HUI MEI CHING t/a DIAMOND DRAGON FINANCE CO v. TAI NGAN CHIU

HCA 580/2015

[2019] HKCFI 650

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 580 OF 2015

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JUDGMENT

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I. INTRODUCTION

1.  The plaintiff (“P”) was a licensed moneylender at the time of advancing of loan and giving of security referred to below.[1]

2.  On 11 May 2012, P and the defendant (“D”) entered into a Building Mortgage Loan Facility Agreement (“Agreement”) whereby on the one part P as lender agreed to lend to D a building mortgage loan up to an aggregate principal amount of $2,000,000.00 (“Loan”) for development of the property known as “Lot No 777 in DD 313” more particularly described in paragraph 4 below and on the other part D as borrower agreed and undertook to repay the Loan and to pay interest accrued thereon at the rate of 1.2% per month (14.4% per annum) in accordance with the Agreement. The following were inter alia express terms and conditions of the Agreement:

(a)	Clause 3 of the Agreement provided that the Loan shall be repaid (a) as to principal amount in one lump sum at the end of the 12th month from the date of execution of the building mortgage (and the Loan shall be subject to further agreement in writing to renew upon review), and (b) as to interest thereon payable monthly in arrears at the end of each month.
(b)	Clause 8 of the Agreement provided that P shall not be obliged to make any amount available under the Agreement unless it shall have received, before any notice to borrow the Loan was given, inter alia “a first legal charge of Building Mortgage of the premises as Lot No 777 in DD 313”.
(c)	Clause 9(a) of the Agreement provided that P might, without prejudice to its other rights thereunder, terminate its obligations to make the facility available and declare the Loan together with all accrued interest and other moneys payable thereunder immediately (or in accordance with such declaration) repayable at any time after D as borrower failed to pay any sum payable by him under the Agreement when due.

3.  The Agreement required D to “sign and return [a copy thereof] to [P] signifying [his] acceptance of the Facility and [his] agreement to all the above terms and conditions ……” D countersigned a copy of the Agreement to confirm “[the] above terms and conditions are confirmed and accepted by the Borrower”.

4.  By a Building Mortgage dated 10 October 2012 (“Charge”) registered in the Land Registry by memorial no 12101901960043 and made between D as borrower and P as lender, the property known as ALL THAT piece or parcel of ground situate lying and being at Lantau Island, New Territories, Hong Kong and registered in the Land Registry as LOT NO.777 in DEMARCATION DISTRICT NO 313 TOGETHER with the messuages erections and buildings erected thereon (if any) (“Property”) was mortgaged to P as security for inter alia the Loan and interest accrued thereon.

5.  The Recitals of the Charge made clear that (a) the Property was held by D from the government subject to the rent and upon the terms and conditions in the government lease being New Grant no 7961 deposited and registered in the Land Registry (“New Grant”), (b) D intended to erect on the Property a 3-storey building with access roads, drainage/sewage systems and other facilities in accordance with (i) certain plans and specifications prepared by the relevant building contractor and (ii) estimated costs for such works according to a detailed estimate to be prepared by such contractor, and (c) D applied to P by way of building mortgage to advance to D building loan facilities being the Loan for the sole purpose of completing the aforesaid development which P agreed to do upon having the repayment of such advances together with interest thereto secured as set out in the Charge.

6.  Clause 1 and 2^nd Schedule of the Charge provided inter alia that in consideration of P granting building loan facilities to the extent of $2,000,000.00 and to be advanced by P to D in accordance with certificates issued by the relevant contractor certifying the various stages of progress of the construction works done in the sum of $500,000.00 on each occasion of “簽約時付”, “完成整幢石屎結構”, “內外瓦完成” and “工程完成後三個月內付工程尾數”, D as borrower covenanted with P that (a) he would on the repayment date (ie “[the] loan principal was repayable in one lump sum after twelve (12) months from the date of First Drawdown”) and on P’s demand in writing made to D or left on some part of the Property or left at D’s last known place of abode or business in Hong Kong pay to P all sums of money which at the date of such demand might be outstanding and according to P’s books payable by D to P in respect of the amount advanced under “this Building Mortgage” (ie the Loan), (b) he would pay interest on the principal loan under such facilities at a monthly rate of 1.2% at the end of each month and to be calculated with daily rates, and (c) he would charge the Property unto P.

7.  Clause 4.04 of the Charge provided inter alia as follows:

“If default shall be made by [D] in payment of the moneys hereby secured or the interest on the same or any part thereof respectively, it shall be lawful for [P] upon obtaining the consent of the [District Lands Officer (“DLO”)], to enter into and upon and take possession of [the Property] and the same thenceforth to hold possess and enjoy and to receive the rent and profits thereof without the interruption by [D] or any other person ……” (my emphasis)

8.  Clause 5.05 of the Charge provided inter alia that:

“If default in payment of the secured indebtedness hereinmentioned or any breach on the part of [D] of any of the terms and conditions here contained shall have occurred (and no delay or waiver of the right to exercise the powers conferred hereby shall prejudice the future exercise of such powers) [P] may provided [P] shall obtain the prior consent of [the DLO] to exercise any power of sale foreclosure or taking of possession or appointment or otherwise taking of any other step to enforce the security under this [Charge] without notice, appoint in writing …… a receiver and manager ...... of all or any part of the [Property] ……” (my emphasis)

9.  Clause 7.08 of the Charge provided inter alia that:

“7. IT IS FURTHER EXPRESSLY AGREED AND DECLARED as follows: ……

7.08 That this [Charge] which provides that [P’s] right to exercise of power of sale or foreclosure or taking of possession or appointment of receiver or power to enforce its security shall be subject to the prior written approval of the Director of Lands (hereinafter referred to as “the Director”) being obtained and the payment to the Government of any additional premium as shall be determined by the Director; ……” (my emphasis)

10.  Clause 9 of the Charge provided inter alia that:

“It is hereby agreed and declared that notwithstanding any provision hereinbefore contained to the contrary, no bankruptcy notice or proceedings may be issued, no process of execution shall be levied or enforced by [P] against [D] or any part of his assets or properties other than the [Property] under any judgment or order obtained and by [P] against [D] TO THE INTENT that [P’s] entitlement to repayment of the secured indebtedness hereunder shall be limited to and be satisfied out of [the Property]”.

11.  Clause 7.05 provided inter alia that no failure to exercise and no delay in exercising on the part of P any right, power or privilege in the Charge shall operate as a waiver thereof, nor shall a single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power, right or privileges provided by law.

12.  Clause 12 of the Charge provided inter alia that in the event of default, P as lender shall be entitled to demand D as borrower to pay all outstanding amount, and an event of default shall be deemed to have occurred upon inter alia any of the following matters arising:

(1)  D had made default in the payment of the secured sum or any part thereof after demand duly made;

(2)  D had made default in the payment on the due date and in accordance with the terms and conditions relating thereto of any principal or interest or instalment or other moneys outstanding and payable by D under any term loan or instalment loan account (whether demanded or not).

13.  Particulars of the Loan under Order 83A of the Rules of the High Court (“RHC”) as pleaded in the Statement of Claim (“SoC”) and referred to above are set out in the Schedule to this Judgment (“Schedule”).

14.  Pursuant to the Agreement and Charge, P lent the Loan of $2,000,000.00 to D by 4 sums of $500,000.00 each which were drawndown on 10 and 29 October and 14 and 30 November 2012 respectively (“1^st, 2^nd, 3^rd and 4^th Sums” and collectively, “Sums”).

15.  P disclosed the 4 corresponding drawdown notices respectively dated 10 and 29 October and 14 and 30 November 2012, which were signed by D. D also signed 4 “不可撤銷的授權書” dated 10 and 29 October and 14 and 30 November 2012 respectively in relation to “Building Mortgage Loan Facility – Lot No 777 in DD 313” to authorise and direct P to pay the Sums in the following manner, and he also signed copies of P’s cheques and his own identity card as confirmation:

Sums	P’s cheque no	Payee of P’s cheque	Amount of P’s cheque (HK$)
1st Sum ($500,000.00)	297968	“[P]之私人貨款(合約號碼:10MO-100278)”	500,000.00
2nd Sum ($500,000.00)	127346	“[P]之私人貨款(合約號碼:12Z-8084400)”	500,000.00
3rd Sum ($500,000.00)	298006	“[P]之私人貨款(合約號碼:12Z-8085555)”	200,000.00
	401461	“[P]之私人貨款(合約號碼:12Z-8085348)”	300,000.00
4th Sum ($500,000.00)	401472	“[P]之私人貨款(合約號碼:12Z-8085705)”	200,000.00
	401473	“[P]之私人貨款(合約號碼:12Z-8085864)”	300,000.00

16.  D also signed 4 “貸款計算表” for each of the 4 Sums which set out details of each Sum including the terms of repayment and the rate of interest.

17.  According to P, D made various interest instalment payments in respect of the 4 Sums / Loan to P, particulars of which were set out in the SoC and are shown in the Schedule, so D was indebted to P for a total sum of $2,171,221.93 as at 18 March 2015 as follows:

Principal of the 1st Sum drawndown on 10 October 2012		$500,000.00
Principal of the 2nd Sum drawndown on 29 October 2012		$500,000.00
Principal of the 3rd Sum drawndown on 14 November 2012		$500,000.00
Principal of the 4th Sum drawndown on 30 November 2012		$500,000.00
Interest on the 1st Sum at 14.4% per annum from 11 August 2014 to 18 March 2015 (220 days)		$43,397.26
Interest on the 2nd Sum at 14.4% per annum from 30 August 2014 to 18 March 2015 (220 days)		$39,649.32
Interest on the 3rd Sum at 14.4% per annum from 15 August 2014 to 18 March 2015 (216 days)		$42,608.22
Interest on the 4th Sum at 14.4% per annum from 31 July 2014 to 18 March 2015 (231days)		$45,567.13
Total:		$2,171,221.93

18.  P claimed that notwithstanding repeated demands/requests (including inter alia a letter dated 12 March 2015 by P’s former solicitors to D that demanded payment of all monies D then owed P), D failed and/or refused to pay P the aforesaid indebtedness or any part thereof, and refused to deliver up possession of the Property to P.

II.   PRESENT ACTION

19.  On 19 March 2015, P commenced the present action against D to claim for (a) possession of the Property, (b) the then outstanding indebtedness of $2,171,221.93, (c) further interest accrued on the outstanding principal amount of the Loan in the sum of $2,000,000.00 at 14.4% per annum from 19 March 2015 until payment in full, and (d) costs on indemnity basis.

20.  D did not file notice of intention to defend. On 27 November 2015, P applied by summons to enter judgment against D. On 27 July 2016, after hearing submissions from P’s counsel and D who appeared in person, Master Lai entered partial final judgment for part of P’s claims as admitted by D in the sum of $1,601,612.00 (“Lai Judgment”), and gave leave for D to file and serve his Defence to P’s remaining claims including claims for interest and possession order within 28 days from the date of such order.

21.  On 17 August 2016, P filed his Defence that referred to a provision in the summary of provisions of the Money Lenders Ordinance Cap 163 (“MLO”) annexed to the Agreement (“Summary”),[2] and averred that despite his written requests made on 26 February and 8 March 2013 (“26/2/13 and 8/3/13 Letters”) P failed to provide him with “附於或戴於借約提要書或備忘錄的 …… 放債人條例摘要第 19 條內規定, 放債人在受到借款人書面要求結算書”, hence P committed an offence and the Agreement was unenforceable.

22.  The copy 26/2/13 Letter annexed to D’s Defence stated as follows:

“敬啟者:

關於物業DD313 Lot 777建築貸款結算書事

本人多次電話貴公司提供上述貸款結算書, 但不得要領, 希貴公司七天內提供每月未有之結算書以作核對所付利息等, 謝謝合作。

此致

鑽龍財務公司

借款人

[D’s signature]

TAI NGAN CHIU

26-2-2013”

23.  The copy 8/3/13 Letter annexed to D’s Defence stated as follows:

“敬啟者:

關於物業DD313 Lot 777建築貸款結算書事

本人曾於2013年2月26日去信貴公司要求提供結算書, 但貴公司不理會, 根據合約的備忘錄第 19 條放債人不提供結算書即屬違法, 特此提醒, 借款人更申明此借款合約無效!

此致

鑽龍財務公司

借款人

[D’s signature]

TAI NGAN CHIU

8-3-2013”

24.  On 23 January 2017, P filed her Reply that denied any breach of the MLO. P further averred D never made any oral/written request or demand to P for supply of statement or information in respect of the Loan as alleged or at all, and D never received from P or anyone any alleged requests, demands, notices and/or letters purportedly dated 26 February and 8 March 2013, which P believed were false documents made up for the purpose of litigation only.

25.  D was absent at various pre-trial case management hearings on 5 May, 12 September, 15 November and 21 December 2017. On 15 November 2017, Master Ho granted an order that unless D within 14 days after service of such order on him file and serve his witness statement(s), D shall be debarred from adducing witness evidence at trial and P shall thereafter forthwith serve its witness statements on D. D failed to serve any witness statement after service of such order on him, so P served its witness statements, and D was thereby debarred from adducing witness evidence at trial.

26.  Further, D had not filed any list of documents to make discovery of documents in the present action save for the copy 26/2/13 and 8/3/13 Letters he annexed to his Defence.

27.  On 19 December 2018, D finally appeared at the pre-trial review before Chow J.

III.   WITNESS EVIDENCE

28.  P called 2 witnesses at trial, Mr Lo Shi Ki (“Lo”) and Ms Fung Wai Man (“Fung”). Both of them adopted their witness statements as part of their evidence. As explained above, D had no witness.

29.  Lo  Lo had been and was P’s general manager since Hui Mei Ching (“Hui”) started to carry on business as Diamond Dragon Finance Company. He managed P’s business for Hui, supervised P’s staff and operations, and was involved in approval of large-sum loans, liaison with borrower customers and recovery of indebtedness from such borrower customers.

30.  Lo said D was a large-sum borrower customer, so he was responsible for (a) liaising with D, (b) approving the Loan being a building mortgage loan for the Property, and (c) liaising with D for recovery of outstanding indebtedness.

31.  Lo explained that after the Loan was drawndown by way of the 4 Sums between 10 October and 30 November 2012, D failed to pay most of the interest instalment payments on time, so Lo had to regularly telephone D or meet with him to remind and request him to make interest payments as soon as possible. D failed to repay the principal of the Loan upon the due date, and asked P to grant time indulgence for payment. D continued pay interest as evident from the Schedule, and P eventually commenced the present action as explained above.

32.  Lo confirmed that all along D did not mention to him or ask him for any “結算書”. Although Lo would tell D the status of his indebtedness whenever Lo chased D for payment, D never disagreed with the amount of indebtedness that Lo informed him, and he only asked for more time to make payment.

33.  Lo said that prior to receipt of D’s Defence he had never seen the 26/2/13 and 8/3/13 Letters that allegedly requested P for provision of “結算書”, and he had never heard of such alleged requests. Lo was responsible for liaising with D and chasing him for repayment, so if P received either the 26/2/13 Letter or 8/3/13 Letter, its staff would follow standard procedure to issue “結算書” to D, and also to inform Lo of the details of D’s requests so that Lo could take follow up action.

34.  Fung  Fung was employed by P as a clerk since 2010, and was responsible for clerical work in relation to accounts/records of P’s customers, including making entries/records for customer accounts, loans and repayments, and filing related documents. Fung said P’s such records were maintained electronically, and an independent electronic account with a unique numberwas kept for each customer loan that contained particulars of the loan (including amount, date and interest rate) and a repayment schedule with information as to every payment. Based on such entries, the computer software would automatically calculate and generate the up-to-date outstanding indebtedness for the loan (including outstanding principal amount, outstanding interest instalments and due dates).

35.  Fung explained that P’s customers usually made payments by cheque or by cash or bank transfer into P’s bank account. When a customer made payment and Fung received the customer’s notice of payment (eg cheque, cheque pay-in slip, deposit slip, transfer slip etc), she would check whether such payment was received/deposited in P’s bank account. If so, she would record such payment based on the nature of the indebtedness (eg payment would be used to first settle outstanding interest and any remaining balance would be used to repay outstanding principal) and customer’s instructions. When Fung recorded such payment, the computer would automatically calculate and update the outstanding principal and interest amounts for the loan.

36.  Fung said that according to P’s computer records, D borrowed money from P on many occasions, and the Loan (drawndown by the 4 Sums) was just one of such loans. Fung confirmed P lent the Loan to D by way of the 4 Sums of $500,000.00 each with interest thereon at the rate of 14.4% per annum (ie monthly interest at $6,000.00) pursuant to the Agreement made between P and D on 11 May 2012, and P charged the Property as security for such Loan. When the 1^st, 2^nd, 3^rd and 4^th Sums with respective unique numbers 10MO-100319 (8086557), 10MO-100320 (8086558), 10MO-100322 (8086559) and 10MO-100325 (8086560) were drawndown on 10 and 29 October and 14 and 30 November 2012 respectively, P signed corresponding “不可撤銷授權書” and countersigned corresponding “貸款計算表” and copy cheques to confirm receipt of such drawndown Sums.

37.  Fung said P’s computer records showed D had not repaid the principal amounts of the 4 Sums, and only paid interest instalments up to divers dates in/about April to August 2015, ie D still owed P the principal amounts under the 4 Sums with the interest payable after divers dates in April to August 2015. By her witness statement, Fung disclosed P’s computer records for the 4 Sums that set out interest payments made by D for each such Sum as set out in the Schedule for the period up to 18 March 2015 with further interest payments made by D for each of the 4 Sums up to divers dates in/about April to August 2015 (as highlighted in italics in the Schedule).

38.  Fung said she never received any telephone call from D requesting for “結算書” for the Loan. D never requested for the same, and no one (including P’s staff) mentioned to Fung any request by D for “結算書” in respect of the Loan. Since Fung was responsible for dealing with P’s customer accounts and loan-related documents, if any of P’s staff received any customer request for “結算書”, he/she would follow standard procedure and forward such request to Fung for handling.

39.  Fung said P never received the 26/2/13 and 8/3/13 Letters from D that purported to request for “結算書” for the Loan. She had never seen such letters prior to receipt of D’s Defence. Fung said if the 26/2/13 and 8/3/13 Letters had been sent to P, P’s staff would have followed standard procedure and forwarded them to her for handling and filing, and she would have followed standard procedure to file such letters and to print the relevant computer records in respect of the 4 Sums to give to D. But there was no letter request for “結算書” in respect of the Loan in P’s files. Fung therefore believed D had never, whether by telephone or letter, requested P for “結算書” in respect of the Loan, and the 26/2/13 and 8/3/13 Letters were false documents.

40.  D’s pleaded defence allegation  As for D’s pleaded allegation of having made requests under section 19 of the MLO, Lo and Fung gave evidence that D never made any request for supply of statement or information regarding the Loan (including the 26/2/13 and 8/3/13 Letters) to either or both of them (even though they were the logical persons whom D would have contacted in respect of the Loan/Sums), and P never received the alleged requests in writing (ie the 26/2/13 and 8/3/13 Letters) as explained above.

41.  Further, Lo had frequent communications with the D in person and by telephone to chase him for payment under the Loan, but D never disputed the outstanding indebtedness save to ask for time indulgence to make payments. Also, Lo never heard from D about such alleged requests for statement or information until receipt of the Defence. Moreover, Fung had never received, come across or found from P’s files D’s alleged requests for statement or information even though she was responsible for keeping P’s customer accounts and for dealing with such customer requests.

IV.   FINDINGS

42.  On balance, I find Lo and Fung to be honest and credible witnesses. Their evidence was supported by P’s documents, including P’s computer records of payments which D had not disputed in the present action. D did not appeal against the Lai Judgment against D in the sum of $1,601,612.00 (see paragraph 20 above), and was therefore bound by the Lai Judgment notwithstanding D’s averment in his Defence that P committed an offence and the Agreement unenforceable.

43.  I find D’s pleaded defence (see paragraph 21 above) improbable and unbelievable.

44.  First, although D claimed he made various requests for statement and/or information about his position under the Loan including the 26/2/13 and 8/3/13 Letters, there was no plausible explanation (and there was no witness evidence from D) as to why he still made payments of interest even in November 2015, September 2015, May 2015 and January 2016 (ie more than 2 years after D allegedly sent the 26/2/13 and 8/3/13 Letters to P) in respect of the 1^st, 2^nd, 3^rd and 4^th Sums respectively (see Schedule), especially when some interest payments were made even after commencement of the present action on 19 March 2015 (see payments marked in italics in the Schedule).

45.  Secondly, even on D’s own case, it appeared from the 8/3/13 Letter that (a) he was well aware of the requirements of section 19 of the MLO, and (b) he took the view that P had committed an offence in failing to provide the statement or information about the Loan as requested, and hence the Agreement was unenforceable. With such underlying understanding that formed the basis of D’s case, his continued interest payments as aforesaid for the 4 Sums was quite inexplicable. On the basis of D’s case, there was no justifiable reason for D to do so given his alleged understanding that the Agreement was unenforceable. But in fact D continued to make interest payments on the 4 Sums long after the 26/2/13 and 8/3/13 Letters, which lent weight to P’s suggestions that (a) D’s alleged requests for statement(s) under section 19 of the MLO were a mere afterthought ruse when P pressed him for payment of the outstanding indebtedness, and (b) the 26/2/13 and 8/3/13 Letters were made up to embroider such afterthought allegation. I therefore reject D’s pleaded defence allegations.

V.   D’S OTHER ALLEGATIONS

46.  D lodged written opening submissions that raised 7 points with 14 annexures. Points 3 and 5 in D’s written opening submissions concerned his pleaded defence, which I have discussed and rejected in Part IV above. The other points had not been pleaded, and were merely raised in D’s written opening submissions. In my view, it was far too late for D to raise these points at trial, and I declined to allow D to run these arguments as (a) there was no factual evidence from D to support such allegations, and (b) it would be unfair to P who did not have the opportunity to consider D’s contentions and to adduce witness and/or documentary evidence to counter these allegations. But for completeness, I set out below D’s other points in his written opening submissions, and add my further observations based on the available evidence.

47.  By point 1 of D’s written opening submissions, D complained that despite his numerous requests P failed to give him a copy of the Agreement and tried to brush this away by saying D had not made any such request: “合約副本在被告人多次要求下也不提供，藉詞說被告人無要求, 原告人“理應”提供貸款合約副本給被告人，此等行為實為原告人之奸詐行為，使被告人不能常常閱讀以作適當調整，如安排轉按及作已還款項比對等”. There was no witness evidence from D (a) that he was not given a copy of the Agreement and/or he made requests for the same, and/or (b) why this was not raised in the 26/2/13 and 8/3/13 Letters and/or in the Defence. There is no merit to such contention.

48.  By point 4 of D’s written opening submissions, D relied on section 18 of the MLO and relevant provision in the Summary,[3] and complained that P failed to give him copy signed note of the Agreement and copy Summary : “根據放債人條例第 18 條“由借款人之訂立借約後七日內簽署，並須在款項借出前填妥，在簽署借款時，放債人必須給予借款人一份已簽署的借約提要書及本簡要乙份。”但原告人沒提供即屬違法。“參照附件 1 ” ”. There was no evidence from D that he was not given such copies, and I note (a) there was in fact “貸款計算表” countersigned by D for each of the 4 Sums which set out details of each Sum including terms of repayment and rate of interest, and (b) the Summary was enclosed to the Agreement. But even if P had not provided the requisite copy signed note and copy Summary (but there was no such evidence), D still paid interest for the 4 Sums for over 2 years despite awareness of such fact. Any suggestion that it would be unjust to enforce the Agreement was doubtful.

49.  By point 2 of D’s written opening submissions, D claimed P lost the original Agreement which would suggest P’s accounts were confusing: “違失貸款原件 (原告人)，這麼重要的文件都可以違失茲證明“鑽龍財務公司”行政混亂導致賬目不清不楚”. Again, there was no evidence from D that P had lost the original Agreement or how the copy thereof in the trial bundle was different from the duplicate he signed. In any event, D did not file any notice of objection as to authenticity in relation to the Agreement that was discovered and disclosed in P’s List of Documents. There was also no evidence from D to show what precisely was the “confusion” caused by alleged loss of the original Agreement. Mere propensity to poor management was quite an insufficient answer.

50.  By point 6 of D’s written opening submissions, D claimed the Sums had been repaid because “不可撤銷授權書” signed by him and copy cheques countersigned by him showed that upon drawdown of the principal amounts of the 4 Sums they were immediately “repaid” to P, so there was no outstanding principal and interest at all: “如原告人所述借款已作償還，那何來尚欠本金及產生利息，混亂不清以祈達致漁目混珠欺詐被告人。“參閱附件 2、3、4、5、6、7、8及9 ” ”. I find such argument unmeritorious.

51.  As Fung explained, P had granted many loans to D of which the Loan was one of them. This was also borne out by (a) pages 207-232 of the trial bundle which were essentially personal loan agreements made between P as lender and D as borrower dated 8 June, 22 August, 27 September, 11 October, 1 November and 10 November 2012 together with corresponding “不可撤銷的授權書” signed by D and copy drawdown cheques countersigned by D (ie at about the same time or shortly before the 4 Sums were drawndown), (b) my judgment in Hui Mei Ching trading as Diamond Dragon Finance Company v Tai Ngan Chiu HCA 579/2015 (unreported, 20 January 2017) in which P granted 4 personal loans to D pursuant to loan agreements dated 10 November and 27 December 2012 and 18 January and 20 March 2013 (ie at about the same time or shortly after the 4 Sums were drawndown), and (c) Fung gave evidence that upon drawdown the 1^st Sum was paid by P’s cheque to P in settlement of outstanding indebtedness in respect of a personal loan that P granted to D in May 2012. It transpired during the trial that even D himself was unsure which loans he owed to P were settled by the 4 Sums that were paid to P upon drawdown.

52.  However, what was clear was that the 4 Sums were not paid over to P upon drawdown in repayment of the Loan. Fung explained that each loan was given a unique number by P, and the unique numbers for the 4 Sums were 10MO-100319 (8086557), 10MO-100320 (8086558), 10MO-100322 (8086559) and 10MO-100325 (8086560) (see paragraph 36 above). It was clear from the 4 corresponding “不可撤銷授權書” D signed for drawdown of the 4 Sums that they were paid to P to settle indebtedness under 6 other loan agreements with different unique numbers, ie 合約號碼:10MO-100278, 合約號碼:12Z-8084400,[4] 合約號碼:12Z-8085555,[5] 12Z-8085348,[6] 合約號碼:12Z-8085705[7] and 合約號碼:12Z-8085864[8] (see paragraph 15 above). Plainly, D borrowed the 4 Sums from P and used them to settle his indebtedness due to P under other loan agreements. In such circumstances, D actually “received” the 4 Sums as they were paid to P by his order. In any event, it would be illogical for D to instantly repay the 4 Sums to P upon drawdown to pay off and settle the Loan and then go on to pay interest on the 4 Sums from 2012 to 2015.

53.  By point 7 of D’s written opening submissions, D complained that P in granting certain loans to him defrauded him by deducting part of the principal amounts to make payments to 智富企業顧問公司 and others: “原告人“Diamond Dragon Finance Company 鑽龍財務公司”許美貞開出支票抬頭人是“智富企業顧問公司”叁萬圓扣起作何用無註明，含糊不清以作欺詐被告人。“參照附件 10 及 11 ”。同樣附件 12、13及14，原告用同樣手法以達非法手段”. I am unable to see the relevance of Annexures 10-14 to D’s written opening submissions, which were “不可撤銷授權書” signed by D and copy cheques countersigned by D in relation to other loans drawndown on 8 August and 27 September 12, ie before the 4 Sums were drawndown. D did not plead any set-off or counterclaim in relation to amounts allegedly deducted by P. There is no merit to this contention.

VI.   CLAIM FOR MONEY JUDGMENT

54.  In my view, all of D’s contentions had no merit. He had not made further payment to P apart from the amounts particularised in the Schedule. The outstanding principal and unpaid interest (at the rate of 1.2% per month or 14.4% per annum) accrued on the 4 Sums calculated up to 5 March 2019 were as follows:

Sums	Outstanding principal (HK$)	Date of default in payment of interest (see Schedule)	Outstanding interest as at 5 March 2019
1st Sum	500,000.00	11 April 2015	280,928.57[9]
2nd Sum	500,000.00	30 August 2015	277,000.00[10]
3rd Sum	500,000.00	15 August 2015	280,071.43[11]
4th Sum	500,000.00	31 July 2015	255,000.00[12]
	2,000,000.00		1,093,000.00
Total:			3,093,000.00
Less Lai Judgment:			(1,601,612.00)
Outstanding amount:			1,491,388.00

55.  I therefore grant judgment in favour of P against D in the sum of $1,491,388.00 with interest on the principal amount of the Loan of $2,000,000.00 at 14.4% per annum from 6 March 2019 until judgment and thereafter at judgment rate until payment.

56.  Order 18 rule 8(4) of the RHC provides that a party must plead specifically any claim for interest under section 48 of the High Court Ordinance Cap 4 or otherwise. Hong Kong Civil Procedure 2019 Vol 1 para 18/8/18 at p 456 states as follows:

“A claim for interest under s.48 of the High Court Ordinance need only be included in the prayer to a pleading. However, all other claims for interest require the facts and matters on which they depend to be set out, and must be pleaded in the body of the pleading and not only in the prayer, though they should also be repeated in the prayer (see O.18, r.15(1)). This applies to liability to interest arising from contractual arrangements. ……

……

If the claim for interest is under a contract express or implied ……, the contractual term relied upon or otherwise the relevant facts and matters relied upon for the entitlement to interest must be specifically pleaded, as should the rate at which and the period for which such interest is being claimed.” (my emphasis)

P did not plead any provision in the Agreement and/or Charge to claim post-judgment interest at the contractual rate. I also note Clause 2 of the Agreement and Clause 1.02 and 2^nd Schedule of the Charge did not provide for payment of post-judgment interest at the contractual rate. Mr Koo, counsel for P, rightly conceded at trial that P would only seek interest at judgment rate in the post-judgment period.

57.  It is perhaps useful to note here that under clause 9 of the Charge (see paragraph 10 above), P was not entitled to levy execution or enforce the aforesaid money judgment against D or his assets/properties other than the Property.

VII.   CLAIM FOR POSSESSION OF THE PROPERTY

58.  By the present action, P in its SoC averred that D was in occupation of the Property and refused to deliver up possession of the Property to P, so P prayed for possession of the Property. In short, P was asking D to deliver up vacant physical possession of the Property to P.

59.  In my view, exercise of the mortgagee’s right to possession can be done by bringing an action for possession as P did by the present action. Fisher and Lightwood’s Law of Mortgage 14^th ed para 29.8 at p 605 states as follows:

“Where the mortgagor is in possession (and he is not a tenant of the mortgagee), the right [to possession] is exercised bytaking physical possession of the land, if that can be done peaceably, or by bringing an action for possession …… The mortgagee need not give notice either before entering or commencing proceedings. ……” (my emphasis)

But Clauses 4.04, 5.05 and 7.08 of the Charge set out pre-requisites for the exercise of P’s right or power to take possession of the Property.

60.  Mr Koo submitted the plain and ordinary meaning of Clause 4.04 of the Charge (ie “it shall be lawful for [P] upon obtaining the consent of the [DLO] to enter into and upon and take possession of [the Property]”) was that the consent of the DLO was required only before P entered into physical possession of the Property and not at the stage when P commenced legal action for possession. However, as explained in paragraph 59 above, P as mortgagee had 2 ways to exercise its right to take possession, ie by peaceable re-entry of the Property or by bringing an action for possession. The fact P chose the latter course of action (possibly because peaceable re-entry could not be practically achieved) did not diminish the fact that by commencing the present action to require D under compulsion of a court judgment to deliver up vacant physical possession P was in fact exercising its right to take possession of the Property. It must be understood that taking possession did not necessarily equate to having physical occupation.

61.  As Mr Koo agreed in his closing submissions, Clause 4.04 (which he relied) must be read in light of (a) the other provisions in the Charge and (b) the relevant context.

62.  In relation to (a) above, the express terms of Clauses 5.05 and 7.08 of the Charge were illuminating. Clause 5.05 essentially provided that P could appoint a receiver and manager “provided [P] shall obtain the prior consent of the [DLO] to exercise any power of …… taking of possession ……” Clause 7.08 was even more explicit in providing that “[P’s] right to exercise of any power of …… taking of possession …… shall be subject to the prior written approval of the Director of Lands …… being obtained and the payment to the Government of any additional premium as shall be determined by the [Director of Lands]”. These 2 provisions made clear it was the exercise of the power of taking of possession that would require (a) prior consent of the DLO, (b) prior written approval of the Director of Lands being obtained and (c) payment of any additional premium as determined by the Director of Lands. It was plain and obvious from the express words “exercise any power of” and “right to exercise of any power of” taking possession. I am unable to read Mr Koo’s limitation to such clear words that the exercise of such power would be restricted to obtaining physical occupation of the Property.

63.  In relation to (b) above, it is necessary to turn to the New Grant. It was evident from the particulars and conditions of exchange in the New Grant that lease of the Property was granted unto D in exchange for the surrender of the old lot described in the 2^nd schedule therein. The New Grant was part of the Small House Policy was evident from clause 4 of the Special Conditions (“SC”) by which D as grantee confirmed he was an indigenous villager who was qualified to receive the Property as a small house grant, and clause 3 of the SC by which D was required to develop the Property by building a small house thereon within 36 months.

64.  The whole rationale of the Small House Policy, which caters for the housing needs of indigenous villagers in the New Territories, is to enable an indigenous villager to erect a small house for himself as his own residence during his lifetime on suitable site within his village.[13] Given the underlying policy requirement for indigenous villagers to reside/occupy small houses to be erected on suitable sites within their own villages, alienation restrictions are contained in the small house grants.

65.  Thus, Clause 5(a) of the SC provided that subject to some exceptions (which I will turn to below), D as the grantee shall not “…… mortgage …… [or] part with possession …… of the [Property] or any part thereof ……” unless (a) 5 years had elapsed since the DLO confirmed that the conditions under the New Grant had been complied with to his satisfaction (clause 5(a)(ii) of the SC) or (b) D had paid to the government additional premium equivalent to the difference between the amount of premium (if any) paid by D to the government at the date of the New Grant and the full market value of the Property (clause 5(a)(ii) of the New Grant) (“Unless Proviso”). In short, D as grantee could not exercise any right he might have as grantee to mortgage or part with possession of the Property unless (i) the DLO had given the requisite confirmation under (a) above or (ii) D had paid the additional premium. Such provision was in line with the underlying rationale for the Small House Policy as explained above.

66.  I will now turn to the relevant exceptions. Clause 5(b) of the SC provided that D might upon satisfying certain requirements mortgage or charge the Property as a whole only for the purpose of the development of the Property “and then only by way of a building mortgage in such form and containing such provisions as the [DLO] shall approve or require”.

67.  Mr Koo pointed out there was no express provision in this exception that circumscribed the mortgagee’s right to exercise the power of taking of possession with need for prior consent/approval by the DLO and Director of Lands and/or for payment of additional premium. In my view, this was unsurprising since (a) such mortgagee was not a party to the New Grant, and (b) the relevant restrictions would be built into the building mortgage itself to bind the mortgagee, which must be why the DLO “shall” approve such building mortgage and require provisions to be included.

68.  Thus, in relaxing the prohibition against mortgages in Clause 5(a) of the SC for a building mortgage to be effected (presumably to enable D as grantee to build his small house on the Property), the concern for restriction against alienation was not with D as grantee parting with possession but with P as mortgagee having the right to exercise the power of taking possession. The relevant protection against alienation was embodied in the provisions of the Charge as approved by the DLO, ie Clauses 4.04, 5.05 and 7.08 that consistently required prior consent/approval of the DLO and Director of Lands and payment of additional premium to the government for the mortgagee’s right to exercise the power of taking of possession.

69.  The other exception was found in Clause 5(d) of the SC which provided that upon certification by the DLO that the conditions in the New Grant had been complied with to his satisfaction, D as the grantee might “with the prior written consent of the [DLO] and on such conditions as may be imposed by him …… mortgage, charge or part with possession of [the Property] ……” but only to (a) an indigenous villager or (b) some other person provided D shall have first paid the additional premium to the government. Again, the alienation restrictions were consistent, and unless they were satisfied the grantee could not even mortgage the Property let alone part with possession.

70.  In my view, upon considering Clauses 4.04, 5.05 and 7.08 of the Charge in the context of the New Grant and the Small House Policy that underlied the New Grant, I find the construction of those provisions as set out in paragraph 58-62 above naturally sat well with such context. I note that the alienation restriction in the New Grant was not limited to parting with physical possession for (subject to conditions) even mortgage/charge of the Property would be prohibited, and the conditions for relaxing such prohibition were precisely the prior consent of the DLO and payment of additional premium. I find P had to obtain the prior consent of the DLO and prior written approval of the Director of Lands, and to pay to the government any additional premium as shall be determined by the Director of Lands. Mr Koo confirmed there was no such consent/approval as yet. In the circumstances, not having satisfied the aforesaid pre-requisites, P was not entitled to exercise its power to take possession of the Property whether by commencement of legal action for possession or otherwise, and Mr Koo’s proposal that the court should order D to deliver up vacant possession of the Property to P within 30 days after having been served with the DLO’s approval failed to address the above concerns over P’s entitlement to bring an action for possession.

71.  In any event, the relief sought in the SoC was for delivery up of vacant possession of the Property by D to P, ie an order by the court directing D to give up and hand over physical possession of the Property that could be enforced without any qualification, which appeared to fly against even Mr Koo’s construction of Clauses 4.04, 5.05 and 7.08 of the Charge. Mr Koo then proposed an order that (a) “[D] do take all necessary steps to obtain the [DLO’s] approval for delivery of possession of the Property to [P]”, and (b) “[D] do within 30 days after having been served with the [DLO’s] approval deliver up vacant possession of the Property”. I am unable to see why D would be obliged to comply with (a) above. It was P who wished to exercise the mortgagee’s right or power to take possession, and there was no provision in the Charge that required D to procure such consent/approval. Anyway, there was no plea in this respect in P’s pleadings, and no evidence was adduced to the effect that D was the appropriate party to make application to the DLO for consent/approval.

72.  P’s claim against D for delivery up of vacant possession of the Property is dismissed.

VIII.   COSTS

73.  Clause 13 of the Charge provided inter alia that D shall be liable to pay on full indemnity basis all costs charges and expenses in any way incurred by P in relation to the Charge (including the costs of any legal action and proceedings in relation to the Charge and/or the moneys and liabilities). But P did not plead such provision to claim for indemnity costs on contractual basis. In the absence of such plea, Mr Koo rightly conceded that P would not rely on Clause 13 of the Charge to seek indemnity costs on contractual basis. In such circumstances, I am only prepared to grant costs on party and party basis.

74.  Bearing in mind that P failed in its claim for possession of the Property (but such claim did not take as much time as P’s claim for monetary judgment), I grant a costs order nisi that D shall pay 60% of P’s costs of the action (including all costs reserved if any) to be taxed on party and party basis if not agreed. Mr Koo did not ask for and hence I do not grant certificate for two counsel.

Schedule

The 1^st Sum of $500,000 drawndown on 10 October 2012

(a) The date in which the loan was made : 10 October 2012

(b) The amount actually lent to D : $500,000

(c) The rate of interest charged : 14.4% per annum

(d) The date when the contract for repayment was made : 10 October 2012

(e) The amount repaid : $132,000

(f) The amount due but unpaid : $543,397.26

(g) The date upon which such unpaid sum or sums became due : 11 August 2014

(h) The interest accrued due and unpaid : $43,397.26 [for the period from 11/8/2014 to 18/3/2015]

Particulars of repayment of the 1^st Sum of $500,000*

The 2^nd Sum of $500,000 drawndown on 29 October 2012

(a) The date in which the loan was made : 10 October 2012

(b)   The amount actually lent to D : $500,000

(c)   The rate of interest charged : 14.4% per annum

(d)   The date when the contract for repayment was made : 10 October 2012

(e) The amount repaid : $132,000

(f) The amount due but unpaid : $539,649.32

(g)   The date upon which such unpaid sum or sums became due : 30 August 2014

(h) The interest accrued due and unpaid : $39,649.32 [for the period from 30/8/2014 to 18/3/2015]

Particulars of repayment of the 2^nd Sum of $500,000*

The 3^rd Sum of $500,000 drawndown on 14 November 2012

(a)   The date in which the loan was made : 10 October 2012

(b)   The amount actually lent to D : $500,000

(c)   The rate of interest charged : 14.4% per annum

(d)   The date when the contract for repayment was made : 10 October 2012

(e) The amount repaid : $126,000

(f) The amount due but unpaid : $542,608.22

(g)   The date upon which such unpaid sum or sums became due : 15 August 2014

(h) The interest accrued due and unpaid : $42,608.22 [for the period from 15/8/2014 to 18/3/2015]

Particulars of repayment of the 3^rd Sum of $500,000*

The 4^th Sum of $500,000 drawndown on 30 November 2012

(a)   The date in which the loan was made : 10 October 2012

(b)   The amount actually lent to D : $500,000

(c)   The rate of interest charged : 14.4% per annum

(d)   The date when the contract for repayment was made : 10 October 2012

(e) The amount repaid : $126,000

(f) The amount due but unpaid : $545,567.13

(g)   The date upon which such unpaid sum or sums became due : 31 July 2014

(h) The interest accrued due and unpaid : $45,567.13 [ for the period from 31/7/2014 to 18/3/2015]

Particulars of repayment of the 4^th Sum of $500,000*

*  all italicised payment items were made after 18 March 2015 and after commencement of the present action on 19 March 2015