Hong & Cao (No 2)

In *Hong & Cao (No 2)*, Carew J of the Supreme Court of New South Wales considered an application by the respondent, Mr. Cao, to set aside a default judgment entered against him in favour of the applicant, Ms. Hong. The dispute arose from a loan agreement, and the default judgment had been entered following Mr. Cao's failure to file a defence within the prescribed time. Mr. Cao sought to have this judgment set aside on the grounds that he had a meritorious defence to the claim and that his failure to file the defence was due to a misunderstanding or oversight.

The primary legal issue before the Court was whether to exercise its discretion to set aside the default judgment. This required the Court to consider two main questions: first, whether Mr. Cao had demonstrated an arguable or meritorious defence to Ms. Hong's claim; and second, whether there was a sufficient explanation for his failure to file the defence within the time limit. The Court also had to weigh these factors against the prejudice that Ms. Hong might suffer if the judgment were set aside.

In reaching its decision, Carew J applied the principles governing the setting aside of default judgments. The Court noted that while a meritorious defence is a significant factor, it is not determinative. The applicant must also provide a reasonable explanation for the delay. In this instance, the Court found that Mr. Cao's explanation, relating to a misunderstanding of court procedures and reliance on his solicitor, was not entirely satisfactory, particularly given the clear timelines set out in the court rules. However, the Court also considered the potential prejudice to Ms. Hong and the overall justice of the case.

Ultimately, Carew J ordered that the default judgment be set aside, conditional upon Mr. Cao paying Ms. Hong's costs of the application and filing his defence within a specified period. The Court considered that, despite the imperfect explanation for the delay, the existence of an arguable defence warranted giving Mr. Cao an opportunity to defend the claim, provided he met the conditions imposed by the Court.