China Yinsheng Finance Ltd v. Wong Ping Shing

HCA 1106/2016

[2020] HKCFI 3072

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1106 OF 2016

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J U D G M E N T

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Introduction

1.This is the trial of the action. 

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

3.The Defendant is and at all material times was the registered owner of the property known as Flat D, 27th Floor, Block 1, Broadview Garden, 1 Tsing Luk Street, Tsing Yi, New Territories, Hong Kong (“Property”).

4.The Plaintiff’s claim is a straightforward one for the recovery of  HK$1,999,790[1] (“Loan”) together with contractual interest at the rate of 27.6% p.a. from 23 March 2016[2] until payment.[3]  The Loan was made pursuant to a Deed of Loan dated 4 December 2015 (“Deed”) whereby the Plaintiff agreed to lend HK$2 million to the Defendant and the Defendant agreed to repay 6 monthly interest instalments of HK$46,000 each, payable on the 4th day of each month, commencing from 4 January 2016.  The Defendant also agreed to repay the Loan together with the final interest instalment ie on 4 June 2016.

5.The sum of HK$2 million was paid out by cheques issued by the Plaintiff’s solicitors Au Thong & Tsang (“ATT”):

(1)     to discharge, on the Defendant’s written instructions, 2 sums owed by the Defendant to OK Finance Limited (“OK”) and United Asia Finance Limited (“UA”) and the costs incidental to the discharge, in the sum of over HK$1.14 million;

(2)     to defray the costs of registration of the Deed in the sum of HK$210;

(3)     to the Defendant by 2 cheques of HK$799,790 and HK$58,595.15, totalling HK$858,385.15.   

6.It is also not in dispute that the Defendant has only made the first 2 monthly interest instalments to the Plaintiff totaling HK$92,000.  In breach of the Deed, the Defendant failed to pay the interest instalment due on 4 March 2016. 

7.By letter dated 23 March 2016 from its then solicitors Gloria Chan & Co (“GCC”), the Plaintiff demanded immediate repayment of the Loan, all outstanding interest as well as overdue interest[4] from the Defendant.

8.On 26 April 2016, the Plaintiff issued the Writ in this action.

The parties’ case

9.As succinctly set out in Mr Ho’s Closing Submissions, the Defendant’s Defence is one of collusion between 中銀國際財務顧問有限公司ie China Asia Finance Consultant Limited (“China Asia”) and the Plaintiff.

10.At paragraph 30 of the Re-Re-Re-Amended Defence (“Defence”), it is pleaded that China Asia

“… was in fact a firm, or a group of persons, who acted as partners, employees, or agents of and in collusion with the Plaintiff, to charge or receive interest or remuneration or reward in the form of security money from borrowers in contravention of sections 2, 24(1), 25, 27(3) and 29(10) of the MLO.”

11.At paragraph 30(u) of the Defence, it is pleaded that the Defendant

“… was cheated to part with this HK$1,163,790 (i.e. HK$250,000 + HK$54,000 + HK$140,000 + HK$719,790) with which China Asia paid itself the unlawfully obtained security money and to defray other expenses to the detriment of the Defendant.”

12.At paragraph 37 of the Defence, it is pleaded that the Deed was

“… illegal and unenforceable by reason of the matters pleaded … herein, in that the effective rate of interest is in contravention of Section 24…MLO.”

13.The effective rate of interest pleaded at paragraph 37 of the Defence is 77.81% p.a., calculated as follows.

Particulars of Excessive Interest

Principal	HK$2,000,000
Contractual interest for 6 months
HK$2,000,000 x 27.6% x 0.5	HK$276,000
Total Repayment Amount
HK$2,000,000 + HK$276,000	HK$2,276,000
Amount actually lent
HK$2,000,000 - HK$719,790 - HK$210	HK$1,280,000
Total interest
HK$2,276,000 - HK$1,280,000	HK$996,000
Effective rate of interest Per Annum
HK$996,000 / HK$1,280,000 x 100%	77.81%

14.While various alleged breaches of sections 18(1) & (2) and 21 of MLO, as well as section 6 of the Unconscionable Contracts Ordinance, Cap 458, have been pleaded in the Defence, on Day 2 of the trial, Mr Ho very properly indicated that he would not be pursuing those alleged breaches as defence in this action.

15.In the Re-Re-Re-Amended Reply (“Reply”), the Plaintiff categorically denies the alleged collusion with China Asia and avers that it has no knowledge of or any association, relation or communication with China Asia or any persons purportedly acting as its employees or agents.  Instead, on the Plaintiff’s case, the Defendant was referred to it by its appointed agent viz Idea Tutorial Centre (“ITC”) and received from it the loan application form signed by the Defendant. On the evidence, the Plaintiff and ITC had signed a referral agreement on 2 October 2015 and after the event, the Plaintiff had paid it HK$20,000 as referral fees.  

The Issue and the witnesses

16.The principal issue which falls for this court’s determination can be formulated as this: whether there was collusion between the Plaintiff and China Asia to deceive the Defendant into applying for the Loan and to charge and receive from him HK$719,790 in connection with the procuring, negotiating or obtaining of the Loan.  If yes, what are the legal consequences of such collusion under the MLO.

17.At trial, the Plaintiff called 4 witnesses:

(1)     PW1 - Ms So Yuen Lan (“Ms So”). 

(2)     Ms So established ITC with a partner in May 2012.  On behalf of ITC, she signed the referral agreement with the Plaintiff on 2 October 2015.  According to the agreement, ITC would from time to time refer intended applicants for loans to the Plaintiff.  If the Plaintiff granted the loans, it would pay referral fees to ITC. 

(3)     Ms So’s testimony was that it was a former colleague, Ms Yan Ka Yu (“Yan”), who referred the Defendant to her at the end of November/ early December 2015 and provided her with relevant documents of the Defendant including inter alia his bank statements, tax returns, loan documents signed with OK and UA and a Transunion (“TU”) credit report for the purpose of his loan application. In turn, ITC referred the Defendant to the Plaintiff and forwarded those documents to the Plaintiff’s officer Yeung Tung Shing (“Yeung”).[5] Ms So confirmed in the witness box that she did not have any contact with China Asia or any other third party except Yan in relation to the Defendant’s loan application.  Subsequently, in February 2016, the Plaintiff paid ITC HK$20,000 as referral fees.  Ms So paid HK$10,000 to Yan.

(4)     PW2 - Mr Chan Chun Pong (“Hugo Chan”).

(5)     Hugo Chan worked for the Plaintiff as a loan officer from early 2015 for about a year.  He was no longer with the Plaintiff at the time of the trial. As a loan officer, his duty was to handle everything relating to loan applications.  Hugo Chan was the one who handled the Defendant’s application and had met him once in early December 2015, albeit he could not remember the exact date. As far as he knew, the Plaintiff used only 1 referral agent in this transaction a Ms So whom he believed to be PW1. During cross-examination, he was adamant that he did not know Mr Siu, one of China Asia’s purported employees/agents.

(6)     PW3 - Mr Hung Chun Ming (“Hung”). 

(7)     Hung has been working at the Plaintiff’s loan department since 2009.  In 2015, his position was senior officer of the department and worked alongside Yeung and Hugo Chan.  Hung’s witness statement is confined to the Plaintiff’s internal procedure in handling loan applications and its practice of using only 1 referral agent with whom it had signed a referral agreement in relation to each loan application. In the witness box, Hung confirmed that, in relation to the Loan, the Plaintiff’s only referral agent was ITC/Ms So.

(8)     PW4 - Mr Chan Hoi Hin Calvin (“Calvin Chan”).

(9)     Calvin Chan was formerly a clerk working at ATT who handled the Loan transaction on the instructions of the Plaintiff.  He confirmed that he was the one who explained the contents of the Deed to the Defendant and witnessed his signatures on it at ATT’s office on 4 December 2015. 

18.The Defendant called himself as his only witness.

19.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 in order to resolve the factual disputes between the parties.

20.As a preliminary observation, this court finds the Plaintiff’s witnesses straightforward and truthful.  Apart from Hung who still works for the Plaintiff, the others are all independent witnesses with no connection with the Plaintiff.  They gave their testimony calmly and their response to questions was mostly direct. While their memory of some of the details may have faded with time, there was no sign of embellishment by any of the Plaintiff’s witnesses.  Their credibility has withstood the vigour of cross‑examination.

21.The same cannot be said of the Defendant.  For reasons to be elaborated at the next section “Deliberation”, this court does not find him a reliable witness.  At this stage, suffice it for this court to put on record  that his testimony is highly improbable, “convoluted and at times confusing”.[6] 

Deliberation

The law

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

23.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).”

24.“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”. 

25.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.”

26.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.”

27.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 had the opportunity to review the authorities in relation to collusion in a similar context as the present action.  The defendant’s primary case was that the plaintiff, Lamto and Worldwide colluded together to charge or receive interest or remuneration or reward in the form of security money, insurance premium, share of repayment, administrative fee and handling fee from the defendant in contravention of sections 2, 24(1), 27(3) and 29(10) of MLO.  By reason of such collusion, the effective rate of interest that the plaintiff charged the defendant well exceeded 60% p.a..  As such, the loan agreement was unenforceable under sections 24(1) and (2) of MLO. 

28.At [36] to [39], the learned Deputy Judge summarised the law 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)

29.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)

30.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.”

The Defendant’s case

31.The Defendant was born in 1962 and had received education up to university level.  At the material time, he worked as an engineer with Hutchison Telecommunications (HK) Ltd at a monthly salary of about $38,000. 

32.In 1992, the Defendant and his 1st wife purchased the Property from The Hong Kong Housing Society with the assistance of a HK$250,000 mortgage.  The mortgage was released 2 years later in 1994.  When his 1^st wife passed away in 2001, he became the Property’s sole owner.  In 2015, the value of the Property was said to be about HK$6 million, before payment of premium to the Society. In 2015, the Property was his residence together with 2 of his children and a Filipino maid.

33.By comparison with his earnings, however, the Defendant can hardly be considered a financially prudent person.  His indebtedness to financial institutions[7] in August 2015, as pleaded in the Defence, was around HK$750,000 as follows:

(1)     HK$14,000 to Australia and New Zealand Banking Group Ltd;

(2)     HK$450,000 to The Bank of East Asia, Ltd;

(3)     HK$78,000 to BOC Credit Card (International) Ltd;

(4)     HK$9,000 to HSBC;

(5)     HK$179,000 to DBS Bank (HK) Ltd; and

(6)     HK$16,000 to Hang Seng Bank Ltd. 

34.On his own factual case, the Defendant was the victim of a scam perpetrated by China Asia via its 3 staff Mr Yu, Mr Siu and Mr Sau in collaboration with the Plaintiff.  Indeed, at paragraph 55 of his 1st witness statement, the Defendant said he believed that “the Plaintiff and China Asia conspired to defraud and caused me to bear a high amount of debts and fall into the crisis of losing [the Property]”.

35.This court shall endeavor to give a summary of the Defendant’s testimony and explain why it finds the testimony wholly unbelievable and fails to support his case of collusion against the Plaintiff.

The “Scams” by China Asia

Part 1: “Scam” leading to the loss of HK$250,000, HK$54,000 and HK$140,000

36.The scam began in August 2015. 

37.In early August 2015, the Defendant received a cold call from a Mr Yu who claimed himself as a staff of “中銀”.  Mr Yu told him his bank could provide a low-interest loan.  At that time, the Defendant had an account with the Bank of China (“BOC”). Since Mr Yu knew the Defendant’s full name and introduced himself as a bank employee, the Defendant thought “中銀” meant BOC. 

38.At the time, the Defendant was badly in need of cash.  After a brief conversation with Mr Yu, they agreed to meet at his office at Room 1303, Kowloon Building, 555 Nathan Road, Kowloon (“Kowloon Building Office”) for a detailed discussion.  Later, on 7 August 2015, the Defendant received a WhatsApp message setting out the documents required, date and time of the meeting ie 6:30 - 7pm on 10 August 2015, and the address of the Kowloon Building Office.

39.At about 6:30pm on 10 August 2015, the Defendant arrived at the Kowloon Building Office and met Mr Yu.  The Defendant mentioned to Mr Yu he had credit card debts of about HK$750,000 and the Property valued at about HK$6 million before land premium.  He told Mr Yu he would like to borrow about HK$500,000 to lessen his financial burden.  His plan was to use HK$200,000 to repay part of his credit card debts and the balance to repay his friend.  After purportedly conducting a credit assessment of the Defendant, a female staff who claimed to be a financial director entered the conference room and told him that they could provide a loan of HK$500,000 with monthly interest rate of 0.18%.  After signing a contract to entrust “中銀” with the loan application, the Defendant left.

40.A few days later, Mr Yu called the Defendant and told him the HK$500,000 loan had been approved and asked him to go to the Kowloon Building Office to complete the procedure.  On 17 August 2015, the Defendant received a WhatsApp message asking him to go to the Kowloon Building Office the next day at 2:30pm together with a number of documents including his credit cards, tax return, the title deeds of the Property.

41.On 18 August 2015, the Defendant went to the Kowloon Building Office.  He first met Mr Yu who told him the loan had been approved and asked him to wait for the manager.  About 5 minutes later, a Mr Siu, who claimed to be the manager of “中銀”, met the Defendant in the conference room. 

42.Contrary to what Mr Yu had told him, Mr Siu told the Defendant “the bank” would need some time to grant the loan of HK$500,000. If the Defendant was badly in need of money, he could go to HSBC and BOC to cash out about HK$350,000 on his credit cards for his immediate use.  Inexplicably, the Defendant agreed with the suggestion.  Mr Siu then arranged for a Mr Sau to take him to the HSBC branch in Mong Kok.  Mr Siu also told the Defendant he had to hand over the cash to Mr Sau who would bring the cash back to the Kowloon Building Office.

43.At about 5:30pm, after withdrawing HK$250,000 with his HSBC credit cards for HK$50,000, HK$70,000 and HK$130,000 respectively and handed the cash to Mr Sau, there was no time to go to BOC for the HK$100,000[8].  So, the two returned to the Kowloon Building Office.  Mr Siu suddenly told the Defendant he had to give “中銀” the HK$250,000 to “stakehold”. Neither the Defendant nor “中銀” could use the money as it was for the purpose of improving the Defendant’s credit rating.  Notwithstanding the Defendant was badly in need of cash, he agreed.  He was then given a “樓宇按揭托管收據” in Chinese ie “Building Mortgage Trust Receipt” (“1^st Trust Receipt”) to sign. 

44.The relevant parts of the 1st Trust Receipt read:

“ CHINA ASIA FINANCE CONSULTANT LIMITED

Building Mortgage Trust Receipt

Party A: CHINA ASIA FINANCE CONSULTANT LIMITED

Party B: WONG PING SHING …

Party B (WONG PING SHING) understands that HKD250,000 is used as the trust fund for Party A’s assistance in applying for the building mortgage loan service.

Party A has received HKD250,000 which is used as the trust fund for Party A’s assistance in applying for the building mortgage loan service for Party B (WONG PING SHING)

Note:   During the application period, neither Party B (WONG PING SHING) nor Party A may use the trust amount, and the trust amount is paid in cash.

Note:   Party B (WONG PING SHING) clearly knows and understands the trust of the building mortgage loan service on 18 August 2015. There is no complaint or dissatisfaction.

Note:   After signing the contract with OK Finance Limited., Party B (WONG PING SHING) must follow the arrangement of the relevant trust fund.

…

Note:   The trust amount will be discharged in three months.”

45.On 19 August 2015, Mr Siu called and told the Defendant his financial report was unfavorable and “the bank” refused to grant the low-interest loan of HK$500,000.  In order to successfully apply for it, the Defendant had to borrow from OK to pay off all his credit card debts.  Mr Siu then asked him to go to the Kowloon Building Office on that day.  The Defendant said he had no choice so he went to the Kowloon Building Office to deal with the application for a loan from OK.

46.In the office, after completing a form and sending it to OK, Mr Siu asked the Defendant to go to OK’s office to complete the loan application and bring back all the cheques he received from OK.

47.On the same day, the Defendant arrived at OK’s office on his own.  He found out from inter alia the loan documentation that the loan amount was HK$800,000, the interest rate was 15% p.a. and the repayment was by 96 monthly instalments of HK$14,357 each.  After completing the documentation, the staff of OK gave the Defendant 6 cheques payable to his institutional creditors to pay off his credit card debts of HK$746,000 as follows:

a.     Australia and New Zealand Banking Group Limited: HKD14,000;

b.     The Bank of East Asia Limited: HKD450,000;

c.     BOC Credit Card (International) Ltd.: HKD78,000;

d.     The Hong Kong and Shanghai Banking Corporation Limited: HKD9,000;

e.     DBS Bank (Hong Kong) Limited: HKD179,000;

f.     Hang Seng Bank Limited: HKD16,000.

48.The staff of OK also gave the Defendant a cash cheque in the sum of HK$54,000 as the balance of the loan. 

49.After going back to the Kowloon Building Office, Mr Siu told the Defendant to pay off the debts with the 6 cheques, cash out the HK$54,000 cheque and bring it back to the office.  At the office, the Defendant, again inexplicably, handed over the cash to Mr Siu as told.  Mr Siu then gave him another “樓宇按揭托管收據” in Chinese ie “Building Mortgage Trust Receipt” (“2nd Trust Receipt”) dated 25 August 2015 to sign.  The 2nd Trust Receipt was in similar terms as the 1st Trust Receipt and again mentioned OK.  Without question, the Defendant left the office after taking the Receipt.

50.On or about 8 September 2015, Mr Siu called the Defendant and said the application for the low-interest loan failed again. At that time, the Defendant still had credit card debts of HK$350,000 from HSBC and BOC.  Mr Siu suggested the Defendant to borrow from UA to pay off the credit card debts of HKD350,000 before continuing to apply to “the bank” for the low-interest loan.

51.Again, the Defendant obligingly accepted Mr Siu’s suggestion.  He signed another form at the Kowloon Building Office while Mr Siu faxed the form together with some documents to UA.  Mr Siu then told him to go to UA’s office alone.  At UA’s office, the Defendant found out the loan amount was only HK$300,000, which was not sufficient to pay off his credit card debts, but he agreed to accept it anyway. 

52.As with the previous occasions, after cashing the cheque from UA, the Defendant went back to China Asia’s office and handed over HK$140,000 cash to Mr Siu as he was told.  Mr Siu then gave the Defendant another “樓宇按揭托管收據” in Chinese ie “Building Mortgage Trust Receipt” (“3rd Trust Receipt”) dated 8 September 2015.  The 3rd Trust Receipt was in similar terms as the 1st and 2nd Trust Receipts but referred to UA instead of OK.  The Defendant claimed that it was after receiving this 3rd Trust Receipt that he realized he was not dealing with BOC, but with China Asia.  Notwithstanding this, the Defendant felt he had to continue following China Asia’s instructions in order to obtain the HK$500,000 low-interest loan as soon as possible.

53.In the next couple months, the Defendant was waiting for news from China Asia but heard nothing.  Eventually, after a prolonged absence of response from China Asia, in November 2015, he called Mr Siu to inquire about the loan and the trust fund.  The Defendant was told the application was still in progress.

54.Pausing here, the incredibility of this part of the Defendant’s case is glaringly obvious. The reasons are numerous but suffice it to mention the following. 

55.First, the Defendant said he had an account with BOC.  If he genuinely thought Mr Yu was a staff of BOC and BOC was willing to offer him a low-interest loan of HK$500,000, he could easily have gone to any branch of BOC to apply for it or at least make some enquiries about its terms. Instead, the Defendant went to the Kowloon Building Office after office hours to meet this stranger Mr Yu.  The Defendant did nothing to make sure that was really an office of BOC or that Mr Yu (whose full name he did not even know) was really a BOC staff.  It also did not seem to bother him that the meeting was after banks’ business hours.

56.Second, after a few days, the Defendant claimed Mr Yu told him the loan had been approved. But when he met Mr Siu at the Kowloon Building Office on 18 August 2015, Mr Siu in effect told him the loan had not yet been approved. Instead, Mr Siu asked the Defendant to borrow HK$350,000 on his HSBC and BOC credit cards if he was badly in need of money. 

57.Normally, someone in the Defendant’s position would have been surprised and suspicious as to why Mr Yu and Mr Siu gave him 2 opposite accounts of the status of the loan application within such a short period of time. There was no suggestion that the Defendant was either surprised or suspicious.  Normally, one would have been even more surprised and suspicious as to why Mr Siu asked him to borrow more on his credit cards which charged very high interest rates when the Defendant said all along he wished to lessen his financial burden.  Yet, the Defendant was quite agreeable to the proposal and did what he was told.

58.Third, if the Defendant was badly in need of cash, which he appeared to be, one would expect him to use the HK$250,000 from HSBC to reduce some of his credit card debts so as to minimise the accrual of interest.  Instead, he paid all the cash to Mr Siu to keep as so-called “trust fund” allegedly in order to improve his credit rating.  How placing money with China Asia/Mr Siu could improve the Defendant’s credit rating is beyond reasonable comprehension. 

59.Fourth, by the time the Defendant was shown the 1st Trust Receipt, he should know (i) he was not dealing with BOC, but China Asia, which was neither a bank nor a finance company; (ii) the HK$250,000 was purportedly a trust fund for China Asia’s assistance in applying for a building mortgage loan. However, the need to set up a trust fund or the point of applying for building mortgage loan was not explained to the Defendant and he did not ask. The Defendant also did not ask why the 1st Trust Receipt was issued by China Asia when he thought he was dealing with BOC. He just signed the 1st Trust Receipt without question and left. For someone of the Defendant’s education background, his behaviour was again incomprehensible.  

60.Fifth, on the very next day, Mr Siu called the Defendant again and told him the low-interest loan was not approved. He was told to go to OK to borrow a sum of money to completely pay off his credit card debts so as to improve his chances of getting the loan. How this could have improved the Defendant’s chances of obtaining a low-interest loan by replacing HK$746,000 credit card debts[9] with a HK$800,000 loan from a finance company when the Defendant was still left with HK$350,000 credit card debts was not explained and the Defendant did not ask.  The Defendant also did not ask about the terms of the OK loan, not even the amount—he just went to OK’s office as told.

61.Sixth, whatever was left of the loan from OK ie HK$54,000 was not kept by the Defendant himself—the money was immediately given to Mr Siu purportedly as trust fund. Again, why it was necessary to set up a trust fund, allegedly repayable in 3 months, was not explained. Why the trust fund was not repayable earlier than 3 months was also not explained and the Defendant did not even attempt to explore the possibility of shortening the repayment period with Mr Siu.  

62.Seventh, the Defendant was supposed to borrow HK$350,000 from UA to fully repay his remaining credit card debts to HSBC and BOC. But at UA office, he was only given a HK$300,000 loan. There was no evidence that the Defendant even tried to seek an explanation from Mr Siu or UA or asked UA to increase the loan amount. He just took the HK$300,000 cheque, cash it and handed over HK$140,000 to Mr Siu as trust fund. Again, if the Defendant agreed to take the UA loan in order to reduce his financial burden, he should have used the entire HK$300,000 to partially repay his credit card debts. But that was not what he did.

63.Eighth, after having been repeatedly let down by China Asia about the low-interest loan, the Defendant continued to do as he was told and continued to hand over the bulk of the money he borrowed to China Asia. It should be noted that by the time of the UA loan in September 2015, the Defendant had in total borrowed HK$1.45 million at the behest of China Asia when all along, the Defendant said he only wanted a loan of HK$500,000.

64.The end result of it all is that, instead of improving his financial position, the Defendant had made things worse by (i) borrowing HK$350,000 more on his HSBC and BOC credit cards but did not have the use of the money except the HK$100,000 from BOC; (ii) replacing HK$746,000 of his previous credit card debts with a HK$800,000 loan from OK with no tangible benefits to himself; (iii) borrowing another HK$300,000 from UA supposedly to pay off his outstanding credit card debts but he only ended up with HK$160,000; (iv) handing over HK$250,000, HK$54,000 and HK$140,000 to China Asia as so-called trust fund.

65.China Asia was a company of which the Defendant had no knowledge and with which he had no prior dealing.  Mr Yu, Mr Siu and Mr Sau were total strangers to him.  For someone of the Defendant’s age, education background, and with his previous experience of borrowing, it is hard to believe that the Defendant was conned by China Asia into believing that by borrowing “high-interest” loans from credit card companies, OK and UA, he would eventually be able to obtain a “low-interest” loan of a much smaller amount from a bank the identity of which he did not even know and did not bother to ask. It is even harder to believe that he would so easily hand over large sums of borrowed money to some total strangers merely in the hope that the low-interest loan would eventually come by.

66.To conclude, this court is not satisfied that the Defendant’s convoluted story of having been repeatedly misled and cheated by China Asia is anywhere near being credible. His testimony in this regard must be rejected. 

Part 2: “Scam” leading to the further loss of HK$719,790

67.During that phone call in November 2015 in which the Defendant was told the low-interest loan was still in progress, Mr Siu also suggested to him that he should borrow from a finance company to pay off HSBC, BOC, OK and UA in order to make it easier for “the bank” to grant the low-interest loan.  There was no explanation from Mr Siu how much to borrow or why it would be easier to get the low-interest loan and the Defendant did not ask. Also, by that time, the Defendant must already know Mr Siu was not a staff of BOC.  He still did not enquire the identity of “the bank” or China Asia’s relationship with it. 

68.In the evening of 2 December 2015, Mr Sau arrived at the downstairs of the Defendant’s company and called him to come down to sign a stack of documents concerning borrowing from a finance company. One of them was a loan application form from the Plaintiff which was blank when the Defendant signed it so he still did not know how much he was supposed to borrow.

69.On 3 December 2015, Mr Siu called and instructed the Defendant to go to the Wanchai MTR station the next day with a whole list of documents and wait for Mr Sau there.  The two would then go to the Plaintiff’s office to complete the loan procedure.

70.On 4 December 2015, the Defendant met up with Mr Sau who took him to the Plaintiff’s office.  Mr Sau stayed downstairs and ask the Defendant to go to the Plaintiff’s office himself.

71.Upon arrival, a male staff[10]took him to the conference room and gave him a stack of documents to sign, including inter alia a completed loan application form and a loan agreement.  However, the loan application form was not the one the Defendant had previously signed and handed to Mr Sau.  In the loan documents, the principal amount was stated to be HK$2 million, the interest rate was 27.6%, the monthly interest instalment was HK$46,000 and, after 6 months, the Defendant had to repay the principal and the last interest instalment.  This was the first time he found out the amount he was supposed to borrow from the Plaintiff and at what rate of interest.

72.The Defendant said he called Mr Siu while the male staff was out of the conference room and told him he was unable to borrow HK$2 million.  Mr Siu then told him since it was difficult for him to borrow money within 1 to 2 years after the low-interest loan was granted, he could use the spare cash after paying off HSBC, BOC, OK and UA as a reserve fund.  The Defendant said he also told Mr Siu his monthly salary was only about HK$38,000 and could not afford to pay HK$46,000 per month.  As to which Mr Siu said the low-interest loan could be released to him within 1 month so he only needed to pay 1 monthly interest instalment. How a HK$500,000 low-interest loan could enable the Defendant to repay a HK$2 million loan with interest was not explained, unless “the bank” was willing to substantially increase the loan amount but that was not mentioned by Mr Siu in that telephone conversation. But, as usual, the Defendant agreed with Mr Siu. 

73.Afterwards, the male staff returned to the conference room.  The staff told the Defendant his loan application was referred to the Plaintiff by an intermediary company.  While the Defendant did not mention the name of the intermediary in his statement, there is in evidence a document entitled “Confirmation: Payment of Referral Fees” dated 4 December 2020 and signed by the Defendant. The document identified ITC as the referral agent and confirmed his agreement to the Plaintiff’s payment of HK$20,000 to ITC as referral fees. 

74.After giving the Defendant a brief explanation of the loan and repayment method, the male staff asked the Defendant to sign on some documents.  After receiving copies of the documents he signed, the Defendant left and met up with Mr Sau downstairs and they went to ATT’s office in Central to sign more loan documents, including the Deed.  After signing the loan documents in front of a staff of ATT[11] in the conference room, he was asked to take a stroll. Afterwards, the Defendant went back to ATT and received a BOC cheque of HK$799,790[12] issued by ATT.  The remainder was withheld by ATT to discharge the OK and UA loans. 

75.The Defendant then called Mr Siu who asked him to cash the cheque which he did together with Mr Sau.  They then went to China Asia’s office at Langham Place, Mongkok. 

76.In China Asia’s conference room, as Mr Siu requested, the Defendant gave him the entire cash of HK$799,790 as trust fund. Mr Siu stressed that the low-interest loan would be granted within 1 to 2 weeks and the amount of the low-interest loan would be sufficient to pay off the Loan.  The Defendant obliged but Mr Siu immediately returned HK$80,000 to him as a reserve fund and for paying off parts of the HSBC and BOC credit card debts. Finally, Mr Siu gave the Defendant another “樓宇按揭托管收據” in Chinese ie “Building Mortgage Trust Receipt” (“4th Trust Receipt”) dated 4 December 2015.  It was a simplified version of the first 3 Trust Receipts and referred to the HK$719,790 as trust fund. 

77.Thereafter, the Defendant had lost touch with Mr Siu or anyone from China Asia but he kept paying the 1st and 2nd interest instalments to the Plaintiff. Finally, the Defendant made a report to the police on 25 January 2016

78.In this court’s view, this part of the Defendant’s story is just as incredible, if not more so, as Part 1.

79.First, the Defendant had known for some time that he was not dealing with BOC but China Asia instead.  Whatever confidence he might have by the name “中銀”, that confidence would have substantially if not completely subsided and the Defendant should have realised that he was dealing with an unknown entity who only purported to be a finance consultant company and whose ability to assist him to get the low-interest loan was totally unproven. That should have made the Defendant more wary of following Mr Siu’s suggestion of borrowing yet again.  But the Defendant remained unperturbed.

80.Second, by December 2015, when his low-interest loan application was still not approved, one would have expected the Defendant to be fed up with China Asia and just asked for the “trust fund” ie HK$250,000, HK$54,000 and HK$140,000 back.  These are not small sums of money compared with his salary of HK$38,000 or with the HK$500,000 he had all along intended to borrow. 

81.That, however, was not what the Defendant did.  What he did was to borrow a much larger sum from yet another finance company ie the Plaintiff without knowing how much “the bank” was prepared to lend to him at low interest, if at all.  As this court observed earlier, there was no explanation from Mr Siu why it would help the Defendant getting the “low-interest” loan by first obtaining a “high-interest” loan and the Defendant did not ask. Further, the Defendant still did not know the identity of “the bank” or its relationship with China Asia.

82.Third, normally, one would need to find out how much to borrow, the rate of interest and the repayment terms before one could decide whether or not to borrow.  The Defendant, on the other hand, did not appear to be too bothered about these important details - he just went along with Mr Sau to the Plaintiff’s office and only found out there and then the amount of the Loan, the interest rate and the repayment terms.

83.Fourth, by the time the Defendant obtained the Loan from the Plaintiff and after a large part of it was used to pay off OK and UA, he was still indebted to HSBC and BOC in the sum of HK$350,000 plus interest. By handing over HK$719,790 to China Asia, he was only left with HK$80,000[13].  In these circumstances, it is most intriguing that the Defendant would have so easily agreed to hand over HK$719,790 to China Asia instead of using the money to completely clear off his credit card debts which carried interest of over 30%. 

84.The Defendant’s only explanation was that he was promised by Mr Siu that the low-interest loan would be available within 1 or 2 weeks and the amount would be enough to pay off the Loan. But Mr Siu did not tell him the low-interest loan would be sufficient also to pay off his credit card debts. So after all the fuss, the Defendant’s financial position was no better than it was in early August. Having been let down by Mr Siu so many times before, why should the Defendant still accept his words at their face value? It is also hard to believe that he would so easily hand over such a large sum of borrowed money to total strangers merely in the hope that the low-interest loan would soon come by.

85.To conclude, this court is not satisfied that this part of the Defendant’s convoluted story is anywhere near being credible. His testimony in this regard must also be rejected.

No evidence of collusion between China Asia and the Plaintiff

86.Whether or not the Defendant had been cheated by China Asia as he claims, this court is wholly unpersuaded that he has discharged the burden of establishing collusion between China Asia and the Plaintiff.

87.To start with, this court finds the Plaintiff’s witnesses truthful and accepts the testimony of Ms So, Hugo Chan and Hung that in relation to the Loan, the Plaintiff had only used 1 referral agent ie Ms So of ITC and had paid it HK$20,000 as referral fees. Their testimony is amply corroborated by contemporaneous documents ie (i) the referral agreement dated 2 December 2015 signed between the Plaintiff and ITC and importantly (ii) the “Confirmation: Payment of Referral Fees” dated 4 December 2015 signed by the Defendant himself.  This court also accepts Ms So’s testimony that she had not had any contact with China Asia or any other third party except Yan and Hugo Chan’s testimony that he did not know Mr Siu at all.

88.Second, there is no evidence that the Plaintiff or its staff had received any part of the HK$719,790 taken by China Asia in connection with the procuring, negotiating or obtaining of the Loan. This is in fact accepted by Mr Ho in his closing submissions at paragraph 10 where he acknowledges “there is no evidence whether Ms Yan, or Ms So, or P all had a share in the money cheated from D … which was $719,790.”  This clearly militates against the suggestion that the Plaintiff and China Asia had acted in concert to extract money from the Defendant.  While this court acknowledges that direct evidence of collusion is hard to come by, the Defendant has to establish some facts from which an inference of collusion can be drawn. None has been so established.

89.If there is no evidence that the Plaintiff had received a share of the HK$719,000 from China Asia, the Particulars of Excessive Interest pleaded at paragraph 37 of the Defence would be completely wrong ie the amount actually lent would be HK$1,999,790 instead of HK$1,280,000 and the effective interest rate would be about 27.6%, as stated in the Deed.

90.Third, apart from a few WhatsApp messages between China Asia’s Mr Yu, Mr Siu and/or Mr Sau and the Defendant, there were no contemporaneous documents from the Defendant which can be used in support of the allegation of collusion or from which collusion can be inferred. Certainly, there were no contemporaneous documents connecting China Asia with the Plaintiff. 

91.In his closing submissions at paragraph 9, Mr Ho relies on an email from Yan to Ms So on 2 December 2015 at 8:47am which forwarded an email attaching the Defendant’s TU credit report from “cafc” to Yan at 12:53am on the same day from an address [email protected].  Mr Ho submits that “cafc” appears to be the abbreviation for China Asia and this email proves that “cafc” was also another referral agent.

92.But [email protected] has not been verified as the email address of China Asia, either by the Defendant’s testimony or by other documentary evidence. Ms So was questioned about this email address in cross-examination but said she was not sure whether “cafc” stands for China Asia.  In this court’s view, it is pure speculation as to who “cafc” stands for.  Further, just by sending the Defendant’s TU report to Yan is hardly proof that this “cafc” was another referral agent or had acted in collusion with the Plaintiff.

93.In his closing submissions at paragraph 11, Mr Ho relies on a wrong phone number said to have appeared on the Plaintiff’s original Loan Application Form as the Defendant’s contact number and which had since been corrected. According to the Defendant, the wrong number was 98864595 and belonged to Mr Siu. The same number appeared in the Plaintiff’s instructions letter to ATT dated 3 December 2015 as the Defendant’s contact number.  Mr Ho therefore submits that Hugo Chan must have seen Mr Siu’s number in other documents kept by the Plaintiff either in the file of the present transaction or other files of the Plaintiff.  But what inference can one draw from this?

94.There is no evidence that Mr Siu or anyone from China Asia had given this number 98864595 to the Plaintiff in connection with the Defendant’s loan application. Ms So, who testified that Yeung of the Plaintiff called her to notify the Defendant to go to the Plaintiff’s office to sign the loan documents, was not asked what number she used to contact the Defendant.  Mr Ho did not explore this in cross-examination and it is wholly unclear how this number ended up in the Plaintiff’s instructions letter to ATT or, as the Defendant alleges, in the Plaintiff’s original Loan Application Form.  There could be any number of reasons as to why that happened.  In this court’s view, the evidence that somehow the number 98864595 ended up in some unidentified file of the Plaintiff and picked up by Hugo Chan is hardly strong enough for this court to draw an inference that China Asia colluded with the Plaintiff in this transaction.

95.Fourth, in his first police statement dated 25 January 2016, the Defendant did not mention he suspected some sort of collusion between the Plaintiff and China Asia.  All he complained of was his worry that he might not get back his trust fund totalling HK$1,163,790 while he was indebted to the Plaintiff for HK$2 million.  Similarly, in his second police statement dated 17 April 2016, the Defendant said he made the report in the hope that the police would investigate China Asia and his inability to recover the trust fund from China Asia.  There was no mention of suspected collusion between the Plaintiff and China Asia either. The allegation of collusion is clearly an afterthought.

96.To conclude, this court is not satisfied that the defence of collusion and the alleged contraventions of MLO is made out. 

Disposition and costs order nisi

97.In the premises, this court finds in favour of the Plaintiff.  There shall be judgment against the Defendant in the sum of HK$1,999,790 together with pre-judgment and post-judgment[14] interest at the rate of 27.6% p.a. from 23 March 2016 until payment.

98.There shall also be an Order nisi that costs of the Action be to the Plaintiff to be taxed on indemnity basis[15] if not agreed and paid by the Defendant forthwith, with certificate for counsel.

99.The Defendant’s own costs be taxed in accordance with Legal Aid Regulations.

Mr Jeremy Cheung, instructed by Pauline Wong & Co, for the Plaintiff

Mr B K Ho, instructed by Lau & Chan, assigned by the Director of Legal Aid, for the Defendant