Lam Sau Fa v. Golden Rich Finance Ltd

HCA 3248/2016
[2018] HKCFI 572

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3248 OF 2016

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AND

HCMP 84/2017
[2018] HKCFI 572

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 84 OF 2017

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(Heard together)

Before: Deputy High Court Judge Kent Yee in Chambers (Open to public)

Date of Hearing: 14 February 2018

Date of Decision: 21 March 2018

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D E C I S I O N

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1.Golden Rich Finance Limited (“Golden Rich”) brought this mortgagee action against Madam Lam by an originating summons dated 12 January 2017 under HCMP 84/2017 (“the OS”) in relation to a loan extended to her in the sum of HK$4.5 million secured by a legal charge in respect of her property. This is the substantive hearing of the OS in which Golden Rich asks for summary judgement.

2.On the other hand, prior to the mortgage action, Madam Lam commenced a High Court action under HCA 3248/2016 (“the High Court Action”) by a writ dated 9 December 2016 and now applies for an order that the mortgagee action and the High Court Action be consolidated by her summons dated 5 May 2017 (“the Summons”).

Background facts

3.Golden Rich is a licensed moneylender. It entered into a written loan agreement dated 5 September 2016 (“the Loan Agreement”) as lender with Madam Lam as borrower. Under the Loan Agreement, the parties agreed that Golden Rich should grant a loan in the sum of HK$4.5 million (“the Loan”) to Madam Lam and the interest rate was 30% per annum. Madam Lam would be subject to a penalty interest of 30% per annum in default of repayment. The Loan together with interest thereon was to be repaid by 12 monthly instalments of HK$112,500 save that the last instalment should be in the sum of HK$4,612,500.00.

4.The Loan is secured by a legal charge registered in the Land Registry by Memorial No. 16091301820039 (“the First Legal Charge”) whereby the property of Madam Lam located at Bellagio, New Territories registered in her sole name (“the Mortgaged Property”) is charged to secure the indebtedness of Madam Lam under the Loan Agreement.

5.The transaction was completed in the office of Messrs. Bobby Tse & Co. (“BT”) in Central, Hong Kong. Mr Tsang was the director of Golden Rich and acted on its behalf to deal with Madam Lam. Their conversation was partially recorded and the audio-recording (“the Recording”), together with its transcript (“the Transcript”), is made available to this court. Apart from the Loan Agreement and the First Legal Charge, Madam Lam also signed an application form for the purpose of the Loan.

6.Mr Tse of BT attended the meeting (“the First Meeting”). He interpreted the First Legal Charge to Madam Lam and witnessed the execution of the same by both parties.

7.After the execution of the documents, Mr Tsang showed Madam Lam a cheque for the amount of HK$13,000.00 payable to BT for their legal costs and disbursements. He further gave Madam Lam a cheque (“the Cheque”) for the sum of HK$4,487,000.00 (“the Sum”) being the balance of the Loan. Madam Lam signed a receipt to acknowledge the payment of the Sum to her.

8.Madam Lam has failed and/or refused to pay the monthly instalments since 5 November 2016.

9.Golden Rich relies on the foregoing undisputed matters to found its claim in the OS. In the OS, it seeks the payment of all monies due under the First Legal Charge and the delivery of vacant possession of the Mortgaged Property.

10.However, it was Madam Lam who had acted first. In the High Court Action, in which Golden Rich is the sole defendant, Madam Lam, acting in person, filed an Endorsement of Writ and principally she claims for a declaration that the First Legal Charge is null and void for illegality, fraudulent scam and for fraudulent intention; and/or alternatively for mistake and fraudulent misrepresentation; and/or alternatively for unconscionable terms of contract. She further claims for an injunction that the title deeds of the Mortgaged Property (“the Title Deeds”) be released to her forthwith and damages to be assessed for all her loss, damage and suffering resulting from the foregoing complaints.

Relevant legal principles

11.Without going further into the allegations of Madam Lam, I understand that she denies liability under the First Legal Charge and she has come up with some serious factual allegations against Golden Rich. I also note that Ms Lai, for Madam Lam, also raises objection to the enforceability of the Loan Agreement on the ground of the alleged breaches of the Money Lenders Ordinance, Cap. 163 (“the MLO”). It is pertinent to remind myself of the established principles at this juncture, which have been helpfully cited to this court by Mr Dawes SC, leading Mr Lee, for Golden Rich in his skeleton submissions.

12.In Wing Hang Bank Ltd v Liu Kan Ying & Ors. [2002] 2 HKC 57, Ma J (as the Chief Justice then was) dealt with an application for summary determination of an originating summons issued by the mortgagee bank. He said this at §10,

“Unlike Order 14 applications where the defendant is obliged to provide sufficient grounds to justify the action continuing to trial, the burden in summary judgment applications under the originating summons procedure is on the plaintiff to justify its entitlement to summary judgment. However, once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence or defences to the claim. In this way, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under RHC, Order 14.”

13.As such, the usual considerations in an Order 14 application apply. The following principles expounded by Cheung JA in Paul Y. Management Limited v Eternal Unity Development Limited and Ors., unreported, CACV 16/2008, 12.8.2008 at §19 in the context of a summary judgment are apposite:

“In deciding whether a plaintiff is entitled to summary judgment the relevant test is whether the defendant has raised credible triable issues. If there are, the matter should go to trial. If not, judgment should be entered against the defendant. In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini-trial on complicated factual issues.”

Parties’ respective cases

14.As observed above, those facts underpinning the claim of Golden Rich is hardly disputable and they suffice to demonstrate a prima facie case. I should then turn to the purported defences raised by Madam Lam. I have pursued all the affidavits made by Madam Lam in this connection.

15.In her written submissions, Ms Lai summarises the purported defences as shown in the affidavits of Madam Lam in the following terms:

(a) The Loan Agreement and/or the First Legal Charge is/are void and/or unenforceable as Golden Rich colluded, conspired with others to injure the interest of Madam Lam and that Golden Rich was in breach of trust to allow the intermediaries including Mr Tse to injure her interest and/or to unduly influence her and that Madam Lam is liable to indemnify her in full (“the Conspiracy Issue”) and

(b) The Loan Agreement is void and/or unenforceable due to the breaches of sections 7, 18(2)(j), 21 and 27 of the MLO (“the MLO Issue”).

16.The Conspiracy Issue as formulated by the defence is on the face of it convoluted and the legal basis is questionable. Even without going into the evidence, I find that the complaints in the OS are obviously different from those set out in the Endorsement of Writ. 

17.Central to the Conspiracy Issue is Madam Lam’s allegation of the existence of a syndicate (“the Syndicate”).  The Syndicate consisted of a few persons with different backgrounds. First, the staff members of Wing Lung Bank (“the WL Bank”) called Madam Lam several times in August 2016 and urged her to apply for a card known as Free Advance Card (“the Card”). Madam Lam alleges that she was not in need of any loan but she eventually accepted the invitation of one of them known as Mr Kevin Ho who claimed to be a financial analyst of Wealth Creation Enterprise Planning Ltd (“Well Creation”) representing the WL Bank.

18.Subsequently, Madam Lam agreed to meet the solicitors of the WL Bank in the morning of 5 September 2016 in their Sheung Wan office. She was asked to bring along the Title Deeds only to verify her creditworthiness.

19.On that day, Mr Ho first took her to the office of Messrs. Cheung & Liu and met Mr Lam who was a solicitor there. Then he took Madam Lam to the office of BT where she met Mr Tse and Mr Tsang. Mr Tse left Mr Tsang and Madam Lam alone to transact their business.

20.Mr Tsang then proceeded to promote the Card to Madam Lam. She was persuaded and signed all the documents presented by Mr Tsang in the belief that they were for the purpose of her application for the Card only.  She claims to have no knowledge and understanding of the contents of those documents by reason of her ignorance of the English language. Presumably, such documents included the application form, the Loan Agreement and the First Legal Charge. She alleges that BT and Mr Tsang being privy to the Syndicate conspired to defraud her.

21.She nevertheless accepts that she received the Cheque from Mr Tsang. She claims to have been directed by Mr Tsang to give the Cheque to Mr Ho to arrange for the issuance of the Card. In the same afternoon, she met Mr Ho and he brought her to the office of Mr Lam of Messrs. Cheung & Liu again. She handed over the Cheque to Mr Lam in exchange of the Card. Mr Ho represented to her that she could withdraw cash out of the Sum with the Card.

22.On 13 September 2016, Mr Lam gave her a WhatsApp message telling her that a transfer had been made and she could use the Sum. In the evening of that day, Mr Setzo who was the branch manager of the WL Bank called her and asked her to withdraw the Sum form her account on the following day.

23.On 14 September 2016, Madam Lam followed the instruction and withdrew the Sum in cash. She was picked up by a private car arranged by the Syndicate and was brought to the office of a solicitor known as Mr Cheng located in Tsim Sha Tsui. The name card of Mr Cheng shows that he worked for an organisation known as Hong Kong Universe Mortgage Centre & Solicitors (“the Organisation”). Madam Lam paid the Sum to Mr Cheng and he issued a receipt to Madam Lam bearing the name of the Organisation and its chop. The description of the payment was stated to be “Mortgage Insurance Fee”.

24.On 16 September 2016, Madam Lam phoned Mr Tse and asked for the return of the Title Deeds. Mr Tse refused to do so on the ground of lack of instruction. Madam Lam then went up to the office of the Organisation, only to find that it was closed. The management office of the office building told her that the office had been raided by the police a few times.

25.Feeling worried, Madam Lam visited the office of Mr Tsang on 20 October 2016 (“the Second Meeting”) and demanded for the return of the Title Deeds. Madam Lam alleges that it was not until then that she realised that the Mortgaged Property have been mortgaged to Golden Rich and that Mr Tsang explained to her that the First Legal Charge was executed.

26.Madam Lam reported this case to the police in October 2016 complaining about the Syndicate. Curiously enough, in the High Court Action commenced shortly afterwards, Madam Lam only targeted at Golden Rich.

Analysis

The Conspiracy Issue

27.I remind myself that the focus should be on the enforceability of the First Legal Charge amongst all the allegations about the Syndicate.

28.After listening to the Recording and reading the Transcript and also the relevant WhatsApp messages, I find the allegations of Madam Lam in regard to the First Meeting and all her conversations with Mr Tsang to be wholly untruthful and unreliable.  All such allegations are flatly rebutted.

29.Without setting out the relevant parts of the Transcript here, I am positive that Madam Lam knew what the documents she signed were during the First Meeting. Mr Tsang explained to her such documents and reminded her that she had the right to seek independent legal advice. Her intention was specifically drawn to the provision that the Loan was a private arrangement between the immediate parties to the Loan Agreement and not any third party. There is nothing to cause me any concern about the understanding of Madam Lam as shown in the Recording.

30.I am convinced that Madam Lam had been given ample opportunities to review the documents before appending her signature to each of them. She was fully engaged during the First Meeting and managed to ask relevant questions. As shown by her questions and Mr Tsang’s responses, she was fully aware that she was going to mortgage the Mortgaged Property.  They talked about redemption. Her assertion that the Title Deeds was passed to Mr Tsang to merely show her creditworthiness is incredible. I am unable to find any reference to the Card either.

31.I should also mention that at the First Meeting, Madam Lam also signed a Chinese document entitled “Legal Opinion Declaration” which contained a provision that Golden Rich has nothing to do with any payment or benefit paid by Madam Lam to any third party apart from the solicitors of Golden Rich pursuant to any agreement with such third parties.

32.In the result, I am unable to detect a shred of evidence of any vitiating factors adversely affecting the enforceability of the Loan Agreement and the First Legal Charge apart from the bare allegations of Madam Lam, which I have no reason to accept. I believe Madam Lam has told this court an untrue account.

33.On the other hand, I am unable to have any confidence in Madam Lam’s allegations about the subsequent dealings with the other members of the Syndicate. I cannot take her words at face value. I am reluctant to make any finding of fraud or scam, however preliminary, without hearing from all those solicitors and the WL Bank. Curiously enough, she has not taken any legal actions against them though they should be easy and ready targets. They are not even mentioned by their names in the High Court Action.

34.Though I am convinced that Golden Rich should know that Madam Lam had been introduced by some other intermediaries to Golden Rich to enter into the Loan Agreement and the First Legal Charge, it doesn’t mean that those intermediaries were the agents of or acting for Golden Rich on its behalf.  There is no evidence of agency at all. The allegation of collusion and/or conspiracy is clearly unsustainable on the evidence adduced by Madam Lam.

35.The response of Madam Lam after she found out that the office of the Organisation was closed is telling. First of all, she gave a text message to Mr Tsang on 18 October 2016 and indicated that she was incapable of repaying the Loan. She made no complaint about any involvement of Golden Rich in any syndicates. She merely mentioned a syndicate of lawyers having taken away from her HK$4 million odd without implicating Golden Rich.

36.Ms Lai tries to water down the damage effect of the Recording on the purported defences by submitting that it does not cover the entire conversation transpired during the First Meeting and that it might have been doctored to serve the purpose of Golden Rich. I am unable to accept this submission.

37.Madam Lam in her affidavit complains that the Recording does not cover the exchanges relating to the Card and other allegations made by her. If she had any conviction in this complaint, she should have asked Golden Rich to produce the master copy by way of correspondence or by a formal application to this court. She has taken neither of these courses.

38.On the other hand, it is a grave allegation indeed to suggest that Golden Rich fabricated false evidence to mislead this court. Madam Lam herself did not in her affidavits explain how the Recording had been edited so that it did not reflect the actual conversation between Mr Tsang and her. Again, there is no reason why she has not even made a request for the original copy of the Recording to support this serious allegation.

39.At the hearing, Ms Lai places heavy emphasis on a document to show the potential involvement of Golden Rich in the Syndicate. It was an authorisation letter issued by Madam Lam to Golden Rich dated 14 September 2016 whereby Madam Lam referred to the First Legal Charge and the Loan and authorized Golden Rich to issue cheques for the Sum to be payable to Golden Rich itself as “upfront/other charge/setup fee”. The authorisation letter bore the signature of Madam Lam. 

40.According to Madam Lam, this authorisation letter was given to her by Mr Tsang among the mortgage documents during the Second Meeting.

41.Mr Tsang’s response is that the authorization letter was not issued by Golden Rich at all and he only saw it for the first time when Madam Lam exhibited the same to her second affidavit.

42.Whether the authorisation letter was actually issued by Golden Rich is indeed a factual dispute which I cannot resolve on affidavits though I have little confidence in Madam Lam’s evidence in general. I should point out that there is no discussion about this authorisation letter during the First Meeting as shown in the Transcript.

43.Even if it was drafted by Golden Rich and signed by Madam Lam during the First Meeting, it is not in dispute that Golden Rich did not make any payment to itself pursuant to the authorisation letter. Instead, Madam Lam had the Cheque and obtained the entire amount of the Sum.

44.Hence, I fail to see how the authorization letter can assist in the case of collusion/conspiracy with the Syndicate.

45.To sum up, the Conspiracy Issue is a non-starter on the evidence. It cannot constitute any triable issues or a credible defence to Madam Lam.

The MLO Issue

46.This issue can be disposed of briefly. Mr Dawes accepts that the wrong address was stated in the Loan Agreement. The actual address where the negotiation and completion of the Loan Agreement was held should be the address of BT instead of the office address of Golden Rich. This is in contravention of sections 7 and 18(2)(J) of the MLO apparently.

47.Section 18(3) of the MLO empowers this court to allow enforcement of a claim notwithstanding any breaches of the MLO. Ribeiro PJ in Emperor Finance Ltd v La Belle Fashion Ltd & Others [2003] 3 HKLRD 995 had this to say to about the exercise of this discretion,

“In exercising the discretion, the court shall examine the breach or breaches in question, their consequences for the parties to the transactions and any other circumstances which may make it inequitable to hold the agreements unenforceable.”

48.Madam Lam does not suggest that she has suffered any prejudice as a result of those inaccurate information in the Loan Agreement. I fail to see any ulterior motive or material gain that could have been intended by Golden Rich to give an inaccurate address in the Loan Agreement. I do not think that the Loan Agreement could be in any way be affected by this breach, either.

49.As regards the alleged breach of section 21 of the MLO in respect of the early redemption charge, the issue of early redemption has never arisen in this case and it does not bother anyone here. Again I do not think that this apparent breach should affect the claim of Golden Rich.

50.Lastly, Mr Dawes accepts that the payment made by Madam Lam for the costs and disbursements of BT relating to the execution of the First Legal Charge in the sum of HK$13,000 to be deducted from the Loan is in contravention of section 27 of the MLO.

51.Section 27(4) provides that the amount paid to or received by any person in contravention of this section may be recovered by the borrower or where such person is an agent of the money lender, may be set off against the amount actually lent.

52.Given the modest amount received by Golden Rich, particularly in contrast to the amount of the Sum advanced to Madam Lam, I believe I should invoke section 27(4) and accept the suggestion of Mr Dawes that the sum of HK$13,000 should be deducted from the Loan and treat the Sum as the actual amount advanced under the Loan Agreement.

53.Thus, I do not think the MLO Issue can assist the defence and constitute any triable issue.

Conclusion and disposition

54.For the reasons given, I see no merit in the Conspiracy Issue and the MLO Issue. Madam Lam has failed to show any bona fide defence and triable issues. If she has any genuine grievance about the Syndicate, of which I am unable to accept Golden Rich is a member, she should take legal actions against them and this alone cannot afford any reason why this matter should go to trial.

55.Accordingly, Golden Rich should be entitled to the relief claimed in the OS and I so order and entered judgment against Madam Lam. The Summons must be dismissed.

56.Mr Dawes has provided this court with a draft order. The terms of the draft order do meet my approval. I am also agreeable to summary assessment of costs of these proceedings including the costs of the Summons. I make an order nisi that all such costs be to borne by Madam Lam on an indemnity basis. Golden Rich should within 14 days from today lodge and serve its Statement of Costs and Madam Lam should lodge and serve her List of Objections, if so advised, within 14 days thereafter. My assessment would be given by way of correspondence.

57.It remains for me to thank all counsel on both sides for their helpful assistance.

Mr Victor Dawes, S.C. and Mr Jason Lee, instructed by Tony Kan & Co for plaintiff (in HCMP 84/2017) and defendant (in HCA 3248/2016)

Ms Annie Lai, instructed by Yu Sun Yau Mak & Lawyers for defendant (in HCMP 84/2017) and plaintiff (in HCA 3248/2016)