AU HEUNG BEN v. SO LIANG KI ALBERT

DCCJ 4868/2021

[2023] HKDC 203

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4868 OF 2021

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BETWEEN

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JUDGMENT

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1.  This is an appeal against the order made by Master Bryan Lung on 2 August 2022 (“the Order”), granting summary judgment in favour of the plaintiff for the sum of $438,797.67, being part of the loan claimed in the Statement of Claim.

2.  This is a case arising from various alleged loans advanced by the plaintiff to the defendant between December 2017 and August 2021. Both the plaintiff and the defendant were friends at the material times, and it is not disputed that no written agreements were entered into between the parties. It is alleged by the plaintiff that a total sum of $1,972,341.59 was lent to the defendant over some eighty odd occasions (“the Total Loan”) with dates and amounts pleaded in the Schedule annexed to the Statement of Claim (“the Schedule”). For the purpose of this summary judgment application, the plaintiff is only pursuing part of the Total Loan against the defendant, which consists of Items 2 to 7 of the Schedule being monies advanced to the defendant in August 2018 in the amount of $289,096.00 (“the August 2018 Loan”), Item 8 of the Schedule being $7,000 advanced to the defendant in September 2018 (“the September 2018 Loan”) and Items 22, 23, 25, 26 and 27 of the Schedule in the amount of $167,890.67 lent to the defendant in March 2020 (“the March 2020 Loan”). The total amount of the August 2018 Loan, the September 2018 Loan and the March 2020 Loan is $463,986.67 (“the Subject Loan”).

3.  The defendant filed a defence denying the Total Loan on 30 November 2021. On 16 February 2022, the plaintiff issued a Summons for Summary Judgment against the dfor the Subject Loan.

4.  The defendant filed his Affidavit on 7 June 2022 admitting that he had borrowed the total amount of the Subject Loan from the plaintiff. In addition, he admitted that the plaintiff had paid for his mobile phone service expenses and travelling expenses totaling $333,694.82 (“the “Expenses Paid”).

5.  The plaintiff’s case is that since the defendant admits that he borrowed the plaintiff’s the Subject Loan and owes the plaintiff for the same, the defendant has therefore no defence and summary judgment should be granted against the defendant.

6.  It is the defendant’s case that he does not agree to all of the other items in the Schedule besides the Subject Loan and the Expenses Paid. The defendant argues that the total amount of these disputed items is $1,174,660.10 (the “Remaining Loans”) and should be regarded as an amount in excess of the principal payable in respect of the Subject Loan, and hence interest under the definition of the Money Lenders Ordinance (Cap 163) (“MLO”). Should the court view that the Subject Loan is the loan principal and the Remaining Loans is interest, the effective rate of such interest would have exceeded 60% per annum and the Subject Loan is therefore unenforceable in its entirety.

APPLICABLE PRINCIPLES

7.  I reminded myself that this is an appeal by way of an actual rehearing of the plaintiff’s application for summary judgment and I should treat the matter as though it has come before me for the first time. Although the judge hearing the appeal may adopt the reasons of the master making the original decision, the judge’s decision is no way fettered by the previous exercise of the master’s discretion: see Hong Kong Civil Procedure 2023, Vol 1 at paragraph 58/1/2.

8.  As for an application for summary judgment, it is a process by which a plaintiff may apply for judgment expeditiously in a case where there is no defence, in order to avoid unnecessary delay. Where a plaintiff has established a prima facie sustainable case, it is for the defendant to show cause why summary judgment should not be granted by reason of the existence of a triable issue or an arguable defence or that there ought to be a trial for some other reasons – see Hong Kong Civil Procedure 2023, Vol 1 at paragraphs 14/4/1 and 14/4/3.

9.  The primary duty, however, rests on the plaintiff to demonstrate that the defendant has no defence. In this regard, the Court will examine not only the defence raised, but also the basic premise of the plaintiff’s claim and its inherent strengths and weaknesses. As Cheung JA said in Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822 at paragraph 14:-

“14. It is well established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence… the starting point in a summary judgment application is that it should only be invoked when there is no defence to a claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence…”

10.  Thus once the plaintiff is capable of arguing that there is no defence to a claim, the onus shifts on the defendant to show that there are triable issues or that he has a “real or bona fide defence” on the balance of probabilities. Sufficient facts and particulars must be given to show that there is a triable issue and the defendant’s affidavit must condescend upon particulars. Bare allegations are not sufficient.

The defendant’s case

11.  In opposing the plaintiff’s application for summary judgment, the defendant explained in his Affidavit that the plaintiff suffered from some financial hardship in around 2017 and took out a loan from United Asia Financial Limited (“UA Loan”). The plaintiff lent part of the money he obtained under the UA Loan to the defendant, ie the August 2018 Loan, which enabled him to settle various credit card payments. The defendant admitted that he later borrowed more money from the plaintiff being the September 2018 Loan and the March 2020 Loan. Further, he identified another 21 items under the Schedule being the “Expenses Paid” by the plaintiff on behalf of him.

12.  The remaining items under the Schedule are therefore the Remaining Loans which is denied by the defendant (besides items 9, 12, 18 and 19 being partial repayment from the defendant). He averred that he never borrowed nor was in any way indebted to the plaintiff in respect of those Remaining Loans. To support the defendant’s contention that the Remaining Loans should be regarded as interest of the Subject Loan, he invited the court to look into the plaintiff’s answer to the defendant’s discovery (the “Discovery Letter”) and analysed how various items of the Remaining Loans were inherently implausible.

13.  The defendant first relied on items 10, 16, 49, 50, 55, 61, 67, 74, 80, 84 and 88 from the Schedule of which the plaintiff explained in the Discovery Letter being the sum “the defendant agreed to pay back HK$10,000 each month to the plaintiff as the plaintiff obtained a loan of HK$700,000 from the United Asia Finance Limited.” The total amount of these monthly repayment is averred at $360,000.00 and since the plaintiff is claiming the principal amount of the August 2018 Loan in this summary judgment application, the defendant argues that the only explanation to these monthly $10,000 repayments would be some monthly interest of the August 2018 Loan.

14.  The defendant also tried to relate the March 2020 Loan with a loan of $500,000 the plaintiff took out with Maxcolm Finance in February 2020 (“Maxcolm Loan”). Likewise, the defendant relied on the Discovery Letter that some 17 items of the Remaining Loans being described as ‘interest’ of the Maxcolm Loan, and since the defendant only agreed that he has taken out the March 2020 Loan from the plaintiff, those 17 items of the Remaining Loans could only be inferred as ‘monthly interest’ of the March 2020 Loan.

15.  As to all outstanding items of the Remaining Loans including some 10 items described as “Hang Seng call back loan interest” at $4,000 per month (the “Hang Seng Loan Interest”), the defendant again argued that there was no evidence of such principal loan was taken out from the Hang Seng Bank by the plaintiff nor monies advanced to the defendant from such loan. And thus in light of the analysis of the UA Loan and the Maxcolm Loan, this remains a real possibility that this Hang Seng Loan Interest is likely to be some charges which the plaintiff imposed on the defendant based on the Subject Loan.

16.  Based on the defendant’s analysis of various ‘interest’ showing in the Schedule, he concluded that the Remaining Loans are so closely related to the Subject Loan that can arguably be inferred as the overall interest payable in respect of the Subject Loan. Since the Remaining Loans is close to $1.2 million, the charging of the interest rate of the Subject Loan must have exceeded 60% per annum, which renders the Total Loan unenforceable.

Legal Analysis

17.  It was held in Emperory Genesisy, supra. that the starting point is for the plaintiff to demonstrate that he had lent the money to the defendant. It is plain that the defendant is not in dispute that the plaintiff did advance the Subject Loan to him and there is nothing in this case that would give rise to the presumption of advancement. It is trite that once a defendant has admitted receiving money from the plaintiff, the payment would prima facie import an obligation to repay on demand. The legal burden is thus on the defendant to prove the facts that he alleges and to show that such money is not repayable on demand.

18.  In Mak Ka Hing v Pang Ming Chung [2011] 1 HKLRD 347, Le Pichon JA (with whom Ma CJHC and Rogers VP agreed) set out the observations of Willmer LJ in Seldeon v. Davidson [1968] 1 WLR 1083 as follows at paragraph 23:-

“…in the absence of circumstances such as that the monies were paid in settlement of an existing debt or that it was given and returned for cash or anything of that sort, money paid by the plaintiff was prima facie repayable on demand. A defendant seeking to evade repayment of the money which was paid to him had the onus of proving the facts which he alleges show that the money was not repayable.”

19.  As such, I am satisfied that the admission from the defendant demonstrated that the prima facie has no defence to the plaintiff’s case, and the onus shifts to the defendant to show that there are triable issues or that he has a “real or bona fide defence” on the balance of probabilities.

20.  It was submitted by Mr Co for the defendant that the plaintiff has been evasive and failed to particularise the Remaining Loans in his pleadings, so much so that the defendant had to request for Further and Better Particulars as to “when, where and how did each and every oral agreement was made”. The defendant, however, was still not satisfied with the particulars being given in the Discovery Letter and urged the court to consider the factual matrix of each and every item on the Schedule, which casts doubts on the plaintiff’s case and reinforces the defendant’s argument that the Remaining Loans being interest payable of the Subject Loan.

21.  Mr Co argued that the existence and the terms of the oral agreement (albeit not pleaded) depends solely on the oral evidence of the parties and it would therefore only be fair for the plaintiff’s case to go to trial and to examine if the Remaining Loans was in fact interest of the Subject Loan.

22.  On this issue, I took reference from So Muk Chung Roger v True Honest Company Limited, HCA 1727/2018 [2020] HKCFI 1269 where Deputy High Court Judge To agreed with the plaintiff’s argument that only material facts are required to be pleaded.

“23. … the Loan Agreement as pleaded contained all the essential elements which must be pleaded as set out in Atkin’s Encyclopedia of Court Forms in Civil Proceedings”. It is trite rule of the pleading that only material facts need to be pleaded and not the evidence. The date, the amount of loan outstanding, the currency, that the loan was payable on demand, that the loan was interest free, the demand for repayment and the default have actually been pleaded. These pleas are sufficient to support the plaintiff’s case.

24. I am unable to see how many triable issue could be said to have been raised by the lack of pleading of the other terms…”

23.  In my view, what makes the advance a loan was its nature in that it was meant to be repayable. Absence of reference to or agreement on interest would not defeat that. While the defendant complained that the plaintiff had not adduced any evidence to show that the Remaining Loans are not interest nor did the plaintiff plead any particulars concerning the negotiation and formation of the alleged oral loan agreement, it is hardly perceivable how the defendant could have signified or authorised his offer and acceptance to the plaintiff to form an agreement. The defendant has not advanced his version of any terms of any loan agreements which he says are in dispute. He has not advanced any argument that by reason of any of those 'oral' terms in dispute he has a valid defence. He has not raised any issue which makes the fact of negotiation and formation of the alleged agreement material facts which are required to be pleaded.

24.  All the defendant was able to make out from the Discovery Letter is a theory of how the Remaining Loans could be interpreted as interest of the Subject Loan. However, there was in fact nothing in the Discovery Letter suggesting any of the Subject Loan was related to the Remaining Loans besides the fact that the plaintiff admitted he used part of the UA Loan to help the defendant to settle the August 2018 Loan. To convince the court that the interest rate for the loans exceeds 60% pa would depend on first the amount of the principal loan and secondly, the borrowing period. The defendant did not, or as he averred, could not provide any particulars as to how much he owed the plaintiff, and even on the defendant's own version of facts that he once agreed to make $10,000 monthly repayment to the plaintiff, he could not particularize the amount of the principal loan nor how long it would take him to settle the debts he owed the plaintiff. Given the uncertainty over the exact amount of the principal loan and the borrowing period, it is not clear whether the applicable interest rate would exceed the statutory restriction of 60% pa.

25.  At this juncture, I also bear in mind the Defence filed by the defendant which merely put forward a bare denial to the plaintiff's contentions. Nowhere in his Defence was there any allegation or suggestion that the Total Loan consisted of interest payable. The first time the defendant raised his purported defence was by way of his Affidavit filed on 7 June 2022, that is almost four months after the plaintiff had issued the application for summary judgment and two months after the Discovery Letter. One must not lose sight that the contents of the Discovery Letter, as prepared by the plaintiff's solicitors in April 2022, were in fact very much similar to the “list of debts” prepared by the plaintiff for the defendant’s information back in January 2021. The defendant nonetheless did not raise any allegations nor queries as to the nature of those ‘interest’ in his ‘Facebook messenger’ conversations with the plaintiff in October 2021. In my view, if the defendant truly believed that the Remaining Loans represent interest of the Subject Loan at a rate of interest exceeded 60% per annum, it would be inconceivable that the defendant, who was legally represented at the time, would have failed to put forward his case in his Defence or any correspondence prior to the commencement of this action.

26.  The inability of the defendant to explain how the Hang Seng Loan Interest is likely to be some charges which the plaintiff imposed on the defendant is simply evidence of a lack of genuine defence.

27.  Per contra, the plaintiff was able to produce documentary evidence of transmittance and/or cheques he drew in favour of the defendant and various banks for settlement of his credit card debts, which tallied with the Discovery Letter and his pleaded case. These documents reinforce the plaintiff’s case that he only intended to ask the defendant to pay him back what he advanced without interest. Apart from the defendant’s bare assertion in his Affidavit, not a speck of evidence has been adduced to show that he and the plaintiff had any kind of agreement as to the repayment scheme, let alone the charges of interest.

28.  In my view, the defendant arbitrarily postulated a theory that the Subject Loan being the principal amount he indebted to the plaintiff and the Remaining Loans is therefore arguably interest receivable. To raise a triable issue or arguable defence, the defendant must condescend upon particulars but “cannot be sparing of the particulars of his defence, and then claim, as a result of his own parsimony in details, that there is an obscurity which must await trial for illumination”. See Sumikin Bussan International (HK) Ltd v The Precast Piling & Engineering Co Ltd And Anor, HCA 3814/2001 unreported, 10 April 2002.

Disposition

29.  The defendant has failed to raise a triable issue. In my judgment the appeal ought to be dismissed with costs to the plaintiff with certificate for counsel.

30.  I make an order nisi that the costs of and occasioned by the appeal be payable by the defendant to the plaintiff to be summarily assessed on paper. The plaintiff has already submitted his statement of costs for summary assessment. I direct the defendant to lodge and serve a list of objections to the plaintiff’s Statement of Costs dated 3 January 2023 on or before 27 February 2023.