Peregrine Investments Holdings Ltd v. The Associated Press

1995, No. A12862

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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Coram: The Hon. Mr. Justice Stone in Court

Date of hearing: 6 June 1997

Date of handing down of judgment: 9 July 1997

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J U D G M E N T

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1. This is a libel action. The Plaintiff's claim is that on 9th December 1995 the Defendant "falsely and maliciously published to its subscribers of and concerning the Plaintiff and of and concerning it in the way of its said business and in relation to its conduct therein" a press release, by reason of which the Plaintiff, a publicly listed company in Hong Kong, alleges that it has been gravely injured in its commercial credit, business and trading reputation and in its goodwill.

2. This is not, however, as in my view it might well have been, the trial of the action itself. Because the application presently before me is the trial of a preliminary issue, which by consent of the parties was ordered by Master Jones on 8th October 1996. Since the date of the framing of this issue, amendments have been made to the pleadings, although such amendment has not affected the substance of the intended debate; effectively therefore, as Counsel agree, the precise terms of the preliminary issue ought now to read as follows:

"Whether the words complained of in paragraph 3 of the Re-Amended Statement of Claim are capable of bearing the meanings alleged in paragraph 4 of the Re-Amended Statement of Claim."

3. I reproduce below the press release complained of, as pleaded in paragraph 3 of the Re-Amended Statement of Claim:

"ROH SUSPECTED OF HIDING SLUSH FUND IN HONG KONG BANK"

SEOUL, South Korea (AP) Prosecutors are investigating whether former President Roh Tae-woo is hiding illicit funds in Hong Kong-based Peregrine Investment Holdings Ltd, new reports said Saturday.

Opposition legislators have alleged that Roh received up to dlrs 150 million in kickbacks from General Dynamics Corp for buying 120 F-16 fighter jets in 1991 and hid most of the money in secret foreign bank accounts.

On Saturday, prosecutors grilled former Defence Minister Lee Jong-koo and former air force chief Chung Yong-hoo on the kickback allegation.

Investigators are already probing Swiss bank accounts allegedly held by Roh.

"We also have begun looking into the suspicion that Mr Roh is hiding money in the Peregrine securities company as well," the national news agency Yonhap quoted an unnamed prosecution official as saving.

Prosecutors were also checking news reports that Roh met Peregrine officials during his visits to Hong Kong in June and August, the official said.

Roh is now in jail on charges of accepting bribes for lucrative government contracts. Twelve industrialists were also indicted on bribery charges. If convicted, Roh could face life in prison.

Roh tearfully admitted in October to amassing dlrs 650 million during his 1988-93 term. About dlrs 104 million remains unaccounted for.

In 1991, General Dynamics, based in Falls Church, Va., won the dlrs 5.2 billion project to sell 120 F-16s as South Korea's next-generation fighter jets.

The decision surprised many military officials because the Defence Ministry had earlier decided in favour of the F/A-18s of a rival firm, McDonnell Douglass.

Prosecutors planned to question Kim Jong-hwi, former national security adviser, who allegedly played a key role in the switch to F-16s. Kim went to the United States a few days after a government probe started in 1993.

The 1993 probe found that secret presidential policy decisions on the fighter project had been leaked to General Dynamics, prosecutors said Friday.

Also Saturday, former President Choi Kyu-hah, citing presidential immunity, refused to honour the prosecution's summons to get his testimony on the 1979 military coup that brought former President Chun Doo-hwan to power.

Chun, president from 1980 to 1988, is now in jail on charges of violating the military criminal law, Choi's testimony is considered vital to proving the charges against Chun.

Choi was a figurehead president for eight months before giving way to Chun. There has been widespread speculation that he quit under pressure from Chun.

The 1979 coup was followed by a brutal crackdown on a pro-democracy uprising several months later which left at least 240 people dead.

Chun and Roh were the first presidents to face punishment for misdeed in office. On Friday, a Seoul district court approved a freeze on Roh's assets estimated at dlrs 390 million. If convicted, Roh will become the first victim of a one-year-old law that required convicted public officials to forfeit property."

4. Paragraph 4 of the Re-Amended Statement of Claim pleads that:

"the said words in their natural and ordinary meaning meant and were understood to mean that :

(1) that the Plaintiff had knowingly and dishonestly allowed Roh Tae-woo to open bank accounts with it in which he had secretly hidden illicit funds obtained by him as bribes from General Dynamics Corporation; alternatively,

(2) that there were reasonable grounds for suspecting that the Plaintiff had knowingly and dishonestly allowed Roh Tae-woo to open bank accounts with it in which he had secretly hidden illicit funds obtained by him as bribes from General Dynamics Corporation; and

(3) that by virtue of its said dishonest conduct, or because there were reasonable grounds for suspecting such conduct, the Plaintiff was under investigation by South Korean prosecutors."

5. The response by the Defendant to this plea, at paragraph 4 of the Re-Re-Amended Defence is a denial, inter alia, that the words as set out in paragraph 4 of the Statement of Claim meant or were understood to mean that which was pleaded in paragraph 4, and that they were not capable of bearing such meanings as were alleged; the pleader subsequently avers that "no dishonesty, disreputable conduct or lack of integrity was attributed by the Defendant's words to the Plaintiff" and thereafter particularises this denial.

6. It is, therefore, the joinder of issue with regard to the capability of the meaning of the meanings pleaded which has found its focus in the preliminary issue now before me. As is often the case in a branch of the law a distinguished English Court of Appeal judge recently described as having "attained a degree of refinement and sophistication besides which the equitable doctrine of the constructive trust is a model of clarity and simplicity" (per Millett L.J. in Gillick v. British Broadcasting Corporation [1996] EMLR 267), the posing of a question is a good deal easier than the furnishing of the answer. What, then, is the standard to be applied by the Court in ruling upon whether the words constituting the alleged libel are capable of bearing the meanings pleaded?

7. In this regard I have been greatly assisted by the submissions of Mr. Robert Ribeiro Q.C., leading Counsel for the Plaintiff, whose review of the applicable principles was a model of clarity; if not wiser as a result of his efforts, I am certainly far better informed. In this context he drew my attention to a series of cases, commencing with Lewis v. Daily Telegraph Ltd [1964] AC 234 (HL), effectively the locus classicus in this area, Jones v. Skelton [1963] 1 WLR 1362 (PC), Skuse v. Granada Television Limited [1996] EMLR 278 and Gillick v. British Broadcasting Corporation [1996] EMLR 267.

8. It is clear that a tribunal approaching a ruling upon whether the words are capable of the meanings attributed to those words must look at the particular words through the eyes of the hypothetical reasonable reader. Lord Reid famously put the matter thus in Lewis, op. cit., at 259-260:

"Ordinary men and women have different temperaments and outlooks. Some are unusually suspicious and some are unusually naive. One must try to envisage people between these two extremes and see what is the most damaging meaning they would put on the words in question. ... What the ordinary man, not avid for scandal, would read into the words complained of must be a matter of impression. I can only say that I do not think that he would infer guilt or fraud merely because an inquiry is on foot. And, if that is so, then it is the duty of the trial judge to direct the jury that it is for them to determine the meaning of the paragraph but that they must not hold it to impute guilt or fraud because as a matter of law the paragraph is not capable of having that meaning. ..."

9. A more contemporary description is provided by Bingham L.J. in Skuse, op. cit. (quoting Neill L.J. in Hartt v. Newspaper Publishing PLC [1989]):

"The hypothetical reasonable reader is not naive but he is not unduly suspicious. He can read between the lines. He can read in an implication more readily than a lawyer, and may indulge in a certain amount of loose thinking. But he must be treated as being a man who is not avid for scandal and someone who does not, and should not, select one bad meaning where other non-defamatory meanings are available."

10. Two other matters seem to me to be key to the present exercise: first, that the exercise is fundamentally impressionistic. It is the broad effect that counts, so that "the court should be cautious of an over-elaborate analysis of the material in issue" (per Bingham L.J. in Skuse, op. cit.) echoing the celebrated dictum of Lord Diplock in Slim v. Daily Telegraph Ltd [1968] 2 QB 157:

"... in this court three lords justices and four counsel have spent the best part of three days upon a minute linguistic analysis of every phrase used in each of the letters. If this protracted exercise in logical positivism has resulted in our reaching a conclusion as to the meaning of either letter different from the first impression which we formed on reading it, the conclusion reached is unlikely to reflect the impression of the plaintiffs' character or conduct which was actually formed by those who read the letters in their morning newspaper in 1964."

11. And second, as Mr. Ribeiro Q.C. stressed, the defamatory 'sting' is often very much a matter of the inference the reader is invited to draw from the words used. As Lord Reid expressed it in Lewis, op. cit., at 258:

"But more often the sting is not so much in the words themselves as in what the ordinary man will infer from them, and that is also regarded as part of their natural and ordinary meaning. ... The sting is in inferences drawn from the fact that it is the fraud squad which is making the inquiry. What those inferences should be is ultimately a question for the jury, but the trial judge has an important duty to perform. Generally the controversy is whether the words are capable of having a libellous meaning at all, and undoubtedly it is the trial judge's duty to rule on that. ..."

12. With regard to the drawing of inferences, Lord Devlin in Lewis, op. cit., at 277, 280, also observed:

"The lawyer's rule is that the implication must be necessary as well as reasonable. The layman reads in an implication much more freely; and unfortunately, as the law of defamation has to take into account, is especially prone to do so when it is derogatory. ... The natural and ordinary meaning of words for the purposes of defamation is not their natural and ordinary meaning for other purposes of the law. There must be added to the implications which the court is prepared to make as a matter of construction all such insinuations and innuendoes as could reasonably be read into them by the ordinary man. ..."

13. Whilst Lord Morris on the same subject expressed the position thus in Jones v. Skelton, op. cit., at p. 1371:

"The ordinary and natural meaning of words may be either the literal meaning or it may be an implied or inferred or an indirect meaning: any meaning that does not require the support of extrinsic facts passing beyond general knowledge but is a meaning which is capable of being detected in the language used can be a part of the ordinary and natural meaning of words. The ordinary and natural meaning may therefore include any implication or inference which a reasonable reader guided not by any special but only by general knowledge and not fettered by any strict legal rules of construction would draw from the words. The test of reasonableness guides and directs the court in its function of deciding whether it is open to a jury in any particular case to hold that reasonable persons would understand the words complained of in a defamatory sense. ..."

14. With these basic principles firmly in mind, I turn now to grapple with the question presently in issue. Whether or not words are capable of the meanings attributed (as opposed to whether they actually mean what they are said to mean) is a matter of law: either they are so capable or they are not, so that if one be wrong on the point, there is, perhaps, the consolation of being wrong clearly. Further, as Counsel agree, the task is to be approached on the basis of that which a judge should properly leave to a jury, so that if the words are ruled to be capable of the meanings alleged, it is for the jury to decide whether they in fact bear such meanings, or indeed any other meanings. Mr. Ribeiro Q.C. put this most attractively when he submitted that the judicial duty is to erect a notional 'ring fence' around the meanings properly ascribed to the words complained of, so that those meanings the words are not capable of bearing lie outside the fence perimeter, so to speak.

15. This, if I may respectfully say so, is an apt and useful analogy, and Mr. Ribeiro Q.C. was in no doubt that in this case his ring fence served properly to enclose the meanings as pleaded by the unidentified draftsman in paragraph 4 of the Statement of Claim. Descriptive compression rarely does justice to cogent argument, but the nub of Mr. Ribeiro's attractive submission was indeed that the press release would be understood by an ordinary reader to mean either that Peregrine was guilty of knowingly, and hence dishonestly, helping Roh Tae-woo hide the proceeds of bribes he had received, or that there were reasonable grounds for suspecting that Peregrine was guilty of such conduct, these matters leading to an investigation of Peregrine by the South Korean prosecutor.

16. In arguing his case, Mr. Ribeiro Q.C. focused essentially upon the title of the press release and upon the first eight paragraphs thereof; indeed, little heed was paid to the balance of the article after the eighth paragraph which dealt with President Roh's tearful admissions regarding his amassing of very large amounts of money during his term of office.

17. Mr. Adrian Huggins Q.C., for the Defendant, invited the Court's attention to the entirety of the article. I remind myself that it is the words of the whole article which it is pleaded bear the meanings ascribed, and that, as Mr. Huggins Q.C. suggested, it was manifestly clear that this press release was directed at the criminal conduct of President Roh; indeed, he observed that there were eleven references to the misconduct of President Roh, and but three references to Peregrine, the latter only in the context of where the funds were being placed. There was, he submitted, no allegation whatever of any misconduct on the part of Peregrine nor of actual knowledge on the part of Peregrine of any crime or wrongdoing by Roh Tae-woo.

18. Mr. Huggins Q.C. accepted the relevant principles to be adopted in approaching the issue, agreeing that the Court should refrain from detailed linguistic analysis - indeed, there was nothing between himself and Mr. Ribeiro Q.C. in terms of the fundamental approach. The difference, however, lay in the conclusion arising from the application of these principles; in a nutshell, Mr. Huggins' broad submission was that no fair and common-sense reading of the press release would lead to an inference or imputation that the Plaintiff was dishonest and knew that the monies so deposited came from corrupt bribes from General Dynamics.

19. With regard to the pleading at sub-paragraph 4(1), Mr. Huggins Q.C. did not hesitate to pitch his case high: it was simply unarguable, he submitted, that the words complained of imputed actual dishonesty or actual knowledge on the part of the Plaintiff of President Roh's criminal activities, so that (although this patently was not the standard required for the present exercise) even an Ord. 18 r.19 benchmark could be attained on this pleading.

20. With respect to the meaning pleaded in sub-paragraph 4(2), Mr. Huggins Q.C. submitted first, that not only was there no allegation whatever of any investigation into or any suspicion of misconduct on the part of Peregrine, but second and in any event, an allegation that the Plaintiff was suspected of having dealt with Roh Tae-woo in the context of the deposit of funds simply could not carry an imputation that there were reasonable grounds for suspecting the Plaintiff of having acted dishonestly or of having knowledge of any wrongdoing by Roh Tae-woo. This, he said, was a non-sequitur and constituted an unjustifiable quantum leap.

21. Given, therefore, that the two sides in this case are poles apart on the issue, what is the answer? Should a jury be directed that the words in the press release are capable of bearing the meanings attributed to them in sub-paragraphs 4(1), 4(2) and 4(3) of the Re-Amended Statement of Claim? I note here that sub-paragraph 4(3) is in two parts, one ancillary to sub-paragraph 4(1) and the other to sub-paragraph 4(2), so that, as Counsel agree, if either or both of sub-paragraphs 4(1) and 4(2) fall away, sub-paragraph 4(3) is correspondingly affected.

22. I confess that I have not found it easy to assume the mindset of the hypothetical reasonable reader possessing the various characteristics envisaged in the authorities; he (or she) I think, is not just the alter ego of the quintessential reasonable man on the Shaukiwan tram, given an apparent penchant for loose thinking, although at the same time he (or she) patently is not a creature of extremes.

23. Nevertheless, on the (I hope reasonable) assumption that the appropriate judicial mindset has been attained, I have little hesitation in finding that the words of the press release are not capable of meaning that ascribed to them in sub-paragraph 4(1), notwithstanding the persuasive and attractive advocacy of Mr. Ribeiro Q.C. In my judgment, the thrust of the article in question is clear; the words used plainly are not capable of sustaining a meaning of actual dishonesty or actual knowledge on the part of Peregrine, and I so hold. Having stated this firm conclusion, the matter is, I think, not susceptible to further elaboration.

24. I turn now to sub-paragraph 4(2). Does the purported tempering of the plea, by the addition of the words "reasonable grounds for suspecting", serve to permit sub-paragraph 4(2) to fall within Mr. Ribeiro's ring fence?

25. After some reflection, I am inclined to the view that it does not; indeed, given the firmness of my conclusion with regard to sub-paragraph 4(1), such modification of pleaded meaning within sub-paragraph 4(2) perhaps accords the Plaintiff little room for manoeuvre. The hypothetical reasonable reader of this press release would not, I think, consider that the association between Peregrine and President Roh was sufficient to impute reasonable grounds for suspicion of actual knowledge and dishonesty on the part of Peregrine in permitting President Roh to open accounts in which he had secretly hidden illicit funds obtained by him as bribes from General Dynamics. It may be that a reader 'avid for scandal' might harbour such suspicion, but this is not to the point, and I fail to see how, in the precise words of the plea, there would be "reasonable grounds" for so suspecting. To the contrary, in my judgment such suspicion, if indeed harboured, plainly would be unreasonable; the hypothetical reasonable reader in Hong Kong, a financially sophisticated city, would be likely to take the view that the corrupt politician consigning funds to the custody of any bank or other financial institution is inherently unlikely to vouchsafe the source of such corrupt funds to the recipient, whether such bank or other institution be in Hong Kong, Switzerland or anywhere else. Banks and financial institutions take large deposits of money in the course of business - that is traditionally what they do - and whilst the locus of such deposits is often likely to be the subject of investigation by pursuing regulatory authorities, the allegation of a meeting with Peregrine officials and of the making of deposits in Peregrine is not capable, in my judgment, of constituting reasonable grounds for suspecting Peregrine of actual knowledge and dishonesty with regard to this particular depositor's crimes or defalcations. To adopt the particular words of Neill L.J. in Hartt, op. cit., quoted with approval in Skuse, op. cit. by the current Master of the Rolls, the hypothetical reasonable reader "must be treated as being a man not avid for scandal and someone who does not, and should not, select one bad meaning where the non-defamatory meanings are available." As Mr. Huggins Q.C. remarked, it is inherently improbable that any President of a sovereign state choosing to conduct business with a financial institution would not be accorded the courtesy of attention from officials of that institution.

26. Accordingly, I do not accept that the hiding of funds in, and the meeting with bank officials of Peregrine, a well-known Hong Kong institution, is capable of containing the 'sting' that the Plaintiff suggests, notwithstanding Mr. Ribeiro's considerable powers of persuasion. Whilst I confess to a degree of hesitation as to the precise placement of the ring fence in this case, at the end of the day it is my view that the Plaintiff has pitched its case too high in pleading that the words are capable of bearing the meaning ascribed in sub-paragraph 4(2), and that a jury should be directed accordingly.

27. Having decided that sub-paragraphs 4(1) and 4(2) are not capable of bearing the meanings pleaded, it follows that sub-paragraph 4(3) must also fall away.

28. The consequence of my judgment on this preliminary issue is, therefore, of considerable significance to the continuation of this action, absent any application to amend the present pleading. As to this, Mr. Ribeiro Q.C. stood his ground on the basis of the pleading as drawn, and alluded to no alternative plea, although in the course of argument Mr. Huggins Q.C. did suggest that 'waiting in the wings' was an alternative formulation. Be that as it may. Both leading Counsel, I think, anticipated receipt of a judgment on the preliminary issue, with thereafter an opportunity for argument on costs and such consequential matters as might arise in light of this judgment. In the circumstances, I am content to permit matters to stand on that basis, and I will hear further submissions when required.

29. Finally, I would like to express my thanks to both Counsel for the care and precision with which they formulated their arguments.

Representation:

Mr. Robert Ribeiro Q.C., leading Mr. Anderson Chow, instructed by Messrs. Herbert Smith, for the Plaintiff.

Mr. Adrian Huggins Q.C., leading Mr. Robert Whitehead, instructed by Messrs. Victor Chu & Co., for the Defendant.