XCHRX INVESTASIA LTD. AND ANOTHER v. KODANSHA CO. LTD. AND ANOTHER

1997, No. A 12519

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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The Proceedings

1. On 20 November 1997, the plaintiffs issued a writ against the defendants. The statement of claim alleges that the plaintiffs were libelled by two articles written in the Japanese language by the second defendant and published by the first defendant The defendants are in Japan. It is not alleged that they have any connection with Hong Kong.

2. The first plaintiff describes itself in the statement of claim as a company incorporated in the British Virgin Islands and "carrying on business in Hong Kong and elsewhere". The second plaintiff says he is "a businessman with diverse business interests in Japan, Hong Kong and elsewhere", and the controlling hand of the first plaintiff.

The Alleged Libels

3. The plaintiffs allege that one article was posted on the Internet, and "was published to members of the public throughout the world, including Hong Kong, who had access to the Internet.". It is said that the other article was published in a magazine, and was published "to members of the public who were readers [of the magazine], including readers in Hong Kong which is one the places where [the magazine] is distributed.". On the face of them, the articles are grossly libellous of the plaintiffs.

The Relief Claimed

4. The plaintiffs claim damages, including aggravated and exemplary damages. One of the allegations in this connection is that the defendants "calculated that the benefits to them through increased circulation . . . would outweigh any compensation payable" to the plaintiffs. The plaintiffs also claim an injunction against republication.

Leave to Serve out of the Jurisdiction

5. On 20 November 1997, the plaintiffs obtained leave to serve the writ on the defendants in Japan. They obtained this leave on an ex parte application supported by an affirmation by their solicitor. The affirmation said that one article was posted on the Internet "and could be read by people in Hong Kong able to access the Internet", and the other article appeared in the magazine "distributed in various places including Hong Kong". The solicitor said that the application fell within Order 11, rule 1(1)(f) of the Rules "on the grounds that the proposed claim is founded on the tort of libel and the damage was sustained within the jurisdiction." That rule applies to cases where "the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction."

The Defendants' Application

6. On 7 July 1998, the defendants applied to have the writ, the service and all subsequent proceedings set aside. During those proceedings, the Master made an order on 8 December 1998 that, unless the defendants filed and served evidence in reply to that of the second plaintiff by 4pm on 22 December 1998, they were precluded from filing and serving any evidence. The defendants did not so file and serve, but, on 13 February 1999, filed and served an affidavit by Mr Clark, a solicitor who had taken over conduct of the matter for the defendants in mid-January 1999. On 19 February 1999, the defendants issued a summons seeking leave to serve and file that affidavit.

The Appeals

7. The matter was heard by the Master on 22 February 1999. He dismissed both the summons of 7 July 1998 and the summons of 19 February 1998. The defendants now appeal against both those decisions.

8. Following the lodging of the appeal, the plaintiffs filed and served further evidence. The purpose of this further evidence is to show that the plaintiffs have a substantial connection with Hong Kong and that they suffered damage by the publications in Hong Kong. After this evidence was filed, Mr Clark filed another affidavit on behalf of the defendants. Much of this evidence from Mr Clark is a repetition of the evidence in his first affidavit.

The First Appeal

9. The appeal against the Master's decision on the summons of 19 February 1999 is relatively straightforward. There was nothing before the Master seeking to explain why the "unless" order had not been obeyed. And the delay in filing the evidence in reply was not a few days, or a week or so, but was filed approaching two months after the time limit had expired. There is also no material before me on which some argument could be based that would seek to excuse the delay. What Mr Clark says explains why he gathered the evidence that the defendants sought to adduce, but it goes nowhere towards explaining why the evidence was not gathered and adduced within the time set by the "unless" order. The defendants' application called for the exercise of a discretion. The exercise of a discretion is not a decision on a whim. There must be some reason advanced for the delay that would enable a judge to understand it and excuse it. It seems to me that, in the circumstances of this case, without some basis on which a discretion could be exercised in favour of the defendants, the application by the defendants was bound to fail before the Master, and cannot succeed before me. That appeal fails and is dismissed.

The Defendants' Additional Evidence

10. That still leaves in the air the fate of the evidence contained in Mr Clark's second affidavit. If it had been so that the plaintiffs had not sought to adduce new evidence in the appeal, it would not have been right to allow in the evidence contained the Mr Clark's first affidavit as regurgitated in his second affidavit. But it cannot be just to allow the plaintiffs to adduce new evidence on the appeal to establish the plaintiffs' connection with Hong Kong and any damage suffered here, and say to the defendants that they may not adduce evidence on these same points in reply, even although some of this evidence was contained in evidence filed outside the time allowed by the "unless" order.

11. By their actions, the plaintiffs have allowed this evidence in, and they must live with that. Not that, in my view, allowing the evidence in makes much difference to an overall view of the facts. The thrust of Mr Clark's evidence is that the plaintiffs have failed to adduce documentary evidence, such as an identity card or business registration, to help establish a substantial connection with Hong Kong. These points were made in argument before the Master. Notwithstanding this, the plaintiffs have not produced such documentary evidence, and, in the light of the fact that the plaintiffs have gone to the trouble of adducing new evidence on the issues concerned and that, if the second plaintiff did hold a Hong Kong identity card and the business of the plaintiffs was registered, such evidence could easily have been adduced, the natural inference to draw is that the plaintiffs are unable to produce a identity card or proof of business registration. So, whether one works on the evidence adduced in Mr Clark's second affidavit or by inference, the conclusion must be, as matter of probability, that the second plaintiff does not hold a Hong Kong identity card and neither his business or that of the first plaintiff is registered in Hong Kong.

12. I give leave to both parties to adduce the new evidence on appeal.

The Second Appeal

The Principles

13. The principles applicable to this type of matter are well known. In view of the way the arguments were presented, there is no need to expound the basic principles here. Both counsel have relied on Berezovsky v Forbes Inc. [1999] E.M.L.R. 278 for guidance on the exercise of the court's discretion in cases such as this; those involving the publication of a foreign libellous document within the jurisdiction. On this point, the principle, as fairly set out in the headnote of the Berezovsky case, and based on earlier decisions and adopted by the English Court of Appeal, reads -

"Where the English circulation of a foreign publication gave rise to a substantial complaint that a tort had been committed in England, having regard to the scale of publication and the extent to which the plaintiff had connections with, and a reputation to protect in, this country, England was prima facie the natural forum for the resolution of the dispute."

The Scale of Publication

14. As to the scale of publication, there were some 500,000 copies of the magazine published of which 157 were distributed in Hong Kong. It is not known, of course, how many Japanese readers with the necessary computer facilities read the Internet publication. I regard 157 copies of the magazine being distributed in Hong Kong as a significant number. Of course, one can do sums with the figures and say that the number published in Hong Kong compared with the total number is very small, but I do not think this is the right approach. What I am concerned about is whether or not the number is significant for the purposes of deciding whether a complaint about the publication could be said to be one of substance. I think it is.

15. This consideration must take into account the nature of the publication. If it is low-key and boring, one might think that a greater size of publication is necessary to consider the tort committed as substantial for present purposes. Where, however, as here, the alleged defamatory material is what one may describe as sensational and juicy, a much smaller size of publication would be sufficient. The nature of the material published in the case before me is such that, in the nature of things, one would expect what is said about the plaintiffs to spread from mouth to ear quickly amongst those who might do business with them. In these circumstances, I would regard a significantly smaller number than 157 as sufficient.

Connections and Reputation

16. I have some little difficulty with a consideration of "the extent to which the plaintiff had connections with, and a reputation to protect in, this country" (My emphasis.). Hirst, LJ, in the Berezovsky case at page300, did use the conjunctive "and" in stating the principle, but I am not sure that the two factors are independent. In Kroch v Rossell [1937] 1 All ER 725, which Hirst, LJ cited with approval, Slesser, LJ said at 729B -

". . . if there were evidence in a particular case that a person had a reputation in this country to be defamed, or was known here, or traded here, or had a professional or social connections, it might be that the circulation of a very few copies might do him very serious and irreparable harm."

17. I suggest that the fundamental consideration is the extent to which the plaintiffs have a reputation in Hong Kong to protect. The degree to which the plaintiffs have connections here is evidence that they have, or have not, a reputation here that merits protection.

The Natural Forum for the Resolution of the Dispute

18. There can be no doubt that what is alleged by the plaintiffs constitutes serious libels by the defendants. Publication of the libels in Hong Kong would be torts committed in Hong Kong. The plaintiffs do not, by their statement of claim, expressly confine their action to the torts committed, and the damage sustained, in Hong Kong. But damage in Hong Kong in a libel case can flow only from a publication in Hong Kong. So, whether they say so or not, the plaintiffs are confined in their action to a tort committed in Hong Kong causing damage in Hong Kong. Mr Jat assures me that this is the plaintiffs' intention, and, indeed, the second plaintiff's evidence relates to publication and damage in Hong Kong. I hold the plaintiffs to this, and proceed on this basis. The plaintiffs may not, in the face of this assurance to me, proceed on any other basis, even if this were possible.

19. So the nature of the dispute for which a natural forum for its resolution must be selected is whether or not the defendants committed a tort in Hong Kong and whether or not the plaintiffs sustained damage in Hong Kong.

The Evidence

20. The plaintiffs' evidence before the Master was that of Mr Wada himself. The salient facts to which Mr Wada deposes are -

1. since November 1994, he has kept an apartment as a residence in Hong Kong;

2. he is a Japanese national, but in about August 1995 he "ceased officially to be a resident of Japan";

3. he has held "investments" in Hong Kong since 1994;

4. he is a businessman acting as an investor for himself and what one may call a facilitator for others;

5. he depends on the trust of his clients and contacts, and he has worked hard to build a good reputation, particularly with the first plaintiff's client and contacts in Hong Kong;

6. he has direct relationships with financial institutions in Hong Kong;

7. he travels frequently, and spends 4 to 6 months a year in Hong Kong;

8. he does not have a residence elsewhere;

9. the first plaintiff has a liaison office in Hong and uses company secretarial services here;

10. the first plaintiff has bank and securities accounts with Citibank and Nikko Securities in Hong Kong;

11. the purpose of this action is to protect the plaintiffs' reputations in Hong Kong;

12. the alleged defamatory articles have been read by business contacts and friends in Hong Kong and elsewhere;

13. the articles have affected the ability of the plaintiffs to do business; and

14. the plaintiffs have not commenced proceedings in relation to the articles in Japan or elsewhere.

21. The evidence filed for the appeal does not take the matter much further, but does provide significant corroboration of what Mr Wada says. The defendants have not been able to mount any significant challenge to this evidence. The only significant factor against a conclusion that the plaintiffs do not have a substantial connection with Hong Kong is the probability that the first plaintiff has not registered its business in Hong Kong and the second plaintiff does not hold a Hong Kong identity card. This I do not accept is enough to negative the solid evidence from the plaintiffs that they have a sufficient connection with Hong Kong to have established a reputation here that deserves protection. Indeed, I would have been satisfied with far less than the plaintiffs have established. Even if it were so that, say, a plaintiff had a presence in Hong Kong only once a year for the purpose of doing business here, such as we have with people who sell insurance and retirement homes in Spain and Cyprus, and a defendant published of that plaintiff in a foreign magazine with only limited circulation in Hong Kong that the plaintiff sold his insurance or his properties fraudulently, I would regard that as a sufficient basis to justify taking proceedings in Hong Kong to protect the plaintiff's reputation here. If a plaintiff has a reputation in Hong Kong, as the plaintiffs in this case have undoubtedly established they have, it is not right to tell him to go elsewhere to vindicate that reputation. The place to vindicate a damaged reputation in Hong Kong is in Hong Kong, not in Japan or somewhere else.

The Result

22. In the result, I am satisfied that the plaintiff has established that it is right that it should have leave to proceed with this action in respect of the tort committed in Hong Kong and the damage sustained in Hong Kong. Hong Kong is, in my view, clearly "the natural forum for the resolution of the dispute."; the dispute being one concerning the alleged libels published in Hong Kong resulting in damage sustained in Hong Kong. The appeal is dismissed.

The Costs

23. I have heard no argument on costs but there seems no obvious reason why they should not follow the event. It also seems to me that this is not the usual sort of interlocutory proceeding that would justify the costs being awarded in any event. I make an order nisi that the defendants pay the plaintiffs' costs both here and below, recoverable immediately.