SUM CHEUNG WAI v. TSUI HIN YUET

HCA 640/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 640 OF 2014

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J U D G M E N T

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1. This is the plaintiff’s (“Sum”) malicious prosecution action against the defendant (“Tsui”). 

2. It is common ground that the parties used to be friends.  Like so many breakdowns of friendship which had come before the court, the friendship between Sum and Tsui ended with a disagreement over financial matters.  That disagreement led to a litigation (HCMP 1707/2010) which was concluded in 2013 (“Action”).  Whilst the Action was on foot, Tsui made a report to the police alleging that Sum had committed a serious offence of theft (“Complaint”).  In the course of investigating the Complaint, Sum was arrested by the police and suffered much humiliation and distress as a consequence.  He seeks to vindicate his honour in this action. 

3. It will be seen below that the scope of relevant factual dispute in this case is not extensive.  I start with a summary of the cases of the parties as laid out in their evidence. 

Sum’s case

4. Sum used to work for a garment import and export company, Trans Eurasia Co Ltd (“TEC”).  He got to know Tsui in 1998 in the course of his work, and the 2 men became friends.  Tsui was and is the owner of Zenith Lace Co Ltd (“Zenith”). 

5. In August 2000, Tsui formed a company by the name of Donna Bodywear Co Ltd (“DBC”).  Donna is the name of Tsui’s wife (“Donna”).  Tsui and Donna were the only shareholders and directors of DBC. However, this company remained dormant until April 2004. 

6. In early February 2004, Tsui and Sum agreed that the latter would take over DBC to start a lingerie business.  They would collaborate on the new business, which I understand to mean that the new business would also benefit Zenith (Zenith later became a supplier of DBC).  The understanding between the 2 men was that Sum would have 100% control and beneficial ownership of DBC.

7. On 15 March 2004, Sum left TEC.  He was given all the statutory books, shares certificates as well as the seal and chop of DBC.  On the next day, Tsui, acting via his brother-in-law, advanced a sum of HK$1 million to DBC as its working capital.  On 24 March 2004, Sum became a signatory of DBC’s bank account.  At that time, he thought that he was the sole signatory[1]. 

8. Sum’s case is that since April 2004 he had been running DBC on his own.  Neither Tsui nor Donna participated in running that company.  Apart from the provision of the working capital of HK$1 million, which was repaid on 12 January 2007 with the profits made by DBC, Tsui provided no further funding to DBC.  Sum did not become a shareholder or a board member of DBC because he was ignorant of these legal niceties, and was trusting of Tsui.  He did not consider these formalities necessary.

9. Sum said that in January 2007 he suggested to Tsui that everything should be formalised in writing but Tsui was evasive. DBC’s business was doing well.  Sometime in May 2009, having consulted a lawyer about his situation and with the view to protecting his interest, Sum spoke to Tsui again about formalising things in writing.  By that time, Sum suspected that Tsui might not honour the agreement made in 2004.  However, he wanted to resolve the matter amicably and offered to pay Tsui 40% of the total assets of DBC, about HK$5.46 million based on DBC’s latest accounts.  Three post-dated cheques were given to Tsui by Sum for that purpose. 

10. The parties were unable to reach an agreement. Sum’s case is that Tsui exploited his lack of documentary support and sought a buyout by Sum of his interest in DBC at HK$8 million.

11. Unable to reach a mutually acceptable buyout, on 8 September 2010 Sum instituted the Action for declaratory relief in respect of his sole ownership of DBC.

12. On 15 September 2010, with the assistance of his solicitors, Tsui filed with the Company Registry a Notification of Increase of Nominal Share Capital by which he sought to have an enlargement of DBC’s share capital so that the shareholding would reflect his case of a 30%-30%-40% division between himself, Donna and Sum.

13. Unknown to Sum, Tsui lodged a false and malicious complaint to the police on 3 December 2010 (the Complaint) via his solicitors that Sum had stolen over HK$17 million from DBC.  Sum said that Tsui was using the power of the police to put pressure on him with the aim of getting more money from him.

14. As a result of the Complaint, Sum was arrested at Lo Wu on 24 January 2013 after having been contacted by the police that he was required to assist in the investigation of a case.  Viva voce evidence was given by Sum[2] on how he was later surprised to learn that he was a wanted person and to be arrested. 

15. Sum described with some details his arrest, followed by police interviews, searches of his office and home, and the detention at North Point Police Station before he was released on bail.  He was in police custody for about 30 hours.  Sum told the court that he felt deeply humiliated and anxious during this traumatic experience.  His arrest at Lo Wu was witnessed by many people.  He was strip searched twice, and he was seen by the security guards at the office and his home when he was taken there by the police for the searches.  Sum’s family members were very worried about the matter.  He felt badly depressed by the experience and was unable to focus on his work afterwards. 

16. Sum was required to report to the police after having been granted bail. Altogether, he had made such report on 7 occasions, from February to September 2013, before a decision was made by the police to release him and put an end to the investigation. 

17. Sum obtained the assistance of solicitors in this matter and had spent a total of HK$105,000 on their fees. 

18. The trial of the Action took place in June 2013 before Mr Justice Harris.  On 23 July 2013, the judgment for the Action (“Judgment”) was handed down.  It was held by the court that Sum was DBC’s sole owner since about March 2004 pursuant to an agreement between Tsui, Donna and Sum.  The court observed that the evidence before it “points strongly to the conclusion that [Tsui’s] report to the police was malicious and made in order to discourage [Sum] from pursuing the [Action]”.

The Complaint

19. In addition to his own evidence, Sum also relies on the evidence of Senior Police Inspector Cheng Sze Wai (“Cheng”) who gave evidence on subpoena. Cheng became the officer-in-charge of the Complaint after he was transferred to the Commercial Crime Bureau (“CCB”) at the end of 2012. 

20. Cheng confirmed that the Complaint was initiated by a solicitors’ letter dated 3 December 2010 (“Letter”).  The Letter was purportedly written on behalf of DBC (there is no dispute that Tsui was the one who caused the Letter to be written).  It referred to the discovery by DBC that 1 of its employees, Sum, was suspected of having stolen more than HK$17.4 million from its bank accounts from August 2005 to March 2008.  This document set the police investigation in motion and I set out below an extract of the same :

“Our client discovered Sum has stolen money from our client by misappropriating the money from our client’s account into his own personal account. Sum would withdraw money from our client’s account every month and deposit the same into his own. He would inform our client the aforesaid money was used to make payments to the vendors and other expenses for and on behalf of our client. Our client’s accountant clerk has internally kept a separate ledger for the above transactions. However, accordingly to our client’s ledger, Sum’s personal account has a balance of more than HK$17,400,000.00 and Sum did not offer to repay such amounts into our client’s account.

A summary of the ledger is enclosed herewith for easy reference.

In view of the evidence aforesaid, our client has reasonable ground to believe that Sum has committed theft contrary to s.2 of the Theft Ordinance (Cap.210).

We shall be grateful if you could look into this matter as soon as practicable. Our client is willing to provide further information and assistance to your investigation.

Should you require further information from our client, kindly contact our Ms Jane Wong at 2868 9800 to arrange for an interview with our client.

  We hope to hearing from you soon.”

21. The ledger enclosed with the Letter appears to be part of the General Ledger of DBC referred to as “Contrast A/C”. 

22. Cheng provided some general information about the investigation carried out by the police in relation to the Complaint, eg, investigating DBC’s bank accounts, its company records and financial records. He also mentioned that the flow of funds was traced.  However, probably due to the passage of time, Cheng was unable to be specific on the investigatory work. 

23. Cheng explained that the day before Sum was arrested, the police had obtained 2 search warrants for respectively the search of his office and home.  Cheng said that at that time the police had reason to believe that Sum had stolen from DBC, and that the police’s reasonable suspicion was partly based on the Complaint. 

24. Cheng also explained that the warrants were issued by a magistrate based on information laid before him by the police. Upon being satisfied that the police had a reasonable belief in the commission of a crime, the warrants were issued to them to further the investigation. 

25. As regards the arrest of Sum, it was carried out in exercise of the power under the Police Force Ordinance, Cap 232 (“Ordinance”).  Cheng said that Sum’s arrest was part of the investigation by the police.  Hence, he was interviewed after the arrest. 

26. Cheng said that the collection of evidence in this case was concluded in May 2013.  The police then consulted the Department of Justice (“DOJ”) for advice.  Before the advice was rendered, a copy of the Judgment was received by the police.  A copy of the Judgment was duly sent by the police to the DOJ.  The advice from the DOJ was received not long before Sum’s release from bail, which took place on 13 September 2013.

27. Finally, Cheng said that the police would not just arrest a subject of complaint based on what the complainant said.  The police was required to investigate the matter and to decide whether it was reasonable to exercise its power under the Ordinance. 

28. I shall set out later a summary of the evidence provided and caused to be provided by Tsui for the Complaint.

Tsui’s case

29. On the second day of this trial, Mr Chan, appearing for Tsui, conceded that there is an issue estoppel against Tsui arising from the Judgment in that he is not entitled to challenge, directly or indirectly, the finding of the court that DBC is wholly owned by Sum since about March 2004.  In the premises, much of the evidence contained in the witness statement of Tsui is not admissible. 

30. Out of expedience, Tsui was allowed to adopt his witness statement as his evidence in this trial de bene esse[3]. It must be said that as a matter of principle a party is not entitled to put forward inadmissible evidence in his witness statement, especially knowing that it will be used at the trial.  This state of affairs exists in this case because, primarily, of a failure on Sum’s side to recognise the issue estoppel, despite having been asked by the court at the PTR whether there would be such an issue at the trial. 

31. There is no controversy over the setting up of DBC, that Tsui and Donna were its only shareholders and directors and that it remained a dormant company until April 2004.  A little earlier that year, according to Tsui’s case, he persuaded Sum to join DBC.  Sum was given a 40% stake in DBC without the need to make any monetary contribution.  In return, Sum would be solely responsible for DBC’s business and management.  However, because Sum did not want to be seen to be competing with TEC, he chose not to be registered as a shareholder or appointed to the board of DBC.

32. From 1 April 2004 to sometime in 2005, Sum was the only employee of DBC.  In order to keep up with the increasing business, Ms Heidi Wai (“Heidi”), Tsui’s sister-in-law who was working for Zenith, was “seconded” to handle the bookkeeping for DBC on a part-time basis. 

33. In around 2005 or 2006, Tsui learned from Heidi that Sum would paid into his personal bank account money belonging to DBC and then defray its expenses from that account.  Tsui saw nothing wrong with that modus operandi and did not question Sum about it.

34. By May 2009, DBC’s business was doing well. According to Tsui, he wanted the company to set up its own factory to manufacture lingerie in China since 2007.  Sum disagreed with him over the idea, and the parties’ relationship deteriorated due to this disagreement.  They began to negotiate for a buyout of the 60% stake held by Tsui and Donna in May 2009, but the 2 men were unable to agree on the price.

35. In August 2010, Sum was removed by Tsui as a signatory to DBC’s bank accounts. 

36. On 8 September 2010, Sum started the Action against Tsui, Donna and DBC claiming sole ownership of the company.  Tsui acknowledged that the enlargement of share capital exercise on 15 September 2010 (see para 12 above) was improper because it involved making false claims. 

37. Sometime after the Action had begun, Tsui’s attention was drawn by Heidi, and he came to know for the first time, that DBC’s “Contrast Account” (“Contrast Account”), which recorded the payments of DBC’s money into Sum’s personal account and the payments from that account of DBC’s expenses, showed that there was HK$17.4 million of its funds unaccounted for.  Tsui was shocked by this “dubious practice” and was upset with Heidi for not alerting him earlier.

38. On 3 December 2010, Tsui caused his solicitors to report the matter to the police for investigation.  Tsui denied any malice in doing so, insisting that he was acting with reasonable cause.  He maintained that as a result of what Heidi told him, he “genuinely believe that there was prima facie a suspected case of misappropriation of company funds which Sum could not apparently account for”. 

39. Apart from attending police interviews himself, Tsui also asked Heidi to attend interviews with the police to assist in their investigation. 

40. There was an appeal against the Judgment filed on 3 September 2013.  It was subsequently abandoned and was dismissed by consent with costs to Sum on 22 August 2014. 

41. In addition to his own evidence, Tsui has called 2 witnesses – Heidi and Ms Yip Lin Yuk (“Yip’), an accounting clerk working for Zenith.

42. The witness statements of both Heidi and Yip took the form of a single paragraph in which various paragraphs of Tsui’s witness statement were identified, and the statement makers purportedly “confirm” the contents as true and correct.  This is not a case where 1 person described in his statement events witnessed by a number of other people, and the other witnesses, having nothing to add, merely adopt the existing evidence to avoid unnecessary proliferation and wastage of costs.  I see no justification for adopting such practice in this case. 

43. I shall deal with the evidence of Heidi when I analyse the controversial issues below.  Yip’s evidence is immaterial.  

Applicable law

44. There are 4 essential elements of the tort of malicious prosecution.  They were identified in Oh v Richdale, CACV 105&162/2003, §12, per Ma CJHC (as he then was) as follows :

“In action of malicious prosecution the plaintiff must show first that he was prosecuted by the defendant, that is to say, that the law was set in motion against him on a criminal charge; secondly, that the prosecution was determined in his favour; thirdly, that it was without reasonable and probable cause; fourthly, that it was malicious. The onus of proving every one of these is on the plaintiff.”

Issues

45. Mr Chan takes issue with 3 of the 4 ingredients of the cause of action against Tsui, namely, whether Sum was prosecuted by Tsui, whether Tsui acted without reasonable and probable cause and whether Tsui was malicious. 

46. Before addressing these issues, I shall set out a summary of the evidence provided or caused to be provided by Tsui for the Complaint. 

Evidence provided for the Complaint

47. I have mentioned above the initiation of the Complaint by the Letter with which a set of the Contrast Account was enclosed. That set of documents consisted of 12 pages.  The first 2 pages covered the period from 1 April 2004 to 31 March 2006.  The remaining 10 pages were concerned with the period from 1 April 2006 to 31 March 2008.  These documents recorded the payments of DBC’s money into Sum’s personal account and the payments from Sum’s personal account of DBC’s expenses.  They showed that there was a sum of about HK$17.4 million which had not been so accounted for. 

48. On 23 February 2011, further documents were provided to the CCB by Tsui’s solicitors, which included, inter alia, the bank statements of DBC’s accounts from 30 September 2006 to January 2010 and the originating summons as well as the affirmations filed in the Action. 

49. There was a police statement of Tsui dated 14 March 2011 (this statement was only confirmed at a later stage – see below).  In that statement, Tsui alleged that he and Donna owned 60% of the shares in DBC.  In April 2008, Tsui told Sum that he should not again use his personal account for the payment of DBC’s expenses.  In September 2009, when the buyout negotiation had broken down, DBC moved its office without any prior notice to Tsui.  Thereafter, Tsui was unable to contact Sum.  On 8 September 2009, Tsui was served with the papers in the Action.  Later that month, he examined again DBC’s finances from 2004 to 2008 and discovered that between the period from 1 January 2005 to 31 March 2008 there was a sum in excess of HK$17 million transferred to Sum’s personal account from that of DBC.  This sum of money had not been repaid to DBC.  He therefore suspected that Sum had stolen from DBC.  Tsui suggested that he required more time to collate the documents of DBC before providing them to CCB. 

50. On 8 February 2012, CCB wrote to Tsui’s solicitors pointing out, inter alia, that the witness statement produced as a result of an interview with Tsui on 14 March 2011 had still not been confirmed despite repeated reminders.  Further, “Tsui could not yet point out which entries shown on the bank records provided by you on 23 February 2011 represented the sum of HK$17.4 million, being the alleged theft amount”. Therefore, CCB asked for confirmation by the end of the month whether Tsui was still pursuing his report.  

51. On 10 February 2012, Tsui’s solicitors responded to the CCB by providing further documents including, inter alia, the financial statements of DBC from 7 August 2000 to 31 March 2010.  It was stated that Tsui’s statement was being finalised. 

52. On 29 February 2012, those solicitors wrote to CCB again stating that Tsui “intends to pursue his report”.  On 25 May 2012, the CCB replied to Tsui’s solicitors stating that: “For the further documents you provided to us on 10 February 2012, it was not indicated how could they (sic) support the allegation of your client”.  It was further stated that: “… if we do not receive the finalized statement from your client and also concrete evidence to support his allegation … by 8^th June 2012, our investigation will end.  If anytime in the future your client could provide evidence to support a prima facie crime, he may report the case again and the matter would then be re-considered”. 

53. It appears from an email from Tsui’s solicitors to the CCB dated 31 May 2012 that Tsui’s statement dated 14 March 2011 was provided to the CCB on that day.

54. Tsui provided another witness statement to the CCB dated 8 June 2012.  Much of this statement repeated the contents of his statement dated March 2011.  However, in the later statement Tsui identified 4 sums of money, 1 for each year from 2005 to 2008, amounting to a total sum of HK$17.42 million which he alleged to have been taken by Sum from DBC without authority. 

55. On 15 August 2012, at the request of Tsui, Heidi provided a witness statement to the police.  In that statement, Heidi described the compilation of DBC’s general ledger, including the Contrast Account which formed part of it.  The exercise was carried out with the documents supplied to her by Sum.  In May 2008, Sum had confirmed with her that all the relevant documents had been given to her.  In June 2010, Tsui asked her about DBC’s accounts, and she printed out the relevant documents and gave them to Tsui. 

56. It appears that on 15 August 2012, Heidi also provided to CCB some accounting documents, including adjusted Profit and Loss Accounts and Balance Sheets, of DBC from 1 April 2004 to 31 March 2008[4].

57. On 14 January 2013, Tsui provided his 3^rd witness statement to CCB.  It added little to what had been provided to the police and it is unnecessary to summarise the same for the present purpose.  On the next day, Heidi provided another witness statement to the CCB.  This statement primarily served to explain the terms used in DBC’s accounts. 

Analysis

58. Of the 3 issues in this case, 2 of them (reasonable and probable cause and malice) are reasonably straightforward issues of facts.  The issue of prosecution by the defendant has 2 aspects : (a) what amounts to a prosecution and (b) whether Tsui can be treated as the prosecutor.  They involve difficult questions of law.  I propose to deal with the factual issues first.

Reasonable and probable cause

59. This issue is closely associated with the issue of malice on the part of Tsui.  It should be said that these elements of the tort will have to be considered on the same set of facts.  The circumstances of any given case may be such that the same factual features will be relevant to the consideration of more than 1 element of this tort. 

60. Here, I have to look closely at the evidence of Tsui.  He is a poor witness.  He was unable to provide any satisfactory answer to basic questions in relation to the Complaint. 

61. The Complaint was about alleged theft of DBC’s money by Sum in that money belonging to the former was transferred to the latter’s private account without good reason.  The critical piece of evidence put forward in support of the Complaint was the Contrast Account.  However, firstly, it is accepted by Mr Chan that, based on Tsui’s own case, Sum was allowed to pay DBC’s money into his personal account and to defray its expenses from that account.  Secondly, the Contrast Account was only made up to 31 March 2008, and it only provided a contrast between payments by DBC to Sum and the latter’s payment of DBC’s expenses (with supporting documents).  It must be plain, as Tsui conceded in cross-examination (“XXn”), that it cannot be said at the time of the Complaint in December 2010 that Sum still owed DBC HK$17.4 million.  This is echoed by the evidence of Heidi, who accepted that the Contrast Account did not show that Sum owed the Company HK$17.4 million as at 31 March 2008 because there might be other debts which would have to be taken into the equation. 

62. Further, Tsui agreed that if Sum had stolen from DBC he would have wanted to hide his tracks instead of providing to Heidi the information which allowed her to compile the Contrast Account. 

63. In these circumstances, as Tsui admitted in XXn, it was very important to obtain an explanation from Sum in respect of the HK$17.4 million.  Tsui said that he could not find Sum.  Further, relying on an email to Sum dated 5 July 2010, Tsui said that he did try to obtain the books of DBC but was refused.  That email referred to the general ledger for financial year 2008 to 2009 and the tax accounts for the year 2009 to 2010.  Furthermore, Tsui said that after the institution of the Action, he did not feel appropriate to contact Sum directly.

64. I find Tsui’s explanations for his failure to obtain an explanation from Sum difficult to accept.  Firstly, at the material time, Tsui and Sum were living in the same building, and their car parks were located next to one another.  It defies common sense to believe that Tsui would have difficulty in finding Sum (there is no evidence that Sum had left Hong Kong and it was never so suggested to him in XXn).  It should be noted that evidently the police had no difficulty in getting in touch with Sum via his mobile phone.

65. Secondly, Tsui and Donna were the only directors of DBC, it was within their power, enforceable by an order of the court, to demand the production of DBC’s books and records.  Given that Tsui was all along acting with the benefit of legal advice, it is difficult to believe that he was not aware of such entitlement. 

66. Thirdly, Tsui could have communicated with Sum via their respective solicitors once the Action had started. 

67. It is equally perplexing that Tsui had admittedly failed to consult DBC’s auditors about the HK$17.4 million.  His answer that he did not think about asking them cannot be taken seriously. 

68. Mr Chu, appearing for Sum, was at pains to point out that Tsui had advanced a false case that he was unable to contact Sum in order to create a misleading impression that Sum had taken a large sum of money from DBC and disappeared, thereby exaggerating the seriousness of the Complaint.  Given my rejection of Tsui’s allegation that he was unable to find Sum, I agree with Mr Chu’s analysis.  Whilst I believe that this feature is more relevant to the issue of malice, I agree that it should be taken into consideration here as well.

69. There is an important variance between the evidence of Tsui and Heidi on how the former came to know about the Contrast Account.  According to Tsui, after he was served with the originating summons in the Action, he was very angry with Sum’s claim that DBC belonged to him.  He then asked Heidi to show him DBC’s documents to see where it was stated that the company belonged to Sum.  Later, he found the Contrast Account when he examined those documents, and he asked Heidi what it was.  After receiving Heidi’s explanation, Tsui went to the police for assistance.

70. In her evidence, Heidi said that Tsui asked her for DBC’s books and accounts, and she provided some documents to him, including the balance sheets, profit and loss accounts and the Contrast Account.  At that time, Tsui did not ask Heidi about the documents.  After a while, possibly because of the Action, Tsui suddenly thought about the books she gave him, and he asked her what the Contrast Account was and to explain the same to him.  Heidi then explained to Tsui how the figures came about. 

71. I am inclined to accept Heidi’s version to be correct.  It is consistent with the fact that Tsui and Sum were negotiating on a buyout and for that purpose Tsui obviously needed some financial information of DBC to work on.  After the breakdown of the negotiation, and in light of the Action, Tsui revisited the financial documents to see what he could find which might be used against Sum.  Although this is also more relevant to the issue of malice, I take the view that this piece of evidence militates against the suggestion that Tsui was acting with reasonable and probable cause. 

72. Finally, in light of the issue estoppel that DBC was, to Tsui’s knowledge, entirely owned by Sum (at all material times), it is difficult to see how the Complaint can be reasonable.  Notwithstanding the separate entities of DBC and its shareholder, I am unable to see how it can reasonably be alleged that Sum was dishonest (a necessary ingredient of theft) in putting DBC’s money into his own account when he could have caused the distribution of the company’s assets to himself[5].

73. In light of the above analysis, I have no difficulty in finding that Tsui did not act with reasonable and probable cause in making the Complaint. 

Malice

74. First of all, Mr Chan has conceded (subject to his submissions on the issues under prosecution (see para 58 above)) that in light of the issue estoppel, Tsui had dishonestly advanced a false case of a 60:40 joint venture in DBC, and it would be difficult to deny the inference that the Complaint was malicious. 

75. In addition to the concession, the same analysis on the evidence under the previous heading provides ample justification for the finding that Tsui acted maliciously in making the Complaint. 

76. For completeness, I should mention, firstly, that I agree with Mr Chan that the comment made by the court in the Action that the Complaint was malicious (see para 18 above) does not give rise to an issue estoppel because it was a comment made in the assessment of the credibility of Tsui, and not a finding on a matter fundamental to the decision in the Action : see Spencer Bower & Handley on Res Judicata, 4^th edn, §8.02 citing Blair v Currant (1939) 62 CLR 464 at 531-533.  I therefore do not rely upon on the comment. 

77. Secondly, I see no room for any suggestion in this case that Tsui was acting with altruistic motive in making the Complaint. It is neither open on his pleading nor the evidence. 

Sum’s credibility

78. Sum was not really taxed in XXn.  With the exception of 2 points, I see no fragility in his evidence, and it has to be said that he gave his evidence in a convincing manner and without exaggeration.  The first point concerns his lack of knowledge about the basics of company law – the need or importance to become a shareholder and director of DBC.  I find it surprising that an experienced businessman would have no such basic knowledge. 

79. Secondly, Sum was unable to explain the Contrast Account.  Given that he knew about the Complaint for some time and that it is very much the focus of this action, I am unable to accept his explanation that he did not check the Contrast Account because it covered a number of years. 

80. However, these 2 points do not seriously impact upon the integrity of Sum’s evidence (bearing in mind in particular that DBC was at all material times his company), and I have no difficulty in accepting the rest of his evidence.

Prosecution

81. The first legal question is what constitutes a prosecution for the tort of malicious prosecution?  In Clerk & Lindsell on Torts, 21^st edn, rubric 16-11, it was explained as follows :

“In establishing the first essential element of the tort of malicious prosecution two key issues must be addressed: what constitutes a prosecution? And who is the prosecutor? To prosecute is to set the law in motion, and the law is only set in motion by an appeal to some person clothed with judicial authority in regard to the matter in question, and to be liable for malicious prosecution a person must at least be actively instrumental in so setting the law in motion. This involves ‘active steps’ to ensure that a prosecution results. So forensic scientists who prepared reports for the police and the DPP as a result of which the claimant was prosecuted for murder could not be liable for malicious prosecution for in no way did they initiate those proceedings. They merely provided information requested by those seeking to decide whether to set the law in motion.”

82. Mr Chan has argued forcefully that there was no prosecution in this case.  The Complaint only constituted a report of a crime to the police.  There is no tort of malicious reporting to the authorities[6].

83. I have to say that none of the authorities put before this court involved a case where the criminal process had not proceeded beyond the investigation by the police. 

84. There are 2 authorities on which Mr Chu heavily relies.  Firstly, Amin v Bannerjee (PC) [1947] AC 322.  In this case from India, the plaintiff and the 1st defendant entered into an oral agreement whereby the former would sell a number of properties to a company to be formed later by the 1st defendant.  Subsequently, the plaintiff took the view that since the 1st defendant had not carried out certain contractual obligations, he would refuse to transfer the rest of the contracted properties.  As a result of this civil dispute, the 2nd defendant, on behalf of all defendants, filed a “petition of complaint” in the court of the Police Magistrate in a Calcutta suburb under certain provisions of the Code of Criminal Procedure, for the criminal offence of “cheating” under the Indian Penal Code.  The magistrate, after having directed 2 investigators to investigate the petition but without response, then proceeded to hold an inquiry himself in open court, in which both the defendants and the plaintiff took part.  He dismissed the defendants’ petition. 

85. There was technically no prosecution having been instituted against the plaintiff.  The plaintiff's claim for damages for malicious prosecution was dismissed in the high court and the dismissal was affirmed by an appeal court, due to the lack of prosecution.  However, upon the plaintiff’s appeal to the Privy Council, the Board allowed the appeal by holding that the true test for malicious prosecution is “not whether criminal proceedings have reached a stage at which they may be correctly described as a prosecution; the test is whether such proceedings have reached a stage at which damage to the plaintiff results”.

86. Giving the judgment of the Board, Sir John Beaumont said :

“… the word ‘prosecution’ in the title of the action is not used in the technical sense which it bears in criminal law is shown by the fact that the action lies for the malicious prosecution of certain classes of civil proceedings, for instance, falsely and maliciously presenting a petition in bankruptcy or a petition to wind up a company…

  …To found an action for damages for malicious prosecution based on criminal proceedings the test is not whether the criminal proceedings have reached a stage at which they may be correctly described as a prosecution; the test is whether such proceedings have reached a stage at which damage to the plaintiff results.  Their Lordships are not prepared to go as far as some of the courts in India in saying that the mere presentation of a false complaint which first seeks to set the criminal law in motion will per se found an action for damages for malicious prosecution.  If the magistrate dismisses the complaint as disclosing no offence with which he can deal, it may well be that there has been nothing but an unsuccessful attempt to set the criminal law in motion, and no damage to the plaintiff results.  But in this case the magistrate took cognizance of the complaint, examined the complainant on oath, held an inquiry in open court … which the plaintiff attended, and at which, as the learned judge has found, he incurred costs in defending himself.  The plaint alleged the institution of criminal proceedings of a character necessarily involving damage to reputation … Their Lordships think that the action was well founded, and on the findings at the trial the plaintiff is entitled to judgment.”

87. Secondly, a Supreme Court of Canada decision in Casey v Automobiles Renault Canada Ltd [1965] SCR 607.  In that case, Coleman, a manager of Automobiles Renault Canada Ltd, had himself laid the information and complaint before a magistrate on behalf of his employer alleging reasonable grounds to believe that Casey had stolen 26 vehicles.  The information was later withdrawn without any proceedings having been instituted.  It was held (by a majority of 4 to 1) that the defendant must be held responsible for the damage to Casey's reputation for it had set the law in motion before the magistrate. 

88. Amin v Bannerjee was considered by the Supreme Court.  In the judgment of majority :

“In my opinion, the essence of the matter, in each case, was the filing of an information to deal with which was within the magistrate’s jurisdiction. At that point, in each case, the informant had done all he could do to launch criminal proceedings against the accused.

I do not interpret the Mohamed Amin case as authority for the proposition that a case of malicious prosecution can never be founded on the laying of an information, but rather as establishing that the information must be one which discloses an offense with which the magistrate can deal. The essence of the matter, in that case, was not that the magistrate acted ‘judicially’ by conducting an inquiry, but that, on the evidence, the magistrate had taken cognizance of the complaint. The proceedings in the present case had progressed just as far, so far as the accused was concerned, as they had in the case of Mohamed Amin.

…

I am therefore of the opinion, with great respect to the views expressed in the Court below, that, as the respondent had caused everything to be done which could be done wrongfully to set the law in motion against the appellant on a criminal charge, an action for malicious prosecution lay against the respondent, …”

89. In Crawford Adjusters Ltd v Sagicor Insurance Ltd (PC) [2014] AC 366, in a dissenting judgment, Lord Sumption said in §121 :

“The tort of malicious prosecution was created in the 17^th and 18^th centuries to deal with the problem of abusive private prosecutions, which was then a serious social evil but has now almost entirely vanished as a result of the creation of public prosecuting authorities. As a result, the tort in its traditional form is now all but defunct.”

90. These dicta perhaps explain the genesis of this tort.  Neither Amin nor Casey supports the proposition that maliciously reporting to the police a crime which does not exist can constitution a prosecution.  Indeed, in both cases, the complainant was in a position, and at least had attempted, to initiate the prosecution process. That cannot be said for the present case. 

91. I do not believe that one can simply apply the ratio of Amin to the present case by substituting “proceedings” with “investigation”, ie, whether the investigation (by the police) had reached a stage which damage to Sum has resulted.  Such a proposition (or to hold that what had transpired in this case as constituting a prosecution) would amount to a reform or at least a significant extension of this tort.  This is unsupported by any authority.  Serious consequence in terms of the number of cases which may be brought under this tort is likely to follow from such an extension.  I am unable to see the justification for the same.

92. In a reasonably well-developed and sophisticated society like Hong Kong, the investigation of criminal offences is entrusted to a professional and well-respected police force.  The exercise of some of its intrusive power is subject to the sanction of the court.  The obtaining of the search warrants in this case is a good example.  Decisions made by the police can also be challenged in court.  Further, the police have the availability of advice from the DOJ.  In these circumstances, it may be said that there are inherent safeguards against abuse for someone who has been wrongly accused of having committed a crime.  Such protection is not, and probably will never be, perfect.  On the other hand, changing the law by providing a cause of action arising for the investigation of a crime should best be carried out by the legislature. 

93. Mr Chu has a fall back argument in that, relying upon the issuance of the 2 search warrants by a magistrate, he submitted that the judicial process had been activated by Tsui.  Whilst it is true that the warrants were obtained from a magistrate, it would not be right to take the view that the matter had proceeded from investigation to prosecution.  I am unable to see how the obtaining of the warrants had changed the complexion of this case. 

94. Importantly, in addition to the tort of malicious prosecution, there are 2 additional causes of action which a person who has suffered from malicious reporting to the authorities may rely upon for redress, namely, malicious procuring of arrest and malicious procurement of search warrant[7].  Hence, the need to extend the reaches of the tort of malicious prosecution is not readily apparent. 

95. For these reasons, I hold that the requirement of prosecution has not been satisfied and this action must fail. 

Was Tsui the prosecutor[8]?

96. In light of the finding on lack of prosecution, I shall deal with this part of the analysis succinctly.  In a very recent judgment of the Court of Appeal, Dutt v Maheshwari, CACV 129/2014, 14 December 2015, the applicable test was stated in §23 as follows :

“The relevant principles, … on the question as to who is to be regarded as the prosecutor where a complainant, who has allegedly manipulated the criminal system for dishonest or nefarious means, is involved had been comprehensively summarized by Ma CJHC (as he then was) in Oh Jae-Hoon Eugene v Richdale, supra, at [19]. For present purposes, we only need to state the applicable test in simple terms thus : are the circumstances such that the facts relating to the alleged crime are exclusively within the knowledge of the defendant so that it is virtually impossible for the police to exercise any independent discretion or judgment on the matter.

97. I am unable to say that this requirement has been met.  It is apparent from the letters from the CCB dated 8 February and 25 May 2012 (see paras 50 and 52 above) that they were, as expected of a sophisticated and responsible authority, exercised their judgment on the Complaint, and were not satisfied at that stage that the evidence provided by Tsui merited further investigation.

98. The additional material provided and caused to be provided by Tsui to the CCB has been identified in paragraphs 53 to 57 above).  Sum was arrested not long after the last piece of evidence was provided to the CCB, Heidi’s 2^nd witness statement dated 15 January 2013.

99. The evidence is not clear (the burden of proof is on Sum) as to what investigation had been carried out by the CCB in addition to examining the additional material.  On one view, the additional material could not take the Complaint much further.  The critical information whether Sum had or had not repay the HK$17.4 million to DBC remained missing. 

100. There is no reason to believe that the CCB had done nothing but to rely upon the additional material from Tsui before deciding to arrest Sum.  Cheng was firm in his evidence that the decision to arrest would not simply based on what a complainant said to the police.  It would be made after investigation and consideration on whether it was reasonable to do so.  I remind myself that the police was aware of the dispute between Tsui and Sum over DBC (see para 48 above), and Cheng did say in evidence that the police had investigated the bank records to trace the alleged stolen sum.

101. In the premises, it would be wrong to hold that the police did not exercise any judgment in this case.

102. Mr Chu also submitted that it was virtually impossible for the police to exercise any independent judgment in this case.  I am unconvinced by the submission.  There is no suggestion by Cheng that the CCB was in any way hampered in its investigation. 

103. Finally, Mr Chu argued, relying on the judgment of Cheung JA in Oh v Richdale[9], that a test with a lower threshold should be applied, namely, whether the false information provided by Tsui had prejudiced the judgment of the police (see Oh, §63-65).  It is unnecessary to deal with this submission because this court is bound by Dutt v Maheshwari.   

Conclusions

104. In the premises, this action is dismissed with an order nisi that the costs of this action be to Tsui, to be taxed if not agreed.