PARAGON MORTGAGE LTD v. CHEUNG WAI PING

DCCJ 1716/2017

[2018] HKDC 1309

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1716 OF 2017

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DECISION

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Introduction

1.  The background facts are set out in my Decision dated 20 August 2018 (see [2018] HKDC 988, the “Main Decision”).  I adopt the same definitions.

2.  In the Main Decision, I struck out the defendant’s defence as being frivolous, gave final judgment in favour of the plaintiff in the sum of HK$900,000 plus contractual interest and indemnity costs, and made an order nisi in relation to the possession of the Property subject to the rights of 2 prior mortgagees.

3.  By summons dated 3 September 2018 (the “Summons”), the defendant applies for leave to appeal against the Main Decision and a stay of execution (including the costs order) pending appeal.

4.  The defendant also orally applies to vary the costs order nisi in the Main Decision.  Since the defendant is acting in person, I entertained the application notwithstanding that it was made out of time and without a proper summons (nor a supporting affirmation). I am unable to see any basis to depart from the normal rule that costs should follow the event.  I have also explained the reasons for awarding indemnity costs in favour of the plaintiff in paragraph 27 of the Main Decision.  I therefore orally dismissed the application at the hearing.

5.  Similar to the Main Decision, this decision is written in English with the defendant’s confirmation.  He may make an appointment with my clerk for interpreting this decision to him if necessary.

Legal principles

6.  The relevant principles are well established.  Before leave to appeal is granted, the court has to be satisfied that the intended appeal has a reasonable prospect of success or there is some other reason in the interest of justice why the intended appeal should be heard.  Reasonable prospect of success involves the notion that the prospect of succeeding must be more than “fanciful” without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at §17.

Leave to appeal

7.  The defendant, being a litigant in person, did not prepare a draft Notice of Appeal setting out the intended grounds of appeal.  During the hearing, I understand from him that he relies on 3 broad points:-

(1)   The defendant contends that a third party intermediary (ie one Mr David Chan on behalf of Anson Enterprise) was involved in the lending process, and this was known to both the plaintiff and the defendant.  Nevertheless, the plaintiff still required the defendant to sign on a written confirmation (addressed to the plaintiff) that no intermediary was involved (the “Confirmation”).  The defendant says that this constituted a breach of Clause 1 of the “Additional Licensing Conditions” under the plaintiff’s money lender license.  Further, the defendant argues that the creation of the Confirmation constitutes some sort of a misrepresentation that affects the validity of the Loan Agreement and the recoverability of the Loan;

(2)   On a related point, the defendant alleges that the plaintiff (or more specifically, its director Mr Leung) has been giving “false evidence” to the court by denying the involvement of an intermediary.  The defendant urges the court to allow this action to proceed to trial so that Mr Leung may be cross-examined and the truth revealed;

(3)   The registered address of the plaintiff, being the one appearing on the plaintiff’s licence (ie Unit 6B, 7/F, Chi Fu Centre) did not exist as there was only a “Unit 6” without any “Unit 6B”.  The defendant further argues that there is a breach of s 7 MLO.

8.  Concerning arguments (1) and (2):-

(1)   As Mr Wong, solicitor for the plaintiff, rightly pointed out, apart from the self-serving assertion from the defendant, there is no evidence of any involvement of an intermediary.  On the other hand, the Confirmation is an incontrovertible document that indicates otherwise;

(2)   The Confirmation is a document signed by the defendant addressed to the plaintiff, so if its contents were false or incorrect (as the defendant alleges), the misrepresentation originated from the defendant and not the plaintiff.  At the highest, the court may decide to treat the Confirmation as vitiated (ie as if the Confirmation did not exist), but that does not affect the plaintiff’s rights to recover the Loan (for which the plaintiff does not need to rely on the Confirmation);

(3)   In any event, a breach of the conditions in the plaintiff’s licence (if established) does not automatically invalidate the Loan Agreement or affect the recoverability of the Loan.  The defendant did not refer to any provision in the MLO that invalidates the loan and/or prohibits its recovery if an intermediary is involved;

(4)   As stated in paragraphs 19 and 20 of the Main Decision, the defendant’s true complaint is that he was defrauded by David Chan / Anson Enterprise.  He is not alleging that the plaintiff was involved in the fraud.  For this simple reason he really has no claim against the plaintiff.  The defendant’s 2 arguments are to invite the court to make the plaintiff liable through the backdoor.  There is plainly no basis to do so and appears to me to be fundamentally wrong in principle; it effectively requires the plaintiff to shoulder the defendant’s loss caused by the (alleged) fraud without the plaintiff being alleged as a party to the fraud.

9.  As to argument (3), in paragraph 18 of the Main Decision I have explained why I have accepted the plaintiff’s explanation in relation to the addresses.  I also see no error in my conclusion as to the proper construction of s 7 MLO (paragraphs 15-17 of the Main Decision), in particular that a breach of s 7 does not affect the enforceability of the loan.

10.  The defendant further argues that s 7 imposes different standards on money lenders depending on their reputation; for the more well-known money lenders, the threshold under s 7(1) MLO may be more relaxed than if it is applied to a money lender which is not as prominent.  I have no hesitation in rejecting this argument.  Clearly the statutory standard applies across the board; the MLO draws no such distinction as contended by the defendant.  In any event this does not advance the defendant’s case given my conclusion above regarding the effect of s 7 on the enforceability of the loan.

11.  I should also record that the defendant stated during the hearing that he is willing in principle to repay the principal amount of the Loan to the plaintiff, but he says that the plaintiff is not entitled to interest and costs.  Based on the arguments advanced by the defendant, I am unable to see any basis for such distinction between the plaintiff’s entitlement to the principal amount of the Loan on the one hand and to interest / costs on the other; the defendant’s arguments are all to the effect that the Loan is irrecoverable by the plaintiff.  But I find the defendant’s position telling: clearly he understands that he is indebted to the plaintiff under the Loan Agreement.

12.  For these reasons, all the proposed grounds of appeal are without merit.  There are no other reasons why the intended appeal should be heard in the interest of justice.  I therefore dismiss the defendant’s application for leave to appeal.

Stay pending appeal

13.  Since I have dismissed the application for leave to appeal, the application for stay pending appeal does not arise.  I see no other basis for granting a stay. 

Conclusion and costs

14.  The Summons is therefore dismissed.  I make a costs order nisi that the costs of the Summons, including the hearing on 23 October 2018, be to the plaintiff on an indemnity basis, to be taxed if not agreed.  This costs order shall become absolute in the absence of any application for variation within 14 days.

15.  I make an order for indemnity costs since the intended grounds of appeal are hopelessly bad.  In reaching my decision on costs, I place no reliance on Clause 11 of the Loan Agreement or Clause 20(b) of the Third Legal Charge, since arguably the Summons is not a step taken by the plaintiff in “recovering” or “enforcing” the Loan nor for the “lawful exercise of the powers” under the Third Legal Charge.