COURT SETS ASIDE STATUTORY DEMAND OF UNLICENSED MONEY LENDER

October 2024

In the recent case of GG v. LL Ltd. [2024] HKCFI 2302, the applicant was one of the personal guarantors for a loan provided by the respondent to a corporate borrower. Following the borrower’s default on interest payments, the respondent issued a statutory demand (SD) in January 2024 for outstanding principal and interest under the loan. The SD was also served on the applicant by advertisement. The applicant sought to set aside the SD, and one of the grounds raised is that the loan is not recoverable pursuant to section 23 of the Money Lenders Ordinance (MLO) as the respondent is an unlicensed money lender.

During the court proceedings, it was undisputed that the respondent was not licensed under the MLO. The court also held that the loan in question was not an exempted loan under paragraph 2(a) of Part 2 of Schedule 1 to the MLO, which only applies when the borrower company also acts as the security provider for the loan in question. While the court retains the discretion to allow the recovery of the loan if it would be inequitable to deprive the money lender of such recovery, these considerations do not come into play in an application to set aside a statutory demand. As far as the present application is concerned, the unlicensed money lender ground is sufficient to set aside the SD.

In conclusion, the court was satisfied there was substantial defence that the respondent was not a licensed money lender and the loan in question was not an exempted loan and thus unrecoverable under section 23 of the MLO. The court ultimately set aside the SD on this unlicensed money lender ground and rejected the other grounds.

To avoid a loan being unrecoverable under the MLO as in this case, the lenders are advised to either obtain the necessary money lender licence or devise an appropriate loan arrangement so that it comes within the scope of an exempted loan.