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- Unreported Judgment
Lee v Sheen QDC 69
DISTRICT COURT OF QUEENSLAND
Lee & Ors v Sheen & Ors  QDC 69
CARRIE KA YEE LEE
RIVER CITY LEGAL PTY LTD
(ACN 164 303 093)
CHANG LONG AUSTRALIA PTY LTD
(ACN 614 186 480)
WATER LEGAL PTY LTD
(ACN 164 122 749)
JAMES DANIEL SHEEN
NSW LEGAL PTY LTD
(ACN 607 586 416)
District Court at Brisbane
8 May 2019
3 December 2018
Subject to submissions about the form of the order, I shall order
APPLICATION – CIVIL PROCEDURE – where the plaintiffs seek orders for disclosure of documents – where defendants seek to strike out various paragraphs of plaintiffs’ amended statement of claim – where plaintiffs allege that they and the defendants are in commercial competition – where defendants admit they are in competition but do not admit such competition is substantial – whether to order disclosure of addresses of defendants clients – whether to order disclosure relating to We Chat accounts – whether documents exist
Uniform Civil Procedure Rules rr 149(1)(b), 171, 223, 224
Lighthouse Forward Planning Pty Ltd & Anor v Queensland Newspapers Pty Ltd & Ors  QSC 217
Robert Bax & Associates v Cavenham Pty Ltd  QCA 53
AJH Morris QC for the applicants/plaintiffs
DB Fraser QC for the respondents/defendants
Londy Lawyers for the applicants/ plaintiffs
Nyst Legal for the respondents/defendants
- The plaintiffs, by application of the 21 November 2018, seek orders for disclosure of documents as set out in paragraphs 1(a), (b) and (c) of that application. These relate to:
- (i)addresses of clients of the defendants’ legal practices;
- (ii)documents relating to a WeChat account of the defendants; and
- (iii)the defendants’ original documents relating to the alleged defamatory message, including drafts of the document.
- The defendants, by cross-application of 28 November 2018, seek to strike out various paragraphs of the plaintiffs’ Amended Statement of Claim (“ASOC”).
- The plaintiffs are involved in an affiliated legal practice collectively referred to as Accuro Legal. They operate from five separate practices at Creek Street in Brisbane, Pitt Street in Sydney, William Street in Melbourne and from premises in Beijing and Shanghai. The first five plaintiffs are solicitors engaged in those practices. It is accepted that whilst the offices operate as a consortium under the name Accuro Legal, each practice may be under separate proprietorship. The sixth, seventh and eighth plaintiffs are corporations conducting the Brisbane, Sydney and Melbourne Offices of Accuro Legal.
- AHL Practice is also an affiliated legal practice conducted under the name AHL Legal. The first defendant is a solicitor involved with AHL Legal and a director of AHL Practice. He is also the registered owner in Australia of a number of related business names including AHL Legal. That consortium operates from 35 separate offices, including offices at Sunnybank and Southport in Queensland, in Sydney (including at Burwood), Melbourne and elsewhere including in Beijing, Shanghai and elsewhere in China. Those practices too may be under separate legal proprietorship. The second defendant is the registered owner of the business name “AHL Legal (Burwood)” and is concerned in the provision of legal services at the Burwood office of AHL Practice.
- The plaintiffs allege that the AHL Practice maintains a WeChat account in the Chinese language and that the 1st Defendant, in July 2017, used that account to publish a message defamatory of the plaintiffs which has resulted in both the individuals and the corporate plaintiffs suffering significant loss and damage. They seek damages for defamation.
- WeChat is of course a social media application largely for the use of Chinese speakers. The allegation the AHL practice maintained the WeChat account in Chinese is denied in paragraph 12 of the Amended Defence and Counterclaim (“AD”).
- In the ASOC it is alleged that Accuro Practice and AHL Practice compete for the provision of legal services to Chinese people and to Chinese speaking people. The plaintiffs allege that they and the defendants are in substantial commercial competition. In particular they allege that certain offices of the AHL Practice tend to attract clientele from the same geographic region as offices of the Accuro Practice. It is alleged that a client or potential client of each of the Accuro Practice offices would consider particular offices of AHL Practice as a suitable alternative. The defendants, whilst admitting in their AD that Accuro Practice and AHL Practice are in competition either deny or do not admit such allegations in relation to particular practices of each party.
- The non-admissions are made generally on the basis:
- The allegations are conclusory in nature and no material facts are pleaded from which the conclusion can be drawn; and
- Despite reasonable enquiries the defendants have not been able to ascertain the truth or falsity of the allegation. It is said that such enquiries include making a request for particulars by letter of 30 January 2018, to which the plaintiffs are said not to have substantially responded.
- The denials are generally made on the basis:
- (i)AHL offices are unlikely to attract clients from the same region as the Accuro Practice offices, and are not promoted to potential customers from the same region;
- (ii)the AHL offices practise in a different market and/or engage in the provision of different types of legal services.
- The relevance of the dispute concerning of the parties’ level of competition is not enunciated in the ASOC or in submissions. It seems to me of potential relevance in two ways:
- (i)if there is significant competition, this might increase the likelihood that a client or potential client of the Accuro Practice might have read the defamatory publication on the AHL WeChat website, and might perhaps have republished the allegations to others;
- (ii)the more significant the competition might mean that readers would be more likely to have instructed the AHL Practice or other unrelated lawyers, instead of Accuro Practice, or might be more likely to do so in the future, because of reliance on the publication.
- The basis of the denial in paragraph 12 of the AD that the AHL Practice maintained the WeChat account of the practice is that while there is a WeChat account for AHL Legal, being one of a number of business names owned by the first defendant, it is not maintained by the AHL Practice but by business consultants. It is said the account was initially maintained by consultants Ao, Han, Li Investment Management Consulting (“AHLI”) and from 4 May 2018 by a different management consultant, AIDI Shanghai Business Consulting (“AIDI”).
- The plaintiffs’ application as proceeded with only seeks the orders set out in paras 1(a), (b) and (c) of the application filed 21 November 2018, namely:
- Orders, pursuant to r 223 of the Uniform Civil Procedure Rules 1999 (“the UCPR”), that the defendants disclose to the plaintiffs:
- (a)the documents referred to in paras 2 to 15 of the letter from Londy Lawyers to Nyst Lawyers dated 11 September 2018 (“plaintiffs’ request for disclosure”), being documents containing the places of residence or business of the clients of the respective offices of the defendants’ legal practice (“the AHL Practice”);
- (b)the documents referred to in paras 16, 17(a), 17(b), 17(c), 17(d), 17(e) and 18(a) of the Plaintiffs’ request for disclosure, being documents in relation to the allegation in para 27(b) of the amended statement of claim that the AHL Practice maintained a WeChat account in the Chinese language, and the denial thereof contained in para 12 of the amended defence, including communications of any of the defendants with AIDI or Ao Han Lee Investment Management Consulting in relation to the establishment or maintenance of the WeChat account;
- (c)the documents referred to in paras 17(f) of the Plaintiff’s request for disclosure, being the defendants’ own copy of the defamatory message, any draft version thereof, and any further copy thereof containing any change, obliteration or other mark or feature likely to affect the outcome of this proceeding.
- The defendants have cross-applied for orders:
- That pursuant to r 171 of the Uniform Civil Procedure Rules (Qld) (“UCPR”) the following paragraphs of the ASOC filed on 15 May 2018 be struck out:
- (i)24(a) to 24(e);
- (ii)25(a) to (e);
- (iv)35(a) and (b); and
- In the alternative, the defendants seek orders pursuant to r 224 UCPR relieving them from disclosing to the plaintiffs documents relating to paras 24(a) to 24(e) and 25(a) to (e) of the ASOC. Further in the alternative, they seek orders pursuant to r 223 UCPR that the plaintiffs disclose to the defendants documents containing the residential or business addresses of the clients of the Accuro Practice and documents relating to the plaintiffs’ promotion to potential clients in the respective areas of the Accuro Practice in support of the allegations in paras 24(a) to (e) and 25(a) to (e) of the amended statement of claim.
Substantial Competition Issue
- Paragraph 1(a) of the plaintiffs’ application relates to disclosure by the defendants of documents referred to in paras 2 to 15 of a rule 444 letter from the plaintiffs’ solicitors to the defendants’ solicitors of 11 September 2018. That letter is document number 5 of Exhibit CGL to the affidavit of Charles Londy filed 21 November 2018. In summary the plaintiffs’ seek:
- documents relating to the geographic region from which clients of each of the Sunnybank, Sydney, Burwood, Campsie, Melbourne, Beijing and Shanghai offices of the AHL Practice are attracted, being documents containing the places of residence, or in the case of business clients the places of business, of the clients of those particular offices of the AHL Practice; and
- documents in relation to the allegations in para 24 of the ASOC as to the defendants’ promotion of those offices of the AHL Practice to potential clients being documents revealing their promotion of the AHL practice to potential customers of those officers and the geographic target thereof.
- In his written submissions counsel for the plaintiffs focusses on the defendants’ r.445 response in a letter 26 September 2018. (see pps 19-22 of the exhibits to the affidavit of Mr Londy). In particular senior counsel submits that the defendants’ reliance on the large and costly nature of the task involved in collating such information, and the secret or confidential nature of such information is not a valid objection to disclosure, particularly as appropriate undertakings would be given to ensure the client details were revealed only to the plaintiffs’ solicitor and to expert witnesses, and not to the plaintiffs themselves.
- In his oral submissions the plaintiffs’ counsel accepted that geographical proximity was only one factor in considering the possibility of Accuro Practice and AHL Practice being in substantial competition. He submitted that both practices are however directed at the same market share, providing legal services to Chinese people and Chinese speakers and the range of services was said to be almost identical. He submitted, by way of example, that if disclosure revealed that AHL has a lot of clients in Sunnybank, where AHL has an office, “that would be helpful. It wouldn’t be conclusive but it would lend itself to proving that they’re…fishing in our lake.” He also noted that although a solicitor in the employee of the defendants’ solicitors, Mr Sathar, had submitted in his affidavit filed in the proceedings that it would be both expensive and time consuming to provide a client list of addresses, there was in fact no indication of actual expense or of actual time involved.
- In considering the force of Mr Morris’ submission is in my view necessary to return to what I said was the likely import of the extent of competition. The allegation is relevant, as I have said, to the issue of whether or not customers or potential customers of Accuro might be likely to have read the alleged defamatory publication and whether this might cause or have caused them to have moved their services from Accuro practice to AHL practice, or to another legal practice, resulting in loss to Accuro.
- Seen it in that light it does not seem to me that the addresses of clients of the AHL Practices in Sunnybank, Sydney, Burwood, Campsie, Melbourne, Beijing and Shanghai would not be of any real relevance in an assessment of those issues. The mere fact, for example, that, as Mr Morris submitted, AHL may have customers in Sunnybank, or indeed in Beijing, Shanghai, Melbourne or Sydney, says nothing at all about the likelihood that those customers had read the alleged defamatory publication or, if they had done so, this would influence their decision whether or not to continue to engage Accuro for the provision of legal services.
- So too documents revealing the defendants’ promotion of the AHL Practice to potential clients of all or any of those offices in the geographic region thereof is not of relevance.
- The defendants’ counsel opposed making the orders as part of their application to strike out those parts of the plaintiff’s pleading to which I have earlier referred. The defendants’ application to strike out parts of the ASOC is made in circumstances in which they admit that Accuro Practice and AHL Practice are in commercial competition, but deny that such competition is substantial. The defendants’ counsel submits that disclosure of addresses does not assist with the determination of the extent of such competition and so is irrelevant. He submits that mere geographical proximity, for example, would not establish that competition was substantial at least in the absence of a pleading of the material facts relied on to show that such a conclusion could be drawn. The absence of such matters is said to be a breach of r 149(1)(b) and r 157 of the UCPR.
- In my assessment the allegation in the ASOC that particular offices of the AHL Practice tend to attract clientele from the same geographical region as a particular office of the Accuro Practice, or that they were promoted to potential clients for that same region does not make the addresses of particular clients disclosable in the circumstance of this case. Those circumstances include that the plaintiff has not in its pleading made any but a very general allegation of competition between geographically proximate offices of Accuro Practice and AHL Practice and has not attempted to show any particular tendency for those practices to attract people on the basis of geographical location or region, even if in fact they might live in the same location or region as the offices are located. Even if disclosed it is unlikely such matters would be of any real importance in the resolution of the matter, including the extent of the loss or damage suffered by the plaintiff.
- In the circumstance the plaintiffs’ application for disclosure of those addresses is dismissed. It is necessary to turn one’s mind to the defendants’ cross application to strike out relevant parts of the ASOC.
- The discretion to strike out pleadings under r 171 of the UCPR should only be exercised in clear cases where the lack of a cause of action is clearly demonstrated. See Robert Bax & Associates v Cavenham Pty Ltd  QCA 53 considered by Flannagan J in Lighthouse Forward Planning Pty Ltd & Anor v Queensland Newspapers Pty Ltd & Ors  QSC 217. At paragraph  of the Court of Appeal’s judgment in Robert Bax & Associates, White JA said:
“Rule 171 closely resembles the language of former O22 R32 Rules of the Supreme Court 1991 (Qld) which enabled the judge to strike out or amend any matter in the pleading which extended to “prejudice, embarrass or delay, the fair trial of the action.” The word “embarrass” has not been retained. Nonetheless any pleading which is difficult to follow or objectively ambiguous or creates difficulty for the opposite party in so far as the pleading contains inconsistencies, is liable to strike out because it can be said to have a tendency to prejudice or delay the fair trial of the proceeding rather than “embarrass” the opposite party.”
- The plaintiffs’ counsel submits the fact of competition is critical in a case of defamation of one legal practice and its staff by another.
- I accept that to be so although the use of the term “substantial” to describe the level of competition is in my view largely inconsequential. The point is that each practice is said to:
- Seek Chinese people and Chinese speakers as their clients
- Offer legal services in largely similar areas of legal expertise
- Have offices in a number of identical cities, and indeed suburbs in some of the Australian cities, and so attract and seek to attract Chinese people or Chinese speakers from those same cities as the clients who consult the other practice
- Consequently, such potential clients might well regard officers of each practice as suitable or alternative providers of required legal services. Whether described as “commercial competition” or “substantial commercial competition” or by another adjective such as significant, direct, fierce or real or otherwise is unimportant in determining the issues which will arise in a defamation case, including the assessment of damages.
Extent of Publication
- Paragraphs 35 and 36 of the ASOC plead that as a result of the alleged defamatory publication on the AHL WeChat account, the message has been both republished and become accessible to the general public throughout the world. It is also alleged that it is likely to continue to be so republished and disseminated in accordance with the “grapevine effect.”
- The defendants’ counsel submitted that in the absence of evidence of actual republication, such republication could not simply be inferred.
- The plaintiff’s counsel submits that what is required is a plea of “facts from which it may be inferred that the publication of the relevant website was read by third parties.” He submitted:
- That the immensity of the WeChat application and its use; and
- The evidence of the publication being accessed by third parties before it was later taken down in July strongly supported an inference of its being republished.
- The evidence in support of those assertions is to be found in the affidavit of Laura Qiao filed on 30 May 2018, especially paras 37, 54, 55 and 57 thereof.
- Difficulties in relation to the proof of republication in an internet defamation case were addressed by Flanagan J in Lighthouse Forward Planning Pty Ltd v Queensland Newspapers Pty Ltd (supra).
- His Honour noted that publication of a defamatory matter was not a unilateral act on behalf of the publisher alone. Rather, it was a bilateral act in which the publisher makes it available and a third party reads it. His Honour said at paragraph :
“If the necessary element of someone reading the publication is to be inferred then the facts from which such inference is to be drawn should be specifically pleaded… If one of those material facts is an inference that a person read the online publications then it is incumbent on the plaintiffs to plead those facts from which such an inference may be drawn. Such facts may include the number of and the period of time over which the… matters complained of were placed on the internet.”
- In my view the allegation that the alleged defamatory publication was published on the WeChat account on 6 July 2017, and that WeChat is a messaging application having over 963 million monthly active users do strongly lead to an inference that it has been read and perhaps republished as alleged.
- It is true in Ms Qiao’s evidence concerning actual hits on the site is not incorporated in the pleading to further support the inference of publication, in the bilateral sense earlier referred to. Whilst that might be done at some stage the failure to do so does not in my opinion derogate from the validity of the inference from the already pleaded facts.
- I accept that such matters as are pleaded could allow a judge to conclude that the publication or its effect had been read and perhaps republished. In such circumstances the strike out application is refused.
- In the ASOC the plaintiffs plead that AHL Practice maintained the WeChat account in the Chinese language. That allegation is denied in the AD on the basis that whilst there was a WeChat account maintained for AHL Legal that account is not maintained by the AHL Practice but by AIDI since 4 May 2018, and previously by AHLI.
- In such circumstances the plaintiff seeks disclosure of documents concerning the process of creating the published document. The defendants’ assertions concerning the establishment and maintenance of the account by AHLI, and subsequently by AIDI, is consistent with affidavits of Ms Qiao filed on 30 November 2018 and also on 30 May 2018.
- Importantly, the affidavits disclose that:
- AHLI was “controlled” by the first to fifth plaintiffs, at least up until July 2016. It should be noted, that Ms Qiao in her earlier affidavit also discloses that AIDI is a Chinese corporation of which the first defendant is the major shareholder and sole director.
- From late July 2016, AHL Legal commenced using AIDI for marketing and consulting services. Whilst not clear, it seems to me that the allegation in the pleadings concerning the WeChat account being maintained by AHLI until 4 May 2018 perhaps relates to some formal registration, but that in practical terms from late July 2016 AIDI was the relevant consultant tasked with managing the WeChat account.
- Ms Qiao is a marketing assistant with AHL Practice and used WeChat to communicate with both AIDI and AHLI.
- The nature of the WeChat application is such that she can no longer access communications, or her communication history, with those two consultants or obtain details of any individual communication.
- She has as a result not been able to locate any correspondence between herself, AIDI or AHLI pertaining to the establishment of the WeChat account or the registration of the AHL WeChat account, or concerning the change of registration from AHLI to AIDI on about 5 May 2018.
- Furthermore, she says that all correspondence with AIDI concerning the publication of the alleged defamatory article of 6 July 2017 and its subsequent removal on 25 July 2017, was via the WeChat application. In about September 2017 Ms Qi, an employee of AIDI and with whom all such communication was had, left AIDI’s employment and was deleted from Ms Qiao’s WeChat application. The consequence of that is that the whole conversation history between Ms Qiao and Ms Qi, including details of the communications themselves about the alleged defamatory article, are lost.
- In paragraph 19 of her second affidavit, Ms Qiao details significant unsuccessful attempts she has made to locate and/or recover that correspondence.
- It is in such circumstances that the plaintiffs seek the order relating to documents concerning the allegations about the WeChat account in paragraph 27(b) of the ASOC. The documents they seek disclosure of are set out in the r.444 letter from the plaintiffs’ solicitors to the defendants’ solicitors of 11 September 2018 (see paras 16, 17(a)-(e) and 18(a) thereof).
- The plaintiffs’ counsel submits the assertion by Ms Qiao that not a single relevant document can be found is “deeply implausible”. In particular it is said that Ms Qiao does not depose to any attempt to recover the messages from the consultants who acted on their behalf. Furthermore, he submitted there must “inevitably” be a paper trail of documentation concerning the engagement of the consultants, their payments including reimbursements for establishing the account and the transfer of registration from AHLI to AIDI.
- Counsel for the defendants simply submits that consistent with Ms Qiao’s affidavit, the defendants have explained the searches conducted and attempts to locate all such documents.
- Ms Qiao’s affidavit of on 30 November, it seems to me, does deal specifically with conversations she had with an administrative officer at AIDI, Penny Han in which she sought records of conversations about the relevant WeChat account with AIDI. Importantly, in view of her swearing that the effect of deleting a WeChat group or friend is the permanent loss of relevant WeChat records with that group or friend, she says Ms Han told her that AIDI also had deleted the relevant WeChat group and that no one at AIDI had copies of conversations involving Ms Qi, the person at AIDI that Ms Qiao said she had spoken to about the July 2017 article the subject of the claim for defamation.
- In such circumstances the submission that the defendant should make further disclosure of records about the issue or alternatively that an order should be made requiring the defendants to depose to:
- (a)comprehensive searches for relevant documents;
- (b)what documents they previously had and what became of them; and
- (c)what attempts have been made to retrieve such documents including attempts to obtain them from the defendants own agents
is without a proper foundation.
- In my assessment Ms Qiao has satisfactorily deposed to relevant matters and I decline to make the orders sought.
- I should perhaps add that it seems of some importance that whilst the defendants in paragraph 12 of their AD do deny they maintained the relevant WeChat account, they admit that in July 2017, being the material time, AIDI managed the WeChat account and, as I earlier stated, Ms Qiao swears this company’s sole director was the first defendant. This is consistent with a submission made to me by senior counsel for the defendant that the first defendant was involved with this company. It seems obvious to me that if the plaintiff were to allege that both Ms Qiao and Ms Qi, both referred to in paragraphs 13(b) of the AD as being the persons who arranged for the article to be posted, acted as agent for the first defendant, and for AHL Practice in doing so, that would result in an appropriate admission.
- In such circumstances para 1(b) of the plaintiffs’ application is also dismissed.
Original Copies or Drafts of the Defamatory Message
- The third part of the plaintiffs’ application concerns a request for disclosure of the defendants’ own copy of the defamatory message and any draft versions or further copies thereof containing any change, obliteration or other mark or feature likely to affect the outcome of the proceedings.
- It was accepted by Mr Fraser, counsel for the defendant, that Ms Qiao had not specifically referred in her affidavit to the fact that no such draft document existed. He submitted however that it was to be strongly inferred from her affidavit that this was the case. I accept that to be so. It seems clear to me that she is saying that the alleged defamatory document was prepared by AIDI, and the original draft was sent to her by way of the WeChat account. I infer from that that Ms Qiao did not ever have a draft written document but in the circumstances I think it reasonable to direct that Ms Qiao swear a further affidavit dealing with this aspect of the matter, namely whether or not she has ever had in her possession a draft written copy of the alleged defamatory publication either prepared by herself, Ms Qi, or other staff of AIDI, the first defendant or anyone else on behalf of AHL Practice.
- Subject to the provision of that affidavit, the plaintiff’s application in this respect is also dismissed.
- Subject to submissions about the form of the order, I shall order
- The First Defendant or Ms Laura Qiao, or other appropriate employee of the AHL Practice is to file an affidavit attesting to whether or not AHL Practice has, or has had, a written copy of the message referred to in paragraph 28 of the ASOC or has or has had any draft versions or further copies thereof containing any changes, obliteration or other mark or feature likely to affect the outcome of the proceedings;
- The plaintiffs’ application for the orders set out in paragraph 1 (a), (b) and (c) of the application filed 21 November 2018 is otherwise dismissed;
- The defendants’ application is dismissed.
- I will hear submissions as to costs.
- Published Case Name:
Carrie Ka Yee Lee, Annette Lung, Chuzi Zhang, Sandy Zhang, Zixi Li, River City Legal Pty Ltd, Chang Long Australia Pty Ltd and Water Legal Pty Ltd v James Daniel Sheen and NSW Legal Pty Ltd
- Shortened Case Name:
Lee v Sheen
 QDC 69
08 May 2019