EVER LONG FINANCE LTD v. CHAN PUI CHING REBECCA

DCCJ 2484/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2484 OF 2014

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DECISION

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Introduction

1. This is a summary judgment application.

2. The plaintiff is a money lender holding a money lender licence under the Money Lender Ordinance, Cap 163 (“MLO”).  The defendant is its customer.

3. The plaintiff seeks summary judgment against the defendant for the unpaid balance of a mortgage advanced by the plaintiff, plus interest and costs.

4. The defendant opposed, seek unconditional leave to defend, on the ground that the mortgage, more precisely the contract itself, was illegal and unenforceable pursuant to section 29(10) of the MLO.  

Dramatis Personae

5. Supreme Era (Asia) Limited (“SEAL”) is a company carries on business by soliciting borrowers for loans.  The defendant received a cold call from a staff of SEAL, her application of personal loan / mortgage was referred to Unique Mortgage.

6. Unique Mortgage is a consultancy company carries on business by referring intended borrowers to money lenders.  It is an agent of the plaintiff.  Mr Tang (“Mr Tang”), its staff, referred the defendant’s application to the plaintiff.

7. Messrs Leung & Lien, the former solicitors for the plaintiff, representing the plaintiff when the loan is advanced to the defendant.

Background

8. The defendant is the registered owner of the property at Flat F, 28^th Floor, Block 8, Castello, No 69 Siu Lek Yuen Road, Shatin, Hong Kong (“The Property”). 

9. The pleaded facts of the plaintiff are that, one Ms Lau of SEAL approached the defendant and had asked if she was interested to obtain a loan, a 3^rd mortgage, to pay off her 2^nd mortgage $600,000 advanced by Winland Finance Limited (“the 2^nd mortgage”).

10. On or about 11 November 2013, the defendant paid visit to SEAL, she was received by both Ms Lau and Eric Lau.  She was told the loan amount will be around $936,000 at a monthly repayment of $7,800 for some 120 installments.  On the same day, the defendant signed an agreement to pay SEAL $200,000 service fee.

11. On or about 20 November 2013, Mr Tang of Unique Mortgage called up the defendant and indicated her application of the loan was referred by SEAL, Mr Tang informed the defendant that a new loan will be arranged by the plaintiff in the amount of $930,000.

12. On or about 28 November 2013, one Mr Chan of the plaintiff confirmed with the plaintiff that the loan application is processing.  

13. On 29 November 2013, the plaintiff advanced the defendant a loan in sum of $930,000 at flat rate of 2.8 % per month or 33.6% per annum (“the Loan”).  The Loan is to be repaid by 120 installments at $27,023 per month.  The Loan was secured by a 3^rd mortgage executed by the defendant against the interest in her Property where the Loan was meant to pay off the 2^nd mortgage of the Property.

14. On the same day, the plaintiff instructed Messrs. Leung & Lien to pay a total sum of the Loan to the defendant and various payees.  It is indisputable that out of the Loan, the defendant had only received $685,876 to satisfy the 2^nd mortgage, the remaining sum was being paid to various payees as follows:-

(i) $6,500 paid to Leung & Lien as costs and disbursements;

(ii) $700 paid to the plaintiff as valuation fees of the Property;

(iii) $27,024 paid to the plaintiff as the 1^st installment of the Loan;

(iv) $27,900 paid to Unique Mortgage as consultation fee; and

(v) $182,000 paid to SEAL as consultation fee.

15. The defendant effected 4 payments, $781,120 in aggregate, after the Loan was advanced: 3 installments in sum of $27,024 on 16 December 2013, 28 January 2014 and 27 February 2014.  The dispute arises when the defendant subsequently deposited a lump sum of $700,000 on 28 March 2014 with the plaintiff and claimed having fully paid up the Loan.  The plaintiff disagreed and maintained its view that the aggregate sum of $781,072 was only partial repayment of the Loan.  After deduction of interest, the plaintiff said the outstanding balance of the Loan is $252,922, which forms the subject matter of this application.

Legal principles for Order 14 application

16. The law on Order 14 application is well established.  Both Mr Lau, counsel for the plaintiff and Mr Jang, counsel for the defendant rely on a recent case, Pacific Harbour Advisors Pte Ltd & Anor v Winson Federal Ltd & ors, unrep, HCA 1257/2013, at page 61 – 66, in that Deputy High Court Judge B Chu summarized succinctly the principles: where the plaintiff established a prima facie case, the burden shifted to the defendant to show why summary judgment should not be given, that is, to raise triable issues, bona fide defence to the plaintiff’s claim; or questions or that for other reasons ought to be tried. If the burden is met, the defendant should be given unconditional leave to defend; or if the defence is “shadowy”, conditional leave to defend should be given.

The defendant’s defence

17. Mr Jang, counsel for the defendant submitted the transaction itself was illegal and unenforceable.  The argument was premised on section 29(10) of the MLO,

“Any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender who charges, recovers or receives any sum as for or on account of any costs, charges or expenses (other than stamp duties or similar charges) referred to in section 27(3) or demands or receives any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof commits an offence.”

18. Without the benefit to read the draft defence of the defendant, the defendant says Unique Mortgage is an agent of the plaintiff, both of them colluded with each other and SEAL, a third party to cause the plaintiff to pay consultation in the loan application. The acts were in contravention of section 29(10) of MLO.  The staffs of SEAL and Unique Mortgage, Mr Lau and Mr Tang had acted in concert in procuring the defendant to accept the Loan when it was always her intention to advance $600,000 from the plaintiff, or any of the money lender.  The loan agreement was illegal and unenforceable. Notwithstanding the acts in contravention of section 29(10) of MLO are criminal in nature, it creates private right between individuals.

19. Mr Jang submitted, the evidence of remuneration or reward is crystal clear when the plaintiff enjoyed a share of $27,024 of the loan when it was being dressed up as the 1^st installment of the Loan. Nevertheless, the sum was not pleaded as it meant to be a 1^st installment in the Statement of Claim.

The issues

20. Bearing in mind the principles of an Order 14 application, the issues in this application, whether the defendant is capable of raising the following triable issues:-

(1) Whether section 29(10) of the MLO is a regulatory provision?  Does it confer a private right for the defendant?

(2) Whether the defendant is capable of raising evidence that the plaintiff, SEAL and Unique Mortgage have colluded together and had caused the plaintiff to pay remuneration to them? and

(3) And if so, can the defendant vitiate the contract, the loan agreement, between the plaintiff and herself?

Discussion

Does section 29(10) of the MLO confer a private right?

21. Mr Lau, counsel for the plaintiff submitted, section 29(10) is a regulatory provision for the money lenders.  It does not confer a civil right to the defendant, there is no authority to support any breach of section 29(10) is a cause of action or defence.

22. Mr Jang cited Estinah v Golden Hand Indonesian Employment Agency (unreported, HCSA 6/2001), this case concerns whether section 57(a) of the Employment Ordinance, Cap 57 could create a private right.  Section 57(a) prohibits an employment agency to obtain from the person (an employee) direct or indirectly any reward or payment or other advantage, except the prescribed commission.  Any person in contravention of this provision commits an offence.  The plaintiff Indonesian maid claimed her employment agent for refund of fees she had paid, which was in contravention of section 57(a).  Kwan J (as she then was) decided,

“20. The general rule is that where a statute creates an obligation and enforces the obligation in a specified manner, that performance cannot be enforced in any other manner. There are two well established exceptions to this general rule and one of them is where upon the true construction of the statute, it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of industrial safety legislation, see Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] AC 173 at 185C to D, per Lord Diplock.”

23. Mr Jang submitted, the statute was made to protect persons who seek for jobs from an employment agency, to prevent exploitation.  Similarly, the section 29(10) of the MLO has the same legislative intent to protect borrowers of loans, a specific class of persons.  The defendant, as customer/borrower of the Loan in this action falls squarely into the specific intended class of persons.  A civil right should be conferred. 

24. I agree with Mr Jang’s submission as there are similarity between both ordinances that a contract might be illegal or unenforceable when fees other than commissions.  On the allegation that the plaintiff’s act was in contravention of section 29(10), where any another remunerations from borrowers were prohibited, I find a private right might be conferred.

Collusion of acts between the plaintiff, Unique Mortgage and/or SEAL

25. On assumption the defendant is able to rely on section 29(10) of MLO as her defence, she has to state with credible evidence of the colluded acts of the plaintiff, Unique Mortgage and SEAL. The focus of this application is the Loan between the plaintiff and the defendant, dealings between SEAL and Unique Mortgage are antecedent arrangements. They are irrelevant.  Should there be any contravention of section 29(10) of the MLO, the defendant might have to seek relief against SEAL and/or Unique Mortgage.  Apart from that, as the date of hearing, no report has been made to the police.

26. The plaintiff could hardly dispute, on 29 November 2013, part of the Loan was advanced to the plaintiff when a substantive amount was paid to settle the fees due to Unique Mortgage and SEAL. The only evidence of alleging the plaintiff accepting remuneration from the defendant might be the sum of $27,024, which was paid to the plaintiff on the same day, allegedly as the 1^st payment of the Loan. The plaintiff collected the same amount without reflected it in its pleaded case as the 1^st installment. Having said that, it is also indisputable that defendant has signed a declaration on the same day, she knew the fees paid were not remuneration from a borrower prohibited under section 29(10) of MLO. Regardless the nature of $27,024, the defendant has declared such sum was not remuneration to the plaintiff, in this respect, she might have pitched her case too high by saying the plaintiff, Unique Mortgage and SEAL colluded together for the alleged $27,024, as fees prohibited by section 29(10) of MLO.

27. The plaintiff accepts, as deposed in the supplemental affirmation of Chan Chung Hon, Unique Mortgage was an agent of the plaintiff, but being an agent of the plaintiff does not mean acts of the two parties were colluded or have acted in concert. I fail to see the defendant could tender credible evidence on this point.  

The acts of the defendant

28. Mr Lau, counsel for the plaintiff submitted, it must be the responsibility of the defendant to settle the monthly mortgage payment, she could not vitiate the plaintiff’s loan agreement. The defendant was well aware of the nature of the payments because she had signed a series of declarations, including her right to seek independent legal advice.  The defendant is now looking for a way to back out from the loan agreement.  The evidence of the defendant is not credible.

29. I agree with Mr Lau. The defendant has signed a number of documents: (i) a referral letter from Unique Mortgage; (ii) the plaintiff’s loan agreement; (iii) the consent letter to dissipate of $930,000; and (iv) internal records and other declarations.  The defendant agreed to appoint Messrs. Leung & Lien to pay off the outstanding 2^nd mortgage to Winland Finance Limited. She confirmed she does not need to seek independent legal advice; she declared no handling fees, no agency fees or service charge was paid to the plaintiff. The defendant took around 30 minutes in the office of Messrs. Leung & Lien, with an opportunity to make phone calls, when all relevant documents were signed. The defendant could have refused, or at least defer the signing of all documents pending clarifications, if she found necessary.

30. The plaintiff then explained in her affirmation that during that period, she had an opportunity to make phone calls, and now she complains the documents were not fully explained to her and she had signed them hastily. The defendant is facing an uphill battle to vitiate all documents she has agreed and signed.  The defendant must be well informed of the arrangement of the Loan and her responsibility that she has had at the time when the Loan was advanced.  She has ample opportunity to decline the Loan on 29 November 2013 or to request for time to reconsider if she found she was only able to receive a portion of it.

31. More importantly, the defendant did not raise queries or file complaints immediately after the plaintiff has advanced the Loan, she had even settled 3 monthly payments. Her complaint for the plaintiff’s contravention of section 29(10) of the MLO was not reported to the police for investigation. Although section 29(10) of the MLO might confer a private right in civil proceedings, the defendant’s defence, an attempt to vitiate the contract between the plaintiff and herself might be defeated by her own act. I conclude the defendant’s evidence in her affirmation is incredible and her possible defence stipulated by Mr Jang could not raise triable issues or a bona fide defence, I do not see there are questions or other reasons ought to have tried. This is a case that summary judgment is appropriate.  

Conclusion

32. I grant summary judgment to the plaintiff with interest as claimed. Costs of the action including the plaintiff’s summons be to the plaintiff, with certificate for counsel, to be taxed if not agreed.