MAK SHIU TONG v. YUE KWOK YING AND ANOTHER

FACV No. 4 of 2004

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 4 OF 2004 (CIVIL)

(ON APPEAL FROM CACV NO. 199 OF 2002)

_______________________

_______________________

_________________________

REASONS FOR DECISION

_________________________

Mr Justice Bokhary PJ:

1. At the conclusion of the hearing we allowed the appeal. And we:

2. We said that we would hand down our reasons later. And we now do so. Our reasons are those given by Mr Justice Ribeiro PJ and Mr Justice Litton NPJ.

Mr Justice Ribeiro PJ:

3. In March 1998, the appellant (whom I shall refer to as the plaintiff) commenced libel proceedings against two defendants, the 1st defendant being the respondent in this appeal. Default judgment was entered against the 2nd defendant in April 1998 and it is no longer involved. I shall accordingly refer to the respondent as "the defendant".

The decisions leading to this appeal

4. In March 2002, Chung J struck out as incurably bad the defences raised by the defendant, namely, a denial that the words complained of referred to the plaintiff, justification and fair comment. In consequence he gave judgment for the plaintiff and dismissed the defendant's counterclaim.

5. The defendant sought to appeal that decision and, in September 2002, the plaintiff obtained from Yuen JA, sitting as a single judge of the Court of Appeal, an order for security for costs in the sum of $273,375.00. Such security was to be provided within 14 days and, in default, the appeal was to stand dismissed. Security was not provided.

6. The defendant brought an appeal against those orders before the Court of Appeal comprising Woo and Cheung JJA. His appeal was successful and Yuen JA's orders were set aside on 2 June 2003. The plaintiff was also ordered to pay the costs of that appeal. The plaintiff now brings the present appeal by leave of the Appeal Committee.

7. It was common ground both before Yuen JA and the Court of Appeal that the defendant is impecunious and would, if unsuccessful on the appeal against the striking-out decision, be unable to pay the relevant costs. It was also common ground that impecuniosity is generally a sufficient ground for ordering security under O 59 r 10(5): see Hong Kong Civil Procedure 2004, 59/10/29. However, all were also agreed that the court has a discretion and may, as Yuen JA put it :-

8. Yuen JA held that there was no basis for exercising this discretion in the present case. The Court of Appeal, however, disagreed. Accordingly, although the appeal has come before the Court in the guise of an argument about security for costs, the underlying issues concern an assessment of the merits of the proposed appeal against Chung J's striking-out orders. In particular, questions arise as to the approach adopted by the Court of Appeal in the light of the defendant's pleaded case.

The plaintiff's claim

9. The plaintiff was at the material time chairman and chief executive officer of certain listed companies. He was involved, through a company called China Treasure Enterprise Limited ("CTEL"), in promoting a property development project known as the "Sun City" project in Huiyang City on the mainland. The defendant was engaged to provide legal consultancy services in relation to that project.

10. The parties fell out with each other and, on 15 February 1998, the defendant was interviewed by a magazine known as "EastWeek" which published an article in Chinese on 5 March 1998 quoting verbatim some of the defendant's remarks.

11. On 11 March 1998, the plaintiff commenced proceedings for libel against the defendant in respect of words extracted from that article on the basis that the defendant had authorised their publication or repetition. In their certified translation, the words complained of state as follows :

12. In the statement of claim, the plaintiff alleges that those words refer to him and that, in their natural and ordinary meaning, they have the following defamatory meanings ("the pleaded meanings") :

The pleaded defences

13. When the defendant filed his defence in July 1998, he was unrepresented. It stated (in its certified translation) :

14. He later obtained legal representation and, in October 1998, an Amended Defence and Counterclaim was filed by his solicitors on his behalf.

15. The plaintiff subsequently sought and obtained a series of further and better particulars of these allegations. After discovery and the exchange of witness statements, leave to set down for trial was given in July 2001, with trial due to commence in April 2002.

16. Upon reviewing the materials as they then stood, the plaintiff decided to apply in December 2001 to strike out the Amended Defence and Counterclaim, invoking a practice that has developed in England and Wales. The practice is discussed by Neill LJ in McDonald's Corp v Steel [1995] 3 All ER 615 at 622-3, and explained in Gatley on Libel and Slander, 10th Ed, §30.35 in the following terms :

Reference to the plaintiff

17. The first defence struck out by Chung J was the defendant's denial that the words complained of refer to the plaintiff. In the Court of Appeal, Cheung JA, who gave the judgment of the Court, agreed that this was a hopeless defence. Those decisions are plainly correct since the plaintiff is referred to by name no less than four times in the words complained of and in a context which makes it plain that the criticisms are levelled at him. No more needs to be said in relation to this defence. It certainly provides no basis for departing from the usual practice regarding security for costs.

Justification, fair comment and meaning

18. A plea of justification must relate to the words which are complained of. A defendant who relies on the defence must show that the defamatory imputation conveyed by those words is true.

19. Accordingly, in advancing a plea of justification, the defendant necessarily takes a view as to the meaning of the words complained of. His case is that the words so understood are true. Similarly, in relation to the defence of fair comment, the defendant contends that the words so understood contain honest comment on a matter of public interest based on facts which are true. It is therefore necessary, in assessing the viability of these defences, to identify the defamatory meaning or meanings sought to be justified or made the subject of fair comment.

20. As noted above, the plaintiff in his statement of claim has set out the pleaded meanings said to represent the natural and ordinary meaning of the words in question. In doing so, he was following a practice which (as Ackner LJ pointed out in Lucas-Box v News Group Newspapers Ltd [1986] 1 WLR 147 at 151) has been settled since Lewis v Daily Telegraph Ltd [1964] AC 234.

21. A defendant may or may not agree with the plaintiff's pleaded meanings. If he does not agree, and if he does not raise pleas of justification or fair comment, he may, but is not required to, plead a positive case as to what he says is the true meaning of those words : Viscount de L'Isle v Times Newspapers Ltd [1988] 1 WLR 49 at 60.

22. However, the position is different where a defendant seeks to rely on justification or fair comment. A defendant is entitled to seek to justify any reasonable meaning of the words published which a jury, properly directed, might find to be the real meaning: Prager v Times Newspapers Ltd [1988] 1 WLR 77 at 86. And, ever since the Lucas-Box decision, his pleadings must make it clear what meaning he is seeking to justify.

23. This was re-iterated by May LJ in Morrell v International Thomson Publishing Ltd [1989] 3 All ER 733 at 737-8, in the following terms :

24. Regarding fair comment, in Control Risks Ltd v New English Library Ltd [1990] 1 WLR 183 at 189, having referred to "Lucas-Box particulars" in relation to justification, Nicholls LJ stated:

The decisions of Chung J and Yuen JA

25. At the hearings before Chung J and Yuen JA, the defendant's pleadings did not put forward any different meaning for the words complained of, whether in terms of the imputation they conveyed or in terms of the meanings he was seeking to justify. His only response to the plaintiff's pleaded meanings was in paragraph 4 of the Amended Defence (set out above) which contains a denial of the relevant paragraph of the statement of claim, qualified by the words "in that the 'Someone' mentioned in the [words complained of] referred to the relevant company"; and adding: "Save that the plaintiff's name was specifically referred to, those Words have no connection with the Plaintiff."

26. Chung J regarded paragraph 4 as purely a denial that the words complained of were published of the plaintiff: the paragraphs in question were denied "in that" they referred to the company CTEL and not to the plaintiff. Chung J therefore held that by virtue of O 18 r 13, the defendant was deemed to have admitted the pleaded meanings. The pleas of justification and fair comment were accordingly taken to be directed at those pleaded meanings, no alternative meanings having been put forward. Yuen JA adopted the same approach.

27. Both Chung J and Yuen JA therefore proceeded on the footing that the defendant was seeking to justify and to rely on fair comment in respect of the imputation that the plaintiff had devised the project as a "scam" to swindle money from investors under the pretence but with no intention of building or developing any property.

28. Approached on this basis, it was held by Chung J that the defences were bound to fail. As noted above, in the Amended Defence, four sets of particulars of justification and fair comment (paragraphs 7A to 7D) were relied on. In the light of additional particulars sought and obtained regarding those paragraphs, those defences were held by Chung J to be unsustainable.

29. Chung J also referred to the witness statements and other documents filed on behalf of the defendant and concluded that they did not provide the basis for sustaining the defences. He therefore struck out the defences and gave judgment for the plaintiff. Yuen JA generally agreed with Chung J's approach and held that none of the points sought to be raised by the defendant on appeal had sufficient prospects of success to justify a departure from the usual practice of ordering security for costs.

The Court of Appeal's decision

30. The Court of Appeal adopted a most unorthodox course. Their Lordships accepted, as Cheung JA stated, that :

That approach is plainly correct since the single judge's jurisdiction is merely to exercise what are either case management powers or interim powers designed to prevent prejudice to any party pending determination of the appeal (High Court Ordinance, s 35). Unless wrong in principle, such interim discretionary orders should not be interfered with.

31. Their Lordships also accepted that, given the defendant's impecuniosity, the plaintiff would normally be entitled to an order for security for costs and that the approach adopted by Yuen JA based on the case of Chan Sai Lun Henry (above), was correct.

32. Nevertheless, without either finding that Yuen JA had erred in principle or requiring the defendant even to formulate any proposed re-amendments sought to be relied on, the Court of Appeal overruled her Ladyship's decision on the footing that (i) the defendant had not admitted the pleaded meanings but was advancing his own different meaning or meanings; and (ii) it was or ought to be possible to formulate viable defences of justification and fair comment in relation to such meanings.

33. Thus, in relation to the pleaded meanings, Cheung JA referred to the argument advanced by Mr Jimmy Kwong, appearing for the defendant, that paragraph 4 of the Amended Defence (set out above) required the insertion of a "missing" full-stop which would result in dividing that paragraph into a denial of the pleaded meanings followed by a denial that the words referred to the plaintiff.

34. It is not easy to see how insertion of such a full-stop could cope with the words "in that" which led both Chung J and Yuen JA to the view that the pleaded meanings were admitted and that paragraph 4 was intended to be no more than a denial of reference to the plaintiff. Indeed, the plaintiff's requests for further and better particulars had been made and the defendant's answers given on that basis. It is to be noted that even on counsel's argument, all that would result is a bare denial of the pleaded meanings, without any alternative meaning put forward. Cheung JA nevertheless concluded that the defendant ought to be allowed to develop an argument as to a difference of meaning, stating :

35. The Court of Appeal was therefore apparently postulating, on a basis which is not made clear and in the absence of any amendment formulated by the defendant, that his case on meaning (apparently both as to meaning simpliciter and as to the meaning sought to be justified) differed from the plaintiff's pleaded meanings. It appears that the Court of Appeal thought it differed in some manner relevant to the time at which the plaintiff's intention not to build was formed. Cheung JA emphasised that such intention was a matter of inference which should be left to the jury. In fact, however, at the present hearing, the defendant has disowned any intention of adopting a different meaning. The defendant, who appeared in person before us, made it clear that he was not resiling from the position maintained before Chung J and that he was seeking to justify the full defamatory imputation of the words as set out in the pleaded meanings.

36. The Court of Appeal does not appear to have questioned Chung J's conclusion that the particulars of justification and fair comment were either irrelevant or actually destructive of the defences in so far as that conclusion was reached on the basis of the pleaded meanings. Instead, Cheung JA took the view that certain other, unpleaded, matters might sustain those defences in relation to some, undefined, different meaning relating to the plaintiff's intentions. For instance, his Lordship stated :

37. However, Cheung JA lamented that such approach had not been adopted by the defendant :

38. His Lordship also suggested that :

39. The Court of Appeal ended by stating :

40. On the foregoing basis, the Court of Appeal did not merely set aside Yuen JA's order for security, it ordered the plaintiff to pay the costs of the appeal.

41. With respect, the Court of Appeal's approach cannot be supported. Where a party invites the court to exercise a discretion on the basis of a case which differs from his pleaded case, the practice of the court has virtually invariably been to require the proposed amendment to be formulated so that everyone can properly see what the proposed new case is. It is difficult to envisage an exception. The simpler the proposed changes, the less excuse there is for not formulating them. The more complex they are, the more important it is that they are clearly set out.

42. This is essential in relation to particulars of justification and fair comment. As the writers of one text-book point out:

43. Accordingly, the pleas of justification and fair comment should never be lightly raised. In McDonald's Corp v Steel [1995] 3 All ER 615 at 621, Neill LJ (with whom Steyn and Peter Gibson LJJ agreed) stated :

44. This strict approach goes beyond the issue of proper pleadings. Thus, where justification is pleaded, the ambit of discovery is dictated, not by the width of the words complained of, but by the particulars of justification which the defendant is able to plead: Zierenberg v Labouchère [1893] 2 QB 183; Goldschmidt v Constable [1937] 4 All ER 293; Gatley, op cit, §31.8. Moreover, a plea of justification which is not made good at the trial may form the basis for an award of aggravated damages : Gatley, op cit, §32.51.

45. It was therefore quite inappropriate for the Court of Appeal to take it upon itself to raise or to try to "improve" a defence of justification on behalf of a defendant who has not himself put forward any pleaded basis for taking such a course. It was particularly wrong to do so in the context of an appeal against an order for security where amendment to the defence (almost six years after justification and fair comment were first raised) had not been argued. The dangers of this approach are illustrated by the fact that, in attributing to the defendant a desire to justify a meaning different from the pleaded meanings, the Court of Appeal was proceeding on a premise which is now disowned by the defendant.

46. On the materials properly before the Court of Appeal, there was simply no basis for interfering with Yuen JA's exercise of discretion. There was certainly no basis for making an adverse costs order against the plaintiff.

Draft proposed amendments

47. As it was evident that the Court of Appeal's encouragement to amend the defence might result in the defendant putting forward some draft amendment for the purposes of the present appeal, the defendant was told that if he intended to refer to any such draft, it had to be delivered in good time before the start of the hearing. In the event, a draft proposed re-amended defence was submitted.

48. It is my view that the draft does not affect the outcome of this appeal. The Court is not presently concerned with any application for leave to re-amend the defence but only to ascertain whether any basis exists for departing from the usual rule requiring security to be put up. The draft pleading does not provide any such basis. Any application for amendment along the lines of that document would be a matter to be dealt with by the Court of Appeal if and when the appeal against Chung J's striking-out order is heard and if the defendant should seek leave to amend at that stage.

49. I would however wish to indicate that if the defendant were to seek such leave, he and his advisers must ensure that a proper evidential basis exists for making the allegations now sought to be made. The plaintiff would be entitled to adduce affidavit evidence to resist amendments seeking to raise any factual allegations which are obviously ill-founded. Moreover, since the draft involves allegations of fraudulent intent and knowledge, full particulars of all facts and matters relied on, presently lacking in the draft, must be pleaded: O 18 r 12(1)(b) and O 18 r 12(4).

Mr Justice Litton NPJ:

50. Consider the practical effect of the Court of Appeal's judgment. Yuen JA's order having been discharged, the defendant was free to pursue his appeal against Chung J's strike-out order without providing any security for the plaintiff's costs in that appeal. Woo and Cheung JJA thought there was nothing unjust in that situation : And that would be so if, on the material then before the court, the prospects of the defendant succeeding in the appeal against the strike-out order were very high. As to this, the learned Justices of Appeal said :

51. Be it noted : Woo and Cheung JJA thought that the burden was on the defendant to show that he had a meritorious defence to the charge of defamation brought by the plaintiff : This stage in the thinking process could only have been reached if the court was satisfied that the plaintiff had made out a prima facie case for striking out the defence in the first place. This is where the proceedings took a curious turn. The strength of the defendant's case stood upon his pleadings : But counsel for the defendant did not rely upon those pleadings : He said he had a new - and as yet unpleaded - case, which he then put forward. As to this, the Court of Appeal said :

52. In the court's concluding remarks, counsel for the defendant Mr Kwong was "urged" to review his pleadings so that the defendant's case could be "fully presented". This was, in effect, to turn the process of civil litigation on its head.

53. The appeal before us is concerned with a question of costs : Whether Yuen JA's order for security should have been disturbed. It would therefore be salutary to pause here and reflect thus : Assuming that counsel for the defendant had, on the strike-out application before Chung J, sought to put forward a new case, admitting in effect that he could not have resisted the strike-out otherwise, what sort of order might Chung J have made? Putting it most favourably for the defendant, it would surely have been along these lines : That the defendant be permitted to amend the defence and put up the new case provided that he paid all the wasted costs to date : And upon failure to pay those costs the defence should stand dismissed.

54. Earlier, I mentioned the Court of Appeal's concluding remarks, urging counsel to review his pleadings. There is now before us a document purporting to be a re-amended defence. Assuming that the appeal against Chung J's order proceeded and counsel for the defendant were to rely upon that document in the Court of Appeal - admitting in effect that he had no grounds of appeal but was seeking an indulgence as to his pleadings and a fresh exercise of discretion by the Court of Appeal in his favour - what sort of order might the Court of Appeal make? Surely it would be along the lines set out in the paragraph above, with the additional costs of the appeal to be paid by him. This is a far cry from the Court of Appeal's approach in this case.

55. As I see it, that court's approach is fundamentally flawed. The rules of pleadings are not tyrannical : The purpose of pleadings is to ensure that the issues between the parties are defined ahead of trial. Putting aside those instances where pleadings have been dispensed with - for instance, that affidavits filed should stand as pleadings - there is no basis under our legal system whereby a court could proceed to judge the merits of a party's defence by reference to an unpleaded case. Inevitably the court is doing injustice to the opposite party : An injustice made worse here by the court ordering the plaintiff to pay the costs of the appeal : Compensating the defendant, in effect, for the mistakes he had made.