YIU HON LAM v. CHAN YU CHUN

CACV 383/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 383 OF 2007

(ON APPEAL FROM DCCJ NO. 5351 OF 2005)

----------------------

----------------------

----------------------

J U D G M E N T

----------------------

Hon Tang VP (giving the judgment of the Court):

1.  The defendant was employed by Nelv (Asia) Limited (“Nelv”) as a company accountant in April 2005.  She was not a qualified accountant but had over 20 years of relevant working experience.  Her monthly salary was under $15,000.

2.  Since the incorporation of Nelv in 1997, the plaintiff had been the company secretary and auditor.  The plaintiff is a practising Chartered Secretary and Certified Public Accountant.

3.  The plaintiff brought proceedings against the defendant in December 2005 for defamation.  After a 7-day trial, District Judge Simon Leung dismissed the plaintiff’s claim and in his judgment which was handed down on 20 August 2007, he made an order nisi that the defendant should paid half of the plaintiff’s costs of the action.

4.  He said:

“125.   The Plaintiff’s claim fails.  Should costs follow the event?  I have no doubt that they should not, in the circumstances of this case.  Considering how the Defendant came to publish her defamatory statements as well as the various untenable positions which she maintained until after the commencement of the trial, I am of the view that discretion should be exercised in favour of a costs order which would reflect my disapproval of such deplorable conduct.”

5.  The defamation complained of were contained in two emails dated 17 June 2005 and 21 June 2005 respectively sent by the defendant to Mr Hideaki Shiota (“Mr Shiota”), who was the managing director of Nelv. Another matter complained of was a slander which consisted of statements made by the defendant at a meeting held in the office of Nelv in presence of Mr Shiota and Mr Mok Kam Chun, Ray (“Mr Mok”), a business associate and personal friend of Mr Shiota and the defendant.

6.  According to the learned judge, the issues to be decided at trial were:

“(1)   whether the statements were made;

(2) whether the statements, if made, were defamatory;

(3) whether the statements, if made and defamatory, were excused by the defence of qualified privilege (and in this regard, whether the defence did not avail the Defendant due to malice on her part); and

(4) if defamation is proved, what compensation should be awarded to the Plaintiff.”

7.  The learned judge held that the defendant had made the statements complained of and that they were defamatory, but that the statements complained of were protected by qualified privilege.

8.  So the claim turned on malice.  He held from paras. 59 to 115 of his judgment, that malice had not been established.

9.  Mr Damian Wong, who appeared for the defendant both at trial and before us, referred us to paras. 82/3/5 in Hong Kong Civil Procedure 2009 which shows that malice is an essential ingredient in defamation and:

“… if there is a lawful excuse for the publication (as, for example, where it is an occasion of qualified privilege) …, the onus is thrown upon the plaintiff of proving the existence as a fact of the malice necessary to maintain the action. …”

10.  In other words, unless malice was established, the plaintiff had no cause of action, even if the words complained of were otherwise defamatory.

11.  The question is whether, in such circumstances, the learned judge’s order that the defendant pays half of the plaintiff’s costs can be justified. 

12.  In the learned judge’s decision of 21 September 2007 (“the decision”), he made the cost order nisi absolute.  In doing so, he mentioned that counsel then appearing for the plaintiff sought to justify the order nisi:

“6. … by reference to the without-prejudice correspondence between the parties’ solicitors prior to the trial.  In this regard, the Defendant objected to the production of these correspondence without her consent.  I have explained to her that such correspondence are certainly relevant and should be considered.”

13.  In para. 7 of his decision, he said that there were 4 issues for trial which we have listed in para. 6 above.  The learned judge said the plaintiff had succeeded on the first two issues and that on the 3^rd issue, the plaintiff had not put up a strenuous contrary argument on qualified privilege.  The focus was on malice.  The 4^th issue concerned damages which he had dealt with only for the sake of completeness. 

14.  The learned judge said:

“8. However, I should also consider the other features in this litigation that I know than just who and to what extent one wins. In my written judgment, I stated the various features of the defence and the conduct of that throughout the trial on the part of the Defendant. I do not intend to repeat them here. It suffices for me to say that they were deplorable. But for the very onerous burden of proof of malice on the part of the Plaintiff, the Defendant would have lost completely and would have been liable for both general and aggravated damages.”

15.  He then went on to say that the without-prejudice negotiations did not actually alter his view.  Then he concluded:

“10.   I need to reflect my adverse view about the Defendant in the costs order. Therefore, an order that parties should bear their own costs on the basis of the result of litigation should only be a starting point. Considering the amount, that is issue No. 3 which I mentioned at the beginning of today's hearing, it is not a quantitative exercise but the exercise of my discretion, taking an overall view of the matter. So considering all the matters once again and the points made by both parties in their submissions today, I see no reason that I have to vary my costs order nisi. I hope I have taken sufficient time to explain in great detail as to why such costs order was made and should be confined.”

16.  With respect, to say that an order that:

“… the parties should bear their own costs on the basis of the result of litigation should only be a starting point …”

understated the weight which should be placed on the principle that costs should normally follow the event.

17.  Mr Tibbo, for the plaintiff, has referred us to In re Elgindata Ltd. (No.2) [1992] WLR 1207.  The principles are well known, and it is unnecessary for us to repeat them.  But as Bokhary PJ said in Commissioner of Inland Revenue v HIT Finance Limited, FACV Nos. 8 and 16/2007, unreported, dated 26 June 2008, the discretion to depart from the normal rule that costs should generally follow the event should be approached with due circumspection. 

18.  Also, in Hebei Enterprises Ltd and Ors v. Livasiri & Co (A Firm) and Ors, FACV Nos. 23 and 25/2007, unreported, dated 5 December 2008, Chan PJ, for the court, said:

“17.   We are keenly aware that the question of costs is a matter of discretion for the trial judge and that an appellate court should be slow to interfere with the exercise of his discretion. We also agree that the Plaintiffs were partly responsible for the significant increase in the length of the trial as a result of their conduct of the proceedings, the allegations they had made (many of which were held to be unfounded), their reluctance to make timely disclosures of the relevant documents and the unsatisfactory witnesses they called. They should thus be deprived of part of their costs. However, we do not agree that it should be as much as 75%. Nor are we satisfied for the reasons we have given above that a case has been made out for ordering that the Plaintiffs should also bear part of the 1^st Defendant’s costs. We think that insufficient regard was paid to the principle that costs should normally follow the event and that this is so even if a party raises issues on which he fails. (See the 2^nd and 3^rd principles discussed in Re Elgindata (No.2).)”

19.  Mr Tibbo submitted that looking at the matter issue by issue, the plaintiff had succeeded on two whereas the defendant only succeeded on one.  Whilst acknowledging the court’s undoubted discretion on costs, one must start with the normal rule that costs should follow the event.  The event is the plaintiff’s claim of defamation.  As noted, the plaintiff would only succeed if he could prove malice, he was unable to do so.  Hence, his claim was rightly dismissed.

20.  Since the learned judge did not rely on the without-prejudice correspondence, it is unnecessary for us to say much save that we do not believe that the without-prejudice correspondence should have been referred to at all.  They were not written without-prejudice save as to costs.  Moreover, more importantly, if the without-prejudice letters were to be looked at, one sees that there the plaintiff was insisting on not just an apology, but payment of costs then estimated at $230,000.  It is now clear that the plaintiff was entitled neither to an apology nor to the payment of costs.  That being the case, it is difficult to see how the without-prejudice correspondence could possibly help the plaintiff.

21.  No doubt the learned judge regarded the defendant as stubborn and unreasonable.  That may well be so.  But the law does not require her to apologize.  If the occasion was covered by qualified privilege, she was entitled to refuse to apologize.

22.  However, according to the learned judge, the defendant had wasted time by asserting that one of the emails had been tempered with and by contending that the contents were not defamatory.  She also challenged the accuracy of the slander relied on.

23.  It is important not to decide cost according to a score sheet on how many issues had gone one way or the other.  It is also important that litigants should know that if they defended issues unnecessarily, they could be penalised in costs.  This is a difficult balance to strike particularly in defamation actions where feelings are likely to run high. 

24.  Having regard to the views expressed by the learned judge, we have come to conclusion that some deduction should be made in respect of the costs to be recovered by the defendant.  Mr Damian Wong for the defendant suggested an upper limit of 20%.  He submitted that no more than one day had been taken up on those matters.  It is clear that most of the time had been spent on malice.

25.  In all the circumstances of this case, we have come to the conclusion that appeal should be allowed and that the plaintiff should be required to pay 80% of the costs of the defendant below.  We make an order nisi that the plaintiff pays the defendant the costs of appeal.  All costs to be taxed if not agreed.