HCA 1244/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1244 OF 2015
________________________
BETWEEN
  SWISS FINANCE Plaintiff
MORTGAGE SERVICES
LIMITED 
(瑞信物業按揭服有限公司)
  and  
  WONG KAM FAN (黃錦藩) 1  Defendant
st

  SZETO YUK PING (司徒玉 2  Defendant

nd

萍)
________________________
Before: Hon B Chu J in Chambers
Dates of Hearing: 14 September 2016
Date of Judgment: 22 December 2016
________________
JUDGMENT
________________
Introduction
1. This is an appeal by the defendants (“Ds”) against Master A Ho’s
decision to enter judgment against them for the sum of HK$1.32m
plus interest .
2. The plaintiff (“P”) was/is at all times a money lender licensed
under the Money Lenders Ordinance, Cap 163 (“MLO”).
3. By a loan agreement dated 17 April 2015 (“Loan Agreement”),
P lent to Ds the sum of HK$1.32m with interest thereon at 30% per
annum.  The loan was repayable by 12 equal monthly instalments,
commencing on 17 May 2015 (“Loan”).  On the same day, Ds also
signed a schedule setting out the interest rate, the monthly
instalments of interest payable by them, and the date of repayment
(“Repayment Schedule”).
4. At the time of entering into the Loan Agreement, Ds disclosed
that they were registered owners of a property in Lei Cheng Uk
Estate (“Property”) and they signed a letter of declaration to P at
the same time as the Loan Agreement, to declare, among other
things, all the then credit facility/loan in respect of the Property
(“Letter of Declaration”). In the Letter of Declaration, Ds declared
that there were : (i) the outstanding balance of principal and 
interest  under a legal charge to Bank of China (Hong Kong)
Limited of HK$233,200 (“1  Mortgage”) and (ii) the outstanding
st

balance under a deed of loan from EGO Finance Limited of

HK$900,000 (“2  Mortgage”).
nd

5. Pursuant to Clause (5) of the Letter of Declaration, Ds agreed to

notify P in writing and to obtain prior written approval from P
should there be any change in the information given to P in the
Letter of Declaration.
6. However, on 30 April 2015, Ds entered into another loan
agreement with one Gain Wealth Global Credit & Investment
Limited for an amount of HK$800,000.  Ds failed to notify P in
writing or to obtain P’s prior written approval for this loan.
7. Upon discovery, P demanded immediate repayment from Ds on
18 May 2015 the outstanding balance of the Loan with interest.
Despite P’s repeated requests, Ds failed to repay the outstanding
balance of the Loan.
8. This led to P issuing the writ herein in June 2015, followed by a
summons issued in August 2015 to enter default judgment against
Ds (“P’s Summons”).  It was only in December 2015 that Ds
issued a summons for leave to file their defence and counterclaim
(“D&C”) out of time (“Ds’ Summons”).
9. The two summonses were heard together and on 13 July 2016,
Master Ho ordered that final judgment be entered for P, and ordered
Ds to pay P the sum of HK$1.32m plus interest and costs.
10. Notwithstanding lodging the appeal, Ds had not applied for any
stay of execution of the order.
11. Mr Dennis To appeared for P and Ms Alison Choy appeared for
Ds at the appeal before this court.
D’s evidence
12. The 1  and the 2  defendants (respectively “D1” and “D2”) are
st nd

husband and wife.  Their evidence was that in February 2015 they
intended to take out a loan of HK$1.32m from P, and were
requested by P’s director, Mr Chan Hoi Leung (“Mr Chan”), to
make a total payment of HK$12,000 as legal fees in February and
in March 2015.  Thereafter, they met with  Mr Chan on 17 April
2015 (“Meeting”).  Ds had understood that the principal of the
Loan would be HK$1.32m and the interest thereon would be
HK$33,000 payable per month on the 17  day of each month and
th

the principal would be repayable in 12 months’ time.  They alleged

they were also told to pay handling fees, at 2 % of the principal
(“Handling Fees”).
13. According to Ds, at the Meeting:
(i) Mr Chan had already prepared all the necessary
documents beforehand;
(ii) Mr Chan did not explain to Ds the contents of the
documents before asking them to sign;
(iii) Mr Chan assured them that the signing of the
documents was just for formalities;
(iv) Ds were not advised to take independent legal advice;
(v) There was no cooling off period given to Ds to
discuss further with their family members and were
pressurized to sign everything on spot; and
(vi) Mr Chan told them the cheque was with P’s solicitors
Messrs Ho & Associates, and that Ds had to hurry up,
sign the documents and to arrive at the solicitors’ office
before close of business that day, as the solicitors’ office
would not be open the next day which was a Saturday;
(vii) The Meeting only lasted for about 15 to 20 minutes;
(viii) During the Meeting, Mr Chan was informed of Ds’
financial situation, namely Ds were not in employment
and had no income and Mr Chan lured them into signing
 the Loan Agreement.
14. Ds claimed they were feeling pressurized and that after the
signing of the documents which they came to know later as the
Loan Agreement and the Letter of Declaration[1], Ds immediately
went to P’s solicitors’ office and received a cheque for
HK$775,100.According to Ds,  this amount was part of the
principal of the Loan minus (i) HK$6,000 being further legal fees;
and (ii) HK$26,400 being the Handling Fees.
15. It was not quite clear as to how the balance of the Loan was
paid, but Ds did not dispute that the balance had been paid by P.
16. Mr Chan had made 5 affirmations on behalf of P. He confirmed
that he did explain the contents of the Loan Agreement and the
Letter of Declaration to Ds and that he did advise Ds that they were
free to instruct their own legal representatives, and that he never
pressurized Ds to sign anything or to push them to attend P’s
solicitors’ office.  On the other hand, it was Ds who were simply
desperate for money and they wished to have the money as soon as
possible.
17. Mr Chan said that as the Property was a housing unit under the
Home Ownership Scheme, Ds would first need to apply for
permission from the Housing Authority before they could mortgage
the Property as security for the Loan, and as Ds did not have
money, they sought immediate financial assistance from P and P
granted them the fund upfront which then became part of the
Loan.  Thus, according to P, the HK$26,400 was for “upfront fees”
requested by Ds which were comprised of the application fees of
HK$3,860 and the legal fees to arrange for the said application of
HK$22,540.
Draft D & C
18. Ds’ proposed defence in the draft D & C is mainly as follows:
(i) The Loan Agreement was in breach of the provisions
of the MLO, rendering it illegal and unenforceable;
(ii) P exerted undue influence on Ds at the time of
entering into the Loan Agreement which rendered it
void ab initio;
 (iii) P was in breach of the Unconscionable Contracts
Ordinance, Cap 458 (“UCO”) which rendered the Loan
Agreement illegal and unenforceable.
19. In Ds’ proposed counterclaim, they sought, among other things,
a declaration that the Loan Agreement was void and further sought
damages for nuisance.
General Legal Principles
20. It is trite that an appeal from the Master is dealt with by way of
an actual rehearing of the application and that while this court may
give weight to the Master’s decision, this court is not bound by the
decision.
21. There is no dispute to the general legal principles in relation to
an appeal from a Master’s decision.
22. I will consider first Ds’ allegations of undue influence and/or
breach of UCO. 
Undue influence and/or UCO
23. It was Ms Choy’s submission that the common law of equitable
doctrine of undue influence has now been “subsumed” under
section 6(1)(d) of the UCO, and Ms Choy relied on Chitty on
Contracts, Hong Kong Specific Contracts, 3  Ed, where it is stated
rd

that it is recognised by Hong Kong courts that while equity also

affords the court with power to grant relief on the ground of
unconscionableness, the new power given to the court by the UCO
is much wider[2].
24. Ms Choy further referred this court to Hang Seng Credit Ltd &
Ors v Tsang Nga Lee & Ors [2000] 3 HKLRD 33 and the factors
listed out therein for consideration in relation to unconscionability.
25. Section 6(1) of the UCO provides:
“(1) In determining whether a contract or part of a contract was
unconscionable in the circumstances relating to the contract at the
time it was made, the court may have regard to (among other
things) –
(a) the relative strengths of the bargaining positions of
the consumer and the other party;
 (b) whether, as a result of conduct engaged in by the
other party, the consumer was required to comply with
conditions that were not reasonably necessary for the
protection of the legitimate interests of the other party;
(c) whether the consumer was able to understand any
documents relating to the supply or possible supply of
the goods or services;
(d) whether any undue influence or pressure was
exerted on, or any unfair tactics were used against, the
consumer or a person acting on behalf of the consumer
by the other party or a person acting on behalf of the
other party or a person acting on behalf of the other
party in relation to the supply or possible supply of the
goods or services; and
(e) the amount for which, and the circumstances under
which, the consumer could have acquired identical or
equivalent goods or services from a person other than
the other party.
(2) In determining whether a contract or part of a contract was
unconscionable in the circumstances relating to the contract at the
time it was made-the court shall not have regards to my
unconscionability arising from circumstances that were not
reasonably foreseeable at the time the contract was made; and the
court may have regard to conduct engaged in, or circumstances
existing, before the commencement of this Ordinance. 
In considering the exercise of its powers under section 5 to grant
relief in respect of a contract or part of a contract found to be
unconscionable, the court may have regards to the conduct of the
parties to the proceedings in relation to the performance of the
contract since it was made.”
26. The UCO came into effect on 20 October 1996.  Although
accept section 6(1) is wider and sets out a number of factors
including undue influence, there is no authority from Ms Choy to
the effect that the common law principles no longer need to be
considered.
27. As pointed out by Mr To, the Court of Appeal in Tong Kwok
Cheong and Tong Wai Lin [2014] 1 HKLRD 339, applying the
statements of law laid down by the Privy Council in Boustany v
Pigott (1995) 69 P & CR 298, had held that, generally speaking, the
burden rested on the party who sought relief to establish an
unconscionable bargain by showing objectionable terms and some
moral culpability or impropriety of the stronger party in taking an
unconscientious advantage of a disabling condition or
circumstances[3].
28. As for undue influence, as seen in Royal Bank of Scotland v
Etridge (No 2) [2002] 2 AC 773 and Li Sau Ying and Bank of
China (Hong Kong ) Ltd (2004) 7 HKCFAR 579, there are two
major classes for undue inference.  Class 1 is actual undue
influence and Class 2 consists of cases of presumed undue
influence and is sub-divided into Class 2(A) of a relationship where
a presumption arises as a matter of law and Class 2(B) when there
is no such relationship.
29. Ds were essentially relying on Class 1 in their proposed
defence, which means it would be necessary for them to prove
affirmatively that they entered into the impugned transaction not of
their own free will but as a result of actual undue influence exerted
against them.
30. Having considered all the evidence, I am of the view that Ds
have not been able to make out a triable issue on the proposed
defence of undue influence and/or unconscionability, for reasons
including the following :-
(i) I accept that the blank Loan Agreement appeared to be
P’s standard agreement consisting of two pages, the
1  page with clauses in English followed by a 2  page, the
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top part, with the standard clauses in Chinese, and the

bottom part setting out in summary the provisions of
sections 18(i) and 54 of the MLO in both English and
Chinese, and I accept such standard agreement would be
prepared with P’s interest in mind; however, money
lending business must be conducted subject to the MLO,
which contains various provisions governing the terms of
lending by a money lender. I accept what was submitted
by Mr To that the bargaining position and the standard
form agreement of P have to a certain extent been
restricted by the MLO and this should not give rise to any
special disability or situation of disadvantage on the part
of Ds[4];
(ii) The evidence showed that it was Ds who approached
P for a loan and there was no evidence to indicate that
they were not aware that P was a money lender; Ds’ own
evidence was they had intended to take out the Loan from
P in February 2015 and they paid P on about 25 February
2015 a sum of HK$6,000 for legal fees for the
preparation of the documents, and on 18 March 2015,
they paid another sum of HK$6,000 as legal fees.  They
did not sign the Loan Agreement and other documents
until 17 April 2015, some 7 weeks later after they paid
the first HK$6,000.  In my view, they had had plenty of
time to consider the matter and/or to obtain independent
legal advice had they wanted to and/or to approach a
licensed bank with a much lower interest rate;
(iii) From the Land Registry record of the Property, as set
out earlier, Ds had already borrowed one loan under the
1  Mortgage from a licensed bank, and further they had
st

borrowed another loan from a finance company EOG

Finance Limited under the 2  Mortgage, and had in fact
nd

executed two deed of loans with this finance company,

and in my view, they were experienced borrowers;
(iv) D1 is retired and D2 is a housewife and both of them
were 60 odd years of age at the time of signing the Loan
Agreement. However, as submitted by Mr To, this would
not mean that they are unsophisticated or that any
transaction done with them would be unconscionable per
se.  D1 was born in 1952 and he used to work in the
logistics industry.  There was no evidence that Ds are
uneducated such that they did not understand the terms of
the Loan Agreement.  In fact, D1 admitted in his own
affirmation that he and D2 understood they would be
borrowing an amount of HK$1.32m and that
the interest payable per month would be HK$33,000 on
the 17  day of each month.[5]
th

(v) Although D1 claimed that he and D2 did not read

English, Mr Chan had said that the contents of the Loan
Agreement and other documents had been read to them
before the signing of the same.  In any event, even if this
was disputed, as mentioned earlier, the Loan Agreement
had a 2  page, or a separate page with a Chinese part and
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the relevant provisions of MLO, which had been signed

by Ds, and even though this page did not contain Chinese
versions of Clauses 10 and 11 of the Loan Agreement and
that Ds claimed no knowledge of those clauses, they
should at least be able to understand all the other relevant
clauses in the Loan Agreement. 
(vi) The Loan Agreement was also accompanied by the
Repayment Schedule, which was in Chinese and
separately signed by Ds, which clearly indicated the
principal of the Loan, the terms of the Loan, including
monthly  interest of 2.5%/annual  interest  of 30%,
monthly amount of  interest  and date of payment of
each monthly instalment commencing from 17 May
2015; Ds must be fully aware of the interest and the
repayment terms of the Loan;
(vii) The Letter of Declaration was in Chinese and signed
by Ds, and again they must be fully aware of the contents
thereof;
(viii) There was no complaint about the size of the fonts
printed on the Loan Agreement, the Letter of Declaration
and/or the Repayment Schedule from Ds;
(ix) Further, on Ds’ own evidence, they were
accompanied by one of their sons Mr Wong Ka Yin at the
Meeting, and there was no independent evidence from
their son as to any conduct on P’s part.  There was no
sufficient evidence of conduct engaged by Mr Chan of P
that Ds were required to comply with conditions that
were not reasonably necessary for the protection of the
 legitimate interests of P;
(x) There was evidence from Mr Chan that Ds had been
advised to consult independent legal advice before
signing the Loan Agreement.  Even if this was disputed,
as I have said earlier, there was a time lapse from when
they formed the intention to borrow from P and the date
of they actually signing the Loan Agreement and the
Letter of Declaration.
(xi) The interest rate of 30 % per annum under the Loan
Agreement was within the permissible ambit under the
MLO.  As pointed out by Master Lai in Freeway Finance
Company Limited v Lai Sau Kei, unrep, HCA 561/2014,
28 June 2016[6], such interest rate would not per se
render the transaction unconscionable.
31. In fact, Ds did pay two instalments of interest. There were 3
receipts respectively of HK$20,000 on 19 May 2015, HK$13,000
on 20 May 2015, and HK$33,000 on 17 August 2015 indicating Ds’
payments of interests.  This further confirmed that they knew of
the interest rate and the monthly instalment.  The first payment
of interest was one month after Ds signed the Loan Agreement,
and there had been adequate time for Ds to find out all the terms
and/or to reflect on the Loan Agreement even if as they claimed,
they were not aware of what they signed at time of signing.  In fact,
the 1  and 2  payments of interest were immediately after P had
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sent its demand letter and the 3  payment of interest was after P’s
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Summons was issued.  There was no evidence that Ds had raised

any queries on the Loan Agreement or any matters in relation to P’s
conduct.
32. Having considered all the evidence, I do not see any sufficient
evidence that P had knowingly taken advantage of Ds’
vulnerability, nor could the terms of the Loan Agreement be said to
be oppressive or that Ds were suffering from a bargaining
disadvantage.  I do not see sufficient evidence to support Ds’
allegation that P had exerted undue influence on Ds or that P had
engaged in any unconscionable conduct in inducing Ds in signing
the Loan Agreement.
Breach of MLO
33. Ds relied on sections 21, 22, and 27 of MLO for their main
ground of defence.
34. Section 21(1) of MLO sets out as follows:
“(1) A borrower under any agreement for the loan of money by a
money lender shall be entitled at any time by notice in writing to
the money lender and the payment to the money lender of all
amounts payable as principal by the borrower which are
outstanding under the agreement, together with interest computed
up to the date of such payment, to discharge his indebtedness under
the agreement:
Provided that the effective rate of such  interest  shall not exceed
the effective rate at which  interest  would have been payable
under the agreement if the borrower had not exercised his right
under this section to discharge his indebtedness.”
35. Ms Choy submitted on behalf of Ds that Clause 10 of the Loan
Agreement which allowed Ds to make early repayment of the
whole or part of the principal at any time subject to two mandatory
conditions was in contravention of section 21(1) above.
36. The two mandatory conditions were:
(i) Ds must give P one month’s notice in writing; and
(ii) Ds must pay P a sum equivalent to 6
months’ interest on the Loan principal.
37. However, as pointed out by Mr To, the present case is not a case
where Ds seek an early repayment of the Loan principal, in which
case it may be arguable that the provisions of Clause 10 and/or the
two conditions may not be effective, as seen from Chitty on
Contracts, Hong Kong Specific Contracts, 3  Ed[7].rd

38. In any event, even if Clause 10 was in contravention of section,

I accept the submission of Mr To that section 21 of MLO is a right-
conferring provision and it guarantees the borrower a right to early
repayment, and a contravention of section 21 does not render the
entire Loan Agreement void for illegality.
39. Ms Choy further submitted that Clause 11 of the Loan
Agreement was in contravention of section 22 of MLO.  Clause 11
states :
“In the event of default of payment by the Borrowers and without
prejudice to all other rights under the said Loan Agreement, we as
the Lender reserve all rights to charge default interest at the rate of
4% per month on the outstanding loan and overdue interest (if
any).”
40. Section 22 provided that:
“(1) Any agreement made for the loan of money by a money lender
shall be illegal if it provides directly or indirectly for-
(a) the payment of compound interest;
(b) prohibiting the repayment of the loan by
instalments; or
(c) the rate or amount of interest being increased by
reason of any default in the payment of sums due under
the agreement:
Provided that provision may be made by any such
agreement that if default is made in the payment upon
the due date of any sum payable to the money lender
under the agreement, whether in respect of principal
or interest, the money lender shall be entitled, subject
to Part IV, to charge simple interest on that sum from
the date of the default until the sum is paid at an
effective rate not exceeding the effective rate payable
in respect of the principal apart from any default, and
any interest so charged shall not be reckoned for the
purposes of this Ordinance as part of
the interest charged in respect of the loan.
(2) Notwithstanding subsection (1), if the court before which the
legality of any agreement comes in question is satisfied that in all
the circumstances it would be inequitable that any such agreement
which does not comply with this section should be held to be
unenforceable, the court may order that such agreement is
enforceable to such extent, and subject to such modifications or
exceptions, as the court considers equitable.”
41. Ms Choy submitted that Clause 11 of the Loan Agreement was
clearly in contravention of section 22(1)(c) of MLO, in providing
for the charging of default interest rate above the agreed lending
rate.
42. Mr To conceded that Clause 11 of the Loan Agreement was in
contravention of section 22 (1)(c) of MLO but submitted that in
light of the overall circumstances of the case the court is entitled to
exercise its discretion to enforce the Loan Agreement with suitable
variations, modifications and exceptions as this court thinks
equitable.
43. I will consider the question of discretion later in the judgment.
44. I now turn to Ms Choy’s submission that the Handling Fees
collected by P were in contravention of s 27 of MLO.  Section 27
provides that:
“(1) Any agreement entered into between a money lender and a
borrower or intending borrower for the payment by the borrower or
intending 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 the
granting of the loan or proposed loan or the guaranteeing or
securing of the repayment thereof shall be illegal.
(2) (repealed)
(3) Subject to section 33A(5), it shall not be lawful for any money
lender or his partner, employer, employee, principal or agent or any
person acting for or in collusion with any money lender to charge,
recover or receive any sum as for or on account of any such costs,
charges or expenses (other than stamp duties or similar charges) or
to demand or receive any remuneration or reward whatsoever from
a borrower or intending borrower for or in connection with or
preliminary to procuring, negotiating or obtaining any loan made or
guaranteeing or securing the repayment thereof.
(4) If any money or money's worth is directly or indirectly paid or
allowed to or received by any person in contravention of this
section, the amount or value thereof, to the extent of such
contravention and notwithstanding any agreement to the contrary,
may be recovered by the borrower from such person or, if such
person is the money lender or a partner, employer, employee,
 principal or agent of the money lender or is in any way acting for
or in collusion with him, may be set off against the amount actually
lent (and that amount shall be deemed to be reduced accordingly)
or may be recovered by the borrower from such person or from the
money lender.”
45. Ms Choy submitted that the Handling Fees were charged “for or
in connection with or preliminary to procuring, negotiating or
obtaining any loan made”, thus by virtue of s 27(1) the agreement
shall be illegal, and by virtue of s 27(3), P’s act of receiving the
Handling Fees shall be unlawful.
46. Further, Ms Choy submitted that once the Loan Agreement was
in contravention of s 27 and was thus illegal, the Court would not
have any residual discretion as in s 22 to enforce the agreement
notwithstanding the breach.  She also submitted that if the Court
were not minded to treat the sum of HK$26,400 as Handling Fees,
such sum should not be treated as loan principal as suggested by P
either.  In any event, it was her submission that the matter should be
resolved at a full trial.
47. As mentioned earlier, Mr Chan had said that the sum of
HK$26,500 was an upfront payment given to Ds as per their
request, and that it was not a handling fee.
48. In any event, there was no stipulation for the payment or a
charge of 2% of the principal of the Loan as service fees or
handling fees in the Loan Agreement.  There was no evidence as to
how the alleged Handling Fee was agreed to by the parties, and
there was no receipt or any other payment document to support Ds’
allegation that the sum of HK$26,500 was a handling fee which
would fall within the s 27 of MLO. 
49. I agree with Mr To that the allegation was a bare assertion on
the part of Ds.
Exercise of discretion
50. Section 22(2) of the MLO states as follows:-
“Notwithstanding subsection (1), if the court before which the
legality of any agreement comes in question is satisfied that in all
the circumstances it would be inequitable that any such agreement
 which does not comply with this section should be held to be
unenforceable, the court may order that such agreement is
enforceable to such extent, and subject to such modifications or
exceptions, as the court considers equitable.”
51. Mr To referred this court to Ontone Finance Company Limited
v Leung Lai Ching Margaret, HCA 372/2011, unrep,13.08.12.  As
held by Le Pichon J, there is nothing in the language of the
provision that would preclude the exercise of the wide discretion in
Order 14 proceedings. The learned Judge observed that:-
“34. Whether the discretion should be exercised is necessarily fact-
sensitive. Clearly regard must be hard to all the facts and
circumstances of the particular case. The court must be satisfied it
has sufficient evidence before it to warrant the exercise of the
discretion.”
52. Mr To submitted that there were authorities which discussed the
discretion of the court in the context of section 18(3) of the MLO,
the provision of which is substantially similar to section 22(2).
53. Both subsections provide for the same test of whether it would
be inequitable not to enforce the loan agreement, and in considering
whether to exercise the discretion under the relevant provision
under the MLO, the court will genuinely balance the interest of the
borrower and the money lender in determining disputes.
54. Further, as observed by Chan PJ in Strong Offer Investment v
Nyeu Ting Chuang(2007) 10 HKCFAR 529:
“17. One of the principal objects of the Ordinance is to control and
regulate money-lending transactions and to provide protection and
relief against excessive interest rates and extortionate stipulations
in respect of loans.
…
19. On the other hand, the statute is not intended to stifle genuine
money-lending transactions or to let the money lender lose all the
money he has lent out and all the security he has because of a
failure to comply with all such requirements, however trivial or
unintentional the breach may be. Hence, where it is not inequitable
to do so, the court would enforce the loan agreement with suitable
variations, modifications and exceptions…
 …
33. All these are valid criticisms. But the matter does not end there.
Such breaches do not automatically disentitle Strong Offer from
recovering its loans. The court still has to conduct a balancing
exercise having regard to the equities in the case and decide
whether it would be inequitable not to enforce the loan
agreement…”
55. The Court of Final Appeal in Emperor Finance Ltd v La Belle
Fashions Ltd & Ors(2003) 6 HKCFAR 402 has also set out some
guidelines as to how such discretion shall be exercised.  Ribeiro PJ
observed that[8]:-
“117. The question which therefore arises is whether the Court
should exercise its discretion under s18(3) to permit Finance to
enforce its claims, wholly or in part, and with or without
modification … This discretion can only be exercised if the court 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”.
…
119. In exercising its discretion, the court should examine the
breach or breaches in question, their consequences for the parties to
the transactions and any other circumstances which may make it
inequitable to hold the agreements unenforceable…”
56. The Court of Final Appeal took into account a wide range of
factors relating to the borrower in the above case, including the fact
that the borrower in question had not been misled or uncertain
about the terms of the loan transaction notwithstanding the fact that
she did not receive the memoranda required under section 18.
57. As further submitted by Mr To, the courts had also considered
the knowledge and experience of the borrower when deciding
whether to exercise their discretion, as in CA Pacific Finance Ltd
(in liq) v Tsui Yun Bun Barry (unrep, HCA 632/2005, Reyes J, 20
July 2009)[9]:-
“… it would be inequitable not to enforce the agreement as far as
principal amount is concerned. Plainly, [the borrower] realised and
 understood at the time what a margin facility was and how it
operated … I do not think that non-inclusion of the details specified
in MLO s 18 would have made any difference to [the borrower]’s
decision to open a margin account …”
58. The principles set out above have also been applied in a more
recent judgment in Treasure Spot Finance Co Ltd v Li Chik
Ming(unrep, HCA 5387/2001, by Mr Recorder Patrick Fung SC, 3
December 2007).  The question before the learned Recorder was
how he should exercise his discretion under sections 18(3) and
22(2) of the MLO. To that end, he summarized the principles laid
down in the two Court of Final Appeal cases and set out the
following guidelines[10]:-
“(i) The discretion given by sections 18(3) and 22(2) to the court is
extremely wide and empowers it to look at all the circumstances in
a particular case in arriving at an equitable result between the
moneylender and the borrower. …
(ii) There is no single circumstance or set of circumstances which
is decisive as to how the court should exercise its discretion in a
particular case. Each case must be decided on its own facts.
(iii) The court will have to go through a balancing exercise in
arriving at a decision …
(iv) The fact that an act or omission by a moneylender constitutes
an offence (as provided under section 29(4)) or is specified to be
illegal (as provided under section 22(1)) is not a factor which is
decisive against the money lender in the exercise of the court’s
discretion, otherwise sections 18(3) and 22(2) would be
meaningless and even self-contradictory.”
59. In the present case :-
(i) There was no dispute that D1 and D2 intended to
borrow a loan of HK$1,320,000. The evidence indicated
that Ds were in need of cash.  Otherwise they would not
have approached P for financial assistance on their own.
(ii) There was also no dispute that a substantial sum of
loan money had in fact been received by Ds.
(iii) Ds had always been fully aware of the terms of the
Loan Agreement and were able to recall some of the
terms in their own words.
(iv) As mentioned earlier, this was not the first time that
Ds borrowed money from financial institutions and they
were no stranger to documents like the Loan Agreement. 
In fact, as set out above, Ds were experienced borrowers. 
(v) Ds were fully aware of their rights and obligations of
the terms of the Loan before entering into the Loan
Agreement.  As mentioned earlier, there was a Chinese
version of the standard Loan Agreement attached to the
English version, which Ds could read and understand.
(vi) As said earlier, they had had time to reflect on the
matter after they first approached P and before the day
when they signed the Loan Agreement.  If Ds had any
query about the terms, they could also have raised it with
their son who was with them.
(vii) This was not a case where the money lender took
advantage of the borrowers by charging an extortionate or
excessive interest rate.  The stipulated
contractual interest of 30% under the Loan Agreement is
well below 48%, being the ceiling of
extortionate interest rate provided under section 25 of the
MLO, and also the excessive interest rate at 60%
prohibited by section 24.
(viii) There was really no sufficient evidence of
any prejudice caused to Ds if the Loan Agreement is to be
enforced now.  The reliefs P sought in Ps’ Summons are
essentially the outstanding principal of the Loan plus the
corresponding interests at the contractual rate.  These are
sums which Ds ought to have repaid to P had they not
breached the Letter of Declaration and/or the Loan
Agreement.  There would not be extra loss caused to Ds
as a consequence of enforcing the Loan Agreement.
(ix) On the other hand, if the Loan Agreement were to be
held unenforceable, D1 and D2 would be unjustly
enriched by being able to keep a substantial amount of
 money under the Loan Agreement.
60. In light of the overall circumstances, I am prepared to exercise
my discretion under section 22 (2) of MLO for the terms of the
Loan Agreement to be enforced as sought by P.
Nuisance
61. Ms Choy did not really address this issue in her skeleton
submissions.  In any event, this mainly relates to Ds’ counterclaim.
Even if the alleged nuisance could be proved, such would have no
bearing on the enforceability of the Loan Agreement.
Conclusion
62. In light of the above, I find that Ds’ appeal has no merits. 
I dismiss Ds’ appeal and order that they pay P’s costs of and
incidental to this appeal.  I order such costs to be summarily
assessed and paid forthwith.  P is to submit a statement of costs
within 14 days, and Ds are to lodge their list of objections within 14
days thereafter.
 
 
  (Bebe Pui Ying Chu)
  Judge of the Court of First
Instance
  High Court
      
Mr Dennis To, instructed by Kevin L H Kwong & Co, for the
plaintiff
Ms Alison Choy, instructed by Mandy Wan & Co, for the 1  and st

2  defendants
nd

[1] See para 10, B:141

[2] At para 6-029
[3] See Holding (2)
[4] See para 143, pg 44 Freeway Finance Company Limited and
Lai Sau Kei and others, HCA 561/2014, unreported, 28 June 2016
[5] At para 8, B:141
[6] At para 164
[7] At para 6-024
[8] At paras 117-119, pgs 442 F-J
[9] At para 29
[10] At para 28, pgs 18-19