KABUSHIKI KAISHA YAKULT HONSHA AND OTHERS v. YAKUDO GROUP HOLDINGS LTD AND ANOTHER

HCA 2409/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2409 OF 2002

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D E C I S I O N

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1. On 6 September 2002, I handed down my Reasons for Ruling made on 28 August 2002 in the Plaintiffs' application for interlocutory injunction. On 18 September 2002, in accordance with Practice Direction 25.1, parties were consulted about the publication of the same. The Plaintiffs had no objection. However, the Defendants through their solicitors responded as follows in a letter dated 26 September 2002,

"As our client have been advised that the above action may be more appropriate to be tried by jury due to its issues on facts, the publication of the reasons for ruling ... may affect the decision of the jurors at the trial. In the premises, our clients are of the view that it is more appropriate to release the reasons after the trial of the above action."

2. In view of that, direction was given by this court on 27 September 2002 that the reasons for ruling were not to be published pending decision on mode of trial. Eventually, after hearing arguments from the parties, this court ruled that the trial would be before a single judge without a jury and leave for publication was granted on 20 November 2002.

3. In the meantime, the Defendants held a press conference in Taiwan on 27 September 2002 to disseminate information about this action and the ruling of 28 August 2002. The notice of that press conference contained statements which can only be described as gross distortion of my ruling. It claimed that the court in Hong Kong ruled on 28 August 2002 that the claims of the Plaintiffs were invalid and the 1st Defendant held valid legal documents and had the right to use the name 養樂多. Press release to the same effect was distributed at the conference. Mr Ho, counsel for the Defendants, suggested that those statements were only made by reference to the use of that name in mainland China. Even so, those statements were still distortion of my reason for ruling. I have already explained in paragraph 8 of my reasons for ruling as to why it was not necessary for me to deal with the use of that name in mainland China in the context of the summons of 21 June 2002. It should have been obvious to any readers that I did not rule on the validity of the Plaintiffs' claims in respect of the Defendants' activities in mainland China. Nor did I rule on the Defendants' right to use that name in mainland China.

4. Further, the heading of the press release suggested that the Defendants won a total victory in this action and the case of the Plaintiffs crumpled and failed ("香港養樂多香江大獲全勝 一舉板倒台港日三巨擘"). I really cannot see how the Defendants could have arrived at this conclusion. Since they have been represented by a very responsible and experienced Leading Counsel at the hearing of August 2002, they must have been fully and adequately advised as to the results of that hearing. Such representation as to the results of the August 2002 heading is nothing other than a complete misrepresentation of the results.

5. Worse still, the Defendants insinuated in the press release that the present action was a means adopted by the Plaintiffs to strike at their competitors and to delay the competitors' business development and to increase the Plaintiffs' market share in the meantime. It was suggested that this was a tactic adopted by the Plaintiffs to diminish their competitors' room of survival in the market.

6. The press release was distributed by the Defendants in Taiwan. However, it was also downloaded onto the website of Yahoo Hong Kong.

7. Upon notice of such conducts of the Defendants, the Plaintiffs through their solicitors wrote to the Defendants' solicitors on 4 October 2002 demanding an undertaking from the Defendants to publish a correction statement and not to repeat such misrepresentations. The letter also asked for disclosure under oath as to the scope of distribution of the press release.

8. By a letter dated 17 October 2002, the Defendants through their solicitors said that their actions were in response to some malicious publications in Taiwan alleging the 1st Defendant of fraud and dishonesty in soliciting investment in its shares. References were made to certain newspaper articles published in Hong Kong concerning the case and it was alleged that these articles and the article published in Taiwan had deterred potential investors to subscribe for the shares of the 1st Defendant. It was also suggested that the press conference was held at the recommendation of an investment consultant firm engaged by the 1st Defendant. The demands of the Plaintiffs were said to be misconceived and the Defendants said they would strenuously resist any application for such relief.

9. I have read the newspaper articles published in Hong Kong and I do not find any misrepresentations as to my reason for ruling in those articles. Nor could I discern any misrepresentation in that respect in the article published in Taiwan referred to by the Defendants. Of course, that article touched on matters apart from my reason for ruling and I am not in any position to comment on those matters. In any event, there is no concrete evidence that the Plaintiffs played any part in those publications apart from outlining the terms of the order of 28 August 2002 and confirming that the 2nd Defendant was a son of an officer of the 2nd Plaintiff to a reporter.

10. On 29 October 2002, the Plaintiffs took out the present summons asking for injunctive and ancillary relief as outlined in the letter of 4 October 2002. Due to the time constraint, the submissions of counsel could not be completed on 20 November 2002 when the matter was first heard by me. However, I was able to reach a decision on paragraph 4 of the summons and for reasons set out in my Reasons for Decision handed down on 28 November 2002, I granted leave for the general publication of my previous Reasons for Ruling. Parties came back on 2 January 2003 to complete their submissions regarding the other paragraphs of the summons.

11. In his Third Affirmation filed herein, the 2nd Defendant attempted to give some explanations for the conducts of the Defendants. On the whole, I find those explanations to be tenuous and incredible. As I said, the Defendants were advised by a team of very able and competent lawyers. There could not be any mistake in their understanding as to the outcome of the hearing in August and my Reasons for Ruling.

12. On the material before me, I do not see any acceptable justification for the acts of the Defendants in this episode. Be that as it may, I must still consider whether the injunctive and ancillary relief sought by the Plaintiffs are proper remedies regarding such conducts of the Defendants. At this juncture, in order to have proper understanding as to the nature of the application of the Plaintiffs, I need to set out the relevant relief sought in the summons,

"1. An injunction to restrain the Defendants ... from doing the following acts or any of them whether in Hong Kong or elsewhere, that is to say:-

(a) misrepresenting the content or effect of the Reasons for Ruling ...handed down on 28 August 2002 or the Order made on 28 August 2002 in this action;

(b) discussing in public the prospects, merits or demerits of this action which may prejudice or affect the outcome of this action; and

(c) authorizing, assisting, counseling, procuring, instigating, inciting, aiding and abetting, directing, causing or enabling others to commit any of the aforesaid acts or acting in concert with others in furtherance of a common design.

2. An order that the Defendants and each of them do within 14 days from the making of this order publish a correction of the misrepresentations made by or on behalf of the Defendants or either of them of the content and effect of the Reasons for Ruling and Order in major newspapers in Taiwan and Hong Kong to be determined by the Plaintiffs, and the wordings of which shall be prior approved by the Plaintiffs.

3. An order that the Defendants ... do within 14 days ... make and file an affidavit or affirmation ... disclosing the extent of distribution and, as far as they know, the names and addresses of the recipients, of the Defendants' press conference notice relating to the Defendants' press conference held on 27 September 2002 and the press release distributed in the press conference, and that the Correction Statement shall be distributed to the same recipients in addition to the publication in the newspapers."

13. Mr Liao SC, leading counsel for the Plaintiffs, has not been able to cite to me any direct authority where such relief has been granted outside the context of a motion for committal for contempt of court. Instead, he sought to support the application by reference to the court's general jurisdiction in granting injunctions and cases decided in the context of committal for contempt of court. He relied heavily on R v Evening Standard [1954] 1 QB 578. That was a case where a London evening newspaper inaccurately reported certain evidence given by a witness in a murder trial which was pending. The Attorney General applied for leave to issue a writ of attachment against the newspaper on the basis that such conducts constituted serious interference with the due course of justice, as such amounted to contempt of court. At p.583-4, Lord Goddard CJ said,

"...the essence of the jurisdiction is that reports, if they contain comments on cases before they are tried ... and all misreports are matters which tend to interfere with the due course of justice. The foundation of the jurisdiction is that such reports are an interference with the due course of justice."

His Lordship then went on to cite certain dicta from Lord Hardwicke LC in The St. James' Evening Post (1742) 2 Atk 469 at 469 and 471,

"Nothing is more incumbent upon courts of justice, than to preserve their proceedings from being misrepresented; nor is there any thing of more pernicious consequence, than to prejudice the minds of the public against persons concerned as parties in causes, before the cause is finally heard."

"There may be also a contempt of this court, in prejudicing mankind against persons before the cause is head. There cannot be any thing of greater consequence, than to keep the streams of justice clear and pure, that parties may proceed with safety both to themselves and their characters."

Lord Goddard CJ continued,

"That is the foundation of the jurisdiction which this court has exercised for more than 200 years, and is the reason why the court will intervene to prevent and punish the publication of improper information before a case is heard or the dissemination of improper information about a case which is to be heard or is not fully heard or of false reports or misrepresentation of the proceedings in a court."

14. In the present case, the Plaintiffs did not make any application for committal or attachment on the basis of contempt of court. Mr Liao submitted that the Plaintiffs needed not resort to the more draconian remedy of moving for contempt when injunctive relief could satisfy their purposes. He referred to Para 52/1/8 of Hong Kong Civil Procedures 2002 which emphasized that contempt proceedings should be a last resort. As to the court's power to grant injunctive relief of this nature, Mr Liao relied on Section 21L(1) of the High Court Ordinance. That is the general provision setting out the power of the Court of First Instance to grant an injunction in cases in which it appears to be just or convenient.

15. In South Carolina Insurance v Assurantie Maatschappij "De Zeven Provincien" NV [1987] AC 24, Lord Brandon said this with regard to the English equivalent of Section 21L(1) at p.40A to E,

"... although the terms of [the section] are very wide, the power conferred by them has been circumscribed by judicial authority dating back many years. [Reference was then made to The Siskina [1979] AC 210; Castanho v Brown & Root [1981] AC 557 and British Airways Board v Laker Airways [1985] AC 58.] The effect of these authorities, so far as material to the present case, can be summarized by saying that the power of the High Court to grant injunctions is, subject to two exceptions ... limited to two situations. Situation (1) is when one party to an action can show that the other party has either invaded, or threatens to invade, a legal or equitable right of the former for the enforcement of which the latter is amenable to the jurisdiction of the court. Situation (2) is where one party to an action has behaved, or threatens to behave, in a manner which is unconscionable."

The two exceptions referred to by Lord Brandon are anti-suit injunctions and Mareva injunctions. With regard to situation (2), on which Mr Liao prayed in aid, Lord Brandon said at p.41D,

"It is difficult, and would probably be unwise, to seek to define the expression 'unconscionable conduct' in anything like an exhaustive manner. In my opinion, however, it includes, at any rate, conduct which is oppressive or vexatious or which interferes with the due process of the court."

Mr Liao submitted what the Defendants did constituted interference with due process of the court. In this connection, he relied on the dicta of Lord Goddard CJ cited in Paragraph 13 above.

16. Mr Liao also referred to the speech of Lord Goff in South Carolina Insurance at p.44G. His Lordship had reservation as to the restriction of the power of the court to grant injunctions. That reservation was shared by Lord Mackay. In this connection, I think this court is bound by the views of the majority in the Privy Council in Mercedes Benz AG v Leiduck [1996] 1 AC 284. Lord Mustill (who delivered the majority judgment) seemed to prefer the view of Lord Brandon at p.298D to G although the observations by Lord Nicholls at p.308C to F are more liberal in this regard.

17. Hence I have to ask whether the Plaintiffs are correct in asserting that the misrepresentation of the Reasons for Ruling in the press conference held at Taiwan coupled with the press release published in Taiwan and Hong Kong affected the due process of the court.

18. Mr Liao accepted that not every misrepresentation of the Reason for Ruling would inevitably have such effect. For instance, he accepted that if the misrepresentation was made in a remote part of the world to person who had no connection with this action, this could not possibly cause any prejudice to the fair trial of this action. However, he submitted that an important issue in the present action is whether the Plaintiffs' reputation in the name 養樂多 has spilt from Taiwan to Hong Kong. The Plaintiffs intended to call some witnesses from Taiwan to establish this and Mr Liao said that the perspectives of such potential Taiwanese witnesses could have been coloured by the misrepresentations disseminated by the Defendants as to the Reason for Ruling.

19. Mr Liao further submitted that the misrepresentations published by the Defendants had damaged the reputation of the Plaintiffs in Taiwan, particularly in view of the remarks insinuating ulterior motives on the part of the Plaintiffs in prosecuting the present action in the press release. He submitted that the Plaintiffs might have a cause of action in trade libel based on these acts of the Defendants. I do not think it is appropriate for me to accept this as a ground for granting the injunction in the present application. If the Plaintiffs intend to make an application for injunction based on a new cause of action, the proper course is to start a new action and apply for interlocutory injunction in the context of that new action. If the Plaintiffs did not deem it appropriate to pursue this as a new claim, I do not think it right to allow this to be slipped in by the backdoor in the context of the present application.

20. Coming back to interference with due process of the court, Mr Ho accepted that the court does have jurisdiction to grant injunction to prevent such interference. However, he submitted it is too far-fetched to suggest that the press conference in Taiwan could have any prejudicial effect on the trial of this case in Hong Kong. He reminded the court it has been decided that the trial would be conducted before a single judge, hence there is no question of potential jurors being affected by the publications and misrepresentations. As regards potential witnesses, Mr Ho said in accordance with the timetable laid down in my directions of 28 August 2002, parties should at least have been ready with the exchange of their witness statements. The Plaintiffs were not able to put forward specific evidence as to witnesses being prejudicially affected by the press releases and press conference organized by the Defendants. He said it is na?ve to assume that a witness called by the Plaintiffs would be tainted by those press releases and the press conference.

21. Given the stance adopted by Mr Ho, I shall assume that the court does have the power to grant injunctive and ancillary relief to a party to counter any steps taken by the other litigant to prejudice the due administration of justice even if there were no application to move for contempt of court. Such power must, however, have a close affinity with the other powers of the court to deal with contempt of court in the publication of material which prejudiced the fair trial of a pending action or was likely to cause public prejudgment of the issue. These could be conducts which interfere with the administration of justice, as such constituted contempt of court (see AG v Times Newspaper [1974] AC 273; AG v Cheung Kim Hung [1997] HKLRD 472).

22. A balance has to be struck between freedom of expression and the law of contempt in this regard (see AG v Cheung Kim Hung [1997] HKLRD 472 at p.478C). The crucial consideration is whether there is a real risk that due administration of justice would be prejudiced (see AG v Cheung Kim Hung [1997] HKLRD 472 at p.480D; Wong Yeung Ng v Secretary for Justice [1999] 2 HKLRD 293 at p.314 D to E). In the present context, although the Plaintiffs are not moving for contempt of court, I am of view that this court should apply the same test in deciding whether to grant the injunctive relief sought. The observations of Lord Goddard CJ have to be read against the facts of that case. That was a murder trial which was pending. The trial was by jury. The newspaper report was a local one, published at the place where the trial took place. The misrepresentation was in respect of the evidence of a witness. In those circumstances, real risk of prejudiced could be readily established (as in the case of AG v Cheung Kim Hung [1997] HKLRD 472). The Chief Justice described the misreporting at p.583 as "a most prejudicial statement" and further said at p.584 that the case might have been a disastrous interference with justice.

23. In applying that test, I bear in mind what was said by Lord Diplock in AG v Times Newspaper [1974] AC 273 at 310 F to G,

"...contempt of court in relation to a civil action is not restricted to conduct which is calculated (whether intentionally or not) to prejudice the fair trial of that action by influencing, in favour of one party or against him, either the tribunal by which the action may be tried or witnesses who may give evidence in it; it extends also to conduct that is calculated to inhibit suitors generally from availing themselves of their constitutional right to have their legal rights and obligations ascertained and enforced in courts of law, by holding up any suitor to public obloquy for doing so or by exposing him to public and prejudicial discussion of the merits of the facts of his case before they have been determined by the court or the action has been otherwise disposed of in due course of law."

24. On the facts of the instant case, there is no question of the tribunal being affected by these conducts of the Defendants since there would not be any trial by jury. As Rogers J (as he then was) observed in AG v Cheung Kim Hung [1997] HKLRD 472 at p.477J,

"Lawyers are trained to disregard facts which are not relevant or inadmissible. Often Judges are told of facts which then have to be ignored for the purposes of the proceedings before them. The exclusion of those facts from their consideration in the decision making process is one of the functions which they must accomplish and have been trained to do so. In large part whether such facts have been excluded can be tested by the reasons which accompany Judges' decisions."

25. Mr Liao's principal ground of attack was based on the effect of those publications on potential witnesses. I accept that the Plaintiffs might deem it necessary to call some members of public from Taiwan as witnesses at the trial. However, given the need to exchange witness statements beforehand, whoever comes to give evidence would to a certain extent be apprised of the development of the disputes between the parties. As mentioned, I have given leave for general publication of my Reasons for Ruling. Hence, by the time when such a witness testifies in the witness box, he should not be under any misapprehension as to the effect of my Reasons for Ruling. The witness would be giving evidence under oath to tell the truth as to his personal knowledge, not what he was told or the impression he gathered from other sources. Although Mr Liao did make some passing reference to prejudice in terms of securing the necessary witnesses, in the absence of any evidence to substantiate the same, I am not prepared to assume that there was any real prejudice in that regard.

26. Further, Mr Ho informed this court that the Defendants would not be calling any members of public from Taiwan to give evidence at the trial. Apart from the 2nd Defendant, the defence intends only to call a Taiwanese lawyer to give evidence. Hence, there is no question of the Defendants obtaining unfair advantage by these publications in terms of securing more sympathetic witnesses to give evidence for them.

27. As to the effect of these publications on the Plaintiffs, whilst I can see their concern about the adverse impact of the same on their reputation in Taiwan, there is nothing to suggest that they felt pressurized by such publications with regard to the continuation of the present action. Regarding the protection of their reputation, if they consider that the damage is substantial, the proper course as I said in Paragraph 19 above is to start a fresh action in whatever jurisdiction as they might be advised. It is not appropriate for them to get relief for that in the context of this action.

28. Hence, the Plaintiffs have not satisfied me that there is a real risk that the due administration of justice has been affected by the conducts of the Defendants.

29. Moreover, even if I were wrong in that conclusion, I do not think it is appropriate to grant the injunction sought by the Plaintiffs on the facts of the present case. It seems to me the proper remedy is to give leave for the general publication of my Reasons for Ruling and this Decision. The injunction sought by the Plaintiffs was drafted in very wide terms and the Defendants would be caught by a slight misinterpretation of my Reasons for Ruling even if it were made innocuously and internally. That plainly goes beyond the proper scope of preventing wrongful interference with due administration of justice.

30. For these reasons, I am not minded to grant any further relief to the Plaintiffs apart from the order I made on 20 November 2002. I would however grant leave for the general publication of this Decision. I have consulted the parties on this at the hearing of 2 January 2003 and they have no objection. Further, this should avoid a repetition of what had happened in respect of my Reasons for Ruling.

31. Although I do not consider it appropriate to grant further relief to the Plaintiffs, the Defendants should not be under the misapprehension that they have emerged as the victors in this summons. It should be clear from I have said in the beginning of this Decision that I absolutely disapprove what they have done. If what they did were done pursuant to the advice of an investment consultant, they have been badly advised. If the 1st Defendant were a listed company in Hong Kong, I would have seriously considered referring this Decision to the relevant regulatory authorities for further investigation. As it is, the 1st Defendant has not yet secured any listing in Hong Kong and its directors, including the 2nd Defendant, should study this Decision carefully with the assistance of their lawyers and reflect on their mistakes in the episode if they wish to hold themselves out as fit and proper persons to act as directors of a listed company.

32. It follows from what I said that I would depart from the usual order in terms of costs. The Plaintiffs are not entirely successful in their applications. In fact, they only manage to obtain the relief in one paragraph of the summons. Substantial time and costs were incurred in respect of the other paragraphs. On the other hand, to mark my disapproval as to the conducts of the Defendants, I do not think they should get any costs in respect of this summons. Further, the position might be very different if there would be a trial by jury. The Defendants had been contending for trial by jury and it was only at the end of the hearing of 20 November 2002 that I ruled that the trial would be before a judge alone. The order nisi on costs I will make is that the Defendants do bear 1/2 of the costs of the summons of 29 October 2002, with certificate for two counsel.