LAI WAI HA v. TAM KWOK MAN BENNY

DCCJ 5939/2019

[2021] HKDC 1210

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5939 OF 2019

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BETWEEN

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DECISION

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INTRODUCTION

1.  Originally, there were two summonses fixed before me on 2 July 2021. One was taken out by the defendant to set aside the final judgment entered against him; and the other was taken out by the plaintiff for leave to file the affirmation of Poon Shing Chuan in support of her opposition to the defendant’s set aside application.

2.  At the beginning of the hearing, Mr Ken To, together with Mr Brian Yu, counsel for the plaintiff, sought leave to withdraw the plaintiff’s summons. No opposition was raised by the defendant’s counsel, Mr Alaxsander Wong. I therefore granted leave to the plaintiff to withdraw her summons as requested with costs to the defendant in any event, to be taxed if not agreed.

3.  What remains to be dealt with is hence the defendant’s summons to set aside the final judgment. The ground for this application is that the judgment was entered irregularly, or, alternatively, that the defendant has a meritorious defence to the claim.

4.  At the end of the hearing, I granted leave for the plaintiff to lodge supplemental submissions as to whether or not it is permissible for the plaintiff to amend the statement of claim when an application to set aside a default judgment is being heard. Leave was also granted to the defendant to lodge a closing submission, including a response to the plaintiff’s supplemental submissions. Mr To and Mr Wong lodged their skeleton submissions on 9 July 2021 and 22 July 2021 respectively.

5.  This is my decision.

THE PLAINTIFF’S CLAIM

6.  The plaintiff’s case as appeared in the Statement of Claim is quite simple and straightforward. I cannot do better than simply quote the Statement of Claim[1] in its entirety:-

“1. By an oral agreement made on 15 June 2015 between the Plaintiff of one part and the Defendant on the other part, the Plaintiff was invited to participate in a ‘horse racing fund’ raised by the Defendant and the Plaintiff had deposited to the Defendant on 15 June 2015 a sum of HK$1,000,000.00 (“the 1^st Agreement”).

2. On 30 August 2016, the Defendant told the Plaintiff that a profit of HK$400,000 was made from the ‘horse racing fund’ and asked the Plaintiff to deposit an additional amount of HK$600,000 in order to raise the amount of ‘horse racing fund’ to HK$2,000,000. The Plaintiff deposited a further sum of HK$600,000,00 (sic) on 30 August 2016 at the Defendant’s request and thus the total amount of the ‘horse racing fund’ became HK$2,000,000. The Defendant had promised the Plaintiff that the said ‘horse racing fund’ was ‘guaranteed’, that is to say that the Plaintiff can cancel the agreement at any time and get back all her money duly deposited with the Defendant.

3. By another oral agreement made on 24 October 2016, the Defendant proposed to the Plaintiff to take part in a project led by a person call ‘TC’ whom the Defendant claimed to his ‘trustable friend’ with the same promise that the Plaintiff can cancel the said agreement at any time and get back all her money duly deposited with the Defendant. The Plaintiff thus made a deposit of HK$1,000,000 to the Defendant on 28 October 2016 (“the 2^nd Agreement”).

4. By virtue of the 1^st and 2^nd Agreement, the Plaintiff totally deposited the sum of HK$3,000,000.00 to the Defendant.

5. Since October 2018, the Plaintiff informs the Defendant that she wishes to cancel the agreement and get back the sum of HK$3,000,000.00. Despite repeated request and demands, the Defendant only repay the sum of $220,000 to the Plaintiff. Therefore, the Plaintiff is entitled to demand the Defendant the total sum of HK$2,780,000.00.

6. By a letter issued by the Plaintiff’s solicitors, Messrs. Pauline Wong & Co. dated 30 July 2019, the Plaintiff is entitled to demand the Defendant the total sum of HK$2,780,000.00. After issuing of the above demand letter, the Defendant repaid a sum of HK$180,000.00 to the Plaintiff and agreed to settle the remaining balance in the sum of HK$2,600,000.00 by early September 2019.

7. The Defendant had failed and/or refused to settle the sum of $2,600,000.00 by early September 2019 and the Plaintiff’s solicitors, Messrs. Pauline Wong & Co. issued another demand letter to the Defendant on 16 September 2019. However, the Defendant failed and/or refused to repay the said sum of HK$2,600,000.00 or any part thereof.

8. The Plaintiff also claims against the Defendant for interest on the said sum of HK$2,600,000.00 under Sections 48 and 49 of the High Court Ordinance, Cap 4. (sic)

AND the Plaintiff therefore claims against:

a. The said sum of HK$2,600,000.00;

b. Interest on HK$2,600,000.00 at the rate of 8.1258% per annum from the date of the Writ until judgment;

c. Further and other reliefs; and

d. Costs of this action.”

SERVICE OF THE WRIT OF SUMMONS

7.  It appears that, soon after the issuing of the Writ, the plaintiff’s former solicitors had sent it to the defendant by registered post[2]. As I am not told about the result of such service of the Writ, I would assume that the service was not successful.

8.  According to the affirmation made by the service processor Madam Li Chiu Yee, she attended the defendant’s business address (“the Business Address”) at the Wanchai Central Building on 6 January 2020 and served the Writ of Summons by inserting the same into a letter box[3]. She served the Writ at the defendant by inserting the Writ into the letter boxes of the defendant’s residential addresses at the Welfare Road on 7 January 2020[4], and at the Caldecott Road (“the Residential Address”) on 9 January 2020[5].

9.  Since no notice of intention to defend was given by the defendant, a final judgment was entered against him on 27 August 2020[6].

APPLICATION TO SET ASIDE DEFAULT JUDGMENT

10.  On 16 November 2020, the defendant took out the present summons to set aside the said final judgment.

11.  In his supporting affirmation, the defendant admitted that a horse raising fund was set up by him and a Mr Duncan Wong (“Duncan”) in about December 2014[7]. The fund was a joint venture in which the participants would share the profits and losses according to their shares in it[8]. The defendant would report the aggregate results after the end of each horse racing season[9], and the participants might withdraw the balance there according to their respective shares in the fund[10]. The defendant also agreed that there was a profit of HK$394,874 in respect of the plaintiff’s shares in 2015/2016 racing season, and that, after taking account of her injection of additional HK$600,000 into the fund, the plaintiff’s shares in the fund amounted to HK$2 million at the end of that season[11].

12.  The defendant also set out the events leading to the plaintiff’s participation of the investment project in his supporting affirmation. The defendant said that it was the plaintiff who asked him to introduce investment opportunity for her. The defendant then told her that he and his friend had invested in an investment project led by a Mr Chan who looked for profit in a short-term investment. The plaintiff decided to join in by depositing HK$1 million into the defendant’s bank account, thereby taking up the defendant’s shares in the project[12]. The plaintiff once decided to withdraw from the project and got back her $1 million. But she later re-joined it in February 2017 by re-depositing the same amount into the defendant’s account. According to the defendant, both the plaintiff and he were fellow investors of the project[13]. Later, the project leader, the said Mr Chan, refused to return the principal sum and profits in the project to the participants. The defendant’s friend was said to be in the process of trying to recover the investment from the said Mr Chan[14].

13.  The defendant further said that the result of 2016/2017 racing season was poor. There was an aggregate loss of over HK$3.8 million. As a result, the plaintiff’s shares were reduced to about $733,953[15]. While the defendant’s friend kept trying to recover the money from the investment project leader, the defendant agreed to return the plaintiff’s investment of HK$1 million to her and to place it into the horse racing fund. Accordingly, the plaintiff’s shares increased to HK$1.75 million[16].

14.  However, the results of the following racing seasons continued to be poor. There was an aggregate loss of about HK$3.2 million in the 2017/2018 season. The plaintiff’s shares were reduced to HK$316,917[17] by the end of the season. A further loss of over HK$3.7 million was incurred in the 2018/2019 racing season. The total losses not only exhausted the entire horse racing fund, but also rendered the defendant to shoulder additional losses personally[18].

15.  The defendant deposed in the supporting affirmation that, in October 2018, the plaintiff asked him to pay HK$1 million to her as her husband needed to the money to pay tax[19]. The defendant told her that he could try to win some money during the 2018/2019 racing season, but he could not guarantee it. Eventually, the defendant failed to achieve the result as he desired, and he could not give her the HK$1 million as planned[20].

16.  Later, the plaintiff chased the defendant for payment. As she told the defendant that she was in need of money, the defendant decided to pay the money out of his own funds. As a result, the defendant told her that he could give the plaintiff a total sum of HK$400,000 by 3 instalments. Because of his financial situations, the defendant only managed to pay the plaintiff a sum of HK$175,000[21].

17.  The defendant then in his affirmation mentioned incidents involving gangsters in June and July 2019[22]. He alleged that the plaintiff was behind the incidents[23]. As a result, his office was closed intermittently since July 2019[24]. His health was also deteriorated at the time, rendering him to be hospitalized for 21 days between October and November 2019. He stayed home after he was discharged from hospital and did not return to office[25]. Because of his fear that the gangsters kept visiting his office, he paid the plaintiff additional sums of $225,000 between July and August 2019[26].

18.  Later, because of the spread of Covid-19 pandemic, the defendant’s office was closed for most of the time since January 2019 and the staff had worked from home[27]. The defendant said he only discovered the present proceedings in September 2020[28].

19.  The defendant stated in his affirmation in reply that the “guarantee” referred to in his WhatsApp message was meant to be that, even if there was a total loss of the fund, he would allow the participants (namely the plaintiff, Duncan, and Kelly) to reap any losses from his future winning. The defendant denied that he had ever told the plaintiff that there was a “guaranteed” profits in her contribution to the fund. Nor did the defendant guarantee that the plaintiff could ask for the return of her full contribution (regardless of profits and losses) at any time.

20.  The defendant’s application is also supported by two affirmations made by a Madam Wong Suk Han and a Madam Lai Kar Yee (whom both counsel referred to as “Rita” and “Kelly” respectively). Rita is a business partner of the defendant, and Kelly is his business associate. Rita and Kelly both confirmed the gangster activities as alleged by the defendant[29]. Rita further affirmed that the defendant had been seriously sick since July 2019 and did not return to office after his discharge from hospital. She also stated that the defendant was on leave on the date when the Writ of Summons was allegedly served at the Business Address (ie 6 January 2020)[30]. She deposed that she was the assigned person responsible for the collection of incoming mails received at the office. Due to some personal reasons, she took leave in the entire month of January. According to her memory, she did not receive anything issued by any solicitor firm to the defendant in whatsoever manner in January 2020[31].

21.  Kelly is the wife of Duncan. She has also been working at the office at the Business Address at the material times[32]. She corroborated the defendant’s case in respect of his dealings with the plaintiff. Particularly, she stated that there was no guaranteed annual return of the horse racing fund, that the participants were not allowed to withdraw unless after a review at the end of the racing season. She said that the meaning of “guarantee” was that in case of loss the defendant would repay Duncan’s and the plaintiff’s principals out of the defendant’s future winnings. If the plaintiff continued to make losses, the defendant had no obligation to make any repayment to Duncan and the plaintiff[33]. She also confirmed that she did not receive any solicitor letter and court document at the office address, and that incoming mails were frequently found on the floor and sometimes were placed in other locations such as window side at the back exit, or inside the female toilet[34].

LEGAL PRINCIPLES – SET ASIDE DEFAULT JUDGMENT

22.  It is convenient to summarize at the outset the legal principles governing the court’s exercise of its discretion to set aside a default judgment. The relevant legal principles are well-established and not in dispute. Mr Wong relied on the recent decision given by Mr Justice Coleman J in Cheung Sai Lon case[35], where his Lordship stated the principles as follows:-

“13. The principles applicable on an application to set aside a default judgment are well-settled, and they can be set out without lengthy reference to previous authority. A distinction is to be drawn between a default judgment entered regularly, and one obtained irregularly.

14. A default judgment entered irregularly (in the sense that it was obtained without good and effective service of the writ) is liable to be set aside ex debito justitiae, and the Court does not have to consider the merits of the proposed defence. The Court does not have to accept a defendant’s assertion that he has not received the writ, which the defendant must show by compelling evidence. The relevant time is the time at which the default judgment was entered; therefore, it is for the defendant to show that he did not have notice of the writ at that time. Nevertheless, even if there was no effective service, the Court retains a residual discretion to impose terms for setting aside, having regard to the parties’ conduct. One such term might be to impose a condition that a payment into Court be made (for example where the court considers the defendant intended to evade service, or delayed substantially before applying to Court to set aside the judgment).

15. However, if the judgment is regular, the Court may set it aside if a meritorious defence can be shown by the defendant. The defendant must show a real prospect of success, meaning a defence which is one that could well be established at trial, requiring clear and objective evidence casting doubt on the claim. The power to set aside a regular default judgment is discretionary and unconditional, and the Court should have regard not just to the merits of the defence case put forward, but to all relevant circumstances. Typically, the circumstances taken into account in the discretionary exercise include: why the default occurred; the defendant’s conduct after he had notice of the proceedings; the explanation for the time taken where there has been delay in making the application; and any prejudice that would be caused to the plaintiff or third parties if the default judgment were to be set aside.”

23.  In assessing whether the defendant has a meritorious defence in setting aside a regular judgment, the Court of Appeal gave the following guidance in the Martyo case[36]:-

“13. Godfrey JA speaks in terms of the defendant being required to show ‘a real prospect of success’ and the court forming a provisional view of ‘the probable outcome of the action’. These formulations have their origin in the judgment of the English Court of Appeal in the ‘Saudi Eagle’ [reference omitted]. There is a danger that they can be read as requiring the court to undertake a mini-trial on the affirmations as to the likely outcome if the matter goes to trial. This is not what is required and perhaps the correct approach can be more helpfully summarised as requiring the court to form a provisional view as to whether or not the defendant has a realistic prospect of successfully defending the action. Determining this will involve assessing whether or not the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has a realistic prospect of establishing a defence in law. The assessment has to be carried out mindful of the interlocutory nature of the application and with a sense of proportionality.”

LEGAL PRINCIPLE – SERVICE

24.  The legal principles relating to the service of the Writ of Summons are equally well-established. They may be summarized as follows:-

(1) The test for proper service is whether the writ “had been brought to the defendant’s notice and not whether it had been delivered to the defendant’s last known address”. Where a defendant was not living at the address where the writ was inserted into a letterbox at that address, it was not brought to the defendant’s notice and the service was irregular[37].

(2) “When a defendant deposes that he has not received the writ through post, the court has little option but to believe this save when there is sufficient material to cast doubt the defendant’s credibility to enable the court to disbelieve him.” [38] But, the court does not have to accept the defendant’s assertion no matter how improbable. How much evidence is required depends on the circumstances of the particular case[39].

DEFENDANT’S SUMMONS TO SET ASIDE DEFAULT JUDGMENT

25.  As I have noted earlier, the defendant’s grounds for setting aside the judgment are of two folds. First, it was contended that the plaintiff’s service of the Writ of Summons was defective and therefore the judgment was entered irregularly. Secondly, and alternatively, even if the judgment was entered regularly, the defendant said he had meritorious defence to the plaintiff’s claim.

26.  Accordingly, the questions at issues are (1) whether the present proceedings were brought to the defendant’s attention before the judgment was entered against him, and (2) whether the defendant has meritorious defence to the plaintiff’s claim.

SERVICE OF THE WRIT OF SUMMONS

27.  Mr To submitted at the outset that the present case was a classic case of evasion of service. He pointed out the fact that there were lots of pre-action emails exchanged between the parties, and that the defendant should be aware of what was really happening at the material times. In my view, these facts should only be regarded as background materials, and have no direct bearings on the issue at hand.

28.  As mentioned above, the Writ of Summons was served on the defendant in three occasions. It is noted that Mr To had neither in the skeleton submissions of the plaintiff nor in his oral submissions referred to the service effected at the defendant’s address at the Welfare Road. I think this is a correct approach. It was deposed in his affirmation that the defendant had moved out of the Welfare Road address since 23 December 2018, which was more than a year before the service of the Writ thereat. Since no evidence has been adduced to the contrary, the defendant’s evidence must be regarded as unchallenged. I therefore hold that the service effected at the defendant’s former address at the Welfare Road was not an effective service.

29.  I now consider the remaining two occasions of service in turn.

(1) The Business Address

30.  The first is the service effected by way of an insertion of letter box at the Business Address. According to Mr Wong, the photograph[40] taken by the service processor shows that only a small portion of the envelope was inserted into the letter box and a large portion remained outside. He suggested that the envelope was prone to fall out of the letter box[41]. Mr Wong also relied on the email sent by the defendant’s company to another insurance company dated 6 January 2020 (ie the date when the Writ was served at the Business Address) that the defendant was on leave that day[42]. The latter evidence is not controverted by Mr To.

31.  Mr To submitted on the other hand that Mr Wong’s contention does not hold any water. He argued that the office was in fact attended by the defendant’s staff on 6 January 2021 and “any stuff going in and out of the office would immediately notice and pick up the envelop [enclosing the Writ of Summons]”[43].

32.  The main plank of this submission by Mr To hinges on the assertion that the defendant’s office was attended by his staff at the time of service. To support this assertion, Mr To relied on the photograph[44] taken by the service processor showing that the lights in the office were switched on. Mr To sought to infer from that photograph that the office was attended by the defendant’s staff, and to further infer that the staff must have picked up the envelope enclosing the Writ of Summons.

33.  With all due respect, I find it too audacious a chain of inferences that can be drawn from the alleged “lights” shown in the photograph. Many, and in my view too many, assumptions are needed in order to bridge the gap between the premises (“lights” allegedly shown in the photograph) and the conclusion (the defendant was in fact notified of the proceedings).

34.  This submission is also not consistent with the service processor’s evidence that she had waited outside the Business Address for around 5 minutes and that she rang the doorbell for several times, but no one answered[45]. If the inference as suggested by Mr To is valid and that the office was indeed attended by staff, it is inexplicable that no one would answer the doorbell when it rang repeatedly for 5 minutes.

35.  This submission is also contradicted by the evidence given by Rita and Kelly, who affirmed that they did not receive any court documents in January 2020. I find that they are independent and unconnected witnesses who have no financial interests in the outcome of the present proceedings against the defendant. In absence of any evidence to the contrary, I reject the suggestion that they would commit perjury in favour of the defendant out of “blind support”[46] to him.

36.  Finally, with all due respect, after a careful study of the relevant photograph, I am unable to see that the envelope was “forcefully pushing itself against the lips of the letter box”[47] and was impossible to be fallen off, as suggested by Mr To. I can find nothing in the photograph that can rule out the possibility suggested by the defendant that the envelope was fallen out of the letter box.

(2) The Residential Address

37.  In his affirmation, the defendant raised concerns regarding the completeness of the address stated in the envelope for the service at the Residential Address. Mr Wong at the hearing confirmed that he would not rely on this point.

38.  The defendant also cast doubt as to whether the service processor had ever gained access to the Residential Address because of the difficulties of getting clearance from the security guard and of gaining entry to the building. During the hearing, Mr Wong also challenged the veracity of the service processor’s evidence on the basis that it was sworn that the security guard had used an access card to open the entrance door, whereas the management company of the building confirmed with the defendant that the entrance door was operated with a password panel, instead of an access card reader[48].

39.  With all due respect, I do not agree that such a doubt (if any) is sufficient to challenge the veracity of the service processor’s evidence. It should be noted that the service processor stated under oath that she had attended the Residential Address for service on 6 January 2020. She also exhibited a photograph[49] taken on the same day indicating a sealed envelope was inserted into the letterbox at the address. In my view, in light of this direct evidence, the service processor’s credibility cannot be undermined by mere discrepancy of the mode of access at the entrance of the building. Fairness demands that she must have a chance to explain the said discrepancy before I am in a position to rule against her veracity. As the service processor was not called to testify before me at the hearing, I do not think I have little choice but to accept her deposition that she had indeed attended the Residential Address for service on 6 January 2020.

40.  However, the same also applies to the defendant’s evidence. The defendant unequivocally stated under oath that he had never received any of the sealed envelopes containing the Writ of Summons. He deposed that he relied on the domestic helper to collect the mails for him, and that the domestic helper had never informed him of the receipt of any mail containing solicitor’s letter or court documents. The plaintiff adduces no direct evidence that can directly contradict this assertion.

41.  Furthermore, similar to the service effected at the Business Address, Mr Wong also relied on the photograph provided by the service processor showing that only a small portion of the purported writ was inserted into the letterbox with a large portion remaining outside. Mr Wong argued that this would be prone to the envelope falling out of the letterbox. It was also said to be likely that the postman would remove the envelope in order to insert other letters into the letterbox. Judging from the position as to how the documents were inserted into the letterbox, I do not see it improbable that the documents would have fallen into the floor, rendering the defendant’s failure to receive notice of the present proceedings.

42.  Finally, it is an undisputed fact that the defendant is an insurance intermediary licensed by the Insurance Authority[50]. There is no doubt that the consequence of a judgment made against him would be devastating to his livelihood. I am therefore prepared to accept that, had the plaintiff’s claim been brought to the attention of the defendant, it would be unlikely for the defendant to ignore it, let a judgement to be entered against him, and then to take the trouble to set it aside. At the hearing, Mr To responded that this was a delaying tactic deployed by the defendant. With all due respect, I do not agree. In my view, it is not likely that anyone would risk his livelihood for simply delaying the matter for a couple of months. In my view, it would far more probable that, had the defendant been aware of the present proceedings, he would have taken proactive steps to defend the claim.

43.  For these reasons, I find that the defendant had not been aware of the present proceedings when the judgment was entered against him in August 2020. Accordingly, the judgment was entered irregularly and should be set aside ex debito justitiae.

44.  Had it been necessary to say so, I would add that I can find no basis to exercise my residual discretion in refusing to set aside the irregular judgment in the present case, nor do I think it just and fair to impose any conditions before the judgment is to be set aside.

MERITORIOUS DEFENCE

45.  Given my findings as aforesaid, it is not strictly necessary for me to consider the merits of the defence. However, even if I am wrong that the judgment was entered irregularly, I would also set the judgment aside. I will explain why.

46.  The main attack launched by Mr To against the defendant’s defence was that it was not explicable why the defendant did not tell the plaintiff about the fact that her shares in the horse racing fund had already been exhausted when she demanded him to repay her portion of shares. At the hearing, Mr To also criticised the defendant for his failure to adduce any documentary evidence showing that the horse racing fund had been exhausted. And such documentary evidence, said Mr To, could be adduce by “snap of a finger”. He also said the defendant’s case was contradicted by his own contention that he would keep his share in the fund at a constant amount of HK$1 million.

47.  With all due respect, I find that Mr To’s attack misses the point. He appeared to have interpreted the defence as if the defendant refused to repay the alleged sum to the plaintiff due to the exhaustion of the horse racing fund. In my view, this is not what the defence really is. The real defence, as Mr Wong submitted at the hearing, is a diametric negation of the existence of the plaintiff’s alleged oral agreement as pleaded in the Statement of Claim. This line of defence is clear where the defendant deposed the followings in his 2^nd affirmation[51]:-

“8. I am advised and verily believe that the Plaintiff’s current claim as pleaded at paragraph 2 of the Statement of Claim is that I had guaranteed that the Plaintiff can cancel the agreement and get back all her money in the racing fund at any time. Essentially, although we are pooling funds to place gambling bets, it is said that I have completely guaranteed her in full, and even if there were losses, I will fully compensate her regardless. This is simply not true and there is no conceivable reason that I would give the Plaintiff (or anyone else for that matter) such guarantee on gambling.”

48.  During the hearing, Mr To raised a rather convoluted argument in response. According to his interpretation of the arrangement between the parties, the plaintiff was entitled to the repayment upon the cancellation of the agreement with the defendant. The defendant was obliged to pay the full amount unless he could demonstrate to the plaintiff that the horse racing fund had been reduced or exhausted. This obligation of the defendant had nothing to do with the “guarantee” as pleaded in paragraph 2 of the Statement of Claim. Accordingly, if the defendant asserted that he could not repay the plaintiff because of the exhaustion of the fund, he must produce evidence to that effect.

49.  This argument is disingenuous. Firstly, as Mr Wong submitted, this is not what the plaintiff pleaded in the Statement of Claim. I find it clear from the Statement of Claim (which is quoted in its entirety in [5] above) that the plaintiff’s claim is formulated in an absolute term with no condition attached to the payment from the defendant. It appears to be this absoluteness of repayment that the agreement is said to be a “guarantee”. Hence, this argument is not consistent with this plain interpretation of the plaintiff’s pleaded case, which I consider to be the proper one. Nor is there any basis for me to accept that Mr To’s convoluted interpretation should be preferred.

50.  Secondly, if this argument is correct and the plaintiff’s claim is conditional upon the availability of the horse racing fund, it is difficult to see how the plaintiff could obtain a final judgment in a liquidated sum, without first having an inquiry of the defendant’s account. At the hearing, Mr To submitted that the final judgment must be upheld because it was obvious that the defendant was indebted to the plaintiff. I agree with Mr Wong’s reply that this is a presumptuous submission[52]. In any event, it is trite that a judgment entered for too much is an irregular judgment and may be liable to be set aside[53].

51.  The problem with the plaintiff’s claim goes deeper. As has already been indicated, the formulation of the plaintiff’s claim has undergone a couple of metamorphoses in the course of these proceedings. As noted above, in the Statement of Claim, the plaintiff’s claim is formulated as a simple contractual claim, where the defendant’s obligation of repayment is formulated in an absolute term and that absoluteness was said to be “a guarantee”. In the plaintiff’s affirmation in opposition, the “guarantee” was said to be a guarantee of “minimum annual return of 4%”. It was also deposed that the defendant had charged a fee/commission, but the plaintiff had never understood how the said fee/commission would be charged[54].

52.  To my surprise, Mr To described the present case as a fraud claim in his skeleton submission, where he wrote in the first sentence that “This case concerns a suspected fraud perpetuated among members of the Rotary Club, where members were enticed into investing in a horse racing fund or other projects which would later claim to have been lost in its entirety in one way or another”[55]. During the hearing, Mr To did not elaborate this formulation of the plaintiff’s claim. Instead, he submitted, as previously mentioned, that the defendant’s obligation of repayment was not absolute but subject to the availability of the horse racing fund (and the defendant was obliged to adduce evidence to support his contention that the fund had been exhausted).

53.  I can see the predicament faced by Mr To. As Mr Wong rightly observed, it makes no commercial sense, or even common sense, to say that a person would have “guaranteed” a return for a horse racing, since horse racing is essentially a high-risk activity. Obviously, no one can guarantee the result of such an activity[56]. The original claim raised by the plaintiff in the Statement of Claim is not sustainable without any modification.

54.  In my opinion, the plaintiff is not entitled to deviate from the original version of the claim in resisting an application to set aside the default judgment. This is because the basis upon which default judgment can be obtained where no defence is filed is that of implied admission. In other words, the reason why the plaintiff can obtain judgment in default of defence is because, where the defendant failed to file a defence, the court will assume that the statement of claim has been impliedly admitted and that is the reason why, in an application for judgment in default of defence, the court will only consider the statement of claim without admitting any evidence[57]. It follows that, in the consideration of setting aside a default judgment, the court should confine to the plaintiff’s pleaded case and only focus on the issue whether the defendant can raise a good defence against the plaintiff’s claim as pleaded in the statement of claim. Any extraneous evidence adduced by the plaintiff in opposition, which is of substantial deviation of the pleaded case, would not be helpful in this respect.

55.  In the present case, I am satisfied that the defendant does have a good defence against the plaintiff’s case as pleaded in the Statement of Claim. In particular, I am of a clear view that the defendant can well establish at trial that the oral agreement in the form as pleaded in the Statement of Claim did not exist at all. In my judgment, this finding is sufficient to set aside the final judgment made against the defendant. In the circumstance, I would set aside the final judgment even if I am wrong in respect of the irregularity of the final judgment.

56.  Relatedly, the plaintiff stated in the Statement of Claim that, in pursuance of an oral agreement made 24 October 2016, she agreed to join the investment project and made a deposit of $1,000,000 to the defendant’s account on 28 October 2016.

57.  As a matter of fact, as was transpired in the defendant’s affirmation, the plaintiff decided to cancel the said agreement. She withdrew her shares and got back her investment on 14 February 2017. She later decided to re-join the investment project by depositing a sum of $1,000,000 into the defendant’s bank account on 27 February 2017[58]. The plaintiff did not take issue with this version of event[59]. Apparently, this version of event is substantially different from what was pleaded in the Statement of Claim. In my view, this part of the plaintiff’s claim is not sustainable in the circumstance.

58.  Mr Wong also points out at the hearing that no mention of a guaranteed return in respect of the investment was stated in the pre-action letter issued by the plaintiff’s former solicitors[60].

59.  At the conclusion of the hearing, Mr To sought leave from the court to amend the Statement of Claim by varying the date of deposit from “28 October 2016” to “27 February 2017”. As mentioned at the beginning of the decision, I granted leave to Mr To to lodge a supplemental skeleton submission in this respect, and to Mr Wong to lodge closing submissions in reply.

60.  In the supplemental submission, Mr To relied on the decision of Hugo Boss Trademark[61], where, in dismissing the defendant’s application for setting aside default judgment, Mr Justice Zervos J (as he then was) allowed the plaintiff to rectify particulars of the cause of action by amending the Statement of Claim[62]. According to Mr To, the relevant paragraph of the Statement of Claim has already contained the necessary particulars of the agreement and the relevant mistake was only a slip of pen by the drafter.

61.  With respect, I do not agree. In my view, the matter is not simply a clerical error. The amendment changes the whole ramification of this part of the plaintiff’s claim. By such an amendment, it is no longer clear whether the 2^nd deposit was made in pursuance of the agreement made on 24 October 2016, as pleaded in the Statement of Claim, or the agreement on 22 February 2017, when the defendant allegedly persuade the plaintiff to re-join the investment project[63]. In my view, due to the lack of further particulars, this part of the plaintiff’s claim is unsustainable.

62.  Accordingly, based on the matters as pleaded in the Statement of Claim, I find that the defendant does have a meritorious defence to the plaintiff’s case. The extraneous evidence given by the plaintiff cannot salvage the defects of her pleaded case. Accordingly, even if I am wrong regarding the irregularity of the judgment, I would still exercise my discretion to set aside the final judgment entered against the defendant.

63.  It follows that the defendant would have unconditional leave to defend the plaintiff’s claim. I would further grant leave to the defendant to acknowledge service of the Writ and to file and serve his defence and counterclaim (if any). The plaintiff would also have leave to file and serve her reply and defence to counterclaim (if any).

COSTS

64.  Costs should follow the event. In view of my decision that the judgment against the defendant was irregular, there is nothing to depart from the general practice that the plaintiff should bear his own costs of signing the irregular judgment and further to pay the defendant’s costs of the application to set aside the judgment[64].

65.  Accordingly, I would order that the plaintiff shall bear its own costs of signing the final judgment dated 27 August 2020, as well as pay the defendant costs of this application in any event, to be taxed if not agreed, with a certificate for counsel.

ORDER

66.  For the reasons as aforesaid, I order that:-

(1) The final judgment entered herein dated 27 August 2020 be set aside;

(2) The defendant do have leave to acknowledge service of the Writ of Summons within 14 days from the date of this decision;

(3) The defendant do have leave to file and serve his Defence and Counterclaim (if any) within 28 days thereafter;

(4) The plaintiff do have leave to file and serve her Reply and Defence to Counterclaim (if any) within 28 days thereafter;

(5) The plaintiff shall bear her own costs of the entering of the said judgment, as well as pay the defendant the costs of the setting aside of the judgment, including the costs of the defendant’s Summons filed herein on 16 November 2020. Such costs are payable in any event, to be taxed if not agreed, with certificate for counsel.

67.  Lastly, I would like to thank Mr Wong, Mr To, and Mr Yu for their assistance rendered to this court.