RICOH HONG KONG LTD v. ELITE HERITAGE (HONG KONG) LTD

DCCJ 1620/2024

[2026] HKDC 1203

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1620 OF 2024

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BETWEEN

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DECISION

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Introduction

1.  This is the Defendant’s appeal against Master Vincent Kee’s decision made on 27 February 2026 dismissing its application to set aside the final judgment entered against it on 5 September 2024 by reason of its failure to serve a defence.

2.  The Plaintiff has served the Writ and the Statement of Claim issued and filed on 26 March 2024 on the Defendant by sending the same to the Defendant at its registered office. The Defendant has subsequently filed its Acknowledgement of Service on 9 July 2024, but has since failed to file a defence, despite having also been served a Notice of Intention to Enter Judgment dated 12 July 2024, as a result of which a Final Judgment by default was entered against the Defendant on 5 September 2024 for the liquidated amount of HK$225,600 with interest thereon and costs.

3.  It was not until 4 September 2025, exactly a year afterwards, that the Defendant issued a summons applying to set aside the default judgment. The application was heard before Master Vincent Kee on 27 February 2026, who dismissed the same.

4.  The Defendant then took out the present appeal on 12 March 2026 against the decision of the Master.

5.  At the hearing before me, the Plaintiff has also made an application by summons dated 28 April 2026 (“the Plaintiff’s Summons”) to expunge the affidavit of Chow Audris Cheuk Wai (“Ms Chow”), the sole director of the Defendant, filed on 12 March 2026 containing further evidence in support of the Defendant’s present appeal.

The Defendant’s application for an adjournment

6.  At 7:22 p.m. on 19 May 2026, i.e. the day before the hearing of this appeal, the court received a message by fax from the Defendant enclosing a further affidavit of Ms Chow, said to be made in the Philippines, stating, without further details, that she was unable to return to Hong Kong to attend the hearing on 20 May 2026 due to “a delay in the necessary travel document for my accompanying infant child”.

7.  In the copy affidavit, the Defendant also attached a copy of an online electronic police report made by Ms Chow to the Hong Kong Police on 19 May 2026 concerning her alleged forged signature appearing on a relevant document in this case, which will be further referred to below.

8.  By the said further affidavit, the Defendant sought an adjournment of the hearing of this appeal to enable her to better prepare for the appeal.

9.  A copy of the fax message with the attachments were then provided to Mr Wong appearing for the Plaintiff at the hearing on 20 May 2026. Mr Wong objected to the Defendant’s application for an adjournment.

10.  After considering the said further affidavit of Ms Chow, and the objections by Mr Wong for the Plaintiff, I refused to adjourn the hearing to a later date and proceeded with the hearing of the appeal and the Plaintiff’s Summons for the following reasons.

11.  Under Order 32 rule 5 of the Rules of the District Court, Cap.336H (“RDC”), the court has power under rule 5(1) to proceed in the absence of a party if, having regard to the nature of the application, it thinks it is expedient to do so.

12.  On this occasion, firstly, the hearing date was made known to the Defendant upon the fixing of the same at its own initiative. The application for an adjournment was not made until the last minute, i.e. in the evening before the day of the hearing.

13.  Secondly, as mentioned above, Ms Chow has not given any further details about the alleged delay in the issuing of the necessary travel document for her infant child. As such, the court was not informed of the entire lead up to the alleged problem and the previous actions taken by Ms Chow, if any, to avoid such delay or to counter the problem.

14.  Thirdly, the above would have culminated in unfairness and prejudice towards the Plaintiff who has not been given any knowledge of the situation until the hearing took place. The question whether any prejudice caused by an adjournment could have been compensated by costs apart, it would certainly not have been compatible with good case management if an adjournment was granted in such circumstances.

15.  For the above reasons, I refused the Defendant’s application for an adjournment, and proceeded with the hearing of the appeal and the Plaintiff’s Summons in the absence of the Defendant.

The factual background

The Plaintiff’s case

16.  By its Statement of Claim, the Plaintiff’s case is that on or about 1 October 2021, it had entered into a Rental and Warranty Services Agreement (“the Service Agreement”) with the Defendant whereby the Plaintiff agreed to implement for and rent to the Defendant a digital “Customer Relationship Management System” (“the System”) together with a mobile application, with a minimum rental period of 36 months at a monthly rental of HK$18,000.

17.  It is common ground that one Niron Technology Limited (“Niron”) was an IT solution contractor engaged by the Plaintiff for the implementation of the System for the Defendant, and the Defendant agreed to pay the aforesaid rental upon the delivery of the System, failing which the Defendant would be liable to pay interest on the outstanding rental at the rate of 2.5% per month.

18.  The Plaintiff’s case is confirmed by the affirmation of Wong Wai Lun (“Mr Wong”), Head of the Solutions Specialist Operations Department of the Plaintiff, dated 6 September 2024, and the affirmations of the Plaintiff’s Credit Control Officer, Tan Muk Lok (“Mr Tan”).

19.  In short, it is the Plaintiff’s case that after the signing of the Service Agreement, the Plaintiff had duly delivered the System and commenced services for the Defendant, issuing invoices to the Defendant. The Defendant has also confirmed in writing the delivery and implementation of the System.

20.  As will be further mentioned below, in support of its case, the Plaintiff relies, inter alia, on a document entitled “User Acceptance Test” dated 19 May 2022 (“UAT”), and also a “Project finish” document dated 4 August 2022 (“Project Finish Acknowledgment”), both confirming that the Plaintiff (through Niron) had successfully completed the “CRM + Promotion and Remarketing APP”, which is understood to be referring to the System and the mobile application under the Service Agreement. According to the Plaintiff, both confirmation documents were signed by Ms Chow on behalf of the Defendant.

21.  Notwithstanding such services, the Plaintiff claims that the Defendant has failed to pay the monthly rental for the months of March 2023 to February 2024, leading to a total outstanding sum of HK$225,600.

The Defendant’s evidence

22.  By the affidavits of Ms Chow (being the sole director of the Defendant) dated 4 September 2025 and 10 November 2025 filed in support of the Defendant’s application to set aside the default judgment, the Defendant claims that, despite she had signed on the aforesaid UAT dated 19 May 2022, the System had in fact never been completely delivered and implemented by Niron, and the Defendant had in fact informed the Plaintiff by an email dated 16 September 2022 that Niron had stopped work since January 2022. She explained that the UAT only reflected “preliminary testing of limited modules”, and the System was never deployed or functional.

23.  The Defendant’s case is that subsequently on 8 March 2023, it had served a formal notice on the Plaintiff by email that the project was terminated. In this regard, the Plaintiff claims it has never agreed that the project was terminated. The alleged termination was merely a unilateral contention by the Defendant without any evidence showing the Plaintiff’s consent.

24.  By her affidavit filed on 10 November 2025, Ms Chow also alleges that she had never seen or signed on the aforesaid Project Finish Acknowledgment dated 4 August 2022.

25.  It is the Defendant’s case that the Plaintiff has been in fundamental breach of the Service Agreement, and the Defendant is not liable for the alleged outstanding rental, despite the Defendant has already paid 19 months of service fees up to February 2023 before ceasing such payments since March 2023.

26.  In respect of the reason why the Defendant has failed to file a defence, Ms Chow explained that at the relevant time due to her pregnancy and medical condition, and the fact she was staying overseas, she was unable to manage the proceedings. She did however arrange for the Acknowledgment of Service to be sent via international courier service. She maintained that the delay or failure to file a defence was “neither intentional nor negligent” but was caused by circumstances beyond her control.

The Plaintiff’s Summons

27.  For the Plaintiff’s Summons, Order 58 rule 1(4) of the RDC provides that “[n]o further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”.

28.  As for such special grounds, the well-established test set out in Ladd v Marshall [1954] 1 WLR 1489 requires that the following three conditions must be satisfied, namely (a) the evidence could not have been obtained with reasonable diligence for use at the hearing below; (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (c) the evidence must be apparently credible, though it need not be incontrovertible such as is presumably to be believed.

29.  The Plaintiff has also referred to Andrew v Andrew [1953] 1 WLR 1453 at 1454, where the Privy Council stated the requirement in Condition (2) as “the fresh evidence, if true, would have had or would have been likely to have had, a determining influence on the court below”.

30.  By the affidavit of Ms Chow filed on 12 March 2026, the Defendant seeks to adduce new evidence of a WhatsApp screenshot (the date of which is unidentified) of her previous communication with one Horace Chung who claims himself as the project manager of presumably the Plaintiff, answering her question which the Defendant now seeks to use in support of its allegation that “the system was never launched and the project was never completed”.

31.  As pointed out by the Plaintiff, the Defendant has not made any application for leave to adduce such new evidence. There is in any event no explanation from the Defendant as to why the evidence could not have been obtained with reasonable diligence for use at the hearing below. Such new evidence therefore does not even satisfy the first condition under the Ladd v Marshall test. It is rejected by this court on this ground alone.

32.  Further, Ms Chow’s indication as set out in paragraph 31 of her said affidavit that she was compiling further materials relating to the project development and the relevant communications is neither here nor there. There are not even particulars given of the materials she intends to rely upon. In any event, the Defendant ought to have adduced the relevant evidence when it made its application to set aside the default judgment, and not at the time of this appeal.

33.  For the above reasons, I am of the view that the Defendant’s attempt to rely on the aforesaid new evidence does not satisfy the Ladd v Marshall test. I therefore made an order in terms of the Plaintiff’s Summons that the Affidavit of Chow Audris Cheuk Wai filed on 12 March 2026 be expunged. The costs of the Summons shall be paid by the Defendant, to be taxed if not agreed.

34.  As for the further evidence concerning the police report mentioned above, although this was evidence that was created at the instance of the Defendant after the decision of the learned Master, the Defendant or Ms Chow has not explained the reason why the police report was not made earlier instead of on the day before this hearing, as her allegation of her forged signature had already been raised when she made her affidavit in reply dated 10 November 2025. This is unfair to the Plaintiff who has only been provided a copy of the said report at the hearing. In any event, I also agree with the Plaintiff that this report simply repeats the earlier allegation and does not add anything substantive to support Ms Chow’s allegation of her forged signature. I therefore also refused to consider the further evidence of the said police report sought to be adduced by the Defendant.

The Defendant’s appeal

35.  I now turn to the Defendant’s appeal.

Applicable legal principles

(i) Appeals against decisions by Masters

36.  First of all, it is trite that an appeal against a Master’s decision is by way of a rehearing as though the application has come before the judge for the first time, and the court’s discretion is not fettered by the previous exercise of discretion by the Master – see Hong Kong Civil Procedure 2026, Vol 1, para.58/1/2.

(ii) Setting aside a regular judgment

37.  There is little dispute that the default judgment entered herein is a regular judgment. It is trite that the power to set aside a default judgment which has been entered regularly is discretionary and such power is unconditional: Hong Kong Civil Procedure 2026, Vol.1 at para.13/9/12.

38.  In the recent case of Leung Choi Fai v Wong Yee Fai and Others, HCA 1572/2022, 22 July 2025 at paras.86-88, DHCJ Andrew Li has set out the legal principles to be considered by the court whether to set aside a default judgment which has been entered regularly as follows:

“86. It is not to say that a defendant who is able to demonstrate a defence which has a real prospect of success has an automatic entitlement to have the default judgment set aside. In exercising the discretion under this rule, the Court has regard to all relevant circumstances. What will be relevant as a factor in any particular case will depend on the individual facts of that case. The usual factors are: why the default occurred; the defendant’s conduct after he had notice of the proceedings; an 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 to third parties if the default judgment were to be set aside. These other relevant factors will then have to be weighed against the dominant factor of the merits in order to see where the justice of the case lies. Further, the fact that a defendant has told lies in seeking to explain the delay may affect his credibility and may, therefore, be relevant to the credibility of his defence and the way in which the court should exercise its discretion: HKCP 2025 at §13/9/13.

87. In order to set aside a regular judgment, the defendant has to show a meritorious defence with a real prospect of success or which carries some degree of conviction. Unless a defendant can produce potentially credible affidavit evidence demonstrating a real likelihood that he will succeed on fact, he cannot be said to have shown he has a real prospect of success: Southwest Securities (HK) Brokerage Limited v Liu Su Heng & Another [2021] HKCFI 863 at §10 (per DHCJ To).

88. Thus, there is a substantial onus on an applicant who seeks to set aside a regular judgment. The defendant should “explain precisely what the proposed defence will be so that the Court can be assisted in forming a value judgment as to whether it can be satisfied that there is some degree of conviction and a real prospect of success in the proposed defence”. Expressing the defence with the usual obscure wording of a pleading would not be sufficient: Tong Yi Sang & Another v Fung Law & Ng & Another [1993] 2 HKC 665 at 672B-E.”

39.  The court will take a holistic approach in deciding whether to set aside a default judgment. It conducts a balancing exercise of all relevant factors, including why the default judgment was allowed to occur in the first place and any consequent prejudice caused to the plaintiff, but the critical factor and starting point are the merits of the defence: Southwest Securities (HK) Brokerage Limited v Liu Su Heng & Another [2021] HKCFI 863 at para.11; Goldteam Group Ltd v Qin Hui [2021] 5 HKC 708 at para.27.

The Defendant’s case of non-complete delivery of the System

40.  According to the Service Agreement signed between the Plaintiff and the Defendant, the delivery of the System to the Defendant included the following 3 items or stages:

Item 1 (Stage 1): System Implementation

Item 2 (Stage 2): Upon User Acceptance Test (UAT)

Item 3 (Stage 3): Upon project acceptance

41.  There is no dispute that the Plaintiff had engaged Niron as its contractor to implement the System for the Defendant in October 2021. According to the Plaintiff, Niron had immediately commenced implementing the System in October 2021, relying on the first invoice sent by Niron to the Plaintiff on 11 October 2021. At the same time, it is not disputed that the Defendant had started payment of the monthly rent in the sum of HK$18,800.00 per month. This was “Item 1 (Stage 1)” referred to in the Service Agreement.

42.  As for “Item 2 (Stage 2)” of the Service Agreement, according to the Plaintiff, Niron had also issued its second invoice dated 19 May 2022 to the Plaintiff together with the UAT dated 19 May 2022 signed by Ms Chow on behalf of the Defendant to confirm its acceptance that the System implemented by Niron had passed the UAT. In the UAT, the Defendant had expressly acknowledged the successful deployment of the System.

43.  Lastly, for “Item 3 (Stage 3)”, the Plaintiff relies on the Project Finish Acknowledgement dated 4 August 2022, which according to the Plaintiff shows the completion of “Item 3 (Stage 3)” of the Service Agreement.

44.  In her affidavit dated 10 November 2025, Ms Chow does not dispute that she had signed on the UAT on behalf of the Defendant, but she said she had never seen or signed the Project Finish Acknowledgment. She observes that her alleged signature on the Project Finish Acknowledgment might have been duplicated from the UAT. However, in the enlarged version of her signatures on the two documents as contained in Exhibit 4 to her said affidavit[1], when Ms Chow went on to confirm her signature on the Project Finish Acknowledgment, she was in fact referring to her signature on the UAT dated 19 May 2022. This anomaly in her evidence has not been clarified, but it would appear, and I am inclined to accept for the purpose of this appeal, that this was an inadvertent mistake as she already specifically stated in her affidavit that she had signed on the UAT but not on the Project Finish Acknowledgement.

45.  Further, upon observation, there is such a large degree of similarity between the signature on the UAT and that on the Project Finish Acknowledgment that would likely lead one to conclude that one was replicated from the other. Contrary to what the Plaintiff has sought to submit, it appears to be a 100% replication and there are apparently no or no significant difference between the two signatures. Although there is no handwriting expert evidence sought to be adduced by the Defendant in relation to the aforesaid allegation of forgery, this no doubt is a live issue simply by looking at the two signatures. For a handwriting expert to examine the signatures, the originals of the relevant documents will need to be obtained and made available.

46.  It may be said that by reason of the Defendant’s delay and the fact that Niron has recently been wound up by the Court, there may be practical difficulty in obtaining such original documents for examination even if the Defendant is allowed to proceed to defend the claim on this ground. However, this argument for the Plaintiff would be more apparent than real, as any prejudice caused by any difficulty in obtaining the original documents for examination by an expert would predominantly be caused to the Defendant, who has the onus to prove the alleged forgery.

47.  As regards the undisputed signature on the UAT, the document does show on its face that the Defendant has confirmed that the Plaintiff had successfully completed the deployment of the “CRM + Promotion and Remarketing APP”. It would seem to me that in light of the undisputed communications referred to below whereby the Defendant has indeed complained of incomplete delivery of the System, the reliability of the UAT and the circumstances under which it was signed will have to be examined in detail.

48.  The Plaintiff also submits that according to the attendance records referred to by Mr Tan, Ms Chow has never complained about incomplete delivery of the System when he made telephone calls to her to chase for payments from March to November 2023. Instead, according to Mr Tan, Ms Chow had tried to explain that her partner was in Mainland China and was in hospital. It was not until 17 January 2024 that Ms Chow raised the complaint that the project was “incomplete” when she received the phone call of Mr Tan’s colleague from the Plaintiff’s Credit Control department chasing for payment.

49.  However, it is not disputed that there was indeed a meeting held on 25 April 2023 between Mr Wong and his colleague with Ms Chow to discuss the reason why the Defendant had failed to make monthly payments, after a demand letter had been issued to the Defendant by the Plaintiff’s solicitors. In that meeting, Ms Chow says she had indicated that the System had not yet been completely delivered to the Defendant, and that she was still following up the matter with the staff of Niron.

50.  The Defendant produced an email dated 26 April 2023, i.e. the day after the aforesaid meeting on 25 April 2023, wherein the Plaintiff through its manager Mr Owen Wong referred to the meeting held on the previous day, and indicated that he had referred the message to Niron about the “expected completion date in Sept.23”. The Defendant claims and it does so appear, that this directly contradicts the Plaintiff’s claim that the project was completed in August 2022.

51.  On the other hand, the Plaintiff submits that apart from the Defendant’s allegation that the System had not yet been completely delivered, there is no information as to what the missing items were, and whether the “expected completion date” was only referring to the expected completion date of the maintenance work. In this regard, the Plaintiff stressed that there is provision in the Service Agreement for ongoing support and maintenance service upon delivery of the system. The Plaintiff referred to Clause 3.1 of the Terms and Conditions of the Service Agreement, which states as follows:

“If the Customer should become aware of any fault in the Licensed Software, the Customer shall promptly notify RHK and shall provide RHK such information as necessary to assist RHK in the diagnosis and correction of the fault.”

52.  The Plaintiff submits that if the Defendant was not satisfied with the work of Niron at any time during the contractual period, the Defendant could rely on Clause 3.1 and notify the Plaintiff so that the latter could refer the complaint to request Niron to follow up on the matter.

53.  However, it seems to me this provision in Clause 3.1 would apply to the discovery of faults in the licenced software, but does not detract from the core duty of the Plaintiff to deliver the System itself within approximately 2 weeks under Item F (on page 5) of the Service Agreement.

54.  The Defendant also relies on an email dated 16 September 2022 sent from one Vickie Chung on behalf of the Defendant to one Joe Lee and copied to one Frances Ip referring to a phone call on the same day, claiming that the Defendant had indeed informed the Plaintiff that Niron had “refused to produce work” since January 2022, and the Defendant had previously informed the Plaintiff about this by phone. The Defendant further indicated in the email that “if there is no work done, it is logical & lawfully [sic] payment should be refrained until they have shown that there is work done”.

55.  The Plaintiff submits that apart from producing the aforesaid email record, the Defendant has not explained who Joe Lee and Frances Ip were, and what positions they held with the Plaintiff, if so. The Plaintiff also says the Defendant has not also set out the details of the alleged telephone calls and whether any complaints of specific items of non-delivery of the System had been indicated to the Plaintiff over the phone.

56.  As the Plaintiff has pointed out, it was not until 4 September 2025 when the Defendant applied for setting aside the default judgment that Ms Chow made the allegation in paragraph 9 of her affidavit setting out specific items that were allegedly “not completed and not delivered to the Defendant”.

57.  Apparently, such details were only given during a meeting held on 2 September 2025 between Ms Chow and the Plaintiff’s representatives. According to Mr Wong who was one of the attendees at the meeting[2], Ms Chow told them that she would keep a video record of the meeting, but the Plaintiff’s representatives stressed that the meeting was on a “without prejudice” basis. This is denied by Ms Chow, but she has not sought to produce the video record of the meeting to show that the Plaintiff had not so indicated. All she mentioned in her affidavit dated 10 November 2025 was that the meeting was not a “without prejudice” negotiation but was an “administrative discussion” initiated by the Plaintiff.

58.  On the balance, I accept Mr Wong’s evidence in this regard, i.e. the meeting on 2 September 2025 was indeed said to be on a “without prejudice”, hence the details of the meeting ought not, and is not considered for the purpose of this appeal. On the other hand, Ms Chow has not denied that this was stressed by the Plaintiff’s representatives at the beginning of the meeting, but only expressed her view that this was not considered to be a “without prejudice” meeting. She has not produced the video record to clarify this.

59.  As such, I will not consider the evidence about what had been discussed during the meeting held on 2 September 2025 on the ground that such discussions were made on a “without prejudice” basis and were privileged.

60.  However, the fact remains that there had indeed been certain other communications between the parties as referred to above when the Defendant had complained about non-delivery or incomplete delivery of the System. Although the Plaintiff complains of a lack of particularity concerning the deficiency of delivery, the existence of such communications have not been disputed by the Plaintiff, which indeed tends to support the Defendant’s case of incomplete delivery or implementation of the System.

Delay by the Defendant in taking out the summons to set aside

61.  The sealed copy of the default judgment dated 5 September 2024 was served on the Defendant on 13 September 2024. As mentioned above, the Defendant only took out the summons to set aside the default judgment on 4 September 2025. There was a delay of one year.

62.  The Plaintiff also submits that a compulsory Winding-Up Order was granted against Niron on 12 February 2025. As such, due to the Defendant’s undue delay in taking out the summons to set aside the default judgment, it has become impossible for the Plaintiff to request Niron to follow up on the alleged complaint and to require Niron’s technicians to inspect the System.

63.  Ms Chow explained in her evidence that the failure to serve a defence was due to the fact that from February to October 2024 she was overseas, and also due to her pregnancy and medical requirements. As such, she was unable to handle the court proceedings. Subsequently since April 2025, she was again pregnant with her second child and remained under continuing medical supervision. She only returned to Hong Kong on 27 August 2025 to specifically deal with this case and to meet with the Plaintiff’s representatives.

64.  The Plaintiff submits that despite such allegations, Ms Chow has not produced any medical or other records that would support her contention.

65.  In fact, Ms Chow or the Defendant was in the meantime able to arrange for the Acknowledgment of Service of the Writ of Summons to be sent through international courier and for the same to be filed on 9 July 2024. The Plaintiff says if the Defendant or Ms Chow could make such logistical arrangements for the Acknowledgment of Service to be filed, there is no reason why a defence could not have been filed.

66.  The Plaintiff says there is serious doubt as to whether Ms Chow was lying when she sought to explain the Defendant’s failure to serve a defence, and the long delay in applying to set aside the default judgment. In this regard, the Plaintiff refers to paragraph 86 of the Judgment in Leung Choi Fai above, which showed that one of the factors that the court would consider when exercising the discretion to set aside a default judgment is the defendant’s conduct after he had notice of the proceedings, and his explanation for the time taken where there has been delay in seeking the application. The fact that a defendant has told lies in seeking to explain the delay may affect his credibility and may therefore be relevant to the credibility of his defence and the way in which the court should exercise discretion.

67.  I agree that there has been a long delay by the Defendant in applying to set aside the default judgment. The Defendant has not produced medical records of Ms Chow to support her contention about her medical condition. However, I am of the view that there is no apparent contradiction or unbelievable aspect in her evidence in this regard. The filing of the Acknowledgement of Service of the writ involves a different treatment from preparing and filing a defence. Obviously, the preparation of a defence would involve substantially more time and other resources.

68.  Overall, I am unable to rule out the Defendant’s evidence concerning Ms Chow’s condition and her explanation for the delay as being unbelievable.

Conclusion

69.  For the above reasons, I am of the view that the Defendant has just managed to show, on the evidence made available to the Court apart from that which has been excluded as aforesaid, that it has a real prospect of success in defending the Plaintiff’s claim, on the apparently undisputed evidence of the aforesaid communications about incomplete delivery of the System, and on the allegation of her forged signature on the Project Finish Acknowledgement. Such evidence is potentially credible and carries some degree of conviction.

70.  The Defendant has not lodged a draft defence in its application to set aside the default judgment to crystallise its exact allegations in defence, but apparently the Defendant has referred to a failure of consideration, and fundamental breach of the Service Agreement.

71.  Taking into account the considerations set out above, I am of the view that the default judgment should be set aside.

72.  I therefore allow the appeal, and make an order that:

(1) the Final Judgment dated 5 September 2024 entered in default of defence be set aside;

(2) the Defendant shall file and serve its Defence and Counterclaim (if any) within 28 days from the date of this Decision;

(3) The Plaintiff shall file and serve its Reply and Defence to Counterclaim (if any) within 28 days thereafter.

73.  As for costs, usually, the plaintiff should be entitled to the costs of setting aside a regular judgment. The relevant principles have been summarised by Deputy High Court Judge William Wong SC in Lu Shaoping v Wu Lianmo & others, HCA 589 of 2019, 4 June 2020, where he said at paras.5 to 7:

“5. Generally, the costs of setting aside a regular judgment should be awarded to the plaintiff. In Ko Sin Yau v Chan Chuen & Another [2007] 1 HKLRD 324, Cheung JA at §21 said:

“21. Generally speaking if an irregular judgment is set aside then the plaintiff should be ordered to bear the costs of the setting aside of the default judgment because the judgment was not properly obtained in the first place. However, where a judgment was set aside not because of it being irregular but because of a meritorious defence the general rule is that the defendant should bear the costs of the application to set aside the default judgment. As an alternative the costs of the application can be in the cause of the action.”

6. The Court can exercise its discretion to depart from the general rule but it must do so with good reason.

7. Where the plaintiff continues to resist a setting-aside application when the basis of the defendant’s defence has been revealed, the costs for resisting the setting-aside application should follow the event. (See Harbour Hero Enterprises Ltd v Chau Nung Tai [2019] 3 HKLRD 174 (CA) which applied Chung J’s judgment in Welson International Limited v Jebson Investments Limited, unreported, HCA 2620/2008, 29 June 2010 at §16)”

74.  I am of the view that, despite the long delay in taking out the application to set aside, the Defendant has not taken a proactive approach in obtaining or adducing the relevant evidence concerning the incomplete implementation of the System. There is no reason why the general or usual approach should not be adopted.

75.  I therefore make an order nisi that the Defendant shall pay the costs of the application to the Plaintiff, to be summarily assessed if not agreed with the following directions:

(i) the Plaintiff shall lodge and serve its statement of costs within 14 days from the date hereof;

(ii) the Defendant shall lodge and serve a list of objections, if any, within 14 days thereafter;

(iii) The costs shall then be assessed summarily on paper.

76.  Lastly, I would like to thank Mr Wong for his assistance.