Hang Seng Finance Ltd v. Chow Mow Shing Kenny

DCCJ007892/1983

Hire-purchase of motor vehicles - measure of damages whether penalty or liquidated with deemed repudication - judgment and assessment at the same time in Chambers to save time and costs when pleadings and supporting evidence permitted - Part IV of Money-Lenders Ordinance Cap. 163 applicable to all money-lending transactions - duty of court to rule on whether transaction extortionate and effective annual rate of interest unconscionable -"Rule of 78" (now extended to Rule 666) applied.

IN THE DISTRICT COURT O HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 7892 OF 1983

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Date: 28th November, 1983.

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EX TEMPORE JUDGMENT

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1. This is an application for leave to enter judgment under Order 84 Rule 3 of the Rules of the Supreme Court in respect of the plaintiff's claim under a hire purchase agreement. Proceedings under this rule can only apply to a claim for liquidated damages, i.e. a genuine pre-estimate of damage and not a sum which may be a penalty, which is actually stipulated or can be positively ascertained by reference to a formula set out in the agreement upon which the plaintiff relies. If the Court is not satisfied that leave to enter judgment should be given the matter will have to proceed to trial. This is clear from the former Order 84 of the White Book, upon which the Order is based, and the authorities there quoted.

2. The agreement concerns the purchase of a Nissan motor vehicle. The amount financed is $38,000; the hire charges (which for most part actually means interest) are $14,236; and the defendant as hirer had paid up 22 monthly instalments of $1,451 each, amounting to $31,922. The mode of repayment as provided by Clauses 1 and 2 was by 36 monthly instalments. By Clause 13 of the Hire Purchase Agreement the defendant was deemed to have repudiated the agreement when he failed to pay any tyro successive instalments of the hire rent as he in fact did. By a letter dated 15th December, 1982 the plaintiff accepted the defendant's repudiation in effect.

3. The effect of Clause 13 appears to be that the owner has the option to determine the agreement when the hirer fails to pay two instalments, but only when this option is exercised by the owner is the hirer deemed to have repudiated the agreement, i.e. related back repudiation.

4. In the Ho Fai (1975) DCLR 130 Judge Power ruled that an owner who pursues a claim for liquidated damages under the agreement after a repudiation by the hirer indicates that he does not accept the repudiation but wishes the contract to stand so that he can enforce his rights under it. However a person who accepted a repudiation of the hire purchase agreement was entitled to recover unliquidated damages. I would respectfully agree.

5. Although this is an ex-parte proceedings for judgment under Order 84, the pleadings and the supporting evidence including the supporting affirmation and the copy Hire Purchase Agreement were so perfectly prepared that I can combine the two steps of entering judgment and assessment of damages at one go in order to save time and costs. The evidence to be adduced at the second stage of assessment would be exactly the same as they are before me.

6. Now the question of assessment. Those parts of the Money-Lenders Ordinance which regulate formalities, licensing and etc. have no application to bank, finance company and other concerns. The plaintiff is a finance company. However, Part IV which governs the rate of interest and disallows unconscionable interest applies to all. Between 48-60% as an effective annual rate, it is presumed to be unconscionable but the Court has a discretion to declare that the agreement is not extortionate having regard to all the circumstances relating to the agreement bearing in mind that such rate is not unreasonable or unfair; when the interest exceeds 60% per annum it is void ab initio (See section 24(1) and section 24(3) ) No later than 1962 in Bridge v. Campbell Discount Co. Ltd. (1962) A. C. 600 at 632 the House of Lords (per Lord Denning) decided:

"Now that equity and law are one, the hire-purchase company should recover its actual damage, and such damage should be assessed according to the realities and not according to any fiction. The hire-purchase company should recover the money it has advanced with interest at a reasonable rate up to the time when the hiring was terminated, less the instalments already received and the sum which the car might reasonably be expected to realise when it was delivered up to them."

Incidentally Bridge's case also dealt with the issue of penalty at pages 614, 615, 624, 629 and 632. It is the Court's duty to ensure that the transaction is not extortionate, the rate of interest is not unconscionable and that fairness and justice must prevail in all the circumstances.

7. In Chartered Finance (HK) Limited v. Helen Fashions Garment Co. Ltd. & Another (1978) DCLR 20, the Bridge case was applied and other approaches considered. In effect, Judge Jones (as he then was) invoked what has been commonly known as "Rule of 78" which emanated from the line of English high authorities like Bridge. The device is to obtain in reality what is generally known as rebate, i.e. the allowance or deduction for the accelerated payment of the capital outlay that the owner (hire purchase company) would otherwise have received by instalments.

8. Returning to this instant case, this has been done by solicitor under the particulars to the Statement of Claim and fully supported by affirmation and other necessary supporting documents like the Hire Purchase Agreement itself. The rebate of hire charges as at 14th December, 1983 is correctly calculated and has again been correctly worked out by solicitor in his pleadings. The amount to be awarded in my judgment is to be exactly as pleaded as follows:

9. I combine the two stops together and I enter judgment for the plaintiff and assess damages at $18,069.59 as claimed. Judgment for plaintiff in that sum with interest at the rate of 8% per annum from date of writ to the date of judgment and with further interest at the rate of 13? per annum from date of judgment to the date of payment.

10. Costs to the plaintiff on the Upper Scale.

11. I am indeed obliged to Mr. Lau for his, as I have said, almost perfect preparation in this case.