AN ZHOU AND OTHERS v. ZHOU ZHENG KUAN AND OTHERS

CACV 193/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 193 OF 2012

(ON APPEAL FROM HCA NO. 241 OF 2010)

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REASONS FOR JUDGMENT

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Hon Fok JA:

Introduction

1. By his decision dated 6 July 2012, the reasons for which were handed down on 30 August 2012, To J entered judgment for the plaintiff against the 1^st defendant pursuant to two unless orders made on 4 May 2012 with costs.

2. The effect of the Judge’s decision was to refuse the 1^st defendant relief from the sanctions provided for under the two unless orders in question.

3. This was the 1^st defendant’s appeal against that decision.  After hearing counsel for the 1^st defendant, we did not call on counsel for the plaintiff and dismissed the appeal, indicating that we would hand down our reasons in due course.  These are those reasons.

The facts and procedural chronology

4. The action is brought by the plaintiffs against various defendants for defamation.  It is the plaintiffs’ case that the 1^st defendant uttered certain defamatory statements against the plaintiffs which the other defendants, being news media and their employees, re-published.  As against the 1^st defendant, the plaintiffs also claim for malicious falsehood in respect of the statements uttered by him.

5. The statements said to be defamatory and false allege that the plaintiffs falsely asserted their connections with the PRC government and senior state officials in order to force a sale at an undervalue of a villa in Shanghai belonging to the 1^st defendant, thereby dispossessing the 1^st defendant of the villa, and that they refused to pay a decoration fee of RMB 7 million.

6. The statement of claim was filed on 17 February 2010 and the 1^st defendant filed his defence on 6 May 2010, to which the plaintiffs filed a reply on 27 July 2010.

7. A long-running dispute over the adequacy of the particularity of the 1^st defendant’s defence then followed.

8. On 9 November 2010, the plaintiffs issued a request for further and better particulars (F&BP) of the defence (the 1^st Request).  The 1^st defendant consented to provide these and filed answers on 20 December 2010 (the 1^st Answer).

9. On 11 May 2011, the plaintiffs requested F&BP of the 1^st Answer (the 2^nd Request).  The 1^st defendant again consented to provide these and filed his answers on 9 June 2011 (the 2^nd Answer).

10. On 22 July 2011, the plaintiffs made a further request for F&BP of the 2^nd Answer (the 3^rd Request) and also applied by summons to strike out part of the 1^st Answer and 2^nd Answer.

11. Up to this point, the 1^st defendant was represented by solicitors.  On 20 August 2011, the 1^st defendant filed a notice to act in person.

12. At a hearing on 5 September 2011, Master Levy ordered the 1^st defendant, who was absent, to provide answers to the 3^rd Request.

13. At a hearing on 21 October 2011, Master Wong struck out certain paragraphs of the 1^st Answer and 2^nd Answer.  Although the 1^st defendant was absent, a representative attended the hearing on his behalf.

14. On 12 December 2011, new solicitors, John W Wong & Co (JWW) filed a notice to act for the 1^st defendant.  As the Judge noted in his Reasons for Decision (Reasons) at §12, at that date, the 1^st Answer, 2^nd Answer and 3^rd Request were incomplete or outstanding.

15. On 14 December 2011, at the hearing of the case management summons (CMS), JWW indicated a possible amendment to the 1^st defendant’s defence and, accordingly, Master Ko granted an extension of 28 days to amend the defence and to comply with Master Levy’s order to answer the 3^rd Request.

16. On 20 February 2012, Master De Souza made an unless order ordering the 1^st defendant to provide answers to the 3^rd Request (Master De Souza’s 1^st Unless Order) and another unless order requiring the 1^st defendant to provide answers to the 1^st Request and 2^nd Request (Master De Souza’s 2^nd Unless Order).  The 1^st defendant, through JWW, did not object to these orders but only sought more time to comply with them.

17. It is of significance that the sanction for non-compliance provided for in these two unless orders was that the defence of the 1^st defendant be struck out and judgment entered for the plaintiffs against the 1^st defendant for the relief claimed in the statement of claim.

18. It is pertinent to note that, on 23 February 2012, Master Ho made an unless order by consent requiring the 1^st defendant to provide a list of documents.  The sanction for non-compliance provided for in that unless order was also that the defence of the 1^st defendant be struck out and judgment entered for the plaintiffs against the 1^st defendant for the relief claimed in the statement of claim.

19. On 12 March 2012, pursuant to Master De Souza’s unless orders, the 1^st defendant filed one set of answers to the 1^st Request and 2^nd Request and another set of answers to the 3^rd Request.

20. However, the plaintiff considered these answers to be inadequate and, on 19 April 2012, applied by summons to strike out these answers and for judgment to be entered against the 1^st defendant. This application was fixed to be heard on 4 May 2012 before To J.

21. On 30 April 2012, the 1^st defendant took out a summons seeking an extension of time to comply with the two unless orders of Master De Souza.  No supporting affirmation was filed until 2 May 2012, shortly before the hearing of the strike out summons.

22. At the hearing before To J on 4 May 2012, counsel for the 1^st defendant admitted that the 1^st defendant’s solicitors were at fault in dealing with the requests and gave an assurance proper answers would be given and the defence amended.  By consent, the Judge made two further unless orders to replicate those made by Master De Souza (To J’s 1^st Unless Order and To J’s 2^nd Unless Order).  By these orders, the 1^st defendant was given until 4 pm on 15 May 2012 to provide the outstanding answers to the three requests.  Also on 4 May 2012, the 1^st defendant filed a summons to amend the defence.

23. Again, the same sanction for non-compliance was provided for in these two unless orders, namely that the defence of the 1^st defendant be struck out and judgment entered for the plaintiffs against the 1^st defendant for the relief claimed in the statement of claim.

24. On 14 May 2012, the 1^st defendant applied by summons to amend some of the answers in the 1^st Answer and 2^nd Answer.

25. On 15 May 2012, on behalf of the 1^st defendant, JWW filed answers pursuant to To J’s 2^nd Unless Order at 2.30 pm and served these on the plaintiff’s solicitors at 5.01 pm.  No answer was filed pursuant to the 1^st Unless Order.

26. On 5 June 2012, the plaintiffs appliedby summons for judgment pursuant to the two unless orders of To J.  That summons was fixed to be heard by To J on 6 July 2012.

27. On 25 June 2012, the 1^st defendant issued a summons to apply for leave to file an answer pursuant to the 1^st Unless Order.  An affirmation in support was filed on 27 June 2012.

28. On 5 July 2012, just one day before the hearing of the plaintiff’s summons for judgment, the 1^st defendant took out two summonses.  One summons, said to be issued under the inherent jurisdiction, sought an order that the defence filed by the 1^st defendant be reinstated.  The other, said to be issued under various orders including RHC O.2 r.4, sought an order that time for complying with the consent unless order dated 4 May 2012 be extended from 4 pm on 15 May 2012 to 16 May 2012.

The hearing below

29. The Judge noted that the answers pursuant to the 2^nd Unless Order made by him were filed in time though served marginally out of time.  He indicated that, if this were the only breach, he would be inclined to grant relief from the sanction of the unless order and so he did not take that breach into account in assessing the plaintiff’s application. He noted that the 1^st defendant was in clear breach of the 1^st Unless Order and that he would focus on the breach of that.

30. At §§24 to 27 of his Reasons, the Judge set out the applicable legal principles regarding relief from sanctions.  It is not suggested that he erred in any way in the identification of the relevant principles.

31. After analysing the history of the requests for F&BP and the explanation for the breach tendered by the principal of JWW on behalf of the 1^st defendant, the Judge concluded that the breach of the 1^st Unless Order was “intentional and contumelious” and that the 1^st defendant had not discharged the burden of showing he was entitled to relief from the sanction.  Accordingly, the Judge entered judgment against the 1^st defendant pursuant to the two unless orders made by him on 4 May 2012 with costs.

This appeal

32. The Judge’s decision appealed against was the exercise of a discretion.  On an appeal to this court against the exercise of a discretion by a judge below, the issue for the court is whether the judge was plainly wrong in his decision or whether he has taken irrelevant matters into consideration in his decision or has ignored relevant matters which entitles this court to intervene: see, for this trite proposition, Daimler AG v Leiduck [2012] 3 HKLRD 119 at §30.

33. As I have already indicated, it was not suggested that the Judge applied the wrong principles to the application before him.

34. Instead, on this appeal, it was contended by the 1^st defendant that: in the circumstances and proper context of the case, the 1^st defendant’s conduct was not contumelious and/or an abuse of the court’s process; and secondly, the Judge’s refusal to grant relief from the sanction to the 1^st defendant was not a proportionate response to the breach of the unless orders.

35. It is submitted that the Judge erred in holding that the 1^st defendant evinced an intention not to comply with the unless orders and that the outstanding answers under the 1^st Unless Order were central to the dispute.

36. It is contended that these errors justify this court in exercising afresh the discretion vested in the Judge and that, in the circumstances, the proper response would be to permit the 1^st defendant to file the answers now attached to his notice of appeal, alternatively only to strike out the offending paragraphs in the defence without striking out the whole of the defence.

Was the Judge right to conclude the default was contumelious and/or an abuse of the court’s process?

37. Mr Benjamin Chain, counsel for the 1^st defendant,[1] submitted that on all the evidence, it was not a proper inference to find that the 1^st defendant was abusing the court’s process.

38. I am unable to agree with that submission.

39. The Judge found that there was “a history of persistent disregard of three court orders prior to the issue of [his] 1^st Unless Order” (Reasons §31).

40. The Judge considered the attempts of the 1^st defendant to provide answers to the 3^rd Request (to which the 1^st Unless Order related) in respect of the outstanding requests (relating to the alleged outstanding decoration fee and the purchase price of the villa).

41. In respect of the decoration fee, the Judge found that the request had not been properly answered “despite four court orders including two unless orders” (Reasons §37).  The Judge took the view that the answer the 1^st defendant sought to file in response to the 1^st Unless Order at the time of the hearing below was “tantamount to an avowed refusal to provide the F&BP” and to comply with the 1^st Unless Order (Reasons §§32 and 33).

42. In respect of the purchase price, the Judge found that it took the 1^st defendant a year to come up with a brief answer that did not really answer the request and that he now sought to dispute that the particulars of the amount of the balance of the purchase price were relevant to the dispute in the action thereby indicating a clear intention not to comply with the 1^st Unless Order (Reasons §40).

43. The Judge considered that the F&BP the 1^st defendant had given, the answers he was seeking to file and the amendments to the answers he had given were “confusing and contradicting” and “embarrassing” to the plaintiffs such that they would not know how the 1^st defendant was going to meet their case (Reasons §41).

44. It seems to me that a review of the procedural chronology of this action amply justifies the views reached by the Judge in this regard.  Further, as indicated in the 1^st defendant’s skeleton submission (§6), the 1^st defendant:

“… does not dispute that the previous answers were confusing and contradictory, and the mistakes so numerous, that he will not even try to defend them.”

45. In his oral submissions, Mr Chain developed an argument that was not adverted to in his skeleton submissions by reference to the penultimate sentence of §33 of the Reasons.  There, the Judge noted that the 1^st defendant’s refusal to provide a breakdown of the RMB 5 million pleaded in the defence was tantamount to an avowed refusal to provide F&BP or to comply with the Judge’s 1^st Unless Order.  Mr Chain submitted that this was wrong because the intended amendment to the defence rendered the breakdown, and therefore the F&BP requested, irrelevant.  The short answer to this point is that this point was also made to the Judge who explained at length, in §§34 to 36 of his Reasons, why the breakdown of the RMB 5 million figure was nevertheless relevant.  I agree with the Judge’s analysis in this regard.

46. Similarly, I am unable to accept the submission that the nature of the defaults and their repetition showed that the 1^st defendant’s legal advisers were at least equally, if not more, responsible for the failure to comply with the 1^st Unless Order.

47. The Judge carefully considered and rejected the evidence of the 1^st defendant’s solicitor as to the reason for the failure to comply with the 1^st Unless Order such that he did not accept “that the default was not due to the fault of the 1^st defendant but due solely to the neglect of his legal representative” (Reasons §§47).  Having reviewed that evidence and the Judge’s analysis of it, I respectfully agree with his conclusions on it.

48. In the light of the 1^st defendant’s acceptance of the inadequacies of the prior attempts to provide the F&BP in question and the Judge’s conclusions as to the explanation for the breach of the 1^st Unless Order, I do not think it can be said that the Judge erred in his conclusion that the breach was “intentional and contumelious” (Reasons §50).  As the Judge there noted: the 1^st defendant had been evading providing these particulars (I shall come back to whether the Judge was wrong to say that these were central to the dispute); there was inexcusable delay on the part of the 1^st defendant in taking remedial action; there was no explanation for the delay; and there was also breach of Master Ho’s unless order to provide a list of documents.

Was the Judge’s decision disproportionate?

49. Mr Chain submitted that there was, in any event, a proper defence of non-publication and, further, that failure to provide F&BP should not, absent intentional and contumelious default or abuse of process, attract the sanction that the whole of the defence be struck out where there are other valid defences.

50. This submission raises the question of proportionality, a point that carried considerable weight in the Daimler AG v Leiduck case (see §57).

51. It is of course correct that, under the CJR, the court will generally use striking out as a remedy of last resort and is encouraged to consider other measures that may be more appropriate: see Biguzzi v Rank Leisure plc [1999] 1 WLR 1926 at p.1933A-B, Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935 at §§33 and 75(1), and Daimler AG v Leiduck at §66.

52. In this regard, however, it is very clear that the Judge had the question of proportionality firmly in mind and specifically addressed this in his Reasons (at §49).  As I have already indicated, I will come back to the question of whether the Judge erred in saying that the requests were related to one of the central issues in dispute.  But so far as proportionality is concerned, I do not think the Judge was wrong in saying the sanction was not out of line with the breach.  In this respect, the multiple and persistent failures to comply with the original 3^rd Request, which became the subject of Master De Souza’s 1^st Unless Order and then subsequently To J’s 1^st Unless Order, speak clearly to the need for “a last indulgence”, and that is precisely how the Judge described his 1^st Unless Order.

53. Mr Chain suggested that the comment in §64 in Daimler AG v Leiduck applies equally here, namely that “it is by no means clear that, at the time the Unless Order was made, thought was given to the question of default otherwise than in respect of the timing and filing of the answers”.

54. I do not agree.  The comment in Daimler AG v Leiduck was made in the context of a case where an unless order was made otherwise than by consent.  Nor was it the case there that the unless order was the second time an unless order was made in respect of the particular matter to be provided.  Here, To J’s Unless Orders were made to replicate Master De Souza’s Unless Orders.  Moreover, the fact that To J’s Unless Orders were made by consent must, it seems to me, support the inference that the sanction built into them was consciously considered by the 1^st defendant and his advisers.  Finally, it is relevant to bear in mind that the sanction of striking out was also built into another consent order, namely Master Ho’s unless order concerning the list of documents.  Such continued and consistent consent to the sanction makes it clear that, unlike in Daimler AG v Leiduck, here thought was given to the question of default otherwise than in respect of the timing and filing of the F&BP.

Is there any basis for this court to exercise the Judge’s discretion afresh?

55. I have already addressed the question of whether the Judge was correct in concluding that the 1^st defendant’s default was intentional and contumelious.  For those reasons, I do not agree that the Judge erred in holding the 1^st defendant evinced an intention not to comply with the unless orders.  On the contrary, the Judge was right, in my view, in concluding that this was his intention.

56. The other basis of error was said to be that the Judge erred in holding that the outstanding answers under the 1^st Unless Order were central to the dispute (Reasons §50).

57. In this regard, the 1^st defendant’s notice of appeal makes the point that the requested F&BP related only to one out of 12 defamatory meanings of the words allegedly published by the 1^st defendant and two out of 9 particulars of falsity under the claim for malicious falsehood.

58. Whilst that numerical point may be valid, it does not follow that the substance of the allegations in respect of which the F&BP were requested are not important to the dispute.  I have already alluded to the nature of the allegedly defamatory statements and malicious falsehoods about which the plaintiffs complain in the action.  The 3^rd Request related to allegations raised by the 1^st defendant by way of justification (in answer to the defamation claim) and truthfulness (in answer to the malicious falsehood claim) regarding the alleged outstanding decoration fee and the purchase price of the villa.  In my view, the Judge was not wrong to describe these matters as “central to the dispute”.  The intent of the Judge in using those words must, I think, be read in the light of the very similar phrase used by him in the preceding paragraph where he described the requests as being “related to one of the central issues in dispute” (Reasons §49).  That, it seems to me, they certainly were.

59. Accordingly, I do not agree that there is any error on the part of the Judge which would justify this court in exercising the discretion afresh.

Is there a basis to challenge the Unless Orders on appeal?

60. At the end of the 1^st defendant’s skeleton submission for this appeal, it was submitted that, in any event, the original Unless Orders were wrong as a matter of principle and that these were the result of error on the part of the legal advisers.

61. I would reject that argument.  To J’s Unless Orders were made by consent.  No appeal from the making of those orders would have been entertained had such an attempt been made.

62. The late invitation by the 1^st defendant to this court (in the final paragraph of the 1^st defendant’s skeleton submission) to grant leave to appeal against those orders out of time is, in my view, without merit.  Not only were To J’s Unless Orders made by consent, they were made in the context of a history of persistent failure to provide the particulars requested notwithstanding the existence of earlier orders including Master De Souza’s Unless Orders.  As the Judge here noted, his unless orders were “the last indulgence” and, as such, there would be no basis for this court interfering with his exercise of discretion in making a strike out the sanction imposed for default.  In any event, the making of the unless orders would not have precluded the 1^st defendant from seeking and obtaining relief from that sanction, if such relief had been justified.

Conclusion

63. I therefore do not think that the Judge’s decision was plainly wrong or that there was any error in his exercise of discretion that would justify this court’s interference and re-exercise of that discretion.  It is clear that the Judge had firmly in mind the provisions of RHC O.2 r.5 and the various factors that must be considered on an application for relief from sanctions when considering his decision. Indeed, in his conclusion (Reasons §51), the Judge held that the 1^st defendant had failed to discharge the burden of showing that he was entitled to relief and, by his orders dated 6 July 2012, he dismissed the 1^st defendant’s late summons for relief, which in any event was out of time since it was not filed as required by RHC O.2 r.4 within 14 days of the failure to comply with his 1^st Unless Order.

64. For all the above reasons, the appeal was dismissed.

65. As to costs, we ordered that the costs of the appeal be paid by the 1^st defendant to the plaintiffs to be taxed on a party and party basis with a certificate for two counsel in this court.  In the face of an indication that we were not minded to order a higher scale of taxation of these costs, the request for this in the plaintiffs’ skeleton submission was not pursued by counsel for the plaintiffs.

Hon Barma JA:

66. I agree with the Reasons for Judgment of Fok JA.

Hon Suffiad J:

67. I agree with the Reasons for Judgment of Fok JA.