STANDARD CHARTERED BANK (HONG KONG) LTD v. LOK SHEK HUNG

DCCJ 1903/2021

[2022] HKDC 805

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1903 OF 2021

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DECISION

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A.  INTRODUCTION

1.  By two Notices of Appeal to Judge in Chambers respectively dated 10 January 2022 and 1 March 2022, the Defendant acting in person appeals to the Court from the decisions of Master Maurice Lam respectively dated 4 January 2022 and 23 February 2022 (“the Master’s Appeal”) making, inter alia, the following orders (collectively, “the Orders”):

(1)  The Final Judgment entered against the Plaintiff for the Defendant’s Counterclaim on 3 August 2021 (“the Default Judgment”) be set aside;

(2)  The Writ of Fieri Facias issued on 31 August 2021 and amended on 10 September 2021 by the Defendant be set aside;

(3)  The sum of HK$848,620.00 paid into court by the Plaintiff on 24 September 2021 pursuant to the Order of Master Jocelyn Leung dated 23 September 2021 be paid out to the Plaintiff through its solicitors, Messrs Tsang, Chan & Wong;

(4)  The Defendant do pay the Plaintiff:

(a)  a sum of HK$915,519.78 with interest thereon at the rate of 0.1051% per day from 24 April 2021 to 4 January 2022, and thereafter at the judgment rate until full payment; and

(b)  a sum of HK$461,744.79 with interest thereon at the rate of 0.0914% per day from 24 April 2021 to 4 January 2022, and thereafter at the judgment rate until full payment (“the Summary Judgment”);

(5)  The execution of the Summary Judgment be stayed pending the determination of the Plaintiff’s application for striking out of the Defendant’s Counterclaim to be made on or before 24 January 2022;

(6)  80% of the costs of the Plaintiff’s Summons filed on 2 August 2021 for the Summary Judgment summarily assessed to be HK$159,377.00, amounting to HK$127,501.60, be paid by the Defendant to the Plaintiff forthwith;

(7)  No order as to costs of the Plaintiff’s Summons filed on 6 August 2021 for the setting aside of the Default Judgment and stay of execution and the costs reserved by Master Jocelyn Leung on 23 September 2021;

(8)  The Defendant’s Counterclaim as contained in paragraphs 22 to 27 of the Defence and Counterclaim filed on 8 June 2021 and paragraphs (1) to (4) of the prayer to such counterclaim be struck out in entirety; and

(9)  Costs of the Plaintiff’s Summons filed on 11 January 2022 for the striking out of the Defendant’s Counterclaim summarily assessed to be HK$700.00 be paid by the Defendant to the Plaintiff forthwith.

2.  The substantive hearing of the Master’s Appeal (“the Substantive Hearing”) took place before the Court on 14 July 2022.

B.  OVERVIEW

3.  In the action herein, the Plaintiff seeks to recover from the Defendant the outstanding credit card payments, together with interest and other fees and charges owed by him from using the VISA Platinum Credit Card No 4058-0380-1943-7477 (“the First Card/the First Card Account”) and the Priority Banking Credit Card No 4423-9483-3134-6289 (“the Second Card/the Second Card Account”) (collectively, “the Credit Cards/the Credit Card Accounts”) issued to him.

4.  The Defendant does not dispute that he has indeed used the Credit Cards and incurred debts. The Defendant’s only complaint is that the interest charged by the Plaintiff is “excessive” in the following sense. Due to financial difficulties, the Defendant has only settled the minimum payment of the Credit Cards in the past 7 years. The Plaintiff however has failed to apply those amounts towards the repayment of the principal loan owed by him. According to the Defendant’s observation, the overall outstanding amount owed by him remains almost the same even though the payments made by him to the Plaintiff throughout these years should have in total exceeded the original principal loan.

5.  In these circumstances, the Defendant alleges that the Plaintiff is in breach of the Unconscionable Contracts Ordinance (“the UCO”) (Cap 458), the Supply of Services (Implied Terms) Ordinance (“the SSO”) (Cap 457) and/or some other overseas legislation and regulation, code and practice etc., and is therefore wrongful, illegal and/or has fallen below the reasonable standard. The Defendant further submits that the present case involves public policy considerations, taking into account the common use of credit cards in Hong Kong but the allegedly wholly inadequate level of protection afforded to credit card users, especially in terms of the interest that can be charged by banks, when compared to the overseas jurisdictions.

6.  The Defendant relies on the same matters above to establish his counterclaim against the Plaintiff.

7.  After considering the submissions thoroughly made by Mr Adrian Wong acting for the Plaintiff and the Defendant in person, and the evidence adduced by the parties below and in the Master’s Appeal (as contained in the respective affidavits/affirmations of Lam Shing Loi, Keith (referred to below as “Keith 1^st” etc.) and Wong Hoi Man Mandy (referred to below as “Mandy 1^st” etc.) for the Plaintiff and those of the Defendant himself (referred to below as “Def 1^st” etc.))[1], and examining the cases and authorities diligently cited by both sides, it is abundantly clear that the Master’s Appeal is completely unmeritorious and should be dismissed.

8.  Here are the detailed reasons.

C.  PLANTIFF’S CLAIMS

9.  The Plaintiff’s claims against the Defendant are straight-forward ones.

10.  The Plaintiff is a bank carrying on business at 32^nd Floor, Nos. 4-4A Des Voeux Road Central, Hong Kong (“the Plaintiff’s Office”), among other premises in Hong Kong, providing banking facilities.

11.  On or about 16 January 2009, the Defendant applied in writing to the Plaintiff for a credit card. The Plaintiff approved the application and issued the First Card to the Defendant subject to the terms and conditions in the Credit Card Cardholder Agreement (“the Cardholder Agreement”).

12.  On or about 5 May 2010, the Defendant applied in writing to the Plaintiff for another credit card. The Plaintiff approved the application and issued the Second Card to the Defendant subject to the terms and conditions in the Credit Card Terms (“the Credit Card Terms”) and the Standard Chartered Bank (Hong Kong) Limited Credit Card Key Facts Statement for Standard Chartered and Manhattan Cardholders (“the Key Facts Statement”) as may be in force from time to time.

13.  On the Plaintiff’s case, as at 23 April 2021:

(1)  a sum of HK$915,519.78 was owed by the Defendant under the First Card Account, together with interest accruing on it at the contractual rate of 0.1051% per day from 24 April 2021 until full payment; and

(2)  a sum of HK$461,744.79 was owed by the Defendant under the Second Card Account, together with interest accruing on it at the contractual rate of 0.0914% from 24 April 2021 until full payment.

14.  On 26 February 2021, the Plaintiff through solicitors made a formal demand to the Defendant for payment but such demand has not been met by the Defendant at any stage until now.

15.  On 28 April 2021, the Plaintiff therefore took out the Writ and commenced the present action against the Defendant claiming for, inter alia:

(1)  the sum of HK$915,519.78, together with interest at the contractual rate of 0.1051% per day from 24 April 2021 to the date of Judgment and thereafter at judgment rate until payment;

(2)  the sum of HK$461,744.79, together with interest at the contractual rate of 0.0914% per day from 24 April 2021 to the date of Judgment and thereafter at judgment rate until payment; and

(3)  costs.

D.  PROCEDURAL HISTORY

16.  The events underlying the making of the Orders below and those relevant to the Master’s Appeal are as follows:

Date	Event(s)
28 April 2021	Writ of Summons with Statement of Claim
8 June 2021	Defence and Counterclaim
2 August 2021	Summons for the Summary Judgment (“the O 14 Summons”)
3 August 2021	The Defendant entered into the Default Judgment for his Counterclaim in the sum of HK$848,620.00
6 August 2021	Summons for the setting aside and stay of execution of the Default Judgment (“the Setting Aside Summons”)
20 August 2021	Both the O 14 Summons and the Setting Aside Summons were adjourned for argument on 4 January 2022; the Plaintiff’s application for interim stay of the execution of the Default Judgment was not dealt with by the court[2]
31 August 2021	Issue of the Writ of Fieri Facias
10 September 2021	Re-filing of the Amended Writ of Fieri Facias
16 September 2021	Bailiff appeared at the Plaintiff’s Office to execute the Amended Writ of Fieri Facias[3]
-Ditto-	Filing of Notice of Change of Solicitors of the Plaintiff to Messrs. Tsang, Chan & Wong
-Ditto-	Ex parte Order of Master Jocelyn Leung for stay of execution of the Default Judgment until the return date, 23 September 2021
23 September 2021	Order of Master Jocelyn Leung for stay of execution of the Default Judgment until the determination of the O 14 Summons and the Setting Aside Summons, subject to the Plaintiff’s payment of HK$848,620.00 into court on or before 24 September 2021, 4:00 pm, and also stay of the Amended Writ of Fieri Facias
24 September 2021	Payment of HK$848,620.00 into court by the Plaintiff
28 December 2021	Reply and Defence to Counterclaim
4 January 2022	The Orders made by Master Maurice Lam for: (1) the setting aside of the Default Judgment; (2) the setting aside of the Amended Writ of Fieri Facias; (3) the payment out of the sum of HK$848,620.00 to the Plaintiff through solicitors; (4) the Summary Judgment; (5) the stay of execution of the Summary Judgment pending the determination of the Plaintiff’s application for the striking out of the Defendant’s Counterclaim to be taken out on or before 24 January 2022; and (6) 80% of the costs of the O 14 Summons (ie HK$127,501.60) to be paid to the Plaintiff forthwith
10 January 2022	Notice of Appeal to Judge in Chambers of the Order of Master Maurice Lam dated 4 January 2022
-Ditto-	Def 4th in support of the Master’s Appeal
11 January 2022	Summons for the striking out of the Defendant’s Counterclaim (“the Striking Out Summons”)
23 February 2022	The Order made by Master Maurice Lam to strike out the Defendant’s Counterclaim and the prayers
1 March 2022	Notice of Appeal to Judge in Chambers of the Order of Master Maurice Lam dated 23 February 2022
-Ditto-	Def 6th in support of the Master’s Appeal

E.  APPLICABLE LEGAL PRINCIPLES

17.  In considering the Orders made by Master Maurice Lam on 4 January 2022 and 23 February 2022 now subject to the Master’s Appeal, I bear in mind the following relevant legal principles.

18.  An appeal from a master to a judge in chambers operates as an actual rehearing of the application leading to the order under appeal, and the judge treats the matter as though it comes before him for the first time. The judge is in no way bound by the decision of the master but can give it appropriate weight: see Hong Kong Civil Procedure 2022, Vol 1, §58/1/2.

19.  By the nature of the Master’s Appeal, the Court has considered the present case afresh and come to its own independent view. The complaint by the Defendant that there was “injustice and prejudice” to him below, if at all, is in this way fully addressed.

20.  The legal principles applicable to an application for summary judgment are well-established (see Ng Ting Kwok v Ng On Kwok & Dan Yin Ping, HCA 1587/2017 (unreported, 31 October 2018) [2018] HKCFI 2438 per DHCJ Marlene Ng (as the Judge then was)):

(1)  The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim.

(2)  When summary judgment is applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court.

(3)  It was not appropriate to embark on a mini‑trial of the action on affidavit evidence. The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.

(4)  In considering whether there are triable issues the court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The court will also consider the inherent probability of the defence.

(5)  The defence set up needs only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law or on the fact.

(6)  To raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim that as a result of his own parsimony in details there is an obscurity which must await trial for illumination. Further, a desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff.

21.  The legal principles applicable to an application for setting aside of a default judgment are also trite (see Shun Pong Limited v Chan Koo Kai Felix & Others, HCA 255/2017 (unreported, 29 November 2018) [2018] HKCFI 2628 per DHCJ Marlene Ng (as the Judge then was)):

(1)  Under Order 19, rule 9 of the Rules of the District Court (“the RDC”) (Cap 336H), the court may, on such terms as it thinks just, set aside or vary any judgment entered. The purpose of the discretion is to avoid any injustice that may be caused by the entering of a judgment in default.

(2)  Under Order 19, rule 8 of the RDC, a defendant who counterclaims against a plaintiff shall be treated for the purposes of rules 2 to 7 as if he were a plaintiff who had made against a defendant the claim made in the counterclaim.

(3)  If a default judgment is regular, the defendant must show a meritorious defence with a real prospect of success or which carries some degree of conviction. Bare assertions are insufficient. Unless a defendant can produce potentially credible affidavit evidence showing a real likelihood that he will succeed on fact, he cannot be said to have shown he has a real prospect of success. This requires the court to form some provisional view of the probable outcome of the action. Where the outcome depends on whose evidence is likely to be accepted, the appropriate test for determining whether the defendant has a real prospect of success is to ask whether the defence “could well be established” at trial or whether the defence witnesses could well be believed at trial.

(4)  There are other considerations which a court must consider, such as the reason why default judgment was allowed to occur in the first place and any delay in setting aside and any consequent prejudice caused to the plaintiff. The court is to conduct a balancing exercise of all relevant factors. But the critical factor and starting point are the merits of the defence. If the defence has no real prospects of success, there is no point in setting aside the same.

F.  SUMMARY JUDGMENT

22.  The Defendant has failed to show that there is any real or bona fide defence upon merits or that for other reason there ought to be a trial in the present case. The Plaintiff should therefore be entitled to the Summary Judgment.

F.1  Interest charged and payment applied per agreed terms

23.  First of all, the Defendant’s use of the Credit Cards and the Credit Card Accounts are subject to the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement. The interest, fees and charges and the payments received from the Defendant are charged and applied by the Plaintiff in accordance with the terms and conditions set out therein.

24.  The Cardholder Agreement, which applies to the First Card and the First Card Account, gives the Plaintiff power to charge interest, fees and charges and to apply payments in the manner as follows:

(1)  Clause 2, which provides that all facilities made available by the Plaintiff in respect of a card or a card account are subject to the terms and conditions in the Cardholder Agreement in force from time to time.

(2)  Clause 5, which provides that charges comprise Voluntary Charges, as well as Involuntary Charges, namely:

(a)  cash advance charge, payable on each cash advance;

(b)  late charge, payable if the minimum payment due specified in any statement is not paid before the payment due date specified in that statement;

(c)  finance charge for cash advance, calculated on a daily basis and accrues on the outstanding balance from time to time of each cash advance with effect from the date of the relevant transaction instruction to the date of repayment in full;

(the default rate is applicable if the minimum payment due is not paid on or before the payment due date as specified in a statement)

(d)  finance charge for purchase, payable if payment of the amount shown in any statement as the new balance is not received in full by the Plaintiff on or before the payment due date specified in the statement, which is calculated on a daily basis on the outstanding balance of charges (excluding the finance charge, bonus points purchase, cash advance and any transaction under the designated additional services, if applicable) from the date of relevant transaction instruction or the statement cycle immediately after the relevant transaction instruction if the Plaintiff has received full payment of the new balance as specified in the statement that covers such statement cycle immediately before the relevant transaction instruction on or before the payment due date as specified in that statement until the Plaintiff receives full payment of the then new balance in the statement issued by the Plaintiff;

(the default rate is applicable if the minimum payment due is not paid on or before the payment due date as specified in a statement); and

(e)  over-limit charge, payable if the outstanding debit balance under the card account exceeds the credit limit assigned to it at any point of time during a statement cycle.

(3)  Clause 10, which provides, inter alia, that:

(a)  without prejudice to the Plaintiff’s right under Clause 13(c) of the Cardholder Agreement to demand for payment in full at any time of outstanding charges on the card account, the Defendant is liable to pay the Plaintiff the full amount described as “minimum payment due”, namely, the aggregate amount of the total of the outstanding billed interest and other Involuntary Charges, the total of any other outstanding billed fees and charges or other billable items, the total of the over-limit amount and/or the overdue amount and any percentage as the Plaintiff may publish from time to time on the basis of the new balance as specified in a statement, or any minimum amount as published by the Plaintiff from time to time, whichever amount is higher;

(b)  payments and credits received in respect of a card account shall be applied in the following order or in any other order as the Plaintiff from time to time thinks fit subject to any applicable law:

(i)  minimum payment due as specified; then

(ii)  installment amount; then

(iii)  cash advances and unpaid transactions which are subject to the normal interest rate(s), and if more than one rate is applicable, the amount charged with the highest rate will be paid first and the rest to be paid in descending order according to the applicable rate(s); then

(iv)  cash advances and unpaid transactions which are subject to the special interest rate(s), and if more than one rate is applicable, the amount charged with the highest rate will be paid first and the rest to be paid in descending order based on the applicable rate(s); then

(v)  fees, charges and transactions incurred from the use of card not yet shown on the current statement.

(4)  Clause 13, which provides, inter alia, that:

(a)  the Defendant shall be liable for any loss directly or indirectly resulting from any breach of the Cardholder Agreement;

(b)  the Defendant may at any time terminate the card account or require the Plaintiff to terminate the use of any card under the card account, and any other cardholder may require the Plaintiff to terminate the use of his card, in each case by notice in writing to the Plaintiff accompanied by the return of the card(s) being terminated, destroyed by having been cut in two such that both the hologram and magnetic strip are cut into two halves;

(c)  in the event of breach of the Cardholder Agreement by any cardholder, or on termination of the card account or demand made by the Plaintiff at any time at its sole and absolute discretion, then notwithstanding any prior agreement or arrangement between the Plaintiff and the Defendant to the contrary (subject to any applicable law), the following charges shall become immediately due and payable in full by the Defendant:

(i)  subject to Clause 12(c) of the Cardholder Agreement where applicable, the total of all charges (excluding the amount of any bonus points purchase) then outstanding on the card account, whether or not already reflected in the new balance of a statement and whether or not already charged to the card account or due and payable at the date of the breach, termination or demand (as the case may be); and

(ii)  the amount of any Voluntary Charges (excluding the amount of any bonus points purchase) incurred after the breach, termination or demand.

(Interest will accrue on the above sums on a daily basis from the due date to the date of repayment at the applicable rate for calculation of interest under Clause 5(a)(ii) of the Cardholder Agreement).

(5)  Clause 15, which provides, inter alia, that the Defendant shall be liable to indemnify the Plaintiff in respect of, and reimburse the Plaintiff on demand, all costs and expenses (including without limitation the charges of any agent or service provider employed pursuant to Clause 15(a) of the Cardholder Agreement, and legal costs and expenses on an indemnity basis) which are of reasonable amount and were reasonably incurred (whether directly or indirectly) by the Plaintiff in demanding, collecting or attempting to collect, or suing to recover, any sum payable to the Plaintiff by the Defendant under the Cardholder Agreement, or in seeking any remedy for any breach of the Cardholder Agreement, or otherwise in enforcing or attempting to enforce the Cardholder Agreement.

25.  Similarly, the Credit Card Terms, which apply to the Defendant’s use of the Second Card and the Second Card Account, provide as follows:

(1)  The terms of the Plaintiff’s banking agreement apply to each use of a credit card. If a cardholder does not agree with those terms, he should not activate or sign the credit card or carry out any transaction. The Defendant accepts the terms of the Plaintiff’s banking agreement when first using the Second Card (Clause 2.4).

(2)  On or before the due date set out in the statement issued by the Plaintiff, the Defendant must pay at least the minimum payment due as set out therein (Clause 8.1).

(3)  The Defendant must pay the interest, fees and charges which apply at any time to the Second Card, including the interest, fees and charges as described in the Attachment annexed to the Credit Card Terms. The applicable rates of interest, fees and charges are set out in the product brochure and/or the tariff sheet (Clause 5.1).

(4)  Interest, fees and charges once applied will be charged until the date the balance owing is paid in full (Clause 5.2).

(5)  If the Plaintiff does not receive the minimum payment on or before the due date, the Defendant must pay for the applicable Involuntary Charges as set out in the Attachment annexed to the Credit Card Terms and the tariff sheet or elsewhere in the Plaintiff’s banking agreements (Clause 8.6).

(6)  If the Plaintiff does not receive the balance owing for the account for a credit card on or before the due date, the Plaintiff may charge (subject to any grace period in accordance with the Plaintiff’s usual practice or applicable law) and debit from the account for the applicable Involuntary Charges as set out in the Attachment annexed to the Credit Card Terms and the tariff sheet or elsewhere in the Plaintiff’s agreement (Clause 8.5).

(7)  The Defendant is liable for his failure to comply with the terms of the Plaintiff’s banking agreement, all transactions made using the Second Card, the balance owing for the Second Card Account and any transactions which the Plaintiff could otherwise have exercised chargeback rights if the Defendant does not notify the Plaintiff of the transactions and provide any further documents or information required by the Plaintiff within the relevant time period (Clause 6.1).

(8)  Notwithstanding any other term in the Plaintiff’s banking agreement, subject to the applicable law, the Plaintiff may at any time demand for immediate payment of any amounts owing to the Plaintiff, whether or not already reflected in a statement and whether or not due and payable as at the date of the demand (Clause 8.7).

(9)  Interest, fees and charges will be payable on the amounts referred to in Clause 8.7 of the Credit Card Terms and are calculated in the same way as set out in the Attachment annexed to the Credit Card Terms and the tariff sheet and on the basis that they accrue daily, starting from the date of the Plaintiff’s demand until payment in full (Clause 8.8).

(10)  If the Defendant thinks that there is an error on the statement, he must notify the Plaintiff with details of the error within the period specified in the statement. If the Defendant does not do so, the Plaintiff treats the statement as correct (Clause 8.11).

(11)  Default interest and default finance charge are payable if the Defendant fails to pay the minimum payment that is due as specified in a statement issued by the Plaintiff on or before the payment due date as specified in that statement (see Attachment to the Credit Card Terms).

26.  With respect to the Defendant’s use of the Second Card and the Second Card Account, the Key Facts Statement further provides:

(1)  Item 5 – Minimum Payment/Minimum Payable Due: All interest, fees, charges (including Annual Fee(s)), the total of the over-limit amount and/or the overdue amount (where applicable) that may be charged, plus 1% of outstanding principal or HK$/CNY220, whichever is higher.

(2)  The Plaintiff has the right to levy fees and charges according to Items 6 to 23 and 25.

(3)  Item 1 – Annualised Percentage Rate (“the APR”) for Retail Purchase/Finance charge for purchase is at the rate specified in the Key Facts Statement when the Defendant opens the Second Card Account, which is subject to review from time to time. The Plaintiff will not charge the Defendant interest if the Defendant pays the balance in full by the due date each month. Otherwise, interest will be charged on the unpaid balance from the date of the previous statement on a daily basis until payment in full and the amount of each new transaction (entered into since the previous statement date) from the date of that new transaction on a daily basis until payment in full.

(4)  Item 2 – APR for Cash Advance/Finance charge for Cash Advance is at the rate specified in the Key Facts Statement when the Defendant opens the Second Card Account, which is subject to review from time to time. Interest will be charged on the amount of cash advance from the date of the transaction on a daily basis until payment in full.

(5)  Item 3 – Delinquent APR/Default rate: Interest rate(s) as specified in the Key Facts Statement in addition to the prevailing or applicable finance charge for purchase and cash advance may be applied to the Defendant’s Second Card Account if the Defendant fails to pay Minimum Payment by Payment Due Date in the past one month and if the Defendant fails to pay Minimum Payment by Payment Due Date for two times or more in the past 12 months.

27.  If and to the extent that the Defendant argues that he did not read these terms and conditions, it is unarguable.

28.  It must be noted that it is not the Defendant’s complaint in the present case that the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement are vitiated by fraud, mistake, misrepresentation, non est factum, duress, undue influence or lack of mental capacity. In any event, the Defendant has not pleaded any fact constituting any particular vitiating factor of a legal document or established it with credible evidence (see Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKCFAR 334 at 362 per Ribeiro PJ).

29.  Generally speaking, when a person signs a legal document, he or she is bound by the act of signature. People may sign documents without reading the small prints and therefore sign them without actually knowing the terms of the documents signed but they are still held to them (see Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at 533 per Litton NPJ).

30.  It should also be pointed out that the accuracy of the Plaintiff’s arithmetic calculations of the interest, fees and charges and the payments in question are not challenged by the Defendant.

F2.  Purported reliance on the UCO provides no real or bona fide defence or other reason for trial

31.  Next, the Defendant’s argument that the Plaintiff is in breach of the UCO by charging him interest and applying the payments received from him in the order pursuant to the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement is equally untenable.

32.  The convenient starting point is that, there is no general jurisdiction to set aside transactions either because of inequality of bargaining power between the parties or because the transaction was improvident. Any suggestion that there is a general principle of equity which justifies the court in relieving a party to any bargain if in the event it operates hardly against him must be dissented from. Unconscionability also must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other (see Ming Shiu Chung (supra) at 365 per Ribeiro PJ).

33.  The UCO provides for relief in respect of a contract for supply of services in which one of the parties deals as consumer.

34.  Pursuant to section 5(1) of the UCO, if the court finds the contract or any part of a contract to have been unconscionable in the circumstances relating to the contract at the time it was made, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable part or limit the application of, or revise or alter, any unconscionable part so as to avoid any unconscionable result.

35.  Section 5(2) of the UCO provides that the person claiming that a contract or part of a contract is unconscionable bears the burden of proof.

36.  In the present case, the Defendant has not begun by identifying which parts in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement are on his case unconscionable. But considering that the Defendant is seeking from the Court the “relief” that the interest charged by the Plaintiff should be “deleted”, presumably, he is challenging the unconscionability of all those parts in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement which give the Plaintiff power to charge interest and to apply payments.

37.  Bearing this in mind, section 6(1) of the UCO provides that, in determining whether a contract or part of a contract was unconscionable in the circumstances relating to the contract at the time it was made, the court may regard to, among other things:

(1)  The relative strengths of the bargaining positions of the consumer and the other party;

(2)  Whether, as a result of conduct engaged in by the other party, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the other party;

(3)  Whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services;

(4)  Whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the other party or a person acting on behalf of the other party in relation to the supply or possible supply of the goods or services; and

(5)  The amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the other party.

38.  Section 6(3) of the UCO further provides that in considering the exercise of its powers under section 5 to grant relief in respect of a contract or part of a contract found to be unconscionable, the court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.

39.  First, on the question of the relative strengths of the bargaining positions of the parties, it is relevant that the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement contain standard terms and conditions pre-drafted by the Plaintiff. There are provisions stating that by using the Credit Cards, the Defendant accepts the Plaintiff’s terms and conditions in force from time to time. In reality, it was almost virtually impossible for the Defendant to be able to negotiate with the Plaintiff for a different set of terms at the time when he applied for the Credit Cards.

40.  That said, it was however open to the Defendant not to subscribe for the credit card services provided by the Plaintiff in the first place. If the Defendant did not agree with any of the Plaintiff’s terms and conditions, he should not activate the Credit Cards or carry out any transaction thereafter. Furthermore, the Defendant may at any time terminate or destroy the Credit Cards or require the Plaintiff to do so by giving it notice. It is however not in dispute that the Defendant has been continuously using the Credit Cards since January 2009 and May 2010 respectively.

41.  In any event, inequality in bargaining power cannot by itself be conclusive on unconscionability, as conversely, the absence of such inequality would not be conclusive as to the conscionability of the contract (see Chang Pui Yin (supra) at §75 referring to Paciocco (supra)).

42.  Second, there should be little controversy that the terms and conditions in question, which the Defendant is required to comply, were designed by the Plaintiff to protect its best commercial interests when providing its customers with the credit card services.

43.  In deciding the reasonableness of these terms and conditions, it must be borne in mind that fundamentally, a credit card holder is obliged to settle all transactions and credit card payments made by him or her and is liable for the outstanding balance owed in the credit card account. It is only when the Plaintiff does not receive the balance owed in the credit card account on or before the due date that it will charge the credit card holder the Involuntary Charges. A credit card holder is required to pay at least the minimum payment due as set out in the monthly statement. The Plaintiff may use the amounts received from a credit card holder towards payment of the minimum payment, instalment amount, cash advances and unpaid transactions and then fees, charges and transactions or in such other order as the Plaintiff thinks fit.

44.  In the present case, it is not the Defendant’s case that the Plaintiff has charged him interest or applied payment beyond the terms and conditions in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement.

45.  As highlighted to the Court by Mr Adrian Wong, in the monthly statements issued by the Plaintiff to a credit card holder[4], details like the payment due date, the minimum payment due, the balance amount due for the relevant month and the finance charge for purchase and/or cash advance for the relevant month are included. There is warning to a credit card holder about the requirement to pay minimum payment due and the finance charges payable in the event of default, and that if he or she continues to use the credit card, he or she would be taken to have accepted the finance charges, and that if he or she does not wish to accept those charges, he or she should refer to the applicable terms and conditions and let the Plaintiff know etc. There is also information showing the credit card holder the effect of making only minimum payment due, namely, that the estimated total amount payable would include the finance charge for purchase to be accrued daily and would be higher than the original outstanding balance. A credit card holder is expected to check these monthly statements carefully.

46.  In the present case, it is not in dispute that the Defendant has not notified the Plaintiff at any time that any item of charge in any monthly statement is erroneous or that he would like to terminate the Credit Cards and the Credit Card Accounts.[5]

47.  The Court remains to be persuaded as to why, in the circumstances identified above, those parts in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement giving the Plaintiff power to charge interest and to apply payments, which were freely agreed by the parties in the first place, should be struck down as not reasonably necessary for the protection of the legitimate interests of the Plaintiff.

48.  Third, the Defendant was educated and experienced at all material times. There is no evidence from the Defendant to show that he did not have a reasonably good understanding of the use and operation of credit cards in January 2009 and May 2010. It is true that the standard terms and conditions in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement are in small prints, nonetheless, there is no evidence from the Defendant to show that the Plaintiff ever refused to provide him with enlarged copies before he applied for the Credit Cards.

49.  Fourth, there is no evidence from the Defendant to show whether or not he ever tried to obtain identical or equivalent credit card services from other banks and whether or not the interest, fees and charges charged by these banks in the event of default were of comparable level to the Plaintiff’s.

F3.  “The totality of circumstances”

50.  At this juncture, the Defendant submits that all circumstances relevant to the determination of whether or not a part of a contract is unconscionable must be taken into account. The Court is ready to accept this submission. Actually, by the expression “among other things”, section 6(1) of the UCO already makes clear that the list is non-exhaustive (see Shum Kit Ching v Caesar Beauty [2003] 3 HKC 235). The Plaintiff is not understood to be disputing otherwise that “the totality of circumstances” should be taken into account.

51.  For instance, considering that the UCO was drafted with reference to Australian legislation, Lam VP in Chang Pui Yin v Bank of Singapore Ltd [2017] 4 HKLRD 458 held that the underlying concepts regarding “unconscionable conduct” in the Australian jurisprudence would provide some guidance in identifying if a particular provision is unconscionable in the UCO context. One however must keep in mind that the Australian statutes target “unconscionable conduct”, which is wider in scope, whereas the UCO directs against “unconscionable contract” and expressly stipulates that the court shall not have regard to any unconscionability arising from circumstances that were not reasonably foreseeable at the time the contract was made (see section 6(2) of the UCO).

52.  Lam VP in Chang Pui Yin (supra) further held at 489:

“66. Whilst the court must have regard to the non-exhaustive list of factors in the statute, it should also consider all other relevant matters and circumstances reasonably foreseeable at the time of making the contract in determining if there is any unconscionability in the terms of the contract. Unconscionability means “something not done in good conscience” and it is to be evaluated by reference to a normative standard of conscience. In such evaluation in the statutory context, the court is not constrained by the general equitable concept of unconscionability.

67. Hardship or bad bargain for a party per se cannot be a sufficient foundation for a finding of unconscionability. At the same time, it may not be too helpful to ask if there has been a high level of moral obloquy or moral tainting. Whilst conduct involving dishonesty, sharp practice or conscious wrongdoing are unconscionable, conduct falling short of these could still be regarded as unconscionable.

68. In Paciocco v Australia and New Zealand Banking Group Limited (2015) 236 FCR 199 at [296], Allsop CJ explained the evaluation of unconscionability as follows:

…It does not involve personal intuitive assertion. It is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.

69. Much of what His Honour said in terms of the norms and values embedded in the law is equally apposite in Hong Kong. We respectfully echo the sentiment and we consider that a similar approach is equally applicable in the context of our UCO though (unlike the position in Australia) we are confined to consumer’s dealings and unconscionability of the terms of the contract at the time when the contract is made.

70. In that context, as opined by Recorder Edward Chan SC in Shum Kit Ching v Caesar Beauty Centre Ltd at p.428, the court may have regard to:

(a) all existing circumstances which are relevant whether they are known to the party against whom relief is sought or not;

(b) future circumstances if those circumstances were reasonably foreseeable having regard to the existing circumstances; and

(c) the legal effect of the contract at the time the contract is made whether this effect is appreciated by the party against who relief is sought or not (emphasis added).”

F4.  The FCA Rules

53.  Bearing in mind these legal principles, the Court considers the matters raised by the Defendant other than those in the statutory list under section 6(1) of the UCO.

54.  Whether or not certain matter is relevant in the examination of the unconscionability of a contract is dependent on the relevant facts and circumstances of the case (see Chang Pui Yin (supra) per Lam VP).

55.  First, the Defendant intends to rely on a part in the Financial Conduct Authority (“the FCA”)’s Consumer Credit (Earlier Intervention and Persistent Debt) Instrument 2018 (“the FCA Rules”) in the UK, which, according to him, requires licensed banks to approach customers with persistent debts and provide them with fixed instalment plans applying less interest rate for a reasonable period (say, a term of 3 to 4 years) and even forbearance including waiving of interest and charges altogether.

56.  The Defendant accepts that the FCA Rules are not of “compulsory application” to the Plaintiff in Hong Kong. The Plaintiff is under no legally enforceable duty to proactively approach the Defendant with the purpose of resolving his financial difficulties and can hardly be considered to be in breach for not doing so.

57.  The Defendant however argues that the FCA Rules should be relevant to the setting of the applicable standard or level of good practice in the banking industry, as Standard Chartered PLC is domiciled in the UK with headquarter located in London and is regulated by the FCA in the UK. The Defendant emphasizes that the Plaintiff’s “high-level management”, namely, the CEO Asia, the CEO HK, the Head of Retail and the Head of Risk Management, are all regulated by the UK Rules and requirements. Furthermore, the Hong Kong market has contributed to a large part of the global revenue of Standard Chartered PLC etc.

58.  But as rightly pointed out by Mr Adrian Wong, Standard Chartered PLC and the Plaintiff are separate legal entities. Hence, whether or not the former is regulated by the FCA and other authorities in the UK is a separate matter. Even if so, it does not necessarily mean that the Plaintiff should be subject to the same purview.

59.  In addition, the Credit Cards are issued by the Plaintiff and used by the Defendant in Hong Kong. The Cardholder Agreement and the Credit Card Terms and the Key Facts Statement, which provide for the terms and conditions from time to time in force for the use of the Credit Cards, are concluded in Hong Kong. The settlement of the credit card payments are also to be made by the Defendant in Hong Kong.

60.  In short, the Defendant fails to show and justify that the FCA Rules should be taken into account in evaluating whether or not the parts in question in the Cardholder Agreement and the Credit Card Terms and the Key Facts Statement are unconscionable.

F5.  Alleged breach of the Code of Banking Practice

61.  Next, the Defendant alleges that the Plaintiff is in breach of the following provisions of the Code of Banking Practice (“the Code”):

Clause 2.1:

“Equitable and Fair Treatment of Customers

Institutions should treat all customers equitably, honestly and fairly at all stages of their relationship with the institutions…”

Clause 12.3:

“While institutions are exempt from the Money Lenders Ordinance (Cap 163) so that the interest rates they charge are not restricted, they should not charge customers extortionate interest rates. If the APRs charged by them on regular performing loans or delinquent revolving loans or loans re-priced due to delinquency (which are calculated in accordance with the method set out in the relevant guidelines issued by the industry Associations) or the annualized interest rates charged by them on amount in default or overdue exceed the level which is presumed to be extortionate under the Money Lenders Ordinance, they should be able to justify why such high interest rate is not unreasonable or unfair. Unless justified by exceptional monetary conditions, the APRs charged on regular loans or delinquent revolving loan or loans re-priced due to delinquency or the annualized interest rates charged on amount in default or overdue should not exceed the legal limit as stated in the Money Lenders Ordinance. For the avoidance of doubt, fees and charges in fixed amounts should not be included in the calculation of annualized interest rates. Fees and charges in fixed amounts imposed on loans in default should be reasonable (emphasis added).”

62.  Even though the Code is a non-statutory Code issued on a voluntary basis, the Hong Kong Association of Banks and the DTC Association expect their respective members to comply with it. The Hong Kong Monetary Authority expects all institutions to comply with the Code and will monitor compliance as parts of its regular supervision. On the other hand, it is clearly set out in the Code that the recommendations are supplementary to and do not supplant any relevant legislation, codes, guidelines or rules applicable to institutions authorized under the Banking Ordinance (Cap 155).

63.  If and to the extent that the Defendant argues that the Plaintiff is in breach of Clause 12.3 of the Code because it has failed to justify that the APRs charged is not unreasonable or unfair and hence falls below the acceptable or reasonable standard, it is unarguable. It is not the Defendant’s case in the first place that the APRs charged by the Plaintiff for the Credit Cards are above 48% per annum and are presumed to be extortionate under section 25(3) of the Money Lenders Ordinance (Cap 163).

64.  With respect to Clause 2.1 of the Code, it is unclear as to how the Plaintiff has not acted “equitably, honestly and fairly”. If and to the extent that the Defendant is complaining that the Plaintiff has not offered him the “Personal Instalment Loan Debt Consolidation Program” as in the case of a new client, there is no evidence form the Defendant to show that he has ever applied, and in any event, his eligibility is simply questionable. Clause 3 thereof provides:

“The Bank will not accept any application of the Program Loan for the purpose of settling outstanding amount(s) of Standard Chartered Credit Card/Standard Chartered Co-Branded Card/MANHATTAN Credit Card/MANHATTAN Co-Branded Card account(s)…(emphasis added)”

65.  In the premises, the Court is not satisfied that the Plaintiff is in breach of Clauses 2.1 and 12.3 of the Code as alleged.

F6.  Supply of Services (Implied Terms) Ordinance

66.  By reason of the above matters, the Court is also not satisfied that it can be shown by the Defendant that the Plaintiff has acted below the reasonable care and skill and is in breach of section 5 of the SSO as alleged.

67.  All these matters being considered holistically show that the Defendant has no real or bona fide defence upon merits in the present case.

F7.  Public policy considerations

68.  Lastly, the Defendant argues that there ought to be a trial out of public policy considerations. The Defendant refers to the research conducted by the Consumer Council in 2013 on the credit card market to show the common use of credit cards in Hong Kong. The Defendant submits that there is however no adequate legislation in place to monitor the overall credit card market and the conduct of the banks as service providers when compared to the overseas jurisdictions. The Defendant advocates that it is necessary for there to be a trial to publicize the problems to the public.

69.  Court proceedings are not intended for examination and debate of public policy issues. It is also obvious that none of those public considerations identified by the Defendant would or could be resolved by way of a trial.

70.  As pointed out to the Defendant at the Substantive Hearing, he should forthwith work on his finance and make arrangement to resolve his financial difficulties. It does not serve his interests to pursue hopeless litigations and to waste legal costs on unnecessary cause. Should the Defendant be genuinely concerned with the protection of consumer rights in the credit card market, he should devote to it in the appropriate forum.

G.  STRIKING OUT OF COUNTERCLAIM AND SETTING ASIDE OF DEFAULT JUDGMENT

71.  Considering that the Defendant has not raised any arguable defence or triable issue to the Plaintiff’s claim, it is plain and obvious that his counterclaim based on the same set of matters and allegations is unsubstantiated and ought to be struck out. The Default Judgment should be set aside. Out of abundance of caution, it is explicitly stated that the Court has considered all the matters set out in Keith 1^st to 2^nd, Mandy 1^st to 4^th and Def 1^st to 6^th in coming to such view.

H.  DISPOSITION

72.  For the reasons above, the Master’s Appeal is dismissed.

73.  Parties are in agreement that costs should follow the event. According to the updated Statement of Costs, the amount incurred and claimed by the Plaintiff is HK$142,335, inclusive of Counsel Fees in the sum of HK$50,000. Taking into account the nature and complexity of the application herein, I am not prepared to allow the time spent by the Handling Partner on works discharged by him with the Handling Solicitor. I summarily assess the Plaintiff’s costs of this action to be HK$112,580.