traditional prime rate based interest scheme would be “more reasonable and provide better value” for Mr Chan.

27.  The onus is on Mr Chan to show how he was misled and that he acted in reliance on the misrepresentation: Chitty on Contracts (35^th ed), §10-006. As the Bank is a corporation, Mr Chan must also show that the representation was either (1) made by the corporate entity or by its agent acting within the scope of his authority or (2) that the corporate entity has either actual or constructive notice of the representation in order for the corporate entity to be held liable for misrepresentation: Bank of China (Hong Kong) Limited v Leung Wai Man [2011] 4 HKLRD 707 at §§40-44.

28.  The interest rates were clearly and prominently stated on the 1^st, 2^nd and 3^rd Facility Letters which were all countersigned by Mr Chan. Furthermore, in relation to the 3^rd Legal Charge, Mr Chan had signed a confirmation dated 22 April 2013 confirming that he fully understood the nature of the matter in the transaction and the legal effect of all incidental documents signed or executed by him. It is difficult to see how the Bank has “misled” Mr Chan about the interest rates.

29.  Mr Chan has not given particulars as to who were in the “professional team” of the Bank that made representations to him and the capacity of that person(s). Nor has Mr Chan submitted any evidence about the Bank’s actual or constructive knowledge of these representations.

30.  Mr Chan has also failed to show the difference between HIBOR and the scheme based on traditional prime rate or that the Bank’s alleged representation was false.

31.  This line of defence is not real or bona fide or triable.

J.  ISSUE 4: MR CHAN BEING MISLED INTO EXECUTING MULTIPLE LEGAL CHARGES

32.  Mr Chan alleges that he asked for one single transaction with one legal charge, but the Bank split it into three and therefore charged him additional fees and interest.

33.  For a start, these loans were granted at different years – in 2004, 2012 and 2013 respectively and for different amounts, but secured by the same Properties.

34.  Each of the 3 Facility Letters stated the loan amount clearly on the first page. There was no evidence of any other amounts mentioned before or at the time each of the 3 loans was granted.

35.  Furthermore, Mr Chan has not explained, nor is it evident from the documents before the Court, what “additional fees” he was charged. Mr Chan has not identified any features of the loans and interest that are unusual or unconscionable, or how he was misled into 3 transactions.

36.  Mr Chan’s allegations could not amount to a real or bona fide, triable defence.

K.  ISSUE 5: CHARGING THE PROPERTIES INSTEAD OF HAVING A PERSONAL LOAN

37.  Mr Chan alleges that he only wanted to take out a personal, unsecured loan but the Bank “misled” him into charging the Properties.

38.  Once again, these are but bare assertions. Mr Chan has not given the particulars of how he has conveyed the message that he only wanted a personal loan to the Bank and how he was misled into getting a secured loan. Furthermore, his allegation contradicts his own statement that he “re-charged” (轉按) the Properties to the Bank. In Mr Chan’s affirmations, he repeatedly refers to ‘charging’ the Properties, indicating his awareness that he was providing security for his loans. It is well within a bank’s rights, and indeed common practice, to require security when lending to individuals. There is no evidence of improper conduct by the Bank.

39.  This line of defence is not real or bona fide or triable.

L.  QUANTUM OF CLAIM

40.  The Bank has provided a breakdown of the amount claimed. Amongst the items are 2 problematic ones:

(1)  The claim for late charges: the instalment payments under the 1^st, 2^nd and 3^rd Legal Charges are about HK$7,900, HK$6,000 and HK$3,500, respectively. A late charge of HK$400 is applied indiscriminately to unpaid instalments regardless of the instalment amount. Hence, in respect of the 1^st Legal Charge, the late charge would be 5.06% (ie $400 ÷ $7,900) pm or over 60% per annum, and even higher for the other 2 Legal Charges. This annual rate infringes section 24 of the Money Lenders Ordinance, Cap 163. The Bank has rightly abandoned this item.

(2)  The claim for interest upon interest (beyond the 4.75% default interest) on the outstanding principal is not based on the loan agreements. The Bank has rightly abandoned this.

41.  Accordingly, the computation proposed by the Bank and accepted by the Court is:

Outstanding principal	HK$	Default interest
1st Loan	838,830.56 (i.e. 846,770.56 – 7,940 received)	default interest of prime + 4.75% from the date of the demand for the 1st Loan (ie 23/12/2019)
2nd Loan	1,327,679.63	-Do-
3rd Loan	754,409.25	-Do-

M.  CONCLUSION AND COSTS

42.  For the above reasons, I find that Mr Chan has not raised any real or bona fide defence to the Bank’s claim and make an order in the following terms:

(1)  Payment of all sums of money due to the Bank under the covenants contained in the 1^st, 2^nd, and 3^rd Legal Charges, which are the sums set out in paragraph 41 above, together with default interest at a rate of 4.75% per annum over the prime rate until the date of judgment and thereafter at judgment rate until payment.

43.  I make an order nisi for costs to be borne by Mr Chan, on solicitor and own client basis, based on clauses 19.01(b) of the 3 Legal Charges, to be taxed if not agreed, after disposal of the possession issue referred to in paragraph 2 above. This costs order will become absolute within 14 days in the absence of a summons for variation.

44.  I thank Mr Ng for his assistance.