HONG KONG FINANCE COMPANY LTD v. SO DAH WAI JOHN AND ANOTHER

HCA614/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 614 OF 2007

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R U L I N G

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1.       In delivering judgment in this matter I made an order nisi that the losing party, the defendants, should pay the plaintiff its costs of the action, and that they should do so on an indemnity basis.  The reason for that is that under clause 17 of the mortgage there is an obligation by the defendants that they would indemnify the finance company in that way.

2.       The defendants have now come back to court and argue that I should not make that order.  In fact, the position which is put forward is that I should only award the plaintiff two-thirds of its costs to be taxed on a party and party basis.  The justification for all of this largely centres on the fact that Mr Fung, the plaintiff’s solicitor, who I found had explained the mortgage to the defendants in a perfectly appropriate and proper way, had failed to point out that the early repayment provisions fell foul of the Money Lenders Ordinance in the sense that the particular clause in the mortgage allowed early repayment, but not before a number of months had elapsed, which is contrary to the relevant provisions of the Money Lenders Ordinance.

3.       In fact, as I found, that would not have made the mortgage deed void or anything of that sort, but it would have the effect of making that particular provision unenforceable.  But in the event on my finding there was negotiation and the matter was amended to a period that suited the defendants, particularly Mr So, the 1st defendant.

4.       But at the end of the day, when I consider the question of costs - and I appreciate that this is very much a matter in my discretion, I am not bound to follow the provisions of clause 17 of the mortgage deed - the fact is that this is a contractual provision which, on my finding, binds the defendants.  They did not have to enter into this agreement.  They decided to do so.  Its terms were explained to them.  Whilst I undoubtedly retain a discretion, I think I ought to give very substantial weight to the terms of the contract. 

5.       In any event I think I ought to say this, and so much appears from my judgment; the defendants, I found, and I have absolutely no doubt about it, had told me a series of deliberate lies designed to try and get out of the mortgage deed.  I know that today Mr So says, and he correctly reminds me that he told me so in the trial, that he accepts the debt.  But where he has no security other than the mortgage, this contest is all about the validity of the mortgage, and the Defendants’ lies were directed at getting themselves out of that transaction.  In doing so, they sought to blacken the character of Mr Fung the solicitor who I had found to be perfectly truthful and who had explained the terms of the mortgage in an entirely appropriate way.  The 1st defendant suggests that Mr Fung ought to have drawn to the plaintiff’s attention that their mortgage deed fell foul of the provisions of the Money Lenders Ordinance so far as the early repayment provisions are concerned, and he certainly didn’t draw that to the attention of the defendants. 

6.       It is right to say that this complaint was never pleaded.  It was never put to Mr Fung, who never had an opportunity to explain himself.  And I do not think it would be right for me to give this any weight in the overall scheme of things where I have found so comprehensively against the defendants on their evidence.  There is really no reason for me not to give proper weight, which I do, to the contractual provision. 

7.       And so costs will be on an indemnity basis.  The costs of this hearing I think need not be on an indemnity basis.  I will hear Mr Ho, counsel for the plaintiff, on this but I would have thought that costs should be to the plaintiff, but only to be taxed on a party and party basis for today.   

(Discussion re costs)

8.       Costs to you today, but on a party and party basis for today’s hearing.