Chu Pei Cheng and Another v. The Queen

HCMP000487/1982

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Power, J. and Liu, J. (Full Bench)

Date: 26 April 1982.

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JUDGMENT

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Power, J.:

1. In this matter the appellant, Madam Chu Pei Cheng, is appealing against a decision of the licensing court at North Kowloon Magistracy which refused to grant her application for a renewal of a licence under the Money Lenders Ordinance on the ground that the interest rate which she intended to charge was "excessive". After the appellant made her original application to the Registrar of Money Lenders under Section 8 of the Ordinance the Commissioner of Police served a copy of a notice of intention to object to the application in accordance with Section 9(4) of Ordinance. The Commissioner objected to the granting of the licence two grounds. Firstly that the premises were unsuitable, both because they were shared with another company and because they were inadequately protected from crime, and secondly that the rate of interest which the appellant proposed to charge was extortionate. As regards the second ground of objection the Commissioner stated that it was made having regard to Section 25(3) of the Ordinance. This section provides that where any proceedings are taken in court for the recovery of any money lent and it is shown that the effective rate of interest exceeds 48% per annum, then having regard to that fact alone, the transaction shall be presumed to be extortionate. The section goes on to say that the Court may declare having regard to all the circumstances relating to the agreement that the rate is not unreasonable or unfair. It seems clear that the effect of this sub-section is to place the onus upon the money lender to show that a transaction, in which the rate of interest exceeds 48%, is not an extortionate transaction. It is clear that such an transaction is not an illegal transaction as Section 24 of the Ordinance provides that an offence is committed only when the effective rate of interest exceeds 60% per annum. The overall effect then of entering into a transation at a rate not exceeding 60% is not to render that transaction void or illegal but simply, if proceedings are brought to recover the amount lent, to place the onus of showing that the transaction was not extortionate upon the money lender.

2. The grounds in s.11 (5) upon which the licensing court can refuse to renew a licence may be summarized as follows:-

We have some doubt that the objection of the Commissioner of Police, as narrowly stated, was valid. However it may well have been that it was intended to indicate that the proposed rate of interest was such that it was not in the public interest to grant a licence. Where an applicant states his intention to charge an indiscriminate interest rate of 59.1% upon every transaction, it seems to us that there is much to be said in support of an objection to the application on the ground that there are already an adequate number of money lending institutions which were prepared to lend money at lesser rates and that it is not, therefore, in the public interest to grant the application. If the objection in the present case was interded to be of that nature, it should have been explicitly so stated.

3. When the matter came on for hearing before the licensing court, the police inspector who appeared for the Commissioner was asked to state his objections and he said that they were:-

The inspector did not appear to have anywhere indicated that at the base of the Commissioner's objection was the contention that the granting of the licence was against the public interest. The applicant then replied that she had installed safety precautions and admitted that she was going to charge 4.92% per month. It is to be noted that there was no evidence given by any of the parties who appeared before the Court. The proceedings appeared to consist simply of a statement by the inspector of police and a statement by the applicant. This does not seem to us to be in accordance with Section 11(4) which sets out the duty placed upon the court when hearing an application. That section says that the Court shall -

"hear any evidence given by the applicant or any witnesses called on his behalf and any evidence aduced by or on behalf of the Registrar or the Commissioner of Police or any other person who appears at the hearing."

It appears that the Court was acting upon the basis that an admission had been made by the appellant in open court and that this admission was sufficient to allow the Court to proceed to determine the matter. We do not consider that this was a desirable course in the circumstances that applied in the present case. The applicant was unrepresented and she, according to her affidavit, had a lot more to say with regard to the rate of interest that she proposed to charge than was contained in the admission which appears on the record. In our view, the desirable course would have been to proceed to hear evidence both from the Commissioner of Police and from the applicant.

4. Be that as it may, the Court did proceed to its decision upon the basis of the applicant's admission. The Court ruled:-

5. "Application refused. Interest rate excessive".

We find it a little difficult to understand what exactly was meant by this ruling. Nowhere in Section 11(5) is it indicated that the Court would be entitled to refuse an application where it was satisfied that the applicant intended to charge an excessive, but lawful, interest rate. It may well be that the Court intended to indicate that because the applicant stated that she intended to charge an excessive but lawful interest rate, that the grant of a licence to her would be contrary to the public interest, If this was the ground upon which the application was refused then it is regrettable that the court did not see fit to make this clear.

6. When the matter came on before the Full Bench, the Crown and the representative of the appellant had arrived at an agreement whereby the Crown undertook not to oppose the grant of a licence if the appellant was prepared to accept certain conditions.

7. The conditions proposed by the Crown which the appellant agreed to accept were as follows:-

The Crown having informed us that they would not object to a licence being issued on those conditions, this Court ordered, under Section 11(6) of the Ordinance, that a licence be granted subject to the conditions set out heretofore and directed the licensing Court to issue such licence on the payment to it of the appropriate fees.

8. As we have already indicated any Court hearing a matter under the Money Lender's Ordinance must bear in mind that there is a duty upon it to hear evidence and to conduct its proceedings in accordance with the ordinary rules relating to the conduct of proceedings in a court of record. Finally, we wish to draw attention to record of proceedings which came before this Court. It consisted of a photostat copy of a hand written record which appeared to have been kept by the magistrate. We do not consider that the record should be placed before this Court in such a form. The record should in our view, be typewritten and appropriately certified.

Representation:

Mr. Cheng Huan, (H.M. So & Co.) for applicants.

Mr. Tristram, Counsel for Crown.