Actually Financial Ltd v. Wong Pui Miu

DCCJ 3317/2020

[2022] HKDC 262

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3317 OF 2020

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DECISION

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THE APPLICATION

1.This is a money lender’s action in which the plaintiff, a registered and licensed money lender under the Money Lenders Ordinance (Cap.163), claimed against the defendant under a loan agreement and a personal loan agreement both made on 5 September 2014 (“the Loan Agreements”), pursuant to which the plaintiff advanced $1,200,000 to the defendant at the interest rate of 33.6% per annum. As the defendant had defaulted in his monthly repayment, the plaintiff claimed for repayment of the loan and interest.

2.By a Judgment handed down on 20 January 2022 (“the Judgment”), the plaintiff’s claim was dismissed. This court also made a costs order nisi that the plaintiff shall bear the defendant’s costs (including all costs reserved), with certificate for counsel, to be taxed if not agreed, and legal aid taxation for the defendant’s own costs.

3.By letter dated 24 January 2022, the defendant applied to vary the said costs order nisi and asked for an order for indemnity costs, on the ground that the court should show its disapproval of the plaintiff’s conduct in the running of its money lender business.

4.As counsel for both parties had indicated at the end of the trial that they would agree to have any application of this nature to be dealt with on paper, paper directions for the parties to lodge their respective written submissions had been issued upon the court’s receipt of the defendant’s application.

5.This is the decision on the defendant’s application.

6.I will adopt herein the same nomenclatures and definitions used in the Judgment.

THE LEGAL PRINCIPLES

7.The general rules as to when the court may order costs on an indemnity basis are well established.

8.In Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) and Others [1991] 1 HKLR 177, Godfrey J (as his Lordship then was) explained that:

“ […] In order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred) or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis. A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis. A taxation of the successful party’s costs on an indemnity basis could properly be ordered, in my opinion, where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for taxation of the successful party’s costs on an indemnity basis.” (at 182G – 183C)

9.In Choy Yee Chun (The representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd[1997] HKLRD 1327, Stock J (as his Lordship then was), having referred to the Judgment quoted above, stated:

“It has since been held that, though there must still be shown special and unusual features, even the circumstances particularised by Godfrey J. are not to be taken as exhaustive of the conditions in which it might be appropriate to make such an award, and that the power to award taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. (See Macmillan Inc. v. Bishopsgate Investment Trust Ltd., 10 December 1993 (unreported) cited in Sung Foo Kee Ltd. v. Pak Lik Co. [1996]3 HKC 570).

In Sung Foo Kee Ltd a litigant had been repeatedly in contempt of court orders and the trial judge had found that the defendant had deployed defences which he termed “hocus pocus” and had used the legal process to prevent the plaintiff obtaining its just payment. The Court of Appeal said that it would have awarded costs on an indemnity basis. It remarked (at page 575) that the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described by Godfrey J. in Overseas Trust Bank (supra). At p.575B - E of Sung Foo Kee Ltd. (supra), Godfrey J.A. said -

‘Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party’s costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, eg the observations of Godfrey J in Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party’s costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature) which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey J at 182J-183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.’

The Court of Appeal endorsed the view of the English courts that :

‘The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win. Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.’ (see Macmillan Inc. v. Bishopsgate Investment Trust Ltd. supra)

Further at p.576 -

‘… it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered.’ (see Munkenbeck & Marshall v. McAlpine (1995) 44 Con LR 30 per Hollis J, at page 33)

The Court of Appeal in Sung Foo Kee Ltd at page 576F added :

‘… Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party’s costs to be taxed on that basis.’ ”

(at 1334G – 1335G)

10.In Cheung Wei Man Vivien and Chan Kim Thiam v Centaline Property Agency Ltd & Others (HCA 286/2000, unreported, 15 December 2006), Lam J (as Lam PJ then was) also had the following to say:

“It is also useful to remind ourselves what Simon Brown LJ said in Liam v MGN Ltd (No.2) [2002] 1 WLR 2810 at Paras.11 and 12 in considering whether the conduct of a losing party is so unreasonable so as to warrant an award of indemnity costs. In particular, at Para.12, His Lordship observed,

‘I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.’ ”

DISCUSSION

11.As aforesaid, the defendant relied on the plaintiff’s way in the running of its money lender business to support this application.

12.In this regard, it has either been found by virtue of the Judgment or is undisputed, that before the defendant entered into the Loan Agreements, he was in financial difficulty:

(1)  He was owing Natural Resources and HSBC three facilities altogether. The total outstanding amount owed to Natural Resources was around $246,000[1], whereas the outstanding debit balance of the defendant’s HSBC Revolving Credit Facility account was $139,632.30[2];

(2)  He was obliged to make a minimum monthly repayment in the total sum of $11,738.90[3] to Natural Resources and HSBC. However, his monthly income was only about $11,000 to $15,000.

13.After entering into the Loan Agreements, the defendant:

(1)  Owed the plaintiff the principal of $1,200,000;

(2)  Still owed HSBC $139,632.30 under the Revolving Credit Facility, with a minimum monthly repayment of $2,970[4].

14.It can be seen that, upon entering into the Loan Agreements, the total amount of indebtedness owed by the defendant increased from $385,632.30 to $1,339,632.30. In other words, there was an increment of liability of principal in the amount of $954,000.

15.Out of this sum of $954,000, $600,000 had been charged as consultancy fee by INC; $201,600 went back to the plaintiff as repayment of interest[5]; $47,480 had been charged by INC under the disguise of “various application fees and legal costs on application to Housing Authority”[6]. Although on the face of it, the defendant had received cash in the total sum of $101,200[7], it must not be forgotten that the defendant was obliged to pay the plaintiff interest for 6 more instalments of $33,600 each in the total sum of $201,600 in the period between the 7^th month and the 12^th month after the date of the Loan Agreements.

16.Why did the defendant agree to enter into the Loan Agreements which had increased his overall indebtedness to such a large extent unnecessarily? To answer this question, one must bear in mind how the whole thing started. Reference may be made to the following part of the Judgment:

“9. On 3 September 2014, a Chinese male, representing himself as Mr Wong of HSBC (“Mr Wong”), called the defendant’s mobile phone and told the defendant that he (the defendant) was required to undertake a credit assessment/stress test. In the telephone conversation, Mr Wong asked the defendant whether he had borrowed from National Resources and whether it was a mortgage loan. The defendant, believing that Mr Wong was really from HSBC, disclosed the details of his debts honestly.

10. Mr Wong informed the defendant that HSBC was entitled to demand immediate repayment of all outstanding debts under the Revolving Credit Facility should the defendant fail in the test and asked the defendant to wait for his call.

11. Later on the same day, Mr Wong called again, and informed the defendant that he had failed the test. As a result, the defendant was very concerned. Upon the defendant’s enquiry, Mr Wong advised him that he should take out a mortgage loan charged on his property. Mr Wong told the defendant that someone from an accounting firm, which had working relationship with HSBC, would call him on the following day.

12. Shortly after 11am on the next day (4 September 2014), a Mr Kong (“Mr Kong”) of INC International Accounting Affairs Limited (“INC”) called the defendant and said that he was referred by HSBC to help the defendant clear his debts. After enquiring the defendant’s credit condition, Mr. Kong advised the defendant to borrow $1,200,000 by mortgaging his property. […]”

17.I have no doubt that that “Mr Wong” actually did not work for HSBC. However, he pretended to be so, and by threatening the defendant that he was required to make immediate repayment of all outstanding debts under the Revolving Credit Facility, he successfully tricked the defendant into believing that there was an urgency to enter into the Loan Agreements. Although Mr Tang, the sole director and shareholder of the plaintiff, denied to have any knowledge of the communication between the defendant and “Mr Wong” (just as he denied to have any business, connections and knowledge of Mr Kong and/or INC prior to these proceedings), such evidence is rejected. I have no doubt that the plaintiff was part of the whole scheme (in other words, playing the same game) together with INC and “Mr Wong” in getting the defendant to enter into the Loan Agreements. The plaintiff, INC and “Mr Wong” had apparently abused the defendant’s dire financial situation at the material time which had caused him to succumb to the “threat” of “Mr Wong”.

18.I am of the firm view that the plaintiff’s unscrupulous lending practices had contravened not only the law but also principles of fair dealing. The court should not condone such kind of misconduct which deserves moral condemnation. To show the court’s disapproval of such misconduct, in my view it is appropriate for the court to exercise its discretion and make an indemnity costs order against the plaintiff.

19.I echo what Bokhary NPJ said in HKSAR v Wong Kwok Wai (2013) 16 HKCFAR 191:

“10. […] It is to be added that the more rapidly and firmly this kind of heartless exploitation is put down as far as it is within the law’s power to do so, the better protected will be vulnerable people like the borrower in the present case.”

20.Although Bokhary NPJ ‘s view was expressed in a criminal case, it must be equally applicable to a civil case like the present one.

ORDER

21.For the above reasons, I order that the costs order nisi in the Judgment be varied to the extent that the defendant’s costs shall be taxed on indemnity basis rather than party-and-party basis.

COSTS

22.I make a costs order nisi that the plaintiff shall bear the defendant’s costs of this application (including the costs reserved), with certificate for counsel, to be taxed on indemnity basis if not agreed.

23.The defendant’s own costs shall be taxed in accordance with Legal Aid Regulations.

24.The above order nisi shall become absolute in the absence of application to vary (which shall be made by letter, if any) within 14 days hereof. Any application to vary the costs order nisi shall be dealt with on papers.

POSTSCRIPTS

25.As mentioned at the beginning of his Decision, paper directions had been given to the parties for disposal of the defendant’s application for variation of the costs order nisi.

26.The plaintiff was supposed to lodge and serve its written submissions in opposition by 25 February 2022. However, the plaintiff had failed to do so, despite the fact that it has a legal representative on record in L & W Lawyers. There was not even a single letter coming from the said solicitors’ firm to explain the stance of the plaintiff.

27.I am of the view that this is very unsatisfactory. So long as a solicitors’ firm remains the solicitors “on record”, the firm, the supervising partner, and the handling solicitor(s) involved still owe their duty to the court as far as this case is concerned. It is not up to them to simply “disappear”. Even if their client has not given them further instructions to act in the present case, the solicitors’ firm is still obliged to keep the court informed about this fact. Take the present application as an example, the plaintiff’s solicitors should have informed the court no later than 25 February 2022 (the deadline for the plaintiff to lodge and serve submissions) that they have received no further instructions and therefore the court’s directions on paper disposal could not be complied with. They should not have kept the court and the other side in the dark as to what is going on.

L & W Lawyers for the plaintiff, not lodged submissions

Mr B K Ho, instructed by Lau & Chan, for the defendant