EARN CROWN INVESTMENT LTD AND ANOTHER v. CHINA FREE PRESS INC. AND OTHERS

HCA 2250/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2250 OF 2015

_____________

D E C I S I O N

_____________

Background

1.  By summons dated 20 September 2016, the 2^nd defendant applies for (1) an order setting aside the writ or service of the writ on the 2^nd defendant; (2) the discharge of any order giving leave to serve the writ on the 2^nd defendant out of jurisdiction; (3) a declaration that in the circumstances of the case the court has no jurisdiction over the 2^nd defendant in respect of the subject-matter of the claim or the relief or remedy sought in the action, or alternatively a declaration that in the circumstances of the case the court should not exercise any jurisdiction it may have; (4) staying the proceedings; and/or (5) such other relief as may be appropriate in the circumstances and the court thinks fit.

2.  As stated in the summons, the grounds for the application are that (1) considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted in another court; (2) the plaintiffs failed to show any or sufficient locus to bring the proceedings and the claims against the 2^nd defendant; (3) the relief sought is not against a person domiciled or ordinarily resident within the jurisdiction (the 2^nd defendant is not domiciled or ordinarily resident within the jurisdiction of Hong Kong); and (4) the claim is founded on the tort of defamation and the damage was not sustained, or resulted from an act committed, within the jurisdiction.

3.  At the hearing, the 2^nd defendant confirmed that he does not need to pursue with the claim for a declaration as mentioned in the summons, as long as the stay of proceedings is granted, but it is usual for the court to grant such a declaration in an application like this.

4.  The 2^nd defendant also confirmed that he will proceed with the application on the basis of the 2^nd plaintiff’s case as pleaded in the Amended Statement of Claim filed on 5 May 2017, rather than the original Statement of Claim.

5.  It should be noted that when the case first started, the only plaintiff in this case was the 1^st plaintiff.  By the order of Master Lai dated 19 February 2016, leave was granted to join the 2^nd plaintiff as a plaintiff in this action and the writ was amended accordingly.  However, the 1^st plaintiff filed a notice of withdrawal on 4 May 2017 to withdraw its claims against all 3 defendants, and the 2^nd plaintiff filed the Amended Statement of Claim on 5 May 2017 without leave pursuant to Order 20, rule 3 of the Rules of the High Court.  In the Amended Statement of Claim, the 1^st plaintiff’s name was deleted and the 2^nd plaintiff is re-named to be the only plaintiff in this case.  This is improper as the writ was not amended correspondingly.  Thus, there should still be 2 plaintiffs in the title of this case, even though the 1^st plaintiff has withdrawn all its claims.

6.  The 1^st and 3^rd defendants have not taken any part in these proceedings.  The present application therefore concerns only the 2^nd plaintiff and the 2^nd defendant.

The 2^nd plaintiff’s case

7.  The 2^nd plaintiff’s case according to the Amended Statement of Claim is that it is a company listed on the Main Board of the Hong Kong Stock Exchange and the holding company of a group of companies (“Emperor Group”) based in Hong Kong which enjoyed (and continues to enjoy) good reputation in Hong Kong and contributed (and continues to contribute) in various charitable funds and foundations, including inter alia the “Emperor Foundations”.

8.  Emperor Group operates a Communications Department which is specifically responsible to review and keep track of any news updates concerning Emperor Group and to respond to outside enquiries (including those from the press).  Their daily tasks include searching through the Internet and other media for news concerning Emperor Group.

9.  The 1^st defendant is a non-profit corporation incorporated under the laws of the State of North Carolina in the United States of America and carries on business as and publishes an online internet newspaper under the name Boxun News using the web addresses http://boxun.com and http://boxun.us.

10.  The 2^nd defendant is an individual residing in Durham, North Carolina of the United States of America, the founder and a shareholder of the 1^st defendant and the editor, manager and/or chief administrator of the Boxun News websites.

11.  The 3^rd defendant is a company incorporated under the laws of the British Virgin Island and has a place of business in Hong Kong.  The 3^rd defendant managed the publication and subscription of a printed magazine under the name of Boxun and managed the Boxun News websites.

12.  The Boxun News website (the 2^nd plaintiff did not state which one) is one of the most popular online communities covering political news and human rights infringements in the Mainland.  Its website is accessible globally including Hong Kong.

13.  On 15 and 16 March 2015, an article titled “Emperor Group colluded with corrupted government official Liu Zhi Hua to illegally obtain land” (written in simplified Chinese) (“the Offending Article”) was published or caused to be published on Boxun News, which is defamatory of and concerning the 2^nd plaintiff and/or Emperor Group (with the 2^nd plaintiff as its figurehead).

14.  On 15 March 2015, Mr Ng Chi Yiu of the Communications Department of Emperor Group through his daily routine discovered and read the Offending Article on the Boxun News website.

15.  Mr Ng took screenshots of the Offending Article and informed his colleagues, including his superior Mr Yuen Yin Man Timothy and Emperor Group’s legal counsel Madam Hom Mun Yee Caroline, both of whom read the Offending Article that day.

16.  On 16 March 2015, Mr Ng received a telephone call through the Communications Department’s hotline from one Ms Chan claiming to be a news reporter from Apply [sic] Daily.  The reporter asked Mr Ng to clarify whether the contents of the Offending Article were factually accurate.

17.  On 17 March 2015, Mr Ng together with other colleagues in the Communications Department discovered and read another article (“the 2^nd Article”) which recited the Offending Article at length (including most of the defamatory passages) and contained further defamatory statements of and concerning the 2^nd plaintiff and/or Emperor Group (with the 2^nd plaintiff as its figurehead).

18.  In light of the discovery of the 2^nd Article, staff members within the Communications Department carried out further searches on the internet and on or around 19 March 2015 discovered that the 2^nd Article was recited and republished on a website known as “Memehk” (“the Memehk Republication”).

19.  The 2^nd plaintiff avers that Boxun News has an average monthly “traffic” (ie browsing rate) of around 1,500,000, of which approximately 2.88% originated from Hong Kong (hence around 43,000 browses per month).

20.  The 2^nd plaintiff further avers that Memehk is a popular website in Hong Kong and maintains a Facebook account so that updated posts would be “pushed” to the subscribers.  Its average monthly traffic was 734,600, of which approximately 55.04% originated from Hong Kong (hence around 400,000 browses per month).

21.  Accordingly, the 2^nd plaintiff avers that the Offending Article, the 2^nd Article and the Memehk Republication have all been published or caused to be published by the defendants in Hong Kong.  Specifically, the Memehk Republication was accessed 312 times and attracted 2 comments/responses as at May 2015.  The same page was accessed 415 times as at 10 November 2016.

22.  By reason of the publication of the Offending Article, the 2^nd Article and/or the Memehk Republication, the 2^nd plaimtiff’s and/or Emperor Group’s (with the 2^nd plaintiff as its figurehead) reputation in Hong Kong have been gravely injured, the 2^nd plaintiff has been exposed to serious public hatred, contempt and/or ridicule, and has suffered loss of business opportunities.

23.  Thus, the 2^nd plaintiff claims against the defendants for damages, including aggravated damages, for libel, as well as an injunction restraining the defendants from publishing the Offending Article, the 2^nd Article and/or the Memehk Republication or other similar articles.  

Applicable legal principles

24.  In making the application, the 2^nd defendant relies on Order 12, rule 8 and Order 11, rule 1 of the Rules of the High Court, as well as the court’s inherent jurisdiction.

25.  Under Order 12, rule 8(2)(b) and rule (2A)(a) of the Rules of the High Court, the 2^nd defendant may apply for an order staying the proceedings on the ground that considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted in another court.  This is in essence the same as applying for a stay of proceedings under the court’s inherent jurisdiction on the ground of forum non conveniens.

26.  In fact, under Civil Justice Reform, forum non conveniens stays are granted under Order 12, rule 8(2) rather than the inherent jurisdiction (see Hong Kong Civil Procedure 2017, paragraph 11/1/10).

27.  The relevant principles for the grant of stay have been summarised by the Hong Kong Court of Appeal in The Adhiguna Meranti (owners of cargo) v The Adhiguna Harapan (owners of ships) [1987] 2 HKLR 904 at 907 and in Wo Fung Paper Making Factory Limited v Sappi Kraft (Pty) Limited [1988] 2 HKLR 346.  A summary of the three-stage process there prescribed may be seen, in a slightly abbreviated form, in The Lanka Muditha [1991] 1 HKLR 741 at 744 as follows:-

Stage (I): Is it shown that Hong Kong is not only the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong…

Stage (II): If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages.  The evidential burden here lies on the plaintiff.

Stage (III): If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) … Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the available appropriate forum … Proof of this … rests upon the applicant for the stay.

   (See Hong Kong Civil Procedure 2017, paragraph 11/1/10C).

28.  The parties have no dispute in relation to the above principles and the burden to establish Stage (I) is on the 2^nd defendant (see Sharab v HRH Prince Al-Waleed Bin Talal Bin Abdal-Aziz Al-Saud [2009] EWCA Civ 353 and Hong Kong Civil Procedure 2017, paragraph 11/1/10H).

29.  However, as the 3 defendants are not Hong Kong companies or Hong Kong resident, the 2^nd plaintiff concedes that it cannot rely on Hong Kong jurisdiction as of right and the burden is reversed when a defendant is served through the long-arm jurisdiction.  In other words, the 2^nd plaintiff must satisfy the court that it is a proper case for the exercise of the discretion to grant leave to serve the writ outside jurisdiction.  This onus remains on the 2^nd plaintiff where the 2^nd defendant makes an application to set aside leave under Order 12, rule 8 (see Hong Kong Civil Procedure 2017, paragraph 11/1/10).

30.  Thus, the 2^nd plaintiff bears the burden to show that its case falls within a sub-paragraph of Order 11, rule 1(1) of the Rules of the High Court and the standard of proof is to show a good arguable case (see Hong Kong Civil Procedure 2017, paragraph 11/1/8).  The 2^nd plaintiff submits that its case falls within Order 11, rule 1(1)(f) as the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within Hong Kong, and that Hong Kong is the appropriate forum to resolve the claim.

Whether the tort was committed in Hong Kong

31.  It is well established that the jurisdiction where the tort was committed is prima facie the natural forum for the determination of the dispute.  In libel cases, the tort is committed at the place where the statement is seen or received by another person, and in relation to publication by input into a computer, it is the place where a person downloads the material which constitutes publication, not the place where the material was input into the computer (see Emperor (China Concept) Investments Ltd v SBI E-2 Capital Securities Ltd, unreported, HCA 2686/2004).

32.  As Mr Ng and the other employees of Emperor Group accessed and read the Offending Article, the 2^nd Article and the Memehk Republication in Hong Kong, I accept that the tort was committed in Hong Kong.

Publication to an agent

33.  However, Mr Ng and the other employees of Emperor Group were all agents of the 2^nd plaintiff.  The 2^nd defendant submits that an action for libel can only be brought if there is publication to some third persons, and publication to employees of the company involved is not publication to third persons.

34.  The 2^nd plaintiff, on the other hand, submits that the suggestion that publication to an agent is legally impossible to constitute defamation is incorrect.  In Earn Crown Investment Ltd & another v Zhang Yu Fang and another, unreported, HCA 712/2015 (a case very similar to the present one and heavily relied upon by the 2^nd defendant), Au-Yeung J cited a passage from Gatley on Libel & Slander, 12th edition,  paragraph 6.15, which clearly sets out the boundaries of the rule, namely when a communication defamatory of a company is sent to the company secretary, it has not been published to the secretary in his personal capacity: the only publication is to the company which can only act through human agents. There is accordingly no publication to a third party and the conclusion is plainly right.  But in the present case, the publication was not addressed to the Legal Department or the Communications Department of the Emperor Group as its agent — it was published on the internet as a message to the entire world — so the rule is inapplicable.

35.  The 2^nd plaintiff also submits that the correct position is set out in Dr. Albert Yeung Sau Shing v Google Inc [2014] 4 HKLRD 493, where Deputy High Court Judge Marlene Ng rejected (at paragraphs 37-48) Google's argument that publication to staff members within a group is no publication to a third party.

36.  I do not accept the 2^nd plaintiff’s submissions in this regard.  In the passage cited by Au Yeung J from Gatley on Libel, it is stated clearly that “there may be a publication to an employee who is not acting in a representative capacity for the company.”  In other words, if the employees were acting in a representative capacity for the company, there can be no publication.  There was no suggestion in the Google case, supra, that the employees were acting in a representative capacity for the company, but in our present case, it is clear that the employees were acting in a representative capacity for the 2^nd plaintiff, as they were tasked to look for these articles for the 2^nd plaintiff or Emperor Group.

37.  Moreover, the screenshots taken by Mr Ng and shown to his colleagues cannot be regarded as publication to some third parties.

38.  Thus, I do not accept that there were publications to some third persons just by referring to publications to the employees or agents of the 2^nd plaintiff. 

The Memehk Republication

39.  In respect of the Memehk Republication, the 2^nd plaintiff submits that, as a starting point, it is trite that a person would be liable for publishing a libel if, by an act of any description, he could be said to have intentionally assisted in the process of conveying the words bearing the defamatory meaning to a third party, regardless of whether he knew that the article in question contained those words.  Consequently, any person who takes part in making the defamatory statement known to others may be liable (see the Google case at paragraph 57, citing Oriental Press Group Ltd v Fevaworks Solutions Ltd (2013) 16 HKCFAR 366 per Ribeiro PJ).  In other words, all entities involved in the chain of publication are jointly and severally liable for the defamation, subject to the defence of innocent dissemination (which is not a point raised by the 2^nd defendant) (see Gatley, supra, at paragraph 6.11).

40.  Thus, the 2^nd plaintiff submits that, since the 2^nd Article was recited and republished through the Memehk Republication, the 2^nd defendant is jointly and severally liable for the damage caused by the Memehk Republication.  It is no answer to say that Memehk was not joined as a party to this action.

41.  The 2^nd plaintiff further submits that it is unclear why the 2^nd defendant said that traffic statistics are insufficient to establish publication in Hong Kong (ie access by readers in Hong Kong).  As a matter of principle, based on a balance of probabilities, in view of the popularity of the Memehk website in Hong Kong, it is more likely than not for some of the 312 browses of the Memehk Republication as of May 2015 and the 415 browses as of 10.11.2016 to have originated from Hong Kong.

42.  Once it is accepted that the Memehk Republication took place in Hong Kong, this adds further force to the argument that Hong Kong is the natural forum for the determination of the dispute.

43.  Based on the authorities cited by the 2^nd plaintiff, I accept that it is arguable that the 2^nd defendant might be liable as a joint tortfeaser, although I have reservation on whether the 2^nd defendant’s situation is the same as those involved in a publication like author, editor and publisher.  It is however not necessary for me to decide this issue here as the 2^nd plaintiff is only required to show a good arguable case at this stage.

44.  However, I do not accept that there is any evidence from the traffic figures to suggest that the browses were related to any of the articles in question.  The 2^nd plaintiff suggests that it is more likely than not that some of the browses were originated from Hong Kong, but that is not good enough, as it does not show that the traffic were browses concerning the articles in question.  It remains insufficient to show that there were actual readings of the articles in question by any person in Hong Kong.

Publication to the general public

45.  Nevertheless, the 2^nd plaintiff relies on the Google case and submits that “where the claimant proves that the impugned material has been published to one or more persons, it may be inferred that the material (if easily accessible) has been published more widely within the jurisdiction.

46.  It cannot be denied that the Offending Article was published to the reporter (presumably from “Apple Daily”) and when the Offending Article was posted online, it could be easily accessible by the general public.  Thus, it can be inferred that the Offending Article has been published more widely within the jurisdiction according to the Google case.

47.  With this authority, I think it is at least arguable that the tort has been committed in Hong Kong and the publication has been made widely in Hong Kong.

48.  It is not necessary for me to decide this issue conclusively at this stage, as the 2^nd plaintiff is only required to show a good arguable case.  In fact, the Google case has also held that this kind of matter should be determined at trial rather than on an application to set aside service out of jurisdiction.

Whether damages sustained in Hong Kong

49.  The 2^nd plaintiff submits that it is a listed company in Hong Kong and is reasonably seen as the figurehead of Emperor Group.  Since the damage to Emperor Group's reputation (hence to the 2^nd plaintiff's reputation) occurred in Hong Kong, the place for the 2^nd plaintiff to vindicate its reputation must be in Hong Kong, not in the Mainland or elsewhere (see Investasia Ltd & another v Kodansha Co Ltd & another [1999] 3 HKC 515 at 522C).

50.  However, the 2^nd defendant argues that the phase “Emperor Group” in Chinese appeared in the Offending Article was clearly defined in the article itself to mean a company called “Emperor Group (Hong Kong) Limited” (translated from Chinese) which is not a company registered in Hong Kong.  In fact, all the companies mentioned in the Offending Article and the 2^nd Article were not companies registered in Hong Kong.  Thus, they were unrelated to the 2^nd plaintiff or Emperor Group in Hong Kong.  The 2^nd Article also made reference to the Offending Article and hence the companies mentioned therein were not related to the 2^nd plaintiff or Emperor Group in Hong Kong.

51.  Thus, the 2^nd defendant submits that the 2^nd plaintiff’s reputation could not be injured and the 2^nd plaintiff has no locus to make the claim.

52.  In this regard, I think it is possible or at least arguable that some members of the public might think that the “Emperor Group” and “Emperor Group Beijing” (both written in Chinese) mentioned in the articles in question were related to Emperor Group in Hong Kong.  One has to read the articles very carefully before one could find out the definition of “Emperor Group” in the Offending Article.  The evidence concerning the reporter making enquiry with Mr Ng suggests that someone has associated the “Emperor Group” mentioned in the Offending Article with Emperor Group in Hong Kong.

53.  The 2^nd defendant argues that it does not mean that the 2^nd plaintiff’s reputation must have been damaged.  The fact that the reporter was making enquiry does not necessarily mean that she believes the contents of the Offending Article and thinks lowly of the 2^nd plaintiff.

54.  The 2^nd defendant also argues that even assuming the publication to employees or agents of the 2^nd plaintiff amounts to publication to some third parties, it is improbable that such employees or agents would think lowly of the 2^nd plaintiff.

55.  Moreover, the 2^nd plaintiff’s pleaded case is that it enjoys good reputation in Hong Kong and contributes in various charitable funds and foundations.  It is not pleaded (not even in the Amended Statement of Claim) that the 2^nd plaintiff enjoys any good reputation in any commercial activities.  The contents of the articles in question were concerning a commercial land transaction which was allegedly obtained illegally.  It is difficult to see how the 2^nd plaintiff’s reputation in charitable funds and foundations could be affected (see Earn Crown Investment Ltd & another v Zhang Yu Fang and another, supra).

56.  I accept the 2^nd defendant’s arguments in this regard and am not satisfied that the 2^nd plaintiff has established any real damages sustained in Hong Kong.

Order 11, rule 1(1)(f)

57.  Order 11, rule 1(1)(f) permits a writ to be served out of the jurisdiction if the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.

58.  Although the 2^nd plaintiff’s claim is founded on the tort of libel, it has not established any damage sustained, or resulted from an act committed, in Hong Kong as aforesaid.  I am therefore not satisfied that the requirement in Order 11, rule 1(1)(f) has been met.

Stage (I) of the test

59.  In relation to Stage (I) of the test as aforesaid, the 2^nd plaintiff submits that because the tort was committed in Hong Kong, then the proper governing law for the determination of the dispute is Hong Kong law (the lex loci delicti). There is simply no choice of law question arising because no other system of law is engaged (even under the "double actionability rule" which is inapplicable on the facts, both systems of law, the lex fori and the lex loci delicti, will be Hong Kong law).

60.  Accordingly, there is no basis to suggest that PRC law might have a bearing on the dispute (e.g. on the availability of certain defences) and that it will be inconvenient if PRC legal experts have to come to Hong Kong to give evidence or that Hong Kong courts will be asked to determine PRC legal questions.

61.  As to other logistical issues (convenience of witnesses and location of documents), it has frequently been said that it counts for very little in relation to forum disputes between Hong Kong and the PRC (see Hong Kong Civil Procedure 2017, paragraphs 11/1/10J and 11/1/10AC).

62.  However, as held in Earn Crown Investment Ltd & another v Zhang Yu Fang and another, supra, the assertion that the place of publication was in Hong Kong has to be considered against the bigger picture.  It cannot be disputed that the alleged defamatory materials were originated from a dispute between Mainland Parties concerning a plot of land in the Mainland, and the laws that were allegedly breached was PRC laws rather than Hong Kong laws.

63.  The 2^nd defendant submits that the observations made in Earn Crown Investment Ltd & another v Zhang Yu Fang and another, supra, can be found in the present case:-

(a)  In the Amended Statement of Claim, it is the 2^nd plaintiff's case that Boxun News are popular online communities covering news on political and human rights abuses in the PRC.  The connections are with the PRC rather than with Hong Kong.

(b)     The 2^nd defendant’s defence relying on justification and fair comment will involve witnesses from the PRC. It is very inconvenient to have them come to Hong Kong and give evidence in Hong Kong court.  Weighing the costs and complications, it must be in favour of the PRC court.

(c)  The 3 defendants are not Hong Kong companies or Hong Kong resident.  Any injunction granted may not be enforceable against website operators out of jurisdiction.

64.  Thus, the 2^nd defendant submits that the PRC plainly has the most real and substantial connection with this action and the PRC courts are the more suitable forum to try this case.

65.  First of all, I accept that the location of witnesses and documents and the costs and inconvenience of moving witnesses and documents are usually immaterial.  However, as mentioned by the author in the book, The Conflict of Laws in Hong Kong by Graeme Johnston, 3^rd ed:-

“Foreign applicable law will sometimes be a significant factor, particularly where the “the foreign law is part of a system which is different from the common law system (such as Mainland)”

66.  In the present case, although the law concerning libel should be governed by Hong Kong law, it is clear that when the defence of justification and fair comment are raised (which is very likely), PRC law will be involved, and it is a significant factor to be considered.

67.  In fact, as all the parties, the land in question and the alleged illegal acts were all connected with the PRC, it is rather artificial to link the alleged defamatory articles with the Hong Kong jurisdiction.

68.  I therefore accept the 2^nd defendant’s submission and find that Hong Kong is not the natural and appropriate forum for the trial, and that the forum in the PRC is clearly and distinctly more appropriate than Hong Kong.

Stages (II) and (III) of the test

69.  The 2^nd plaintiff raises no issue in relation to Stage (II) of the test, and hence it is not necessary for me to consider these two stages.

Conclusion

70.  As the requirement in Order 11, rule 1(1)(f) has not been satisfied, the order for the service out of the writ should be set aside.

71.  As I find that the PRC is the more appropriate forum, it follows that the present proceedings should be stayed.

72.  I therefore order as follows:-

(a) The order giving leave to serve the writ out of jurisdiction on the 2^nd defendant be discharged and the service of the writ on the 2^nd defendant out of jurisdiction be set aside.

(b) The proceedings herein be stayed.

(c) Costs order nisi: The 2^nd plaintiff do pay the 2^nd defendant his costs of the action including the costs of the summons dated 20 September 2016 with certificate for counsel to be taxed if not agreed.