HONIP CREDIT LTD v. LEUNG TAK SING PAUL

HCMP 835/2018

[2019] HKCFI 2442

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 835 OF 2018

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DECISION

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A.  Introduction

1.  This is the defendant’s appeal against the order of Master S P Yip made on 19 June 2019 granting the plaintiff’s application for a monetary judgment and possession of land against the defendant with costs.

B.  The relevant factual background

2.  At the material times:

(1)  the plaintiff is a licensed moneylender; and

(2)  the defendant is the sole registered owner of Lot Nos 1165 and 1166 in DD 121, Yuen Long, New Territories (“the Property”). 

3.  The defendant has executed the following documents in favour of the plaintiff:

(1)  A loan agreement dated 12 December 2014 for the principal sum of HK$3,000,000 at an annual interest rate of 28.80% to be repayable by 120 monthly instalments (“the 1^st Loan Agreement”).

(2)  A mortgage dated 12 December 2014 under which the Property was charged as security for securing general credit facilities granted by the plaintiff to the defendant upon the terms and conditions mentioned therein and up to HK$5,000,000 with interest, costs, expenses and charges (“the 1^st Mortgage”).

(3)  A refinancing loan agreement dated 13 February 2015 for the principal sum of HK$3,300,000 at an annual interest rate of 28.80% to be repayable by 120 monthly instalments (“the 2^nd Loan Agreement”).

(4)  A refinancing loan agreement dated 15 July 2015 for the principal sum of HK$5,000,000 at an annual interest rate of 21.60% to be repayable by 24 monthly instalments (“the 3^rd Loan Agreement”).

(5)  A refinancing loan agreement dated 26 September 2016 for the principal sum of HK$6,200,000 at an annual interest rate of 20.40% to be repayable by 24 monthly instalments (“the 4^th Loan Agreement”).

(6)  A second mortgage dated 26 September 2016 under which the Property was further charged as security for securing general credit facilities granted by the plaintiff to the defendant upon the terms and conditions mentioned therein and up to HK$3,000,000 with interest, costs, expenses and charges (“the 2^nd Mortgage”).

(7)  A refinancing loan agreement dated 22 November 2016 for the principal sum of HK$6,900,000 at an annual interest rate of 20.40% to be repayable by 24 monthly instalments (“the 5^th Loan Agreement”).

(8)  A refinancing loan agreement dated 10 April 2017 for the principal sum of HK$7,800,000 at an annual interest rate of 20.40% to be repayable by 24 monthly instalments (“the 6^th Loan Agreement”).

(9)  A refinancing loan agreement dated 2 June 2017 for the principal sum of HK$8,400,000 at an annual interest rate of 20.40% to be repayable by 24 monthly instalments (“the 7^th Loan Agreement”).

(10)  A third mortgage dated 2 June 2017 under which the Property was further charged as security for securing general credit facilities granted by the plaintiff to the defendant upon the terms and conditions mentioned therein and up to HK$400,000 with interest, costs, expenses and charges (“the 3^rd Mortgage”).

4.  The defendant has defaulted in making monthly payments due to the plaintiff under the 7^th Loan Agreement.

5.  On 24 May 2018, the plaintiff’s solicitors sent demand letters to the defendant at, amongst others, the Property.  The plaintiff’s solicitors stated that the defendant had defaulted as to his repayment obligations under the 7^th Loan Agreement, the 1^st, 2^nd and 3^rd Mortgages, and demanded for payment within the next 7 days, failing which the plaintiff would proceed with an action against the defendant seeking an order for possession of the Property and for payment of the entire outstanding amount of indebtedness.

6.  On 5 June 2018, the plaintiff issued the Originating Summons herein against the defendant seeking, inter alia, repayment of the entire amount of outstanding principal and interest, vacant possession of the Property and costs on a full indemnity basis.

7.  On 19 June 2019, Master S P Yip granted the plaintiff the following orders against the defendant:

(1)  The plaintiff do recover against the defendant the sum of HK$9,831,941.05 secured by the 1^st, 2^nd and 3^rd Mortgages together with interest on the sum of (i) HK$8,400,000 at the rate of 20.40% per annum (with a rate of HK$4,694.79 per day)from 7 August 2018 until payment and (ii) HK$1,05,200 at the rate of 20.40% per annum (with a rate of HK$572.99 per day)from 7 August 2018 until payment.

(2)  The defendant do within 28 days after service upon him of this Order deliver up to the plaintiff vacant possession of the Property.

(3)  Upon the defendant paying to the plaintiff the money hereby ordered to be paid and all other moneys (if any) secured to the plaintiff by the 1^st, 2^nd and 3^rd Mortgages, the plaintiff (subject and without prejudice to the due exercise of any power of sale for the time being vested in it) do re-deliver to the defendant possession of the mortgaged properties and release to the defendant the security constituted by the 1^st, 2^nd and 3^rd Mortgages as the defendant may agree or this Honourable Court may direct.

(4)  The costs of these proceedings be to the plaintiff on indemnity basis with certificate for counsel to be taxed if not agreed.

8.  By a Notice of Appeal dated 2 July 2019, the defendant seeks to appeal against the Order of Master S P Yip.

C.   The plaintiff’s compliance of the relevant requirements      

9.  Having considered the submissions set out in skeleton submission filed on behalf of the plaintiff, it appears to me that the relevant procedural requirements as set out in Orders 83A and 88 of the Rules of the High Court, and the relevant requirements as set out in the Money Lenders Ordinance (Cap 163) (“the MLO”), have been complied with by the plaintiff in relation to the 7^th Loan Agreement, and the 1^st, 2^nd and 3^rd Mortgages.

10.  I also note that the defendant has not taken any point in this appeal regarding the requirements under Orders 83A and 88 of the Rules of the High Court and the MLO (other than the compound interest point which will be dealt with below).  Indeed, he did not file any skeleton submissions to support his appeal.

D. The defendant’s defences

11.  The defendant is a litigant in person and has not filed any skeleton submissions in this appeal.  As this is a rehearing of the application, I will consider the various points the defendant has previously set out in his affirmations to determine if he has demonstrated any triable issues of fact or law. 

12.  First, the defendant claims that the demand letters from the plaintiff’s solicitors and the court documents served at the Property were never received by him.  However, as provided under the terms of the 1^st,2^nd and 3^rd Mortgages, service of any communication to the defendant (including a demand for payment) and service of any originating process may be effected by leaving, or sending by prepaid post, the same to the Property.  Accordingly, the service of the plaintiff’s demand letter and the Originating Summons at the Property was valid.

13.  Second, the defendant contends that the plaintiff could not commence the present proceedings for vacant possession of the Property (on 5 June 2018) until the expiry of one month from the date of the demand letter (ie 24 May 2018).  However, the express terms of the three Mortgages provide that the Mortgages may be immediately enforced upon the occurrence of an “Event of Default” as defined in the Mortgages:

(1)  It was provided in each of the Mortgages that an “Event of Default” would have occurred if “[the defendant] makes default in the payment on the due date and in accordance with the terms and conditions relating thereto of any principal or interest or other moneys outstanding and payable by the [defendant] under any term loan account (whether demanded or not)”.

(2)  It was further provided in each of the Mortgages that upon an “Event of Default” occurring, the plaintiff may at any time take possession of the Property. 

(3)  The proviso in clause 6.01(c) of the 1^st Mortgage would only be engaged when the plaintiff seeks to sell, call in, collect or convert into money the Property; it is not engaged when the plaintiff merely commences legal proceedings to seek an order for possession of the Property.

14.  Third, the defendant argues that as the loans pursuant to the 1^st and 4^th Loan Agreements had been fully paid off, there is no legal basis for enforcing the 1^st and 2^nd Mortgages.  However, it is plain that the money covered by the 1^st and 2^nd Mortgages is not tied to the loans under the 1^st and 4^th Loan Agreements.  Accordingly, it does not follow that the 1^st and 2^nd Mortgages would be discharged upon the full payment of the loans under the 1^st and 4^th Loan Agreements.

15.  Fourth, the defendant alleges that he borrowed HK$3,000,000 under the 1^st Loan Agreement for one Mr Cheung Kam Min (“Mr Cheung”), a solicitor of Messrs K M Cheung & Co, and the money was given to Mr Cheung so that he could repay his clients the money that had been misappropriated by him (Mr Cheung).  However, such an allegation is contradicted by (1) the mortgage loan application form signed by the defendant on 8 December 2014 stating that the HK$3,000,000 loan was for “生意周轉” and (2) the official receipt issued by Mr Cheung acknowledging receipt of the HK$3,000,000 paid by the defendant as costs on account.

16.  Fifth, the defendant asserts that Mr Cheung and the plaintiff had set him (the defendant) up in getting him to borrow the loan of HK$3,000,000 and to charge the Property as security for repayment. Such an assertion is nothing but a bare assertion, and completely lacks any evidential support.

17.  Sixth, the defendant disputes that he actually borrowed the principal sum from the plaintiff under each of the 2^nd, 3^rd, 4^th, 5^th, 6^th and 7^th Loan Agreements.  However, as pointed out in the plaintiff’s skeleton submissions, there is contemporaneous documentary evidence showing the plaintiff’s acknowledgement of receipt of each of the loans.

18.  Seventh, the defendant contends that the plaintiff had charged interest upon the default interest under clause 7 of each of the 1^st, 2^nd, 3^rd,4^th, 5^th, 6^th and 7^th Loan Agreements, and had illegally charged compound interest contrary to section 22 of the MLO:

(1)  Section 22(1) of the MLO provides:

“Any agreement made for the loan of money by a money lender shall be illegal if it provides directly or indirectly for—

(a) the payment of compound interest;

...

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 money 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.”

(2)  It is clear that the proviso of section 22(1) allows a money lender to charge simple interest on any sum that is due and unpaid (whether in respect of principal or interest) at an interest rate not exceeding the effective rate payable in respect of the principal apart from any default.

(3)  Clause 7 of the Loan Agreements provides, inter alia, that if default occurs in the payment of any sum payable to the plaintiff on the due date, whether in respect of principal or interest, the defendant would pay interest on that sum at the specified interest rate from the date of default until full payment.

(4)  I consider clause 7 to be in compliance of section 22(1) of the MLO.

19.  Eighth, the defendant alleges that the principal sum under each of the 2^nd, 3^rd, 4^th, 5^th, 6^th and 7^th Loan Agreements has included both the outstanding principal and the outstanding accrued interest arising from the previous loan, and each of the refinancing loan has charged compound interest contrary to section 22 of the MLO.  On the basis of the Court of Appeal’s decision in New Japan Securities International (HK) Ltd v Lim Yiong-lin [1987] HKLR 447, it seems to me that each of the refinancing loan was a new loan and could not be regarded as charging compound interest.

20.  Accordingly, the defendant has not in my view raised any triable issue.  I consider the learned Master was correct in granting the orders against the defendant.

E.  Disposition

21.  For the reasons given above, I dismiss the defendant’s appeal. 

22.  I consider that the defendant should bear the plaintiff’s costs occasioned by this appeal on an indemnity basis on the basis of the relevant clause in each of the three Mortgages. 

23.  At the end of the hearing, Mr Cheng handed up the plaintiff’s skeleton bill of costs.  After hearing this Court’s explanation of the purpose of the skeleton bill of costs, the defendant indicated that he would not have any objection to the payment of the plaintiff’s costs should the Court dismiss his appeal. Having considered the plaintiff’s skeleton bill of costs, I would summarily assess the plaintiff’s costs occasioned by this appeal to be HK$150,000, and would order the same to be paid by the defendant to the plaintiff.