Hung Ling Chun Felicia and Another v. Chow Yung Fong and Another

HCA010172/1994

HCA10172/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10172 OF 1994

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Coram: Mr Recorder G. Ma, SC in Chambers

Date of Hearing: 12 April 2001

Date of Judgment: 20 April 2001

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J U D G M E N T

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THE ISSUE

1. The present appeal from Master De Souza's dismissal of the 2nd defendant's application to set aside default judgment raises acutely the following question regarding the court's approach in such applications : where the defendant is able to demonstrate a defence which has a real prospect of success, does it follow that the court must set aside the default judgment, or in what circumstances would the court in its discretion not do so?

FACTS

2. By a writ issued on 11 October 1994 (which was endorsed with a Statement of Claim), the plaintiff (Mr Young Bing Ching Albert) claimed against the 1st defendant the sum of HK$5 million, being the outstanding balance of a loan made by the plaintiff to him of HK$16 million. Under a written loan agreement in Chinese dated 1 March 1994 ("the loan agreement"), the 1st defendant acknowledged that he borrowed the sum of $16 million from the plaintiff with a promise that this be repaid within 15 days. As the loan agreement assumes some importance, I set it out in full (I have been provided with a certified translation) :

"Borrowing Acknowledgement

Mr. Chow Yung Fong borrows Hong Kong currency HK$16,000,000.00 (Hong Kong Dollars Sixteen Million in whole) from Mr. Young Bing Ching with a security of cheque Number 534966-012-893-0000247 drawn on Bank of China by Hong Kong Ikawa Trust Group Ltd. and promise to repay the loan in one lump sum within 15 days.

1st March 1994

	Borrower :
	Sd. (in Chinese) Sd. (in English)"

3. An additional claim is made against the 1st defendant on the basis of a dishonoured cheque. A defence was filed by the 1st defendant on 2 December 1994. I have not been told of the progress of this part of the action concerning the 1st defendant. Looking at the court file, I have not been able to see that much progress has been made here.

4. The plaintiff's claim against the 2nd defendant (described in the writ as a firm) is based on an alleged guarantee. The Statement of Claim pleads :

"7. Pursuant to the Loan Agreement the 2nd Defendant agreed to guarantee the repayment of the loan of HK$16,000,000 by the 1st Defendant to the Plaintiff and deposited with the Plaintiff by way of security a cheque ('the Security Cheque') no.534966 dated 15th March 1994 drawn by the 2nd Defendant on the Bank of China in favour of King Fook Gold and Jewellery Co Ltd as directed by the Plaintiff.

8. The Security Cheque was duly presented for payment but was returned dishonoured for lack of funds in the 2nd Defendant's account.

9. In the premises, notice of dishonour was dispensed with.

10. Further or alternatively, the 2nd Defendant as guarantor of the 1st Defendant under the Loan Agreement is liable to pay to the Plaintiff the sum of HK$5,000,000."

5. Mr Richard Khaw, for the plaintiff, made it clear at the hearing that his client was not relying on any cause of action based on dishonour, but only on the alleged guarantee. He was correct to do so as the cheque in question (which is expressly referred to in the loan agreement) was drawn by the 2nd defendant in favour of King Fook Gold and Jewellery Co. Ltd, which is not a party to these proceedings.

6. The writ was personally served on the two partners of the 2nd defendant : Mr Masaaki Ikawa (on 25 October 1994) and Mr Tsang Sing Ming (on 26 October 1994). No intention to defend having been given by the 2nd defendant, default judgment was entered on 6 December 1994 for $5 million with interest. It is this judgment that the 2nd defendant seeks to set aside in these proceedings.

7. Based on the default judgment, bankruptcy notices dated 27 June 1995 were issued against Mr Ikawa and Mr Tsang. Personal service was effected on Mr Ikawa on 12 July 1994. As far as Mr Tsang was concerned, on 26 July 1994, Master O'Donnell made an order allowing service of the notice by means of :-

(1) the sending of the bankruptcy notice by ordinary post to Mr Tsang's last known address at Flat 3D, 456 King's Road, North Point ("the North Point address");

(2) advertising a notice of proceedings once in a Chinese newspaper; and

(3) leaving a copy of the notice with an adult inmate at the North Point address.

8. A bankruptcy petition was presented by the plaintiff against Mr Ikawa on 2 August 1995. On 11 October 1994, a receiving order was made against him by Master Woolley. A bankruptcy petition against Mr Tsang was presented on 5 October 1994 and, by order of Master Woolley dated 22 November 1995, a receiving order was made against him. The Official Receiver was appointed the receiver for both Mr Ikawa and Mr Tsang.

9. It was not until late 1998, by a letter dated 22 December 1998, that the Official Receiver inquired of Messrs Lovell White Durrant (then the plaintiff's solicitors) regarding the judgment debt. It was stated in that letter that, according to Mr Tsang, he "himself" had not borrowed any money nor did he guarantee the debt in question. It was also asserted that as the 2nd defendant only commenced business on 1 June 1994, this being some three months after the transaction in question. By a letter in reply dated 13 January 1999, Messrs Lovell White Durrant referred to the default judgment dated 6 December 1994. Thereafter, it would appear that no further action was taken by the Official Receiver either in the bankruptcy or in the action itself. During the hearing, I was informed by Mr Ho (who appears for the 2nd defendant) that the Official Receiver told Mr Tsang to instruct lawyers to deal with this matter and, as a result, Mr Tsang then consulted Mr Ho's firm in January 1999.

10. On 16 July 1999, the 2nd defendant issued a summons to set aside the default judgment obtained some four and a half years earlier. This is the summons that was dismissed by Master De Souza on 9 March 2000 and from which the 2nd defendant now appeals. I do not know what has accounted for the period of some 20 months between the issue of the summons and the March 2000 hearing before Master De Souza. Part of the reason was probably the appointment of Madam Hung Ling Chun Felicia to represent the estate of Mr Young Bing Ching Albert. This was made by order of Master Ho on 5 September 2000. Mr Young died in November 1995.

11. I have dealt with the chronology in some detail for it will be some importance when I consider below the factors in the present case going towards the exercise of the court's discretion. First, however, it is necessary to deal with the merits of the 2nd defendant's defence as this is very much the threshold which any defendant seeking to set aside a default judgment must cross.

CONSIDERATION OF THE MERITS OF THE DEFENCE

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 ...".

13. Does the 2nd defendant pass the threshold test here? In my judgment, I am satisfied that the 2nd defendant has discharged the burden of showing it has real prospects of a viable defence.

14. I have already referred to the relevant paragraphs in the Statement of Claim. Although the claim against the 2nd defendant is pleaded on the basis of a guarantee, no particulars are given as to whether the guarantee referred to is oral, written or exists in some other form. The loan agreement does not contain or evidence a guarantee at all. It is not signed by the 2nd defendant. The only reference to the 2nd defendant is a reference to a cheque issued by it numbered 534966-012-893-0000247. This was the cheque which was stated in the loan agreement to constitute the security for the loan made to the 1st defendant and which, as I have already pointed out above, was drawn in favour of King Fook Gold & Jewellery Co. Ltd. Although the loan agreement names a limited company rather than the 2nd defendant as such (which is a firm) as the issuer of the cheque, it is clear from the specific reference to the cheque number that the entity which was intended to be referred to was the 2nd defendant.

15. Mr Khaw rightly did not seek to argue that the loan agreement could be construed as a guarantee from the 2nd defendant to the 1st defendant covering the 1st defendant's liabilities. I have already pointed out that the 2nd defendant did not sign the document. The loan agreement does not anywhere use the word "guarantee" or any similar word. The relevance of the loan agreement, so submitted Mr Khaw, was that it gave rise to an inference that the 2nd defendant, by providing cheque as security, must have entered into some arrangement whereby it would guarantee or somehow be responsible for the indebtedness of the 1st defendant to the plaintiff. Mr Khaw further referred to a fax dated 14 March 1994 from the 1st defendant to Mr Tsang, in which there was reference to the cheque. This fax was, at some stage, sent or forwarded by the 2nd defendant (as can be seen from the fax reference at the top). Thus, it is said this was yet another indication of the 2nd defendant's involvement. Next, as further evidence in support of the plaintiff's case, Mr Khaw referred to paragraph 3 of the affirmation of Mr Kelvin Chan (a solicitor at Messrs Johnson, Stokes & Master, the plaintiff's present solicitors), in which Mr Chan deposes to "the 2nd defendant's agreement to guarantee repayment". No particulars are provided of this agreement and Mr Chan of course has no personal knowledge. It is not clear from his affirmation just what the relevant sources are for this assertion, but he does say generally that the facts deposed to are either within his personal knowledge or are derived from the files and records of the deceased Mr Young and Madam Hung Ling Chun (the present plaintiff).

16. I accept that the plaintiff may well be right in saying that the 2nd defendant's role regarding the loan was to guarantee it. Why else would it agree to draw a cheque as security, one might ask? And if the cheque was dishonoured (as it was in the present case), what would the 2nd defendant's residual responsibility be for the default of the repayment of the loan, especially when there is some doubt as to whether the payee (King Fook Gold & Jewellery Co. Ltd) could recover on the cheque in the first place, not having apparently provided any consideration? These are questions which would be relevant in considering the question whether the 2nd defendant was ultimately a guarantor. They are all the more pertinent given the fact that Mr Young, the person most likely to be able to give evidence on this in support of the claim, is now deceased so that one would inevitably have to rely at least to a certain extent on circumstantial evidence.

17. Nevertheless, I take the view that the evidence in support of the existence of the guarantee is far from conclusive and that the 2nd defendant, in denying that it acted as a guarantor, has a real prospect of a defence. Although it is not explained just what was the extent of the 2nd defendant's involvement and why it drew a cheque as security in the first place, the evidence in support of the existence of a guarantee is not altogether satisfactory.

18. For completeness' sake, I should say that the other defences raised by the 2nd defendant would not have enabled it, in my judgment, to pass the threshold test. I set out briefly my views :-

Misjoinder of the 2nd defendant

19. Mr Ho argued that the entity that issued the cheque and the one that allegedly guaranteed the 1st defendant's indebtedness was not the 2nd defendant, but one which merely shared the same name. In short, the plaintiff had sued the wrong party. Reference was made to an application by the 2nd defendant for registration of its business under the Business Registration Regulations dated 6 July 1994, in which it was stated that the business commenced on 1 June 1994. The partners of this firm were Mr Ikawa and Mr Tsang. Since the 2nd defendant only commenced business on 1 June 1994, Mr Ho argues it could not have been either the entity that issued the cheque or the guarantor for the loan made on 1 March 1994. This does not follow. The fact that a firm or partnership commences business on a certain date does not mean that the partnership was actually formed on that date. It could well have been formed before then and in most cases involving a partnership this will be the position. The 2nd defendant has not provided any evidence of when the firm or partnership was formed other than this application. On the other hand, the plaintiff has provided me with a copy of an application by the 2nd defendant for registration of its business dated 20 August 1991. This document shows clearly that the 2nd defendant was in existence at that time. There is no evidence before me to suggest that the two entities are different. On the contrary, it is clear that Mr Ikawa has at least been involved since 1991 in the firm known as Ikawa Trust Co. (Hong Kong). He is named as a partner in both the 1991 and 1994 Applications. Even on his case, Mr Tsang concedes he had been an employee of Ikawa Trust Co. (Hong Kong), the entity that he says issued the cheque. There is little doubt the "two" firms are one and the same.

Mr Tsang's liability as partner

20. Mr Ho then contends that Mr Tsang cannot, in any event, be liable under the guarantee since he only became a partner after liability had accrued thereunder. Reference was made to section 11 of the Partnership Ordinance, Cap.38. Reliance was again placed on the 1994 Application. However, as pointed above, the application provides no indication of when the partnership was formed and no further evidence has been provided by Mr Tsang as to when and how the partnership with Mr Ikawa was formed. In his affirmation, he does say that in March 1994, he was working as an employee of the 2nd defendant but this again provides no insight into when and how he became a partner. These are matters within his knowledge and he could reasonably have been expected to deal with this in more direct terms. I note here Mr Tsang's assertion that Ikawa Trust Co. (Hong Kong), having been set up in 1991 with Mr Ikawa and one Lee Ngok as partners, became a sole proprietorship in 1993 until it ceased business in 1995. Again, Mr Tsang could have been expected to substantiate this assertion but he has not done so. The plaintiff, on the other hand, has pointed to registration formalities that have to be complied with under the Business Registration Regulations, Cap.310, if a partnership was to become a sole proprietorship. No such formalities appear to have been made in the case of Ikawa Trust Co. (Hong Kong).

The 2nd defendant's liability is secondary to that of the 1st defendant

21. Mr Ho submits that the 1st defendant has filed a defence and since there has not been any trial on his liability towards the plaintiff, the 2nd defendant's liability is therefore also in doubt. This does not follow at all. All I would point out is that the 2nd defendant has not adduced any evidence nor raised a positive case that the 1st defendant is in fact not liable to the plaintiff.

Section 13 of the Law Amendment and Reform (Consolidation) Ordinance, Cap.23

22. The 2nd defendant contends that as the guarantee sued on by the plaintiff is not in writing nor signed by the 2nd defendant, there can be no liability under that section of the Law Amendment and Reform (Consolidation) Ordinance. That section, however, has no application to guarantees. The particular provision that the 2nd defendant in reality wishes to rely on is section 4 of the English Statute of Frauds 1677, which used to apply in Hong Kong but no longer does.

THE RESIDUAL DISCRETION NOT TO SET ASIDE

23. Given the conclusion I have reached that the 2nd defendant has demonstrated a defence which has a real prospect of success, am I then bound to set aside the default judgment in the present case or in what circumstances is the court entitled not to set aside?

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.

27. In Evans v. Bartlam, after stating that there was no rigid rule to the effect that there had to be a reasonable explanation for the default before default judgment could be set aside, Lord Atkin said : "... though obviously the reason, if any, for allowing judgment and thereafter applying to set it aside is one of the matters to which the Court will have regard in exercising its discretion. ...". At p.482, Lord Russell of Killowen stated :-

"The contention no doubt contains this element of truth, that from the nature of the case no judge could, in exercising the discretion conferred on him by the rule, fail to consider both (a) whether any useful purpose could be served by setting aside the judgment, and obviously no useful purpose would be served if there were no possible defence to the action, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained, to which he could have set up some serious defence. But to say that these two matters must necessarily enter into the judge's consideration is quite a different thing from asserting that their proof is a condition precedent to the existence or exercise of the discretionary power to set aside a judgment signed in default of appearance."

28. At p.489, Lord Wright stated :-

"The Court might also have regard to the applicant's explanation why he neglected to appear after being served, though as a rule his fault (if any) in that respect can be sufficiently punished by the terms as to costs or otherwise which the Court in its discretion is empowered by the rule to impose."

29. In The Saudi Eagle, at p.225, Sir Roger Ormrod stated :-

"The conduct of the defendants in this respect and in deliberately deciding not to give notice of intention to defend because it suited the interests of the group to let the plaintiffs proceed against these defendants is a matter to be taken into account in assessing the justice of the case. ..."

30. In Premier Fashion Wears Ltd, Bokhary JA took into account the prejudice that would be caused to the plaintiff in that case if judgment were set aside. At p.217, the learned judge says : "And in the course of that delay, Premier and Broadway took steps and incurred costs on the footing of the indemnity judgments. What is more, it appears probable that what little chance they ever had of execution against Chow disappeared during the period of delay". At p.219, Litton JA said : "All the relevant circumstances must be considered including the third party's conduct after the proceedings were served upon him".

31. In Shocked, the English Court of Appeal dealt with the approach applicable to the setting aside of judgments after trial where the defendant had been absent. In such situations, the approach differs from the setting aside of default judgments. Whereas the emphasis in setting aside a judgment after trial focuses on the defendant's explanation for his absence rather than the merits of his defence, the approach in default judgments is to focus primarily on the merits of the defence : see above. However, the Court of Appeal in that case emphasised the weighing exercise that had to be carried out in cases involving default judgments. At p.379, Leggatt LJ said :-

"These cases relating to default judgments are authority for the proposition that when considering whether to set aside a default judgment, the question of whether there is a defence on the merits is the dominant feature to be weighed against the applicant's explanation both for the default and for any delay, as well as against prejudice to the other party."

THE WEIGHING EXERCISE IN THE PRESENT CASE

32. As stated above, I have concluded that in terms of merits, the 2nd defendant has passed the threshold test. Prima facie, justice would demand that judgment be set aside and that the 2nd defendant be permitted to go to trial.

33. However, for the reasons that follow, I am firmly of the view that in the present case, justice ultimately demands that the default judgment should not be set aside.

34. The chronology of relevant facts in this case is striking. Default judgment was entered on 6 December 1994 but the application to set aside default judgment was not made until nearly five years later. While delay by itself may not be a critical factor and often is not (see Evans v. Bartlam at p.489, per Lord Wright and Hong Kong Civil Procedure 2001 at paragraph 13/9/10), the length of the delay is relevant in the present case especially when coupled with the events that have taken place. On the length of the delay, I note in passing that if the plaintiff had himself delayed in commencing the action until now, he would be time barred.

35. Of greater importance are the events that have taken place since the entering of default judgment. Bankruptcy proceedings were instituted against both Mr Ikawa and Mr Tsang and receiving orders were made against them in late 1995. I presume the Official Receiver has been active in proceeding on the basis of these receiving orders since then. There are no proceedings afoot to set aside the receiving orders although Mr Ho informs me that were I to set aside the default judgment, there would be such proceedings to set aside the receiving orders (whether against both Mr Ikawa and Mr Tsang or only one of them is not clear). Where a receiving order has been made against a person and there has been a lapse of quite some years as in the present case, it is likely that third party interests will be involved. These interests may be prejudiced if the receiving order is set aside. However, I accept this is speculative though not an unrealistic or unreasonable assumption to make.

36. However, what has concerned me in particular is the prejudice caused to the plaintiff if I were to set aside the default judgment. The "undoing" or "reversal" of receiving orders after all this time by itself of course causes its own particular problems as far as prejudice to the plaintiff is concerned. However, it is the prejudice caused to the plaintiff by the absence at any trial of Mr Young, that gives me the most unease. As I have already noted, he passed away in November 1995. If the 2nd defendant had given Notice of Intention to defend and then participated in the action at the time it should have (late 1994), the action would have been well under way by 1995 and I have little doubt that active steps would have been taken to prepare for trial. This would have included taking statements from Mr Young. By late 1995, given the issues in this case, the parties might even have been near trial. As events turned out, from the plaintiff's point of view, the 2nd defendant was just not interested in defending the action. Despite the fact that the writ was served personally on both partners, no Notice of Intention to defend was given. After default judgment was entered and the notices of bankruptcy based on the judgment were served, and even with receiving orders having been made, still neither partner of the 2nd defendant showed any interest in setting aside the default judgment. The plaintiff was therefore fully justified in assuming that the action had come to an end and that there was no need to take any steps towards preparing for trial. Four years later, however, the 2nd defendant took out the present summons to set aside and now wants the matter to go to trial, an attitude which is the opposite of that exhibited at the time when it should have defended the action. Given this very real prejudice to the plaintiff, in order to see where the justice of the case lies, it then becomes important to look into the reason why the 2nd defendant allowed judgment to go by default and the reason for the delay in applying to set aside.

37. Mr Tsang states in his affirmation that when he received the writ, he did not fully understand its contents and effect. He says he was also under the misapprehension that it related only to Mr Ikawa. I cannot accept this at face value. The writ which contained the Statement of Claim was in both English and Chinese. There is nothing in the Statement of Claim which even mentions Mr Ikawa so that it is difficult to see why Mr Tsang would have thought that the action related only to Mr Ikawa. It may be that Mr Tsang is referring to his allegation that at the time the loan was made and the indebtedness thereunder incurred, the 2nd defendant was not a firm or partnership of which he was a partner but only a sole proprietorship. It is unsatisfactory that he does not actually say this if this was what was meant. In any event, I have already dealt with this aspect above. There is insufficient evidence from Mr Tsang regarding the allegation of when he became a partner and of the sole proprietorship.

38. Even if I thought that Mr Tsang's reason for not giving Notice of Intention to defend was plausible, there can be no excuse for his not taking any prompt action to set aside the judgment after he was served with a bankruptcy order and after a receiving order was made against him. In his 2nd affirmation, he says that the bankruptcy proceedings against him were instituted and conducted in his absence as he was living and working in the Mainland "most of the time" during the period from 1995 to 1998. He also asserts that he was not aware of the receiving order until he was approached by the Official Receiver in late 1998. I do not accept this. Although there was an order for substituted service for the bankruptcy notice on Mr Tsang, this was served both by post to and by leaving the notice with a person at the North Point address. This address is Mr Tsang's present address as can be seen from the affirmations he has served. I find it extremely difficult to believe that he would not have known about the bankruptcy proceedings. When he says he worked in the Mainland for "most of the time", it can be inferred that for a part of the time he was in Hong Kong. I conclude he knew or must be taken to have known about the bankruptcy proceedings but chose simply to ignore them.

39. Weighing up these various considerations against my earlier conclusion on the merits of the defence, I take the view that it would not be fair or just if the default judgment was set aside. I am not at all satisfied with the 2nd defendant's explanation either for allowing judgment to go by default or for the delay in setting aside. Above all, I regard the prejudice which would be suffered in particular by the plaintiff if the judgment were set aside, as critical. I recognise that exceptional circumstances have to be shown before a court will refuse to set aside a default judgment where a real prospect of success in the defence has been demonstrated, but a court will not shirk from this conclusion if the justice of the case demanded it. In my view, the interests of justice would not be served by setting aside the default judgment in the present case.

CONCLUSION

40. Accordingly, the 2nd defendant's appeal is dismissed. I also make an order nisi that the 2nd defendant should pay the plaintiff the costs of and occasioned by this appeal, to be taxed if not agreed.

Representation:

Mr Richard Khaw, instructed by Messrs Johnson, Stokes & Master, for the Plaintiff

Mr Keith Ho of Messrs Keith Ho & Co., for the 2nd Defendant