Chan Che Leung v. Carina Finance Ltd
Read the full judgment text of DCCJ 848/2021 on BabelCite. This District Court judgment was delivered on 3 July 2026.
1. This is a dispute arising from two written loan agreements, both dated 19 March 2015, one in Chinese and one in English, between the Plaintiff, as borrower, and the Defendant, as lender, in which a loan of $150,000 was extended to the Plaintiff to be repaid by 72 monthly instalments at an interest rate of 42% per annum. They are collectively referred to below as the Loan Agreements, and, if necessary, individually as the Chinese Loan Agreement [1] and the English Loan Agreement [2] respective
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DCCJ 848/2021 [2026] HKDC 1121 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 848 OF 2021 ---------------------------------------
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------------------------ JUDGMENT ------------------------ A. Introduction 1.This is a dispute arising from two written loan agreements, both dated 19 March 2015, one in Chinese and one in English, between the Plaintiff, as borrower, and the Defendant, as lender, in which a loan of $150,000 was extended to the Plaintiff to be repaid by 72 monthly instalments at an interest rate of 42% per annum. They are collectively referred to below as the Loan Agreements, and, if necessary, individually as the Chinese Loan Agreement[1] and the English Loan Agreement[2] respectively. 2.In this action, the Plaintiff seeks to rescind the Loan Agreements and recover the money he paid the Defendant pursuant to those agreements on the basis that (a) he entered into the Loan Agreements in reliance on the fraudulent misrepresentations of the Defendant and/or its agents, (b) in any event, the Loan Agreements were unenforceable pursuant to sections 18, 24 and 25 of the Money Lenders Ordinance (Cap 163) (“MLO”), and (c) the Defendant was unjustly enriched. B. The parties’ respective cases B1. The Plaintiff’s case 3.The Plaintiff’s case can be briefly summarized as follows: 4.In early March 2015, the Plaintiff was approached by an unknown person, whom the Plaintiff in this action referred to as Mr A. Mr A claimed himself to be an employee of Bank of East Asia (東亞銀行) (“BEA”) and told the Plaintiff that he could assist him to restructure his two existing high-interest loans at a much lower interest rate with BEA. 5.Subsequently, one Mr Lee of PWR International Enterprises Limited (天匯國際企業(香港)有限公司) (“PWR”) invited the Plaintiff to attend several meetings at the office of PWR. At those meetings, Mr Lee made several misrepresentations to the Plaintiff. 6.In reliance on those misrepresentations, the Plaintiff (a) signed a “物業私人貸款顧問費合約”[3] (“the Consultancy Agreement”) with PWR, in which it was stated that the Plaintiff has to pay a consultancy fee of $150,000 to PWR for its service, and (b) agreed to borrow a further loan of $150,000 (“the Loan”) from a BEA-pre-approved moneylender to be arranged by PWR. The alleged BEA-pre-approved moneylender turned out to be the Defendant. 7.Mr Lee told the Plaintiff that, for arranging the intended loan restructuring with BEA, the Plaintiff needed to improve his credit rating. And that could be achieved by promptly repaying the first two monthly instalments for the Loan. More importantly, Mr Lee stated that the Plaintiff did not need to repay the Loan out of his own pocket. 8.Mr Lee then arranged someone, who he said was from the moneylender, to inspect the Plaintiff’s home property on 18 March 2015. When the person arrived, the person provided his full name as “Cheung Kwok Hung” (“Impostor Cheung KH”) and claimed he was from and represented the Defendant. He then carried out the inspection of the Plaintiff’s home and thereafter asked the Plaintiff to pay $1,000 as inspection fee, which the Plaintiff did accordingly. 9.After the inspection, Mr Lee further requested the Plaintiff to attend the office of Joseph CT Lee & Co, a solicitor firm engaged by the Defendant, on 19 March 2015 to sign a formal agreement for the Loan. On that occasion, the same person who had carried out the home inspection the day before, i.e., Impostor Cheung KH, represented the Defendant. In reliance on a further misrepresentation made by Impostor Cheung KH, the Plaintiff signed the Loan Agreements, under which the Plaintiff has to repay the Loan of $150,000 by 72 monthly instalments with a total sum of $412,775.26. 10.As to the cheque of $150,000 for the Loan received from Impostor Cheung KH on 19 March 2015, the Plaintiff was immediately escorted to cash it and bring it back to Mr Lee, who took away $138,000 for, as he said, settling PWR’s consultancy fee and legal fee of Joseph CT Lee & Co For the remaining cash of $12,000, the Plaintiff repaid the first two instalments of the Loan on the same day. 11.Shortly thereafter, Mr Lee disappeared and could no longer be reached. The Plaintiff further discovered that, despite the repayment of the first two instalments, his credit rating was not improved, and no financial re-structuring was arranged by Mr Lee or PWR as promised. 12.The Plaintiff therefore reported the matter to the police, but was told that the Loan Agreements he had signed with the Defendant were valid and there was nothing the police could do. 13.Out of fear, the Plaintiff repaid the Loan as per the repayment schedule of the Chinese Loan Agreement, and the same were discharged in May 2020. 14.It is to be noted that the Plaintiff never had the chance to verify the identity of Impostor Cheung KH before the trial; he therefore kept referring to that person as “Cheung Kwok Hung” in his pleadings and witness statements. However, on day 3 of the trial, after meeting the sole director of the Defendant, Mr Pang Yick Fai Preston (“Mr Pang”), in court, the Plaintiff identified Mr Pang as the same Impostor Cheung HK who carried out the home inspection on 18 March 2015. 15.The Plaintiff contended that the misrepresentations were false. And by reason of the matters stated above, and that Mr Pang, being the sole director of and expressly claimed to act for the Defendant, the Defendant has actual or alternatively constructive knowledge of the misrepresentations. 16.But for the misrepresentations, the Plaintiff would not have (a) signed the Consultancy Agreement on 17 March 2015, (b) paid Impostor Cheung KH (Mr Pang) an inspection fee of $1,000 on 18 March 2015, (c) signed the Loan Agreements on 19 March 2015, or (d) repaid the 72 monthly instalments required under the Loan Agreements. 17.As the misrepresentations were fraudulent, the Plaintiff seeks rescission of the Loan Agreements and damages in the amount of $401,775.26. 18.The Plaintiff further contended that, pursuant to sections 27(3) and (4) of MLO, he is entitled to statutory set-off against the Defendant for the sum of $150,462. 19.Furthermore, the Loan Agreements were illegal and/or unenforceable under MLO, because (a) the interest charged by the Defendant under it was not capable of being expressed as a constant percentage rate per annum, (b) the Defendant ought but failed to state the effective interest rate per annum as determined in accordance with Schedule 2 of MLO, (c) the effective interest rate charged by the Defendant exceeded the allowable rate stated in section 25 of MLO, (d) the interest rate per annum of 42% stated in the note/memorandum[4] of the Chinese Loan Agreement and the First Schedule of the English Loan Agreement[5] was incorrect, and (e) if one was to take into account the deductions made for paying the consultancy fee ($121,000) and legal fee ($17,000) in the calculation, the actual effective interest rate charged far exceeded the maximum allowable interest rate stated in section 24(1) of MLO. 20.By reason of the illegality and unenforceability of the Loan Agreements, the Defendant was not entitled to retain the benefit conferred thereunder, namely the total repayment of $412,775.26 received, and was thus unjustly enriched at the expense of the Plaintiff. The Plaintiff is therefore entitled to and claim restitution. 21.The Plaintiff further claims interest pursuant to sections 49 and 50 of the District Court Ordinance, Cap. 336. B2. The Defendant’s case 22.The Defendant admitted that Mr Pang was at all material times the Defendant’s sole director and shareholder. However, while the Defendant accepted that Mr Pang, acting on behalf of the Defendant, attended the meeting at the office of Joseph CT Lee & Co Lee on 19 March 2015 for the signing of the Chinese Loan Agreement, it took the following position in its pleadings and at trial. 23.The Defendant and Mr Pang did not know PWR and have never had any relationship or dealings with PWR, its directors, shareholders or employees. PWR, its directors or shareholders have never been connected to or affiliated with the Defendant in any way. 24.Mr Pang was not Impostor Cheung KH, he did not conduct, nor has the Defendant instructed anyone to conduct inspection of the Plaintiff’s home property. Neither the Defendant nor Mr Pang knew or had any relationship or dealings, business or otherwise, with Impostor Cheung KH. And they have never authorised Impostor Cheung KH to act on their behalf. 25.The Defendant was also not connected to BEA. 26.The Defendant and Mr Pang had no knowledge of the misrepresentations made by Mr Lee; if they had been made, as the Plaintiff alleged, they were not made with the Defendant’s knowledge, authority or consent. The Defendant denied that the Plaintiff had mentioned Mr Lee’s misrepresentations to Mr Pang at the meeting of 19 March 2015. 27.The Defendant has, at the material times, no knowledge of the Consultancy Agreement between PWR and the Plaintiff and had not authorised anyone to execute the same with the Plaintiff. It was signed without the Defendant’s knowledge. 28.Regarding the inspection fee of $1,000, the Defendant has no knowledge of the same, nor has it authorised anyone to charge such a fee. If the Plaintiff did pay Impostor Cheung KH the alleged inspection fee, the fee was collected without the Defendant’s knowledge, authority or consent, and the Defendant has not received the fee from Impostor Cheung KH. The Defendant specifically denied that Impostor Cheung KH was ever its staff, employee, or an authorised representative or agent. 29.As to the circumstances in which the parties entered the Loan Agreements, the Defendant’s case is that:
30.At the meeting on 19 March 2015, Mr Pang was the only representative of the Defendant handling the signing of the Loan Agreements and other relevant documents; no other person from the Defendant was present, particularly the alleged Impostor Cheung KH was not there. 31.The Defendant also denied that Mr Pang had made any misrepresentation. If it was made by Impostor Cheung KH, it was not made with the Defendant’s knowledge, authority or consent. 32.The Defendant confirmed that the Plaintiff has fully repaid the Loan under the Loan Agreements. The Defendant pointed out that the Plaintiff had not made any complaint to it regarding the Loan Agreements before the commencement of this action. 33.The Defendant also pleaded that the consultancy fee was not collected on its behalf, and it had not received any of the consultancy fee allegedly paid by the Plaintiff. 34.Regarding legal fees, the Defendant paid Joseph CT Lee & Co directly for the preparation and execution of the English Loan Agreement. 35.Regarding the issue of compliance with MLO, the Defendant averred that section 27(3) and (4) of the ordinance are not relevant. And for the purpose of the said statutory provisions, PWR, Mr Lee and/or Impostor Cheung KH were not “person(s) acting for or in collusion with” the Defendant; the said statutory provisions, therefore, have no application. 36.The Defendant further averred that the amount loaned to the Plaintiff was as stated in the note or memorandum of the Loan Agreements, which was $150,000, and sections 18(1)(a), 18(2)(d) of MLO had been complied with. 37.Furthermore, the interest charged by the Defendant under the Loan Agreements was capable of being expressed and, in fact, expressed as a constant interest rate of 42% per annum; Schedule 2 of MLO, therefore, has no application. 38.And, for the purpose of sections 24(1) and (2) of MLO, the amount of interest charged on the principal sum under the Loan Agreements did not exceed the allowable limit, which was 60% at the time; the Loan Agreements were, therefore, legal and enforceable. 39.Accordingly, the Plaintiff is not entitled to restitution, or any relief claimed. B3. The Plaintiff’s reply 40.One of the key factual issues in this case is whether Mr Pang inspected the Plaintiff’s home property on 18 March 2015 and falsely presented himself as “Cheung Kwok Hung” or “張國雄” during that visit and at the meeting on 19 March 2015 when the Loan Agreements were signed. It is noteworthy that, in response to the Defendant’s claim that Mr Pang was the sole attendee and dealt with the Plaintiff at the solicitors’ office on 19 March 2015, the Plaintiff pleaded, among other things, the following in paragraph 3 of his Re-Re-Amended Reply:
41.Notably, in his reply, the Plaintiff did not seek to attribute liability to the Defendant by expressly asserting that Mr Pang was the person who inspected his home property on 18 March 2015 and also represented the Defendant at the meeting on 19 March 2015. Instead, the Plaintiff maintained a neutral stance, acknowledging that he did not know the true identity of Impostor Cheung KH. 42.Furthermore, the Plaintiff specifically denied that he had ever proposed any term for the Loan or ever discussed the details of the Loan with Mr Pang prior to the meeting on 19 March 2015. The Plaintiff also denied that Mr Pang made the appointment with him to attend the solicitor’s office. The Plaintiff also pointed out that Mr Chong never told him that he could seek independent legal advice as alleged by the Defendant. C. The issues 43.Parties have filed a Joint Statement of Issues in Dispute on 22 July 2025 containing 13 detailed issues, they boil down to the following:
D. The Trial 44.This case came this Court on 23 October 2025, and it lasted for 10 days in total. 45.At the hearing, the Plaintiff was represented by Mr Valentine Yim (“Mr Yim”) and Ms Noel Chan of counsel, both of whom were instructed by Messrs Y.K. Lau & Chu. The Defendant was represented by Mr Gilbert Kwong (“Mr Kwong”) of counsel under the instruction of Messrs N.K. Tsang & Co. 46.In this action, the following witness statements were served by the parties:
47.As previously mentioned, a central factual dispute between the parties was whether Impostor Cheung KH was actually Mr Pang. At the outset of the trial, Mr Yim requested that Mr Kwong arrange for Mr Pang to appear in court so the Plaintiff could meet him and determine whether he was the same individual—Impostor Cheung KH—who had interacted with the Plaintiff at the relevant times. The Defendant initially resisted this request. Mr Kwong argued that an in-court identification would be improper under these circumstances and referred to the Turnbull directions. I was not persuaded by Mr Kwong’s argument; the Defendant did not maintain that Mr Pang had never met the Plaintiff, and therefore misidentification was not a genuine risk. In fact, the Defendant accepted that Mr Pang met the Plaintiff in person on 19 March 2015. Since Mr Pang had provided two witness statements and was expected to testify for the Defendant, the Plaintiff would, in any event, have the opportunity to identify him during his court appearance. Insisting otherwise would only have unnecessarily prolonged the trial by requiring the Plaintiff to be recalled after Mr Pang’s testimony. Ultimately, Mr Kwong agreed to arrange for Mr Pang to attend court on day 3 of the trial for identification. Upon identification, the Plaintiff confirmed that the individual he had consistently referred to as “Cheung Kwok Hung” from the Defendant—who visited his home on 18 March 2015 and oversaw the signing of the Loan Agreements at Joseph CT Lee & Co’s office on 19 March 2015—was, in fact, Mr Pang. 48.It is to be noted that, throughout the trial, Mr Pang continued to deny that he had conducted the home inspection on 18 March 2015. D1. Evidence of the Plaintiff 49.The Plaintiff testified at trial, and his evidence was rigorously examined by Mr. Kwong. The following is the Plaintiff’s account. 50.In March 2015, the Plaintiff received a telephone call from Mr A who claimed to be calling from BEA. 51.Mr A addressed the Plaintiff by his full Chinese name. He was also aware that the Plaintiff was using a BEA bank account for receiving his monthly income, as well as the Plaintiff’s two existing loans with PrimeCredit and UA Finance (“High-Interest Loans”). 52.Mr A told the Plaintiff that BEA and PrimeCredit had just merged, there was an opportunity for the Plaintiff to discharge the existing High-Interest Loans and replace them with a single loan from BEA at an interest rate at least half of that of the High-Interest Loans (“Loan Restructuring”). Mr A then said that his colleague would contact the Plaintiff in 1 to 2 days. 53.About 2 days later, the Plaintiff received a telephone call from another man who introduced himself as Mr Lee. Mr Lee alluded to the Plaintiff’s prior telephone conversation with Mr A, whom he referred to as his colleague. The Plaintiff was therefore immediately placed under the impression that Mr Lee was also from or associated with BEA. 54.During the call, Mr Lee referred to the Plaintiff’s earlier expression of interest in the Loan Restructuring proposed by Mr A, and said that the interest rate of the High-Interest Loans from finance companies was definitely much higher than the interest rate charged by banks. He then scheduled a meeting in person with the Plaintiff at 6/F, Yes & Right House, Nos. 1-3 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong (“PWR’s Office”). First meeting with Mr Lee 55.On 10 March 2015, the Plaintiff attended PWR’s Office. The interiors of the office were modern and finely decorated. Upon arrival, the Plaintiff was greeted by three young ladies in smart casual attire sitting at the reception desk. There were also other male staff dressed in business formal clothing standing at one side conversing with each other. The atmosphere was very much business as usual. 56.A few minutes later, Mr Lee led the Plaintiff into a conference room. After they both sat down, Mr Lee passed the Plaintiff his business card[13], which bears the header of “PWR International Enterprises Limited 天匯國際企業(香港)有限公司” and the handwritten words “李生” on it. Mr Lee further said, “我哋同東亞銀行合作”. The Plaintiff then took it to mean that PWR was BEA’s partner. Mr Lee went even further, saying that PWR was part of BEA. 57.Mr Lee went on to say that “東亞委託我哋了解你嘅情況”. He then proceeded to ask questions about the Plaintiff, such as where he lived, whether he was living in his own property or a rental property, and the details about the Plaintiff’s existing loans, such as the total amount owed, the amount and duration of the monthly repayment instalments that the Plaintiff had been making. At that time, Mr Lee mainly asked for details of the Plaintiff’s loan with UA Finance, as he was aware of the details of the Plaintiff’s loan with PrimeCredit. 58.In reply, the Plaintiff informed Mr Lee that he lived in his own property, which was a part of the government’s tenants purchase scheme. As for the High-Interest Loans, the Plaintiff disclosed that the total outstanding balance was approximately $280,000 across two separate loans from PrimeCredit and UA Finance. He also provided details of the loans, including that the UA Finance loan was a revolving loan (循環貸款) and that the PrimeCredit loan had a monthly repayment of about $5,987 over 72 months. 59.Mr Lee then said “we can help you apply for a new loan with BEA at an interest rate that is at most half of the interest rate of your two existing loans with PrimeCredit and UA Finance” (“BEA Loan”). 60.Mr Lee further explained the role and purpose of the BEA Loan under the proposed Loan Restructuring scheme as follows (“1st Misrepresentation”):
61.The Plaintiff was enticed by Mr Lee's representations and assurances regarding PWR's affiliation with BEA and the benefits of the proposed Loan Restructuring to lower borrowing costs. He, therefore, told Mr Lee to go ahead with the application. 62.Mr Lee then told the Plaintiff that, in order to make the application, the Plaintiff would need to obtain his TransUnion Credit Report (“TCR”) for the purpose of credit rating assessment. Mr Lee then tried to access the Plaintiff’s TCR online. However, it was unsuccessful; the Plaintiff believed it was because he had not created an online account. 63.Towards the end of this first meeting, which lasted about 45 minutes, Mr Lee told the Plaintiff that, to move the application forward quickly, the Plaintiff would need to return the following day with his TCR and the title deeds for his property. Second meeting with Mr Lee 64.On the following day (i.e. 11 March 2015), the Plaintiff did as he was told. He obtained a copy of his TCR in the morning and returned to Mr Lee’s office in the afternoon, bringing along his TCR and the title deeds of his property. Mr Lee briefly reviewed the documents and kept the TCR; he told the Plaintiff that the credit rating assessment would be conducted over the next few days and that he would contact the Plaintiff again. Third meeting with Mr Lee 65.Within less than a week, Mr Lee called the Plaintiff again for a third meeting at PWR’s Office. 66.On 17 March 2015, the Plaintiff attended PWR’s Office as scheduled. On that occasion, Mr Lee told the Plaintiff that, after having carefully reviewed the Plaintiff’s TCR, which assessed his credit rating poorly at a low F-grade, they have concluded that the Plaintiff’s credit rating was too low for obtaining the BEA Loan for the Loan Restructuring. However, Mr Lee assured the Plaintiff that his poor credit rating could be addressed by way of obtaining an additional loan from a BEA-pre-approved company (東亞預批公司) of $150,000, i.e. the Loan defined above, with which the Plaintiff’s credit rating could be improved. 67.Upon hearing about applying for an additional loan, the Plaintiff immediately raised his concerns with Mr Lee over the repayment of such loan. 68.However, Mr Lee assured the Plaintiff that:
69.The Plaintiff understood Mr Lee’s assurances to mean that the Loan is purely an administrative step for obtaining the BEA Loan; it has no real consequences for the Plaintiff, as the actual loan obtained would be handed back to PWR anyway, which was within the same family as BEA and the BEA-pre-approved company. 70.Mr Lee also added that, to enjoy PWR’s services in relation to the proposed Loan Restructuring, the Plaintiff must sign an agreement with PWR. He then handed the Plaintiff a copy of the agreement in Chinese, bearing the company header “PWR” and entitled “物業/私人貸款顧問費合約”, i.e., the Consultancy Agreement. 71.Mr Lee further assured the Plaintiff that the consultancy fee of $150,000 stated in the Consultancy Agreement, which mirrors the amount of the Loan to be provided by the BEA-pre-approved company, would be internally dealt with by BEA, the BEA-pre-approved company and PWR. The said fee would not actually be paid out of the Plaintiff’s own pocket (“3rd Misrepresentation”). Relying on Mr Lee’s assurances and explanations, the Plaintiff signed the Consultancy Agreement as directed. 72.It was on the strength of Mr Lee’s various representations and assurances set out above that the Plaintiff believed that he would not incur any responsibility to repay the Loan or pay the consultancy fee. The Plaintiff, at the time, understood that both the Loan and the Consultancy Agreement were mere internal procedures of BEA and its affiliated partners without any binding effect or financial consequences for him. 73.This third meeting with Mr Lee (at PWR’s Office) only lasted 30 to 45 minutes. After the Consultancy Agreement was signed, Mr Lee told the Plaintiff that there would be an inspection of the Plaintiff’s home on the following day, which was part of the BEA-pre-approved company’s standard procedure. Inspection of the Plaintiff’s home on 18 March 2015 74.On the following day, i.e., 18 March 2015, Mr Lee called the Plaintiff again, notifying him that a staff member of the BEA-pre-approved company would contact him shortly to arrange an inspection of his home. Mr Lee further informed the Plaintiff that there would be an inspection fee of $1,000 and the Plaintiff should prepare for it. 75.About 10 to 15 minutes later, a man who introduced himself as “Mr Cheung” called the Plaintiff; this Mr Cheung referred to the Plaintiff’s telephone conversation with Mr Lee a moment ago and asked if he could carry out an inspection at the Plaintiff’s home shortly. The Plaintiff said he was home, and Mr Cheung could come anytime. 76.Mr Cheung arrived in less than 15 minutes. Upon arrival, Mr Cheung introduced himself as “Cheung Kwok Hung” from Carina Finance Limited (i.e., the Defendant). The Plaintiff was able to remember Mr Cheung’s full name, “Cheung Kwok Hung”, as it was a common name shared by one of his friends. 77.The inspection only lasted about 5 minutes. At the end, Mr Cheung, i.e., Impostor Cheung KH as defined in Section B1 above, asked for an inspection fee of $1,000, which the Plaintiff paid. No receipt was, however, issued by Impostor Cheung HK for such payment. 78.Given that the home inspection and the requirement for $1,000 inspection fee had been foretold by Mr Lee, the Plaintiff was under the impression that Impostor Cheung KH was indeed a staff member of the Defendant, which was the BEA-pre-approved company that Mr Lee mentioned. 79.Soon after Impostor Cheung KH finished the inspection and left, Mr Lee called the Plaintiff again. He instructed the Plaintiff to meet his colleague at Exit C of Central MTR station the following morning. He told the Plaintiff that his colleague would bring him to the solicitors’ firm for making arrangements for the Loan and then accompany him back to Mr Lee’s office where the Plaintiff would need to give him the amount of the Loan received. Signing of the Loan Agreements 80.In the morning of 19 March 2015, the Plaintiff met Mr Lee’s colleague at Exit C of Central MTR station as scheduled. He no longer recalled that person’s name and, therefore, referred to him as “Mr B” in this action. 81.Mr B took the Plaintiff to the office of Joseph CT Lee & Co at 10/F, Euro Trade Centre, 21-23 Des Voeux Road, Central. 82.Upon arrival, the Plaintiff was received by Impostor Cheung KH, who led him to one of the conference rooms, while Mr B waited outside. The Plaintiff stressed that the person who inspected his property and the one who witnessed the signing of the Loan Agreements at the solicitors’ office on the following day were definitely the same person. 83.As mentioned above, at trial, upon meeting Mr Pang, the Plaintiff pointed out that Mr Pang was the person from the Defendant who carried out an inspection at his home on 18 March 2015, and, on that occasion, Mr Pang misrepresented himself to the Plaintiff as “Cheung Kwok Hung” instead. And at the meeting on 19 March 2015, Mr Pang did not disclose his true identity; the Plaintiff therefore thought he was dealing with “Cheung Kwok Hung”, who represented the Defendant. 84.Leaving aside the issue of whether Mr Pang carried out the inspection at the Plaintiff’s home the day before, in light of the Plaintiff’s in-court identification, it is common ground that Mr Pang acted for the Defendant at the meeting on 19 March 2015 for the signing of the Loan Agreements. 85.After Mr Pang seated the Plaintiff, he left the room. Within one or two minutes, Mr Pang returned with a stack of documents, which he identified as the contract. The Plaintiff briefly flipped through the documents without reading them in detail. He observed that some were in Chinese and others in English, with several pages poorly printed at very low resolution and covered in black dots. 86.At that time, Mr Pang merely stated, “This is a loan for $150,000, repayable by a monthly instalment of $5,731 for 72 months”. He did not mention the interest rate charged, nor did he take the Plaintiff through the documents. 87.It is noteworthy that at the time, the Plaintiff was a 60-year-old timber formwork worker, and his formal education ended at Primary 6. He is therefore not a highly educated or sophisticated person. 88.At that point, the Plaintiff mentioned to Mr Pang that, based on Mr Lee’s statements, his understanding was that the Loan would be settled within 60 days and he would only be responsible for the first two monthly instalments. Before the Plaintiff could elaborate further, Mr Pang interrupted, stating that he had no knowledge of any discussions between the Plaintiff and others. Mr Pang neither confirmed nor denied the Plaintiff’s understanding. (Note: The aforesaid was characterised by the Plaintiff in this action as the “4th Misrepresentation”) 89.Mr Pang then left the room, and Mr Chong entered. Mr. Chong said that the Loan was $150,000 repayable by monthly installments of $5,731 for 72 months. He did not tell the Plaintiff the interest rate charged under the Loan, nor did he tell the Plaintiff that he might seek independent legal advice, all that Mr Chong said was that the Plaintiff did not have to sign it if he had doubts. 90.On that occasion, the Plaintiff did not ask for more explanation from Mr Pang or Mr Chong because Mr Lee had already explained to him the purpose of taking out the Loan, which was merely for improving the credit rating without any financial consequences to the Plaintiff. Neither Mr Pang nor Mr Chong corrected the Plaintiff on his understanding. 91.Mr Chong only stayed in the conference with the Plaintiff for two to three minutes. After Mr Chong left, Mr Pang re-entered the room with a cheque of $150,000 and asked the Plaintiff to sign at different places of the Loan Agreements. 92.Mr Pang then handed the plaintiff the cheque with an A4 size paper containing a photocopy of the cheque. He then took out another piece of paper, which contained the following already-typed-proforma statement in Chinese with blank spaces for filling in the person's name and Hong Kong identity card number:
93.Mr Pang asked the Plaintiff to copy the above pro-forma statement onto the lower part of the said A4-size photocopy of the cheque, fill in his personal details and sign underneath the hand-written pro-forma statement. The Plaintiff did accordingly.[15] 94.The Loan Agreements and the pro-forma statement were signed by the Plaintiff in the presence of Mr Pang, while the Plaintiff was still labouring under the belief that the proposed Loan Restructuring would happen and that the Plaintiff would obtain the BEA Loan in 60 days. Such understanding was conveyed to Mr Pang before the signing of the said documents; Mr Pang did not correct it despite the fact that he clearly had contact and had liaised with Mr Lee in scheduling the inspection on 18 March 2015 and the signing of the Loan Agreements at Joseph CT Lee & Co’s office on 19 March 2015. 95.The Plaintiff only stayed in the conference room for about 20 minutes in total, during which Mr Pang and Mr Chong entered the room and talked to him in turn. The Plaintiff emphasized that he signed all the documents in one go after Mr Pang re-entered the conference room; none of it was signed in front of Mr Chong. Regarding Mr Pang, he did not sign the Loan Agreements at the meeting. 96.The Plaintiff stated that his sole reason for obtaining the Loan (on paper) was to complete the necessary steps to secure the BEA Loan. He never informed Mr Pang or any representative of the Defendant that he needed the Loan to “ease cash flow problems,” as alleged by the Defendant in its Re-Re-Amended Defence. Furthermore, the Plaintiff never disclosed to Mr Pang or any representative of the Defendant his existing loans with PrimeCredit and UA Finance, let alone the interest rates for those loans. 97.After the Plaintiff signed the Loan Agreements as instructed by Mr Pang, Mr Pang handed him a piece of paper bearing the name “Miss Kam” and a phone number[16]. Mr Pang informed the Plaintiff that after each monthly repayment, he must notify Miss Kam. In an intimidating tone, Mr Pang added that if any payment was more than three days late, someone would go to the Plaintiff’s home to “pay him a visit” (“拜訪”). The Plaintiff found this threatening. As a result, even after discovering he had been scammed, the Plaintiff continued to repay the Loan according to the repayment schedule of the Chinese Loan Agreement until it was fully settled. Money received was taken away by Mr Lee 98.After the signing of the Loan Agreements, the Plaintiff walked out of the conference room and found that Mr B was still waiting outside. 99.In accordance with Mr Lee’s instruction, Mr B took the Plaintiff to a nearby Hang Seng Bank to cash the cheque, then accompanied him back to Mr Lee’s office. 100.Mr Lee took away the whole of $150,000 cash and only returned $12,000 to the Plaintiff, together with a receipt bearing the heading of PWR for the sum of $121,000 as “consultant fee”. Mr Lee explained that the $12,000 cash was for the Plaintiff to make the first two monthly instalments required under the Loan Agreements. 101.Shortly after the Plaintiff left the office of Mr Lee, he realised three abnormalities with the way Mr Lee dealt with the money loaned by the Defendant. First, the $12,000 in cash returned by Mr Lee exceeded the amount required for the first two instalments, totaling $11,462 only. Secondly, the sum of $12,000, together with the alleged consultant fee of $121,000, only amounted to $133,000; there was still a sum of $17,000 unaccounted for. Thirdly, the amount of the consultant fee stated on the receipt was less than the $150,000 stated in the Consultancy Agreement. 102.The Plaintiff started to suspect that he had been deceived by Mr Lee and Mr Pang. He therefore immediately called Mr Lee to enquire about the $17,000 shortfall. Mr Lee replied that it was to defray legal fees. The Plaintiff understood that, by “legal fees”, Mr Lee was referring to the costs of preparing the Loan Agreements and other related documents by Joseph CT Lee & Co. 103.After his telephone conversation with Mr Lee, the Plaintiff immediately went to an HSBC branch and made the first two monthly instalments of $11,462. At that point, the Plaintiff was still hoping that the Loan Restructuring would be done in 60 days’ time. The discovery of the fraud 104.In the following two weeks after 19 March 2015, the Plaintiff made phone calls to Mr Lee every day to follow up on the status of the proposed Loan Restructuring. Only the first few calls reached Mr Lee, who reassured that they were “working on it”. In later calls, somebody else answered, with the excuse that Mr Lee was occupied, either in the meeting, on another phone call or out of the office. Mr Lee did not return the Plaintiff’s calls. 105.After the signing of the Loan Agreements, neither Mr Lee nor Mr Pang ever contacted the Plaintiff. As time passed, the Plaintiff’s suspicions that he had been defrauded by the Defendant, PWR, Mr Lee and Mr Pang grew stronger. 106.In late March 2015, the Plaintiff reported the suspected fraud to the police. However, the police officer had reviewed the relevant documents, the Plaintiff was told that it was a clear case of “三角短傳” (collusion among several parties); that the documents the Plaintiff had signed were legally binding; and that there was nothing much the police could do. 107.Upon hearing what the police said, the Plaintiff fell into an uncontrollable state of extreme panic and agony to the point of having suicidal thoughts because he was very afraid and worried that he would not be able to repay the Loan and the existing High-Interest Loans. The aftermath 108.In about April 2015, the Plaintiff was informed by the Housing Authority that someone had tried, but unsuccessfully, to register an encumbrance on the Plaintiff’s home property. Upon checking the records of the Land Registry, the Plaintiff found that it was the Defendant who had attempted to register the Loan Agreements as an incumbrance on the Plaintiff’s property, which was rejected by the Land Registry. 109.In about mid-June 2015, the Plaintiff obtained an updated TCR; there was no record of BEA ever checking the Plaintiff’s credit rating, the Plaintiff’s High-Interest Loans were not discharged or consolidated into the promised BEA Loan. The proposed Loan Restructuring did not happen. And the Plaintiff’s credit rating remained an F-grade without improvement. 110.In about July 2015, the Plaintiff made an enquiry with BEA, providing details of his encounters with PWR and the Defendant, as well as the various representations and assurances Mr Lee made, particularly the alleged affiliation of PWR with BEA and the Defendant being a BEA-pre-approved company. BEA responded a few weeks later, stating that “BEA had no relationship with either PWR or the Defendant; the Defendant was not a so-called “BEA-preapproved company” and that BEA had never heard of, let alone partnered with, these entities”. 111.After June 2015, despite the gradual discovery of the fraud, the Plaintiff continued to make timely repayment to the Defendant as per the requirements of the Loan Agreements. It was made partly out of fear that the Defendant knew where he lived, and, if he failed to repay, may “pay him a visit”, and partly because, as he was told by the police officer, the documents he had signed with the Defendant were valid and binding on him. 112.The Plaintiff continued to make timely repayment to the Defendant until the Loan was fully discharged on 7 May 2020. The involvement of “Cheung Kwok Hung” and the Defendant in similar fraud cases 113.While the Plaintiff continued to repay, he never stopped seeking redress for the deceit and illegal charging of fees by way of taking legal action. 114.Between September 2015 and 4 June 2020, when the Plaintiff was granted legal aid to pursue his present claim, the Plaintiff continuously sought free legal advice from the Clinic Legal Education of the Faculty of Law of the University of Hong Kong under the Duty Lawyer Service (“HKU CLE”). 115.In about October 2015, HKU CLE discovered from the company search of PWR that the sole director of PWR in March 2015, i.e., the time when the fraud was perpetuated on the Plaintiff, was named “Cheung Kwok Hung (張國雄)”[17], which coincides with the name Mr Pang represented himself to be during the home inspection. The search also showed that PWR had only been incorporated on 12 November 2014, shortly before the Plaintiff was approached by Mr Lee. 116.On or around 15 November 2015, the Plaintiff submitted his first application for legal aid. This application was subsequently rejected on 11 July 2016, as PWR had been dissolved and there was no prospect of recovering the “consultant fee” and “legal fees” paid to it. 117.In or around May 2017, HKU CLE further discovered and informed the Plaintiff of a criminal case, DCCC 312/2016, in which “Cheung Kwok Hung (張國雄)” and “Li Wing Tat (李榮達)”, operating under another company, Wincades International Accounting Affairs Limited[18], were charged with conspiracy to defraud and conspiracy to launder money in connection with a fraudulent scheme. The accused, Cheung Kwok Hung, who was convicted in DCCC 312/2016, was the sole director of PWR mentioned previously.[19] It is noted that the fraud perpetuated on the victim in DCCC312/2016 was very similar to what the Plaintiff experienced in this case.[20] 118.With these further discoveries, HKU CLE advised the Plaintiff to apply for legal aid again in January 2018. However, this second application was also rejected on 13 August 2018. 119.On 27 August 2018, the Plaintiff launched an appeal against the decision of the Director of Legal Aid refusing legal aid. 120.On 28 February 2019, the Plaintiff’s appeal was allowed. Legal aid was obtained on 4 June 2020. 121.On or about 22 August 2023, the Plaintiff learned of another criminal case, DCCC 923/2020, in which the reasons for the verdict were handed down on 21 October 2021. The case involved the conviction of a person also named “Cheung Kwok Hung” for three charges of fraud. One of the charges was based on facts very similar to the facts of this case – the person named “Cheung Kwok Hung” made fraudulent misrepresentations and successfully induced the victim in January 2016 to take out a loan, also in the sum of $150,000, from the Defendant. 122.The above was the Plaintiff’s evidence. The Plaintiff strikes me as an honest and credible witness; he consistently provided direct and coherent answers to Mr Kwong’s questions. His testimony remained unshaken under rigorous cross-examination, and his responses were generally consistent with his witness statements. When he could not recall specific factual details during cross-examination, he candidly admitted it without hesitation, even in situations where his answers, whatever they were, could not have been challenged by the Defendant, who claimed to have no knowledge of the dealings between PWR and the Plaintiff. 123.Further, the Plaintiff’s account was not inherently improbable and did not contradict any contemporaneous documents. There were also no internal inconsistencies in the Plaintiff’s evidence. 124.As a matter of public record, PWR was only set up shortly before March 2015 when the incident in question happened and struck off the Companies Register not too long after the fraud in question was reported by the Plaintiff to the police. Besides, no one with a right-thinking mind would have agreed to pay $150,000 consultant fee to PWR for obtaining a loan of $150,000 from the Defendant, or even for the proposed $300,000 BEA Loan, particularly when the purpose of obtaining the BEA Loan was merely to replace the existing High-Interest Loans at a lower interest rate. 125.More significantly, the director of PWR at the time, Mr Cheung Kwok Hung, was subsequently convicted, in DCCC 312/2016, for similar fraud perpetuated on other parties. 126.I have also noted that the Plaintiff’s evidence of having been requested by Mr Lee to meet at the Central MTR station before going to the solicitors’ office on 19 March 2015 was confirmed by Mr Pang under cross examination, despite the fact that Mr Pang had stated in his statement that he met the Plaintiff at G/F of Joseph CT Lee & Co’s office. This indeed shows that the Plaintiff’s evidence is more reliable than that of the Defendant. 127.On the issue of whether Mr Pang impersonated Cheung Kwok Hung during the home visit on 18 March 2015 and at the meeting in Joseph CT Lee & Co’s office on 19 March 2015, Mr Pang denied conducting any home inspection at the Plaintiff’s property on 18 March 2015. However, for the reasons set out below, I find, on balance, that Mr Pang did conduct the inspection and, on that occasion, presented himself to the Plaintiff as Cheung Kwok Hung. He also failed to disclose his true identity when he met the Plaintiff again at Joseph CT Lee & Co’s office on 19 March 2015.
128.As to why Mr Pang impersonated Cheung Kwok Hung during the home inspection on 18 March 2015, it is not necessary for me to make a specific finding. However, one plausible explanation could be that Mr Pang sought to avoid immediate suspicion by the police once the scam was uncovered — a consequence that was inevitable at some point. D2. Evidence of the Defendant 129.In this action, the Defendant claimed that it had no knowledge of the dealings between PWR and the Plaintiff; no evidence was therefore adduced to rebut or challenge this part of the Plaintiff’s evidence. Mr Pang’s evidence 130.Mr Pang’s evidence may be succinctly summarised as follows:
131.Under cross-examination and in response to questions from the Court, Mr Pang further testified as follows:
132.I find Mr Pang’s evidence wholly unconvincing. He repeatedly changed his evidence under cross-examination and when questioned by the Court. At one point, after being confronted several times with inconsistencies between his oral evidence and his witness statements, Mr Pang declared that if his testimony in the witness box conflicted with his written statements or the Defendant’s pleadings, then the written statements and pleadings should be regarded as the truth, rather than his oral evidence. This was an extraordinary remark. 133.Furthermore, some aspects of his testimony were inherently improbable or contrary to common experience; they are simply not credible. Several examples illustrate this:
134.Mr Pang also failed to offer a credible explanation for the Defendant’s destruction of documents that, by his own admission, would have contained details of the intermediary in question. It is evident that Mr Pang was attempting to distance himself from PWR and to prevent the intermediary involved in the transaction in question from being traced or identified. 135.I therefore do not find Mr Pang to be a credible witness. He continually shifted his position under cross-examination and appeared to fabricate explanations as needed. Accordingly, wherever Mr Pang’s evidence conflicts with that of the Plaintiff, I prefer and accept the Plaintiff’s account and reject Mr Pang’s evidence. Mr Chong’s evidence 136.Mr Chong was a practising solicitor at Joseph CT Lee & Co. 137.It’s Mr Pang’s evidence that whenever the loan to be granted exceeds $100,000, he would engage Mr Chong to prepare a formal English loan agreement. Mr Chong confirmed that the incident in question was not the first time he had prepared an English loan agreement for the Defendant. He also described the “usual practice” adopted for signing the agreements as follows:
138.He then purported to give evidence on what happened on 19 March 2015. In particular, he said:
139.Apart from the apparent contradictions with the Plaintiff’s evidence, which I have accepted, Mr Chong’s testimony is inherently improbable. It is unlikely he could recall whether, at that time, someone was waiting for the Plaintiff outside the conference room or inside the office of Joseph CT Lee & Co, considering that the meeting occurred in March 2015, over ten years ago. He was probably not telling the truth, which seriously undermines the reliability of his evidence as a whole. 140.When questioned by the Court, it became clear that he had no recollection of what actually occurred on 19 March 2015. It was highly unsatisfactory for Mr Chong to give evidence on factual matters he could not recall and to fail to inform the Court or qualify his evidence accordingly. 141.With respect to whether Mr Chong explained the English Loan Agreement to the Plaintiff during the meeting, the Plaintiff maintained that Mr Chong did not. Initially, Mr Chong repeatedly asserted that he had; however, when Mr Yim challenged him, pointing out that it would have been impossible to explain the agreement's details in the brief time Mr Chong spent with the Plaintiff in the conference room, Mr Chong abruptly responded that he had “explained” the agreement by instructing the Plaintiff to read it himself. 142.It is therefore evident that Mr Chong did not explain the English Loan Agreement to the Plaintiff. Since Mr Chong merely asked the Plaintiff to read the agreement himself, he should not have testified in court that he had explained it, knowing this was untrue. Such conduct clearly falls below the standard expected of a legal practitioner or officer of the court. 143.Furthermore, as mentioned above, the Plaintiff’s evidence (which I accept) was that Mr Chong did not advise him to seek independent legal advice. Nevertheless, Mr Chong asked the Plaintiff to sign the following confirmation on the spot:
144.It is highly improper, and indeed unethical, for Mr Chong, as a legal professional, to request the Plaintiff (even if not his client) to sign a written confirmation when he knew its contents were untrue and contrary to the Plaintiff’s interests. This conduct is wholly unacceptable. 145.Regarding the procedures adopted for signing the loan agreement, since it was the Defendant’s position that the Chinese Loan Agreement was incorporated into the English Loan Agreement, Mr Chong was asked why he did not address both agreements when meeting the Plaintiff. His answer was as evasive as Mr Pang’s; he stated that he did not know the reason, only that it was the practice at the time. 146.Neither Mr Pang nor Mr Chong provided a reasonable explanation or justification for adopting such a practice. I consider that, under these procedures, the seamless coordination between Mr Pang and Mr Chong — ensuring that Mr Chong did not witness the interaction between Mr Pang and the borrower while inside the conference room of Joseph CT Lee & Co — would, at the very least, raise suspicion that Mr Chong was aware of impropriety and deliberately chose not to inquire further. 147.Considering the matters and observations set out above, I reject Mr Chong’s evidence. 148.In this action, it is unnecessary for me to make findings as to whether Mr Chong actually knew about the fraud in question or had provided assistance in perpetrating it against the Plaintiff. However, I do find such arrangements unsatisfactory and undermine public confidence in the integrity of the legal profession, which is the principal concern. In the recent case of New Finance Co v Lo Siu Kong [2025] HKCFI 566, the Court of First Instance expressed its concern (at paragraph 90 of the judgment) about solicitors assisting unscrupulous moneylenders; the legal profession should be reminded of this. “I am of the view that the whole plot could not have happened without the participation of Mr Cheung of Messrs Pauline Wong & Co., Solicitors. Solicitors should be reminded that they should not lend their assistance to unscrupulous money lenders.” E. Discussion E1. Issue 1 - Whether the alleged misrepresentations were made? If so, whether they were made fraudulently, knowingly or recklessly or without genuine belief in their truth? 149.Given that I have accepted the Plaintiff’s evidence and that no evidence was presented by the Defendant to rebut or even challenge the Plaintiff’s evidence in relation to the 1st, 2nd and 3rd Misrepresentations, I find that they were made by Mr Lee and PWR. 150.Further, in consideration of the following, I am satisfied that 1st, 2nd and 3rd Misrepresentations were made by Mr Lee and PWR fraudulently, in the sense that they were representations of facts which Mr Lee and PWR knew they were false and the same were made with an intention to induce the Plaintiff to enter the Loan Agreements with the Defendant. And to the extent that part of the said representations were statements of intention regarding future conduct, for instance, to apply for the BEA Loan and arrange the Loan Restructuring for the Plaintiff, Mr Lee and PWR had at the material times no such intention to do so. See Glory Gold Limited v Star Play Development Limited [2008] 2 HKLRD 416 (CA) at §20.
151.Regarding the 4th Misrepresentation, Mr Yim submitted that silence, which has the effect of misleading the Plaintiff, was also capable of constituting actionable misrepresentation. He further submitted that the test is whether (a) the words or conduct in fact led the representee to believe the alleged (false) fact, and (b) it was reasonable for the representee to believe it from the words or conduct as he perceived them. See Cartwright, Misrepresentation, Mistake and Non-Disclosure (7th ed., 2025) at §§3-06, 16-05. 152.According to the Plaintiff, during the meeting on 19 March 2015, he conveyed to Mr Pang that, based on Mr Lee’s statements, he understood the Loan would be settled within 60 days and that he would only be responsible for the first two monthly instalments. Before the Plaintiff could elaborate further, Mr Pang interrupted, stating that he had no knowledge of any discussions between the Plaintiff and others. Mr Pang neither confirmed nor denied the Plaintiff’s understanding. Mr Yim argued that this constituted misrepresentation. 153.With respect, I do not agree that Mr Pang’s actions at the time, as described, could amount to a representation that the 1st, 2nd, or 3rd Misrepresentation was true. Mr Pang did not remain silent; rather, he expressly stated that he had no knowledge of the discussion between the Plaintiff and the intermediary. His conduct indicated a lack of interest in their dealings. Objectively considered, a reasonable person would not interpret this as confirmation of any of the alleged Misrepresentations.
154.Accordingly, I hold that the alleged 4th Misrepresentation does not constitute an actionable misrepresentation. E2. Issue 2 – If so, whether, but for one or more of the said misrepresentations, the Plaintiff would not have signed the Consultancy Agreement and the Loan Agreements, or paid Mr Lee and Impostor Cheung HK (i.e. Mr Pang) the various fees or charges as alleged 155.The answer to this issue is self-evident. 156.As a matter of common sense, no reasonable person would agree to pay a consultancy fee of $150,000 (to PWR) simply to reduce the interest rate on an existing loan of approximately $280,000. I am therefore satisfied that, absent reliance on the 3rd Misrepresentation, the Plaintiff would not have signed the Consultancy Agreement. 157.With regard to the Loan Agreements, the Plaintiff testified that he was not in need of funds at the time. In my judgment, he would not have signed the Loan Agreements but for his reliance on the 1st and 2nd Misrepresentations. 158.Concerning the sum of $138,000 taken away by Mr Lee, it is clear that, having signed the Loan Agreements, the Plaintiff would not have handed over the $150,000 loan received from the Defendant to Mr Lee had he not relied on the 2nd Misrepresentation. 159.The inspection fee of $1,000 was paid to Mr Pang on 18 March 2015, as Mr Lee had notified the Plaintiff in advance and Mr Pang requested payment on the spot. The inspection was presented by Mr Lee as an integral part of the Loan Restructuring process. It is also evident that, absent reliance on the 1st and 2nd Misrepresentations, the Plaintiff would not have made this payment. E3. Issue 3 – Is the Defendant liable for any of the said misrepresentations? If so, what is the entitlement of the Plaintiff, if any? 160.To found liability for misrepresentation, it is sufficient for the Plaintiff to satisfy the Court, on balance, that the Defendant either shared a joint design to defraud, or had notice of the Misrepresentations in question. Chitty on Contracts (35th ed., 2023) at §10-031
161.As to the requirement of notice or knowledge of the Misrepresentations, Mr Pang is deemed to have actual notice if he has wilfully shut his eyes to the obvious, or has wilfully and recklessly failed to make such inquires as an honest and reasonable man would make. Cartwright, Misrepresentation, Mistake and Non-Disclosure at §4-82
162.On the facts of this case, in consideration of the following, I am satisfied, on balance, and thus find that Mr Pang, at the material times, shared a joint design with PWR and/or Mr Lee to defraud the Plaintiff into entering the Consultancy Agreement and the Loan Agreements.
163.Even if my earlier finding—that Mr Pang acted jointly with PWR to defraud the Plaintiff—were incorrect, I would still, for the same reasons and in light of Mr Pang’s having either turned a blind eye to the Misrepresentations or failed to make the necessary inquiries in the circumstances, conclude on balance that Mr Pang had notice or knowledge of the 1st to 3rd Misrepresentations at the material times. 164.Regarding the Defendant’s liability for Mr Pang’s actions, Mr Pang himself testified that, at the material times, he was the sole director and shareholder of the Defendant.[24] Moreover, Mr Pang made all business decisions and was therefore the directing mind of the Defendant. The Defendant was a licensed moneylender; Mr Pang’s acts in question pertained to the Defendant’s principal business and fell within the usual scope of a director’s authority. I therefore further find that Mr Pang’s participation in a joint scheme to defraud, and, to the extent necessary, his (actual or constructive) knowledge of the 1st, 2nd and 3rd Misrepresentations, are attributable to the Defendant. See Yau Sang Galvanizing (Hot-Dip) Company Limited v Fashion Tress (America) Engineering Co Ltd & Ors [2025] HKCFI 529, per DHCJ N Nip SC at §§98-99. 165.Indeed, Mr Kwong conceded in closing that, if it is established that Mr Pang had actual or constructive knowledge of the 1st to 3rd Misrepresentations, the Defendant would be liable for fraudulent misrepresentation. 166.Accordingly, I find the Defendant liable to the Plaintiff for fraudulent misrepresentation. Relief for fraudulent misrepresentation 167.Having established the Defendant’s liability for fraudulent misrepresentation, the Plaintiff is entitled to rescind both the Consultancy Agreement and the Loan Agreements. 168.However, as PWR is no longer in existence, it would not serve any purpose to declare that the Consultancy Agreement between the Plaintiff and PWR is rescinded. 169.Regarding damages, it is well established that a victim of fraudulent misrepresentation is entitled to damages, which are to be measured as the actual loss directly resulting from the fraudulent misrepresentation, even if such loss could not have been foreseen by the representor. See Chitty on Contracts, 35th ed., Vol 1, §§10-056, 10-64, 10-65. 170.In my judgment, had the Plaintiff not been fraudulently induced by 1st to 3rd Misrepresentations to enter into the Consultancy Agreement and the Loan Agreements, he would not have: (a) paid Mr Pang the inspection fee of $1,000 on 18 March 2015; (b) handed over the sum of $138,000 to Mr Lee on 19 March 2015; or (c) repaid the Loan by way of instalments in accordance with the repayment schedule in the Chinese Loan Agreement, totalling $412,775.26. 171.Taking into account that, pursuant to the Loan Agreements, the Plaintiff received a sum of $150,000 from the Defendant on 19 March 2015, the loss he suffered as a result of the Defendant’s fraud is $401,775.26. This, so I hold, is the amount the Plaintiff is entitled to recover as damages. 172.The damages under this head primarily represent the monthly repayments made by the Plaintiff according to the repayment schedule over a six-year period, from 19 April 2015 to 19 March 2021. The cause of action accrued with each monthly instalment. In my judgment, it is only fair that the Plaintiff be compensated for the loss of use of his money resulting from these repayments. Doing the best I can, I consider it appropriate to award interest from approximately the midpoint of the repayment period, which is April 2018. E4. Issue 4 – If the Plaintiff has paid the alleged fees to Mr Lee and Impostor Cheung HK (i.e. Mr Pang), is the Plaintiff entitled to recover the same from the Defendant pursuant to sections 27 of the MLO? 173.As I have found in favour of the Plaintiff on Issues 1 to 3, and awarded damages for fraudulent misrepresentation accordingly, it is unnecessary for me to address this issue. Any entitlement the Plaintiff may have under section 27 of the MLO would overlap with the damages already granted for misrepresentation above. E5. Issue 5 - Are the Loan Agreements enforceable under sections 18 and 24 of the MLO? If so, should the Court enforce them? If not, how much is the Plaintiff entitled to recover by way of restitution? 174.The Loan Agreements consist of both the Chinese Loan Agreement and the English Loan Agreement. 175.The Chinese Loan Agreement includes a detailed repayment schedule with 72 monthly instalments, specifying the respective amounts for the repayment of principal and interest for each instalment. In contrast, the English Loan Agreement contains no such schedule. 176.Mr Pang testified that the Chinese Loan Agreement was not a standalone binding contract unless the English Loan Agreement was also signed. At trial, Mr Kwong clarified and stated the Defendant’s position as follows: (a) the Chinese Loan Agreement is not a stand-alone contract and is therefore unenforceable on its own, and (b) it was incorporated into and forms part of the English Loan Agreement. 177.Mr Kwong argued that, by virtue of clause (18)[25] of the English Loan Agreement, the Chinese Loan Agreement was incorporated into it. 178.Clause (18) is in the following terms:
179.I do not agree that Clause (18) of the English Loan Agreement is capable of incorporating the Chinese Loan Agreement, as submitted. When construed in its proper context, it merely provides that the English Loan Agreement did not supersede the Chinese Loan Agreement. I therefore find that the Chinese Loan Agreement does not form part of the English Loan Agreement. 180.In light of the position taken by the Defendant, I further hold that the Chinese Loan Agreement is unenforceable. 181.The remaining questions are whether the English Loan Agreement complies with the requirements of sections 18 and 24 of the MLO and, if it doesn’t, whether it should still be enforced by the Court. 182.In this regard, the Plaintiff contended that the Loan Agreements were unenforceable. Mr Yim’s argument pertaining to sections 18 and 24 was threefold:
183.As I have held that the Chinese Loan Agreement is unenforceable, only the English Loan Agreement is considered here. E5.1 Should the sums paid to Mr Lee (in purported settlement of consultancy fee and legal fee) and Mr Pang (as inspection fee) be included in calculating the interest rate? 184.Section 2 of the MLO contains the following definition:
185.In Skyline Credit Ltd v Leung Hing Chung [2022] 4 HKLRD 561, it was held by the Court of Appeal (at §43) that for the purpose of the MLO, “principal” means the amount actually lent, which excludes any sum handed back by the borrower to the lender as a pure gift or not in satisfaction of any obligation. 186.Chu JA (as she then was) further held (at §50) that, to qualify as “interest” under section 2(1) of the ordinance, the amount does not have to be paid or payable to the lender or its agent, it can be paid to someone else so long as it is “paid or payable in consideration of or otherwise in respect of a loan”.
187.Mr Yim argued that the Plaintiff’s repayment of the first two instalments (i.e., $11,462) on the same day the Loan was granted should be treated as the “amount handed back to the Defendant” and deducted from the principal of the Loan. I do not agree. First, the repayment was not made at the request of the Defendant, its agent, or the intermediary. Second, it was made to satisfy the Plaintiff’s obligation under the English Loan Agreement, albeit prematurely. Therefore, this amount should not be deducted in determining the “amount actually lent.” If an early repayment made by a borrower voluntarily must be deducted from the loan amount to determine the “amount actually lent” — even when the moneylender is without fault — the borrower could render the loan agreement unenforceable per se. As a matter of principle, despite the discretionary power conferred on the court under section 18(3) of the MLO, that cannot be correct. 188.However, I do accept that, pursuant to Skyline Credit Ltd v Leung Hing Chung, supra, the two sums, namely $138,000 paid to Mr Lee in purported settlement of the consultancy fee and legal fee, as well as the inspection fee of $1,000, ought to be considered as “interest” for the purpose of the MLO. 189.It is plain from the evidence presented that the Defendant had not taken into account the sums paid to Mr Lee and Mr Pang in preparing the English Loan Agreement; the annual interest rate of 42% stated therein was therefore inevitably underestimated and thus incorrect. 190.Accordingly, the English Loan Agreement is unenforceable per se. E5.2 Could the interest under the English Loan Agreement be expressed as a simple, constant annual percentage rate? 191.Section 18(2)(i) of the MLO provides:
192.This provision mirrors section 6(2) of the Moneylenders Act 1927 in the UK (“MA 1927”). Its meaning and application were considered in detail by the English Court of Appeal in Askinex Ltd v Green & others [1969] 1 QB 272. 193.Section 6(2) of MA 1927 provides that the note or memorandum of the loan agreement shall show: “either the interest charged on the loan expressed in terms of a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with the First Schedule.” Askinex Ltd. , supra, at 281C. 194.In Askinex Ltd., the first limb of section 6(2) – “the interest charged on the loan expressed in terms of a rate per cent per annum” was held to mean “the interest charged on the loan (i.e. the total amount payable in money over the full period) is capable of being expressed in terms of a simple actual rate per cent, per annum over that period ”. 195.Lord Denning further explained, by way of illustration, the application of section 6(2) of MA 1927 that for stating the interest rate charged under a loan agreement, the provision gave the moneylender a choice between two alternatives, namely either a rate expressed as a simple actual rate per cent per annum over the whole loan period, or a deemed interest rate to be determined in accordance with the First Schedule of the Act. He further held that if the total interest charged on the loan was not capable of being expressed in terms of a single actual rate per cent per annum, i.e., the actual rate, the moneylender must state the deemed interest rate. See Askinex Ltd. , supra, per Denning at 281C – 282A
196.It was clear from Lord Denning’s illustration that, on the proper construction of the first limb of section 6(2) of MA 1927, if the rate of interest charged on the outstanding principal (which diminishes progressively with each monthly repayment) remains constant over the loan period, such rate can be stated pursuant to the first limb of the provision. See Askinex Ltd., supra, per Denning at 282B – G
197.Diplock LJ gave a similar interpretation (at 290B-G) to the first limb:
198.However, if the loan agreement only states the lump-sum monthly instalments to be made over the loan period without a detailed repayment schedule showing how the monthly instalments are to be split between repayment of principal and interest, it is impossible to calculate an actual rate of interest under the first limb. In such circumstances, the moneylender must state the deemed interest rate to be determined in accordance with the First Schedule - See Askinex Ltd. , supra, per Denning at 282E-G.
199.This was the legal position in the UK. However, in Hong Kong, although section 18(2)(i) of the MLO was modelled on section 6(2) of MA 1927, the Court of Appeal in Kwok Ying Lung v Ko Chi Hung & Anor [2001] 3 HKC 480, having considered Askinex Ltd., gave a different interpretation to the first limb of section 18(2)(i) of the MLO. 200.In Kwok Ying Lung, the Court of Appeal adopted the same construction as in Askinex Ltd. and agreed that, under section 18(2) of the MLO, the rate of interest charged could be stated either as an actual rate or an effective rate to be ascertained in accordance with Schedule 2 of the MLO, and when the total amount of interest charged is not capable of being expressed in terms of a single actual rate per cent per annum, the effective rate of interest has to be stated. It further held that resort to Schedule 2 to determine an effective interest rate is necessary only where the interest charged under the loan agreement is not expressed as a rate.
201.However, Yuen J (as she then was) made a further refinement in Kwok Ying Lung that, as a matter of statutory interpretation, the “rate of interest charged on the loan” referred to in section 18(2)(i) of the MLO must be a single, constant rate charged on the entire loan. This clearly deviated from the construction given to s 6(2) of MA 1927 in Askinex Ltd., which referred to the outstanding principal instead of the entire loan.
202.The said refinement made in Kwok Ying Lung was subsequently affirmed by the Court of Final Appeal in Good Time Finance v HKSAR (2013) 16 HKCFAR 795.
203.It is therefore settled that, on the proper construction of section 18(2)(i) of the MLO, the simple, constant interest rate to be stated in the loan agreement under the first limb of section 18(2)(i) of the MLO has to be the rate charged on the entire loan, not the outstanding principal as may diminish over time, depending on whether the monthly repayment involves repayment of the principal and, if so, the schedule of such repayment. 204.Turning back to the fact of the present case, the English Loan Agreement, so far as material for present purposes, contained the following terms:
205.It is noted that the English Loan Agreement provided for equal monthly repayments of $5,731.00 over 72 months, comprising both principal and interest. However, the breakdown of each monthly instalment between principal and interest was not specified. According to Askinex Ltd., this omission makes it impossible to calculate an actual rate of interest for the purpose of the first limb of section 18(2)(i) of the MLO. 206.Further, in Good Time Finance Ltd, CFA held that unless the interest rate stated is a true actual rate of interest under the first limb of s.18(2)(i), the correct method of calculating the effective rate of interest is that set out in Schedule 2 of the MLO. 207.Further, applying the construction given by the Court of Appeal in Kwok Ying Lung, if the actual interest rate on the entire loan amount of $150,000 was truly 42% per annum as stated in the English Loan Agreement, the total interest payable would be $378,000 (i.e., $150,000 x 42% x 6). Adding the principal, the total repayment would be $528,000, which far exceeds the sum actually payable under the English Loan Agreement—$412,632. This demonstrates that the 42% interest rate stated in the agreement was not the true actual rate of interest under the first limb of section 18(2)(i). 208.In the Plaintiff’s opening submissions, Mr Yim calculated the effective interest rate pursuant to Schedule 2 of the MLO, based on the total interest payable, the number of monthly instalments set out in the Loan Agreements, and the original loan amount of $150,000. He determined the effective interest rate to be 57.59%. Mr Kwong did not dispute this calculation. Evidently, the 42% rate stated in the English Loan Agreement was also not the effective interest rate under the second limb of section 18(2)(i). 209.Therefore, even without taking into account the payments made to Mr Lee and Mr Pang referenced above, the English Loan Agreement, in its present form, still fails to comply with section 18(2)(i) of the MLO. It is, accordingly, unenforceable for this reason as well. 210.As I will elaborate in section E5.3 below, the English Loan Agreement was also rendered unenforceable under section 24(2) of the MLO. Accordingly, it is unnecessary to consider whether it would be inequitable to refuse enforcement under section 18(3) of the MLO. E5.3 Did the effective rate of interest exceed the limit of 60% prescribed in section 24 of the MLO? 211.Section 24 of the MLO effective at the material times was in the following terms:
212.As I mentioned above, under the English Loan Agreement, the $150,000 loan was to be repaid in 72 instalments of $5,731.00 each. The total amount of interest payable thereunder was $262,632, calculated as $5,731 x 72 - $150,000. Based on the said repayment terms, the effective rate of interest determined by Mr Yim in accordance with Schedule 2 of the MLO was 57.59%, which did not exceed the allowable limit of 60% under the ordinance. 213.As I have found, for the purposes of the MLO, that the sums of $138,000 paid to Mr Lee and $1,000 paid to Mr Pang should be treated as part of the interest paid. If these amounts are included, the effective rate of interest calculated according to Schedule 2 rises to 88.03%.
214.This is excessive. For this reason, the English Loan Agreement was also unenforceable pursuant to s.24(2) of the MLO. E5.4 How much is the Plaintiff entitled to recover by way of restitution? 215.Mr Yim submitted that if the Court finds in favour of the Plaintiff that the Loan Agreements were enforceable under the MLO, the Plaintiff is entitled to an order for restitution based on the principles of unjust enrichment. He further referred me to the following authorities in support: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 (at §67 & §91), Credit One Finance Ltd v Yeung Kwok Chi & ors [2021] 1 HKC 598(§51), Burrows, The Law of Restitution (3rd ed., 2011) (p.201), AXHT Co Ltd v Freeway Finance Co Ltd [2020] 4 HKLRD 133 (§§40-42), Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 (§§43-44, 48-49, 61-66). 216.The relevant legal principles regarding a claim for restitution based on unjust enrichment are not in dispute between the parties. Mr Kwong also relied on Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd in his closing submissions. As to the other legal submissions made by Mr Yim with reference to the other authorities cited, they were not disputed by Mr Kwong in his reply submissions. 217.The relevant principles can be briefly summarised as follows:
218.As I have found above, the $1,000 inspection fee was paid directly to Mr Pang on 18 March 2015, and the total repayment made by the Plaintiff to the Defendant was $412,775.26, of which $12,000 was originally from the Defendant/Mr Pang. 219.I am also satisfied that had the Plaintiff known that the Misrepresentations were untrue, he would not have allowed the home inspection to take place, still less paid the inspection fee to Mr Pang. Further, had the Plaintiff known that the Loan Agreements were unenforceable, or had he not been intimidated by Mr Pang, he would not have repaid the loan in accordance with the repayment schedule of the Chinese Loan Agreement. 220.For the reasons set out above, in my judgment, the Plaintiff is, in principle, entitled to an order for the restitution claimed. However, it is unclear how much the Plaintiff is claiming under this head. In paragraph 44C of its Re-Amended Statement of Claim, the Plaintiff pleaded it was entitled to restitution of “all benefit received by the Defendant” without stating the amount. The Plaintiff’s position remained the same in its closing submissions; no specific amount that it was seeking to recover under this head was stated in its written closing. 221.Given that I have already found in favour of the Plaintiff on its claim for fraudulent misrepresentation, and damages to be awarded under it would represent an upper bound for the amount recoverable, it is unnecessary for me to quantify in monetary terms the benefit received by the Defendant for the purpose of this claim. 222.However, was I required to make a finding on the value of the benefit received by the Defendant from the transaction(s) involved, as there is no evidence to show that the Defendant has received the $138,000 the Plaintiff paid to Mr Lee, I would find that the benefit unjustly retained by the Defendant is $263,775.26, being $412,775.26 + $1,000 - $150,000. This would be the amount the Plaintiff is entitled to recover in restitution. 223.While I have not recited every detail of the witnesses’ statements and oral testimonies, or explicitly addressed in this judgment all the arguments raised by counsel, I have duly considered them in reaching the findings set out above. F. Conclusion 224.In the premises, I make the following orders:
G. Follow-up 225.Having determined, on the balance of probabilities, that Mr Pang participated in the joint scheme to defraud the Plaintiff, and noting that the seamless coordination between Mr Pang and his solicitor, Mr Chong, during the contract signing process further raises suspicion, I direct the Registrar to forward a copy of this judgment to the Director of Public Prosecution for such action he may consider appropriate. 226.Finally, I wish to express my appreciation to counsel for their valuable assistance in this matter.
Mr Valentine Yim, instructed by Y.K. Lau & Chu, assigned by the Director of Legal Aid, and Ms Noel Chan, instructed by Y.K. Lau & Chu, on a pro bono basis, for the Plaintiff Mr Gilbert Kwong, instructed by N.K. Tsang & Co., for the Defendant [1] C/24/348-358 [2] C/55/453-468 [3] C/23/347 [4] C/24/353 & 358 [5] C/55/459 [6] C/57/470 [7] C/32/388 [8] A/9/109-130 [9] A/10/131-139 [10] A/8/99-108 [11] A/11/140-146 [12] A/7/94-98 [13] C/31/387 [14] Exhibit P1 [15] C/26/376 [16] C/36/404 [17] C/46/423-429 [18] Wincades was incorporated on 27 March 2014 [C/53/446] [19] Form NAR1 of Wincades [C/52/441] [20] For the charge of Conspiracy to defraud, the particulars of offence were: … Cheung Kwok Hung …, between 27/3/2014 and 27/3/2015 in Hong Kong, conspired together and with other persons unknown, to defraud the clients of Wincades International Accounting Affairs Limited (“Wincades”), by dishonestly:- (a) falsely representing that:- (i) Wincades was entrusted by a bank or a financial institution in Hong Kong to handle the loan arrangements of the clients of the said bank or financial institution; (ii) Wincades could assist the clients to obtain a mortgage loan or personal loan with terms and conditions more attractive to the clients; and (iii) consultancy fee would not be charged by or payable to Wincades, or those fee would be refunded to the clients unless the particular mortgage loan or personal loan anticipated by the clients was successfully obtained. (b) thereby causing and inducing those clients to pay consultancy fee to Wincades. [B/193-194] [21] Police case number: TST 1501991 RPI [22] C/57/470 [23] C/55/467 [24] 彭翊暉的證人陳述書 paragraph 2 [25] C/55/457 [26] Based on the mathematical formula derived by Denning MR in Askinex Ltd (Appendix), representing the steps described in the First Schedule of MA 1927, which are the same as Schedule 2 of the MLO. [27] AXHT Co Ltd v Freeway Finance Co Ltd [2020] 4 HKLRD 133 (§§40-41), Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 (§§43-44, 48-49, 61-66) [28] Credit One Finance Ltd v Yeung Kwok Chi & ors [2021] 1 HKC 598, per Recorder Eugene Fung SC at §51 | |||||||||||||||||||||||
= 88.03% Cases cited in this judgment