DELO (HK) CO LTD v. DAVID LING

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On 3 October 1996, the plaintiff obtained judgment against the defendant in default of notice of intention to defend. This was a regular judgment. The defendant applied to set aside the judgment, but this application was dismissed on 9 December 1996. The defendant now appeals against that decision.

2. The only matter in dispute before me was whether the defendant has shown that he has a real prospect of success in his defence.

3. The defendant was the plaintiff's employee. His contract was terminated. The plaintiff's claims can be placed in three categories -

• In respect of the allegation that the defendant failed to hand over to the plaintiff certain documents and other items that were the plaintiff's property.

• In respect of the allegation that, negligently or in breach of contract, the defendant failed to ensure the safe custody of the plaintiff's goods.

• In respect of the allegation that the defendant misappropriated or converted or received some rental and telephone deposits.

4. It is not necessary to go into the details of the defences set up by the defendant to these claims. It is enough to say, and this is not disputed by Mr Yuen, that, if what the defendant says is accepted at the end of trial, the defences are complete defences to the claims.

5. Mr Yuen has not been able to point to any improbabilities in the defendant's version of events, or any inconsistencies between that version and the contemporaneous documents. The most that he is able to say is that what the defendant says about the first claim mentioned above - which is that he returned the items to Mr Dick Chan, a former employee of the plaintiff on 29 April 1996 - is denied by Mr Chan. Mr Yuen argues that Mr Chan is no longer employed by the plaintiff so he has no motive to lie. On the other hand, it is implicit in the plaintiff's own evidence that the defendant did return some items to Mr Chan on 29 April 1996, but the plaintiff does not tell me what these items were. So the situation is that I have from the plaintiff an incomplete version of events. I cannot accept that this enables me to say that what the defendant says does not have any real prospect of establishing his defence.

6. In the defendant's favour, we have a story painted by the plaintiff's evidence of unsatisfactory service by the defendant, failure to properly report to the plaintiff, failure to set up a proper system to control the plaintiff's goods and failure to properly account for the plaintiff's property at the conclusion of his employment. But we do not have this version of dissatisfaction of the plaintiff reflected in any contemporaneous document. The defendant's service was terminated on 25 April 1996. In May 1996, the plaintiff's manager wrote to the plaintiff's wife. In this letter, the manager complains about the defendant's failure to attend at the plaintiff's office, as he should have done and about the defendant's failure to refund money, including the rental and telephone deposits. Not a word is said about failure to return the items mentioned in the first claim, any defendant's failure to safeguard the plaintiff's property or any of the other causes of dissatisfaction mentioned in the plaintiff's evidence. In connection with this letter - in which the manager makes serious allegations of the defendant being a slacker in his work - the manager says, presumably to explain why he did not mention the complaints concerned, that he was trying to avoid damaging his relationship with the defendant too seriously, so the tone of the letter was mild. This does ring true.

7. There was no letter of complaint outlining the plaintiff's allegations until the plaintiff's solicitor wrote to the defendant on 10 July 1996. This letter, amongst other things, alleged losses of goods valued at about RMB 1.15 million for which the defendant was said to be responsible. The claim under this head is now some RMB 1.9 million. The letter also coincided with the defendant's claim in the Labour Tribunal for $84,428 arising out of the contract of employment.

8. I conclude that there is no reason, at this stage, to find that the defendant's evidence will not be accepted after trial, and that, therefore, he has not established that he has a real prospect of establishing his defence. Indeed, on the papers before me, it looks as if the defendant has a better chance of success than the plaintiff does.

9. Accordingly, the appeal succeeds. The default judgment is set aside. The defendant is to file his defence within 14 days.

10. The matter of costs was not argued. The defendant asks for costs of the appeal and before the Registrar. I am not sure that this would be just. The defendant has succeeded before me, but he brought the matter on his own head by allowing the default judgment to be entered. And, at the end of the day, it may be that it will be shown that the defendant is liable. I am inclined to think that the proper order should be that costs be in the cause. In that way, the party found ultimately to be right will recover costs. I make an order nisi that costs be in the cause.