Chue Kwok Kay v. Chan Tai
Read the full judgment text of HCA 12577/1983 on BabelCite. This High Court CFI judgment was delivered on 30 January 1984.
1. In this matter the Plaintiff Chue Kwok Kay is suing the Defendant Chan Tai on 35 dishonoured cheques. 27 of the cheques, dated from the 15th February 1983 to the 15th September 1983, were drawn on the China State Bank, and totalled $2,041,966.00. 8 of the cheques, dated from the 4th February 1983 to the 15th August 1983, were drawn on the Hong, Kong Industrial & Commercial Bank and totalled $241,062.50. All except two of the cheques were stamped "Account Payee Only".
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HCA012577/1983 Appeal by Defendant against order of Master giving Plaintiff, suing on dishonoured cheques, summary judgment under O.14 of R.S.C. Defendant alleges cheques, which were post-dated, were given as security for loan on which agreed rate of interest was 56% per annum. Defendant submits that judgment should be set aside as s.24 of the Moneylenders Ordinance provides that where proceedings are taken for the enforcement of any security in respect of any extortionate loan the Court may reopen the transaction to do justice between the parties. Court was satisfied that a difficult point of law was involved and that judgment should be set aside and unconditional leave given to defend.
BETWEEN
_____ Coram: Hon. Power, J. Date of Hearing: 19 December 1983 Date of Delivery of Judgment: 30 January 1984 __________ JUDGMENT __________ 1. In this matter the Plaintiff Chue Kwok Kay is suing the Defendant Chan Tai on 35 dishonoured cheques. 27 of the cheques, dated from the 15th February 1983 to the 15th September 1983, were drawn on the China State Bank, and totalled $2,041,966.00. 8 of the cheques, dated from the 4th February 1983 to the 15th August 1983, were drawn on the Hong, Kong Industrial & Commercial Bank and totalled $241,062.50. All except two of the cheques were stamped "Account Payee Only". 2. The Plaintiff applied for summary judgment under O.14. The master gave judgment to the Plaintiff and ordered that the Defendant pay damages to be assessed and the Defendant now appeals against that judgment. As is the practice the master did not give any reasons explaining why he made such an order. This is unfortunate in the present case as the order is an unusual one to have given in an action upon dishonoured cheques. It does seem that the master may have had Section 25 of the Money Lenders Ordinance to which I will turn later, in mind when making his order. 3. The affidavit of the Plaintiff in support of his application simply verified that the amounts were due and owing upon dishonoured cheques. 4. The Defendant did not file any affidavit in the O.14 proceedings but caused one to be filed by his solicitor, Mr. Sit Hoi Wah. Mr. Sit stated that the Defendant was in the Republic of China for urgent business affairs and medical treatment for his eye disease and that he had prepared the affirmation from knowledge which he had obtained from long distance telephone conversations with the Defendant and from papers and documents provided by him. Mr. Sit stated, in paragraph 4 of the affidavit, "I verily believe that the Plaintiff was at all material times carrying on the business as a money lender within the meaning of the Money Lenders Ordinance, Cap. 163 of the Laws of Hong Kong'. Mr. Sit went on to say that the cheques were repayment of a loan made by the Plaintiff to the Defendant on divers days in early February 1982 which totalled $1,559,300. He stated that the Defendant had agreed to pay interest on the loan at the rate of 4.5%per month and that the agreement provided that the interest should be paid by two payments. One of $31,186. being 2%, was to be paid each calendar month. The other of $38,982.50 being 2.5%, was to be paid within the following six months. Mr. Sit referred to these payments as the "A" payments and the "B" payments. He went on to say that, as regards interest, the Defendant, by the 15th September 1982, was indebted to the Plaintiff in the sum of $93,558.00, being the 2% interest payments for the months of July, August and September, and that the Defendant then agreed to give the Plaintiff a post-dated cheque for $124,700 which would cover the 2% interest payments for those 3 months and for the month of October. Mr. Sit produced a document which was said to be in the hand-writing of the Defendant setting out certain of the repayments. This document was not easy to follow, however, upon one reading of it, it did appear to indicate that payments of 2% and 2.5% were to be made each month. Mr. Sit went on to say that the parties agreed that the $124,700 was to be treated as part of the capital sum owing which brought the capital sum, as at October 1980, to $1,684,000. It was also said to be agreed that the 4.5% interest would, thereafter, be paid on this amount with the same requirement as regards staggered payments. Mr. Sit referred to the further payments of interest as the "C" payments and the "D"' payments. 5. The affidavit indicates the payments for which each of the cheques were said to be made. However, a detailed analysis reveals many discrepancies. Cheque after cheque is in an amount which does not tally with the amount for which, it is suggested, it was given in payment. The "B" repayments for the months of June, July, August, September and October should each have been in an amount of $38,982. 50. In fact only one was in that amount, the others were in amounts of $53,014, $51,260, $49,506, and $49,506. No explanation is given as to how this major over-payment came to occur. The repayments of the "A" interest appear to be in the correct monthly amounts, however, they do not commence until July 1982. No explanation is given as to why the repayments of "B" interest should commence in June 1982 and the "A" repayment should commence in July. Indeed there is no explanation as to why interest payments did not commence at the time when the loan was made i.e. early in 1982. One would have expected interest payments to have commenced in February or March of that year. The repayments of the "C" and "D" interest appear to relate to the months from November 1982 until March 1983. There is nothing said to explain why the Defendant did not have to make any interest payments after March 1983. It is true that the 6 cheques which are said to relate to the "D" payments are dated from April to September 1983 however the deponent explains this by saying that the cheques were post-dated because those payments were not due until six months after they were incurred. 6. The "C" interest repayments for November and December 1982 and January 1983 should have been in an amount of $101,040. In fact the cheque which is said to have been given in repayment thereof, No. 517326, was in an amount of only $78,900. 7. I have set out only sufficient of the discrepancies to indicate that the explanation of the Defendant was far from satisfactory. One cannot help but remark that if the payments of interest had commenced in March 1982, as they might well have, had they commenced after the making of the loan, and run until September 1983, which is the date of the last of the cheques given by the Defendant, then there would have been 19 payments of interest in all which is the number of payments referred to in Mr. Sit's affidavit. This would, of course, tally much more closely with the suggestion by the Plaintiff that the loan was made early in 1982 and that interest payments were to be made on the loan thereafter varying between 2% and 2.5%. 8. The Plaintiff filed a further affidavit in which he denied that he was at any material time a money lender. He said that on divers occasions early in 1982 at the Defendant's request and in consideration of the Defendant agreeing to allot shares to him in a company which the Defendant was forming, he advanced various loans to him. He said that the agreement was that the loans would be repaid as soon as possible and that interest at the rate of 2% to 2.5% per month would only be paid on the loans until the allotment of the company shares. According then to the Plaintiff the consideration for the loan was, initially, to be the interest payments and was, thereafter, to be furnished by the allotment of shares. The Plaintiff said that in about September 1982 the Defendant told him that he had obtained banking facilities and that he would not allot him any shares in the company. He said that the Defendant then informed him that the outstanding interest due amounted to $253,808.50, which he agreed to pay as soon as possible, and that the Defendant suggested that if he agreed to take the sum of $1,559,300 as being the principal then due, the Defendant would add the sum of $124,700, being four months interest at the rate of 2%, to make a total sum then owing of $1,684,000. He said that the Defendant offered to pay him that amount as soon as possible together with interest at the rate of 2% per month for the first four months from the 15th October 1982 and thereafter at the rate of 2.5% until payment in full. He said that he agreed to these suggestions and that thereafter the Defendant commenced to repay him by cheque but that numerous cheques given were dishonoured. The Plaintiff went on to say that his total payment. was made up as follows:-
9. I am at a complete loss as to how the figure of $253,808.50 for outstanding interest as at September 1982 was calculated. The parties are, however, in agreement that as at September 1982, an amount of $1,684,000 was the principal owing and that the further amount claimed represents the interest due thereon. The parties are, of course, at odds as to how this interest was to be calculated. The Plaintiff says that it was calculated at a rate of 2% to 2.5% and the Defendant says it was to be calculated upon the basis of a rate of 4.5% which was to be paid by way of staggered payments. However this may be the Defendant does not deny that the amount claimed is an amount due from him made up of principal and interest. 10. Mr. Mumford, who appeared for the Plaintiff, took a preliminary objection to the affidavit filed by the Defendant's solicitor. In particular he objected to paragraph 4 thereof in which the solicitor had said that he verily believed that the Plaintiff was a money lender. He submitted that if this statement was one of belief and not personal knowledge then the solicitor was failing to reveal the source of his knowledge. 11. Mr. Wong who appeared for the Defendant took instructions on this matter and said that the solicitor was not purporting to speak from his personal knowledge in this regard but was setting out a conclusion which he had arrived at upon the basis of the information supplied to him by the Defendant. Mr. Wong said that this information came not only from what was told to Mr. Sit by the Defendant but also from certain documents. He had to concede that only one of these documents was exhibited to Mr. Sit's affidavit. In the outcome Mr. Wong said he was content to proceed upon the basis of the information in the affidavit and would rely upon it as being sufficient to raise an arguable case, that the Plaintiff was a money lender. His argument was that a person who lent money in the way the Plaintiff had and who demanded interest in the way the Plaintiff had would be a money lender within the meaning of that term as used in the Money Lenders Ordinance (the Ordinance). In the Ordinance a money lender is defined as meaning "Every person whose business (whether or not he carries on any other business) is that of making loans or who advertises or announces himself or holds himself out in any ways carrying on that business".A money lender is then a person whose business is that of making loans. Mr. Wong submitted that all he had to establish was a triable issue. He relied upon the evidence which showed that there were a number of loans made, that a very high rate of interest was demanded and that there were a large number of repayments. He submitted that these facts were sufficient to raise a triable issue as to whether or not the Plaintiff was carrying on the business of a money lender. Halsbury's Laws of England, Volume 32, at paragraph 129, states that whether or not a person is carrying on the business of money lender,
12. Mr. Wong submitted that the rate of 4.5% which his client said was the rate at which the money was lent was only just under the rate of 60% which would have made the loan an offence under s.24 of the Ordinance. He also referred to s.25 which states that where -
13. Mr. Wong submitted that, even if the Defendant was not a money lender, as this was a matter where proceedings were taken "for the recovery of money lent or the enforcement of an agreement or security in respect of a loan”, the court would be entitled to reopen the transaction and it was not therefore an appropriate case for summary judgment under O.14. 14. The evidence was that in several transactions over a short period early in February 1982, the Plaintiff lent a large sum of money, totally about $1?million, to the Defendant with whom, it appears, he became acquainted when both were members of the Pok Oi Hospital Board. The exact arrangements as to the mode of repayment and as to the rate of interest are in dispute. 15. However both parties say that the principal and interest were paid by post-dated cheques. I was quite satisfied that there was nothing in the evidence to raise an arguable issue that the Plaintiff was a money lender. 16. Mr. Wong argued that, even if this was so, it was not an appropriate case in which to give judgment under O.14. He submitted that s.25 applied and that this court should send the matter for trial so that the trial court could reopen the transaction so as to do justice between the parties having regard to all the circumstances. 17. Mr. Mumford argued that, even if this was so and he contended that it was not, the court should at least give judgment in the amount of the principal. 18. S.25(1)(a) comes into operation where proceedings are taken by any person for -
in respect of any loan. The Plaintiff is here suing upon cheques. Mr. Wong argued, however, that this was, in reality, an action both for the recovery of money lent and for the enforcement of a security in respect of a loan. 1 have considerable doubt that the action can properly be characterized as one for the recovery of money lent as Plaintiff is suing upon the cheques. Even if this be so Mr. Wong contended that it was an action for the enforcement of a security as the cheques were given to secure the loan and the interest repayment. 19. Mr. Mumford contends that this is not so as, on the facts, the cheques were nothing more than post-dated cheques given as repayment of the loan. The affidavit of Mr. Sit states that the cheques mentioned in paragraph 5 thereof were delivered "to settle the principal sums of various loans of money advanced by the Plaintiff to the Defendant on divers days early in 1982. Mr. Mumford submitted that no suggestion was made that they were given as security. 20. S.25, it seems to me clear provides a shield and not a sword. When a person who has lent money on extortionate terms seeks to recover that money or to enforce the loan agreement or to obtain money or goods on which the loan was secured the court may reopen the whole transaction. It is open to a debtor, in such circumstances, to refuse to pay the loan or to a person who furnished any security to refuse to honour his commitment and, when an action is brought, to ask the court to reopen the matter under s.25.If, however, the debtor does not refuse to pay, thereby forcing the money lender to sue, but agrees to pay and does so by way of cheques, whether post-dated or not, is he debarred an action being brought upon the cheques, from asking that the matter be reopened? 21. First it must be asked whether a loan can be secured by post-dated cheques. One of the meanings given for the word "security" in the Shorter Oxford English Dictionary is "a document held by a creditor as guarantee of his right to payment". 22. It is I am satisfied arguable that a loan can be secured on a post-dated cheque and that that was so in the present case. Neither counsel was able to refer to any authority in point. I am satisfied that a difficult point of law is involved and that leave should be given to Defendant. 23. Indeed, although this was not argued by Mr. Wong, it may also be open to the Defendant to contend that the words "enforcement of any agreement" have a wider meaning that the words ''under any agreement" or ''on any agreement" and that the action being taken by the Plaintiff is one to enforce the agreement. 24. As it will be for the court of hearing, if it thinks proper, to "re-open the transaction so as to do justice to the parties having regard to all the circumstances'' I do not think that I should, at this stage, order the Defendant to pay the principal sum to the Plaintiff as was requested by Mr. Mumford. 25. Before leaving the matter, I turn to the decision of the learned Registrar in which he ordered that judgment be entered under O.14 r.3 for the Plaintiff against the Defendant with damages to be assessed. He did not give any reasons and it is not clear exactly why he did this. It may well have been that he considered that the application of s.25 was beyond argument and that the only matter for consideration was the ascertainment of the amount to be recovered in accordance with the provisions of that section. If this was his view then I am not, as can be seen from the foregoing, satisfied as to its correctness. The order of the Master is set aside and the Defendant is given unconditional leave to defend.Cost reserved to trial judge.
Representation: Mr. E.C. Mumford (Pang, Kung & Co.) for Plaintiff/Respondent. Mr. H.Y. Wong (H.H. Lau & Co.) for Defendant/Applicant. |