Lau Tak Lun and Another v. Ho Ka Yan

DCCJ 7604/2024

[2025] HKDC 1243

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 7604 OF 2024

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DECISION

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1.This is an application to set aside default judgment dated 27 January 2025, no notice of intention to defend having been given by the Defendant (“D”). It is convenient for me to first deal with the procedural history between the parties.

A.  Procedural history

2.The Plaintiffs (“Ps”) filed their writ of summons endorsed with a Statement of Claim on 23 December 2024, and by an affirmation of service dated the same day P2 deposed that Ps had inserted the writ and statement of claim through letter box for the address of D on the same day. Exhibited thereto was a photograph of a letterbox with a parcel having been inserted through the letterbox for unit 807. I note that D’s address given on her affirmation is at Room 807, Ping Hay House, Tai Ping Estate, Sheung Shui, New Territories. Incidentally, I also note that the Qube by Tomica Hong Kong, D’s company, had a physical shop at Sino Centre 8F store number 807. At the hearing, D confirmed that she does not dispute that the picture exhibited by Ps showed the mailbox at her address.

3.Under Order 12 rule 5 RDC (Cap 336H), the time limited for acknowledging service in the case of a writ served within jurisdiction is 14 days after service of the writ. After such time, Ps are entitled to enter default judgment for unliquidated damages under Order 13 rule 2 RDC.

4.D had not filed any acknowledgment of service.

5.Ps proceeded to apply for an interlocutory judgment against D pursuant to Order 13 rule 2 RDC and on 27 January 2025 interlocutory judgment was granted in favour of Ps.

6.D’s explanation is that she had not received the writ and the statement of claim. In her second affirmation she deposed that she had informed the police and she exhibited a letter from the building management company replying to her request for CCTV footage for 23 December 2024.

B. The Applicable principles

7.It is convenient to summarize at the outset the legal principles governing the court’s exercise of its discretion to set aside a default judgment. The relevant legal principles are well-established and not in dispute. In Cheung Sai Lon v Cheung Sai Ha [2021] HKCFI 904 at [13] – [15], Coleman J stated the principles as follows:-

“13. The principles applicable on an application to set aside a default judgment are well-settled, and they can be set out without lengthy reference to previous authority. A distinction is to be drawn between a default judgment entered regularly, and one obtained irregularly.

14. A default judgment entered irregularly (in the sense that it was obtained without good and effective service of the writ) is liable to be set aside ex debito justitiae, and the Court does not have to consider the merits of the proposed defence. The Court does not have to accept a defendant’s assertion that he has not received the writ, which the defendant must show by compelling evidence. The relevant time is the time at which the default judgment was entered; therefore, it is for the defendant to show that he did not have notice of the writ at that time. Nevertheless, even if there was no effective service, the Court retains a residual discretion to impose terms for setting aside, having regard to the parties’ conduct.

One such term might be to impose a condition that a payment into Court be made (for example where the court considers the defendant intended to evade service, or delayed substantially before applying to Court to set aside the judgment).

15. However, if the judgment is regular, the Court may set it aside if a meritorious defence can be shown by the defendant. The defendant must show a real prospect of success, meaning a defence which is one that could well be established at trial, requiring clear and objective evidence casting doubt on the claim. The power to set aside a regular default judgment is discretionary and unconditional, and the Court should have regard not just to the merits of the defence case put forward, but to all relevant circumstances. Typically, the circumstances taken into account in the discretionary exercise include: why the default occurred; the defendant’s conduct after he had notice of the proceedings; the explanation for the time taken where there has been delay in making the application; and any prejudice that would be caused to the plaintiff or third parties if the default judgment were to be set aside.”

8.In assessing whether the defendant has a meritorious defence in setting aside a regular judgment, the Court of Appeal gave the following guidance in the Maryo Development Ltd v Tsang Yau May & others, unreported, (11/1/2016, CACV 101/2015), per Yuen, Barma JJA, Harris J at §13:

“13. Godfrey JA speaks in terms of the defendant being required to show ‘a real prospect of success’ and the court forming a provisional view of ‘the probable outcome of the action’. These formulations have their origin in the judgment of the English Court of Appeal in the ‘Saudi Eagle’. There is a danger that they can be read as requiring the court to undertake a mini-trial on the affirmations as to the likely outcome if the matter goes to trial. This is not what is required and perhaps the correct approach can be more helpfully summarised as requiring the court to form a provisional view as to whether or not the defendant has a realistic prospect of successfully defending the action. Determining this will involve assessing whether or not the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has a realistic prospect of establishing a defence in law. The assessment has to be carried out mindful of the interlocutory nature of the application and with a sense of proportionality.”

C.  Was the interlocutory judgment regular?

9.In the absence of any contrary evidence such as the post having been returned, the service is deemed to have been effective and by operation of Order 10 rule 1(3) be deemed to be the seventh day after the date on which the writ and Statement of Claim was inserted through the letter box for the address in question. D had until 13 January 2025 to file an acknowledgment of service and thereafter Ps is entitled to enter default judgment against D. I am satisfied that the interlocutory judgment was regular.

D.  Did D have a meritorious defence?

10.The underlying action concerns a dispute between Ps and D in which Ps claim against D for unliquidated damages for defamation and malicious falsehood for statements made during and/or after D’s employment with, according to P, Digi Gold Ltd  (“DGL”) trading as the Qube by Tomica Hong Kong.  P1 is a director of DGL, and P2 is his wife [HB/B/182], and a manager of DGL. There is a dispute as to which is the entity which employed D, whether it was a partnership under Ps, ie the Qube partnership, or another entity, Digi Gold Ltd trading as the Qube by Tomica Hong Kong. The parties have other ongoing cases, including LBTC 5/2022, in which this issue is being litigated. In LBTC 5/2022, the case is adjourned to be heard on 15 September 2025.

11.It is not in dispute that D started working at Sino Centre 8F store number 807 on 17 August 2021, and that D worked as an online sales assistant for the business’ sale of toys. At the hearing, D says she would post pictures of toys on the company website and carousell (旋轉平台) for customers to view online and she would provide customer services to such customers.

12.While Ps had produced a written contract dated 17 August 2021 between D and DGL trading as the Qube by Tomica HK, such contract is unsigned, and D denies having seen or signed such letter.

13.According to D, her employment relationship with her employers terminated on 7 December 2021. It is her case that she had worked as an online sales assistant until this date, and she resigned from her post at that time because since December 2021 she was unable to contact her employers (see Ho’s 1^st Affirmation §7).

14.According to Ps, however, D’s contract “was terminated on 30 Sep 2021”, and P stated in his SOC paragraph 4 the following:  ‘with payment in lieu of notice by reasons of D’s failure to tender a resignation letter as required under the employment offer letter accepted by D on or about 17 August 2021’. It is unclear what ‘payment in lieu of notice by reasons of D’s failure to tender a resignation letter’ meant. Curiously, in Ps’ written submissions, Ps say that D worked for DGL as a full time online sales assistant in the period 17 August to 30 November 2021, despite pleading that her contract was terminated on 30 September 2021.

15.P1 explained that at the material time the Qube by Tomica had been the subject of cyberbullying and that there were angry customers coming to the physical shops. At the time the company could not accept any more pre-orders and “D should know that she had no job left”. Ps say that the reference to 30 September 2021 in the pleadings is a typo and Ps in fact mean 30 November 2021. 

16.According to D, her employer had failed to pay her salary since November 2021 (ie she had been paid her October salary but not her salary since November); see also [B/351] (mandatory provident fund schemes authority statement/report prepared by D, para 10). Ps had not filed evidence in respect of the issue of payment of salary.

17.As a further background, P1 on behalf of Ps had adduced as part of his evidence a police statement dated 26 Nov 2024 (LTL-33) in which P1 stated that he was the boss of two entities, “the Qube” and “the Qube by Tomica Hong Kong”. According to the police statement, as for “the Qube”:

(a)  The physical store was established in September 2019, and was located in Mong Kok Sino Centre M floor no 27 to 29 and 35.

(b)  The physical store closed in December 2021.

(c)  Notwithstanding that its physical store closed, it was still conducting business operations at the time of the police statement.

18.According to the police statement, as for the Qube by Tomica Hong Kong:

(a)  It was established in September 2021, and since 23 September 2021 had a physical store at Sino Centre 8F store number 807.

(b)  It had ceased business operations at the time of the police statement.

19.The police statement did not mention when the Qube by Tomica HK ceased business operations and when it ceased having a physical shop. However, in another police statement by P1 dated 15 August 2024, [B/ 205] he stated that the Qube by Tomica Hong Kong ceased its retail store toy business (結束玩具零售店業務) on 3 December 2021.

20.As stated above, there is a dispute as to the duration of D’s employment and to the identity of D’s employer. These are matters which are still being litigated between the parties in LBTC 5/2022. I do not propose to determine such issues, but this is relevant and important background information in considering the merits of D’s defence, as will be discussed below.

21.In their SOC, Ps claim that D made a series of defamatory statements in whatsapp messages dated 14, 15, 16, 17, 20, 21, 22, 23 December 2021 in a whatsapp group New Operations (“the Statements”), and that such words, in their natural and ordinary meaning, meant or were understood to mean, inter alia, that:

(a)  Ps owed outstanding salary payments;

(b)  Ps have absconded; and

(c)  Ps’ company has been dissolved.

22.I observe the following from the screen captures of the whatsapp messages adduced by Ps:

(a)  The group New Operations has four members, “Alan’s, Candy, Karis, and [you]”.

(b)  In a whatsapp message dated 9 December 2021, D wrote, inter alia, [Alan,究竟發生咩事今日12/9都未出糧？唔係話12/7號咩？].

(c)  In a whatsapp message dated 21 December 2021, D wrote [我見你網站有營運緊架，有生意架，即 係未執粒？總之我按12/2 口頭承諾12/5同你嘅 whatsapp 對話  我仲係work from home] .

(d)  From the above message, it would appear that D is referring to:

(i)   An oral promise on 2 December 2021 and a conversation on 5 December 2021 that there was an understanding that D was to work from home.

(ii)  A previous understanding between P and D that D would be paid by 7 December 2021.

(e)  Further, it would appear from the whatsapp messages that the physical shop in unit 807 at Sino Centre had closed in December 2021 and that D had personal belongings there.

(f)  In a whatsapp message dated 10 December 2021, there is also reference to ‘M floor’ facing litigation, which appears to be a reference to the physical shop of the Qube. It appears that Ps had informed D that the Qube was facing litigation at the material time.

23.At the hearing, P1, whose submissions and position P2 adopts, stated the following:

(a)  At the material time the Qube by Tomica HK had been the subject of cyberbullying and that there were angry customers coming to the physical shop. The business was in chaos around 30[1] November 2021 and at that time D had indicated ‘to HR’ that she would not be going to the physical store as she was afraid of being attacked by customers. D was not the only employee who had done so; in fact the cyberbullying had caused the Qube by Tomica HK’s staff to be afraid to come back to unit 807. In fact, the physical shop was closed from 3 December 2021 and the online store closed on 2 December 2021.

(b)  Ps viewed D as having “left the business” on 30 November 2021. Ps’ position is that if D had “left the business”, she would need to tender resignation letter. If she needed to leave immediately she would need to pay payment in lieu of notice.

(c)  P1’s evidence at the hearing was that if the cyberbullying had stopped, he would have expected the employees to come back to work.

(d)  P1 disagrees with there having been any oral promise or understanding that D would be paid salary after 30 November 2021 as alleged by D.

24.D is unrepresented. As I understand her evidence, her defence is substantively as follows:

(a)  The whatsapp group “New Operations” only contained four individuals, and apart from the two Ps and D herself, the other person is the mother of P1, who was also the person responsible for the finances of the company she was working for. These were persons with the power to pay salary. She disputes the messages were defamatory (§§8 and 9 of Ho’s 1^st Affirmation);

(b)  She contends that Ps’ claim against her for defamation and malicious falsehood is Henderson v Henderson (1843) 3 Hare 100 abuse of process as there is another action initiated by DGL, namely DCCJ 239/2025  in respect of the same set of whatsapp messages in which DGL claimed that such messages were defamatory against it (§3.2 of D’s skel);

(c)  She contends that the reality of the situation is that P1 and P2 had not paid her due salary, and such issue is being litigated in LBTC 5/2022, (Ho’s 2^nd Affirmation §g) [HB/285]. I understand this to be a justification defence.

25.Dealing first with the argument based on Henderson v Henderson, I do not consider such defence to have a realistic prospect of success. The rule in Henderson v Henderson prevents a party from raising a claim or defense in subsequent legal proceedings if it could have been, and should have been, raised in earlier proceedings between the same parties. The court requires the parties to put forward their whole case and will not, except under special circumstances, permit them later to reopen matters which might have been brought forward as part of already concluded litigation. DCCJ 239/2025 is an ongoing litigation, and it could not be said that Ps are attempting to reopen an already concluded issue or that Ps ought to have raised such issue in DCCJ 239/2025 and not here; indeed, it would appear from the action number that the present action was instituted prior to those in DCCJ 239/2025.

26.However, I find that her other defences are meritorious when considered against the relevant background and contemporaneous documents.

27.For her defence that the messages were not defamatory:

(a)  There were four members in the whatsapp group “New Operations”, ‘Alan’s’, ‘Candy’, Karis and one more person indicated only as ‘you’ in the screenshot. D says these members are P1, P2, herself and Lily, who is the mother of P1. She said all members are persons in the management of the company which employed D, and who had power to cause salary to be paid to D.

(b)  At the hearing, P1 agrees that the fourth person is Lily and it refers to his mother. However, he states that the name “Alan’s” in the whatsapp screenshots in fact referred to a phone number “9012****” that was a company whatsapp number, which 20-30 people could have access to, being employees of DGL/the Qube by Tomica HK. At the hearing, he agreed that these are all staff who “left the business” on or around 30 November 2021 for fear of being attacked by customers, and to whom he had all treated as having resigned without notice. D disagreed that the phone number “9012****” was a company business whatsapp account and denied that she needed access to such a number to do her work.

(c)  The Statements were sent after 30 November 2021, when all the staff of DGL/the Qube by Tomica HK, according to Ps, had “left the business”. Even if the number is one used for conducting the business, the staff of DGL/the Qube by Tomica would no longer have access to the whatsapp group “New Operations” unless they had access to the phone with the phone number “9012****”. Such staff could not have done so, having been treated by Ps as having resigned without notice after 30 November 2021.

(d)  A statement is not defamatory at all unless the publication has caused or is likely to cause serious harm to the reputation of the claimant: see Duncan and Neill on Defamation, 4^th ed, para 8.20; Jameel v Dow Jones and Co Inc [2005] QB 946. Indeed, where the publication did not cause and is unlikely to cause serious harm to the reputation of the claimant, proceeding with a claim against the defendant may be considered disproportionate and constitute an abuse of process against the defendant: see Jameel v Dow Jones and Co Ltd §§70, 71.

(e)  In the circumstances, where in effect the only person to which the Statements were published to, apart from P1 and P2, was the mother of P1, I consider that an argument that the publication did not cause and is not likely to cause serious harm to the reputation of the Ps, would have high prospects of success. I also find that, against the present factual matrix, an argument that what Ps are now doing is disproportionate and tantamount to an abuse of process would also have a realistic prospect of success.

(f)   Further, and in any event, an intimation that a business had ceased trading or business is not defamatory: see Chu Fung Chee v Apple Daily ltd  [2023] HKCFI 1318 at para 17: It is not defamatory to publish of a tradesman that he has ceased to carry on his business or that his business has been or is about to be, acquired or absorbed by another firm, for such statement, though likely to injure him in his business, does not reflect on him in his conduct of it.

28.For her justification defence:

(a)  It is evident from the contemporaneous documents adduced that there is a real confusion as to the proper employer of D, and of when D’s employment was terminated. From the other evidence adduced by both parties, it is evident that in early December 2021 Ps’ businesses was facing an uncertain future. Indeed, according to Ps’ own evidence, the Qube by Tomica, which Ps say was the employer of D, ceased its retail store business operations on 3 December 2021.

(b)  It is Ps’ own position stated in their skeleton submissions that D had worked for them until 30 November 2021. D’s position is that she had not been paid her November and December 2021 salary. Ps had not filed evidence on the matter of payment of salary.

(c)  In the circumstances, I find that D may well be able to establish at trial that she was owed her salary by either of the entities controlled by Ps. Indeed, the question of whether D was owed salary is a matter being litigated in LBTC 5/2022 and if she is successful there, she would be substantially, if not wholly, successful in establishing her defence. See s 26 of the Defamation Ordinance (Cap 21): a defence of justification shall not fail by reason only that the truth of every charge is not proved if the words not proved to be true do not materially injure the Ps’ reputation having regard to the truth of the remaining charges. In any event, in light of the evidence before me, I find that D may well be able to establish at trial that the business of Ps had dissolved and/or that the Ps had ‘absconded’ at the time the Statements were sent.

E. Conclusion

29.To conclude, I find that D had raised meritorious defences that have a realistic prospect of success.

30.I order that the Default Judgment and any execution thereon be set aside. I grant the Defendant unconditional leave to defend and the Defendant is to file and serve her notice of intention to defend within 7 days of the date hereof and to file her defence within 28 days thereafter. The Plaintiffs are to file their Reply within 28 days thereafter.

31.I make a costs order nisi that costs of and occasioned by this application be to the Defendant, to be taxed if not agreed. If there is no application before the court to vary this order within 14 days, the costs order nisi will become absolute.