HKCFI 944
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 589 OF 2019
||LU SHAOPING (盧少平)
||WU LIANMO (吳聯模)
||ZHANG ZHUSHENG (張朱晟)
(also known as CHEUNG CHU SHING)
||THE FIFTH SEASON (HONG KONG)
INTERNATIONAL GROUP LIMITED
Before: Deputy High Court Judge William Wong SC in Chambers
Date of the Plaintiff’s Written Submissions: 27 April 2020
Date of the 2nd Defendant’s Written Submissions: 20 April 2020
Date of Decision on Costs: 4 June 2020
DECISION ON COSTS
1. The 2nd Defendant’s Summons dated 6 September 2019 to set aside the default judgment obtained by the Plaintiff on 22 August 2019 was heard before this Court on 23 January 2020. There is no dispute that the default judgment was obtained regularly (“the Regular Default Judgment”).
2. During the hearing, after full submissions, I indicated to the parties that except for the issue of limitation defence, I was not minded to set aside the Regular Default Judgment. However, in all fairness to the 2nd Defendant and to achieve justice, I allowed the 2nd Defendant to put in further evidence to make good her limitation defence.
3. On 24 February 2020, the 2nd Defendant filed her draft 2nd Affirmation which was exhibited in the 4th Affidavit of Yau Paul. The said affidavit was served on the Plaintiff on 26 February 2020. Thereafter, the parties, by consent, agreed that the Regular Default Judgment be set aside.
4. The only outstanding issue is costs. The parties have since, following the directions of this Court, filed detailed written submissions.
Relevant Legal Principles
5. Generally, the costs of setting aside a regular judgment should be awarded to the plaintiff. In Ko Sin Yau v Chan Chuen & Another  1 HKLRD 324, Cheung JA at §21 said:
“21. Generally speaking if an irregular judgment is set aside then the plaintiff should be ordered to bear the costs of the setting aside of the default judgment because the judgment was not properly obtained in the first place. However, where a judgment was set aside not because of it being irregular but because of a meritorious defence the general rule is that the defendant should bear the costs of the application to set aside the default judgment. As an alternative the costs of the application can be in the cause of the action.”
6. The Court can exercise its discretion to depart from the general rule but it must do so with good reason.
7. Where the plaintiff continues to resist a setting‑aside application when the basis of the defendant’s defence has been revealed, the costs for resisting the setting-aside application should follow the event. (See Harbour Hero Enterprises Ltd v Chau Nung Tai  3 HKLRD 174 (CA) which applied Chung J’s judgment in Welson International Limited v Jebson Investments Limited, unreported, HCA 2620/2008, 29 June 2010 at §16)
8. The burden of proving the existence of a meritorious defence in a setting‑aside application rests with the applicant. An applicant has to adduce sufficient evidence and particulars to prove that there is a meritorious defence.
9. The crucial issue here is when did the 2nd Defendant first demonstrated to the Court that she has a meritorious limitation defence. There is no dispute that the 2nd Defendant has not disclosed her limitation defence in any draft pleadings or affirmations before the substantive hearing. It was first mentioned in Ms Tang’s Skeleton Submissions dated 20 January 2020.
10. Ms Tang’s first submission is that the issue of limitation ought to have been obvious to the Plaintiff from the outset when the present action was commenced. She referred this Court to the Plaintiff’s own pleadings and the final judgment obtained by the Plaintiff. Ms Tang submitted that the Plaintiff’s own case was all along based on a claim accruing from 1 March 2013 (or 15 March 2014), which, either way, would have been time‑barred when the writ was issued on 4 April 2019.
11. To be fair, it is not entirely that straightforward. Certainly, it does not appear to be that obvious to the 2nd Defendant as none of her supporting affirmations mentioned the limitation issue. When Ms Tang relied on it for the first time in her Skeleton Submissions dated 20 January 2020, the Plaintiff responded by submitting that the debt was dispersed on 4 April 2011 and thus was only due on 4 April 2013. Mr Smith SC submitted that this Court could exercise its discretion to rectify a mistake and amend the final judgment. Indeed, if there is no substance in the limitation defence but a mere mistake in the final judgment, it is unlikely that the Court will set aside the entire judgment.
12. Clause 1.2 of the Loan Agreement reads as follows:
“Loan period: From 1 March 2011 to 1 March 2013; total of 24 months. The loan start date under this contract should be the date of disbursement of the loan by Party A; if the loan start date and the date of disbursement are not the same, the date of disbursement shall prevail: that is, once the loaned money leave Party A’s account, then the loan period shall be extended accordingly.” (Emphasis added.)
13. It is correct that both the Plaintiff and the 2nd Defendant proceeded on the basis that the sum of money was disbursed in April 2011 after the execution of the Supplemental Agreement on 31 March 2011. That is why at the substantive hearing, the sole evidential basis for the limitation defence was the fact that the disbursement of the...