MAK SHIU TONG v. YUE KWOK YING AND ANOTHER

HCA 3758/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3758 OF 1998

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D E C I S I O N

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Introduction

1. The plaintiff commenced this action on 11 March 1998 claiming various relief against the defendants for libel. Judgment was already entered against the 2nd defendant ("D2"). Leave has been given in July 2001 for this action (as between the plaintiff and the 1st defendant ("D1") to be set down for trial and the trial is scheduled to be in April 2002.

2. On 3 December 2001, the plaintiff took out this application asking for:-

(a) D1's counterclaim to be struck out;

(b) D1's amended defence to be struck out;

(c) consequentially, liberty for the plaintiff to enter judgment against D1.

3. The libel consisted of an article published by the "EastWeek" ("東周刋") magazine on about 5 March 1998. The parts relied upon by the plaintiff in his statement of claim are:-

(a) 「有人收咗錢就無諗過起樓，本來御花園同天星廣場應該喺九五年底前完工，但係到而家為止，仲係爛地一塊。」

「無諗住起已經唔係好事，為咗敷衍小業主，佢委託我當法律諮詢人，向小業主解釋中國法律，麥紹棠並答允按中國法例賠償未能如期交樓的利息，更承諾九六年底可以全部完工。原來麥紹棠一路以來都採『拖字訣』，而家小業主堅持喺廣東省，深圳等地告緊佢。按中國法例，小業主一旦勝訴，麥紹棠成為法定持牌人，一定要負責，會被起訴，香港法例唔同大陸法，喺大陸出咗問題，麥紹棠要負責。」

(b) 「太陽城爛尾樓係一個『局』，受害嘅層面好廣，而有人就一個仙都無出過，更挪用訂金作收購其他上市公司之用......」

The English translation of the above is:-

(a) "Someone after receiving the money never thought of building houses, originally work for Regent on the Park and Star Place should be completed before the end of '95, but up to now, still is a piece of wasteland";

"Never thought of building was already not a good thing, in order to fob off the small owners, he engaged me to be legal consultant, to explain Chinese law to the small owners, Mak Shiu Tong also agreed according to Chinese law to compensate interest for late hand over of property, and also promised full completion of work by end of '96. In fact Mak Shiu Tong was using 'delaying tactics' all along, now the small owners insisted on suing him in Guangdong province, Shenzhen etc. According to Chinese law, if the small owners are successful, Mak Shiu Tong being the legal representative, must bear responsibility, will be sued, Hong Kong law is different from Chinese law, if a problem arises in China, Mak Shiu Tong must bear responsibility";

(b) "'Sun City' uncompleted housing was a 'scam', level of victimisation is very wide, but someone did not even contribute a cent, and even took the deposit to use for acquiring other listed companies".

The Plaintiff's Case

4. The gist of the plaintiff's case has been set out in the statement of claim. The plaintiff is a businessman and the chairman and chief executive officer of CCT Telecom Holdings Limited ("CCT"), formerly known as China Treasure Telecom Holdings Limited, and of China Treasure, Inc. These companies are listed in Hong Kong and New York respectively.

5. The plaintiff also claims to be a well known and well respected businessman in Hong Kong and the mainland, especially in the electronics and telecommunications industries.

6. D1 was the managing director of D2 which was formerly engaged by China Treasure Industrial Enterprise ("CTIE") to provide legal consultancy services in relation to a development project in Huiyang City. The project was known as the "Sun City" (太陽城) ("the Project"). The Project consisted of a number of construction works such as the "Star Place" (天星廣場) and "Regent on the Park" (御花園). CTIE was the developer of the Project.

7. It is the plaintiff's case that the defendants published the libel out of spite and revenge well knowing that the statements were false and defamatory. The plaintiff pleads that the defendants did so because D2's said engagement was terminated on about 19 December 1996.

8. The defamatory meaning of the words quoted above was pleaded in the statement of claim to be:-

(1) the Project was a scam devised by the plaintiff;

(2) the plaintiff has swindled money from investors under the pretence but with no intention of building or developing any property;

(3) the money swindled was then used by the plaintiff privately to purchase listed companies in Hong Kong.

Further, it was pleaded by the plaintiff:-

(a) the words complained of imputed a crime punishable by imprisonment, namely, obtaining money from investors by deception and/or a fraudulent scheme;

(b) further or alternatively, those words were calculated to and did disparage the plaintiff in his profession, trade or business.

9. The plaintiff's reputation was damaged as a result and he has suffered distress and embarrassment. The plaintiff claims against the defendants for damages (including aggravated and/or exemplary damages), injunction, interest and costs.

History of the Proceedings

10. D1 initially acted in person and on 13 July 1998, he filed a defence essentially denying all of the plaintiff's allegations. Para. 3 thereof reads:-

"What I had said to the reporter of East Week in the interview are true, have facts to support and absolutely fair journalistic comment. I have not defamed the Plaintiff".

Para. 5 thereof states:-

"The 1st Defendant counterclaims against Plaintiff for compensation:-

1. damages: including damages suffered by the 1st Defendant in terms of business loss, mental distress and loss of time;

2. costs; and

3. other costs".

11. On 27 October 1998, an amended defence was filed by D1's solicitors. D1's case set out in his original defence was in essence repeated. Para. 7 of the amended defence sets out the following particulars in support of D1's pleas of justification and fair comment:-

"A. Whilst the relevant persons/companies were demanding payments of arrears, they already knew that works and construction of the whole project had been suspended since April 1995 and would not be resumed.

B. The Plaintiff promised to pay interest by way of compensation and to complete the works by 1996, but did not fulfil such promises in their entirety.

C. The small properties owners had applied to the China International Economic and Trade Arbitration Commission, Shenzhen, for arbitration and have won.

D. Some of the relevant persons/companies bought rights in respect of certain shares without making payment and, at the outset, planned to use public money to purchase a listed company".

The counterclaim set out in the original defence was repeated in the amended defence.

12. As stated above, judgment was entered against D2 (on 17 April 1998 by Findlay J in default of a defence). D1 applied to have that set aside and the application was heard by Findlay J. on 29 July 1998. By a written judgment dated 4 August 1998, the application was dismissed. The judgment recorded that counsel for D2 accepted that the words published of the plaintiff were defamatory and agreed with Findlay J.'s suggestion that:-

"the thrust of the words was that the plaintiff had implemented a dishonest, fraudulent scheme relating to construction project in mainland China".

The following comments of Findlay J in his judgment are also relied upon by the plaintiff in this application:-

"... it is quite clear that, when appearing before Waung, J on 22 July 1998, [D1] said that, when he uttered the words, he was speaking on behalf of [D2].

... the only issue was justification and fair comment. In seeking to show that [D2] has a case on this, [D2] does nothing but produce some documents written by others. There is no need to go into these documents in detail. They say nothing that would go towards establishing justification. Even if one assumes that the facts stated in those documents are true, they go not one inch towards showing that the words spoken were justified or fair comment. What is also significant is that [D2] issued a legal opinion on 30 January 1996 regarding the disputes over [the Project]. This opinion is totally inconsistent with [D2's] present assertion that the plaintiff was conducting a fraudulent scheme ... " (p. 3G-H and I-P of the transcript of judgment).

13. Upon the plaintiff's requests, 3 sets of further and better particulars of the amended defence and counterclaim were filed on 12 January and 26 April 1999 respectively by D1's legal advisers. In the further and better particulars filed on 26 April 1999, D1 admitted all the words quoted were spoken by him to the reporter of "EastWeek".

14. In the further and better particulars filed on D1's behalf on 26 April 1999:-

(1) D1 identified the "fair comments" or "fair news commentary" in the words complained of to be "無諗住起巳經唔係好事" ("Never thought of building was already not a good thing") and "拖字訣" ("delaying tactics");

(2) D1 identified matters of public interest or current events or news on which the comments or opinions were made to be "太陽城爛尾樓" ("'Sun City' uncompleted housing").

15. Between 13 September 1998 and 5 July 2001, in the course of court hearings before the listing judge and listing master, directions were given for the further conduct of the proceedings. On 4 July 2001, leave was given by the listing master for this action to be set down for a 7-day trial before a bilingual judge with a jury in the fixture list within 60 days. Thus, by the time of this application, this action was (or should be) ready for trial. By then, discovery was completed and witness statements and expert reports were filed and served by both parties.

16. Having perused the documents filed and served by D1 for use at trial, the plaintiff considered D1 would be unable at trial to prove his pleaded case. Hence, this application. In this connection, the plaintiff relies on Gatley on Libel and Slander (1998) 9th Ed., para. 30-140:-

"Striking out.

The advent of witness statements has given rise to a practice of applying, at or before trial, to strike out parts of an opponent's pleading if it is apparent from the witness statements served that the party will not be able to prove part of his pleaded case. This was the course adopted in McDonald's v. Steel, where the plaintiff applied before trial and before discovery was completed, but after service of witness statements, to strike out parts of the defence and particulars of justification and fair comment. On the defendants' appeal, Neill L.J. stated that when an application is made before trial, the correct approach is to consider whether or not the defendants' case in relation to a particular passage in the defence is incurably bad: at an interlocutory stage, and before full discovery, the court will seldom be able to say that a particular allegation is incapable of being proved. However, he saw considerable merit in applying at the close of evidence at trial to strike out allegations for which there is no evidence for the jury to consider, and he regarded the practice of applying at the start of trial as a sensible one in an appropriate case, where it is likely to shorten the trial ... ".

I should also set out the rest of the passage in Gatley because Neill L.J. entered a caveat for the practice:-

"... but [he] warned that there may be cases where the defendant hopes (and, he implied, should be permitted) to prove his case by eliciting favourable answers in cross-examination".

17. Counsel for the plaintiff has drawn my particular attention to the following passage in McDonald's (p. 622g, per Neill, LJ):

"Furthermore, following the introduction of the practice whereby witnesses' statements are exchanged in accordance with Ord 38 r 2A, there may well be cases where after the witnesses' statements have been served it may be possible to demonstrate that the pleaded case is hopeless. For example, in a libel action it might become clear that the defendant had no evidence available other than rumour and that there was no possibility that the case was going to be improved by discovery" (emphasis supplied).

The Parties' Arguments at the Hearing

18. I agree with the plaintiff's argument that since this action is now ready for trial, this striking out application is in effect no different than one made at the beginning of the trial.

(1) Amended Defence

19. The amended defence (when read together with the 3 sets of further and better particulars) in effect raises the following lines of defence:-

(1) the words complained of did not refer to the plaintiff but only to "relevant companies";

(2) the plea of justification;

(3) the plea of fair comments.

(a) Was the Plaintiff Referred to?

20. The amended defence and further and better particulars deny that the words complained of actually referred to the plaintiff and allege that the words complained of only referred to the so-called "relevant companies".

21. Whether the words might be understood by reasonable people to refer to the plaintiff is a question of fact for the jury. However, in the context of this case, a reasonable jury properly directed on the law would be bound to find in the plaintiff's favour over this issue. This is because, as can be seen from the passages quoted above, the plaintiff's name was expressly and repeatedly referred to. Further, it was expressly stated in those passages that the plaintiff was one using "delaying tactics" and the one to bear legal responsibility. The word "he" was always used in the passages indicating that the article was about an individual and not a company. In fact, the passages never referred to any company.

22. I therefore find this line of defence to be untenable.

(b) Were the Words Defamatory?

23. Counsel for the plaintiff submitted that at the hearing before Findlay J., both D1 and D2 were represented by solicitors and counsel. Hence, the legal representatives' agreement that the words were defamatory was binding on D1. I do not agree with this submission because it was clearly recorded in the written judgment that they only represented D2.

24. But leaving aside the question of representation, para. 4 of the amended defence reads:-

"[D1] denies para. 7, 8, 9 [which sets out the alleged defamatory meanings], 10 [which sets out the alleged imputations of the words] and 11 of the [statement of claim] in that the "Someone" mentioned in the Words referred to the relevant company. Save that the plaintiff's name was specifically referred to, those Words have no connection with the Plaintiff."

Thus, when para. 4 is read in context, there is no denial in the amended defence that the words complained of bore the defamatory meanings and imputations set out in the statement of claim. RHC Ord. 18 r. 13(1) reads:-

"Any allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading ... ".

By virtue of the said failure to deny, D1 is deemed to have admitted the defamatory meanings and imputations pleaded in para. 9 and 10 of the statement of claim.

25. Further, having looked at the article (especially the words complained of) I consider that this line of defence is untenable. Findlay J has correctly:-

(a) observed in the written judgment, the only issue is really the pleas of justification and fair comment;

(b) suggested to D2's counsel, "the thrust (or "sting") of the words was that the plaintiff had implemented a dishonest, fraudulent scheme relating to construction project in mainland China".

Any finding by a jury to the contrary would be perverse.

26. I therefore also find this line of defence to be untenable.

(c) Is the Plea of Justification Bound to Fail?

27. In order to determine whether this plea is bound to fail, it is important to bear in mind the defamatory meaning of the words, in other words, the "sting" of the defamation. This has been set out above and is repeated for convenience:-

(1) the Project was a scam devised by the plaintiff;

(2) the plaintiff has swindled money from investors under the pretence but with no intention of building or developing any property;

(3) the money swindled was then used by the plaintiff privately to purchase listed companies in Hong Kong.

Further, it was pleaded by the plaintiff:-

(a) the words complained of imputed a crime punishable by imprisonment, namely, obtaining money from investors by deception and/or a fraudulent scheme;

(b) further or alternatively, those words were calculated to and did disparage the plaintiff in his profession, trade or business.

28. As stated above, the particulars given by D1 to support this plea were set out in para. 7A to 7D of the amended defence filed on 27 October 1998. Particulars 7A read:-

"Whilst the relevant persons/companies were demanding payments of arrears, they already knew that works and construction of the whole project had been suspended since April 1995 and would not be resumed."

I agree with the plaintiff's argument that when these particulars are read together with answer 5.5 of the further and better particulars filed on 26 April 1999, the plea is untenable. Answer 5.5 says:-

"The oral demands [for payment of arrears by the purchasers] were made in June, November 1993 and July 1994".

29. The combined effect of the above documents is that the demands for arrears were made in June and November 1993 and July 1994 but the alleged suspension was said to have occurred in April 1995. Clearly these demands cannot properly be relied upon to justify the defamatory meaning set out above.

30. Particulars 7B state:-

"The Plaintiff promised to pay interest by way of compensation and to complete the works by 1996, but did not fulfil such promises in their entirety."

Similarly, even if this plea be true, it cannot properly support a plea of justification of the defamatory meaning of the words published in the article the subject matter of this action.

31. Particulars 7C read:-

"The small properties owners had applied to the China International Economic and Trade Arbitration Commission, Shenzhen, for arbitration and have won."

This is also an untenable plea for the same reason stated in relation to particulars 7B above.

32. Lastly, particulars 7D aver:-

"Some of the relevant persons/companies bought rights in respect of certain shares without making payment and, at the outset, planned to use public money to purchase a listed company."

The above averment has to be compared to answers 7.2 and 7.4 of the further and better particulars filed on 26 April 1999. Particulars 7.2 read:-

"[The name of the company which shares have allegedly been purchased is] Tam Kin Sang and Wong Kam Fai."

Particulars 7.4 state:-

"[The names of the persons who have allegedly planned to use money of the public to purchase a listed company are] Tam Kin Sang and Wong Kam Fai."

I agree with the plaintiff's argument that:-

(1) answer 7.2 does not make any sense with looked at in the context of this action;

(2) what is alleged in answer 7.4 is that 2 other people, and not the plaintiff, planned to use public money to purchase a listed company.

(d) Is the Plea of Fair Comment Bound to Fail?

33. A plea of fair comment is dependent, among other things, on proof of the truth of the underlying facts upon which the comments were made: Gatley, para. 12-14.

34. One of the "fair comments" particularized in the further and better particulars filed on 26 April 1999 is the comment "[the plaintiff] never thought of building [the Project] was not a good thing". In relation to this averment, D1 has to prove that the plaintiff never intended to construct the Project before he can establish whether the comment "was not a good thing" was fair or not. By reason of the matters set out under the earlier headings, there is no admissible evidence which will enable D1 to prove this.

35. In relation to the other averment "[the plaintiff has been using] 'delaying tactics'", this is in fact a statement of fact and not a comment. By reason of the above matters, I agree with the plaintiff that there is no evidential basis to support the truth of such statement.

36. The plea of "fair comment" is bound to fail.

(e) Statements and Documents for Use at Trial

37. 4 witness statements have been filed by D1. They were respectively made by D1, a Mr. Pang Yat Hua, Mr. Yim Chi Ming and Mr. Chou Mo. In relation to those made by D1, Pang and Chou, I agree with the plaintiff's criticism that these documents contain mostly bare unparticularised assertions which were based either on unsubstantiated personal belief or rumours which are hearsay in nature. The remaining parts are irrelevant to the issues in this action. Mr. Yim's statement is totally irrelevant to this action.

38. The legal opinion relied upon by D1, even if true, also cannot establish the defamation directed at the plaintiff. The opinion expressed therein is in any event disputed by the legal opinion of the plaintiff's expert.

39. The documents proposed to be used (including the additional documents shown to the court at the hearing of this application), such as documents supplied by some of the sub-contractors of the Project, or the transcript of the tape recording of the meeting held on 16 November 1995, cannot advance D1's case either. At most, some of them contains complaints made, or dissatisfaction expressed, by third parties.

(f) D1's Arguments at the Hearing

40. At the hearing of this application, D1 relied in particular on 2 undisputed matters to support his defence of justification:-

(a) as a fact, the plaintiff has transferred his shareholding in the relevant companies to a third party;

(b) there was no documentary record of remittance of money from Hong Kong to the mainland for the purpose of the Project other than the audited accounts disclosed by the plaintiff.

41. In relation to point (b) above, I agree with the plaintiff that there were many documents in the trial bundle showing that (1) the construction work at the site of the Project was progressing and (2) interim payments have been made, at the relevant time. Further, the reasons given by the developer for delay in work progress were that there was flooding and a change in the state economic policy in the mainland. In fact, D2's own legal opinion dated 30 January 1996 confirmed those reasons to be the ones causing the delay.

42. In relation to point (a) above, the plaintiff submitted it is important that the plaintiff remained a guarantor despite the transfer of shareholding.

43. Because of the above, I do not consider that there is any realistic hope D1 would be able to prove his case, for example, by eliciting favourable answers in cross-examination if this action were allowed to proceed to trial.

(2) Counterclaim

44. No factual basis has been pleaded in the counterclaim in support of the claim for relief. No cause of action or facts in support of a cause of action, has been set out therein.

45. Insofar as the counterclaim is based on the plaintiff's alleged breach of the cross undertaking as to damages, this is untenable as a matter of law: see Fletcher Sutcliffe Wild Ltd. and Others v. Burch & Others [1982] FSR 64, 67-70. Insofar as it is based on the tort of malicious prosecution, first, the plea is defective. Also, it is bad in law for a number of reasons, including this action is not a criminal proceeding, and it is premature to commence such a counterclaim when the outcome of this action is still unknown. Furthermore, such a counterclaim (if allowed to stand) is likely to embarrass or delay the trial of this action: Gatley, para. 27.27, especially n. 98. This is particularly so in this action because if this action were tried, it would be tried by a judge with a jury.

Conclusion

46. To conclude, I find in the plaintiff's favour. There should accordingly be an order in terms of the summons.

47. Since there is no triable issue between the parties as to liability, the dates scheduled for the trial of this action should be vacated.

Costs

48. There is no apparent reason to justify a departure from the usual rule that costs should follow the event. There will therefore be a costs order nisi (pursuant to RHC Ord. 42 r. 5A(6)) that the costs of this action up to the date of this decision (including the costs of this application (and any related reserved costs)) be paid by D1 to the plaintiff to be taxed if not agreed.