Hannaford Finance Ltd v. Fong Ka Tak Francis

HCA 2230/2018

[2025] HKCFI 3872

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2230 OF 2018

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D E C I S I O N

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A.  INTRODUCTION

1.By a notice of appeal dated 14th March 2025, the Defendant appeals against Master Bonnie Cheng’s decision of 28th February 2025 dismissing:

1.1  his summons of 14th October 2024 (“the Setting Aside Summons”) seeking to set aside the default judgment entered against him on 16th May 2022 (“the Default Judgment”), and

1.2  his summons of 8th November 2024 (“the Relief Summons”) seeking relief from sanctions following on from the unless of Master Rita So on 29th September 2021, being the striking out of his Defence for failure to answer the interrogatories filed and served on him on 30th June 2021 (“the Interrogatories”) by 4pm on 20th October 2021.

B.  THE BACKGROUND

B1.  The background to the Plaintiff’s claim

2.The Plaintiff is a licensed money Lender under the Money Lenders Ordinance, Cap.163 (“the MLO”). Mr Law Sau Fai Francis (“Mr Law”) is its director.

3.The Plaintiff’s claim against the Defendant is for repayment of $5,704,220 due under a promissory note of 29th January 2016 (“the Promissory Note”), together with interest and costs.

4.The Plaintiff’s pleaded case is that the debt was incurred by reason of a loan made by the Plaintiff to the Defendant. It says that on 29th January 2016, the Plaintiff emailed to the Defendant soft copies of documents regarding the loan (“the Loan Documents”), comprising:

4.1  the Promissory Note;

4.2  a memorandum in accordance with s.18 MLO (“the Memorandum”);

4.3  a letter of authorisation (setting out the manner of advancement of the loan) (“the Letter of Authorisation”);

4.4  an acknowledgement of receipt of the memorandum;

4.5  an acknowledgment of receipt of the loan (“the Loan Receipt”).

5.The Plaintiff says that the Defendant emailed back to the Plaintiff signed copies of the Loan Documents (except for the Promissory Note) and then sent photographs of the same to the Plaintiff via WhatsApp.

6.The Defendant’s pleaded case is that prior to the Promissory Note, there had been various personal loans made by Mr Law to the Defendant, and then on about 29th January 2016, Mr Law suddenly and wrongfully pressured him to sign the Promissory Note and other documents. However, the Defendant’s latest position is that he mixed up what happened on 29th January 2016 with events on 10th May 2016.

7.There was a meeting at the Plaintiff’s office on 10th May 2016. The Plaintiff says that the Defendant failed to produce the originals of the signed Loan Documents as had been agreed, so the Plaintiff reprinted the documents and the Defendant re-signed them at the meeting. The Defendant’s latest position is that it was at the 10th May 2016 meeting (and not on 29th January 2016) that he was coerced into signing the Loan Documents.

B2.  The procedural history

8.The writ in these proceedings, endorsed with a statement of claim, was issued on 21st September 2018. It was served on the Defendant at two addresses, one on Kotewall Road, and one on Tai Hang Road (“the Tai Hang Road Address”).

9.The Defendant filed his Defence on 25th January 2019, and the Plaintiff filed its Reply on 25th October 2019.

10.The parties exchanged witness statements on 29th April 2021.

11.The Defendant’s evidence is that he had difficulties travelling to Hong Kong between 2021 and 2023 due to COVID-19 measures.

12.On 30th June 2021, the Plaintiff filed the Interrogatories. There is no dispute that they were served on the Defendant, who was then legally represented.

13.By letter of 27th July 2021, Messrs Ng, Lie, Lai & Chan (“NLLC”) informed the Plaintiff’s solicitors that they had no further instructions to act for the Defendant, as the Defendant had sent them a “Notice to Act” (“the Notice To Act In Person”). A copy of the notice was enclosed, addressed to both NLLC and the Plaintiff’s solicitors, indicating the Defendant’s intention to act in person, and stating his address as the Tai Hang Road Address. There is no real dispute that the Notice To Act In Person was signed by the Defendant (at the highest, he said that due to the lapse of time, he could not recall the circumstances in which it was “purportedly” signed).

14.On 7th September 2021, NLLC issued a summons, seeking a declaration that it had ceased to be the solicitors acting for the Defendant in the action.

15.On 17th September 2021, Master Lai ordered that upon compliance with the requirements of RHC O.67 r.6(1), NLLC would cease to be the solicitors acting for the Defendant in the action.

16.On 23rd September 2021, the Plaintiff issued a summons, seeking an order that unless the Defendant answered the Interrogatories, his Defence be struck out, and leave be given to the Plaintiff to enter judgment against him.

17.The summons was heard on 29th September 2021. NLLC and counsel for the Defendant attended the hearing, as although they had no instructions from the Defendant, no certificate had yet been filed in accordance with the requirements of RHC O.67 r.6(1). Master Rita So ordered that unless the Defendant filed and served an affidavit to answer the Interrogatories by 4pm on 20th October 2021, the Defence would be struck out and leave would be given to the Plaintiff to enter judgment against the Defendant (“the Unless Order”). The Master further ordered that the Defendant’s solicitors were to inform the Defendant of the order made. The Defendant claims that he was not aware of the Unless Order at the time it was made and that it was not brought to his attention, although he also says that due to the lapse of time, he could not recall the communications which he had with NLLC in about September 2021. He says that he believes that they were unable to reach him to obtain instructions.

18.On 7th October 2021, NLLC filed a Certificate of Service of Order pursuant to O.67 r.6(1), confirming that Master Lai’s order of 17th September 2021 had been served on the Defendant by posting a copy to the Tai Hang Road Address.

19.On 18th October 2021, the Plaintiff’s solicitors served the Unless Order on the Defendant by posting a copy to the Tai Hang Road Address as the last known address of the Defendant.

20.On 8th February 2022, the Plaintiff issued a summons for leave to enter judgment against the Defendant (“the Judgment Summons”). There was a reference to O.83A r.4 in the margin of the summons. The Judgment Summons was served on the Defendant by posting a copy of it, together with a copy of a supporting affidavit, to the Tai Hang Road Address. The Defendant says that he did not know about the summons.

21.On 16th May 2022, Master David Chan gave leave to the Plaintiff to enter judgment against the Defendant; final judgment was accordingly entered against the Defendant for the sum of $5,704,220, together with interest and costs (that is, the Default Judgment).

22.The Defendant claims that he became aware of the Default Judgment only in about mid-August 2024 when he received a letter dated 12th August 2024 from Messrs Swaab, the Plaintiff’s Australian legal representatives, enclosing a Notice of Registration of Judgment stating that a judgment had been registered against him in the Supreme Court of New South Wales on 27th May 2024. It was then that he instructed solicitors to apply to set aside the Default Judgment.

23.Messrs Rowdget W Young & Co filed a Notice to Act for the Plaintiff on 20th August 2024.

24.The Defendant claims that he was given to understand that it would have taken at least two weeks’ time to retrieve the court file to inspect and obtain copies of the relevant papers for the making of his applications.

25.The Setting Aside Summons was taken out on 14th October 2024, and the Relief Summons on 8th November 2024.

26.The Defendant says that he was not the registered owner of the property at the Tai Hang Road Address, and if documents addressed to him were sent there, they would have been passed from the tenant living there to the agent of the corporate owner (of which the Defendant’s father was the majority shareholder and a director), who would then have passed the same to the Defendant’s father; the latter would then have passed the same to the Defendant.

C.  THE SETTING ASIDE SUMMONS

27.Mr Acorn Lau, counsel for the Defendant, submitted that the Default Judgment was irregular, as the Judgment Summons was served on the Defendant at the Tai Hang Road Address, but that address was not the Defendant’s usual or last known address. It was said that the Notice To Act In Person could not be taken to have given an official address for service as it was not filed in court and the Defendant therefore did not truly intend for it to take effect. However, a party’s last known address does not have to be derived from a document filed in court. A defendant’s last known address refers to the address last known to the plaintiff from whatever source he may have, and a defendant may have a number of addresses “last known” to the plaintiff: see Hong Kong Civil Procedure 2025, volume 1, note 65/5/5.

28.Service of the Judgment Summons pursuant to O.65 r.5(1) and r.5(2)(b) was therefore effected upon posting: see s.8 Interpretation and General Clauses Ordinance, Cap.1; Chan Chun Chuen v Commissioner of Inland Revenue [2012] 2 HKLRD 379 at [40], [41] (Lam J, as he then was).

29.Accordingly, even if the Defendant did not (as he claimed) know of the Judgment Summons, the Default Judgment would still have been regular: Chan Kam Wai and Chan Kam Cheung (in their personal capacities and as administrators of the estate of Lo Fung Kau, deceased) v Chan Kam Man [2023] HKCA 940 at [13], [17] (G Lam JA) (in the context of service of a summons seeking summary judgment under the Rules of the District Court).

30.The various further objections raised by Mr Lau to the propriety of the Tai Hang Road Address as an address for service as the Defendant’s usual or last known address,[1] such as that the Defendant was not the registered owner of the property at the Tai Hang Road Address, or that the Notice To Act In Person appeared “dubious”, are therefore beside the point.

31.Mr Lau then sought to argue that the Default Judgment was irregular as it was entered on an erroneous basis.

31.1  He submitted that the Plaintiff falsely misrepresented that the Promissory Note was made on 29th January 2016, when in fact the Defendant did not send either the original or a copy of the Promissory Note to the Plaintiff that day. However, the Defendant’s own pleaded position is that he signed the Promissory Note on or about 29th January 2016 under pressure from Mr Law; and his latest position, as set out in a draft Amended Defence exhibited to the 3rd Affirmation of Fong Ka Tak Francis (“Fong 3rd”), is that he did indeed sign the Promissory Note on 29th January 2016 (and not under coercion; he only says that he thought he was borrowing from Mr Law personally). There is therefore no false misrepresentation, on the Defendant’s own evidence.

31.2  Mr Lau then submitted that the Plaintiff could not have satisfied the requirements of O.83A r.4(2)(a), which requires a money lender applying for judgment in default of defence to produce, at the hearing of his summons, the original agreement relating to the money lent. Mr Lau submitted that this meant that the Default Judgment was irregular (since the Plaintiff would not have had the original Loan Documents to hand, as they were with the Defendant), citing 溫 訴 黎 [2007] HKCLRT 8 (official English translation Wan v Lai [2007] HKCLRT 30) at [86]. That was a case where a judgment in default was found to have been obtained by a money lender on the basis of false representations to the court as to whether the loan was due and how much had been repaid, so that a charging order nisi obtained on the strength of this judgment was set aside. Mr Lau then cited SLWE and ors v CTT and anor, unreported, HCMP 1237/2010, 19th July 2010 at [5] to [14]. That was a case where an ex parte order for guardianship was made in the absence of the party disputing the applicant’s entitlement to guardianship, and in reliance on a false statement to the court that there had been a family agreement that the applicant should handle the application for guardianship; eventually the applicant agreed to have the ex parte order set aside. These authorities do not support the Plaintiff’s claim that the Default Judgment in the present case is irregular by reason of failure to comply with O.83A r.4(2)(a).

32.The Default Judgment being a regular one, the burden is on the Defendant to show that he has a defence on the merits which has a real prospect of success, or which carries with it some degree of conviction. I agree with counsel for the Plaintiff, Mr Lok Ho, that the Defendant fails to do this.

32.1  The Defendant’s pleaded case is that there was no loan agreement with the Plaintiff and that he was coerced into signing the Promissory Note and to provide security for loans in fact advanced by Mr Law. However, in his draft affirmation seeking to answer the Plaintiff’s interrogatories, he said that he had mixed up the meeting of 29th January 2016 with a meeting in May 2016. In other words, he did not, in fact, sign the Promissory Note under duress.

32.2  What is then left of the Defendant’s defence is that he borrowed the money from Mr Law, not the Plaintiff, on terms similar to previous loans from Mr Law (in particular, with no fixed repayment date, no security, and little or no interest payable). However, apart from signing the Promissory Note, the Defendant also signed a number of other documents to arrange for the loan, which indicated that the Plaintiff, not Mr Law, was the lender (including the Letter of Authorisation addressed to the Plaintiff, and the Memorandum naming the Plaintiff as the lender). The contemporaneous WhatsApp records showed that the Plaintiff sent these in draft to the Defendant, who reviewed them and sought to negotiate the interest rate with the Plaintiff’s staff. The Defendant’s defence is contradicted by the undisputed contemporaneous evidence, and the Defendant has no explanation for this.

33.The Defendant says it is undisputed that he was not at the Plaintiff’s office on 29th January 2016. The Plaintiff relies on the loan documents signed by the Defendant on 10th May 2016 (which the Plaintiff says that it reprinted and asked the Defendant to sign, as the Defendant had failed to provide the originals of the copies signed on 29th January 2016). The Defendant says that this means that the Plaintiff is guilty of multiple breaches of the MLO: the Memorandum incorrectly stated the “place of negotiation” and “place of completion” of the agreement for the loan as the Plaintiff’s offices, in breach of s.18(2) MLO. However, as the Defendant accepts, s.18(3) MLO provides that the court may nevertheless order that the loan agreement is enforceable. The Defendant says that whether the court would order enforcement is fact sensitive, and the burden is on the Plaintiff to establish that the discretion should be exercised in its favour. That is so, but as the Plaintiff points out, there is no suggestion or evidence of any vitiating factor which would render the Promissory Note not enforceable. The Defendant’s latest position is that he did sign the Loan Documents on 29th January 2016, and not under duress as originally claimed. It is not disputed that the Plaintiff advanced the loan amount to the Defendant, and the Defendant did not make repayment. In the circumstances, it is difficult to see what real prospect of success the Defendant would have in resisting judgment.

D.  THE RELIEF SUMMONS

34.I make the preliminary observation that, as Mr Lau realistically submitted, if the Defendant is unsuccessful on the Setting Aside Summons, there is little to be gained from the Relief Summons.

35.O.2 r.4 provides that where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the court for and obtains relief from the sanction within 14 days of the failure.

36.O.2 r.5 provides that on an application for relief from sanctions, the court is to consider all the circumstances. A non-exhaustive list of factors is then set out:

“ (a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure to comply;

(e) the extent to which the party in default has complied with other rules and court orders;

(f) whether the failure to comply was caused by the party in default or his legal representative;

(g) in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) whether the trial date or the likely trial date can still be met if relief is granted;

(i) the effect which the failure to comply had on each party; and

(j) the effect which the granting of relief would have on each party.”

37.In the present case, the Defendant has not given a satisfactory explanation as to why the Relief Summons was issued only on 8th November 2024. Even on the Defendant’s own evidence, he was aware of the Default Judgment by mid-August 2024. He instructed solicitors to act, and they filed a notice to act on 20th August 2024. He says that it would have taken them at least two weeks to retrieve court documents to enable his applications to be made. At any rate, he was able to take out the Setting Aside Summons on 14th October 2024. He must have been aware of the terms of the Unless Order by then, as he made an affirmation on 9th October 2024 referring to the Default Judgment and the fact that it referred to the Unless Order of 29th September 2021. From the face of the Default Judgment, it would have been apparent that it was the failure to comply with the Unless Order by 20th October 2021 that resulted in the sanction of the Defence being struck out. Despite this knowledge, he still did not take out the Relief Summons until 8th November 2024. There was an explanation in the 2nd Affirmation of Fong Ka Tak Francis that the Relief Application was academic since the grounds for seeking relief were substantially the same as those for seeking to set aside the Default Judgment, so that only the Setting Aside Summons was issued, and the Relief Application was not issued until Master MK Liu made certain observations at the hearing on 25th October 2024. This is not a good reason for failing to follow the express requirement in O.2 rr.4 and 5 that an application must be made to seek relief from sanctions, that this application must be made within 14 days from the failure in question, and that the application for relief needs to be supported by evidence (which would be directed to the circumstances of that application and not some other “substantially similar” application).

38.Furthermore, I agree with the submissions of the Plaintiff that in any event, the rest of the three-year delay between the non-compliance with the Unless Order of 29th September 2021 and the issuance of the Relief Summons on 8th November 2024 has not been adequately or credibly explained. There is no evidence from NLLC, the solicitors acting for the Defendant at the time of the making of the Unless Order who were expressly ordered by the court to inform the Defendant about the order, that they failed to notify the Defendant about the Unless Order. As the Plaintiff points out, NLLC should have been in contact with the Defendant at the material time: NLLC filed the Defendant’s witness statement in April 2021, and the Defendant was able to provide his Notice To Act In Person to NLLC in July 2021 (which may be contrasted with the Defendant’s claim[2] to the effect that in the second half of 2021, the case had been pushed to the back of his mind as he did not have any update about it[3]). The Defendant does not provide any reason for his “belief” that NLLC was unable to reach him in September 2021 [4] – he claims that he was busy in Australia researching COVID-19 vaccines in 2021 and looking after his sick wife, and that he was affected by travel restrictions, but he does not say that he would not have been contactable or that he somehow lost touch with NLLC who had been acting for him for several years by that time. Furthermore, the Defendant’s own evidence is that the Unless Order (and Default Judgment) ought in the ordinary course of events to have reached him eventually after being posted to the Tai Hang Road Address, and he offered no explanation as to why this would not have happened.[5] Also, the Defendant does not deny that he was aware of the Interrogatories of 30th June 2021, which he was required to answer. He does not explain how he was going to deal with these, if his state of mind was that there was no Unless Order but he was prepared to positively defend the proceedings.[6]

39.In the circumstances, the Defendant has not provided credible evidence that he was not aware of the Unless Order. There has therefore been gross and unexplained delay in the making of the application for relief from sanctions.

40.From the Plaintiff’s perspective, granting the Defendant relief from sanctions would potentially cause much prejudice (if the Default Judgment were to be set aside) as it has proceeded for over three years on the basis that the Defendant was in breach of the Unless Order. It is in the interests of the administration of justice (a relevant consideration expressly referred to in O.2 r.5(1)(a)) that court orders be obeyed, particularly since an unless order is a final opportunity for a party to carry out an act ordered by the court. Sanctions for non-compliance should take effect, and an innocent party should not lightly be deprived of the fruits of an unless order, unless the defaulting party is able to satisfy the court that its discretion should be exercised in its favour. See Daimler AG v Leiduck, Herbert Heinz Horst and others, unreported, HCA 4089/1994, 28th July 2011, at [58] (DHCJ Au-Yeung, as she then was).

41.It is also true that refusing to grant the Defendant relief from sanctions would equally potentially cause much prejudice to him (if the Default Judgment were to be set aside) as the Defence would then remain struck out, so that the Defendant would not be able to defend the action even if he were successful in setting aside the Default Judgment. The administration of justice equally requires that the substantive rights of the parties be resolved instead of being brushed aside on purely technical grounds or for inadvertence (Daimler AG at [58]). However, in the present case, the Defendant fails to establish either merits carrying a real prospect of success, or a credible case of inadvertence.

42.The application for relief from sanctions should therefore be refused.

E.  DISPOSITION

43.The Defendant’s appeal fails. I dismiss the Setting Aside Summons and the Relief Summons.

44.Mr Lau agreed that if the two summonses were dismissed, the Defendant should pay the costs of and occasioned by both summonses to the Plaintiff. I decline to order costs on an indemnity basis – although the Defendant’s case was unmeritorious, I would not go so far as to say that there is some special or unusual feature which justifies an award of indemnity costs (Town Planning Board v Society for Protection of the Harbour Ltd (2004) HKCFAR 114 at [15], Li CJ).

45.The Plaintiff is to lodge and serve its statement of costs within five days. The Defendant is to lodge and serve a list of objections, in bullet point form, limited to two pages, within five days thereafter. The Plaintiff has leave to lodge and serve a reply, in bullet point form, limited to two pages, within three days thereafter.

Mr Lok Ho, instructed by Gallant, for the Plaintiff

Mr Acorn Lau, instructed by David Fenn & Co., for the Defendant