EARN CROWN INVESTMENT LTD AND ANOTHER v. ZHANG YU FANG AND ANOTHER

bjbj HCA 712/2015 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 712 OF 2015 ____________ BETWEEN EARN CROWN INVESTMENT LIMITED 1st Plaintiff EMPEROR INTERNATIONAL HOLDINGS LIMITED 2nd Plaintiff and ZHANG YU FANG 1st Defendant WONG FUNG TONG 2nd Defendant ____________ Before: Hon Au-Yeung J in Chambers Date of Hearing: 26 April 2016 Date of Decision: 29 April 2016 D E C I S I O N This is the defendants application for stay of proceedings in d Chain Profits Ltd (said to be an affiliate of the Emperor Group) agreed to purchase and the defendants agreed to sell their shares of and in Rich Ever Group Ltd at RMB160 million. Rich Ever Group held a plot of land in Beijing. Emperor Holdings was the guarantor of Grand Chain in that transaction. Mr Lung, counsel for the plaintiffs, is unable to confirm if Emperor Holdings was the same as P2. In 2014, litigation was commenced in Beijing in relation to that transaction and has remained unresolved to date. The plaintiffs allege that the defendants have caused 3 defamatory articles to be published ( the 3 defamatory articles ) on 3 online forums, which were republished through various websites. The subject matter of the defamatory articles involved the transaction stated in the preceding paragraph. The plaintiffs allege that they have suffered loss of reputation. The defendants seek to stay the present action on the ground of forum non conveniens. In issue is where the 3 defamatory articles were published in Hong Kong (according to the plaintiffs) or the Mainland (according to the defendants)? Further affirmations At the hearing, I have granted leave to P2 to put in an affirmation, effectively to confirm its reliance on the affirmations of P1 in support of the present application. That was a justifiable stance to avoid any possible allegations that P2 has no evidence in support. Legal principles for stay on the ground of forum non conveniens Where a plaintiff has commenced and served proceedings in Hong Kong as of right (as in the present case where the plaintiffs were incorporated in Hong Kong and the defendants were served in Hong Kong) the jurisdiction should not lightly be disturbed, even for proceedings commenced here only fortuitously. Various authorities suggest that such propositions are no more than a reflection of where the burden of proof lies (ie on the defendants) rather than of how heavy it is. At best it is a variable factor and the weight attached to it will depend on the circumstances and the strength of the underlying connections to Hong Kong. Hong Kong Civil Procedure 2016, Vol 1, 11/1/10A at pages 132. The question of which is the appropriate forum is a matter to be considered by the court in exercising its discretion. The test is whether the interests of all the parties and of justice are best served by proceedings here or abroad. See Hong Kong Civil Procedure 2016, Vol 1, 11/1/10 at page 131. The principles for the grant of stay are not in dispute: (1) Stage (I): Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong. The burden rests firmly on the defendant. (2) Stage (II): If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages. The evidential burden here lies on the plaintiff. (3) Stage (III): If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II). Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the available appropriate forum. Proof of this rests upon the applicant for the stay. See The Lanka Muditha [1991] 1 HKLR 741, 744 following the Spiliada [1987] AC 460; Hong Kong Civil Procedure 2016, Vol 1, 11/1/10C. The correct approach to considering the connecting factors for a particular forum is not just to load up the factors which point to particular jurisdictions in the abstract to see which party has the longer list. The court must focus on the appropriateness of the competing forums in light of the factors from the point of view of the matters actually likely to arise in the trial of the action. Where is ultimately the most appropriate place for trial also takes into account additional factors that may trump the connecting factors, eg desirability of avoiding multiple proceedings. The forum most suitable for the interests of the parties and the ends of justice is not necessarily the forum with the closest connection to the dispute. See Hong Kong Civil Procedure 2016, Vol 1, 11/1/10D at page 133. The location of witnesses and documents may carry little (if any) weight, unless perhaps it is necessary to compel production of documents held abroad and not yet available to the parties or the witnesses are only compellable in the foreign jurisdiction: Hong Kong Civil Procedure 2016, Vol 1, 11/1/10AB at page 141. The fact that documents and even witnesses are located in Mainland China will now often count for very little before the Hong Kong courts, especially where the Mainland witnesses hold Hong Kong residency unless compellability is an issue: Hong Kong Civil Procedure 2016, Vol 1, 11/1/10AC at page 142. Stage (I) the appropriate forum The jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute. Emperor (China Concept) Investments Limited v SBI E-2 Capital Securities Limited & anr, HCA 2686/2004, 10 January 2006, at 9, DHCJ Saunders. Publication of a libel occurs at the place where the statement is seen or received by another person. In relation to publication by input into a computer, it is the place where a person downloads the material which constitutes publication, not the place where the material was input into the computer: Emperor (China Concept) Investments Limited, at 12. Ascertaining the place where the tort has been committed is only the starting point. The more tenuous the claimant s connection with the local jurisdiction (and the more substantial any publication abroad), the weaker this consideration becomes. See Don King v Lennox Lewis & ors [2004] EWCA Civ 1329, CA of England, a case on internet libel: 27. Thus the starting-point for the ascertainment of what is clearly the most appropriate forum is to identify the place where the tort has been committed. That will, of course, by definition be England in a defamation case where leave to serve out has been obtained on the basis of publication here. But and here is our second proposition from the cases the more tenuous the claimant's connection with this jurisdiction (and the more substantial any publication abroad), the weaker this consideration becomes. 28. in relation to Internet libel, bearing in mind the rule in Duke of Brunswick v Harmer that each publication constitutes a separate tort, a defendant who publishes on the Web may at least in theory find himself vulnerable to multiple actions in different jurisdictions. The place where the tort is committed ceases to be a potent limiting factor. The place where the damage to reputation is suffered is the place for the plaintiff to vindicate its reputation: Investasia Ltd & anor v Kodansha Co Ltd & anor [1999] 3 HKC 515, at 522C. Regarding the plaintiff s connections with and reputation in Hong Kong, the fundamental consideration was the extent to which the plaintiff had a reputation to protect. The degree to which it had connections in Hong Kong was evidence that they had or had not a reputation here that merited protection. Investasia, at 520G. Mr Wong (counsel for the defendants) relies on the case of King v Lewis & ors [2004] EWHC 168 (QB) as an example of the need to adduce evidence on reputation, popularity of the relevant websites and frequent access by people in England. With respect, I do not think that case laid down any general proposition of the kind suggested by Mr Wong. I would only say that in a case like the present, there must be sufficient evidence to satisfy the court that it is appropriate for the action to be tried here. Hong Kong as the natural or appropriate forum The 3 defamatory articles did not identify P1 at all. There is a corporate chart to show that P1 was a subsidiary of the Emperor Group, but the company search did not show P2 to be a shareholder of P1 and there was no documentary evidence in support of the corporate chart. So how could P1 s reputation be injured at all? Mr Lung, counsel for the plaintiffs, submits that at best the court can only stay P1 s action and P2 s action will continue. In any case, the action will remain in Hong Kong. Whether P1 enjoys any significant reputation here that may attract substantial damages is purely a question of quantum for trial. With the greatest respect, this is not just a question of quantum of damages but, rather, lack of locus of P1 to bring the claim. Further, the are assertions, to show that it has any association with the Emperor Group; (d) P1 was not mentioned as a subsidiary in P2 s annual report, probably because P1 was not amongst those subsidiaries which had substantial contribution to or had substantial assets or debts of the Emperor Group. (see clause 9 of the Listing Rules in Exhibit ZYF-4). The court simply does not have to go to Stages (II) and (III) as regards P1. As regards P2, there is a need to see where the publication was, what and where the damage to reputation was suffered. An action for libel can only be brought if there is publication to some third person: Huth v Huth [1915] 3 KB 32, 39, Lord Reading CJ. A butler of the claimant who read a libellous document (addressed to the claimant) out of his curiosity and was in breach of his duty was not a third person: Huth v Huth , at pp 37-39. Each separate publication gives rise to a separate cause of action. It is therefore necessary for the particulars of claim to identify which is or are the publications relied on. See Philip Wallis & anor v Justin Meredith [2011] EWHC 75, Clarke J, at 56. An employee may not be a third person, depending on the circumstances: It is presumed that a posted letter is published to its addressee. Where the addressee is the claimant he will have to show that there has been another reader in order to establish publication. This could be the employee who typed the letter on behalf of the sender or the employee of the claimant who may have read the letter in the course of his duties. [But as stated in the footnote of this passage, in such circumstances, the publication may be protected by qualified privilege, citing Bryanston Finance Ltd & ors v DeVires & anor [1975] QB 703.] However, where the sender did not know and had no reason to believe that it would be read by another person he will not be liable: Price, Duodu & Cain on Defamation Law, Procedure & Practice, 4th ed, An agent of a company may not be a third person, depending on the circumstances: There is a publication where the defamatory matter is communicated to the claimant s agent. The best known case, where the plaintiff procured publication of a newspaper to his agent many years after its initial publication would nowadays be dismissed as an abuse of process, but there could be publications to an agent, unprovoked by the claimant-principal, which could be damaging. A distinction must be drawn in this context between communications to the agent of a natural person and certain communications to the agent of a company. When, e.g. a communication defamatory of a company is sent to the company secretary as a communication to the company it has not been published to the secretary in his personal capacity: the only publication is to the company, which can only act through human agents. There is some Canadian authority extending the scope of non-publication further than to the situation of the agent of a company. Thus, in Monument Mining Ltd v Balendran Chong & Bodi the British Columbia Supreme Court held that an unsolicited communication about the plaintiff to his lawyer was not published. On the other hand, there may be a publication to an employee who is not acting in a representative capacity for the company. Gatley on Libel and Slander, 12th ed, 6.15. In Steve Sanders v Steve Percy, Ministry of Justice [2009] EWHC 1870 (QB), HH Judge Moloney, one set of slanderous words was spoken only to one person, the claimant s own solicitor, who did not appear to have believed them or acted on them in any way to the claimant s detriment. That part of the claim was struck out on the ground, amongst others, that the limited advantages accruing to the claimant, if successful, could not outweigh the expense to the parties and the waste of court resources involved in permitting such a trivial case to go on trial (at 13). Similarly, in Philip Wallis, the only alleged publication was to the claimant s solicitor. The claim was struck out for abuse of process. One of the explanations of Clarke J (at 60) was as follows: I doubt that [the claimant s solicitor] was likely to have thought the worse of his client on account of [the defamatory statement] particularly in the light of his client s denials; and there was no evidence to that effect or of any harm from that publication or even of any concern on the part of Mr Wallis as to what Mr Morallee might be thinking of him. Although, as Eady J put it in Mardas v New York Times Company [2009] EMLR 8 at 15 "whether there has been a real and substantial tort within the jurisdiction (or arguably so) ... cannot depend upon a numbers game", each case must be determined on its own facts, and much may depend on the identity of the publishee(s) or the publisher, the publication relied on is as numerically minimal as it could get, and was to the claimants' professional agent, who was acting in respect of a commercial dispute with Mr Meredith. It does not seem to me that the claimants require vindication in respect of such a publication to a solicitor who has been busily engaged in stating that the allegation is false; and that any "vindication" by success in the action will be illusory or, at best, minimal. It would not be legitimate for the claimants to justify the pursuit of the proceedings by praying in aid the effect that they may have in vindicating them in relation to any wider publication, Applying Philip Wallis, the amended statement of claim ( asoc ) has not specified the publication except for general references to publication on the internet. Further whilst it is true that the websites may be accessible to the whole world and not just the Mainland, the place of publication is important to determine the appropriate forum. The evidence on publication only came from Ms Hom (Legal Counsel of the Emperor Group) which I shall assume to be true: 11. On or about 15th March 2015, I learnt from the Corporate Communications Department of the Emperor Group (which was/is responsible to review and keep track of any news update in relation to the Emperor Group) of the existence and circulation of the [3 defamatory articles] online. In an attempt to ascertain the extent to which the reputation of the plaintiff [which I take to mean the plaintiffs wherever this term appears in her affirmation] and/or the Emperor Group was damaged, I accessed and read [the 3 defamatory articles] on various websites and online communities. She allegedly read the 3 defamatory articles when she was physically in Hong Kong. She claimed not to know where the websites were registered or operated but the defamatory articles were and still are accessible by readers in Hong Kong, including [herself] and employees of the plaintiffs and/or the Emperor Group . Who the reader in the Corporate Communications Department was and where he/she/the Department were located were never made clear. Applying paragraph 28 above, Ms Hom was an employee or Legal Counsel reading the defamatory articles in Hong Kong in the course of her duties, at the instigation of the claimant-principal. In that regard, there was no suggestion that a distinction should be drawn between the Emperor Group and P2. There was no publication to a third person. Further, Ms Hom did not state whether the purpose of her access to the defamatory articles was achieved. Applying Steve Sanders and Philip Wallis, it is hard to imagine how a legal counsel or employee like her would have thought the worse of P2. The publication was minimal, whether in number or effect. The assertion that the place of publication was in Hong Kong has to be considered against the bigger picture: (a) P2, which Mr Lung describes to be the holding company suffering the greatest loss of reputation and sues in class defamation , was not the original plaintiff in Hong Kong. Strangely enough, it was P1 (who did not even have locus) was the original plaintiff. (b) ?b0W"u |v gP W0W:r common defamatory article and both without P2 being a party? The first hint of joining P2 in this action only came about by a letter from the plaintiffs solicitors dated 23 October 2015, 7 months after this writ was issued, and 3 months after the summons for stay was issued. The plaintiffs evidence on publication in Hong Kong simply lacks credence. One cannot help feeling the artificiality in linking the 3 defamatory articles to Hong Kong. Giving the most benevolent interpretation to the plaintiffs evidence, the Beijing action and this action show that there might have been publication in both Hong Kong and the Mainland. The next question is: what was the reputation of P2 in Hong Kong that was allegedly damaged? Despite the defendants express challenge to the existence of reputation, Ms Hom had not gone further than saying that it was good reputation in various charitable funds and foundations, including the Emperor Foundation. Such reputation, if ever existed, was remotely related to the commercial land transaction that formed the subject matter of the defamatory articles. In my view, the connection of the defamatory articles to Hong Kong was thin and could hardly make Hong Kong the natural forum for the dispute. Mainland China as the alternative available forum The 3 defamatory articles had every connection with the Mainland. Their subject matters covered matters which happened in the Mainland. They may involve issues on land law and criminal law in relation to P2 s oppression on the vendor or o 0ZS unities covering news and/or human rights abuses in the Mainland ( 3 and 6 asoc). The defendants deny having caused the defamatory articles to be published but, if the contrary is shown, may rely on justification and fair comment. The potential witnesses for those defences are in the Mainland, likely to be people from the website operators, knowing the source of the information and its veracity. There is evidence that they were not cooperative and there may be a need to compel their attendance. The defendants have residency in Hong Kong but have allegedly moved back to the Mainland some years ago. They have no assets in Hong Kong against which there can be enforcement of a monetary judgment. Though the plaintiffs might have their reputation vindicated in Hong Kong, any injunction granted in their favour may not be enforceable against the website operators out of jurisdiction. In my view, the Mainland plainly has the most real and substantial connection with this action and the courts there are the more suitable forum to try this case. Stage (II): Whether the plaintiff may be deprived of a legitimate personal or juridical advantage available to them in Hong Kong Mr Lung confirms that there are no issues under Stage (II). Stage (III): Balance of the advantages and disadvantages of the 2 stages This stage is not engaged at all because the answer to Stage (II) is . In any event, on balance, even if all or some of the websites were not based in the Mainland, and some of the readers were from Hong Kong, the thin connection with Hong Kong and the analyses under Stage (I) plainly lean heavily in having the Mainland as the forum for trial. I place little weight on logistical issues (ie location of documents, experts and witnesses), given the convenience of travel between Hong Kong and the Mainland these days. The Mainland courts are used to receiving expert evidence on Hong Kong law and vice versa. Recognizing that I should not lightly disturb the forum invoked as of right and balancing all factors, the interests of all the parties and of justice are best served by granting a stay as sought. Orders The defendants seek a declaration that the court should not exercise any jurisdiction it may have over these proceedings. I do not think the court should make this declaration. This court does have jurisdiction but just that it decides to stay the proceedings. It is sufficient to make an order staying the proceedings in Hong Kong in favour of the Mainland courts on the ground of forum non conveniens. l_NE hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt hTbt gdTbt qeqeqeTeFe gd-/ hTbt hTbt wi\M>4 gd), gd), gdri gdU+ gd), gd8h gdri gd@D gd@D gdri gd), hYMN hYMN hugs gdri gd), gdri gdri gd), gdri ECosts should, on a nisi basis, follow the event and be to the defendants. Costs of the plaintiffs summons dated 26 April 2016 (for filing the further affirmation) should also be to the defendants as they arose out of the late joinder of P2. All costs are summarily assessed and allowed at $220,000. I thank counsel for their assistance. (Queeny Au-Yeung) Judge of the Court of First Instance High Court Mr Vincent Lung, instructed by Hom & Associates, for the plaintiffs Mr Peter K C Wong, instructed by Tam, Pun & Yipp, for the defendants PAGE - A B C D E F G H I J K L M N O P Q R S T U V A B C D E F G H I J K L M N O P Q R S T U V A B C D E F G H I J K L M N O P Q R S T U V A B C D E F G H I J K L M N O P Q R S T U V hTbt hTbt [Content_Types].xml Iw}, $yi} _rels/.rels theme/theme/themeManager.xml K Y, sQ}# theme/theme/theme1.xml w toc'v )I`n 3Vq%'#q x}r :\TZaG I u3 L+M2 e\O* $*c? )6-r IqbJ#x ,AGm T[XF64 E)`# R>QD =(K& =al- 4vfa 0%M0 theme/theme/_rels/themeManager.xml.rels 5 6?$Q K(M&$R(.1 [Content_Types].xmlPK _rels/.relsPK theme/theme/themeManager.xmlPK theme/theme/theme1.xmlPK theme/theme/_rels/themeManager.xml.relsPK <?xml version="1.0" encoding="UTF-8" standalone="yes"?> <a:clrMap xmlns:a="http://schemas.openxmlformats.org/drawingml/2006/main" bg1="lt1" tx1="dk1" bg2="lt2" tx2="dk2" accent1="accent1" accent2="accent2" accent3="accent3" accent4="accent4" accent5="accent5" accent6="accent6" hlink="hlink" folHlink="folHlink"/> i$&@ 6o>` HCAP 8/2007 Judiciary Normal.dotm Judiciary Microsoft Office Word Judiciary Hong Kong HCAP 8/2007 Title <b:Sources SelectedStyle="\APA.XSL" StyleName="APA" xmlns:b="http://schemas.openxmlformats.org/officeDocument/2006/bibliography" xmlns="http://schemas.openxmlformats.org/officeDocument/2006/bibliography"></b:Sources> <?xml version="1.0" encoding="UTF-8" standalone="no"?> <ds:datastoreItem ds:itemID="{346FF6E0-A99A-491B-A44E-961BAD26C3BF}" xmlns:ds="http://schemas.openxmlformats.org/officeDocument/2006/customXml"><ds:schemaRefs><ds:schemaRef ds:uri="http://schemas.openxmlformats.org/officeDocument/2006/bibliography"/></ds:schemaRefs></ds:datastoreItem> Microsoft Office Word 97-2003 Document MSWordDoc Word.Document.8