EXCEL CONCRETE LTD v. THE CONCRETE PRODUCERS ASSOCIATION OF HONG KONG LTD AND OTHERS

HCA 938/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 938 OF 2011

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D E C I S I O N

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Introduction

1.  There are 3 applications which need to be determined:

(a) in relation to the defence of the 1^st, 2^nd and 7^th defendants (collectively “the leave application defendants”), their applications for (1) a time extension to file their re-amended defence, and (2) leave to re-re-amend their defence;

(b) the plaintiff’s application for leave to adduce expert evidence;

(c) in relation to the plaintiff’s case management summons, its applications for (1) a time variation to file the amended reply, and (2) costs.

2.  They will be considered and determined below.

Background

3.  The plaintiff commenced this defamation action in June 2011.  The background leading to this action has been summarized in the decision dated 18 July 2013 (“the July 2013 decision”).  As the court of appeal has done so in its judgment of 25 June 2014 (“the June 2014 judgment”), I will gratefully quote from the July 2013 decision:

“11. The plaintiff claims the 7^th, 8^th and 9^th defendants together with other companies (collectively, ‘Cartelists’), five of whom were members of D1, were active members of a cartel aimed at controlling the concrete products market in Hong Kong, driving the plaintiff and other potential competitors out of the concrete supply market in Hong Kong and/or preventing new entrants from entering the market (‘Cartel’). Other non-active members of the Cartel followed the Cartelists’ directions and guidance on prices and allocations of projects (‘passive Cartelists’).

12. The plaintiff claims each of the Cartelists and/or each of the passive Cartelists was a competitor of the plaintiff, and the Cartelists’ combined share of the ready-mixed concrete market in Hong Kong amounted to about 80%. It is averred that representatives of the Cartelists regularly attended meetings at which the operation of the Cartel was discussed and agreed upon, and that from time to time meetings took place among the plaintiff, cement manufacturers/traders and members of the quarry industry to agree on guidelines for the Cartel and how to deal with new market entrants such as the plaintiff.

13. The plaintiff claims the Cartelists used D1 as a shield behind which to hide and a front to legitimise/facilitate the operation of the Cartel, and the Cartelists had a decisive influence on the steps taken by D1 because most of the Cartelists were members of D1 and/or due to the overlap of the Cartelists and D1’s management. The plaintiff is the first company in over 10 years to attempt to beat the Cartel and break into the Hong Kong concrete supply market.

14. The plaintiff claims:

(a) The 13/10/10 Letter (published to the MTRC) referred to and was understood to refer to the plaintiff. At that time, the plaintiff contracted to supply concrete produced by their KT Plant and, once ready, their Tin Wan Plant (‘TW Plant’) in Aberdeen on project-specific basis for a MTRC project awarded to a joint venture.

(b) The 14/10/10 Letter (published to the Buildings Department and the Southern District Council) referred to and was understood to refer to the plaintiff. At that time, the plaintiff was in the process of constructing the TW Plant and supplying concrete produced by the KT Plant for the construction of the raft foundation of the TW Plant.

(c) The 21/12/10 Letter (published to the MTRC) referred to and was understood to refer to the plaintiff. Attached to such letter was a letter from the 1^st defendant to HKQAA dated 20 December 2010 which referred to the certification process for a newly built concrete batching plant, and at that time (to the knowledge of the recipients of the 21/12/10 Letter) a certification process for the KT Plant was pending with the HKQAA.

15. The plaintiff claims the impugned statements in the 13/10/10, 14/10/10 and 21/12/10 Letters related to (a) complaints against the plaintiff about the unlawful erection/operation of the KT Plant with the aim of supplying concrete for MTRC projects, and (b) supply of inferior or substandard concrete, and were calculated to disparage the plaintiff in their business and commercial interests.  The plaintiff further claims the impugned statements were false, and the defendants knowing they were false or being reckless as to their truth, maliciously instructed, authorised, caused and/or procured such statements to be published with the intention of preventing the plaintiff from (i) supplying concrete to the MTRC for their projects, (ii) producing concrete at the KT Plant, (iii) constructing and operating the TW Plant, and (iv) supplying concrete produced at the KT and TW Plants.  The plaintiff therefore claims for, inter alia, damages and injunctive relief restraining the publication of similar statements.”

Application for leave / time extension

4.  The subject-matter of the July 2013 decision and the June 2014 judgment was similar to this application; the leave application defendants sought leave to re-amend their defence.  By the July 2013 decision, the court refused that application.  But the court of appeal partly disagreed; the June 2014 judgment says:

“As is clear from the structure of the draft re-amended Defence as a whole … the primary purpose of this plea relating to the Short-Piling Scandal is to answer … the Amended Statement of Claim which pleaded the building up of its reputation by the Plaintiff” (para 11 thereof);

“[out of para 4 of the draft re-amended defence, the] … gist of the Short Piling Scandal was pleaded in sub-para (8) and the first sentence of sub-para (11) of para 4. Those were the material facts and in our view, it is quite enough to plead those at the Defence stage … ” (para 14 thereof);

“We agree with [the leave application defendants] that on the question of malice, the court is not primarily concerned with the objective relevance of the Short Piling Scandal. The relevant inquiry is directed to the state of mind of [the leave application defendants] when the statements were published” (para 20 thereof);

“Hence, … we do not think [the leave application defendants] should be barred from advancing a case of honest belief based on the Short Piling Scandal to rebut malice as a matter of pleading. Whether [they] did hold such honest belief is a question of fact. With respect, we do not agree with the Judge that one can conclude at this stage that such a plea has no merit because of the temporal factor, lack of objective nexus and lack of references to the Short Piling Scandal in the letters in question” (para 22 thereof).

5.  The essence of the so-called “short piling scandal” has been set out in:

“sub-para (8) and the first sentence of sub-para (11) of para 4”

of the draft re-amended defence (para 14, the June 2014 judgment).  Those averments have been quoted in the June 2014 judgment:

“The practice of Zen Pacific, of which Mr. D. Zen was a director, came into the limelight in an incident in December 1999 where two of the five multi-storey residential buildings at Yuen Chau Kok (the ‘Buildings’) then being constructed for the Hong Kong Housing Authority (‘HKHA’) under the Home Ownership Scheme Development were found to have excessive settlement:

(a) The tender for the construction of foundations at the site of Yuen Chau Kok was awarded to Zen Pacific on 15 January 1998. The piling contract commenced on 10 February 1998; the piling works commenced in March 1998 by Hui Hon Contractors Limited (‘Hui Hon’), the sub-contractor nominated by Zen Pacific responsible for the piling works of the Buildings.

(b) Zen Pacific owed HKHA the contractual duties, inter alia, to construct the piles in accordance with specifications, to properly supervise the works, to discover and to report any defect.

(c) The said piling works were completed between July and August 1998.  Subsequent investigations of the Buildings by HKHA revealed that the foundations of the Buildings had serious defects due to faulty pilings.  As a result, the Buildings had to be torn down (the ‘Short-Piling Scandal’).”

“The Short-Piling Scandal aroused serious public concern on the building quality of public housing, calling for detailed investigation into the circumstances surrounding these incidents.”

(the above averments are called “the approved averments”; see also para 14, the June 2014 judgment (quoted at para 4 above)).

6.  The main dispute of this application centres around para 56B of the draft re-re-amended defence (“the draft defence”) and para 58A thereof (which repeats para 56B).  Para 56B contains 9 sub-paragraphs and can be summarized as follows:

(1) sub-para (1) to (3) set out the individuals behind (and the inter-relationship of) the companies which were responsible for the short piling scandal;

(2) sub-para (4) to (7) in gist repeat the approved averments (though they are set out in different language);

(3) sub-para (8) avers that the 1^st and 2^nd defendants were aware of the short piling scandal before the 3 letters were published, and that knowledge (i) caused them to be particularly wary of the activities and/or practices of other members of the construction industry and (ii) contributed to the publication of those letters;

(4) sub-para (9) avers that the 1^st defendant was particularly wary of the activities and/or practices of entities which were managed, controlled and/or connected to the same individuals.  The 1^st defendant came to know of this in October 2010.  This knowledge, and the 1^st defendant’s knowledge of the matters set out in sub-para (1) above, contributed to the 1^st defendant’s publication of the last letter.

7.  Para 56B of the draft defence is:

“[in] further answer to paragraphs 44A, 44B, 45A, 45B, 46A and 46B”

(of the re-amended statement of claim).  In essence, para 44A, 45A and 46A thereof allege that the defendants published the libel maliciously, while para 44B, 45B and 46B thereof allege that the libel was published as part of the campaign to injure the plaintiff’s business.

8.  The plaintiff submits in this application that:

“[the] touchstone … is whether the [defendants] held a positive belief in the truth of the published statements. … The fundamental objection is that there is simply no averment in [the draft defence] that either D1 or D2 held a positive belief that the relevant published statements were true because of the short-piling scandal” (emphasis supplied) (para 12 and 14, plaintiff’s skeleton submissions).

9.  What the June 2014 judgment said about “malice” has been quoted at para 4 above, and is repeated for convenience:

“We agree with [the leave application defendants] that on the question of malice, the court is not primarily concerned with the objective relevance of the Short Piling Scandal. The relevant inquiry is directed to the state of mind of [the leave application defendants] when the statements were published” (para 20 thereof);

It then referred to Horrocks v Lowe [1975] AC 135, 149 for the proposition that a defendant’s motive is crucial.  The passages quoted from Horrocks included the following:

“Broadly speaking, it means malice in the popular sense of a desire to injure the person who is defamed … But to destroy the privilege the desire to injure must be the dominant motive …; knowledge that it will have that effect is not enough if the defendant is nevertheless acting in accordance with a sense of duty or in bona fide protection of his own legitimate interests” (emphasis supplied).

10.  Leaving aside whether the plaintiff’s above submissions are an attempt at a re-run of its argument (based essentially on temporal factor, objective nexus and so on) which did not find favour with the court of appeal, and judging from the passage quoted from Horrocks (above), it appears that, by para 56B and 58A of the draft defence, the leave application defendants are primarily advancing a case based on the proposition in Horrocks (above). As to whether the plea is also put forth to establish their belief in the truth of the 3 statements the proposition in Horrocks (above), and, if they do, that would be a matter for trial.

11.  The plaintiff makes the further point that the particulars of the corporate officers who possessed that state of mind should also be given.  Reliance is placed on Broadway Approvals Ltd v Odhams Press Ltd (No 2) [1965] 1 WLR 805, 813:

“… but a company’s mind is not to be assessed on the totality of knowledge of its servants”.

12.  Here, for the reasons given below, I agree with the leave application defendants that no such particulars are required.  It must be noted:

(a) the above observation in Broadway was made in the context of whether it was correct to “lump together” the knowledge of the corporate defendant’s advertising department and that of its editorial department to establish malice on the defendant’s part;

(b) the burden of proving malice lied with the plaintiff.

13.  However, this part of the leave application defendants’ case is in gist this:

(1) both the short piling scandal itself and the individuals said to be responsible for it became a public issue (hence the averment “[they] aroused serious public concern, calling for detailed investigation”);

(2) the connection of those individuals (as well as the related companies) was confirmed to the 1^st defendant in October 2010 (in writing).

In the context of such a case, the particulars of the corporate officers who possessed the above knowledge do not seem to be a material fact, at least for pleading purpose. This is particularly so in view of the now prevalent practice of detailed witness statements being prepared and served before trial.

14.  Finally, the plaintiff complains that the short piling scandal plea has not been raised by the 3^rd and 4^th defendants (who are sued as personal tortfeasors and are separately represented in this action).  I agree with the leave application defendants this is irrelevant to the case of the leave application defendants.

15.  In view of the above matters, I do not consider there to be anything improper in para 56B or 58A of the draft defence.

Plaintiff’s application for expert

16.  The following are the parts of this application which have been agreed in principle:

(a) whether the quality of the plaintiff’s concrete meets various specified standards;

(b) whether the plaintiff’s concrete products from its Kam Tin plant (“the Kam Tin concrete”) were sub-standard in not complying with the above standards;

(c) whether the Kam Tin concrete was sub-standard in not complying with the code of practice of the Buildings Department (“the SUC Code”), and/or the specified practice note, and/or the specified standard.

17.  The plaintiff contends the following parts of the leave application defendants’ proposed expert directions (Annex 1, the leave application defendants’ skeleton submissions) should be dismissed; namely, experts’ opinion on whether the plaintiff’s Kam Tin operation failed to comply with:

(1) the specified standards and/or specified practice note in that the said operation never obtained certification thereunder (para 45(2), plaintiff’s skeleton submissions; para 1(j) and (k), Annex 1 to the leave application defendants’ skeleton submissions);

(2) the specified standards and/or the building sub-legislation in that said operation did not comply with the SUC Code and/or the specified standard (para 45(2), plaintiff’s skeleton submissions; para 1(l), Annex 1 of the leave application defendants’ skeleton submissions);

(3) the various specified standards in that the said operation did not obtain approval thereunder (para 45(2), plaintiff’s skeleton submissions; para 1(m), Annex 1 to the leave application defendants’ skeleton submissions).

For the reasons given below, I disagree with the plaintiff.

18.  The plaintiff’s first ground of objection is that the experts should not be asked to give their opinions based on facts which are not yet proved.  I do not consider that to be a valid ground; it is trite law:

“It is … permissible for [an expert] to give an opinion on the basis of such hearsay … of which admissible evidence will be given by another witness” (Phipson on Evidence (2013) 18^th Ed, para 33-09 (see also para 33-09, text to n 53)).

19.  As to the plaintiff’s second ground of objection is that it doubts whether para 17(1) to (3) above are necessary, I agree with the leave application defendants those matters are relevant to their plea of justification.

20.  On the other hand, the leave application defendants contend the following parts of the plaintiff’s summons should be dismissed:

(a) para 1(d) to (f) (sub-standard concrete and its possible adverse effect on construction works);

(b) para 1(h) to (j) (quality of the plaintiff’s concrete production process).

21.  In relation to para 20(a) above, I agree with the leave application defendants that this part suffers from a number of inadequacies including lack of specifics and lack of reference standard(s).  In any event, this should be adequately covered by the experts’ opinion mentioned in para 16 and 17 (especially para 16(c)) above.  Insofar as it may be proper to seek the experts’ opinion on whether concrete which complies (or which fails to comply) with the standards mentioned in para 16 (and 17) above has any impact (adverse or otherwise) on construction works (and, if adverse, particulars of such impact), this part of the plaintiff’s application will have to be re-formulated (the language presently used does not reflect these).

22.  In relation to para 20(b) above, I also agree with the leave application defendants for reasons similar to para 21 above.  Further, the alleged libel concerned the plaintiff’s concrete (and its adverse effect on construction works); nothing has been said about the plaintiff’s production process (in any event, any such matter should be adequately covered by the experts’ opinion mentioned in para 17 above).

Case management summons applications

23.  Only para 4 (costs be in the cause) requires determination.  This will be dealt with under the heading “Costs order nisi”.

Conclusion

24.  In relation to the application mentioned in para 1(a) above, there will be an order in terms of the summons.

25.  In relation to the application mentioned in para 1(b) above, leave will be given for the matters set out in Annex 1 to the leave application defendants’ skeleton submissions.

26.  In relation to the application mentioned in para 1(c) above, there will be an order in terms of para 1 of the summons (with a further direction that any such (and subsequent) witness statements are to stand as evidence in chief unless the court or the trial judge otherwise directs).

Other matters

27.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order nisi

28.  There is no apparent reason to depart from the usual rule that costs should follow the event.  There will accordingly be the following costs orders nisi pursuant to Ord 42 r 5B(6).

29.  In relation to the application mentioned in para 1(a) above, (i) the costs of and occasioned by the leave application defendants’ re-amendment and re-re-amendment be paid by them to the plaintiff; but (ii) the costs of the hearing are to be paid by the plaintiff to the defendants.

30.  In relation to the application mentioned in para 1(b) above, those costs be paid by the plaintiff to the leave application defendants.

31.  In relation to the application mentioned in para 1(c) above, those costs be in the cause of this action.

32.  I consider summary assessment of costs to be appropriate.  The costs in para 29(ii) and 30 above shall thus be so assessed.  For this purpose:

(1) for the costs ordered at para 29(ii) above, the defendants be at liberty to lodge with court and serve a statement of costs within 14 days from today;

(2) for the costs ordered at para 29(ii) above, the plaintiff be at liberty to lodge with court and serve a statement of objections within 14 days thereafter;

(3) for the costs ordered at para 30 above, the leave application defendants be at liberty to lodge with court and serve a statement of costs within 21 days from today;

(4) for the costs ordered at para 30 above, the plaintiff be at liberty to lodge with court and serve a statement of objections within 21 days thereafter.

33.  To avoid doubt, I have allocated four-fifths of the hearing time to the costs mentioned at para 29(ii) and one-fifth thereof to the costs mentioned at para 30 above.

34.  There may be an application (on the part of the leave application defendants) for certificate for the court attendance of more than one counsel.  The parties are at liberty to lodge with court and serve their respective written submissions regarding this (if so advised) within 7 days from today.