CHAN CHE LEUNG v. CARINA FINANCE LTD

DCCJ 848/2021

[2026] HKDC 1121

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 848 OF 2021

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JUDGMENT

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A.  Introduction

1.  This is a dispute arising from two written loan agreements, both dated 19 March 2015, one in Chinese and one in English, between the Plaintiff, as borrower, and the Defendant, as lender, in which a loan of $150,000 was extended to the Plaintiff to be repaid by 72 monthly instalments at an interest rate of 42% per annum. They are collectively referred to below as the Loan Agreements, and, if necessary, individually as the Chinese Loan Agreement[1] and the English Loan Agreement[2] respectively.

2.  In this action, the Plaintiff seeks to rescind the Loan Agreements and recover the money he paid the Defendant pursuant to those agreements on the basis that (a) he entered into the Loan Agreements in reliance on the fraudulent misrepresentations of the Defendant and/or its agents, (b) in any event, the Loan Agreements were unenforceable pursuant to sections 18, 24 and 25 of the Money Lenders Ordinance (Cap 163) (“MLO”), and (c) the Defendant was unjustly enriched.

B.  The parties’ respective cases

B1.  The Plaintiff’s case

3.  The Plaintiff’s case can be briefly summarized as follows:

4.  In early March 2015, the Plaintiff was approached by an unknown person, whom the Plaintiff in this action referred to as Mr A. Mr A claimed himself to be an employee of Bank of East Asia (東亞銀行) (“BEA”) and told the Plaintiff that he could assist him to restructure his two existing high-interest loans at a much lower interest rate with BEA.

5.  Subsequently, one Mr Lee of PWR International Enterprises Limited (天匯國際企業(香港)有限公司) (“PWR”) invited the Plaintiff to attend several meetings at the office of PWR. At those meetings, Mr Lee made several misrepresentations to the Plaintiff.

6.  In reliance on those misrepresentations, the Plaintiff (a) signed a “物業私人貸款顧問費合約”[3] (“the Consultancy Agreement”) with PWR, in which it was stated that the Plaintiff has to pay a consultancy fee of $150,000 to PWR for its service, and (b) agreed to borrow a further loan of $150,000 (“the Loan”) from a BEA-pre-approved moneylender to be arranged by PWR. The alleged BEA-pre-approved moneylender turned out to be the Defendant.

7.  Mr Lee told the Plaintiff that, for arranging the intended loan restructuring with BEA, the Plaintiff needed to improve his credit rating. And that could be achieved by promptly repaying the first two monthly instalments for the Loan. More importantly, Mr Lee stated that the Plaintiff did not need to repay the Loan out of his own pocket.

8.  Mr Lee then arranged someone, who he said was from the moneylender, to inspect the Plaintiff’s home property on 18 March 2015. When the person arrived, the person provided his full name as “Cheung Kwok Hung” (“Impostor Cheung KH”) and claimed he was from and represented the Defendant. He then carried out the inspection of the Plaintiff’s home and thereafter asked the Plaintiff to pay $1,000 as inspection fee, which the Plaintiff did accordingly.

9.  After the inspection, Mr Lee further requested the Plaintiff to attend the office of Joseph CT Lee & Co, a solicitor firm engaged by the Defendant, on 19 March 2015 to sign a formal agreement for the Loan. On that occasion, the same person who had carried out the home inspection the day before, i.e., Impostor Cheung KH, represented the Defendant. In reliance on a further misrepresentation made by Impostor Cheung KH, the Plaintiff signed the Loan Agreements, under which the Plaintiff has to repay the Loan of $150,000 by 72 monthly instalments with a total sum of $412,775.26.

10.  As to the cheque of $150,000 for the Loan received from Impostor Cheung KH on 19 March 2015, the Plaintiff was immediately escorted to cash it and bring it back to Mr Lee, who took away $138,000 for, as he said, settling PWR’s consultancy fee and legal fee of Joseph CT Lee & Co For the remaining cash of $12,000, the Plaintiff repaid the first two instalments of the Loan on the same day.

11.  Shortly thereafter, Mr Lee disappeared and could no longer be reached. The Plaintiff further discovered that, despite the repayment of the first two instalments, his credit rating was not improved, and no financial re-structuring was arranged by Mr Lee or PWR as promised.

12.  The Plaintiff therefore reported the matter to the police, but was told that the Loan Agreements he had signed with the Defendant were valid and there was nothing the police could do.

13.  Out of fear, the Plaintiff repaid the Loan as per the repayment schedule of the Chinese Loan Agreement, and the same were discharged in May 2020.

14.  It is to be noted that the Plaintiff never had the chance to verify the identity of Impostor Cheung KH before the trial; he therefore kept referring to that person as “Cheung Kwok Hung” in his pleadings and witness statements. However, on day 3 of the trial, after meeting the sole director of the Defendant, Mr Pang Yick Fai Preston (“Mr Pang”), in court, the Plaintiff identified Mr Pang as the same Impostor Cheung HK who carried out the home inspection on 18 March 2015.

15.  The Plaintiff contended that the misrepresentations were false. And by reason of the matters stated above, and that Mr Pang, being the sole director of and expressly claimed to act for the Defendant, the Defendant has actual or alternatively constructive knowledge of the misrepresentations.

16.  But for the misrepresentations, the Plaintiff would not have (a) signed the Consultancy Agreement on 17 March 2015, (b) paid Impostor Cheung KH (Mr Pang) an inspection fee of $1,000 on 18 March 2015, (c) signed the Loan Agreements on 19 March 2015, or (d) repaid the 72 monthly instalments required under the Loan Agreements.

17.  As the misrepresentations were fraudulent, the Plaintiff seeks rescission of the Loan Agreements and damages in the amount of $401,775.26.

18.  The Plaintiff further contended that, pursuant to sections 27(3) and (4) of MLO, he is entitled to statutory set-off against the Defendant for the sum of $150,462.

19.  Furthermore, the Loan Agreements were illegal and/or unenforceable under MLO, because (a) the interest charged by the Defendant under it was not capable of being expressed as a constant percentage rate per annum, (b) the Defendant ought but failed to state the effective interest rate per annum as determined in accordance with Schedule 2 of MLO, (c) the effective interest rate charged by the Defendant exceeded the allowable rate stated in section 25 of MLO, (d) the interest rate per annum of 42% stated in the note/memorandum[4] of the Chinese Loan Agreement and the First Schedule of the English Loan Agreement[5] was incorrect, and (e) if one was to take into account the deductions made for paying the consultancy fee ($121,000) and legal fee ($17,000) in the calculation, the actual effective interest rate charged far exceeded the maximum allowable interest rate stated in section 24(1) of MLO.

20.  By reason of the illegality and unenforceability of the Loan Agreements, the Defendant was not entitled to retain the benefit conferred thereunder, namely the total repayment of $412,775.26 received, and was thus unjustly enriched at the expense of the Plaintiff. The Plaintiff is therefore entitled to and claim restitution.

21.  The Plaintiff further claims interest pursuant to sections 49 and 50 of the District Court Ordinance, Cap. 336.

B2.  The Defendant’s case

22.  The Defendant admitted that Mr Pang was at all material times the Defendant’s sole director and shareholder. However, while the Defendant accepted that Mr Pang, acting on behalf of the Defendant, attended the meeting at the office of Joseph CT Lee & Co Lee on 19 March 2015 for the signing of the Chinese Loan Agreement, it took the following position in its pleadings and at trial.

23.  The Defendant and Mr Pang did not know PWR and have never had any relationship or dealings with PWR, its directors, shareholders or employees. PWR, its directors or shareholders have never been connected to or affiliated with the Defendant in any way.

24.  Mr Pang was not Impostor Cheung KH, he did not conduct, nor has the Defendant instructed anyone to conduct inspection of the Plaintiff’s home property. Neither the Defendant nor Mr Pang knew or had any relationship or dealings, business or otherwise, with Impostor Cheung KH. And they have never authorised Impostor Cheung KH to act on their behalf.

25.  The Defendant was also not connected to BEA.

26.  The Defendant and Mr Pang had no knowledge of the misrepresentations made by Mr Lee; if they had been made, as the Plaintiff alleged, they were not made with the Defendant’s knowledge, authority or consent. The Defendant denied that the Plaintiff had mentioned Mr Lee’s misrepresentations to Mr Pang at the meeting of 19 March 2015.

27.  The Defendant has, at the material times, no knowledge of the Consultancy Agreement between PWR and the Plaintiff and had not authorised anyone to execute the same with the Plaintiff. It was signed without the Defendant’s knowledge.

28.  Regarding the inspection fee of $1,000, the Defendant has no knowledge of the same, nor has it authorised anyone to charge such a fee. If the Plaintiff did pay Impostor Cheung KH the alleged inspection fee, the fee was collected without the Defendant’s knowledge, authority or consent, and the Defendant has not received the fee from Impostor Cheung KH. The Defendant specifically denied that Impostor Cheung KH was ever its staff, employee, or an authorised representative or agent.

29.  As to the circumstances in which the parties entered the Loan Agreements, the Defendant’s case is that:

(1)  In early March 2015, Mr Pang received a cold call from an agent who introduced the Plaintiff as a potential borrower.

(2)  As the proposed loan terms were acceptable to Mr Pang, he contacted the Plaintiff directly to discuss the details, particularly the repayment schedule.

(3)  After the terms of the loan were agreed upon, the Defendant prepared the Chinese Loan Agreement incorporating the agreed terms.

(4)  The Defendant then sent the Chinese Loan Agreement to its solicitors, Joseph CT Lee & Co, for preparation of the English Loan Agreement.

(5)  When the Loan Agreements were ready, Mr Pang contacted the Plaintiff and fixed an appointment on 19 March 2015 at the office of Joseph CT Lee & Co for signing.

(6)  The Defendant authorised Mr Pang to attend the meeting with the Plaintiff on 19 March 2015. At the meeting, Mr Pang explained the terms of the Chinese Loan Agreement and the other relevant documents to the Plaintiff; both the Chinese Loan Agreement and a Chinese declaration[6] were signed by the Plaintiff in the presence of Mr Pang.

(7)  After that, Mr Pang left the conference room. Mr Chong Wai Ming Raymond[7] (“Mr Chong”), a solicitor of Joseph CT Lee & Co, entered the room and arranged the English Loan Agreement and other relevant documents for the Plaintiff’s signature. Mr Chong advised the Plaintiff that he could seek independent legal advice as to the contents of the English Loan Agreement and the loan transaction. The Plaintiff acknowledged and expressed that it was not necessary. The English Loan Agreement was then signed by the Plaintiff in front of Mr Chong and no others.

30.  At the meeting on 19 March 2015, Mr Pang was the only representative of the Defendant handling the signing of the Loan Agreements and other relevant documents; no other person from the Defendant was present, particularly the alleged Impostor Cheung KH was not there.

31.  The Defendant also denied that Mr Pang had made any misrepresentation. If it was made by Impostor Cheung KH, it was not made with the Defendant’s knowledge, authority or consent.

32.  The Defendant confirmed that the Plaintiff has fully repaid the Loan under the Loan Agreements. The Defendant pointed out that the Plaintiff had not made any complaint to it regarding the Loan Agreements before the commencement of this action.

33.  The Defendant also pleaded that the consultancy fee was not collected on its behalf, and it had not received any of the consultancy fee allegedly paid by the Plaintiff.

34.  Regarding legal fees, the Defendant paid Joseph CT Lee & Co directly for the preparation and execution of the English Loan Agreement.

35.  Regarding the issue of compliance with MLO, the Defendant averred that section 27(3) and (4) of the ordinance are not relevant. And for the purpose of the said statutory provisions, PWR, Mr Lee and/or Impostor Cheung KH were not “person(s) acting for or in collusion with” the Defendant; the said statutory provisions, therefore, have no application.

36.  The Defendant further averred that the amount loaned to the Plaintiff was as stated in the note or memorandum of the Loan Agreements, which was $150,000, and sections 18(1)(a), 18(2)(d) of MLO had been complied with.

37.  Furthermore, the interest charged by the Defendant under the Loan Agreements was capable of being expressed and, in fact, expressed as a constant interest rate of 42% per annum; Schedule 2 of MLO, therefore, has no application.

38.  And, for the purpose of sections 24(1) and (2) of MLO, the amount of interest charged on the principal sum under the Loan Agreements did not exceed the allowable limit, which was 60% at the time; the Loan Agreements were, therefore, legal and enforceable.

39.  Accordingly, the Plaintiff is not entitled to restitution, or any relief claimed.

B3.  The Plaintiff’s reply

40.  One of the key factual issues in this case is whether Mr Pang inspected the Plaintiff’s home property on 18 March 2015 and falsely presented himself as “Cheung Kwok Hung” or “張國雄” during that visit and at the meeting on 19 March 2015 when the Loan Agreements were signed. It is noteworthy that, in response to the Defendant’s claim that Mr Pang was the sole attendee and dealt with the Plaintiff at the solicitors’ office on 19 March 2015, the Plaintiff pleaded, among other things, the following in paragraph 3 of his Re-Re-Amended Reply:

“(a) the Plaintiff had never personally heard of the name “Pang Yick Fai Preston” nor been introduced to any person surnamed “Pang” in association with the Defendant until the receipt of the Defence on or about 21 April 2021;

(b) the only person who acted, or at least purported to act, for and on behalf of the Defendant in dealing with the Plaintiff in person was a man who introduced his full name to the Plaintiff as “Cheung Kwok Hung”

(c) the first time the Plaintiff met Mr Cheung in person was when the latter attended to inspect the Home Property as pleaded in paragraph 16 of the RASOC.

(d) the Plaintiff only subsequently learned that a man with the Chinese name “張國雄” was the sole director of PWR and a man of this same Chinese name had been arrested, prosecuted and convicted in DCCC 312/2016 for a similar fraud (ie, the criminal case pleaded in paragraphs 36(e) and 36A of the RASOC). On this basis, the Plaintiff has up until present notionally equated Mr Cheung of the Defendant with the said張國雄 of PWR and in the said criminal case. However, the Plaintiff has not seen the said 張國雄 other than Mr Cheung in real life to verify the same; and

(e) insofar as the Defendant's affirmative case in the Re-Re-Amended Defence is that Mr Pang was the only person who, on behalf of the Defendant, directly contacted and personally attended to the Plaintiff in arranging for the signing of the Loan Agreement, the Plaintiff avers, without thereby making any admission, that: -

(i) the person to whom the Defendant refers as Mr Pang is one and the same as the person to whom the Plaintiff refers as Mr Cheung, namely the man who introduced himself as Cheung Kwok Hung of the Defendant, inspected the Home Property at an inspection fee, and arranged for the Plaintiff to sign the Loan Agreement at the solicitor's office … ; and

(ii) by virtue of the Defendant's positive pleaded case that Mr Pang was the aforesaid person (hereinafter referred to as “Mr Cheung/Pang”), whether or not this pleaded case can be made good, the Plaintiff avers that Mr Pang and the Defendant have or must have actual or constructive knowledge and notice of the said facts and circumstances surrounding the Plaintiff’s encounter and dealing with Mr Cheung/Pang for and on behalf of the Defendant ….” (emphasis in bold added)

41.  Notably, in his reply, the Plaintiff did not seek to attribute liability to the Defendant by expressly asserting that Mr Pang was the person who inspected his home property on 18 March 2015 and also represented the Defendant at the meeting on 19 March 2015. Instead, the Plaintiff maintained a neutral stance, acknowledging that he did not know the true identity of Impostor Cheung KH.

42.  Furthermore, the Plaintiff specifically denied that he had ever proposed any term for the Loan or ever discussed the details of the Loan with Mr Pang prior to the meeting on 19 March 2015. The Plaintiff also denied that Mr Pang made the appointment with him to attend the solicitor’s office. The Plaintiff also pointed out that Mr Chong never told him that he could seek independent legal advice as alleged by the Defendant.

C.  The issues

43.  Parties have filed a Joint Statement of Issues in Dispute on 22 July 2025 containing 13 detailed issues, they boil down to the following:

(1)  Whether the alleged misrepresentations were made? If so, whether they were made fraudulently, knowingly or recklessly or without genuine belief in their truth? (Issue 1)

(2)  If so, whether, but for one or more of the said misrepresentations, the Plaintiff would not have signed the Consultancy Agreement and the Loan Agreements, or paid Mr Lee and Impostor Cheung KH the various fees or charges as alleged? (Issue 2)

(3)  Is the Defendant liable for any of the said misrepresentations? If so, what is the entitlement of the Plaintiff, if any? (Issue 3)

(4)  If the Plaintiff has paid the alleged fees to Mr Lee and Impostor Cheung KH, is the Plaintiff entitled to recover the same from the Defendant pursuant to sections 27 of the MLO? (Issue 4)

(5)  Are the Loan Agreements enforceable under sections 18 and 24 of the MLO? If so, should the Court enforce them? If not, how much is the Plaintiff entitled to recover by way of restitution? (Issue 5)

D.  The Trial

44.  This case came this Court on 23 October 2025, and it lasted for 10 days in total.

45.  At the hearing, the Plaintiff was represented by Mr Valentine Yim (“Mr Yim”) and Ms Noel Chan of counsel, both of whom were instructed by Messrs Y.K. Lau & Chu. The Defendant was represented by Mr Gilbert Kwong (“Mr Kwong”) of counsel under the instruction of Messrs N.K. Tsang & Co.

46.  In this action, the following witness statements were served by the parties:

(1)  For the Plaintiff: Witness Statement of Chan Che Leung dated 9 November 2022[8], and Supplemental Witness Statement of Chan Che Leung dated 9 May 2024[9].

(2)  For the Defendant: 彭翊暉的證人陳述書 dated 9 November 2022[10], 彭翊暉的補充證人陳述書 dated 4 June 2024[11], and Witness Statement of Chong Wai Ming Raymond dated 9 November 2022[12].

47.  As previously mentioned, a central factual dispute between the parties was whether Impostor Cheung KH was actually Mr Pang. At the outset of the trial, Mr Yim requested that Mr Kwong arrange for Mr Pang to appear in court so the Plaintiff could meet him and determine whether he was the same individual—Impostor Cheung KH—who had interacted with the Plaintiff at the relevant times. The Defendant initially resisted this request. Mr Kwong argued that an in-court identification would be improper under these circumstances and referred to the Turnbull directions. I was not persuaded by Mr Kwong’s argument; the Defendant did not maintain that Mr Pang had never met the Plaintiff, and therefore misidentification was not a genuine risk. In fact, the Defendant accepted that Mr Pang met the Plaintiff in person on 19 March 2015. Since Mr Pang had provided two witness statements and was expected to testify for the Defendant, the Plaintiff would, in any event, have the opportunity to identify him during his court appearance. Insisting otherwise would only have unnecessarily prolonged the trial by requiring the Plaintiff to be recalled after Mr Pang’s testimony. Ultimately, Mr Kwong agreed to arrange for Mr Pang to attend court on day 3 of the trial for identification. Upon identification, the Plaintiff confirmed that the individual he had consistently referred to as “Cheung Kwok Hung” from the Defendant—who visited his home on 18 March 2015 and oversaw the signing of the Loan Agreements at Joseph CT Lee & Co’s office on 19 March 2015—was, in fact, Mr Pang.

48.  It is to be noted that, throughout the trial, Mr Pang continued to deny that he had conducted the home inspection on 18 March 2015.

D1.  Evidence of the Plaintiff

49.  The Plaintiff testified at trial, and his evidence was rigorously examined by Mr. Kwong. The following is the Plaintiff’s account.

50.  In March 2015, the Plaintiff received a telephone call from Mr A who claimed to be calling from BEA.

51.  Mr A addressed the Plaintiff by his full Chinese name. He was also aware that the Plaintiff was using a BEA bank account for receiving his monthly income, as well as the Plaintiff’s two existing loans with PrimeCredit and UA Finance (“High-Interest Loans”).

52.  Mr A told the Plaintiff that BEA and PrimeCredit had just merged, there was an opportunity for the Plaintiff to discharge the existing High-Interest Loans and replace them with a single loan from BEA at an interest rate at least half of that of the High-Interest Loans (“Loan Restructuring”). Mr A then said that his colleague would contact the Plaintiff in 1 to 2 days.

53.  About 2 days later, the Plaintiff received a telephone call from another man who introduced himself as Mr Lee. Mr Lee alluded to the Plaintiff’s prior telephone conversation with Mr A, whom he referred to as his colleague. The Plaintiff was therefore immediately placed under the impression that Mr Lee was also from or associated with BEA.

54.  During the call, Mr Lee referred to the Plaintiff’s earlier expression of interest in the Loan Restructuring proposed by Mr A, and said that the interest rate of the High-Interest Loans from finance companies was definitely much higher than the interest rate charged by banks. He then scheduled a meeting in person with the Plaintiff at 6/F, Yes & Right House, Nos. 1-3 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong (“PWR’s Office”).

First meeting with Mr Lee

55.  On 10 March 2015, the Plaintiff attended PWR’s Office. The interiors of the office were modern and finely decorated. Upon arrival, the Plaintiff was greeted by three young ladies in smart casual attire sitting at the reception desk. There were also other male staff dressed in business formal clothing standing at one side conversing with each other. The atmosphere was very much business as usual.

56.  A few minutes later, Mr Lee led the Plaintiff into a conference room. After they both sat down, Mr Lee passed the Plaintiff his business card[13], which bears the header of “PWR International Enterprises Limited 天匯國際企業(香港)有限公司” and the handwritten words “李生” on it. Mr Lee further said, “我哋同東亞銀行合作”. The Plaintiff then took it to mean that PWR was BEA’s partner. Mr Lee went even further, saying that PWR was part of BEA.

57.  Mr Lee went on to say that “東亞委託我哋了解你嘅情況”. He then proceeded to ask questions about the Plaintiff, such as where he lived, whether he was living in his own property or a rental property, and the details about the Plaintiff’s existing loans, such as the total amount owed, the amount and duration of the monthly repayment instalments that the Plaintiff had been making. At that time, Mr Lee mainly asked for details of the Plaintiff’s loan with UA Finance, as he was aware of the details of the Plaintiff’s loan with PrimeCredit.

58.  In reply, the Plaintiff informed Mr Lee that he lived in his own property, which was a part of the government’s tenants purchase scheme. As for the High-Interest Loans, the Plaintiff disclosed that the total outstanding balance was approximately $280,000 across two separate loans from PrimeCredit and UA Finance. He also provided details of the loans, including that the UA Finance loan was a revolving loan (循環貸款) and that the PrimeCredit loan had a monthly repayment of about $5,987 over 72 months.

59.  Mr Lee then said “we can help you apply for a new loan with BEA at an interest rate that is at most half of the interest rate of your two existing loans with PrimeCredit and UA Finance” (“BEA Loan”).

60.  Mr Lee further explained the role and purpose of the BEA Loan under the proposed Loan Restructuring scheme as follows (“1^st Misrepresentation”):

(1)  The amount of the BEA Loan would be $300,000.

(2)  The funds obtained would be applied to discharge the outstanding balance of $280,000 under the High-Interest Loans, leaving the Plaintiff with an additional $20,000 for his own use.

(3)  The interest rate under the BEA Loan would be, in any case, at least 50% lower than the rate charged under the High-Interest Loans.

(4)  As to the repayment terms, it could be further discussed (“供款期可長可短，可以再傾”).

61.  The Plaintiff was enticed by Mr Lee's representations and assurances regarding PWR's affiliation with BEA and the benefits of the proposed Loan Restructuring to lower borrowing costs. He, therefore, told Mr Lee to go ahead with the application.

62.  Mr Lee then told the Plaintiff that, in order to make the application, the Plaintiff would need to obtain his TransUnion Credit Report (“TCR”) for the purpose of credit rating assessment. Mr Lee then tried to access the Plaintiff’s TCR online. However, it was unsuccessful; the Plaintiff believed it was because he had not created an online account.

63.  Towards the end of this first meeting, which lasted about 45 minutes, Mr Lee told the Plaintiff that, to move the application forward quickly, the Plaintiff would need to return the following day with his TCR and the title deeds for his property.

Second meeting with Mr Lee

64.  On the following day (i.e. 11 March 2015), the Plaintiff did as he was told. He obtained a copy of his TCR in the morning and returned to Mr Lee’s office in the afternoon, bringing along his TCR and the title deeds of his property. Mr Lee briefly reviewed the documents and kept the TCR; he told the Plaintiff that the credit rating assessment would be conducted over the next few days and that he would contact the Plaintiff again.

Third meeting with Mr Lee

65.  Within less than a week, Mr Lee called the Plaintiff again for a third meeting at PWR’s Office.

66.  On 17 March 2015, the Plaintiff attended PWR’s Office as scheduled. On that occasion, Mr Lee told the Plaintiff that, after having carefully reviewed the Plaintiff’s TCR, which assessed his credit rating poorly at a low F-grade, they have concluded that the Plaintiff’s credit rating was too low for obtaining the BEA Loan for the Loan Restructuring. However, Mr Lee assured the Plaintiff that his poor credit rating could be addressed by way of obtaining an additional loan from a BEA-pre-approved company (東亞預批公司) of $150,000, i.e. the Loan defined above, with which the Plaintiff’s credit rating could be improved.

67.  Upon hearing about applying for an additional loan, the Plaintiff immediately raised his concerns with Mr Lee over the repayment of such loan.

68.  However, Mr Lee assured the Plaintiff that:

(1)  The Loan is merely an internal matter between BEA, the BEA-pre-approved company and PWR, which was arranged to improve the Plaintiff’s credit rating on paper. To illustrate his point, Mr Lee drew a triangle on the piece of paper showing the affiliation between BEA, the BEA-pre-approved company and PWR as if they were all part of the BEA group of companies.[14]

(2)  It is not a real loan; the Plaintiff would simply pass the $150,000 advanced by the BEA-pre-approved company to PWR for further handling, so that the Plaintiff would not have taken a real loan and would not be responsible for repaying it.

(3)  The Plaintiff only needed to make the first two monthly instalments of the Loan at $5,731 per month to the BEA-pre-approved company, and the funds for that repayment would be supplied by PWR in advance. The timely payment of the first two monthly repayment instalments would demonstrate the Plaintiff’s ability to repay and thereby improve his credit rating.

(4)  PWR would need 60 days to obtain the BEA Loan on the Plaintiff’s behalf; by that time, the Loan would be internally “dealt with”, and the Plaintiff would not have to repay any outstanding sums on the Loan, which would be subsumed under the BEA Loan.

(collectively, “2^nd Misrepresentation”)

69.  The Plaintiff understood Mr Lee’s assurances to mean that the Loan is purely an administrative step for obtaining the BEA Loan; it has no real consequences for the Plaintiff, as the actual loan obtained would be handed back to PWR anyway, which was within the same family as BEA and the BEA-pre-approved company.

70.  Mr Lee also added that, to enjoy PWR’s services in relation to the proposed Loan Restructuring, the Plaintiff must sign an agreement with PWR. He then handed the Plaintiff a copy of the agreement in Chinese, bearing the company header “PWR” and entitled “物業/私人貸款顧問費合約”, i.e., the Consultancy Agreement.

71.  Mr Lee further assured the Plaintiff that the consultancy fee of $150,000 stated in the Consultancy Agreement, which mirrors the amount of the Loan to be provided by the BEA-pre-approved company, would be internally dealt with by BEA, the BEA-pre-approved company and PWR. The said fee would not actually be paid out of the Plaintiff’s own pocket (“3^rd Misrepresentation”). Relying on Mr Lee’s assurances and explanations, the Plaintiff signed the Consultancy Agreement as directed.

72.  It was on the strength of Mr Lee’s various representations and assurances set out above that the Plaintiff believed that he would not incur any responsibility to repay the Loan or pay the consultancy fee. The Plaintiff, at the time, understood that both the Loan and the Consultancy Agreement were mere internal procedures of BEA and its affiliated partners without any binding effect or financial consequences for him.

73.  This third meeting with Mr Lee (at PWR’s Office) only lasted 30 to 45 minutes. After the Consultancy Agreement was signed, Mr Lee told the Plaintiff that there would be an inspection of the Plaintiff’s home on the following day, which was part of the BEA-pre-approved company’s standard procedure.

Inspection of the Plaintiff’s home on 18 March 2015

74.  On the following day, i.e., 18 March 2015, Mr Lee called the Plaintiff again, notifying him that a staff member of the BEA-pre-approved company would contact him shortly to arrange an inspection of his home. Mr Lee further informed the Plaintiff that there would be an inspection fee of $1,000 and the Plaintiff should prepare for it.

75.  About 10 to 15 minutes later, a man who introduced himself as “Mr Cheung” called the Plaintiff; this Mr Cheung referred to the Plaintiff’s telephone conversation with Mr Lee a moment ago and asked if he could carry out an inspection at the Plaintiff’s home shortly. The Plaintiff said he was home, and Mr Cheung could come anytime.

76.  Mr Cheung arrived in less than 15 minutes. Upon arrival, Mr Cheung introduced himself as “Cheung Kwok Hung” from Carina Finance Limited (i.e., the Defendant). The Plaintiff was able to remember Mr Cheung’s full name, “Cheung Kwok Hung”, as it was a common name shared by one of his friends.

77.  The inspection only lasted about 5 minutes. At the end, Mr Cheung, i.e., Impostor Cheung KH as defined in Section B1 above, asked for an inspection fee of $1,000, which the Plaintiff paid. No receipt was, however, issued by Impostor Cheung HK for such payment.

78.  Given that the home inspection and the requirement for $1,000 inspection fee had been foretold by Mr Lee, the Plaintiff was under the impression that Impostor Cheung KH was indeed a staff member of the Defendant, which was the BEA-pre-approved company that Mr Lee mentioned.

79.  Soon after Impostor Cheung KH finished the inspection and left, Mr Lee called the Plaintiff again. He instructed the Plaintiff to meet his colleague at Exit C of Central MTR station the following morning. He told the Plaintiff that his colleague would bring him to the solicitors’ firm for making arrangements for the Loan and then accompany him back to Mr Lee’s office where the Plaintiff would need to give him the amount of the Loan received.

Signing of the Loan Agreements

80.  In the morning of 19 March 2015, the Plaintiff met Mr Lee’s colleague at Exit C of Central MTR station as scheduled. He no longer recalled that person’s name and, therefore, referred to him as “Mr B” in this action.

81.  Mr B took the Plaintiff to the office of Joseph CT Lee & Co at 10/F, Euro Trade Centre, 21-23 Des Voeux Road, Central.

82.  Upon arrival, the Plaintiff was received by Impostor Cheung KH, who led him to one of the conference rooms, while Mr B waited outside. The Plaintiff stressed that the person who inspected his property and the one who witnessed the signing of the Loan Agreements at the solicitors’ office on the following day were definitely the same person.

83.  As mentioned above, at trial, upon meeting Mr Pang, the Plaintiff pointed out that Mr Pang was the person from the Defendant who carried out an inspection at his home on 18 March 2015, and, on that occasion, Mr Pang misrepresented himself to the Plaintiff as “Cheung Kwok Hung” instead. And at the meeting on 19 March 2015, Mr Pang did not disclose his true identity; the Plaintiff therefore thought he was dealing with “Cheung Kwok Hung”, who represented the Defendant.

84.  Leaving aside the issue of whether Mr Pang carried out the inspection at the Plaintiff’s home the day before, in light of the Plaintiff’s in-court identification, it is common ground that Mr Pang acted for the Defendant at the meeting on 19 March 2015 for the signing of the Loan Agreements.

85.  After Mr Pang seated the Plaintiff, he left the room. Within one or two minutes, Mr Pang returned with a stack of documents, which he identified as the contract. The Plaintiff briefly flipped through the documents without reading them in detail. He observed that some were in Chinese and others in English, with several pages poorly printed at very low resolution and covered in black dots.

86.  At that time, Mr Pang merely stated, “This is a loan for $150,000, repayable by a monthly instalment of $5,731 for 72 months”. He did not mention the interest rate charged, nor did he take the Plaintiff through the documents.

87.  It is noteworthy that at the time, the Plaintiff was a 60-year-old timber formwork worker, and his formal education ended at Primary 6. He is therefore not a highly educated or sophisticated person.

88.  At that point, the Plaintiff mentioned to Mr Pang that, based on Mr Lee’s statements, his understanding was that the Loan would be settled within 60 days and he would only be responsible for the first two monthly instalments. Before the Plaintiff could elaborate further, Mr Pang interrupted, stating that he had no knowledge of any discussions between the Plaintiff and others. Mr Pang neither confirmed nor denied the Plaintiff’s understanding. (Note: The aforesaid was characterised by the Plaintiff in this action as the “4^th Misrepresentation”)

89.  Mr Pang then left the room, and Mr Chong entered. Mr. Chong said that the Loan was $150,000 repayable by monthly installments of $5,731 for 72 months. He did not tell the Plaintiff the interest rate charged under the Loan, nor did he tell the Plaintiff that he might seek independent legal advice, all that Mr Chong said was that the Plaintiff did not have to sign it if he had doubts.

90.  On that occasion, the Plaintiff did not ask for more explanation from Mr Pang or Mr Chong because Mr Lee had already explained to him the purpose of taking out the Loan, which was merely for improving the credit rating without any financial consequences to the Plaintiff. Neither Mr Pang nor Mr Chong corrected the Plaintiff on his understanding.

91.  Mr Chong only stayed in the conference with the Plaintiff for two to three minutes. After Mr Chong left, Mr Pang re-entered the room with a cheque of $150,000 and asked the Plaintiff to sign at different places of the Loan Agreements.

92.  Mr Pang then handed the plaintiff the cheque with an A4 size paper containing a photocopy of the cheque. He then took out another piece of paper, which contained the following already-typed-proforma statement in Chinese with blank spaces for filling in the person's name and Hong Kong identity card number:

“本人 _____ 香港身份證號碼 __________確認收取上述支票家碧財務有限公司，並沒收本人任何手續費用，本人作出以下聲明，本人是經自己聯絡之中介公司，向家碧財務有限公司申請以上貸款，故本人與中介公司之任何協議，均與家碧財務有限公司無關。”

93.  Mr Pang asked the Plaintiff to copy the above pro-forma statement onto the lower part of the said A4-size photocopy of the cheque, fill in his personal details and sign underneath the hand-written pro-forma statement. The Plaintiff did accordingly.[15]

94.  The Loan Agreements and the pro-forma statement were signed by the Plaintiff in the presence of Mr Pang, while the Plaintiff was still labouring under the belief that the proposed Loan Restructuring would happen and that the Plaintiff would obtain the BEA Loan in 60 days. Such understanding was conveyed to Mr Pang before the signing of the said documents; Mr Pang did not correct it despite the fact that he clearly had contact and had liaised with Mr Lee in scheduling the inspection on 18 March 2015 and the signing of the Loan Agreements at Joseph CT Lee & Co’s office on 19 March 2015.

95.  The Plaintiff only stayed in the conference room for about 20 minutes in total, during which Mr Pang and Mr Chong entered the room and talked to him in turn. The Plaintiff emphasized that he signed all the documents in one go after Mr Pang re-entered the conference room; none of it was signed in front of Mr Chong. Regarding Mr Pang, he did not sign the Loan Agreements at the meeting.

96.  The Plaintiff stated that his sole reason for obtaining the Loan (on paper) was to complete the necessary steps to secure the BEA Loan. He never informed Mr Pang or any representative of the Defendant that he needed the Loan to “ease cash flow problems,” as alleged by the Defendant in its Re-Re-Amended Defence. Furthermore, the Plaintiff never disclosed to Mr Pang or any representative of the Defendant his existing loans with PrimeCredit and UA Finance, let alone the interest rates for those loans.

97.  After the Plaintiff signed the Loan Agreements as instructed by Mr Pang, Mr Pang handed him a piece of paper bearing the name “Miss Kam” and a phone number[16]. Mr Pang informed the Plaintiff that after each monthly repayment, he must notify Miss Kam. In an intimidating tone, Mr Pang added that if any payment was more than three days late, someone would go to the Plaintiff’s home to “pay him a visit” (“拜訪”). The Plaintiff found this threatening. As a result, even after discovering he had been scammed, the Plaintiff continued to repay the Loan according to the repayment schedule of the Chinese Loan Agreement until it was fully settled.

Money received was taken away by Mr Lee

98.  After the signing of the Loan Agreements, the Plaintiff walked out of the conference room and found that Mr B was still waiting outside.

99.  In accordance with Mr Lee’s instruction, Mr B took the Plaintiff to a nearby Hang Seng Bank to cash the cheque, then accompanied him back to Mr Lee’s office.

100.  Mr Lee took away the whole of $150,000 cash and only returned $12,000 to the Plaintiff, together with a receipt bearing the heading of PWR for the sum of $121,000 as “consultant fee”. Mr Lee explained that the $12,000 cash was for the Plaintiff to make the first two monthly instalments required under the Loan Agreements.

101.  Shortly after the Plaintiff left the office of Mr Lee, he realised three abnormalities with the way Mr Lee dealt with the money loaned by the Defendant. First, the $12,000 in cash returned by Mr Lee exceeded the amount required for the first two instalments, totaling $11,462 only. Secondly, the sum of $12,000, together with the alleged consultant fee of $121,000, only amounted to $133,000; there was still a sum of $17,000 unaccounted for. Thirdly, the amount of the consultant fee stated on the receipt was less than the $150,000 stated in the Consultancy Agreement.

102.  The Plaintiff started to suspect that he had been deceived by Mr Lee and Mr Pang. He therefore immediately called Mr Lee to enquire about the $17,000 shortfall. Mr Lee replied that it was to defray legal fees. The Plaintiff understood that, by “legal fees”, Mr Lee was referring to the costs of preparing the Loan Agreements and other related documents by Joseph CT Lee & Co.

103.  After his telephone conversation with Mr Lee, the Plaintiff immediately went to an HSBC branch and made the first two monthly instalments of $11,462. At that point, the Plaintiff was still hoping that the Loan Restructuring would be done in 60 days’ time.

The discovery of the fraud

104.  In the following two weeks after 19 March 2015, the Plaintiff made phone calls to Mr Lee every day to follow up on the status of the proposed Loan Restructuring. Only the first few calls reached Mr Lee, who reassured that they were “working on it”. In later calls, somebody else answered, with the excuse that Mr Lee was occupied, either in the meeting, on another phone call or out of the office. Mr Lee did not return the Plaintiff’s calls.

105.  After the signing of the Loan Agreements, neither Mr Lee nor Mr Pang ever contacted the Plaintiff. As time passed, the Plaintiff’s suspicions that he had been defrauded by the Defendant, PWR, Mr Lee and Mr Pang grew stronger.

106.  In late March 2015, the Plaintiff reported the suspected fraud to the police. However, the police officer had reviewed the relevant documents, the Plaintiff was told that it was a clear case of “三角短傳” (collusion among several parties); that the documents the Plaintiff had signed were legally binding; and that there was nothing much the police could do.

107.  Upon hearing what the police said, the Plaintiff fell into an uncontrollable state of extreme panic and agony to the point of having suicidal thoughts because he was very afraid and worried that he would not be able to repay the Loan and the existing High-Interest Loans.

The aftermath

108.  In about April 2015, the Plaintiff was informed by the Housing Authority that someone had tried, but unsuccessfully, to register an encumbrance on the Plaintiff’s home property. Upon checking the records of the Land Registry, the Plaintiff found that it was the Defendant who had attempted to register the Loan Agreements as an incumbrance on the Plaintiff’s property, which was rejected by the Land Registry.

109.  In about mid-June 2015, the Plaintiff obtained an updated TCR; there was no record of BEA ever checking the Plaintiff’s credit rating, the Plaintiff’s High-Interest Loans were not discharged or consolidated into the promised BEA Loan. The proposed Loan Restructuring did not happen. And the Plaintiff’s credit rating remained an F-grade without improvement.

110.  In about July 2015, the Plaintiff made an enquiry with BEA, providing details of his encounters with PWR and the Defendant, as well as the various representations and assurances Mr Lee made, particularly the alleged affiliation of PWR with BEA and the Defendant being a BEA-pre-approved company. BEA responded a few weeks later, stating that “BEA had no relationship with either PWR or the Defendant; the Defendant was not a so-called “BEA-preapproved company” and that BEA had never heard of, let alone partnered with, these entities”.

111.  After June 2015, despite the gradual discovery of the fraud, the Plaintiff continued to make timely repayment to the Defendant as per the requirements of the Loan Agreements. It was made partly out of fear that the Defendant knew where he lived, and, if he failed to repay, may “pay him a visit”, and partly because, as he was told by the police officer, the documents he had signed with the Defendant were valid and binding on him.

112.  The Plaintiff continued to make timely repayment to the Defendant until the Loan was fully discharged on 7 May 2020.

The involvement of “Cheung Kwok Hung” and the Defendant in similar fraud cases

113.  While the Plaintiff continued to repay, he never stopped seeking redress for the deceit and illegal charging of fees by way of taking legal action.

114.  Between September 2015 and 4 June 2020, when the Plaintiff was granted legal aid to pursue his present claim, the Plaintiff continuously sought free legal advice from the Clinic Legal Education of the Faculty of Law of the University of Hong Kong under the Duty Lawyer Service (“HKU CLE”).

115.  In about October 2015, HKU CLE discovered from the company search of PWR that the sole director of PWR in March 2015, i.e., the time when the fraud was perpetuated on the Plaintiff, was named “Cheung Kwok Hung (張國雄)”[17], which coincides with the name Mr Pang represented himself to be during the home inspection. The search also showed that PWR had only been incorporated on 12 November 2014, shortly before the Plaintiff was approached by Mr Lee.

116.  On or around 15 November 2015, the Plaintiff submitted his first application for legal aid. This application was subsequently rejected on 11 July 2016, as PWR had been dissolved and there was no prospect of recovering the “consultant fee” and “legal fees” paid to it.

117.  In or around May 2017, HKU CLE further discovered and informed the Plaintiff of a criminal case, DCCC 312/2016, in which “Cheung Kwok Hung (張國雄)” and “Li Wing Tat (李榮達)”, operating under another company, Wincades International Accounting Affairs Limited[18], were charged with conspiracy to defraud and conspiracy to launder money in connection with a fraudulent scheme. The accused, Cheung Kwok Hung, who was convicted in DCCC 312/2016, was the sole director of PWR mentioned previously.[19]  It is noted that the fraud perpetuated on the victim in DCCC312/2016 was very similar to what the Plaintiff experienced in this case.[20]

118.  With these further discoveries, HKU CLE advised the Plaintiff to apply for legal aid again in January 2018. However, this second application was also rejected on 13 August 2018.

119.  On 27 August 2018, the Plaintiff launched an appeal against the decision of the Director of Legal Aid refusing legal aid.

120.  On 28 February 2019, the Plaintiff’s appeal was allowed. Legal aid was obtained on 4 June 2020.

121.  On or about 22 August 2023, the Plaintiff learned of another criminal case, DCCC 923/2020, in which the reasons for the verdict were handed down on 21 October 2021. The case involved the conviction of a person also named “Cheung Kwok Hung” for three charges of fraud. One of the charges was based on facts very similar to the facts of this case – the person named “Cheung Kwok Hung” made fraudulent misrepresentations and successfully induced the victim in January 2016 to take out a loan, also in the sum of $150,000, from the Defendant.

122.  The above was the Plaintiff’s evidence. The Plaintiff strikes me as an honest and credible witness; he consistently provided direct and coherent answers to Mr Kwong’s questions. His testimony remained unshaken under rigorous cross-examination, and his responses were generally consistent with his witness statements. When he could not recall specific factual details during cross-examination, he candidly admitted it without hesitation, even in situations where his answers, whatever they were, could not have been challenged by the Defendant, who claimed to have no knowledge of the dealings between PWR and the Plaintiff.

123.  Further, the Plaintiff’s account was not inherently improbable and did not contradict any contemporaneous documents. There were also no internal inconsistencies in the Plaintiff’s evidence.

124.  As a matter of public record, PWR was only set up shortly before March 2015 when the incident in question happened and struck off the Companies Register not too long after the fraud in question was reported by the Plaintiff to the police. Besides, no one with a right-thinking mind would have agreed to pay $150,000 consultant fee to PWR for obtaining a loan of $150,000 from the Defendant, or even for the proposed $300,000 BEA Loan, particularly when the purpose of obtaining the BEA Loan was merely to replace the existing High-Interest Loans at a lower interest rate.

125.  More significantly, the director of PWR at the time, Mr Cheung Kwok Hung, was subsequently convicted, in DCCC 312/2016, for similar fraud perpetuated on other parties.

126.  I have also noted that the Plaintiff’s evidence of having been requested by Mr Lee to meet at the Central MTR station before going to the solicitors’ office on 19 March 2015 was confirmed by Mr Pang under cross examination, despite the fact that Mr Pang had stated in his statement that he met the Plaintiff at G/F of Joseph CT Lee & Co’s office. This indeed shows that the Plaintiff’s evidence is more reliable than that of the Defendant.

127.  On the issue of whether Mr Pang impersonated Cheung Kwok Hung during the home visit on 18 March 2015 and at the meeting in Joseph CT Lee & Co’s office on 19 March 2015, Mr Pang denied conducting any home inspection at the Plaintiff’s property on 18 March 2015. However, for the reasons set out below, I find, on balance, that Mr Pang did conduct the inspection and, on that occasion, presented himself to the Plaintiff as Cheung Kwok Hung. He also failed to disclose his true identity when he met the Plaintiff again at Joseph CT Lee & Co’s office on 19 March 2015.

(1)  It is improbable that the Plaintiff was aware that Cheung Kwok Hung was the sole director of PWR prior to the home inspection on 18 March 2015. Had the Plaintiff known this and fabricated the story about the home visit by Cheung Kwok Hung, it would have been easier for him to simply claim that Cheung Kwok Hung from PWR had dealt with him throughout and made the alleged misrepresentations. There would have been no need to invent an unknown individual, Mr Lee.

(2)  If the individual who conducted the home inspection on 18 March 2015 had not impersonated Cheung Kwok Hung, the Plaintiff would not have provided that name to HKU CLE, and it would not have come to HKU CLE’s attention. Consequently, even if HKU CLE later encountered the same name in DCCC 312/2016 and DCCC 923/2020, it would not have notified the Plaintiff or advised him to pursue legal action. Similarly, the Plaintiff would not have mentioned the name to the police in late March 2015[21], or to BEA when making a direct enquiry at BEA’s headquarters in July 2015.

(3)  The Plaintiff has consistently maintained that the individual who inspected his property on 18 March 2015 and the person he met at Joseph CT Lee & Co’s office on 19 March 2015 were the same, and that this individual identified himself as Cheung Kwok Hung. The Plaintiff’s position did not change, even after the Defendant pleaded in its defence that its director, Mr Pang, had handled the contract signing on 19 March 2015. Had the Plaintiff been dishonest, he could have taken advantage of the Defendant’s admission by asserting that Mr Pang conducted the home inspection on 18 March 2015, thereby attributing liability to the Defendant. Instead, the Plaintiff waited until he had the opportunity to meet Mr Pang in court before confirming this was the case.

128.  As to why Mr Pang impersonated Cheung Kwok Hung during the home inspection on 18 March 2015, it is not necessary for me to make a specific finding. However, one plausible explanation could be that Mr Pang sought to avoid immediate suspicion by the police once the scam was uncovered — a consequence that was inevitable at some point.

D2.  Evidence of the Defendant

129.  In this action, the Defendant claimed that it had no knowledge of the dealings between PWR and the Plaintiff; no evidence was therefore adduced to rebut or challenge this part of the Plaintiff’s evidence.

Mr Pang’s evidence

130.  Mr Pang’s evidence may be succinctly summarised as follows:

(1)  The Defendant was a licensed moneylender, and, at the material times, Mr Pang was the sole shareholder and director of the Defendant.

(2)  At that time, it was common practice for intermediaries (中介人) to refer potential borrowers to financial companies. Whether the borrower entered into a separate service agreement with the intermediary or was required to pay a service fee was a matter solely between the borrower and the intermediary. Unless the borrower disclosed relevant details, Mr Pang would have no concern.

(3)  In or about March 2015, Mr Pang received an enquiry from an intermediary—whose name he could not recall—regarding a potential $150,000 loan to the Plaintiff. Mr Pang deemed it a viable business opportunity, and the intermediary then provided him with the Plaintiff's contact details.

(4)  Mr Pang then contacted the Plaintiff. After the terms of the loan were agreed with the Plaintiff, Mr Pang prepared the Chinese Loan Agreement and passed it to Joseph CT Lee & Co for preparation of the English Loan Agreement.

(5)  When the Loan Agreements were ready, Mr Pang contacted the Plaintiff again and fixed the appointment on 19 March 2015 at Joseph CT Lee & Co’s office for the signing of the agreements.

(6)  Mr Pang initially stated repeatedly (in his two witness statements) that, on 19 March 2015, he first met the Plaintiff on the ground floor of Joseph CT Lee & Co.’s office, and that they went up together. However, under cross-examination, Mr Pang admitted this was incorrect. In fact, the Plaintiff was instructed to meet someone at MTR Central Station, who then escorted him to the solicitors’ office. This happens to be in line with the Plaintiff’s account.

(7)  Inside the conference room of Joseph CT Lee & Co, Mr Pang explained the Chinese Loan Agreement to the Plaintiff, who then signed the document. Mr Pang also signed the agreement at the same time, in the Plaintiff’s presence.

(8)  After the Chinese Loan Agreement was signed, Mr Pang left the conference room. Mr Chong then entered and explained the English Loan Agreement to the Plaintiff. Once the Plaintiff had signed the English Loan Agreement, Mr Chong walked out of the room, and Mr Pang returned and handed the Plaintiff a cheque for $150,000, made out in his favour. At the same time, the Plaintiff was asked to sign the following declaration, which he did:

“本人陳志良香港身份證號碼 …. 確認收取上述支票 家碧財務有限公司並沒收本人任何手續費用，本人作出以下聲明，本人是經自己聯絡之中介公司，向家碧財務有限公司申請以上貸款 故本人與中介公司之任何協議，均與家碧財務有限公司無關”[22]

(9)  After receiving the cheque, the Plaintiff left the solicitors’ office first, while Mr Pang remained behind. During this time, Mr Pang did not observe the Plaintiff being accompanied by anyone.

(10)  From the time the Loan was taken out in March 2015 until the commencement of these proceedings, the Plaintiff did not raise any complaints about the Loan Agreements or any impropriety in their execution. Nor did he mention any of the misrepresentations that he later alleged in this action.

(11)  Without raising any complaint, the Plaintiff fully repaid the Loan in 2020, for a total sum of $412,775.26.

(12)  Prior to the commencement of these proceedings, neither the Defendant nor Mr Pang had heard of, or was aware of, the existence of PWR. They had no business relationship with this entity.

(13)  Neither the Defendant nor Mr Pang knew PWR’s director, Cheung Kwok Hung, or Mr Lee. Neither individual was ever authorised by the Defendant or Mr Pang to act on their behalf in dealing with the Plaintiff.

(14)  As to the alleged misrepresentations, neither the Defendant nor Mr Pang was aware of them, nor did the Plaintiff mention any such matters to Mr Pang at the time the Chinese Loan Agreement was executed.

(15)  The Defendant was not a so-called BEA-pre-approved company, nor had it ever authorised anyone to represent it as such.

(16)  The Defendant and Mr Pang had no knowledge of the Consultancy Agreement, nor did the Plaintiff mention it to Mr Pang when the Chinese Loan Agreement was signed. The Defendant derived no benefit from the Consultancy Agreement.

(17)  As to the alleged payment to Mr Lee of PWR, the Defendant has no knowledge of it. In any event, the Defendant has paid Joseph CT Lee & Co the legal fees for their services provided in the transaction in question.

(18)  As for the alleged Impostor Cheung KH, Mr Pang did not know this person and never authorised him—or anyone else—to conduct the home inspection on 18 March 2015 or to act for the Defendant. Mr Pang also never presented himself to the Plaintiff as Cheung Kwok Hung or conducted the home inspection in question. Accordingly, the $1,000 inspection fee allegedly paid to Impostor Cheung KH has no connection to the Defendant or Mr Pang.

(19)  At trial, Mr Pang further testified that the mutual understanding with the Plaintiff was that the Chinese Loan Agreement was not binding unless and until the English Loan Agreement was signed. In light of Mr Pang’s oral testimony, Mr Kwong clarified that the Defendant’s position is that the Chinese Loan Agreement was not a standalone binding contract, but was instead incorporated into, and forms part of, the English Loan Agreement.

131.  Under cross-examination and in response to questions from the Court, Mr Pang further testified as follows:

(1)  On average, the Defendant issued 90 to 100 loans per year, with all borrowers being introduced by intermediaries. In 80% of cases, these were returning intermediaries who had previously referred business to the Defendant.

(2)  However, Mr Pang claimed he never sought to build relationships with these intermediaries due to their poor public image. As a result, he did not retain their contact details and could not recall any of them. For this reason, he was unable to provide information regarding the intermediary who introduced the Plaintiff. Furthermore, since Mr Pang did not socialise with individuals in the intermediary trade, he had no contacts to assist in identifying that intermediary.

(3)  If the loan amount exceeded $100,000, the borrower would always be required to sign an English loan agreement at a solicitors’ firm, and Mr Chong was always engaged for this task.

(4)  For the signing of loan agreements, the following procedures were always adopted by the Defendant and Mr Chong:

(a)  Mr Pang would first meet with the borrower privately to execute the Chinese loan agreement.

(b)  After the borrower signed the Chinese loan agreement, Mr Pang would leave the room. Mr Chong would then enter and oversee the signing of the English loan agreement with the borrower.

(c)  Once the English loan agreement was signed, Mr Chong would leave and Mr Pang would re-enter to complete the remaining formalities, including handing the cheque to the borrower.

(5)  When asked why he did not instruct Mr Chong to handle both the Chinese and English loan agreements with the Plaintiff simultaneously, but instead dealt with them separately in each other’s absence, Mr Pang replied that he did not know the reason; it was simply the established practice.

(6)  Mr Chong signed the documents as a witness in Mr Pang’s presence. However, this account contradicted what Mr Kwong reported to the Court the previous day, after being asked to obtain specific instructions from Mr Pang on this matter.

(7)  He could not rule out the possibility that, while he was with the Plaintiff in the conference room, someone in their twenties was waiting for the Plaintiff outside.

132.  I find Mr Pang’s evidence wholly unconvincing. He repeatedly changed his evidence under cross-examination and when questioned by the Court. At one point, after being confronted several times with inconsistencies between his oral evidence and his witness statements, Mr Pang declared that if his testimony in the witness box conflicted with his written statements or the Defendant’s pleadings, then the written statements and pleadings should be regarded as the truth, rather than his oral evidence. This was an extraordinary remark.

133.  Furthermore, some aspects of his testimony were inherently improbable or contrary to common experience; they are simply not credible. Several examples illustrate this:

(1)  Although all of the Defendant's business was brought in by intermediaries, and in 80% of cases the same intermediary would refer further business, Mr Pang claimed he never made any effort to socialise with these intermediaries or even retain their contact details.

(2)  In DCCC 923/2020, the accused, Cheung Kwok Hung, fraudulently induced Mr Chan (one of the victims) to borrow money from the Defendant. Mr Pang stated that he was invited to assist the police investigation and should have been informed by the police of the intermediary's name—namely, Cheung Kwok Hung—who introduced the victim. Yet, when asked whether he remembered anyone named Cheung Kwok Hung, Mr Pang claimed the name did not ring a bell.

(3)  Moreover, although Mr Pang said he had been invited by the police on several occasions to assist with fraud investigations, he could not even recall which police station he had attended.

(4)  Mr Pang claimed that, even after the Chinese loan agreement was signed, the Defendant might decline to proceed with the English loan agreement—for example, if the borrower had lied about his debts. When asked how the Defendant determined whether the borrower was truthful, Mr Pang said that he and Mr Chong would observe whether the borrower received calls from debt collectors during meetings for the loan agreements. This assertion was not only inherently implausible and illogical but was also subsequently contradicted by Mr Chong’s own evidence.

134.  Mr Pang also failed to offer a credible explanation for the Defendant’s destruction of documents that, by his own admission, would have contained details of the intermediary in question. It is evident that Mr Pang was attempting to distance himself from PWR and to prevent the intermediary involved in the transaction in question from being traced or identified.

135.  I therefore do not find Mr Pang to be a credible witness. He continually shifted his position under cross-examination and appeared to fabricate explanations as needed. Accordingly, wherever Mr Pang’s evidence conflicts with that of the Plaintiff, I prefer and accept the Plaintiff’s account and reject Mr Pang’s evidence.

Mr Chong’s evidence

136.  Mr Chong was a practising solicitor at Joseph CT Lee & Co.

137.  It’s Mr Pang’s evidence that whenever the loan to be granted exceeds $100,000, he would engage Mr Chong to prepare a formal English loan agreement. Mr Chong confirmed that the incident in question was not the first time he had prepared an English loan agreement for the Defendant. He also described the “usual practice” adopted for signing the agreements as follows:

“8. … Mr. Pang would come to office of the Firm [Joseph CT Lee &Co.] together with the borrower. Mr. Pang would then explain the contents of the loan agreement and other documents prepared by the Defendant in Chinese to the borrower (without my presence and any third party presence). If the borrower agrees to those contents, he or she would sign the loan agreement and other documents in Chinese before Mr. Pang.

9. After that, I would interview the borrower independently without the presence of any third party, including Mr. Pang and to explain the contents of the loan agreement in English to the borrower. I would also explain to the borrower that he or she would have the right to obtain an independent legal advice as to the loan transaction and the contents of the loan agreement before signing. If the borrower indicates that it is not necessary to obtain an independent legal advice, an acknowledgment attached to the loan agreement in English will also be signed by him or her. It was only until then I would proceed with the transaction.”

138.  He then purported to give evidence on what happened on 19 March 2015. In particular, he said:

“10. On the 19^th March 2015 at the time which I cannot recall, the Plaintiff came to the Firm accompanied by Mr. Pang of the Defendant.

11. Nothing happened on that day departed from the usual process as I mentioned above.

12. After Mr. Pang finished the signing of the loan agreement and documents in Chinese with the Plaintiff and left the conference room, I interviewed the Plaintiff independently without the presence of any person including Mr. Pang and arrange the loan agreement in English to be signed by the Plaintiff.

13. The Plaintiff was duly advised that he could obtain an independent legal advice as to the content of the loan and the loan transaction. The Plaintiff acknowledged that it was not necessary for obtaining such independent legal advice.

14. The loan agreement in English and the acknowledgment attached thereto were signed by the Plaintiff in my presence without the presence of any others, including Mr. Pang.

15.  At all material time, I did not aware of any person other than Mr. waiting the Defendant outside the conference room and/or in the area Firm.”

139.  Apart from the apparent contradictions with the Plaintiff’s evidence, which I have accepted, Mr Chong’s testimony is inherently improbable. It is unlikely he could recall whether, at that time, someone was waiting for the Plaintiff outside the conference room or inside the office of Joseph CT Lee & Co, considering that the meeting occurred in March 2015, over ten years ago. He was probably not telling the truth, which seriously undermines the reliability of his evidence as a whole.

140.  When questioned by the Court, it became clear that he had no recollection of what actually occurred on 19 March 2015. It was highly unsatisfactory for Mr Chong to give evidence on factual matters he could not recall and to fail to inform the Court or qualify his evidence accordingly.

141.  With respect to whether Mr Chong explained the English Loan Agreement to the Plaintiff during the meeting, the Plaintiff maintained that Mr Chong did not. Initially, Mr Chong repeatedly asserted that he had; however, when Mr Yim challenged him, pointing out that it would have been impossible to explain the agreement's details in the brief time Mr Chong spent with the Plaintiff in the conference room, Mr Chong abruptly responded that he had “explained” the agreement by instructing the Plaintiff to read it himself.

142.  It is therefore evident that Mr Chong did not explain the English Loan Agreement to the Plaintiff. Since Mr Chong merely asked the Plaintiff to read the agreement himself, he should not have testified in court that he had explained it, knowing this was untrue. Such conduct clearly falls below the standard expected of a legal practitioner or officer of the court.

143.  Furthermore, as mentioned above, the Plaintiff’s evidence (which I accept) was that Mr Chong did not advise him to seek independent legal advice. Nevertheless, Mr Chong asked the Plaintiff to sign the following confirmation on the spot:

“I/We, the Borrower hereby acknowledge that Messrs. Jospeh C.T. Lee & Co., Solicitors have advised me/us that they are the solicitors acting for the within named Lender. The contents of the within written Loan Agreement have been interpreted and explained to me by Messrs. Joseph C.T. Lee & Co., Solicitors and they have advised me/us of the risks of entering into the within written Loan Agreement and invited me/us to seek independent legal advice on the loan transaction mentioned therein as well as on the contents of the written Loan Agreement. I/We hereby confirm that I/we fully understand the contents of the within written Loan Agreement and the advice given to me/us by Joseph C.T. Lee & Co., Solicitors and I/we do not see the need for independent legal advice despite every chance having been offered to me/us to do so.”[23]

144.  It is highly improper, and indeed unethical, for Mr Chong, as a legal professional, to request the Plaintiff (even if not his client) to sign a written confirmation when he knew its contents were untrue and contrary to the Plaintiff’s interests. This conduct is wholly unacceptable.

145.  Regarding the procedures adopted for signing the loan agreement, since it was the Defendant’s position that the Chinese Loan Agreement was incorporated into the English Loan Agreement, Mr Chong was asked why he did not address both agreements when meeting the Plaintiff. His answer was as evasive as Mr Pang’s; he stated that he did not know the reason, only that it was the practice at the time.

146.  Neither Mr Pang nor Mr Chong provided a reasonable explanation or justification for adopting such a practice. I consider that, under these procedures, the seamless coordination between Mr Pang and Mr Chong — ensuring that Mr Chong did not witness the interaction between Mr Pang and the borrower while inside the conference room of Joseph CT Lee & Co — would, at the very least, raise suspicion that Mr Chong was aware of impropriety and deliberately chose not to inquire further.

147.  Considering the matters and observations set out above, I reject Mr Chong’s evidence.

148.  In this action, it is unnecessary for me to make findings as to whether Mr Chong actually knew about the fraud in question or had provided assistance in perpetrating it against the Plaintiff. However, I do find such arrangements unsatisfactory and undermine public confidence in the integrity of the legal profession, which is the principal concern. In the recent case of New Finance Co v Lo Siu Kong [2025] HKCFI 566, the Court of First Instance expressed its concern (at paragraph 90 of the judgment) about solicitors assisting unscrupulous moneylenders; the legal profession should be reminded of this.

“I am of the view that the whole plot could not have happened without the participation of Mr Cheung of Messrs Pauline Wong & Co., Solicitors. Solicitors should be reminded that they should not lend their assistance to unscrupulous money lenders.”

E.  Discussion

E1.  Issue 1 - Whether the alleged misrepresentations were made? If so, whether they were made fraudulently, knowingly or recklessly or without genuine belief in their truth?

149.  Given that I have accepted the Plaintiff’s evidence and that no evidence was presented by the Defendant to rebut or even challenge the Plaintiff’s evidence in relation to the 1^st, 2^nd and 3^rd Misrepresentations, I find that they were made by Mr Lee and PWR.

150.  Further, in consideration of the following, I am satisfied that 1^st, 2^nd and 3^rd Misrepresentations were made by Mr Lee and PWR fraudulently, in the sense that they were representations of facts which Mr Lee and PWR knew they were false and the same were made with an intention to induce the Plaintiff to enter the Loan Agreements with the Defendant. And to the extent that part of the said representations were statements of intention regarding future conduct, for instance, to apply for the BEA Loan and arrange the Loan Restructuring for the Plaintiff, Mr Lee and PWR had at the material times no such intention to do so. See Glory Gold Limited v Star Play Development Limited [2008] 2 HKLRD 416 (CA) at §20.

(1)  PWR was only set up shortly before the incident in question occurred.

(2)  Mr Lee disappeared and could not be reached shortly after the Plaintiff had signed the Loan Agreements and $138,000 of the amount received from the Defendant was taken away by him.

(3)  The credit rating of the Plaintiff was not improved.

(4)  No BEA Loan has ever been arranged by Mr Lee or PWR.

(5)  BEA subsequently confirmed that it had no relationship with PWR or the Defendant, and the Defendant was not a so-called BEA-pre-approved company.

(6)  Contrary to Mr Lee’s 2^nd and 3^rd Misrepresentations, the Loan was not “settled” internally among BEA, PWR and the Defendant; Defendant indeed required the Plaintiff to repay the same according to the repayment schedule in the Chinese Loan Agreement.

(7)  PWR was dissolved and struck off the Companies Register shortly after the Plaintiff had reported the fraud to the police.

(8)  PWR’s sole director, Mr Cheung Kwok Hung, was subsequently convicted in DCCC 312/2016 for similar fraud perpetuated against other victims around the same time.

151.  Regarding the 4^th Misrepresentation, Mr Yim submitted that silence, which has the effect of misleading the Plaintiff, was also capable of constituting actionable misrepresentation. He further submitted that the test is whether (a) the words or conduct in fact led the representee to believe the alleged (false) fact, and (b) it was reasonable for the representee to believe it from the words or conduct as he perceived them. See Cartwright, Misrepresentation, Mistake and Non-Disclosure (7th ed., 2025) at §§3-06, 16-05.

152.  According to the Plaintiff, during the meeting on 19 March 2015, he conveyed to Mr Pang that, based on Mr Lee’s statements, he understood the Loan would be settled within 60 days and that he would only be responsible for the first two monthly instalments. Before the Plaintiff could elaborate further, Mr Pang interrupted, stating that he had no knowledge of any discussions between the Plaintiff and others. Mr Pang neither confirmed nor denied the Plaintiff’s understanding. Mr Yim argued that this constituted misrepresentation.

153.  With respect, I do not agree that Mr Pang’s actions at the time, as described, could amount to a representation that the 1^st, 2^nd, or 3^rd Misrepresentation was true. Mr Pang did not remain silent; rather, he expressly stated that he had no knowledge of the discussion between the Plaintiff and the intermediary. His conduct indicated a lack of interest in their dealings. Objectively considered, a reasonable person would not interpret this as confirmation of any of the alleged Misrepresentations.

“Where the alleged misrepresentation was express, the question is how a reasonable person in the claimant's position would have understood the words used. The representation must, however, be read in context including, where a series of representations are made, their cumulative effect: representations may in combination convey a meaning which no single one imparts.

Where it is alleged that there was an implied representation, the question is what a reasonable person would have inferred was being impliedly represented by the representor's words and conduct in their context. The Court of Appeal has said that a helpful test is “whether a reasonable representee would naturally assume that the true state of facts did not exist and that, if it did, he would necessarily have been informed of it” (emphasis added) - Cartwright, Misrepresentation, Mistake and Non-Disclosure (7th ed., 2025) at §3-06

154.  Accordingly, I hold that the alleged 4^th Misrepresentation does not constitute an actionable misrepresentation.

E2.  Issue 2 – If so, whether, but for one or more of the said misrepresentations, the Plaintiff would not have signed the Consultancy Agreement and the Loan Agreements, or paid Mr Lee and Impostor Cheung HK (i.e. Mr Pang) the various fees or charges as alleged

155.  The answer to this issue is self-evident.

156.  As a matter of common sense, no reasonable person would agree to pay a consultancy fee of $150,000 (to PWR) simply to reduce the interest rate on an existing loan of approximately $280,000. I am therefore satisfied that, absent reliance on the 3^rd Misrepresentation, the Plaintiff would not have signed the Consultancy Agreement.

157.  With regard to the Loan Agreements, the Plaintiff testified that he was not in need of funds at the time. In my judgment, he would not have signed the Loan Agreements but for his reliance on the 1^st and 2^nd Misrepresentations.

158.  Concerning the sum of $138,000 taken away by Mr Lee, it is clear that, having signed the Loan Agreements, the Plaintiff would not have handed over the $150,000 loan received from the Defendant to Mr Lee had he not relied on the 2^nd Misrepresentation.

159.  The inspection fee of $1,000 was paid to Mr Pang on 18 March 2015, as Mr Lee had notified the Plaintiff in advance and Mr Pang requested payment on the spot. The inspection was presented by Mr Lee as an integral part of the Loan Restructuring process. It is also evident that, absent reliance on the 1^st and 2^nd Misrepresentations, the Plaintiff would not have made this payment.

E3.  Issue 3 – Is the Defendant liable for any of the said misrepresentations? If so, what is the entitlement of the Plaintiff, if any? 

160.  To found liability for misrepresentation, it is sufficient for the Plaintiff to satisfy the Court, on balance, that the Defendant either shared a joint design to defraud, or had notice of the Misrepresentations in question. Chitty on Contracts (35^th ed., 2023) at §10-031

“In order to ground relief to a person who has entered into a contract as a result of a misrepresentation, it is normally necessary that the misrepresentation should have been made either by the other party to the contract, or by his agent acting within the scope of his authority, or by someone with whom the other party shared a joint design to defraud and who thus was a joint tortfeasor; or that the other party indicated that he approved or adopted a representation made by a third person; or that the other party had notice of the misrepresentation. Notice may be actual or constructive” (emphasis added.)

161.  As to the requirement of notice or knowledge of the Misrepresentations, Mr Pang is deemed to have actual notice if he has wilfully shut his eyes to the obvious, or has wilfully and recklessly failed to make such inquires as an honest and reasonable man would make. Cartwright, Misrepresentation, Mistake and Non-Disclosure at §4-82

“…it appears now to be established that a misrepresentation by a third party will allow the representee to avoid the contract where the other contracting party had actual knowledge or actual notice of it at the time of the contract,

What will constitute actual knowledge or actual notice? … it has been held that actual knowledge or actual notice extends in law to cases where the person has wilfully shut his eyes to the obvious, or has wilfully and recklessly failed to make such inquiries as an honest and reasonable man would make.”

162.  On the facts of this case, in consideration of the following, I am satisfied, on balance, and thus find that Mr Pang, at the material times, shared a joint design with PWR and/or Mr Lee to defraud the Plaintiff into entering the Consultancy Agreement and the Loan Agreements.

(1)  On 18 March 2015, Mr Lee called the Plaintiff and informed him that a staff member of the Defendant would contact him shortly to arrange an inspection of the Plaintiff’s home address. The Plaintiff was also required to prepare $1,000 for payment of an inspection fee.

(2)  Within 15 minutes, Mr Pang (impersonated as Cheung Kwok Hung) called the Plaintiff and referred to the Plaintiff’s telephone conversation with Mr Lee a moment ago. Mr Pang requested a home visit shortly.

(3)  Within less than 15 minutes, Mr Pang arrived.

(4)  The above shows that Mr Pang and Mr Lee had been in constant contact, and Mr Pang would probably have been on his way to the Plaintiff’s property before Mr Lee even called the Plaintiff.

(5)  There was no discernible useful purpose for the visit. In fact, Mr Pang testified that the Defendant would not require any inspection of the Plaintiff’s home, as his property was not going to be provided as collateral for the granting of the Loan. The home inspection was therefore just part of the show to defraud the Plaintiff, and Mr Pang took part in it.

(6)  Further, during the visit, Mr Pang introduced himself to the Plaintiff as Cheung Kwok Hung, which was the name of the sole director of PWR. This could not be a coincidence.

(7)  Shortly after Mr Pang completed the home inspection, Mr Lee called the Plaintiff and instructed him to meet his colleague the following day to go to the solicitors’ office; this demonstrates that Mr Pang and Mr Lee maintained continuous contact in order to stage the home visit.

(8)  During the meeting on 19 March 2015 at the office of Joseph CT Lee & Co., when the Plaintiff expressed his understanding of the nature of the Loan (as misrepresented by Mr Lee) to Mr Pang, Mr Pang interrupted him and prevented him from continuing. As a matter of common sense or human nature, an innocent moneylender with no knowledge of the prior Misrepresentations would have listened to the Plaintiff or at least made further inquiries—particularly given that Mr Pang was aware of the intermediary’s involvement.

(9)  However, if Mr Pang had in fact participated in the fraudulent scheme or was aware of the Misrepresentations prior to the meeting, his reaction at the time would be both understandable and expected.

163.  Even if my earlier finding—that Mr Pang acted jointly with PWR to defraud the Plaintiff—were incorrect, I would still, for the same reasons and in light of Mr Pang’s having either turned a blind eye to the Misrepresentations or failed to make the necessary inquiries in the circumstances, conclude on balance that Mr Pang had notice or knowledge of the 1^st to 3^rd Misrepresentations at the material times.

164.  Regarding the Defendant’s liability for Mr Pang’s actions, Mr Pang himself testified that, at the material times, he was the sole director and shareholder of the Defendant.[24] Moreover, Mr Pang made all business decisions and was therefore the directing mind of the Defendant. The Defendant was a licensed moneylender; Mr Pang’s acts in question pertained to the Defendant’s principal business and fell within the usual scope of a director’s authority. I therefore further find that Mr Pang’s participation in a joint scheme to defraud, and, to the extent necessary, his (actual or constructive) knowledge of the 1^st, 2^nd and 3^rd Misrepresentations, are attributable to the Defendant. See Yau Sang Galvanizing (Hot-Dip) Company Limited v Fashion Tress (America) Engineering Co Ltd & Ors [2025] HKCFI 529, per DHCJ N Nip SC at §§98-99.

165.  Indeed, Mr Kwong conceded in closing that, if it is established that Mr Pang had actual or constructive knowledge of the 1^st to 3^rd Misrepresentations, the Defendant would be liable for fraudulent misrepresentation.

166.  Accordingly, I find the Defendant liable to the Plaintiff for fraudulent misrepresentation.

Relief for fraudulent misrepresentation

167.  Having established the Defendant’s liability for fraudulent misrepresentation, the Plaintiff is entitled to rescind both the Consultancy Agreement and the Loan Agreements.

168.  However, as PWR is no longer in existence, it would not serve any purpose to declare that the Consultancy Agreement between the Plaintiff and PWR is rescinded.

169.  Regarding damages, it is well established that a victim of fraudulent misrepresentation is entitled to damages, which are to be measured as the actual loss directly resulting from the fraudulent misrepresentation, even if such loss could not have been foreseen by the representor. See Chitty on Contracts, 35th ed., Vol 1, §§10-056, 10-64, 10-65.

170.  In my judgment, had the Plaintiff not been fraudulently induced by 1^st to 3^rd Misrepresentations to enter into the Consultancy Agreement and the Loan Agreements, he would not have: (a) paid Mr Pang the inspection fee of $1,000 on 18 March 2015; (b) handed over the sum of $138,000 to Mr Lee on 19 March 2015; or (c) repaid the Loan by way of instalments in accordance with the repayment schedule in the Chinese Loan Agreement, totalling $412,775.26.

171.  Taking into account that, pursuant to the Loan Agreements, the Plaintiff received a sum of $150,000 from the Defendant on 19 March 2015, the loss he suffered as a result of the Defendant’s fraud is $401,775.26. This, so I hold, is the amount the Plaintiff is entitled to recover as damages.

172.  The damages under this head primarily represent the monthly repayments made by the Plaintiff according to the repayment schedule over a six-year period, from 19 April 2015 to 19 March 2021. The cause of action accrued with each monthly instalment. In my judgment, it is only fair that the Plaintiff be compensated for the loss of use of his money resulting from these repayments. Doing the best I can, I consider it appropriate to award interest from approximately the midpoint of the repayment period, which is April 2018.

E4.  Issue 4 – If the Plaintiff has paid the alleged fees to Mr Lee and Impostor Cheung HK (i.e. Mr Pang), is the Plaintiff entitled to recover the same from the Defendant pursuant to sections 27 of the  MLO?

173.  As I have found in favour of the Plaintiff on Issues 1 to 3, and awarded damages for fraudulent misrepresentation accordingly, it is unnecessary for me to address this issue. Any entitlement the Plaintiff may have under section 27 of the MLO would overlap with the damages already granted for misrepresentation above.

E5.  Issue 5 - Are the Loan Agreements enforceable under sections 18 and 24 of the MLO? If so, should the Court enforce them? If not, how much is the Plaintiff entitled to recover by way of restitution?

174.  The Loan Agreements consist of both the Chinese Loan Agreement and the English Loan Agreement.

175.  The Chinese Loan Agreement includes a detailed repayment schedule with 72 monthly instalments, specifying the respective amounts for the repayment of principal and interest for each instalment. In contrast, the English Loan Agreement contains no such schedule.

176.  Mr Pang testified that the Chinese Loan Agreement was not a standalone binding contract unless the English Loan Agreement was also signed. At trial, Mr Kwong clarified and stated the Defendant’s position as follows: (a) the Chinese Loan Agreement is not a stand-alone contract and is therefore unenforceable on its own, and (b) it was incorporated into and forms part of the English Loan Agreement.

177.  Mr Kwong argued that, by virtue of clause (18)[25] of the English Loan Agreement, the Chinese Loan Agreement was incorporated into it.

178.  Clause (18) is in the following terms:

“This Agreement supersedes all previous agreements (if any) whether in writing verbal or implied between the parties hereto and except the Loan Agreement in Chinese dated 19^th March 2015.”

179.  I do not agree that Clause (18) of the English Loan Agreement is capable of incorporating the Chinese Loan Agreement, as submitted. When construed in its proper context, it merely provides that the English Loan Agreement did not supersede the Chinese Loan Agreement. I therefore find that the Chinese Loan Agreement does not form part of the English Loan Agreement.

180.  In light of the position taken by the Defendant, I further hold that the Chinese Loan Agreement is unenforceable.

181.  The remaining questions are whether the English Loan Agreement complies with the requirements of sections 18 and 24 of the MLO and, if it doesn’t, whether it should still be enforced by the Court.

182.  In this regard, the Plaintiff contended that the Loan Agreements were unenforceable. Mr Yim’s argument pertaining to sections 18 and 24 was threefold:

(1)  For the purpose of section 18 of the MLO, the Defendant ought but failed to consider the sums of $138,000 paid to Mr Lee and $1,000 paid to Mr Pang in determining the interest rate; the purported 42% interest rate per annum stated in the English Loan Agreement was therefore incorrect.

(2)  In any event, based on the respective terms of repayment stated in the Loan Agreements, the interest rate per annum was not capable of being expressed as a rate per cent per annum; the Defendant ought to have determined the effective interest rate pursuant to Schedule 2 of the MLO instead and stated the same in the Loan Agreements.

(3)  And, for determining the effective interest rate, if one takes into account the sums of $138,000 and $1,000 paid to Mr Lee and Mr Pang for obtaining the Loan, the effective interest rate would exceed the statutory limit of 60% prescribed under section 24(2) of the MLO.

183.  As I have held that the Chinese Loan Agreement is unenforceable, only the English Loan Agreement is considered here.

E5.1  Should the sums paid to Mr Lee (in purported settlement of consultancy fee and legal fee) and Mr Pang (as inspection fee) be included in calculating the interest rate?

184.  Section 2 of the MLO contains the following definition:

“effective rate (實際利率), in relation to interest, means the true annual percentage rate of interest calculated in accordance with Schedule 2;

interest (利、利息) does not include any sum lawfully agreed to be paid in accordance with this Ordinance on account of stamp duty or other similar duty, but save as aforesaid includes any amount (by whatever name called) in excess of the principal, which amount has been or is to be paid or payable in consideration of or otherwise in respect of a loan;

principal (本金), in relation to a loan, means the amount actually lent”

185.  In Skyline Credit Ltd v Leung Hing Chung [2022] 4 HKLRD 561, it was held by the Court of Appeal (at §43) that for the purpose of the MLO, “principal” means the amount actually lent, which excludes any sum handed back by the borrower to the lender as a pure gift or not in satisfaction of any obligation.

186.  Chu JA (as she then was) further held (at §50) that, to qualify as “interest” under section 2(1) of the ordinance, the amount does not have to be paid or payable to the lender or its agent, it can be paid to someone else so long as it is “paid or payable in consideration of or otherwise in respect of a loan”.

“43. As we have pointed out in Gain Wealth Global Credit & Investment Ltd v Chan Suk Fong, supra, [57], what was actually lent is a question of fact, not a question of law. Money is lent if it is applied by the lender to the purposes of the borrower in any way which the borrower authorises but excludes any sums handed back by the borrower to the lender as a pure gift or not in the satisfaction of any obligation.

….

50. In Gain Wealth Global Credit & Investment Ltd v Chan Suk Fong, supra, [48], [50] to [55], it was held that to qualify as “interest” under s.2(1), the amount does not have to be paid or payable to the lender or its agent, and can be paid to someone else so long as it is “paid or payable in consideration of or otherwise in respect of a loan”. Where there is no evidence of any involvement of the lender regarding the monies defrauded by the intermediary and nothing to link the payment by the borrower with the loan made by the lender, it could be difficult to establish that the payment was paid or payable in consideration of or otherwise in respect of the loan.”

187.  Mr Yim argued that the Plaintiff’s repayment of the first two instalments (i.e., $11,462) on the same day the Loan was granted should be treated as the “amount handed back to the Defendant” and deducted from the principal of the Loan. I do not agree. First, the repayment was not made at the request of the Defendant, its agent, or the intermediary. Second, it was made to satisfy the Plaintiff’s obligation under the English Loan Agreement, albeit prematurely. Therefore, this amount should not be deducted in determining the “amount actually lent.”  If an early repayment made by a borrower voluntarily must be deducted from the loan amount to determine the “amount actually lent” — even when the moneylender is without fault — the borrower could render the loan agreement unenforceable per se. As a matter of principle, despite the discretionary power conferred on the court under section 18(3) of the MLO, that cannot be correct.

188.  However, I do accept that, pursuant to Skyline Credit Ltd v Leung Hing Chung, supra, the two sums, namely $138,000 paid to Mr Lee in purported settlement of the consultancy fee and legal fee, as well as the inspection fee of $1,000, ought to be considered as “interest” for the purpose of the MLO.

189.  It is plain from the evidence presented that the Defendant had not taken into account the sums paid to Mr Lee and Mr Pang in preparing the English Loan Agreement; the annual interest rate of 42% stated therein was therefore inevitably underestimated and thus incorrect.

190.  Accordingly, the English Loan Agreement is unenforceable per se.

E5.2  Could the interest under the English Loan Agreement be expressed as a simple, constant annual percentage rate?

191.  Section 18(2)(i) of the MLO provides:

“(2) The note or memorandum shall contain all the terms of the agreement and in particular shall set out –

the rate of interest charged on the loan expressed as a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with Schedule 2.”

192.  This provision mirrors section 6(2) of the Moneylenders Act 1927 in the UK (“MA 1927”). Its meaning and application were considered in detail by the English Court of Appeal in Askinex Ltd v Green & others [1969] 1 QB 272.

193.  Section 6(2) of MA 1927 provides that the note or memorandum of the loan agreement shall show: “either the interest charged on the loan expressed in terms of a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with the First Schedule.” Askinex Ltd. , supra, at 281C.

194.  In Askinex Ltd., the first limb of section 6(2) – “the interest charged on the loan expressed in terms of a rate per cent per annum” was held to mean “the interest charged on the loan (i.e. the total amount payable in money over the full period) is capable of being expressed in terms of a simple actual rate per cent, per annum over that period ”.

195.  Lord Denning further explained, by way of illustration, the application of section 6(2) of MA 1927 that for stating the interest rate charged under a loan agreement, the provision gave the moneylender a choice between two alternatives, namely either a rate expressed as a simple actual rate per cent per annum over the whole loan period, or a deemed interest rate to be determined in accordance with the First Schedule of the Act. He further held that if the total interest charged on the loan was not capable of being expressed in terms of a single actual rate per cent per annum, i.e., the actual rate, the moneylender must state the deemed interest rate. See Askinex Ltd. , supra, per Denning at 281C – 282A

“The case depends on the true application to this case of section 6 (2) of the Act of 1927. That is the section which compels the moneylenders to show the rate of interest. It says that the note or memorandum shall show “either the interest charged on the loan expressed in terms of a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with the First Schedule.”

In applying this section it is important to remember the definition of “interest” and “principal.” Section 15 (1) states: “ ‘Interest’... includes any amount, by whatsoever name called, in excess of the principal, paid or payable to a moneylender in consideration of or otherwise in respect of a loan” and that: “ ‘Principal’ means in relation to a loan the amount actually lent to the borrower.” In this case the “principal” was £25,000. The “interest” was the excess over £25,000 payable by the borrower. It comes to £33,750. This must be steadily borne in mind. The “interest charged on the loan” was not the payment of £281 5s. a month. It was the total sum of £33,750. It must also be borne in mind that we are only concerned with simple interest. The Act by section 7 prohibits compound interest.

With this introduction, I turn now to section 6 (2). It gives the moneylender a choice between two alternatives, which I will call alternatives (A) and (B). The choice is between stating an actual rate and a deemed rate. The first alternative (A) applies when the interest charged on the loan (i.e., the total amount payable in total money over the full period) is capable of being expressed in terms of a simple actual rate per cent. per annum over that period. In such a case the moneylender satisfies the statute by stating that rate in the memorandum. The second alternative (B) applies when the total sum of interest is not capable of being expressed in terms of a single actual rate per cent. per annum, with the result that resort must be had to a deemed rate. In this second alternative the moneylender has to ascertain the deemed rate by making the calculation prescribed in the First Schedule and he must state in the memorandum that it is “calculated in accordance with the provisions in the First Schedule” to the Act.”

196.  It was clear from Lord Denning’s illustration that, on the proper construction of the first limb of section 6(2) of MA 1927, if the rate of interest charged on the outstanding principal (which diminishes progressively with each monthly repayment) remains constant over the loan period, such rate can be stated pursuant to the first limb of the provision. See Askinex Ltd., supra, per Denning at 282B – G

“These two alternatives can best be explained by taking an illustration of each. To illustrate the first alternative (A), I would take the case where a moneylender makes a loan of £24,000 repayable over 10 years at £200 a month, and meanwhile interest to be payable at the rate of 25 per cent, per annum on the balance outstanding from time to time. Under such a contract, the principal is reduced by £200 a month. So the interest gets less each month. The interest payable for the first month is £500 (25 per cent, per annum on £24,000 for one month). The interest payable for the second month is £495 16s. 8d. (25 per cent, per annum on £23,800 for one month). And so on. The interest is reduced by £4 3s. 4d. each month. The interest payable for the last month is £4 3s. 4d. is (25 per cent, per annum on £200 for one month). The total sum payable for interest over the 10 years comes to £30,250. That is the “interest charged on the loan." But it is capable of being expressed in terms of an actual rate per cent, per annum, namely, 25 per cent, per annum. The moneylender satisfies the statute by expressing the interest 25 per cent, per annum.” (emphasis added)

197.  Diplock LJ gave a similar interpretation (at 290B-G) to the first limb:

“if the first option is exercised, the only guide as to how the calculation is to be made is contained in the words in which the required result of the calculation is described, and these words do involve mathematical concepts. “Interest” is “money paid for the use of money lent” (Shorter Oxford Dictionary), and if “interest charged on the loan” is to be expressed in terms of a rate in relation to time (viz. per annum), the interest must be treated as accruing from day to day, and if it is to be expressed as a single rate, it must be treated as accruing at a uniform rate throughout the contract. It follows that where the contract provides for payment by the borrower of the total amount of principal and interest by periodic instalments, the “interest charged on the loan,” if it is to be capable of being expressed in terms of a single rate, must be treated as accruing at a uniform rate during the periods between successive instalments. This is possible  mathematically only if the sum paid in each instalment is treated as consisting, as to part of interest, at the expressed rate per cent per annum for the period since the date on which the previous instalment was paid upon the amount of principal outstanding since that date, and, as to the remainder, of repayment of principal; from which it follows that the actual sum, payable as interest upon the principal outstanding in respect of each period, diminishes progressively in each successive instalment as more and more of the principal is repaid. Consequently if the periodic instalments by which the loan is repayable are of equal amounts payable at equal intervals, the proportion of each instalment to be treated as repayment of principal increases, and the proportion to be treated as payment of interest correspondingly decreases in each successive instalment. If the amount of each instalment, the length of the intervals between instalments and the amount actually lent are known, it is possible, although laborious, to calculate the rate per cent, per annum at which interest is charged on the loan. This method of appropriating the total amount of each instalment between interest and principal is the only one which enables one to express in terms of a single rate per cent per annum the actual yield which the moneylender obtains on his investment. The rate per cent per annum so calculated is that which is referred to in such cases as Parkfield Trust Ltd. v. Curtis, Mason & Wood Ltd. v. Greene and Mutual Loan Fund Association Ltd. v. Sanderson, as the “true interest” or “actual interest” It is in my view what is meant by the expression in section 6(2) of the Act: “the interest charged on the loan expressed in terms of a rate per cent per annum.” (emphasis added)

198.  However, if the loan agreement only states the lump-sum monthly instalments to be made over the loan period without a detailed repayment schedule showing how the monthly instalments are to be split between repayment of principal and interest, it is impossible to calculate an actual rate of interest under the first limb. In such circumstances, the moneylender must state the deemed interest rate to be determined in accordance with the First Schedule - See Askinex Ltd. , supra, per Denning at 282E-G.

“To illustrate the second alternative (B), I would take the case where a moneylender makes a loan of £24,000 repayable with interest over 10 years at £450 a month. Each instalment is payable in a lump sum to include both principal and interest without splitting them up (similar to hire-purchase transactions where the monthly instalments are not split up). Under such a contract it is impossible to calculate an actual rate of interest: for the simple reason that you do not know how much is paid off the principal each month and how much off the interest. Suppose that during the first five years each instalment of £450 was split up into £350 off the principal and £100 off the interest; and that during the second five years it was £50 off the principal and £400 off the interest. You cannot express that transaction in terms of a single rate per cent, per annum over the whole ten years. Faced with this difficulty, the First Schedule tells the moneylender how to calculate the deemed rate. On making that calculation, the result is a deemed rate of 24.13 per cent. He puts that figure in the memorandum and adds the words “as calculated in accordance with the provisions of the First Schedule.” If chooses this alternative, he must insert those words, or words the like effect.”

199.  This was the legal position in the UK. However, in Hong Kong, although section 18(2)(i) of the MLO was modelled on section 6(2) of MA 1927, the Court of Appeal in Kwok Ying Lung v Ko Chi Hung & Anor [2001] 3 HKC 480, having considered Askinex Ltd., gave a different interpretation to the first limb of section 18(2)(i) of the MLO.

200.  In Kwok Ying Lung, the Court of Appeal adopted the same construction as in Askinex Ltd. and agreed that, under section 18(2) of the MLO, the rate of interest charged could be stated either as an actual rate or an effective rate to be ascertained in accordance with Schedule 2 of the MLO, and when the total amount of interest charged is not capable of being expressed in terms of a single actual rate per cent per annum, the effective rate of interest has to be stated. It further held that resort to Schedule 2 to determine an effective interest rate is necessary only where the interest charged under the loan agreement is not expressed as a rate.

“So where an actual rate is specified in the note or memorandum, the schedule has no application. The calculations in the schedule are only relevant to produce a deemed rate only where the total sum of interest is not capable of being expressed in terms of an actual rate per cent per annum, for example, where a loan is repayable by a number of instalments, each instalment comprising principal as well as interest.

I would respectfully adopt the same construction for section 18(2)(i) of the Ordinance. It is a construction that accords with the provisions of section 2(2): the calculations set out in Schedule 2 produce a deemed rate of interest and resort to Schedule 2 is only necessary where the interest charged “is not expressed in terms of a rate”. Indeed, the requirement in the main part of section 2(2) to appropriate to principal and interest any amount paid or payable to the lender, repeated in paragraph 1 of Schedule 2, makes no sense and is difficult to apply where, as in the present case, the nature of each payment (i.e. whether it is a payment of interest or of principal) is clear. Nor, in my view, is it really possible to perform the calculations set out in Schedule 2 where an actual rate has been specified. In such a case, the calculations cannot readily be performed because they are not meaningful and cannot be meaningfully applied to produce a deemed rate where interest is charged at an actual rate.

It is also clear from the majority judgment in Askinex that so long as the interest is capable of being expressed in terms of a simple actual rate per centum per annum, it matters not that the actual amount of interest payable is set out rather than being expressed as a rate per centum per annum.

In my judgment, Schedule 2 to the Ordinance has no application unless the interest payable under a loan is not capable of being expressed in terms of an actual rate per cent per annum. In such a case, the calculations set out in Schedule 2 yield a deemed rate.” Kwok Ying Lung, supra, 489H – 490D

201.  However, Yuen J (as she then was) made a further refinement in Kwok Ying Lung that, as a matter of statutory interpretation, the “rate of interest charged on the loan” referred to in section 18(2)(i) of the MLO must be a single, constant rate charged on the entire loan. This clearly deviated from the construction given to s 6(2) of MA 1927 in Askinex Ltd., which referred to the outstanding principal instead of the entire loan.

“I respectfully agree with the Judgment of Hon. Le Pichon JA. I would only like to emphasize one refinement to the proposition that where an actual rate is specified in the note or memorandum, Schedule 2 has no application.

The “actual rate” there referred to is the first means in s.18(2)(i) of formulating interest payable, i.e. “the rate of interest charged on the loan expressed as a rate per cent per annum”. That rate must by definition be a single, constant rate charged on the entire loan. The language does not admit of a rate varying from time to time.

Therefore, it cannot apply to agreements where repayments comprise elements of both principal and interest. In those agreements, with each (say, monthly) repayment the principal is steadily reduced. Even though the borrower is making the same monthly repayment at ostensibly the same rate of interest, the truth is that (since the principal is steadily reducing) there is a hidden increase in the interest rate. There is no single constant rate of interest and the “actual rate” formulation does not apply.” (at 492A-D)

202.  The said refinement made in Kwok Ying Lung was subsequently affirmed by the Court of Final Appeal in Good Time Finance v HKSAR (2013) 16 HKCFAR 795.

“7. … in the present case, it is not possible to comply with the first limb of s. 18(2)(i) to state “the rate of interest charged on the loan expressed as a rate per cent per annum”, since an actual rate within s.18(2)(i) must be a single, constant rate charged on the entire loan and cannot apply to agreements where repayments comprise elements of both principal and interest: see Kwok Ying Lung v Ko Chi Hung [2001] 3 HKC 480.

….

9. Where, as here, repayments were to consist of principal and interest over time, the correct method of calculating the effective rate of interest is that set out in Sch.2 to the MLO. That methodology is applicable even if an interest rate is stipulated in the loan agreement, unless that interest rate is a true actual rate of interest under the first limb of s.18(2)(i). … ”

203.  It is therefore settled that, on the proper construction of section 18(2)(i) of the MLO, the simple, constant interest rate to be stated in the loan agreement under the first limb of section 18(2)(i) of the MLO has to be the rate charged on the entire loan, not the outstanding principal as may diminish over time, depending on whether the monthly repayment involves repayment of the principal and, if so, the schedule of such repayment.

204.  Turning back to the fact of the present case, the English Loan Agreement, so far as material for present purposes, contained the following terms:

“(1) Loan

The amount of the Loan is described in the First Schedule hereto …

(2) Term

The duration of advancement of the Loan is described in the First Schedule hereto.

(3) Repayment

The Loan together with interest thereon shall be repaid by the Borrower to the Lender without deduction I the manner set out in the First Schedule hereto.

(4) Interest

(a) Interest shall accrued on the Loan at the fixed rate as described in the First Schedule hereto and shall be payable by the Borrower to the Lender in the manner set out in the First Schedule hereto.

THE FIRST SCHEDULE

(c) The Loan (貸款金額)

Hong Kong Dollars ONE HUNDRED AND FIFTY THOUSAND Only (HK$150,000.00)

(g) Terms of repayment of the Loan and interest (償還貸款的條款)

The Loan an interest thereon shall be repaid by 72 monthly instalments of HK$5,731.00 each payable on the 19^th day of each month. The 1^st instalment shall be payable on 19^th April 2015.

(本金及利息分72期還，每期HK$5731.00於每月的第19日還款。第一期還款於2015年4月19日)。

(重要事項：若未能每期準時償還貸款，借款人明白清楚及同意放債人有權隨時可以要求立刻全數清還一切欠款及過期利息等等)。

(i) Interest rate (貸款利率):-

Interest rate 42% per annum

年息為42厘”

205.  It is noted that the English Loan Agreement provided for equal monthly repayments of $5,731.00 over 72 months, comprising both principal and interest. However, the breakdown of each monthly instalment between principal and interest was not specified. According to Askinex Ltd., this omission makes it impossible to calculate an actual rate of interest for the purpose of the first limb of section 18(2)(i) of the MLO.

206.  Further, in Good Time Finance Ltd, CFA held that unless the interest rate stated is a true actual rate of interest under the first limb of s.18(2)(i), the correct method of calculating the effective rate of interest is that set out in Schedule 2 of the MLO.

207.  Further, applying the construction given by the Court of Appeal in Kwok Ying Lung, if the actual interest rate on the entire loan amount of $150,000 was truly 42% per annum as stated in the English Loan Agreement, the total interest payable would be $378,000 (i.e., $150,000 x 42% x 6). Adding the principal, the total repayment would be $528,000, which far exceeds the sum actually payable under the English Loan Agreement—$412,632. This demonstrates that the 42% interest rate stated in the agreement was not the true actual rate of interest under the first limb of section 18(2)(i).

208.  In the Plaintiff’s opening submissions, Mr Yim calculated the effective interest rate pursuant to Schedule 2 of the MLO, based on the total interest payable, the number of monthly instalments set out in the Loan Agreements, and the original loan amount of $150,000. He determined the effective interest rate to be 57.59%. Mr Kwong did not dispute this calculation. Evidently, the 42% rate stated in the English Loan Agreement was also not the effective interest rate under the second limb of section 18(2)(i).

209.  Therefore, even without taking into account the payments made to Mr Lee and Mr Pang referenced above, the English Loan Agreement, in its present form, still fails to comply with section 18(2)(i) of the MLO. It is, accordingly, unenforceable for this reason as well.

210.  As I will elaborate in section E5.3 below, the English Loan Agreement was also rendered unenforceable under section 24(2) of the MLO. Accordingly, it is unnecessary to consider whether it would be inequitable to refuse enforcement under section 18(3) of the MLO.

E5.3  Did the effective rate of interest exceed the limit of 60% prescribed in section 24 of the MLO?

211.  Section 24 of the MLO effective at the material times was in the following terms:

“24. Prohibition of excessive interest rate

(1) Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an offence.

(2) No agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan shall be enforceable in any case in which the effective rate of interest exceeds the rate specified in subsection (1).”

212.  As I mentioned above, under the English Loan Agreement, the $150,000 loan was to be repaid in 72 instalments of $5,731.00 each. The total amount of interest payable thereunder was $262,632, calculated as $5,731 x 72 - $150,000. Based on the said repayment terms, the effective rate of interest determined by Mr Yim in accordance with Schedule 2 of the MLO was 57.59%, which did not exceed the allowable limit of 60% under the ordinance.

213.  As I have found, for the purposes of the MLO, that the sums of $138,000 paid to Mr Lee and $1,000 paid to Mr Pang should be treated as part of the interest paid. If these amounts are included, the effective rate of interest calculated according to Schedule 2 rises to 88.03%.

 = 88.03% [26]

214.  This is excessive. For this reason, the English Loan Agreement was also unenforceable pursuant to s.24(2) of the MLO.

E5.4  How much is the Plaintiff entitled to recover by way of restitution?

215.  Mr Yim submitted that if the Court finds in favour of the Plaintiff that the Loan Agreements were enforceable under the MLO, the Plaintiff is entitled to an order for restitution based on the principles of unjust enrichment. He further referred me to the following authorities in support: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 (at §67 & §91), Credit One Finance Ltd v Yeung Kwok Chi & ors [2021] 1 HKC 598(§51), Burrows, The Law of Restitution (3^rd ed., 2011) (p.201), AXHT Co Ltd v Freeway Finance Co Ltd [2020] 4 HKLRD 133 (§§40-42), Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 (§§43-44, 48-49, 61-66).

216.  The relevant legal principles regarding a claim for restitution based on unjust enrichment are not in dispute between the parties. Mr Kwong also relied on Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd in his closing submissions. As to the other legal submissions made by Mr Yim with reference to the other authorities cited, they were not disputed by Mr Kwong in his reply submissions.

217.  The relevant principles can be briefly summarised as follows:

(1)  To succeed in a claim on unjust enrichment, the plaintiff has to show that (a) the defendant was enriched, (b) the defendant received the benefit at the expense of the plaintiff, (c) the enrichment was unjust, and the defendant fails to establish any applicable defence.

(2)  On the issue of whether the enrichment was at the expense of the plaintiff, the test is “whose ultimate expense” the payment was made from; so long as the plaintiff’s loss is sufficiently closely linked to the defendant’s gain, it is not necessary to demonstrate a direct transfer of benefit from the plaintiff to the defendant, though such a direct transfer would certainly satisfy the requirement.[27]

(3)  The defendant’s enrichment is unjust if it results from a mistake of fact or law made by the plaintiff. It is prima facie unjust for a recipient of money to retain a payment if, had the payer known the true state of affairs (for example, that the contract pursuant to which the payment was made was actually unenforceable), he would not have made the payment.[28]

218.  As I have found above, the $1,000 inspection fee was paid directly to Mr Pang on 18 March 2015, and the total repayment made by the Plaintiff to the Defendant was $412,775.26, of which $12,000 was originally from the Defendant/Mr Pang.

219.  I am also satisfied that had the Plaintiff known that the Misrepresentations were untrue, he would not have allowed the home inspection to take place, still less paid the inspection fee to Mr Pang. Further, had the Plaintiff known that the Loan Agreements were unenforceable, or had he not been intimidated by Mr Pang, he would not have repaid the loan in accordance with the repayment schedule of the Chinese Loan Agreement.

220.  For the reasons set out above, in my judgment, the Plaintiff is, in principle, entitled to an order for the restitution claimed. However, it is unclear how much the Plaintiff is claiming under this head. In paragraph 44C of its Re-Amended Statement of Claim, the Plaintiff pleaded it was entitled to restitution of “all benefit received by the Defendant” without stating the amount. The Plaintiff’s position remained the same in its closing submissions; no specific amount that it was seeking to recover under this head was stated in its written closing.

221.  Given that I have already found in favour of the Plaintiff on its claim for fraudulent misrepresentation, and damages to be awarded under it would represent an upper bound for the amount recoverable, it is unnecessary for me to quantify in monetary terms the benefit received by the Defendant for the purpose of this claim.

222.  However, was I required to make a finding on the value of the benefit received by the Defendant from the transaction(s) involved, as there is no evidence to show that the Defendant has received the $138,000 the Plaintiff paid to Mr Lee, I would find that the benefit unjustly retained by the Defendant is $263,775.26, being $412,775.26 + $1,000 - $150,000. This would be the amount the Plaintiff is entitled to recover in restitution.

223.  While I have not recited every detail of the witnesses’ statements and oral testimonies, or explicitly addressed in this judgment all the arguments raised by counsel, I have duly considered them in reaching the findings set out above.

F.  Conclusion

224.  In the premises, I make the following orders:

(1)  It is declared that (a) the English Loan Agreement dated 19 March 2015 made between the Plaintiff and the Defendant be rescinded and set aside, and (b) the Chinese Loan Agreement dated 19 March 2015 purportedly made between the Plaintiff and the Defendant is unenforceable.

(2)  The Defendant do pay the Plaintiff a sum of $401,775.26, as damages for fraudulent misrepresentation.

(3)  The Defendant do pay the Plaintiff interest on the sum of $401,775.26 running from April 2018 at 1% above the prime rate per annum up to the date of this judgment, and thereafter at judgment rate until payment in full.

(4)  There be costs order nisi that the Defendant is to pay the Plaintiff’s costs of this action, including all costs reserved. The said costs are to be taxed on an indemnity basis, if not agreed, with a certificate for counsel.

(5)  The Plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.

(6)  The above costs order nisi shall become absolute unless an application to vary is made within 14 days.

G.  Follow-up

225.  Having determined, on the balance of probabilities, that Mr Pang participated in the joint scheme to defraud the Plaintiff, and noting that the seamless coordination between Mr Pang and his solicitor, Mr Chong, during the contract signing process further raises suspicion, I direct the Registrar to forward a copy of this judgment to the Director of Public Prosecution for such action he may consider appropriate.

226.  Finally, I wish to express my appreciation to counsel for their valuable assistance in this matter.