DR CHAN HIN KEUNG HENRY v. APPLE DAILY LTD AND OTHERS

CACV 100/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 100 OF 2015

(ON APPEAL FROM DCCJ NO. 1474 OF 2013)

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J U D G M E N T
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Hon Cheung JA:

1.  I agree with the judgment of Yuen JA.

Hon Yuen JA:

2.  This is an appeal from the decision of Deputy District Judge J Chow given on 19 January 2015 (“the Decision”) refusing leave to the 1^st - 3^rd defendants to amend their Defence and striking out certain passages in the statements of two defence witnesses in a defamation action.

Background

3.  The plaintiff was (apart from other occupations) a director, founder member and 25 % shareholder (equally with three other shareholders) of a company called CLAP Group Ltd (“CGL”).  The company was incorporated on 19 January 2012.

4.  The Chinese name of this company is 「嘉高賓尼(集團)有限公司」. 

5.  About 3 months previously, two other companies had been incorporated on 13 October 2011 with the identical Chinese name「嘉高賓尼」.  These companies were

- CKB 168 Ltd (“CKB 168”), the Chinese name of which was「嘉高賓尼168有限公司」, and

- CKB168 Holdings Co Ltd (“CKB 168H”), the Chinese name of which was「嘉高賓尼控股有限公司」.

6.  Accordingly although the name of CGL is different from those of CKB168 and CKB 168H in English, in Chinese all three companies shared the same name, the only difference being what followed, ie “集團”(group), “168” and “控股”(holdings) respectively.

7.  It cannot be seriously disputed that the Chinese name「嘉高賓尼」was distinctive, as on the face of it, the name does not have a meaning and appears to be transliterated.

8.  All three companies shared the same registered office.  Some of the other directors and shareholders of CGL were apparently involved in the operations of CKB168, as well as in some other companies mentioned in the articles which will be referred to later in this Judgment.  However the plaintiff’s case is (Witness Statement, 31.7.2014):

“20. When I took up the shares in CGL, I was not aware of CKB168 Ltd (“CKB168") or its associated companies and had no idea the Chinese company name of CGL bore resemblance to those of the Chinese company names of CKB168 or its associated companies.

21. I have no business dealings with CKB168 or its associated companies. Furthermore, as far as I am aware, CGL does not have any business dealings with CKB168 or its associated companies”.

Publication

9.  The plaintiff alleges that on 26 November 2012, three articles appeared in:

-  the Apple Daily newspaper (of which the 1^st defendant was the proprietor and publisher, and the 2^nd defendant was the chief editor);

-  the http://appledaily.com website (of which the 3^rd defendant was the owner/registrant), which website automatically redirected readers to

-  the http://hk.apple.nextmedia.com website (of which the 3^rd defendant was the copyright owner, and the 4^th defendant was the owner/registrant, provider, administrator and manager).   

10.  For present purposes, it is sufficient to note that one of the articles referred to a pyramid scheme by CKB168 to sell online courses, and that the Chinese name 「嘉高賓尼」 had been derived from a Canadian virtual entertainment and learning course called “Cackleberries” with which it had no connection.

Alleged defamation of plaintiff

11.  In summary, the plaintiff alleged that he had been defamed in that:

(A) certain words in the 2^nd article meant and were understood to mean that

(1) he had an interest in the business or participated in the operations of CKB, a scam operation involved in pyramid sales;

(2) there was a nefarious connection between his shareholding in CGL and CKB;

(3) he was engaged in criminal activities; and

(4) he was a fraudster and a cheat;

(B) the words in all three articles when read together conveyed similar defamatory meanings.

Proceedings

12.  The plaintiff through his solicitors sent a letter before action to the 1^st and 4^th defendants.  There was no response.

13.  The plaintiff then commenced proceedings in the District Court against the 1^st to 3^rd defendants.  The 4^th defendant was referred to by name at para. 15(2)(a) of the statement of claim filed on 25 April 2013, but it was not made a party until 5 September 2014.

14.  On 25 July 2013 the 1^st to 3^rd defendants filed a Defence drafted by counsel which: 

-  denied that the words bore the pleaded meanings (para. 13);

-  asserted that only the 2^nd article referred to the plaintiff (para. 14); and

-  pleaded justification of the words in the 2^nd article, various particulars being given of justification (para. 15).

15.  A Reply was filed on 3 September 2013.   

16.  After a case management hearing in November 2013, the parties filed lists of documents in February - March 2014.

17.  A case management hearing took place before Master D Ho on 24 June 2014 at which he made the following orders which are relevant to this appeal:

(1)  witness statements to be filed by 31 July 2014;

(2)  parties to take out all further interlocutory applications by 29 August 2014;

(3)  by 13 October 2014, parties to file:

-  a list of issues

-  an updated listing questionnaire

-  certificate of estimated length of trial and

-  a case management conference bundle;

(4)  case management conference to be held on 20 October 2014.

Witness statements

18.  By 31 July 2014, both sides filed witness statements.  The statements of 伍雅謙 (“Ng Nga Him”) and Tam Sau Han Patty contained certain passages as follows (which, individually or cumulatively in the context, will be referred to below as “the subject passages”).

(1)  Miss Ng’s witness statement:

-  at paras. 39-42, referred to actions taken by the Securities and Exchange Commission in the USA against companies including CKB168 and CKB168H, and

-  at para. 43, exhibited a table showing changes to corporate details which had been referred to in para. 21 of the same statement.

(2)  Miss Tam’s witness statement:

-  at paras. 47-56, recounted steps taken by the 1^st defendant’s journalists to verify materials, in support of the defence commonly known as Reynolds privilege.

19.  On 29 August 2014, the deadline for interlocutory applications, the plaintiff issued a summons to strike out the subject passages. 

Proposed amendments

20.  On the same day, the 1^st - 3^rd defendants issued a summons to amend their Defence.  The amendments were substantial:

(1)  at para. 15A, it was pleaded as an alternative defence that if the articles should be read together and insofar as the words bore certain meanings, they were true, the particulars of justification (at sub-para. 4) including:

-  complaints received from members of the public (sub-paras. (4)(a) and (b));

-  absence of authority from Cackleberries Entertainment Inc. (sub-paras. (4)(c), (d), and (e));

-  common personnel of CGL and CKB168 (sub-paras (4)(g) and (h)); and

-  actions taken by the SEC in the USA against companies including CKB168 and CKB168H (sub-para. (4)(l));

(2)  at paras. 16A and 16B, it was pleaded that the words constituted fair comment on a matter of public interest, namely the existence of pyramid sales schemes and/or purported investment schemes which may involve pyramid sales schemes;

(3)  at para. 16D, it was pleaded that the words were published on an occasion of qualified privilege and/or were ­covered by Reynolds privilege, particulars being given of the steps taken by the 1^st defendant’s journalists to verify materials.

21.  Both summonses were listed for hearing on 21 November 2014. 

Adding the 4^th defendant

22.  Before the hearing however, as earlier mentioned the plaintiff obtained an order on 5 September 2014 to add the 4^th defendant as a party.  The statement of claim was duly amended on 10 September 2014. 

23.  On 12 November 2014, the 4^th defendant filed a Defence drafted by the same solicitors representing the 1^st to 3^rd defendants.  At para. 16, it pleaded that it “repeats and adopts all of the matters pleaded by the 1^st to 3^rd defendants ...” in their Defence filed on 25 July 2013. 

24.  In fact (as Mr Victor Lui, the plaintiff’s counsel properly accepts), the 4^th defendant could have immediately included in its Defence at least the contents of para. 15A of the 1^st to 3^rd defendants’ proposed amendments, and the plaintiff could have no objection. 

Issues before the deputy judge

25.  The plaintiff objected to the amendment of the Defence on the ground of delay. Separately (as Miss Queenie Lau counsel for the 1^st - 3^rd defendants fairly accepts), the plaintiff also objected to para. 15A(4)(l) of the draft amendment, as well as the subject passages in Miss Ng’s statement, on the ground of irrelevance.

Decision of the deputy judge

26.  In her Decision, the deputy judge refused the 1^st - 3^rddefendants leave to amend their Defence on the sole ground of unexplained delay.  Although she accepted that the amendments raised “real questions of controversy”, were not bound to fail, and applying general principles governing amendments, should be allowed (para. 16), she refused the amendments because they were late (paras. 17-21) and no explanation had been given for the delay (paras. 22-26).

27.  The deputy judge also struck out all the subject passages on the basis that the application to amend was “determinative”.  However the deputy judge did not go on to decide whether in any event, para. 15A(4)(l) of the draft amendment should not be allowed, and the subject passages in Miss Ng’s statement should be struck out, for irrelevance.

Grounds of appeal

28.  Pursuant to leave granted by the deputy judge, the 1^st to 3^rd defendants filed a Notice of Appeal on 11 May 2015, the grounds being essentially:

-  as the application for leave to amend the 1^st to 3^rd defendants’ Defence had been taken out before the expiry of the deadline for further interlocutory applications in Master Ho’s order, the deputy judge erred in holding that it was late or that it required an explanation (grounds 1 and 2);

-  the deputy judge erred in holding that the parties were “on the verge of setting the case down for trial” when the plaintiff had only added the 4^th defendant as a party after the application for amendment had been made, and discovery and exchange of witness statements had not even taken place at the time of the Decision (ground 3);

-  the deputy judge should not have struck out the relevant passages in the witness statements as they were relevant to the defence as amended (ground 5).

Respondent’s notice

29.  On 26 May 2015, the plaintiff filed a respondent’s notice seeking to affirm the Decision on the additional grounds that the SEC charges and the changes to the corporate materials were irrelevant.  

Discussion

30.  It should be noted that the deputy judge accepted that applying general principles, the amendments should be allowed.  These principles were stated by the House of Lords in Ketteman and Others v Hansel Properties Ltd [1987] 1 AC 189, at 212 as follows:

“First, all such amendments should be made as are necessary to enable the real questions in controversy between the parties to be decided. Secondly, amendments should not be refused solely because they have been made necessary by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights. Thirdly, however blameworthy (short of bad faith) may have been a party’s failure to plead the subject matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party. Fourthly, there is no injustice to the other party if he can be compensated by appropriate orders as to costs”. (Emphasis added).

31.  These remain the court’s guiding principles post-CJR: see Topwell Corporation Ltd v Kwan CACV88/2013, 21 May 2013, where Hon Kwan JA held (para. 39): 

“The principles in Ketteman v Hansel Properties ... on the exercise of discretion to allow or refuse an amendment of pleadings remain good law after the CJR ... Having said that, in the exercise of discretion, the court must of course have regard to the underlying objectives in Order 1A of the RHC or of the RDC, so it cannot be assumed that once the principles in Ketteman are satisfied, the amendment would be allowed. The court would need to balance all relevant factors to decide how its discretion should be exercised, if the application is made in circumstances offending one or more of the underlying objectives. In this particular case, a pertinent consideration in giving effect to the underlying objectives is that the court ‘shall 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’ (Order 1A rule 2(2) of the RDC)”. (Emphasis added).

32.  In the present case, there is no doubt that the amendments raise important defences of justification, fair comment, qualified privilege and Reynolds privilege.  Mr Lui submitted that one would have expected these defences to have been pleaded earlier and I agree.  However, even though he argued that the 1st to 3^rd defendants must have made a “conscious decision” not to plead them earlier, he has expressly shied away from alleging bad faith.  In my view, in the absence of an allegation of bad faith (see the third proposition in Ketteman) supported bycogent evidence, it is unconstructive to ask the court to engage in speculation as to why these defences had not been pleaded earlier. 

33.  Given the importance of these defences to the resolution of the parties’ rights and obligations in a defamation action, the real issue is whether the judge was correct in holding that, notwithstanding the Ketteman principles, the application to amend should not be allowed by reason of its being late, for which an explanation was required but not supplied.

34.  As the Decision was made in the exercise of the court’s discretion, the relevant questions engaged in this appeal are whether the deputy judge erred in principle of law or failed to take into account a relevant matter or was plainly wrong.

35.  First, in the Decision as well as the decision for leave to appeal, the deputy judge referred to the judgment in Raytech Industries Co Ltd v Leung Wai Kit (unrep. HCA1360/2011, 16 May 2014).  In the leave to appeal decision, the deputy judge quoted para. 26 of that judgment as follows:   

“Having regard to the underlying objectives of the CJR, the court must be vigilant against attempts to derail the timetable set. So, where there is an order setting a deadline for making interlocutory applications, late applications require an explanation and should not be entertained without the court being satisfied with the explanation for the delay. ...”.

36.  However it should be noted that in Raytech,the application to amend (made on 30 April 2014) came well after the deadline set by the court for making interlocutory applications (18 June 2012, later extended to 22 February 2013) and was clearly non-compliant with the court order.

37.  In our case, Mr Lui properly accepts that the application to amend was compliant with Master Ho’s order. 

38.  That is not to say that all applications to amend should be allowed as long as they comply with the deadline set by the court for interlocutory applications, but with respect, it seems the deputy judge may have misunderstood the passage she quoted from Raytech. Otherwise it is difficult to see why she held that an explanation was regarded as necessary, in light of the third proposition in Ketteman, when the plaintiff has not alleged or produced any evidence of bad faith.

39.  Be that as it may, in any event it is clear that the deputy judge had failed to take into account the recent joinder of the 4^th defendant as a party.  Mr Lui said that was probably because the point was not specifically argued, but the fact remains that the deputy judge should have been aware from the contents of the Amended Statement of Claim itself (the plaintiff’s statement of truth being dated 8 September 2014) that an additional party had been added only two months before the hearing, and the parties were certainly not “on the verge [of] setting the case down for trial” (para. 17).  They could not possibly have set down for trial when the plaintiff and 4^th defendant had not even reached the discovery stage, let alone inspection and exchange of witness statements. 

40.  In the leave to appeal decision, the deputy judge set out her view on this point as follows:

“... the 4^th defendant is the registrant/owner of the Apply Daily website, the plaintiff’s claim against all the defendants remains the same. I accept Mr Lui, counsel for the plaintiff’s submissions, by adding the 4^th defendant as a defendant would not impact on the overall progress of this action”.

41.  It is correct that allowing the amendment of the 1^st to 3^rd defendants would put the progress of the action further back than the addition of the 4^th defendant would do, but with respect it was still plainly wrong to say that a case is “on the verge of setting down for trial” when a party had only been added two months before, and interlocutory steps such as discovery, inspection and exchange of witness statements had not even started.  

42.  Finally, it should be noted that the plaintiff’s two affirmations for the hearing did not suggest that he would suffer any prejudice.

43.  For the reasons set out above, I take the view that the deputy judge’s exercise of discretion in refusing leave to amend on the ground that the delay needed to be explained was an error of law; that in considering that the parties were on the verge of setting down the case for trial, she had failed to take into account the recent addition of the 4^th defendant; and that insofar as she had taken that fact into account but nevertheless held that the case was on the verge of setting down for trial, then that was with respect plainly wrong.

44.  However that is not the end of the matter.  As noted previously, the plaintiff had also challenged the relevance of para. 15A(4)(l) of the draft amendment and the subject passages in Miss Ng’s statement.  The deputy judge did not go on to determine that issue in case she was wrong on the ground of unexplained delay.  The question is whether this court should do so. 

45.  Paragraph 15A(4)(l) and paras. 39-42 of Miss Ng’s statement deal with the SEC charges.  The plaintiff has argued that they are not relevant to the action as a “post-publication event” because even though the SEC’s announcement of charges and asset freezes was made before publication of the articles, it would appear that the defendants only became aware of it after publication. There are also other arguments which challenge the contents and consistency of the Defence.  Defamation is a notoriously technical area of law.  I consider it would not be appropriate for a two-judge court to hear these arguments and see if it can reach a unanimous determination without the benefit of a first instance decision. 

46.  As for the last paragraph of Miss Ng’s statement (para. 43), it seems to me that this is simply to exhibit an update of information disclosed on public records, such information having already been referred to in another (unchallenged) part of her statement (para. 21).  I do not see how it can be regarded as irrelevant. 

Order

47.  I would therefore allow the appeal, set aside the deputy judge’s orders and make the following orders:

(1)  order in terms of the 1^st to 3^rd defendants’ summons filed on 29 August 2014, save that the issue whether leave should be given to plead para. 15A(4)(l) of the Amended Defence on the ground of irrelevance be remitted to a judge of the District Court for determination;

(2)  the plaintiff’s summons filed on 29 August 2014 be dismissed, save that the issue whether paras. 39-42 of 伍雅謙 (Ng Nga Him’s) Witness Statement filed on 31 July 2014 should be struck out on the ground of irrelevance be remitted to a judge of the District Court for determination;

(3)  written submissions (restricted to 7 pages) in respect of costs below and on appeal to be filed with the court within 14 days after handing down of this Judgment. 

48.  Finally I would like to thank both counsel for their assistance.