Candace Guidance Signage Ltd v. Halitech Tactile & Signage Co Ltd

HCA 138/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 138 OF 2006

______________________

BETWEEN

______________________

Before : Mr Recorder Fok, SC in Court

Dates of Hearing : 5-7 November 2007

Date of Handing Down Judgment : 20 November 2007

______________________

J U D G M E N T

______________________

Introduction

1.The Plaintiff, Candace Guidance Signage Limited, supplies and installs tactile guidance markers, which are metal discs embedded in floors and pathways to assist the visually impaired.  The Defendant, Halitech Tactile & Signage Company Limited, is a competitor of Candace in this business.

2.Candace claims against Halitech for malicious falsehood said to arise from two e-mails both dated 9 February 2004 and from a circular distributed in about mid-February 2004.  Candace claims injunctive relief and damages.

3.Halitech says it is not responsible for either the e-mails or the circular.  In any event, says Halitech, the statements contained in the e-mails are substantially true.  As to the circular, Halitech says no reasonable reader would understand the statements to refer to Candace, but in any event they are substantially true or are matters of fair comment.  In respect of both the e-mails and the circular, Halitech denies malice.  Halitech also denies Candace has lost any business as a result of the publications in question.

The publications complained of

4.The e-mails dated 9 February 2004 both had the same subject heading, namely “reference of bad list case of tactile” and their text reads as follows:-

“	This is the three bad list project of stainless steel tactile done by Candace most is standard school project of ASD so right now 39/F of ASD is now stop using the tactile from them because of the install method, special is TKO 73 standard school ARCH still not accept the finishing by Candace.”

5.The e-mails were both signed off with the name “Kenneth Kwok”, under which there was a mobile telephone number.  They were both sent from the e-mail address, [email protected].

6.One of the e-mails was addressed to Ms Vicky Mok, the purchasing officer of Dickson Construction Company Limited, whilst the other was addressed to Ms Hon Lok Ling, the estimating and procurement officer of Shui On Construction Company Limited.  Both Dickson and Shui On were contractors who had previously engaged Candace.

7.Mr Fung Chun Hung, a director of Candace, testified that Ms Mok notified him of the e-mail she had received on 10 February 2004, and it was forwarded to Candace on 12 February 2004; Ms Hon notified him of the e-mail she had received on 13 February 2004, and on that date it was forwarded to Candace.

8.Both e-mails had an attachment which was a single sheet headed “Research on Bad List Case in Hong Kong Using Tradional (sic) Method”.  There was a notation at the top left corner reading “Recent jobs research by Halitech Tactile & Signage Co. Ltd.”

9.The circular complained of is similar to the attachment to the e-mails.  It is headed “Bad List Case in Hong Kong Using Tradional (sic) Method”.  The notation “Recent jobs research by Halitech Tactile & Signage Co. Ltd.” appears at the bottom left corner.  The main part of the circular consists of two sets of photographs: that on the top has the words “Cheung Kong Centre Footbridge” written across it, whilst that on the bottom has the words “Tseung Kwan O Area 73”.  The photographs show different floor areas in which tactile guidance markers have been installed.  Each set of photographs has a cross printed through the photographs.  Underneath the lower set of photos the circular reads, “Recent job photo completed in Oct 2003 photo taken on Dec 2003” (the first three words being in bold type).

The Issues in the action

10.The following issues fall for determination:-

(1)	Was Halitech responsible for the publications complained of?
(2)	Would the statements in the circular reasonably be understood to refer to Candace?
(3)	Were the statements in those publications false?
(4)	Did Halitech publish those statements maliciously?
(5)	Has Candace suffered any loss and damage as a result of the publication of the e-mails and circular, and is it entitled to injunctive relief?

Background facts

11.Before dealing with the issues in the action, it is necessary to set out some of the background concerning the establishment and personnel involved in Halitech.

12.From April 2002 to August 2003, Candace employed Mr Kenneth Kwok as an Assistant Sales Supervisor with duties to promote its products, oversee its marketing and supervise the work of its junior salesmen.  Mr Kwok left Candace’s employment on 23 August 2003.

13.On 24 September 2003, Halitech was incorporated in Hong Kong.  The subscriber shareholders and initial directors were Ms Lau Wai Hang and Ms Chang Chor Ki, who respectively owned 51% and 49% of Halitech’s shares.  Ms Lau was and is Mr Kwok’s girlfriend.

14.Ms Chang is married to Mr Chung Wai Lun.  Between October 2001 and October 2003, Mr Chung was engaged by Candace as a sub-contractor to install tactile guidance markers supplied by Candace to several of its projects.

15.The initial shareholders and directors of Halitech remained the same until 6 April 2004 when Ms Lau Wai Hang was replaced by Ms Helen Yeung Lai Kuen.  Ms Yeung is Mr Kwok’s mother and she now owns 51% of Halitech’s shares, while Ms Chang continues to own the other 49%.  Ms Yeung and Ms Chang are the only directors of Halitech.

16.Ms Chang’s evidence was that, when it was incorporated, Halitech had four staff consisting of Ms Yeung, Ms Chang, Mr Kwok and Mr Chung.  There are now three staff plus the two directors, the three staff being Mr Kwok, who is Halitech’s sales manager, Mr Chung, who is Halitech’s project manager, and a person named Ellen, who is Halitech’s administrative assistant.  Only Mr Kwok, Mr Chung and Ellen are full time staff.  Ms Chang testified that all of the staff and directors took part in the day to day running of Halitech, including Mr Kwok, whose role was to sell and promote its products.  From time to time, Halitech has had other sales staff and it is Mr Kwok’s function to supervise the sales staff.

Issue (1) : Was Halitech responsible for the publications complained of?

17.Halitech says that the publications complained of were not published by it: it denies it sent the e-mails or authorized Mr Kwok to send them; if Mr Kwok sent them, it denies they were sent with its authority and says it was not within Mr Kwok’s authority to send them.

18.As for the circular, Halitech says that this was part of the research records it prepared to show its customers but denies that it distributed the circular to architects, contractors or other members of the public.

(a) Was Halitech responsible for the publication of the e-mails?

19.In support of Halitech’s case that it was not responsible for the two e-mails, Ms Terry Chan, counsel for the Defendant, pointed to the fact the e-mails were sent at 6.54 pm and 6.40 pm respectively and from a personal e-mail account.  Ms Chang gave evidence that Halitech’s business hours were 9 am to 5 pm and that it has a company e-mail address, which is [email protected].

20.Counsel for the Defendant also submitted it was telling that a letter before action sent on behalf of Candace was addressed to Mr Kwok personally.  She suggested this showed Candace itself regarded the e-mails as having been sent by Mr Kwok personally rather than on behalf of Halitech.

21.Whilst the times at which the e-mails were sent is a matter of record, as is the account from which Mr Kwok sent them, the evidence to which I have referred above shows a strong connection between him and Halitech.

22.In addition to the evidence concerning Mr Kwok’s obvious strong ties to the majority shareholder of Halitech and one of its two directors, first in the person of his girlfriend and latterly in the person of his mother, Ms Chang’s evidence was that Mr Kwok was given a free hand to deal with clients and could make approaches to clients without seeking approval from her first.  She also accepted that, if he were to use the company e-mail account, he would not need her approval before sending e-mails to other people.

23.In the light of the evidence of the connection between Mr Kwok and Halitech and of his involvement in its business, I have little hesitation in finding that the e-mails were sent by Mr Kwok in his capacity as sales manager of Halitech and on its behalf and I reject the contention that he was acting outside the scope of his authority in sending them.  Ms Chang accepted that when a sales manager of Halitech sees a client, the client will see him as a representative of Halitech.

24.The mere fact that Mr Kwok sent the two e-mails outside Halitech’s usual business hours and using a personal account does not, in my view, mean that he was not sending them on behalf of Halitech.  There was no evidence that Mr Kwok was in business on his own account.  The fact they were sent using a personal e-mail account rather than Halitech’s company e-mail account appears to indicate the use of a subterfuge by Mr Kwok, a point which may be relevant in the event it is necessary to consider what inferences might be drawn as to his motivation for sending the e-mails.

25.Finally, in this context, I would add that I do not think the fact the letter before action was addressed to Mr Kwok personally is significant.  Candace was entitled to address its initial complaint to Mr Kwok as the author of the e-mails but that does not preclude it from pursuing Halitech if the evidence discloses that Mr Kwok sent them on its behalf, as I have found to be the case.

(b) Was Halitech responsible for the publication of the circular?

26.Halitech did not dispute that the circular was produced by it.  The question is whether it was responsible for publishing it, in the sense of distributing it to architects, contractors and others, as contended by Candace.

27.Mr Fung stated that, in about mid-February 2004, he came across the circular when he was at a meeting with some contractors.  He recalled that the first time he saw it was after he saw the two e-mails.

28.Ms Chang gave evidence that Halitech’s sales managers would bring its promotional materials including research materials to meetings with potential clients and let those clients see those materials during the meetings.  She maintained, however, that Halitech instructed its staff they were only to take the materials out to show clients and they should not distribute them.  She did, however, accept that sometimes if a client really demanded to have the materials, then in individual cases the sales manager could be flexible and leave them with the client but, in such a case, Halitech would not know if the sales manager had done so.  She also accepted there was a chance photocopies might be left behind with the client.

29.In the light of this evidence, I have no hesitation in finding that the circular which came to Mr Fung’s attention was distributed by Halitech to contractors through one of its sales managers acting on its behalf.

30.Indeed, I further consider Ms Chang’s evidence that Halitech’s sales managers were instructed not to leave copies of promotional materials such as the circular with clients to be inherently improbable.  The circular and documents like it were clearly for the purpose of promoting Halitech as a specialist in the field of the supply and installation of tactile guidance markers and it would not have made sense for Halitech to seek to suppress such promotional material.

Issue (2) : Would the statements in the circular reasonably be understood to refer to Candace?

31.There can be little doubt that the circular related to Candace:  the only two projects identified by name are projects it had undertaken.  The question, however, is whether a reader of the circular would understand it to be referring to Candace.  In this regard, Halitech correctly points out that there is no express reference to Candace in the circular and it denies that the statements in the circular would reasonably be understood to refer to Candace.

32.Halitech submitted that the circular would not be understood to refer to Candace since a reasonable reader would see that it was merely seeking to compare traditional methods for installing tactile markers with new methods.  Mr Chung testified there is no scientific terminology commonly in use in the industry so that the terms used in the circular would not suggest a reference to Candace.  He said tactile markers of the type shown in the photographs in the circular are readily available for purchase from sources other than Candace.  Indeed, he had bought a screw in type tactile marker shortly before the trial from a shop in Reclamation Street.  On this basis, it was contended there was no reason why a reader of the circular would understand that it was referring to Candace.

33.Mr Fung’s evidence, on the other hand, was that the terms used in the circular were used in Candace’s promotional materials and, in particular, the “pull out test certificate” was a test used exclusively by Candace.  He also gave evidence the domed-shaped markers with 2 or 3 grooves on them depicted in the photographs in the circular were introduced into Hong Kong by Candace and were used by them extensively in its projects: they have, he said, come to be identified with Candace.  He said that, although they could now be readily purchased in Hong Kong, this was not the case at the time the circular was produced in early 2004.  Finally, he pointed to the fact that the two projects depicted were projects of Candace and the Cheung Kong Centre footbridge would in particular be recognisable to most traders in the field as being a project of Candace.

34.As between the evidence of Mr Fung and Mr Chung on this issue, I preferred the evidence of Mr Fung, who impressed me generally as a witness.  I accept that the terms used in the circular were identifiable as being those used by Candace and that the type of screw in markers shown in the photographs would, in early 2004, also have been capable of being understood to refer to Candace.

35.This leads to the question of whether a reasonable reader of the circular would in fact have understood it to refer to Candace.  Where a plaintiff is only identifiable by reason of extrinsic facts which are not generally known, as is the case here, there is no actionable publication unless it is shown that the words were communicated to persons with such knowledge.  The question is whether reasonable people with their knowledge would understand the publication to refer to the plaintiff: Gatley on Libel and Slander (10^th Ed.) §§7.3 and 32.17.

36.Mr Mak Heung Wing, a sales manager for a company supplying guidance tiles, gave evidence that when he was shown the circular he knew it was referring to Candace because of the terms used, the markers depicted and the reference to the Cheung Kong Centre footbridge project.

37.It was also Mr Fung’s unchallenged evidence that the market of tactile markers was a relatively new and specialised one in which there were only about 3 or 4 established companies, including Candace, which has 60% to 70% of the market, and Halitech.

38.In the circumstances, I accept that contractors reading the circular would have understood the circular to refer to Candace and I therefore find that the statements in the circular were reasonably to be understood to refer to Candace.

Issue (3) : Were the statements in those publications false?

(a) Were the statements in the e-mails false?

39.Candace complains that the e-mails contained the following false statements, namely, the statements that at the time of the e-mails:-

(1)	The 39/F of ASD had stopped using Candace’s stainless steel tactile markers; and
(2)	Candace’s finishing at TKO 73 had still not been accepted by the architect.

40.Candace’s case is that the ASD had not, as at the date of the e-mails, stopped using its tactile markers.  It refers to documents from the ASD dated both before and after the e-mails showing that Candace’s markers were, and continued after the date of the e-mails to be, approved for installation in ASD projects.

41.Halitech took two main points.  First, Halitech submitted the ASD documents relied upon were insufficient to discharge Candace’s burden of proving falsity.  In any event, Halitech contended, those documents showed that it was ASD’s normal practice to approve materials but not the method of installation.  Secondly, Halitech maintained that the statement in the e-mails that the ASD had stopped using Candace’s tactile markers was a reference to the ASD having stopped using its method of installation.

42.I am satisfied that the documents relied upon by Candace do evidence the fact that Candace’s markers had been on the ASD’s list of acceptable materials since 1 March 2002 and that this remained the position until March 2005.  Mr Fung’s unchallenged evidence was that after that date the ASD ceased to maintain a list of acceptable materials.

43.I am also satisfied that, in giving approval to Candace’s materials, the ASD also specified either that the manufacturer’s method of installation or a specific identified method of installation should be followed.  The documents provide no support for Hactile’s contention that the ASD had merely stopped using Candace’s method of installation.

44.I reject Halitech’s reading of the e-mails as meaning only that the ASD had stopped using Candace’s method of installation rather than its markers.  In my opinion, an ordinary reader of the e-mails would understand the statement in question to mean that the ASD had stopped using Candace’s markers and not just its method of installation.

45.As regards the statement that the architect had not accepted Candace’s finishing at TKO 73, Halitech’s case is that there is no correspondence or certificate from the architect to certify completion or acceptance.  It also argued that, based on photographs of the condition of the project at TKO 73 in March 2004, there was no basis for thinking the architect would have accepted Candace’s finishing.  It disputed the adequacy of Candace’s evidence that its work on the project was accepted as at 30 January 2004.

46.Against this, Candace relied on Mr Fung’s evidence that it had no contact with the architect of that project but that, instead, its contractor had confirmed acceptance of its installation of guidance markers on 30 January 2004.

47.Although Candace might have adduced more direct evidence concerning the completion of its work on the TKO 73 project, I accept Mr Fung’s evidence that Candace’s work there was completed, accepted and confirmed by the contractor on 30 January 2004.  The latter fact is supported by the job completion certificate dated 30 January 2004 counter-signed by the contractor for whom Candace was undertaking the work.  Although this document was only produced by him in the course of his oral evidence, I am satisfied it is corroborative of Mr Fung’s evidence in this regard.  I also accept his evidence that Candace was paid in full for the project on 16 March 2004 and that this would only have occurred if the relevant parties for whom the work was being done had accepted it.

48.There was no evidence that the architect had initiated any contact with Candace to register any complaint about Candace’s finishing at any time after 30 January 2004 and I accept Mr Fung’s evidence that Candace did not have any contact with the architect in respect of the TKO 73 project.  Halitech’s complaint about the lack of discovery of documentation passing between the architect and Candace concerning practical completion and a defects list presupposes the existence of such correspondence and direct contact.  In any event, it would have been open to Halitech to seek such discovery at an earlier stage of the proceedings if it thought it existed.

49.I therefore find that the statements in the e-mails were false in the two respects complained of.

(b) Were the statements in the circular false?

50.Candace complains that the following statements in the circular were false, namely the statements that:-

(1)	Candace’s job in respect of the TKO 73 project was completed in October 2003; and
(2)	The photographs of TKO 73 showed Candace’s quality of work after the work was completed.

51.Halitech contended that the evidence showed that the schools at the TKO 73 site were already open by October 2003 and this showed the installation of the markers had been completed, in the sense of being done, by that time.  It also contended that the circular was simply seeking to compare the methods of installation and to highlight the defects in the traditional methods and the remedial work that would be necessary.

52.I am satisfied that the statement in the circular that the job was completed in October 2003 was false.  I have already referred above to the evidence showing that Candace’s work was completed, accepted and confirmed by the contractor on 30 January 2004.  As at October 2003, therefore, it could not properly be described as completed.  It is correct that the word “completed” is not necessarily to be understood as a term of art but, in the context of the circular, I am satisfied that a reasonable reader would understand the statement to suggest that this was the time at which Candace had finished its work, to the point of acceptance by its client.

53.I therefore find that the statement in the circular was false in the first sense complained of, namely that it stated that Candace’s job in respect of the TKO 73 project was completed in October 2003.

54.However, I am not satisfied that the evidence demonstrates the circular was false in the second sense complained of, namely that the photographs of TKO 73 showed Candace’s quality of work after the work was completed.

55.Mr Chung testified that he took the photographs shown in the circular in respect of TKO 73 in December 2003 and I accept that is when they were in fact taken.  He also took a set of photographs of tactile markers at the TKO 73 site in March 2004.  These appeared to show that the condition of the markers was similar in March 2004 to that shown in the December 2003 photographs.

56.Candace did not produce any photographs to evidence the state of its work as at the date of its completion of the job on 30 January 2004.  No other evidence was adduced to support the falsity of the circular in this sense.

57.Finally, in respect of the issue of falsity, I reject Halitech’s alternative submission that the statement, which I have found to be false as set out above, was a matter of fair comment.

58.First, although counsel made no submissions on this issue, I am highly doubtful the defence of fair comment is an available defence to a claim for malicious falsehood as opposed to one for defamation.  Secondly, and in any event, the elements for the defence of fair comment (as to which see Cheng & Anor. v. Tse Wai Chun (2000) 3 HKCFAR 339 at 347B-J) are simply not made out for at least the following reasons: the words complained of constitute a statement of fact and not a comment; furthermore, even if they were comment, the comment is not one on a matter of public interest.

Issue (4) : Did Halitech publish those statements maliciously?

59.The relevant test was not in issue between the parties: to demonstrate malice, Candace must prove either (a) that Halitech knew when it published the words that they were false or was reckless as to whether they were true or not, or (b) that it did so for the purpose not of advancing its own interest but of injuring Candace (see Hong Kong Wing On Travel Service Ltd. v. Hong Thai Citizens Travel Services Ltd. [2001] 2 HKLRD 481 at 491H-I).

60.It was Halitech’s case that, to the extent any of the statements complained of were false, it had reasonable cause to believe them to be true.

(a) Did Halitech publish the statements in the e-mails maliciously?

61.Candace says that Mr Kwok must have known the statements in the e-mails were false because, in his position as Assistant Sales Supervisor with Candace from April 2002 to August 2003, he must have known that Candace’s tactile markers had been on the ASD’s list of acceptable materials since 1 March 2002.  There was no basis for the statement that the ASD had stopped using Candace’s markers, nor for the statement that the architect had not accepted Candace’s finishing at TKO 73.

62.In her closing submissions, counsel for Halitech made submissions addressed to whether Halitech had published the e-mails with the purpose of injuring Candace.  There was no substantive argument from Halitech in relation to Candace’s contentions that Mr Kwok must have known the statements to be false or have been reckless as to whether they were true or not.

63.It is obvious that the most important witness as to Mr Kwok’s state of knowledge at the time he wrote the e-mails is Mr Kwok himself.  However, he was not called to testify for Halitech.  This is notwithstanding his continued close connection with and employment by Halitech.

64.In the present circumstances, the observation of Saunders J in Tai Yip Dyeing Factory Ltd. v. Kong Hoi Sang [2007] 1 HKLRD 608 at 619 (§51) is, in my view, pertinent:-

“

The law is clear.  When a party elects not to call a particular witness on a point, thereby depriving the court of positive evidence as to important issues in the case, the court is entitled to draw any reasonable inference against that party, absent any explanation on its part: see British Railways Board v. Herrington [1972] AC 877 at p.930 and Grave v. GA Bonus Plc [1992] Lloyd’s Rep 716.”

65.Mr Kwok could have explained the basis on which he included the statements complained of in the e-mails and the grounds on which he reasonably believed those statements to be true.  He did not.  I am left therefore without any evidence from Mr Kwok as to why he wrote those false statements.

66.In my view, it is reasonable to infer, and I do so infer, that Mr Kwok would not have been able to provide any evidence as to the basis on which he believed those statements to be true.  I also infer that Mr Kwok would either not have been able to deny that he knew the statements in the e-mails were false or that he gave any heed to whether they were true or not.

67.In the circumstances, I find that Mr Kwok did know the statements in the e-mails were false or was reckless as to whether they were true or not and accordingly I conclude that Halitech published the statements in the e-mails maliciously.

68.As I have concluded that Mr Kwok knew the statements in question to be false, it is unnecessary to consider the question of motive to injure.  Had it been necessary to do so, I would have considered it relevant that Mr Kwok had disseminated the false statements by way of an e-mail that did not identify Halitech.  As noted above, this appears to have been a subterfuge and would support an inference that his intention was to undermine Candace’s commercial interests.  However, as I have said, it is not necessary to consider this issue and so I make no finding in this regard.

(b) Did Halitech publish the statements in the circular maliciously?

69.I have found that the circular is false in stating that Candace’s job in respect of the TKO 73 project was completed in October 2003 but not in stating that the photographs of TKO 73 showed Candace’s quality of work after the work was completed.

70.It is therefore only necessary to consider the question of malice in relation to the statement in the circular that I have found to be false.

71.Ms Chang gave evidence that the circular was the product of the joint efforts of Halitech’s staff as a whole.  Mr Chung, however, confirmed in cross-examination that it was Mr Kwok who was responsible for inserting the October 2003 date of completion in the circular.  He said he had told Mr Kwok this date and that it was based on inquiries he had made at the construction site.  He said he called in at the site office at TKO 73 and was told the work of installing the tactile markers had been completed in October 2003.  He also believed this was true since the schools were already open and he had not seen any areas fenced off as being under construction.

72.Mr Pun, counsel for Candace, submitted that I should reject Mr Chung’s evidence as to how he came to learn of the date of completion.  He submitted Mr Chung’s evidence that he had been told the completion date by someone in the site office and that he had not seen any part of the site fenced off was incredible.  He submitted that, even if Mr Chung was told the work was completed in October 2003, he did nothing to check this and so he was reckless as to the truth of this date.

73.Although Mr Chung’s evidence was not compelling, I am prepared to accept his evidence that he was told by someone on the site that the installation of the tactile markers was completed in October 2003. 

74.The evidence from the websites of two of the schools operating at the TKO 73 site indicates they did open in 2003 and, in the case of one of them, in September of that year.  Even if parts of the site were fenced off as being under construction, Mr Chung was certainly able to gain access in December 2003 to take photographs of various parts of the floor area where tactile markers had been installed and this suggests those areas at least were not fenced off.

75.For these reasons, even though he was mistaken in doing so, I am prepared to accept that Mr Chung did honestly believe, and had reasonable grounds to believe, that the installation of the tactile markers at TKO 73 had been completed in October 2003.

76.I accept that the circular was that one of the promotional materials used by Halitech’s staff to show potential clients.  It is clear that Halitech’s purpose in publishing the circular was to highlight ways in which Candace’s installation techniques were inferior.  It was doing so for the purpose of promoting its own business in competition to that of Candace.  I do not find that it published the circular for the direct and dominant purpose of injuring Candace’s business.

77.In the circumstances, I do not find that Halitech published the false statement in the circular maliciously.

Issue (5) : Has Candace suffered any loss and damage as a result of the publication of the e-mails and circular, and is it entitled to injunctive relief?

78.Candace’s pleaded case is that, as a result of the publications complained of, it suffered pecuniary loss in that four specific contracts were cancelled between February 2005 and October 2005.  It claims the loss of the estimated profits on those contracts as special damages.

79.Candace’s alternative case is that the words complained of were calculated to cause pecuniary damage to it.  Although not expressly identified as a claim relying on s.24 of the Defamation Ordinance, Cap.21, it is clear that this is the substance of the claim pleaded by Candace in paragraph 12 of its Statement of Claim.  On this basis, Candace seeks general damages.

80.Whilst at one stage counsel for Candace appeared to contend that it was open to Candace to claim both special damages and general damages under s.24 of the Ordinance for the same publication, he eventually accepted that Candace must choose between the two alternatives.  In my view, this is obviously correct: the whole purpose of s.24 is to provide a remedy in malicious falsehood despite the difficulty of proving actual loss (see Joyce v. Sengupta [1993] 1 WLR 337 at 347B-C per Sir Donald Nicholls VC (as he then was)).  Clearly, such a claim for general damages is an alternative to a claim for special damages.

81.As to the claim for special damages, there was no evidence to support the claim that the contracts in question were cancelled as a result of the publication of the e-mails or the circular.  Indeed, in the case of one of the contracts relied upon, Mr Fung’s evidence was that the reason it was cancelled was because the architect required a different method of installation.  Since the change of installation method was to a method which Candace apparently does use, it is difficult to see why this change would have led to the loss of the project.  Furthermore, there was no evidence beyond Mr Fung’s bare assertions to support the amounts claimed.  Whilst I considered him to be a generally truthful witness, I am not satisfied that Candace has adduced sufficient evidence to substantiate the pleaded special damages.  This is particularly the case given the passage of over a year from the date of the publication of the offending e-mails before the first cancellation complained of.

82.Turning to the claim for general damages, counsel for Halitech submitted that, having pleaded a claim for special damages, it was not open to Candace to pursue a claim for general damages under s.24.  She did not cite any authority for this proposition and I reject it since it seems to me to fly in the face of the very purpose for which s.24 was introduced.  The very fact that Candace has not been able to prove actual loss is the reason why it should be able to rely on s.24.  In my view, were the position as counsel for Halitech submitted, it would defeat the purpose of s.24, namely to enable the court to award more than merely nominal damages where actual loss could not be proved (see, again, Joyce v. Sengupta (supra.) at 347B-C).

83.Mr Fung’s evidence was that, as a result of the e-mails, he had to meet with representatives of the two contractors who had received the e-mails to explain the situation and to assure them of the quality of Candace’s tactile markers.  Candace was required to submit further documents and additional information to Dickson Construction in order to retain an ongoing project at the Science Park.  Although Candace did manage to retain that project, Mr Fung’s evidence was that much additional time and effort was spent by Candace to counter the effects of the e-mails.

84.I consider that the publication of the e-mails was calculated to, in the sense of being likely to, result in pecuniary loss to Candace.  Specifically, I am prepared to accept that the e-mails did cause the disruption and additional effort which Mr Fung described in reassuring the recipients of the e-mails and I am therefore prepared to infer that this resulted in some pecuniary or monetary loss to Candace.

85.In Hong Kong Wing On Travel Service Ltd. v. Hong Thai Citizens Travel Services Ltd.(supra.) at p.499, Chu J inferred such loss from three factors, one of which was the fact that the plaintiff had to deploy resources to explain the situation to its business associates and participants of its tours.

86.Counsel for Candace did not cite any authority to provide guidance on the amount of damages that might be appropriate in the present case.  Based on the fact that only one of the three factors relied upon by Chu J in the Hong Kong Wing On Travel Service case is present in this case, he suggested that an award of one-third of the amount awarded in that case would be appropriate.

87.In the absence of any other suggested approach for the quantification of damages in the present case, I will adopt this basis of estimation, imprecise though it undoubtedly is.  I will therefore make an award of HK$10,000 in respect of the malicious falsehoods contained in the e-mails.

88.Candace’s pleaded case also sought injunctive relief against Halitech.  The basis of this was that a letter had been written by solicitors for Candace demanding a retraction and apology in respect of the words complained of to which Halitech failed to reply.  Instead, Candace claimed, Halitech issued a further circular in July 2005 containing pictures which were very similar to those in the circular complained of.

89.I do not think injunctive relief is appropriate in the present case.  The further circular does not, in my judgment, amount to a repetition of the malicious falsehoods I have found to be contained in the e-mails.

90.Accordingly, I decline to order the injunctive relief and order for delivery up sought by Candace.

Conclusion

91.I find that the statements complained of in the e-mails constitute malicious falsehoods on the part of Halitech and I award the sum of HK$10,000 as general damages pursuant to s.24 of the Defamation Ordinance but decline injunctive or other relief.

92.I do not find the statements complained of in the circular constitute malicious falsehoods.

93.There appears to be no good reason why the costs of the action should not follow the event. 

94.However, it is not apparent to me why this claim was not brought in the District Court.  Even on the basis of Candace’s pleaded claim for special damages, which I have not found established, the amount of the claim would not have exceeded the District Court limit of jurisdiction. 

95.In the circumstances, I make an order nisi that the costs of this action be paid by Halitech to Candace but that such costs should be taxed on the District Court scale, if not agreed.

Mr Kevin K H Pun, instructed by Messrs Tam, Pun & Yipp, for the Plaintiff

Ms Terry Chan, instructed by Messrs Howell & Co, for the Defendant