CELEBRITY CREDIT LTD v. KOO SAU CHUN

HCMP 312/2020

[2023] HKCFI 31

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 312 OF 2020

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DECISION

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INTRODUCTION

1.  This is an appeal from the decision of Master D. To dated 22 July 2022 (the “Decision’) by way of the Appellant’s Amended Notice of Appeal dated 10 October 2022.

2.  Master D. To made the order, inter alia, that the Plaintiff do recover against the Defendant the sum of HK$5,890,000.00 secured by a legal charged dated 8 April 2019 (the “Legal Charge”) and interest on the sum of HK$5,890,000.00 at the rate of 13% per annum, i.e., HK$63,808.33 per month and HK$2,097.81 per day, from and including 8 October 2019 to the date of the Decision and thereafter at the judgment rate until payment. Master D. To also awarded the Plaintiff interest on the default sum of HK$5,890,000.00 at the rate of 13% per annum.

3.  This matter first came before this Court on 3 October 2022. I allowed the Defendant to amend her Notice of Appeal out of time with consequential orders for filing of further affirmation evidence. The Plaintiff was also given leave to file an affirmation in reply.

BACKGROUND FACTS

4.  The Plaintiff is a money lender in Hong Kong and there is no dispute that the Plaintiff advanced a loan of HK$5,890,000 to the Defendant (the “Loan”).

5.  A loan agreement was duly executed on 8 April 2018 (the “Loan Agreement”). The terms and conditions of the same are not be repeated here.

6.  There is also no dispute that after receiving the Loan in its full amount on 8 April 2019, the Defendant paid interest to the Plaintiff in the amount of HK$63,808.33 each month until October 2019. No further payments were made by the Defendant to the Plaintiff, either for settling the principal or interest, after 10 October 2019.

7.  The Defendant was also late in repaying the interest in June, August and September 2019, thus triggering the default provisions under clause (e) of the First Schedule and clause 6 of the Loan Agreement.

GROUNDS OF APPEAL

8.  Although the Defendant is not legally represented, she did file very detailed written submissions albeit not signed by the author of the document. Ms Koo informed this Court that it was drafted by Mr Edmond Yeung whose firm also prepared the hearing bundle for her.

9.  First, in so far as the Defendant’s reliance on the suspected collusion between the Plaintiff and Easy Strategy Credit Limited (“Easy Strategy”) and the suspected collusion between the Plaintiff and Sino Link Mortgage Company Limited (“Sino Link”) is concerned, the Defendant has produced no concrete evidence other than her mere suspicion. It is not proper for this Court to find collusion without any evidence.

10.  The Defendant alleged the Plaintiff charged her at a higher interest rate than her previous mortgagee, Easy Strategy. Hence, there was collusion between the Plaintiff and Easy Strategy. I have no hesitation to dismiss the same. I accept Ms Leung’s submission that the Defendant as an adult is free to decide if she wished to obtain a loan from the Plaintiff at an interest rate higher than that offered by Easy Strategy. The sole increment in the interest rate does not help the Defendant to prove the existence of collusion between the Plaintiff and Easy Strategy.

11.  Indeed, the Defendant’s evidence was that Sino Link’s interest rate was 48% per annum but she still chose to obtain subsequent second and third mortgage from Sino Link without notifying the Plaintiff.

12.  I also accept Ms Leung’s submission that the Plaintiff and Easy Strategy are just members of Hong Kong General Chamber of Property Finance Limited. Ad-hoc business referrals were involved. However, that per se cannot constitute collusion.

13.  Further, there is no evidence which suggests that any intermediary or middleman had been engaged or paid.

14.  The Defendant, in her oral submissions, stressed that when she defaulted in her repayments, she was coerced to borrow from Sino Link.  Hence, there was collusion between the Plaintiff and Sino Link. However, the evidence relied upon by the Defendant cannot remotely establish that she was coerced to borrow from Sino Link. The Plaintiff merely suggested that she had to obtain alternative financing given she had difficulties in making the repayments.

15.  Secondly, the Defendant alleges that there was a prepayment charge. Ms Leung for the Plaintiff submitted that the Defendant exhibited her bank book which shows that HK$180,000 was deposited into her bank account. The Plaintiff then explained and exhibited various legal correspondences, solicitors’ cheques and cheque deposit slip in support of the discharge of the previous mortgage of the Defendant.

16.  Importantly, the balance of HK$244,833 was further returned to the Defendant with copy of the cheque exhibited. These, Ms Leung submits, rebut the repayment charge “believed to be HK$63,333” by the Defendant.

17.  I am of the view that although the Defendant produced no evidence which shows whether the cheque with the sum of HK$244,833 had been cleared, on balance of probabilities, there is no credible reason as to why that cheque would not have been cleared.

18.  Ms Leung for the Plaintiff further submits that even putting the Defendant’s case to its highest, the Defendant still fails to prove the interest rate exceeded 48% or 60% per annum after taking into account of the alleged HK$63,333 prepayment charge.

19.  Overall, I am of the view that the Defendant has not produced sufficient factual evidence to suggest that the only irresistible inference was that the HK$60,333 was charged by the Plaintiff as prepayment charge and therefore such sum was not returned to the Defendant.

20.  Thirdly, the Defendant argues that there is a breach of Section 7(1)(b) of the Money Lenders Ordinance, Cap.163 (“the Ordinance”) as the Plaintiff did not carry out its business on specified place. There is no dispute that the Loan Agreement and the Legal Charge were executed in the office of Messrs. Wai & Co.. However, as G. Lam J. (as he then was) said in Tong Bo Finance Co Ltd v Veronica Ella, HCA 2933/2015, unreported, 3 July 2018 at §§16-17:

“16. It was further stated in the defence that the plaintiff contravened section 7 of the Money Lenders Ordinance which provides that, relevantly: “No person shall carry on business as a money lender at any place other than the premises specified in such licence.

17….the fact that the defendant had not attended the office of the plaintiff itself and had entered into the transaction in the offices of the solicitors’firm in question where the documents were explained to them and signed by them is, in my view, not sufficient to establish that the plaintiff was carrying on business at any place other than its own premises as specified in the licence. At the end of the day, this is the place where quite clearly the plaintiff had advanced the principal sum of the loan pursuant to properly drawn up documentation that had been explained to the borrowers, including the defendant.”

21.  On the facts of the present case, the Defendant did attend the Plaintiff’s office for the first few meetings. The Defendant admits that she attended the Plaintiff’s office. I accept that the negotiation, the explanation of terms of the Loan Agreement and other associated documents to the Defendant, the evaluation and the approval of the Loan to the Defendant, the calculation and the instruction of the amount of drawdown/payment to the Defendant, the previous Mortgagor and other relevant parties including Messrs Darin Leung & Partners, were all carried out at the Plaintiff’s office specified in the Money Lenders License at Cheung Sha Wan Plaza.

22.  It is undisputed that the execution of the Loan Agreement together with the Legal Charge was carried out in the office of Messrs. Wai & Co. but the Defendant had no objection to the same.

23.  I agree that substantial part of the money lenders business with the Defendant was carried at the place specified in the License. Hence, I dismiss this ground of appeal.

24.  Fourthly, it is alleged that the Plaintiff has breached section 18(1) of the Ordinance by failing to give a copy of the Loan Agreement to the Defendant. I have no difficulties in dismissing this ground of appeal for the following reasons:-

(1)  The Loan Agreement was executed in duplicate.  A copy of the same and other relevant documents were given to the Defendant immediately after their execution in the office of Messrs. Wai & Co.

(2)  A copy of the Loan Agreement was again sent to the Defendant by WhatsApp later on 15 October 2019 upon the Defendant’s request.

25.  Ms Leung for the Plaintiff submits that the WhatsApp message exhibited by Ms Hui rebuts the Defendant’s assertion that it was her first time to see the copy of the Loan Agreement from the hearing bundle for the hearing before Master D. To. I agree.

26.  Ms Leung for the Plaintiff further submits that as can be seen from the land searches, in less than 3 months after the date of the legal charge dated 8 April 2019, the Defendant entered into the Second Mortgage dated 24 June 2019 with another creditor, namely, Sino Link, over the same subject Property for a maximum amount of HK$700,000. The Defendant further entered the Third Mortgage dated 16 January 2020 with Sino Link again over the same subject Property for a maximum amount of HK$793,000. These reveal that the Defendant was an experienced mortgagor and a borrower as she kept mortgaging the subject Property since 13 June 2005 for 10 times (including one transfer of mortgages from the Primecredit Limited to the Bank of East Asia, Limited) with various creditors before the Defendant signed the Loan Agreement and Legal Charge with the Plaintiff.

27.  In any event, I find the Defendant’s case that she did not receive a copy of the Loan Agreement not credible at all.

28.  Fifthly, it is true that the Plaintiff has breached sections 8 and 22 of the Ordinance in the following sense:

(1)  Clause (e) of the First Schedule to the Loan Agreement sets out that the interest rate for the 1^st month is 25% per annum whereas the interest rate for the succeeding 11 months is reduced to 13% per annum provided that the 1^st month’s interest is paid on time. This is a breach of section 18(2)(i) of the Ordinance, which provides that the interest rate must be a single, constant rate charged on the entire loan and does not admit of a rate varying from time to time (see: Kwok Ying Lung v Ko Chi Hung & Anor [2001] 3 HKC 480, at 492B per Yuen J (as she then was)).

(2)  Clause (6)(m) of the Loan Agreement charges 48% per annum interest on the outstanding loan amount both before and after judgment. This is also a breach of section 18(2)(i) of the Ordinance.

(3)  Clause (6)(k) of the Loan Agreement charges interest on the default sum at a rate of 48% per annum. This is a breach of section 22(1)(c) of the Ordinance, which provides that the rate of interest on any default sum should not be increased by reason of the default. This breach renders this interest clause illegal and thus unenforceable.

29.  However, in considering these breaches of the Ordinance, the Court has a discretionary power, under sections 18(3) and 22(2) of the Ordinance, to order that the relevant interest clauses are enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.

30.  The relevant legal principles on the exercise of the Court’s discretion under sections 18(3) and 22(2) are comprehensively reviewed by Ng J in Hao Tian Finance Co Ltd v Hung Yuk Ming and Another [2020] HKCFI 465, at §§ 105- 108.

31.  In the present case, I am of the view that Master D. To has exercised her discretion correctly because first, although 25% per annum was specified under clause (e) of the First Schedule for the interest payment for the 1^st month, the Defendant actually paid at the rate of 13% per annum for the 1^st month and the Plaintiff has not enforced 25%. Secondly, the Defendant was fully aware of the terms and conditions of the Loan Agreement which had been fully explained to her. Contrary to her allegation that she did not obtain a copy of the Loan Agreement, in fact a copy of the same had been provided to her. She is a seasoned money borrower.

32.  In exercising its discretion, the Court has to balance the interest of both the Plaintiff and the Defendant. On the facts of the present case, there is no strong reason as to why the Defendant should get a windfall by not repaying the principal with an interest at 13% per annum as ruled by the learned Master.

33.  Sixthly, insofar as section 21 of the Ordinance is concerned, the early redemption clause in the First Schedule provides a 2% surcharge on the original loan amount as the administration fee for early repayment. This is a breach of section 21 of the Ordinance, which prohibits the charge of administration fee for early repayment (see: Hao Tian Finance Co Ltd v Hung Ynk Ming and Another(supra) at §§90-91.)

34.  However, it is not disputed that the Plaintiff has not sought to invoke this clause. As such, I am of the view that the early redemption clause in the First Schedule is severable from the Loan Agreement in accordance with its clause (9). This breach is thus remediable and should not render the Loan Agreement unenforceable. (See: Easy Fortune Property Ltd. v Yung Chun Him [2019] HKCA 1055, at §§ 22 per Chu JA (as she then was)).

35.  Seventhly, I do not find it credible that the Defendant signed the Loan Agreement under duress or there are any other vitiating factors which would render the Loan Agreement unenforceable. The Defendant does not dispute the authenticity of her signatures on the Loan Agreement and the Legal Charge.

36.  The Defendant does not allege that the Plaintiff forced her to sign the Loan Agreement and the Legal Charge. Insofar as she was under financial pressure to sign the said documents in order to borrow money to ease her financial situation is concerned, that is definitely not a ground for setting aside the Loan Agreement and the Legal Charge on the ground of duress. As a matter of fact, in the Defendant’s written submissions, she did not heavily rely on this point.

37.  Finally, insofar as the Defendant’s allegation of misrepresentation by the Plaintiff before Master D. To is concerned, that is not material to the issues to be determined in this appeal.

38.  In any event, the Plaintiff denied it had ever made any misrepresentation to the court below. Ms Leung for the Plaintiff submitted that land search is a public record and the Defendant who was educated up to university level and a registered legal owner with experience in mortgaging her property should have no difficulty in conducting the land search on her own account. It is submitted that the Plaintiff never attempted to deny that the Defendant had a previous mortgage with Easy Strategy, rather the Defendant obtained the subject loan in this appeal from the Plaintiff for the purpose of discharging her previous mortgage with Easy Strategy. The Plaintiff had produced the relevant supporting exhibits.

39.  I should mention that after the conclusion of the substantive appeal hearing, by a letter dated 22 November 2022, the Defendant sought to make further submissions and file further evidence in the form of a letter rather than an affirmation.  In the said letter, the Defendant sought to prove that the Plaintiff did charge and receive 25% interest per annum for the first month of the subject loan and had actually cashed in the cheque in the sum of HK$58,900.00.

40.  I am of the clear view that procedurally it is not right and allowable for the Defendant to file such submissions and evidence well after the conclusion of the substantive appeal hearing.  It is not fair to the Plaintiff to have to deal with such submissions and evidence only addressed in the form of a letter.

41.  In any event, as the Defendant acts in person, this court directed the Plaintiff to see if it had anything to respond to the Defendant’s letter dated 22 November 2022.  On 2 December 2022, the Plaintiff filed the Second Affirmation of Hui Yin Wah Ivory which stated, inter alia, that:

“6. Upon approving the loan application of the Defendant, on 10^th April 2019, the Defendant voluntarily deposited HK$58,900.00 to the Plaintiffs NCB bank account with account number 043-512-00048209 in settling the first payment of the Loan Agreement concerning the Property. As to the remaining amount of HK$3,100.00, it concerns with the Defendant's first payment of mortgage loan of another property situate at Shop 263 on Second Floor, North Point Centre, Nos. 277-288 King's Road, Hong Kong. Adding both amounts of HK$58,900.00 and HK$3, 100.00 makes a total of HK$62,000.00 as shown in the bank records of the Plaintiff.

7. Further, on 7^th May 2019, the Defendant deposited an amount of HK$63,808.33 for payment of the Loan Agreement concerning the Property. On both occasions, the Plaintiff was charging at an interest rate of 13% p.a. all along on the assumption that the Defendant made payments on time. However, the Defendant had stopped making payments ever since after she made the sixth payment instalment of the Loan Agreement. I crave leave to refer to Exhibit "TTH-7" in the 2^nd Supplemental Affirmation of Tam Tsz Hin filed on 26^th May 2021 being copies of bank statements of the Plaintiff company.

8. Based on the previous affirmations and evidence filed to Court, the Plaintiff submits that it has only been using 13% p.a. as the outstanding interest rate and 13% p.a. as the default interest rate all along in connection with the Loan Agreement…

12. Again, I repeat paragraph 8 hereinabove of this affirmation. On the face of the evidence itself, the Plaintiff adopts 13% p.a. as outstanding interest rate and 13% p.a. for default interest rate. Such rate adoption goes in line with the ruling made by Master D. To in the substantive hearing on 22^nd July 2022.”

42.  Given the explanations professed by the plaintiff, I am of the view that Master D. To rightly made the Decision.

DISPOSITION

43.  For all the reasons stated above, I make an order that the present appeal is dismissed with costs.

44.  The Plaintiff asks for costs to be taxed on an indemnity basis pursuant to the contractual clauses of the Loan Agreement and the Legal Charge. I agree.

45.  I have directed that the costs will be summarily assessed by this Court.

46.  I have since received the Plaintiff’s Schedules of Costs and the Defendant’s List of Objections. I summarily assess the Plaintiff’s costs as follows: -

(1)  For the Schedule of Costs dated 21 July 2022: HK$190,000.

(2)  For the Schedule of Costs dated 3 October 2022: HK$70,000.

(3)  For the Schedule of Costs dated 28 October 2022: HK$200,000.

47.  Finally, I thank Ms Leung for the Plaintiff for her helpful assistance.