GREAT EAST ASIA SURVEYORS AND CONSULTANTS CO LTD AND OTHERS v. CHAN KAM WAI FREDERICK

CACV 197/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL No. 197 of 2004

(ON APPEAL FROM DCCJ No. 1732 of 2003)

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JUDGMENT

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Hon. Cheung JA:

1.  I agree with the judgment of Yuen JA and the orders she proposes to make.

Hon Yuen JA:

2.  This is an appeal by the Plaintiffs against an order of H.H. Judge Carlson made on 8 April 2004 in which he (a) refused to order that part of the Counterclaim alleging defamation be struck out unless it be amended to properly plead a claim in defamation and (b) ordered the Defendant to pay 1/3 of the Plaintiffs’  costs of the summons.  At the same time, the judge had also refused the Plaintiffs’ application to strike out parts of the Defendant’s Defence.  The Plaintiffs had in their Notice of Appeal also lodged an appeal against this order, but withdrew it at the hearing before us without prejudice to their right to issue another application for strike-out now that the Defendant has supplied further and better particulars of the Defence which the judge had ordered.

3.  There is also a cross-appeal by the Defendant from the judge’s order for costs, the Defendant’s position being that he should not have been ordered to pay any part of the costs. 

4.  The judge had given both parties leave to appeal against his orders. 

Background

5.  I shall briefly set out the background relevant to the present appeal.  The Defendant was previously employed by the 1^st Plaintiff.  A written contract of employment was signed, but it would appear the Defendant was not given a copy. 

6.  When the Defendant subsequently left the 1^st Plaintiff’s employ, the 1^st Plaintiff asserted that he was prohibited under a restraint of trade clause in the contract from undertaking similar work for a period of 1 year. 

7.  The validity or otherwise of this restraint of trade clause has apparently not been made the subject of dispute, at least in this action.  Instead, things took a rather unusual turn. 

8.  The Defendant claimed that he had not noticed the restraint of trade clause in the contract when he signed it and concluded that it must have been added afterwards. 

9.  This led to an allegation of forgery (amongst other things) which the Defendant made in a letter dated 17 February 2003 to the 1^st Plaintiff and its solicitors, which he copied to an officer of the Labour Department to whom he had reported the 1^st Plaintiff for not having provided its staff with copies of their contracts. 

10.  About a month later, on 18 March 2003, the Defendant sent another letter to the 1^st Plaintiff’s customers and business associates, in which he alleged (amongst other things) that the restraint of trade clause had been “maliciously falsified” by the 2^nd Plaintiff, a director and controlling shareholder of the 1^st Plaintiff.

11.  These letters led to the issue of the writ in this action by the Plaintiffs for damages for defamation.

12.  The Defendant filed a Defence, but he also filed a Counterclaim in which he also claimed to have been defamed by the Plaintiffs.  He pleaded:

“1. The Counterclaim - Based on the events documented in the Statement of Claim of the Plaintiffs from Section 1 to Section 8, and in the Statement of Defence of the Defendant from Section 1 to Section 5 (hereinafter collectively referred to as “the Events”), the Defendant counterclaims the Plaintiffs for ... publicize false and defamatory information regarding the Defendant, ...”;

“3. Publicize False and Defamatory Information - The Plaintiff publized [sic] the false claim as standard fax (Appendix A dated 24 December 2003).  Such claim was never made known or verified with the Defendant throughout my employment period (August 2001 to December 2002) and only first known to the Defendant on 6 January 2003.  The act of the Plaintiffs to publize [sic] the false claim disparaged professional and career status of the Defendant and induced fear and anxiety to the Defendant”.   

13.  Appendix A was a fax from the 1^st Plaintiff to other companies shortly after the Defendant’s departure which alleged that the Defendant was under a 1-year restraint of trade clause and asking the recipients to note the same to avoid legal disputes. 

14.  The Defendant counterclaimed for damages and an injunction “to demand the Plaintiffs to publish clarification and apology of the defamatory acts and words committed against the Defendant”.

Pleading of defamation in Counterclaim

15.  I deal first with the judge’s refusal to order that those parts of the Counterclaim alleging defamation be struck out unless it be amended to properly plead a claim in defamation. 

16.  I recognise from the outset that this was a matter of discretion for the judge, and an exercise of discretion would not be lightly upset unless the judge had erred in law or was under a misapprehension of fact, or had taken irrelevant matters into consideration, or had failed to take relevant matters into consideration, or the exercise of discretion was such that no court properly directing itself on the relevant principles would have come to that decision.

17.  I also fully appreciate the judge’s wisdom in adopting a more generous approach in interpreting the Defendant’s pleadings as the Defendant did not have the benefit of legal representation and defamation pleadings are in any event notoriously difficult to get right, even for lawyers.

18.  Having said that, the law remains the same whether for the lawyer or for the layman.  As a matter of law, a party who claims to have been defamed must specify what he claims to be the defamatory words, what he claims are their natural and ordinary meaning (and/or what he claims are innuendo), and in what way he claims they are defamatory of him, or the "defamatory sting" (Gatley on Libel and Slander 10^th ed paragraphs 3.12, 3.15-3.18, 26.11-26.12, 26.20-26.22, etc.  Although the English Civil Procedure Rules have no equivalent in Hong Kong, the requirements of pleading these matters have been part of the common law).  Absent these essential matters, it is impossible for a defendant against whom a claim of defamation is made to meet the case and impossible for the trial judge to know what are the real issues between the parties. 

19.  I have assumed that the allegation of defamation in paragraph 1 of the Counterclaim refers to the matters pleaded in paragraph 3.  In the way that the Counterclaim is pleaded, when read with the Defence and Appendix A, one can understand that the Defendant is saying that since he had not signed a contract containing the restraint of trade clause, the Plaintiffs’ assertion in the fax that he was under restraint of trade was false.  But is the Defendant saying that the fax was defamatory of him (i.e. had disparaged his character) simply because it falsely claimed that he was under restraint of trade?  Or is he suggesting that the words in the fax meant something more?  If so, what?  And in what way were they defamatory?

20.  In his Ruling, the judge said at paragraphs 15 and 16 that he did not consider the Plaintiffs to be “forensically prejudiced” and that in any event, much of the subject matter of their complaint would be cured by the provision of the further and better particulars ordered.

21.  With respect to the judge, I have to disagree.  First, a party is substantively prejudiced if he cannot tell from the other party’s pleading what that party’s case is.  The Plaintiffs are obviously entitled to know what the Defendant is alleging so that they can respond to it, whether by pleading a defence to it, or by applying to strike it out on the basis that it discloses no reasonable cause of action.  As noted above, one does not know from the Counterclaim whether the Defendant is alleging defamation simply because he says the fax contained a false assertion that he was under restraint of trade, or whether he is saying there was more to it. 

22.  Secondly, the further and better particulars ordered by the judge were not of the Defendant’s allegation of defamation by the Plaintiffs, but of the Defendant’s defence to the Plaintiffs’ allegation of defamation by him.  A perusal of the Further and Better Particulars filed by the Defendant served to confirm that.  There may be some commonality, but unless the extent of the Defendant’s case on defamation is revealed, that cannot be assumed.

23.  By reason of the above, I have to say with respect that the judge had failed to direct himself properly on the Plaintiffs’ entitlement to the matters set out in paragraph 18 above. 

Order

24.  I would set aside the order refusing paragraph 2 of the Plaintiffs’ summons and make an order in terms, save that the Defendant having asked for 28 days for the amendment and Mr Chain for the Plaintiffs having no objection, the period of 28 days is to be substituted for 14 days.

Costs appeals

25.  Dealing first with the Defendant’s costs appeal (although there is no notice of appeal), he submitted that he should not have been required to bear any costs at all, because when he realized at the hearing before the judge on 25 March 2004 that he was obliged to supply further and better particulars, he provided them orally at the hearing and then in written form afterwards. 

26.  In my view, that is not a ground for challenging the order that he bear (part of) the costs of the hearing.  The hearing on 25 March 2004 was necessitated (partly) by his having failed to provide further and better particulars when requested.  By the time he provided them at the hearing, the Plaintiffs had already expended the costs of instructing counsel and solicitors to attend the hearing.  The fact that as a layman, the Defendant was unaware of his obligation to provide further and better particulars does not change the fact that the Plaintiffs had to pay their lawyers to attend the hearing in order to get the particulars. 

27.  The Defendant said that as he was ignorant of the law, he should not be “punished” for it.  That is a misconception.  The judge did not order costs to be paid on the indemnity basis, so it was not a case of the Defendant being “punished” by the judge as he seems to think.  The costs order was on the party and party basis, so it was simply to (partly) compensate the Plaintiffs for the legal fees they had to expend.  The Defendant’s costs appeal must therefore be dismissed. 

28.  As for the Plaintiffs’ costs appeal, the judge awarded them 1/3 of the costs presumably because they had sought 3 orders and he had given them only 1 (paragraph 3 of the summons).  On appeal, they have succeeded in overturning the judge’s decision refusing paragraph 2 but they did not withdraw their appeal in respect of the judge’s decision refusing paragraph 1 until the hearing before this court.

Order

29.  Taking everything into account, as the Plaintiffs have only partly succeeded in their appeal and the Defendant has wholly failed in his, I consider that it would be fair to order that the Defendant is to pay half of the Plaintiffs’ costs here and below.