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Li Po Lai And Another v Tai Wo Finance Ltd

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date30 October 2017
Year2017
Judgement NumberDCCJ556/2017
Subject MatterCivil Action
CourtDistrict Court (Hong Kong)
DCCJ556/2017 LI PO LAI AND ANOTHER v. TAI WO FINANCE LTD

DCCJ 556/2017

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 556 OF 2017

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BETWEEN
LI PO LAI 1st Plaintiff
LEE KIN TAI 2nd Plaintiff
and
TAI WO FINANCE LIMITED Defendant

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Coram: His Honour Judge Ko in Chambers
Date of Hearing: 20 October 2017
Date of Decision: 30 October 2017

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DECISION

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1. This is the plaintiffs’ application for summary judgment pursuant to Order 14 of the Rules of the District Court.

Background

2. The defendant is a money lender licensed under the Money Lenders Ordinance, Cap 163 (“MLO”). This case concerns three loans extended by the defendant to the plaintiffs.

3. By the 1st agreement made between the defendant as lender and the plaintiffs as borrowers on 3 October 2016, the defendant agreed to lend $500,000 to the plaintiffs for a period of 6 months subject to the terms of the agreement and upon the security of the plaintiffs’ property in a residential development known as The Reach in Yuen Long.

4. By the 2nd agreement made between the defendant as lender and the 1st plaintiff as borrower on 3 October 2016, the defendant agreed to lend $300,000 to the 1st plaintiff for a period of 6 months subject to the terms of the agreement and upon the security of a property in a residential development known as The Apex in Kwai Chung and a commercial property in New East Sun Industrial Building in Kwun Tong both owned by the 1st plaintiff.

5. By the 3rd agreement made between the defendant and the 1st plaintiff on 14 October 2016, the defendant agreed to lend $100,000 to the 1st plaintiff for a period of 12 months subject to the terms of the agreement and upon the security of the 1st plaintiff’s property in The Apex.

6. It is common ground that the plaintiffs have subsequently made the following repayments:

(a) $10,000, $6,000 and $2,500 were repaid in November 2016 against the 1st loan, the 2nd loan and the 3rd loan respectively.

(b) Upon the sale of the plaintiffs’ property in The Reach, a sum of $902,000 was paid to the defendant on 19 December 2016.

(c) Upon the sale of the 1st plaintiff’s property in The Apex, a sum of $89,500 was paid to the defendant on 10 February 2017. The parties have also tried to pay $18,226 into court, but the payment was not effected as they have not answered the Master’s requisitions satisfactorily.

7. The defendant has confirmed that all the principal and interests due under the 1st loan and the 2nd loan had been settled. As for the 3rd loan, the defendant was apparently comforted by the payment received in February 2017 and released the security.

The claim

8. It is the plaintiffs’ case that notwithstanding the loan amount stated in the loan agreements, only $480,000, $286,000 and $92,000 were in fact lent.

9. According to the 1st plaintiff, she was told on each occasion when she received the money that the difference “was deducted from the loan as legal fees charged for preparation of the loan agreement and all other relevant documents.”[1]

10. The plaintiffs contend that such deductions contravened s 27 of the MLO and rendered the loan agreements illegal. Consequently (so the argument goes), the defendant may only recoup from the plaintiffs the amounts actually lent but not to charge further for interest or other charges.

11. By this action, the plaintiffs claim:

(a) in respect of the 1st loan, a declaration that the loan agreement was illegal and that the plaintiffs were only indebted to the defendant in the sum of $470,000 (being $480,000 – $10,000) as at 19 December 2016;

(b) in respect of the 2nd loan, a declaration that the loan agreement was illegal and that the 1st plaintiff was only indebted to the defendant in the sum of $280,000 (being $286,000 – $6,000) as at 19 December 2016;

(c) in respect of the 3rd loan, a declaration that the loan agreement was illegal and that the 1st plaintiff was only indebted to the defendant in the sum of $89,500 (being $92,000 – $2,500) as at 10 February 2017; and

(d) repayment of $152,000.

The defence

12. The defendant has yet to file a Defence.

13. It is not apparent from the affirmation in opposition that the defendant is disputing the fact that only $480,000, $286,000 and $92,000 had been lent under the respective loan agreements.

14. At the hearing, Mr Yip (counsel for the defendant) mounted a threefold defence: (i) the loan agreements were not illegal under s 27 of the MLO; (ii) the parties were in pari delicto so much so that the court should not assist the plaintiffs in recovering any money paid under an illegal contract; and (iii) the defendant would rely on the severance clause in the loan agreements insofar as any part of the loan agreement is ruled illegal by the court.

The principles

15. The applicable principles are well established and have been fully set out in Hong Kong Civil Procedure 2018 (“HKCP 2018”).

16. For the purposes of this application, the following points may be emphasized:

(a) The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence to the plaintiff’s claim.

(b) In every summons for summary judgment, the first considerations are whether the case comes within the Order and whether the plaintiff has satisfied the preliminary requirements for proceedings under Order 14. If these procedural considerations are satisfied and the plaintiff has raised a plausible and prima facie sustainable case, the burden (as it were) then shifts to the defendant to satisfy the court why judgment should not be given against him.

(c) In practice, the court will generally require an affidavit from the defendant before it will feel satisfied that the defendant is entitled to leave to defend. The defendant’s affidavit must condescend upon particulars and should, as far as possible, deal with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it.

(d) The test at this summary stage is simply whether the defendant’s assertions are believable. The court must not embark on a mini trial on affidavits and the summary procedure is not appropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact.

Discussion

(1) No statement from the plaintiffs of no defence

17. One of the necessary conditions for proceeding under Order 14 is that the application must be supported by an affidavit that states the deponent’s belief that there is no defence.[2]

18. At the beginning of the hearing, I drew parties’ attention to the fact that the plaintiffs had omitted to state in their supporting affirmations that there was no defence and referred parties to Hongkong Chinese Bank Ltd v Delon Photo & Hi-Fi Centre Ltd [2000] 3 HKC 71 at 74F-75D. The plaintiffs’ solicitors gave an undertaking through the plaintiffs’ counsel (Ms Tang) to rectify the defect upon the defendant raising no objection and the argument proceeded. Eventually, the 3rd affirmation of the 1st plaintiff was filed before the conclusion of the hearing and the defect is cured.

(2) Contravention of section 27 of the MLO

19. Section 27(1) materially provides that:

“Any agreement entered into between a money lender and a borrower … for the payment by the borrower … to the money lender of any sum for or on account of costs, charges or expenses (other than stamp duties or similar duties) incidental to or relating to the negotiations for or granting of the loan … or the guaranteeing or securing of the repayment thereof shall be illegal.”

20. The plaintiffs have exhibited the cheques in question evidencing the amounts actually received by them. It is clear (and not disputed by the defendant) that $20,000, $14,000 and $8,000 (totaling $42,000) had been deducted from the loans.

21. Mr Yip has obviously missed the point when he argued that there was no contravention of s 27 as the repayments were neither charged during the negotiation process nor for the procurement of the loans (see paras 30-31 of his skeleton submissions). As I have made plain to him, the focus should be on the deductions.

22. At the hearing, Mr Yip tried to distance the defendant from the illegality by suggesting that the defendant might not know about the deductions. This is futile.

23. It is trite that the defendant must condescend upon particulars and state clearly and concisely what the defence is and what facts are relied on to support it.[3] In the opposing affirmation, the defendant’s General Manager (Mr Chu) is curiously silent on the amounts advanced to the defendant’s solicitors for the purpose of the loans (see paras 13 and 23 of his affirmation). Against the plaintiffs’ clear assertions that legal fees had been charged in contravention of s 27, Mr Chu was only prepared to say that he “was not present for the discussion of the legal charge and issuing the cheques to the Plaintiffs” (see paras 19 and 26 of the affirmation in opposition) without specifically denying the defendant’s knowledge of or involvement in the arrangement.

24. This court is entitled to act on the plaintiffs’ evidence when such evidence is not contradicted by the defendant. I find that there is a contravention of s 27(1) in making the deduction totalling $42,000 as “legal fees charged for preparation of the loan agreement and all other relevant documents”.

25. The consequence of a contravention of s 27 is provided under s 27(4), which is in these...

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