Idd 1628 Ltd and Others v. Mok So Yin and Another

DCCJ3328/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3328 OF 2008

BETWEEN

Before:  H H Judge Wong in Chambers (Open to the public)

Date of Hearing:  25 September 2008

Date of Delivery of Decision:  25 September 2008

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D E C I S I O N

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1.The plaintiff issued a writ of summons against the two defendants in this action on 27 June 2007.  On 10 August 2008 both defendants duly filed acknowledgements of service, but they failed to file a defence.  On 8 October 2007 the plaintiffs obtained judgment against the two defendants in default of defence, and this is the judgment the 1st defendant, Mr Mok, is applying to set aside on 8 December 2007.  The plaintiffs applied and obtained meanwhile a charging order absolute against the 1st defendant’s property on 30 November 2007.  No doubt it was after the charging order was made absolute that the 1st defendant realised, upon advice, that he had to set aside the judgment if he wished to set aside the charging order.  Hence the application to Master Lai on 8 December 2007 to set aside the 8 October 2007 judgment.  

2.The application to set aside was heard by Master Lai on 26 May 2008.  Upon a full hearing the application was refused by the Master. 

3.The 1st defendant then appealed against Master Lai’s refusal to set aside the judgment in default on 24 July 2008, almost two months after the refusal.  The application came before me on 30 July 2008.  The hearing was adjourned because Mr Mok informed me at the hearing he was pursuing an appeal against the Legal Aid Department’s refusal of his application for legal aid, and that he was not legally represented.  He wished to be represented, and his legal aid appeal would be heard on 14 August 2008.  The appeal is restored today.  I am told that Mr Mok had withdrawn his appeal on the day of the application.  He is now represented by counsel. 

4.Since the adjournment on 30 July 2008, Mr Mok had filed a further affirmation in opposition, and the plaintiff filed an affirmation in reply exhibiting various documents in support, including: minutes of meeting of the board of directors on 22 March 2007; e-mail exchanges between Mr Mok and various persons; balance sheets; profit and loss accounts of the plaintiffs; bank guarantees, etc.  It is clear from these documents that Mr Mok was involved as the managing director of the 1st and 2nd plaintiff companies at the initial stages of their incorporations, namely their documents are recorded between October 2007 up to and including January 2008 that Mr Mok had signed as the managing director.  He signed documents such as contracts of employment, and conducted the two companies’ business and purchases in that position as managing director.  The records exhibited showed that by March 2007 Mr Mok was no longer in the position of managing director.  That can be seen in the minutes of meeting of the board of directors of 22 March 2007. 

5.In the affirmation filed by the plaintiff for today’s hearing, namely the affidavit of Mr Tsang who was the founder and is still a director of the 1st and 2nd plaintiffs, he raised various allegations of acts of conflict of interest on the part of Mr. Mok, namely his position as managing director of the two plaintiffs, such as the undisclosed profits he made in purchasing Bangtel from a service provider to the 1st and 2nd plaintiffs, and communications by e-mail with various persons in such connections.  I have no doubt that these allegations and these alleged acts formed part of the reasons why Mr Mok lost his position as the managing director of the 1st and 2nd plaintiffs.  I have no doubt he must have had some disagreement with the other directors, in particular, Mr Wong and Mr Tsang, that these alleged acts led to the fallout between the shareholders and directors of the 1st and 2nd plaintiffs.  These formed the basis of the plaintiff’s cause of action seeking repayment of the loan to Mr Mok under the loan agreement.

6.The fact of the matter is, Mr Mok is no longer employed by the two plaintiffs, and in the present action, he is required to pay back the loan.  In order to set aside a regular judgment entered against Mr Mok, he has to show good prospects of success in his defence.  The burden is on him to show not only he has an arguable case as in an Order 14 application, but also he has to show he has good and realistic prospects of success. 

7.Mr Mok up to now had been trying to poke holes in the evidence produced by the plaintiffs, namely the balance sheets and the profits and loss accounts.  He had also demanded the plaintiff to show that the loan to him was made and paid to the companies, and that the loan had come from Mr Wong, the 3rd plaintiff and not from Mr Wong’s company Tandem Investment Co. Ltd. he claimed the plaintiff’s accounts had failed to show this.   This tactic is not applicable in an application to set aside judgment in default in a regular judgment.  Mr Mok seemed to have forgotten it was he who has to show he has good prospects of success in his defence, not a defence simply demanding the plaintiff to prove the case against him. 

8.Mr Mok also relied on what he called an oral agreement between Mr Wong, the 3rd plaintiff, himself and Mr Ritchie Nguyen, the 2nd defendant, that they would reduce their shareholdings to 1 per cent and leave the employ of the two plaintiff companies, in return, their respective loans would be waived by Mr Wong.

9.Mr Mok failed to produce any documentary evidence in support of this agreement, nor any evidence that the agreement has been performed in any way.  This so-called oral agreement is denied by the plaintiffs and the 3rd plaintiff Mr Wong.  According to Mr Wong, the only agreement reached at that meeting was that Mr Mok and Mr Nguyen would leave the employ of the company and their shareholdings would be reduced to 1 per cent.  There was no agreement of waiving the loans from Mr Wong. 

10.When faced with such an allegation, one asks the question, what benefits would Mr Wong derive from such an agreement?  He would be losing $300,000 loans extended to the two defendants in return for the surrender of 9 per cent of their shares, when neither defendant on their own admission had paid up any part of the loans except for the initial payment of $30,000 before the incorporation of the 1^st and 2^nd plaintiffs.  It does not make sense.

11.As to Mr Mok’s claim that he did not know whether Mr Wong had injected any part of the loans under the loan agreement into the companies, Mr Mok himself should be able to answer those questions because he was the managing director.  For a considerable period of time, he was in charge of operating and running the two companies.  He was supposed to handle not just the purchasing of the service provider and networking with outside companies, he was also in charge of the whole operation as the managing director.  He should possess the information of the financial position of the companies.  He cannot now turn round and claim he had no idea whether any money was expended or that he was ignorant of the accounts as the managing director of the two companies.  It is evident that he has signed employment contracts, salaries were paid to employees hired by the companies through him, office rentals payments etc., all these company expenditure he obviously should have ample knowledge of.  He is not entitled now to say, “Show me where the money has gone?”  It is Mr Mok who has to show he has good prospects in his defence.  He is not in the position to demand the plaintiff to prove the case against him when the plaintiffs’ claim is for a loan extended to him, it has nothing to do with the good or poor running of the company.  It is about a loan that Mr Mok owed under a loan agreement.

12.For the aforesaid reasons, I find Mr Mok has failed to show he has good prospects of success in his defence.  The Master’s decision was a correct one.  The appeal is dismissed.  Costs to be borne by the 1st defendant, to be taxed if not agreed with certificate for counsel.

Ms Lorinda Lau C W, instructed by K Y Lo & Co., for all Plaintiffs

Mr Sidney Lee Chi-hang, of Sidney Lee & Co., for the 1^st Defendant