KENCY BROTHERS LTD v. LAU MAN SANG, JAMES

DCCJ 2143/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2143 OF 2012

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BETWEEN

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DECISION

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1.  By the summons for application for leave to appeal which taken out by the defendant on 11 January 2013 (“said Summons”), the defendant applies for leave to appeal against the Judgment made by me on 21December 2012 with the Reasons for Judgment which was handed down on 8 January 2013 (“my Reasons for Judgment”). Under the said Summons, 4 proposed grounds of appeal have been stated therein.

LEGAL PRINCIPLES

2.  The source of jurisdiction for the application is section 63A of the District Court Ordinance (Cap 336) and the practice and procedure of the application is governed by Order 58 of the Rules of the District Court.  By virtue of section 63A(2) of Cap 336, it is provided that leave to appeal shall not be granted unless the court is satisfied that,

(a)   the appeal has a reasonable prospect of success; or

(b)   there is some other reason in the interests of justice why the appeal should be heard.

3.  The relevant test of whether an appeal has a reasonable prospect of success under section 63A(2) is whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal.  A reasonable prospect of success therefore means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable”.[1]

DISCUSSION

4.  As noted from the proposed grounds in the said Summons, the defendant seems only relied on the 1^st limb (ie reasonable prospect of success).  I will herein below consider whether each of the proposed grounds of appeal demonstrate a reasonable prospect of success.

Proposed Ground (a)

5.  The defendant is complaining me of placing undue weight to the “admissions” in his Defence and Counterclaim.  The defendant alleged that the said admissions are not unequivocal in light of the other averments and the matters deposed in his affirmation.

6.  It is the first time of the defendant to raise the issue of “not unequivocal plea” and “mistake”.  These allegations have no evidential basis or supported by the defendant’s affirmation.  In my view, the admissions made by the defendant are unequivocal plea in his pleadings.  All along the defendant is legally represented by a law firm and the handling solicitor has been qualified for over 20 years.  The Defence and Counterclaim was drafted by his solicitor and verified by the defendant by a statement of truth pursuant to Order 41A RDC.  Indeed, I had discussed and analyzed the importance of statement of truth at para 24 of my Reasons for Judgment.  I am entitled to place weight and to consider the said admissions under the trite legal principle.

7.  Furthermore, no evidence or explanation is put forward by the defendant as to why the matters pleaded in his pleadings are incorrect or not according to his instructions or unclear.  The handling solicitor for the defendant did not file any affidavit explaining why such obvious discrepancies or mistakes were made.  It seems to me that the defendant is trying to make use of his own discrepancies or alleged mistakes in his pleadings and affirmation as a ground of appeal.  I cannot accept that such discrepancies or mistakes made by the defendant can demonstrate a reasonable prospect of success in his appeal.  Accordingly, I reject the submission of Mr Hung, Counsel for the defendant that those mistakes made in the pleadings and in the defendant’s affirmation are genuine.

8.  Concerning the “interest” issue, I had given a detailed and careful analysis on the effect of the “admissions” together with all the evidence before the court, including the matters deposed in the affirmations (both the plaintiff and the defendant) from paras 22 to 28 in my Reasons for Judgment.  I do not need to repeat here again.

9.  Mr Hung, Counsel for the defendant, submitted that since there is no dispute between the parties that a total sum of about HK$1 million (ie US$64,600 x 2) has been paid by one Chow Fat Kow (“Chow”) paid to VRHL, the only question seems to be for what purpose the said sum was paid.  In my judgment, the defendant’s allegation that part of the said sum was used to pay off the 5^th Loan is just a bare assertion which is contrary among the pleadings and the affirmation of the defendant.  Indeed, I had already considered and assessed the credibility of the said allegation in paras 30 to 34 of my Reasons for Judgment.

10.  In any event, I think that according to the defendant’s case, if Chow has overpaid to the plaintiff, no matter what the exact amount of the excess is, Chow may consider claiming against the plaintiff for such excess plus the sum of HK$300,000 ie the principal sum of the 5^th Loan since judgment based on the 5^th Loan has been entered against the defendant. Theoretically, the plaintiff will not be unjustly enriched or receive double. Of course, there may be an entirely separate legal proceedings between Chow and the plaintiff, on which I shall refrain from giving any further comments.  By the way, I was informed by Mr Tze, Counsel for the plaintiff that no legal proceedings are commenced by Chow against the plaintiff up to the date of this hearing.  

11.  By reasons of the aforesaid, this proposed ground is entirely without merit and justification.

Proposed Ground (b)

12.  In this proposed ground, the defendant complained that there were no documentation on the terms of the 5^th Loan and interest charging is inconsistent to the friendship between the parties.  According to para 5 of the defendant’s affirmation filed 29 October 2012, he deposed that in view of the good relationship between Mr Tang and him, as admitted in para 3 of the Statement of Claim, Mr Tang readily agreed to advance to him the First Loan. It is undisputed that “Mr Tang” refers to Tang Kai Ming Kenneth or Kenneth Tang who are the same person.

13.  Para 3 of the Statement of Claim states that Kenneth Tang and the defendant has been known to each other since the 1970’s when both of them are secondary schoolmates in the United Kingdom and they started to have business relationship since late 1980’s.  I disagree that interest is charged on the 5^th Loan is inconsistent to the friendship between the parties especially when the amount of such loan is huge and no security is given by the defendant.

14.  More importantly, I consider that the terms of the 5^th Loan has been pleaded clearly in the Statement of Claim and was admitted by the defendant in his Defence and Counterclaim and verified by him.  In addition to that the Agreed Interest Rate was evidenced by the exhibits attached in the 2^nd affirmation of Tang Kai Ming Kenneth (TKMK-5, TKMK-6 and TKMK-7) with detailed calculations shown therein and these contemporaneous documents and exhibits were all undisputed by the defendant.  There are overwhelming evidences for the court to conclude the terms of the 5^th Loan as held in the judgment.

15.  Under this proposed ground, the defendant also complained that the plaintiff did not give explanation as to why the plaintiff advanced the 5^th Loan before pursuing for repayment of the 1^st to 4^th Loans.  In my judgment, I fail to find that this will affect the defendant’s liability to repay the 5^th Loan to the plaintiff so as to demonstrate a reasonable prospect of success in his appeal. It is the trite law in Order 14 application that a defendant must show that there are triable issues and that he has to satisfy the court that he has a “real or bona fide defence” or “a fair probability or reasonable grounds that a bona fide defence exists”.  The burden is on the defendant not the plaintiff.

Proposed Ground (c)

16.  Under this proposed ground, the defendant attacked my discretion under the Money Lenders Ordinance (“MLO”).  Mr Hung, Counsel for the defendant, argued that the charge of a compound interest in a loan should by itself render the loan illegal pursuant to section 22 of the MLO.  Nonetheless, he rightly conceded that I still have the discretion under the law to enforce the 5^th Loan[2].

17.  It is the trite law that appeal against exercise of discretion will not be entertained unless it can be shown that the judge exercised his discretion under a mistake of law, principle or fact or failed to exercise his discretion[3].

18.  In my view, the defendant simply fails to show why the discretion exercised by me was not in proper accordance with the well established legal principles.

19.  Before exercising my discretion, I had reviewed all the evidence of both parties placed before the court and had considered all the relevant issues such as whether there was any prejudice suffered by the defendant; any oppression or objectionable conduct of the plaintiff; the actual interest rate charged and no dispute on receiving the Monthly Loan Statements by the defendant for 17 years etc (paras 35 to 37 of my Reasons for Judgment refers).

20.  First of all, there is no affirmation evidence by the defendant that he has been misled by the interest rate as shown in the Monthly Loan Statement or the calculation is incorrect.  Secondly, the calculations as shown in the Monthly Loan Statements are the exact calculation of the 1% per month compound interest according to days of the respective month.  Thirdly, the defendant has been receiving all the Monthly Loan Statements on monthly basis for about 17 years without making any complaint of high interest rate.  Fourthly, there is about 40 years friendship between the parties and no security has ever been given by the defendant.  Lastly, the defendant is a sophisticated businessman since 1980’s holding the position of managing director of companies.  It was just a commercial transaction between two experience businessmen and no reason why the defendant should get any windfall out of it.

21.  Mr Hung, Counsel for the defendant, contended that the Monthly Loan Statements sent to the defendant were misleading as far as the quoted interest rate is concerned.  The interest rate of 12% referred to in those statements was both incorrect and misleading (as it tended to mislead the recipient that a simple interest rate at a monthly rate of 1% was charged, ie 1% x 12 month). On the other hand, Mr Tze, Counsel for the plaintiff said that the calculations in the Monthly Loan Statements were correct which were verified by an accountant.  I note that all along the defendant has never pleaded in his Defence and Counterclaim or deposed in his affirmation in opposition challenging the accuracy of the calculations in the Monthly Loan Statements.  It is again the first time Mr Hung raise this issue which was not even mentioned in the last hearing before me by those instructing him.  I must reject this kind of fanciful submission since it was made without any evidential basis.  If it was so raised in the last hearing before me by those instructing Mr Hung, I may still consider granting adjournment and giving direction for filing a single joint expert report concerning the accuracy of the calculations in the Monthly Loan Statements.  However, for the purpose of this leave to appeal application, I see no reason why I will do so.

22.  Besides, as admitted by the defendant, the loans were advanced among friendship between the parties.  In my view, the issue of money lender is self contradicted by the defendant himself thus not credible.  I accept that the plaintiff has a very strong case that the 5^th Loan is an exempted loan under Schedule 1, Part 2 (5) of the MLO as submitted by Mr Tze, Counsel for the plaintiff.  Nevertheless, I do not think that it is necessary for me to make finding on this issue for the purpose of granting summary judgment since I had decided to exercise my discretion to enforce the 5^th Loan.

Proposed Ground (d)

23.  Again, this proposed ground is totally without merit.  It has been clearly from paras 42 to 45 of my Reasons for Judgment that the defendant has no locus standi under the Counterclaim and as for the so called “repayment” made by Chow.  I have provided detailed reasoning at paras 30 to 34 of my Reasons for Judgment.  I would not repeat here. 

24.  In the first place, Mr Hung, Counsel for the defendant, made no submission at all on this proposed ground in his written skeleton submission filed.  However, at the hearing, Mr Hung suddenly said that he received instruction from those instructing him that Chow was the agent of the defendant in repayment.  The issue of agency is never pleaded nor deposed in the defendant’s affirmation. Again, Mr Hung submitted that it is another obvious mistake and that the defendant is prepared to apply for necessary amendment of his Defence and Counterclaim.  Mr Hung conceded that he had in fact held no conference with the defendant before the hearing.  Thus, I cannot see how Mr Hung was able to make submission that the defendant will make such an application for amendment concerning this agency issue.  I have no hesitation to reject this kind of fanciful submission since there is no evidence before me that Chow was the agent of the defendant in repayment.

25.  Besides, I must assume that the plaintiff will no doubt vigorously oppose this intended application since judgment has already entered against the defendant.  Mr Hung has no ground to preempt the court’s decision that it would entertain this intended application for amendment.  I cannot accept that in order to obtain leave to appeal, the defendant keeps on changing his case, which only shows that his evidence is not credible.

Other relevant matters

26.  Mr Hung, Counsel for the defendant, also submitted that if the court finds the defendant’s case to be shadowy, the defendant is prepared to pay into court the full amount of disputed sum under the 5^th Loan pending the determination of the case at trial.  I fail to see how this submission will persuade me to grant leave to appeal.  This submission only shows the concession of Mr Hung as to the weakness of the defendant’s case.

27.  Mr Hung for the defendant further submitted that if leave is granted for this appeal, the defendant shall undertake to file an application supported by affirmation to amend the Defence so as to correct the aforesaid discrepancies and mistakes.  As mentioned above, Mr Hung conceded that he had in fact held no conference with the defendant before the hearing.  I fail to see how Mr Hung was able to make submission that the defendant undertakes to this court to make such an application for amendment.  I have no idea if Mr Hung has the chance to explain to the defendant the serious consequence of breach of undertaking to the court. Obviously, Mr Hung as Counsel refused to give me his personal undertaking to such effect.  Again, I do not see how this fanciful submission will persuade me to grant leave to appeal. 

28.  Regarding the applicability of the compound interest rate to the judgment sum until payment, Mr Hung for the defendant rightly conceded that I have discretion to allow the compound interest rate based on my finding that it is the contractual interest rate agreed by the parties under the 5^th Loan.

CONCLUSION

29.  In the circumstances, I dismiss the said Summons since I am not satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  As costs shall follow event, the defendant must pay costs of this application with certificate of Counsel.