Defence on the merits
31 The only matter in Mr Li's Affidavit that suggested a defence on the merits was the alleged agreement of May 2009. Had a binding agreement been reached, that may have provided a defence to the present claim, on the basis of some sort of accord and satisfaction. No agreement was reached in May 2009. As noted above, the pre-requisite to further negotiations was the payment of $401,951.75 within 2 weeks of the letter of 7 May. That was not paid until 28 May. But even if it had been paid, that payment only enabled further negotiations about repayment of interest and the discontinuance of the proceedings. Nothing in that regard was agreed. In any event, Mr Li did not put this forward as any defence on the merits.
32 When I asked Mr Li what his defence on the merits to the claim was, he raised 2 matters that were not referred to in his Affidavit. The first concerned his guarantee. He submitted that although he may have guaranteed the original debt, the guarantee did not extend to cover the new arrangements that were made in May 2009 and subsequently in December 2009/January 2010.
33 Secondly, he said there was a genuine dispute about the way interest was calculated arising out of the December 2009/January 2010 Agreement. It was difficult to understand precisely what Mr Li was saying about the interest dispute. It appeared to relate to the fact that under the original arrangement, interest was charged at 50% in the third year of the loan, but in the subsequent variations of the Agreement interest was charged at $753.43 per day.
34 In relation to the guarantee, it is clear that clause 8 of the Loan Agreement (set out in para 5 above) made it clear that the guarantee was a continuing obligation, which would be unaffected by any change in circumstances, and would only cease when the lender received the full repayment of the loan amount and the interest payable under the Agreement.
35 If there is any doubt about it, paragraph 5 of the letter of 22 November 2008 (para 7 above) made it clear that the variation of the arrangement then made did not prejudice the terms of the original Loan Agreement. Further, the written agreement of 4 January 2010 also contained acknowledgments (highlighted in para 19 above) that Mr Li was still bound by the guarantee.
36 Clause 8 of the Loan Agreement means that Mr Li as guarantor has no defence to the claim based on the variations of the Agreements nor based on the offers made by the Plaintiffs to extend the time for payment.
37 The first thing to note about the interest is that the rates of interest were those offered by Mr Li in order to obtain the loan. Secondly, the daily rate of interest identified in a number of letters and emails of $753.43 is a figure based on the 3rd year's interest rate of 50%.
38 In my opinion, the interest that was agreed to be paid by the Defendants, both by the arrangement of 22 November 2008 and the arrangement contained in the Agreement of 4 January 2010, is the interest that has been charged. There is no evidence that the rate of interest claimed in the Default Judgment was not the correct interest under the Agreement.
39 Mr Li had prepared a draft defence after he had received notice of the Default Judgment. Although he did not purport to rely on anything in that defence on the Motion before me, because he was unrepresented I have considered what was pleaded in it. The only defence of any substance pleaded was that the original Agreement was never properly executed nor was any chance given for the Defendants to obtain independent legal advice. There is nothing apparent on the face of the Loan Agreement to suggest it has not been properly executed. In any event, Mr Li's subsequent conduct in acknowledging his indebtedness to the Plaintiffs pursuant to the Loan Agreement on the 2 occasions the Agreement was varied, and what was said at the May 2009 meeting, point to the fact that there was no substance to that pleaded defence.
40 Finally, Mr Li raised in his oral submissions, without there being any evidence of this, that the arrangement he made with Mr Xie was a gentlemen's agreement and one that would that would never be enforced in court. This was never pleaded in his draft defence, nor was anything said in his Affidavit to suggest any such arrangement.
41 What does appear from the evidence are constant promises by Mr Li to repay what he acknowledged was owing pursuant to the Loan Agreement and a failure to fulfil any of those promises. In my opinion, Mr Li has not established that he has any defence on the merits for the claim made by the Plaintiffs.
42 For these reasons, the application to set aside the judgment should be refused.