YELSEN FINANCE HOLDINGS LTD. v. CHAN MEI SUEN

HCA 7506 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7506 OF 1998

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J U D G M E N T

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1. This is an action by a licensed money lender against a lady, Chan Mei Suen ("Defendant") in respect of a Guarantee given by her and signed by her in relation to a loan of $1 million made by the Plaintiff, licensed money lender, to the sister.

2. The issues before me are four:

(i) whether the Plaintiff provided copies of the Agreement and the Guarantee to the Defendant Guarantor in accordance with section 20(1) of the Money Lenders Ordinance;

(ii) whether the Agreement amounts to a note or memorandum in writing referred to in section 18(1);

(iii) whether the Agreement was signed by the Debtor after the Defendant Guarantor signed the Guarantee and therefore was contrary to section 18(1) of Ordinance; and

(iv) whether the Agreement and the Guarantees are extortionate given that the annual rate of interest was 54% and thus should be re-opened by the court.

Issues (i) and (iii) are for me, crucial. They both turned on the events of 27th November 1997. I, therefore, propose to consider those two issues first, that is issues (i) and (iii).

3. What is involved in issues (i) and (iii) is the question whether the Plaintiff's evidence is to be believed or that of the Defendant is to be believed. The evidence given by Mr. Lai of the Plaintiff is that on the day in question, both of the two sisters, that is the Debtor/Borrower as well as the Guarantor/Defendant, came together to the office of the Plaintiff at about 2:30 p.m. They stayed for about 1 1/2 hours and during that 1 1/2 hours, Mr. Lai explained to both of them very carefully the Agreement, and then the Guarantee and that the Agreement was first signed by the Borrower after explanation by Mr. Lai and then the Agreement was signed by the Guarantor. This was then followed by the signing of the Guarantee by the Guarantor. There was also the signing by the Guarantor of an acknowledgement of receipt of copies and copies of the Agreement and the Guarantee were made and given to them by the Plaintiff and then the two sisters left. That is the version of the Plaintiff.

4. The Defendant's version is very very different. Both Ms. Chan, the Guarantor as well as her sister gave evidence before me and their evidence amounted to this: that the Guarantor Ms. Chan was employed by a trading company with hours of work from 9:00 a.m. to 5:30 p.m. with one hour of break between 1:00 p.m. and 2:00 p.m., and it was very difficult for her to get leave and it was only during that lunch hour between 1:00 p.m. and 2:00 p.m. that she could come to the office of the Plaintiff to sign. That was why arrangement was made by her sister, the Borrower, with Mr. Lai beforehand for the Defendant Guarantor to come alone on 27th November to sign the Guarantee. The reason given for the sister, the Borrower, not being able to come on 27th at lunch time was because the sister had an important partnership problem that she had to resolve.

5. Now, there is as a start, a conflict of the evidence which could only be resolved by cross-examination. I had seen Mr. Lai's giving evidence. I had also seen the two sisters giving evidence and being cross-examined extensively by Mr. Liang. I have no hesitation in accepting the evidence of the two sisters. I prefer their evidence. They gave their evidence well. I am particularly impressed by the Defendant who impressed me as an honest and reliable witness. I have every reason to believe that it was because of her inability to get time off from work that she went to the Plaintiff's office at the time between 1:00 p.m. and 2:00 p.m. It would be an outrageous lie for the Defendant to put forward this, when for all one knows Mr. Lai could well be away during that time. If such allegation is untrue, there could be evidence to show that Mr. Lai could not possibly in the office between the hour of 1:00 p.m. and 2:00 p.m. on 27th. But be that as it may, I have no doubt that from all the material presented to me, specially from the oral evidence of the two witnesses of the Defendant that their version is to be preferred. I accept, of course, that there is material which seems to contradict the Defendant's case. There is an acknowledgement of receipt, for example, which was signed by Ms. Chan, the Defendant acknowledgement receipt of copies of the documents. She gave a very good explanation which I accept that she was told by Mr. Lai that you better sign this because the documents must all be signed by the Borrower and if the Defendant did not sign the receipt, then she has to come back again after the Borrower had signed, so she signed the receipt.

6. The acceptance of the evidence by this court of Ms. Chan's evidence that they were not there together, it seems inevitably to point also to the fact that the copies of the documents were not given to them as suggested by Mr. Lai. I also accept the evidence of the two Chans that the documents were not properly explained to the Chans.

7. I think in all the circumstances, there was, therefore, a breach of section 18(1) as well as section 21 of the Ordinance. I do not believe that this is a case where the court can possibly have regard to section 18(1) of the Ordinance and enforce the Agreement on the basis that it would be inadequitable not to do so. For me, it seems to me that this is clearly a case where the court must not enforce the Agreement.

8. Having reached this conclusion on these two issues, it seems to me that the other issues do not call for consideration and I do not propose to do so. The action, therefore, must be dismissed with costs.