TONG BO FINANCE CO LTD v. VERONICA ELLA

HCA 2933/2015

[2019] HKCFI 1832

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2933 OF 2015

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J U D G M E N T

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1.  This is an action brought by the plaintiff, a money-lender, for recovery of a loan made to the defendant and her husband, Mr King Wai-ming, in August 2015. Although the loan was made to them jointly, since Mr King has been bankrupted, the present action is being brought only against the defendant. Although the defendant filed a defence and witness statements of herself and Mr King at an earlier stage of these proceedings, she has, since June 2018, been unrepresented by any solicitors and, despite service on her of the relevant documents and notices, has not appeared at the trial.

2.  The facts relied upon and as proved by the evidence adduced by the plaintiff are straightforward.  In August 2015, the defendant and Mr King were referred to the plaintiff for a possible loan transaction involving a second mortgage on a property in Tseung Kwan O jointly owned by them.  At the time, the couple was indebted to HSBC for a loan in the amount of around HK$3,285,000 secured by a first mortgage on the property.  There were two other loans to them secured by a second and a third mortgage on the property respectively, amounting to the sums of HK$1.4 million (owed to Hao Tian Finance Company Limited) and HK$350,000 (owed to Hong Kong CT Finance Limited). 

3.  Having considered the existing indebtedness and the approximate valuation of the property, the plaintiff was prepared to advance a loan of HK$2,050,000 to the defendant and Mr King for the purposes of discharging the existing second and third mortgages and the associated indebtedness, with the remaining surplus for the borrowers. It can be seen that on 20 August 2015, Mr Lam of the plaintiff contacted Mr King and provided him with the contact details of the solicitors’ firm at which the transaction was completed on the following day, 21 August 2015.  On that day, the defendant and Mr King attended at the office of the solicitors’ firm of Mike So, Joseph Lau & Co.

4.  There, according to the evidence I heard from Ms Jenny Shui, a staff member of the firm who explained the relevant documents to the couple, both defendant and Mr King entered into the loan documents.  First, they signed on a promissory note for the amount of HK$2,050,000, a memorandum prepared in accordance with section 18 of the Money Lenders Ordinance (Cap 163) setting out the required particulars, a summary of the provisions of the Ordinance attached to the memorandum, a document called “Terms and conditions” which appear to be a set of general conditions or standard general conditions of the plaintiff applicable to this kind of loan transactions, and a repayment schedule which set out the amount of interest to be repaid monthly for 12 months at HK$41,000 each (representing an interest rate of 24% per annum) and the date of repayment of the principal of HK$2,050,000 on 21 August 2016, being a year from the date of the loan.

5.  Two cheques were drawn by the plaintiff on that date, one in favour of the solicitors’ firm in the sum of HK$1.88 million and the other in favour of Mr King in the sum of HK$170,000.  Mr King and the defendant signed on a copy of the cheques in acknowledgement of their receipt thereof.  According to the evidence, the cheque for HK$1.88 million was employed by the solicitors’ firm on the borrowers’ behalf to discharge the outstanding indebtedness on the existing second and third mortgages, together with a further contribution of about HK$36,000 from the borrowers.  The cheque for HK$170,000 was given to Mr King and the defendant. 

6.  In addition, the borrowers also signed a document acknowledging receipt of the application form, a copy of the loan agreement, a cheque, the repayment schedule and the provisions of the Money Lenders Ordinance.

7.  In September 2015, the pre-existing second and third mortgages were discharged and the associated indebtedness duly repaid. There are in evidence certain mobile phone text exchanges between Mr Lam of the plaintiff and Mr King, in which Mr King was reminded to make payment.

8.  On 9 October 2015, the defendant and Mr King made the first payment of interest in the amount of HK$41,000, albeit it had been due since 21 September 2015.  Subsequently, Mr King was reminded to make payment of the second instalment, but neither he nor the defendant ever paid the second or the subsequent instalments, or indeed the principal of the loan.

9.  In fact, on 28 October 2015, Mr King presented his own petition for bankruptcy which was granted on 8 December 2015. It may be noted that in none of the text communications between Mr King and Mr Lam was there any complaint that the couple had been tricked into the transaction or otherwise defrauded.

10.  On 10 December 2015, the plaintiff issued the writ of summons in these proceedings against the defendant alone endorsed with a statement of claim containing the particulars required under Order 83A of the Rules of the High Court. 

11.  The main matter raised by the defendant in her defence filed is that before entering into the loan transaction with the plaintiff, she had actually dealt with a company called Global Property (Asia) Investment Services Company Limited (“Global Property”) which was represented by two individuals named Tommy Li and George Cheung.  It was said that they had made various representations to the defendant and Mr King including, among other things, that they would be able to help them sell the property at the price of HK$6.4 million. 

12.  It was also said that out of the HK$170,000 surplus obtained under the loan from the plaintiff, the defendant and Mr King only eventually received HK$30,000 from George Cheung, with the rest, ie HK$130,000, kept by Tommy Li and George Cheung as some kind of loan approval charge.  A document has indeed been disclosed by the defendant during discovery in the form of an agreement dated 13 August 2015 between Mr King and Global Property to help obtain refinancing for Mr King for the fee of 5% of the loan (at that time intended to be in the amount of HK$2.35 million) payable to Global Property.

13.  There is, however, no credible evidence to connect Global Property to the plaintiff, either as a subsidiary or an agent or some form of party acting in concert together with the plaintiff.  In particular, the defendant has not appeared in court, as a result of which neither her witness statements nor those of Mr King form part of the evidence.  In these circumstances, there is nothing to substantiate the allegations of the various misrepresentations made by George Cheung and Tommy Li, nor is there, in any event, any evidence to show that those representations, even if in fact made, were in any way attributable to the plaintiff.

14.  Certain points were raised in connection with the Money Lenders Ordinance by the defendant’s defence.  It is said that the “loan approval charge” of HK$140,000 retained by Global Property renders the loan agreement with the plaintiff illegal under section 27(3) or (4) of the Ordinance.  However, since there is nothing to show that Global Property was a partner or principal or agent of, or a person acting for or in collusion with the plaintiff, this defence does not get off the ground, even if it is assumed that Global Property did indeed receive HK$140,000.

15.  Then it is said that there is a breach of sections 24 and 25 of the Ordinance, as well as section 18, because the interest was not in fact 24% per annum once the sum of HK$140,000 is taken into account.  Again, as there is nothing to show that the plaintiff was party to the receipt of the sum of HK$140,000, there is no basis to suggest that that sum should somehow be treated as not actually lent, and therefore to be deducted from the principal, or should be treated as additional interest paid on the loan.  This allegation, therefore, must also be rejected.

16.  It was further stated in the defence that the plaintiff contravened section 7 of the Money Lenders Ordinance which provides that, relevantly:

“ No person shall carry on business as a money lender at any place other than the premises specified in such licence.”

17.  However, the fact that the defendant had not attended the office of the plaintiff itself and had entered into the transaction in the offices of the solicitors’ firm in question where the documents were explained to them and signed by them is, in my view, not sufficient to establish that the plaintiff was carrying on business at any place other than its own premises as specified in the licence.  At the end of the day, this is the place where quite clearly the plaintiff had advanced the principal sum of the loan pursuant to properly drawn up documentation that had been explained to the borrowers, including the defendant.

18.  I see no reason why the contract should be characterised as unconscionable within the meaning of the Unconscionable Contracts Ordinance (Cap 458) or should otherwise be reopened under section 25 of the Money Lenders Ordinance. 

19.  There is nothing to contradict the evidence of the witnesses called by the plaintiff which I accept.

20.  In these circumstances, it seems to me the plaintiff has established its entitlement to judgment for the principal sum of HK$2,050,000, together with contractual interest thereon at 24% per annum from 22 September 2015 until payment, and there will be judgment accordingly. 

21.  I am also satisfied that having regard to the contractual provisions accepted by the defendant, the costs of the action should be to the plaintiff on an indemnity basis.  The costs are to be taxed if not agreed.