Chow Chun Ting v. Chow So Ngor
Read the full judgment text of HCA 1794/2009 on BabelCite. This High Court CFI judgment.
1. These are Order 14 proceedings in which on 26 February this year Master Levy gave the Defendant conditional leave to defend. She directed that the Defendant should bring into court the whole of the amount claimed by the Plaintiff which is $1,657,437.40. This is an appeal from that order.
Cites 5 cases
|
HCA 1794/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1794 OF 2009 ----------------------
---------------------- Before: Deputy High Court Judge Carlson in Chambers Date of Hearing: 17 May 2010 Date of Judgment (Handed Down): 15 June 2010 ---------------------- J U D G M E N T ---------------------- Introduction 1.These are Order 14 proceedings in which on 26 February this year Master Levy gave the Defendant conditional leave to defend. She directed that the Defendant should bring into court the whole of the amount claimed by the Plaintiff which is $1,657,437.40. This is an appeal from that order. 2.The Plaintiff is a licensed moneylender and the Defendant is the widow of Mr Chung Tung Yuen (“the deceased”) and the administratrix of his estate. He had issued four cheques to the Plaintiff between 4 March and 28 April 2009, totalling the amount of the claim that I referred to in the previous paragraph, all of which have been dishonoured. The Plaintiff is suing on these cheques. 3.The Defendant is defending the action and the Order 14 summons on two bases. Firstly, that the amount represented by the cheques have being paid and therefore that no debt exists and, more vigorously, because of alleged breaches by the Plaintiff of the Moneylenders Ordinance (“the Ordinance”) which are said to render the debt unenforceable. It is submitted on her behalf that the Order 14 summons should be dismissed alternatively, that she should be given unconditional leave to defend. History of Dealings Between the Deceased and the Plaintiff 4.The deceased owned a business trading in hand bags and babies clothing. He was a native, as was the Plaintiff, of the Chiu Chow-speaking region of the Mainland. The Plaintiff in the conduct of his moneylending business would frequently lend money to fellow Chiu Chow-speakers. Since about 2004 and until his death in 2009, the deceased was a frequent borrower from the Plaintiff. The Plaintiff says that the loans made to the deceased were “friendly” in the sense that they were not part of his moneylending business and the monthly rate of 2.5% (or 30% per annum) was less than the commercial rate that he would charge his usual customers in the operation of his moneylending business which is registered as the Yat Cheong Private Loans Company which he has been running since 1985. 5.The evidence is that, in the course of borrowing from the Plaintiff, the deceased or his company the Tung Sun Industrial Company had borrowed a total of $28,731,018.90 represented by 68 cheques. The deceased or his company had repaid, over the years that these loans were made $29,945,245.30 represented by 127 cheques which were drawn either by the deceased or his company. The difference of $1,214,226.40 would have been the interest paid on the various loans. At pages 183-187 of the hearing bundle is a list exhibited to Mr Wallace Chung’s affirmation of 12 February 2010, he being the deceased’s son, which appears to be a complete list of cheques received from the Plaintiff and cheques paid by the deceased or by his company to the Plaintiff. It is from this list that the two amounts in excess of $28 and $29 million respectively is obtained. 6.The Plaintiff in his 5th affirmation has said that in 2004 the deceased, with whom he had been friendly since the previous year, asked him if he would be prepared to lend him money. He said that it was not for him but for his customers who wanted to borrow money. He said although the money was not for him he would be personally responsible to the Plaintiff to ensure that it was repaid. In view of their friendship and because he considered the deceased well-off, he owned expensive cars, his home was substantial and in a good area and he had provided expensive wedding receptions for his three sons’ at the Intercontinental Hotel, he was prepared to lend him all the money that he did. He was confident that it would be repaid. 7.The deceased had asked him to let him have a discounted interest rate because they were friends. The Plaintiff says that he usually charged between 3% and 3.5% per month when extending loans through his moneylending business. In that business he could not be seen to treat customers differently. And so, in the deceased’s situation he went outside his moneylending business. What he did was to ask his own friends whether they would be prepared to lend to the deceased. They were, and so he would collect their contributions to the loans and write out the cheques that one sees in the long list recording their respective transactions. Because of friendship and the fact that these loans were outside his ordinary moneylending business he felt able to charge less interest which, in the deceased’s case, was 2.5% per month. The fact that these were transactions which were not part of his business explains why he did not record the loans in a written memorandum as required by the Ordinance which he would have done in the usual course of his business. 8.At paragraphs 15 to 20 of his 5th affirmation dated 24 February 2010 [pages 81-82], the Plaintiff relates the system that the two men used. He would write out a cheque to the deceased who would give the Plaintiff a post-dated cheque. By using cheques it was easy to keep track of payments between them. He gives an example at para.16 [page 81] in relation to the first loan of $500,000 which was for three months. The deceased gave the Plaintiff a cheque for $37,500 for the interest over this three-month period and then repaid the principal when it was due. This represented the pattern of lending and repayment and if the deceased was not able to repay principal on the due date, he would renew the loan by paying a cheque for the interest for the new period of the loan. The Plaintiff says, and this is plain from the long list of loans and repayments, that they were able to operate successfully in this way for five years without any mishap until the final four cheques which were dishonoured. These cheques related to a time when the deceased was not well and latterly had been in hospital prior to his death. 9.The Plaintiff’s case is that this is an unanswerable claim. The deceased’s sons, principally Wallace, who seems to have conduct of this on behalf of the family, is seeking to take advantage of his father’s death to try and get out of what is owed by taking these specious points on the Moneylenders Ordinance. The simple fact of the matter is that there exists in the list a full record of the payments and repayments between the two men. Over the course of five years, the deceased had been pleased to have these considerable amounts of money, over $28 million lent to him (or perhaps for his friends) which he was able to repay together with the agreed rate of interest at 2.5%. This claim is perfectly straightforward. The cheques were issued, presented and have not been met. There is no defence to the claim. The Defences 10.The Defendant having adopted this stance, the court is obliged to consider the points taken at face value. It seems to me that the first issue raised which is that the amounts represented by the cheques have been paid and therefore that no debt is owing simply cannot stand up to any sensible scrutiny. 11.The arithmetic has been done by Mr Deng, who appears for the Plaintiff on this appeal, by taking the list [pages 183-187 supra] and analysing the four loans which are represented by the four cheques and which are the subject matter of the claim. This he has done by superimposing on the list coloured in orange the four loans, in issue, advanced to the deceased. In yellow, he has marked the repayment of interest in respect of the first loan of $521,863.40, the second of $423,628 and the third of $500,000. The evidential foundation for this is related by the Plaintiff in his third affirmation dated 28 December 2009. It is helpful to set out his evidence in full as it relates to this [see paras 6-12, pages 39-42]:
What all this amounts to, as the coloured-in list annexed to Mr Deng’s submission shows, is that there remains outstanding these four cheques totalling $1,657,491.40. This represents a simple arithmetical fact which the Defendant cannot dispute and so had this been the only issue raised by the Defendant, the Plaintiff would have been entitled to his summary judgment. 12.However, there is a second broad limb to the defence which relates to defences available under the Moneylenders Ordinance. 13.It is true to say that it was not until his 5th affirmation that the Defendant revealed that he was a registered moneylender. It is a fact that the deceased was perfectly content to deal with the Plaintiff for five years on the basis which has been described by the Plaintiff in paras.39-42 supra of his 3rd affirmation without troubling over the statutory safeguards contained in the Ordinance. Now that he has died the Deceased’s estate is crying foul and refuses to pay hoping to be vindicated by the court. The various points having been taken, these will need to be considered and dealt with on their merits. 14.By virtue of section 18 Moneylenders Ordinance, the following formalities are required to have been complied with in respect of transactions to which the Ordinance relates:
The Plaintiff accepts that these formalities have not been complied with in respect of any of the loans that were made to the deceased and most particularly including these four cheques. Two issues arise on this. Firstly, the fundamental one that although a registered moneylender, these transactions were not part of the Plaintiff’s moneylending business and secondly, the question of the court’s discretion to enforce a loan notwithstanding non-compliance with sub-sections (1) and (2) of section 18. 15.The discretion to overlook non-compliance with these sub-sections is set out in sub-section 3 of section 18 which says this:
16.It is convenient to first consider the question of whether these loans fell outside the Plaintiff’s moneylending business. In this regard, it is important to apply Order 14 principles. The burden rests on the Defendant to raise a triable issue once the Plaintiff has established the basis of his case. In this matter the Plaintiff, suing as he does on these four cheques, it being trite law that a cheque is as good as cash, plainly has established his case. The matter therefore falls to be determined on the basis of whether the Defendant can show that there are triable issues. It is sufficient for this purpose to refer to the case of Man Earn Ltd v Wing Tong Fong [1996] 1 HKC 225 which explains how this comes about in practice. 17.In deciding whether these numerous transactions represented by so many cheques over a period of five years in which a total (going both ways) of over $56 million changed hands at, on the Plaintiff’s case, annual interest of 30% [2.5% per month] fell outside his moneylending business, the Plaintiff is always going to be very hard pressed indeed to show that these transactions fell outside that business and were distinct “friendly” loans. There is no doubt that on the authorities, it is possible for a registered moneylender to lend money to friends and relatives outside his core business. Whether this is so depends on the evidence in each case and with such matters will always be a question of fact and degree. In this case, at the very least, it is highly arguable that this was the Plaintiff lending on a commercial basis as part of his business. Whilst, I appreciate that there are points that can be made going the other way, a definitive resolution of this issue would need the matter to go to trial. And so, on this aspect the Defendant has shown a triable issue. 18.The next more contentious issue is the question of whether at this stage, it is open to the court to exercise its discretion, under section 18(3), in Order 14 proceedings in circumstances where the Plaintiff accepts that there never has been compliance with section 18(1) and (2). Indeed, the Plaintiff has sought to rely on this fact as demonstrating the “friendly” nature of the two men’s dealings based on friendship and trust. 19.I am satisfied on the authorities to which I have been referred that a court can, even on a paper proceeding such as this, exercise its discretion to excuse non-compliance. There is no need per se to defer such a decision to a trial at which the witnesses could be cross-examined. This is plain from a consideration of the cases of Emperor Ltd v La Belle Fashions Ltd [2003] 6 HKCFAR 402, Strong Offer Investment Ltd (in Liquidation) v Nyeu Ting Chuang [2007] 3 HKC 234 and Treasure Spot Finance Co. Ltd v Li Chik Ming & Anr (unreported HCA 5387/2001). 20.The sub-section requires the court to look at all the circumstances. The undoubted fact is that the Plaintiff and the deceased had been accustomed to doing business in this way for five years. There is nothing in the record of transactions as represented by all of these cheques that would indicate that the Defendant had in any way been deceived or short-changed. The Plaintiff’s explanation of how they proceeded, which I have recited extensively, holds together as a sensible narrative. Short-term loans were advanced at 2.5% per month and when the deceased was not in a position to repay the principal, he merely rolled-over the loan for a further short period on payment of the requisite interest. This is all accurately reflected in the list which I have set out above. 21.Another feature is that the deceased was an experienced businessman in business for about 40 years. He may have needed these loans for himself or for his friends, it matters not which it was, and presumably could not raise the money from a cheaper source such as a primary bank and therefore had to look to somebody like the Plaintiff to provide the funds at considerably higher rates of interest which he was willing to pay and which over the years he did pay. It is submitted by Mr Deng that he knew what he was doing and obviously was content to obtain loans in this way. As between lender and borrower, the Plaintiff and the deceased, who it would appear enjoyed a cordial relationship, I would have thought that after all these years of uneventful and perfectly orderly dealing between them that it would be (to use the words of the Ordinance) inequitable not to enforce the loans as now represented by these four cheques. There is no evidence that in these transactions over the years, there was any pressure on the deceased to enter into the loans and he was willing and apparently able to “roll them over” by paying the appropriate amount of interest for the periods of extension of the paticular loan. 22.In such circumstances, I would have been prepared to exercise my discretion under sub-section 3 as between the two principals in favour of enforcement of the loans and this would also have related to any irregularity contravening section 22 which prohibits compound interest being charged, as it does prohibitions on the repayment of loans by instalments and the rate or amount of interest beingincreased by reason of default in the payment of sums due under the agreement. I can discover no irregularities of this sort here but had there been, again as between the two principals, I would have exercised my discretion to enforce the agreement to the extent appropriate having regard to any irregularity which would have required the agreement to be suitably modified and enforced accordingly [see section 22(3)]. 23.The question that now arises is whether the matter is to be viewed differently due to the fact that it is the deceased’s estate that is being sued. Should the administratrix be given more leeway, as it were, in defending this application for summary judgment despite the fact that the court might well have entered judgment against the deceased had he been personally sued during his lifetime. Before I attempt to answer this, it is as well that I should refer to one other matter that is relied on by Mr Kenneth Chan, who appears for the Defendant. 24.The evidence of Mr Wallace Chung is that in 2005 at his father’s office, he had been introduced to the Plaintiff by his father [pages 70-73]. Shortly after that meeting, he discovered a business card in the Plaintiff’s name with a company name “Yat Cheong Finance Company”. Since this has all come to a head, Mr Chung has done a company search and he has not been able to find any business in the Plaintiff’s name under Yat Cheong Finance Company. His registered moneylending company, which has been so registered since 1985, is Yat Cheong Private Loans Company. What I am asked to conclude from this, or at least hold that there must be a triable issue meriting further investigation and explanation at the trial, is that the Plaintiff was conducting, at least in 2005, an unregistered, unlicensed and therefore illegal moneylending business which if proved would make any loans through it illegal and, of course, irredeemably unenforceable. And so, this evidence as well is placed before the court as an obstacle in the Plaintiff’s way which should prevent him obtaining summary judgment. The Defendant’s Arguments 25.Mr Chan has submitted that the points that I have referred to taken either individually or in combination are sufficient to require the Plaintiff to be taken to trial and without the imposition of any conditions. He submits that this is the sort of case, given the Defendant’s position as administratrix of the deceased’s estate, in which there are at worst some other reasons for trial as prescribed under O.14 rr.3 and 4 and to that extent therefore an administratrix is perhaps at an advantage over a living principal debtor to a series of transactions such as these. For this, Mr Chan has relied on Miles v Bull [1969] 1 QB 258, a decision of Megarry J (as he then was). This was of course a case decided on its own facts. These are sufficiently recited in the headnote to the report as follows:
Having considered the facts of the case, Megarry J decided that the Defendant’s wife had no arguable defence to the claim but that this was a transaction that ought to be scrutinised with some care because, on those facts, it bore the appearance of a device to evict the Defendant. He then went on to consider the effect of the then new rules 3 and 4 of Order 14. Under rule 3(1), if a defendant satisfies the court “that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial” then it would be inappropriate to enter summary judgment. Megarry J. then discussed the significance of these words which bear repetition here:
In that case, the Master had given the wife unconditional leave to defend and Megarry J upheld his decision. Here also, Mr Chan submits, I should also give this defendant the same accommodation. 26.What Mr Chan is saying is that in the absence of the deceased, it is only the Plaintiff who can provide first-hand evidence of their relationship in respect of these loans. He should be obliged to give that evidence at the trial where his account will be closely investigated and tested in cross-examination. Before that he will be required to provide discovery of his moneylending business and he will have to fully explain the persistent breaches of section 18(1)(2) of the Ordinance and provide a full history of his dealings. Only then, having established what the Plaintiff has said, the court can properly decide whether to enforce the loans notwithstanding the breaches of the Ordinance. He will also need to explain his calculations as to interest, it not being accepted that these payments are at a rate as low as 2.5% per month. He will also have to explain the name on the business card that was found by Wallace Chung in 2005 which is in the name of a company that is not a registered moneylending company. Conclusions 27.Certain conclusions need to be arrived at by me before I can decide how the appeal should be disposed of. Firstly, there is an eminently arguable case for saying that all of these transactions were on a commercial, as opposed to a friendly basis and were therefore conducted under the umbrella of the moneylending business. This being so the terms of the Ordinance must apply. There have been serial breaches of section 18(1)(2). As to this issue, the balance of the evidence must favour a defendant in her particular position. That means the Plaintiff needs to persuade the court to exercise its discretion to overlook breaches of section 18 and (if any) section 22 and enforce the debt as appropriate to the breaches that will need to be forgiven. The history of the relationship between the deceased and the Plaintiff would suggest that if this were an action between the two of them I would have been disposed to have exercised my discretion in the Plaintiff’s favour. However, this is not an action between these two. In this case, the position of the administratrix needs to be given added consideration, rather in the way that Megarry J considered appropriate in his judgment in Miles v Bull supra. I have already held that as a matter of arithmetic I am satisfied that the claim is a correct one which only leaves over the issues covered by the Ordinance. 28.I have decided therefore that the issues that I have discussed in the previous paragraph require the scrutiny that only a trial can provide. I say this notwithstanding that there is a distinct element in this application that those advising the administratirix have been busy scrambling about looking for ways of getting out of honouring these four cheques. In the event, they have got there for the reasons that I have given, albeit standing on shaky ground. I do not think that this is a case for unconditional leave to defend. I agree with the Master that the Defendant will have to bring into court the whole of the claim within 42 days of the date of this judgment. I have not been provided with any firm evidence why she cannot do so. If she is able to show cause why she cannot pay any or all of this amount into court, she must apply to me and provide detailed and compelling evidence why she cannot comply with this condition. 29.The appeal therefore must stand dismissed as will the appeal against the refusal to stay execution of the order in this case because I have provided a further 42 days for the Defendant to comply with the requirement to pay into court during which time the Defendant will be able to apply to show cause why she cannot do so. Costs 30.These should follow the event to be taxed on a party and party basis if they cannot be agreed. The costs order will be an order nisi.
Earl Deng, instructed by Messrs Philip Chan & Co., for the Plaintiff Kenneth C L Chan and Rita So, instructed by Messrs Tony Au & Partners, for the Defendant |
Cases cited in this judgment
Further hearings and rulings under HCA 1794/2009