LAM YIN v. LIU PING

DCCJ 1034/2023

[2025] HKDC 2063

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1034 OF 2023

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DECISION

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A.  The Appeal

1.  This was the hearing for the Defendant’s out of time appeal against the Order of Master Bianca Yu dated 2 July 2025, whereby the Defendant’s application for setting aside the default judgment entered against the Defendant on 29 June 2023 (“Judgment”) was dismissed.

B.  The Background

2.  At all material times, the Plaintiff was the Regional Manager at Prudential Assurance Company Limited (“Prudential”).

3.  On or about 23 May 2019, the Plaintiff (“甲方”) and the Defendant (“乙方”) entered into a co-operation agreement (“Agreement”), which contained the following terms:

“甲方在 2019 年 5 月 23 日定立以下協議，甲方同意支付 HK283,500 給予乙方作為預支贊助費，乙方同意與接受於 2020 年 6 月 1 日正式 加入英國保誠卓越團隊 D1622 區域發展，並誠(sic)諾在以下時間段內完成以下例表的業績要求。

3 年的業績協議	AFYP[1]	CASE	續保率	FYC[2](*27%)
1/6/2020-31/5/2021	HK$1,000,000 以上	40	100%	HK$94,500
1/6/2021-31/5/2022	HK$1,000,000 以上	40	100%	HK$94,500
1/6/2022-31/5/2023	HK$1,000,000 以上	40	100%	HK$94,500

乙方需要在指定最後期限完成以上的要求。如有違反雙方協議所定的要求，乙方需退還全數預支的贊助費給甲方。”

4.  Pursuant to the Agreement:

(1)  On or about 4 June 2019, the Plaintiff paid the Defendant HK$283,500.

(2)  On 1 June 2020, the Defendant joined the Plaintiff’s team at Prudential pursuant to the Agreement.

5.  According to《保誠保險有限公司代理條款及細則 - 2020》(“Prudential Agency Terms and Conditions”), the Plaintiff was entitled to commission from Prudential by reason of the Defendant and the Defendant’s lower-tier members having joined the Plaintiff’s team, calculated as follows:

“I2.2下列為各層階的相關上線經理佣金百分比：

直接招募 首年佣金的27.0% (第一層經理須為資深營業經理或以上職級)

第二層招募            首年佣金的12.0%

第三層招募            首年佣金的3.0%

第四層招募            首年佣金的0.5%”

6.  Subsequently, the Defendant failed to reach the targets set out in the Agreement, whether in the first or second year. On 12 August 2022, before the end of the three-year period specified in the Agreement, the Defendant resigned and left Prudential.

7.  On 13 March 2023, the Plaintiff commenced these proceedings against the Defendant for the return of the sum of HK$283,500. The Defendant filed the Acknowledgement of Service on 6 April 2023, but failed to file any Defence subsequently. On 29 June 2023, the Plaintiff entered the Judgment against the Defendant.

8.  What happened afterwards was as follows:

(1)  On 8 February 2024, the Plaintiff issued a statutory demand against the Defendant in HCSD 12/2024.

(2)  On 10 January 2025, DHCJ Jonathan Wong set aside the statutory demand.[3]

9.  I will return to this in Section D below.

10.  On 17 February 2025, the Defendant applied for setting aside the Judgment, which was, as explained at the beginning of this decision, dismissed by Master Bianca Yu on 2 July 2025. The Defendant filed the Notice of Appeal to Judge in Chambers out of time on 19 August 2025.

11.  At the hearing, Ms Tina Mok appeared for the Plaintiff and Mr Immanuel Fong appeared on behalf of the Defendant.

C.  The Legal Principles

12.  There is no serious dispute about the applicable legal principles. The following legal principles are largely taken from the Plaintiff’s submissions.

C1. Appeal against Master’s decision

13.  Under O58, r1(3) of the Rules of District Court (“RDC”), the notice of appeal must be issued within 14 days after the judgment, order or decision appealed against was given or made.

14.  In the appeal, the court will deal with a defendant’s application for setting aside the Judgment by way of a rehearing and is not in any way fettered by the previous exercise of discretion by the Master. See: Hong Kong Civil Procedure 2025, at §58/1/2.

15.  In considering whether to extend the time for appeal, the court has to consider all relevant factors, particularly: (1) length of the delay; (2) reasons for the delay; (3) merits of the proposed appeal; and (4) the degree of prejudice to the other parties. See: Hong Kong Civil Procedure 2025, at §58/1/9.

C2. Setting aside default judgment

16.  The law recognises a distinction between the threshold requirement for setting aside a judgment obtained regularly, and irregularly.

17.  To set aside a regular judgment, the major consideration is whether the defendant has shown a defence on the merits to which the court should pay heed, not as a rule of law, but as a matter of common sense. It is not sufficient to show a merely “arguable” defence that would justify leave to defend under O14. The defendant must show that he has “a real prospect of success”. To do so, he must satisfy the court that his case and evidence that he adduces in support of it are potentially credible and carry some degree of conviction. See: Hong Kong Civil Procedure 2025, at §§13/9/13, 13/9/14.

18.  Even if a defendant is able to demonstrate a defence which has a real prospect of success, the default judgment is not entitled to be set aside automatically. In exercising the discretion, the court will have regard to all relevant circumstances, including inter alia, why the default occurred; the defendant’s conduct after having notice of the proceedings; an 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 to third parties if the default judgment were to be set aside. These other relevant factors will then have to be weighed against the dominant factor of the merits in order to see where the justice of the case lies. See: Hong Kong Civil Procedure 2025, at §13/9/13.

D3. Setting aside on terms

19.  Where a defendant has a reasonably arguable defence which ought to be allowed to go to trial, there must be something specific in the defendant’s conduct or in the case, which justifies the imposition of a condition. Such condition is imposed, for example, “to encourage the proper future conduct of the litigation and to provide a measure of security for the plaintiff”. See: Hong Kong Civil Procedure 2025, at §13/9/15; L & M Specialist Construction Ltd v Wo Hing Construction Co. Ltd [2000] 3 HKLRD 262, 269 D-I, pe Ribeiro JA (as he then was).

D.  Applying the Legal Principles to the Present Case

20.  Mr Fong (on behalf of the Defendant) submitted that the Defendant has a meritorious defence. More specifically:

(1)  The relevant provision of Agreement is unenforceable because it is a penalty.

(2)  The Plaintiff breached the implied term of the Agreement that the Plaintiff shall not obstruct the Defendant from performing her duties under the Agreement, which amounted to a repudiation thereof.

D1.  Penalty

21.  In Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 at §§69-70, Chu JA held that:

“69. The law in relation to penalties was reviewed by the UK Supreme Court in the conjoined appeal of Cavendish Square Holdings BV v Makdessi and ParkingEye Ltd v Beavis, in which it undertook a comprehensive review of the authorities on liquidated damages and penalties. It considered that while the traditional test … was a useful tool in a simple case, it was not easily applied to more complex cases … The true test was held to be whether the clause is out of all proportion to the innocent party’s legitimate interest in enforcing the contract. It further recognised that an innocent party could have a legitimate interest in the performance of the contract or some appropriate alternative to performance that goes beyond compensation. It was said by Lord Neuberger and Lord Sumption (with whom Lord Carnwath and Lord Clarke agreed) that (at [32]):

The true test is whether the impugned provision is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance. In the case of a straightforward damages clause, that interest will rarely extend beyond compensation for the breach, and we therefore expect Lord Dunedin’s four tests would usually be perfectly adequate to determine its validity. But compensation is not necessarily the only legitimate interest that the innocent party may have in the performance of the defaulter’s primary obligations.

70. In applying the test, the court should first identify the legitimate interest of the innocent party that is being protected by the clause, and then assess whether the clause is out of all proportion to the legitimate interest by considering the circumstances in which the contract was made. Notions of whether the clause has a deterrent purpose or whether it is a genuine pre-estimate of loss would be subsumed by the broader enquiry into the legitimacy of the interest that supports the provision.”

22.  The Defendant relied upon DHCJ Jonathan Wong’s judgment in HCSD 12/2024, Liu Ping (廖平) 及 Lam Yin (林燕) [2025] HKCFI 193, in which his Lordship set aside the Plaintiff’s statutory demand, and held as follows:

“5.8 本席認為：

(1) [P] 對退還贊助條款的詮釋有值得商榷的地方。根據該條款，如有違反雙方協議所定的要求，[D]需退還全數預支的贊助費給[P]；

(2) 明顯地，另一詮釋是假若[D]達到第一及第二年的銷售目標，但在第三年不達銷售目標僅港幣$100,000，[D]不單止有責任把預支贊助費（金額相當於三年內佣金加起來的總額）全數退還，而[P]亦獲得保誠保險根據港幣 $2,900,000 AFYP 發放的佣金。

5.9 法例清楚指出債權人呈請必須為算定款項，（即定義上不能存在任何罰款的元素 penal element）。雖然本案只是在作廢申請階段，但不應因此而忽略了這條款有可能是罰款，而不可執行這一事項。因此，本席認為。這是一個符合第 48(5)(d)的情況，促使本席行使酌情權把法定要求償債書作廢的特別原因。 ” (Emphasis in the original)

23.  For the avoidance of doubt, no question of issue estoppel was raised by either party, and I shall proceed accordingly.

24.  In the present case, the Defendant’s core submission was, as explained in DHCJ Jonathan Wong’s judgment in HCSD 12/2024, that while the Plaintiff would be entitled to receive for three years the commissions from Prudential according to the Prudential Agency Terms and Conditions, calculated on the basis of 27% of the Defendant’s FYC and various percentages of the Defendant’s lower-tier members’ FYC, the Defendant would be liable for returning the sum of HK$283,500 in full, even if the Defendant just missed the last year’s target by a small margin. Consequently, the Defendant argued that what the Agreement provided was out of all proportion to the Plaintiff’s legitimate interest in protecting the Plaintiff from her loss in the event that the Defendant failed to achieve the targets.

25.  Ms Mok (who appeared on behalf of Plaintiff) submitted that the Agreement and the Prudential Agency Terms and Conditions were separate and independent. The Plaintiff’s legitimate interest under the Agreement, therefore, should not be considered together with the Prudential Agency Terms and Conditions. Under the Agreement, the sum of HK$283,500 was described as “Upfront Payment”. The Plaintiff had a legitimate interest in recovering it when the Defendant failed to achieve the targets. Indeed, as submitted by Ms Mok, similar claw-back clauses were very common in contracts between insurance agents and between agents and insurance companies.

26.  After considering both parties’ submissions, while I can see some force in Ms Mok’s arguments, I do not consider that it is appropriate to dismiss the Defendant’s case as having no real prospect of success at this stage. In my view, both parties’ cases should be afforded a proper opportunity for trial. I stress that this is by no means an indication that the Defendant will ultimately succeed in her case. Nonetheless, in my opinion, the Defendant meets the threshold requirement for setting side a regular default judgment.

D2.  Breach of implied term

27.  The Defendant’s contention in this regard can be dealt with briefly. In my view, the Defendant’s evidence is no more than bare allegations without any proper substantiation. I am, therefore, not satisfied that the Defendant has made out a case that she has a real prospect of success in her claim that the Plaintiff breached any implied term of the Agreement.

D3.  The Defendant’s conduct

28.  Despite my ruling in favour of the Defendant’s case on the penalty point above, I consider that the Defendant’s conduct in these proceedings was entirely unsatisfactory. As explained in Section B above, her application for setting aside the Judgment was made more than 1½ years after the Judgment was entered against her. While she had offered some explanations (eg only realising the Judgement was entered against her through HSBC on or about 4 August 2023), I am not satisfied that these explanations are good enough to excuse her. I agree with Ms Mok that time and costs had been wasted as a result of the Defendant’s unreasonable conduct in these proceedings.

29.  Having regard to all the relevant circumstances, I consider that while the Defendant should be given an opportunity to have a trial of her case, this should only be done on terms “to encourage the proper future conduct of the litigation and to provide a measure of security for the plaintiff”. In this regard, the Defendant indicated that she would be able to provide HK$200,000 by a payment into court within 42 days.

D4.  Extension of time for the appeal

30.  As held by Deputy Judge Peter Ng SC (as he then was) in Hady v Bazar [2012] 3 HKLRD 29:

“45. In considering whether to extend time to appeal, this Court has to consider all relevant factors, particularly:

(1) the length of the delay;

(2) the reasons for the delay;

(3) the merits of the proposed appeal;

(4) the degree of prejudice to the other party.

Postwell Ltd v Cheng Kap Sang , para. 33; Menno Leendert Vos v Global Fair Industrial Ltd (unrep., HCMP 796/2010, [2010] HKEC 971) para.16 (Cheung and Kwan JJA).

46. Now that we are in the post-CJR era, it is incumbent on this Court to give effect to the underlying objectives of the Rules of the High Court when exercising any of its powers: RHC O.1A rr.1 and 2. In particular, this Court must always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties: RHC O.1A r.2(2).” (Emphasis added)

31.  In the present case, the merit of the proposed appeal has passed the threshold requirement for setting aside a regular default judgment, as I have explained in Section D1 above. The delay in filing the Notice of Appeal (33 days) is not exceptionally long, and the degree of prejudice to the Plaintiff is not too significant. The Defendant has explained that the delay was due to her misconception about the legal procedures when she was a litigant in person.

32.  Considering all the factors, I am satisfied that I should exercise my discretion to extend the time for the appeal.

E.  The order

33.  For the reasons above, I make the following orders:

(i)  Upon the Defendant making a payment of HK$200,000 into court as security for the Plaintiff’s claim and/or the Plaintiff’s costs within 42 days from the date of this decision:

(a)  The Defendant’s application for extension of time for the appeal be allowed; and

(b)  The Judgment and the Order of Master Bianca Yu dated 2 July 2025 be set aside;

(ii)  If the Defendant fails to comply with the condition set out in paragraph (i) above, the Defendant’s application for extension of time for the appeal and the Defendant’s appeal be dismissed;

(iii)  Liberty to apply;

(iv)  There be a costs order nisi that the costs of this appeal be to the Plaintiff in any event, with certificate for counsel, to be taxed if not agreed. This costs order nisi shall become absolute in the absence of any application to vary the same within 14 days of handing down.

34.  It remains for me to thank Ms Mok and Mr Fong for the assistance they rendered to the court.