NANYANG COMMERCIAL BANK, LTD v. LIN ZHUO YAN

HCA 2132/2018

[2020] HKCFI 1250

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2132 OF 2018

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BETWEEN

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REASONS FOR DECISION

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Introduction

1.  This is the hearing of the defendant’s (the “Defendant”) appeal against the order of Master Benny Lo made on 27 December 2019 dismissing the Defendant’s application to set aside the default judgment entered against the Defendant on 6 December 2018 (the “Default Judgment”).  The Defendant’s application was launched on the basis that the purported service of the writ based on which the Default Judgment was entered was irregular. 

The law

2.  It is trite that an appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time, save that the party appealing, even though the original application was not by him but against him, has the right as well as the obligation to open the appeal: Hong Kong Civil Procedure 2020[1]. The judge in chambers is in no way fettered by the previous exercise of discretion by the master.

3.  The legal principles applicable to an application to set aside a default judgment by reason of irregular service are well-established and were summarised in Ng Kwok On & Lam Man Lin v Rich Legend Limited & Others[2]. Under Order 10 rule 1(2)(a), a writ for service on a defendant within the jurisdiction may be served by sending a copy of the writ by registered post to his usual or last known address. Rule 1(3) provides that when a writ is served in accordance with rule 1(2), the date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date on which the copy was sent to the address in question.  This presumption of good service is rebuttable.  The burden of proof is on the defendant who seeks to set aside the default judgment by reason of irregular service.  The real test for service is whether the writ has been sufficiently brought to the attention of the defendant and not whether it has been delivered to his usual or last known address. 

4.  A judgment obtained as result of irregular service of the writ is an irregular judgment which the defendant is entitled to have it set aside as of right without consideration of the merits of his defence, subject to the court’s discretion to impose conditions, which depends on factors such as whether the defendant is at fault in not receiving the writ as served pursuant to the rules, or whether there is inexcusable delay on the part of the defendant in seeking to set aside the irregular judgment: Po Kwong Marble Factory v Wah Yee Decoration Co Ltd[3]. On the other hand, even if a judgment is a regular one, the court has a wide discretionary power to set it aside, with or without conditions. The guiding principle in the exercise of such discretion is to avoid injustice. Such injustice is generally (but not always or automatically) shown where the defendant can show a meritorious defence with a real prospect of success or which carries some degree of conviction.  In assessing the merits of the defence, it requires the court to form some provisional view of the probable outcome of the action.  Where the outcome depends on whose evidence is likely to be accepted, the appropriate test is to ask whether the defence witnesses could well be believed at trial.

5.  The issues raised by this appeal are:

(1) whether the Defendant is able to show that the service of the writ was irregular; if he can, he is entitled to have the Default Judgment set aside as of right;

(2) if he cannot, (a) whether he can demonstrate a good defence; and (b) if he can, he is entitled to have the Default Judgment set aside subject to such conditions, if any, which the court may impose; and

(3) if he cannot, the appeal shall be dismissed.

The background facts

6.  The Defendant is a non-executive chairman and a director of Hsin Chong Group Holdings Limited (“Hsin Chong Group”).  Between 2015 and 2017, he made and issued the Chairman’s Statement in the Annual Reports of Hsin Chong Group in his name as the Non-executive Chairman of Hsin Chong Group. 

7.  Hsin Chong Construction (Asia) Limited (the “Borrower”) is one of the principal subsidiaries of Hsin Chong Group.  But at the material time the Defendant was not a director of the Borrower.  

8.  Since around 2015, the Plaintiff had been granting banking facilities to the Borrower.  In around April 2017, the Borrower defaulted in making payment of its indebtedness to the Plaintiff.  In May 2018, the indebtedness was not fully settled.  After some discussions between representatives of the Plaintiff on the one part and representatives of Hsin Chong Group and the Borrower, including the Defendant on the other, about the indebtedness, the Plaintiff sent a draft deed of guarantee to the Defendant through two executive directors of Hsin Chong Group, Choi who was also the Chief Executive of Hsin Chong Group and Wu.  

9.  On or about 9 July 2018, the Head of Collection Division of the Credit Management Department of the Plaintiff, Leung Ying Fai (“Leung”) followed up with the Defendant about execution of the deed of guarantee.  He made arrangement via WeChat message for a meeting with the Defendant in Kunlun Hotel in Beijing on 11 July 2018. 

10.  Leung and his colleague Victor Cheung flew to Beijing to meet with the Defendant about execution of the deed of guarantee.  At the meeting, the Defendant suddenly said that he wanted to consult a lawyer.  Understandably, Leung was not thrilled by such a request as he had flown all the way to Beijing on the understanding that the Defendant would sign the deed.  He reminded the Defendant that he and/or Wu had had the draft deed of guarantee for some time already.  Then the Defendant chose to telephone Wu.  After he had a telephone conversation with Wu, he executed the deed of guarantee in favour of the Plaintiff (the “Guarantee”).

11.  However, Hsin Chong Group still defaulted in making payment of its indebtedness.  The Plaintiff sent a letter of demand dated 21 August 2018 to the Defendant’s address at (1) Hsin Chong Centre which is the office of Hsin Chong Group (“Hsin Chong address”) and (2) Four Seasons Place Hong Kong, 8 Finance Street (the “Four Seasons address”) which the Plaintiff found from the annual returns of Hsin Chong Group for the years 2015 to 2017 was the residential address of the Defendant.  Leung also sent the Defendant a copy of the letter via WeChat and informed him that the Plaintiff would issue proceedings against him.    

12.  As of 10 September 2018, the Borrower was indebted to the Plaintiff in the amount of $72,976,724.06 and further interest on the outstanding principal of $70,739,539.25 at the default interest rate of 11% per annum from 11 September 2018 until full payment of the outstanding principal.

13.  On 12 September 2018, the Plaintiff commenced the present proceedings against the Defendant. On the same date, the Plaintiff’s process server served the writ of summons by prepaid registered post addressed to the Defendant at the Hsin Chong address and Four Seasons address.  The Defendant said he had ceased living at the Four Seasons address since 2011/2012 despite he had provided that very address as his residential address in the annual returns of Hsin Chong Group for 2015 to 2017.  Anyway, the Plaintiff is not relying on service at the Four Seasons address, but service at the Hsin Chong address only.

14.  No acknowledgement of service or defence having been filed, the Default Judgment was entered in favour of the Plaintiff against the Defendant on 6 December 2018.   

15.  On 21 February 2019, the Plaintiff issued a statutory demand in respect of the judgment debt against the Defendant.

16.  On 3 May 2019, the Plaintiff presented a bankruptcy petition in HCB 2554/2019 against the Defendant (“Bankruptcy Petition”). 

17.  On 9 August 2019, the Defendant applied to set aside the statutory demand via HCSD 34/2019 (the “HCSD proceedings”).

18.  On 29 August 2019, the Defendant made the present application to set aside the Default Judgment.  On 27 December 2019, Master Benny Lo dismissed the Defendant’s application to set aside the Default Judgment.  On 9 January 2020, the Defendant appealed against the order of Master Benny Lo.  In the meantime, by orders dated 18 October 2019, the Bankruptcy Petition and HCSD proceedings were stayed pending this appeal.

The Defendant’s grounds for setting aside the Default Judgment

19.  The Defendant’s grounds for setting aside the Default Judgment are that the writ of summons has not been properly served on him; that the Plaintiff was in breach of the duty of full and frank disclosure when it obtained the Default Judgment at the ex parte proceeding before the master; and in any event he has a meritorious defence.

Service of the writ of summons

20.  The crux of the Defendant’s case on service is that the Hsin Chong address was the office address of Hsin Chong Group.  Given his non-executive title, he did not have any office or workplace at the Hsin Chong address.  He could not have notice of the writ.  He only had notice of the Default Judgment after he was personally served the Bankruptcy Petition.  He also raised the point that the Hsin Chong address was not stated on the Guarantee and was not provided by him as his address.  The service was therefore irregular.

21.  It is trite law that the real test for service is whether the writ has been brought to the attention of the defendant and not whether it has been delivered to his usual or last known address.  Service of the writ was effected by registered mail pursuant to Order 10 rule 1(2)(a) of the Rules of the High Court on 12 September 2018.  Pursuant to rule 1(3), the date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date on which the copy was sent to the address in question, ie 19 September 2018. The burden of proving the contrary is on the Defendant who seeks to set aside the Default Judgment.

22.  The thrust of the Defendant’s argument for irregular service is that the writ was served on the registered office of Hsin Chong Group and not the residential address of the Defendant who regularly stayed or travelled overseas and that the Hsin Chong address was not provided by him.  A defendant’s last known address refers to his address which is last known to the plaintiff.  It matters not that a different address might have been discovered with further or diligent inquiry: Cosec Nominees Ltd v Lau Hon Ming[4]. Furthermore, a plaintiff is entitled to ascertain a defendant’s last known address from whatever source available, for example, the details of where the defendant lives, works or can be found, and where letters etc may be delivered. A person may change his address in course of time.  If he chooses not to provide the address on which legal process by any person to whom he may be under a liability may be served or to update his address, he has to accept the consequence which the law prescribes for service of legal process.  That precisely is the purpose for which Order 10 rule 1 was enacted.  To hold otherwise would enable a defendant to escape service of legal process and liability by not giving or updating his address with the party to whom he owes liability. There is no reason why the phrase “last known address” should be restricted to mean the address which the defendant last intentionally made known to the plaintiff: The Hong Kong Mortgage Corp Ltd v Ching Kit Yu & Anor[5]. Here, the Defendant chose not to disclose in the Guarantee his residential or correspondence address through which correspondence or legal process may be effected.  He was known to the plaintiff as the non-executive Chairman and a director of Hsin Chong Group which was the parent or holding company of the Borrower and sharing the same registered office.  There is every reason for the Plaintiff to treat the Hsin Chong address as the usual or last known address of the Defendant.

23.  The Defendant’s evidence is that he has no executive functions in Hsin Chong Group and has no office at the Hsin Chong address.  Mr Chen, counsel for the Defendant, argued that if the Defendant were Hsin Chong Group, the service would have been effective, but not as the Defendant is just an individual.  Hsin Chong Group has a long list of subsidiaries and the Defendant is just one of the directors of Hsin Chong Group and only in a non-executive capacity.  He submitted that the registered office of Hsin Chong Group could not automatically be the address of any of its directors.

24.  I respectfully differ.  Albeit the Defendant was described as a non-executive Chairman, he was the only Chairman and he signed the Chairman’s Statement in the annual reports of Hsin Chong Group.  Even though he claimed to have no office at Hsin Chong Group, he was a director of Hsin Chong Group and its Chairman.  According to Leung, he first met with the Defendant on or about 21 June 2017 when the debt restructuring of the Borrower was discussed.  During the negotiations, both Choi and Wu had to take instructions from the Defendant who appeared to be the ultimate decision maker.  He agreed or at least indicated his agreement to act as guarantor for the Borrower.  The Defendant is practically the controlling mind and the soul of Hsin Chong Group and particularly the Borrower.  He could not be a “nobody” in Hsin Chong Group to whom its staff paid no respect.  There was no reason why any correspondence addressed to him at that address would not have been brought to his personal attention.  Mr Chen argued that that is only an assumption and there is no legal presumption that the registered office of Hsin Chong Group is automatically the address of any of its directors.  Again, I respectfully differ.  This is because the real test for service is whether the writ has been brought to the attention of the defendant and not whether it has been delivered to his usual or last known address.  The Plaintiff is not required to deliver the writ to his business address, residential address or indeed any particular address stated on the Guarantee.

25.  Ms Lau, counsel for the Plaintiff, referred me to a letter of demand dated 21 August 2018 addressed to the Defendant at the Hsin Chong address which was not returned and to which the Defendant responded by letter dated 27 August 2018.  A copy of the letter was sent to the Four Seasons address which was returned undelivered.  She argued that this is evidence that service at the Hsin Chong address was good service.  However, Mr Chen pointed out that an image of that letter of demand had been sent by Leung to the Defendant.  He submitted that explained why the Defendant was able to respond and that the Defendant had not received the letter sent to the Hsin Chong address.  That is a plausible explanation sufficient to neutralize the inference to be drawn from the Defendant’s response by his letter dated 27 August 2018 for the purpose of these summary proceedings, but not sufficient to rebut the presumption of due service under Order 10 rule 1(3).

26.  Mr Chen argued that the Defendant was not in Hong Kong at the time of service of the writ.  He referred me to evidence in the Defendant’s WeChat messages that at various times the Defendant said he was in Beijing, Shangdong, Europe and London.  His frequent absence from Hong Kong does not assist him as there is no dispute that he was in Hong Kong on 19 September 2018, ie 7 days from the date that the writ was sent by registered post to the Hsin Chong address.  It is on this date that the Defendant’s presence in Hong Kong is needed: Lu Wen Yun v Chen Ching Chih[6].

27.  Mr Chen also said that the Defendant was always out of Hong Kong and Leung had been maintaining constant communication with him through WeChat.  He therefore argued that the Plaintiff could have sent the Defendant a message via WeChat to bring the writ to his notice just as Leung did when sending him an image of the letter of demand dated 21 August 2018.  That may be an effective way of bringing the writ to the Defendant’s notice.  But communication via WeChat is not an accepted mode of service under Order 10 or by agreement under the Guarantee. There is no reason for the Plaintiff to suspect that service on the registered office of Hsin Chong Group of which the Defendant is a director and the Chairman would not have sufficiently brought the writ to his notice.  The fact that there are other means of bringing the writ to the notice of the Defendant in parallel does not mean the service according to the prescribed rules under Order 10 is irregular.  

28.  Mr Chen referred me to the case of Law Kwok Hung v Tse Ping Man[7], Philip Securities (HK) Ltd v Lam Chi Bin Stanley[8] and Fok Chun Hung v Lo Yuk Shi[9].  The principles in these cases relate to service at the Four Seasons address which the Defendant alleged was to the Plaintiff’s knowledge not his usual or last known address.  As service on the Four Seasons address is not relied on by the Plaintiff, any argument based on these authorities is irrelevant.  In any event, there is no evidence that the Plaintiff knew the Defendant had moved out of the Four Seasons address.  In fact, to the contrary, it was the Plaintiff’s belief that the Four Seasons address was his Hong Kong residential address as shown in the annual returns of Hsin Chong Group for 2015 to 2017.  

29.  Mr Chen submitted that as there is contrary evidence from the Defendant that he had not received the writ and hence this is not a case suitable for summary judgment. He referred me to the case of Ng Kwok On & Lam Man Lin v Rich Legend Limited & Others[10] which was a case of service by registered mail under Order 13 rule 1(2)(a).  In that case, Thomas Au DJ (as he then was) held that the service was irregular on the basis of hearsay evidence from the defendant’s solicitors that according to their inquiry with the Post Office the writ had been returned to the plaintiff’s solicitors undelivered.  Mr Chen therefore submitted that as there is dispute on the fact of service this is not a case suitable for summary judgment and the parties’ evidence on service should be properly tested.  I think Ng Kwok On is clearly distinguishable from the present case.  In that case, there was some hearsay evidence from the Post Office that according to its record the mail had been returned undelivered but the record could not be produced as it was destroyed after six months.  Here, there is evidence that the mail had not been returned and there is no evidence from the Defendant about enquiry from the Post Office.

30.  I agree that summary judgment is not appropriate in a case where there is any serious dispute as to matters of fact or any difficult question of law: see Hong Kong Civil Procedure 2020[11]. This does not mean that once such an argument of irregular service is raised, the court shall set aside a default judgment regardless of the weight of the evidence.  The court will not take the alleged defence raised in affidavit evidence on its face value but will test it against the evidence disclosed in the affidavits including matters such as contemporaneous documents and inherent probability of the defence as in a case of summary judgment under Order 14. In Re Safe Rich Industries Ltd[12], Bokhary JA (as he then was) said:

“The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized — because failure to recognize it would create a debt-dodger’s charter — that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonable dispute.”

The court will not conduct a mini-trial on complicated factual issues: see Paul Y Management Ltd v Eternal Unity Development Ltd[13]. It is only where the circumstances are such as to require close investigation, there ought to be a trial and summary judgment would be inappropriate: see Hong Kong Civil Procedure 2020[14] and Miles v Bull[15].

31.  The Defendant bears the burden of proof.  Apart from a bald assertion that he had no office at the Hsin Chong address and had not received the writ, the Defendant offered no credible evidence or explanation why the writ had not been brought to his notice.  As distinguished from the case of Ng Kwok On, there is evidence from the Plaintiff that the writ had not been returned undelivered and there is no contrary credible evidence of non-delivery, the Defendant is far from having discharged the burden of proof required under Order 10 rule 1(3). As I have mentioned above, the Defendant is the controlling mind and soul of Hsin Chong Group at its registered office the writ was served.  He could not be a “nobody” in Hsin Chong Group to whom its staff paid no respect.  He is the Chairman of Hsin Chong Group and one of its director.  Even accepting that he did not have an office at the Hsin Chong address (which is already stretching common sense to the extreme), there is no reason why any correspondence addressed to him at that address would not have been brought to his personal attention.  The Defendant is far from having discharged the burden of proof.  I am satisfied that the writ has been effectively service on the Defendant and the Default Judgment obtained was a regular judgment.

Material non-disclosure before the Master

32.  Mr Chen argued that having regard to the fact that the Plaintiff knew the Defendant was regularly out of Hong Kong and that the Plaintiff and Defendant had been in constant communication through WeChat, these are matters which the Plaintiff should have brought to the attention of the master in the ex parte application for the Default Judgment.  The failure to bring such matters to the attention of the master gave the master the false impression that the Defendant had a regular office at the Hsin Chong address at the time of service.  These matters include:

(1) the Plaintiff consciously decided not to bring the writ to the attention of Defendant through WeChat which was the parties’ usual mode of communication;

(2) that the Hsin Chong address was described as the Defendant’s last known and usual address solely because of the Defendant’s non-executive title in Hsin Chong Group;

(3) that the Hsin Chong address was not provided by the Defendant in the Guarantee as his correspondence address or an address at which he could be found; and

(4) that to the Plaintiff’s knowledge the Defendant was not in Hong Kong most of the time and that the service at the Hsin Chong address might not have reached him in Hong Kong.

Mr Chen argued that had these disclosures been made, the master might have ordered other modes of service or inquiries to be made before entering the Default Judgment.

33.  I have covered all these points raised by Mr Chen when considering whether service at the Hsin Chong address was regular.  Briefly, the Hsin Chong address is the Defendant’s address last known to the Plaintiff.  It matters not how that address came to the Plaintiff’s knowledge.  Given that the Defendant was the controlling mind and soul of Hsin Chong Group, there was no reason for the Plaintiff to doubt that service at the Hsin Chong address would not have sufficiently brought the writ to the Defendant’s notice regardless whether he was always out of Hong Kong.  Besides, the Defendant was physically in Hong Kong at the time of service.  Alerting the Defendant of service of the writ might be prudent, but not a requirement for effective service.  In the circumstances of this case, I do not consider any of the facts raised by the Defendant need to be disclosure to the master.

34.  In any event, as an appeal is a rehearing, all these facts may be considered in the exercise of my discretion whether to set aside the service on the grounds of non-disclosure.  In the light of the fact that the Defendant was actually in Hong Kong at the time of service and his position as the controlling mind and soul of Hsin Chong Group, there is no reason why such discretion should not be exercised.

Unconscionable contract defence

35.  The Defendant submitted that it is arguable that the Guarantee is liable to be set aside as an unconscionable bargain under common law or the Unconscionable Contracts Ordinance.  Section 5 of the Ordinance gives the court power to grant relief to parties dealing as consumer to a contract for sale of goods or supply of services which the court finds unconscionable.  Relief includes refusing to enforce the contract in its entirety or just the part which the court finds unconscionable or revise or alter any unconscionable part.  The burden is on the person claiming that a contract or part of it is unconscionable to prove that it is.  The burden of proof is therefore on the Defendant.

36.  In Chang Pui Yin v Bank of Singapore Ltd[16], the Court of Appeal held that the principles under the Ordinance are applicable to customers of banking services or persons dealing with banks, hence to Guarantee in issue. 

37.  Section 6 of the Ordinance sets out a list of factors or bargaining weakness to be considered by the court in determining whether a contract or part of it was unconscionable relating to the contract at the time it was made.  These include unequal bargaining positions; imposition of conditions which were not reasonably necessary for the protection of the legitimate interest of the other party; the consumer’s inability to understand any documents relating to the supply or possible supply of goods or services; undue influence or pressure exerted or any unfair tactics used against the consumer; and the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from another different party.  The list is non-exhaustive.  At common law, a contract may be set aside as being an unconscionable bargain, if the bargain is oppressive to the complainant in overall terms; the complainant was suffering from certain bargaining weakness; and the other party must have acted unconscionably in the sense of having knowingly taken advantage of the complainant.  Both the Ordinance and the common law require an element of knowledge of the bargaining weakness and that the other party had knowingly taken advantage of that weakness before the court would give relief to the bargain: Shum Kit Ching v Caesar Beauty Centre Ltd[17].  The Defendant relied on four bargaining weaknesses.

38.  First, the Defendant argued that the Plaintiff was in a much stronger bargaining position as against him.  The officer acting for the Plaintiff was the Head of Collection Division of the Credit Management Department of the Plaintiff and the Guarantee was a standard form agreement pre-drafted by the Plaintiff with no negotiation or consultation with the Defendant and with the Plaintiff’s sole interest in mind.

39.  As matter of law, mere inequality of bargaining power is generally not a ground for setting aside a contract.  In Lloyds Bank Ltd v Bundy[18], Lord Denning MR considered that the thread running through the cases of unconscionability was the concept of “inequality of bargaining power”.  He said:

“By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract upon terms which are very unfair or transfer property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other.”

This principle operates within a very narrow scope.  The inequality which invokes the operation of this principle has to be an extreme one, such as very unfair contractual terms and grossly inadequate consideration.  In National Westminster Bank Plc v Morgan[19], Lord Scarman questioned whether there was any need in the modern law to erect a general principle of relief against inequality of bargaining power as it is unlikely that mere inequality of bargaining power, even when this leads to exertion of considerable pressure will be recognized as a ground for setting aside a contract. 

40.  The Defendant was not a banker by profession, but he was not a person of ordinary understanding and ability.  He was a seasoned businessman and the Chairman of a substantial listed company.  He was in the position to provide the much needed security which the Plaintiff wanted to secure a third party indebtedness which was likely to become irrecoverable.  The Plaintiff has as much to respect the Defendant as has the Defendant towards the Plaintiff as a creditor of the subsidiary of the company of which he is the Chairman and a director.  That was probably why the Plaintiff had to wait for two months for the Defendant to decide whether to sign the deed of guarantee and to fly its staff to Beijing where the Plaintiff was for the purpose of executing the deed of guarantee.  The Defendant had the draft deed of guarantee for two months and did not see fit to argue for any amendments.  That reflects that the Plaintiff did not regard the terms of the deed of guarantee unacceptable.  It was just give and take.  The Defendant wanted liquidity for the subsidiary of the company of which he was the Chairman and a director.  The Plaintiff wanted additional third party security to secure a debt which was likely to turn bad.  They were in equal bargaining position. The Defendant has failed to establish the kind of gross inequality, extreme unfairness or grossly inadequate consideration as could invoke this doctrine.

41.  Second, the Defendant argued that he did not understand the Guarantee as it was written in English and that was a matter known to the Plaintiff.  Further, he said that the Guarantee did not indicate the amount owed by the Borrower.  Hence, the potential liability for which the Defendant would be liable was not made clear in the Guarantee.

42.  Though the Guarantee was in English, there is no evidence that the Plaintiff knew that the Defendant cannot read English (even if it is true).  On the fact, the Defendant responded to the Plaintiff’s solicitors’ letter of demand dated 21 August 2018 by his letter apparently written by him in English.  It was fluent and business-like.  It would impress anyone that the writer was conversant in English.  It reinforces the proposition that there is no evidence that the Plaintiff knew the Defendant could not read English.

43.  Furthermore, on the fact, the Defendant knew what the Guarantee was about.  He attended the negotiation.  Choi and Wu took instructions from him.  It was with his consent that the deed of guarantee was to be drafted and to be signed by him.  Then, as the WeChat messages show, he arranged for the meeting in Beijing to sign the deed of guarantee.  As for the amount to be guaranteed, it was stated in the Second Schedule to the Guarantee that it was unlimited.  The Defendant is a seasoned businessman.  It lies ill in his mouth to even suggest he did not know the content of the Guarantee and the extent of his liability as a guarantor.

44.  Furthermore, it is trite law that mere ignorance of the substance of the document which one freely signed, short of fraud, mistake, misrepresentation, non est factum, duress, undue influence and lack of mental capacity is not sufficient to vitiate the instrument on which one affixed his signature: see Ming Shiu Chung & Others v Ming Shiu Sum & Others[20].  The following passage of the judgment of Ribeiro PJ in that case is pertinent:

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.”

45.  In Bank of China (Hong Kong) Ltd v Fung Chin Kan[21] , Litton NPJ held that when someone signs a legal document it is not open to him to argue that he is not to be bound by his signature:

“… the fundamental principle that, generally speaking, when a person sign a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.”

46.  The scenario described by their Lordships is precisely similar to the present case, a legal document which the Defendant knew was a deed of guarantee to which he voluntarily appended his signature.  These authorities put it beyond all doubt that it is not open to the Defendant to argue that he should not be bound by the Guarantee because it was written in English; he could not read English; it had not been explained to him; and he did not understand its content.   

47.  Third, the Defendant argued that he was not a party to the term loan of the Borrower and was not originally liable under that loan agreement.  There was no commercial benefit for him to enter into the Guarantee to shoulder any liability at all. The terms of the Guarantee are so one-sided that it was unconscionable. 

48.  As a matter of banking practice, guarantees are often given by persons who were not party to the original loan.  It can hardly be said that the Guarantee was of no commercial benefit to the Defendant.  He was the Chairman of Hsin Chong Group which was the holding company of the Borrower.  The Guarantee states that it was executed in consideration of the Plaintiff granting or continue to grant general banking facilities to Hsin Chong Group and/or withholding proceedings against or not to make immediate demand for repayment from the Borrower for so long and on such terms and conditions as the Plaintiff may think fit. Obviously, the Borrower was in financial difficulties and was unable to pay its debt.  The Defendant as the Chairman of Hsin Chong Group has an interest to keep this subsidiary of Hsin Chong Group afloat.  Whether this interest was worth his personal risk was a matter for him.  He was free to take it or leave it.  The Guarantee could not be argued to be unconscionable.

49.  Lastly, the Defendant argued that at the time of signing the deed of guarantee he was not explained the content of the deed and his request to seek independent legal advice was flatly rejected by Leung.  I have already explained that on the authorities lack of explanation of the content of the deed of guarantee is not in the circumstances of a case such as this to be equated with unconscionability.  In any event, the Defendant had two months to consider the deed of guarantee before he agreed to execute it.  It was with his agreement that Leung and his colleague flew to Beijing to attend to execution of the deed of guarantee.  Thus when the Defendant said he wanted to consult a lawyer before signing, the Plaintiff’s representatives were not thrilled.  But in any event, the Plaintiff did not refuse to let him seek legal advice.  The Defendant chose to discuss the matter with Wu and after such discussion he voluntarily executed the deed of guarantee.  I do not consider there was any unconscionable conduct on the part of the Plaintiff.

50.  All these conducts complained of whether considered under the Unconscionable Contracts Ordinance or common law fall far short of unconscionable conduct.  I am not satisfied that the Defendant has discharged the burden of showing a meritorious defence.

Delay

51.  The Default Judgment was entered on 6 December 2018.  The Defendant explained the delay in making the present application to set aside the Default Judgment because it was only on 17 May 2019 that he became aware of the Default Judgment and he took time to seek legal advice and time for discussion with the Plaintiff concerning a potential compromise.  No account was given for his inaction between May and August 2019.  Even putting his case to the highest, it was only until 9 August 2019 that he applied to set aside the statutory demand and even less of a reason why he did not make the present application to set aside the Default Judgment until 29 August 2019.  The delay is indicative of a lack of bona fide defence.

Conclusion

52.  For the above reasons, I am satisfied that service of the writ was regular.  The Defendant has failed to show any meritorious defence with a real prospect of success.  His defence is just moonshine.  Accordingly, the master’s decision is upheld and the Defendant’s appeal is dismissed with costs to the Plaintiff with certificate for counsel.  The costs were assessed by gross sum assessment in the sum of $132,000.