WONG YAT KEUNG BILLY v. KAI SHUN INTERNATIONAL ACCOUNTING CO LTD

DCCJ3042/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3042 OF 2013

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DECISION

1. This is the Plaintiffs’ application by summons issued on 17 October 2013("Summons") for default judgment for:

1) a declaration that the Plaintiff is not liable to the Defendant for any sum pursuant to the Referral Agreement dated 11 March 2013;

2) a declaration that the said Referral Agreement is unenforceable;

3) an injunction restraining the Defendant from causing or permitting or continuing any intimidation, coercion and harassment to the Plaintiff and/or his family members; and 

4) Costs.

Background

2.  The Defendant, by itself and through debt collecting agents engaged by it, seeking to collect an alleged debt from the Plaintiff.  The Plaintiff considered he is not liable to the Defendant and refused to pay any of the sum demanded.

3.  The Plaintiff was then indebted and would like to further mortgage the property owned by him and his wife as tenancy in common in equal share (the “Property”) to finance the repayment.

4.  The Plaintiff was introduced to Mr Lo (subsequently known to be a director of the Defendant) who promised that he could arrange the Property to be mortgaged so that the Plaintiff could obtain HK$10mils at the interest rate of P-1.8%, and Mr Lo eventually urged the Plaintiff to sign an agreement (the “Referral Agreement”) dated 11 March 2013 with “Ka Shun” (which has the same Chinese name as the Defendant [Kai Shun] but is not a registered company in Hong Kong.

5. Ka Shun did not sign on the Referral Agreement when the Plaintiff signed on it.  Neither Ka Shun nor the Defendant managed to secure a mortgage in terms as per the Referral Agreement.  On 20 May 2013, the Plaintiff and his wife were forced to sell the Property at HK$12mils in order to repay the debts.  On 28 May 2013 Mr Lo called the Plaintiff and alleged that by selling the Property the Plaintiff was in breach of the Referral Agreement and demanded the HK$500,000 consultancy fee (“the alleged consultancy fee”). 

6. On or about 4 June 2013, a copy of the Referral Agreement bearing the Defendant’s company chop was sent to the Plaintiff ‘s solicitors.  The sale of the property was completed on 5 July 2013.  Time being, the Defendant has instructed debt collecting agents including one Mr Ma to collect the alleged consultancy fee from the Plaintiff by intimidation/harassment.  

7. The Plaintiff issued his Writ of Summons on 15 August 2013, and applied for an interim injunction on the same day; an interim injunction was granted until 23 August 2013, the Plaintiff issued an inter-parte summons on 16 August 2013.  On the return date, upon hearing the counsel of the Plaintiff and the representative of the Defendant, the interim injunction was extended until 3 September 2013.  The Defendant was absent on 3 September and the interim injunction was extended until further court order.  The Defendant did not file any affirmation in relation to the interim injunction application

8. The Defendant undoubtedly was served the writ, the various court orders and the other documents related to the present case, but up to the present moment, the Defendant has not acknowledged service and has not filed its Defence. 

9. The Plaintiff took out his summons for default judgment on 17 October 2013; the Defendant did not file any affirmation for the present application or any time summons for its Defence.  The Defendant only indicated on 21 October 2013 that he has no objection that the Plaintiff lodge the hearing bundles with the court by an unsigned letter with the Defendant’s letter head but purportedly issued by Ka Shun.

Discussion

Declaratory reliefs and injunctive reliefs

10. The relevant legal principles has been summarized in Chan Ka Hay and others v Sino Favour Development Limited HCA 2457/2008, 9 October 2012, those applicable to the present application being:

“(1) In general, a declaration would not be granted when giving judgment without trial (e.g. default judgment). However, this was only a rule of practice and not of law and would give way to the paramount duty of the court to do the fullest justice to the plaintiff which he was entitled. … A declaration can also be granted without trial, by way of a default judgment under Order 19 Rule 7, if the plaintiff has a genuine need for such relief and the court could properly grant it based on the merits of the case. It is only a rule of practice but not a rule of law not to make a declaration when giving judgment in default without a trial: HKCP 2012 15/16/2; Patten v Burke Publishing Co. Ltd. [1991] 1 WLR 541 (applied in Liu Chi Keung v Law Sim Yuk [2006] 4 HKLRD 385; Lam Shing Shou v Lam Hon Man & Others [2002] HKLRD (Yrbk) 94)

(2) The statement of claim must show a case for the order the applicant seeks to obtain.  The court’s task (in exercising its discretion) is to see whether the plaintiff appears to be entitled to judgment on his statement of claim.  The court does not need to be satisfied by evidence adduced by the plaintiff to prove his case: HKCP 2012 19/7/14.”

The tort claim

11. Mr Chau for the Plaintiff submitted that the tort of harassment is recognized to be part of the local law.  And he summarized the element of the tort as follows:

(1)  The term ‘harassment’ means a course of conduct by a person, whether by words or action, directly or through third parties, sufficiently repetitive in nature as would cause, and which he ought reasonably to know would cause, worry, emotional distress or annoyance to another person.  This is not intended to be an exhaustive definition of the term but rather one that sufficiently encompasses the facts of the present case in order to proceed with a consideration of the law. (Lau Tat Wai v Yip Lai Kuen Koey HCA 1466/2011, para.62)

(2)  It is not necessary to show intention on the part of the wrongdoer to cause injury to the victim.  The lower threshold of recklessness as to whether the victim would suffer injury from his act would suffice.  The lower threshold is justified when physical or mental harm can be involved (Lau Tat Wai at para.65)

12. According to the Plaintiff’s Statement of Claim, the Referral Agreement was entered into by the Plaintiff alone and his family members did not take part in it.  However, since the Plaintiff refused to pay the Defendant, the Defendant has by itself, its servants and agents, including debt collecting agents intimidated and harassed the Plaintiff and his family members.

13. The Plaintiff has provided the particulars of the threats and intimidation since 31 May 2013 in his Statement of Claim, including threat that one Mr Ma, a debt collecting agent, would wait at his children’s school and would go to his wife’s office to collect the debt, and instructed debt collecting agents to go to the Plaintiff’s wife’s office for demanding the debt on 2 occasions (paragraph 12 of the Statement of Claim).

14. Mr Chau submitted that there is absolutely no reason to approach the Plaintiff’s wife and their children.  The approaches by the Defendant were of a repeated nature, and these actions served no other purposes other than causing distress and annoyance to the Defendant and his family members.  The intimation of waiting for the Plaintiff’s children at school and the incident of 3 males intruding in the wife’s office are per se disturbing and intimidating. 

15. Mr Chau submitted that the fact that there are serious issues to be tried in respect of the Tort Claim had already been confirmed by two different judges who respectively granted and extended the interim injunction until further court order.  Yet up till now the Defendant has not filed any affirmation opposing the granting of the interim injunction.

The contract claim

16. Without explanation from the Defendant, the reason of using different English name on its document and correspondence is unknown, yet there is no dispute that the Defendant has been consistent with his Chinese name, and the plaintiff does not appear to take any issue on identity as to the contracting parties of the Referral Agreement.  

17. Clause 2 of the Referral Agreement reads, “[Ka Shun ]undertakes that the interest rate of P-1.8% or less can be achieved in respect of the first mortgage, and that [the Plaintiff] shall not be required to pay any fees if [it was] not successful” . 

18. Clause 3 of the Referral Agreement provides that, “Financial arrangement, balance transfers, matters in respect of property mortgages, the lender must be a bank or financial institutions holding [relevant] authorized licenses”.

19. Clause 4 of the Referral Agreement provides that, “When [the Plaintiff’s] financial arrangement application, debt restructuring or as agent for bankruptcy (代辦破産) is/are successfully completed, [the Plaintiff] shall forthwith pay [Ka Shun] a consultancy fee equals to 5% of the total amount of financial arrangement in the sum of HK$10mils.

20. Clause 6 of the Referral Agreement provides that, “[the Plaintiff] shall pay the service charge of [Ka Shun] on the date when the loan is withdrawn.  If [the Plaintiff] pays the service charge 7 days after the withdrawal (counting from the date of withdrawal). [Ka Shun] is entitled to claim [for the sum] by legal proceedings against [the Plaintiff], and on such occasion [the Plaintiff] will bear all the legal costs and fees.  [Ka Shun] will charge a surcharge of 30% and all expenses caused by the outstanding service charge which shall be borne by [the Plaintiff]”.

21. Clause 7 of the Referral Agreement provides that, “After [the Plaintiff] has signed this agreement and has been successfully approved, and if within 5 months [the Plaintiff] makes any [financial arrangement] by engaging other company or person or by himself, [the Plaintiff] shall pay [Ka Shun] the consultancy fee in full.”.

22. Clause 8 of the Referral Agreement provides that, “If [the Plaintiff] terminates the contract within 5 months after the signing of a loan agreement, [the Plaintiff] shall pay [Ka Shun] the service charge as provided in the agreement as the termination charge”.

23. According to the Plaintiff’s Statement of Claim, the referral agreement is about obtaining a first mortgage for the Property, but the Defendant failed to secure such mortgage for the Plaintiff pursuant to Clause 2 of the Referral Agreement.

24. According to the Plaintiff’s Statement of Claim, the defendant started to demand consultancy fees pursuant to the Referral Agreement after the sale of the Property on 20 May 2013, Mr Lo of the Defendant called the Plaintiff on 28 May 2013 alleged the Plaintiff in breach of the Referral Agreement.  Mr Chau submitted that at the time of the sale, none of the preconditions in clause 6, 7 and 8 are satisfied; and he further submitted that where the Defendant attempts to argue clause 7 and 8 can be construed in such a way that it is entitled to the full consultancy fees within the first 5 months even without securing any financial arrangement as stipulated, if the Plaintiff makes his own arrangement or terminate the contract, the clauses would amount to penalty clauses, as it is not a genuine estimation of the damages. 

25. Further, or alternatively Mr Chau submitted that according to the guidelines for “Prudential Measures for Property Mortgage Loans” issued by the Hong Kong Monetary Authority to all authorized institutions dated 10 June 2011, for residential properties occupied by the owner with a value at HK$10mils or above, the maximum LTV ratio shall be 50%; in the premises the Referral Agreement is unenforceable by one or both of the reason below:

1)  the Defendant would not be able to perform Clause 2 and 4 in accordance with Clause 3 by mortgaging the Property;

2)  the performance of Clause 4 would in any event be illegal.

Necessity

26. Mr Chau submitted that even after the Plaintiff has successfully obtained the interim injunction, the Plaintiff and his wife were still approached by the debt collecting agents.  The debt collecting agents approached them on the basis that there is an existing debt owed to the Defendant. These actions have to be stopped urgently, and they cannot be effectively prevented unless there is a declaration to the effect that the Plaintiff is not liable pursuant to the Referral Agreement.  The declaration which show that there is no “debt” to be collected, would assist the Plaintiff to resist any further harassments and nuisance.

Conclusion

27. I am satisfied that the Defendant has been properly served with all relevant court documents including the Writ, the Statement of Claim, the inter-parte summonses, and the various court orders.  The Defendant should be fully aware of the proceedings and it chose to take no action apart from attending one call-over hearing for the interim injunction application, and three notes/letters to the Plaintiff’s solicitor as shown in the Correspondence Bundle for the present application.  I am also satisfied that the notes/letters issued by the Defendant have discharged no reasonable cause of defence to the Order sought in the present summons.

28. I am further satisfied that the Plaintiff’s solicitors have duly fortified and informed the Defendant of the present application for leave to enter judgment against it and the hearing before this Court.

29. Having considered all the circumstances of the case, I accept the submissions of Mr Chau that the statement of claim show a case for the order sought and the declaratory relief sought is necessary.  Mr Chau agreed that should the court grant the declaration as per paragraph 1(1) of the summons, the declaratory relief as per paragraph 1(2) is not necessary.

30. Accordingly I grant the order in term of Paragraph 1(1) and 1(3) of the summons.

Costs

31. I consider the usual principle that costs follow event should apply. I therefore grant a costs order nisi to be made absolute within 21days from the date hereof that the Defendant is to pay the Plaintiff costs of this action, with certificate for counsel for this summons. 

32. At the end of the discussion I indicated to the parties that I intend to summarily assess the costs.  Mr Chau informed me that the Plaintiff has already obtained a costs order against the Defendant on 3 September 2013 relating to the costs for the Plaintiff’s injunction application (including costs previous reserved in relation of the application) be the Plaintiff’s costs in the cause with certificate for counsel.  The Plaintiff requested this part of the costs to be taxed if not agreed; I consider this is an appropriate course and shall order accordingly.

33. For the rest of costs, the Plaintiff requests summary assessment.  I consider the appropriate course is to have the summary assessment to be conducted by way of paper disposal.  Accordingly, the Plaintiff is directed to file and serve a copy of his statement of Costs to the Defendant within 7 days after the costs nisi made absolute and the Defendant do submit its comment to the Plaintiff’s statement of costs, if any, to the court with copy to the Plaintiff within 7 days thereafter.