CHOW TAI FOOK JEWELLERY CO. LTD. v. SHUN KAI BULLION CO. LTD.

HCMP6992/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.6992 OF 1998

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J U D G M E N T

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1. This is a mortgage action in which the plaintiff, being the mortgagee, claims against the defendant mortgagor, for, inter alia, payment of monies due under the mortgage and possession of the mortgaged property by Originating Summons under Order 88, Rules of the High Court. The Originating Summons was heard before a master on 3 April 2000. The master ordered that the plaintiff's application be dismissed with costs to the defendant with a certificate for counsel. Against this order of the master, the plaintiff now appeals. Needless to say the appeal is by way of rehearing.

The facts

2. The mortgaged property, namely Flat No.3, 14/F Hung Tak Building, Nos.106-108 Des Voeux Road Central, Hong Kong, was charged to the plaintiff by way of a Legal Charge dated 23 June 1994 as security for a loan of HK$1.5 million. It was an express terms of the Legal Charge that the loan be repaid by 120 equal monthly instalments of HK$20,662.50, commencing on 22 July 1994. It was also stipulated that the interest rate was to be at 11% per annum "or such other rate as the lender may from time to time charge from 23 June 1994". The Legal Charge was registered at the Land Registry by Memorial No.6061575 on 6 July 1994. The defendant had defaulted in payment of the instalment payments since 22 June 1998. A letter of demand was sent by the plaintiff's solicitors to the defendant on 27 October 1998. Despite such demand, the defendant failed or refused any payment, whereupon the plaintiff issued the present Originating Summons on 28 December 1998.

The defence case

3. The above facts are not disputed by the defendant. Only two points have been taken by the defendant in respect of this appeal. The first point taken is that the plaintiff is a money lender within the meaning of the Money Lenders Ordinance and that the requirements of sections 18 and 20 of the Money Lenders Ordinance have not been complied with by the plaintiff, therefore, this appeal ought to be dismissed.

4. The second point taken by the defendant is that the rate of interest charged by the plaintiff is not the rate of 11% as agreed in the Legal Charge.

The Money Lender's point

5. Section 2(1) of the Money Lenders Ordinance provides as follows :-

"2. Interpretation

(1) In this Ordinance, unless the context otherwise requires ...

'money lender' means every person whose business (whether or not he carries on any other business) is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business, but does not include-

(a) a person specified in Part 1 of Schedule 1; or

(b) as respects a loan specified in Part 2 of Schedule 1, any person who makes such loan."

6. Part 2 of Schedule 1 is headed "Exempted Loans" and paragraph 2 thereof states as follows :-

"2. A loan made to a company secured by a mortgage, charge, lien or other encumbrance-

(a) registered, or to be registered, under the Companies Ordinance (Cap.32); or

(b) which would, in the case of a company referred to in paragraph (b) or (c) of the definition of 'company' in section 2(1), be able to be registered under that Ordinance if that company were a company referred to in paragraph (a) of that definition."

7. "Company" is defined in section 2(1) of the Money Lenders Ordinance as follows :-

"... 'Company' means a body corporate-

(a) incorporated under the Companies Ordinance (Cap.32);

(b) incorporated by any other Ordinance; or

(c) incorporated or established outside Hong Kong;

..."

8. The plaintiff submits that it is misconceived to regard the plaintiff as a "money lender" in respect of the loan secured by the Legal Charge. The plaintiff says that insofar as the loan secured by the Legal Charge is concerned, that loan is exempted by paragraph 2 of Part 2 of Schedule 1 of the Money Lenders Ordinance. Therefore, says the plaintiff, it is not a money lender as defined by the Money Lenders Ordinance insofar as this excepted loan is concerned.

9. The plaintiff further relies heavily on the judgment of Recorder Ribeiro SC (as he then was) in the case of Liggars Limited v. D.C. Finance (Holdings) Limited and Another [1998] 2 HKLRD 227 where he said at page 233 as follows :-

"All of the words in that provision, including the words which exclude exempted persons and persons who make exempted loans, together constitute the definition of 'Money Lender' for the purposes of the Ordinance. In my view, the words are unambiguous and clear. Where any person makes a loan to a company secured by a mortgage, that person makes an exempted loan and is not to be regarded as a money lender as respects that loan. It matters not whether that person is legally a money lender for the purposes of any other loan or is licensed as a money lender under the Ordinance or carries on business as such."

10. On the other hand, the defendant has adduced evidence before me that quite apart from the Legal Charge relied upon by the plaintiff in this application, Mr Wong Shun, a director of the defendant, and his wife have also signed a Letter of Guarantee dated 23 June 1994 in respect of the same loan by the plaintiff to the defendant and which is the subject matter of a separate action by the plaintiff against Mr Wong and his wife on that Letter of Guarantee. It is not disputed by the plaintiff that there was this Letter of Guarantee signed by Mr Wong and his wife.

11. In this respect, the point taken by Mr Swaine, who appears for the defendant, is that the words in paragraph 2 of Part 2 of Schedule 1 of the Money Lenders Ordinance where it says :-

"2. A loan made to a company secured by a mortgage, charge, lien or other encumbrance-"

should be read with the word "only" after the word "secured". Therefore, says Mr Swaine, once it is shown that a Letter of Guarantee was also signed by Mr Wong and his wife in respect of the same loan, this takes the matter out of the exemption created by Part 2 of Schedule 1 of the Money Lenders Ordinance.

12. For my part, I am unable to agree with this suggestion put forward by Mr Swaine for two reasons. Firstly, if the legislature had intended paragraph 2 of Part 2 of Schedule 1 to be read with the inclusion of the word "only" after the word "secured", it would have been the easiest thing for the legislature to have inserted the word "only" into paragraph 2 where Mr Swaine suggests it should be. Secondly, the words "or other encumbrances" at the end of paragraph 2, these encumbrances being unspecified, it makes no sense to read paragraph 2 in the way suggested by Mr Swaine, i.e. with the inclusion of the word "only".

13. Furthermore, the Letter of Guarantee was not signed by the defendant but by Mr Wong and his wife as third parties, albeit guaranteeing the same loan. Nor that the plaintiff, in the present application, relied upon the Letter of Guarantee. The plaintiff's case in the present application is based solely on the Legal Charge.

14. I have no hesitation in accepting the words of Recorder Ribeiro SC (as he then was) in the case of Liggars cited above.

15. However, that is not the end of the matter. The present case before me is distinguishable from Liggars case on the facts. In Liggars case, the plaintiff there, namely Liggars Limited, was a B.V.I. company, and therefore falls within subparagraph (c) of the definition of "Company" in section 2(1) of the Money Lenders Ordinance. As such, the mortgage in that case was an encumbrance which could be registered under the Companies Ordinance had Liggars Limited been a Hong Kong company. In the present case, however, the plaintiff is a Hong Kong company. Whilst the evidence before me shows that the legal charge in the present case was registered in the Land Registry, there is no evidence before me that this legal charge has been registered under the Companies Ordinance. It was registrable as a charge on land or any interest therein under section 80(2)(d) of the Companies Ordinance, Cap.32. It is the plaintiff's case that this loan was an exempted loan under the Money Lenders Ordinance. As such, the onus was upon the plaintiff to show that they come within this exemption. In the absence of any such evidence showing that the Legal Charge has been registered under the Companies Ordinance (within the five weeks prescribed by the Companies Ordinance for such registration), I am of the view that the plaintiff has failed to satisfy the requirement contained in subparagraph (a) of paragraph 2 of Part 2 of Schedule 1 of the Money Lenders Ordinance, and thereby has failed to show that this was an exempted loan under the Money Lenders Ordinance.

16. Once the plaintiff has failed to show that this was an exempted loan under the Money Lenders Ordinance, and since no submission has been made by the plaintiff to show that the requirements of section 18 and section 20 of the Money Lenders Ordinance has been complied with by the plaintiff, accordingly, this appeal is dismissed.

17. Having decided this appeal on the money lender's point, there is no need for me to deal with the interest point taken by the defendant.

18. I would also make a cost order nisi that the costs of this appeal be borne by the plaintiff.