MARYO DEVELOPMENT LTD v. TSANG YAU MAY

MARYO DEVELOPMENT LTD v. TSANG YAU MAY

D3's application to set aside the regular default judgment was dismissed because he failed to demonstrate a meritorious defence with a real prospect of success: his evidence contained material commercial implausibilities and inconsistencies (timing and matching of payments, acceptance without pursuing outstanding balance, lack of credible explanation of business arrangements and valuations), he delayed about six months without satisfactory explanation, and setting aside would prejudice the plaintiff which had already altered its position; accordingly the court refused to set aside the judgment and instead varied the injunction to reduce the frozen sum.

Citation
MARYO DEVELOPMENT LTD v. TSANG YAU MAY
Parties
Plaintiff: Plaintiff company (P); 1st Defendant/director: Tsang Yau May (D1); 2nd Defendant/director: Tsang Kwong Kan (D2); 3rd Defendant: Third defendant (D3); Administratrix/registered Shareholder/director: Chan Yui Ling (Chan)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
13 April 2015
Case Number
HCA271/2013
Procedural Posture
Consolidated Civil Action Hca2297/2012 (leading) Consolidated With Hca271/2013 / Interlocutory Application to Set Aside a Regular Default Judgment (summons Hearing to Set Aside Judgment and Vary Injunction/payment Orders)
Outcome
Application to set aside default judgment dismissed in part; injunction varied to reduce the amount of restrained assets; costs ordered against D3 for parts of the summons.
Legal Topics
Setting Aside Default Judgment, Knowing Receipt, Directors' Duties and Misappropriation, Mareva/injunction and Freezing Orders, Constructive Trust, Valuation Disputes
Source Language
EN
Company Law Trusts and Fiduciary Duties Civil Procedure Equitable Remedies Commercial Law Setting Aside Default Judgment Knowing Receipt Directors' Duties and Misappropriation +3 more

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Parties

Plaintiff company (P)

Plaintiff

Tsang Yau May (D1)

1st Defendant/director

Tsang Kwong Kan (D2)

2nd Defendant/director

Third defendant (D3)

3rd Defendant

Chan Yui Ling (Chan)

Administratrix/registered Shareholder/director

Procedural Posture

Consolidated Civil Action Hca2297/2012 (leading) Consolidated With Hca271/2013 / Interlocutory Application to Set Aside a Regular Default Judgment (summons Hearing to Set Aside Judgment and Vary Injunction/payment Orders)

Legal Issues

  1. 1 Whether the 3rd defendant (D3) established a meritorious defence with a real prospect of success to justify setting aside a regular default judgment
  2. 2 Whether D3 had 'knowing receipt' of company funds diverted in breach of fiduciary duties by directors D1/D2
  3. 3 Whether the transactions (5/10/10 and 22/7/11) were genuine arms-length sales or sham devices to siphon company assets

Ratio Decidendi

D3's application to set aside the regular default judgment was dismissed because he failed to demonstrate a meritorious defence with a real prospect of success: his evidence contained material commercial implausibilities and inconsistencies (timing and matching of payments, acceptance without pursuing outstanding balance, lack of credible explanation of business arrangements and valuations), he delayed about six months without satisfactory explanation, and setting aside would prejudice the plaintiff which had already altered its position; accordingly the court refused to set aside the judgment and instead varied the injunction to reduce the frozen sum.

Court Disposition

Application to set aside default judgment dismissed in part; injunction varied to reduce the amount of restrained assets; costs ordered against D3 for parts of the summons.

Orders

  • Paragraphs 1-2 of the summons (application to set aside the D3 Judgment and liberty to defend) dismissed
  • Injunction Order varied: value of D3's assets subject to restriction reduced from HK$9,130,000 to HK$1,309,989.30; paragraphs 3-5 of the summons adjourned sine die with liberty to restore