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

CAMP 427 /2022, [2023] HKCA 776

On Appeal From [2022] HKDC 805

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 427 OF 2022

(ON AN INTENDED APPEAL FROM DCCJ NO 1903 OF 2021)

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J U D G M E N T

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Hon Yuen JA (giving the Judgment of the Court):

1.  This is the Defendant’s renewed application for leave to appeal against the decision of Deputy District Judge Teresa Wu (“the Judge”)  given on 4 August 2022 ([2022] HKDC 805)  (“the Decision”)  dismissing the Defendant’s appeals against the orders of Master Maurice Lam (“the Master”)  dated 4 January 2022 and 23 February 2022.  Leave to appeal to this Court was refused by the Judge on 5 October 2022 with reasons given on 18 November 2022 ([2022] HKDC 1334)  (“Leave Decision”).

2.  Having considered the papers, we consider that it is appropriate to determine the Defendant’s application on paper without an oral hearing.

Background

3.  The factual background and procedural history of this case have been set out in §§1 to 16 of the Decision and may be briefly stated as follows.

4.  On 28 April 2021, the Plaintiff commenced this action to recover from the Defendant amounts due under two credit cards (“Credit Cards”)  issued by the Plaintiff in January 2009 and May 2010 respectively. The Plaintiff claimed against the Defendant for the sum of HK$915,519.78 due under the First Card Account, the sum of HK$461,744.79 due under the Second Card Account, and contractual interest.

5.  The Defendant did not dispute that he had used the Credit Cards and incurred debts thereon.  Nor did he question the Plaintiff’s calculations.  The Defendant said that, due to financial difficulties, he could only afford to settle the monthly minimum payments for around 7 years from 2013 to 2020[1], and he argued that the interest charged by the Plaintiff was excessive, such that the payments made by him throughout the years exceeded the original principal.

6.  The Defendant argued that:

(1)  as he was a customer with persistent debts, the Plaintiff failed to assist him by e.g. proposing more options for repayment, pursuant to the Consumer Credit (Earlier Intervention and Persistent Debt)  Instrument 2018 issued by the Financial Conduct Authority (“FCA”)  in the UK (“the FCA rule”)  which he alleged applied to the Plaintiff as Standard Chartered plc was domiciled in the UK;

(2)  the Plaintiff was in breach of the (non-statutory)  Code of Banking Practice issued by the Hong Kong Association of Banks and the DTC Association (“the Code”)  by not treating him, a customer, equitably, honestly and fairly (contrary to clause 2.1)  in not offering him lower rates of interest under the Plaintiff’s “Personal Instalment Loan Debt Consolidation Program” (“the Program”), and charging extortionate interest rates (contrary to clause 12.3);

(3)  the contractual provisions relied upon by the Plaintiff are unenforceable under the Unconscionable Contracts Ordinance (Cap. 458)  (“UCO”); and

(4)  the Plaintiff was in breach of implied term by failing to provide services to its customers with reasonable care and skill under s.5 of the Supply of Services (Implied Terms)  Ordinance (Cap. 457)  (“SSO”).

7.  The Defendant counterclaimed the sum of HK$848,620 as the sum allegedly overcharged.  He obtained default judgment against the Plaintiff on his counterclaim on 3 August 2021.  

8.  On 4 January 2022, the Master set aside the default judgment[2] and granted summary judgment to the Plaintiff.  On 23 February 2022, the Master struck out the counterclaim.

9.  As mentioned earlier, on 4 August 2022 the Judge dismissed the Defendant’s appeals against the Master’s orders.  The Judge held that the Defendant failed to show that he had any real or bona fide defence on the merits, and that the Plaintiff was entitled to summary judgment.  As the counterclaim was based on the same allegations raised by the Defendant, the Judge upheld the Master’s orders setting aside the default judgment and striking out the counterclaim.

Intended grounds of appeal

10.  The Defendant’s intended grounds of appeal may be summarised as follows:

(1)  the Judge did not address the “foreign illegality” defence in relation to the breach of the FCA rule (“Ground 1”);

(2)  public policy is involved, and it is in the interests of justice that the court should examine the legal issues arising from persistent credit card debts in Hong Kong (“Ground 2”);

(3)  the Judge did not examine the specific clauses under the contractual documents relating to the Credit Cards (“Credit Card Contracts”)  in accordance with the principles laid down in section 6 of the UCO and the totality of the circumstances (“Ground 3”);

(4)  the Judge ought to have held that the Plaintiff was in breach of the Code by failing to treat its customers equitably, honestly and fairly, and charging extortionate interest rates (“Ground 4”); and

(5)  the Judge did not consider the legal principles of the SSO in rejecting the Defendant’s case based on that ordinance (“Ground 5”).

Legal principles

11.  Under section 63A(2)  of the District Court Ordinance (Cap. 336), leave to appeal shall not be granted unless the court is satisfied that the intended appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice that the matter should be heard.

12.  A reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125, §17.

Ground 1 – “Foreign Illegality” based on breach of the FCA rule

13.  The Defendant’s arguments under Ground 1 is premised upon the FCA rule being applicable to the Plaintiff.

14.  However, the Defendant’s arguments that the parent company of the Plaintiff, Standard Chartered PLC, was domiciled in the UK and subject to the supervision of the FCA, and that some of its key executives are approved by the FCA[3] to perform specific roles at a regulated firm do not answer the fundamental point that Standard Chartered PLC and the Plaintiff are separate legal entities, with separate rights and obligations (Decision, §58).

15.  The Defendant’s reliance on Ryder Industries Ltd v Chan Shui Woo (2015)  18 HKCFAR 544 and Patel v Mirza [2017] AC 467 is misplaced.

(1)  The principles on foreign illegality as set out in §39 of Ryder Industries Ltd are not engaged in the present case.  The governing law under the Credit Card Contracts was expressly Hong Kong law. Further, there is no suggestion that any performance of the contracts took place in the UK.  The Defendant did not challenge the Judge’s holdings that the Credit Cards were issued by the Plaintiff in Hong Kong, and that he settled payments in Hong Kong (Decision, §59).   Nor is there any basis to suggest that the “real object and intention” of the contracting parties was to perform some act which is illegal in a foreign jurisdiction.

(2)  Patel v Mirza is not relevant when the Defendant has failed to show any grounds of alleged illegality in Hong Kong.  

16.  By reason of the above, the Defendant has failed to show any reasonable prospect of success for Ground 1.

Ground 2 – Public Policy

17.  Under Ground 2, the Defendant submits that “credit card persistent debt issues are of general impact to many people in Hong Kong” and that the court should “examine the related legal issues about it”.[4]  The Defendant also submits that the “legitimate protection of consumers’ right” in respect of credit card services in Hong Kong is of “public policy nature and the core issue for the present case”.[5] More specifically, the Defendant complains that credit card service providers like the Plaintiff are “free to charge whatever interest rate they wish” as they are not governed by the Money Lenders Ordinance (Cap. 163)  (“MLO”).

18.  This is not a valid ground of appeal.  As pointed out by the Judge, court proceedings are not intended for examination of public policy issues such as those identified by the Defendant (Decision, §69). Further, the exemption of banks from the application of the MLO is clearly set out in section 3 of the MLO.

19.  Accordingly, there is no reasonable prospect of success for Ground 2.

Ground 3 – the UCO

20.  Ground 3 concerns the Defendant’s complaint that the Judge did not examine the specific clauses in the Credit Card Contracts in accordance with the provisions under the UCO and the totality of the circumstances.

21.  However, in §§24 to 26 of the Decision, the Judge had identified the relevant terms in the Credit Card Contracts on the Plaintiff’s powers to charge interest, fees and charges, and proceeded to analyse the case in accordance with the factors listed in section 6 of the UCO (set out in §37)  in §§39 to 49, taking the totality of the circumstances into account (§50).  We see no error whatever in the analysis. 

22.  In relation to §36, the Defendant contended that he had identified the unconscionable parts in the Credit Card Contracts which relate to the interest rate.  As pointed out in §7 of the Leave Decision, the Judge had proceeded in the Decision on the basis that the Defendant was “challenging the unconscionability of all those parts” in the Credit Card Contracts giving the Plaintiff the “power to charge interest and to apply payments” (Decision, §36).  The Judge was therefore fully aware of the Defendant’s contention and dealt with it in §§39 to 49.

23.  Regarding §40 of the Decision, the Judge was entitled to take into account (a)  the continuous usage of the Credit Cards by the Defendant since January 2009 and May 2010 respectively, and (b)  that it was open to the Defendant to terminate the Credit Cards at any time.  The Defendant referred to the fact that he only started to pay the monthly minimum payment since 2013.  We do not see how that fact assists this ground of appeal. 

24.  Further, the Judge was entitled to take into account the lack of evidence from the Defendant on whether the interest and charges imposed by other banks for similar credit card services were comparable to those imposed by the Plaintiff (Decision, §49).  

25.  Finally, in relation to §45 of the Decision, the Defendant argued that the Judge was wrong to refer to the monthly statements of the Credit Cards in concluding that he was aware of the interest rate and charges imposed by the Plaintiff.  However, the Defendant did not deny the receipt of those statements in his evidence, and he is obviously literate.   

26.  Accordingly, there is no reasonable prospect of success for Ground 3.

Ground 4 – the Code

27.  Under Ground 4, the Defendant essentially repeats his arguments before the Judge that the Plaintiff was in breach of Clause 2.1 and/or Clause 12.3 of the Code.

28.  We are not satisfied that the Judge erred in her analysis of the arguments in this respect in §§61 to 65 of the Decision. 

29.  It was not the Defendant’s case that the Plaintiff had charged a rate above 48% APR (the rate then presumed to be extortionate under s.25(3)  MLO[6])  in respect of the Credit Cards.  Therefore, it does not fall foul of Clause 12.3 of the Code.

30.  As to the alleged breach by the Plaintiff in failing to treat its customers equitably, the Defendant’s complaint is directed at the fact that the Plaintiff did not offer the Program to him.  However, as the Program did not apply to any customers for the purpose of settling outstanding amounts of credit cards issued by the Plaintiff[7], he was not treated differently from such customers.  In any event, the Defendant did not adduce any evidence that he had ever applied to this program.  As such, the Defendant’s allegation of non-equitable treatment simply does not get off the ground.

31.  There is no reasonable prospect of success for Ground 4.

Ground 5 – the SSO

32.  Under Ground 5, the Defendant contends that the Judge did not refer to the legal principles of the SSO in reaching the conclusion that the Plaintiff was not in breach of that ordinance.

33.  The Defendant’s case under the SSO is based upon his allegations of the Plaintiff’s breach of the Code.  It was therefore not necessary for the Judge to refer to the legal principles of the SSO when she had rejected his allegations on the Code.  There is therefore also no reasonable prospect of success for Ground 5.

Order

34.  As the Defendant has failed to show any reasonable prospect of success in his intended appeal, and as we do not see any other reason in the interests of justice why his intended appeal should be heard, his application for leave to appeal is dismissed.

35.  We would make an order nisi that the costs of the application be paid by the Defendant to the Plaintiff which we would summarily assess at $47,837.00.

36.  As the application is wholly without merit, we would further order, pursuant to Order 59 r.2A(8)  of the Rules of the High Court (Cap. 4A), that no party may under r.2A(7)  request this determination to be reconsidered at an oral hearing inter partes.