The One Credit Ltd v. Yeung Yuen Fu
Read the full judgment text of DCCJ 4600/2019 on BabelCite. This District Court judgment was delivered on 27 December 2019.
1. This is the defendant’s appeal against the Master’s decision on 2 December 2019 to strike out his defence and counterclaim with costs to the plaintiff summarily assessed at HK$700.00. At the appeal hearing on 27 December 2019, the plaintiff was represented by Mr Wong Tak Ka of Messrs K.B. Chau & Co. (“Mr Wong”), and the defendant acted in person and was present.
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DCCJ 4600/2019 [2020] HKDC 10 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 4600 OF 2019 --------------------
-------------------- Before: Deputy District Judge David Chan in Chambers (Open to Public) Date of Hearing: 27 December 2019 Date of Decision: 27 December 2019 Date of Reasons for Decision: 6 January 2020 --------------------------------------- REASONS FOR DECISION --------------------------------------- INTRODUCTION 1.This is the defendant’s appeal against the Master’s decision on 2 December 2019 to strike out his defence and counterclaim with costs to the plaintiff summarily assessed at HK$700.00. At the appeal hearing on 27 December 2019, the plaintiff was represented by Mr Wong Tak Ka of Messrs K.B. Chau & Co. (“Mr Wong”), and the defendant acted in person and was present. 2.At the end of the hearing, I allowed the appeal, dismissed the plaintiff’s Inter Parte Summons dated 24 October 2019 (the “Summons”), set aside the costs order made by the learned Master, and ordered that costs of the Summons and this appeal be to the defendant in any event to be taxed if not agreed. I also gave direction for the defendant to amend his defence and counterclaim. I said that written reasons for my decision would be handed down in due course. This I now do. 3.Despite that the defendant is acting in person, his pleadings, notice of appeal and the supporting affidavit are all written in English. As such, this Reasons for Decision is also written in English. Should the defendant require translation of this Reasons for Decision to him in Punti, arrangement could be made with the court interpreter. 4.An appeal from a master to a judge under Order 58, rule 1(1) of the Rules of the District Court (the “RDC”) is by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time, save that the party appealing, even though the original application was not by him but against him, has the right as well as obligation to open the appeal.[1] 5.In light of the said settled approach, I will in this Reasons for Decision consider afresh the plaintiff’s application to strike out the defendant’s defence and counterclaim. PROCEDURAL IRREGULARITIES 6.The decision of the learned Master stemmed from the plaintiff’s application by way of the Summons. In it, the plaintiff sought to strike out the defendant’s defence and counterclaim. 7.The Summons, however, did not specify the ground or grounds for an application under Order 18, rule 19 of the RDC. It is a requirement that the same should be specified in a summons for striking out.[2] Such specification is found, instead, under paragraph 3 of the affirmation of Mr Lui Fung Ho[3] (“Mr Lui”) filed on 24 October 2019 (“Lui’s Affirmation”) in support of the Summons. It is stated therein the only ground relied on is that the defence and counterclaim disclosed no reasonable cause of defence. Order 18, rule 19(1)(a) of the RDC is thus engaged. 8.Pausing here, it is trite that for an application under Order 18, rule 19(1)(a) of the RDC, no evidence should be filed.[4] As such, Lui’s Affirmation is inadmissible when this court considers the striking out application.[5] It follows that I am not supposed to rely on Lui’s Affirmation to identify the ground that the plaintiff relies on to strike out the defence and counterclaim. In any event, an omission in the Summons should not be salvaged by Lui’s Affirmation. 9.Moreover, no letter has been tendered by the plaintiff to show compliance of the requirement under paragraph 5 of Practice Direction 19.1. At the hearing, Mr Wong also confirmed that no such letter was ever issued to the defendant. Paragraph 5 of Practice Direction 19.1 provides that in an application to strike out a pleading as disclosing no reasonable cause of action, the applicant shall inform the respondent of the ground in writing at least 5 clear days before the day fixed for the hearing. Compliance with this direction is important, as the whole point of the framework is to give the other party adequate time to amend pleadings and/or file evidence and not to take him by surprise.[6] 10.From the notes of the learned Master, the defendant was clearly taken aback during the hearing on 2 December 2019, when he had to answer to the application. His reply was “我唔認識，我以為自我介紹” when the learned Master asked whether he agreed with the Summons. 11.I appreciate that non-compliance of paragraph 5 of Practice Direction 19.1, on itself, might not lead to the Summons being dismissed. This was confirmed by HH Judge M Ng (as she then was) in Kwan Kwok Leung v Wong Hei Yu Winny (unreported, DCCJ 5406/2007, 28 November 2008) at paragraph 47:-
12.Be that as it may, the combined effect of such non-compliance together with the irregularity as highlighted in paragraphs 7 and 8 above warrants serious consideration to have the Summons dismissed. At the very least, the Summons should not have been processed unless and until the said irregularities were rectified. However, for the reasons given below, I think it would be a waste of time and costs, and redundant, to go through such exercise. THE STRIKING OUT APPLICATION 13.I will in the sections below consider the plaintiff’s striking out application based on the ground under Order 18, rule 19(1)(a) of the RDC. Before I do that, I will first set out the relevant principles. Principles on striking out application 14.The general principles concerning striking out of pleadings have been summarized by Hon Au-Yeung J in the case of K & L Gates v Navin Kumar Aggarwal & Ors (unreported, HCA 1061/2011, 20 May 2016), at paragraph 20:-
15.In particular, for an application under Order 18, rule 19(1)(a) of the RDC, the following legal principles are applicable:-
The plaintiff’s case 16.As per the specially indorsed writ of summons issued on 26 August 2019, the plaintiff is a money lender licensed under the Money Lender’s Ordinance, Cap 163 (“MLO”). On 24 January 2019, the plaintiff as the lender and the defendant as the borrower entered into a loan agreement (the “Loan Agreement”), under which a sum of HK$800,000.00 was lent by the plaintiff to the defendant (the “Loan”). The Loan and interest thereon at the rate of 24% per annum shall be repaid by 72 monthly instalments. The said monthly repayments fell on the 24th day of each month starting from 24 February 2019. 17.The defendant made prompt repayments from 24 February 2019 to 24 June 2019, but defaulted in the one fixed for 24 July 2019. As such, the plaintiff, through its solicitors, issued a letter of demand against the defendant on 2 August 2019 (the “Demand Letter”), requesting for full repayment of the outstanding principal together with interest within 3 days from the date thereof, with the warning that failing compliance of the request, the plaintiff would institute legal proceedings against the defendant. 18.In spite of the Demand Letter, the defendant failed to make repayment, giving rise to this action. The plaintiff now claims the outstanding principal and interest in the sum of HK$798,081.07, further interest thereon at the contractual rate until full payment, and costs of this action on full indemnity basis. The defendant’s case 19.The defendant acknowledged service of the writ and gave notice of intention to defend on 4 September 2019. In his homemade defence and counterclaim filed on 27 September 2019, the gist of his defence is that the plaintiff had failed to issue receipts for the repayments he made between February 2019 and 24 June 2019. As per the letter dated 9 August 2019 annexed to the defence and counterclaim (the “Letter”), complaint was lodged by the defendant to the plaintiff for non-issuance of the said receipts. 20.I note in passing that the defendant has made other denials and averments in his defence, but they are mostly out of sync and do not correspond with the paragraphs in the statement of claim that they aimed to answer. 21.Turning now to his counterclaim, the defendant claims that he suffered loss and damage of HK$20,000.00 as costs for legal advices. Apart from that, he also claims for loss and damage due to the need to seek advice from the court on when to restart repayment, and for an amount set aside to cover unreasonable interest and court charges. Finally, in the prayer section of his counterclaim, he also asks for costs for obtaining transcripts of court hearings. Discussion: whether the defence should be struck out 22.I disagree with the plaintiff that there is no reasonable cause of defence. The defendant, by the Letter, had requested for receipts of the repayments he had made to the plaintiff from February 2019 to 24 June 2019. The Letter was dated 9 August 2019, after the Demand Letter was issued but before commencement of this action. It could also be observed from the Letter that there were allegedly prior communications between the parties by email messages in early August 2019 concerning this matter. Despite his use of the word “receipts” in the defence, properly understood, the defendant was seeking from the plaintiff a written record on the payments it had received from him. 23.Section 19(1)(b) of the MLO provides:-
24.Where the said demand was made by the borrower, section 19(4) provides that:-
25.In light of these statutory provisions, if the plaintiff had received such demand during continuance of the Loan Agreement but without reasonable excuse failed to provide a statement showing the amount of any payment it had received from the defendant within 1 month after the said email or the Letter was made, i.e. on or before 9 September 2019, it would be barred from commencing this action against him, or to recover any sum due under the Loan Agreement, and interest should not be chargeable in respect of the period of default. In other words, the complaint raised by the defendant in his defence could possibly provide for a full defence to this action. 26.Furthermore, I note from a number of cases that this line of defence was relied on by the borrowers under money lender actions, for example, Fast Billion Holdings Ltd v Sun Pui Yuk [2019] 2 HKLRD 906[8] and Hui Mei Ching t/a Diamond Dragon Finance Company v Tai Ngan Chiu [2019] HKCFI 650.[9] 27.I must stress that I am not concerned with the merits of the defence raised by the defendant. The mere fact that the case is weak, and not likely to succeed, is no ground for striking it out. So long as the defence discloses some cause of action or raises some question that ought to be tried, it should not be struck out. 28.For the above reasons, I find that the defence raised by the defendant does disclose a cause of defence or at the very least raises some questions that ought to be tried. 29.I would mention in passing that during the appeal hearing, the defendant submitted a new line of defence, i.e. that he had made repayments for the 24 July 2019 and 24 August 2019 instalments, thus he was not in breach of the Loan Agreement. If he were to rely on this defence, he would need to include it in his amended defence and counterclaim. Discussion: whether the counterclaim should be struck out 30.The Summons provided for striking out both the defence and the counterclaim. The learned Master, when striking out the defence, also struck out the counterclaim, but did not specify the reason for doing so.[10] But one could deduce that as the defendant’s counterclaim premised on his defence, it could not survive independently if the defence were struck out. In light of my decision above, this is no longer the case. I shall therefore proceed to consider whether the counterclaim should still be struck out under Order 18, rule 19(1)(a). 31.For the first head of counterclaim, the HK$20,000.00 is a claim for costs of legal advices. This is special rather than general damages, and particulars of the same should be given.[11] But where a pleading is defective only in not containing particulars to which the other side is entitled, application should be made under Order 18, rule 12 of the RDC, and not for an order to strike out the pleading.[12] 32.As to the other heads of counterclaim, I am baffled by them. First, no legal advice would and could be given by the court. Assuming that the defendant meant any direction or order to be given by the court, I cannot envisage a situation where the court would charge him for the same. Second, regarding his claim for the amount set aside to cover unreasonable interest and court charges, again I query what he is asking for. If he were to set aside some funds to pay for interest legally chargeable by the plaintiff, how is that a loss or damage to him? And if the interest were unreasonable, why would the court order the same to be paid by him? Moreover, what unreasonable court charges would there be? Finally, I wonder why the defendant is already catering for the need to obtain court transcripts. 33.Albeit the problems highlighted above, I do not think they call for the counterclaim or any part of it to be struck out. As I have given directions for the defendant to amend his defence and counterclaim, the defects could be cured at the same time. CONCLUSION 34.Based on the reasons provided, the appeal is allowed and the Summons is dismissed. 35.To improve on the clarity of his defence and counterclaim, amendments would be required.[13] I have therefore given direction at the end of the appeal hearing that the defendant shall, within 28 days from the date thereof, i.e. on or before 24 January 2020, apply by way of a summons for leave to amend his defence and counterclaim.[14] I also made the said application returnable on 6 February 2020 at 10:00 am at Court No. 15. 36.Finally, I have ordered that the costs order made by the learned Master against the defendant be set aside. Costs of the Summons and this appeal, including this hearing and the hearing on 2 December 2019, shall be paid by the plaintiff to the defendant in any event to be taxed if not agreed.
Mr Wong Tak Ka of K.B. Chau & Co., for the plaintiff The defendant was unrepresented and present [1] Hong Kong Civil Procedure 2020, Vol 1, para 58/1/2, at p 1161 [2] Ibid, para 18/19/3 at p 502 [3] Mr Lui is the manager of the plaintiff [4] See Order 18, r 19(2) of the RDC [5] Likewise, the affidavit filed by the defendant on 16 December 2019 shall not be considered [6] See Tadano South China Company Limited v Brightford Limited & Anor (unreported, CACV 152/2006, Hon Le Pichon JA, 17 August 2006) at para 24 [7] See C Y Foundation Group Ltd & Anor v Best Max Holdings Ltd & Ors (unreported, HCA 787/2011, Recorder L Wong SC, 3 June 2013) at para 2 [8] In that case, the defence under section 19(1)(b) was not pleaded but raised in the witness statements. Arguments under the same were allowed but this defence was ultimately rejected, as the demand was made after commencement of the action, and long after the loan agreement was terminated. [9] The same defence was raised but rejected by Madam Justice M Ng based on the facts of that case. [10] It should be noted that in paragraph 3 of Lui’s Affirmation, the Summons was made because there was no reasonable cause of defence. It does not set out the ground for striking out the counterclaim. [11] Supra, note 1, para 18/12/41 at pp 481-482; see also Hang Seng Credit Card Ltd & Ors v Tsang Nga Lee & Ors [2000] 3 HKLRD 33 at pp 41I to 42C [12] Supra, note 1, para 18/19/5 at p 505 [13] The amendments shall include but not limited to: (1) properly plead his defence pursuant to section 19 of the MLO and/or new defence that he intends to raise; (2) render particulars on the costs of legal advices in the sum of HK$20,000.00; (3) render particulars on and/or delete the other heads of counterclaim [14] With draft of the amended defence and counterclaim annexed thereto | ||||||||||||||
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