SUN HUNG KAI CREDIT LTD v. TREASURE PROFIT LTD AND ANOTHER

HCMP 1201/2024

[2026] HKCFI 1313

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1201 OF 2024

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J U D G M E N T

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A.  Introduction

1.  In these proceedings, the Plaintiff (“P”) is seeking to recover a loan of HK$96,912,692 (“the Loan”) lent under the Loan Agreement dated 28 December 2023 (“the Loan Agreement”) to the 1^st Defendant (“D1”), together with interests.

2.  The Loan is secured by a Mortgage dated 16 December 2021 between D1 (as mortgagor) and P (as mortgagee) whereby a landed property situated at 23^rd Floor, Fast East Consortium Building, No 121 Des Voeux Road Central, Hong Kong (“the Property”) was charged by D1 to P as security for the due payment of the Loan (“the Mortgage”). P is also seeking an order to enforce the Mortgage, requiring D1 to deliver vacant possession of the Property and the title deeds and documents to P.

3.  The Loan is also secured by a Deed of Guarantee dated 28 December 2023 (“the Guarantee”) executed by the 2^nd Defendant (“D2”, a director of D1). P is seeking an order pursuant to the Guarantee, requiring D2 to pay the Loan together with interests to P.

4.  This is the substantive hearing of the Originating Summons herein. In this hearing, Mr Vincent Chen represents P, and Mr Joshua Lai represents D1 and D2 (collectively “Ds”).

B.   BACKGROUND

5.  P is a licensed money lender under the Money Lenders Ordinance (“MLO”).

6.  D1 is the registered owner of the Property.

7.  D2 has been a shareholder of D1 since December 2020. D2 is now a director of D1.

8.  The Property is a non-residential premises comprising six units.

9.  By tenancy agreements dated 1 September 2020 (“the 2020 Tenancy Agreements”), (a) units 2301-03 were let out to Bright Rising Enterprise Limited (“Bright Rising”); (b) unit 2304 was let out to Chengxin Finance Limited (“Chengxin”); and (c) units 2305-06 were let out to Nano Solution Limited. The terms in all the 2020 Tenancy Agreements were the same, ie from 1 September 2020 to 31 August 2023. Each of the 2020 Tenancy Agreements contained an option that the tenant would have the right to a lease for a further term of 24 months from 1 September 2023 to 31 August 2025 at the then open market rent.

10.  In October 2021, D2 approached P for refinancing an existing mortgage concerning the Property taken out with another licensed money lender. D2 understood that P offered low interest rate for refinancing an existing mortgage loan. Subsequently, P was provided with the 2020 Tenancy Agreements during D1’s loan application process.

11.  On 16 December 2021, P approved a loan of HK$87,000,000 to D1, to be repaid on 16 December 2023. On that same day, the Mortgage over the Property in favour of P was entered into.

12.  Clause 10.01 (vii) of the Mortgage provides as follows:

“[D1] hereby covenants and undertakes with [P] that for so long thereafter as the Loan or any other sum owing hereunder remains outstanding:-

…..

(vii) save with the Lender’s written consent, [D1] will not lease or in any way part with possession or make any arrangement for the sharing of the Property or any part thereof or any interest therein or accept the surrender of any lease or tenancy (except in respect of all existing tenancies, licences and lettings subsisting at the date hereof and [D1] will not save with the Lender’s written consent renew the existing tenancies, let re-let sublet or part with possession or enter into any Tenancy Agreement of the Property or any part hereof)” (Emphasis added)

13.  On 1 September 2022, P further approved a loan of HK$5,000,000 to D1, to be repaid on 1 September 2023.

14.  By tenancy agreements dated 1 September 2023 (“2023 Tenancy Agreements”), D1 granted leases to Bright Rising and Chengxin of their respective units for a further term from 1 September 2023 to 28 February 2025. Each of the 2023 Tenancy Agreements provided an option that the tenant would have the right to lease for a further term of 18 months from 1 March 2025 to 31 August 2026 at the then open market rent.

15.  In or around mid-2023, D1 began to experience difficulties in raising funds to make timely repayments of the instalments to P.

16.  On 28 December 2023, P and D1 entered into the Loan Agreement. The Loan provided by P to D1 is secured by (a) the Mortgage, and (b) the Guarantee of even date given by D2. Prior to entering into this Loan Agreement, upon P’s request, D2 had provided the 2023 Tenancy Agreements and rental records for the units in the Property via WhatsApp to P’s representative on 16 November 2023.

17.  Under the Loan Agreement:

(1)  D1 would need to repay the Loan and the interest by 6 monthly instalments. The first 5 monthly instalments would be repayment of interest only. The last monthly instalment would be repayment of the principal and interest.

(2)  The interest rate is 12% per annum.

(3)  The default interest rate is 24% per annum.

18.  D1 made repayment totalling HK$430,000 due up to and including 2 May 2024, but failed to continue to make repayment thereafter despite repeated demands.

19.  On 11 June 2024, D2 sent a WhatsApp message to P’s representative, in which D2 mentioned that there were tenants in the Property, and D2 asked whether P would accept that D1 could renew the existing tenancies with the tenants for 2 or 3 years (“the 11.06.2024 Proposal”). D2 said if the proposal was accepted, D1 would have more rental incomes to repay the indebtedness owed to P.

20.  On 18 June 2024, P’s representative replied. In that reply (“the 18.06.2024 Reply”), P’s representative said:

“另外，根據閣下之訊息所說，希望可以和租客再加簽租約兩至三年並將扣除一切開支之後所收到的款項清還本公司。由於內容不詳，本公司並不接納以上之要求。” (Emphasis added)

21.  By tenancy agreements dated 25 June 2024 (“the 2024 Tenancy Agreements”), D1 granted leases to Bright Rising and Chengxin of their respective units of the Property for a further term from 1 March 2025 to 31 August 2026. Each of the 2024 Tenancy Agreements provided an option that each tenant would have the right to a further term as stipulated in the 2023 Tenancy Agreements.

22.  On 12 July 2024, P commenced these proceedings by the Originating Summons herein.

23.  On 13 December 2024, Bright Rising and Chengxin took out an application for an order to join these proceedings as the 3^rd and the 4^th Defendants (“the Joinder Application”). On 26 September 2025, the Joinder Application was heard by Eugene Fung J. On the same day, the learned judge gave a written decision and dismissed the application (“the 2025 Decision”)[1].

C.  PRINCIPLES

24.  The Originating Summons Procedure is governed by RHC, Order 28. Under Order 28 rule 4, the Court has a wide discretion. If the case can be dealt with summarily and the nature of the case requires, there is no reason not to grant summary judgment to the plaintiff.[2]

25.  The following principles, which are applicable in this case, have been succinctly set out by Wilson Chan J in Huang Meixia (黃美霞) v. Leung Hoi Shan (梁凱珊) & Ors[3] [2021] HKCFI 3727:

“16. It is clear that the court has power at the hearing of an originating summons under RHC, Order 28, rule 4 to dispose of the action summarily where there are no triable issues: Re Estate of Chan Yim Mei, HCMP 313/2015 (unrep, 30/03/2017) at [7].

17. Once the plaintiff has prima facie demonstrated on the evidence that he is entitled to judgment, it is then up to the defendant to show that he does have a defence or defences to the claim. There is in practice little difference between an application for summary judgment in originating summonses and an application under RHC, Order 14: Wing Hang Bank Ltd v Liu Kam Ying And Others [2002] 2 HKC 57 at [10], per Ma J (as he then was); Bank of China (Hong Kong) Ltd v Keen Lloyd Resources Ltd, CACV 1787/2001 (unrep, 8/02/2002) at [17]- [19].

18. A defendant must condescend to particulars; the mere assertion in an affidavit of a given situation by the defendant is insufficient. 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. In assessing the credibility of the defendant’s factual case, while the court will not embark on 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. If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so. See: Ontone Finance Co Ltd v Leung Siu Kee & Ors, HCA 408/2011, (unrep, 28/02/2012) at [23].

19. As noted by Megarry V-C, “[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff.” See: Wong To Yick Wood Lock Ointment Ltd v Sky Harvest Medicine Co Ltd [2018] 3 HKLRD 506 at [12].”

D.  DISCUSSION

D1  P having shown a prima facie case

26.  Having considered the evidence, I am of the view that P has shown a prima facie case on evidence.

D2   No arguable defence

27.  Ds have put forward the following grounds to resist P’s claim:

(1)  The Loan Agreement is extortionate and ought to be reopened to do justice between the parties having regard to all the circumstances.

(2)  P is not entitled to have vacant possession of the Property.

28.  In my view, none of these grounds are arguable.

D2.1   Ground 1

29.  Ds are relying upon s.25 of MLO, which is as follows:

“(1) Subject to section 24(2), where—

(a) proceedings are taken in any court by any person (whether a money lender or not) for the recovery of any money lent or the enforcement of any agreement or security in respect of any loan; and

(b) subject to subsection (3), there is evidence which satisfies the court that the transaction is extortionate, the court may reopen the transaction so as to do justice between the parties having regard to all the circumstances, and, for that purpose, make such orders and give such directions in respect of the terms of the transaction or the rights of the parties thereunder as the court may think fit.

(2) For the purposes of this section, a transaction is extortionate if—

(a) it requires the debtor or a relative of his to make payments (whether unconditionally or on certain contingencies) which are grossly exorbitant; or

(b) it otherwise grossly contravenes ordinary principles of fair-dealing.

(3) Any agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds 36 per cent per annum shall, having regard to that fact alone, be presumed for the purposes of this section to be a transaction which is extortionate; but except where such rate exceeds the rate specified in section 24(1), the court may declare that any such agreement is not extortionate for the purposes of this section if, having regard to all the circumstances relating to the agreement, the court is satisfied that such rate is not unreasonable or unfair.

(4) In determining whether a transaction is extortionate for the purposes of this section, regard shall be had to such evidence as is adduced concerning—

(a) interest rate prevailing at the time it was made;

(b) the factors mentioned in subsections (5) and (6); and

(c) any other relevant considerations.

(5) Factors applicable under subsection (4)(b) in relation to the debtor include—

(a) his age, experience, business capacity and state of health; and

(b) the degree to which, at the time of entering into the transaction, he was under financial pressure, and the nature of that pressure.

(6) Factors applicable under subsection (4)(b) in relation to the lender or other person by whom the proceedings are taken include—

(a) the degree of risk accepted by the lender, having regard to the nature and value of any security provided;

(b) his relationship to the debtor;

(c) whether or not a specious cash price was quoted for any goods or services included in the transaction; and

(d) where one or more other transactions are to be taken into account, the question how far any such other transaction was reasonably required for the protection of the debtor or the lender, or was in the interest of the debtor.

(7) Any court in which proceedings might be taken for the recovery of any loan or security in respect of a loan shall have and may at the instance of the debtor or any surety exercise the like powers as may be exercised under this section where proceedings are taken for the recovery of a loan; and the court may entertain any application under this subsection by the debtor or surety notwithstanding that the time for repayment of the loan or any instalment thereof has not arrived.

……” (Emphasis added)

30.  Plainly, in this case, the presumption in s.25(3) is inapplicable. Thus, whether Ds may invoke s.25 depends upon whether Ds could point to any evidence showing that the transaction in the Loan Agreement is extortionate.

31.  Mr Lai has made it clear that Ds are relying upon s.25(2)(b) to say that the transaction in the Loan Agreement is extortionate. Mr Lai for Ds submits that:

(1)  Since August 2023, P must have known that D1 was in some state of financial distress, struggling to amass the necessary funds to repay the principal of the HK$5,000,000 loan, which was imminently due for repayment on 1 September 2023.

(2)  P must also have known that D1 was effectively at the end of its tether, clinging desperately to the hope of securing a renewal despite being unable to repay P. The desperation was so pronounced that, on 17 August 2023, D2 felt compelled to ask P for the minimum repayment needed to approve a renewal and to inquire whether it would be possible to proceed with a full renewal for now, and set up a plan to repay the principal later. It must have been obvious to P that D1 was operating from a position of extreme and desperate vulnerability.

(3)  Ds were further confronted with pressure on multiple fronts. On 31 August 2023, they received letters from P’s solicitors, demanding immediate repayment of the outstanding sums due under both the HK$87,000,000 and HK$5,000,000 loans. Thereafter, D2 was further subjected to numerous calls from P’s loan officers, once again demanding immediate repayment of the outstanding sums. The mere fact that such pressure might arguably be commonplace does not diminish its potential to be substantial and overwhelming pressure, particularly as experienced by Ds.

(4)  In addition to intensifying D1’s vulnerability through sustained pressure, P further capitalised on this vulnerability by effectively holding out the possibility of a short renewal (of only six months) to coax Mr. Mang into raising HK$1,000,000 through family and friends. This was then paid to P on 27 December 2023 (ie one day before the Loan Agreement was entered into).

(5)  On 8 December 2023:

(a)  P informed D2 that it had finally decided to grant the loan renewal to D1 to provide some more time to sell the Property or arrange refinancing, in view of D1’s genuine efforts to repay.

(b)  Recognizing D1’s precarious position, P told D2 that D1’s interest burden would be reduced by resetting the interest rate to 17% per annum, while nevertheless maintaining the default interest rate at 24% per annum. This ostensible gesture of generosity was made with awareness of D1’s meagre ability to repay, its weak track record and the overwhelming likelihood that D1 would once again be subject to default interest at 24% per annum.

(c)  Further underscoring D1’s tenuous ability to repay, D2 replied on 11 December 2023 that even an interest rate of 17% per annum was beyond D1’s capacity, and that the rate would need to be reduced to 10% per annum to be feasible.

(6)  The Loan Agreement ultimately settled on an interest rate of 12% per annum and an overdue interest rate of 24% per annum. However, these rates were imposed on D1 with P’s full awareness of D1’s limited ability to repay, its weak track record and the overwhelming likelihood that D1 would once again incur default interest at 24% per annum – an eventuality that would clearly be wholly insurmountable to D1.

(7)  Viewing the circumstances in the round, this was P taking advantage of Ds’ acute financial distress and vulnerability, in circumstances where it was fully aware of Ds’ virtual inability to repay and desperate search for respite. This was all the while P continued to impose what was, in the circumstances, virtually default interest at 24% per annum – an amount P knew D1 would likely incur again, and which was entirely beyond D1’s capacity – whilst P’s own interests remained secured by the Property. In the circumstances, the Court should be entitled to reopen the transaction.

(8)  In the circumstances, it is at least arguable that the transaction should be reopened under s.25 of MLO.

32.  In my view, Mr Lai has used some colourful words in his submissions. However, with respect, I am of the view that those submissions are not in line with the commercial reality. I have no hesitation in rejecting all those submissions.

(1)  In 2023, before P and D1 entering into the Loan Agreement, P had already lent HK$87,000,000 and HK$5,000,000 to D1. Undoubtedly, these are substantial sums.

(2)  The fact that Ds were in financial difficulties does not mean that they could ignore the repayment obligations. One must bear in mind that the dealings between P and Ds are commercial dealings, which should be based upon logics in the commercial world. P’s acts in demanding and chasing Ds for repayments cannot be described as unreasonable or unconscionable.

(3)  Ds had tried to seek indulgence from P. It is understandable that Ds would like to have some indulgence from P. However, P is not under any obligation to grant Ds any indulgence. After all, knowing that Ds were in financial difficulties, P had to look after its own commercial interest and to assess the risk involved if some further indulgence was given to Ds.

(4)  P made it a condition that further loan would only be granted to Ds if Ds made some repayment first. In the circumstances described in the subparagraphs above, this is a reasonable commercial decision which cannot be criticized at all. Eventually, Ds made a repayment of HK$1,000,000 on 27 December 2023, and the next day P and D1 entered into the Loan Agreement.

(5)  As shown in the evidence, the interest rate of 12% per annum in the Loan Agreement is the result of the negotiation between P and Ds. Each side has made some concession in the negotiation.

(6)  There is no evidence showing that the interest rate and the default interest rate stipulated in the Loan Agreement are higher than those prevailing in the market at the time the Loan Agreement was made.

(7)  There is also no evidence showing that in late 2023, bearing in mind the financial conditions of Ds at that time, Ds could obtain a loan in the financial market on terms much better than those in the Loan Agreement.

(8)  Further, as submitted by Mr Chen, there is no basis in support of the suggestion that at the time of entering into the Loan Agreement, P was fully aware that the default interest rate would definitely apply. As shown in the evidence, the purpose of providing the Loan to Ds is to provide Ds some breathing space and time, so that Ds could try to sell the Property and to repay the indebtedness owed to P. Had the Property been sold at a good price, Ds would have had been able to repay the Loan in time with no default interest.

33.  In my judgment, there is no evidence showing that the transaction in the Loan Agreement is an extortionate transaction. Ground 1 is not arguable.

D2.2  Ground 2

34.  Mr Lai submits that by reason of estoppel by convention[4], P is bound by the tenancy agreements in respect of the Property and is not entitled to have vacant possession of the Property. Mr Lai submits that:

(1)  The Mortgage must be underpinned by the existence of a common assumption that the tenancies could be renewed following the 2020 Tenancy Agreements, even without the need for P’s written consent. This common assumption is reflected by the fact that when P entered into the Mortgage, P knew the existence of the 2020 Tenancy Agreements. Under each of the 2020 Tenancy Agreements, the tenant had an option to a lease for a further term of 24 months. P knew that if the tenant chose to exercise the option, D1 would immediately be bound.

(2)  The Loan Agreement must also be underpinned by the same common assumption. At the time of the Loan Agreement, P knew that some units in the Property were occupied by Bright Rising and Chengxin pursuant to the 2023 Tenancy Agreements. In each of the 2023 Tenancy Agreements, the tenant had an option to a lease for a further term of 18 months. P knew that if the tenant chose to exercise the option, D1 would immediately be bound. Despite knowing all these, P did not raise any objection to the 2023 Tenancy Agreements.

(3)  If P is allowed to resile from the common assumption, it would be manifestly unjust to D1, for D1 would be compelled to breach the 2024 Tenancy Agreements in that scenario.

35.  With respect, I am unable to accept Mr Lai’s submissions.

(1)  It is indisputable that before P commencing these proceedings, on 25 June 2024, the 2023 Tenancy Agreements were replaced by the 2024 Tenancy Agreements. In my view, the real issue is whether P is bound by the 2024 Tenancy Agreements.

(2)  Before D1 entering into the Tenancy Agreements, by the 18.06.2024 Reply, P had clearly and unequivocally told Ds that the 11.06.2024 Proposal was rejected. Plainly, there is no room to argue that when D1 entering into the 2024 Tenancy Agreements, D1 was reasonably under an impression that P had agreed to or would have no objection to D1 having some new tenancy agreements with the tenants.

(3)  Mr Lai submits that the 18.06.2024 Reply should be interpreted as meaning the following:

(a)  P was plainly aware of the existence of some tenancies affecting the Property;

(b)  P had no apparent objection to such tenancies in principle, whether on the basis of a lack of written consent or otherwise; and

(c)  Had D2 provided a more comprehensive proposal, P might well have been open to accepting it.

(4)  I do not agree with the interpretation suggested by Mr Lai. In my view, the meaning of the 18.06.2024 Reply is clear and unequivocal – as to the 11.06.2024 Proposal made by Ds (ie renewing the existing tenancies with the tenants for 2 or 3 years), the answer given by P is a resounding “No”.

(5)  Mr Lai’s submission is also not supported by the evidence. There is no evidence from Ds, alleging that when D1 entering into the 2024 Tenancy Agreements, notwithstanding the 18.06.2024 Reply given by P, Ds were under an impression that P had agreed to or would not object to D1 having some new tenancy agreements with the tenants.

36.  Based upon the evidence, I do not see any arguable case against P based upon estoppel by convention. In my judgment, Ground 2 is unarguable.

D3   Conclusion

37.  For the reasons above, P has demonstrated a prima facie case on evidence, and Ds have failed to show any arguable defence to P’s claim. Accordingly, P’s claim must be allowed.

38.  There is no dispute that costs should follow the event. Mr Chen further seeks indemnity costs by relying upon the relevant contractual provisions.

(1)  Clause 17 of the Loan Agreement:

“17. The Borrower and the Mortgagor shall (with the object and intention of affording to the Lender a full indemnity of all amounts actually disbursed or incurred by the Lender pursuant to the terms hereof) pay or reimburse to the Lender, on demand:-

……

17.2 all reasonable expenses (including legal expenses on a full indemnity basis) incurred by the Lender in suing for or recovering any sum due from the Borrower and the Mortgagor to the Lender hereunder or in connection with the protection or enforcement of the Lender's rights or interests hereunder.” (Emphasis added)

(2) Guarantee:

(a) Clause 2.01

“…the Guarantor guarantees, unconditionally and irrevocably, payment of the Guaranteed Moneys to the Lender on demand Forthwith” (Emphasis added)

(b) Clause 1

“ “Guaranteed Moneys” means the aggregate of …… (iii) all expenses of the Lender in enforcing this Guarantee on a full indemnity basis” (Emphasis added)

39.  It is well established that where a contract provides for costs to be payable on an indemnity basis, it provides the starting point for the court’s discretionary exercise and the court should be slow to disturb the parties’ agreement.[5] Having reviewed the contractual provisions, I agree with Mr Chen that P is entitled to have indemnity costs.

40.  Mr Lai submits that P has failed to lodge and serve the skeleton submissions in accordance with the timetable in the directions issued by this Court before the hearing, and hence P should not be entitled to have indemnity costs. Mr Chen has offered his apology to this Court for the delay in lodging and serving the skeleton submissions. In my view, while it is unsatisfactory for not lodging and serving P’s skeleton submissions in time, Ds have not suffered any prejudice as a result. In the circumstances, I do not regard the delay in lodging and serving the skeleton submissions as a sufficient reason for departing from the contractual provisions set out in the above.

41.  I would make an order that costs of these proceedings (including costs reserved) be to P, to be taxed on an indemnity basis if not agreed.

42.  Mr Chen has provided a Draft Order to this Court. Having considered the parties’ respective submissions, I would only make the following changes to the Draft Order:

(1) in [2] of the Draft Order, the period within which D1 would need to deliver vacant possession of the Property to P be changed to “within 28 days from the date of the judgment”; and

(2) the costs order proposed in the Draft Order be changed to the one set out in [41] above.

E.  DISPOSITION

43.  I enter final judgment in favour of P and against Ds, and make an order in terms of the Draft Order with the amendments set out in [42] above.

44.  Lastly, it remains for me to express my gratitude to Mr Chen and Mr Lai for the helpful assistance provided to the Court.