JOHN ROBERT LEES and TSUI CHI CHIU, the Joint and Several Liquidators of GMF FINANCE LTD (in Creditors’ Voluntary Liquidation) v. CLOUTIER GUY EVON HUANG JIALIN

CACV 84/2018

[2019] HKCA 105

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 84 OF 2018

(ON APPEAL FROM HCMP NO 3079 OF 2016)

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J U D G M E N T

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Hon G Lam J (giving the judgment of the Court):

Introduction

1.  This appeal has arisen out of proceedings brought by the joint and several liquidators (“Liquidators”) of GMF Finance Ltd (“GMF”), a licensed money lender, against the defendant borrowers for recovery of a loan and possession of the property charged as security.[1] The defendants contend that both the loan and the security are unenforceable because of various breaches by GMF of the Money Lenders Ordinance (Cap 163) (“Ordinance”).  Both the Master and, on appeal, Deputy Judge Kent Yee (“the Judge”) allowed GMF’s claim in full.  The defendants now appeal to this court.

Factual background

2.  The basic facts are not in dispute, although there is scant direct evidence of the details because the Liquidators do not have personal knowledge of the events prior to their appointment and the defendants have only filed a very brief affirmation made by an employee of a company of the 1^st defendant.

3.  It is not in dispute that GMF and the defendants entered into a loan agreement in the form of a Facility Letter dated 14 September 2015, and a Second Legal Charge dated 15 September 2015 over a flat and a car parking space in a residential estate known as “Avignon” in Kwun Chui Road, Tuen Mun, as security for the loan.

4.  The principal terms of transaction are set out in the Preamble of the Facility Letter as follows:

“ Property : Flat C (Being a Duplex Residential Flat) on the 2^nd Floor of Tower 5 & Residential Car Parking Space No. P220 on Lower Ground Floor, Avignon, No. 1 Kwun Chui Road, Tuen Mun, New Territories

Loan Amount : Hong Kong Dollars Five Million Only (HK$5,000,000)

Guarantor(s) : Nil

Interest Rate (APR) : 19.192% p.a.

Interest Rate (Flat) : 1.5% p.m.

Upfront Interest : 1% of the Loan Amount, which is HK$50,000, payable on demand by Borrower to Lender

Number of Instalments : 12

Instalment Amount : As Per Repayment Schedule

Repayment Frequency : Monthly

1^st Repayment Date : 30^th day of September 2015

Subsequent Repayment Day : 30^th day of each calendar month until the loan is matured (Details refer to Repayment Schedule)

Loan Drawdown Date : 16^th day of September 2015

Loan Maturity Date : 30^th day of August 2016

……  ”

5.  These terms were substantially repeated in a “Memorandum of Summary Terms” prepared pursuant to s 18 of the Ordinance and signed by the defendants (“Memorandum”), attaching a summary of the provisions of the Ordinance as required by s 18(1)(b) of the Ordinance and reg 11 of the Money Lenders Regulations (Cap 163A).

6.  In addition, the Facility Letter provides as follows:

“ 6.1 Interest

Interest on the Loan will be charged at the rate as stated above subject to fluctuation at our discretion. Interest will accrue daily on the outstanding principal amount of the Loan and based on the actual number of days in a calendar year.

6.2 Late Payment

Default interest will be calculated daily on any sums due but not paid … at the effective rate of interest on the Loan … Such interest will be payable on the instalment repayment dates (or such other date(s) as we may from time to time specify).

…

7.1 Repayment in general

The Loan together with interest calculated at the rate stated above to be repaid in such frequency, by such number of instalments and for such sum per instalment as stated above commencing on the date specified herein. Notwithstanding the aforesaid, if at any time a repayment schedule (“Repayment Schedule”) is prepared and produced to you, you agree to pay such amounts and at such times as stated in the Repayment Schedule.

7.2 Order of application of instalments

Instalments will be credited first in repayment of any sums, other than the principal or interest, due and owing by you to us in respect of the Loan; next towards payment of interest due on the outstanding Loan (including any shortfall interest carried forward); and the balance will be applied in reduction of outstanding principal of the Loan.

…

8.2 Prepayment penalty

If repayment of the whole of part of the Loan is made within the first six (6) months from the date of advancement of the Loan, you agree to pay us a 2% penalty fee on the amount of the Loan.

…

15.1 All reasonable costs and expenses (including legal fees, valuation fees and stamp duties) incurred by us under or in connection with this Facility, the Security Document and other necessary documents are to be borne by you solely and will be repayable to us upon demand.

19.10 Any provision of this facility which is declared by any court or tribunal of competent jurisdiction to be illegal, invalid or unenforceable in any respect under the applicable law shall be severed from this Facility to the maximum extent permissible by the applicable law without in any manner affecting the legality, validity or enforceability of the remaining provisions of this Facility, all of which shall continue in full force and effect.  ”

7.  The Repayment Schedule at the end of the Facility Letter takes the following form:

Instalment No.	Due Date	Principal	Interest	Instalment Amount	Balance
Drawdown	2015-09-16				5,000,000.00
1	2015-09-30	-	35,547.95	35,547.95	5,000,000.00
2	2015-10-30		75,000.00	75,000.00	5,000,000.00
3	2015-11-30		75,000.00	75,000.00	5,000,000.00
4	2015-12-30		75,000.00	75,000.00	5,000,000.00
5	2016-01-30		75,000.00	75,000.00	5,000,000.00
6	2016-02-29		75,000.00	75,000.00	5,000,000.00
7	2016-03-30		75,000.00	75,000.00	5,000,000.00
8	2016-04-30		75,000.00	75,000.00	5,000,000.00
9	2016-05-30		75,000.00	75,000.00	5,000,000.00
10	2016-06-30		75,000.00	75,000.00	5,000,000.00
11	2016-07-30		75,000.00	75,000.00	5,000,000.00
12	2016-08-30	5,000,000.00	75,000.00	5,075,000.00	0.00
	Total:	5,000,000.00	860,547.95	5,860,547.95

8.  Shortly before the Facility Letter was entered into, there was an exchange of emails.  In the latest email in evidence dated 11 September 2015 from one Chuk Lap Keung, an employee of the 1^st defendant’s company, to the 1^st defendant, he reported, following a conversation with GMF’s representative regarding the intended loan, that the first 3 months’ interest, a legal fee, a valuation fee and the “cost of loan acquisition” (equivalent to the “upfront interest” referred to in the Facility Letter) would be deducted from the loan proceeds at the outset so that the amount to be released to the defendants upon drawdown would be $4,714,800, calculated as follows:

Loan Acquisition 16/09/2015 Less:	Loan Principal 10 / 2015 Interest 11 / 2015 Interest 12 / 2015 Interest Legal Fee Valuation Fee 1% of Funding Amount	HKD 5,000,000.00 HKD 75,000.00 HKD 75,000.00 HKD 75,000.00 HKD 6,000.00 HKD 4,200.00 HKD 50,000.00
	Actual Amount Received	HKD 4,714,800.00

9.  What in fact happened 5 days later differed slightly from what was set out in this email in that the amount released to the defendants on 16 September 2015 was $4,754,252.05, equivalent to the deduction of $245,747.95 from $5,000,000.  It is common ground that the sum deducted is comprised as follows:

9 / 2015 Interest 10 / 2015 Interest 11 / 2015 Interest Legal Fee Valuation Fee 1% of Funding Amount

HKD 35,547.95 HKD 75,000.00 HKD 75,000.00 HKD 6,000.00 HKD 4,200.00 HKD 50,000.00

In other words, instead of deducting (among others) the interest instalments for October to December 2015 as suggested in the email, those for September to November 2015 were actually deducted and retained by GMF upon drawdown.

10.  It is common ground that the first 6 instalments in the Repayment Schedule were “paid” (with the first three being deducted and kept by GMF upon drawdown and the 5^th being paid 12 days late), and that the defendants also paid the 7^th and 8^th instalments, albeit several months late after GMF went into creditors’ voluntary liquidation on 14 April 2016.  The defendants did not pay the 9^th to 12^th interest instalments or the principal, despite demands made by the Liquidators.

11.  Accordingly, in November 2016, the Liquidators instituted proceedings by originating summons against the defendants for payment of the amounts due and possession of the property charged.  In the first affirmation of Tsui Chi Chiu (Tsui’s 1^st affirmation), one of the two Liquidators, made on 30 December 2016, it was claimed that the principal amount outstanding was $5,000,000 and that various sums of interest and default interest were owing and continuing to accrue at the rate of 19.192% p.a.

12.  After queries were raised by Master R Lai in an early hearing in relation to, inter alia, the “upfront interest” of $50,000 and the legal fee of $6,000, the Liquidators stated, in the second affirmation of Tsui Chi Chiu (Tsui’s 2^nd affirmation) made on 10 May 2017, that they were prepared to deduct those two sums from the principal amount of the loan, which therefore became $4,944,000.  Revised calculations were proffered based on this varied principal amount.  Further interest continued to be claimed by the plaintiffs on the basis of 19.192% p.a.

13.  On 25 May 2017, the defendants filed an affirmation of Chuk Lap Keung, exhibiting, inter alia, a copy of the email of 11 September 2015 and the statement of the defendants’ joint bank account, which showed that the actual amount GMF released to them on 16 September 2015 — the loan drawdown date — was $4,754,252.05.

14.  In the light of this, in June 2017 the Liquidators re‑amended the originating summons to state that the Facility Letter was for the sum of $4,754,252 and, shortly prior to the hearing before Master Elaine Liu on 7 November 2017, filed the third affirmation of Tsui Chi Chiu (Tsui’s 3^rd affirmation) in which they accepted the principal amount of the loan was $4,754,252 instead of $5,000,000.  The affirmation set out revised calculations in support of the claim for: (i) principal in the sum of $4,754,252; (ii) unpaid 9^th to 12^th interest instalments of $75,000 each (less a small amount of $932.88 paid by the defendants with the 5^th instalment) in the total sum of $299,067.12; (iii) accrued interest on the principal from 31 August 2016 to 7 November 2017 at the rate of 18.1% p.a. in the sum of $1,023,194.06; and (iv) default interest on the 5^th, 7^th and 8^th instalments which were paid late and on the 9^th to 12^th instalments which remained unpaid, at the rate of 18.1% p.a. in the aggregate sum of $300,735.61.  The total amount claimed was $6,377,248.79.  The rate of 18.1% p.a. was not explained in the affirmation but in the plaintiffs’ skeleton argument used before the Master, as described below.

The decisions below

15.  On 7 November 2017, Master Elaine Liu gave judgment for the plaintiffs in the amount stated in Tsui’s 3^rd affirmation, ie $6,377,248.79, together with interest at 18.1% p.a. henceforth until payment.  She also ordered the defendants to give vacant possession of the property charged.

16.  The defendants appealed, contending that because of various breaches of the Ordinance, the loan and security were unenforceable. The principal complaints raised by the defendants before the Judge were as follows:

(1)   Given that the Liquidators’ position was that the principal was $4,754,252, neither the Facility Letter nor the Memorandum accurately set out the principal of the loan, in breach of s 18(2)(d).

(2)   The contractual interest rate was 1.5% per month, or 18% p.a.  The Liquidators’ use of 19.192% p.a. (in Tsui’s 1^st and 2^nd affirmations) or 18.1% p.a. (in Tsui’s 3^rd affirmation) is in breach of s 18(2)(i).

(3)   The fluctuation of interest rate provided for in clause 6.1 of the Facility Letter is contrary to s 18(2)(i).

(4)   The Memorandum stated that default interest on late payment would be charged at the rate of 19.192% p.a.  In Tsui’s 3^rd affirmation, this was lowered to 18.1%.  Both figures are higher than the contractual rate of 18% p.a., in breach of s 22(1)(a).

(5)   Clause 8 of the Facility Letter imposed certain restrictions on early repayment and also a penalty of 2% of the amount of the loan if repayment was made within the first 6 months.  This infringed s 21.

(6)   The preamble and clause 15 allowed GMF to charge “upfront interest”, valuation fees and legal fees on the defendants. This infringed s 27.

17.  In addition, the defendants contended that Tsui’s 3^rd affirmation failed to state the amount of interest in arrears at the date of the originating summons and at the date of the affirmation as required by RHC Order 88 rule 5(3), but only at the date of the anticipated hearing before the Master, ie 7 November 2017.

18.  On 28 February 2018, the Judge dismissed the defendants’ appeal, holding that:

(1)   On the defendants’ argument that neither the Facility Letter nor the Memorandum correctly set out the principal of the loan, the Judge noted that s 18(3) conferred a discretion on the court to uphold a transaction notwithstanding any breach of s 18.  He noted that the defendants accepted the terms of the loan and the transfer of $4,754,252 instead of $5,000,000 and even paid the first few instalments without queries.  They had never complained of being in any way misled by GMF or having suffered any prejudice due to non‑compliance with s 18.  The Judge rejected any suggestion of sharp practice on the part of the Liquidators.  The 1^st defendant was a businessman and the interest rate could not be said to be anything close to excessive.  It was an everyday commercial transaction.  He exercised his discretion under s 18(3) as he took the view it would be inequitable to invalidate the entire transaction due to the inaccuracies in the Facility Letter and the Memorandum whilst the defendants had the benefit of the loan of $4,754,252.[2]

(2)   As for the Liquidators’ reliance on the interest rate of 18.1% p.a. in Tsui’s 3^rd affirmation, the Judge held it was a reduction of the interest rate (from 19.192%) in favour of the defendants and it would be unfair to allow them to rely on this reduction to vitiate the entire Facility Letter for breach of s 18(2)(i).[3]

(3)   As regards the fact that the Memorandum provided for a default interest rate of 19.192% p.a., the Judge held that the court had a discretion under s 22(2) to enforce the enhanced rate.  The Judge observed that the defendants did obtain the loan, and the default interest rate was only slightly higher than the stated rate and was accepted by the defendants in the Memorandum without demur or complaint.  He considered there was no prejudice suffered by the defendants.  He accepted the Liquidators’ concession to use the lower rate of 18.1%.[4]

(4)   In relation to the restrictions and penalty on early repayment which were apparently in breach of s 21, those provisions had never been invoked in this case.  In any event, they could be severed by reason of clause 19.10 of the Facility Letter and did not render the remainder of the agreement unenforceable.[5]

(5)   As regards the “upfront interest”, valuation fees and legal fees, given the Liquidators’ concession that these sums should be deducted from the principal, the defendants had not really paid those amounts.  In any event, the amounts did not appear to be unreasonable or exorbitant and any breach of s 27(1) would only render the agreement to pay such charges, not the entire loan agreement, illegal and unenforceable.[6]

This appeal

19.  The defendants have mainly raised the following arguments in their appeal to this Court:

(1)   The rate of 18.1% p.a. as advanced by the Liquidators in Tsui’s 3^rd affirmation and adopted by the Judge was unexplained, erroneously calculated, and contrary to the rates stated in the contract.

(2)   Because of the upfront deductions, the actual amount advanced was less than $5 million, but the defendants were misled into believing that the loan was $5 million and into paying $75,000 as monthly interest instalments for 8 months, thus overpaying GMF.  The discrepancies had also created uncertainties for the defendants as regards the true rate of interest.  The Judge erred in holding that the defendants had suffered no prejudice.

(3)   The Judge erred in the exercise of his discretion under s 18(3) in failing to take account of: (i) the plaintiffs’ unilateral alteration of interest rate; (ii) GMF’s concealment of its contravention of s 27; (iii) GMF’s cumulative beaches of the Ordinance; and (iv) the plaintiffs’ looseness and imprecision in these proceedings.

Discussion

20.  Notwithstanding that the documents stated the loan was for $5,000,000, there is no dispute now that the sum of $245,747.95 (see the breakdown in §9 above) should be deducted from the principal, because:

(1)   As regards the sum of $50,000 being “cost of loan acquisition”, the sum of $6,000 in legal fees and the sum of $4,200 in valuation fees, such deduction is the effect of s 27(1) and (4) which provide:

“(1) Any agreement entered into between a money lender and a borrower … for the payment by the borrower … to the money lender of any sum for or on account of costs, charges or expenses (other than stamp duties or similar duties) incidental to or relating to the negotiations for or the granting of the loan or proposed loan or the guaranteeing or securing of the repayment thereof shall be illegal.

…

(4) If any money or money’s worth is directly or indirectly paid or allowed to or received by any person in contravention of this section, the amount or value thereof, to the extent of such contravention and notwithstanding any agreement to the contrary … may be set off against the amount actually lent (and that amount shall be deemed to be reduced accordingly) …”

These amounts are therefore to be set off against the amount actually lent which is deemed to be reduced accordingly.

(2)   As regards the amount of $185,547.95 retained by GMF as “pre‑paid interest” in respect of the first three instalments, given that no interest had in fact accrued on the drawdown date and the defendants had never had the benefit of the money, this sum is, in our view and as is common ground between the parties, sensibly to be treated as in reality a reduction of the principal.  This is consistent with the definition of “principal” in s 2(1) as “the amount actually lent” and with s 2(3) which provides:

“For the purpose of determining the amount of the principal of a loan, any amount thereof which is not shown to have been lent except for the purpose of treating it as an instalment paid by the borrower in repayment of the loan and which is so treated by the lender shall be disregarded.”

21.  On the basis that the real principal is $4,754,252.05, two terms in the Facility Letter (construed together with the email) come into conflict with each other: the stipulation that interest is to be paid monthly at 1.5% p.m., and the requirement to make payment by instalment as per the Repayment Schedule.  The former would suggest a sum lower than $75,000 (viz $4,754,252.05 × 1.5% = $71,313.78) was payable per month and for every month including September (partially), October and November 2015, while the latter would suggest that an instalment of $75,000 was payable per month but only from December 2015 to August 2016 as the first 3 instalments had been “set off”.  In either case, however, the principal repayable on 30 August 2016 would be $4,754,252.05.

22.  Clearly this was not something the parties had actually thought about at the time of their contract.  The problem only arose as a result of the application of the law to their arrangement, and the consequent need to adjust the amount of the principal and hence the repayment terms.  The court nevertheless has to ascertain what the contract means on its proper construction before deciding whether and to what extent it is enforceable notwithstanding breaches of the Ordinance. 

23.  On behalf of the defendants Ms Fong initially submitted that interest should remain governed by the stipulation of 1.5% p.m. on the revised principal, but she recognised that this would mean the defendants had started off by defaulting in payment of interest for the period from 16 September to 30 November 2015.  Further, it is to be noted that clause 7.1 of the Facility Letter gives precedence to the Repayment Schedule by providing that the defendants “agree to pay such amounts and at such times as stated in the Repayment Schedule” notwithstanding the rate stated in the Facility Letter.  Adhering to the Repayment Schedule subject to the removal of the first 3 months’ instalments and the reduction of the principal seems to us to be the construction that would do the least violence to the language of the Facility Letter.  It would also lead to a lesser amount of interest payable than applying the rate of 1.5% p.m. for the entire loan period.

24.  On balance we therefore take the view, and in the end Ms Fong accepted, that on its proper construction, the transaction as adjusted meant that, with the reduction of the principal to $4,754,252.05, the borrowers agreed to pay interest at $75,000 per month, but only for 9 months starting from December 2015, on the dates set out in the Repayment Schedule, and to repay the principal of $4,754,252.05 at the end. 

25.  On this basis, the total amount of interest payable would be $675,000 (ie $75,000 × 9) on a principal of $4,754,252.05 over 11 months and 14 days.  A simple calculation would give a flat rate of 14.85% p.a.[7] Because the interest instalments were payable monthly from the fourth month onwards rather than in a lump sum at the end, the rate would in truth be somewhat higher than 14.85% p.a.[8]  Alternatively, it is possible to calculate the “effective rate” as defined in s 2(1) of the Ordinance using the statutory formula in Schedule 2 to the Ordinance, which can be worked out to be approximately 15.53% p.a.

26.  In contrast, the rate of 18.1% p.a. adopted in Tsui’s 3^rd affirmation, as explained in the calculations set out in the plaintiffs’ skeleton argument before the Master dated 1 November 2017, was calculated by taking the principal as $4,754,252 and the total interest as $860,547.95, and then dividing $860,547.95 by $4,754,252 on the basis this was the interest for the time elapsed of 1 year, and multiplying the quotient by 100 (ie $860,547.95 ÷ $4,754,252 × 100 = 18.10%).

27.  This calculation is erroneous, at least in two respects.  First, the term of the loan was in fact not 1 year, but 11 months and 14 days.  Secondly, as explained in §9 above, the amount of $245,747.95 deducted from $5,000,000 already included the first 3 pre‑paid interest instalments totalling $185,547.95.  If the principal is to be reduced in the manner adopted, $185,547.95 must also be deducted from the total interest paid. It follows that the Judge erred in accepting 18.1% p.a. as the applicable interest rate, though in fairness it should be pointed out that the first error mentioned above was one in favour of the defendants and the second error was not drawn to his attention by counsel, and the defendants were also erroneous in submitting below that 18% p.a. should instead be used in calculating the monthly instalments payable, which they submitted to be $71,313.78. 

28.  In our view, since the instalments remained payable at $75,000 per month for the 4^th to 12^th instalments of interest, there was no over‑payment of interest in respect of the 4^th to 8^th instalments, as Ms Fong accepted at the hearing.  Nor do we think that there was a “unilateral change” of the interest rate by the plaintiffs from the agreed rate.  The re‑calculations were necessitated by the adjustments required as set out above, not by any attempt on the plaintiffs’ part to change the interest rate.

29.  Be that as it may, the loan was in substance still quite different from that appearing from the documentation.  There were clear breaches of s 27(1) in relation to the charges and fees, which had to be set off from the principal.  The “pre‑payment” of 3 instalments of interest had necessitated a further reduction of the principal.  As a result of the necessary adjustments, neither the Facility Letter nor the Memorandum correctly set out the amount of the principal or the rate of interest charged, in breach of s 18(2)(d) and (i).  The loan agreement is therefore unenforceable by virtue of s 18(1), subject to the court’s power to allow enforcement under s 18(3), which provides:

“ Notwithstanding subsection (1), if the court before which the enforceability of any agreement or security comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable, the court may order that such agreement or security is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

30.  The principles relating to the exercise of this discretion have been set out by the Court of Final Appeal in Emperor Finance Ltd v La Belle Fashions Ltd & Others (2003) 6 HKCFAR 402 and Strong Offer Investment Ltd v Nyeu Ting Chuang (2007) 10 HKCFAR 529, and need not be repeated here.

31.  As stated above, the Judge was in error in accepting the contractual rate of interest to be 18.1% p.a. and in giving judgment by applying that rate.  It follows, with respect, that the Judge also failed to take into account the uncertainties attending the true rate of interest applicable that have resulted from the manner in which GMF conducted itself in the transaction.  Furthermore, in describing the loan here as “an everyday commercial transaction”, the Judge failed in our view to attach significance to the fact that GMF had deliberately structured the transaction in such a way that not only were fees and charges imposed in breach of s 27(1) and 3 instalments were in fact retained by GMF contrary to the Repayment Schedule, but also that the Memorandum prepared for the purpose of complying with s 18, which, as GMF knew, did not reflect the entire agreement between the parties, inevitably became incorrect.  It is also a notable feature of this case that until Master R Lai queried the figures, the plaintiffs were seeking to recover a loan of $5,000,000 with interest at 19.192% p.a.  Further concessions were only made when the defendants exhibited their bank statement showing receipt of only $4,754,252.05 upon drawdown.  In saying this, we do not make any criticism against the Liquidators personally who came into the picture long after the loan was made.  For these reasons, however, we are satisfied that this court is entitled to exercise the discretion under s 18(3) afresh.

32.  That said, we have no doubt at all that the Judge was correct in allowing the plaintiffs to recover the principal amount of the loan in the sum of $4,754,252.05.  Indeed, at the hearing Ms Fong did not resist the suggestion that it would be inequitable to allow her clients to keep the money they received from GMF.

33.  Further, Ms Fong accepted that the defendants should be required to pay the outstanding 9^th to 12^th interest instalments in the total sum of $299,067.12 ($300,000 less a small sum of $932.88 paid with the 5^th instalment). 

34.  For the interest during the period from 31 August 2016 to the date of judgment entered by the Master on 7 November 2017, Ms Fong submitted that the usual commercial rate of prime plus 1% per annum should be applied, alternatively the judgment rate.  Ms Lee, who appeared for the Liquidators, no longer supported the use of 18.1% p.a. but submitted that the rate of 14.85% p.a. (as explained in §25 above) should be used. 

35.  We decline to adopt the rate of 14.85% p.a.  It is not a rate mentioned anywhere in the loan documentation or in the plaintiffs’ evidence in the proceedings below or in any respondent’s notice or even in the plaintiffs’ skeleton argument in this court.  It is a deemed flat rate we have worked out from the interest instalments payable under our construction of the contract as revised in the light of the necessary adjustments, not a general rate agreed by the parties and stipulated in the agreement.  Money lenders who have conducted themselves like GMF should not be encouraged to think that the Ordinance may be contravened with impunity.  In the circumstances of this case, we do not see there is anything inequitable for the plaintiffs to be limited to the usual commercial rate.  We would therefore accept Ms Fong’s primary submission.  As for the time after the Master’s judgment, we would apply the judgment rate.

36.  In conclusion, for the above reasons, we uphold the Judge’s decision allowing the plaintiffs to recover the principal, but allow the defendants’ appeal to the extent that the rate of interest from 31 August 2016 to 7 November 2017 on the principal and outstanding instalments should be reduced to prime rate plus 1% per annum, and thereafter judgment rate.

37.  Having regard to the way in which the arguments developed and the relative success on the part of the parties respectively, we would order, on a provisional basis, that there be no order as to the costs of this appeal, and that the costs orders below are to be left intact (subject to correcting the inadvertent errors in those orders pointed out by Ms Fong).