TOTAL EXPRESS INTERNATIONAL (HK) LTD v. ZHANG JUNHUA

HCMP 513/2016

[2021] HKCFI 2590

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 513 OF 2016

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JUDGMENT

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Introduction

1.  The Plaintiff is and was at all material times a licensed money lender under the Money Lenders Ordinance, Cap 163 (“MLO”). 

2.  The Defendant is and at all material times was the registered owner of the property situated at Flat A, 25/F, Homing Terrace (浩明雅苑), No 151, Kowloon City Road, Kowloon, Hong Kong (“Property”), having purchased the Property in 2005.

3.  The Plaintiff’s claim is a straightforward one for the recovery of a loan of HK$1.35 million (“Loan”) together with contractual interest at the rate of 36% p.a..  The Loan was made pursuant to the following documents:

(1)  a loan agreement dated 1 December 2015 no TE-20151201-001 in Chinese for the sum of HK$1.35 million and for a term of 12 months (“Loan Agreement”);

(2)  a memorandum of the Loan Agreement in Chinese (“Memorandum”) which provides that:

(a)  the principal sum of the Loan is HK$1.35 million;

(b)  interest will be payable by the Defendant at the rate of 3% per calendar month ie 36% p.a. on the principal sum of the Loan;

(c)  the accrual of interest shall commence on 1 December 2015;

(d)  the amount of interest payable per month is HK$40,500;

(e)  interest shall be paid by 12 instalments, with the first instalment to be paid on 1 January 2016 and, thereafter, interest shall be payable on the first day of each month;

(f)  the principal sum of the Loan shall be paid together with the 12th instalment of interest.

(The Memorandum together with the Loan Agreement collectively as “Loan Contract”).

(3)  a Second Legal Charge dated 1 December 2015 registered in the Land Registry by Memorial No 15121800800030 (“Second Legal Charge”).

4.  Pursuant to the Loan Contract and the Second Legal Charge, the Plaintiff advanced the Loan to the Defendant on 1 December 2015.  The Defendant has failed to pay any monthly interest instalment to the Plaintiff. 

5.  By letter dated 24 February 2016 from its solicitors, the Plaintiff demanded payment of the Loan together with all accrued interest from the Defendant.  However, the Defendant has not made any payment to the Plaintiff despite the demand.

The Agreed Facts

6.  The parties have helpfully provided an Agreed Statement of Facts (Revised) to this court.  In addition to what is set out above, the Statement also contains the following.

7.  The Property was subject to a First Legal Charge dated 17 July 2015 (“OCBC Charge”) with OCBC Wing Hang Credit Limited (“OCBC”) registered in the Land Registry with memorial no 15081000990175.  It was to secure a loan of HK$3.4 million from OCBC to the Defendant.  The interest rate charged by OCBC was 2% p.a. below the bank’s fluctuating Prime Lending Rate which was 5.25% at the time. 

8.  On 1 December 2015, the Defendant attended the Plaintiff’s office to sign documents for the Loan.  There, the Defendant signed the following documents:

(1)  Application form in Chinese.

(2)  The Loan Agreement in Chinese.

(3)  Declaration on fees in Chinese.

(4)  Notice to customer regarding personal information / privacy in Chinese.

(5)  Form of summary of provisions of MLO in Chinese and English.

(6)  Declaration of financial status in Chinese.

(7)  The Memorandum in Chinese.

(8)  Statement of interest and principal in Chinese (“Statement”).

9.  Afterwards, the Defendant went to the office of Messrs Pauline Wong & Co (“Pauline Wong”)and executed the following documents:

(1)  The Second Legal Charge.

(2)  Important notice in English and Chinese acknowledging that Pauline Wong were solicitors acting for the Plaintiff and the Defendant, upon the invitation of Pauline Wong, chose not to seek independent legal advice.

(3)  Notice in Chinese acknowledging that the Defendant was the sole beneficial owner of the Property and apart from the mortgage to OCBC, the Property was not subject to another mortgage or legal charge.

(4)  An irrevocable power of attorney.

10.  After signing the above, Pauline Wong gave the Defendant a cheque in the sum of HK$1.35 million (“Cheque”) drawn on its Bank of China (Hong Kong) Limited (“BOC”) account.  The Cheque was drawn payable to the Defendant. The Defendant acknowledged receipt of it by signing on a receipt in Chinese. 

11.  The Defendant deposited the Cheque into her bank account with BOC (“D’s Account”) on 1 December 2015.

12.  The Defendant withdrew HK$1 million in cash from D’s Account on 1 December 2015.  She further withdrew HK$350,000 in cash from D’s Account on 2 December 2015.

The parties’ case

13.  As succinctly set out in Ms Wong’s Opening Submissions at paragraph 9 and confirmed by Mr Ho, the Defendant’s defence is that the Loan Contract and the Second Legal Charge are illegal and unenforceable owing to the following alleged breaches of the MLO.

14.  First, collusion.  The Defendant’s pleaded case[1] is that the Plaintiff unlawfully acted in collusion with a company Ngai Fung International Enterprise Limited (藝鋒國際企業有限公司) (“Ngai Fung Inter”) to deceive her into entering into the Loan Agreement and the Second Legal Charge and that the Plaintiff charged or received from the Defendant a sum of money for procuring the Loan Agreement and the Second Legal Charge in contravention of section 27(3) of MLO.  The alleged sum charged to or received from the Defendant was said to be HK$1,309,500 ie the HK$1 million and HK$350,000 withdrawn by the Defendant on 1 and 2 December 2015 and then paid by her to a Mr Wong of Ngai Fung Inter, minus a sum of HK$40,500 deposited back into D’s Account on 4 December 2015.  It is her pleaded case that she is entitled to recover or set off the sum of HK$1,309,500 from the Plaintiff’s claim pursuant to s 27(4) of the MLO.

15.  Second, excessive interest rate.  The Defendant’s pleaded case[2] is that the Plaintiff charged her excessive rate of interest of 4,433% in contravention of section 24 of MLO. 

16.  At the beginning of the trial, Mr Ho confirmed that the Defendant no longer pursued the other pleaded breaches of the MLO.

17.  As set out in Mr Ho’s Opening Submissions[3], the Defendant has put forward a rather usual course of events in support of the allegation of collusion.  Putting it briefly, the events recited by Mr Ho are as follows.

18.  The Defendant was born in Mainland China in 1978 and educated up to 3^rd year in secondary school.  She is a widow with a daughter living in rented property whilst the Property was rented out.  The Defendant relied on the savings of her late husband and rental income from the Property to cover their living expenses.  In 2015, the Defendant borrowed HK$3.4 million from OCBC which was secured by the OCBC Charge.  With this loan, the Defendant paid off the prior mortgage with Standard Chartered Bank, leaving a balance of about HK$2 million which she subsequently lost in a failed investment in Mainland China. 

19.  The rental income from the Property was only HK$15,800 per month while the monthly mortgage payment to OCBC was about HK$15,000.  The Defendant was eager to find a way to reduce the monthly repayment.

20.  On 6 November 2015, the Defendant received a call from a man (“Male A”) who claimed to work in a bank and asked her whether she had financial difficulties.  Male A said he could help her to find a bank mortgage at low interest rate.  The Defendant told Male A the Property was subject to the OCBC Charge with interest at around 3.1% p.a. and monthly payment of HK$15,000.  Male A responded by saying that this was too high and that he could arrange a mortgage loan at 1% to 2% p.a..  The charges involved would be HK$30,000 and payable only if the mortgage was successfully arranged.  A meeting was arranged between the two on 9 November 2015 but the Defendant was unable to attend.  Male A kept contacting the Defendant by phone and by WhatsApp asking to arrange a meeting with her. 

21.  Finally, the Defendant agreed to meet him on 20 November 2015 at Ngai Fung Inter’s office at China Hong Kong City, Canton Road, Kowloon.  At Ngai Fung Inter’s office, instead of meeting Male A, the Defendant was received by a Mr Wong (“Mr Wong”) who gave her a business card of Ngai Fung Inter on which he wrote down his surname and phone number.  Mr Wong represented to the Defendant that Ngai Fung Inter and China Construction Bank (“CCB”) had a cooperative relationship.  He could arrange a mortgage loan of HK$3.4 million with interest at 1% p.a. for a term of 30 years.  The monthly instalment would be around HK$10,940.  However, according to Mr Wong, in order to secure the CCB loan, the Defendant had to place a sum of money with a law firm recommended by Ngai Fung Inter in order to show CCB that the Defendant was in a healthy financial condition.  Mr Wong assured the Defendant that even if the application was unsuccessful, she would not suffer any loss.  Lastly, Mr Wong assured the Defendant that the CCB loan would be arranged before 1 January 2016.

22.  On 26 November 2015, the Defendant met with acolleague of Mr Wong named “中保” (“Chong Po”) and was taken to Ngai Fung Inter’s recommended law firm Messrs Au, Thong & Tsang (“ATT”) in Central to continue with the application.  The application was not proceeded with because of problems with proof of the Defendant’s identity ie when the Defendant purchased the Property in 2005, she used her passport as proof whereas on 26 November 2015, she could only show her HKID card.

23.  On 30 November 2015, Mr Wong called the Defendant and said he found another law firm to arrange the security deposit required to apply for the CCB loan.  But Mr Wong did not mention the name of the law firm or the amount of the security deposit.  Subsequently on the same day, a male person (“Wong’s colleague”) called the Defendant.  He introduced himself as a colleague of Mr Wong and instructed her to send him a copy of her PRC ID card by WhatsApp to his phone no 6448 7111[4] which the Defendant did.  According to the Defendant, she now believes that Wong’s colleague should be a staff of the Plaintiff.  Lastly, on the same day, the Defendant also received a call from Chong Po who asked her to meet him in Mongkok on 1 December 2015 at 2 pm and he would take her to the law firm mentioned by Mr Wong.

24.  On 1 December 2015, the Defendant was taken to a nearby office by Chong Po.  At the time, the Defendant was not sure whether it was the Plaintiff’s office or whether the Plaintiff’s name plate was displayed at the office.  But she now believes that, while in the office, she was received by a male staff of the Plaintiff whose name she could not remember (“P’s staff”).  P’s staff asked her to fill in a form with her personal particulars.  She was later presented with the Loan Agreement and other related documents and was asked to sign them.  This was the first time the Defendant realized she was borrowing HK$1.35 million from the Plaintiff with a monthly instalment of HK$40,500.

25.  The Defendant said she was very surprised since she was told by Mr Wong the day before that she would be taken to another law firm rather than a finance company.  She asked P’s staff why she had to go to a law firm the last time and a finance company this time.  The Defendant further told him that her purpose was to obtain a low interest mortgage loan from CCB and Ngai Fung Inter’s plan was to place a security deposit with a designated law firm.  The P’s staff did not respond and simply asked the Defendant whether she wanted to borrow or not.  In her 2nd supplemental statement, the Defendant added that the P’s staff also said if she wanted to apply for a low interest mortgage loan, she should follow the instructions of Ngai Fung Inter. 

26.  According to the Defendant, she is now clear this P’s staff wasChan Ka Ho(“Ka Ho”), the Plaintiff’s manager who handled the transaction.

27.  The Defendant felt uncomfortable and called Mr Wong.  Mr Wong told the Defendant that it would not cause her any problem by signing the Loan Agreement and related documents.  Mr Wong also told the Defendant that Ngai Fung Inter had already explained to the Plaintiff that the HK$1.35 million was a security deposit to be placed in a law firm pending the process of the CCB loan and the Plaintiff was lending her on that basis.  The Defendant was also told that there was no need for her to repay the Plaintiff since upon CCB’s approval of the loan, Ngai Fung Inter would instruct the law firm to transfer the HK$1.35 million to CCB who would repay the Plaintiff.  If CCB did not approve the loan, Ngai Fung Inter would instruct the law firm to refund the $1.35 million to the Plaintiff.  Believing what she was told, the Defendant signed the Loan Agreement and other documents.

28.  After signing the documents, another staff of the Plaintiff gave the Defendant a card of the Plaintiff with its telephone number printed on it.  He told the Defendant that every time she made an instalment payment, she had to mention that number as confirmation.  He then put down a WhatsApp number on the card and asked the Defendant to contact him if she had any further questions.  The number he wrote down was 6448 7111, the same number of Wong’s colleague who called the Defendant earlier on 30 November 2015.

29.  After the meeting at the Plaintiff’s office, Chong Po took the Defendant to the office of Pauline Wong.  On the way, the Defendant kept chatting with Mr Wong by WhatsApp and phone call.  Mr Wong told the Defendant inter alia that Pauline Wong would issue a cheque to her to get money from the bank and asked her to go to his office after getting the money. 

30.  At Pauline Wong’s office, the Defendant met a man whom she subsequently knew was Mr Cheung Man Yuen (“Mr Cheung”), legal clerk of Pauline Wong.  In the conference room, Mr Cheung presented the Defendant with 2 English documents for her to sign ie a mortgage document and a power of attorney.  The Defendant said she was unsure whether to sign them and Mr Cheung’s reaction was that she would not get the cheque if she did not sign them.

31.  After the Defendant had signed the documents, she was given the Cheque. Mr Cheung then informed the Defendant that if she could not repay the Loan, the Plaintiff had the right to take possession of the Property[5]. Since the Defendant had been told by Mr Wong that she did not have to repay the Plaintiff even if the application for the CCB loan was unsuccessful, the Defendant thought there would be no problem. 

32.  Thereafter, Chong Po told the Defendant to cash the Cheque with BOC and give the whole amount to Ngai Fung Inter.  On that day, the Defendant withdrew HK$1 million from D’s account.  On the following day, she withdrew the remaining HK$350,000from D’s account.  On both occasions, after the Defendant had obtained the cash, she went to Ngai Fung Inter’s office and handed over the same to Mr Wong as instructed.  In return, the Defendant was given 2 English documents which she thought were receipts but were in fact invoices for HK$1 million and HK$350,000 respectively.  The invoices also described the 2 sums as Ngai Fung Inter’s “Consultant Fee”. 

33.  On 3 December 2015, the Defendant contacted Mr Wong to enquire about the progress of the CCB mortgage.  Mr Wong asked her not to worry and to give him her bank account number.  On the next day, the Defendant received HK$40,500 in D’s account from Mr Wong. 

34.  On 10 December 2015, the Defendant discovered from someone she did not know ie 2 staff of New Miles Mortgage Consultant Limited that the sums of HK$1,000,000 and HK$350,000 were described as “Consultant Fee” rather than “Security Deposit” on the 2 documents she received from Mr Wong and that she had been cheated.  The Defendant then reported the matter to the Mongkok Police Station on 11 December 2015.  She was instructed by the police to contact Mr Wong.  Soon after, Mr Wong stopped all communications with her.

35.  ThePlaintiff’s reply to the charge of collusion is simple - it is not in any way related to Ngai Fung Inter, Mr Wong or Chong Po.  Even if the Defendant can prove that she has been deceived by these third parties, that has nothing to do with the Plaintiff.

36.  The Plaintiff also denies charging excessive interest rate.

The Issues and the witnesses

37.  The 3 issues which fall for this court’s determination are:

(1)  Whether the Defendant was in breach of the Loan Agreement which would entitle the Plaintiff to enforce its remedies under it and the Second Legal Charge.  (“Issue 1”)

(2)  Whether the Plaintiff colluded with the purported intermediaries viz Ngai Fung Inter, Mr Wong and Chong Po[6] as alleged.  (“Issue 2”)

(3)  Whether the Plaintiff was in breach of sections 27 and 24 of the MLO which rendered the Loan Contract illegal and unenforceable.  (“Issue 3”)

38.  At trial, the Plaintiff called 2 witnesses:

(1)  PW1 - Mr Cheung, the legal executive who attended to the Defendant at the office of Pauline Wong on 1 December 2015.

(2)  PW2 - Chan Ka Chun, director of the Plaintiff (“Chun”).

39.  Mr Cheung’s evidence is short and not controversial.  His involvement in the present case is limited to explaining to the Defendant the contents of the various documents prepared by Pauline Wong and witnessing her signing on them.  There is no suggestion by Mr Ho that Mr Cheung or Pauline Wong were acting in collusion with Ngai Fung Inter. 

40.  Chun is the elder brother of Ka Ho who was all along intended to be a witness of the Plaintiff.  Ka Ho was the Plaintiff’s manager at the time who on 30 November 2015 received an enquiry by phone for a loan of HK$1.35 million.  He subsequently received a number of documents from the Defendant by fax including her ID card, the OCBC Facilities letter, address proof, TransUnion report etc and processed the Defendant’s loan application.  Ka Ho also attended to the Defendant on 1 December 2015 for the signing of the loan documentation at the Plaintiff’s office. 

41.  As explained in Chun’s witness statement, since the beginning of the present proceedings in 2016, the Plaintiff had intended and arranged for Ka Ho to testify on its behalf.  It was after Ka Ho’s resignation from all his positions in the Plaintiff in late 2018 and the subsequent breakdown in relationship between the 2 brothers that, by the time of the 1st PTR, it was confirmed that Ka Ho would not testify for the Plaintiff. 

42.  Mr Ho criticizes Chun’s testimony as 100% hearsay in relation to what Ka Ho did on 30 November and 1 December 2015.  However, Ms Wong submits and this court agrees that there are 2 aspects of Chun’s testimony which clearly has probative value.  First, he was a shareholder and director of the Plaintiff whose role was to oversee and manage the operation of its business.  He has personal knowledge of the Plaintiff’s general working practice at the material time and was in a position to confirm that the Plaintiff was in no way associated with Ngai Fung Inter, Mr Wong or Chong Po.  Second, Ka Ho had personally reported to him about the Defendant’s application and his assessment of it.  It was Chun who finally approved the application. 

43.  The Defendant called herself as the only witness.

44.  This court has carefully considered the testimony, as well as the demeanour, of all witnesses, and assessed it against the documentary evidence and the known and undisputed circumstances of this case.  This court has in particular considered the inherent probabilities or otherwise of the witnesses’ testimony and assessed their credibility accordingly.

45.  As a preliminary observation, this court finds the Plaintiff’s witnesses straightforward and truthful.  They gave their testimony calmly and their answers to questions were mostly direct.  While they were in the witness box, this court did not detect any sign of embellishment of their testimony.  Their credibility has withstood the vigour of cross‑examination.

46.  As for the Defendant, for reasons to be elaborated in the next section “Deliberation”, this court does not find her a reliable witness.  Apart from the speculative nature of her subjective belief that the Plaintiff was acting in collusion with Ngai Fung Inter, this court finds her narrative of the events convoluted and highly improbable.  She has filed a total of 3 witness statements dated 8 January 2018 (“Zhang 1”), 9 April 2018 (“Zhang 2”) and 21 July 2020 (“Zhang 3”).  In Zhang 2, the Defendant has made 4 relatively minor revisions to Zhang 1.  However, in Zhang 3, the Defendant has made over 10 substantial revisions to Zhang 1 as well as a number of revisions to her 2 police statements dated 11 December 2015 and 16 November 2016.  Normally, a witness’s memory would fade with time.  In the case of the Defendant, it seems that her memory increasingly improved as the trial date approached. 

Deliberation

The law

47.  This court shall start with the relevant provisions of the MLO. 

48.  Section 24 provides:

“(1) Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an offence.

(2) No agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan shall be enforceable in any case in which the effective rate of interest exceeds the rate specified in subsection (1).”

49.  “Interest” is defined in section 2 as not including “any sum lawfully agreed to be paid in accordance with this Ordinance on account of stamp duty or other similar duty, but save as aforesaid includes any amount (by whatever name called) in excess of the principal, which amount has been or is to be paid or payable in consideration of or otherwise in respect of a loan”. 

50.  Sections 27(3) and (4) provide:

“(3) Subject to section 33A(5), it shall not be lawful for any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender to charge, recover or receive any sum as for or on account of any such costs, charges or expenses (other than stamp duties or similar charges) or to demand or receive any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof.

(4) If any money or money’s worth is directly or indirectly paid or allowed to or received by any person in contravention of this section, the amount or value thereof, to the extent of such contravention and notwithstanding any agreement to the contrary, may be recovered by the borrower from such person or, if such person is the money lender or a partner, employer, employee, principal or agent of the money lender or is in any way acting for or in collusion with him, may be set off against the amount actually lent (and that amount shall be deemed to be reduced accordingly) or may be recovered by the borrower from such person or from the money lender.”

51.  Section 29(10) provides:

“(10) Any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender who charges, recovers or receives any sum as for or on account of any costs, charges or expenses (other than stamp duties or similar charges) referred to in section 27(3) or demands or receives any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof commits an offence.”

52.  In Skyline Credit Limited v Leung Hing Chung [2019] HKCFI 169, a money lender’s action for the recovery of a loan advanced by the plaintiff as lender to the defendant as borrower pursuant to a loan agreement, DHCJ William Wong SC summarised the law at [36] - [39] on collusion as follows: 

“Legal Principles in relation to Collusion

36. As in the case of conspiracy, one seldom has direct evidence of collusion. What the court needs to be satisfied is that, from the evidence, the parties were acting in concert and playing the same game. The court is entitled to rely on overt acts of the parties involved and established facts to draw inferences in order to make a finding of collusion.

37. In HKSAR v Wong Kwok Wai (2013) HKCFAR 191, Tang PJ at §11 said:

‘11. I agree. On such a charge, the question to ask and answer is whether the persons who are said to have acted in collusion were playing the same game. It should not be made more complicated.’

38. Bokhary NPJ at §§6-8 said:

‘6. The conviction was based on two irresistible inferences: firstly, that all the persons and companies who dealt with the borrower were acting in concert and, secondly, that the applicant was colluding with a money lender in the making of the demand for $3,600.

7. It was open to the Magistrate to conclude, as he in effect did, that the demand was part of a dishonest and surreptitious enterprise which was meant to – and did – extract money from the borrower.

8. The points of law said on the applicant’s behalf to arise go to the meaning of collusion. No such point really arises. It is plain in the circumstances that the applicant and the moneylender were acting in concert and surreptitiously in a dishonest enterprise to extract money from a victim. Whatever else may or may not be within the meaning of ‘collusion’ under s.29(10), the applicant and the moneylender’s conduct certainly is fairly and squarely within that meaning.’

39. In Famous Zone Electronics Ltd v Hongkong and Shanghai Banking Corp Ltd [1998] 3 HKC 723, Sakhrani J. at 727F-G said:

‘It is plain that collusion as used in O 17 does not necessarily connote anything sinister on the part of the applicant. In Mureietta v South American etc Co Ltd (1893) 62 LJQB 396 it was held that collusion in the sense in which it is used in the Order does not necessarily involve anything morally wrong. As Wills J said at 397:

Colluding may be said to be an equivalent for playing the same game.’” (emphasis added)

53.  At [40], the learned Deputy Judge also quoted extensively from Ever-Long Finance Ltd v Yeung Wah Lung [2017] 1 HKLRD 500, a decision of Deputy Judge Simon Ho.  For my part, it is only necessary to recite what Deputy Judge Ho said as follows:

“86. The word ‘collusion’ under s.27(3) and (4) of MLO would no doubt need to be construed in its own statutory context against the whole of the Ordinance with its objective and intent in mind. One key purpose of MLO is clearly to protect the borrower from having to borrow money from others at excessive or extortionate interest rates. If one lends or offers to lend at an effective rate of interest exceeding 60% per annum (as specified in s.24) would commit an offence, and the loan agreement together with any collateral security would become illegal and unenforceable irrespective of whether the lender is a money lender or not. Section 25 is also enacted to protect a borrower from being subject to an extortionate loan transaction. …

87. The long title of the Ordinance also expressly provides that:

‘To provide for the control and regulation of money lenders and money-lending transactions, the appointment of a Registrar of Money Lenders and the licensing of persons carrying on business as money lenders; to provide protection and relief against excessive interest rates and extortionate stipulations in respect of loans; to provide for offences and for matters connected with or incidental to the foregoing; and to repeal the Money-lenders Ordinance 1911.’ (Emphasis supplied.)

88. Given the above proper perspective, it is clear to me that the purpose and design of s.27(3) and (4) is chiefly to prevent the aforesaid statutory protection afforded to a borrower from being stripped away or otherwise compromised by not only the money lender but also by any other related persons as mentioned therein in receiving costs, charges, expenses (other than stamp duties or similar charges), remuneration or reward from the borrower in addition to the interest charged by the money lender. Just like interest, these various sums (irrespective of whatever label given) are essentially the borrower’s costs of borrowing from the money lender.

…

90. … In my view, to qualify as the collusion under s.27(3) and (4), it would be sufficient for such person and the money lender to co-operate with each other to do or abstain from doing some act(s) with a view to facilitate the conclusion of the loan transaction against the borrower’s interest or otherwise to his prejudice. I take this to be the essence of the term ‘collusion’ as appeared in s.27(3) and (4) to meet with the statutory intent and purpose, and in accordance with the test of ‘playing the same game’ as expressed by Tang PJ in Wong Kwok Wai.” (emphasis added)

54.  Lastly, on the burden and standard of proof of “collusion”, in Chun Sang Plastics Company Limited v Y T Cheng (Ching Tai) Limited & Ors [2011] 4 HKLRD 74 at [69], Cheung CJHC observed that:

“ … He who asserts must prove. Moreover, in relation to a serious allegation like collusion, whilst the standard of proof remains the balance of probabilities, when assessing the probabilities, the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities. Re H [1996] AC 563; HKSAR v Lee Ming Tee (2003) 6 HKCFAR 336.”

Issue 1

55.  The answer is clearly yes.  It is common ground that the Defendant had signed the Loan Agreement and the Second Legal Charge and that she had failed to make any repayment whatsoever of the monthly interest instalment as scheduled or the principal sum of the Loan despite demand.  If so, the Defendant would be in breach of the Loan Agreement and would entitle the Plaintiff to enforce its contractual remedies under the Loan Agreement and the Second Legal Charge.

Issue 2 - collusion

56.  For reasons to be given below, this court is not satisfied that the Defendant’s convoluted story of having been cheated by Mr Wong/Ngai Fung Inter is anywhere near being credible.  Further, whether or not the Defendant had been cheated by Mr Wong/Ngai Fung Inter as she claims, this court is not persuaded that she has discharged the burden of establishing collusion between Mr Wong/Ngai Fung Inter and the Plaintiff.

57.  To start with, although the Defendant was educated only up to 3rd year in secondary school, she is no stranger to obtaining finance on the security of property prior to the subject transaction.  As Ms Wong sets out in her Opening submissions, according to her TransUnion Report, the Defendant had:

(1)  a mortgage account no 8830358198870000 with OCBC which was closed on 23 July 2013;

(2)  a mortgage account no 0000001016894553 with Standard Chartered Bank which was closed on 31 July 2015;

(3)  as at 10 November 2015, a personal mortgage account no 8830389591870000 with OCBC - presumably this related to the OCBC Charge and the HK$3.4 million loan from OCBC.

58.  Given her previous experience of borrowing from banks, it is rather incredible that the Defendant would have so easily accepted what Male A said on the phone when he cold called her on 6 November 2015.  The Defendant did not even know the surname of this Male A yet she was prepared to meet up with him, at first on 9 November 2015 at the office of a different company, and then on 20 November 2015 at the office of Ngai Fung Inter.  When the Defendant finally arrived at Ngai Fung Inter’s office, she did not see this Male A but was apparently not interested in finding out why.  She was instead received by Mr Wong.

59.  It is just as incredible that the Defendant would have accepted Mr Wong’s story that in order to secure the CCB loan, the Defendant had to place a security deposit with a law firm in order to show CCB that she was in a healthy financial condition.  It must be remembered that at the time, the Defendant was in a dire financial condition, having lost HK$2 million in a failed investment in Mainland China.  Further, 20 November 2015 was the first occasion when the Defendant met Mr Wong in Ngai Fung Inter’s office.  Mr Wong was a complete stranger to her.  So was this company Ngai Fung Inter.  Instead of asking for proof of the relationship between Ngai Fung Inter and CCB or proof of Ngai Fung Inter’s past experience in arranging a loan at 1% p.a., she accepted everything that Mr Wong told her.  Even more incredible is that, at the time, she was not told, nor did she ask Mr Wong, the amount of security deposit required, how she was supposed to come up with the security deposit or which law firm to place it with in order to apply for the CCB loan.  In Zhang 1 at paragraph 15, the Defendant simply said:

“… However, in order to successfully arrange the HK$3,400,000 mortgage of CCB, I had to deposit a sum of money to the law firm recommended by Ngai Fung as a guarantee to CCB to show CCB that I had a healthy financial condition for the purpose of getting the approval of the low-interest mortgage. At that time, Mr. Wong did not tell me the amount of the guarantee, and he did not mention whether the bank or the finance company would provide the deposit, nor did he tell me in which law firm the guarantee would be deposited. Mr Wong told me that he would be responsible for the whole process, so I should not worry about the guarantee. …” (emphasis added)

60.  Obviously, the Defendant knew she did not have any substantial amount of cash to pay for the security deposit since she suggested in that paragraph that it would come from a third party, be it a bank or a finance company.  At paragraph 18 of Zhang 1, the Defendant just said Mr Wong would arrange this security deposit for her:

“On 24 November 2015, I obtained my TransUnion Personal Credit Report. On the same day, I immediately took the report to the office of Ngai Fung and gave it to Mr Wong for photocopying. After photocopying, Mr Wong returned the original of the TransUnion Personal Credit Report to me. Mr Wong told me that my TransUnion Personal Credit Report was acceptable. In order to continue applying for CCB mortgage, I had to deposit a guarantee in the law firm arranged by Ngai Fung for custody. Mr Wong assured me that Ngai Fung would arrange the guarantee for me. ...” (emphasis added)

61.  Next, by 1 December 2015 after Chong Po had taken her to the Plaintiff’s office, she was presented with inter alia the Loan Agreement and the Memorandum from which she realized she was borrowing HK$1.35 million from the Plaintiff with a 12-month repayment schedule.  She was also told by Mr Wong on the phone that the HK$1.35 million was the security deposit to be placed in a law firm (the identity of which she still did not know).  While Mr Wong kept assuring the Defendant that there was no need for her to repay the Plaintiff, she never bothered to ask the Plaintiff’s staff whether or not that was the case. 

62.  In fact, it would have been perfectly obvious to the Defendant that the Plaintiff would look to her for payment.  Otherwise, why should the Plaintiff have bothered to prepare all those loan related documents including in particular the Statement which sets out the due date for payment of each of the 12 interest instalments as well as the principal sum? Yet, the Defendant took Mr Wong’s word for it and went on to sign the Loan Agreement etc believing that she would not incur any liability for doing so.  As a matter of common sense, how gullible the Defendant has to be in order to believe that a finance company would lend her money but would not look to her for repayment? This court has carefully observed the Defendant in the witness box.  This court does not believe that she is such a person. 

63.  Worse still, after the Defendant had withdrawn HK$1.35 million in cash from BOC, she was not told to deposit it with any designated law firm, as Mr Wong had kept telling her.  Instead, she took it to Ngai Fung Inter’s office and handed over all of it to Mr Wong in return for 2 sheets of paper in English which she did not even understand.  On the Defendant’s own case, she was in such difficulties that she had to refinance her OCBC loan in order to reduce her monthly repayment by about HK$4,000.  How someone, however naïve, would hand over such a large sum of money to a person whom she had only met 10 days ago is totally beyond one’s comprehension.  It is also the Defendant’s own case that at the office of Pauline Wong, after receiving the Cheque, Mr Cheung then told her that if she could not repay the Loan, the Plaintiff had the right to take possession of the Property.  That renders the handing over of the HK$1.35 million to Mr Wong doubly intriguing.  The stake of losing her Property is just too big, the advantage of reducing her monthly repayment by HK$4,000 is just too small and the risk of being cheated by a stranger is just too high.

64.  To conclude, the Defendant’s testimony on what actually happened is so unbelievable that this court must reject it totally.  Specifically, since the Defendant’s case of collusion between the Plaintiff and Mr Wong/ Ngai Fung depends largely if not completely on her own testimony, the same must for the aforesaid reason be rejected.

65.  But there are other reasons for rejecting the defence of collusion.

66.  In her Closing Submissions, Ms Wong submits that she has identified three purported acts of collusion in the Re-re-Amended Defence (“Defence”) but none of them could establish collusion to the requisite standard.  This court agrees.

67.  The first purported act of collusion is pleaded at paragraph 18 of the Defence which states that:

“On or about 30^th November 2015 … a male staff holding himself out as a colleague of Mr. Wong contacted the Defendant by telephone and asked the Defendant to send him a copy of her PRC Identity Card by whatsapp to his phone number 64489111. The Defendant did as requested … The Defendant is now aware that the said male should be the staff of the Plaintiff …”

68.  Chun’s testimony is that the Plaintiff did not have a staff with the surname Wong.  While its staff did call the Defendant on 30 November 2015, as corroborated by the Defendant’s own call record, there is no reason why he would have held himself out as a colleague of Mr Wong.  Chun explains it was the Plaintiff’s usual practice that before a borrower attended the Plaintiff’s office to sign the loan documents, its staff would call the borrower to inform him of the time and venue ie the Plaintiff’s office for signing the documents, as well as asking him to send or bring along the necessary documents.

69.  In her police statement dated 11 December 2015 (“1st Police Statement”), the aforesaid telephone conversation was not mentioned.  Instead, the Defendant said at paragraph 7:

“At 5:32 pm on 30 November 2015, I received a phone call at home from a phone with number 5327 3637. The caller was a man speaking Punti dialect. I do not remember his surname. He claimed to be a colleague of Mr. Wong of Ngai Fung International Enterprise Limited. He asked me to meet him at Sin Tat Plaza, Mongkok at 2pm on the following day (that is 1 December 2015).”

70.  64489111 was one of the Plaintiff’s mobile numbers at the time, but there is no evidence that 5327 3637 was.  According to the Defendant, that number belonged to Chun Po.  It is therefore likely that the Defendant had mixed up the person calling from 64489111 with the one who called from 5327 3637 viz Chun Po and, not surprisingly, claimed to be a colleague of Mr Wong.  Eventually, in cross-examination, the Defendant agreed that she only thought that the person calling from 64489111 was a colleague of Mr Wong. 

71.  The second purported act of collusion is pleaded at paragraph 21 of the Defence which describes at length what happened on 1 December 2015 at the Plaintiff’s office:

“… Since what the Defendant intended was making a mortgage of the Property with CCB but not lending [sic] money from a finance company like the Plaintiff, the Defendant therefore asked the Plaintiff’s Male Staff why she was asked to go to a law firm (ie. Messrs. Au. Thong & Tsang) last time but was required to go to the office of a finance company (ie the Plaintiff) this time. The Defendant told the Plaintiff’s Male Staff that her purpose was to do a mortgage of the Property with low interest since the interest rate of the present mortgage of the Property was high. The Defendant also told the Plaintiff’s Male Staff about Ngai Fung’s plan to place a security deposit in a designated law firm for the purpose of the Intended CCB Mortgage. Despite hearing what the Defendant said,the Plaintiff’s Male Staff seemed nonchalant and simply asked whether or not the Defendant wanted to borrow the loan. The Plaintiff’s Male Staff further said that if the Defendant wished to apply low-interest-rate mortgage loan, the Defendant had to follow the instructions of Ngai Fung.” (emphasis added)

72.  Ms Wong rightly points out that the above conversation allegedly between the Plaintiff’s male staff and the Defendant was not recorded in the 1st Police Statement.  Instead, at paragraph 9, the Defendant stated:

“After we had entered [Total Express International (Hong Kong) Limited], another male received me. I do not remember his surname. He was a Chinese male, aged around 40, of medium build. He took me to one of the rooms and we sat down. Then he asked me to sign a contract of a loan. It stated that I borrowed HK$1,350,000 from Total Express International (Hong Kong) Limited and had to repay a monthly interest of HK$40,500 for 12 months. In the last instalment, I also had to repay the principal of HK$1,350,000. After having read the contract of loan, I found that there was something wrong. Therefore I phoned Mr. Wong of Ngai Fung International Enterprise Limited. Mr. Wong asked me to sign the contract. He said he would take responsibility of the loan and the loan would be used as guarantee amount at the solicitor’s firm. I was not aware of tricks and signed on the contract of loan …”

73.  What the Defendant had told the police on 11 December 2015 was very different from what she described in Zhang 1 from paragraphs 26 to 31 or what is pleaded at paragraph 21 of the Defence. 

74.  Importantly, the part underlined in paragraph 21 of the Defence above ie the Plaintiff’s male staff telling the Defendant to follow the instructions of Ngai Fung Inter was first mentioned in Zhang 3 at paragraph 7 and was only added to the Defence by a violet amendment on 22 July 2020.  This court agrees with Ms Wong’s submission and takes the view that, more probable than not, this part of the Defendant’s testimony is an afterthought in order to embellish her case of collusion between the Plaintiff and Ngai Fung Inter.

75.  The third purported act of collusion is pleaded at paragraph 34 of the Defence as to what happened at the office of Pauline Wong on 1 December 2015 after the Defendant had signed the documents in front of Mr Cheung and received the Cheque.  The long and short of that paragraph is to suggest that Mr Cheung appeared to be acquainted with Chung Po and briefly spoke to him.  To the credit of Mr Ho, he refrains from suggesting in his Closing submissions that Mr Cheung and Pauline Wong were part of the collusion network with Ngai Fung Inter.  But even if he were to so suggest, that would not avail the Defendant - familiarity between Mr Cheung and Chung Po is not evidence that the Plaintiff and Ngai Fung Inter were acting in collusion.

76.  At paragraph 5 of his Closing submissions, Mr Ho also puts forward a number of minor points in support of his case on collusion.  In so far Mr Ho relies on the Defendant’s testimony in support of those points, they must be rejected as this court does not find the Defendant a reliable witness.  Lastly, Mr Ho makes a curious point that the Cheque was a “virtue cash cheque” to enable the Defendant to draw cash from BOC.  This court has considered the argument but finds it to be completely without merits.

Issue 3

77.  Given this court’s finding that there was no collusion between the Plaintiff and Ngai Fung Inter, there is clearly no contravention of section 27 of MLO.  The remaining issue concerns the alleged charging of excessive interest rate in contravention of section 24 of MLO.

78.  As stated in paragraph 15 of this Judgment, the Defendant’s pleaded case is that the Plaintiff charged her excessive rate of interest of 4,433% in contravention of section 24 of MLO.  As can be seen from the Particulars, the calculation is premised on there being collusion between the Plaintiff and Ngai Fung Inter so that the amount actually lent by the Plaintiff to the Defendant was merely HK$40,500. 

79.  Given this court’s finding that there was no such collusion, the defence of excessive interest rate naturally falls away.  This court therefore finds that the amount actually lent was HK$1.35 million, the total interest payable was HK$486,000 (HK$40,500 x 12) and the rate of interest was as stated in the Loan Agreement ie 3% p.m. or 36% p.a..

Quantum of the Plaintiff’s monetary claim

80.  Section VI Clause 5 of the Loan Agreement provides:

“In the event that the Borrower [is] in breach of any terms and conditions of this agreement including default payment … the money lender is entitled to forthwith recover all outstanding balance of the principal and interest against the Borrower …”.

81.  Section VI Clause 9 of the Loan Agreement further provides:

“Default interest of the portion of the principal and interest due [and] payable, shall be calculated in accordance with the interest rate of this agreement until full payment”.

82.  Relying on Clause 9 and this court’s judgment in Credit One Finance Limited v Leung Ying Lok and Chiu Wai Ping Virgine Connie [2020] HKCFI 2919 at [87] - [88], the Plaintiff seeks both pre-judgment and post-judgment interest to be calculated based on the contractual rate of 36% p.a. until payment. In his Note on calculations of principal and interest, Mr Ho does not appear to resist the claim for post-judgment interest at the contractual rate, as opposed to say judgment rate.

83.  Further, in Credit One Finance Limited, this court heldthat charging simple interest on an interest instalment which has already fallen due but unpaid is permissible by virtue of the proviso to section 22(1) of MLO.  In that case, the plaintiff claimed and this court awarded contractual rate of interest on the principal and only 2 unpaid interest instalments due before the Plaintiff’s demand letter: see paragraph 89 of this court’s judgment in Credit One Finance Limited.

84.  This formula is in principle adopted by Mr Ho in his Note on calculations of principal and interest.  According to Mr Ho’s calculation, the Plaintiff is entitled to (i) the principal of HK$1.35 million, (ii) 2 unpaid interest instalments due on 1 January and February 2016 respectively totalling HK$81,000 and (iii) interest on HK$1.35 million and HK$81,000 from 24 February 2016 at the contractual rate of 36% until payment.  In this court’s view, what Mr Ho has overlooked is that the principal and the 2 interest instalments have different due dates ie 24 February 2016 for the principal[7] and 1 January and February 2016 respectively for the 2 unpaid interest instalments. 

85.  Ms Wong, on the other hand, seeks to claim (i) the principal of HK$1.35 million, (ii) contractual interest on the principal from 1 December 2015 ie HK$486,000 per year and (iii) contractual interest on HK$486,000 from 1 January 2016 ie HK$174,960 per year.  The problem with this calculation is that the Plaintiff is claiming interest upon interest ie 36% interest on HK$486,000 per year.  This will fall outside the proviso to section 22(1) of MLO and what this court held in Credit One Finance Limited.  Even if Clause 5 has the effect of accelerating the payment of all outstanding balance of principal and interest, it would not assist Ms Wong if her calculation does not come within the proviso to section 22(1) of MLO.

86.  To conclude, this court finds the Plaintiff is entitled to the sums of HK$1.35 million and HK$81,000, together with pre-judgment and post-judgment interest at the rate of 36% p.a. as follows:

(1)  on the sum of HK$40,500 from 1 January 2016 until payment;

(2)  on the sum of HK$40,500 from 1 February 2016 until payment; and

(3)  on the sum of HK$1.35 million from 24 February 2016 until payment.

Delivery of vacant possession of the Property

87.  The Defendant having been in default of the terms of the Second Legal Charge, the Plaintiff is entitled to take possession of the Property[8]. In his Closing Submissions, Mr Ho very properly does not resist the Plaintiff’s claim for vacant possession if the Defendant’s defence fails.

88.  The only complication is that subsequent to the trial, this court was informed that OCBC’s solicitors had indicated opposition to the Plaintiff’s claim for vacant possession and that OCBC had commenced legal proceedings against the Defendant for inter alia possession of the Property.

89.  By letter dated 2 September 2021, the Plaintiff’s solicitors informed this court that the Plaintiff will not pursue the remedy of vacant possession.

Disposition and cost order nisi

90.  There shall be judgment in favour of the Plaintiff against the Defendant in the sums of HK$1.35 million and HK$81,000, together with pre-judgment and post-judgment interest at the rate of 36% p.a. as per paragraph 86 above.

91.  There shall be an Order nisi that costs of the Action be to the Plaintiff to be taxed if not agreed on an indemnity basis[9] and paid by the Defendant forthwith, certificate for counsel.  The Defendant’s own costs be taxed in accordance with Legal Aid Regulations.

92.  Liberty to apply.