Kwok Ying Ming v. Chow Kam Chuen

DCCJ 3491 /2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3491 OF 2006

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BETWEEN

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D E C I S I O N

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1.This is the Plaintiff’s application for summary judgment against the Defendant for the sum of HK$506,000.00 with interest.

Undisputed facts

2.It is not disputed by the Defendant that the Plaintiff:

(1)	made a loan (“the 1st Loan”) of HK$200,000 to him in October 2002 with interest to be charged at HK$6,000 per month.
(2)	made a further loan (“the 2nd Loan”) of HK$60,000 to him in April 2003 free of interest.

3.It is common ground that upon the lending of the 1^st Loan, the Defendant issued to the Plaintiff a cheque (“the Post-dated Cheque”) for a sum of HK$206,000 post-dated to 25 November 2002 (which is about a month after the loan was advanced).

4.When the Plaintiff subsequently presented the Post-dated Cheque, it was dishonoured.

5.It is also common ground that, other than having made a repayment of HK$12,000 as interest for the 1^st month under the 1^st Loan and the month between 26 November and 25 December 2002, the Defendant has not repaid any of the 1^st and 2^nd Loans to the Plaintiff.

6.On 5 April 2004, the Plaintiff and the Defendant signed a document (“the Written Document”) which recorded the facts of the making of the 1^st and 2^nd Loans and the then outstanding sums due from the Defendant to the Plaintiff.  The Written Document provides as follows:

“	<欠款借據>
	鄒鑑泉先生與郭英銘先生之間款項往來
	借款人：		鄒鑑泉先生。 (鄒鑑傳)
	付款人：		郭英銘先生。
	1)	郭生2002年10月25日付港幣貳拾萬元予鄒生，議息每月陸仟元
	2)	郭生2003年4月付港幣陸萬元予鄒生，免息。
	3)	鄒生2003年1月付港幣壹萬貳仟元予郭生，為付02年10月~11   份之息。
	4)	由02年12月至04年1月利息共港幣柒萬捌仟元正，尚未付
	5)	上述款項截至15/2/04，共欠33.8萬 (港幣叁拾叁萬捌仟元
	6)	鄒生付予郭生一張東亞銀行支票銀碼：206,000 – NO: 99124301517340017709 。付款日：25-11-2002 。銀行拒付。另一張東亞銀行支票NO:9912500151734001770901。銀碼：200,000 - 沒有付款   待鄒生指示再入票。
	7)	上列兩張銀行支票已於5-4-2004在馬灣鄉事會退返給鄒 ”

7.On 17 July 2006, the Plaintiff brought the present action seeking to recover from the Defendant the outstanding principals under the 1^st and 2^nd Loans and the interest accrued under the 1^st Loan (after giving credits to the Defendant’s previous repayments of interests).

The Claim

8.The Plaintiff’s claim is a simple one:

(1)	The 1st Loan was made where the Defendant agreed to repay within a month with an interest of HK$6,000, and hence the Post-dated Cheque.  The Defendant has since defaulted and thus should be liable to repay the outstanding principal of HK$200,000 with the interest at HK$6,000 per month so accrued since.
(2)	The 2nd Loan was made to the Defendant with a term that it should be repaid within a year from April 2003.  The Defendant has since defaulted in repaying the same and should thus be liable.

Defences

9.Through his Defence and affirmation filed in opposition of the present application, the Defendant effectively raises the following 2 defences.

The defence on repayment date

10.First, it was agreed between the parties that the 1^st and 2^nd Loans were only repayable upon certain model houses built on Lot No. 641 at Ma Wan are assigned to the Defendant by Sun Hung Kai (“SHK”) (presumably the developer of the houses).  Since these model houses have not been so assigned to the Defendant, the 1^st and 2^nd Loans are not yet repayable.  The Defendant’s case in support of this defence can be summarized as follows:

(1)	The Plaintiff advanced the 1st Loan to the Defendant to enable the Defendant to pay wages to his workers engaged in a project (“the Project”) to build 28 houses in Tai Kai Village Ma Wan with the construction company known as “二年益” (“the Construction Company”).
(2)	There was no specific agreement as to the repayment date under the 1st Loan although the Defendant informed the Plaintiff that he hoped that the money could be repaid when he received the construction costs (“the Construction Costs”) of the Project from the Construction Company.
(3)	The Post-dated Cheque was given to the Plaintiff with the condition that the Plaintiff should only present it upon the Defendant’s instructions to do so as and when the Defendant knew that the Construction Costs would be sufficient to cover his expenses and the repayment of the 1st Loan.
(4)	The Construction Costs turned out to be insufficient and thus the Defendant could not repay the 1st Loan and the interest thereof.
(5)	In December 2002, the Plaintiff and the Defendant agreed that the Defendant shall first pay HK$12,000 to the Plaintiff as interest, and that the 1st Loan together with the interest would only be repayable when one or more of the model houses to be constructed in Lot No. 641 in Ma Wan was assigned by SHK to the Defendant.  The said intended assignment was said to be made under an exchange of the lot for house scheme between the Government, SHK and the Defendant, amongst other residents of Ma Wan.
(6)	In April 2003, while they met at a restaurant discussing the potential for the Plaintiff to sell building materials to or through the Defendant, the Plaintiff, after knowing that the Defendant was in need of money, again offered to lend him the 2nd Loan.  The Defendant accepted the same and it was agreed the 2nd Loan would be repaid together with the 1st Loan when a model house was assigned to the Defendant by SHK.
(7)	On 5 April 2004, i.e., the date when the Written Document was signed, the Plaintiff further agreed to waive the Defendant’s payment of interest on the 1st Loan from February 2004 onwards.  Upon such understanding, the Written Document was signed by the parties.
(8)	Since no model house has been assigned to the Defendant, the 1st and 2nd Loan together with interest are not yet due and thus the Defendant is not liable to repay as claimed.

The money lender defence

11.The 2^nd defence raised by the Defendant is that the Plaintiff is a money lender in advancing the 1^st and 2^nd Loans, and he is in breach of sections 18 and 23 of the Money Lenders Ordinance (Cap 163) (“the MLO”) in respectively failing to provide the Defendant the statutory memorandum under the loan agreements and to register as a licensed money lender.  As such, the loans and interest are not recoverable subject to the Court’s exercise of discretion to allow enforcement.

Applicable principles

12.The principles applicable to a summary judgment application are well known.  The burden is on the Defendant to show a triable defence which is not practically moonshine and is worthy of belief.   The Defendant should also condescend to particulars in support of the defences raised.  See:  Hong Kong Civil Procedure 2007, paras 14/4/3, 14/4/4, 14/4/9.

Do the Defences raise any triable issues

The defence of repayment date

13.I will first deal with the defence based on the Defendant’s case that there was an agreement between the parties that the repayment date of the 1^st and 2^nd Loans would be the day when a model house was assigned to the Defendant.

14.Mr. Leung, Counsel for the Plaintiff, submits that the defence and the allegations in support thereof are simply incredible and frivolous in light of the following:

(1)	It is wholly incredible that if there were in fact such an agreement as to the repayment date, the same had somehow not been included and recorded in the Written Document when the parties decided to reduce the existence of the loans and the outstanding sum in it.  This is particularly so as the Defendant has not put forward any explanation in his evidence as to why the parties regarded it unnecessary to record this important term of the loans in the Written Document.
(2)	The Defendant has failed to provide any documents to support the allegation that he would be assigned a model house by SHK.  If the allegation bears any truth, it is again incredible that the Defendant has no documents whatsoever to back up the story.
(3)	The allegation is contrary to any common and commercial sense, in that a lender would have agreed to a wholly uncertain repayment date.  This is particularly so as it is common ground that the Plaintiff and the Defendant only came to know each other for the first time when the loans were advanced.

15.I accept Mr Leung’s submissions. 

16.In addition to those, I also find it unbelievable that had the Defendant’s allegation been true, there is absolutely no evidence to show and explain why the model house had not been assigned to the Defendant for almost 4 years since October 2002 (when the Defendant was already engaged in the construction of the Project) until the time when the present action was brought.   There is also no evidence whatsoever from the Defendant to show even the present status of the construction of the model house, if any.

17.In the premises, I hold that the defence that there had been an oral agreement between the Plaintiff and the Defendant that the 1^st and 2^nd Loans are only to be repaid when a model house is assigned to the Defendant not worth of belief.  No triable issue arises therefrom.

18.In relation to the waiver of interest as alleged by the Defendant, I also find this incredible, as the same has not been included in the Written Document.    In this respect, it is important to note that clause 1 of the Written Document provides expressly that the interest chargeable on the 1^st Loan is HK$6,000 per month, meaning that the interest would accrue on a monthly basis.

19.For the above reasons, the defence of the repayment date and waiver of interest fail.

The Money lender defence

20.The MLO provides as follows:

“	2.	‘money lender’ means every person whose business (whether or not he carries on any other businesses) is that of making loans or who advertises or announces himself or holds himself out in any way as carrying on that business …
		…
	18.	(1)	No agreement for the repayment of money lent by a money lender or for the payment of interest on money so lent, and no security given to any money lender in respect of any such agreement or loan, shall be enforceable unless –
			a)	within 7 days after the making of the agreement, a note or memorandum in writing of the agreement is made in accordance with subsection (2) and signed personally by the borrower, and a copy of such note or memorandum is given to the borrower at the time of signing; and
			b)	there is included in or attached to such copy a summary, in such form as may be prescribed, of such provisions of this Part and Part IV as may be prescribed.
		(2)	The note or memorandum shall contain all the terms of the agreement and in particular shall set out -
				…
		(3)	Notwithstanding subsection (1), if the court before which the enforceability of any agreement or security comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable, the court may order that such agreement or security is enforceable to such extent, and subject to such modifications or exception, as the court considers equitable.
				…
	23.	No money lender shall be entitled to recover in any court any money lent by him or any interest in respect thereof or to enforce any agreement made or security taken in respect of any loan made by him unless he satisfies the court by the production of this licence or otherwise that at the date of the loan or the making of the agreement or the taking of security (as the case may be) he was licensed:
			Provided that if the court is satisfied that in all the circumstances it would be inequitable if a money lender who did not satisfy it that he was licensed at the relevant time was thereby not entitled to recover such money or interest or to enforce such agreement or security, the court may order that the money lender is entitled to recover such money or interest or to enforce such agreement or security to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

21.Mr. Leung fairly accepts that, if the Plaintiff was a money lender as defined under the MLO, the 1^st and 2^nd Loans were made in breach of requirements under ss 18 and 23 of the MLO.  However, he says that given the evidence now presented before the Court, it should still clearly exercise its discretion to enforce the loan agreements and no triable issue should arise therefrom.

22.In light of Mr. Leung’s concession and submissions, in relation to the defence based on the MLO, 2 sub-issues need to be determined.

23.First, whether there is a triable issue on whether the Plaintiff advanced the 1^st and 2^nd Loans to the Defendant in the course of a money lending business as defined under section 2 of the MLO.

24.Second, even if it is triable that the Plaintiff is a money lender as defined under the MLO, whether the evidence before the Court is clear to show that no reasonable Court after a trial would have refused to exercise the discretion under ss. 18 and 23 to enforce the loan agreements as they are. See:  Orix Asia Ltd v Grant Forward Industrial Ltd, unrep., HCCL 79/1999, 15 June 2000, Waung J, at page 5 of the transcript of judgment.

Whether the Plaintiff is a money lender for the purpose of the 1^st and 2^nd Loans

25.Mr Fong, Counsel for the Defendant, submits that there is clearly a triable issue as to whether the Plaintiff advanced the loans as a money lender.  He relies on the following evidence:

(1)	The Defendant has deposed on oath that he knew that the Plaintiff has previously lent money to others for interest.  This is not denied or rebutted by the Plaintiff.
(2)	It is the Plaintiff’s own case that the very first meeting set up between the Plaintiff and the Defendant was for the purpose of discussing the making of the 1st Loan.  Thus, the matter was conducted in a business like manner.
(3)	The loan transactions, in particular the 1st Loan, were more akin to a commercial dealing than to a causal friendly one since:  (a) the interest rate charged was some 36% per annum which is unusually high if the loan was made only on a casual and friendly basis, (b) the Plaintiff demanded the Defendant to provide him with a post-dated cheque and (after it was dishonoured) and another undated cheque for the purpose of repayment, (c) the Plaintiff and the Defendant were not even friends and in fact they hardly knew each other (as emphasized by the Plaintiff) when the loans were made.

26.Mr Leung however submits that there is simply no or no credible evidence before the Court to make the issue triable because:

(1)	The Defendant’s allegation that the Plaintiff had previous lent money to others is nothing but a bare assertion.  The Plaintiff has in his supporting affirmation confirmed that he has not carried out or held out to be carrying on any money lending business.
(2)	Given that the 1st Loan was intended to be repaid within a month when it was made, the HK$6,000 interest to be payable should not be regarded as evidence to show that the parties were proceeding on a commercial interest rate.  The parties were likely to be only considering what a reasonable sum should be paid as interest to the Plaintiff for a loan that would last only for one month.
(3)	The post-dated and undated cheques were given to the Plaintiff not as a form of security and thus they do not support a case of money lending business.
(4)	The 2nd Loan was interest free, and no money lender would have carried on business as such, in particular when the Defendant has already defaulted in the repayment of the 1st Loan.

27.Whether the Plaintiff advanced the loans as a money lender is a fact sensitive issue.  After considering the submissions and the evidence before me, I have come to the view that there is at least a triable issue as to whether the Plaintiff advanced the 1^st and 2^nd Loans to the Defendant in the course of a money lending business. 

28.I accept Mr Fong’s submissions that the evidence raises at least a triable case on money lender. 

29.Mr Leung’s submissions do not assist the Plaintiff.  The Plaintiff’s own disposition that he carries on no “money lender business” is purely self serving, in particular when he does not in fact deny that he has previously lent money to other people with interest. Whether those transactions render him carrying on a money lending business under the MLO is for the Court to decide but not dependent on how he himself treats them.  Further, to certain extent, the submissions are based on possible inference from or even speculation on the evidence.  They only show that the question is clearly triable.

30.For my part, I also found it rather unusual that the Plaintiff would have been prepared to lend money to the Defendant with interest only on a friendly basis when they hardly knew each other.  On the other hand, the transaction bears the feature of a lending business, in that the risk of lending to some stranger is compensated by the rather high interest rate imposed.

Whether the Court should exercise the discretion under ss 18 and 23 even at the summary procedure

31.Mr Leung submits that the authorities show that:

(1)

in considering whether it should exercise the discretion under ss. 18 and 23 of the MLO, the Court should examine the nature of the breach or breaches in question, their consequences for the parties to the transaction and any other circumstances which may make it inequitable to hold the agreement unenforceable.  See:  Emperor Finance v La Belle Fashion（2003） HKCFAR 402, para 119 per Ribeiro PJ at p 442I-J.

(2)

Further, the circumstances to be taken into account should include matters such as the relative status of the parties, the nature and extent of the default, the way in which it arose, the implications for the borrower, and the attitude of the lender and the general appearance of the contract throughout.  One of the most important considerations is whether the borrower has suffered any prejudice as a result of the non-compliance with the statutory requirements.

32.Mr. Fong does not take issue on these principles as advanced by Mr Leung.  Mr Fong however says that, since the Court has to look at the entire circumstances of the transaction and dealing between the parties before it should decide whether or not to exercise the discretion, I should therefore leave the question to be determined at trial and all the relevant evidence is and could be canvassed. 

33.In Cheung Chow v Cheugn Ng Sheong Steven, unrep., CACV 119/1993, 24 November 1993, Bokhary, Mortimer JJA and Liu J, the Court of Appeal allowed an appeal from the defendant against the summary judgment given by the first instance judge on 2 dishonoured cheques.  Given that the first instance judge concluded that there was a triable issue as to whether the plaintiff was a money lender under the MLO, the only live issue before the Court of Appeal for the purpose of the appeal was whether the judge was right in granting the summary judgment by exercising the discretion provided under ss 18 and 23 of the MLO.  In allowing the appeal, Bokhary JA (as he then was) said at paras 20 and 21 as follows:

“	20.	It is at least reasonably arguable that, as those learned judges held at first instance, the court should be slow to relieve money lenders who fail to comply with [the MLO] regulating their activities, since any other approach would be to frustrate rather than to promote the objects of such legislation. One can understand that point of view, as money lenders are sometimes companies, and the financial penalty is not particularly high when it comes to the criminal sanctions for breaches of the provisions of the relevant legislation.  In a final appeal with all the facts having been investigated, as opposed to an interlocutory one with many relevant facts in issue, this Court would be in a position to give further guidance as to how the discretion should be approached.
	21.	If it be correct for the courts to approach their discretion in the way in which it was approached in the two first instance decisions which I have mentioned – and I don think that we can rule that out at this stage – then it would be important to have a full picture of the activities in general of the money lender in question.  That picture is not before us. Overall, no court can say with reasonable confidence at this stage that it has a clear view of all circumstances which fall to be considered in the exercise of the discretion here in question.”

34.I do not read Cheung Chow as an authority where the Court of Appeal is laying down a general proposition that whenever the question of the exercise of discretion arises in an O.14 application, the Court must invariable allow the matter to go to trial to, so to speak, canvass the entire circumstances relating to the transaction and the dealings between the parties. 

35.Deputy High Court Judge Lam (as he then was) and Hon Kwan J also came to the same view respectively in Celestial (International) Securities & Investment Ltd v William Henry Woo, unrep., HCA 9695/2000, 4 December 2001, at paras 34 and 35, and in Re William Henry Woo ex parte Celestial (International) Securities & Investment Ltd a creditor, unrep, HCB 276/2002, 31 May 2002) at para 16.   Both learned judges are of the view that if the evidence before the Court is sufficiently clear, it is entirely open to the Court in hearing a summary relief to conclude that no reasonable court would refuse to exercise the statutory discretion.

36.In the present case before me, the Defendant has not raised any evidence or even a complaint that (a) he was somehow prejudiced by the Plaintiff’s breach of ss. 18 and 23 of the MLO, (b) the conduct of the Plaintiff as a money lender or in the transactions has been oppressive or objectionable, (c) the interest rate charged under the 1^st Loan is unreasonably high or that the Defendant was somehow misled or coerced into agreeing to the same.

37.Quite to the contrary, the undisputed evidence is that (a) the Defendant is a businessman and has been running his ferry shipping business and (according to his own case) a construction business.  It can thus hardly be said that he is unsophisticated, (b) he is fully aware of the terms of the loans as demonstrated by the Written Document, and (c) the Plaintiff has been indulgent in chasing for repayment for over 3 ½ years without adopting any adverse measures.

38.In light of this evidence, I hold that the contravention of ss 18 and 23 of the MLO does not prevent the Court from granting summary judgment in this case as equity cries out for relief under the provisos. 

39.It follows that the money lender defence also fails.

Conclusion

40.For the above reasons, I give summary judgment against the Defendant in the sum of HK$506,000.  The Defendant shall also pay interest at the rate of HK$6,000 per month from 17 July 2006 until the date of the judgment and thereafter at judgment rate.

41.I further order that costs of the action and this application be to the Plaintiff to be taxed if not agreed with certificate for counsel.

Representation:

Mr. Paul H.M. LEUNG instructed by Messrs Cheng, Wong, Lam & Partners for the Plaintiff.

Mr. Dickson FONG instructed by Messrs Jal N. Karbhari & Co. for the Defendant.