Read the full judgment text of HCA 010172/1994 on BabelCite. This High Court CFI judgment was delivered on 20 April 2001 before Recorder G. Ma, SC.
Civil procedure – setting aside of default judgment – Order 13, rule 9 – regular default judgment obtained against 2nd defendant firm Ikawa Trust Co. (Hong Kong) on 6 December 1994 for HK$5 million in respect of alleged guarantee of HK$16 million loan to 1st defendant – writ personally served on both partners, no Notice of Intention to defend – whether defendant who demonstrates a defence with real prospect of success is entitled to have default judgment set aside as of right – held, no – merits is the primary or dominant consideration but not the only one – court retains discretion to weigh merits against defendant's explanation for default, post-service conduct, delay in applying to set aside, and prejudice to plaintiff and third parties – The Saudi Eagle [1986] 2 Lloyds Rep 221, Premier Fashion Wears Ltd v Li Hong Chung [1994] 1 HKC 213, Evans v Bartlam [1937] AC 473, Shocked v Goldschmidt [1998] 1 All ER 372 followed – subsidiary defences (misjoinder, Mr Tsang's liability as partner under Partnership Ordinance (Cap 38) s.11, 2nd defendant's liability being secondary to 1st defendant, and Statute of Frauds / Law Amendment and Reform (Consolidation) Ordinance (Cap 23) s.13 point) all rejected as not crossing threshold – on the merits of the guarantee defence, evidence in support of the existence of a written or oral guarantee far from conclusive, with 2nd defendant having a real prospect of a viable defence – however, nearly five-year delay, implausible explanations for the default and for inaction after receiving orders, and very real prejudice to plaintiff through death of Mr Young, the key witness, in November 1995 – justice required that default judgment not be set aside – appeal dismissed with costs of and occasioned by the appeal to be taxed if not agreed.
Legal issues: Whether demonstrating a defence with real prospect of success automatically entitles a defendant to set aside a default judgment
Outcome: Appeal by 2nd defendant against dismissal of its application to set aside default judgment dismissed; default judgment of 6 December 1994 for HK$5 million with interest to stand.