Yau Siu Yuen and Others v. Shing Cheuk Hing and Others

HCA006312/1996

HCA6312/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6312 OF 1996

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Coram : Hon Yam J in Chambers

Date of hearing : 22 November 1999

Date of judgment : 23 December 1999

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J U D G M E N T

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1. On 1 April 1999, I made an order pursuant to RHC O.62, r.8 that two firms of solicitors consequentially acting for the 8 defendants, ("the defendants") (except the 4th defendant who was separately represented) to show cause why an order should not be made against them jointly and/or severally that they should bear costs personally for their clients. I shall, first of all, deal with those events leading to the aforesaid order.

Background

2. This is an action brought by 4 plaintiffs, being committee members of the Incorporated Owners of one Wah Kai Industrial Centre ("Wah Kai"). There were three documents in issue. The plaintiffs alleged that by the 1st Document, all the 9 defendants were identified as being members of "the Owners Concerned Group of Texaco Road Wah Kai Industrial Centre" ("the Concerned Group") dated 7 December 1995.

3. In paragraph 11 of the Statement of Claim it was pleaded that on or about 15 December 1995, the Concerned Group published the 2nd Document which said :

"..... inflating the lift maintenance costs .... where has the money of each and every owner gone? We, the owners, now suspect that the current management committee have stolen money."

The original Chinese version is as follows :

"....電梯維修報大數....我們各業主的錢到了那裏去，現在我們業主懷疑現任委員偷錢。"

4. There is also a further allegation of a defamatory 3rd Document which is not the main concern of the matter now before me.

5. The Writ was dated 4 June 1996. The Defence and Counterclaim was filed on 27 June 1996. Para.1 of the defence was pleaded as follows :

"1(a) The 1st to 3rd and 5th to 9th Defendants admit paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, and 11 of the Statement of Claim.

(b) The Lift Maintenance Fund Expenses were shown to be HK$4,735,312 in the Balance Sheet as at 31st July 1995 of the Incorporated Owners of Wah Kai Industrial Centre ("Wah Kai") whereas at an Owners' General Meeting of Wai Kai the corresponding amount was announced as HK$4,163,695.

(c) The allegation in Chinese mentioned in paragraph 11 of the Statement of Claim is, in the premises, a fair comment based on truths."

This was signed by Mr Yeung Shak Nung, Counsel for the 1st to 3rd and 5th to 9th defendants. Messrs C.K. Mok & Co. were acting for them at that time.

6. The 4th defendant was separately represented and his main defence was that he was not a member of the aforesaid Concerned Group.

7. It is not quite apparent from the aforesaid pleaded defence as to why the comments (if they were comments at all) as contained in the 2nd Document was fair comments based on those matters pleaded in paragraph 1(b).

8. The defendants contended that solicitors and counsel were instructed that the Owners' General Meeting was held on 26 March 1993. In other words, by March 1993, the expenditure was stated to be at about $4.1 million whereas by July 1995, the total expenditure was stated to be at $4.7 million odd. It gave an apparent impression that $570,000 was spent in two years. There were 16 lifts all together. Thus for each lift the maintenance expenses for two years were apparently $36,000 odd or $18,000 odd for one year.

9. It is, therefore, not quite clear why the Concerned Group suspected some members of the management committee had stolen money basing on the aforesaid fact. Mr Au Yeung, Counsel for Messrs C.K. Mok in the matter now before me, agreed that defence of fair comment had not been properly pleaded.

10. A standard form of pleading fair comment could be found at Form 60, p.173 ofAtkin's Court Forms Vol.25 (1998 issue) as follows :

" 4. The [said words or words set out in paragraph 2 of the Statement of Claim] if and insofar as they bear the meaning that (set out details) are fair comment upon a matter of public interest, namely [the conduct of the Plaintiff as a Parliamentary candidate for ....].

PARTICULARS OF FACTS AND MATTERS ON WHICH THE COMMENT WAS BASED

(Set out the facts and matters relied on)

[The Defendant will, if necessary, rely on Section 6 of the Defamation Act 1952.]"

11. Mr Au Yeung agreed that the pleader did not plead that the comment was a matter of public interest and did not state why it was public interest at all. Further, there was no particular of facts and matters on which the comment was based save and except the aforesaid sub-para.(b).

12. Furthermore there was also the failure of the pleader to appreciate that fair comment has to be based on facts already known to the defendants. In pleading fair comment, the learned author in Atkin's Court Forms (supra), paragraph 16 at pages 79-80 said :

"... Where the facts are set out in the libel, the defendant may use the 'rolled-up' plea alleging that in so far as the words complained of consist of statements of fact, they are true in substance and in fact, and in so far as they consist of expressions of opinion, they are fair comment on those facts which are a matter of public interest. It is important to remember, however, that the 'rolled-up' plea is simply a plea of fair comment and since it entails the service of complicated particulars, the modern practice is to use the normal plea of fair comment and to set out as particulars the facts and matters relied on to support the comment, in the normal way. If only some of the pleaded facts are proved to be true, the defence will not fail if the comment is fair having regard to those facts which are proved..."

" It is important to remember that a plea of fair comment relates only to comment; if there are any defamatory statements of fact in the words complained of, the defendant must justify those statements; a plea of fair comment will not suffice as a defence to such statements."

Again, in Form 63 at page 176, the way to plead the 'rolled-up' plea is as follows :

" 4. In so far as the [said words or words set out in paragraph 2 of the Statement of Claim] consist of statements of fact they are true in substance and in fact, and in so far as they consist of expressions of opinion they are fair comment namely (set out nature of comment) on the said facts which are a matter of public interest (set out details).

PARTICULARS PURSUANT TO RSC ORDER 82 RULE 3(2)

4.1 The following words are statements of fact: (set out the words alleged to be statements of fact).

4.2 The facts and matters relied on in support of the allegation that the words set out in 4.1, above, are true are as follows: (set them out)."

13. On the other hand, the Defence was further pleaded that it was an expression of suspicion and not an allegation. It has been decided that it was immaterial that the defamatory imputation was conveyed by a suggestion even in hypothetical or question form ― see Eastern Express v. Mo Man Ching [1998] 2 HKC 593 at p.601B. Thus the defendants' plea in the Defence that they were not making an allegation but merely expressing a suspicion is no defence. Mr Au Yeung has fairly and promptly admitted that the Defence pleaded is substandard in nature and more is desired in pleading the defendants' case.

14. On about 14 November 1996, Messrs Wong Ka Ming & Co. filed a notice of change of solicitors and acted for those eight defendants. Thereafter, Messrs Wong & Co. ceased business and Messrs Packwood & Co. agreed with the Law Society to handle the aforesaid cessation of business or matters arising therefrom. Thereafter, Packwood & Co. changed to Wong & Packwood, (it should be noted that it is a different Mr Wong from Mr Wong Ka Ming) who then handled the case until the end of the trial.

15. The trial started before me on 29 March 1999. At the outset Mr Tony Ng, who was instructed for those eight defendants, applied for leave to withdraw the Counterclaim which was accordingly granted. At the end of the opening of the plaintiffs' case, Mr Ng applied for adjournment for the defendants to consider some documents produced just some days before by the plaintiffs. During the course of his application, the Court went through with him those issues to be tried in order to clarify what the Defence actually meant, as Miss Yu, SC for the plaintiffs said in her opening that "all the plaintiffs can do is to guess what the defences of the defendants are."

16. On the second day of the trial, during the course of clarifying those issues to be tried, Mr Ng indicated that he would apply to amend the Defence including withdrawing the admissions to paragraphs 6 and 7 of the Statement of Claim. Paragraphs 6 and 7 are concerned with identifying the Concerned Group members in publishing the 1st Document on or about 9 December 1995. Mr Ng was repeatedly reminded by the Court that withdrawing an admission at this late stage is a very serious matter and that affidavit must be filed to explain why admissions were mistakenly made in the first place.

17. Before the Court convened on the following day, i.e. 31 March 1999 (the third day of the trial), Mr Ng through the court clerk, handed in a proposed Amended Defence and an Affidavit of the 8th defendant in support of the withdrawal of admissions as to paras.6 and 7 of the Statement of Claim. Paragraph 1(b) was amended to state specifically that the Owners' General Meeting was dated 26 March 1993 with an addition of a new para.(c) which reads as follows :

"The said Lift Maintenance Fund was only found and should only be used for the purpose of carrying out the lift maintenance works as passed in a resolution in the Owners' General Meeting dated 29th November 1991."

18. There was however no allegation that the Fund had been used otherwise. Thus the amended version to para.1 did not add much to the Defence nor did it clarify anything at all why the "comment" was fair comment based on "truths". In fact, it raised an apparent misconception that for those two years, the lift maintenance expenses were increased and spent only by a reasonable amount as aforesaid.

19. What was more startling was that the Affidavit of the 8th defendant, trying to explain the admissions to paragraphs 6 and 7 of the Statement of Claim reads as follows :

"4. In our Defence, it admits paragraph 6 and 7 of the Statement of Claim. However, upon recent further reveal of the document for the preparation of trial with our lawyers. We found out that paragraph 6 and 7 were wrongly admitted.

5. The mistake might be the reason of our misunderstanding with the previous handling lawyers. We humbly crave leave from this court to allow us to amend our Defence and apologise for any inconvenience caused to the Court and other parties in this case."

20. My immediate concern was whether instructions were properly taken. Further, I am afraid the aforesaid Affidavit is far below any professional standard as required of solicitors and/or counsel. Apart from the incomprehensible and ungrammatical English put forward, it did not explain how the misunderstanding arose and with which handling lawyers and how the reveal (sic) of documents had led to the discovery of wrongful admission. If leave can be granted on the strength of such an affidavit, anyone can withdraw any admission made in the pleadings.

21. On the 3rd day of trial, the parties in fact had come to a settlement, i.e. those eight defendants would pay the plaintiffs' $1.2 million by way of damages with no order as to costs. The sum would be paid by instalments.

22. I was told by Counsel for the plaintiffs that $1.2 million would not be enough for their total costs. I was wondering how the defendants would come to this stage whereby they would have to dig deep into their pocket in order to put an end to this matter. On the other hand, the plaintiffs in the end did not benefit at all from the amount of "damages" paid to them since they also have to dig into their pocket in order to pay their own lawyers' fees.

23. The standard of pleadings and the affidavit in support for leave to withdraw admission had prompted me to make an order pursuant to RHC O.62, r.8 as there is a reasonable cause to believe that the service received by the defendants was not up to the required professional standard.

24. Consequently affirmations filed in this matter are as follows :

1) Affirmation of Mr Ma Kwan Lam, Legal Executive of Wong & Packwood dated 1 June 1999;

2) Affirmation of Mr Lee Chiu Ming, Senior Litigation Clerk with the said two firms of solicitors throughout dated also 1 June 1999, exhibiting an affirmation of Mr Yeung Shak Nung of Counsel dated 19 April 1999;

3) Affirmation of Mr Mok Chiu Kuen, the Partner of Messrs C.K. Mok & Co., dated 1 June 1999;

4) Two affirmations of those eight defendants dated 14 June 1999 and 18 November 1999.

25. The solicitors were given 14 days to reply to the affirmation of the defendants dated 14 June 1999. No reply was filed thereto. They should be taken as agreeing to those facts as stated by their clients save and except certain minor discrepancies with their own version which I shall deal with later on. The fact remained that the Court was waiting for the reply affirmation of the solicitors. They did not inform the Court that they did not intend to file any affirmation in reply, and they did not apply to fix a date for the hearing of the matter. Thus there was some delay in fixing the date of hearing until November.

The defendants' case

26. From those affirmations filed, the following facts could be gathered therefrom as deposed to by the various deponents.

1. The case for the defendants had been handled by Mr Lee Shu Ming, the Senior Litigation Clerk ("Mr Lee") originally with Messrs C.K. Mok & Co. Those eight defendants approached Mr Lee because the 7th defendant, Leung Kwok Ki, was the cousin of Mr Lee. (The 7th defendant however had in the course of litigation in or about 1997 sold his property and left the building leaving behind the other seven defendants to shoulder his share of the responsibility.)

2. According to the defendants, there was only one conference with Mr Yeung of Counsel on 14 June 1996 for about 1 hour 20 minutes apparently for the preparation of the Defence and Counterclaim. Thereafter, it was only Mr Lee who handled the matter for them and met them. The defendants intended to hand over a number of documents to Mr Lee. However, Mr Lee said documents were already sufficient. The defendants pointed out that the 1st Document contained a signature and a chop whereas the document in their possession only had a signature without a chop. They urged Mr Lee to inform Mr Yeung of Counsel. However, Mr Lee said it would only affect the credibility of the plaintiffs and asked them to take the documents back. Dispute as to authenticity of documents had never been raised. From the affidavit of Mr Yeung of Counsel, he was not aware of the version put forward by the defendants.

3. In November 1996, Mr Lee changed to the firm of Messrs Wong Ka Hing & Co. and the case followed him. The defendants were never informed of this change of solicitors. According to Mr C.K. Mok, he was only informed of the resignation of Mr Lee the day before his departure on 14 November 1996. He did not inform the defendants, he thought it was the defendants' idea to change solicitors.

4. In fact the defendants said that they were not informed of this change of solicitors until the next year, on 14 August 1997, when Messrs Wong Ka Hing & Co. demanded and subsequently received costs on account. Mr Mok agreed that the defendants and Mr Lee did attend his office and some of the defendants wished to retain their service as solicitors. According to the defendants, Mr Mok in reply contended that the case would have to be handled afresh and all costs will be calculated from the very beginning including charges for each document. Apparently no solicitor in his firm had handled the case before except the clerk Mr Lee.

5. Between August 1997 and June 1998, Messrs Wong Ka Hing & Co. demanded and received three times costs on account from the defendants. The only solicitor involved in this case was Mr Wong Ka Hing ("Mr Wong") who met the defendants for not more than 5 minutes. Apparently the case had been handled all along by Mr Lee alone as before.

6. In October 1998, Messrs Wong Ka Hing & Co. ceased business and the case was then transferred to Packwood & Co. Again, the defendants were not informed of this change of solicitors until 23 October 1998 when Mr Lee demanded costs on account. The defendants felt that Mr Lee had not informed them of their position from time to time. Since the defendants considered that they had not received proper legal services, they intended to instruct another firm of solicitors. However, it then occurred to them that it was quite late as the trial had already been fixed for 22 February 1999 (which was later on rescheduled to 29 March 1999).

7. On 21 December 1998, they have seen Mr Packwood for about 10 minutes, Mr Packwood suggested to them to settle the matter. Subsequently, the other side offered $2 million damages plus costs. On the other hand, the defendants were repeatedly assured and advised by Mr Lee that they had an arguable case with merits on the defence. The defendants accordingly did not press on the settlement any further.

8. Mr Yeung said after 2 September 1996 he had received no further instructions on amendments of pleadings or conduct of the trial. In fact he appeared before Rogers J (as he then was) on 13 September 1996. I suppose his instructions to act ceased shortly thereafter. It was not until January 1999 that Mr Tony Ng of Counsel was instructed to act for the defendants. In between the two dates, no counsel were instructed to advise or to handle the case.

9. Before the trial the defendants had three conferences with Mr Tony Ng of Counsel on 13 January 1999, 24 March 1999 and Sunday, 28 March 1999 on which day no solicitors or representative from Packwood & Co. was present. Counsel had conference directly with the lay clients, the defendants.

10. It can be seen from the affidavit of Mr Lee that he took a very active part in advising clients. For example, in his paragraph 8, he said that in the conference with the defendants on 21 December 1998 he :

1) explained to the defendants that the accountant's report may or may not be admissible and stressed to the defendants the usefulness of the report was limited (he did not know whether it was admissible);

2) advised the defendants that if the report is admissible, it would be substantial evidence of the defence;

3) cautioned the defendants that there was a risk of losing the case and cost implications; and

4) advised the defendants that it would be best to instruct both a senior counsel and a junior counsel.

27. Again, in the conference with Mr Tony Ng on 24 March 1999, Mr Lee reminded the defendants that in July 1996 the plaintiffs' failure to strike out the Counterclaim would be an indication that the defence had some merits. He did not attend the conference on Sunday, 28 March 1999. Mr Tony Ng of Counsel had to meet lay clients directly in a conference the day before the trial.

28. The aforesaid facts supported the inference that Mr Lee was left basically entirely on his own without much supervision from any of his supervising solicitor. That was the case in Messrs C.K. Mok & Co., Messrs Wong Ka Hing & Co., Messrs Packwood & Co., and Messrs Wong & Packwood.

The law

29. The legal position of exercising the Court's jurisdiction pursuant to Order 62, rule 8 has been explained in the case of Ho Lee Man v. Wong Wai Kai (No.2) [1993] 1 HKC 193. In the judgment of Litton VP (as he then was), he said at pages 195-196 :

"Although this inherent jurisdiction to make solicitors personally liable for the costs of proceedings has existed for a very long time, it has been seldom exercised. This can be seen from the rarity of authorities. The reason is obvious. In litigation, there is almost invariably a winner and a loser. The losing party often feels disgruntled - sometimes against his own solicitors. In the course of civil litigation, there are usually many interlocutory steps - sometimes too many. The outcome cannot be always predicted with accuracy. If a solicitor should run the risk of being personally liable for the costs every time his client takes a wrong step, this would have a profoundly harmful effect on the normal conduct of civil litigation. A solicitor, instead of doing his best in the circumstances for his client, would tremulously be looking to his own pocket, fearful of the consequences if he loses. Such an attitude would also have a harmful effect upon the organization of the profession. Often, litigation is put in the charge of an employed solicitor. It would be a most unfortunate development if firms, in employing young solicitors, should adopt a practice of requiring an indemnity from the young solicitor to cover the situation where the firm might incur liability for costs, as a result of some erroneous step taken in litigation. It is probably for reasons such as these that Sir John Donaldson MR in Orchard v South Eastern Electricity Board (supra) at p 572 cautioned against an overzealous use of the jurisdiction under O 62 r 8(1) of the Rules of the Supreme Court. In that passage, the Master of the Rolls referred to the judgment of Sachs J in Edwards v Edwards [1958] P 235 and said:

Sachs J examined the authorities and stated that it was axiomatic that the mere fact that the litigation failed was no reason for invoking the jurisdiction - nor was an error of judgment, nor even the mere fact that an error was of an order which constituted, or was equivalent to, negligence. There had to be something which amounted to a serious dereliction of duty (see p 248). The decision of this court in Davy-Chiesman v Davy-Chiesman [1984] Fam 48 was to the like effect. The jurisdiction could only be invoked in the case of serious misconduct and the initiation or continuance of an action when it had no, or substantially no, chance of success which might constitute such misconduct (per Dillon LJ at p 67).

Sir John Donaldson MR went on at p 572-E to emphasize that the jurisdiction had to be exercised with care and discretion, and only in clear cases:

...it must never be forgotten that it is not for solicitors or counsel to impose a pre-trial screen through which a litigant must pass before he can put his complaint or defence to the court."

30. It is with these important principles in mind that I now turn to examine the circumstances of the present case.

The present case

31. The circumstances of this case are as follows :

1. The matter had all along been handled by an unqualified person, i.e. a litigation clerk, albeit he is a senior clerk of 25 years' experience.

2. Counsel for the defendants pleaded the defence of fair comment. However, he did not take into consideration that it has to be comment based on facts known to the defendants at the time of making the comment. This is accepted by Mr Au Yeung for Messrs C.K. Mok as a good proposition of law. From all the facts known to the defendants at the time of publishing the 2nd Document there were no basis for them to make those defamatory remarks. The defence of fair comment therefore cannot be substantiated.

3. The defence of justification is, on the other hand, on a different footing. It is open to the defendants to discover more new facts afterwards in order to justify their defamatory statement. From what I gathered from the notes of proceedings before Seagroatt J in the striking off of the defence hearing, Seagroatt J made an order on 12 July 1996 that the plaintiffs should allow the defendants to examine the accounts of the incorporated owners. That was relevant to the pleaded Defence of justification and there was no reason to strike off the Defence and Counterclaim at that stage. However one must also bear in mind that there is a distinction between pleading on paper with merits and a case with merits.

4. Pursuant to Seagroatt J's order, the report of the accountant dated 22 August 1996 was made. Upon receiving it both Mr Lee and Mr C.K. Mok were of the opinion that the defendants' case was weakened. Mr Mok said he had advised one of the defendants (probably the 1st defendant Mr Shing) that "the inspection was not favourable he should consider settlement (sic.) the case." Mr Shing said during that period of time, he used to go up to the office of Messrs C.K. Mok. It might well be one of those casual occasions that he met Mr Mok by chance and Mr Mok told him something to that effect. However not all defendants were advised properly of their position there and then.

5. In short, the defence of fair comment had no material facts to rely on at the time of making the comment and the defence of justification had no further evidence to support after the accountant's report, albeit there were certain hindrances to the investigation of the accountant.

6. At that stage, the defendants were not told of their position in respect of the pleaded defences which were literally gone unless further evidence came to light. It also appears that the solicitors did not press for further discovery of evidence. Instead, they opted for a contempt hearing which was dismissed by Rogers J (as he then was) on 13 September 1996.

7. Without further evidence after the accountant's report, Mr Lee had repeatedly assured, even up to January 1999 when meeting with the defendants and Tony Ng of Counsel, that there were merits in their defence. Mr Lee said that his advice was based on the fact that the plaintiffs failed to strike off the Defence and Counterclaim before Seagroatt J. I am afraid he was not professional enough to see the distinction between the defence of fair comment and justification, and the basis upon which the Defence and Counterclaim was not struck off. By then he still advised the defendants that if the report is admissible, it would be substantial evidence of the defence.

8. Apparently the defendants were not fully explained the basis of the pleaded defence whilst they thought they had meritorious defences fully supported by documents. It explains why the defendants were carrying a bag of documents throughout the trial which probably had not been considered by solicitors and/or counsel.

9. Both firms in allowing Mr Lee to handle the case for most of the time without supervision is at the risk of exposing themselves to liabilities. In this case, I find Mr Lee's handling of the case and the firms in allowing him to do so amounted to serious misconduct and dereliction of duties. It is not a case where the solicitors were just negligent or just in the pitfall of not advising a client properly. It is a case where a litigation clerk was allowed by both firms of solicitors to handle the case nearly entirely on his own, and thus leading the defendants to the rosy path of believing that they had an arguable case on merits. It is against this background, and in these circumstances, that there was no exploration or advice to seek a settlement at an early stage of the proceedings. Although Mr Packwood is right in submitting that even if there was a exploration for a settlement at any stage, they might not be fruitful, yet the defendants were entitled to proper advice of solicitors instead of litigation clerk. The defendants were not properly advised as to their vicarious position until the very late stage, i.e. just before and after the commencement of the trial.

Conclusion

32. For the aforesaid reasons, I consider that the two firms of solicitors are liable for all costs incurred by their client, and, therefore, they have to repay forthwith to them.

33. In respect of my comment on counsel, the original pleading is in my view sub-standard as aforesaid. However the undesirable result of how the case had developed is short of serious dereliction of duty or serious misconduct on the part of the pleader.

34. In respect of Mr Ng of Counsel, he was instructed at a very late stage to handle the trial and he got the unenviable task of handling a case which had been badly handled by the litigation clerk all along. He was working under pressure in putting the defendants' case on a proper footing. I only find that the affidavit put forward by him in support of withdrawal of admission is definitely of unprofessional standard which should not be repeated. Apart from that, I have no other criticism of him in the circumstances of this case.

35. All in all, I do not find the conduct of Counsel by itself sufficient to compel me to make an order under Order 62 against the solicitors. My order made herein is entirely directed at the two firms of solicitors which had allowed their clerk to handle the case almost on his own, occasionally with counsel. For that reason, the two firms of solicitors should bear costs personally vis-à-vis their own clients which means all costs they received from the defendants will have to be returned to them forthwith.

36. There shall also be a costs order nisi that each of those seven defendants shall be entitled to costs of $2,000 each in the matter before me in lieu of taxation pursuant to O.62, r.9(4)(b).

Representation:

Mr Packwood of Wong, Packwood & Co. in person

Mr Herbert Au Yeung, inst'd by M/s Shamson Zeall & Co., for C.K. Mok & Co.

The seven defendants appeared in person