WONG LING PAN v. TEAM BUILDING LTD

HCA 389/2011

[2021] HKCFI 336

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 389 OF 2011

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D E C I S I O N

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APPLICATION

1.  This is the appeal against the Order of Master Cruden which dismissed the Defendant’s summons for an application to, inter alia, set aside the default judgment which was entered against the Defendant some 9 years ago on 26 January 2012 (the “Default Judgment”) on the ground that it has meritorious defence.

2.  The Plaintiff opposes the Defendant’s appeal on the grounds that (1) the Defendant has no meritorious defence and (2) the Defendant’s delay in making the application to set aside the Default Judgment has caused substantial prejudice to the Plaintiff.

MATERIAL FACTS

3.  The Plaintiff’s case is simple and straightforward. He claimed for the return of HK$5,000,000, which he paid to the Defendant and importantly of which the Defendant acknowledged receipt, as the purchase price for a property under an agreement for sale and purchase dated 23 April 2008 (the “Agreement”) duly executed by the Plaintiff as purchaser and Mr Susanto Susanto (“Susanto”) on behalf of the Defendant as vendor.

4.  It is undisputed that the Defendant failed and/or refused to deliver vacant possession of the subject property on the completion date. As such, the Plaintiff was entitled to the return of the HK$5,000,000.

5.  Both parties were separately represented by their respectively solicitors in the transaction.

6.  After obtaining the Default Judgment, the Plaintiff proceeded to enforce and the same and thereafter obtained a charging order nisi and then a charging order absolute on 16 January 2013 and 27 February 2013 respectively.

7.  The Plaintiff also commenced proceedings for an order for sale of the subject property in HCMP 2912 of 2013 (the “HCMP Proceedings”) thereafter.

8.  For a period of about 5.5 years since the Default Judgment until 4 September 2017, the Defendant had not disputed the validity of the Default Judgment.

9.  Importantly, after the Defendant’s former solicitors, Messrs. Wan Yeung Hau & Co (“WYHC”) filed their notice to act in the HCMP Proceedings on 5 April 2016, the Defendant even proceeded to reach a compromise with the Plaintiff with the Plaintiff on 26 September 2016 by way of a Tomlin Order on the terms that the Defendant shall pay the Plaintiff a sum of HK$6.8 million and a sum of HK$50,000 being costs in full and final settlement of all claims in the HCMP Proceedings, and did actually pay HK$3,050,000 pursuant to the said terms.

10.  The Defendant, in breach of the Tomlin Order, did not pay the balance of the settlement sum, despite requests for extension of time.

11.  It was not until 4 September 2017 that the Defendant filed the application to set aside the Default Judgment on the following basis:

“6. It is my brother’s clear instructions that the Defendant has never received any payment of HK$5,000,000.00 (or any part or parts thereof) from the Plaintiff in this action or anyone related to the Plaintiff, and that he being unable to understand English, did not at the time know he was signing an agreement for the sale and purchase (the “Purported Agreement”) of the Property on 23^rd April 2008). It is there verily believed that the Purported Agreement (which is dated 23^rd April 2008) was obtained through fraud or misrepresentation….I crave leave to refer to page 17 of KKY-1 as evidence that the Purported Agreement was not interpreted to the Defendant in a language which the understands being either Hokkien, Indonesian or Cantonese.” (See §6 of the 1^st Affirmation of Kwok Kwok Yu who is the brother of Susanto.) (Emphasis added.)  

12.  The above is the totality of the Defendant’s defence.

13.  However, in the Affirmation of Tse Shek Hong Bill, a legal executive who formerly worked for Messrs. Christopher K.Y. Wong, solicitors acting for the Defendant in the transaction, Mr Tse unequivocally affirmed that:

“5. I recall distinctly that before I invited Mr. Susanto to sign on the SPA:

(1)   I explained to Mr. Susanto the contents of the SPA. In particular, I explained to him that the SPA was a sale and purchase of the Property. TBL was the vendor and Wong Ling Pan (“Mr Wong”) was the purchaser.

(2)   I repeated that the consideration was $5,000,000.

(3)   I asked Mr. Susanto to confirm his instruction that TBL had received the full amount of $5,000,000 from Mr. Wong, the purchaser. Mr. Susanto answered in the affirmative.

(4)   Mr. Susanto also confirmed he understood the contents of the SPA.”

14.  After the filing of the Affirmation of Tse Shek Hong Bill, Mr Kwok filed his 2nd affirmation on 16 March 2020 under which he deposed that:

“17. Chan Kin Kwan introduced me and my brother to a person nicknamed ‘KK’ who was a legal executive at CKYW, ‘KK’ then provided a document to my brother, and said the document is a guarantor agreement, to provide a guarantee for Chan Kin Kwan’s debt of $5,000,000. We told ‘KK’ that both my brother and I do not understand English, and then ‘KK’ translated the document to us, explaining to us that the document is a guarantor agreement, it took about 30 minutes for the whole process of introduction, explanation and signing of the guarantor agreement, and as the purpose of us being there was to sign a guarantor agreement, having satisfied by ‘KK’ that this was a guarantor agreement, my brother appended his signature. At no time did ‘KK’ or Chan Kin Kwan told us that the guarantor agreement had a clause that money was paid to the Defendant. Further it was not told to us by ‘KK’ or Chan Kin Kwan that the document was in fact a sale and purchase agreement.” (Emphasis added.)

15.  Mr Wong for the Plaintiff made three pertinent points. First, there is a complete lack of contemporaneous documentary evidence to support the Defendant’s case, such as records of communication between Chan Kin Kwan (“Chan”) and Kwok or Kwok and Susanto or records in whatever form evidencing the existence of the alleged guarantee agreement.

16.  Secondly, the Defendant’s key factual witnesses, i.e., Susanto and Chan, did not make any affirmations. Kwok’s allegation in respect of Susanto’s poor health is not supported by any documentary proof such as medical certificate. It remains questionable why Susanto cannot make an affirmation to give his account of the events given that it is still possible for him to get the same notarized in Indonesia.

17.  Thirdly, the Defendant duly acknowledges that the Default Judgment was a regular judgment.

APPLICABLE LEGAL PRINCIPLES

18.  The relevant legal principles for setting aside a regular judgment are well established and are set out by Mr Recorder Ma SC (as he then was) in Young Bing Ching (deceased) v Chow Yung Fong & Another [2001] 2 HKLRD 394. The learned Recorder at §§12, 24-26 said:

“12. Where, as in the present case, a regular default judgment has been obtained, the burden on a defendant is to demonstrate that he has a defence on the merits which has a real prospect of success or carries with it some degree of conviction. This is the effect of The Saudi Eagle [1986] 2 Lloyds Rep.221 at 223. This approach has been followed in Hong Kong. If a defendant is unable to discharge the burden, there is simply no point in the action continuing and the court will not, therefore, in the exercise of its discretion under Order 13, rule 9, set aside the judgment. As was said by Bokhary JA in Premier Fashion Wears Ltd v. Li Hong Chung [1994] 1 HKC 213 at 216, "no court would wish to reopen a matter without merit since that would only pointlessly postpone the inevitable". In The Saudi Eagle, Sir Roger Ormrod had this to say as a general principle, "the primary consideration is whether the defendant 'has merits to which the Court should pay heed' ..., not as a rule of law but as a matter of common sense since there is no point setting aside a judgment if the defendant has no defence ..."

24. The starting point in this discussion is that where there has been a regular default judgment, the primary consideration for the court will be the merits of the defendant's case. In most cases, the determination of this aspect will be determinative of the application to set aside. If the defendant fails to satisfy the requisite test, there would be no point in setting aside the default judgment: see above. On the other hand, if the defendant satisfies the test, "... the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication. ..." (per Lord Wright in Evans v. Bartlam [1937] AC 473 at 489). To quote again from the judgment of Bokhary JA in Premier Fashion Wears Ltd at p.216, "... no court likes to decide any matter other than in accordance with the merits, if any are in real prospect, because the court's objective is justice". In the same case at p.219, Litton JA said: "Obviously, if upon the material before the court, the third party appears to have a strong defence to the claim that would be a powerful reason for setting aside the default judgment on the basis that in all the circumstances of the case it is just to do so". Thus, where a defendant is able to show that he has merits in his defence, justice will often demand that the default judgment be set aside and he be permitted to go to trial.

25. Exceptionally, however, despite being able to demonstrate sufficient merits in his defence, a defendant might not be permitted to have the default judgment set aside. In my judgment, the fact that a defendant is able to demonstrate a defence of sufficient merit does not mean he has an automatic entitlement to have the default judgment set aside. The consideration of the merits of the defence, albeit the "primary" (see Evans at p.489 and The Saudi Eagle at p.223(i)) or the "dominant" (see Shocked and another v. Goldschmidt and others [1998] 1 All ER 372 at 379) consideration, is not stated to be the only one. Indeed, as Godfrey JA pointed out in Premier Fashion Wears Ltd at p.219, the requirement of a defence with a real prospect of success is "at least" what a defendant must show. This presupposes the existence of other factors to which the court should have regard.

26. The court is in my view entitled, indeed obliged, to exercise its discretion under Order 13, rule 9 with regard to all the relevant circumstances: see Premier Fashion Wears Ltd at p.219, per Litton JA. What will be relevant as a factor in any particular case will of course depend on the individual facts of that case, and 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: see Shocked at p.379. It is, of course, no longer the law (if it ever was anyway) that before a judgment can be set aside, a defendant must provide a satisfactory explanation for his default; there is simply no such condition precedent and no cause for the court to lay down such rigid rules: see Evans v. Bartlam at p.480 (per Lord Atkin). Relevant factors to be weighed against the merits factor include the defendant's explanation of why he allowed default judgment to occur, his conduct after proceedings were served on him, any delay on his part to apply to set aside and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside. All this is clear from the authorities but I need only refer to a few.”

19.  In Maryo Development Ltd v Tsang Yau May, CACV 101 of 2015, unreported, 11 January 2016, Harris J (with whom Yuen and Barma JJA agreed), sets out the Court’s approach at §§11-14 as follows:

“11. There was no dispute before the Judge about the principles that governed the determination of the application to set aside what the 3^rd Defendant conceded was a regular default judgment.  RHC O.13 r.9 provides:

‘Without prejudice to rule 7(3) and (4), the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.’

12.  The Rule gives the court a discretion to set aside a default judgment.  The discretion is not restricted in anyway by the language of the rule, however, the authorities offer guidance as to how the discretion is to be exercised.  Of those authorities Godfrey JA says this in Premier Fashion Wears Ltd v Li Hing-chung.

‘Of the modern cases, I would single out Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd’s Rep 221. This, I believe, shows that for the purposes of O.13 r.9 it is generally not sufficient for a defendant merely to show an arguable defence, although that alone would justify leave to defend being given under O.14. A defendant who seeks to set aside a regular judgment must at least show that his case has a real prospect of success. To do so he must satisfy the court that his case, and the evidence he has adduced in support of it, carries some degree of conviction. It seems to me that unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success.’

At line 15 he continues:

‘The court still has to form a provisional view of the probable outcome of the action.’

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”. 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.

14.  Whether or not the defendant has a realistic prospect of successfully defending the claim is the primary consideration, but as Bokhary JA (as he then was) explains in his judgment in Premier Fashion other factors such as the reason judgment was allowed to be entered, and any delay in making the application to set aside, are to be taken into account.  In a case in which the assessment of the prospects of the defence lies in the balance these other factors may tip a case one way or the other.”

20.  In Cheung Chi Po v Ke Jun Xiang, CACV 170 of 2011, unreported, 22 May 2012, Cheung JA in allowing the appeal against judge’s decision to set aside a judgment, said at §11 that:

“11. This being a regular judgment, the defendant in order to set aside the judgment has to show that he has a real prospect of success on the merits of the case : Premier Fashion Wears Ltd and Broadway Sportwear Ltd v. Chow Cheuk-man & Another [1994] 1 HKLR 377. The court is required, not merely to consider what the defendant had said but also to assess whether what he said was credible. The court is required to consider all the circumstances of the case including the defendant’s conduct after the proceedings were served on him.”

21.  Cheung JA at §§16 and 17 further said:

“16. Had the matter rested there, one would expect the Judge to refuse to set aside the judgment.  However, the Judge instead held that in the light of the defence that no money was actually lent, the plaintiff should have produced at least some evidence that at least some part of the $25 million had actually been lent.  In doing so, the Judge fell into the same error that Godfrey JA had described in Premier Fashion Wears Ltd at 383, namely,

‘The Judge seems to have thought that, if the defendant can show he has an arguable defence, a default judgment against him ought to be set aside unless there is incontrovertible evidence before the court to negate it. With all respect to him, that approach is not a correct approach’.

17. In my view the Judge had exercised his discretion erroneously, either on a basis not recognized by the established principles on setting aside a regular judgment, or had not actually applied the principles.”

22.  On assessing the credibility of the defendant’s factual case in the context of summary judgment applications, Deputy High Court Judge Lisa Wong (as she then was) in Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor [2013] 2 HKC 259 at §61 said:

“61. The principles governing the grant or refusal of summary judgment under Order 14 are well established. It is for the defendant to show that there is an arguable defence or triable issue. In doing so, the defendant must condescend to particulars. The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend. The defendant must satisfy the court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence. In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible. Rather, the court must look at the whole situation. In assessing the credibility of the defendant’s factual case, while the court will not embark on a mini-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate. If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so. If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence. See eg National Westminster Bank plc v Daniel [1993] 1 WLR 1453, per Glidewell J at 1457; Manciple Ltd v Char On Man [1995] 3 HKC 459 (CA), per Mortimer JA at 466E-G; Re Safe Rich Industries Ltd, CACV 81/94, unreported, per Bokhary JA at page 5; Microsoft Corporation v Electro-Wide Ltd [1997] FSR 580, per Laddie J at 593; DMT Finance Ltd v Ming Kee Investments Ltd, HCCL 11/1998, unreported, per Stone J at page 4 and Paul Y Management Ltd v Eternal Unity Development Ltd, CACV 16/2008, unreported, per Cheung JA at §19.”

ANALYSIS

23.  Ms Tam for the Defendant submitted that there are factual disputes and this Court should not determine factual disputes by conducting a mini trial on affidavits. I am of the view that the Court has a duty at this stage to evaluate whether there are genuine factual disputes or simply incredible allegations raised without any real prospect of success. I am of the view that this case falls within the latter category. The law is not that once a defendant raises a factual dispute, then the defendant is automatically entitled to trial.

24.  Ms Tam for the Defendant basically relied on two points. First, she submitted that there is an absence of translation clause in the Agreement and hence it gives credence to the Defendant’s case that the Agreement was not translated to Susanto. I am of the view that there are no merits in this argument. First, Susanto’s latest case is that there was translation but the translation was deceptive or misleading. I find it hard to be convinced that an absence of a translation clause could give rise to a meritorious defence.  Susanto is a seasoned businessman. If he were asked to sign on a document in a language which he has no knowledge, it was certainly up to him to procure proper translation so that he knew what he was signing. If he chose to sign on a Russian legal document, he could not escape liability by alleging that the relevant document was not properly or accurately translated to him.

25.  Secondly, Mr Wong for the Plaintiff submitted that the Defendant is a corporate entity and it is unusual to have a translation clause for a corporate entity. This may or may not be the case. However, the key is that I do not see how the Plaintiff has an obligation to secure proper translation for the Defendant which the Defendant was then legally represented.

26.  Thirdly and importantly, Mr Tse, the legal executive goes on oath to state that he did fully explain the content of the Agreement to Susanto. The Court has not been informed of any incentive on the part of Mr Tse to lie on oath.

27.  Fourthly, I note that Susanto was able to understand and sign on a board resolution which is in English.

28.  Ms Tam’s second argument is that there was a substantial undervalue of the subject property. She submitted that the subject property should be worth about HK$9 million. It is inexplicable why the Defendant would have agreed to sell the subject property to the Plaintiff at HK$5 million. First, the Defendant filed no expert evidence to show that the subject property’s fair market value should be HK$9 million. The Defendant only relies on a general price index of grade B office buildings in Sheung Wan. I agree with Mr Wong for the Plaintiff that such evidence is unreliable. There are many different forms of grade B office buildings, the condition and quality of the relevant buildings are relevant factors. One simply cannot use the general price index to deduce a fair market price of a specific building. I agree.

29.  Secondly, prior to the application to set aside the Default Judgment, there was never any suggestion that the sale of the subject property was below market price. Mr Wong for the Plaintiff also submitted that even if it is below the market price, it could also mean that the Plaintiff had obtained a good bargain.

30.  Thirdly, in any event, this is not highly relevant as at the end of the day, the Defendant did not transfer the subject property to the Plaintiff. What the Plaintiff claimed was a return of the HK$5,000,000 which he paid to the Defendant and to which the Defendant acknowledged receipt. The Defendant’s receipt of the HK$5,000,000 was also confirmed by the evidence of Mr Tse.

31.  Fourthly, I find it highly incredible that if the Defendant had not received HK$5,000,000, it would have repaid HK$3,050,000 to the Plaintiff pursuant to the Tomlin Order. This does not make any commercial or common sense.

32.  Mr Wong for the Plaintiff also relied on the following grounds which I find persuasive. First, while the Plaintiff’s case is supported by the Agreement which included the Defendant’s acknowledgement of its receipt of HK$5,000,000, the Defendant’s case is not supported by any contemporaneous documents. I agree that the Defendant’s ex post facto complaint letter to the Law Society against its law firm in handling the transaction has little probative value. There is no explanation as to why the Defendant has not sued the relevant law firm if indeed it has committed a fraud against the Defendant.

33.  Secondly, the Defendant has failed to produce any evidence from Susanto that (1) he does not understand English; (ii) he did not know what he signed and yet signed on it; (iii) Mr Tse (or “KK”) in the Defendant’s case) fraudulently told him that the Agreement was a guarantee; or (iv) he did not receive HK$5,000,000. I agree that the absence of Susanto’s affirmation evidence is telling and it does not help to prove the Defendant’s case. Mr Wong for the Plaintiff is correct to point out that when a defence similar to non est factum is alleged, the Court would be very slow to rule in favour of the defendant if the person who signed the document chose not to give evidence, unless there is a credible explanation for his inability to do so. In the present case, it is incredible that Susanto was not able to make an affirmation because he had health problems when:

(1)     there is no medical report or record supporting the allegation;

(2)     in April to September 2016, he was able to give instructions to his solicitors to settle the HCMP Proceedings;

(3)     on 5 December 2019, he was able to sign a board resolution giving his brother, Kwok, the authority and send the same to Kwok for Kwok to make his affirmation 6 days later on 11 December 2019;

(4)     he was able to give clear instructions to Kwok (Kwok said in his affirmation “my brother instructed me” and many matters could only have come from Susanto); and

(5)     even if Susanto is not residing in Hong Kong, there can be no difficulties for Susanto to make an affirmation in Indonesia.

34.  Thirdly, the Defendant has not adduced evidence from Chan Kin Kwan and there was no explanation for the same. The alleged debt was not pleaded with particulars and there is no explanation as to why a loan of HK$300,000 could be ballooned to HK$5,000,000, an exact sum.

35.  Fourthly, I also agree that the story of Susanto to travel to Hong Kong to give a personal guarantee to Chan Kin Kwan when the latter was a stranger to Susanto is hardly credible. There is no evidence that Susanto has ever followed on whether the said debt was paid or not. Susanto also brought along the title deeds of the subject property for the purpose of executing the guarantee.

36.  Fifthly, I find it hard to believe that a legal executive, who have understood perfectly the consequences of fraudulent conduct or misrepresentation, could have colluded with Chan Kin Kwan to misrepresent to Susanto the nature of the Agreement while there is no evidence that the person nicknamed “KK” has obtained any benefit from Chan Kin Kwan. Further, Susanto could have brought his own assistant to the law firm to help him comprehend the legal documents which he was about to sign. It is not sure as to how this scheme of fraud could have been implemented.

37.  Sixthly, Mr Wong for the Plaintiff is right in submitting  that the Plaintiff and the Defendant were separately represented by lawyers. Even according to Kwok, it was Chan Kin Kwan who took Susanto and Kwok to the Defendant’s law firm and asked them to bring the title deeds. It was never alleged that the Plaintiff was involved in the arrangement. There is no basis upon which the Plaintiff could be a part to the alleged fraudulent scheme.

38.  Seventhly, I am of the view that Mr Wong for the Plaintiff is also right that if Susanto was merely there to execute a guarantee with the subject property as a security, Chan Kin Kwan’s creditor simply did not have to go through the trouble to conspire with others in order to deceive Susanto into signing a sale and purchase agreement. The creditor could always properly prepare a guarantee and a mortgage for execution, and then enforce them by selling the subject property if Chan Kin Kwan defaulted.

39.  Eighthly, Kwok said that in late 2017, Chan called him for help. However, it was until about at least 4-5 months later, in April 2008, that the Agreement was executed. 4-5 months is a long period of time in the circumstances. One would wonder why Chan Kin Kwan’s creditor was willing to wait for 4-5 months without taking further action against Chan Kin Kwan for recovery of the debt, and why Chan Kin Kwan was willing to wait for help from Kwok and not to obtain help from others.

40.  Ninthly, it is true that initially the Defendant claimed on various occasions and in documents filed to the Court that the Agreement was not interpreted to Susanto at all. It was only after having sight of the Affirmation of Tse Hek Hong Bill that the Defendant changes its position and claims that Chan Kin Kwan and the legal executive did translate the document to them but somehow misrepresented its nature.

41.  Tenthly, I agree that as a matter law, on the Defendant’s pleaded case, the fraud and/or misrepresentation actually came from Chan Kin Kwan and/or “KK” and are not related to the Plaintiff. It is established law that in order to grant relief to a person who has entered into a contract as a result of a misrepresentation, it is necessary that the misrepresentation should have been made either by the other party to the contract or by his agent acting within the scope of his authority or that the other party had notice of the misrepresentation. (See Chitty on Contracts 33^rd Ed., at §7-025).  Given that it is the Defendant’s case that the misrepresentation came from Chan Kin Kwan and/or “KK” but not from the Plaintiff, the defence of misrepresentation is a non-starter.

42.  Finally, as I mentioned above, I find it of great significance that on the Defendant’s case, Susanto discovered the misrepresentation in 2016. However, he chose not to rescind the Agreement. Instead, he instructed his lawyers to enter into the Tomlin Order with the Plaintiff and agreed to pay HK$6,800,000 and costs for the sum of HK$50,000. The Defendant did actually pay the Plaintiff HK$3,050,000. I agree that these conduct are inconsistent with someone who has been defrauded or has had an intention to rescind the contract. Rather it sits better with an affirmation of the Agreement.

43.  Mr Wong for the Plaintiff also reminded this Court that inferences of fraud or serious misconduct were not be reached by conjecture nor a mere balance of probabilities. The drawing of inferences must be properly grounded on the primary facts found. (See Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334).

44.  Further, Mr Wong for the Plaintiff submitted that there is substantial and unexplained delay on the part of the Defendant to apply to set aside the Default Judgment. If the Defendant has a meritorious defence which has a reasonable prospect of success, I am of the view that the delay factor will feature less significantly in the exercise of the court’s discretion. However, in the present case, as I have analysed above, I am of the view that the Defendant’s case is hopeless and without any merits.

45.  I am of the view that there is substantial delay of about 5.5 years from the Default Judgment to the application to set it aside. Mr Wong for the Plaintiff is right that the Charging Order nisi and supporting documents were served on the Defendant’s registered address in the BVI as well as on the subject property on 15 February 2013. Kwok said that the subject property was used as one unit for Susanto’s another company, Sweet Field Limited, since 1983. Hence, even if the allegation that Susanto’s BVI agent did not forward any documents served on the BVI address is true, Susanto should have knowledge of the Default Judgment and the enforcement action by February 2013.

46.  Finally, I also agree that the Plaintiff will suffer substantial prejudice if the Default Judgment is set aside. A key consideration is the loss of evidence due to lapse of time. The Defendant’s lawyer who handled the transaction has made a declaration that they could no longer locate the relevant files due to moving of offices in 2012 and 2014. Mr Wong for the Plaintiff submitted that the Plaintiff is now being seriously prejudiced and it cannot rely on the contemporaneous records kept by the said lawyers to prove his case. The transaction lawyer’s file very likely would have contained a board resolution of the Defendant authorizing the transaction, which might severely damage the Defendant’s case. Other documents in the file which probably exist are the retainer, attendance notes, invoice and payment records. Had the Defendant taken action earlier to set aside the Default Judgment, there would have been a good likelihood for the relevant file to be found.

47.  I take into account all the matters stated above and come to the clear conclusion that on the facts of the present case, the Court should not exercise its discretion to set aside the Default Judgment.

DISPOSITION

48.  For all the reasons stated above, this appeal is dismissed.

49.  As far as costs is concerned, I make an order that the Defendant is to pay the costs of and occasioned by the present appeal to the Plaintiff and I summarily assess the same at HK$100,000.

50.  Finally, it remains for me to thank Mr Wong for the Plaintiff and Ms Tam for the Defendant for their assistance. In particular, this Court is greatly assisted by Mr Wong’s comprehensive skeleton submissions.