CHOY BING WING v. NG YAT CHI

1988, No.A6115

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H E A D N O T E

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    Libel of a professional man. Damages assessed at $2,500,000 including exemplary damages arising as a result of aggravating features.

1988, No.A6115

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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Preliminary

1. The plaintiff claims damages for libel contained in a letter written by the defendant in the Chinese language on the 26th July 1986, addressed to the Directors of China Resources (Holdings) Company Limited ("China Resources") in Hong Kong and copied to certain ministries in Beijing.

2. By the defence, the defendant admitted being the author of the letter and that it was addressed to the Directors of China Resources. However, he denied that the words were defamatory or, in the alternative, alleged that the words were true in substance and in fact or that the letter was published on an occasion of qualified privilege. Later, by an amendment to the defence, the defendant withdrew the pleas of justification and qualified privilege so that the only defence that remained was the denial that the words were defamatory.

3. By another amendment to the defence the defendant admitted that the letter had also been delivered to Zhang Jian Hua who was formerly chairman of China Resources and that a copy was sent to Mr Zheng of the Ministry of Trade and Economics in Beijing.

4. There is no dispute that libel is actionable in China pursuant to Articles 101 and 102 of the General Principles of the Civil Law of the People's Republic of China.

5. The defendant was debarred from defending the action or taking any further step in the proceedings by an order of the 2nd April 1992 following his failure to comply with three orders for the payment of costs to the plaintiff in respect of some of the interlocutory proceedings in the action.

6. An application was made at the beginning of the hearing by Mr Brumen Li who claimed to be the personal assistant of the defendant and the Chief Executive of the defendant's company, to represent the defendant. However, I refused this application as he has no locus. In fact, Mr Li had made an earlier application before a master which application was also refused. Mr Li informed me that he is not aware of the present whereabouts of the defendant although he believes that he is residing in France.

7. The proceedings were, therefore, limited to formal proof and the assessment of damages.

Background

8. The plaintiff is a consulting civil and structural engineer, carrying on business as the sole proprietor of Bing Choy and Associates. He is an authorised person and engineer as defined in the Buildings Ordinance in architectural planning and engineering. From 1980 until 1986, the plaintiff was frequently employed as the consulting civil and structural engineer and authorised person by China Resources and its associated companies for their building and engineering works projects in Hong Kong.

9. In 1985, the plaintiff was appointed by Yuen Fat Wharf and Godown Company Limited (Yuen Fat), a subsidiary of China Resources as the authorised person for a building project known as the Cheung Sha wan cargo pier and godown in Kowloon (the Cheung Sha wan project). As the authorised person, it was the plaintiff's duty to supervise the building work of the project, to carry out inspections and to ensure that the work was carried out in accordance with the regulations and plans approved by the Building Authority.

10. Prior to 1985 the defendant had no experience in site investigation or caisson work and was not a registered contractor under the Buildings Ordinance. However, he became the sole proprietor of Vincent Construction Co. (Vincent), a builidng and engineering contractor which was registered with the Building Authority. In May 1985, the defendant entered into a contract with China Resources to carry out a site investigation for the Cheung Sha Wan project and to prepare a report in connection with the caisson work.

11. One of the requirements for the site investigation was to provide information to building contractors, who would be invited to tender for the caisson work, of the estimated depth to the bed rock to enable them to calculate the cost. It is abundantly clear from the evidence that boring records in the site investigation report produced by the defendant were grossly inaccurate, with an average difference of 5.7 metres between the bed rock level set out in the site investigation report and the actual level. The plaintiff, however, was unaware of this fact at the time. Based upon the information in the report, the plaintiff calculated the levels for the caisson foundation which he submitted with the relevant plans to the Building Authority for approval. Approval was given by the Building Authority on the 23rd August 1985.

12. In July 1985, a number of contractors, including the defendant, were invited by China Resources to submit tenders for the caisson work. The defendant submitted a tender and later a revised tender through Vincent which was accepted by China Resources, and he was appointed as the contractor for that work. The defendant later submitted a tender for the superstructure, but failed to be appointed to do this work.

13. Between October 1985 and May 1986, various complaints were made by the plaintiff and Yuen Fat in correspondence about the lack of quality, experience and progress of Vincent in the construction of the caisson work which included failure to properly grout thereby endangering the lives of those on the construction site. It was towards the end of the caisson work in April 1986 that the plaintiff discovered the serious discrepancies between the actual bed rock levels of the caisson and the deeper levels as set out in the defendant's site investigation report. Drilling tests that were carried out revealed that the discrepancies measured up to as much as 30 metres per caisson. The plaintiff reported the matter to the Building Authority, China Resources and the defendant.

14. On the 21st July 1986, Vincent wrote to Yuen Fat accusing it of intending to mislead the general manager of China Resources into believing that Vincent's site investigation report was falsified and claimed that the report was correct to the best of the defendant's knowledge and demanded an apology. There was further correspondence in June and July 1986 between the plaintiff and Vincent when the plaintiff accused Vincent of inaccuracies in the site investigation report. Vincent denied the allegations and countered with various threats.

15. Four letters, written by the plaintiff which the defendant alleged were defamatory, became the subject of a libel action instituted by the defendant against the plaintiff in August 1986. The gist of those letters was to the effect that the information contained in the site investigation report was misleading. One of the letters was written to the Building Authority, two were written to the defendant and one to the defendant's solicitors. Each letter was copied to China Resources and two were also copied to subsidiary companies of China Resources.

16. The defendant in that action claimed general damages and special damages of $9.7m for the loss of profit that he claimed to have suffered by reason of his failure to obtain the contract for the superstructure of the Cheung Sha Wan project for which he blamed the plaintiff and Chung Bor, a director of Yuen Fat.

17. By his defence the plaintiff pleaded qualified privilege and justification.

18. After several contested interlocutory hearings, the trial of the action was due to commence on the 4th January 1989, but on the 20th December 1988, the defendant was granted leave to discontinue the proceedings upon payment of the plaintiff's costs on an indemnity basis. It appears that the defendant took this course because although the action had proceeded on the basis that the site investigation report had been prepared by him, it was ascertained during discovery that the work had been sub-contracted.

19. Although the plaintiff had seen the letter of the 26th July 1986 shortly after it had been written, he did not receive a copy until two years later which was the reason for the delay in the institution of the present proceedings. The letter of the 26th July 1986 which was written by the defendant in his capacity as the sole proprietor of Hung Wai Co. reads :-

    "(Chop)

HUNG WAI CO. IMPORTERS & EXPORTERS ROOM 1303 & 1306, YAU YUE BUILDING,

127-131_ DES VOEUX ROAD CENTRAL, HONG KONG

Our Ref.

Your Ref.                                                                                                       Hong Kong

Mr. Cheung, the chairman of directors and all other managing directors,

    We deeply appreciate the years of support from your company during the transaction between our company and your company. Vincent Construction Company, a subsidiary of our company, was founded in 1984 at a time when the political future of Hong Kong was not yet certain. Upon the encouragement of the Xin Hua News Agency and concerned friends from the mother country, an announcement of founding of the company was made at the Alumni Association of the University of Hong Kong. The opening cocktail party was attended by almost a thousand guests. For the economic prosperity of Hong Kong, we had made some contribution. In 1984, we were awarded a contract by the Housing Department of the Hong Kong Government for the Lok Fu Estate project. (Performed by Chinese architects on secondment). In 1985, we were awarded the contract of the Cheung Sha Wan construction site of your company after tendering. We tendered the lowest quotation for the work. The contract is available for your reference. It was the first time in Hong Kong history that works of such complexity and difficulty in technological field was undertaken. Our company was able to complete punctually with guaranteed quality and quantity was entirely due to the voluntary assistance rendered by many distinguished architects of the University of Hong Kong, the Chief Manager of Shui On Construction Company Mr Yeung Shui Yan and the Principal Architect of Cheung Kong (Holdings) Co., Ltd. Mr Chung Chun Keung. What I said is all true, please send someone to investigate.

    Dear Managing Directors, Mr Chung Bor of Yuen Fat Godown, a subsidiary of your company, has in collaboration with an irregular architect, repeatedly found fault with us. As a result, our company cannot survive in Hong Kong and suffered loss of reputation. What was their purpose! Our company has tolerated on many occasions, and we cannot but to put up with them. The only way is to resist these corrupt persons. To be cautious and for the good relationship between our company and your company, we request the Board of Directors of your company to send someone to look into the truth. Who is concocting rumours? Who is clean? Please adjudicate the matter in due course and you will understand

Note : c.c. Copies of all documents to relevant ministries of Central Administration in Beijing.

c.c. Copies of all documents to Minister Zheng, Ministry of Economics and Trade in Beijing.

A person who loves his native country and village

Ng Yat-chi's own handwriting - Hung Wai Co.

(Signed and sealed)"

Evidence of the Plaintiff

22. The plaintiff said that he is a chartered engineer having qualified twenty-five years ago. He is an authorised person and registered structural engineer as defined in the Buildings Ordinance in architectural planning and engineering. The plaintiff testified that he had done work regularly for China Resources from 1980 until 1986 which included his appointment as the authorised person for the Cheung Sha Wan project in 1985. However, following the defendant's letter of the 26th July 1986, he received no further business from China Resources. The plaintiff said that China Resources was his main client providing him with 60% of his work. He estimated that by virtue of the withdrawal of business by China Resources, his annual loss of profit was about $440,000.

Evidence of Chung Bor

23. Chung Bor was employed by China Resources in 1976 and became the general manager and director of Yuen Fat. Mr Chung was responsible for the Cheung Sha Wan project and liaised with the plaintiff whom he had known since 1980 for the site investigation. Mr Chung's immediate superior was Jiang Won who was the director and general manager of China Resources Godown and Transportation Company Limited and a director of Yuen Fat. Mr Chung came to know the defendant in 1986. He said that the defendant was not amongst the initial tenderers for the site investigation, but his name was later included upon the instructions of Jiang Won. The initial tender put forward by the defendant for the site investigation was between $130,000 to $140,000 which Mr Chung considered to be rather high. Later, his tender was reduced to $99,000 which was the lowest tender and it was accepted by China Resources. It is significant that before his tender was accepted, he had informed Mr Chung that he wanted to do the job even if it resulted in a loss.

24. The defendant was not a tenderer for the caisson work until Jiang Won placed his name on the list despite Mr Chung's observation that he did not have much experience and was not suitable. Far East Piling Company was the lowest tenderer with a sum of $43.01m, but Jiang Won informed Mr Chung to delay making a decision until he had spoken to the defendant. Mr Chung went on to say that he was present when Jiang Won said to the defendant:

"We are old friends, now the lowest bid belongs to Far East Piling, $43.01m, you try to think carefully and see if you can do it".

Later the same day, the defendant submitted a tender of$43m which was accepted.

25. Following the completion of the caisson work, Jiang Won wanted the defendant's company, Vincent, to be placed on the list of tenderers for the superstructure work although Mr Chung had again reported that the defendant was unsatisfactory.

26. In April 1986, Mr Chung states that he was told by Chi Chiang Hui, the First Deputy General Manager and Director of China Resources, that he wished to inform the defendant of the lowest prices tendered for the superstructure as the Head of the New China News Agency Xu Jiatun wanted the defendant to succeed. However, no official documents were received by Mr Chung with regard to the issue of the superstructure and the defendant was not selected for this work.

27. Mr Chung said that there was a difference of 18% in depth between the depth of the bed rock as set out in the site investigation report and the actual depth. He said that by reason of the inaccurate information contained in the report, China Resources suffered damages amounting to approximately $5.8m. Although this sum could have been deducted from retention monies held, amounting to $6m, instructions to claim this sum from the defendant were not received until after the retention monies had been released.

28. Mr Chung was threatened with defamation proceedings by the defendant arising as a result of the defendant's failure to obtain the contract for the work to be done for the superstructure. However, no proceedings were instituted by the defendant against Mr Chung. No steps were taken by China Resources to recover the sum of $5.8m from the defendant which appears surprising.

29. Mr Chung went to Beijing in May 1987 to make a report about the Cheung Sha Wan project, but upon arrival at the airport he was detained and his travel documents were confiscated. However, he eventually returned to Hong Kong in September 1987 and resigned from China Resources.

30. Mr Chung confirmed that the plaintiff received no further work from China Resources following the letter of the 26th July 1986, but that if he had been in a position to make a decision, he would have continued to employ him.

Evidence of Andy Wong

31. Andy Wong was the project manager for Vincent at the time of the caisson work for the Cheung Sha Wan project. He said that the site investigation was carried out by a sub-contractor Konwall Construction and Engineering Limited.

32. During the course of his work in connection with the project, Mr Wong expressed concern to his superior about the time agreed by the defendant and China Resources for completion of the caisson work after he had seen the figures for the depth of the bed rock levels in the site investigation report. In reply he was told that the actual depth might not be as deep as the site investigation report and he was asked to complete the work and not to worry if the time was realistic or not based on the site investigation record. When he made an inspection of the caisson work, he found it was not as deep as stated in the site investigation report.

Evidence of Mr Szeto Kwok Chung

33. Mr Szeto was the contract manager of Vincent until December 1991. He described various projects carried out by Vincent as the sub-contractor of T.S.Wong and Company Limited of which company the defendant was a director. This company was a subsidiary of Max Share Limited (Max Share) of which company the defendant was also a director. Max Share was a joint venture company with China Resources.

Evidence of Professor Lumb

34. The evidence of Professor Lumb, a consultant engineer, was admitted under a hearsay notice. He made a report on the 21st September 1986 after reading the documents and making site inspections. In paragraphs 3 and 4 of this report, he said :-

3. The differences between the 'investigated' or reported rock levels and the actual levels, determined after excavation of the caissons to a satisfactory founding level, are unreasonably great. The reported levels are on average 5.7m deeper than the actual levels. The range of the difference was from -3.2m (cf L10, with actual rock level below that reported) to +17.7m (cf L17, with actual rock level nearly 18m above that reported), with only two instances of under-estimation of rock level (L8 & L10).

4. In routine site investigations in Hong Kong, it is often found that slight discrepancies between reported and actual rock levels occur, but the differences in level are commonly no more than a metre or so unless the bed-rock surface is highly irregular with pinnacles or wide, vertical, decomposed joints. Furthermore any differences found are almost certainly under-estimations rather than over-estimations, due to logging highly decomposed rock as fresh rock or to considering a boulder as being bed-rock. Over-estimation of rock level by several metres, such as is the case here, is unknown and moreover would be regarded as an impossibility by most engineers because drilling through soil is carried out by a different technique to that for drilling through rock and the technique used for soil could never be used for drilling through rock."

He concluded that the boring records were misleading.

Conclusions on allegations of libel

35. As was submitted by Mr Bartlett for the plaintiff, the sting of the libel is contained in paragraph 13 of the Statement of Claim as amended which reads as follows :-

"13. The aforesaid words, in their natural and ordinary meaning or alternatively by reason of the facts and matters hereinbefore set out meant and were understood to mean that the Plaintiff:

(i) was an irregular architect or an irregular Authorised Person and Engineer and was unfit and unsuitable to be an architect or an Authorised Person and Engineer;

(ii) in his capacity as the consulting civil and structural engineer and the Authorised Person and Engineer employed by the said China Resources, conspired or collaborated with the said Chung Bor in dishonestly purporting to find fault with the Defendant in his building works in respect of the said building project;

(iii) was thereby guilty of corruption;

(iv) has been guilty of unprofessional conduct which renders him unfit and unsuitable to be a civil and structural engineer or an Authorised Person and Engineer."

36. It is abundantly clear, that the words by their ordinary or natural meaning are defamatory. Further, there can be no doubt, and it was not disputed by the defendant, that the words referred to the plaintiff. There was indeed no other authorised person to whom the words could have referred.

37. I accept the evidence given by the plaintiff and his witnesses and I am satisfied that the allegation of libel has been proved.

Damages

38. Mr Bartlett, for the plaintiff, submitted that the plaintiff was entitled to general damages that flow from the libel, together with special damages for his loss of profit arising from the withdrawal of business by China Resources, and exemplary damages arising from a number of aggravating features. In the alternative, if the plaintiff has not established sufficient causation, with regard to the claim for special damages, it can be reflected instead by way of exemplary damages.

Special damages

39. Mr Bartlett accepted that it was necessary to call a witness from China Resources in support of the plaintiff's claim for special damages, but in fact no witness was called.

40. With the defendant debarred from defending the action, three days were fixed on the 7th April 1992 for the formal proof of the claim to commence on the 1st June 1992. However, no steps were taken by the plaintiff's solicitors to effect service of the subpoenas upon the proposed witnesses of China Resources until the 21st May. On that day, unsucessful attempts were made to serve Mr Chi Chiang Hui, Mr Kei Kwong Chuen and Mr Wei Quan. The process server, in his affirmation, states that he was informed that Mr Wei Quan was in Beijing and would not return to Hong Kong until the end of June so no further attempts could be made to serve him. Two other attempts were made to serve Mr Chi and Mr Kei, but they were also unsuccessful.

41. Mr Chi was in a position to testify about the desire to inform the defendant about the lowest tender for the superstructure. However, I was not informed what evidence could be given by the other two witnesses other than that they were required to produce some documents. Indeed, although I assume that Mr Kei and Mr Wei were employed by China Resources, I was not given any details as to the positions that they hold.

42. Mr Bartlett contended that both Mr Chi and Mr Kei were evading service and I believe his suspicions may be well-founded. He therefore submitted that as the plaintiff had made attempts to call appropriate evidence and had been unsuccessful, and that as there is sufficient material before the court to infer a reason for the reluctance of the witnesses to give evidence, the plaintiff should not be deprived of his remedy for special damages where there is other evidence from which the appropriate inferences as to causation can be drawn. While I accept the merit of this submission, I consider that the plaintiff's solicitors should have taken steps to secure the attendance of other directors or representatives of China Resources who might have been able to give evidence as to the circumstances that led to the withdrawal by China Resources of its business relationship with the plaintiff. As a result, although the circumstances of the withdrawal of work by China Resources from the plaintiff indicate that the libel by the defendant may have caused the loss of business, the plaintiff has failed to adduce sufficient evidence to establish this claim on the balance of probabilities. Nevertheless, I accept. Mr Bartlett's submission that it is a matter that can be taken into consideration as an aggravating feature.

Aggravating features

43. There are several aggravating features in this case which justify an award of exemplary damages. First, the allegation of corruption against the plaintiff was wholly unsubstantiated and was made for the purpose of ruining the business relationship of the plaintiff with China Resources for which the plaintiff suffered a substantial loss of profit. The defendant's object in preparing the site investigation report with inaccurate information was designed to mislead those persons who relied upon it in order that he would gain an advantage in the tendering process for the caisson work. Second, the action instituted by the defendant was totally unjustified and was eventually discontinued at the eleventh hour with indemnity costs awarded to the plaintiff. Third, the conduct of the defendant in these proceedings can be sharply criticised by his unmeritorious resistance to the interlocutory proceedings for three and a half years until he was eventually debarred from defending the action due to his failure to comply with orders to pay costs to the plaintiff. During this time he abandoned his original defence of justification and qualified privilege in order to frustrate an order for discovery after he had answered interrogatories stating that the site investigation work had been sub-contracted, thereby contradicting his allegation that it had been done by Vincent. Fourth, there was wide publication both in Hong Kong and Beijing, where the allegations were communicated to a large number of people. Fifth, there has been no apology or retraction of the libel by the defendant. The conduct of the defendant towards the plaintiff can only be described as outrageous and despicable. The plaintiff is accordingly entitled to a substantial award of exemplary damages.

Conclusions

44. My attention was drawn by Mr Bartlett to a number of Hong Kong authorities with regard to damages, but none is relevant to the present case. The highest award cited which included exemplary damages was $350,000 by Liu J. in Ng Man Sun v. Law Wai & Ors., A182 and A826/1989, (unreported 3rd January 1991.

45. In determining the quantum of damages, the court must not make an excessive award and should not add the general damages to the exemplary damages, but make an award as a whole, taking into account the aggravating features. This was a most serious libel upon a professional man that resulted in the withdrawal by China Resources of its business from the plaintiff. Having regard to all the circumstances of the case and the contumelious conduct of the defendant, I consider that the appropriate sum to be awarded by way of compensatory and exemplary damages is $2,500,000. There will accordingly be judgment for the plaintiff for this sum with costs.