STEPHEN FINLEY v. HOME & HOME PROPERTIES LTD. AND ANOTHER

HCA 11244/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11244 OF 1996

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R U L I N G

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Introduction

1. This is the ruling on a number of questions of law which the parties raised at the close of the case of the 2nd defendant ("the defendant").

2. The background leading to this ruling is in brief as follows. This action was commenced by the plaintiff, a practising solicitor, against 2 defendants for libel. The 1st defendant ("the estate agent"), a limited company formerly engaged in businesses including that of an estate agent, was wound-up after this action was instituted. The defendant was the director of the estate agent.

3. At the beginning of the trial, which has been heard before a judge sitting with a jury, the plaintiff informed the court that the estate agent's liquidators had indicated that there was no fund available to them to defend this action and they had decided not to do so. Further, the plaintiff said he would only seek to proceed against the defendant at trial.

4. The plaintiff's complaint in this action is based on two letters. The first letter was dated 17 September 1996 addressed to a company called Hong Kong Niiroku Ltd ("Niiroku") and signed by the defendant ("the first letter"). The second letter was dated 30 September 1996 addressed to the plaintiff and signed by the estate agent. The identity of the person who signed the second letter does not appear in the document. The plaintiff claims that it was signed by the defendant but the defendant denies having done so.

5. The background circumstances were these. The plaintiff was the solicitor acting for Niiroku in Niiroku's sale of a shop located at Caine Road, Hong Kong. The estate agent was responsible for bringing the parties to the conveyance together and, according to undisputed evidence adduced at trial, it would be entitled to commission if the conveyance was completed. The purchaser's solicitors raised requisitions on title which resulted in a dispute as to whether the requisitions needed to be answered. The dispute became known to the estate agent and the letters were written in such circumstances.

6. At the close of the defence case, the following lines of defence are relied upon:-

(a) the letters are incapable of bearing a defamatory meaning (para. 5, 8 and 15 of the Re-Amended Defence);

(b) the defendant did not write, sign or publish the second letter (para. 8 of the Re-Amended Defence);

(c) if the first letter is capable of bearing a defamatory meaning:-

(1) the offending passages are words of fair comment (para. 17 of the Re-Amended Defence);

(2) it was published on an occasion of qualified privilege (para. 18 of the Re-Amended Defence).

7. The Re-Amended Defence pleads the defence of justification (para. 17 thereof) but defence counsel accepts that there is no proper basis for it to be left to the jury. The pleading also avers that, if the letters were published by the defendant, he only did so as an agent for the estate agent (para. 18A and 23 thereof). This was also abandoned by the defence.

Issues Relating to this Ruling

8. The matters over which a ruling is requested by the parties, in the order in which they were argued by counsel, are:-

(a) there is no proper evidence to establish that the second letter was published by the defendant;

(b) the letters are incapable of bearing a defamatory meaning;

(c) when assessing the quantum of damages, it is legally permissible for the jury to consider whether the plaintiff's client was affected by the defamation;

(d) there is no proper basis for the defence of fair comment to be left to the jury;

(e) there is no proper basis to support the defence of qualified privilege.

9. Further to the above, this ruling will also deal with the defendant's application for leave to further amend his pleading. The application arises in the following manner. In relation to the second letter, the only defence raised in the Re-Amended Defence is that the defendant did not publish it. There is no plea relating to qualified privilege (or fair comment). Defence counsel realised the omission in the course of submissions made in relation to this ruling. He asks for leave to further amend the pleading so as to rely on the defence of qualified privilege as well. This is opposed by the plaintiff. If leave is given to the defendant, he will be able to rely on qualified privilege should the court rule that:-

(a) the second letter is capable of bearing a defamatory meaning;

(b) there is evidence which may enable the jury to find the defendant has published it.

10. I shall deal with these matters in turn under separate headings.

11. The test for deciding what in effect is a no case to answer submission relating to the above matters has been set out in Hong Kong Civil Procedure 2002, para. 35/7/2 (citing Yuill v. Yuill [1945] P 15 and Storey v. Storey [1960] 3 WLR 653):-

"A submission of no case may be made either if no case has been established in law or the evidence led is so unsatisfactory or unreliable that the court should hold that the burden has not been discharged".

Publication of the Second Letter

12. As stated above, the second letter does not on its face show who signed it. When the defendant testified, he denied having done so and claimed that a staff whose name he now cannot recall did so. This was not accepted by the plaintiff and counsel in fact put to the defendant that he lied about this matter.

13. While there is no direct evidence of the second letter having been signed by the defendant, the plaintiff relies on the following matters:-

(1) the defendant testified that a staff of the estate agent considered the first letter to be important enough so that, although the conveyance was the business of a branch, the first letter should be signed by someone from the senior management;

(2) it was for that reason the first letter was signed by the defendant;

(3) it is also the defendant's testimony that each branch office was headed by a branch manager. Normally, branch managers should account to one of the three managers in the head office. The defendant was one of the two directors at the head office and usually he would not attend to daily operations;

(4) since the defendant agreed to sign the first letter, it can be inferred that he agreed with the importance of the matter;

(5) the second letter was in reply to a letter dated 26 September 1996 from the plaintiff. In short, the plaintiff's letter was a letter from a solicitor alleging he had been defamed and threatening to commence legal action for that reason;

(6) the second letter was thus related not merely to the conveyance, but to a potential legal action;

(7) further, the second letter contained a remark prompting the plaintiff to commence legal action;

(8) the matters set out in the second letter were (at least arguably) even more important that those set out in the first letter.

14. The plaintiff argues that the jury is entitled, after having taken the above matters into account, to:-

(a) reject the defendant's testimony regarding who signed the second letter as being untruthful;

(b) having rejected his testimony, to draw the inference that the second letter was in fact signed by him.

15. I agree with the plaintiff and therefore find that there is sufficient evidence for this matter to be decided by the jury.

Defamatory Meaning

16. The parts of the first letter which the plaintiff claims contain defamatory words have been set out in para. 6(i) to 6(iii) of the Statement of Claim whereas those parts of the second letter said to contain defamatory words have been set out in para. 10(i) to 10(iii) thereof. I do not propose to repeat them here.

17. Counsel for the plaintiff accepts that, for the purpose of this ruling, the "sting" (or gist) of the defamation was that the plaintiff, as the vendor's solicitor, has unjustifiably obstructed the conveyancing transaction and it was probable he did so intending to benefit himself. I do not understand defence counsel to dispute that the words set out in para. 6(i) of the Statement of Claim are capable of having that meaning. Even if he does, I agree with the plaintiff that those words are capable of such meaning.

18. In relation to the words set out in para. 6(ii) and 6(iii) of the Statement of Claim, I agree with the defence that they are quite unobjectionable if read in isolation. However, it is trite law that words in a document have to be read in the context of the whole document. With this in mind, I disagree with the defence that the words in para. 6(ii) and 6(iii) were incapable of a defamatory meaning.

19. Similarly, in relation to the second letter, I agree with the plaintiff that the words set out in the Statement of Claim were capable of a defamation meaning. The defence contends that the words set out in para. 10(i) to 10(iii) of the Statement of Claim were only comments directed generally to all cases and not referrable to the plaintiff. That may well be so if the words are read in isolation. However, the second letter has made express reference to the first letter. Further, the time between the two letters was so proximate that the jury can properly decide whether they can be considered as one series of correspondence: Gatley on Libel and Slander (1998) 9th Ed., para. 3.30, especially text to n. 78.

20. Defence counsel also argues that the Statement of Claim has not pleaded that the two letters should be read as one series. With respect, I do not find that the plaintiff needs to do so. All that he needs to plead are the material facts, including the material parts of the alleged libel: see RHC Ord 18 r 7, especially Ord 18 r 7(2) and Gatley, para. 26.12 (at p. 655).

Matters Relevant to Quantum of Damages

21. When defence counsel makes his final speech in relation to the quantum of damages, he wishes to ask the jury to take into account the evidence which (so the defence contends) will entitle the jury to find that the plaintiff's client, Niiroku, did not give any weight to the defamatory words in the letters; for example, the fact that the plaintiff continued to act as Niiroku's solicitors until about August 2001.

22. The plaintiff opposes and submits that only matters such as the conduct of the plaintiff, his position and standing, the nature of the libel, the mode and extent of publication, the absence or refusal of any retraction or apology, and the conduct of the defendant from the time when the libel was published down to the verdict can be considered by the jury: see Gatley, para. 9.2 (at p. 203).

23. I consider that the defence can ask the jury to consider that the letters were published to individuals who were (or should have been) well acquainted with the plaintiff and therefore they can assess the defamation in that context. This matter falls with "the mode and extent of publication" of the defamation.

Fair Comment

24. Counsel for the plaintiff argues that in order for the defendant to rely on the defence of fair comment, the defendant has to establish the truth of the facts on which the comments were based: see Gatley, para. 12.2, 12.7 and 12.14. Since the defence of justification is no longer relied upon (hence, it is at least implicitly accepted that the underlying facts cannot be proved), the defence of fair comment should not be left to the jury.

25. As stated above, the words relied upon by the plaintiff in this action are said to give rise to the "sting" that the plaintiff unjustifiable obstructed the conveyancing transaction and it was probable he did so intending to benefit himself.

26. On the other hand, the defamatory words set out in para. 10(i) of the Statement of Claim are:-

"... we are not only shocked by such childish and immature response but also very downhearted and disappointed to see the failure of certain legal education programs in the British Commonwealth ... ".

A separate and different defamatory meaning (unrelated to the "sting" referred to above) has been given to these words in para. 11 of the Statement of Claim. However, counsel for the plaintiff accepts that, for the purpose of this application, the words in para. 10(i) should be treated as part of the "sting" of the defamation set out above and they do not add anything further to the "sting".

27. The "sting" of the defamation is the underlying fact which the defendant needs to prove before he can successfully establish this defence. However, there is no evidence regarding the matter at all. In such circumstances, I agree with the plaintiff's submissions and rule that this defence cannot properly be left to the jury.

Qualified Privilege

28. It is undisputed that commission would have been payable to the estate agent by Niiroku and the purchaser if the conveyance had been successfully completed. Counsel for the defendant submits that, because of this connection to the conveyance, the letters were written on an occasion of qualified privilege.

29. The law relating to this aspect is not in issue and can be summarised as follows:-

(a) where the facts giving rise to the occasion of privilege are undisputed, whether the occasion was privileged is a question for the judge;

(b) although examples of what classes of statement are privileged do not exhaust the general principle relating to this defence, a statement made on a subject-matter in which the defendant has a legitimate interest is one of those classes.

Gatley, para. 14.1 (at p. 326) and 14.4.

30. In relation to point (b) above, Gatley stated:-

"Where a communication is made by someone with an interest in the subject matter to someone who has a corresponding interest in receiving the communication it is made on a privileged occasion. Such a situation is often referred to as one in which the parties have a common interest. Often their interests will be identical, or arise out of the same set of circumstances, ... but a common interest, in this sense, is not an essential ingredient in the defence: the interests of the parties can be quite different in kind, but the occasion may still be privileged ... " (emphasis supplied) (para. 14.43).

31. Counsel for the plaintiff submits that the transaction involving the vendor and purchaser on the one part and the estate agent on the other was different from that involving only the vendor and purchaser. The former transaction was related to the estate agent's commission whereas the latter was related to the conveyance of real property. Counsel submits that there was accordingly no common interest between the two transactions.

32. With respect, I disagree. One of the decisions referred to in Gatley as an example of an occasion of privilege was Blackham v. Pugh (1846) 15 LJCP 290. The facts therein, as summarised in Gatley were:-

"D sold goods to P on credit and, discovering that the whole of P's stock in trade had been sold by auction and that P had quitted without leaving his address, told the auctioneer not to pay the proceeds of sale to P because he had committed an act of bankruptcy. P had in fact committed no act of bankruptcy, the goods having been sold on his retiring from business. It was held that the notice was privileged as it was sent in good faith and in the honest protection of D's own interests" (para. 14.44).

33. Further, Gatley also referred to Aspro Travel Ltd v. Owners Abroad Group Plc [1996] 1 WLR 132, 143. The facts of that case can be summarised as follows. The plaintiff and defendants were members of ABTA and competitors in the package holiday business. The defendants informed hoteliers and travel agents that the plaintiff was about to become bankrupt or there were reliable rumours to such effect. The plaintiff sued the defendants for defamation. The defendants denied the defamation and further relied on the defence of justification and qualified privilege. Counsel for the plaintiff was fair enough to refer to the following passage in Aspro Travel Ltd:-

"It is in my judgment arguable that (a) the manager of a hotel has an interest in knowing that if a travel agent goes bankrupt another identified travel agent is ready to take over the former's obligations, (b) a member of A.B.T.A. has an interest in keeping inconvenience to holiday makers in the care of another A.B.T.A. member to a minimum since (1) this will keep to a minimum the amount of claims on the A.B.T.A. compensation fund to which he is a contributor and (2) his own trade may well be adversely affected by stories about disappointed holiday makers who have been let down by A.B.T.A. members, and (c) the relationship between the defendants was such that if one had an interest then the others did" (per Schiemann LJ, p. 143A-B).

34. In view of the above cases, I do not see how the facts of the present case can properly be said to fall outside the defence of qualified privilege.

35. As will be discussed under the heading "Leave to Further Amend the Defence", the defence of qualified privilege does not at present cover the second letter in the Re-Amended Defence. Counsel for the plaintiff argues that even if the Re-Amended Defence be further amended to enable that defence to be pleaded in relation to the second letter, that defence is still not available to the second letter. This is because the second letter has nothing to do with the earlier correspondence, especially the first letter, and thus the libel was not committed on a privileged occasion.

36. I disagree. The plaintiff's case in relation to whether the words were capable of a defamatory meaning is that the letters form a series of correspondence. He cannot shift this part of his case just because this will suit his purpose in relation to another issue in the action. In any event, the contents of the letters make this argument unmeritorious.

37. Defence counsel also relies on Gatley, para. 14.48 (Reply to demand) and 14.49 (Reply to attack). Since I have been able to decide this matter without the need to consider these paragraphs, I will not comment on the merits of this argument.

38. Finally, for completeness, I also find that:-

(a) although the privilege was in fact related to letters written on the estate agent's behalf, since a limited company cannot function except through natural persons (such as its officers or directors), the defence should also be available to the defendant who published the letters in his capacity as the estate agent's director: Gatley, para. 14.72;

(b) the publication of the second letter to the plaintiff's personal secretary and articled clerk was made in the ordinary course of business, or was "ancillary privilege": Gatley, para. 14.68 to 14.71.

Counsel for the plaintiff has not argued otherwise in relation to the above points.

39. Counsel for the plaintiff also submits that there were irrelevant statements in the letters; alternatively, parts of the letters were excessive. With respect, even if this was true, I do not consider this to be material to this action. This is because I agree with the observation of Lord Diplock in Horrocks v. Lowe [1975] AC 135, 151 to the effect that, even if there were irrelevant statements in an article published on a privileged occasion, this is only relevant to the question of express malice. To this extent, insofar as the observations of Lord Dunedin in Adam v. Ward [1917] AC 309, 327 can be considered to be different from Lord Diplock's, I would prefer the view of Lord Diplock. Excessive and/or irrelevant statements in the letters are immaterial in this action because the plaintiff has accepted throughout the trial that the defendant did not act with express malice when publishing the letters.

40. To conclude, I find that the letters were published on an occasion of qualified privilege.

Leave to Further Amend the Defence

41. The Re-Amended Defence pleads the defence of qualified privilege, but only in relation to the first letter. In the course of submissions made in relation to this ruling, defence counsel noticed the omission and sought leave to further amend the defence pleading so as to raise this line of defence in relation to the second letter.

42. Counsel for the plaintiff opposes the application for leave. He submits that it was made at an extremely late stage. Further, he contends that had the defence also raised earlier in relation to the second letter, he might have conducted the trial differently in that he might further cross-examine the defendant.

43. I do not accept the plaintiff's contention. As stated above, the letters formed one series of correspondence. The circumstances surrounding the correspondence are undisputed. The contents of the correspondence, especially the letters, were self-explanatory. I therefore do not see how raising the defence in relation to the second letter can affect the conduct of the trial. This is particularly so in view that the defence has already been raised in relation to the first letter.

44. The plaintiff also complains that he has been taken by surprise by the application. With respect, again, because the defence has already been raised (albeit only in relation to the first letter), I do not consider this complaint to be valid.

45. The plaintiff has not otherwise suggested that he has been irreparably prejudiced by the application and there is no material to suggest that he has been.

46. In the circumstances, I will give leave to the defendant to further amend his Re-Amended Defence in order to raise the defence in relation to the second letter even though the application was made at an extremely late stage of the proceedings.

Other Matters

47. I should also record that, for the purpose of this action, although para. 5 and 9 of the Statement of Claim set out the individuals to which the letters have respectively been published, the parties accept:-

(1) the first letter was only published to the management of Niiroku;

(2) the second letter was only published to the management of Niiroku and the plaintiff's personal secretary and articled clerk;

(3) point (2) is without prejudice to the defendant's argument that the publication of the second letter to the plaintiff's personal secretary and articled clerk was not authorised or intended by the defendant, nor was it a natural and probable consequence of the original publication.