THE INCORPORATED OWNERS OF ON NING GARDEN v. WONG MO CHI

DCCJ 3473/2022

[2023] HKDC 1276

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3473 OF 2022

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DECISION

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INTRODUCTION

1.  This is the plaintiff’s application by way of summons taken out on 16 March 2023 (“Present Summons”) for judgment in default of defence under Order 19 rule 7 of the Rules of the District Court, Cap 336H (“RDC”).

BACKGROUND

2.  The plaintiff (“IO”) registered as the Incorporated Owners of On Ning Garden (“Estate”) under section 8 of the Building Management Ordinance, Cap 344 (“BMO”) in 1996. The defendant (“Wong”) became one of the 2 registered legal owners of one of the units of the Estate in 2006.

3.  In the present action, IO complains Wong to have published and caused to publish statements, which IO considers to be defamatory of it, on multiple occasions since 2018. Premised on the cause of action of libel, IO claims for damages, an injunction, a written apology (collectively, “Relief”).

4.  The claim for a written apology was abandoned as confirmed by Mr. Sin, Counsel for IO, at the hearing of the Present Summons on 15 June 2023 (“Summons Hearing”).

DEFAULT OF DEFENCE

5.  IO issued the Writ of Summons to commence the present action on 6 September 2022. Wong filed Acknowledgement of Service of Writ of Summons giving notice of intention to defend on 23 September 2022.

6.  Time for IO to file and serve a statement of claim was extended and further extended by two court orders. On 26 January 2023, IO filed the Statement of Claim (“SOC”) and later served it on Wong.

7.  Under Order 18 rule 2(1) RDC, Wong had 28 days after the SOC was served on him to serve a defence on IO, i.e. 28 days after 31 January 2023. Notwithstanding the expiry of the time limit for serving a defence on 28 February 2023, no defence was filed by Wong.

8.  On 28 February 2023, IO filed the Notice of Intention to Enter Judgment and then served a copy of the same on Wong pursuant to Order 19 rule 8A RDC (“8A Notice”). On 16 March 2023, IO took out the Present Summons.

9.  According to the two affirmations of service filed for IO respectively on 18 May 2023 and 13 June 2023, the Writ of Summons, the SOC, the 8A Notice, the Present Summons and the relevant papers had been properly and timely served on Wong in accordance with the RDC.

10.  In the circumstances, I am satisfied that proper service of all the requisite legal documents have been timely effected on Wong in accordance with the RDC. No defence having been filed, the default judgment procedure under Order 19 RDC is available to IO.

DEFENDANT’S OPPOSITION

11.  On 5 May 2023, Wong filed an affirmation which expressed his wish to stay the present proceedings on the ground that IO, being an incorporated owners, had no locus standi to sue for defamation, and accordingly, the commencement of the present action was beyond the power of an incorporated owners as provided by s 18(2)(g) of the BMO (“Locus Argument”).

12.  At the Summons hearing, Wong did not make any application for serving a Defence. Nor did he indicate any intention to do so. Neither draft defence nor affirmation with facts giving rise to a defence was produced. Instead, he reiterated the Locus Argument being his sole ground of opposition to the Present Summons. He argued that as IO’s cause of action of defamation was not related to the common parts of the Estate nor in respect of a matter in which the co-owners of the Estate have a common interest, IO was not entitled to prosecute the present claim.

13.  Indeed, a similar argument made by a defendant was rejected by the Court of Appeal in The Incorporated Owners of Tung Lo Court v Tsui Wai Yip [2015] 4 HKLRD 397. In that case, the Court of Appeal decided that whether an incorporated owners has the locus standi to sue for defamation is a question of law. An incorporated owners can seek support from common law for locus to commence a defamation action even if sections 16 and 18 BMO do not provide a power to sue because of the limited applicability of those two sections which do not cover the cause of action of defamation that is not related to the common parts or a matter in which the owners have a common legal interest.

14.  At common law, an incorporated owners, being a corporation, has a reputation which the law protects and can therefore sue for defamation. The primary function of an incorporated owners is to perform its duties and to exercise its functions under the BMO and the deed of mutual covenants concerning the building. When a defamatory statement is made against the incorporated owners, having the effect of discrediting its integrity as an incorporated owners or its ability in discharging its duties and functions as an incorporated owners, such as to lead people of ordinary sense to the opinion that it conducts its affairs in a way which is inefficient, improper or even dishonest. It has the right to sue to protect its reputation.

15.  Applying these legal principles to the present case, Wong’s Locus Argument is bound to fail. Suffice it to say for the present purpose that even if taking Wong’s argument to the highest that sections 16 and 18 BMO do not empower IO to commence the present proceedings because of the limited applicability of those two sections, IO is still empowered to sue for defamation under the common law.

16.  On the pleaded facts of the SOC which I will elaborate further below, the common law provides necessary locus standi to IO to sue Wong for defamation in the present proceedings. Wong has no legal basis to oppose the Present Summons or to apply for stay of the present proceedings. Nor has he provided a valid defence to the present claim.

STATEMENT OF CLAIM

17.  IO’s pleaded case in the SOC can be summarized as follows.

18.  The Estate is situated at 10 Sheung Ning Road, Tseung Kwan O. It is a residential complex completed in 1991. It comprises 2,300 residential units, housing more than 2,500 residents.

19.  IO, being the registered incorporated owners of the Estate, performs the duties and exercises the functions as provided by both the BMO and the Deed of Mutual Covenant (“DMC”). It has its own reputation and corporate reputation, based on its credible integrity and ability to discharge its duties and functions as an incorporated owners, that the law protects. It has a right to sue for statements defamatory of IO or directed against all the co-owners.

DEFAMATORY WORDS

20.  From 6 April 2018 to 17 July 2022, Wong published or caused to be published words defamatory of IO (collectively, “Published Words”), (which are set out in the Schedule annexed to this Decision.) The English translations of the Published Words were pleaded in the SOC. The pleaded meanings of the Published Words are also set out in the SOC which are briefly summarized as follows: -

(1)  Annexure 1

Annexure 1 - 1^st Words

IO has been unlawfully using its contingency fund for speculative tradings of foreign currency.

 

Annexure 1 - 2^nd Words

IO did not act in accordance with the law.

 

In recent years, the Estate had a lot of unnecessary costly engineering works. The highly questionable one was that in 2016, IO proposed a resolution to engage in a 12-year renovation works to the external wall, which raised concerns amongst the co-owners, who kept IO under surveillance and discovered IO had a practice of not acting in accordance with the law.

 

Recently, IO’s resolution relating to the New Year Lion Dance Activity is an example of unjustified expenditure. Similar incidents happened in the past.

 

Annexure 1 - 3^rd Words

unclear and doubtful expenditure - “trilogy”

 

part one: IO suddenly proposed a resolution and put it to a vote without giving prior notice through notice of meeting or displaying the proposed resolution as required under the BMO.

 

part two: After the meeting, IO did not disclose the quotations submitted by the contractors and those submitted by the contractors whose tenders were accepted for comparison in the meeting minutes.

 

part three: the monthly summary of the income and expenditure was set out in ultra-small font, deliberately making it difficult to read. Account items could not be found due to lack of schedules and annotations, rendering the expenditures unclear and doubtful.

 

All three parts are contrary to the BMO.

 

Annexure 1 - 4^th Words

using the contingency fund for investment

 

The member(s) of the Management Committee (“MC”) suddenly put forward a proposed resolution to use the contingency fund for making investments in foreign currency at a meeting of IO. Fortunately, the resolution was temporarily suspended due to the objection of several co-owners. Otherwise, the incident of suddenly putting forward a proposed resolution and immediately putting it to a vote would happen again. The contingency fund only caters for expenditure of unexpected and urgent nature according to the BMO.

 

Annexure 1 - 5^th Words

For avoidance of further unclear and doubtful expenditures in future and for rectifying the situation of IO not acting in accordance with the law, a jointly signed petition should be prepared and delivered to the

 

District Office requesting the District Office to strengthen its control over IO and to rectify the situation.

 

Annexure 1 - 6^th Words

In August 2016, IO proposed to cease making contributions to the special funds and to turn them into payments for the 12-year external wall renovation engineering works. The co-owners discovered many problems and queried whether it was lawful to split the engineering works, hence, there were co-owners distributing leaflets in order to alert the residents.

 

As a result of the general meeting of the corporation, the co- owners voiced out their objections by pointing out that the 12- year engineering works was a waste of money, leading to the suspension of the resolution.

 

In April 2017, upon discovery of the fresh water tank not being cleaned thoroughly, the co-owner(s) alerted the residents by distribution of leaflets and subsequently, issued letter relating to the cleanliness of the water tanks to the management company, ending up with the incrustation accumulated for several years was washed away in one go.

 

In October 2017, the committee members of IO scored the lift maintenance contractor(s) for the purpose of guiding the co-owners to vote for it. Co-owner(s) queried the contractor being scored the lowest by the Electrical and Mechanical Services Department was scored the highest by the committee members. Accordingly, co-owner(s) alerted the residents by distribution of leaflets, ending up with a commotion at the general meeting, causing the IO evenly allocated the votes by proxy to the contractors so as to avoid further queries.

 

(2)  Annexure 2

The accounts of IO are really strange. Items involving one hundred odd dollars were fully accounted for whereas the prices of the projects worth several tens of thousand dollars were not provided.

 

(3)  Annexure 3

 

Annexure 3 - 1^st Words

To eradicate corruption and promote integrity, the last 7 days to authorize a proxy to cast vote, already sufficient number of co-owners to run for an election to become members of the MC, if get elected, can thoroughly inspect the books and accounts, and, have the rights to sue and to claim for improper expenditures in the past.

 

Annexure 3 - 2^nd Words

Corrupted bid-rigging gave rise to problems

-  co-owners who had inspected the accounts of IO were deliberately prevented from obtaining evidence

-  the procedure for cleaning freshwater tank is crude. The quality of the drinking water is unsupervised.

-  the quality of lift maintenance is poor, malfunction and get trapped

-  the standard of the cleaning service is poor

-  excessive management fees

-  many unnecessary engineering works, draining the funds of the Estate

-  management company takes charge of the contractors, unfair competition and bid-rigging

-  co-owners are not able to know the content of an addendum to a non-disclosure agreement

-  using the special fund to engage in speculative trade of foreign currency, contingency fund becomes a high risk investment

 

(4)  Annexure 4

 

Annexure 4 - 1^st Words

Verify record: tenants, owners have chances to get a thousand dollars reward

 

contact the owners: assist in exposing the collective falsification of proxy votes.

 

Annexure 4 - 2^nd Words

Co-owners are forced to make pre-payments of the increments of management fees for the following 3 years. The   MC overspent, resulting in substantial increments of management fees in the following 3 years.

 

Annexure 4 - 3^rd Words

Verify record: tenants, co-owners have chances to get thirty thousand dollars reward

 

contact the owners: assist in exposing the collective falsification of proxy votes.

 

(5)  Annexure 5

 

Annexure 5 - 1^st Words

Financial scam: bypass the “yearly reasonable slight upward adjustment in management fees”

 

Deliberated an accumulated deficit to mislead the co-owners to the need of substantially raising the management fees

 

Annexure 5 - 2^nd Words

Owners signed for cancellation of pre-payments of the raise of management fees for the following 3 years at 15% and changed the increment of the management fees to be calculated on a reimbursement basis at 3.5%.

 

(6)  Annexure 6

 

Annexure 6 - 1^st Words

[same as Annexure 5 - 1^st Words]

 

Annexure 6 - 2^nd Words

Black box operation: the average inflation rates in the past few years were only 1%. The Estate nevertheless recorded an enormous deficit giving rise to an increment of management fees for 15%.

 

(7)  Annexure 7

 

Annexure 7 - 1^st Words

The proposed resolutions at the general meeting, which the owners requested to convene were altered by the MC. The owners shall not be fooled and be deceived again! Be alert to the real situation before sign!

 

Annexure 7 - 2^nd Words

Urgent notice from the “Surveillance Group for Co-owners of the Estate”:

[same as Annexure 7 – 1^st Words]

 

(8)  Annexure 8

Surveillance Group for Co-owners of the Estate

 

Approximately 500 co-owners “appointed proxies” to vote, chose to “substantially raise” management fee!

You believe it or not? There had been co-owners who discovered false instruments appointing proxies! Were you involved?

 

name list of the instruments appointing proxies for the co-owners general meeting on 5 June 2022. Reward 1,000 dollars.

 

If know any co-owners being named in the name list of the instruments appointing proxies had not appointed any third parties as proxies to vote, please phone Mr. Wong. It is possible that they were just a tip of the Iceberg. If there are a substantial amount of forgeries, it proves that there were people who want to gain exorbitant profits!

21.  The Published Words have the natural and ordinary meanings, the direct, implicit and/or the inferred meanings, in gist, that:-

(a)  IO was incompetent, ineffective, and dishonest in discharging its duties and using its power. It mismanaged the Estate, biased the contractors, overcharged the management fees and misused the funds of the Estate, contrary to the DMC and BMO.

(b)  IO had not acted or exercised its power in accordance with the proper procedures. The procedures governing holding of meetings, use of funds, charging of management fees, keeping and disclosure of books and documents were not strictly followed.

(c)  The wrongful and unlawful conducts had ended up with poor cleaning service, improper lift maintenance, questionable books and accounts, wrongful use of funds, corrupted bid-rigging, falsification of proxies, over-charging management fees.

(d)  IO put its own preference above the collective interest of the co-owners and contravened the laws. Co-owners were not provided with sufficient, accurate and adequate information relating to the management of the Estate or the use of the funds of the Estate, and, were misled from time to time.

(e)  It was imperative for the co-owners of the Estate to self-help for protecting their interests. Through self-help, they successfully defended their interests by suspending, stopping or remedying some of the wrongful acts of IO.

PUBLICATION

22.  The publications of the Published Words were by both physical and digital means (collectively, “Various Publications”):-

(a)  physical means took the form of leaflets, notices, banners and/ or posters, in large conspicuous words and coloured papers. (“Physical Publication”);

(b)  digital means took the form of posts on an online social medium viz Facebook with a page named “安寧花園監察組” (“Facebook Page”) that is assessable by the general public. (“Digital Publication”)

23.  Since 6 April 2018, Wong had, on multiple occasions, set up booths outside a kindergarten and a shopping arcade at 10 Sheung Ning Road (collectively, “Publication Spots”) for the Physical Publication to the residents of the Estate and thousands of non-resident visitors who frequented the shops, schools, restaurants which located at the Publication Spots.

24.  In parallel, Wong also created and managed the Facebook Page, which was accessible by the general public without restriction. Wong had, on multiple occasions, uploaded the digital forms of some of the Published Words to the Facebook Page, or, caused to have some written narratives of the Published Words available for access in the Facebook Page.

25.  The Facebook has many millions of users around the world. The Facebook Page could be readily read without having first downloaded it from the web. The Facebook Page had more than 100 subscribers.

26.  The publication of the Published Words can be summarized as follows:-

Annexure 1:  published through Physical Publication on 6 April 2018 and through Digital Publication since then.

Annexure 2:  published through the Digital Publication since 12 May 2018.

Annexure 3:  published through the Physical Publication on or around 30 August 2019 and through Digital Publication thereafter.

Annexure 4:  published through the Physical Publication on or around 19 or 25 January 2022

Annexure 5:  published through the Physical Publication from 20 to 22 April 2022

Annexure 6:  published through the Physical Publication from 7 to 8 May 2022

Annexure 7:  published through the Physical Publication on or around 22 May 2022

Annexure 8:  published through the Physical Publication on or around 17 July 2022

27.  As a result of the publications of the Published Words, there were substantial but unquantifiable third parties other than the members of the MC who received and read the Published Words.

REFERENCE

28.  Some of the Published Words expressly name IO by its name in Chinese as “業主立案法團” (trans, “incorporated owners”) or “法團” (trans, “incorporation”) and are absolutely clear that they refer to IO.

29.  For those Published Words which refer to “管理委員會” (trans, “management committee”) or “委員會” (trans, “committee”) refer to and can be understood to refer to the MC. Given the powers and duties of IO are exercised and performed by the MC under section 29 BMO, the reference to MC refers to and can be understood to refer to IO.

30.  Further, the fact that the Published Words refer to IO can also be inferred by way of a legal innuendo under Order 82 rule 3(1) RDC. Persons as residents and owners of the Estate, visitors who frequented the Publication Spots, internet users who viewed the Facebook Page, the persons who dealt with IO were aware that the Estate was managed by IO and IO exercised and discharged its duties through MC pursuant to the DMC and BMO.

31.  As a consequence of the publications of the Published Words, both IO’s own reputation and its corporate reputation representing all co-owners of the Estate have been seriously damaged. The publications cast aspersions on IO’s integrity and ability to discharge its duties as incorporated owners properly and efficiently.

32.  Further or alternatively, as a consequence of the libel by the publications, IO is lowered in the estimation of right-thinking members of society generally and is subject to hatred, contempt or ridicule.

33.  On such basis, IO asks for the Reliefs.

LEGAL PRINCIPLES: DEFAULT JUDGMENT

34.  In default judgment application, the court looks to the pleaded facts alone and no other evidence will be permitted. Judgment will be given on the plaintiff’s claim provided that the pleaded facts give rise to the relief sought: Lam Chi Fat v Liberty International Insurance [2002] 3 HKLRD 480, §§26-27.

35.  The basis upon which default judgment can be obtained, in circumstances where no defence is filed, is that of implied admission. The court will assume that the Statement of Claim has been impliedly admitted: Hong Kong Civil Procedure 2023 Vol 1 § 19/2/1.

36.  Default judgment procedure is applicable to libel action: Koo Ming Kown v The Baptist Convention of Hong Kong operating as Pui Ching Primary School HCA 731/2017, unreported, 30 October 2017.

LEGAL PRINCIPLES: DEFAMATION

37.  In order to succeed in a claim for defamation, a claimant has to show that defamatory matters with reference to the claimant have been published by a defendant: Bawang International (Group) Holding Limited and another v Next Magazine Publishing Limited HCA 1109/2010, unreported, 23 May 2016.

DISCUSSION

38.  In the present proceedings, Wong has unequivocally decided not to serve a Defence to defend the present claim. In the circumstances, IO is entitled to apply for default judgment on an undefended claim basing on the SOC. Wong is regarded to have impliedly admitted the facts and matters pleaded in the SOC.

39.  Having considered the SOC, I am satisfied that IO has pleaded sufficient facts to prove its claim. Factual causation is established. Wong has not filed any defence to dispute the facts or the components of the tort of defamation as contained in the SOC.

DEFAMATORY WORDS

40.  I accept the Published Words, in their actual words used, in their natural and ordinary meanings, by direct assertions or by inferential or implied meaning, meant and were understood to mean that as those elaborated in the SOC which I have briefly summarized as above. Particulars as required under Order 82 rule 3(1) RDC were also sufficiently pleaded.

41.  The Published Words are plainly defamatory as pleaded as they attacked IO’s integrity, impartiality, honesty, competency and efficiency. They have the effect of lowering IO’s estimation in the eyes of right-thinking members of society and adversely affected its reputation.

42.  The Published Words tend to lead reasonable people of ordinary intelligence, with the ordinary person’s general knowledge and experience of world affairs to the opinion that IO conducted its affairs in a way which is incompetent, inefficient, improper, unlawful and dishonest: Multi-Winner Investment Ltd v Lau Ming Yee [2017] 1 HKLRD 328.

43.  They discredited IO to have mismanaged its finance, unlawfully used the funds of the Estate, incurred unjustified expenses, misjudged the needs for engineering works, over-charged management fees, failed its duty of disclosure, conducted its business contrary to the prescribed procedures, engaged in bid-rigging activities, manipulated meetings and voting and improper maintenance of the common parts.

PUBLICATION

44.  The SOC has identified each and every publication of the Published Words, including modes of publications, in physical form and/or digital form, with the actual means of publication as leaflets, notices, posters, banners, Facebook specified therein.

45.  The classes of recipients of such publications as residents, co-owners of the Estate, visitors, Facebook viewers were set out. The location of the Publication Spots and the access of the Facebook Page was described.

46.  The scope of recipients of the Published Words were unarguably substantial. The classes of the recipients were various which include not only members of MC and co-owners of the Estate.

REFERENCE

47.  I am also satisfied that the Published Words referred to IO by expressly naming IO or by being understood as referring to IO basing on the pleaded facts that IO exercised and performed its duties and powers of managing the Estate under the BMO and the DMC through MC pursuant to section 29 BMO.

48.  Such facts also formed part of the general knowledge of some of the readers, as co-owners, occupiers of the Estate, passers-by who frequented the Publication Spots, the Facebook users who accessed to the Facebook and other person who dealt with the IO, to the effect that Wong was reasonably understood to refer MC to IO as well as to refer the one who managed the common parts or common affairs of the Estate to IO. Further, such facts also formed part of the extrinsic facts possessed by those recipients of the Published Words which establish an indirect reference of IO.

49.  In the premises, the pleaded facts satisfy the requirements of establishing cause of action of libel which are logical and remained unchallenged.

INJUNCTION

50.  There has been a long history of Wong publishing defamatory words referring to IO from time to time since 2018. He had the practice of setting up booth, posting banners and posters, distributing notices and uploading materials into the internet for repeated publications of the Published Words. The defamatory words have been increasingly widened in scope and serious in nature. Some of them were repetitive in contents. Some publications took only about 2 weeks apart.

51.  In view of the fact that the publication has continued for a number of years with no sign of cessation, there is solid basis to suggest that repetition of the Published Words is anticipated. I am convinced that granting of an injunction is justified to restrain Wong from republishing the Published Words as set out in the Plaintiff’s Revised Proposed Directions dated 15 June 2023 save that the words being extracts of the statutory provisions of the BMO should not be included.

CONCLUSION

52.  By reason of matters set out above, I am satisfied that IO’s pleaded case in libel is made out. The constituent parts of the torts are properly set out and the essential facts in support have been sufficiently pleaded.

53.  In default of defence, IO has proved its case that Wong had published, and/or caused to be published the Published Words which were defamatory of IO and/ or with reference to IO and their pleaded meanings, in effect disparaging IO’s reputation.

54.  Taking into account of the seriousness of the defamation, of the extent of the publication, of the absence of apology and of the real prospect that Wong will republish the Published Words, IO is entitled to an injunction restraining Wong from publishing the defamatory words as well as to claim for damages to be assessed.

ORDER

55.  Having considered all the relevant documents before me and of the submissions of the parties, I am satisfied that judgment should be entered against Wong.

56.  I make an order that:-

(1)  Wong whether by himself, his servants, agents or otherwise be refrained from publishing or causing to be published the exact words set out in the Plaintiff’s Revised Proposed Directions dated 15 June 2023 (with slight amendments as set out in paragraph 51 above) or similar words defamatory of IO; and

(2)  damages to be assessed.

COSTS

57.  I make a costs order nisi that Wong do pay IO costs of this action on liability including all costs reserved, to be taxed if not agreed, with certificate for counsel. This costs order nisi shall become absolute in the absence of application to vary by summons within 14 days.

58.  I thank Counsel for his assistance.

59.  For the benefit of Wong who acts in person, I allowed the Summons Hearing to be conducted in Chinese. Given the Pleadings and the legal documents submitted by IO in this case are in English and so are the counsel’s submissions, I chose to hand down this Decision in English. Court interpreter’s assistance in perusing this Decision may be arranged, if requested by Wong.

SCHEDULE