Easy Policy Finance Ltd v. 陈海滨

HCA 1256/2021

[2025] HKCFI 4295

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1256 OF 2021

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J U D G M E N T

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Introduction

1.The is an action brought by the Plaintiff (“Easy Policy”) against the Defendant, Mr 陈海滨 (“Chen”) for:

(1)  The recovery of a sum of $11 million as the loan advanced to Chen (“Loan”) under a Mortgage Loan Letter of Offer dated 11 May 2011 together with interest;

(2)  The recovery of the government rent and rates paid on behalf of Chen by Easy Policy, together with interest;

(3)  An order for Possession of the Chen’s property namely, Flat D, 20^th Floor, Block 1, Royal Peninsula, No.8 Hung Lai Road, Kowloon, Hong Kong (“Property”).

2.Chen was legally represented when the Amended Defence and Counterclaim was filed on 12 April 2022. It was only on 21 January 2025 that an order was made by the Court for Chen’s solicitors to cease acting for him in the action. Since the Pre-Trial Review hearing on 6 March 2025, Chen has failed to appear in Court, and he was absent from the trial.

3.On the first day of trial, having been satisfied that Chen had been properly given notice of the trial dates, and that he had been served with the trial bundles, I proceeded with the trial pursuant to Order 35 rule 1(2) RHC. It is for Easy Policy to prove its case and its entitlement to the reliefs sought.

Background

The parties

4.Easy Policy is a licensed money lender under the Money Lenders Ordinance (Cap 163) (“MLO”). The Chief Executive Officer of Easy Policy is Mr Siu Yuk Shing (“Siu”).

5.Chen has been the registered owner of the Property since 29 April 2011. Madam Chen Aifang (“Madam Chen”) is the younger sister of Chen.

Easy Policy’s case

6.It is Easy Policy’s case that Chen is a borrower / mortgagor to Easy Policy:

(1)  by way of a Mortgage Loan Letter of Offer dated 11 May 2011 (“Loan Agreement”), under which Chen obtained the Loan in the sum of $11,000,000 from Easy Policy;

(2)  by way of a Legal Charge dated 11 May 2011 and registered in the Land Registry by memorial no.11053102650198 (“Legal Charge”), under which the Property was charged by Chen to Easy Policy as security for the due payment of the Loan.

7.According to the evidence of Siu, he came to know a Mr Hau Kwai Leung (“Hau”) in around 2010. At all material times, Hau was a friend of Chen, Madam Chen, Siu and Mr Cheung Kok Cheong (“Cheung”) who is a solicitor and a partner at Messrs SH Chan & Co (“SH Chan & Co”).

8.Siu and Cheung both made statements for the Plaintiff, and gave evidence at trial. Hau passed away in November 2016, and was not able to give any evidence.

9.In his evidence, Cheung claims that Hau was an old friend of his, and that he had represented Hau in the past when Hau purchased real property in Hong Kong. According to Cheung, it was in around early 2011 that Hau recommended SH Chan & Co to Madam Chen as the handling solicitor for the purchase of a residential property in Hong Kong (ie the Property). As Madam Chen was unable to come to Hong Kong to sign the documents, Chen replaced her as the purchaser of the Property. Hau acted as Chen’s agent or middle-man to handle the purchase.

10.Cheung claims that he spoke to Chen on the telephone in January 2011 when he confirmed the terms of the purchase. In early April 2011, Chen and Hau attended Cheung’s office and signed the conveyancing documents for the purchase of the Property. Completion of the purchase took place on 29 April 2011. Chen became the registered owner of the Property, and the title deeds and documents of the Property were delivered to and kept by SH Chan & Co.

11.It is the evidence of both Siu and Cheung, that Hau called them in May 2011 to inform them that Chen intended to borrow money in Hong Kong by using the Property as security.

12.According to Siu, he met with Hau at Easy Policy’s office on or around 7 May 2011 (“7 May 2011 Meeting”). During this meeting, Hau told Siu that his friend, Chen, was the owner of the Property and urgently required a loan but his loan application had been rejected by Hang Seng Bank. Hau asked Siu if Easy Policy could offer a loan to Chen and said that Madam Chen could act as a guarantor for the loan. It is Easy Policy’s case that Hau discussed the terms of the proposed loan on Chen’s behalf with Siu, and that Hau recommended Cheung to Siu for the preparation of the loan documents. It was Siu’s evidence that he was told that Chen needed the loan urgently, but 7 May 2011 was a Saturday and hence there was no staff member in Easy Policy who was available to provide a standard form loan agreement. Instead, Siu agreed to let Cheung (who was the solicitor previously dealing with and acting for Chen in the purchase of the Property) to draft the loan agreement on an urgent basis.

13.It is the evidence of both Siu and Cheung that on 9 May 2011, Siu and Hau attended Cheung’s office at SH Chan & Co (“9 May 2011 Meeting”) to discuss the loan arrangement. Siu understood that Cheung had acted for Chen in the purchase of the Property. Hau asked Cheung to finish drafting the loan documents as soon as possible and to bring the documents to Shenzhen for Chen and Madam Chen to sign in the evening of the same day, because Chen urgently needed the loan but Madam Chen’s travel document to Hong Kong had expired, and hence she could not come to Hong Kong. Cheung’s evidence was that Siu insisted that Cheung should draft the loan agreement as per the terms which were discussed earlier between Siu and Hau/Chen on the telephone.

14.In the evening of 9 May 2011, Siu, Hau, Cheung, Chen, and Madam Chen met at the lobby of the Shangri-la Hotel in Shenzhen (“9 May 2011 Shenzhen Meeting”). During the meeting,

(1)  Chen and Madam Chen showed their Mainland identity cards to Cheung to confirm their identity.

(2)  Cheung took out and explained to Chen and Madam Chen the draft Loan Agreement, Legal Charge, and other confirmation letters and warning notices.

(3)  Chen and Madam Chen expressed and confirmed that they understood the contents and agreed to accept them, and then proceeded to sign the documents one by one.

(4)  Siu, on behalf of Easy Policy, signed the Loan Agreement.

(5)  Chen said that as he did not have any bank account in Hong Kong, he would authorise SH Chan & Co, after receiving the loan and deducting the first monthly repayment and administrative fee, to release the balance to Hau, for Hau then to transfer the sum to Madam Chen’s bank account in the Mainland. Chen signed a handwritten note to that effect.

(6)  Siu, Chen, and Madam Chen exchanged their mobile phone numbers.

15.Siu explained that as he was not required to sign the Legal Charge, he did not pay special attention to its contents. It was only after the commencement of this action that Siu found a typographical error in Clause 1 of the Legal Charge, which provides for default interest of 48% per annum, instead of 24% per annum as intended and agreed by the parties. Cheung’s evidence was that this was an inadvertent mistake. Easy Policy seeks rectification of Clause 1 to this effect.

16.The Loan Agreement and the Legal Charge contain inter alia the following terms:

(1)	The Loan	$11,000,000
(2)	Tenure	1 year
(3)	Interest rate per month	2% of the Loan (i.e. 24% per annum)
(4)	1st to 11th monthly instalments (interest only and be paid on the 11th day of each month)	$220,000
(5)	12th instalment (interest and the Loan repayment to be paid on 11 May 2012)	$11,220,000

17.Clause 1 of the Legal Charge provides, inter alia, that “…if the Loan, interest thereon or any other monies owing or any part hereof shall not be paid when due the Borrower will pay to the Lender interest on so much of the Loan, interest thereon or any monies in arrears at the rate of 48% per annum calculated from the date such sums should have been paid to the date of actual payment by the Borrower”. This is subject to rectification as sought by Easy Policy.

18.On 11 May 2011:

(1)  Easy Policy issued a cheque in the sum of $11 million to SH Chan & Co pursuant to the Loan Agreement.

(2)  SH Chan & Co issued a cheque in the sum of $220,000 to Easy Policy as Chen’s payment of the first instalment.

(3)  SH Chan & Co issued a cheque in the sum of $10,780,000 to Hau as the release of the balance.

(4)  The date of 11 May 2011 on the Loan Agreement and the Legal Charge referred to the date of release of payment, although they were executed on 9 May 2011.

19.Notwithstanding the term in the Loan Agreement providing for a 2% administrative fee, Easy Policy did not in fact collect any administrative fee.

20.Hau issued a cheque in the sum of $15,000 to SH Chan & Co for their legal fees of handling the loan for Chen.

21.On around 19 July 2011, SH Chan & Co passed to Easy Policy the title deeds and documents in relation to the Property, including the Legal Charge, and Easy Policy signed the acknowledgement of receipt. Siu considered that it would be more convenient for SH Chan & Co to keep these documents (instead of Easy Policy) because the title deeds would be returned to Chen upon full repayment. Siu therefore requested SH Chan & Co to keep the title deeds for Easy Policy.

22.Madam Chen on behalf of Chen made repayments of interest for the first ten instalments in the total sum of $2,220,000.

23.Chen then defaulted further repayment and failed to repay the outstanding principal and interest despite multiple demands made to him, Madam Chen and their common friend, a Mr Xie Zhonghua.

24.Pursuant to Part C of the Second Schedule of the Conveyancing and Property Ordinance (Cap 219) (“CPO”) which was incorporated into the Legal Charge by reason of Clause 6(a), Easy Policy as the Mortgagee had paid Government Rent and Rates on behalf of Chen, as and when demanded by the Government.

25.Easy Policy thus claims against Chen for the outstanding principal and interest and the Government Rent and Rates paid by Easy Policy together with interest, based on the Loan Agreement and the Legal Charge.

Chen’s case

26.Chen’s primary position, according to his pleading and witness statement, is that he was never the borrower or mortgagor to any loan agreement or charge. He pleaded that he never signed the Loan Agreement or Legal Charge, and claimed that the signatures on the Loan Agreement or Legal Charge were not his.

27.Chen claims in his Defence that no equitable charge was created by way of any deposit of the title deeds of the Property with Easy Policy, as alleged. The Defence pleads that Chen’s friend “Mr Ke” is and was in possession of those title deeds.

28.Chen further pleads that, even if Chen did enter into the Loan Agreement and did create the Legal Charge, these instruments should not be enforceable against him because Easy Policy breached Sections 18(2)(a),(b),(c),(f),(g) and (j), 7(1)(b) and 29(1)(b), 27(1), and 22(1)(c) of the MLO.

29.Third, it is Chen’s defence that even if the Loan Agreement and Legal Charge were enforceable against Chen, he is not liable for:-

(1)  the outstanding interest because of the time bar of six years pursuant to Section 19(5) of the Limitation Ordinance (Cap 347) (“LO”); and

(2)  the Government Rent and Rates paid by Easy Policy with respect to the Property, which payment is not admitted by Chen.

30.Chen counterclaims, inter alia, for declarations that the Loan Agreement and the Legal Charge are void and unenforceable.

The disputed issues

31.Counsel for Easy Policy helpfully summarized the issues in dispute as follows:

(1)  Whether Chen signed and entered into the Loan Agreement and the Legal Charge (“Signature Issue”);

(2)  Whether Chen is liable to repay the outstanding principal and interest under the Loan Agreement and the Legal Charge: (“MLO Issues”) which include:

i.  Whether Easy Policy failed to comply with Sections 18(2)(a),(b),(c),(f),(g) and (j) of the MLO, and notwithstanding such non-compliance, whether in all the circumstances it would be inequitable that the Loan Agreement and/or the Legal Charge should be held unenforceable; or to what extent the Loan Agreement and/or the Legal Charge should be enforceable under Section 18(3) of the MLO;

ii.  Whether Easy Policy executed the Loan Agreement at a place other than the premises specified in its licence contrary to Sections 7(1)(b) and 29(1)(b) of the MLO;

iii.  Whether Easy Policy charged 2% administrative fee contrary to Section 27(1) of the MLO; and

iv.  Whether the default interest rate of 48% per annum (or 24% per annum if rectified) provided under Clause 1 of the Legal Charge contravened Section 22(1)(c) of the MLO;

(3)  Whether Easy Policy’s claim for the outstanding interest is time-barred under the MLO (“Interest Time Bar Issue”); and

(4)  Whether Easy Policy can claim (and if so the amount of) Government Rent and Rates in respect of the Property paid by Easy Policy for Chen under Part C of the Second Schedule of CPO (“Government Rent and Rates Issue”).

(5)  Alternatively, whether Easy Policy can rely on unjust enrichment and/or restitution to recover the loan amount and the amount of Government Rent and Rates in respect of the Property paid by Easy Policy for Chen (“Unjust Enrichment / Restitution Issue”).

32.I shall deal with these issues in turn.

Signature Issue

33.Although Chen in his pleading did not expressly plead forgery, Chen’s flat denial of having signed the Loan Agreement and Legal Charge essentially amounts to an allegation that the Loan Agreement and Legal Charge (bearing what appears to be Chen’s signature) were forgeries. There is no merit in this contention.

34.In Choi Lisa Mei Yin v Yau Pak Kin [2019] HKCA 812 at para 34, Kwan VP held that the party who sues on a document and asserts its validity bears the legal burden of satisfying the court that such document is genuine. The burden on the defendant is evidential, namely, to adduce sufficiently cogent evidence to raise the issue of forgery in order to justify its consideration by the court.

35.In Choi Lisa Mei Yin at paragraph 36, Kwan VP referred to the relevant passages in the leading authority Nina Kung v Wong Sin Shin (2005) 8 HKCFAR 387:

“36. I endeavour to summarise those passages in the following propositions (unless stated otherwise, all the paragraph references are to Nina Kung):

(a) A standard of cogency is imposed on the party bearing the burden of adducing evidence considered sufficient to raise the issue of forgery. The principle of Re H & Others (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at 586, per Lord Nicholls of Birkenhead, applies by analogy, factoring in the inherently greater improbability of serious misconduct and requiring the person bearing the burden to prove it with evidence of a commensurate cogency (“the Re H standard”). So when weighing up and assessing the probabilities in relation to the evidence of forgery, the court must bear in mind the seriousness of the misconduct alleged, recognising that it carries an inherent degree of improbability. It must take account of propensity and evidence of propensity must go into the balance. In the absence of evidence of propensity, evidence to a very high standard of cogency is necessary before the court can be justified in finding forgery. (§§182, 184, 625, 626)

(b) The evidential burden is to adduce evidence which, properly assessed, is capable of justifying a reasonable inference that the relevant signature was forged. It is not enough merely to raise suspicious circumstances that did not themselves prove forgery. (§§233, 627, 628)

(c) Where the challenge to the genuineness of the signature is based solely upon inferences drawn from circumstantial evidence, any such inference must be properly grounded in the primary facts found. The court must guard against indulging in conjecture under the guise of drawing an inference where the primary evidence does not logically and reasonably justify the particular inference in question. There is need for a disciplined approach that inferences of serious misconduct are to be drawn only where they are compelling, sufficient to overcome the inherent improbability that serious misconduct would have occurred (HKSAR v Lee Ming Tee & Securities and Futures Commission (2003) 6 HKCFAR 336 at §72, per Mason NPJ) (“the Lee Ming Tee principle”). (§§185 to 187, 194(b), 234, 625)

(d) Where there is direct evidence of execution of a document, expert handwriting evidence is necessarily of a lower order of cogency than such direct evidence. (§393)

(e) When evaluating expert evidence on handwriting, it is important to recognise that such evidence has both a harder, more scientific, side and a softer, less precise facet involving professional judgment of a relatively subjective nature. While the factual part of the evidence of an expert is verifiable, the opinion part is inherently less precise than a conclusion based on the result of a scientific analysis. The acceptability of an expert’s opinion depends very much on how sound and convincing the reasons for his opinion are. (§§20, 394)”

36.The Loan Agreement and Legal Charge bear what appears to be Chen’s signature. Chen accepts this (in paragraph 5A of his Amended Defence and Counterclaim). On the available evidence, I accept that these documents are prima facie authentic.

37.Chen bears the evidential burden to adduce cogent evidence to prove forgery. Save for the bare assertions in Chen’s pleading and witness statement (even if the latter is to be considered when Chen failed to appear at trial to be cross-examined), there is no evidence supporting his allegation that the signatures on the Loan Agreement and Legal Charge were not his. This is sufficient for me to reject Chen’s assertion of forgery. I consider below further evidence substantiating the authenticity of the Loan Agreement and Legal Charge.

38.The signatures on the Loan Agreement and Legal Charge resemble Chen’s signature on the (i) Statement of Truth of his Amended Defence and Counterclaim, (ii) his witness statement, (iii) a document with the heading “S.H. Chan & Co.” bearing the specimen signatures of Chen and Madam Chen, (iv) the Formal Sale and Purchase Agreement, (v) the Assignment, and (vi) his “Declaration” (a document submitted by Chen purportedly to serve as a witness statement).

39.Further, it was Siu’s and Cheung’s evidence that they witnessed Chen and Madam Chen signing the Loan Agreement and Legal Charge at the 9 May 2011 Shenzhen Meeting. I accept Siu’s and Cheung’s evidence that the 9 May 2011 Shenzhen Meeting did take place as they claimed. Cheung’s evidence that he attended the 9 May 2011 Shenzhen Meeting is supported by his statement of Travel Record. Chen accepted that the 9 May 2011 Shenzhen Meeting took place, but claimed that there were other people also at the meeting. Chen’s allegations about the presence of the other people were denied by Siu and Cheung (and I accept their evidence), and were not supported by any other evidence or contemporaneous documents. In any event, even if there were other individuals present at Shangri-la Hotel as Chen claimed, I do not consider the identity of the individuals allegedly present to be material to the Signature Issue, so long as Chen does not dispute that Siu, Madam Chen and he were present.

40.Further, I find a number of Chen’s assertions incredible and contrary to the contemporaneous evidence and the evidence of the witnesses called by Easy Policy.

41.First, Chen claimed that he did not know and had never met Cheung. This is contrary to Cheung’s evidence that he was the solicitor in charge of the purchase of the Property in early 2011 (prior to Chen obtaining the Loan). It was stated on both the Formal Sale and Purchase Agreement of the Property dated 14 April 2011 and the Assignment dated 29 April 2011 that both instruments were “SIGNED SEALED and DELIVERED by the Purchaser [ie Chen] in the presence of” Cheung and “INTERPRETED to the Purchaser by” Cheung. It was not argued at trial that Chen would be precluded by contractual estoppel to contend that the state of affairs agreed and accepted at the time and recorded in the Formal Sale and Purchase Agreement and Assignment were not true, but on the available documentary evidence, I fail to see how Chen can now deny that Cheung was the solicitor in charge of the conveyancing transaction of the Property: see Chau Chun Kun and Chan Koon Wa v Yeung Ho Keung Rene [2021] HKCFI 3507 at paras 21-22. On the evidence, Chen’s assertions are entirely incredible.

42.Chen’s acquaintance with Cheung is in any event also confirmed by the retainer and SH Chan & Co’s “Customer’s Questionnaire” signed by Chen, where Cheung’s name appeared on the document, and was countersigned by Cheung.

43.Second, Chen claimed that he had never come to Hong Kong. The burden is on Chen to prove this assertion, but he never produced his movement or travel record as evidence in these proceedings. Although Chen’s witness statement has not been properly admitted into evidence as he did not appear at trial, he admitted there that he had held a Two-way Permit to Hong Kong. The documentary evidence adduced at trial includes Chen’s Two-way Permit which was valid between 25 January 2011 and 24 January 2012. According to Cheung’s evidence, Chen’s Two-way Permit was one of the documents Chen produced to Cheung to verify his identify during their meeting in Hong Kong in April 2011.

44.On the basis of Chen’s Permit, I am entitled to draw the inference that Chen had come to Hong Kong at some point between 25 January 2011 and 24 January 2012, which covered the period when Chen signed the conveyancing documents for the Property. This is particularly so when Chen has not come to trial to give evidence to the contrary, or to be cross-examined. Chen’s claims, in the witness statement and in the Declaration made by him in July 2021, that he had never been to Hong Kong and never obtained any loans here, remain nothing more than self-serving bare assertions, which have not been tested by cross-examination.

45.Third, Chen claimed that he did not know Hau. This assertion is contrary to Siu’s and Cheung’s evidence. Further, there are a number of copies of bank deposit slips dated 24 and 25 January 2011 and 29 April 2011 faxed by Hau to SH Chan & Co regarding the payment of the purchase price for the Property. While it is unclear precisely why and how Hau came to play a role in Chen’s purchase of the Property, it is undeniable from the evidence of payment that Hau had indeed acted as an agent to assist Chen’s purchase of the Property and the handling of the purchase price. It is incredible that Chen did not know Hau.

46.Fourth, Chen claimed that there was a “Mr Ke” as alleged, who had assisted in his purchase of the Property, and that Ke had been instructed by Chen to keep the title deeds. There is no documentary evidence at all (contemporaneous or not) suggesting the existence of this “Mr Ke” in the conveyancing transaction for the Property. I accept Siu’s and Cheung’s evidence that the title deeds of the Property were kept at SH Chan & Co (whether as instructed by Siu/Easy Policy or otherwise), that they were in their possession at all material times, and that they were able to produce the deeds as evidence. According to Cheung, he had never met and did not know any Mr Ke.

47.As I do not accept Chen’s assertion that “Mr Ke” was in possession of the title deeds of the Property, it is unnecessary for me to deal with the issue raised by Chen, as to whether an equitable charge was created in respect of the Property.

48.To conclude, I do not find any of Chen’s evidence to be credible or reliable, even if his witness statement should be taken into consideration.

MLO Issues

Section 18 MLO

49.Section 18(1) and (2) of the MLO provide:

“(1) No agreement for the repayment of money lent by a money lender or for the payment of interest on money so lent, and no security given to any money lender in respect of any such agreement or loan, shall be enforceable unless—

(a) within 7 days after the making of the agreement, a note or memorandum in writing of the agreement is made in accordance with subsection (2) and signed personally by the borrower, and a copy of such note or memorandum is given to the borrower at the time of signing; and

(b) there is included in or attached to such copy a summary, in such form as may be prescribed, of such provisions of this Part and Part IV as may be prescribed,

and no such agreement or security shall be enforceable if it is proved that the note or memorandum was not signed by the borrower before the money was lent or the security was given.

(2) The note or memorandum shall contain all the terms of the agreement and in particular shall set out—

(a) the name and address of the money lender;

(b) the name and address of the borrower;

(c) the name and address of the surety, if any;

(d) the amount of the principal of the loan in words and figures;

(e) the date of the making of the agreement;

(f) the date of the making of the loan;

(g) the terms of repayment of the loan;

(h) the form of security for the loan, if any;

(i) the rate of interest charged on the loan expressed as a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with Schedule 2; and

(j) a declaration as to the place of negotiation and completion of the agreement for the loan.”

50.I accept Easy Policy’s submissions that the Loan Agreement and Legal Charge themselves could be read together to constitute the “memorandum” as required under Section 18 of the MLO. There is no requirement for a separate document to constitute the “memorandum”: see Celestial (International) Securities & Investment Limited v William Henry Woo HCA 9659/2000, 4 December 2001 at para 29 (per DHCJ Lam, as the PJ then was).

51.In Strong Offer Investment Ltd v Nyeu Ting Chuang (2007) 10 HKCFAR 529 at paras 21 to 24, Chan PJ held:

“21. One of the points raised in the courts below was whether the contractual documents in this case could be taken together to constitute a note or memorandum which satisfied the requirements of s.18(1). This point was raised in this Court not as a separate ground of appeal but in support of the contention that the court should not have exercised its discretion in enforcing the loan agreement. This is a point which was deliberately left open in the Emperor Finance case, by Ribeiro PJ who said at para. 100:

“100. … I ought to state parenthetically that since no argument was addressed concerning any possible difficulties flowing from the fact that the contract was contained in separate documents, that issue is ignored in this judgment. This should not be taken to suggest that such a practice is necessarily valid for the purposes of the Money Lenders Ordinance.”

22. Mr Russell Coleman SC, for Mr Nyeu, argued that s.18(1) does not allow several documents to be looked at together as forming one note or memorandum and that there was no single note or memorandum in the present case which answered the statutory description. He submitted that it is envisaged by the legislature that there is one note or memorandum in which all the information can be found and that the requirements of the section are not met by a document which contains only most but not all of the necessary information regarding the loan; nor by having all the information contained in several documents.

23. With respect, this argument cannot be sustained. It is not supported by the wording of the section. Construed in its context, s.18 does not and is not intended to refer to only one single document by the words “a note or memorandum in writing of the agreement”. A loan agreement may be made orally or in writing, or partly orally and partly in writing. All that s.18 requires is that there must be something in writing so that the borrower can know all the terms and conditions of the loan. It matters not whether they are contained in one document or more than one document. If a contract contains all the terms and conditions of the loan, as is usually the case, it is as good as anything and clearly meets the requirements of the section. It would be absurd to ask for another note or memorandum to set out all the terms and conditions again just to satisfy the requirements. Such construction is inconsistent with the letter and spirit of s.18.

24. Counsel’s argument is also contrary to the decision in Holiday Credit Ltd v Erol [1977] 1 WLR 704 which was a case which dealt with s.6 of the Moneylenders Act 1927 the relevant part of which is similar to our s.18. One of the issues there was whether the necessary note or memorandum contained all the terms of the contract. The House of Lords held that this statutory requirement was satisfied by considering all the documents together which were described as “a composite document”. At p.709, Lord Morris of Borth-y-Gest said:

“In my view there may be a ‘note or memorandum’ which is capable of satisfying the requirements of section 6 if documents are so conjoined as to comprise a composite memorandum. … There was accordingly in my view one composite document which contained various terms: reference to such terms could readily be made.”

25. In my view, the judge and the Court of Appeal were clearly right in rejecting Mr Nyeu’s argument.”

52.On the Loan Agreement, I am satisfied that all the terms and particulars required under Section 18(2) of the MLO have been set out, save for the following.

(1)  Section 18(2)(c): Although (a) the address of the money lender (Easy Policy), (b) the address of the borrower (Chen), (c) the address of the surety (Madam Chen) were not separately set out in the Loan Agreement, their names are sufficiently clear and identified on the face of the Loan Agreement. Further, the addresses of Easy Policy and Chen can be found in the First Schedule of the Legal Charge. Only the address of Madam Chen cannot be found in the documents.

(2)  Section 18(2)(j): a declaration as to the place of negotiation and completion of the agreement of the loan is not found anywhere in the loan documents.

53.As to the other requirements:

(1)  Section 18(2)(e), (f): The date of the agreement is expressly set out in the Loan Agreement to be 11 May 2011 (although the Loan Agreement and Legal Charge were signed on 9 May 2011). I also accept that the date of the Loan is set out in Clause 1 of the Legal Charge, stating that “In consideration of the sum of DOLLARS ELEVEN MILLION ($11,000,000.00) HONG KONG CURRENCY (“the Loan”) now paid by the Lender to the Borrower…” indicates the drawdown of the Loan as being 11 May 2011. This is confirmed by a cheque dated 11 May 2011 for $11,000,000 (ie the principal of the Loan) issued by Easy Policy.

(2)  Section 18(2)(g): I am satisfied that the terms of the repayment of the Loan are sufficiently set out in the Loan Agreement (which is a very concise document) and the Legal Charge.

(3)  Section 18(2)(h), (i): The form of security and rate of interest (expressed as a rate per cent per annum) are set out in the Loan Agreement. There is an issue regarding the true interest rate of the Loan Agreement, which will be dealt with below.

54.Chen further complained that Easy Policy did not state the ID number of the surety. This is not required under Section 18 of the MLO and does not affect the enforceability of the documents.

55.In light of the above, it is not disputed that Easy Policy was in breach of Section 18(1) of the MLO. Easy Policy accepted this. The question is whether I should exercise the discretion under Section 18(3), which provides that:

“Notwithstanding subsection (1), if the court before which the enforceability of any agreement or security comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable, the court may order that such agreement or security is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

56.I am guided by the principles set out by Chan PJ in paras 18-20 of Strong Offer:

“18. Section 18 offers one of the key protections to uneducated, ignorant and unsophisticated borrowers who may not be aware of all the terms and conditions under which the loans are made to them … These conditions are imposed to ensure that a borrower is fully aware of and freely agrees to all the terms and conditions of the loan, and in particular knows exactly how much money he has borrowed and what interest he has to pay.

19. On the other hand, the statute is not intended to stifle genuine money-lending transactions or to let the money lender lose all the money he has lent out and all the security he has because of a failure to comply with all such requirements, however trivial or unintentional the breach may be. Hence, where it is not inequitable to do so, the court would enforce the loan agreement with suitable variations, modifications and exceptions. This is the discretion given to the court by s.18(3).

20. In resolving any dispute between the money lender and the borrower, therefore, there should be no pre-conceptions either in favour of or against the money lender or the borrower. The statute has sought to strike a fair balance between the two parties. In applying the provisions of s.18, the court has to bear in mind, among other things, the parties’ respective rights and obligations under the statute as well as the agreement made by them. See Ribeiro PJ in Celestial Finance Ltd v Yu Man Hon (2004) 7 HKCFAR 450 at para.21.”

57.The Court’s discretion under Section 18(3) is very wide. I agree with the observations made by Recorder P Fung SC at para 28 of the judgment in Treasure Spot Finance Company Limited v Li Chik Ming & Anor HCA 5387/2001, 3 December 2007, where he held:

“28. From these cases, I believe that the following guidelines (not necessarily exhaustive) for the exercise of the discretion can be extracted : -

(i) The discretion given by sections 18(3) and 22(2) to the court is extremely wide and empowers it to look at all the circumstances in a particular case in arriving at an equitable result between the moneylender and the borrower. (See the Judgment of Ribeiro PJ in the Emperor case at para. 119 and the Judgment of Chan PJ in the Strong Offer case at para. 20.)

(ii) There is no single circumstance or set of circumstances which is decisive as to how the court should exercise its discretion in a particular case. Each case must be decided on its own facts.

(iii) The court will have to go through a balancing exercise in arriving at a decision. (See the Judgment of Chan PJ in the Strong Offer case at para. 33.)

(iv) The fact that an act or omission by a moneylender constitutes an offence (as provided under section 29(4)) or is specified to be illegal (as provided under section 22(1)) is not a factor which is decisive against the moneylender in the exercise of the court’s discretion, otherwise sections 18(3) and 22(2) would be meaningless and even self-contradictory.”

58.On the facts of this case, it would be unfair and inequitable to deny Easy Policy’s claim to enforce the Loan Agreement and Legal Charge, and I would exercise the discretion under Section 18(3) of the MLO to enforce the Loan Agreement and the Legal Charge for the following reasons.

(1)  The Loan Agreement is a short, concise document written in Chinese. Chen only stated that he could not read or understand English.

(2)  The most important key terms of the Loan Agreement (ie principal amount, interest rates, monthly repayment amount) were clearly stated in the Loan Agreement.

(3)  The Loan Agreement was accompanied with a notice titled “放債人條例” (Money Lenders Ordinance), which summarises the relevant provisions of the MLO in Chinese. Chen’s rights were stated in this notice.

(4)  I do not consider that the omission of the address of the surety (ie Madam Chen) is a material matter, or one which causes any serious prejudice to Chen. Madam Chen is Chen’s sister who had been involved in the purchase of the Property. In any case, Easy Policy is not enforcing the Guarantee against Madam Chen in this action.

(5)  Likewise, I do not consider that the omission of the place of the negotiation and completion of the agreement of the loan is material or would otherwise cause prejudice to Chen. I accept the evidence of Siu and Cheung, that Chen and Madam Chen were present at the 9 May 2011 Shenzhen Meeting.

(6)  I accept Siu’s and Cheung’s evidence that the terms of the Loan Agreement and Legal Charge had been explained to Chen and Madam Chen during the 9 May 2011 Shenzhen Meeting. Chen signed a letter dated 9 May 2011, confirming that the contents of the related documents had been explained to him (“本人…確認…陳淑雄律師行已向本人…解釋其內容…”), and that he did not require independent legal advice.

(7)  Based on the various documents he had read and signed, it is very unlikely that Chen could in any way have been misled as to the terms of the Loan Agreement and Legal Charge. Importantly, Chen did not plead any matter (save for a bare assertion that he would object to Easy Policy’s seeking the Court’s exercise of discretion), nor adduced any evidence that would militate against the exercise of the discretion under Section 18(3) of the MLO.

(8)  When asked why Easy Policy did not just adopt its own standard form loan agreement (which is presumably compliant with MLO), but instead instructed Cheung to draft the Loan Agreement, Siu’s answer was that this was because it was a Saturday when Chen urgently needed the loan and there was no staff member around to provide the standard form loan agreement. This was corroborated by Cheung’s evidence. Although Cheung did mention that he drew Siu’s attention to the provision in the Loan Agreement providing for administrative fee that may contravene the MLO (which will be dealt with below), there is no evidence that Siu was aware of any contravention of the requirements under Section 18 of the MLO. I am unable to draw any inference that Section 18 was deliberately breached.

Sections 7 and 29 of the MLO

59.In his pleading, Chen complained that the Loan Agreement was not executed at the place specified in Easy Policy’s money lender’s licence, and that Sections 7(1)(b) and 29(1)(b) of the MLO have been contravened. There is no merit in this contention.

60.Section 7(1)(b) of the MLO provides that “No person shall carry on business as a money lender … at any place other than the premises specified in such licence”. Section 29(1)(b) provides that “Any person who carries on business as a money lender – … (b) at any place other than the premises specified in his licence… commits an offence”.

61.The legal principles concerning Section 7(1)(b) were discussed in Ng J’s judgment in Hao Tian Finance Co Ltd v Hung Yuk Ming & Anor [2020] HKCFI 465 at paras 119-124:

“119. But does it follow, from the fact that the Defendants had not attended the Premises prior to the signing of the Loan Agreement and the Mortgage, that the Plaintiff was thereby in breach of section 7(1)(b) for not carrying on business as a money lender at any place other than the premises specified in its Money Lenders Licence? In this court’s view, the answer must be no.

120. It is not in dispute nor is it disputable that the Premises were the Plaintiff’s office and place of business as specified in its Money Lenders Licence. There is no evidence to suggest that the Plaintiff did not at the material time habitually carry on its money lending business on the Premises. Further, it is a fact found by this court that a substantial part of the preparatory work for the loan application were done and the assessment of the loan application by Keith Lau took place on the Premises between 1 and 4 June 2015. After Raymond had finished his inspection of the Property on 5 June 2015, he also went back to the Premises to brief Keith Lau as to what had happened. It seems to this court a complete non sequitur to suggest that because the very last part of the loan transaction which took place on 5 June 2015 ie the meeting between the Plaintiff’s Keith Lau and Raymond and the Defendants and the signing of the Loan Agreement and the Mortgage took place in a solicitors’ firm, the Plaintiff was not carrying on its money lending business on the Premises.

121. In The Annotated Ordinances of Hong Kong—Money Lenders Ordinance (Cap 163) 2015 Reissue at paragraph 7.02, the author noted:

‘If the money lending transaction is substantially arranged and started at the authorised place of business of the money lender, it would seem that this would not be in breach of the provision because not every stage or incident of the transaction needs to be carried out at the same address: Kirkwood v Gadd [1910] AC 422, Cornelius v Phillips [1916-1917] All ER 685, [1918] AC 199. It is generally accepted that the licensed money lender, to come within the terms of the provision, does not have to undertake the whole of his tasks at his place of business as shown in the licence ...’ (emphasis added)

122. In Kirkwood v Gadd [1910] AC 422, it was held not to be a breach of the former UK equivalent of section 7(1)(b) where the agreement for the loan, the advance of the money and the taking of security (a bill of sale) all took place at the borrower’s private residence. At pp 423-4, Lord Loreburn LC explained why:

‘ ... This Act of Parliament cannot mean that every stage and every incident of every piece of the money‑lending business is to be transacted at the registered office. That would be impossible, for such things as making inventories or taking possession of furniture under a bill of sale are part of the business and must be done where the goods are situated. Nor can it be intended to prohibit the employment of clerks and agents, or the transaction outside the registered address of every single thing that could by possibility be transacted within it. That would be needlessly oppressive and would strain the words. We must look at the nature of the mischief disclosed according to the approved canons of statutory construction. The mischief is that this dangerous business may be conducted by persons under false names or a variety of names without the security of an ascertained address, or at places where men may be taken unawares or off their guard. The words, which are in terms general, must be applied accordingly.

I do not propose to define what is meant by carrying on business lest I may facilitate evasion. But I do think that if a money‑lender really deals with a borrower at his registered address, whether by interview or correspondence, he may, without infringing the Act, transact negotiations, or conclude the actual contract, elsewhere.’ (emphasis added)

123. In Cornelius v Phillips [1918] AC 199, the whole of the money lending transaction, in every one of its stages as between the money‑lender Phillips and the borrower Cornelius, was carried out at the Blundell Arms Hotel, which was not the registered address of Phillips, and no part of the transaction was carried out at the money‑lender’s address. It was in these circumstances that the House of Lords concluded there was a contravention of the former UK equivalent of section 7(1)(b).

124. To conclude, since a substantial part of the present loan transaction with the Defendants was started and arranged on the Premises, this court is of the view that the Plaintiff had not contravened section 7(1)(b) of MLO.”

62.The principles in Hao Tian Finance were cited in Re To Yuk Fung [2020] HKCFI 2134 at para 20 (by G Lam J, as he then was) and Shun On Finance Limited v Leung Chun Wa [2024] HKCFI 1359 at paras 56-59 (by DHCJ KC Chan, as he then was).

63.In the present case, it is clear that there was no breach of Section 7(1)(b) and hence there was no commission of any offence under Section 29(1)(b):

(1)  Easy Policy’s office address (“Easy Policy’s Office”) was stated on its money lender’s licence, which is the same address of Easy Policy as that stated in the First Schedule of the Legal Charge.

(2)  There is no evidence to suggest that Easy Policy did not at the material time habitually carry on its money lending business at Easy Policy’s Office.

(3)  In fact, and I accept Siu’s and Cheong’s evidence, Hau attended Easy Policy’s Office at the 7 May 2011 Meeting to negotiate and discuss the terms of the loan on behalf of Chen. Although Siu could not quite remember clearly whether 7 May 2011 was a Saturday (which it was), this is understandable given the lapse of time. I accept that the assessment of the loan application was done at the Easy Policy’s Office. It was at this point when Easy Policy preliminarily decided to offer the loan to Chen and passed on the matter to SH Chan & Co/Cheung for the drafting of the loan documents.

(4)  After entering into the Loan Agreement and Legal Charge, by letter dated 19 July 2011, SH Chan & Co sent to Easy Policy (addressed to Easy Policy’s Office) the title deeds and documents of the Property.

(5)  Chen placed much emphasis on the fact that the Loan Agreement and Legal Charge (and other related loan documents) were not signed in Easy Policy’s Office, but at the Shangri-la Hotel in Shenzhen at the 9 May 2011 Shenzhen Meeting. Section 7(1)(b) does not require each and every stage of the loan transaction to be carried out in the money lender’s premise. The place of signing of the loan documents alone does not negate the other matters pointing towards Easy Policy operating its money lending business at Easy Policy’s Office.

Section 27 MLO

64.Chen complained that certain charges or fees charged by Easy Policy were in contravention of Section 27(1) of the MLO.

65.Section 27 of the MLO provides:

“(1) Any agreement entered into between a money lender and a borrower or intending borrower for the payment by the borrower or intending borrower to the money lender of any sum for or on account of costs, charges or expenses (other than stamp duties or similar duties) incidental to or relating to the negotiations for or the granting of the loan or proposed loan or the guaranteeing or securing of the repayment thereof shall be illegal.

…

(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.”

66.Under Section 27(4) of the MLO, any costs, charges or expenses covered by the section and included in the agreement between the money lender and the borrower may be recovered by the borrower, or set off against the money actually lent. However, any breach of Section 27 does not render the entire loan agreement unenforceable.

67.The consequence of violation of Section 27 was set out by Cheng J in her judgment in Premier Capital Management Limited v So Wang Fung by So Wang Ming [2024] HKCFI 849 at para 81:

“81. The fact that there were charges or payments which contravened s.27 MLO and are illegal by virtue of the section does not in itself make the Loan unenforceable. The mere fact that a transaction is illegal does not necessarily mean that it is unenforceable. In the case of payments which contravene s.27 MLO, s.27(4) MLO expressly provides for the applicable remedies – the illegal payments may be set off against the amount actually lent or may be recovered by the borrower. In other words, whilst the loan is unenforceable to the extent provided for by s.27(4), it is at the same time otherwise enforceable. See K Cash Ltd v So Wang Fung [2021] 4 HKLRD 796 at [27], [30] (Cheung JA).”

68.The Loan Agreement contains a provision whereby Easy Policy charged a 2% administrative fee for the Loan. Easy Policy accepts that the provision itself is in breach of Section 27(1), but emphasized the fact that it never collected the administrative fee in fact.

69.On Chen’s part, he never pleaded that a 2% administrative fee was actually charged or collected. Based on the Client Ledger Report of SH Chan & Co made in respect of Chen, it is also not shown that any administrative fee was charged. The debit entry on 11 May 2011 for $220,000 was stated to represent “interest”, which is consistent with the term on the Loan Agreement to charge a 2% “first instalment” interest. I also accept Cheung’s evidence that he had advised Siu that the 2% administrative fee was unlawful, and Siu had said that he would not enforce this term. On the available evidence, there was only one instalment of $220,000 paid to Easy Policy in or around 11 May 2011. On balance of probabilities, I am satisfied that Easy Policy did not actually charge the 2% administrative fee. There is therefore no need to set off the actual amount lent against this amount.

70.Further, Easy Policy raised the fact that a legal fee of $15,000 was charged by SH Chan & Co for handling the loan for Chen, and on its own has accepted that the charging of the legal fee from the loan contravened Section 27(3). On Easy Policy’s own case, an amount of $15,000 is to be set off against the actual amount lent.

Sections 24, 25 MLO

71.The above analysis on Section 27 of the MLO has implications on the effective interest rate of the Loan. Although Chen never pleaded as a defence that the interest rate of the Loan Agreement was excessive or extortionate under Sections 24 and 25 of the MLO, for completeness, I will consider this issue.

72.The Loan Agreement and Legal Charge were entered into in 2011. As per Sections 24(3) and 25(9) of the MLO, the prevailing thresholds of “effective rate of interest” in Sections 24 and 25 of the MLO should apply. These provide that:

(1)  Any person who lends or offers to lend money at an effective rate of interest which exceeds 60% p.a. commits an offence, and such an agreement is not enforceable: (Sections 24(1), (2)). There is no discretion for this Court to reopen the transaction and allow the agreement to be enforceable if the effective interest rate exceeds this threshold.

(2)  Any agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds 48% p.a. shall, having regard to that fact alone, be presumed for the purposes of this section to be a transaction which is extortionate; but except where such rate exceeds the rate specified in Section 24(1), the court may declare that any such agreement is not extortionate for the purposes of this section if, having regard to all the circumstances relating to the agreement, the court is satisfied that such rate is not unreasonable or unfair: Section 25(3). The Court would have the discretion to reopen the transaction if the loan agreement is declared to be extortionate: Section 25(1).

73.Under Section 2 of the MLO:

(1)  In relation to the meaning of principal: “principal, in relation to a loan, means the amount actually lent”.

(2)  In relation to the meaning of interest: “interest does not include 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”.

74.According to Easy Policy, the principal for the Loan should be calculated as follows:

Item	Amount (HK$)
Contractual Principal	11,000,000
LESS: withheld first instalment of interest payment	220,000
LESS: Legal Fee	15,000
Total	10,765,000

75.I accept the submissions made by Counsel for Easy Policy that the two items deducted above should not count towards the principal as representing the money actually lent to Chen. Moreover, the 2% administrative fee should not be deducted as it was never enforced nor deducted from the sum actually lent to Chen.

76.As for the calculation of interest, I also accept the submissions made for East Policy, that:

(1)  The Court would recalculate the contractual interest rate taking into account breaches of Section 27 of the MLO: See Hong Kong Property Mortgage Ltd v Ng Lai Ping Cathy [2018] 4 HKC 559 at paras 66-70; Skyline Credit Ltd v Leung Hing Chung [2019] HKCFI 169 at paras 123-124 (per DHCJ William Wong SC).

(2)  The fees and expenses charged in breach of Section 27 would have to be deducted from the actual amount received by the borrower (i.e. the principal).

(3)  In calculating the effective rate of interest under Sections 2, 24 and 25 of the MLO, the Court has to take into account 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. Therefore, the fees and expenses charged in breach of Section 27 would also added into the interest: Skyline Credit at para 120.

77.The approach in Skyline Credit was approved by the Court of Appeal in Gain Wealth Global Credit & Investment Ltd v Chan Suk Fong [2020] 4 HKLRD 831. At para 63, Kwan VP held that the approach in Skyline Credit did not involve any “double counting” and that “[i]t is only right that this amount should be accounted for in considering the amount of interest and the amount of the deemed principal. There is no valid reason why it should be taken into consideration just once”.

78.On this basis, the calculation of the interest is as follows:

Item	Amount (HK$)
Contractual Interest ($11,000,000 * 2% monthly interest * 12 months)	2,640,000
ADD: unpaid 2% administrative fee	220,000
ADD: Legal Fee	15,000
Total	2,875,000

79.Easy Policy accepted that the 2% administrative fee, even though unpaid and unenforced, should be added to the calculation of interest. The definition of “interest” in Section 2 includes an amount that has been paid and “is to be paid or payable in consideration of or otherwise in respect of a loan.” (emphasis added). Likewise, the legal fee was an amount actually paid, and should be counted towards interest.

80.I also agree with Easy Policy’s submissions that the first instalment of interest payment of $220,000 withheld by Easy Policy (though deducted from the principal) should not count towards interest. This instalment already formed part of the “Contractual Interest”, being the first instalment of interest payment. It was also never pleaded by Chen that this withheld sum should constitute interest.

81.On the basis of the above calculations, the effective rate of interest for the Loan would be: $2,875,000 ÷ $10,765,000 × 100% = 26.71%.

82.Even if I was wrong and the $220,000 interest payment withheld should be added to the interest, the effective rate of interest would be: ($2,875,000 + $220,000) ÷ $10,765,000 × 100% = 28.75%.

83.In either case, the effective rate of interest does not exceed the thresholds specified in Sections 24 and 25 of the MLO.

Section 22 MLO

84.Chen pleaded that Clause 1 of the Legal Charge provided for “default interest” charged at 48% p.a., which contravenes Section 22(1)(c) of the MLO.

85.Section 22(1)(c) of the MLO provides:

“Any agreement made for the loan of money by a money lender shall be illegal if it provides directly or indirectly for—…

(c) the rate or amount of interest being increased by reason of any default in the payment of sums due under the agreement:

Provided that provision may be made by any such agreement that if default is made in the payment upon the due date of any sum payable to the money lender under the agreement, whether in respect of principal or interest, the money lender shall be entitled, subject to Part IV, to charge simple interest on that sum from the date of the default until the sum is paid at an effective rate not exceeding the effective rate payable in respect of the principal apart from any default, and any interest so charged shall not be reckoned for the purposes of this Ordinance as part of the interest charged in respect of the loan.” (Emphasis added)

86.Easy Policy’s case is that the interest rate of 48% p.a. on default, as specified in the Legal Charge, was an inadvertent mistake, and that it was the common understanding, agreement or mutual consent of the parties that an interest rate of only 24% p.a. on default would be charged. Easy Policy accordingly seeks rectification of this clause.

87.According to Easy Policy, this is a case of rectification for common or mutual mistake. The relevant principles are set out in Cheng J’s judgment in Lau Wai Kwong v Lau Cheung Kam Ling Margaret née Cheung Kam Ling Margaret [2023] 4 HKC 189 at paras 62-65:

“62. In the case of common or mutual mistake, the mistake is about whether a written document correctly reflects what the parties had, on an objective assessment, agreed it should contain. If parties have agreed to execute a document in certain terms and by mistake it contains different terms, the court can order specific performance of the prior agreement by rectifying the document. See Kowloon Development Finance Ltd v Pendex Industries Ltd (2013) 16 HKCFAR 336 at [19] (Lord Hoffmann NPJ).

63. The party seeking rectification must show that:

63.1 the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;

63.2 there was an outward expression of accord;

63.3 the intention continued at the time of the execution of the instrument sought to be rectified;

63.4 by mistake, the instrument did not reflect that common intention.

See Kowloon Development Finance Ltd at [31], approving the analysis of the Court of Appeal in that case. Lam J (as he then was), giving the judgment of the Court of Appeal in [2012] 5 HKLRD 11 at [25], cited Peter Gibson LJ’s summary of the requirements in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 at 74 (Peter Gibson LJ).

64. In ascertaining the common intention, the approach is an objective one. The question is what a reasonable observer would have understood the parties to mean. See Kowloon Development at [19]. See also Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [60] (Lord Hoffmann):

“…the authorities suggest that in both cases [of a binding antecedent agreement and a common continuing intention without a binding antecedent agreement] the question is what an objective observer would have thought the intentions of the parties to be. Perhaps the clearest statement is by Denning LJ in Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450, 461:

“Rectification is concerned with contracts and documents, not with intentions. In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any other contract. You look at their outward acts, that is, at what they said or wrote to one another in coming to their agreement, and then compare it with the document which they have signed. If you can predicate with certainty what their contract was, and that it is, by a common mistake, wrongly expressed in the document, then you rectify the document; but nothing less will suffice.” ”

65. In claims for rectification for contracts for common or mutual mistake, it is necessary for the court to be confident that the formal document does not reflect what was previously agreed. In commercial contracts, at least, one does not construe preceding heads of agreement as if they were a contract and simply compare them with the final document. If there is room for ambiguity in the heads of agreement or if they might have been varied in the course of subsequent negotiations, a claim for rectification must fail. See Kowloon Development Finance Ltd at [24].” (emphasis added)

88.The burden is clearly on Easy Policy to demonstrate the matters set out in para 63 of Lau Wai Kwong. Based on the evidence available, and absent any evidence from Chen, I am not satisfied that Easy Policy has shown that there was a common continuing intention for Clause 1 of the Legal Charge to be rectified, or that Clause 1 (as currently drafted) did not reflect the common intention of the parties. This is particularly so in the light of the Defence (and Chen’s witness statement), which denies not only that there was any loan agreement or mortgage made, but also that there was any common understanding or consensus that the interest payable was chargeable at 24%.

89.It is trite that that in identifying the common intention of the parties, the Court looks at “what a reasonable observer would have understood the parties to mean and not concerning itself with their uncommunicated states of mind”: Kowloon Development Finance Ltd v Pendex Industries Ltd & Ors (2013) 16 HKCFAR 336 at para 19 (per Hoffmann NPJ). The express language used in the instrument cannot be totally ignored, when the Court seeks to identify what the parties had objectively intended the language and the instrument to mean. Even if I should accept Cheung’s evidence that he had made an inadvertent mistake when drafting the loan documents by adopting a boilerplate in a rush, or Siu’s evidence that he had only intended to apply an interest rate of 24%, these can at most only show the uncommunicated state of mind of Easy Policy (even assuming that Cheung’s mistake could even be attributed to Easy Policy). On Cheung’s evidence, the contents of both the Legal Charge and the Loan Agreement had been explained to Chen. This includes the explanation of the rate of 48% and Chen did not state that it did not represent the parties’ agreement.

90.Although I will not accede to Easy Policy’s request to rectify Clause 1 of the Legal Charge, which on its face provides for interest being charged at 48% by reason of any default in payment and contravenes Section 22(1)(c) of the MLO, the Court retains a discretion to permit enforcement of the Legal Charge. Section 22(2) of the MLO provides:

“Notwithstanding subsection (1), if the court before which the legality of any agreement comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement which does not comply with this section should be held to be unenforceable, the court may order that such agreement is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

91.As to the Court’s discretion under Section 22(2), Chan PJ observed in Strong Offer at para 42 as follows:

“42. However, in view of the submissions made by Mr Shieh on s.22 of the Ordinance, I would like to make the following observations on this provision. This section prohibits, among other things, the charging of compound interest either directly or indirectly and renders a loan agreement which contains such a condition not just unenforceable but also illegal. See s.22(1). Notwithstanding such illegality, the court has a discretion under s.22(2) so that if it is satisfied that in all the circumstances it would be inequitable that the loan agreement should be held unenforceable, it may order that such agreement is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable. Although the wording is similar to that in s.18(3), this discretion serves a different function and provides a different protection to borrowers, namely, from a contractual requirement to pay compound interest. Insofar as it is sought to argue that the scope of this discretion is wide enough to enable the court to uphold the compound interest, this argument is clearly unsustainable. Under no circumstances would a court of law give effect to such illegal element. This would be against public policy. Nor can this be the intention of the legislation; in fact, it would be contrary to the legislative intent to enforce something which the section itself declares illegal. In my view, the object of the discretion is to allow the money lender to recover the loan together with any amount or rate of interest which is permitted under the provisions of the Ordinance, where the court considers it equitable to make such an order.”

92.The relevant factors in considering the discretion under Section 22(2) include the particular circumstances of the borrower, and whether any prejudice flowed from the statutory breaches: see Easy Fortune Property Limited v Yung Chun Him [2020] 4 HKC 1 at paras 62-63 (per Chu JA).

93.In the recent case of China Sun Finance Company Limited v Morality International Trading Limited & Others [2025] 1 HKLRD 1032 at paras 16-18, DHCJ Pheobe Man also noted in her decision that the court would look at “all the circumstances” and that “the factors to be taken into account include (i) relative status of the parties; (ii) the nature and extent and effect of the default; (iii) the way in which the default arose; (iv) the implications for the borrower; (v) the attitude of the lender (whether there was a blatant disregard of the MLO); and (vi) the general appearance of the contract throughout”. I agree that these are the relevant factors to be taken into account.

94.I am of the view that it would be inequitable if Easy Policy were unable to enforce the Loan Agreement and Legal Charge entirely. I would exercise the discretion to allow Easy Policy to charge interest on the defaulted amount at a simple interest rate of 24% per annum, which is the contractual interest rate as stated on the Loan Agreement. In the exercise of this discretion, I have taken the following matters into account:

(1)  The terms concerning default interest were included in the Legal Charge. Based on my analysis concerning Section 18 of the MLO and my findings that Chen had indeed entered into the Loan Agreement and the Legal Charge at the 9 May 2011 Shenzhen meeting, I do not find it likely that Chen did not have notice of the relevant terms on default interest, or that default interest would not be charged.

(2)  I do not believe that Chen was an unsophisticated borrower. He was 42 year old at the time of entering into the Loan Agreement and Legal Charge, according to his PRC identity card. He also represented himself as a government official and that he received tertiary education. There is no reason for me to doubt this.

(3)  I find Cheung to be a credible witness. I accept his evidence that the reference to the 48% interest rate in Clause 1 of the Legal Charge to be a drafting mistake on his part. While this was not sufficient to justify rectification, this is a relevant factor for me to take into account when exercising my discretion.

(4)  Based on the demand letters sent to Chen, Easy Policy never sought to enforce or demand default interest at 48% p.a.. In the demand letters, interest was charged at the contractual interest rate of 24% p.a.. This is also consistent with Easy Policy’s stance that it had only intended to charge default interest at 24% p.a..

95.Nor does my declining the rectification sought affect the application of Sections 24 and 25 of the MLO, which are not engaged.

96.The term “the effective rate of interest” in Sections 24 and 25 does not apply to the situation when the borrower defaulted on repayment of the loan. The “effective rate of interest” in Sections 24 and 25 refers to the “actual rate” which must be a single, constant rate charged on the entire loan charged before any default: Easy Fortune §§36-53 (per Chu JA, as she then was). Specifically at paras 52-53, Chu JA held:

“52. The three cases relied on by the defendant therefore do not support his contention that in determining whether there is a breach of section 24(2), the default interest must also be included in ascertaining the effective rate of interest of the loan.

53. Further by reason of the above analysis, the Judge did not err at [40] and [41] of the judgment where he pointed out that in analysing whether section 24 has been contravened, this should not be done on a scenario of default, and if a higher rate of interest is payable on default, this should be considered under section 22.” (emphasis added)

97.For this reason, even if Easy Policy charges default interest at a rate higher than the “effective rate of interest” on the Loan by virtue of Clause 1 of the Legal Charge, Sections 24 and 25 would not be engaged. Whether or not Sections 24 and 25 had been contravened should not be done on a scenario of default: Sun Entertainment Culture Limited v Inversion Productions Limited [2023] HKCFI 2400 §§13-17, 28-29, 34-36 (per DHCJ Le Pichon) (as upheld by the Court of Appeal in [2024] 4 HKLRD 991 at paras 29-58 (per G Lam JA)); see also Key Step Ventures Ltd v Fuguiniao Group Ltd & Ors [2020] HKCFI 1087 at paras 19-27 (per DHCJ Kenneth Wong).

98.In any event, the presumption in Section 25(3) would only be triggered when the effective rate of interest “exceeds” 48% p.a.. The charging of default interest under Clause 1 of the Legal Charge at 48% p.a. does not “exceed” that threshold (Freeway Finance Co Ltd v Lai Sau Kei HCA 561/2014, 28 June 2016 at paras 110-112; Celebrity Credit Limited v Koo Sau Chun [2023] HKCFI 31 (see paras 28)).

Section 21 MLO

99.Notwithstanding the provision in the Loan Agreement providing for an early repayment fee for early redemption of the Property, this right was never exercised and Easy Policy never enforced this provision. It is therefore unnecessary for me to consider Section 21.

Interest Time Bar Issue

100.Section 19(1) of the LO provides that no action shall be brought to recover any principal sum of money secured by a mortgage or other charge on property, or to recover proceeds of the sale of land, after the expiration of 12 years from the date when the right to receive the money accrued.

101.Easy Policy commenced this action on 20 August 2021. There is no dispute that the action to recovery the principal of the Loan is within time.

102.Insofar as interest is concerned, Section 19(5) of the LO provides that no action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge shall be brought after the expiration of 6 years from the date on which the interest became due.

103.Easy Policy accepts that the interest payable outside the 6-year period, i.e. before 20 August 2015, is time-barred and does not seek to recover this sum. I shall take this into account when calculating the sum due to Easy Policy.

Government Rent and Rates Issue

104.Easy Policy claims also the Government Rent and Rates paid on behalf of Chen, together with interest.

105.Clause 6(a) of the Legal Charge incorporated Part C of the Second Schedule of the CPO. Paragraph (e) therein provides:

“(e) That if the borrower shall make default in payment of the said premium and other moneys (if any) or the Government rent or any part thereof or in the performance or observance of the said covenants terms and conditions or any of them or in effecting such insurance or in paying the insurance premiums or in so repairing as aforesaid or in duly complying with all such requirements and notices as aforesaid or shall fail to endorse over and deliver such policies and receipts then and in such case and so often as the same shall happen it shall be lawful for the lender to pay such premium or other moneys (if any) or Government rent and so perform and observe such covenants terms and conditions effect such insurance or repairs pay such insurance premiums or comply with all such requirements and notices as aforesaid and the borrower shall forthwith repay to the lender on demand all moneys expended by the lender in so doing and until such repayment such moneys shall be a charge upon the property as if the same had formed part of the loan and bear interest accordingly.”

106.As Chen defaulted on the Government Rent and Rates, Easy Policy was entitled to pay the same on Chen’s behalf and to treat such sum as forming part of the Loan, and to charge interest.

107.The relevant payments made by Easy Policy are (including those incurred post-writ):

Date	Amount (HK$)
9 December 2014	12,375.40
11 December 2014	6,389.00
2 May 2015	6,207.90
14 May 2015	6,389.10
22 June 2015	8,122.70
7 September 2015	8,122.00
29 January 2016	5,482.90
3 June 2016	13,856.60
7 January 2021	7,741.80
11 October 2022	12,081.70
31 October 2022	14,654.40
10 February 2023	7,000.20
17 March 2023	6,999.20
15 June 2023	7,576.00
9 October 2024	14,709.70
Total	137,708.60

108.However, given the limitation period on claiming interest as discussed above, Easy Policy would only be entitled to interest on the Government Rent and Rates paid on or after 20 August 2015.

Unjust Enrichment/Restitution Issue

109.It is unnecessary for me to decide this issue given my conclusion on the enforceability of the Loan Agreement and Legal Charge.

Quantum

110.Based on the above findings and concessions made by East Policy, the quantum of the claims are set out below.

Principal

111.Easy Policy is entitled to claim:

(1)  Outstanding principal: $10,765,000.00

(2)  Government Rent and Rates: $137,708.60

112.The total is $10,902,708.60.

Interest

113.Easy Policy is entitled to claim interest on the outstanding principal of $10,765,000.00 at the rate of 24% per annum (ie daily interest of $7,078.36) from 21 August 2015 until full repayment. This comprises the following:

(3)  Interest from 21 August 2015 to 20 August 2021 at 24% p.a.: $10,765,000 × 24% × 6 years = $15,501,600.00

(4)  Interest from 21 August 2021 to the date of this judgment at 24% p.a.: $10,765,000 × 24% × (133/365 days + 3 years + 265/365 days) = $10,567,985.75

(5)  Interest from the date of judgment to the date of full payment at 24% p.a.

114.For interest on the Government Rent and Rates, because they were paid on divers dates, and due to the limitation period issue, the interest on each payment would be different.

115.First, as to the interest on the Government Rent and Rates paid by Easy Policy pre-writ:

Date of Payment	Amount (HK$)	Calculation of Interest	Interest (HK$)
9 December 2014	12,375.40	Interest for 6 years: $12,375.40 × 24% × 6 years   Daily interest: $8.14	17,820.58
11 December 2014	6,389.00	Interest for 6 years: $6,389.00 × 24% × 6 years   Daily interest: $4.20	9,200.16
2 May 2015	6,207.90	Interest for 6 years: $6,207.90 × 24% × 6 years   Daily interest: $4.08	8,939.38
14 May 2015	6,389.10	Interest for 6 years: $6,389.10 × 24% × 6 years   Daily interest: $4.20	9,200.30
22 June 2015	8,122.70	Interest for 6 years: $8,122.70 × 24% × 6 years   Daily interest: $5.34	11,696.69
7 September 2015	8,122.00	Interest from 8 September 2015 to 20 August 2021:   $8,122 × 24% × (115/365 days + 5 years + 232/365 days)   Daily interest: $5.34	11,599.55
29 January 2016[1]	5,482.90	Interest from 30 January 2016 to 20 August 2021:   $5,482.90 × 24% × (337/366 days + 4 years + 232/365 days)   Daily interest: $3.61	7,311.62
3 June 2016[2]	13,856.60	Interest from 4 June 2016 to 20 August 2021:   $13,856.60 × 24% × (211/366 days + 4 years + 232/365 days)   Daily interest: $9.11	17,333.34
7 January 2021	7,741.80	Interest from 8 January 2016 to 20 August 2021: $7,741.80 × 24% × 225/365 days Daily interest: $5.09	1,145.36
Total			94,246.98

116.Easy Policy also claims interest on the above sum at the contractual rate of 24% p.a., pursuant to paragraph (e) of Part C of the Second Schedule of the CPO, and I will allow this claim. Easy Policy is additionally entitled to claim interest on each tranche of the payment from 21 August 2021 until the date of payment.

117.Second, as to Government Rent and Rates paid post-writ, Easy Policy is also entitled to interest at 24% per annum from the day after Easy Policy’s payment to the date of full payment by Chen.

Date of Payment	Amount (HK$)	Calculation of Daily Interest
11 October 2022	12,081.70	$12,081.70 × 24% ÷ 365 days = $7.94
31 October 2022	14,654.40	$14,654.40 × 24% ÷ 365 days = $9.64
10 February 2023	7,000.20	$7,000.20 × 24% ÷ 365 days = $4.60
17 March 2023	6,999.20	$6,999.20 × 24% ÷ 365 days = $4.60
15 June 2023	7,576.00	$7,576.00 × 24% ÷ 365 days = $4.98
9 October 2024	14,709.70	$14,709.70 × 24% ÷ 365 days = $9.67

Disposition

118.For reasons explained above, I allow Easy Policy’s claim and make the following orders:

(1)  Easy Policy do recover against Chen the sum of $10,902,708.60 (comprising the outstanding principal of $10,765,000.00 and the Government Rent and Rates paid by Easy Policy on behalf of Chen of $137,708.60);

(2)  Easy Policy do recover against Chen interest on the outstanding principal at the rate of 24% per annum (ie daily interest of $7,078.36) from 21 August 2015 until full payment;

(3)  Easy Policy do recover against Chen interest on Easy Policy’s payment of the Government Rent and Rates at the rate of 24% per annum, from the day following Easy Policy’s respective payments until full repayment by Chen.

(4)  Unless Chen do make payment of the sums as referred to in sub-paragraphs (1) to (3) hereinabove within 28 days after service of this Judgment, Chen do deliver to Easy Policy vacant possession of the Property within 28 days thereafter.

(5)  Upon Chen paying to Easy Policy the sums hereby ordered to be paid and all other monies (if any) secured to Easy Policy by the Legal Charge (subject and without prejudice to the due exercise of any power of sale for the time being vested in it), Easy Policy do re-deliver to Chen possession of the Property comprised in the Legal Charge and release to Chen the security constituted by the Legal Charge.

(6)  Chen’s counterclaim be dismissed.

119.The costs of the action and of the counterclaim are to be paid by Chen to Easy Policy with certificate for one counsel only, to be taxed if not agreed.

Mr Michael Lee and Mr Billy Mok, instructed by Eddie Lee & Company, for the plaintiff

The Defendant (not legally represented since 28 January 2025) did not appear