CHAN KWING CHIU AND ANOTHER v. 陳志球

CACV 209/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 209 OF 2012

(ON APPEAL FROM HCA NO. 505 OF 2007)

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REASONS FOR JUDGMENT AND
DECISION ON COSTS

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Hon Cheung JA:

1. I agree with the Reasons for Judgment and Decision on costs by Kwan JA. Accordingly there shall be costs order in terms of para 112.

Hon Yuen JA:

2. I agree with the Reasons for Judgment and Decision on Costs of Kwan JA.

Hon Kwan JA:

3. This is an appeal of the 1^st and 2^nd plaintiffs (“Chan” and “Lam” respectively) in a defamation action against Chan Chi Kau (“C K Chan”), who was then the chief estate manager of Whampoa Property Management Co Ltd (“WP”).  The plaintiffs were owners and residents of a residential development in Tai Po known as Savanna Garden (“the Estate”), and WP was then the manager of the Estate.  After a nine-day trial in June 2012, in respect of a dispute described as a storm in a teacup, Deputy Judge M Chan (as she then was) dismissed the plaintiffs’ claim in a judgment handed down on 23 July 2012, and gave judgment in favour of C K Chan on his counterclaim in defamation against the plaintiffs.  As C K Chan expressed the wish he only wished to be vindicated and would be happy with any award of damages the court deemed fit, the judge made a nominal award of $5,000 against each of Chan and Lam.

4. The plaintiffs, who appeared by Mr Lawrence Ng here and below[1], filed a Notice of Appeal of 22 pages with 37 grounds, which read inappropriately like a submission, seeking to challenge the judge’s findings of fact in respect of the defence of justification, the finding of law that the communications complained of were made on occasions of qualified privilege, and the finding of fact that there was no evidence of malice to defeat the protection of qualified privilege.  In respect of the counterclaim, it was contended that the judge had failed to consider the defence that the words complained of in the relevant letters were not defamatory of C K Chan, and that the judge should have found for the plaintiffs on the defences of justification and qualified privilege.

5. Mr Paul Lam, SC sought to support the dismissal of the claim for the reasons given in the judgment.  In addition, he contended that the judge should have upheld the defence of justification in respect of all three sets of the offending words of C K Chan, not merely the second and third sets.  For the counterclaim, he argued that the defence of qualified privilege, which was not dealt with by the judge, should be rejected.

6. At the conclusion of the hearing, we dismissed the plaintiffs’ appeal on the claim and allowed their appeal on the counterclaim.  We heard arguments on costs and reserved our decision.  I now give the reasons for judgment and our decision on costs.

The background

7. The relevant background matters giving rise to the dispute, taken largely from the judgment, may be stated as follows.

8. The Estate consists of 40 houses and nine apartment blocks.  The plaintiffs are both house owners.  Members of the Owners’ Committee (“the Committee”) were elected by the owners of the Estate at the annual general meeting and the Committee was tasked with deciding on matters relating to the management of the Estate in liaison with the manager.  As mentioned, WP was the manager at the material time.

9. For the 2005/2006 session of the Committee, Chan was the vice chairman and Lam a member of the same.  For the 2006/2008 session, Chan was a member of the Committee.  So at the time of the incident on 27 October 2006 (“the Incident”), Chan was a Committee member.

10. The relationship between WP and the Committee deteriorated after the Committee for the 2005/2006 session took office in September 2005.  The Committee members thought that the management staff of WP were incompetent and complained of one incident after another relating to the affairs of the Estate.

11. In February 2006, an under-aged and unlicensed driver drove his parents’ car into the barrier of the carpark complex of the Estate.  The Committee discovered this only in June 2006.  They claimed that the record of the incident had been altered by WP to cover up the incident.

12. In April 2006, the former chairman of the Committee, who was allegedly drunk, stopped his car at the main entrance of the Estate in the peak traffic hours of the morning and caused serious obstruction.  The Committee considered WP had handled this improperly.

13. In June 2006, there were several attempted burglaries in the Estate.  The Committee complained there were serious failings in the security system and measures maintained by WP.  At a meeting of the owners in July 2006, the Committee members expressed severe criticism of WP and demanded improvement.

14. In August 2006, WP introduced and implemented the policy of impounding cars which the house owners parked outside their homes, by or near the entrance to their garages, claiming that the vehicles were parked in the common areas and private roads of the Estate and causing obstruction.  The Committee members however claimed that house owners had parked their cars outside their garages for many years without interference from the former manager of the Estate, that they had not been consulted about the policy and they disagreed that WP could implement the policy without their consent.  Indignant correspondence was circulated among the Committee, WP and the residents.  The Committee threatened to issue a solicitor’s letter to WP.  There were heated exchanges at a meeting of the Committee attended by C K Chan and his team.  On 21 October 2006, the house owners declared to WP in writing that they would continue to park their cars outside their garages.  And WP responded on 27 October 2006 stating it would continue to enforce the deed of mutual covenants (“the DMC”) within the Estate.

The Incident

15. At around 9 pm on 27 October 2006, Lam returned home from Shenzhen and parked his car by the entrance to his house for his domestic helper to clean before moving it into the garage.  He received a curt telephone call from the management office to move his car immediately, or it would be impounded.  Lam considered this unreasonable and decided to go to the management office to reason with the staff.  He telephoned Chan and asked the latter to go with him.  Chan and his wife summoned at least two other house owners to go to the management office.

16. Lam arrived at the management office first.  He found the site manager Hui Kau Yung (“Hui”) and two security officers (Kuo Chien Cheng and Ng Siu Wing; “Guo” and “Ng” respectively) in the employ of WP present.  Lam asked Hui to go to his house to see if the parking of his car outside was causing inconvenience to anyone.  There was dispute between the parties as to what happened next.  Lam said he pulled Hui by his sleeve and demanded he should go.  Chan and his wife then arrived and Chan claimed he tried to separate Lam and Hui to prevent a fight.  Hui claimed he was grabbed forcibly by Lam, dragged for some distance and Chan then pushed him in the chest.

17. The police was summoned.  After some preliminaries, the matter was recorded in the police notebook as a push and shove incident and that it had been settled by the parties.

18. About half an hour after the police left, Hui claimed he felt unwell.  He sent for an ambulance which took him to a nearby hospital for treatment.  He then filed a report with the police of having been assaulted by Lam and Chan.

The defamation alleged in the claim

19. On 13 November 2006, C K Chan as the chief estate manager of WP issued a letter in Chinese to the Committee members on behalf of WP (“the 1^st Letter”), the words complained of in the statement of claim read as follows[2]:

“ 翡翠花園

駐物業經理受襲事件及違例泊車事宜

本公司駐物業經理許教勇先生於2006年10月27日在執行扣鎖違規停泊車輛職務時，被兩名業戶暴力毆打。由於涉及本公司前線員工在合法執行職務期間的人身安全，事態非常嚴重…由於事件涉及管業處前線員工人身安全…警方現正就該宗傷人事件展開調查…本公司…同時保留向有關人士追究法律責任的權利。”

20. The words complained of in the 1^st Letter referred to Hui having been “violently assaulted” (“暴力毆打”) by two owners whilst executing his duties of impounding illegally parked vehicles.  It was stated that the matter involved the personal safety of frontline workers of WP in their lawful execution of duties, that it was a very serious matter and was being investigated by the police, and that WP reserved its right to claim against those who were responsible.

21. Prior to the issue of the 1^st Letter, C K Chan had asked the chairman of the Committee, Yim Kwok Hong (“the Chairman”), to include the Incident and the issue of unauthorised parking in the agenda of the meeting of the Committee scheduled on 15 November 2006.  The Chairman did not agree, on the ground that the Incident was being investigated by the police and it involved a matter between individual owners and it was not for the Committee to deal with such matters.

22. On 15 November 2006, WP tendered its resignation as the manager of the Estate by giving six months’ notice.  On 16 November, C K Chan issued a letter in Chinese to all the owners of the Estate (“the 2^nd Letter”).  In the 2^nd Letter, the words complained of in the statement of claim read as follows:

“ 終止翡翠花園管理服務合約

…

在2006年10月27日晚上，管業處駐邨經理在執行合法鎖車職務期間，在管業處辦公室內遇襲受傷，事件現正交由警方調查中。…

由於本公司前線職員人身安全受到嚴重威脅，而有部份業戶更透過不同方式，試圖阻撓及影響管業處職員執行合法職務，對本公司依法管理翡翠花園構成障礙，… ”

23. The words complained of in 2^nd Letter bore the caption of termination of the management contract with Savanna Garden.  They stated that the site manager had been “attacked and injured” (“遇襲受傷”) in the management office in the course of the execution of his lawful duties of impounding vehicles, and that the matter was being investigated by the police.  It was stated that the personal safety of WP’s frontline staff had been seriously threatened, and that some of the owners had attempted to obstruct and influence the officers of the management office in their execution of lawful duties, thereby constituting hindrance to WP’s management of the Estate.

24. At the meeting of the Committee on 15 November 2006, C K Chan spoke to the members of the Committee in Cantonese and these words (“the 3^rd Offending Words”) were complained of in the statement of claim:

“主席，我希望將10月27號發生嘅事故擺上去今日嘅議程度討論…我地有位同事喺管理處度遇襲受傷，我地公司覺得呢件事事態非常嚴重，因為呢件事涉及到我地嘅員工執行合法職務期間遇襲… ”

25. By the 3^rd Offending Words, in the course of requesting the Chairman to add the Incident as an item for discussion on the agenda, C K Chan said his colleague had been “attacked and injured” (“遇襲受傷”) in the management office and WP considered this to be very serious as it concerned its staff being attacked when he was carrying out his lawful duties.

The defamation alleged in the counterclaim

26. On 17 December 2006, the police wrote to Chan stating that they had completed their investigation of the Incident and as the parties concerned did not wish to pursue the matter and the police found no one had committed any offence, the police had terminated the investigation.

27. Following from this letter of the police, Lam, Chan and the two of them jointly wrote three separate letters in Chinese, which formed the subject of C K Chan’s counterclaim against them for defamation.

28. The first of the letters was written by Lam to the Committee on 25 December 2006 (“Lam’s Letter”), and copied to all residents of the Estate and WP.  Lam’s letter bore the heading “含冤被屈，真相大白” (“Suffered an injustice and was wronged, the truth is revealed”).  It referred to the 2^nd Letter issued by C K Chan and queried if the incident mentioned in it was the Incident.  It went on to say although he was not named in the 2^nd Letter, as one of the persons involved in the Incident it had led to his being widely condemned and accusations had been directed at him.

29. The second letter, dated 27 December 2006, was written by Chan to the Committee (“Chan’s Letter”) and copied to all residents of the Estate, WP and its parent company Hutchison Whampoa Ltd (“Hutchison”).  Chan’s Letter set out his account of the Incident and referred to the letter of the police to him quoting that the police found no one had committed any offence and had terminated their investigation.  It referred to the 1^st and 2^nd Letters issued by C K Chan and questioned if C K Chan was referring to the Incident in his said letters.  He stated that although he was not identified by name in the 1^st and 2^nd Letters, as one of the persons involved in the Incident, this had led to his being the target of public criticism and his reputation was seriously damaged.

30. The third letter, dated 10 January 2007, was written jointly by Chan and Lam to Ms Laura Cheung, general manager – corporate affairs of Hutchison (“the Joint Letter”) and copied to Li Ka Shing, Fok Kin Ning and Mrs Chow Woo Mo Fong of Hutchison, and Raymond Chow, Raymond Tam, Tony Tsui and William Tang of WP.  In the Joint Letter, it was stated that C K Chan had made irresponsible accusations in correspondence, and used the Incident to justify WP’s resignation as manager of the Estate.  It was claimed that the allegations made by C K Chan were unsubstantiated, possibly defamatory and had seriously affected and distressed all residents of the Estate.

The judgment below

31. Chan and Lam issued a writ against C K Chan on 13 March 2006 alleging defamation in respect of the words complained of in the 1^st Letter, the 2^nd Letter and the 3^rd Offending Words.

32. C K Chan pleaded in defence justification and qualified privilege.  At the trial, he did not dispute that the words complained of were understood to refer to Chan and Lam, although they were not mentioned by name.  Nor did he dispute that the words are on their face defamatory.  Chan and Lam claimed that C K Chan was actuated by malice so he could not rely on qualified privilege in defence to the claim.

33. C K Chan raised a counterclaim in respect of the words complained of in Lam’s Letter, Chan’s Letter and the Joint Letter, alleging that these letters are defamatory of him as suggesting that his account of the Incident was untrue and concocted.

34. Chan and Lam pleaded justification and qualified privilege in defence to the counterclaim.

35. The three main issues considered by the judge were: (1) whether Hui was “violently assaulted” and “assaulted or attacked and injured” by Lam and Chan on 27 October 2006; (2) whether WP had a duty to issue the 1^st Letter, the 2^nd Letter and to publish the 3^rd Offending Words; and (3) whether C K Chan was acting under an improper motive when he issued the 1^st Letter, the 2^nd Letter and published the 3^rd Offending Words.

36. In respect of issue (1) on justification, the judge bore in mind that the offending words should be construed in their natural and ordinary meaning, which is the meaning in which reasonable people of ordinary intelligence, with the ordinary person’s general knowledge and experience of worldly affairs, would likely to understand them.  She rejected the submission it would be appropriate to construe the words used by their legal meaning, by reference to the criminal offences or torts of assault, or battery[3]. She construed the words “暴力毆打” (“violently assaulted”) in their proper context to mean that Hui had been violently assaulted or beaten, and the words “遇襲受傷” (“attacked and injured”) to mean that Hui had been attacked, or assaulted or hit, and injured as a result[4].

37. The judge considered the conflicting accounts given by the witnesses called to give evidence of the Incident, which happened more than five years ago.  She found that although Lam had, in his testimony in court, attempted to play down his agitation when he arrived at the management office, she did not find it credible and in any event Lam admitted in court he had used foul language[5].  The judge did not find it credible that Lam in his agitated state would have used his thumb and finger to slightly pull Hui in a pinching motion as Lam appeared to suggest in court[6].

38. Having reviewed the evidence of the witnesses, the judge noted that although Hui’s witness statement may have been exaggerated, Hui remained consistent in his claim from 28 October 2006 (when he gave his first statement to the police) until trial that Lam had pulled him by his shirt, and had dragged him for a distance, which he claimed at trial to be three feet[7].

39. As for Chan’s claim that he used his two hands to separate Lam and Hui, the judge did not believe his evidence a gentle parting would have been adequate and found it inherently more likely that Chan would have had to use a measure of force to push both Hui and Lam back[8].  She considered that the evidence of Lam, Kuo and Ng was consistent with Hui’s claim that Chan had pushed him on his chest causing him to take two steps back[9].  Pausing here, it should be noted that since Hui was not fighting with Lam, it was not necessary for Chan to push Hui back, as he needed to do with Lam.

40. Having considered all the evidence, the judge accepted that Lam had used force to pull Hui for a distance of about three feet, and that Chan had pushed Hui in his chest in an attempt to make him back away from Lam and as a result Hui had to take two steps backward[10].

41. The judge did not find it incredible Hui told the police he agreed to settle the matter when the police arrived at the management office, as Hui did not feel particularly unwell at the time.  She accepted his evidence that shortly after the police, Lam and Chan had left, he began to feel unwell and decided to go to the hospital for a check up.  She considered the hospital records to be sufficient evidence to infer that the pain Hui complained of was caused by his encounter with Lam and Chan earlier[11].  She rejected the suggestion that Hui had been instigated by C K Chan to make a false complaint about his injuries and found it inherently more probable that Hui had reported the Incident to his immediate superior, Dominic Wu, not C K Chan[12].

42. On the evidence, the judge accepted that Hui was attacked and injured as a result and some violence had been exerted on him.  However, she did not consider that a reasonable person of ordinary intelligence and general knowledge would consider that by reason of Hui having been forcibly dragged for three feet and pushed to the extent that he had to retreat two steps, Hui had been “violently assaulted” or “violently hit” by Lam and Chan[13].  She held that the defence of justification failed in respect of the words “暴力毆打” (“violently assaulted”), as it has to be shown not only that violence had been exerted on Hui but that there was “毆打” (“an assault”) as these words are generally understood, i.e. that Hui had been hit, struck or beaten.  It has not been shown that Hui had been hit, struck or beaten violently.  She found the words “遇襲受傷” (“attacked and injured as a result”) are justified[14].

43. As regards issue (2) whether the occasions in which the 1^st and 2^nd Letters and the 3^rd Offending Words were published were protected by qualified privilege, the judge held that C K Chan, as the chief estate manager of WP and in charge of WP’s portfolio of properties as the managerial level, had a legal duty to raise the Incident with the Committee, as the representative of the owners and residents of the Estate, for discussion, to ensure the safety of Hui and other employees of WP working at the Estate and who might be required in future to enforce the policy of impounding vehicles[15].  The judge also held that the Committee had the duty and interest to be informed of the Incident, as the Committee was tasked with the management of the Estate in liaison with the manager, and had the power to deal with matters relating to the management of the common areas of the Estate[16].  Further, in respect of the 2^nd Letter, WP had decided to resign as manager of the Estate as a result of the Incident, and it had the duty or interest to explain to the residents the reason for its resignation[17].  The judge held accordingly WP had the duty and interest to issue the 1^st and 2^nd Letters and to publish the 3^rd Offending Words, and the Committee and the residents of the Estate had the duty and interest to receive the same letters and the offending words[18].

44. For the issue of malice in (3), the judge held that Chan and Lam had failed to establish that C K Chan was acting under some dominant and improper motive to injure them, and not in furtherance of his duty or interest as the chief estate manager of WP to raise the Incident and the issue of the personal safety of WP’s employees for discussion by the Committee.  The judge was satisfied that C K Chan honestly and positively believed that the conclusions he reached on the materials he had received were true and his dominant motive was the proper discharge of his and WP’s duties of securing the personal safety of their front-line staff in their work at the Estate, and to explain WP’s resignation as the manager[19].

45. When the judge turned to consider the counterclaim at the end of her judgment, she dealt with it very briefly in a single paragraph[20].  She held that as the claim of defamation of Chan and Lam has failed against C K Chan, it followed that Chan and Lam had, by publishing Lam’s Letter and Chan’s Letter, defamed C K Chan.  She made no finding of defamation in respect of the Joint Letter referred to in the earlier part of her judgment.  And she did not deal with justification and qualified privilege that had been raised by Chan and Lam in defence to the counterclaim.  She made a nominal award of damages of $5,000 each against Chan and Lam.

The judge’s findings in respect of justification in the claim

46. Much of Mr Ng’s arguments on appeal were devoted to attacking the judge’s findings of fact made in respect of the defence of justification raised by C K Chan, which the judge held to be partially successful.  Essentially, he contended that the judge had erred in making these findings about the Incident: (1) Lam had used force to pull Hui for a distance of about three feet; (2) Chan had pushed Hui in the area of his chest in an attempt to make him back away, as a result of which Hui had to take two steps backwards; and (3) Hui was injured as a result of the forceful pulling and pushing of Lam and Chan.

47. Much of Mr Ng’s arguments to us were a repetition of the arguments advanced on behalf of the plaintiffs before the judge in the oral and lengthy written submissions made in the opening and closing stages of the trial.  A total of seven witnesses gave evidence about the Incident and what happened shortly afterwards.  On the plaintiffs’ side, there were Chan, Lam, Chan’s wife Madam Wong Mei Ying (“Mrs Chan”) and the Chairman. On C K Chan’s side, there were Hui, Kuo and Ng.  Most of them had provided police statements.  All were cross-examined closely on the previous accounts they gave as well as the accounts and testimony in court given by the others.  In this trial which had lasted for nine days, the judge could not be expected to set out the gist of all the evidence, whether oral or documentary, that was adduced.  The mere fact that she did not mention particular items of evidence or refer to certain submissions of counsel does not mean she had not reviewed them when she prepared her judgment.  Furthermore, the judgment was given within a month of the conclusion of the trial, when the evidence and the submissions of counsel would have been relatively fresh in her mind.  This court should not interfere with the findings of primary fact of the judge, which rested to a large extent on her assessment of the credibility and oral testimony of witnesses, merely because particular items of evidence were not mentioned in the judgment, unless it has been shown that the findings she made were plainly wrong.

48. Further, as Lord Hoffmann had said in Biogen Inc v Medeva plc [1997] RPC 1 at 45, “the need for appellate caution in reversing the judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy.  It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence.  His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance …, of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation.”  In the light of this penumbra surrounding the findings of fact of the judge, it would be quite wrong and wholly inappropriate for us to undertake a fresh evaluation of the evidence on our own, as Mr Ng would seem to ask us to do.

49. Mr Ng submitted that the judge’s findings of fact are inconsistent with contemporaneous documents, undisputed evidence and admissions of the defendant’s own witness.  There is no merit in this submission.

50. The contemporaneous documents he referred to are the police notebook, WP’s occurrence book, and the letters from the police dated 24 November 2006 and 17 December 2006.  He contended the descriptions of the Incident contained in these documents were consistent with the plaintiffs’ case that no assault of Hui was committed, that there was merely mutual pushing and shoving, and that Hui sustained no injuries in the Incident.  He argued that the judge failed to consider these documents important to the plaintiffs’ case and did not deal with them in the judgment.

51. As I have mentioned above, the mere fact that these documents were not mentioned in the judgment does not mean that the judge had not considered them in assessing the conflicting accounts of the witnesses.  These documents had all been mentioned in the oral and written submissions of the plaintiffs at the opening and closing of the trial[21].  Besides, it is not even correct that the police notebook was not referred to in the judgment, as the judge did mention earlier that the matter was recorded by the police as a “push and shove incident” and that it was also recorded to have been settled by the parties[22].  The judge had also noted the gist of the letter of the police dated 17 December 2006 informing Chan that the police had terminated the investigation[23].  The judge had plainly placed little or no weight on the brief descriptions of the Incident in these documents, as she was fully entitled to do.  The plaintiffs’ counsel had also conceded in his oral opening submission that the letter of the police dated 24 November 2006 is of “very little evidential value” and “not of much evidential value”[24].

52. The undisputed evidence Mr Ng relied on which he said the judge had overlooked was: the evidence of the Chairman who saw no sign of violent assault having taken place when he arrived at the management office; and that there was no evidence Hui had made complaints of having been assaulted or injured to various people, i.e. the Chairman, two other residents who had arrived at the management office after the Chairman, the policemen and the paramedics who attended the scene.

53. Again, all these were matters addressed in the plaintiffs’ submissions at the trial[25].  The judge is entitled to place little or no weight on these matters.  As Mr Lam had pointed out to us, Hui was cross-examined on why he had not made complaint to the Chairman, the policemen and the paramedics[26].  The judge did not find it incredible when the police arrived, Hui agreed to settle the matter and told the police so as he did not feel particularly unwell at the time and did not wish to further damage the relationship between the owners and WP[27].  The judge was entitled to accept his explanation.

54. As for the admission of the defendant’s own witness which the judge allegedly failed to consider, this was Ng’s evidence in cross-examination in which he said what he saw in the Incident did not amount to “violently assaulted” (“暴力毆打”) or “attacked and injured” (“遇襲受傷”)[28].

55. This matter was addressed in the plaintiffs’ closing submissions[29].  The judge had considered Ng’s evidence, and noted his acceptance that he had seen little of the Incident, and only had a very hazy memory of the Incident by the time of the trial, which was not surprising.  She also noted that in the police statement of Ng given shortly after the Incident, Ng had stated that Lam had lifted Hui, and dragged him forward for a few steps, and when Chan appeared, he used his right hand to push Hui on the chest, which made Hui step back for two steps[30].  The judge was clearly entitled to reject and accept different parts of the evidence of Ng for the reasons she gave.

56. Next, Mr Ng relied on evidence not referred to in the judgment which he said was “largely unchallenged” and supportive of the plaintiffs’ case.  This was evidence given by Mrs Chan and the Chairman.  All these matters were addressed fully in the plaintiffs’ submissions at trial[31].

57. Regarding Mrs Chan, Mr Ng submitted the judge was wrong to find that she arrived at the management office after her husband.  This is a misreading of the judgment, as the words “who arrived after Chan” in §32 refer to “the other owners” not Mrs Chan.  In fact, the judge had mentioned in §8 that Chan and his wife arrived at the management office when Lam had physical contact with Hui.  It is not correct for Mr Ng to say the judge failed to consider Mrs Chan’s evidence at all, nor is it correct to say her evidence was largely unchallenged.  Plainly, the judge had considered her evidence, as it was mentioned in §32 that she did not witness the close encounter between Hui and Lam and then Chan and that she only heard loud noises or argument, and saw four or five guards who surrounded Lam.

58. Mr Ng submitted the judge was wrong to find that Mrs Chan did not witness the close encounter between Hui and Lam and then Chan.  That shorthand expression of “close encounter” used by the judge may not have described the situation entirely accurately.  Having considered Mrs Chan’s police statement[32], her witness statement[33] and those parts of the transcript[34] to which our attention was directed, it is apparent that Mrs Chan was not in a position to make a clear observation of what had happened within a very short time as she was standing behind her husband and I do not think there was any serious error in the judge’s finding as claimed by counsel.  In any event, the judge was entitled to give no weight to Mrs Chan’s evidence, having considered it in §32.

59. As for the Chairman’s evidence, it is simply incorrect to say it was largely unchallenged, as Hui did not accept he was speaking on the telephone to C K Chan[35] (the judge had made a finding to the contrary, that Hui had reported the Incident to his immediate superior Dominic Wu, not to C K Chan[36]) or that he was on the telephone for 30 minutes[37], and Kuo did not accept he had told the Chairman that Hui must be reporting to the boss or that the Chairman had said to him when the ambulance arrived that Hui was just playing at something[38].

60. It was suggested to Hui in cross-examination that he had spoken to C K Chan over the telephone before Hui asked Kuo to call for an ambulance, to which Hui disagreed[39].  It was submitted by the plaintiffs in the closing submission that Hui did not suffer any injuries and the ambulance was called only after Hui had spoken to C K Chan on the telephone[40].  It is not correct to say that the judge did not consider the Chairman’s evidence at all.  The judge had plainly considered the Chairman’s evidence, and declined to give weight to it, as she rejected the allegation that Hui had been instigated by C K Chan to make a false complaint about his injuries[41].

61. Mr Ng criticised the judge’s statement that “the account given in Hui’s witness statement may have been exaggerated”[42].  He submitted that the judge should have made a definite finding whether Hui had exaggerated or fabricated his evidence as this was highly relevant to his credibility.  In support of this contention, he quoted parts of the statements of Lord Hoffmann in In re B (Children) [2009] 1 AC 11 at §2: “… a judge or jury must decide whether or not [a fact in issue] happened. There is no room for a finding that it might have happened.”

62. It is totally unhelpful to the court to quote from authorities without regard to the proper context in which the statements were made.  Mr Ng omitted the first part of what Lord Hoffmann said in the first sentence that he quoted.  The full sentence reads: “If a legal rule requires a fact to be proved (a “fact in issue”), a judge or jury must decide whether or not it happened.”  The words omitted by counsel are clearly material, as they put in context the latter part of the quotation, and explain why the trial judge in Re B was not allowed to sit on the fence but was obliged to make findings as to whether it was more likely than not that events alleged had or had not taken place, assisted if necessary by the burden of proof.  That context was care proceedings and a fact-finding hearing was held to ascertain whether the threshold criteria under section 31(2) of the Children Act 1989 for the making of a care order were satisfied.

63. The present case is far removed from that situation.  There is no legal rule which requires the fact in issue (whether there was exaggeration in Hui’s account of how he was manhandled by Lam) to be proved.  There is no merit whatsoever in Mr Ng’s submission.  The judge was fully entitled to accept such parts of Hui’s evidence as she considered appropriate, having analysed his evidence and reviewed the evidence of the other witnesses and having regard to the inherent probabilities as explained in the judgment[43].  To resolve the dispute as to the manner in which Hui was manhandled in the Incident, the judge did not consider it necessary to reach a definite view whether he had given an exaggerated account in his witness statement.  I do not think her approach could be faulted.  There was ample evidence to support her findings of fact in §§45 and 46.

64. Mr Ng peppered his submission with the words “unfair” and “plainly unfair”, claiming that the judge’s finding was unfair to the plaintiffs.  The court would expect counsel not to use these words lightly.  I could detect no unfairness in the legal process in which the plaintiffs had taken part.  They have had a nine-day trial in which they were given every opportunity to explore all aspects of the evidence thought helpful to their case and to seek to persuade the judge to their cause.  The judge had considered and analysed the evidence carefully and explained in her judgment how and why she reached her findings.  The fact that the judge had decided not to accept some of the evidence the plaintiffs relied on and the submissions made on their behalf did not render the trial in any way unfair.

65. Mr Ng alleged that the judge made the finding that Hui had been “attacked and injured” by the plaintiffs without proper consideration whether the standard of proof required under established principles had been met to justify such a grave and serious finding, citing among other cases In re H (Minors) [1996] AC 563 and Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117 at §84.  The plaintiffs had repeatedly reminded the judge of the relevant legal principles regarding the standard of proof in their submissions[44].  The judge had expressly and correctly stated that the burden of proof was on a balance of probabilities[45] (see Mir, Abdul Rehman v Mir Heena, CACV 10/2012, 21 March 2013, §§28 to 30).  There is no merit in the contention that the judge had not applied the correct approach regarding the standard of proof.

66. Lastly, it was contended by Mr Ng that the judge had erred in making an inconsistent or contradictory finding.  He argued that having found that the defendant had failed to prove the words “暴力毆打” (“violently assaulted”) were true, the judge made an inconsistent or contradictory finding that the defendant had proved that the words “遇襲受傷” (“attacked and injured”) were justified[46]. His argument ran as follows.

67. He submitted that the word “襲” means “襲擊” (“attack”) and cited the dictionary meanings of “attack” in the Shorter Oxford English Dictionary (6^th ed) p 146 and Longman Dictionary of English Language & Culture (2^nd ed) p 88, to contend that the word means to use violence against, especially with a weapon.  He contended that the word “襲擊” (“attack”) in the modern world may bring to mind “terrorist attack” or “chemical attack” and that the hypothetical reasonable reader is one who could read between the lines and could read an implication more easily than a lawyer and might indulge in a certain amount of loose thinking (Skuse v Granada Television Ltd [1996] EMLR 278 at 285 to 286).  Hence, to a reasonable reader, the words “遇襲受傷” (“attacked and injured”) would suggest that the attack was with a weapon or was a form of violent assault, resulting in serious personal injuries.

68. Mr Lam put in a respondent’s notice to contend that the judge was in error in holding that the words “暴力毆打” (“violently assaulted”) were not justified and in ruling that they mean to an ordinary, reasonable and fair-minded person that Hui had been violently assaulted or hit, struck or beaten[47].  He too would appear to argue that the judge had made an inconsistent finding, as he contended it is difficult to discern any material difference between “暴力毆打” (“violently assaulted”) and “遇襲受傷” (“attacked and injured”).  He submitted that the judge was wrong in rejecting the submission that the words should be construed by their legal meaning[48], and what the plaintiffs did to Hui constituted an assault in law.  He argued that the court should not be too literal in its approach or insist upon proof of every detail where it is not essential to the sting of the charge.  The gist of the words “毆打” (“assaulted”) is that Hui had been subjected to physical violence and as the judge had accepted “some violence had been exerted on him”[49], she should have held that the main charge or gist of the words “毆打” (“assaulted”) was justified.

69. I do not accept the submissions of either counsel.  I am inclined to think that the judge was correct in holding as she did that the defendant had succeeded in establishing justification only in respect of the words “遇襲受傷” (“attacked and injured”), but not in respect of the words “暴力毆打” (“violently assaulted”).  I reject the contentions the judge’s finding was inconsistent in any way.  I do not agree with the submission there is no material difference between “暴力毆打” (“violently assaulted”) and “遇襲受傷” (“attacked and injured”).

70. The judge construed the offending words in their natural and ordinary meaning, which is the meaning in which reasonable people of ordinary intelligence, with the ordinary people’s general knowledge and experience of worldly affairs, would be likely to understand them[50].  She is right in not adopting the dictionary meaning, as urged by the plaintiffs, as “the court should not be too literal in its approach” (Skuse v Granada Television Ltd at 286).  She is also correct in not construing the natural and ordinary meaning of “assault” with regard to the legal meaning, as urged by the defendant, as although “the natural and ordinary meaning of words ought in theory to be the same for the lawyer as for the layman”, “the layman reads in an implication much more freely; and unfortunately, as the law of defamation has to take into account, is especially prone to do so when it is derogatory” (Lewis v Daily Telegraph Ltd [1964] AC 234 at 277, per Lord Devlin).

71. The words “毆打” (“assault”) were qualified by the words “暴力” (“violently”), so these words must be read, construed and understood together.  The sting of the charge was that Hui had been hit, struck or beaten violently.  Merely establishing that some violence had been exerted on Hui is inefficient to justify the sting of the charge.

72. For the above reasons, I reject all of the arguments of the plaintiffs in attacking the judge’s findings in respect of justification raised in defence in the claim.  I reject also the defendant’s arguments in support of the respondent’s notice that the judge was in error in holding that justification was not established in respect of the words “暴力毆打” (“violently assaulted”).

The judge’s findings in respect of qualified privilege in the claim

73. Mr Ng contended that the judge was wrong in law in holding that the publication of the 1^st and 2^nd Letters and the 3^rd Offending Words was protected by qualified privilege.  He submitted that C K Chan had no duty to publish the offending words, as the matter was under police investigation when the offending communications were made.  In support of this proposition, he quoted from the judgment of Eady J in Miller v Associated Newspapers Ltd [2004] EMLR 33 at §10:

“It is always necessary to have regard to the principle highlighted by Lord Hobhouse in Reynolds[51] at 238 to the effect that: ‘No public interest is served by publishing or communicating misinformation’. This is why there is generally no duty to publish mere rumour or gossip or allegations which are still the subject of investigation by an appropriate body or tribunal.”

74. Mr Ng referred to Cheng & Anr v Tse Wai Chun (2000) 3 HKCFAR 339 at 355I to 356A, in which Lord Nicholls of Birkenhead NPJ said as follows:

“The rationale of the defence of qualified privilege is the law’s recognition that there are circumstances when there is a need, in the public interest, for a particular recipient to receive frank and uninhibited communication of particular information from a particular source: see Reynolds v Times Newspapers Ltd [1999] 3 WLR 1010 at 1017. Traditionally, these occasions have been described in terms of persons having a duty to perform or an interest to protect in providing the information. If, adopting the traditional formulation for convenience, a person’s dominant motive is not to perform this duty or protect this interest, he is outside the ambit of the defence.”[52]

75. He submitted that in the present situation, there could be no public interest to be served for the Committee and all the owners of the Estate to receive the offending communications from C K Chan when the matter of the alleged assault was still the subject of investigation by the police.

76. He cited also Gatley on Libel & Slander (11^th ed) at §17.11, which stated that “charges of crime, whether made to the claimant in the presence of other persons, or to the proper authorities, will only be privileged if made with the honest desire of promoting investigation into the alleged crime, or prosecuting the alleged offender …”.

77. Further in support of his contention that the Committee had no duty or interest in receiving the offending communications, Mr Ng submitted that the Committee had no power to manage the common areas and facilities or to enforce the provisions of the DMC, it was not an organ to receive and deal with an alleged criminal assault by an individual owner against a staff of WP, and it had no power to discipline or punish an individual owner for having allegedly assaulted a staff of WP.  The judge was in error in holding that the Committee has the power to deal with matters relating to the management of the common areas of the Estate[53], as under the DMC, it is the manager, WP in this instance, that had the power to “do all such acts and things as may be necessary or requisite for the proper management of the [Estate]”[54].  C K Chan also admitted in cross-examination that the Committee was a “consultative organ”, “not an owners incorporated committee, so the final management say rests on [WP].”[55]

78. He argued that this was analogous to Hebditch v MacIlwaine [1894] 2 QB 54, in which it was held that a letter sent by the ratepayers of a parish to the board of guardians of the parish complaining of alleged irregularities at the election of a guardian for the poor of the parish was not protected by qualified privilege.  At 58 to 59, Lord Esher, MR stated it was clear that the communication was not privileged, as the board of guardians could do nothing in the matter, they could not set aside the election, they had no interest in the matter and no duty or power to take any action upon the communication made to them.

79. Mr Ng also cited Lee Man Kin v Wang Mei Chun & Ors, HCA 2876/2003, 19 August 2005, which is a decision of Deputy Judge L Chan (as he then was).  It was held in that case that the communication to the residential owners sub-committee of a development was not protected by qualified privilege, as unlike the management committee of a corporation incorporated under the Buildings Management Ordinance, Cap 344, the sub-committee had no power to manage the common areas and common facilities, it had no power to investigate or punish infringement of the DMC and its jurisdiction is very limited.  The communication was in relation to a personal dispute between a flat owner and the plaintiff who was a member of the sub-committee and a representative of one of the tower blocks.  The complaint was about the plaintiff’s personal conduct or his conduct as a block representative.  The sub-committee had no power over the plaintiff’s personal conduct or his conduct as a block representative.  The judge held that the sub-committee had no duty or interest to receive such complaint (at §§47 to 50).

80. Mr Ng submitted this bore similarity to the present case.  And just as the Committee would have no duty or interest to receive the communications in the 1^st Letter and the 3^rd Offending Words, all the owners of the Estate would likewise have no duty or interest to receive the 2^nd Letter sent to them.

81. Lastly, he contended that the judge erred in disregarding the evidence of the Chairman that before the 1^st Letter was sent, the Chairman had refused C K Chan’s request to discuss the Incident in the meeting of the Committee on 15 November 2006[56], on the grounds that the Incident was being investigated by the police and the Incident involved a matter between individual owners and it was not for the Committee to deal with such matters[57].

82. I do not accept Mr Ng’s proposition that the defendant would have no duty to publish the offending words because the alleged assault was being investigated by the police.  The statements in the authorities he cited – Miller v Associated Newspapers Ltd, Cheng & Anr v Tse Wai Chun and Gatley on Libel & Slander at §17.11 – were all taken out of context, and do not provide any support for his proposition.

83. The statements of Eady J in Miller v Associated Newspapers Ltd were made in the context of a Reynolds category of privilege, which is concerned with responsible journalism and publications to the public at large where the matter is of sufficient public concern, not in the context of a “classical” form of privilege which is of a different nature in that it is founded on a relationship and is primarily concerned with communications of a “private” nature.  We are here concerned with a “classical” form of privilege.

84. What Lord Nicholls said in Cheng & Anr v Tse Wai Chun was to explain the rationale of the defence of qualified privilege in a general sort of way.  Mr Ng latched on to the words “public interest” in Lord Nicholls’ statements to marry the “public interest” as discussed in the Reynolds category of privilege in Miller v Associated Newspapers in order to derivesupport for his proposition.  This is not a legitimate use of authorities.

85. The statement in Gatley at §17.11 was taken from a chapter dealing with malice in qualified privilege.  As the judge has noted[58], this passage should be read in the proper context.

86. I turn to consider the relationship between the manager WP, the Committee and the owners of the Estate to place the communications between them in the proper context, so as to determine the question if the communications should be protected by qualified privilege.

87. I start with the provisions in the DMC.  The Committee was appointed by the owners at the annual meeting[59].  Thus, it is an owners’ committee as defined in section 34D(1) of the Buildings Management Ordinance[60].  The Committee, on behalf of all the owners, appointed WP as the manager of the Estate by a letter dated 12 July 2005.  It was stated in the letter that particulars of WP’s management role and the manager’s rights, powers and duties were described in the DMC and, in addition, WP was also required to undertake duties delegated to it by the Committee at the latter’s discretion for duties required to be performed by the Committee under the DMC or the Buildings Management Ordinance.  Under the DMC, WP acted as the attorney of the owners in respect of any matter concerning the common areas and common facilities[61], including to manage and control the parking of all vehicles within the Estate[62].

88. In the 1^st Letter, C K Chan stated that he wished to raise the Incident in the meeting of the Committee on 15 November 2006 because the matter involved the personal safety of frontline workers of WP in the execution of their duties of impounding illegally parked vehicles in the Estate.  As the judge had rightly observed, the Incident was not a personal dispute or quarrel between Hui and Lam or Chan[63], unlike the situation in Lee Man Kin v Wang Mei Chun.  I agree with the judge that C K Chan had a legal duty to raise the Incident with the Committee for discussion, and the Committee had the duty and interest to be informed of the Incident, for the cogent reasons she gave in §§54 to 58.  Mr Ng accepted before us that the Committee should discuss matters relating to the impounding of cars on the Estate, he merely reiterated his stance that the alleged assault should not be discussed when it was still under police investigation.  But as recorded in the minutes of the Committee meeting on 15 November 2006, the primary concern of C K Chan in raising the Incident with the Committee was to ensure the personal safety of the staff of WP in the course of the work within the Estate, he was not going to discuss the Incident itself[64].

89. The judge was right to hold that the Chairman’s refusal to discuss the Incident at the Committee meeting could not negate or diminish the existence of duty and interest on C K Chan’s part to raise the matter for discussion and on the Committee’s part the duty and interest to be informed.

90. The cases of Hebditch v MacIlwaine and Lee Man Kin v Wang Mei Chun & Ors were cited by the plaintiffs to the judge[65], and the latter was considered in the judgment[66].  They are distinguishable on the facts.  Further, as was noted in Gatley at §14.18, cases from the nineteenth century, such as Hebditch v MacIlwaine, may rely heavily on formal powers of control as the foundation of the necessary interest, whereas at the present day, courts would pay greater attention to continuing concerns and the legitimacy of interests not accompanied by formal powers.

91. I agree entirely with the judge that the occasions for the publication of 1^st Letter and the 3^rd Offending Words should be protected by qualified privilege.

92. As for the 2^nd Letter, this was sent to all the owners of the Estate to explain to them the reason for WP’s resignation as the manager.  This was obviously a matter of concern to all the owners.  The judge was correct to hold that this too was covered by qualified privilege[67].

93. For the reasons given above, I reject the plaintiffs’ submissions that the judge was in error in holding that the communications were made on occasions protected by qualified privilege.

The judge’s findings in respect of malice in the claim

94. Mr Ng sought to challenge the finding of fact made by the judge that there was no evidence of malice in the publication of the offending words.  He relied on the same matters raised at the trial – various incidents in February, April and June 2006; the letters issued by the Committee on 23 and 26 August 2006 in response to the policy of impounding cars; the evidence of Chan, Lam and other owners of what C K Chan allegedly said and did at a meeting of the Committee on 7 September 2006; the evidence of Chan and other owners of what Hui allegedly said in a meeting of the Committee shortly before 21 October 2006; the evidence of what Chan said in a meeting of the Committee on 15 November 2006; C K Chan’s refusal or failure to inform the residents of the Estate of the termination of police investigation; and the letters dated 25 May 2007 and 10 July 2007 issued by the solicitors acting for Hui making a demand for compensation of $500,000.

95. All the above matters were raised on behalf of the plaintiffs at the trial[68].  The judge had considered these matters thoroughly in §§66 to 74 of the judgment.  She found it improbable and far-fetched for Chan and Lam to suggest that C K Chan would personally take it upon himself to issue statements for his own and dominant purpose of injuring or getting back at Chan and Lam, as objectively and dispassionately considered, there was no need for him to do so[69].  I respectfully agree.  There is no basis to interfere with the judge’s finding of fact that C K Chan’s dominant motive in the communications was the proper discharge of his and WP’s duties of securing the personal safety of their frontline staff in their work at the Estate, and to explain WP’s resignation as the manager.  There is no merit in any of the grounds of appeal regarding malice.

96. For all the above reasons, we dismissed the appeal of the plaintiffs against the judgment on the claim.

The judge’s finding in respect of the counterclaim

97. The judge dealt with the counterclaim very briefly in one single paragraph at §78, probably because the counterclaim was not the focus of the trial.  She found for C K Chan on defamation in respect of Lam’s Letter and Chan’s Letter and made no finding regarding the Joint Letter.  She did not deal with justification and qualified privilege pleaded by Chan and Lam in defence to the counterclaim.

98. The respondent’s notice served on behalf of C K Chan merely sought to argue that the judge should have dismissed the defence of qualified privilege in respect of the counterclaim.  At the hearing of the appeal, Mr Lam sought leave to serve a supplemental respondent’s notice to contend that the judge should also have found in favour of C K Chan in respect of his claim in defamation regarding the Joint Letter.

99. At the hearing, we declined to give leave to serve the supplemental respondent’s notice out of time, as it does not appear to us that the situation could be salvaged.  Even if this court could make a finding that the Joint Letter was defamatory (leaving aside the question whether the judge was correct in holding that the words complained of in Lam’s Letter and Chan’s Letter were defamatory), Mr Lam would still be faced with the difficulty that on the issue of qualified privilege, the judge had not made proper findings of fact and it is not possible for this court to do so.  Without proper findings of fact, C K Chan would not be able to discharge his burden of proving malice, on the part of Chan and Lam, to defeat the defence of qualified privilege.

100. It was for the above reasons that we allowed the appeal of the plaintiffs on the counterclaim and set aside the judgment on the counterclaim.

The decision on costs

101. I would first consider the costs below.  The costs orders made by the judge were as follows.

102. By an order nisi made when the judgment was given on 23 July 2012, the judge ordered the plaintiffs to pay the defendant the costs of the main action and of the counterclaim.  The defendant sought to vary the costs order nisi on the basis of a sanctioned offer under Order 22 rules 2 and 3 of the Rules of the High Court made to the plaintiffs by a letter of his solicitors dated 2 December 2010.  The offer was in relation to the whole of the claim and the counterclaim, and was on a “drop hands” basis, with no order as to costs.  The offer lapsed without being accepted on or before 30 December 2010, nor did the plaintiffs ever respond to the offer thereafter.

103. On 20 August 2012, the judge varied her costs order nisi and made an order in these terms: the plaintiffs are to pay the defendant the costs of the main action and of the counterclaim on party and party basis up to 30 December 2010, and thereafter on indemnity basis, to be taxed if not agreed, with certificate for counsel, with enhanced interest on the indemnity costs at the rate of 1% above judgment rate until actual payment.  She also ordered costs of the application to vary the order nisi to be paid by the plaintiffs to the defendant, on indemnity basis with enhanced interest at the rate of 1% above judgment rate until actual payment.

104. Mr Lam submitted that in respect of the costs of the main action and of the counterclaim on party and party basis up to 30 December 2010, it is right that the defendant should not have the costs of the counterclaim, as judgment on the counterclaim has been set aside by this court.  He suggested that an appropriate apportionment of the costs attributable to the counterclaim should be 10%.  In respect of the costs of the main action and of the counterclaim on indemnity basis with enhanced interest after 30 December 2010, Mr Lam submitted this should not be disturbed as the plaintiffs have not achieved anything better than the sanctioned offer in December 2010.

105. I agree with his submission, except that the apportionment of costs attributable to the counterclaim should be 20% as submitted by Mr Ng, instead of a mere 10%.

106. Turning to the costs of the appeal, there was another sanctioned offer dated 11 March 2013 from the solicitors of C K Chan.  By this letter, he offered to waive his demand for damages awarded in the counterclaim for $10,000, he agreed to accept costs awarded by the judge on a party and party basis for the whole action below and waive enhanced interests on the indemnity costs; and, in consideration of the above, both sides shall dismiss the appeal including the notice of appeal and the respondent’s notice by consent with no order as to costs whereby the judgment in the court below shall stand subject to the terms of the sanctioned offer.  This offer lapsed without being accepted on or before 8 April 2013.

107. Mr Lam submitted that the plaintiffs did not achieve a better result than the above sanctioned offer.  In respect of the costs before 8 April 2013, he submitted that it would be appropriate to apportion the costs of the appeal between the main action and the counterclaim and award the defendant the costs attributable to the appeal of the main action, which he apportioned at 90%.  After 8 April 2013, the defendant should have the whole of the costs of the appeal against the main action and the counterclaim, on an indemnity basis and with enhanced interest.

108. Mr Ng submitted it is incorrect to say the plaintiffs did not achieve a better result than the above sanctioned offer as this court has set aside the judgment on the counterclaim, which the defendant did not offer in the sanctioned offer.  He contended that the plaintiffs had to come to court to have the judgment on the counterclaim set aside and to clear their names.  So the sanctioned offer should have no effect on the costs of the appeal and the plaintiffs should be entitled to the costs of the appeal attributable to the counterclaim, which he apportioned at 20%.

109. After we have heard arguments on costs at the hearing which concluded on 17 September 2013, the plaintiffs wrote further to the court on 19 September 2013 to make further submission on costs contending that the defendant did not do better than what he offered by the sanctioned offer dated 11 March 2013 in that by the sanctioned offer, the plaintiffs were required to pay 100% of the costs below but on appeal, after the appeal against the judgment on the counterclaim was allowed, the plaintiffs are ordered to pay only 80% of the costs of the proceedings below before 30 December 2010, whilst such period covered most of the work done in respect of the counterclaim involving the preparation of pleadings and evidence, albeit that the defendant had offered to have the costs awarded in his favour to be taxed on a party and party basis instead of indemnity basis.

110. I am inclined to agree with Mr Lam.  I am sceptical whether the plaintiffs had indeed declined to accept the sanctioned offer because the defendant did not offer to set aside the judgment on the counterclaim.  Although the appeal court does have jurisdiction to allow an appeal by consent, it does not exercise this jurisdiction unless special reasons are shown and it may or may not do so on paper without a hearing, whereas a dismissal of an appeal by consent is a straightforward matter that would be dealt with on paper (Hong Kong Civil Procedure 2013, vol 1, §59/0/20).  If the plaintiffs were genuinely concerned that the judgment on the counterclaim should be set aside as a term of the settlement, they could and should have raised this with the defendant when the sanctioned offer was received six months ago.  Even if this court should find it necessary to hold a hearing to decide whether the judgment on the counterclaim should be set aside by consent, this would be a much simpler hearing than the substantive appeal which was set down for two days.

111. Looking at the terms of the sanctioned offer as a whole, I am satisfied that by the dismissal of the counterclaim the plaintiffs did not achieve a better result in this appeal.  Regarding the assertion made by the plaintiffs’ solicitors in their further submission after the hearing, I do not think it right to focus only on the costs of the counterclaim before 30 December 2010.  I think one should look at the whole of the costs below, in particular the costs incurred for the nine-day trial.  It does not seem likely to me that 80% of the costs below on a party and party basis up to 30 December 2010 and thereafter on an indemnity basis with enhanced interest would be less than 100% of the entire costs below on a party and party basis.  So it cannot be said that the plaintiffs have done better by the costs order they obtained from this court when the appeal against the judgment of the counterclaim was allowed.  There is no reason why the consequence of non-acceptance of a sanctioned offer should not be visited on the plaintiffs.

112. I would make the following orders on costs:

 (1)   Paragraph 1 of the costs order of the judge dated 20 August 2012 be varied as follows:

“The plaintiffs are to pay the defendant 80% of the costs of the main action and of the counterclaim on party and party basis up to 30 December 2010, and thereafter pay the entirety of the costs of the main action and of the counterclaim on indemnity basis, to be taxed if not agreed, with certificate for counsel, with enhanced interest on the indemnity costs at the rate of 1% above judgment rate until actual payment.”

      (2)   The plaintiffs do pay the defendant 80% of the costs of this appeal, on a party and party basis, up to 8 April 2013 and thereafter pay the entirety of the costs of this appeal on indemnity basis, to be taxed if not agreed, with certificate for counsel, with enhanced interest on the indemnity costs at the rate of 1% above judgment rate until actual payment.