Premier Capital Management Ltd v. So Wang Fung By So Wang Ming His Guardian Ad Litem and Another

HCA 2337/2015

[2024] HKCFI 990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2337 OF 2015

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D E C I S I O N

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1.In my judgment of 21^st March 2024 (“the Judgment”), I asked the parties to lodge an agreed draft order for approval. The parties are in disagreement on two points, as set out in Messrs Lau & Chan’s letter of 3^rd April 2024, which I now determine. Abbreviations below are those used in the Judgment.

Interest

2.The Defendants ask for the draft order to be amended so that the interest runs only from the date of the Judgment, and not for any of the contractual period as stated in paragraph 105 of the Judgment.

3.The basis for this is an argument that, based on the findings of collusion in the Judgment, the court should reopen the transaction under s.25 MLO and exercise its discretion to order interest to run from the date of the Judgment.

4.However, given the Defendants’ position at trial that the re-opening of the transaction was limited to the situation where the effective rate of interest exceeded 48% per annum (Re-Re-Re-Re-Re-Amended Defence paragraph 10; Defendants’ Closing paragraph 74(2); counsel’s response to the court’s query at trial as noted in Judgment paragraphs 49 to 51), the issue of re-opening the transaction under s.25 MLO was not further addressed in the Judgment beyond this position.

5.Had the argument arisen at trial, I would have held that the transaction was extortionate for grossly contravening ordinary principles of fair-dealing (s.25(2)(b) MLO) given that:

5.1  Both of the Defendants were mentally handicapped and Mr So had no mental capacity to enter into the transaction (Judgment paragraphs 4 to 6);

5.2  Even though I have not made any findings as to Premier Capital’s awareness of the Defendants’ lack of capacity (the Defendants’ defences based on mental incapacity having been abandoned), it would have been apparent to Mr Siu of Premier Capital, given the Defendants’ occupations and level of income, that they were not well-educated or sophisticated persons;

5.3  Mr Siu was aware, on the basis of the information available to him that the Defendants had no need for a loan as large as $900,000 (Judgment paragraph 66);

5.4  Mr Siu was also well aware that the Defendants’ monthly income was insufficient to cover the monthly interest instalments (Judgment paragraph 61.8, 66), let alone the principal, which would have meant that the Defendants would end up in default, thus putting the Property at risk of being used for repayment; and Mr Siu’s claim that the Defendants would have obtained a mortgage for the purposes of making repayment was not credible (Judgment paragraph 61, 66);

5.5  Mr Siu’s claim not to have known that Jone’s charged Mr So a fee was incredible (Judgment paragraph 60);

5.6  Premier Capital was acting in collusion with Jone’s and its employee Mr Franky Lee within the meaning of s.27 MLO, cooperating with each other to facilitate the conclusion of the Loan transaction, against the interest of the Defendants who, to the knowledge of Premier Capital, did not need a loan of $900,000, did not have the ability to make the necessary repayments, and did not have any intention of obtaining a mortgage to fund repayments (Judgment paragraph 66).

6.Accordingly, I would have held that the Defendants should only be asked to repay the amount which was actually lent to them ($371,583), and interest at judgment rate from the date of the Judgment: cf. Gain Wealth Global Credit & Investment Ltd v Chan Suk Fong [2020] 4 HKLRD 831 at [76] to [79]. In this regard, it is notable that there has been no dispute since at least the time of the joint expert report of 13^th November 2017 that Mr So did not have the required mental capacity to enter into the Loan Agreement, yet interest has continued to accumulate.

7.However, the court is now functus officio on the issue of interest. It is for the Defendants to take the matter on appeal if they should think fit. I have set out my views above in relation to the Defendants’ additional argument on s.25 MLO in the event that the matter should go further, given that the Defendants have now raised the point.

Costs

8.Whilst the costs order in the Judgment was made on a nisi basis, so that it can be revisited, it does not seem to me that s.25 MLO, which is directed at reopening the money lending transaction, extends to affecting the way in which the court’s discretion should be exercised in relation to the costs of the proceedings. Insofar as the Defendants are asking for a variation of the costs order nisi on the basis of s.25 MLO, I decline to do so.

9.I record that it is right for the Defendants to say that they have not agreed that costs should be assessed on the District Court scale; the reference in Judgment paragraph 107 to there being no dispute that costs should be assessed on the District Court Scale was a reference to counsel for Premier Capital not disputing that the costs should be assessed on the District Court scale,[1] since the costs order in the Judgment was made in favour of Premier Capital.

10.As to Premier Capital’s current submission that costs should be assessed on the District Court scale only after the increase in the District Court’s jurisdiction which came into effect on 3^rd December 2018, the entirety of the costs order nisi (not just the scale of costs) was made on the basis of Premier Capital’s submission at trial that costs should be assessed on the District Court scale regardless of which party should prevail and without reference to the December 2018 date (see counsel’s Speaking Note paragraph 54). It would not be right to adjust the period during which this scale applies without at the same time reconsidering the other aspects of the order. I therefore also decline to vary the costs order nisi as submitted by Premier Capital.

Terms of the order

11.The order should be drawn up as proposed by Premier Capital.

12.Premier Capital asked for costs for its preparation of its submissions regarding the draft order. As will be apparent from the above, I have not accepted either party’s submissions in their entirety. I therefore make no order as to costs of the parties’ preparation of submissions regarding the draft order.

Messrs FONGS for the Plaintiff

Messrs Lau & Chan, assigned by Director of Legal Aid, for the 1^st and 2^nd Defendants