HOI TIN TONG COMPANY LTD v. CHOY KWOK KEUNG

CACV 482/2021, [2024] HKCA 582

On Appeal From [2021] HKCFI 2888

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 482 OF 2021

(ON APPEAL FROM HCA NO. 1755 OF 2013)

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JUDGMENT

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Hon Chu VP :

1.  This is the plaintiff’s appeal against the judgment of Lok J (‘the Judge’) given on 27 September 2021^[1] dismissing its claim against the defendant for defamation, malicious falsehood and conspiracy to injure with costs.

2.  The plaintiff’s grounds of appeal are directed at the Judge’s findings that the defence of justification was made out, the defendant was not liable as the publisher of the videos and articles complained of by the plaintiff, and the conspiracy to injure failed.

3.  I had read in draft the judgment of Cheung JA.  I agree with it and that the appeal should be dismissed with costs.  I would only add a few words on two of the arguments advanced by Mr Man SC, together with Mr JY Chan, for the plaintiff.  I shall adopt the abbreviations used in Cheung JA’s judgment.

4.  First, with regard to the defamation claim, Mr Man complains that the Judge upheld a defence of justification that has not been pleaded.  It is true that the issue formulated by the defendant in his closing submission, which the Judge adopted in [125(ii)] of the judgment (see [30] below), does not appear to be engaged on the pleadings.  The reference to different handling depending on the severity of the mould (namely, rinsed off the mould if it was not serious and discarded or returned the turtle jellies if the mould was serious) does not form part of the malpractice described in the 1^st and 2^nd Videos and the Articles^[2].  As analysed by Cheung JA, this is not part of the sting or defamatory meaning and is not relevant. 

5.  Despite the formulation in [125(ii)], the Judge was not distracted and had remained focused on the core issues of whether, as a matter of fact, the plaintiff’s shops had adopted the malpractices^[3] and the plaintiff had instructed its staff to adopt the malpractices^[4].  This is clear from the paragraphs following [125], cumulating in the finding at [142] that ‘the plaintiff’s management did give instructions to its staff to adopt the Malpractices’.  The Mould Malpractice^[5] as found by the judge did not distinguish between serious and not serious mould.  Plainly, the Judge did not uphold an unpleaded defence of justification.  There is, in any event, no prejudice to the plaintiff.  The plaintiff had in its written closing submission (at [35.8]) addressed the implausibility of an instruction to the shopkeepers or supervisors to assess the severity of the mould and to decide on whether to discard the turtle jellies or to wash off the mould.

6.  Second, on the conspiracy to injure claim, the plaintiff had submitted to the Judge that irrespective of whether the materials published in the videos and articles were true or not, the defendant would still be liable for the tort if he had the predominant intention to injure.  The Judge rejected the submission at [151] of the judgment, and stated at [155] that :

‘ If the Plaintiff’s argument is right, any defendant speaking the truth, even if their intention in doing so was to settle their score with the claimant, would be liable for conspiracy to injure even if there is no liability for defamation. In my judgment, this cannot be right and the Plaintiff’s claim for conspiracy cannot possibly succeed.’

7.  Mr Man complains that the Judge failed to recognize that conspiracy to injure can be by lawful means, such that even if the Mould Malpractice is substantially true, the defendant is still liable if he combined with Lee and/or Lam with a predominant intent to injure the plaintiff. 

8.  I accept that the plaintiff’s submission is correct as a matter of legal proposition.  The Judge’s rejection of the submission has to be understood against his factual findings that there was no agreement between the defendant, Lam and/or Lee, there was no factual basis that Lam or Lee shared a predominant intention to injure the plaintiff and there was no conspiracy^[6].  The claim of conspiracy to injure cannot succeed on the facts as found by the Judge.  The above passage in [155] should not be read as stating a proposition of law.

Hon Cheung JA :

I.  The appeal

9.  Lok J dismissed the plaintiff’s claim against the defendant for defamation, malicious falsehood and conspiracy to injure.  The plaintiff now appeals.

10.  The plaintiff’s claim arose out of two video clips published on 12 September 2013 by ‘appledaily’ on Youtube and three articles published on the same day in three local newspapers, namely, Apple Daily, The Sun and Oriental Daily respectively.  The videos and articles concerned the quality of turtle jellies 「龜苓膏」sold by the plaintiff and the alleged malpractices of the plaintiff in cleaning and processing mouldy turtle jellies and transferring turtle jellies from plastic to pottery cups.

II.  Background

11.  The detailed background of the case is stated in the judgment below.  We will refer to the relevant ones for the purpose of this appeal.

12.  The plaintiff is a Hong Kong company engaged in the business of producing and selling turtle jellies 「龜苓膏」and related products under the brand name ‘Hoi Tin Tong 「海天堂」’ (‘HTT’) with retail shops in Hong Kong and the Mainland.  Mr Ng Yiu Ming 「吳耀明」 (‘Ng’) is the founder of HTT and is known as its ‘boss’. 

13.  The defendant was at one time the business associate of Ng in the operation of the HTT business in the Mainland but they had since fallen out with each other. The defendant started his own business in traditional herbal medicine in 2013.

14.  The present case relates to the problem of mould developed in the turtle jellies.  Turtle jellies in pottery cups (which were supposed to be freshly made 「鮮製龜苓膏」) were found to be covered in mould from time to time after the turtle jellies were delivered to the retail shops.  The problem was caused by the unsatisfactory storage conditions and the exposure during transportation from the factories in the Mainland to the HTT shops. 

15.  There was serious dispute between the parties as to how the plaintiff and the HTT shops would deal with this problem after the turtle jellies were delivered to the HTT shops. According to the defendant, Ng and other senior staff instructed the employees in the HTT shops to rinse or wash off the mould covering the turtle jellies in the pottery cups with tap water (‘the Mould Malpractice’).  The senior management also instructed the staff to transfer turtle jellies produced in plastic cups to pottery cups before serving customers as if the jellies were freshly made (‘the Transfer Malpractice’). The defendant claimed that he had complained about the malpractices repeatedly. The plaintiff denied the malpractices or that its senior management had given any instructions to the frontline staff to adopt the malpractices. 

16.  The defendant had sought Ng’s co-operation when he started his own business, but Ng was not interested.  In July 2013, the defendant made a telephone call to Xu (who is Ng’s cousin and also involved with the plaintiff’s business) and threatened to destroy the HTT brand if Ng’s cooperation in the defendant’s proposed business venture was not forthcoming.  The defendant said repeatedly that he might ‘push the button’ 「㩒掣」to damage the plaintiff’s brand.  The plaintiff reported the incident to the police in September 2013.

17.  On 1 August 2013, the defendant together with Madam Lee Nga Man Ada (‘Lee’) who was a reporter of Apple Daily, and Madam Lam Yat Hung「林日紅」 (‘Lam’) who was the plaintiff’s employee working at one of the plaintiff’s retail shops in Hong Kong (‘the Mongkok Shop’) met at the shop.  Lee secretly recorded a video of a demonstration by Lam with the assistance of the defendant in which Lam showed how to wash off the mould on pots of turtle jellies.  Lam rinsed them with tap water and scrubbed the surface with a sponge.  She said this was the standard practice of the plaintiff for making mouldy turtle jellies fit for sale (‘the 1^st Demonstration’).  In this demonstration, the defendant pointed to the mould appearing on a cup of turtle jelly when Lam commented that the moulding was very mild and Lee would shiver if she saw the mould that resembled nasal discharge.  The defendant told Lam to contact him if she saw some severely mouldy turtle jellies, and he would then ask Lee to visit the Mongkok Shop again.  When Lam indicated to Lee that mouldy turtle jellies would be sold to customers once they were rinsed and cleaned, the defendant acknowledged the same.

18.  The defendant’s case is that the 1^st Demonstration was a genuine reflection of the malpractices.

19.  On 4 August 2013, there was a second demonstration by Lam to Lee of washing off the mould on the turtle jellies (‘the 2^nd Demonstration’). Again the demonstration was secretly recorded by Lee.  Lam resigned on 14 September 2013.

20.  The videos were published on 12 September 2013 by ‘appledaily’ on Youtube.  One of the videos (‘the 1^st Video’) contained edited parts of the 1^st Demonstration. The following words said by the defendant at the 1^st Demonstration were included in this video: 「不過呢個好輕微」 (but the problem for this one is slight), and 「未發到鼻涕」 (not developed to a state looking like nasal discharge).  The other video (‘the 2^nd Video’) was a coverage by Apple Daily concerning, inter alia, a university study which revealed that turtle jellies sold by the plaintiff contained almost no turtle shell.  The 2^nd Video was not related to the subject of mouldy turtle jellies.

21.  As for the three articles published on 12 September 2013, the Apple Daily article was, in substance, a printed version of the 1^st Video. The newspaper contained another article (not the subject matter of plaintiff’s claim) which was, in substance, a printed version of the 2^nd Video. In respect of the Apple Daily article, amongst the allegedly defamatory words (contained in four passages) pleaded by the plaintiff, only the following words in one passage were purportedly said by the defendant :

「海天堂前高層蔡國強說，海天堂主打的瓦盅裝龜苓膏，因儲藏及運輸監控有問題，每當天氣濕熱便容易發霉變壞。近年海天堂生產大量密封式，保買期較久的膠杯裝龜苓膏，再由各分店店員換落瓦盅。」

English translation:

‘ [The Defendant], [HTT’s] former senior management, said that [HTT’s] main product is turtle jelly in pottery pot, due to storage and transportation supervision problem, mould would develop in turtle jellies every time when the weather is hot and humid. Recently, [HTT] produced a lot of turtle jellies put in sealed plastic cups with longer preservation period, and the staff of the various shops would then transfer them to pottery cups.’

22.  The other three passages in the Apple Daily article relied upon by the plaintiff contained the observations of Lee made after her visits to the Mongkok Shop relating to the malpractices.

23.  The Sun and Oriental Daily articles were virtually identical as they were published by the same group of newspapers.  They were about a press conference held by Ng in Guangzhou on 11 September 2013 (‘the Press Conference’), during which Ng said that some video clips about the plaintiff’s products circulated in the Mainland were false, and that he had been framed.  He was confronted by the defendant who also appeared in the Press Conference.  The defendant referred to the mould of the turtle jellies and other quality problems about the turtle jellies.  He claimed that the plaintiff sold turtle jellies in plastic cups (which were much cheaper) as if they were freshly made by putting them into pottery cups, i.e. the Transfer Malpractice. 

24.  In respect of the Sun article, the plaintiff pleaded the following words purportedly said by the defendant at the Press Conference :

「蔡又指，部分龜苓膏在運送和冷藏過程中還會出現發霉，但海天堂亦不肯丟掉，近幾年來一直都是吩咐員工洗去龜苓膏表面的白色霉菌再賣給消費者食用。員工則是按照吩咐直接將[龜苓膏放]在自來水下用海綿抺洗，再放入雪櫃待售。

…蔡國強又指有關生產是由海天堂在惠州的兩間廠房生產，該兩間廠房的產品會供應給廣州、佛山、東莞、和香港，不排除已有發霉龜苓膏流入香港。」

English translation:

‘ According to [the Defendant], some of the turtle jellies developed mould due to the transportation and cooling process, but [HTT] refused to discard the products. Throughout the past few years, they instructed the staff to remove the white mould on the surface of the turtle jellies and sell the “cleaned” products to consumers. The staff followed the instruction and rinsed the mouldy products with water and scrubbed the same with sponges and then put them in the refrigerator for sale.

Further according to [the Defendant], the relevant products were produced in the two factories in Huizhou.  The products from these two factories would be supplied to Guangzhou, Foshan, Dongguan and Hong Kong.  It cannot rule out the possibility that some of the moudly turtle jellies had already been put on sale in Hong Kong.’

25.  In respect of the Oriental Daily article, the plaintiff pleaded that the virtually identical words were purportedly said by the defendant.

26.  The Apple Daily article was expressly stated to be written by Lee and another journalist.  The other two articles were written by unidentified journalists of The Sun and Oriental Daily stationed in Guangzhou. 

27.  The defendant denied that he was involved in, or had procured or authorized the publication of any of the articles.

III.  Findings by the Judge relevant to this appeal

28.  1)  The Judge found that it is indisputable that mould would develop in the plaintiff’s turtle jellies from time to time.  As no preservatives were added, mould was prone to develop in the turtle jellies if they were not stored or transported in appropriate low temperature.  Even facing such recurring problem, the plaintiff had not devised or implemented any effective means to resolve it whether in terms of transportation or storage.

2)  The Judge rejected the plaintiff’s contention that the demonstrations of the washing of the jelly with mould were not genuine and were staged.  He held that what had been shown there truly reflected some of the practices (including the malpractices) adopted by at least Lam in the Mongkok Shop.

3)  The Judge found that the plaintiff’s management did give instructions to its staff to adopt the malpractices.  At the very least, they had encouraged or condoned its staff to do so.

4)  The Judge found that the defendant had discharged the burden of justifying the meanings of the words pleaded by the plaintiff.

5)  The Judge also observed by way of obiter that on the basis that the plaintiff is relying on the videos and the articles as the original publications, the defendant should not be held liable for the publication of the pleaded words contained in the videos and the Apple Daily article (‘the Non-responsible Words’).  On the other hand, it may be argued that the defendant is responsible for the publication of the pleaded words in the other two articles (‘the Responsible Words’).

6)  The Judge held that as he had found for the defendant on the defence of justification, the plaintiff failed in its claim based on defamation and malicious falsehood.

7)  The Judge rejected the plaintiff’s contention that there was a conspiracy between the defendant, Lee and Lam to injure the plaintiff.  There was no evidence that there was any agreement or understanding between them to injure the plaintiff.  In respect of Lee, the Judge held that she was just making a report of a piece of investigative journalism with a view to exposing the malpractices that she believed existed in the operation of the plaintiff’s shops.  Further, the upholding of the plaintiff’s allegation against Lee would mean that every reporter engaging in investigative journalism would be liable for the tort of conspiracy to injure if they make a report in the press based on the information provided by a whistle blower.  This simply cannot be right. In respect of Lam, the Judge held that Lam did not know what she did in the two separate demonstrations had been covertly recorded by Lee and the only explanation as to why Lam performed the malpractices is that, without knowing that she was being taped, she just wanted to show the procedures of the malpractices to someone whom she believed was one of the new employees of the defendant who formerly was one of the senior management of the plaintiff.  She did not even remove her name tag for the demonstrations.

8)  Since the Judge had found there was no conspiracy between the defendant, Lee and Lam, the plaintiff also failed in its claim for conspiracy to injure.

9)  The Judge did not find it necessary to deal with the quantum of damages.

IV.  Grounds of appeal

1)  Grounds 1 and 2 – Finding of malpractices unsustainable                                   

29.  The first ground of appeal challenges the Judge’s decision at [142] that ‘the plaintiff’s management did give instructions to its staff to adopt the malpractices. At the very least, they had encouraged or condoned its staff to do so.’

(1)  Justification

i)  The plaintiff’s argument

30.  Mr Man SC (together with Mr Chan for the plaintiff) argued that the Judge erred in upholding a defence of justification which was not raised in the pleadings.  He referred to [158] of the judgment where the Judge held that the burden is on the defendant to establish that the sting of the defamatory matters is substantially true and [125] of the judgment where the Judge held that :

‘125. …..Essentially, the court has to decide which of the two following alternatives was more likely to be true on a balance of probabilities:

(i)   to discard or return the turtle jellies to the company (or the factory) whenever there was mould found on the surface irrespective of how minor the moulding was (as contended for by the Plaintiff); or

(ii)  to rinse off the mould by water if it was not serious, but in serious case, discard or return the turtle jellies to the company (or the factory) (as contended for by the Defendant).’ (emphasis added)

31.  He argued that whilst the Judge was correct on [125(i)], he was wrong on [125(ii)] because the words that were underlined above were simply not the defendant’s pleaded case.  Both the defendant’s pleading and witness statement contended that the plaintiff’s staff were instructed to rinse or wash off the mould covering the turtle jellies without any mention that the staff were required to assess the seriousness of the mould.  These words only came from the evidence of the defendant’s witness Lin Li Bing.  Mr Man argued that as such the defendant’s pleaded case is plainly not proved to the satisfaction of the Judge.  The idea that the malpractices would be engaged no matter how serious the mould is not even considered to be a viable alternative.  That is understandable given the Defect Forms for the Mongkok Shop signed by Lam herself from 2009-2013 recorded moulded turtle jellies which were discarded from time to time, and the genuineness of these documents were not challenged at trial.  Also, as the Judge observed at [127] that it might not be easy to judge whether the moulding was serious to the extent that the turtle jellies had to be thrown away.   Further (although it is not necessary for the plaintiff to demonstrate that a judgment upholding an unpleaded case has caused prejudice), if there had been a plea by the defendant that the plaintiff’s employees had been required to determine whether the mould was serious, the plaintiff could have pleaded (and adduced evidence) on, say, whether requiring the employees to make such a difficult judgment call would be sensible or likely.

ii)  My view

32.  It is difficult to understand the logic of the plaintiff’s argument.  What happened was that the Judge adopted in [125] of the judgment the defendant’s formulation of the alternative issues contained in his closing written submission.  It is apparent from the plaintiff’s Speaking Note lodged in response to the defendant’s closing written submission that no pleading objection was taken and no prejudice point was taken.  More importantly, the words now complained of by the plaintiff are irrelevant to the plaintiff’s case on defamation and the defendant’s case on justification.  The focus of the Court and the parties in the hearing below on the sting or defamatory meaning was about the plaintiff’s practice of washing off the mould from the turtle jelly and selling the washed jellies to customers notwithstanding the Judge’s adoption of the formulation of alternative issues with the inclusion of the words that were underlined.  The plaintiff pleaded in [15] of the Amended Statement of Claim that the natural and ordinary meaning of the defamatory words published by the defendant in the 1^st Demonstration and the three articles meant :

1)  the plaintiff’s system of storage and transport for turtle jelly products regularly causes the turtle jelly products to become mouldy;

2)  the employees in all or some of the branches operated by the plaintiff have a regular practice of rinsing mouldy turtle jelly with tap water, scrubbing the mould with a sponge and then selling the same to its customers (the ‘Alleged Practice’);

2A)  the purported mould depicted in the Defamatory Clips was not even of the most severe variety, with turtle jelly bearing nasal discharge-like mould routinely sold to customers by way of the Alleged Practice;

3)  the Alleged Practice has been carried out for the past several years; and

4)  the plaintiff instructed its employees to engage in the Alleged Practice or otherwise encouraged or condoned the Alleged Practice. (emphasis added)

33.  The plaintiff further pleaded in [16] :

‘ the Defamatory Words and Defamatory Clips individually or collectively meant and were understood to mean that :

16.1   the plaintiff’s general operational standards in relation to product hygiene and safety are subpar; and/or

16.2   the plaintiff priorities profit over product safety and hygiene.’

34.  The plaintiff then pleaded about the falsity of the words :

‘ 17 The reasonable meanings conveyed by the Defamatory Words and Defamatory Clips as pleaded above are false.

particulars of falsity

17.1   The Plaintiff’s standing instructions to all of its employees were to discard any turtle jelly products as soon as any mould was discovered;

17.2   The Alleged Practice never existed and was never implemented, promoted, condoned, or otherwise permitted in any branch operated by the plaintiff; and

17.3   The Alleged Practice as depicted in the Defamatory Clips and described in the Defamatory Words was staged by the employee acting in concert and/or under the instructions of the defendant.’

35.  The defendant pleaded in [38] of the Amended Defence that ‘the words published were true in substance and in fact.’

particulars of justification

(1)  the defendant repeats the matters pleaded in [11‑16] above;

(2)    upon production of the turtle jelly in pottery cups in the old and/or new factory, the same would be stored there at for one to four days before the same would be transported to inter alia the plaintiff’s warehouse in Hong Kong;

(3)    upon delivery to the plaintiff’s warehouse in Hong Kong and before the turtle jelly as contained in pottery cups were collected by the plaintiff’s vans and/or staff, the same were from time to time left or exposed outside the warehouse without air conditioning facilities;

(4)    when the weather in Hong Kong become humid, the turtle jelly as contained in the pottery cups would also easily be mould covered when or upon delivery to the plaintiff’s retail outlets in Hong Kong; and

(5)  the Malpractice has been adopted by the plaintiff in inter alia Hong Kong to wash off the mould from the turtle jelly in pottery cups and to transfer the turtle jelly from the sealed plastic cups used to facilitate longer storage and the transportation from the old and/or new factory, to pottery cups for the same to be served at the retail outlets and be presented as freshly made, or to other plastic cups for take away purpose.

36.  It is quite clear from the judgment that the Judge decided that the defendant succeeded on the plea of justification within the parameters of the parties’ pleadings.  The plaintiff’s complaint was that the defendant had defamed it by falsely alleging the malpractice of the plaintiff instructing its staff to wash off the mould on the turtle jellies and sell the washed jellies to customers.  It was not the plaintiff’s case that the sting was about the seriousness of the mould and the plaintiff’s instruction on how to treat the turtle jelly with different degree of mould.  The defendant had met the pleaded accusation by saying that this malpractice was true.  Whilst in its closing written submission the defendant had also referred to the words that were underlined in [30] above, that part was clearly irrelevant for the defendant to succeed on its defence of justification.  The accusation had been squarely met and proved to be true by evidence to the satisfaction of the Judge.  As the Judge observed :

‘ 158. It is trite that the plea of justification will succeed if a defendant proves on a balance of probabilities that the sting or substance of the defamatory words is true.^[7] In other words, a defendant only has to prove that “the main charge, or gist of the libel” is true. A defence of justification would still succeed even if the publication was inaccurate in some minor respects provided that it is not one of material inaccuracy.^[8] ’

37.  This is a short point and it is not necessary to discuss the arguments relied by Mr Dawes SC (together with Ms Lee and Mr Yeung) for the defendant that the finding by the Judge was at best a variation, modification or development of what was averred and not something new, separate and distinct: John G Stein v. O’Hanlon [1965] AC 890 (HL) at 909E‑G or on the principle of pleadings that the ‘greater includes the lesser’ by reference to Arab Bank Ltd v. Ross [1952] 2 QB 216 (CA) at 235 applied in Hung Yuen Chan Robert v. Hongkong Standard Newspaper [1996] 4 HKC 519 at 531H.

(2)  Finding plainly wrong?

i)  The plaintiff’s argument

38.  Second, the plaintiff argued that the Judge’s finding on this issue was plainly wrong.  He erred in relying on Lin’s evidence of the practice in Mainland HTT shops by describing Lin as the ‘only independent witness’ when Lin was one of the persons who left the Mainland HTT Business and helped the defendant set up his competing business in the Mainland, including by poaching other employees to leave and join the defendant’s new business.  The Judge said her role in assisting the defendant in setting up his competing business was nothing more than ‘fulfilling her duty as employee in helping her new employer’.  But he described all of the plaintiff’s witnesses (including some employees) as being ‘related to the plaintiff’, even though the plaintiff’s employees were merely also fulfilling their duties as employees.  Further, Lin’s knowledge was limited to the operation of Mainland HTT shops which were not owned or operated by the plaintiff.  The defendant’s own evidence describing the alleged malpractices in Hong Kong did not mention any distinction between more and less severe cases of mould.  Lam did not suggest during the demonstrations that she was instructed to differentiate between serious and mild cases.  If the demonstrations were genuine and not staged for the purpose of causing maximum damage to the plaintiff’s reputation, it is difficult to understand why Lam did not explain to Lee the Defect Forms she filled out on those days.

ii)  My view

39.  In my view, the plaintiff had failed to meet the high threshold that is required in upsetting finding of facts by a trial judge who had the benefit of directly seeing and hearing the witnesses. As Mr Dawes submitted, the plaintiff’s attack on the Judge’s reliance on Lin’s evidence is just a regurgitation of arguments already deployed in the trial below and rejected.  This would not be a valid ground of appeal : Yu Man Fung Alice v. Chiau Sing Chi Stephen [2021] HKCA 1456 at [6‑8] per Kwan VP.  Nor would general assertion that the finding was against the weight of the evidence or that the trial Judge failed to attach sufficient weight to a piece of evidence: Yap Sui Kong v. Yip Fong Tim [2018] 4 HKLRD 791 at [22].  The weight attached to assessment of the plaintiff’s witnesses is within the province of the Judge.  This is precisely what the plaintiff had attempted to do in this appeal.  The Judge at [133] was entitled to rely on the evidence of Ng that the operation of Mainland HTT shops and the plaintiff’s shops in Hong Kong were substantially similar and the turtle jellies sold were all produced and delivered from the same factory.

40.  The Judge was entitled to reject the plaintiff’s contention that the demonstrations were staged.  The fact that Lam did not suggest that she was instructed to differentiate between serious and mild cases or that she did not explain to Lee the Defect Forms did not even begin to show that the finding was plainly wrong.

41.  The defendant further argued that the alternative finding that the plaintiff ‘encouraged or condoned’ the malpractice in [142] of the judgment is not open on the pleadings.  In my view, this point is academic as the Judge had expressly found that the plaintiff had instructed the staff to carry out the malpractice.  Further, the plaintiff had clearly pleaded in [15.4] of the Amended Statement of Claim that the plaintiff had instructed its employees to engage in the alleged practice or otherwise encouraged or condoned the alleged practice and the defendant had responded to this plea in [38] of the Amended Defence.

(3)  Rejection of the plaintiff’s case on standing instruction

i)  The plaintiff’s argument

42.  The plaintiff argued that the Judge was plainly wrong in [126] in rejecting the plaintiff’s case that there were standing instructions for moulded turtle jelly to be discarded on the basis that ‘there were no written instructions to back up its allegations.’  The Judge overlooked the express written instructions to staff and supervisors requiring them to tally the number of deteriorated products and to fill out the Defect Forms.  The Defect Forms also showed that such instructions were not only given but actually carried out at the Mongkok Shop by Lam herself.  Whilst these instructions referred to products generally, the Judge overlooked the unchallenged testimony of Ng, CM Ng and Shum that other products such as bird nest and black fungus sesame tea were specifically named in the notices because they were seasonal, whereas turtle jellies were staple products available all the time.  The Judge found that ‘it would be quite impossible to ensure that each staff would have obtained the same message unless there were something in writing’, but inexplicably found that all frontline staff were instructed to assess the severity of the mould despite the lack of any written instruction to that effect.

ii)  My view

43.  This is again a challenge to the finding of facts by the Judge which failed to meet the high threshold required to succeed in such a challenge.  The Judge did not overlook the written instructions or Defect Forms.  The Judge rejected the plaintiff’s case having considered a wide spectrum of evidence including the following.  First, the plaintiff allowed unrefrigerated vans to transport turtle jellies, which were prone to develop mould in hot and humid condition, and it had allowed cost consideration to compromise food safety which they had said to be of top priority [69].  Second, the plaintiff’s witnesses were also vague and evasive when they were asked about how to tackle the recurring mould problem.  There was also confusion in their evidence about the details of the alleged ‘system’ for the return of the mouldy turtle jellies and the filing of the Defect Forms [70].  Third, the plaintiff’s supervision on the procedures of the frontline staff in dealing with mould problem was rather lax in this regard, and it was likely that the plaintiff’s management, at the very least, was aware of or just turned a blind eye to the Mould Malpractice adopted by its frontline staff to deal with such problem [71].  The Judge elaborated on his reasons as follows :

‘ 126. I have great reservation about the Plaintiff’s version. First, there were no written instructions to back up its allegation. The Plaintiff had employed a lot of front-line staff in operating its shops. It would be quite impossible to ensure that each staff would have obtained the same message unless there were something in writing. In fact, express written instructions had been given as to how to deal other defective products such as bird nest and black fungus sesame tea (黑木[耳]芝麻茶), and it would be quite difficult to understand why there were no similar written instructions for the Plaintiff’s flagship products, i.e. turtle jellies. Second, the system of returning or discarding mouldy products in Hong Kong was confusing and in any event not strictly enforced. Different Defects Forms were used, very relaxed reporting procedures were adopted and there was no one to enforce or supervise the whole process of returning or discarding the mouldy turtle jellies. No one had checked the returned defective products or had done anything to follow up on the problem.

127.  In my judgment, simply allowing the front-line staff to throw away the mouldy turtle jellies, no matter how minor was the moulding, without some kind of supervision does not make a lot of business sense.  It might open to abuse by employees as they could misappropriate the products for their own benefits pretending that they had been discarded. After all, moulding was a recurring problem by that time and the Plaintiff could not have just let the employees [to] throw away the products as they pleased, as it might not be easy to judge whether the moulding was serious to the extent that the turtle jellies had to be thrown away.  As the evidence suggests that the Plaintiff had not adopted a more stringent system to monitor the process, it was very unlikely that instructions had simply been given to the front-line staff to throw away the mouldy turtle jellies whenever such problem occurred.

128.  Further, it was unlikely that the 2 Demonstrations on 1 and 4 August 2013 were the first two occasions that Lam performed the Malpractices.  It must have persisted for some time judging the way how familiar and experienced she sounded and performed the routine during the demonstrations.   It was also unlikely that Lam was acting in defiance of the alleged standard instructions from the Plaintiff’s management.  The evidence suggests that Lam was a trustworthy and reliable employee.  Given that moulding was a recurring problem, it was more probable that she had obtained instructions from her supervisor as to how to deal with the problem, rather than devising a solution on a frolic of her own.

129.  In the 1^st Demonstration as recorded in the unedited video clip, Lam told Lee that her supervisor had taught her to use a spoon to get the mould off the surface of the jellies.  As Lam did not know about the covert recording, what she said by that time was likely to be true.  It showed that the Plaintiff had been exploring different ways to remove the mould from the surface of the jellies.

130.  Had Lam devised her own way of removing the mould, I find it odd why Shum did not try to find out more about the Malpractices from Lam during their conversations after the incident.  It would have been important for the Plaintiff to find out more information from Lam, such as how long the Malpractices had been adopted and whether such practices also existed in other shops.  Quite surprisingly, Shum did not bother to find out such information, or did not even ask Lam not to leave and to clarify the matter for the Plaintiff.

131.  I also find that Lam was not and could not be the only frontline employee who adopted the Malpractices.

132.  As mentioned above, Lam revealed that it was her supervisor (probably CM Ng) who taught “them” how to remove the mould. If that was case, it was most improbable that the supervisor only gave such direction or instruction to Lam.  He must have given the same instruction to other employees under his supervision.  It was likewise improbable that he would so [instruct] those under his supervision unless the same was approved by the senior management of the Plaintiff.’

44.  In my view the Judge was entitled to his view on standing instructions.

(4)  Minutes of meetings

i)  The plaintiff’s argument

45.  The plaintiff referred to [139] of the judgment where the Judge held that ‘it would be quite naїve to suggest that the Plaintiff and the Mainland HTT Business would have recorded something which might damage their reputations in writing’ and complained that the Judge had ignored the minutes of meetings of the plaintiff that regularly record various problems (such as finding ceramic fragments, bugs and even razors) which may have damaged their reputations if published in the press, and that such risk did not deter the plaintiff from recording them in the minutes.  In fact, a number of minutes referred to the mould problem.  It was expressly mentioned in the September 2011 Minutes that if there were white spots on the bottom of the turtle jelly cups, it should not be sold.  The defendant was identified as 「蔡生」in the minutes but none of his alleged complaints about the malpractices were recorded.

ii)  My view

46.  The Judge did not overlook the minutes of meeting that recorded the mould or other product quality problems.  As Mr Dawes submitted, moulding or the existence of broken glass, razors or bugs were not deliberately created by the company and there is a world of difference for a company to encounter such problem and to record it and a company deliberately giving or recording instructions to rinse mouldy products for sale and consumption in the minutes.

47.  In my view having considered all the other evidence in this case, the plaintiff fails to establish the Judge’s finding of facts is plainly wrong.

(5), (6) and (7)  Staged demonstrations?

i)  The plaintiff’s argument

48.  The plaintiff argued that the Judge erred in disregarding the fact that Lam completed Defect Forms on both 1 and 4 August 2013, and that was strong evidence that the demonstrations were staged.

49.  The plaintiff argued that the Judge had ignored the part of Lee’s affirmation in which she deposed that she gave a ‘guarantee to the informant(s) that their identity will not be revealed’.  The ‘informant’ could only have been Lam, as the defendant was expressly named as the whistle blower whereas Lam’s identity was intended to be concealed, albeit unsuccessfully due to the inadvertent revelation of her name tag.  Lam must have known that Lee was a reporter if Lee gave her a guarantee that her identity would not be revealed.               

50.  The plaintiff argued that the Judge failed to take into account the threatening call in which the defendant threatened to destroy the HTT brand by contacting the press which showed a clear motive by the defendant to stage the demonstrations.

ii)  My view

51.  The Judge had considered the Defect Forms at [121] of the judgment.  He held :

‘ 121. …On 4 August 2013, Lam stated in the Defects Forms that there were “很多，白色，１点点” (many white spots) in 16 pots of turtle jellies. This actually supports that, on that day, there were truly many pots of mouldy turtle jellies, and hence Lam informed the Defendant to tell Lee to come to observe how she rinsed off some of them.’

52.  The Judge had considered and given reasons for rejecting the plaintiff’s argument that the demonstrations were staged.  Amongst the findings by the Judge, it is pertinent to refer to the following :

‘ 112. It can see from the unedited or original raw videos, including what Lam told Lee about the work procedures, that Lam was very natural and was genuinely trying to share her experience with whom she thought was an incoming staff of the Defendant’s new business. I do not accept that she was “acting” in or “staging” the Demonstrations.’

53.  The Judge had in fact considered that part of Lee’s affirmation at [113] of the judgment but held with reasons at [114(iv)] why it was unsafe to rely on it.  I fail to see how this point would assist the plaintiff.

54.  The Judge had referred to the taped conversation in [15] when he dealt with the background of the case and he recorded the defendant’s arguments that the conversation was equivocal and had very little probative value.  Having regard to all the circumstances of the case, this taped conversation would not have strengthened the plaintiff’s case or lessened the soundness of the Judge’s finding.  Again the plaintiff fails on these grounds.

2)  Ground 3 – Conspiracy to injure

(1)  The plaintiff’s argument

55.  The plaintiff first argued that if the Court finds that the demonstrations were staged and the malpractice was untrue, it cannot be seriously disputed that at least the defendant and Lam’s predominant intention must have been to injure the plaintiff.  Alternatively, it argued that even if the malpractice was found to be substantially true, the Judge erred in law in holding that there could be no liability for conspiracy for publishing the truth because : i)  in the context of conspiracy to injure by lawful means, even if the malpractice was substantially true, the defendant would still be liable if he combined with one or more other persons to carry out the demonstrations with a predominant intent to injure the plaintiff: Chinabase Holdings Ltd v Robert Chun Chung Ip [2016] 4 HKLRD 304 at [21] and ii) the Judge erred in principle in finding at [153] that even if the defendant had a predominant intent to injure the plaintiff, the plaintiff’s claim must fail for failing to prove that Lee and Lam shared such predominant intent to injure because once the evidence shows that the defendant apparently had a predominant purpose to injure the plaintiff when combining with Lam and Lee to publicize the alleged malpractice, it is for the defendant to meet such case by evidence that the combination was to further his, Lam’s or Lee’s legitimate interests: Crofter Hand Woven Harris Tweed Company, Limited and Another v Veitch[1942] AC 435 at 453; Clerk & Lindsell on Torts (24^th ed.) at [23-132]-[23-133].  It is not necessary for Lam or Lee to personally harbour a predominant intent to injure the plaintiff for the defendant to be held liable.  It is sufficient that Lee and/or Lam knew of or and countenanced the defendant’s predominant purpose to injure: Crofter v Veitch at 495; Clerk & Lindsell at [23‑132]. See also MX1 Ltd and Another v. Farahzad [2018] 1 WLR 5553.

(2)  My view

56.  For the purpose of this appeal, it is sufficient to refer to the following two passages in Clerk & Lindsell on the meaning of the tort of conspiracy and the two types of conspiracy.

‘ [23‑103] The tort of conspiracy requires an agreement, combination, understanding, or concert to injure, involving two or more persons.

[23-102] The tort of conspiracy takes two forms: conspiracy to use unlawful means, and lawful means conspiracy, which at one time was commonly called ‘conspiracy to injure’. The latter does, but the former does not, require a predominant purpose to injure.’

57.  As I have upheld the Judge’s finding that the demonstrations were not staged and the malpractice was true, the plaintiff’s first argument fails.  I further disagree with the plaintiff’s alternative argument on the ‘lawful means conspiracy’ which at one time was known as ‘conspiracy to injure’.  This is because the Judge expressly found at [143] that :

‘ There was simply no agreement or understanding between the said parties to injure the plaintiff.’

58.  In respect of Lam, the Judge held that she was not involved with the conspiracy :

‘ 148. On the part of Lam, I have already explained why she was not involved in any conspiracy. The Demonstrations could not have been staged, and the only explanation as to why Lam performed the Malpractices is that, without knowing of being taped, she just wanted to show the procedures of the Malpractices to someone whom she believed was one of the new employees of a person who formerly was one of the senior management of the Plaintiff. She did not even remove her name tag for the Demonstrations.

149.  The Plaintiff cannot put forward any direct or even circumstantial evidence to prove that Lam was somewhat involved in the Conspiracy.  Even Ng admitted that this was based on suspicion only.  He suspected that Lam sided with the Defendant and had grudges against the Plaintiff and himself, and yet all the circumstantial evidence suggests that Lam was a reliable employee who performed her job well.’

59.  The Judge held that likewise in respect of Lee :

‘ 144. On the part of Lee, she was just making a report of a piece of investigative journalism with a view to expose the Malpractices that she believed existed in the operation of the Plaintiff’s shops. Though the report might affect the reputation of the Plaintiff, that is far from saying that Lee was a co-conspirator fabricating the story with the predominant intention of injuring the Plaintiff. In fact, Lee and Apply Daily did not simply take the Defendant’s words on face value. They had carried out their own investigations including the visit to the factory in Huizhou. They also followed the transportation of the turtle jellies from the Plaintiff’s warehouse to the retail shops. In case they simply relied on the Defendant’s story without verifying it, it might expose them to serious potential legal liabilities. Lee also separately covered the news concerning a university study which revealed the turtle jellies sold by the Plaintiff contained almost no turtle shell at A1 headline of the issue dated 12 September 2013, which the Plaintiff acknowledges has nothing to do with the Defendant.’

60.  In my view the reasonings are sound and the plaintiff has failed to show the findings are plainly wrong. 

61.  In respect of the plaintiff’s argument on ‘knowledge or countenance’ on the part of Lam and Lee, Lord Porter at page 495 of Crofter Hand-Woven Harris Tweed stated that :

‘…I am not myself prepared to accept the view that the joint object of the parties combining is necessarily alone to be looked at. Each party may well have its own private end to gain. The joint aim may at any rate be no more than a desire for prosperity or peace in the industry, and yet the combination may be justified. If, however, one of the parties had no purpose but to vent his own vindictive spite and if the other knew of and countenanced that purpose by giving his assistance to the malicious acts of the first, it may be that the other would then be a participant in the wrong planned by the first to which he gave his assistance.’

62.  Clerk & Lindsell at [23-132] stated that :

‘ …A party to a combination who had a separate and predominantly vindictive or mercenary interest of his own, other than trade interests, might not be protected; but, in such a case, if the other parties have predominantly lawful objects of their own he will, even though malicious, incur no liability at all. If, however, the other parties know of and countenance his vindictive purpose, they will, it is submitted, be jointly responsible with him for wrongful conspiracy.’

63.  In MX1 Ltd, Marcus Smith J stated that :

‘ 22 (5) It is an open question whether a party to the combination, who knows of and countenances the unlawful object of the other parties, can be said him- or herself to have an unlawful object in mind. The view of Clerk & Lindsell on Torts, 22nd ed (2017), para 24-113 is that this is sufficient. In my judgment, provided that party lacks another legitimate object, the inference that he or she is adopting the unlawful object of the others must be hard to resist.’

64.  It is not necessary for me to discuss the open question whether the test is whether Lam and Lee ‘knew of and countenanced the defendant’s predominant purpose to injure’ by reference to these authorities and textbook because the finding by the Judge leaves no room for this test to be relied in this case.  Hence the plaintiff’s challenge on the Judge’s decision on conspiracy to injure simply cannot get off the ground.

3)  Ground 4 – Defendant not liable as a publisher of the video and articles

65.  It is not necessary for me to discuss this ground since the plaintiff has failed to overturn the Judge’s finding on justification and the Judge’s view on this issue was obiter.  It is sufficient to state that although the Judge regarded R v Cooper (1846) 8 QB 533 and Parkes v Prescott and Another (1869) L.R. 4 Ex 169 to be ancient cases, we do not understand him to be questioning the correctness of these decisions.  Mr Dawes also does not disagree with the principles stated in the two cases which were based on agency.  As correctly stated by the Judge, whether the defendant is a publisher or not is a fact sensitive issue.

V.  Conclusion

66.  Accordingly, I would dismiss the appeal with an order nisi that costs of the appeal be to the defendant together with certificate for two counsel.

Hon G Lam JA :

67.  I agree with the judgments of Chu VP and Cheung JA.