DCCJ001286/2001

DCCJ 1286/2001
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 1286 OF 2001
____________________________
BETWEEN
Konew Finance Limited Plaintiff
AND
Lam Ping Fui, Eric 1st
Defendant
2nd
Tang Wai Yee, Christina
Defendant
____________________________
Coram: Judge H C Wong in Court
Date of Judgment: 11 February 2003
 
____________________________
JUDGMENT
____________________________
 
1. This is my judgment after careful consideration of the
circumstances. The plaintiff is a registered money lender and the
plaintiff claims against the defendant for the recovery of a loan
and accrued interest under two loan agreements.
2. The defendants entered into a loan agreement with the plaintiff
on 13 February 1998 for the loan of $200,000 at an interest rate of
3.2 per cent per month and agreeing to repay the sum of $6,400
monthly.
3. This loan was secured by a second mortgage on the defendant's
property at Flat B, 16th floor, 128 Broadway, Mei Foo Sun Chuen
in Kowloon, hereinafter referred to as "the said property". I shall
refer to this loan agreement as "the first loan agreement".
4. The defendant paid a total of $84,600 in monthly payments up
to May 1999 under the first loan agreement.
5. In May 1999, the plaintiff discovered that the said property had
been repossessed by the 1st mortgagee and was subsequently sold.
6. The parties then negotiated on the repayment of the loan and,
upon the 1st defendant's promise to repay upon his impending
retirement when his retirement fund would give him such
sufficient money to repay the loan, the parties entered into a
second loan agreement on 7 May 1999.
7. The loan on the second agreement was for $216,000, although
no further money was paid to the defendant by the plaintiff.
8. The interest rate specified in that second loan agreement dated
7 May 1999 is 3.5 per cent per month, which is equal to 42 per
cent per annum, with the monthly repayment sum of $7,560
payable from 6 June 1999 until the whole loan was repaid.
9. The whole sum was to be repaid within 6 months and it is
further specified that should the defendants default on their
monthly repayment, then the whole loan would become
immediately repayable.
10. Under the second loan agreement, the defendants paid the total
sum of $58,700 in monthly payments up to 2 December 2000.
However, since that date, the defendants failed to pay any further
repayments to the plaintiff.
11. The plaintiff now claims against the defendants for the
payment under the statement of claim under a writ of summons
against the defendants issued on 19 January 2001 for $216,000,
the loan under the second loan agreement and $92,500 in interest
accrued up to the date of the issue of the writ. It further claims
interest at 42 per cent per annum from 7 January 2001 until the
date of repayment of the loan.
12. The defendants filed a defence and resisted the claim of the
plaintiff. Meanwhile, the 2nd defendant was declared a bankrupt
on 5 June 2001.
13. At the trial originally fixed for hearing on 21 November 2002
before Deputy Judge T So, the defendants were absent. The
Deputy Judge ordered the plaintiff to serve the 1st defendant in
writing, at both his office address and his last known address,
which was a residential address.
14. A further order was made for the plaintiff to serve or write to
the Official Receiver as far as the 2nd defendant is concerned, as
judgment against the 1st defendant may affect the interest of the
2nd defendant according to the Deputy Judge's order.
15. At today's hearing I have been shown letters from the
plaintiff's solicitor to the 1st defendant at both his last known
residential address and his office address. The office address
service was not effected for the letter was returned because the
address was said to be incomplete.
16. It is, however, apparent that service on the 1st defendant's last
known residential address is in full compliance with the views of
the court in that this is the address that the 1st defendant put down
in his notice to act in person.
17. The Official Receiver was also duly informed of the date of
the hearing and the Official Receiver has indicated by letter and
replied that he is not going to appear or take any steps in these
proceedings, as far as the 2nd defendant's interest is concerned,
for the Official Receiver does not wish to incur further costs.
18. In the defence filed by the defendants, the defendants admitted
to have received a sum of $190,000 only and admitted further that
they have paid monthly payments under the second loan
agreement of $58,700.
19. At today's hearing, the plaintiff admitted that both the first and
second loan agreements failed to comply with section 18 of the
Money Lenders Ordinance, Cap.163, in that both have failed to
specify the loan in words and have specified in figures only.
20. Further, two, the rate of interest charged on the loan was
expressed as a rate per cent per annum or the rate per cent per
annum represented by the interest charged as calculated in
accordance with schedule 2 of the Ordinance.
21. And, three, a declaration as to the place of negotiation and
completion of the agreement for the loan.
22. Further, the plaintiff in the first agreement infringed section 27
of the Money Lenders Ordinance by charging expenses or
a handling   fee  of $4,000, which has been made illegal under
section 27 of the Ordinance.
23. Furthermore, clause 5 of the first agreement purported to
contract out the jurisdiction of the court in the following terms:
"Interest payable under this deed shall be paid but
notwithstanding that the lender may have obtained any judgment
against the borrower and shall be paid at the aforesaid monthly
rate as well before and after and notwithstanding any such
judgment."

24. Clause 6 of the second loan agreement is in similar terms,

although it was written in Chinese.
25. The plaintiff's solicitor, in his submission today and the
plaintiff in the evidence filed by witness statement of PW1, Mr
Lee, and affirmations filed by Mr Lee, claimed that no prejudice
has been caused to the defendants in spite of their failure to
comply with section 18 of the Money Lenders Ordinance.
26. It has been submitted to me that these were technical breaches
only and that the court has a discretion to enforce the agreement to
such an extent as the court considers equitable subject to such
modifications under section 18(3) of the Ordinance.
27. It has been further submitted by the plaintiff's solicitor, Mr
Lui, that no prejudice has been caused to the defendants because
the defendants understood both the English and Chinese language
and they have read the agreements before the agreements were
signed.
28. According to the terms of section 18(3) of the Money Lenders
Ordinance, clearly the court has such a discretion and may make
such modifications as it sees fit under the circumstances.
29. As to the infringement of section 27 of the Money Lenders
Ordinance, the plaintiff has conceded to deduct $4,000 from the
loan of $200,000 for PW1, Mr Lee, admitted to have only paid
over $185,250 after deduction of the first month's interest of
$6,400 and $4,350 solicitors' charges for the execution of the
second mortgage deed and a further deduction of $4,000
of handling charges by the plaintiff.
30. The plaintiff now concedes that it is seeking to recover
$196,000 of the loans originally extended under the first
agreement.
31. This concession has, obviously, completely changed the loan
amount set out in the two loan agreements because, according to
the table of calculations submitted by the plaintiff's solicitor, Mr
Lui, the reduction of the loan to $160,000 has reduced the interest
payable and the loan amount under the second agreement to
$203,985 after deducting the 38.4 per cent per annum interest
under the first loan agreement.
32. The plaintiff now claims that it is entitled to recover $196,000
in principal of the loan granted and a total of $245,030.86 in
interest up to 21 November 2002, or an interest of $87,765.28 up
to the date of writ at 42 per cent per annum as interest under the
second agreement and also under clauses 3 and 6 of the second
agreement, clause 6 being identical to clause 5 of the first
agreement.
33. The two loan agreements have clearly failed to comply with
the requirements of the Money Lenders Ordinance in many ways,
not only that section 18 was not fully complied with, the plaintiff
had charged handling charges or expenses, which is prohibited by
section 27 of the Ordinance; and further, they attempted to
contract out of the court's jurisdiction in the charging of the rate of
interest after judgment. This last infringement I find to be an
obvious abuse of the court process.
34. The plaintiff seeks to enforce the agreement in these courts, on
the one hand, yet informs the court, in another breath, that it does
not have to comply with the court's order.
35. I have considered the judgments in the two cases cited to me.
The High Court case HCCL79/1999, a judgment by his Honour
Judge Wang in chambers, date of judgment 15 June 2000, in the
case of Orix Asia Limited v Grant Forward Industrial Limited
& Others.
36. Clearly, the case is not from the same section of the Money
Lenders Ordinance, although it is a case on the Money Lenders
Ordinance; it relies on section 20 of that Ordinance, applicable to
surety. Wang J mentioned in obiter that non-compliance under
section 18 of the Ordinance has much more lenient consequences
and that, under section 18(3), the court has a substantial discretion
notwithstanding the non-compliance of section 18(1).
37. The second case is a District Court judgment of my brother
Judge Lok on an appeal from Mr Registrar Au Yeung, and the
date of judgment 1 June 2001, where my brother Judge Lok
allowed the enforcement of the five loan agreements despite the
non-compliance of section 18 of the Money Lenders Ordinance.
38. Considering the background of the present case, the
infringement or non-compliance of the Money Lenders Ordinance
is much wider than it seems from the case before my brother
Judge Lok in DCCJ17916 and the other three cases in his
judgment of 1 June 2001 in that not only section 18 was not
complied with, there's been infringement of section 27 and the
contracting out by the two loans agreement clauses 5 and 6
respectively.
39. After careful consideration of the background of this case, and
the wordings of the two loan agreements, and after taking also
into consideration the defence filed by the defendants admitting to
have received the loan of $190,000 and the payment of $58,700
under the second loan agreement, and after considering the
evidence of Mr Lee and the production of the total monthly
payments under the two loan agreements made by the defendants,
I am prepared to allow the enforcement of the repayment of the
loan principal itself.
40. This is an exercise of my discretion under section 18(3) of the
Money Lenders Ordinance and because, in view of the
infringement or non-compliance of section 18(1) and (2) of the
Money Lenders Ordinance, in fact, I have found the two loan
agreements to be outrageously drafted.
41. However, I consider that it is equitable for the plaintiff to
recover the principal of the loan which the defendants admitted to
have received.
42. However, I would disallow the interest charged under the two
loans agreement and I shall allow the payment by the defendants
of $84,600 under the first loan agreement and the payment of
$58,700 under the second loan agreement, making a total of
$143,300, to be treated as the defendants' repayment of the loan
principal.
43. I shall allow interest to be charged from the date of the issue
of the writ to the date of judgment at half judgment rate and
thereafter at full judgment rate until full payment.
44. As the plaintiff has been successful in recovering the loans, I
shall allow costs to the plaintiff to be taxed if not agreed.
 
 
Judge H C Wong
District Court Judge
 
Representation:
Present: Mr Hermes Lui, of Messrs W K Lui & Co., for the
Plaintiff