Lai Kwok Kei t/a Yau Loong Money Lender Co v. Poon Chi Hang

DCCJ004145/1978

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

CASE NO. 4145 OF 1978

-----------------

-----------------

Coram: N.B. Hooper, Judge of District Court

Date of Judgment: 9 April 1979

-----------------

JUDGMENT

-----------------

1. The Plaintiff's particulars of claim which are very brief are set out as follows -

"The plaintiff claims against the defendant for the sum of $3,250 being the value of (1) Cheque No. WC439155 dated the 18th of May 1978 drawn on the Bank of Communications, 15 Sub-office, Hong Kong, which made payable to the plaintiff and the plaintiff became the holder of the said cheque in due course. The said cheque was dishonoured upon presentation and the defendant had due notice of dishonour of the said cheque, but the said defendant did not pay the said cheque for the sum of $3,250 or any part thereof."

2. The defendant admits that he is the drawer of the cheque in question but denies that he owes the plaintiff $3,250. He has pleaded that the plaintiff is a money lender and that on the 18th of May 1978 the plaintiff lent to the defendant a sum of $2,500 and charged the defendant interest at $750 per month. He has pleaded that he then "drew the cheque in question to the plaintiff as evidence and the plaintiff promised not to present the cheque." Furthermore he has pleaded that the interest rate was later reduced to $140 per week. He maintains that up to the 7th of July 1978 he duly gave to the plaintiff $1,480 for interest and principal. He has further pleaded that this interest rate was reduced again to $112 per week and that in respect of this new rate of interest he had paid $224. The defendant then pleaded as follows -

3. It is common ground that this cheque was drawn by the defendant on the 18th of May 1978 and that this is the date a sum of money was borrowed from the plaintiff. It is also common ground that on this date the defendant signed a borrowing note Exh. P1 in which he acknowledged that he borrowed from Messrs. Yau Loong Money Lender Company $3,250. The borrowing note is in fact in the following terms -

"Borrowing note maker POON Chi-hang am in urgently need of money now borrow from Messrs. Yau Loong Money Lender Company Hong Kong Dollars Three Thousand Two Hundred Fifty only and it is stipulated that the due date shall be 10th day of August 1978 on which date the principal sum together with interest shall be paid back in full, if in default or delay to repay the said sum, I myself will be fully responsible for all legal liability and (also) for any loss which may be sustained by Yau Loong Money Lender Company as a result of this borrowing. Lest oral words of the mouth shall bear no proof, this document is made as proof.

4. Whilst the defendant admits signing this borrowing note (Exh. P1) he has testified in cross-examination that at the time when he signed it only the amount of $3,250 and the identity card number appeared on it and the rest had not yet been filled in.

5. It will be seen that the form is a printed form and it is only the parts that are underlined in the above passage which had been completed in ink. Although the defendant admitted that the figure of 3,250 appeared on the document it is his evidence that the loan was only in respect of an amount of $2,500 and was a loan by the plaintiff personally as a friend and not in his capacity as a money lender.

6. I have formed the firm impression that the defendant is mistaken when he says that is was lent on a friendly basis. The very fact when he says this form in the name of the money lender company, and that he was required to sign this form in the name of the money lender company, and that he did sign it in this case shows quite clearly that whatever the motive was it was regarded by both sides at that time as being a transaction between the money lender company and the defendant.

7. Although that document Exh. P1 purported to evidence a loan of $3,250 to be paid on the 10th day of August 1978 together with interest, the defendant maintains that he only borrowed the sum of $2,500 and that the cheque was made out in the sum of $3,250 because there was added to the loan a sum of $750 representing interest for the 1st month. He testified that at the time when the cheque was drawn it was stated clearly by both he and the plaintiff LAI Kwok-kei that the cheque was used as a sort of security. He testified that he has paid off a total of $1,704, thus leaving a balance of only $796 outstanding in respect of the loan of $2,500. The defendant gave some details as to how he made this payment sometimes in cash to the plaintiff and sometimes by depositing it into the plaintiff's bank account. He produced to the Court the slip of paper given to him by the plaintiff stating his bank account number upon which has been typed the figure $140. He testified that this was the amount of interest which he was required to pay to the plaintiff each week. He explained this rate of interest by saying that as the rate of $750 per month was too high the plaintiff agreed at his request to reduce it by 20%. 20% of $750 is $600 for one month, which is $20 for one day, which is $140 for one week. He produced also the two document Exh. D3 showing a deposit into the plaintiff's account of $140 on the 9th of June 1978 and $640 on the 7th of July 1978. The last payment he testified represented $500 return of capital and $140 the weekly interest.

8. Although the defendant was subjected to cross-examination, he wasn't really shaken in the witness-box. The remarkable thing is that the plaintiff nor anybody on his behalf has given evidence to refute anything which the defendant has said.

9. In the absence of such evidence I accept the defendant's evidence that the loan was for $2,500, although written for a larger amount in Exh. P1 the borrowing note, and that it included a sum of $750 as representing interest for the first month. I am satisfied also that this cheque was handed over by the defendant to the plaintiff as security for the loan of $2,500 and for interest of $750 for the first month. (The facts are similar to those before this Court in KOO Kun-woo v. LEE Yue-kwan [1964] D.C.L.R. 198.)

10. It will be observed that the rate of interest in this case is excessive in the extreme. It represented 360% per annum or 20% less than that when it was reduced. Furthermore it is clear that these proceedings are really an attempt to enforce a security made or taken in respect of money lent within the meaning of section 2 of Money Lenders Ordinance. It would thus appear that the plaintiff should have endorsed on his particulars of claim the particulars set out in Rule 15 of the District Court Civil Procedure (General) Rules in relation to actions brought by a money lender. This would of course mean that he would have to state full particulars of the amount of the loan and the rates of interest, and the dates on which any payments had been made whether in relation to principal or interest.

11. This the plaintiff has not done and the result is an irregularity in these proceedings. Had he done so then obviously the excessive rate of interest would have been brought to the attention of the Court, and the Court could have reopened the transaction under the provision of Section 2 of the Money Lenders Ordinance.

12. As the plaintiff has hidden the true nature of this transaction by bringing his action on the cheque alone, instead of making it clear that it was being brought to enforce a security for the loan, I consider that the most appropriate course is for me to set aside these proceedings wholly under 0.2r. 1(2) R.S.C. and order that the plaintiff pay the costs of these proceedings.