CHAU HOI SHUEN, SOLINA HOLLY v. SEEC MEDIA GROUP LTD

CACV 275/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 275 OF 2012

(ON APPEAL FROM HCA NO. 1194 OF 2010)

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BETWEEN

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Hon Yeung VP :

1.  I have the advantage of reading the draft judgment of Cheung JA and I agree with it entirely. The appeal is dismissed with costs nisi to the plaintiff, with certificate for two counsel, to be taxed if not agreed.

Hon Cheung JA ：

Facts

2.1   Caijing Magazine (財經) is a periodical magazine published in the Mainland.  It was distributed in Hong Kong by the defendant, a company listed in the Hong Kong Stock Exchange.  Issue No. 265 of the magazine (dated 7 June 2010) published two articles which were defamatory of the plaintiff, a prominent local businesswoman and well-known philanthropist both locally and in the Mainland.  She participated in charitable activities organised by the Li Ka Shing Foundation and her eponymous Chau Hoi Shuen Foundation. 

2.2   The two articles alleged that the plaintiff had engaged in corruption by paying US$500,000 by way of ‘consultancy fee’, part of which was intended by her to be distributed to a senior government official in the Mainland for assisting in the approval by the Mainland authorities of projects related to Mr. Li Ka Shing’s Cheung Kong (Holdings) Limited.  The article further alleged that the plaintiff had admitted that she paid the US$500,000 ‘consultancy fee’.

2.3   The plaintiff sued the defendant for libel.  The defamatory content of the articles was not challenged by the defendant.  The only issue was whether the defendant, as the distributor of the magazine, was liable for the libel.  Mr Recorder Patrick Fung SC held that it was and ordered the defendant to pay $650,000 by way of damages to the plaintiff. The defendant now appeals.

Defence of innocent dissemination

3.1   Beijing Caijing Magazine Limited is the publisher of the Caijing Magazine.  It is the primary publisher of the libel.  While the defendant who distributed the magazine which contained the libel is also jointly and severally liable for the damage to the plaintiff’s reputation, it is entitled to rely on the common law defence of innocent dissemination.  The Court of Final Appeal, per Ribeiro PJ, in the recent case of Oriental Press Group Ltd v Fevaworks Solutions Ltd [2013] 5 HKC 253 reviewed the authorities on this defence including Emmens v Pottle (1885) 16 QBD 354 and the High Court of Australia decision of Thompson v Australian Capital Television Ltd and Others (1996) 186 CLR 574 where Gaudron J at page 592 pointed out that the defence has been adopted not only in the English cases, but also in Canada, Australia and New Zealand. 

3.2   Mr Johnny Mok SC and Ms Janet Ho, counsel for the plaintiff, have extracted from the Court of Final Appeal judgment the relevant principles which I will gratefully adopt :

(1) This defence is not available to the “first or main publisher of a work” but is confined to “persons who, in the ordinary course of business, play ‘a subordinate part in disseminating it’ ” (para. 29).  The subordinate disseminators are “persons such as wholesalers, distributors, booksellers, librarians, newsagents and the like” (para. 56).

(2) For the first or main publisher, the strict publication rule applies, namely, the person who first spoke or composed the defamatory matter (the originator) is ‘liable, provided he intended to publish it or failed to take reasonable care to prevent its publication’, regardless of whether he knew that an article contained the defamatory words in question (paras. 19, 22).

(3) A subordinate disseminator is only liable if he ‘knew or ought by the exercise of reasonable care, in the circumstances in which the work came to him or was disseminated, to have known that the article disseminated contained defamatory material’ (para. 29).

(4) The onus is on the subordinate disseminators ‘to prove that they did not know that the article contained a libel and that their lack of knowledge was not due to their own lack of care’ (paras. 29, 32).

3.3   Ribeiro PJ at paragraph 47 summarised the innocent dissemination defence as follows :

‘ 47. ……The defence is therefore applicable to persons who are admittedly publishers, although playing a subordinate role, allowing them to be exonerated from liability if they discharge the burden of showing that they did not know that the article which they had helped to disseminate contained the offending content and that such lack of knowledge was not due to any lack of reasonable care on their part.’

Meaning of knowledge

1) Defamation and libel

4.1   Mr Paul Shieh SC together with Mr Bernard Man, counsel for the defendant, argued that it is not clear whether the defence will only be defeated if the distributor knew ‒ or negligent as to the fact ‒ that the publication contained a libel (i.e. a statement lowering someone else’s reputation and as to which there is no defence such as justification or fair comment or privilege) as opposed to merely a statement with a defamatory meaning, irrespective of whether he knew or ought to have known that there was no defence.

2)  Lord Denning’s alternative view

4.2   Mr Shieh attempted to resurrect an argument first raised by the prominent jurist of the 20^th century, Lord Denning MR in Goldsmith v Sperrings Ltd [1977] 1 WLR 478 where at page 486, in expressing a dissenting opinion, he challenged the traditional view on the law on innocent dissemination :

‘ Both counsel before us conducted the case on the assumption that the distributors were prima facie liable. They were liable unless they could prove—and the burden was on them to prove—that they did not know that “Private Eye” was of a character likely to contain a libel. This assumption was based on Gatley on Libel and Slander, 7th ed. (1974), para. 241. Since then, I have looked into the authorities for myself: and I venture to think that the law is not as counsel assumed it to be.’

4.3   Instead he proffered the alternative view at page 487 that,

‘ Common sense and fairness require that no subordinate distributor—from top to bottom—should be held liable for a libel contained in it unless he knew or ought to have known that the newspaper or periodical contained a libel on the plaintiff himself; that is to say, that it contained a libel on the plaintiff which could not be justified or excused: and I should have thought that it was for the plaintiff to prove this.’ (emphasis added)

4.4   Mr Shieh did not pursue the point that the burden is on the plaintiff but he insisted that Lord Denning’s alternative view should be preferred.  One can immediately see the wide scope of this alternative formulation.  Even if the distributor is aware of the defamatory content of the article (in the sense that it is defamatory on its face, see Metropolitan Schools Ltd v Designtechnica Corporation [2011] 1 WLR 1743 at paragraph 67), he will still not be liable unless he knows or reasonably would have known that it is a libel which could not be justified or excused.  In other words this alterative view allows the defendant to say that although I am aware of the defamatory content, since I honestly or reasonably think it can be excused or justified because of the defences that are available to an action for libel, therefore I am able to rely on the innocent dissemination defence. 

4.5   The alternative view was not subscribed to by the majority in Goldsmith. While it can be safely said that the rejection was because this point was not raised by counsel and only came up in Lord Denning’s private research, both Scarman LJ (at page 500) and Bridge LJ (at page 505) referred to the principle on innocent dissemination in Gatley on Libel and Slander (7^th ed) (1974) where no distinction was drawn on the terms of defamatory matter and libel. Bridge LJ at page 505 stated that,

‘ The legal background, with which all parties to the settlements must be taken to have been familiar, is that any disseminator of defamatory matter is liable to the party defamed, subject to the defence of innocent dissemination. To establish this it is for him to show that he did not in fact know that the publication contained defamatory matter and that he had no reason to believe that it was likely to contain defamatory matter Gatley on Libel and Slander, 7th ed., para. 241.’

4.6   At page 508, Bridge LJ, using strong language to say Lord Denning’s view is unacceptable, further stated that :

‘ Secondly, it claims, in effect, that the Master of the Rolls’ private researches demonstrate the law, as stated in the leading text book, to be not only wrong but unarguable. Such a claim is untenable.’

4.7   In the more recent case of Metropolitan Schools Ltd, Eady J at paragraph 69 expressed his difficulties in accepting Lord Denning’s alternative view :

‘ Mr White invites me to take the same view of the defence of innocent dissemination as that of Lord Denning MR and to hold that his client would not be liable unless it could be shown that he was positively aware that any defence would fail. There is no other support for that view of the law available. It depends entirely on adopting the reasoning of Lord Denning MR. I should do so, says Mr White, because the common law is obviously uncertain and I should err on the side of protecting his client’s article 10 rights (and, for that matter, the rights of those who use search engines). I have considerable difficulty with doing so, however, because it seems to me that the defence of innocent dissemination as interpreted by Lord Denning MR throws up more problems than it is likely to solve. How could someone hoping to avail himself of the defence know that a defence of justification was bound to fail, save in the simplest of cases? How is he/she to approach the (often controversial and uncertain) question of meaning? How much legal knowledge is to be attributed to him/her in arriving at these conclusions? What of a possible Reynolds defence?’ (emphasis added)

3)  Academic discussion

4.8   The distinction of these two views has attracted academic discussion.  In Carter-Ruck on Libel and Privacy (6^th Edn, 2010), paragraph 14.7, the editors suggested that :

‘ Though the position is not without doubt, the view expressed in most of the authorities and, it is submitted the better view, is that the defence will be defeated only where the subordinate distributor knows the publication contains a libel as opposed to a merely defamatory statement. Thus, to put it affirmatively, the defence is available both where the defendant neither knew nor ought to have known that the publication contained a defamatory imputation and also where the defendant knows that the publication contains defamatory material but honestly and reasonably believes that a defence is available in respect of that publication.’ (emphasis added)

4.9   While Duncan & Neill on Defamation (3^rd edn, 2009), paragraph 20.03 also referred to this distinction, at footnote 3 to this paragraph, the editors also said that :

‘ …. Earlier cases do not discuss the distinction between ‘libellous’ and ‘defamatory’ and it may well be that the reports use the former term loosely: see, for example, Emmens v Pottle (1885) 16 QBD 354, Sun Life Assurance Co of Canada v WH Smith and Son Ltd (1934) 150 LT 211, Mallon v WH Smith and Son Ltd (1893) 9 TLR 621, Haynes v de Beck (1914) 31 TLR 115, Martin v Trsutees of the British Museum (1894) 10 TLR 338.’

4.10   The editors of Gatley on Libel and Slander, 12^th Ed (2013) at footnote 338 to paragraph 6.38 under the heading of ‘Relationship of the Defamation Act 1996 and the common law’ stated that,

‘ Though the older cases are briefly reported it seems likely that in fact they involved situations where the defendants were simply unaware of the contents of what they were selling, in which event perhaps too much weight should not be placed upon the precise words used by the judges, who did not, after all, say “actionable libel”.’

4)  The defendant’s argument

4.11   Mr Shieh argued that Lord Denning’s alternative view stands to reason :

(1) Take modern day Hong Kong as an example, many newspapers and magazines routinely publish articles which, on their face and title, bear prima facie defamatory meanings (i.e. articles which lower other people’s reputation).

(2) If a distributor is liable (or disentitled from relying on the defence of innocent dissemination) simply because the prominent headline or title bears a defamatory meaning, distribution channels for all but the most uninformative publications would be blocked.  News vendors could not safely sell or distribute many newspapers or magazines.  That would be an unacceptable restriction of freedom of speech and the freedom of the press.  Mr Shieh specifically referred to the position of a news vendor in the street which sells large number of newspapers and gossip magazines which may contain defamatory content on their covers.

My view

5.1   While the view of Lord Denning must be accorded with the greatest respect, the task of this Court is to ascertain what the law is.  Ribeiro PJ stated in paragraph 24 of Fevaworks Solutions Ltd :

‘ 24. The strictness of the publication rule plainly called for some relaxation. The common law defence of innocent dissemination was developed to that end. It was a defence which became established in English law as a result of the decisions in Emmens v Pottle in 1886 and Vizetelly v Mudie’s Select Library Ltd in 1900.’

5.2   The courts had not drawn any distinction between the defamatory matter and libel in the sense now being pressed upon us until Lord Denning’s dissenting view in Goldsmith in 1977.  Even that remains to be a minority view not accepted by the majority in the case.  I agree with the views expressed in Gatley and Duncan & Neill that the courts in the earlier cases probably used the two phrases loosely and did not intend to seek a distinction between them.  In my view, uncertainty will be encountered if the alternative view is adopted for the reasons advanced by Eady J which I respectfully adopt.  For example, how could someone hoping to avail himself of the defence know that a defence of justification was bound to fail, save in the simplest of cases?  How is he to approach the (often controversial and uncertain) question of meaning?  How much legal knowledge is to be attributed to him in arriving at these conclusions?  What of a possible Reynolds defence under qualified privilege?

5.3   But I think there is a more fundamental objection to Lord Denning’s alternative view in that it unnecessarily broadens the scope of the innocent dissemination defence and lowers the liability threshold for libel by a subordinate distributor.  The starting point of the discussion is that a subordinate distributor is equally liable as the main publisher of the libel.  It is against the harshness of this rule that the innocent dissemination defence is made available to the subordinate distributor.  However, under the alternative view, the subordinate distributor will only be liable if he honestly or reasonably believes that the defamatory material he is aware of does not constitute a libel.  The defence as reformulated depends on his belief that the defamatory content does not constitute an actionable libel.  Contrast the position of the main publisher, in order to meet the claim, he must establish his defence such as fair comment, qualified privilege etc. by way of evidence.  His honest or reasonable belief that the content is not libellous is not sufficient.  Seen in this light, one may ask why should there be such a difference between the main publisher and subordinate distributor when they are both aware of the defamatory matter?  Why should the liability threshold for a subordinate distributor be lowered to such an extent?  If a balance is to be struck, is the traditional view based on the absence of knowledge (or lack of negligence) of the defamatory matter not already sufficient to reduce the harshness of the strict rule? 

5.4   The Court of Final Appeal in Fevaworks Solutions Ltd had used the words defamation and libel interchangeably.  I do not understand this to mean that there is any real difference of the words in the context of the innocent dissemination defence.  The judgment of the Court of Final Appeal did not reveal that there were arguments on the distinction of ‘defamatory’ and ‘libellous’ content although its reference to Metropolitan Schools Ltd meant that it was aware of the distinction of the two concepts.  I would be surprised if the Court of Final Appeal in reviewing and restating the innocent dissemination defence intended that the use of the word ‘libel’ should bear the meaning now advanced by the defendant.

5.5   The extent of the common law defence may be considered against the United Kingdom Defamation Act 1996.  Ribeiro PJ at paragraph 30 stated that :

‘ 30. ….Thus in England, Lord McKay of Clashfern LC introducing the bill which became section 1 of the Defamation Act 1996, described it as ‘a modern equivalent of the common law defence of innocent dissemination.’

5.6   This point was referred to by the academic works.  Carter-Ruck pointed out at paragraph 14.7 :

‘ It should be noted that if this view [i.e. the alternative view] is correct, then it would appear that the common law defence will be less easily lost than the defence under Defamation Act 1996, s 1 which is only available if the defendant neither knew, nor had reason to believe that what he did caused or contributed to the publication of a defamatory statement.’

5.7   Duncan and Neill at paragraph 20.03 also said that :

‘ If, as the language of this and earlier cases might suggest, liability depends on whether the distributor knew or ought to have known that the publication contained or was likely to contain matter which was not merely defamatory but libellous (that is, both defamatory and not protected by any of the substantive defences), then the common law defence would afford greater protection than s 1 of the 1996 Act, literally interpreted. The point, however, is far from clear.’

5.8   Mr Mok referred to the Hansard, House of Lords, 2 April 1996, col.214-216 on the debate on the enactment of the Defamation Act 1996.  It is interesting to note that Lord Lester of Herne Hill had attempted to move an amendment to the draft legislation :

‘ Yet the defence of innocent dissemination, as it is set out in Clause 1, would, as I understand it, exclude from its protection those who were aware, or ought to have known, that the material they were handling was merely defamatory whether or not its publication was defensible. This, I believe, would have important implications for the large newsagents I have mentioned. Once they have discovered a defamatory statement in one of the publications they distributed, they would be denied the protection of the defence of innocent dissemination regardless of any steps that they subsequently took to assure themselves that the statement was true and that its publication was not therefore libellous. If I am right, that would have the unfortunate effect that it might encourage newsagents, booksellers and libraries to keep their eyes shut and remain ignorant of the contents of the publications they carry.

This amendment seeks to bring the defence of innocent dissemination in Clause 1 into line with my understanding of the common law defence.  I beg to move.’

5.9   This view echos Lord Denning’s alternative view.  The Lord Chancellor, Lord Mackay of Clashfern in response to Lord Lester’s proposal stated that :   

‘ Clause 1 is intended to provide a defence for those who have unwittingly provided a conduit which has enabled another person to publish defamatory material. It is intended to provide a modern equivalent of the common law defence of innocent dissemination, recognising that there may be circumstances in which the unwitting contributor to the process of publication may have had no idea of the defamatory nature of the material he has handled or processed.

The amendment proposed by the noble Lord would, in effect, create an entirely new defence.  It would give a defence to a person who was indeed aware, or on notice, that he was contributing to a defamatory publication, but nevertheless chose to do so.  It would allow him to rely on his own judgment as to whether there might be some other defence in the event of the defamed person taking proceedings, and have the effect of presenting him with a real defence because he thought, however wrongly, that he would be able to rely on some other defence.’  (emphasis added)

5.10   Lord Lester then withdrew his proposed amendment :

‘ I have been persuaded by what the noble and learned Lord has said. We share a common aim: to achieve a fair balance in the Bill between the rights of plaintiffs and defendants. I am reassured by the explanation that Clause 1 is designed to give effect to the common law defence of innocent dissemination. In those circumstances, I beg leave to withdraw the amendment.’

5.11   This debate highlights one thing, namely, the innocent dissemination defence is an attempt to strike a balance between the right of the plaintiff who is defamed and the defendant who distributes the defamatory matter.  The plaintiff would not have suffered the wrong had it not been for the link in the chain of publication provided by the defendant distributor.  On the other hand, as pointed out by Ribeiro PJ at paragraph 23 :

‘ under the strict rule, publication of a libel, for instance by a newspaper, meant that the journalist who was the originator of the article; the editor who accepted and prepared it for publication; the printer who set the type and printed it; the wholesale distributor who disseminated it; the newsagents who sold it to the readers; and the newspaper’s proprietor who published it through its employees or agents were all jointly and severally liable for the damage to the plaintiff’s reputation.’

5.12   Hong Kong is proud to have a free, independent and courageous press.  Freedom of speech and freedom of the press are some of our treasured core values and I would loath to see them being deprecated.  But I do not regard the traditional view of the innocent dissemination defence is disproportionate to the recognisation of these values.  In my view the proper balance is struck by the traditional view of the innocent dissemination defence which mitigates the hardship that falls upon a distributor who may distribute defamatory articles innocently.  It may not be perfect but it certainly is a workable test.  Further to address the concerns raised by Mr Shieh, the solution is really for the distributor to take indemnities or by taking out insurance against liability, a recommendation raised by Eady J in Metropolitan Schools Ltd.

5.13   In respect of the news vendors in the streets, the reality is that they are unlikely to be named as defendants in the libel suit.  The role of a subordinate distributor may range from a busy newsagent distributing large quantity of newspapers and magazines to a distributor like the defendant in this case who distributes only one magazine of a circulation of about 180 copies in Hong Kong.  In between, there are the news vendors in the streets who sell newspapers and magazines in their stalls.  But, since the defence of innocent dissemination is based on a compromise, then the news vendors must be subject to the same principles governing that of the busy newsagent or the defendant.  One just cannot adopt different thresholds for each of them.  However, how a news vendor may be able to discharge his duty will depend on the individual circumstances of the case and it is too much of a generalisation to say that the traditional test is not workable with these news vendors.

5.14   In this case the Judge declined to follow Lord Denning’s approach.  I agree with his view.

Application of the defence to this case

1)  The connection between the publisher and the defendant

6.1   The Judge summarised the connection between the defendant and the publisher of the Caijing Magazine as follows :

‘ 19. The Magazine was founded in 1998. Originally its publisher was an organisation in Beijing called the “Stock Exchange Executive Council” (“SEEC”) (also referred to as「聯辦」or “Lianban”) which does not appear to have anything really to do with any stock exchange because there has never been any stock exchange in existence in Beijing. SEEC was established by a Mr Wang Boming (“Mr Wang”) in 1988.

20. Initially, the advertising matters of the Magazine were handled by SEEC itself. Subsequently, SEEC transferred the exclusive advertising rights in the Magazine to a company and, on 22 March 2000, such rights were further transferred to another company called “Beijing Caixun Advertising Co. Ltd (“Beijing Caixun”).

21. The Defendant was incorporated in the Cayman Islands originally under another name.  As a result of a reverse takeover in about 2002, 70% of the interest in two advertising companies, namely, Beijing Caixun and another company by the name of Shenzhen Caixun Advertising Co. Ltd (“Shenzhen Caixun”) were injected into the Defendant.  The remaining 30% in those two advertising companies was also acquired by the Defendant in late 2003.

22. Thus, in effect, the Defendant came to possess the exclusive advertising rights in the Magazine.

23. In 2003, the Defendant changed its old name to its present name, i.e., SEEC Media Group Limited.

24. In about 2002, a company by the name of “Beijing Caijing Magazine Limited” (“the Publishing Company”) was set up in Beijing.  It took over the publishing business of the Magazine from SEEC.  From then onwards, the Publishing Company became the「出版單位」(publishing unit) and SEEC remained as the「主管單位」(governing unit) and「主辦單位」(managing unit) of the Magazine.

…..

26. The Defendant has four executive directors.  They are : -

(i) Mr Wang;

(ii) Mr Zhang Zifang (“Mr Zhang”);

(iii) Mr Dai Xiaojing (“Mr Dai”); and

(iv) Mr Li Shijie (“Mr Li”).

These four persons are also directors of the Publishing Company.

27. As regards Mr Wang, it has been mentioned above that he established SEEC in 1988 and that it was SEEC which founded the Magazine in 1998.  Mr Wang is also : -

(i) the chairman and chief executive officer of the Defendant;

(ii) the chairman and legal representative of the Publishing Company;

(iii) the editor-in-charge of the “producer” of the Magazine; and

(iv) the chief executive officer of SEEC.

28. The office premises used by the Defendant, the Publishing Company and SEEC in Beijing are all situated in the same building, namely, Prime Tower in the Chaoyang District, although on different floors.’

2)  The defendant’s role

6.2   The Judge referred to the evidence of Mr Tseung Sheung Shun Joseph (‘Mr Tseung’) on the role played by the defendant in handling the subscription and distribution of the magazine :

‘ 30. Mr Tseung says that he has been the company secretary of the Defendant since the year 2000. He further says that as a holding company the Defendant does not have any major business operation in Hong Kong. It only employs two persons, namely, himself and a Ms Chan who assists him.

31. He says in his Witness Statement as follows : -

“ Role of the Defendant in Handling the Subscriptions of Caijing

11. As I have indicated under paragraph 5 above, the publisher of Caijing is not part of the Group, the Defendant’s major role is to act as the contact point for subscriptions of Caijing in Hong Kong and also for overseas subscribers except for the subscribers in China.

12. The Defendant maintains the information of subscribers of Caijing in Hong Kong, and collects the subscription money. At present, the Defendant has a database of around 180 subscribers subscribed Caijing through it.

13. The Defendant also deals with the dispatch of issues of Caijing to the subscribers.

The Roles of Ms Chan in Handling the Subscription and Dispatch of Caijing to the Subscribers

14. Ms Chan is the staff member of the Defendant responsible for subscription and dispatch of Caijing in Hong Kong.

15. According to Ms Chan, she will obtain information of the particular issue of Caijing such as weight and approximate delivery date from our contact in Beijing, normally three days before each issue of Caijing is released.

16. Ms Chan will prepare the address labels of the subscribers.

17. For subscribers located in non-commercial areas or for overseas subscribers, Ms Chan will put labels and appropriate postage onto the envelopes. For the local subscribers located in commercial areas, she will only prepare the address labels.

18. On the Mondays when the issue of Caijing is released every fortnight, Ms Chan will arrange for EDS Express Co. (the “Courier”) to come to the Defendant’s office in Hong Kong and collect the envelopes and labels.

19. 陳新記書報有限公司 (Chan Sun Kee Books And Newspaper Ltd) (“陳新記”), the distributor of Caijing in Hong Kong for the newsstands, will also receive the magazines on the release date. The Courier will then go to 陳新記 and collect the magazines after collecting the envelopes and labels from the Defendant’s office. They will put the magazines into the envelopes or paste the address labels onto the plastic wrappings of the magazines.

20. These tasks only form a very insignificant part of Ms Chan’s daily duties and it is estimated that she has spent approximately 11 hours for handling the subscription and dispatch of Caijing on a monthly basis.”

32. In his oral evidence, Mr Tseung has supplemented his evidence as follows : -

(i) The Magazine would be printed by a printer in Shenzhen commissioned by the Publishing Company.

(ii) For every issue, the Shenzhen printer would deliver 400 – 500 copies to Chan Sun Kee in Hong Kong.

(iii) The Defendant would only be supplied with a few left-over copies of each issue by Chan Sun Kee 2 or 3 days after the bulk had been sent to newsagents for sale in the street and had been sent or posted to subscribers by the Courier.

(iv) He and Ms Chan would only get to see copies of each issue after the distribution and not before.

(v) The Defendant does not charge the Publishing Company anything for handling the subscription and the distribution.’

3)  The decision

6.3   The Judge held that the defendant was unable to rely on the innocent dissemination defence because of its negligence :

‘ 50. ….the Defendant has been negligent in that the system adopted by it simply makes it impossible for itself to vet the issues in any manner, even in a most casual way, before they are sent out to subscribers. ….

51. The position of the Defendant cannot be justifiably compared with that of a newsagent distributing or selling newspapers.  There is no suggestion that Mr Tseung and Ms Chan are overwhelmed with other work or that the number of publications they have to handle is huge. There is no suggestion that the issues of the Magazine must be sent out with great urgency, unlike newspapers in respect of which probably every minute counts.  There is no reason why the Defendant cannot obtain a copy of each issue in advance from the Publishing Company in some shape or form or in its final form just to have a look to make sure that there is nothing amiss. ……

52. In the present case, if anyone from the Defendant would just care to take a casual look at the cover of Issue No. 265, he or she would have noticed the words “involving the richest man Li Ka Shing”. This should at once ring an alarm bell and should have caused the Defendant to look at the relevant articles inside to make sure that there was nothing libellous about Mr Li Ka Shing.  In turn, the libellous material about the Plaintiff would have been discovered.’

4)  Mr Shieh’s arguments

6.4   Mr Shieh argued that the authorities hold that a distributor is not negligent simply because he has not employed someone to go through the contents of all the magazines or newspapers carried by him from cover to cover.  He would also not be negligent merely because he has not put in place a mechanism for ‘spot-checks’.  He argued that the judge’s holding is not consistent with these cases.  He referred to Bottomley v Woolworth (1932) 48 TLR 521, per Scrutton LJ at page 521 :

‘ Anyone who read the table of contents would have seen that it included what was probably a defamatory article, but Messrs Woolworth and Co did not read every magazine that was sent to them.

……If [the defendant] had in fact examined specimen magazines that would have had no effect unless the libel was contained in the actual magazine which was examined.  How would a periodical examination of specimen magazines show that the magazine in question contained a libel?’

6.5   He submitted that the position is the same in respect of newspaper: see Emmens, at page 357 (Lord Esher MR) and 358 (Bowen LJ); Mallon v WH Smith & Sons (1893) 9 TLR 621, page 622 (Cave J).

6.6   Mr Shieh further submitted that the Judge, in proposing the supposedly reasonable system in paragraphs 51-52, has failed to consider how the defendant would have reacted to an issue containing prima facie defamatory materials.

(1) If one adopts the legal test that a distributor should desist upon knowing of existence of prima facie defamatory words, then Ms Chan would be required to immediately desist from public publication.  This would be an unacceptable and disproportionate intrusion to the freedom of speech and the freedom of the press.  Given the nature of the magazine (known for investigative journalism), the supposed system would mean that Ms Chan has to desist from publication in most cases.

(2) If one adopts the alternative legal test that a distributor should desist upon knowing of existence of libellous words, then the ‘system’ suggested by the Judge would require her to investigate into whether there is any defence to a libel suit.  This would place an unjustifiably heavy burden on distributions in the defendant’s position, and would also be an unacceptable and disproportionate intrusion to the freedom of speech and the freedom of the press.

(3) The judge has failed to address his mind to these very important issues in the assessment of what is reasonable.  If he had done so, it would have been obvious that the system he envisaged is not reasonable. 

6.7   Mr Shieh submitted that it is also wrong for the judge to say in judgment paragraph 51 that the defendant’s position could not be compared to a newsagent distributing or selling newspapers.  The judge’s reason for so saying is that Mr Tseung and Ms Chan had time in their hands and the magazine did not have to be published urgently is wrong,

(1) As accepted in judgment paragraphs 30 and 31, Mr Tseung is the company secretary and Ms Chan assisted him.  They obviously had other duties apart from the handling of the labels, which occupied only a very small part of their time.

(2) It is fundamentally wrong to hold that a busier person would not be negligent, but a less busy person would.

(3) It is clear that the magazine is a periodical which reports news.  It is obvious that news is a highly perishable commodity.  It is absurd to expect that subscribers to be content with being sent the magazine even just a few days after they are available at the newsagent.

5)  My view

6.8   I disagree with Mr Shieh’s view.  The standard of reasonable care is to be judged according to the circumstances of the case.  Ribeiro PJ had pointed out that :

‘ 90. Formulated as a defence which requires the defendant to prove that he did not know and would not, with the exercise of reasonable care in the relevant circumstances, have known that the article contained defamatory content, the focus of the innocent dissemination defence has been on past, completed publications. Thus, a newsagent who has already sold its consignment of newspapers which contained an offending article will rely on the defence seeking to prove that, when making the sales, it was not aware of the defamatory content and could not, with reasonable care, have discovered it.

91.   What is needed to satisfy the standard of reasonable care will vary according to the circumstances. …’ (emphasis added)

6.9   The requirement of ‘reasonable care’ clearly envisages that it is not sufficient for the subordinate distributor to say that he does not have knowledge because he chooses not to read the article.  The whole ethos of the innocent dissemination defence requires him to take reasonable steps to find out whether the article contains defamatory matters.  What is reasonable must vary according to the circumstances.

6.10   In this case as the Judge held that :

‘ 51. ……This is against the background that, a few days before the issues of the Magazine are sent to Hong Kong, Ms Chan would already be able to get information of the weight and approximate delivery date from the Publishing Company. The position is made worse by the fact that the Defendant and the Publishing Company have got common directors. The directors of the Defendant as such should have been able to make and should have made it possible for the Defendant to have a system whereby the Defendant could at least have a look at the issues before they were sent out. The directors of the Defendant could have devised a system of having checks on behalf of the Defendant in Beijing, even by entrusting such task to the editorial board of the Publishing Company.’

6.11   As shown by the case of Sun Life Assurance Co of Canada v W H Smith & Son Ltd [1933] All ER Rep 432 (CA), the lack of a system which imposed supervision on what a newsagent exhibited at their bookstalls justified a finding of negligence by the jury.  In that case the newsagent received newspaper posters from the newspaper publisher containing libellous words and which they displayed at their bookstalls.  Scrutton LJ at 437 held that :

‘ ….My own view is that it would be better in future if two questions are put to the jury on those lines: (i) whether the defendant knew, and (ii) whether he would have known if he had carried on his business properly.

If that is the law, and the way in which the defendants can establish that they are not liable, it seems to me that there was ample evidence in the case now before the court upon which the jury might answer the fourth question in the way they did, namely, that there was negligence on the part of the defendants in not knowing that the poster or the newspaper contained a libel.  If the defendants are compelled at their head office to send out papers and posters without knowing what is in them because of the mass and volume of their business, and so, not knowing whether a poster may contain a libel, direct the managers of their bookstalls, who have an opportunity and would, in the course of business, look at the posters before they are posted, not to exercise any discretion or take any step to delay the posting if they think, looking at a poster, that it might be libellous, the jury may very well find that they are carrying on their business carelessly in that respect, with the result that liability will attach to them if, for payment, they exhibit a poster which does in fact contain a libel, as has been found in this case.’ (emphasis added)

6.12   In Bottomley, the plaintiff complained that among the ‘remainders’ brought by the defendants and sold by them at their various stores were copies of the ‘Detective Story Magazine,’ dated October 22, 1927, which contained an article headed ‘Swindlers and Scoundrels.  Horatio Bottomley, Editor and Embezzler.’ Amongst the questions put to the jury and their answers was the following :

‘ 3. When the magazine was disseminated by them was it by any and what negligence on their part that they did not know that it contained a libel?—We find that there was negligence owing to the absence of periodical examination of specimen magazines.’

6.13   The jury had previously answered yes to the question whether the defendants were innocent of the libel contained in the magazine disseminated by them.  The trial judge held that since the jury had found the defendants innocent of any knowledge of libel there was no evidence for them to find negligence on the part of the defendants.  He entered judgment for the defendants.  The judgment was upheld on appeal.  Scrutton LJ held that :

‘ The remainders of American magazines were disposed of by Messrs. Woolworth and Co., and they sold about 50,000 copies every week. The average weekly consignment might contain from 400 to 500 different magazines. The matter complained of was obviously defamatory unless it was justified, and it was not justified. Any one who read the table of contents would have seen that it included what was probably a defamatory article, but Messrs. Woolworth and Co. did not read every magazine that was sent to them.

There was no evidence to justify a finding that there was in the nature of the magazine something which should have led the defendants to suppose that it contained a libel.  There was in the subject-matter nothing which should have put them on their guard.  The jury’s answer to question 3 was absurd and irrelevant.  If Messrs. Woolworth had in fact examined specimen magazines that would have had no effect unless the libel was contained in the actual magazine which was examined.  How would a periodical examination of specimen magazines show that the magazine in question contained a libel?’

6.14   The decision in Bottomley was clearly fact specific and it does not provide a ‘be all and end all’ argument that subordinate distributors are not expected to devise a system to check the content of the articles that they are to distribute.  As discussed earlier, a subordinate distributor may take many forms, from a busy newsagent which deals with large volume of publications from different publishers to someone like the defendant in the present case which only deals with one magazine, the standard of reasonable care must be judged according to the circumstances of the case.  Whether discovery is an onerous task really depends on the circumstances.  In this case the cover of this particular issue of the Caijing Magazine bears this title :

「新貴之盟一群橫跨商務工商外匯領域的青年技術官僚如何自設外資審批雙向收費站,牽涉華人首富李嘉誠、內地首富黃光裕，以及西門子、飛利浦首創等知名企業。」

Translation : ‘Alliance of the newly appointed officials (or VIP).  How did a group of young technocrats who stretched across business, commercial-industrial and forex sectors set up the two-way tollbooth on foreign investment approval, involving the richest Chinese man Li Ka Shing, the richest man in China Huang Guang Yu, and also famous enterprises such as Siemens, Philips and Capital Group.’

[Note : The translation of the heading by the parties and referred to by the Judge was ‘Alliance of the Nouveau Riche’. I do not think it convey the full meaning of the term「新貴」]

6.15   The Judge held this is a controversial title and if anyone from the defendant would just care to take a casual look at this cover, he or she would have noticed the words ‘involving the richest man Li Ka Shing’.  This should at once ring an alarm bell and should have caused the defendant to look at the relevant articles inside to make sure that there was nothing libellous about Mr Li Ka Shing.  In turn, the libellous material about the plaintiff would have been discovered.  I agree with his view.

6.16   If the subordinate distributor had knowledge of the defamatory content, then it follows that it must desist or remove it from distribution if it wishes to escape liability. 

Actual knowledge

7.  The defendant having been found negligent, its liability must have been established.  This being the case I will refrain from addressing the issue whether the defendant had actual knowledge of defamatory matter attributed by Mr Wang Boming’s (one of its executive directors) knowledge (which was challenged) of the libel.

Conclusion

8.  I would dismiss the appeal with costs nisi to the plaintiff with certificate for two counsel.

Hon Chu JA :

9.  I agree with the judgment of Cheung JA and have nothing to add.