TODAY IS FINANCE LTD v. TSUI MAN YIN SOPHIA AND ANOTHER

HCMP 3187/2015

[2019] HKCFI 811

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3187 OF 2015

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REASONS FOR JUDGMENT

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Introduction

1.  The plaintiff (“TIF”) is a licensed money lender.  The 1^stdefendant (“Tsui”) was TIF’s customer.  Tsui was and is the registered owner of a property known as Unit A, 9^thFloor of Block A, Smithfield Terrace, No 77 Smithfield, Hong Kong (“the Property”).  The 2^nd defendant (“Poon”) is Tsui’s husband. Tsui and Poon are now occupying the Property.

2.  TIF commenced these proceedings against Tsui on 1 December 2015.  TIF is seeking an order to compel Tsui to repay a loan together with interest owed by Tsui to TIF under a written loan agreement dated 23 June 2015 (“the Loan Agreement”), and to deliver vacant possession of the Property to TIF in accordance with a second mortgage dated 24 June 2015 executed by Tsui (“the Second Mortgage”).  Tsui counterclaims that the Loan Agreement is illegal, null, void and unenforceable.  Tsui also claims that the Loan Agreement the Second Mortgage ought to be set aside.  

3.  Poon applied to join in these proceedings on 10 March 2016, and the court allowed the joinder application on 6 June 2016.  Poon claims that Tsui in fact has no beneficial interest in the Property, and he himself is the sole beneficial owner of the Property.  In a nutshell, Poon is saying that he is not bound by the Second Mortgage.  Poon has made a claim against Tsui, seeking a declaration that he is the sole beneficial owner of the Property, and an order compelling Tsui to assign and transfer the Property to him.  Poon has also made a counterclaim against TIF for an order to vacate the registration of the Second Mortgage in the Land Registry, and for damages for the alleged wrongful registration of the Second Mortgage in the Land Registry.

4.  Tsui and Poon were separately legally represented in these proceedings until 25 October 2018.  From that date onwards, they are acting in person.  Having read the evidence on service produced by TIF, I am satisfied that the documents concerning this trial have been duly served on Tsui and Poon.  Accordingly, although Tsui and Poon are absent in the trial, I am of the view that the trial should proceed as scheduled.

5.  Having read the papers and heard the submissions and the evidence, in my view, TIF is entitled to have judgment.  At the end of the trial, I have given judgment to TIF.  I now give my reasons.

The parties’ respective cases

6.  TIF’s case is simple and straightforward.  TIF claims that they have granted a loan of HK$2,100,000 (“the Loan”) to Tsui under the Loan Agreement.  Under the Loan Agreement, Tsui has to repay the Loan together with interest.  The principal sum and the interest would be repaid by 12 monthly instalments.  Each of the 1^st to 11^th instalments is in the sum of HK$63,000, being the payment of interest only.  The last instalment would be in the sum of HK$2,163,000 for payment of interest payable together with repayment of the principal sum of the Loan.  The Loan is secured by the Second Mortgage.

7.  TIF claims that after repaying the first two instalments, Tsui has failed to make any further repayment, including the 3^rd instalment of HK$63,000 on 24 September 2015, when that instalment was due.  The failure to repay the 3^rd instalment on 24 September 2015 constitutes an event of default under both the Loan Agreement and the Second Mortgage, and TIF has the right to demand immediate repayment of all the indebtedness owed by Tsui under the Loan Agreement and to enforce the Second Mortgage[1].  By a letter dated 13 October 2015 from TIF’s solicitors to Tsui (“the demand letter”), TIF demanded Tsui to pay all the outstanding sums to TIF.  As a result of the demand letter, the following sums became due and payable by Tsui to TIF on 13 October 2015:

(1) Principal sum of the Loan:	HK$ 2,100,000
(2) Instalment of interest for the period from 25 August 2015 to 24 September 2015:	HK$ 63,000

TIF also claims that they are entitled to charge interest on the principal sum at the default interest rate of 30.75% above the prime rate of Bank of East Asia Limited provided in the Loan Agreement[2].

8.  Tsui’s case is that TIF “had dishonestly conspired and combined together with other persons and/or financial intermediaries and with the sole or predominant intention of injuring [Tsui] and/or of causing loss to the [Tsui] by unlawful means by inducing [Tsui] to enter into loan transactions with various financial institutions and/or money lenders as well as to take away or misappropriate [Tsui]’s loans or proceeds of the loans purportedly advanced by the said various financial institutions and/or money lenders with a view to defraud [Tsui] and to conceal such fraud from [Tsui].”[3] By reason of all these, Tsui says that the Loan Agreement and the Second Mortgage should be set aside.  Tsui also claims that the Loan Agreement and the Second Mortgage have never been explained to her.  She also alleges that TIF is in breach of section 18(1) of the Money Lenders Ordinance (“MLO”) since no note or memorandum in writing in respect of the Loan had ever been made and given to her within 7 days after the making of the Loan.  Tsui also claims that she is merely a trustee holding the Property on trust for Poon, and Poon is the sole beneficial owner of the Property.  Tsui has filed a witness statement, but she has not attended the trial to give any evidence.

9.  Poon’s case is that the Property was purchased by him using his own money and he is the sole beneficial owner of the same.  Tsui is a mere trustee holding the Property for him.  TIF has never taken any reasonable step to enquire whether Poon has any interest in the Property.  In these circumstances, any interest derived by TIF from the Second Mortgage must be subject to the Poon’s equitable interest in the Property.

The evidence

10.  TIF has called Mr Cheung Siu Fai (“Cheung”) to give evidence.  Cheung joined TIF in June 2014 and was the manager working in TIF at the time of the Loan Agreement and the Second Mortgage.  The gist of his evidence is as follows:

(1)   In or about middle June 2015, a mortgage consultant introduced Tsui to Cheung.  Cheung was told that Tsui would need a loan to refinance her mortgage with GMF Finance Limited (“GMF”), and the amount requested was HK$2,200,000. Through this mortgage consultant, Tsui has submitted some documents to TIF for their consideration, including a credit report from TransUnion, a credit rating company.  Having considered the credit report, TIF was of the view that Tsui had a generally healthy credit record.

(2)   Tsui represented herself as the sole beneficial owner of the Property. Cheung therefore had conducted a land search on or about 17 June 2015.  The land search revealed that Tsui was the sole registered owner of the Property, and the Property was subject to a first mortgage in favour of Citibank (Hong Kong) Limited, and a second mortgage in favour of GMT. Cheung had also checked the market price of the Property in the internet, and found out that the market price was slightly above HK$4 million at that time.

(3)   On or about 20 June 2015, Cheung started to contact Tsui directly.  After some negotiation, TIF decided to grant a loan of HK$2,100,000 to Tsui, and the loan had to be secured by a second mortgage in favour of TIF.

(4)   On 23 June 2015, Tsui went to TIF’s office and signed a letter of offer (“the Letter of Offer”) and the Loan Agreement.  Before Tsui leaving TIF’s office, Cheung handed copies of some documents to Tsui, including a copy of the Letter of Offer and a copy of the Loan Agreement.

(5)   On 24 June 2015, Tsui attended the office of the law firm representing TIF (“the Law Firm”).  Tsui executed the Second Mortgage and other related documents in that office.

(6)   The Loan of HK$2,100,000 was released to Tsui through the Law Firm. According to Cheung’s memory, HK$1,600,000 was used to repay the indebtedness owed by Tsui to GMT and to discharge the second mortgage in favour of GMT. HK$63,000 was given to a company in accordance with Tsui’s direction.  The only deduction from the Loan is the registration fee of the Second Mortgage.  The remaining balance of the Loan was given to Tsui herself.

11.  TIF has produced documents (including copies of the cheques mentioned below) to show that the HK$2,100,000 have been released to Tsui by the following cheques issued by the Law Firm:

(1)   On 24 June 2015

(a)   a cheque of HK$63,000 payable to Capital Gain Consultants Company, issued in accordance with Tsui’s direction;

(b)   a cheque of HK$436,550 payable to Tsui;

(c)   a cheque of HK$450 payable to the HKSAR Government,being the registration fee of the Second Mortgage; 

(2)   On 4 July 2015

(a)   a cheque of HK$1,569,406.15 payable to GMT, being the redemption money paid by Tsui to GMT;

(b)   a cheque of HK$3,000 payable to a law firm retained by GMT, being the costs of that law firm in handling the release of the second mortgage in favour of GMT;

(c)   a cheque of HK$450 payable to the HKSAR Government,being the registration fee of the release of the second mortgage in favour of GMT;

(d)   a cheque of HK$27,143.85 payable to Tsui.

12.  I am of the view that Cheung is an honest witness.  His evidence is broadly supported by the documents.   I note that from the documents, the total amount used for the purpose of discharging the second mortgage in favour of GMT is not exactly HK$1,600,000 but is HK$1,572,856.15 [4]. However, that sum is close to HK$1,600,000.  In my view, the quality of Cheung’s evidence is not severely affected by this minor discrepancy.  Save that the total amount used for the purpose of discharging the second mortgage in favour of GMT should be the aforesaid sum as shown in the documents, I accept Cheung’s evidence.

13.  Tsui and Poon have filed witness statements respectively.  However, they have not attended the trial to give any evidence.  Since their witness statements have not been confirmed on oath and they have not been subject to cross-examination, I give no weight to their witness statements.

Analysis

14.  Tsui has never disputed that she has signed the Loan Agreement and executed the Second Mortgage.  In these circumstances, Tsui bears the burden to plead and to prove a factor which can vitiate the Loan Agreement and The Second Mortgage.  As said by Ribeiro PJ in Ming Shiu Chung & Others v Ming Shiu Sum & Others^[5]:

“ 84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regardedit as enough to show that he signed without knowing its contentsfor the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

85. Thus, in Saunders v Anglia Building Society [1971] AC 1004 at 1016, Lord Reid warned against an approach, like that of the Court of Appeal, which inverts the general rule:

We find in many of the authorities statements that a man’s deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the manhad taken no precautions at all, and there was no ground forhis belief that he was signing something different from thatwhich in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to show that he should have it.

86. And in Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at p.533, Litton NPJ acknowledged:

… the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.

87.   The vitiating factors at common law include fraud, mistake, misrepresentation, nonest factum, duress, undue influence and lack of mental capacity: see, for instance, Blay v Pollard & Another [1930] 1 KB 628; and Gillman v Gillman (1946) 174 LT 272.  To disown a signed legal document, facts constituting the particular vitiating factor relied on must be pleaded and established by the evidence. …”

15.  With respect, although Tsui has mentioned some legal terms inher defence, in my view, no proper defence has been pleaded or sufficiently pleaded in her defence.  Further, Tsui chose not to attend the trial and did not give any evidence in support of her case.  That being the case, Tsui’s case must fail.

16.  Based upon the evidence accepted by this court, I find that by passing a copy of the Letter of Offer and a copy of the Loan Agreement (which includes provisions of Part III and Part IV of the MLO and a repayment schedule) before Tsui leaving TIF’s office on 23 June 2015, TIF has complied with section 18(1) of the MLO and there is no breach of that section.

17.  In respect of Poon’s claim that he is the sole beneficial owner of the Property, the principle is that unless it is shown otherwise, the legal ownership of a property is regarded as consistent with the beneficial entitlement. Poon bears the burden to show that the beneficial ownership of the Property is different from the legal ownership of the same[6]. However, Poon has not attended the trial and has not given any evidence in this trial.  Accordingly, Poon’s claim must fail.

18.  Further, not only that there is no evidence in support of Poon’s case, there is in fact clear evidence directly against his case.  In the deed dated 15 August 2013 creating the first mortgage in favour of Citibank (Hong Kong) Limited, Tsui and Poon executed the same as joint borrowers, and Tsui executed the deed as the mortgagor.  Since Poon has signed the same, Poon must be taken to be having agreed to the contents of the deed.  In various places of the said deed, Poon in fact has acknowledged that Tsui is the sole beneficial owner of the Property:

(1)   Recitals Clause (4)

“ The Mortgagor is the registered and beneficial owner of the Property.”

(2)   Clause 2.1

“ For the consideration aforesaid the Mortgagor as beneficial owner hereby charges to the Lender ….”

(3)   Clause 8.2.11

“ The Mortgagor is the sole legal and beneficial owner of the Property and no other person or occupier of the Property has any beneficial interest in the Property and that no other person has made or will make any contribution to the purchase price or repayment of mortgage loan in respect of the purchase or mortgage of the Property.”

19.  In view of the above, TIF is entitled to have judgment.  Tsui must forthwith repay the principal sum of the Loan of HK$2,100,000 and the instalment of interest for the period from 25 August 2015 to 24 September 2015 of HK$63,000 to TIF.  In respect of the principal sum of HK$2,100,000, I am satisfied that based upon Clause (i) of the First Schedule to the Loan Agreement, TIF is entitled to charge interest thereon from the date of the demand letter (ie 13 October 2015) at the rate of 30.75% above the prime rate of Bank of East Asia Limited until full payment of the said sum.  In respect of the instalment of interest of HK$63,000, I would simply provide pre-judgment interest at the rate of 1% above the best lending rate of HSBC from 13 October 2015 until the date of the judgment, and thereafter there would be post-judgment interest at the judgment rate until full payment of the said sum.

20.  TIF is also entitled to have possession of the Property pursuant to Clause 6.01(a) of the Second Mortgage.  Tsui is bound by the Second Mortgage and must deliver vacant possession of the Property to TIF.  Poon has no interest in the Property and has no right to remain in occupation of the Property.  I am aware of the fact that Tsui and Poon may need some time to find another residence.  I would order Tsui and Poon to deliver vacant possession of the Property to TIF within 56 days.

21.  I have heard submissions on costs.  The general rule of costs following the event should apply.  The majority of the time in these proceedings was spent on Tsui’s defence against TIF’s claim.  I would order that 80% of TIF’s costs incurred in these proceedings be paid by Tsui, and the remaining 20% be paid by Poon.  In respect of the costs to be borne by Tsui, TIF relies upon Clause (n) of the First Schedule to the Loan Agreement and Clause 19 of the Second Mortgage and claims that those costs be taxed on indemnity basis.  I allow this claim. 

22.  Although TIF’s claim in this case may now be within the District Court’s jurisdiction after the increase of the District Court’s jurisdiction on 3 December 2018, these proceedings were commenced on 1 December 2015 and leave to set down for trial was given on 18 October 2017.  In these circumstances, the costs should be taxed on the usual High Court scale.

23.  As a matter of completeness, I would also order dismissal of the Poon’s claim against Tsui.  Since both Poon and Tsui are absent in the trial, there would be no order as to costs in respect of this claim.

Disposition

24.  For the reasons above, I have given judgment to TIF, and I have made the following order:

(1)   Tsui do forthwith repay the following sums to TIF:

(a)   HK$2,100,000, together with interest thereon at 30.75% above the prime rate of Bank of East Asia Limited from 13 October 2015 until full payment of the said sum;

(b)   HK$63,000, together with interest thereon at the rate of 1% over the best lending rate of HSBC from 13 October 2015 until the date of the judgment, and at the judgment rate until full payment of the said sum;

(2)   Tsui and Poon do deliver vacant possession of the Property to TIF within 56 days;

(3)   There be liberty to apply for the purpose of carrying out the terms of this order;

(4)   Tsui’s counterclaim against TIF be dismissed;

(5)   Poon’s claim against Tsui be dismissed;

(6)   Poon’s counterclaim against TIF be dismissed;

(7)   80% of TIF’s costs incurred in these proceedings (including all costs reserved, if any) be paid by Tsui to TIF on indemnity basis, to be taxed if not agreed;

(8)   20% of TIF’s costs incurred in these proceedings (including all costs reserved, if any) be paid by Poon to TIF on party and party basis, to be taxed if not agreed; and

(9)   Save the aforesaid, there be no order as to costs in Poon’s claim against Tsui.

25.  I direct that upon Tsui and Poon’s request, these reasons for judgment be interpreted to them by a court interpreter inside the High Court Building at a mutually convenient time.

26.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.