Bawang International (Group) Holding LTD & Anor V Next

Date and Time: Tuesday, 13 April, 2021 3:13:00 PM HKT
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1. BAWANG INTERNATIONAL (GROUP) HOLDING LTD & ANOR v NEXT MAGAZINE PUBLISHING LTD -
[2016] HKCU 1213
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Bawang International (Group) Holding Ltd & Anor v Next Magazine Publishing Ltd
CaseBase | [2016] HKCU 1213
BAWANG INTERNATIONAL (GROUP) HOLDING LTD & ANOR v NEXT

MAGAZINE PUBLISHING LTD - [2016] HKCU 1213
Hong Kong Cases Unreported · 732 Paragraphs
COURT OF FIRST INSTANCE

Hon Lok J in Court
HCA 1109B/2010; HCA 1109/2010
2-6, 9-13, 16-20, 23-27, 30-31 March, 1-2, 8, 10 April, 8, 11-13 May, 25-26, 29 June, 19-21, 25, 27, 29 August
2015, 23 May 2016
Headnotes
Tort — Defamation — Libel — Meaning of alleged defamatory words — Disparaging of products of

plaintiffs — Justification — Honest comment — Malice — Publication in public interest — Injurious
falsehood — Quantum — Causation and remoteness — Double actionability — General damages —
Exemplary damages
Mr Jason Pow, SC and Mr John Hui instructed by Peter Yuen & Associates, for the 1st and 2nd Plaintiffs
Mr Benjamin Yu, SC and Ms Queenie Lau, instructed by Deacons, for the Defendant
Lok J
JUDGMENT
Index
I Background
II The defamatory meanings of the Article with reference to the Plaintiffs
(i) Legal principles in determining the meaning of the alleged defamatory words (ii) The Plaintiffs’ pleaded meanings (iii)
Words disparaging to products vis-à-vis the Plaintiffs (iv) Reference to the Plaintiffs
III Defence of justification
(i) Lucas-Box meanings pleaded by the Defendant (ii) Toxicological evidence on the alleged harmful effect of 1,4-dioxane
in BaWang Shampoo Products (a) What is 1,4-dioxane? (b) "Human studies" in respect of 1,4-dioxane (c) Regulations
and safety standards in relation to the presence of 1,4-dioxane in cosmetic products including shampoos (d) Different to
methodology to assess the health risk associated with the presence of 1,4-dioxane in consumer products (e) Is 1,4-
dioxane genotoxic? (f) MOA (Mode of Action) (g) The policy behind the default option and its limitations (h) Are the
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[2016] HKCU 1213
assessments made by NICNAS, EU Bureau and Health Canada out-dated? (i) WHO’s and HKWSD’s safety level of 1,4-
dioxane in drinking water and the ‘de minimis’ level advocated by Dr Sawyer (iii) Conclusion on toxicology evidence and
the defence of justification
IV Defence of honest comment
(i) Undisputed legal principles (ii) The "three comments" are statements of facts (iii) "Comments" not based on true facts
(iv) The first two "comments" do not meet the defamatory stings in the Article (v) Malice in publishing the "comments"
V Defence of publication in the public interest
(i) The development of the principle of "responsible journalism" (ii) Human rights jurisprudence (iii) The standard of
responsible journalism (iv) Events leading to the publication of the Article (a) How did the investigation begin? (b) How
was the investigation conducted? (c) How was the Article drafted and edited? (d) How did the Defendant seek the reply or
verification from the BaWang Group? (e) The dubious background of "Mr Chan" (v) Whether the Defendant’s reporting fell
below the standard of responsible journalism? (a) Serious nature of the allegations targeting the Plaintiffs (b) Serious flaws
in the conclusion reached by the Defendant as to the safety level of 1,4-dioxane in shampoo and its failure to verify the
scientific basis for the advocated safety limit (c) Failure to present fairly or adequately the contrary scientific view and the
reply of the Plaintiff (d) Inclusion of unnecessary defamatory accusations against the Plaintiffs (e) Failure to verify the
credibility of the information provided by the complainant (f) Other considerations (g) Conclusion on responsible journalism
VI Injurious falsehood
(i) Falsity of the statement (ii) Malice in publishing the statement
VII Quantum
(i) The actual loss of sales and profits (ii) Juridical basis in claiming for loss resulting from republications (iii) Causation and
remoteness of damages (iv) Conflict of law issue and the question of double actionability (v) Right to claim for loss of the
sales and profits in Hong Kong (vi) The effect of the said rulings on the assessment of damages (vii) General damages (viii)
Exemplary damages
VIII Conclusion
[1] This a claim for libel and malicious falsehood in respect of an article published in the Next Magazine on 14 July
2010 ("the Article") about the presence of a chemical known as 1,4-dioxane in the Plaintiffs’ shampoos.
[2] The quantum of the Plaintiffs’ claim is substantial amounting to about HK$600 million, which may be a record in
term of the quantum of a defamation claim.
[3] The trial of this case lasted for 39 days. The court has been asked to determine numerous issues, including the
concept of responsible journalism, conflict of law issues relating to the claim for damages caused by overseas third
parties’ republications, human right consideration in assessing damages resulting from a piece of investigative
journalism and the relevance of the no-reflective-loss principle in assessing the damages for defamation suffered by
the holding company and its subsidiaries. Some of these issues are novel which have not been canvassed in the
Hong Kong courts before. Apart from these legal issues, the court has to deal with substantial and complicated
expert evidence from toxicologists, chemical engineering experts, accounting experts and Mainland law experts.
Due to the complexity of this case, I find it difficult to keep this Judgment to a reasonable length.
[4] I cannot criticise the parties for overburdening the court with all these issues. After all, the subject Article had
seriously affected the business and the reputations of the Plaintiffs and the share price of the 1st Plaintiff had
dropped significantly within a few hours after the publication of the Article. On the other hand, this is the first time
that a journalist is facing such a huge claim for defamation relating to a piece of investigative journalism. The
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[2016] HKCU 1213
present case involves human right considerations such as freedom of expression and right of the public to know. All
these issues deserve serious consideration.
[5] The 1st Plaintiff is a company incorporated in the Cayman Islands whose shares are listed in the Hong Kong
Stock Exchange.
[6] The 2nd Plaintiff is a company incorporated in the Mainland with its registered office in Guangzhou. The 2nd
Plaintiff is a wholly-owned subsidiary of the BaWang Group of companies ("the BaWang Group") of which the 1st
Plaintiff is the ultimate holding company.
[7] The Plaintiffs are engaged in the business of designing, manufacturing and marketing of Chinese herbal
shampoos and hair care products, skin care products and health care products, including shampoo products under
the brand names "BaWang" and "Royal Wind" ("BaWang Shampoo Products"). The Plaintiffs’ products are sold in
the Mainland, Hong Kong and some other countries around the world.
[8] The Defendant is the publisher of a weekly Chinese magazine bearing the name "Next Magazine" ("the
Magazine") which is widely circulated in Hong Kong.
[9] The Article involved a report about the presence of an alleged carcinogenic substance known as 1,4-dioxane in
BaWang Shampoo Products.
[10] The handling reporter of the Article was one Madam Lam Yu Ting (林瑜婷)("Madam Lam"). According to
Madam Lam, the Article originated from a complaint made by one "Mr Chan" ("Mr Chan"). Because of his family
history, "Mr Chan" was concerned about the presence of 1,4-dioxine in shampoo. He therefore bought a few
shampoos in the market and sent them to surveyors for examination. The reports from the surveyors showed that
BaWang shampoo contained 27 ppm (parts per million) of 1,4-dioxane, whereas shampoos of two other brands,
Rejoice and Acene, contained 8.8 ppm and 2.9 ppm of 1,4-dioxane respectively. For the other 3 brands including
O’Naomi, the results were "not detected". After interviewing the complainant, Madam Lam purchased 3 bottles of
BaWang Shampoo Products which were later tested to have contained 10 ppm of 1,4-dioxane. She also conducted
some research about such chemical which was a confirmed animal carcinogen. Some regulatory agencies
classified the chemical as a "possible human carcinogen".
[11] In the course of her research, Madam Lam had also spoken, a few times over the telephone, with Professor
Lam Hon Wah Michael (林漢華) ("Professor Lam") who is an associate professor in the Department of Biology and
Chemistry of the City University of Hong Kong, and Dr Lau Fei Lung (劉飛龍)("Dr Lau") who is the director of the
Toxicology Training Centre in United Christian Hospital.
[12] Madam Lam produced the first working draft of the Article on about 12 July 2010. On 13 July 2010, the
Magazine sent a letter to the public relation company of the BaWang Group for comment about the presence of 1,4-
dioxane in BaWang Shampoo Products. On the same day, two reporters of the Magazine went to the head office of
the BaWang Group in Guangzhou asking for comment or explanation about the issue.
[13] The Article was published in the 1062nd issue of the Magazine dated 15 July 2010. It is common ground that
that particular edition of the Magazine was available in the market in the morning of 14 July 2010.
[14] The heading or the topic of the Article was "霸王致癌" (BaWang causes cancer), which appeared in the cover
page of the Magazine and the first page of the Article. There was also a short passage near the topic in the first
page of the Article which reads as follows:
"因成龍一句「動L」而揚名的霸王洗頭水，打着「中藥世家」旗號，標榜防脫髮配方，就算售價貴過不少歐、日名牌洗頭水
兩三成，照樣大把人捧場。去年霸王更乘勢來港上市，現時市值逾一百七十億元，創辦人陳啟源夫婦的身家更暴漲至逾百億
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[2016] HKCU 1213
元。本刊最近發現霸王旗下的多隻洗頭水，不約而同含有名為二噁烷的致癌物質；醫生表示長期接觸可導致皮膚敏感出疹，
損害肝腎功能，甚至引發癌症！"
The English translation reads:1
"BaWang shampoo, which became famous because of the slogan ‘Dong-al’ by Jackie Chan, flaunted the banners of
‘renowned family of traditional Chinese herbs" and "anti-hair fall formula’. Even though its price is 20%-30% higher than a
number of famous European or Japanese brand shampoos, it is still very popular. Last year, BaWang further advanced its
position and got listed in Hong Kong. Its current market value is in excess of $17 billion and the wealth of its founders, the
Chen Qiyuan couple, was substantially increased to over $10 billion. This magazine recently found that several kinds of
shampoo under BaWang all contained, incidentally, a carcinogen called 1,4-dioxane. Doctors indicated that persistent
contact with the substance could cause skin allergy and eruption, damage to liver and kidney functions or even cancer."
[15] The contents of the Article read as follows:
"近年，霸王洗頭水的風頭一時無兩，儼如中年男士的防脫救星。年約四十歲的陳先生，去年底全家開始使用霸王洗頭水，「
我同屋企人都開始有脫髮問題，而我哋一家由細到大都信中藥，霸王標榜中藥防脫，所以轉用霸王。
今年三月，陳先生在報章看到一則關於洗頭水含致癌物質的新聞：「有內地媒體化驗了十支內地品牌的洗頭水，居然有九支
含有致癌物質二噁烷！」惟該篇報導沒有披露品牌名稱，令全家都用霸王的陳先生憂心忡忡，「我阿嫲阿爺同姑姐都係肝癌
死，我自己有乙型肝炎，人哋話癌症隔代遺傳的機會率好高。自細阿媽已經好小心，食嘢要揀有機，會致癌的食物，好似鹹
魚更加唔會食。」
朋友見陳先生愁眉不展，遂建議他把洗頭水拿去化驗，「問咗幾間先搵到香港通用公證行有得驗二噁烷，其他例如標準化驗
所都無得驗。」他遂在百佳買了一支全新的霸王洗頭水，交予香港通用公證行化驗，並付了一千五百元化驗費。
二噁烷可穿透皮膚吸收
兩星期後，化驗報告出爐，陳先生一看之下頓時又驚又怒，「霸王咁大間公司，洗頭水居然都有二噁烷！」他遂即時棄用家
中的霸王洗頭水，但他始終想繼續用中藥洗頭水，無計可施下，惟有接連將飄柔、澳雪、O’Naomi，屈臣氏及萬寧牌出產的
中藥洗髮水拿去化驗，總共花費了七千多元。
結果，飄柔及澳雪均含微量二噁烷，故他現時選用沒有被驗出該物質的O’Naomi洗頭水，「既然人哋都可以無，咁點解霸王
咁大牌子會有呢？」
根據陳先生提供的化驗報告，霸王的二噁烷含量為27ppm（即一百萬分之二十七，或每一公升洗頭水含二十七毫升）；飄柔
首烏洗頭水則含有8.8ppm；澳雪人參靈芝洗頭水含有2.9ppm；O’Naomoi、萬寧牌及屈臣氏牌中藥洗髮水的化驗結果是「No
t
Detected」，即未能驗出含有二噁烷。本刊隨後在屈臣氏買了兩支霸王及一款同為霸王生產的追風洗頭水，未經開封便送到
香港通用公證所化驗，三支洗頭水的結果皆含有10ppm的二噁烷。
城市大學生物及化學系副教授林漢華表示，二噁烷是有害物質，「如果一次過好大劑量咁喺空氣中吸入，甚至會死。」他續
指二噁烷可穿透皮膚，再被人體吸收，「佢可以經皮膚入血，好似透過洗頭水或化妝品，長期接觸二噁烷，有可能會令肝同
腎受損，而喺動物身上，亦已證實會致癌。」聯合醫院中毒諮詢科總監劉飛龍補充：「長期接觸，皮膚可能會出疹，亦會影
響免疫系統。可以避免的話，就應該盡量避免。」
原料質素影響含量
林漢華表示二噁烷本身沒護髮或清潔功效，惟為令到洗頭水的質感比較柔滑及油潤，往往會加入聚乙二醇等甘油類化學品，
「而制造聚乙二醇的過程之中，可能用到二噁烷。洗頭水若含有二噁烷，可能是因為呢啲聚乙二醇原料上有殘留物質。」
根據美國環境保護局資料，二噁烷屬於「可能引致人類癌症」一類；按加州用作監管有害化學品的條例《第六十五號提案》
，二噁烷更直接被歸類為致癌物質，若產品含量超過10ppm，消費者有權控告生產商。
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其實多個國家如歐盟、中國及台灣均禁止生產商在個人護理產品及化妝品添加二噁烷，惟若是在製造過程中令產品受到微量
污染，則可以接受，但各地均沒界定何為微量。
霸王便以此作為擋箭牌，堅拒認錯，表示產品接照國內現行法律、法規及標準之要求規範生產。記者帶着化驗報告直闖廣州
的霸王總部，向負責人質詢為何洗頭水中含有致癌物質，惟對方多個職員均推說負責人不在。
承認早知含二噁烷
最後本刊以電話聯絡到霸王首席執行官萬玉華，她表示早已知道產品含有二噁烷：「是在原料上出現的，無可避免，全行大
部分洗頭水都有,
但含量好少，對人體唔會有害。」惟專家不認同，林漢華說：「洗頭水係日日用，而且二噁烷都幾毒，10ppm已經係危險邊
緣，20ppm以上直頭係多。」
而且，根據美國食物及衛生局資料，即使二噁烷真的在生產過程中殘留，亦可使用真空剝離(Vacuum Stripping)
辦法抽出。林漢華指出：「原料上唔一定會有殘留，簡單啲講，原料靚自然無雜質同污染。」劉飛龍續指要產品完全不含二
噁烷，生產成本可能貴五至六倍，故廠商未必願意。換句話說，覇王之所以含二噁烷，原因可能是原料質素欠佳。
飄柔及澳雪的公關回覆本刊，其產品所含的二噁烷微乎其微，不會危害人體健康，但亦表示會設法減少含量。"
In recent years, BaWang shampoo stood out from others as if it was the emancipator for prevention of hair falling in middle-
aged men. "I and my family began to have hair-falling problems. We all believe in Chinese herbs since we were small.
BaWang flaunted its banners of ‘Chinese herbs’ and ‘anti-hair falling formula’, so[we] changed to BaWang", said Mr. Chan,
who is about 40 years of age and whose family started to use BaWang shampoo since late last year.
In March this year, Mr. Chan read a newspaper article about shampoo containing carcinogens. "A mainland media
arranged to examine 10 Chinese-branded shampoo, surprisingly 9 of them contain the carcinogen 1,4dioxane!" However,
the article did not disclose the brand names, thus causing Mr. Chan, whose family all used BaWang, to be very anxious.
"My grandparents and my aunt all died of liver cancer and I personally have hepatitis B. People said cancer has high rate of
reversion. My mom has been very careful since [we were] small and would choose organic food [for us]. [We] would not eat
food that would cause cancer, like salted fish."
A friend who found Mr. Chan anxious suggested him to take the shampoo for examination. "I made inquiries with several
[laboratories] and SGS Hong Kong is the only one that provides examination for 1,4-dioxane content. Such kind of
examination is not available in other [laboratories], like [Standard Laboratory]." Mr. Chan thus bought a new bottle of
BaWang shampoo in Park n Shop, handed it to SGS Hong Kong for examination and paid the examination fee of $1,500.
1,4-dioxane can penetrate through the skin and be absorbed
Two weeks later, the examination report was ready. Mr. Chan felt scared and angry upon reading it, "BaWang is such a big
company and yet its shampoo contains 1,4-dioxane!" He thus immediately stopped using the BaWang shampoo at home,
but he still wanted to use Chinese herbal shampoo. Running out of ideas, he took all brands of Chinese herbal shampoo
including Rejoice, Acene, O’Naomi, Watson’s and Mannings to be examined, and spent a total of HK$7,000 odd [for the
examinations].
The results, [of the examinations] showed that Rejoice and Acene both contained traces of 1,4-dioxane. So he now uses
O’Naomi shampoo, in which no 1,4-dioxane was detected. Other [products] do not have [1,4-dioxane], why was it found in a
big brand like BaWang?"
According to the examination report provided by Mr. Chan, the 1,4-dioxane content was 27ppm (i.e. 27/1000000 or 27ml
per litre of shampoo) in BaWang, 8.8ppm in Rejoice polygonum shampoo, 2.9ppm in Acene ginseng and lingzhi shampoo,
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and the results for O’Naomi, Mannings and Watson’s brands of shampoo were "not detected", that is, no 1,4-dioxane
content was detected. This magazine then bought two bottles of BaWang shampoo and a bottle of Royal Wind shampoo
(also produced by BaWang) from Watson’s and delivered the bottles unopened to SGS Hong Kong for examination. The
result shows that all three bottles of shampoo contained 10ppm of 1,4-dioxane.
Lam Hon Wah, Associate Professor of the School of Biology and Chemistry of City University [of Hong Kong] indicated that
1,4-dioxane was noxious and "if one inhales a large volume of it in the air in one go, one will even die". He further indicated
that 1,4-dioxane could penetrate through the skin and then be absorbed by the human body. "It can go through the skin into
the blood. If one has persistent contact with 1,4-dioxane, say, by using shampoo or cosmetics, it may cause damage to the
liver and kidney, and it has been proved in animals that it can cause cancel." Lau Fei Lung, Director of the Toxicology
Training Centre of the United Christian Hospital, added, "If one has persistent contact [with it], one’s skin may have
eruption, and the immune system will also be affected. It shall be avoided as far as possible."
Quality of raw materials affected the content
Lam Hon Wah indicated that 1,4-dioxane itself does not have conditioning or cleansing functions. However, to make
shampoo softer and smoother, very often glycerol kind of chemicals such as polyethylene glycol would be added. "1,4-
dioxane may be used in the process of manufacturing polyethylene glycol. If shampoo contains 1,4-dioxane, it may be the
residue in the polyethylene glycol materials."
According to information from the Environmental Protection Bureau of the United States, 1,4-dioxane belongs to the kind [of
materials] that "may cause cancer to humans". According to "Motion No.65" which is the law of California governing toxic
chemicals, 1,4-dioxane is directly classified as a carcinogen. If its content exceeds 10ppm, consumers have the right to sue
the manufacturer.
In fact, a number of countries such as the EU, China and Taiwan all prohibited manufacturers to add 1,4-dioxane into any
personal skin care products or cosmetics, but it is acceptable if the product is contaminated with traces of [1,4-dioxane] in
the course of manufacturing. However, there is no definition for "traces".
BaWang thus used this as a shield and firmly refused to admit any fault. They indicated that their products were produced
according to the current laws, regulations and standards of China. Our reporter went straight to the headquarters of
BaWang with the examination reports [intending to] question the person in charge why a carcinogen was found in their
shampoo, but several staff members gave an excuse that the responsible person was not around.
Admitted that [they] knew long time ago about the 1,4-doxane content
Lastly, this magazine got in touch with Wan Yuhua, chief executive officer of BaWang, by telephone. She indicated that
they knew long time ago about the 1,4-dioxane content, "It exists in the raw materials used and is unavoidable. It is there in
most of the shampoos produced by our fellow traders but its content is minimal and will not do any harm to the human
body." Experts however disagreed. "Shampoo is used every day and 1,4-dioxane is quite toxic. 10ppm is already on the
margin of being dangerous and 20ppm is absolutely excessive." said Lam Hon Wah.
In addition, according to information from the Food and Hygiene Bureau of the United States, even if there is really residue
of 1,4-dioxane in the production process, it can be extracted by means of vacuum stripping. "There is not necessarily
residue in raw materials. Put simply, good raw materials will certainly have no impurity or contamination," indicated Lam
Hon Wah. Lau Fei Lung added that the production cost may rise by 500 to 600% if [manufacturers] are to make their
products completely free of 1,4-dioxane and producers may therefore not be willing to do so. In other words, the reason for
the 1,4-dioxane content found in BaWang products may be the poor quality of raw materials.
The Public Relations Department of Rejoice and Acene replied to this magazine that their products contained very minimal
level of 1,4-dioxane which will not cause any harm to human health, but they indicated that they would try to reduce such
content."
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[16] A caption also appeared next to a whole-page photograph of, amongst others, Mr Chan Qiyuan (the founder of
the 1st and 2nd Plaintiffs) and his wife, containing the following words:
"霸王洗頭水以中藥及天然作為賣點,但內裡卻含有致癌物質,長期使用會危害健康."
"BaWang shampoo uses Chinese medicine and natural [ingredients] as its selling points but contains carcinogen;
prolonged use will be hazardous to health."
[17] The Plaintiffs complain that the words in the Article mentioned in the preceding three paragraphs ("the Words")
are defamatory of them.
[18] The Article then went on with the listing history of the 1st Plaintiff and the family background of Mr Chan
Qiyuan, and it was queried in the Article whether Mr Chan Qiyuan did come from a family with Chinese medicine
background. It was also alleged that Mr Chan Qiyuan had made a fortune by reason of the soaring share price of
the 1st Plaintiff.
[19] The Article also contained 2 captioned boxes: one containing some technical facts about 1,4-dioxine, and the
other one listing out some incidents about the concern for the presence of 1,4-dioxine in consumer products in
recent years.
[20] The share price of the 1st Plaintiff dropped by about 14% within a few hours after the publication of the Article.
The trading of the 1st Plaintiff’s shares was suspended in the Hong Kong Stock Exchange in the afternoon of the
same day.
[21] The Plaintiffs’ main claim is one on defamation. To oppose such claim, the Defendant relies on the following
defences:
(i) the facts and allegations included in the Article are true;
(ii) certain comments made in the Article are fair comment; and
(iii) it would be in the public interest to publish the Article, thereby the Defendant is protected by the defence of publication
in the public interest or commonly referred to as the "Reynolds privilege".
[22] I will deal with these defences in the latter of this Judgment. Before I do so, I have to make a finding about the
meanings of the Words and whether the Words referred to the Plaintiffs. Whether the defences of justification, fair
comment and publication in the public interest would succeed depends on the meanings of the Words.
[23] In order to succeed in a claim for defamation, a claimant has to show that defamatory matters with reference
to the claimant have been published by a defendant.
[24] The matters published are defamatory if they expose the claimant to contempt and ridicule by others and
cause others to shun him. The matters would also be defamatory if they lower the claimant’s estimation in the eyes
of right-thinking members of society and adversely affect his reputation.4
(i) Legal principles in determining the meaning of the alleged defamatory words
[25] There is no dispute that the following principles are applicable for the court in determining the meaning of an
alleged defamatory article.
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[26] In determining the meaning, words in an article are normally construed according to their natural and ordinary
meaning, and the judge or jury has to ascertain the single meaning which the publication sued upon would convey
to the mind of an ordinary, reasonable, fair-minded reader.5
[27] The article must be read as a whole. It is well established that the context and circumstances of the publication
must be taken into account. A plaintiff cannot pick and choose parts of the publication. For example, a particular
sentence may be considered defamatory, but there may be other passages which neutralize or mitigate its sting. A
reasonable reader is assumed to have read the whole article complained of, and a defendant is entitled to have
considered as part of the plaintiff’s case the whole of the piece from which the alleged libel is extracted.6
[28] In reading the article in its entire context, the court will also bear in mind the general tenor of the entire article.
The fact that an article gives a generally uncomplimentary rendering of the claimant will obviously affect a
reasonable reader’s understanding of the specific portions or statements in the article. The court will also consider
the effect of the "visual impact" of the article on the readers.
[29] As regards the meaning of the alleged defamatory words, it is trite that it is a question of fact to be read "in the
sense in which ordinary persons, or in which we ourselves out of court… would understand them" and whether the
words are capable of defamatory meaning is for the judge.7
[30] In Jeynes v News Magazines Ltd 8, Sir Anthony Clarke MR summarised the nature of the exercise:
"(1) The governing principle is reasonableness. (2) The hypothetical reasonable reader is not naïve 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. (3) Over-elaborate
analysis is best avoided. (4) The intention of the publisher is irrelevant. (5) The article must be read as a whole, and any
‘bane and antidote’ taken together. (6) The hypothetical reader is taken to be representative of those who would read the
publication in question. (7) In delimiting the range of permissible defamatory meanings, the court should rule out any
meaning which, ‘can only emerge as the produce of some strained, or forced, or utterly unreasonable interpretation…’ (8) It
follows that it is not enough to say that by some person or another the words might be understood in a defamatory sense."
[31] It is well established that the words are to be construed in their natural and ordinary meaning, i.e. the meaning
in which reasonable people of ordinary intelligence, with the ordinary person’s general knowledge and experience
of worldly affairs, would be likely to understand them.9
[32] The natural and ordinary meaning does not rest upon any technical process of construction or analysis. In
some circumstances, the defamation does not lie in the actual words used, but in an inferential or implied meaning
that the words are capable of bearing without the need to have recourse to extrinsic facts.10
[33] It has been considered that the range of legitimate meanings is a matter of impression, "provided that the
impression is not of what the words mean but of what a jury could sensibly think they meant… Such an exercise is
an exercise in generosity, not in parsimony"11 .
[34] In defamation cases, the "single meaning rule" applies. The words complained of were deemed to bear only
one natural and ordinary meaning which was the meaning that the words would convey to the reasonable reader. In
Oriental Daily Publisher Ltd & Anor v Ming Po Holdings Ltd ,12 Lord Neuberger NPJ observed that, in ascertaining a
single meaning of the words, the first question to be considered must be: what did the statement mean? His
Lordship also said: "Conventionally, the question admits of only one answer, to be arrived at by reference to the
words used when assessed in their context, documentary, factual and common sense. This is true even where
more than one meaning is possible."13
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(ii) The Plaintiffs’ pleaded meanings
[35] In the Re-Re-Amended Statement of Claim, it is pleaded that the Words in the Article, in their natural and
ordinary meaning, meant and were understood to mean:14
(i) the 1st and/or 2nd Plaintiffs knowingly manufactured and marketed products which would, through normal and regular
use, cause serious illnesses and even cancer to users of these products;
(ii) the 1st and/or 2nd Plaintiffs knowingly used cheap and inferior raw materials in the manufacture of its products in order to
save costs even though the end product would, even through normal and regular use, cause serious illnesses and even
cancer to its users;
(iii) the 1st and/or 2nd Plaintiffs ignored or paid little regard to the health and safety of consumers who used or purchased its
products;
(iv) the 1st and/or 2nd Plaintiffs exploited legal and regulatory loopholes and relied on the absence of legal sanction or
regulation as an excuse to justify its conduct in manufacturing and marketing products which would, through normal and
regular use, cause serious illnesses and even cancer to users of those products;
(v) the 1st and/or 2nd Plaintiffs had unjustifiably refused to acknowledge that it had done anything wrong; and
(vi) by reason of the aforesaid conduct, the 1st and 2nd Plaintiffs were irresponsible, incompetent and greedy commercial
organisations which lacked commercial morality.
[36] Mr Pow SC, counsel for the Plaintiffs, submits that although there are 6 pleaded meanings, all of them are
interrelated. According to him, the 1st meaning is the core meaning and all the other meanings actually "flow" from
the 1st meaning.
[37] The 1st pleaded meaning is that the Plaintiffs knowingly manufactured and marketed products which would,
through normal and regular use, cause serious illnesses and even cancer to users of these products. The Plaintiffs
contend that such meaning contains the following "stings" on both the Plaintiffs’ products and their conduct of
business:
(i) BaWang Shampoo Products would cause serious illness or cancer through normal and regular use;
(ii) this fact was known to the Plaintiffs; and
(iii) nonetheless, they went ahead to manufacture and market such products.
[38] Mr Yu SC, counsel for the Defendant, submits that the Article does not impute the first sting as mentioned
above. According to him, the Article only carries the meaning that BaWang Shampoo Products contain carcinogenic
substance known as 1,4-dioxane and long term use of such products may have the possibility of getting cancer.
Further, it was written in the Article that in a number of places such as European Union ("EU"), Mainland and
Taiwan, it was acceptable for consumer products to contain traces of 1,4-dioxance and there was no definition for
"traces", and so the Article does not suggest that normal or regular use of BaWang Shampoo Products would cause
cancer or other illnesses.
[39] I disagree. The meaning of the Article goes far beyond that. The topic of the Article as shown in the cover
page of the Magazine and the first page of the Article clearly states that BaWang Shampoo Products cause cancer.
The artwork for the words "致癌" (cause cancer) in the first page of the Article further heightened the readers’ alarm.
The Article vividly described the awe and fear harboured by "Mr Chan" as to the prospect of developing cancer
through using BaWang Shampoo Products. In the Article itself, it has been repeated many times that prolonged and
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regular use of BaWang Shampoo Products would be hazardous to human health, causing cancer and damage to
liver and kidney and other illnesses, including the statement:
"霸王洗頭水以中藥及天然作為賣點,但內裡卻含有致癌物質,長期使用會危害健康" (BaWang shampoo uses Chinese
medicine and natural [ingredients] as its selling points but contains carcinogen; prolonged use will be hazardous to
health). Further, the Article tells the readers that the presence of 10 ppm of 1,4-dioxane in shampoo is already on
the margin of being dangerous and 20 ppm is absolutely excessive. As the Article claims that BaWang Shampoo
Products contain as much as 27 ppm of 1,4-dioxance, the clear message conveyed by the Article is that normal and
regular use of BaWang Shampoo Products would cause serious illness and cancer. I do not believe that Mr Yu is
seriously suggesting otherwise.
[40] The main dispute between the parties is whether the Article is also imputing that the Plaintiffs knew about the
alleged harm of their products but nevertheless went ahead to manufacture and market the same. Although the
Article does not expressly say so, I find that an ordinary and reasonable reader would have understood the Words
as carrying such meaning.
[41] The Article first began with stating that Madam Wan Yuhua ("Madam Wan"), who was the Chief Executive
Officer of the BaWang Group and the wife of Mr Chan Qiyuan, admitted that all along, she knew that BaWang
Shampoo Products contained 1,4-dioxane. The Article then queried why shampoos of such big brand name did
contain such substance. The Article also stated that the Plaintiffs made use of the loophole of not having a
uniformed definition of "traces" of 1,4-dioxane in shampoos and used this as a shield refusing to admit fault and
justifying the presence of that high level of 1,4-dioxane in BaWang Shampoo Products. Finally, the Article stated
that inferior raw materials might be a source for the contamination of 1,4-dioxane and manufacturer might not be
willing to increase the costs in purchasing more expensive raw materials to eliminate the presence of 1,4-dioxane in
the production of shampoos.
[42] In my judgment, the meaning of all these allegations is clear. The management of BaWang, which was a big
brand name, should have known about the harmful effects of 1,4-dioxane as alleged in the Article. However, since
there was no regulatory regime governing the presence of 1,4-dioxane in shampoos, the Plaintiffs, in order to save
costs, used raw materials of inferior or at least low quality for the production of BaWang Shampoo Products. In
other words, the Plaintiffs had made a conscious decision of using raw materials of inferior quality for the production
of BaWang Shampoo Products, which resulted in the contamination of 1,4-dioxance to a level that was harmful to
human health.
[43] It is trite law that a hypothetical reasonable reader can draw inference not only from the words used but also
from the tenor and context of the whole article. Given the general context of the Article imputing culpability on the
part of the Plaintiffs over the incident, an ordinary and reasonable reader would certainly have understood the
Article as accusing the Plaintiffs of knowing the health risks posed by BaWang Shampoo Products; hiding behind
unclear regulatory regimes; putting a blind eye to such risk for mercenary reasons; and obstinately refusing to admit
fault even when exposed.
[44] Further, the words "堅拒認錯" (firmly refused to admit any fault) could only be understood on the premise of a
"wrong" on the part of BaWang which they adamantly refused to admit or acknowledge. The suggestion of "wrong"
is echoed by the description of "便以此作擋箭牌" (used this as a shield) which gives a common colloquial nuance of
"putting up lame excuse". I therefore find that the Words do carry the 1st meaning as pleaded by the Plaintiffs.
[45] I then turn to the 2nd pleaded meaning which relates to the Plaintiffs’ use of inferior raw materials for the
production of BaWang Shampoo Products. According to the Plaintiffs, the 2nd meaning went further to impute the
following misconduct on the part of the Plaintiffs in manufacturing the Products: (i) the harmful products were the
result of using cheap or inferior raw materials; and (ii) the Plaintiffs did so with a mercenary motive to save costs.
[46] I also agree with Mr Pow that the above additional stings are borne out by the ordinary and natural meaning of
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the Words. It was suggested in the Article that a probable reason for BaWang Shampoo Products containing 1,4-
dioxane was the unsatisfactory quality of the raw materials. This was then connected to the earlier quotation of Dr
Lau that raw materials with absolutely no contamination would cost 5-6 times higher and manufacturers may not be
willing to shoulder such high costs. A combination of these two statements gave rise to a clear impression that the
problem arose out of "costs implication" and hence imputed a mercenary motive or agenda on the part of the
Plaintiffs. Reasonable readers were likely to draw such inferential meaning given the general context of the Article
imputing culpability on the part of Plaintiffs over the incident.
[47] In so far as the Defendant is seeking to rely on the phrase "原因可能是" (the reason may be) to argue that
readers would not have understood the suggestion relating to the use of inferior raw materials as a definite
assertion, I do not accept that such argument can assist the Defendant’s case.
[48] In Gatley, the learned authors said the following:15
"It is immaterial whether the defamatory imputation is conveyed by words of direct assertion or by suggestion, for
insinuation may be as defamatory as an explicit statement and even more mischievous. Similarly words may be defamatory
even though they are used in an interrogative form, and in principle the same should apply if they are used in a hypothetical
way, so long as in the context in which they are used they may reasonably be interpreted to convey the truth. The tendency
and effect of the language, not its form, is the criterion and a defendant cannot defame and escape the consequences by
dexterity of style."
[49] In my judgment, though it was not worded as a direct assertion, the Article coveys a clear message to ordinary
readers that the Plaintiffs, in order to save costs, used inferior raw materials in the production of BaWang Shampoo
Products which resulted in the contamination of 1,4-dioxane to a level that was harmful to human health. Hence, I
find that the Words would have understood by an ordinary and reasonable reader to carry the 2nd meaning as
pleaded by the Plaintiffs.
[50] The Plaintiffs’ 3rd pleaded meaning is that the Plaintiffs ignored or paid little regard to the health and safety of
consumers. In discussing the 1st and 2nd pleaded meanings, I have already found that a reasonable reader would
have understood the Article as accusing the Plaintiffs of knowing the health risks posed by BaWang Shampoo
Products; hiding behind unclear regulatory regimes; putting a blind eye to such risk for mercenary reasons; and
obstinately refusing to admit fault even when exposed. The 3rd meaning naturally flows from the defamatory stings
contained in the 1st and 2nd pleaded meanings. A manufacturer of consumer products accused of the conducts
mentioned in the 1st and 2nd meanings would certainly be considered by reasonable readers as "paying little or no
regard to the health and safety of consumers".
[51] In his submission, Mr Yu argues that the 3rd meaning is inaccurate because by quoting Madam Wan’s
response, the Words only suggest that Bawang has taken a view that consumers should not be concerned about
the presence of 1,4-dioxane in its products. However, such argument ignores the immediate context following the
said quotation. Madam Wan’s viewpoint was immediately negated by a disagreement said to have come from an
"expert" ("惟專家不認同"). Reasonable readers are bound to understand the Article as suggesting that Madam
Wan’s point of view was "unacceptable". The purported viewpoint of Professor Lam was immediately juxtaposed
which suggested 20 ppm was "clearly beyond the danger point". Far from leaving readers with the view of Madam
Wan, the Article clearly presented Madam Wan’s view as being unacceptable when further read in conjunction with
the prior nuances of "refusing to admit wrong" and "putting up lame excuse".
[52] For the above reasons, I find that when the Words are read in context, they clearly convey the message that
the Plaintiffs paid little regard to the health and safety of consumers.
[53] The 4th and 5th pleaded meanings relate to the Plaintiffs’ exploitation of legal and regulatory loopholes, and
reliance on the absence of regulatory regimes to justify their conducts. In my judgment, these meanings naturally
flow from the earlier meanings. For the same reasons given in respect of the earlier pleaded meanings, I also find
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that the Words would have been understood by an ordinary and reasonable reader to carry the 4th and 5th pleaded
meanings.
[54] The Plaintiffs’ 6th pleaded meaning is that, based on the aforesaid conducts, the Plaintiffs were irresponsible,
incompetent and greedy commercial organisation which lacked commercial morality. Again, the imputation of
"irresponsible" is borne out by the sting that the Plaintiffs knowingly manufactured products which is seriously
unsafe for consumers’ health, and sought to justify its conduct by exploiting legal and regulatory lacuna or
loopholes. The above conduct, together with the Plaintiffs’ alleged decision to use raw materials of inferior quality,
can at the very least be described as "incompetent". The Plaintiffs are further accused of using cheap and inferior
raw materials out of a mercenary motive, thus an imputation of "greedy" can readily be inferred. Finally, the
imputation of "lacked commercial morality" can be readily inferred if one considers the stings of greediness and lack
of regard for customers’ safety. Hence, I also find in favour of the Plaintiffs in respect of the 6th pleaded meaning.
[55] Based on my finding on the meanings of the Words contained in the Article, it is obvious that these meanings
are defamatory to the Plaintiffs. It cannot be seriously argued that such meanings do not lower the Plaintiffs’ status
in society and in the eyes of the public.
(iii) Words disparaging to products vis-à-vis the Plaintiffs
[56] The Plaintiffs rely on two causes of action, namely libel and injurious falsehood. One of the main distinctions
between these two causes of the action is that words which merely disparage a person’s goods or property, but in
no way reflect on his personal or trading character, are not defamatory; whereas a defendant who maliciously
published a false statement in disparagement of another person’s goods may be liable for malicious falsehood.16
[57] To oppose the claim for libel, the Defendant therefore seeks to argue that the Plaintiffs cannot sue for such tort
as the Words are disparaging merely of the products, namely BaWang Shampoo Products, and not against the
Plaintiffs. Mr Yu relies on the classic exposition of the distinction between libel and malicious falsehood as set out
by Lord Esher MR in South Hetton Coal v North-Eastern News Association 17 to argue that the imputation in the
Article was only with regard to the Plaintiffs’ goods only, namely BaWang Shampoo Products were hazardous to
human health, and so the proper cause of action against the Defendant should be one based on malicious
falsehood.
[58] However, it is trite law that a statement which on its face is a disparagement of goods may still be read by
reasonable readers as also disparaging the claimant’s conduct and reputation. This is especially true when the
claimant in question is the "manufacturer" of the goods disparaged. In Gatley, the learned authors said:18
"Thus an action will lie for an imputation that a trading company is in an insolvent condition, or that the company or its
directorate is composed of alien enemies. So an imputation on the goods sold or manufactured by a trading company may
involve a reflection on the company in the way of its business, and if a statement be made as to the mode in which a
trading company conducts its business, such as to lead people of ordinary sense to the opinion that it conducts its business
in a dishonest, improper or inefficient manner, the law is the same as in the case of an individual, and the company can
maintain an action without proof of special damage."
[59] A libel on a thing may therefore constitute a libel on a person, because the language may import malpractice
or other impropriety on the part of the person who manufactures or sells the goods. That is the reason why the
learned authors in Gatley said: "Care should however be taken not to read too much into Lord Esher’s words"19 .
Examples of some of the imputations on goods reflecting the conduct of a company’s business can be found in
Gatley at §2.48.
[60] There is also a local decision on this particular issue. In Ming Kee Manufactory Ltd v Man Shing Electrical
Manufactory Ltd20 , the plaintiff’s competitor (the defendant) issued a letter to certain companies who were
customers of both the plaintiff and defendant, advising that the plaintiff’s electrical products were fitted with
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unapproved fuselinks and were being withdrawn from the market. It was argued by the defendant that any
disparagement related only to the plaintiff’s goods and hence the plaintiff’s reputation could not be defamed by the
words used. However, DHCJ Jones (as he then was) held that the offending words of the defendant’s letter were
not merely disparaging of the plaintiff’s goods but were disparaging of its reputation because the necessary
inference from the letter was that the use of unapproved fuses was deliberate or negligent, and the use of
unapproved fuses affected a product’s safety and was not something a reputable manufacturer would do. Under
such circumstances, disparagement contained in the defendant’s letter went well beyond merely that of the
plaintiff’s goods.
[61] Applying the same approach, looking at the nature of the accusation that "Bawang Shampoo Products can
cause serious illness and even cancer" in the entire context of the Article, reasonable readers could only have read
them as imputing culpability on the part of the Plaintiffs: they were either deliberate, reckless or negligent in respect
of the safety of their products. The accusation that "Bawang Shampoo Products can cause serious illness and even
cancer, and is unsafe for consumer use" is clearly something which a reasonable reader of the Article would regard
as something which a reputable manufacturer would not do. In other words, it is clear that a reasonable member of
the public would no longer regard a manufacturer of cancerous and unsafe shampoo products as reputable. The
presentation of this accusation went beyond mere disparagement of Bawang Shampoo Products alone. The Words
surely reflected badly on the trade and business reputation of the Plaintiffs.
[62] Furthermore, the aforesaid accusation is just one of the several imputations contained in the Article. The
Article also accused the Plaintiffs of:
(i) knowingly manufactured and sold such unsafe products without regard to customers’ health;
(ii) using cheap and inferior raw materials in order to make mercenary gain;
(iii) exploiting the legal lacuna or loopholes as excuse for their conduct; and
(iv) refusing to admit their wrong when confronted.
[63] All these additional allegations went far beyond disparaging Bawang Shampoo Products and surely reflected
on the way in which the Plaintiffs carried on their business of manufacturing and selling the Products. Even the
Defendant’s own witness, Madam Lam, agrees in her testimony that if someone suggests that a product is harmful
to health, and that this product was manufactured by a company, it is a serious accusation against the company
itself. Hence, the Words are clearly actionable in libel.
(iv) Reference to the Plaintiffs
[64] Another requirement for a cause of action in libel is that the defamatory words must be with reference to the
claimant or claimants.
[65] There is no dispute that the Article refers to the 1st Plaintiff being the holding company of the BaWang Group.
[66] There is no express reference to the 2nd Plaintiff in the Article. However, the Plaintiffs rely on the following
evidence to show that persons acquainted with the Plaintiffs would reasonably believe that the 2nd Plaintiff was
referred to in the Article:
(i) information provided in the prospectus and the annual reports of the 1st Plaintiff showing that the 2nd Plaintiff was the
manufacturer of BaWang Shampoo Products and the main operating subsidiary in the BaWang Group; and
(ii) the packaging of BaWang Shampoo Products indicating that the 2nd Plaintiff was the manufacturer of the products.
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[67] So far as the reference to the 2nd Plaintiff is concerned, the following legal principles are relevant:
(i) the primary test is "whether the plaintiff may reasonably be understood to be referred to by the words";21
(ii) where the plaintiff is not specifically named in the defamatory statements, the test is whether persons acquainted with
the plaintiff would reasonably in the circumstances believe that the plaintiff was referred to in the article;22
(iii) it is not necessary to adduce direct evidence from persons acquainted with the plaintiff to say that they understood the
words as referring to the plaintiff, and the court is entitled to infer from all the evidence that there were probably persons (to
whom the words were published) who would reasonably believe that the defamatory statements refer to the plaintiff;23
(iv) a corporation may be defamed and its business damaged even though the readers have no idea of its formal legal
name. It is sufficient to prove publication to persons who "would know who the owners were", and this requires identification
of ownership and the plaintiff, but does not require knowledge of the plaintiff’s name;24
(v) if a defamatory statement made of a "class or group" can reasonably be understood to refer to every member of it, each
one has a cause of action25 : an example is when a defamatory statement is made in respect of a "group of companies";26
and
(vi) however where the words complained of do not specifically indentify the claimant company and that company is one of
several in a larger group with similar names, the claim may fail unless a reasonable person could think that the claimant
company was sufficiently referred to or that the words sufficiently identified all, or some of, the companies in the group.27
[68] The Article refers to "BaWang", though there is no express reference of "BaWang" as a group of companies.
The 1st Plaintiff is the holding company of the BaWang Group listed in the Hong Kong Stock Exchange. Being a
listed company of considerable size, a reasonable reader acquainted with the Plaintiff should have understood that
the BaWang businesses in Hong Kong and the Mainland were actually operated through its subsidiaries, though
they might not know the exact names of the various subsidiaries involved. Even someone acquainted with Plaintiffs
might not have bothered to read all the details in the prospectus and the listing documents of the 1st Plaintiff in order
to ascertain the names of each subsidiary.
[69] From the nature of the alleged defamatory statements and the context of the entire Article, which was about
an attack on the quality of BaWang Shampoo Products, reasonable readers should have understood that the
allegations contained in the Article were directed against the holding company and the other subsidiaries in the
BaWang Group responsible for the manufacturing and marketing of BaWang Shampoo Products in Hong Kong
including the 2nd Plaintiff. As the 2nd Plaintiff was the main operating subsidiary responsible for the manufacturing of
BaWang Shampoo Products in Hong Kong, I find that the Article did refer to the 2nd Plaintiff even though the
general public might not know its specific name.
[70] Mr Yu submits that the 2nd Plaintiff cannot maintain a cause of action for libel because there is no direct
evidence that readers of the Article identified the publication with the 2nd Plaintiff. Relying on Palace Films Pty Ltd v
Fairfax Media Publications Pty Ltd 28, a decision of the Supreme Court of New South Wales, Mr Yu argues that it is
necessary for the 2nd Plaintiff to establish that it was identified by readers with knowledge of extrinsic facts at the
time of the publication or read the public information concerning the 2nd Plaintiff.
[71] I disagree. Palace Films is a case applying the principles of Channel Seven Sydney Pty Ltd. v. Parras 29 upon
its specific facts. In Palace Films, the court held that reference in the statement complained of to "Palace Film" was
not enough, without resort to extrinsic facts, to establish sufficient reference to the plaintiff company. As any person
with knowledge of the extrinsic facts would also have known that Palace Films Pty Ltd permitted the name "Palace
Films" to be used in connection with film distribution to another corporate entity, Palace Enterprises Pty Ltd, which
conducted the film distribution business discussed in the matters complained of, the particulars provided were
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therefore not capable of identifying the plaintiff. In other words, there might be several entities which might be
related to the name "Palace Film", and there was uncertainty as to which entity the libel referred to.
[72] The present case is quite different. There was no confusion that the attack in the Article was directed against
the holding company and the subsidiaries responsible for manufacturing and marketing of BaWang Shampoo
Products in Hong Kong, and so the Plaintiffs should not be required to adduce other extrinsic evidence to prove that
the readers had detailed knowledge of the corporate structure of the BaWang Group and the specific names of the
subsidiaries responsible for manufacturing and marketing of BaWang Shampoo Products in Hong Kong.
[73] Furthermore, Palace Films reinstates the principle that in order to establish reference to the claimant, in case
of uncertainty (which is not the case here), the claimant only need to establish that at least one person to whom the
article was published understood from extrinsic facts that the article referred to that plaintiff.30 In the present case,
there is no dispute that the 2nd Plaintiff was clearly stated in the listing documents of the 1st Plaintiff and the
packaging of BaWang Shampoo Products as the manufacturer of the Products. As listing of the 1st Plaintiff had
attracted a lot of publicity in Hong Kong and BaWang Shampoo Products were widely sold and consumed in Hong
Kong, I agree with Mr Pow that such undisputed evidence is sufficient for the court to draw an inference that there
must have been at least one person who would have knowledge of the 2nd Plaintiff being the manufacturer of
BaWang Shampoo Products and who would have read the Article. In other words, it is not necessary to call direct
evidence from a particular reader to establish reference, which can be established by implication from the
established facts in the case.
[74] For the above reasons, I am satisfied that an ordinary reader would have understood the Words as referring to
the 2nd Plaintiff which was the manufacturing arm of the BaWang Group. Although such finding allows the 2nd
Plaintiff to maintain a cause of action for libel against the Defendant, it may have serious implication on the issue of
quantum as to whether the 1st Plaintiff should be allowed to recover the loss suffered by its subsidiaries responsible
for the distribution of BaWang Shampoo Products in Hong Kong. I will deal with such matter in length in the latter
part of this Judgment on quantum.
[75] It is not disputed that the Article was published by the Defendant. As the Words in the Article are defamatory
with reference to the Plaintiffs, they can maintain a cause of action in libel against the Defendant unless the latter
can establish any of the pleaded defences.
[76] The first pleaded defence is justification. The burden would be on the Defendant to establish such defence.
(i) Lucas-Box meanings pleaded by the Defendant
[77] The Defendant has pleaded alternative Lucas-Box meanings31 about the contents of the Article and is seeking
to justify those meanings:32
(i) the presence of 1,4-dioxane in shampoo can harm the health of those using such shampoo, including harming the users’
livers or kidneys, or even causing cancer;
(ii) several kinds of shampoo sold under the brand name of "霸王" ("BaWang") contain the substance 1,4-dioxane;
(iii) the levels of 1,4-dioxane in some of the shampoos sold under the brand name of "霸王" ("BaWang") were greater than
those found in various other shampoos sold to the public;
(iv) a possible cause of the presence of 1,4-dioxane in shampoos is the poor quality of raw materials used in the production
of the shampoos;
(v) some manufacturers and/or vendors of shampoos, such as Rejoice and Acene, have expressed willingness to reduce
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the content of 1,4-dioxane in their products but the Plaintiffs take the view that the presence of 1,4-dioxane in shampoo is
unavoidable, minimal and not harmful to users; and
(vi) although the Plaintiffs knew that shampoos sold under the brand name of "霸王" ("BaWang") contained 1,4-dioxane, the
Plaintiffs were not concerned about the health and safety of consumers who used or purchased their products because the
levels of 1,4-dioxane in their shampoos were, according to the Plaintiffs, within legal safety limits; and
(vii) the Plaintiffs did not acknowledge that the presence of 1,4-dioxane in shampoo could harm the health of those using
such shampoo.
[78] Based on my finding on the meanings of the Article, I am satisfied that the Words, in their ordinary and natural
meaning, bear stings defamatory to the Plaintiffs. In considering the defence of justification, the court then has to
determine: (i) whether Words bear the Lucas-Box meanings as contended for by the Defendant; (ii) if so, whether
as a matter of fact that any of all of the Lucas-Box meanings is true; and (iii) whether the proved meanings are
sufficient to meet the libellous stings conveyed by the Words in the Article. It is only when each of the stings is
properly met with true facts that the defence of justification succeeds.33
[79] The 1st pleaded Lucas-Box meaning seems to suggest that any concentration or amount of 1,4-dioxance in
shampoo can harm the health of users, even causing cancer. However, such a sweeping statement cannot be true
because the Defendant’s own toxicology expert accepts that concentration below a certain limit has "de minimis"
health risk.
[80] On the first day of the trial, the Defendant therefore added the following particulars in the pleading restricting
the pleaded meaning:34
"Regular and continuous use of shampoo which contains 1,4-dioxane at 6.4 ppm or 10 ppm or 27 ppm of 1,4-dioxane
materially increases the risk of developing cancer."
[81] Hence, the meaning that the Defendant now seeks to justify is that shampoo containing 6.4 to 27 ppm of 1,4-
dioxane can "materially increase" the risk of cancer. As I see it, this issue is the main battlefield between the parties
so far as the defence of justification is concerned. The question has to be resolved with the help of expert evidence
on toxicology, which I will deal with in details in the latter part of this Judgment.
[82] The 2nd pleaded Lucas-Box meaning is uncontroversial as it is common ground that BaWang Shampoo
Products did contain "traces" of 1,4-dioxane. However, there is a serious dispute between the parties as to whether
such level of 1,4-dioxane does pose a health risk to consumers. It is clear from the Words in the Article that the
level or concentration found in BaWang Shampoo Products was hazardous to human health, and so the justification
of the 2nd Lucas-Box meaning per se cannot meet the stings in the Article. Ultimately, the court has to resolve the
question as to whether regular and continuous use of BaWang Shampoo Products would materially increase the
risk of developing cancer.
[83] The Defendant’s 3rd pleading meaning is that the levels of 1,4-dioxane in some of the BaWang Shampoo
Products were greater than those found in various other shampoos sold to the public.
[84] Again the issue here is not whether the levels of 1,4-dioxane found in BaWang Shampoo Products were
higher than those found in other shampoos. The most important sting conveyed by the Article is that the levels of
1,4-dioxane found in BaWang Shampoo Products were dangerous to human health, and so the comparison of the
levels of 1,4-dioxane in different brands is neither here nor there. Ultimately, the court has to resolve the basic
question so as whether regular and continuous use of the BaWang Shampoo Products would materially increase
the risk of developing cancer.
[85] However, one of the factual issues which may be relevant to the 2nd and 3rd Lucas-Box meanings is the
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reliability of the test results provided by the complainant "Mr Chan" to Madam Lam. According to the SGS test
reports, 6 bottles of shampoo of different brands were found to have contained the following levels of 1,4-dioxane:
(i) BaWang: 27 ppm; (ii) Rejoice: 8.8 ppm; (iii) Acene: 2.9 ppm; (iv) O’Naomi, Mannings, Watson: not detected. As 3
bottles of BaWang Shampoo Products independently tested by the Defendant were later found to have contained
only 10 ppm of 1,4-dioxane, there are factual issues as to whether the BaWang shampoo submitted by "Mr Chan"
for testing ("the Dubious Sample") did in fact contain 27 ppm of 1,4-dioxane, and whether the levels of 1,4-dioxane
found in BaWang shampoo Products were indeed higher than those found in other brands.
[86] In my judgment, it is not necessary for the court to resolve these factual issues in considering the question of
justification. So far as this particular defence is concerned, in order to meet the stings conveyed by the Article, the
key question is whether regular and continuous use of BaWang Shampoo Products would materially increase the
risk of developing cancer or other illnesses. Whether BaWang Shampoo Products did contain a higher level of 1,4-
dioxane than the other brands is quite irrelevant. In answering such key question, both toxicology experts agree that
10 ppm, contrary to what was said in the Article, is not the proper safety limit. According to the Plaintiffs’ expert,
shampoo containing less than 100 ppm, or desirably 30 ppm, of 1,4-dioxane should be considered as safe,
whereas the Defendant’s expert is of the view that shampoo containing as little as 6.4 ppm is still unsafe. In such
circumstances, whether the Dubious Sample did contain as much as 27 ppm of 1,4-dioxane becomes an academic
issue.
[87] On the other hand, whether the Article should contain the reference to 27 ppm may be a matter relevant in
considering the issue of responsible journalism. In the latter part of this Judgment dealing with the defence of
publication in the public interest, I will deal with the possibility of tampering with the dubious samples submitted by
"Mr Chan" for testing and whether Madam Lam should include the test result of 27 ppm in the Article.
[88] In any event, the Defendant would bear the burden of establishing the facts in support of the defence of
justification. If, contrary to my analysis above, it would be necessary for the court to make factual findings as to: (i)
whether the Dubious Sample submitted by "Mr Chan" for testing did contain 27 ppm of 1,4-dioxane; and (ii) whether
the level of 1,4-dioxane found in BaWang shampoo was higher than those of the other brands, it would be the
burden on the Defendant to establish these facts. Based on the various dubious features about the samples
submitted by "Mr Chan" for testing as pointed out by me in the latter part of this Judgment on the issue of
responsible journalism, I find that the Defendant has failed to prove these facts in support of the defence of
justification.35
[89] The Defendant’s 4th pleaded meaning is that a possible cause of the presence of 1,4-dioxane in BaWang
Shampoo Products is the poor quality of raw materials used in the production of the shampoos.
[90] The evidence from the chemical engineering experts is most relevant to this particular issue. The Plaintiffs’
expert is Dr Richard Parent (who is also the Plaintiffs’ toxicology expert)("Dr Parent") and the Defendant’s expert is
Mr Robin Jones ("Mr Jones"). There is an issue as to whether Dr Parent is a qualified expert on chemical
engineering. As there is substantial interplay between toxicology and chemical engineering and Dr Parent had
related working experience in this field, I accept him to be a qualified expert in chemical engineering. In any event, I
am putting very little weight on his evidence because of the lack of relevancy to the remaining live issues about the
manufacturing process of BaWang Shampoo Products.
[91] The Defendant seeks to rely on the particulars pleaded in §§10(15) and 10(15A) of the Defence36 to justify its
4th Lucas-Box meaning.
[92] In §10(15), the Defendant relies on "the lack of 1,4-dioxane in 3 of the shampoo allegedly tested by SGS" as
the only factual basis of an inference that the cause of presence of 1,4-dioxane in Bawang Shampoo Products was
possibly caused by poor quality of raw materials. I agree with Mr Pow that this is plain non sequitur.
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[93] First, it is not disputed that the fact that SGS stated the 1,4-dioxane level to be "not detected" in a particular
shampoo sample does not mean that it contains no 1,4-dioxane. It just means that it contains less than 2.5 ppm of
1,4-dioxane, which is the minimum detectable level of the SGS testing equipment.
[94] Second, as agreed by Mr. Jones himself, it is not possible to ensure the complete removal of 1,4-dioxane from
the ammonium laureth sulfate ("ALS"), which is indisputably a very common ingredient for making shampoo. So
even the best ALS available in the world would contain traces of 1,4-dioxane. Its presence in shampoo products is
inevitable. Therefore, the "quality" of the raw materials is not the cause of the presence of 1,4-dioxane in Bawang
Shampoo Products. Rather, it is the "type" of raw material involved.
[95] Third, the evidence of Madam Jiang Ri Qiong (蔣日瓊)("Madam Jiang"), the formula engineer of the BaWang
Group, dispels the Defendant’s allegation that the 2nd Plaintiff manufactured BaWang Shampoo Products using raw
materials of poor quality.
[96] As stated in the Affirmation of Madam Jiang, the presence of 1,4-dioxane in Bawang Shampoo Products is
due to a necessary ingredient, ALS, which forms 25% by volume of the final shampoo products. This is confirmed
by the experts. The 2nd Plaintiff had a supplier vetting process, and Hunan Resun "湖南麗臣"("Hunan Resun"), the
chosen supplier which had about 20 years’ experience in supplying ALS, had both the requisite equipment and
experience in producing high quality ALS and controlling the amount of 1,4-dioxane. The evidence also shows that
Hunan Resun had a good track record with many international brands including Johnson & Johnson, Colgate,
Procter & Gamble and Uni-lever.
[97] The ability of Hunan Resun to be a reliable supplier of high quality raw material is not challenged in cross-
examination. In particular, Mr. Jones opines that Hunan Resun gives the appearance of a modern industrial plant
and is capable of producing raw materials to a good standard.
[98] As at July 2010, Hunan Resun had contractually guaranteed to the 2nd Plaintiff that the ALS supplied would
not contain more than 40 ppm of 1,4-dioxane. As ALS forms 25% by volume of the final shampoo product, the level
of 1,4-dioxane in the final product should be in the region of 10 ppm.37 According to Madam Jiang, the contractual
guarantee of 40 ppm was technically the best that ALS suppliers in the Mainland vetted by the 2nd Plaintiff were
able and willing to contractually guarantee, a matter which has not been challenged by the Defendant. There is also
no evidence that in 2010, there was another ALS supplier which was willing to guarantee a 1,4-dioxane
concentration of lower than 40 ppm. Under such circumstances, the raw material ALS sourced from Hunan Resun
that the 2nd Plaintiff used in July 2010 in manufacturing BaWang Shampoo Products was already the best quality
that the 2nd Plaintiff could obtain in term of the minimisation of 1,4-dioxane concentration. Further, Madam Jiang
testifies that over the years, the 2nd Plaintiff kept negotiating and working with the ALS suppliers, and with
advancement in technology and skills, Hunan Resun was able to guarantee as low as 20 ppm of 1,4-dioxane since
early 2013.
[99] There is also complaint that there was inaction on the part of BaWang to deal with the problem relating to
presence of 1,4-dioxane in shampoo. According to the Defendant, it was doubtful whether the management of
BaWang had given specific instruction to Madam Jiang to reduce the 1,4-dioxane in BaWang Shampoo Products, in
particular after the publication of the newspaper report about the presence of 1,4-dioxane generally in the
shampoos marketed in the Mainland in Guangzhou Daily on 15 March 2010. Further, Madam Jiang does not know
about all the 1,4-dioxane incidents mentioned in the news articles obtained by Madam Lam during her research.
[100] But according to Madam Jiang, from 2008 onwards, the 2nd Plaintiff had been trying to improve the shampoo
formula and to see if the level of 1,4-dioxane could be reduced, including the formula suggested in an email from
Acene. However, doing so would compromise the quality of the shampoo products, for example making the final
product not stable and not foamy, resulting in the possible non-compliance with the shampoo implementation
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standard QB/T 1974 required by the Mainland authorities. Mr Jones agrees that reformulation would involve a
change in the property or quality of the shampoo.
[101] During cross-examination, it has been suggested that the 2nd Plaintiff could lower the contractual guarantee
of 40 ppm to, say 30 or 20 ppm, by just increasing the price. This is because Hunan Resun could either just
disregard a batch which contained more than the contractually guaranteed concentration, or mix a "good" batch
with a "bad" batch (as suggested by Mr. Jones) to get an average which is within the contractual limit. But as
Madam Jiang explains, it is not a question of price, but a question of technology. She has already explained that as
at 2010, the state of technology of Hunan Resun was that it could not make a guarantee of concentration of lower
than 40 ppm. The fact that Hunan Resun could, in some batches, attain less than 40 ppm is neither here nor there,
because there was no way to ensure that Hunan Resun would be able to meet a contractual guarantee of, say 20
ppm, even if the 2nd Plaintiff was willing to pay more. For example, what if, despite its best efforts, Hunan Resun
was only able to produce batches of ALS with over 30 ppm in a particular month? It means that there would be no
delivery to the 2nd Plaintiff in that month. Not only would Hunan Resun be in breach of the contractual guarantee,
but the 2nd Plaintiff would not have enough raw materials to continue production. No reasonable commercial entities
in the shoes of Hunan Resun and the 2nd Plaintiff would have entered into such a deal in the first place.
[102] Further, Mr Yu relies on the supply contracts for ALS made between the 2nd Plaintiff and Hunan Resun from
2009 to 2011 to show that there was a corresponding increase in the contract price when Hunan Resun was
prepared to lower the contractual guarantee for the presence of 1,4-dioxane in the ALS supplied. According to Mr
Yu, this tends to support that the Plaintiffs were able to obtain better ALS by paying more.
[103] However, such argument has ignored the evidence of Madam Jiang that, Hunan Resun, being one of the
most reliable suppliers of the ALS in the Mainland at the material time, was only prepared to give a contract
guarantee of 40 ppm. As mentioned above, it had to do with technology rather than price. Further, there are a lot
reasons to explain for the increasing trend in contract price, for example the increasing labour and transportation
costs faced by the industries in the Mainland at the material time as shown by the evidence from the accounting
experts mentioned in the latter part of this Judgment.38
[104] There are some attacks against the credibility of Madam Jiang as a witness. According to the Defendant,
there is some confusion in her evidence as to whether BaWang had consulted toxicologists relating to the presence
of 1,4-dioxane in shampoo, whether anyone from BaWang’s management had given her instruction in 2010 or any
time to reduce or eliminate 1,4-dioxane in shampoo, and the exact time when the BaWang Group negotiated with
Hunan Resun for a limit of 20 ppm for the ALS to be supplied in 2011.
[105] In my judgment, there is no reason for me to doubt the credibility of Madam Jiang’s evidence. Despite the
vigorous cross-examination, she answers the questions in a straightforward manner without any exaggeration.
Madam Jiang is only a formula engineer, and yet she has been asked various questions covering vast area
including the negotiation for the contracts for the supply of raw materials and her knowledge about what happened
around the world relating to the presence of 1,4-dioxane in shampoo. She has been trying her best to answer the
questions. It is not surprising that she is confused about a few facts, and I do not accept that such immaterial
confusion would undermine the overall credibility of her evidence.
[106] In such circumstances, the Defendant has simply failed to discharge the burden of proving that the Plaintiffs
used raw materials of poor or inferior quality in manufacturing the BaWang Shampoo Products.
[107] The Defendant also relies on the particulars pleaded in §10(15A) of the Defence to justify the 4th pleaded
Lucas-Box meaning, saying that the Plaintiffs had not taken all necessary steps to devise manufacturing process or
to adopt a formula or process that would either ensure the absence of 1,4-dioxane in their products or one which
removed or reduced the amount of 1,4-dioxane to a minimum.
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[108] Again, the justification of these particulars does not meet the defamatory stings of the Words. The message
conveyed by the Article is not just that 1,4-dioxance is an unpleasant substance and manufacturers should
minimize the level of 1,4-dioxane as much as possible. The Article went further and positively alleged that BaWang
Shampoo Products were hazardous to human health. Obviously, if BaWang Shampoo Products were unsafe, then
it was justified for the Defendant to complain that the Plaintiff should have devised a manufacturing process or
adopted a formula to ensure the absence of 1,4-dioxane. However, if the Products were not unsafe, there was no
obligation on the Plaintiffs and no commercial reason for them to eliminate 1,4-dioxane from its products at all
costs. Furthermore, as confirmed by Dr Parent, ALS has certain function in the manufacturing process of
shampoos. In fact, Madam Jiang’s unchallenged evidence is that there were certain specific regulations relating to
shampoos in the Mainland, for example those relating to the stability and foaming property of the shampoos. The
use of ALS would help the Plaintiffs to meet these specific regulations in the Mainland.
[109] The Defendant also alleges that because the Good Manufacturing Practice ("GMP"), which has been defined
by regulatory authorities in the United States and elsewhere as good manufacturing practice for the cosmetic
industry, was not in place in the Plaintiffs’ production line in 2010, the Plaintiffs were not able to detect any
presence of 1,4-dioxane in their products and reject them. But in my judgment, the Plaintiffs had no obligation to
detect and reject products containing any 1,4-dioxane. As agreed by Mr. Jones, even with the GMP in place, it is
still not possible to ensure the complete removal of 1,4-dioxane from ALS. As further explained by Madam Jiang,
the amount of 1,4-dioxane in BaWang Shampoo Products depended on the amount present in the raw material
ALS. The Plaintiffs’ mandate was to keep the level of 1,4-dioxane in the end products below 30 ppm, reference
taken from the Australian NICNAS39 which was considered to be safe. The 2nd Plaintiff would require Hunan Resun
to check every batch of ALS delivered. The 2nd Plaintiff would also periodically send samples of finished products to
independent agent to test for the level of 1,4-dioxane to ensure that the safe level would be achieved. Although the
Plaintiffs did not conduct any in-house examination to monitor the level of 1,4-dioxance in the final products, which
apparently is Mr Jones’ only criticism on BaWang’s production process, the Plaintiffs did monitor the quality of ALS
supplied by Hunan Resun.
[110] In any event, the regulatory authority and the cosmetic industry in the Mainland did not require shampoo
products to comply with GMP in 2010, a matter which is accepted by Mr Jones himself. The Plaintiffs eventually
achieved that standard in 2013.
[111] Obviously, BaWang was able to ensure the safety of its final products in 2010 even without adopting the
GMP. This is supported by the 6.4 ppm and 10 ppm test results given by SGS. As Mr. Jones opines, such small
variance in the level of 1,4-dioxane in the raw material is normally expected in the manufacturing process. Mr.
Jones’ concern appears solely relates to the 27 ppm test result. As further elaborated below, the Dubious Sample is
highly questionable and any Defendant’s argument or criticism which is based on the 27 ppm result should
therefore be approached with caution.
[112] The Defendant also complains that the 2nd Plaintiff "overly depended upon" Hunan Resun, because it did not
allow for "possibilities" such as "mistakes in chemical analysis such as sampling errors undetected or other
accident; presence of other ingredients which could contain 1,4-dioxane, such as ethylene glycol distearate and
deterioration of ingredients before use"40 . However, as Mr. Jones admits in cross-examination, these are only
theoretical possibilities in general cases. There is simply no evidence to show that these theoretical possibilities
actually occurred in the present case.41 On the contrary, it is clear from Madam Jiang’s evidence and the various
testing reports adduced that the 2nd Plaintiff had maintained a record of controlling the presence of 1,4-dioxane in its
shampoo products to no more than 10 ppm.
[113] Finally, the Defendant criticises the 2nd Plaintiff’s supplier evaluation protocol, in that it is "more appropriate"
for BaWang to focus on the weight or quality of the ingredient, rather than the value of orders placed.42 However, for
the ALS sourced from Hunan Resun, it falls anyway within the most stringent category (Group A) of suppliers.43
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Hence, this complaint does not apply. In any event, the Defendant has not raised this complaint during the cross-
examination of the Plaintiffs’ witnesses.
[114] The Defendant’s 5th pleaded Lucas-Box meaning is that some manufacturers or vendors of shampoos, such
as Rejoice and Acene, had expressed willingness to reduce the contents of 1,4-dioxane in their products but the
Plaintiffs took the view that the presence of 1,4-dioxane in BaWang Shampoo Products was unavoidable, minimal
and not harmful to users. It should be noted that the Article also stated that Rejoice and Acene considered the
quantities of 1,4-dioxane in their products, namely 2.9 to 8.8 ppm, were very minimal (微乎其微) and not harmful to
the health of users.
[115] This meaning merely purports to set out the alleged difference in attitude between BaWang and other brands
as to how to deal with the issue. In any event, any attempt to justify such meaning cannot assist the Defendant’s
case, as this meaning is essentially not defamatory towards the Plaintiffs who took the view that the presence of
minimal quantity of 1,4-dioxane in shampoo is unavoidable and not harmful to the health of users. Justifying the
truth of this statement does not meet the stings of the libel mentioned in the earlier part of this Judgment.44 Again
this begs the same question as to whether regular and continuous use of BaWang Shampoo Products would
materially increase the risk of developing cancer. If the Products were safe, the view taken by the Plaintiffs was
justified.
[116] The 6th pleaded Lucas-Box meaning is that although the Plaintiffs knew that BaWang Shampoo Products
contained 1,4-dioxane, the Plaintiffs were not concerned about the health and safety of consumers who used or
purchased their products because the levels of 1,4-dioxane in their shampoos were, according to the Plaintiffs,
within legal safety limits.
[117] Again, the justification of such meaning depends on the safety of the BaWang Shampoo Products. If the
Products were not safe, there might be some justification for the Defendant to say that the Plaintiffs were not
concerned about the health and safety of consumers.
[118] I would make one further observation here. No matter whether BaWang Shampoo Products were safe
judging from the new scientific materials available after the publication of the Article, the evidence shows that the
Plaintiffs were concerned about safety of their consumers taking into account the scientific materials available
before the publication of the Article. According to Madam Jiang, even though as at July 2010, the Mainland State
Food & Drug Administration ("SFDA") had not formally specified a legal safety threshold for the level of 1,4-dioxane
in shampoo products, she had already studied the Australian NICNAS Report and adopted the 30 ppm limit stated
therein.45 BaWang was not just relying on a standard proposed by regulatory authority. It was relying on a scientific
study (which apparently was the only one available at that time apart from the EU and Health Canada Reports46 )
about the safety level of 1,4-dioxane in shampoo. Further, Madam Jiang accepted the 40 ppm contractual limit
guaranteed by Hunan Resun on the basis that the end product would not contain more than 10 ppm of 1,4-dioxane,
well under the 30 ppm threshold recommended by NICNAS.
[119] At the trial, even Madam Lam agrees that any institutions which followed the NICNAS and EU standards
cannot be said to be irresponsible.
[120] There is some suggestion at the trial that the Plaintiffs should have engaged a toxicologist to advise them at
the relevant time. However, it is common ground that all the relevant and up-to-date scientific reports available at
the time of the publication of the Article (i.e. July 2010) specifically on the safety of 1,4-dioxane in consumer
products, including reports from the regulatory authorities in Australia, EU and Canada, showed that shampoo
containing as much as 27 ppm of 1,4-dioxane was considered as safe. If the Defendant had engaged a toxicologist,
that would probably have been the conclusion of the toxicologist by that time.
[121] The 7th pleaded Lucas-Box meaning is that the Plaintiffs did not acknowledge that the presence of 1,4-
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dioxane in shampoo would harm the health of those using such shampoo. Again, this begs the key question as to
whether regular and continuous use of BaWang Shampoo Products would materially increase the risk of developing
cancer. If the Products were safe, there was no reason for the Plaintiffs to make such acknowledgment. On this
issue, I would also repeat the same observations I made in respect of the 6th pleaded Lucas-Box meaning about the
safety limit recommended by the most up-to-date scientific reports available at the time of the publication of the
Article.
(ii) Toxicological evidence on the alleged harmful effect of 1,4-dioxane in BaWang Shampoo Products
[122] Having addressed the 7 Lucas-Box meanings pleaded by the Defendant, I return to the key question in the
defence of justification, namely whether regular and continuous use of BaWang Shampoo Products would
materially increase the risk of developing cancer. As I see it, whether the Defendant can successfully establish the
defence of justification hinges upon the determination of this issue.
[123] The court can only resolve this issue with the assistance of the expert evidence on toxicology. The Plaintiffs’
toxicology expert is Dr Parent. The Defendant had originally engaged the late Dr Bojan Flaks ("Dr Flaks") as its
expert on toxicology. Unfortunately, Dr Flaks passed away before the trial and so the Defendant’s present expert is
Dr William Sawyer ("Dr Sawyer").
[124] There is no dispute that both Dr Parent and Dr Sawyer are qualified experts in toxicology.
[125] The experts have prepared the following reports for this case:
(i) expert report of Dr Parent dated 10 February 2012 ("Dr Parent’s Report");
(ii) expert report of Dr Sawyer dated 9 October 2014 ("Dr Sawyer’s Report");
(iii) 1st and 2nd supplemental expert reports of Dr Parent dated 7 November 2014 and 13 February 2015 respectively ("Dr
Parent’s 1st and 2nd Supplemental Reports"); and
(iv) joint expert report of Dr Parent and Dr Sawyer dated 26 January 2015 ("Toxicology Joint Expert Report").
[126] Dr Sawyer has also reviewed the following earlier expert reports prepared by Dr Flaks and he agrees with Dr
Flaks’ opinion as stated in these reports:
(i) expert report of Dr Flaks dated 26 January 2012;
(ii) joint expert report of Dr Parent and Dr Flaks dated 26 July 2012 ("Parent/Flaks Joint Expert Report"); and
(iii) expert report on "not agreed issues" of Dr Flaks dated 15 August 2012.
[127] The toxicology experts have been asked to express their opinion on 8 issues:
(a) Is 1,4-dioxane a probable carcinogen for human beings?
(b) Might 1,4-dioxane be genotoxic to human beings?47
(c) What harm can 1,4-dioxane cause to humans? Is there any medical evidence or reported case on such harm caused to
humans?
(d) What level of intake of, exposure to or contact with (through skin, scalp or inhalation or otherwise) 1,4-dioxane could
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cause harm to humans? Please state also any assumptions underlying such answer including but not limiting to time,
period and concentration.
(e) Is raw material of poor quality a possible cause for the presence of 1,4-dioxane in shampoos? Are there other possible
causes of the presence of 1,4-dioxane in shampoos?
(f) Is it possible to ensure that shampoos do not contain 1,4-dioxane or is the presence of 1,4-dioxane unavoidable?
(g) What are the regulations, requirements and safety standards in relation to the presence of 1,4-dioxane in cosmetic
products including shampoo in USA, EU and (where applicable) other jurisdictions identified by the expert?
(h) Will the presence of 6.4 ppm of 1,4-dioxane in commercial shampoo cause serious illness or cancer to human beings on
the assumption that the shampoo (a) comes into contact with the human skin for a short period of time and will be rinsed off
and (b) on a regular basis?
[128] Since all these questions are interrelated, I propose to deal with them together.
(a) What is 1,4-dioxane?
[129] According to the data in the Toxicological Review of 1,4-dioxane and Technical Fact Sheet published by the
United States Environmental Protection Agency ("USEPA") in September 2013 and January 2014 respectively, 1,4-
dioxane is a synthetic industrial chemical that is completely miscible in water. It is primarily used as a solvent for
celluloses, organic products, lacquers, paints, varnishes, paint and varnish removers, resins, oils, waxes, dyes,
cements, fumigants, emulsions, and polishing compositions. 1,4-dioxane has been used as a solvent in the
formulation of inks, coatings, and adhesives and in the extraction of animal vegetable oil.
[130] 1,4-dioxane can also be found as a contaminant in ethoxylated surfactants (ALS is a typical example of an
ethoxylated surfactant) that are used in cosmetics, detergents, shampoos and food additives.48 1,4-dioxane is
formed as an accidental by-product of the ethoxylation process. Ethylene oxide is added in the manufacturing
process of various skin care products, including shampoos, to reduce the harmful effect of other chemical used in
the manufacturing process. For example, Sodium Lauryl Sulphate, a chemical used in shampoo as foaming agent
that is harsh on the skin, is often converted to the less harsh chemical Sodium Laureth Sulphate (the "eth" denotes
ethoxylation), which can contaminate the product with 1,4-dioxane.49
[131] There is no dispute that 1,4-dioxane is found to be an animal carcinogen.50
[132] However, both experts agree there is insufficient reliable published scientific or medical data or direct
epidemiological evidence to show that 1,4-dioxane is carcinogenic to human.51 It is impossible to conduct human
studies in respect of the carcinogenicity of 1,4-dioxane. Even with animals studies, global ethical and economic
considerations dictate that animal carcinogenicity testing be carried out using limited number of laboratory
animals.52 Hence, the lack of adequate human epidemiological studies is not the result of negative studies but
rather a lack of conclusive human studies.
[133] Many international regulatory authorities have classified 1,4-dioxane as "likely to be carcinogenic to human",
"reasonably anticipated to be a human carcinogen" or "possibly carcinogenic to humans", including USEPA, US
Department of Health and Human Services, and International Agency for Research on Cancer.
[134] When a chemical is identified as an animal carcinogen, both experts agree that it is the policy of most
regulatory bodies that the chemical should be designated as a possible or probable human carcinogen. If a
chemical has been shown to be carcinogenic to humans in scientifically sound clinical and epidemiological studies,
then it is designated as a human carcinogen. 1,4-dioxane has not been designated as a human carcinogen or
genotoxin.
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[135] The toxicology experts further agree that the designation of 1,4-dioxane as a probable or possible carcinogen
does not necessarily mean that any exposure to 1,4-dioxance will produce cancer in humans. It just means that in
abundance of caution, the public and scientists should be aware of this property for the chemical and further
evaluate the risks involved. In the Toxicology Joint Expert Report, Dr Sawyer says that "[in] virtually all public health
assessments, confirmed animal carcinogens classified as probable human carcinogens or reasonably anticipated to
be carcinogenic on the basis of animal evidence are always treated as probable carcinogens until conclusive
human epidemiological evidence is available. There are many such chemicals, and in the absence of hard data, all
health professionals are required to use caution when producing health risk assessments."53
[136] From what the experts agreed, it is clear that "designation or nomenclature" reflects only a theoretical as
opposed to proven risk based on animal studies which showed carcinogenic effects on animals. Both experts agree
to "uncertainty" as it applies to humans. The "designation or nomenclature" is not based on experiments on
humans. Rather it is mainly for regulatory purpose.
(b) "Human studies" in respect of 1,4-dioxane
[137] Despite the agreement of the experts about the insufficiency of reliable published scientific or medical data or
direct epidemiological evidence to show that 1,4-dioxane is carcinogenic to humans, Dr Sawyer seeks to rely on a
study by Hansen (1993)("Hansen’s Study")54 to support the effect of 1,4-dioxane on humans.
[138] The Hansen’s Study was available because Denmark kept a database recording the number of new cases of
liver cancer each year, and a comparison was made between people who were exposed to 1,4-dioxane and
developed liver cancer and the incidence of liver cancer in the general population in Denmark, which showed an
increase of incidence of cancer of 64%. Dr Sawyer claims that the Hansen’s Study is "the most robust
epidemiological study published to date".
[139] However, there are serious limitations about the Hansen’s Study. Firstly, the workers in that study were
exposed to a combination of both 1,4-dioxane and 1,1,1-trichloroethane. Secondly, the dose and exposure levels of
the worker are not known. This is of particular relevance to the present case as the main dispute between the
parties is whether the dose in BaWang Shampoo Products was dangerous. Thirdly, when a latency period
(minimum 10 years) was incorporated in the analysis, the standardised proportionate incidence ratio was reduced
to 1.15. Fourthly, it was a retrospective survey of 19,000 cancer cases in the Danish cancer registry which observed
liver cancer in workers using 1,4-dioxane from 1970 to 1984. It was not 19,000 people exposed to 1,4-dioxane.55
Fifthly, some other epidemiological studies, namely studies by Buffler (1978)56 and Thiess (1976)57 , tend to support
that there is no indication of any increase in cancer in workers producing 1,4-dioxane.
[140] Dr. Sawyer says that since 1,1,1-trichloroethane is not classifified as a human carcinogen, such that no
confounding factors identified can explain the increase in cancer risk. The Hansen’s Study therefore "does support
human cancer from exposure to 1,4-dioxane".58 But as Dr. Parent has pointed out,59 although 1,1,1-trichloroethane
is not a carcinogen, it is a liver toxin acting on the same organ as 1,4-dioxane. So it produces liver toxicity and may
account for the increase in cancer risk in that study.
[141] In my judgment, what is most important is that the Hansen’s Study had been considered as inconclusive by
other scientists. As pointed out by the scientists conducting the risk assessment in the NICNAS Report60 ,
uncontrolled factors such as the potential for exposure to other carcinogenic chemicals, particularly 1,1,1-
tricholoroethane, and the lack of quantitative exposure data for 1,4-dioxane confound any conclusions regarding a
causal association with liver cancer in Hansen’s Study.61
[142] Even USEPA, the approach of which is heavily relied upon by Dr Sawyer, accepts that the results of these
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"human studies" are inconclusive. In the Toxicology Review (2013), USEPA stated:
"Studies in humans are inconclusive regarding evidence for a causal link between occupational exposure to 1,4-dioxane
and increased risk for cancer; however, only two studies were available and these were limited by small cohort size and a
small number of reported cancer cases (Buffer et al., 1978; Thiess et al., 1976)"62
[143] The passage did not refer to the Hansen’s Study. However, if USEPA considered that such study was of any
relevance, they would certainly have had included such study in the Toxicology Review.
[144] Hence, as agreed by the experts, there is insufficient reliable published scientific or medical data or direct
epidemiological evidence to show that 1,4-dioxane is carcinogenic to humans. The possible risk of harm to humans
is just a matter of inference from animal studies, which I will deal with in some details in the latter part of this
Judgment.
(c) Regulations and safety standards in relation to the presence of of 1,4-dioxane in cosmetic products
including shampoos
[145] The toxicology experts have also been asked to supply information about the regulations and safety
standards in relation to the presence of 1,4-dioxane in cosmetic products in countries such as the United States and
EU.
[146] The United States Food and Drug Administration ("USFDA") has been monitoring levels of dioxane in
cosmetics for some time but has not found it necessary to set limits, stating that the dioxane levels that they have
found as part of their monitoring programme for cosmetics and personal care products "do not present a hazard to
consumers". USFDA allows levels of dioxane in glycerides and polyglycerides of hydrogenated vegetable oils as
food additives but not to exceed 10 mg/kg (10 ppm).63 The USEPA allows for up to 4 milligrams per litre (ppm) in
drinking water for a 1-day only limit. The US National Academy of Sciences establishes a specification of 10 ppm
for 1,4-dioxane in a food addictive called polysorbate.64
[147] In EU, trace amounts of 1,4-dioxane are allowed as impurities from raw materials under the European
Cosmetic Directive, 76/768/EEC.65
[148] The Association of Southeast Asian Nations (ASEAN) Cosmetic Directive allows for trace amounts of 1,4-
dioxane to be present in cosmetics provided that, inter alia, "such presence is technically unavoidable in good
manufacturing practice".66
[149] Apart from exposures to shampoos and cosmetics, many regulatory agencies consider that human can be
exposed to 1,4-dioxane in working environment at levels that are considered safe.67 I do not propose to set out all
these limits in this Judgment, except to say that the Plaintiffs rely on these limits to support that these regulatory
agencies have assumed threshold exposure for 1,4-dioxane below which there are no health effects.
[150] 1,4-dioxane is included in Canada’s "Cosmetic Ingredient Hot List" and is prohibited at any level in
cosmetics.68
[151] As 1,4-dioxane is classified as a possible human carcinogen, there has been some concern about the
presence of 1,4-dioxance in consumer products such as shampoos and cosmetics, and as a result a number of
health and regulatory agencies had carried out studies on such subject.
[152] The first report was conducted by National Industrial Chemicals Notification Assessment Scheme
("NICNAS") in Australia which was published in June 1998. Its conclusion was that "[the] presence of 1,4-dioxine
(up to 30 ppm) as an impurity in consumer products is therefore not considered to pose a significant health risk to
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the general public"69 . The report also mentioned that "[whilst] it is desirable that the level of 1,4-dioxance in
consumer products be limited to 30 ppm, a level of 100 ppm in consumer products is considered toxicologically
acceptable"70 . In its final recommendation, NICNAS said:71
"In the protection of public health, it is recommended that levels of 1,4-dioxane in consumer products be limited to 100
ppm."
[153] The next report was published by the European Chemicals Bureau ("the EU Bureau") with the title "European
Union Risk Assessment Report – 1,4-dioxane" in 2002 ("the EU Report"). The object of the EU Report was again to
conduct a risk assessment associated with the exposure of human to 1,4-dioxane. In respect of the exposure to
1,4-dioxane through the use of shampoo, the EU Report assumed a 1,4-dioxane concentration of 50 ppm (resulting
in a total dose of 0.92 μg/kg bw/day) and 300 ppm (resulting in a total internal dose of 5.53 μg/kg bw/day) as a very
worst scenario. Even after taking into account intra- and inter-species differences, the EU Bureau was of the view
that there would be no concern for consumers even if the concentration of 1,4-dioxane in shampoo is up to 300
ppm.
[154] Health Canada published another report entitled "Screening Assessment for the Challenge – 1,4-Dioxane" in
March 2010 ("the Health Canada Report"). The purpose of the report was to conduct screening assessment of 1,4-
dioxane to determine whether such substance presents or may present a risk to the environment or to human
health. The report would estimate the exposure of human to 1,4-dioxane through different media, including the use
of shampoos and other personal care products. Based on a number of reference materials, shampoos selling in
Canada contained a range of 0.05 up to 45.5 ppm of 1,4-dioxane. The maximum concentration of 45.5 ppm was
therefore used in the study to derive at the exposure estimates. The conclusion of Health Canada is that "1,4-
dioxane is not entering the environment in quantity or concentration or under conditions that constitute or may
constitute a danger in Canada to human life or health"72 .
[155] One of the underlying approaches for the said 3 reports is that they adopt a threshold approach in the
assessment of health risk in the case of relatively low dosage absorbed by human through the use of shampoos
and other consumer products.
[156] Another agency which closely monitors the health effect of 1,4-dioxane is USEPA. It published technical fact
sheets and toxicological reviews in respect of 1,4-dioxane from time to time. For the protection of public, USEPA
adopts a linear extrapolation approach as a default option in assessing the health risk possibly caused by a
chemical substance in the absence of positive scientific proof. I will further explain this methodology in the latter part
of this Judgment.
[157] The Mainland authority adopts the safety guideline proposed by NICNAS. According to the announcement of
the Mainland SFDA dated 16 July 201073 , the ideal limit of 1,4-dioxane in daily consumer products is 30 ppm.
Further, as long as the content of 1,4-dioxane does not exceed 100 ppm, it "would be regarded as an acceptable
content level in toxicology". On 30 December 2011, Mainland SFDA announced that it intended to set a residue
limit of 30 ppm on 1,4-dioxane in cosmetic products.
[158] There is no regulatory safety limit relating to the presence of 1,4-dioxane in consumer products in Hong
Kong.
[159] 1,4-dioxane exists in natural environment and so water may also contain such substance. The World Health
Organisation ("WHO") has issued guideline for the safety limit of 1,4-dioxane in water which is currently 50μg/litre.
[160] The Water Services Department in Hong Kong ("HKWSD") adopts the WHO 2011 guideline value which is
50 μg/litre. According to the article "Drinking water quality for the period of October 2013 and 2014" published by
the Water Science Division of the HKWSD between 2013 and 2014, the minimum, maximum and average amount
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of 1,4-dioxane for the water supplied in Hong Kong was no more than 12.5 μg/litre. As demonstrated in the latter
part of this Judgment74 , these figures relating to drinking water would be relevant in determining whether BaWang
Shampoo Products are considered safe.
[161] As one can see from the above, there has been very little statutory control over the amount of 1,4-dioxane
present in consumer products, health care products or shampoos. According to the newspaper reports obtained by
Madam Lam in the course of her research, it seems that Qatar and a few Middle East countries are the only
countries which have statutory control over the amount of 1,4-dioxane in consumer products including shampoos.
The limit is 10 ppm. But having considered all the scientific materials presented to the court in this case, I cannot
find any scientific support for this limit of 10 ppm.75
(d) Different methodology to assess the health risk associated with the presence of 1,4-dioxane in
consumer products
[162] The central issue in respect of the defence of justification is whether chronic use of BaWang Shampoo
Products would materially increase the risk of getting cancer. Since it is not possible to conduct experiments on
humans, scientists have to rely on data from animal studies to assess the health risk on humans.
[163] In this regard, the parties have overwhelmed the court with voluminous scientific materials. The court is not
here to write a medical literature regarding the carcinogenicity of 1,4-dioxane. The task of the court is to make a
determination about the safety of BaWang Shampoo Products based on the existing scientific evidence presented
by the parties. It may be the case that further research in the future may contradict the finding made by the court
today, but the court can only do the best it can to determine this question based on the existing scientific evidence
presented before the court.
[164] Scientists use animals, most commonly rats and mice, to test the carcinogenicity of a substance. They
cannot test animals with low dosage. If someone wants to test the effect of low dosage, for statistical purpose, one
may need to use thousands if not millions of animals for the experiment which is something not feasible or ethical.
Scientists therefore test the animals with huge dosage. If the result is positive, they would plot the result on a graph
with two axes: one with the number of animals affected and the other one with the different dosages administered.
Scientists would use such data to study the effect of a particular chemical on the subject animals.
[165] I am given to understand that scientists will only use the statistically significant data in the graph for their
studies and discard those are not.
[166] At this stage, I would introduce two terms used by scientists in analysing the data which are relevant in
assessing the health risk on human.
[167] The first one is "lowest-observed-adverse-effect level" ("LOAEL"), that is the lowest dosage that adverse
effect has been observed in respect of the experiment on the animal. Obviously, such level cannot tell the scientists
as to whether there would be adverse effect at lower levels. Due to the sample size and other parameters of the
experiment, it just means that that is the level with the lowest observed adverse effect.
[168] The second one is "no-observable-adverse-effect level" ("NOAEL"). If the scientists are able to find out a
NOAEL from a particular experiment, it may support a threshold safety limit under which the chemical presents no
health risk to humans. However, due to the limited sample size and other parameters of the experiment, it may not
be possible for scientists to find a NOAEL in every study or experiment.
[169] In assessing the possible effect of a chemical on humans, scientists have to make some adjustments in
analysing the data from animal experiments. Firstly, scientists have to take into account the physical difference
between humans and animals. For example, the weights of humans and animals are different. Secondly, scientists
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have to consider the ways in which the humans and animals absorb the chemical. In the case of using shampoo by
humans, the intake is by way of inhalation and dermal absorption which is more indirect as compared with ingestion
in the case of animal experiments.
[170] Dr Parent is the opinion that there is a threshold safety limit of 1,4-dioxane in consumer products under which
the substance poses no health risk to human. In the animal studies, huge dosages were given to the animals
resulting in saturation of the metabolic capabilities of the animals causing damage to liver, nasal passages and
other organs. This liver damage has been demonstrated to be a precursor to the development of liver cancer. The
combination of 1,4-dioxane being non-genotoxic and only showing cancer at very high dosing levels in animals
would indicate that there is a threshold dose below which no cancer occurs. This threshold has been demonstrated
in animal studies and a mode of action ("MOA") for liver cancer development has been proposed based on the
saturation of metabolic capacity and hepatotoxicity as precursors to cancer development. In the opinion of Dr
Parent, the combination of a threshold dose and the metabolic saturation resulting in hepatotoxicity strongly support
the view that exposure to low levels of 1,4-dioxane in shampoos or cosmetic products results in no significant risk of
cancer or any other diseases.
[171] Dr Parent is not the only toxicologist that supports the threshold approach. The scientists compiling the
NICNAS Report, the EU Report and the Health Canada Report all accepted that there is a threshold dose below
which there is no risk to human health. In the earlier part of this Judgment, I have already set out their conclusions
in their studies relating to the safety of 1,4-dioxane in consumer products including shampoos.
[172] I first start with the approach taken by NICNAS. One of the major considerations for the scientists in
considering whether to adopt a threshold approach is whether the substance is considered to be genotoxic76 .
NICNAS adopted the "threshold approach" to drive at a "margin of safety" ("MOS") because they considered 1,4-
dioxane to be non-genotoxic:
"It is generally considered appropriate that risk characterization of non-genotoxic carcinogens … … should be treated
differently to genotoxic carcinogens, in that the former group of chemicals (which include 1,4-dioxane) may be treated as
requiring a threshold dose to elicit effects. Therefore an MOS approach is generally recommended for non-genotoxic
carcinogens. Risk assessments for genotoxic carcinogens have traditionally been carried out using low-dose extrapolation
models (e.g. linear Multistage (LMS) model), often referred to as quantitative risk assessment or mathematical modelling
techniques."77
[173] The methodology is set out in the NICNAS Report. MOS is derived by dividing what they consider as the
NOAEL (observed from animal studies) by the estimated human dose ("EHD").
[174] The EHD involved in possible exposure to human through cosmetic products (including shampoo) was then
calculated. Exposure to 1,4-dioxane (by dermal contact and inhalation) through the use of shampoo product
containing 30 ppm of 1,4-dioxane was also calculated. The total absorption would be 0.36 µg/kg/day for a 60 kg
person. Then similar calculations were made for exposures to 1,4-dioxane through body lotion/cream (0.24
µg/kg/day) and household detergents (0.72µg/kg/day).78
[175] NICNAS then considered a "worst case scenario" which assumed a person making use of 10 consumer
products a day (each containing 1,4-dioxane). Using the highest figure of exposure by household detergents
0.72µg/kg/day as denominator, the total daily exposure would roughly be 7 µg/kg/day for a 60 kg person.79
[176] Then, a NOAEL was chosen from animal study by Yamazaki (1994)("Yamazaki’s Study")80 , namely 10-40
mg/kg/day.81 The lower figure of 10 mg/kg/day was used.
[177] By dividing the NOAEL by the EHD under the worst case scenario above, the MOS derived was about 1,500.
The significant of MOS was explained as:
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"The MOS provides a measure of the likelihood that a particular adverse health effect will occur under the conditions of
exposure. As the MOS increases, the risk of potential adverse effects decreases. In deciding whether the MOS is of
sufficient magnitude, expert judgment is required. Such judgments are usually made on a case-by-case basis, and should
take into account uncertainties arising in the risk assessment process, such as the completeness and quality of the
database, the nature and severity of effect(s) and intra/inter species variability." 82
[178] As mentioned above, NICNAS picked the NOAEL from the Yamazaki’s Study in 1994 (which another study
by Kano (2009)("the Kano’s Study")83 was based on). This is explained in §9.2.5 of NICNAS Report which set out
the study on liver tumours:
"Hepatocellular adenomas and carcinomas were significantly increased in rats at 0.1% and 0.5% 1,4-dioxane, respectively
(Yamazaki et al., 1994). Cholangimoas were also reported in a single rat study at 1% (Kociba et al., 1974). A NOAEL (oral)
for all liver tumours in rats was determined between 0.01% and 0.02% 1,4-dioxane (equivalent to 10-40mg/kg/day) in
studies by Kociba et al. (1974) and Yamazaki et. Al (1994), based on the increased incidence (dose-related) of adenomas
in male animals at and above 0.02% (statistically significant at 0.5%).
Hepatocellular adenomas and carcinomas were also significantly increased in mice at the lowest dose level, 0.05%
(equivalent to 40-70 mg/kg/day) 1,4-dioxane. However, a clear dose-response relationship for adenomas was not evident in
mice (Yamazaki et al., 1994). A NOAEL (oral) was not identified in this mouse study."
[179] After identifying the NOAEL, NICNAS derived the MOS. The conclusion was stated under the section "12.2
Assessment of public health risks":
"In rat studies (Section 9.2.5) the overall chronic NOAEL was 10-40 mg/kg/day (0.01-0.02% 1,4-dioxane in drinking water).
Compared with a NOAEL of 10mg/kg/day, the above worst case assumption of a systemic exposure of 7µg/kg/day (from
consumer products) would represent a safety margin (MOS) of about 1500."
[180] If it is not the worst case scenario, and if one is simply using the systemic exposure for a 60-kg person who
uses shampoo on daily basis, which is 0.36µg/kg/day, the MOS would be about 31,000.84
[181] Based on the analysis, NICNAS concluded that "[the] presence of 1,4-dioxane (up to 30 ppm) as an impurity
in consumer products is therefore not considered to pose a significant health risk to the general public".85 In its final
recommendation, NICNAS stated that "[in] the protection of public health, it is recommended that levels of 1,4-
dioxane in consumer products be limited to 100 ppm."86
[182] Besides NICNAS, the EU Bureau is also a proponent for the threshold approach. First, the EU Report stated
that as 1,4-dioxane is considered to be a non-genotoxic carcinogen, a threshold approach is appropriate and
justified.87 It specifically noted that:
"Although there are some indication that 1,4-dioxane may be weakly genotoxic, 1,4-dioxane is considered a non-genotoxic
compound based on the total weight of evidence. This is further supported by the absence of DNA-adducts at hepatoxic
doses." 88
"The mechanism behind the organ-specific toxicity and carcinogenic effects of 1,4-dioxane has not yet been elucidated.
1,4-dioxane is considered as a non-genotoxic compound." 89
[183] Then, it went on and discussed the MOS:
"The margin of safety (MOSs) between the inhalation exposure estimates (0.013 mg/m3… for scenario I90 … respectively),
and the NOAEL of 400 mg/m3 are all ==10,000. The MOSs between the dermal exposure estimates (0.03 mg/cm3… for
scenario I… respectively) and the calculated dermal NOAEL of 20 mg/kg bw/day are far greater than 1000. When
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comparing the oral NOAEL with the total internal doses for scenario I (0.92 µg/kg bw/day)… the MOS-values are all
==3,000.
Taking into account intra- and inter-species differences, the non-genotoxic properties of the substances and the use of
NOAELs from chronic studies, these MOSs indicate no concern from consumers by inhalation and dermal exposure...
Remark: Even when the announced reduction measures were not taken or were not effective, the total internal doses for
scenario I (5.53 µg/kg bw/day)… would result in MOS-values ≥1,000 when compared to the oral NOAEL of 10 mg/kg
bw/day. Hence, also in this very worst case, there would be no concern for consumers after inhalation and dermal
exposure…"91
[184] One should note that EU Bureau assumed a 1,4-dioxane concentration of 50 mg/kg in shampoo (resulting in
a total internal dose of 0.92 µg/kg bw/day), and 300 mg/kg (resulting in a total internal dose of 5.53 µg/kg bw/day)
as a very worst case.92 Despite that, EU Bureau was of the view that there would be no concern for consumers
even if the concentration of 1,4-dioxane is up to 300 mg/kg, i.e. 300 ppm.
[185] The threshold approach was also adopted in the Health Canada Report (March 2010). In the report, the
adoption of the threshold approach was explained at various places including the following:93
"Based principally on the weight of evidence-based assessments of several international agencies … … and available
information … … The collective evidence indicates that 1.4-dioxane is not a mutagen and exhibits weak clastogenicity in
some assays, but not others, at high exposure levels often associated with cytotoxicity. Consideration of the available
information regarding genotoxicity, and conclusions of other agencies, indicate that 1,4-dioxane is not likely to be genotoxic.
… … Although the mode of induction of tumours is not fully elucidated, the tumours observed are not considered to have
resulted from direction interaction with genetic material. Therefore a threshold approach is used to characterize risk to
human health."
[186] On exposure scenario, a number of consumer products were examined. Pertinent to this case is the
shampoo scenario. Based on a number of reference materials, shampoos selling in Canada contained a range of
0.05 up to 45.5 ppm. The maximum concentration of 45.5 ppm was therefore used in the study to derive at the
exposure estimates.94
[187] Exposure to female adult was used in the study as women were considered to be the most exposure group.
The total exposure to 1,4-dioxane through the use of shampoo was set out in Table 7b.95 The MOS was also set out
in a table in Appendix 5.96 The MOS was between 8,000 and 13,300. According to the Health Canada Report, the
MOS for intake from combined inhalation and exposure during use of consumer products (including shampoo) was
considered adequately protective and the approach taken by them was conservative.97
[188] Health Canada thus concluded that:
"The margins between upper-bound estimates of exposure from environmental media and use of consumer products,
taking into consideration multiple product use scenarios and levels associated with effects in experimental animals are
considered to be adequately protective to account for uncertainties in human health risk assessment for both cancer and
non-cancer effects.
On the basis of the adequacy of the margins between conservative estimates of exposure to 1,4-dioxane and critical effect
levels in experimental animals, it is concluded that 1,4-dioxane is not entering the environment in quantity or concentration
or under conditions that constitute or may constitute a danger in Canada to human life or health." 98
[189] Dr Parent adopts the assessments made by NICNAS, EU Bureau and Health Canada. He is therefore of the
opinion that BaWang Shampoo Products certainly constitute no real risk of harm to humans, whether the
concentration of 1,4-dioxane in the shampoo is 6.4, 10 or 27 ppm. The MOS is large enough to be safe.
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[190] Pausing here, these 3 reports were the most up-to-date, authoritative and relevant studies relating to the
presence of 1,4-dioxane in consumer products including shampoo at the time of the publication of the Article.
According to these reports, shampoo containing 6.4, 10 or even 27 ppm is considered safe and is not posing any
health risk to consumers.
[191] I then turn to the methodology adopted by Dr Sawyer in assessing the health risk of 1,4-dioxane in BaWang
Shampoo Products.
[192] Dr Sawyer disagrees that there is a threshold dose for 1,4-dioxane in consumer products under which there
is no health risk to human. Instead, he uses the linear extrapolation approach to assess the risk, which is a default
option used by USEPA in assessing the health risk to human in case of the lack of available epidemiological study
data on human.
[193] Put it simply, scientists would collect data from animal studies. In the case that scientists can only obtain a
LOEAL from the experiments, due to the limitations of animal studies, they would not be able to know the effect on
the animal (if any) if the dosages are to be reduced much further. In such case, scientists would use the LOEAL and
to draw a linear line from the LOEAL point down to zero dosage in order to assess the risk on human. The
approach of "linear extrapolation down to zero" is therefore a mathematical construct with a view to estimate the
dose-response at such low dose levels not observable from experiments. The extrapolation all the way to zero is
based on an assumption that there is a "linear relationship" between dosage and response. In other words, it differs
from the threshold approach in that it assumes that there is no "threshold dose" under which a substance would
produce no effect, and hence harm.
[194] In conducting the risk assessment, Dr Sawyer uses the USEPA cancer slope factor derived from the Kano’s
Study. Then it is multiplied with the lifetime average daily dose, which then gives the risk per million people.
[195] The Kano’s Study was a report building on what had been observed in the Yamazaki’s Study in 1994. In
particular, Kano studied the responses at lower dosage situation using additional statistics to do such further
studying. In the Yamazaki’s Study, there was no denotation as to whether particular results were statistically
significant or not.
[196] Male rats and mice and female rats and mice were tested in the Kano’s Study. According to Dr Sawyer, it is a
strict rule applied internationally that scientists, in performing a toxicology study to examine different species of
animals, would use the most sensitive species in making a toxicological risk assessment. In Kano’s Study, the data
relating to female mice, which was the most sensitive species, were used to derive the cancer slope factor.
[197] The incidence of hepatocellular adenomas or carcinomas in the female mice in the Kano’s Study was
statistically significant at all doses (namely 500 ppm, 2,000 ppm and 8,000 ppm) according to the various tests. In
the opinion of Dr Sawyer, the lowest dose of 500 ppm for female mice, the incidence of liver tumours (namely 35
out of 50 female mice) was statistically significant.
[198] Due to the limitations in the experiment, only LOAEL was found in the case of the female mice, namely
66mg/kg/day (i.e. 500 ppm). No NOAEL was found. As mentioned above, the presence of a NOAEL may support
the existence of a threshold. But as no NOAEL was found, Dr Sawyer (and indeed USEPA99 ) used the LOAEL for
female mice (i.e. 500 ppm) to extrapolate the risk in a linear manner down to zero. That gives us the cancer slope
factor.
[199] Dr Sawyer performs a risk assessment based on the cancer slope factor adopted by USEPA. It is not
disputed that USEPA adopts a cancer slope factor for 1,4-dioxane of 0.1 (mg/kg-day).100 Risk for dermal exposure
to 1,4-dioxane can then be evaluated by multiplying the cancer slope factor with the dose. Apart from the risk
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associated with the dermal contact with 1,4-dioxane, there is also risk resulting from inhalation of the substance.
The calculation of the dose involves a complicated formula involving both the inhalation risk and dermal risk, and
NICNAS Report and EU Report adopted slightly different figures for calculating dose resulting from the use of
shampoo. After performing the calculation, Dr Sawyer evaluates the risks from using shampoo containing 1,4-
dioxane as follows (using the internal dosage levels adopted in the EU Report101 ):
(i) the risk from using shampoo containing 6.44 ppm 1,4-dioxnae results in a 1.2 x 10 level, i.e. 12 new cancer diagnoses
per year per population of 1 million;
(ii) the risk from using shampoo containing 10 ppm 1,4-dioxnae results in a 1.8 x 10 level, i.e. 18 new cancer diagnoses per
year per population of 1 million; and
(iii) the risk from using shampoo containing 27 ppm 1,4-dioxnae results in a 4.9 x 10 level, i.e. 49 new cancer diagnoses per
year per population of 1 million.
[200] The Plaintiffs dispute the methodology of Dr Sawyer but not his calculation.
[201] According to Dr Sawyer, it is generally accepted amongst toxicologists that de minimis benchmark level for
cancer risk in the United States is 1 x 10-6. In other words, the risk of cancer is considered negligible only when
posing less than one in a million lifetime risk to the most exposed individual. Hence, based on the cancer slope
factor adopted by USEPA for 1,4-dioxane, the use of shampoo containing 10 or 27 ppm of 1.4-dioxane materially
increases the risk of persons in the general population having cancer, and that the risk is many times greater than
the generally accepted de minimis risk level benchmark.
[202] The linear extrapolation approach has been adopted by some of the regulatory authorities in setting the
safety limit of 1,4-dioxane.
[203] USEPA set a safety level for drinking water containing 0.7 μg of 1,4-dioxane per day and be at the de
minimis cancer risk level. According to Dr Sawyer, the amount of 1,4-dioxane that enters a person’s body by using
shampoo containing 6.44 ppm or 10 ppm would be 8.3 μg/day or 13 μg/day respectively, over 10 to 20 times the
abovementioned drinking water level of 0.7 μg/day.
[204] USFDA has set the limit of 10 ppm for 1,4-dioxane in glycerides and polyglycerides for use in products such
as dietary supplements.102 In setting such limit, USFDA calculated the risk estimate adopting the linear
extrapolation approach.
[205] According to Dr. Sawyer, some countries are not even willing to adopt the risk assessment. For example,
Germany considers there to be no safe level of exposure to 1,4-dioxane and resists the use of risk assessment. In
Canada, 1,4-dioxane is prohibited at any level in cosmetics.103
[206] Further, Dr Sawyer opines that there is a particular vulnerability of populations in Southeast Asia to liver
cancer from the high prevalence of hepatitis B in this part of the world. Dr Sawyer has not taken such factor into
account in his assessment, and Mr Yu therefore submits that his assessment is an underestimate.
[207] According to Dr Sawyer, the linear extrapolation approach is the "state-of-the-art" methodology in assessing
health risk of possible carcinogen on human.
[208] Based on the aforesaid, it is Dr Sawyer’s opinion "to reasonable toxicological certainty that the BaWang
shampoo presents as a genuine public health risk".
(e) Is 1,4-dioxane genotoxic?

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[209] So which is the better methodology in assessing the cancer risk? It is common ground that scientists may
take into account, inter alia, the following factors in determining which methodology to adopt in assessing the risk:
(i) whether the substance is genotoxic; and
(j) whether the MOA of the substance in causing cancer is known.
[210] I first deal with the issue as to whether 1,4-dioxane is genotoxic.
[211] Genotoxins cause genetic damage or mutations by binding to or damaging DNA sequencing.
[212] Both experts agree in Toxicology Joint Expert Report that if 1,4-dioxane is not genotoxic, there exists a
probable threshold of intake by human beings below which there would be no carcinogenic risk.104 As 1,4-dioxane
is considered not as a genotoxin, Dr Parent, as well as many other regulatory agencies including NICNAS, EU
Bureau and Health Canada, adopt a threshold approach in assessing the cancer risk to humans. On the other
hand, if 1,4-dioxane is genotoxic, it may be justified to adopt the linear extrapolation approach which is the one
adopted by Dr Sawyer and USEPA. Hence, one of the main battlefield in the present case is whether 1,4-dioxane is
genotoxic.
[213] In his final submissions, Mr Yu has kept on asking the question as to why there is a threshold. To answer his
question, it is the scientists who say so. Based on the various reasons given in their reports, the scientists of
NICNAS, EU Bureau and Health Canada accepted that there is a threshold in the case that the chemical is not a
genotoxin. That is also the agreement between both toxicology experts.105
[214] As to whether 1,4-dioxane is genotoxic, both experts agree in the Toxicology Joint Expert Report that:
(i) there is no significant foundation for considering 1,4-dioxane as a genotoxin. Most assays for genotoxicity for 1,4-
dioxane have been negative, but the possibility that 1,4-dioxane is weakly genotoxic has not been eliminated;106 and
(ii) most of the international regulatory agencies, including EU Bureau, United States Agency for Toxic Substances and
Disease Registry ("USATSDR"), Environment Canada, USEPA, United States National Toxicology Programme and the
Australian authorities, do not consider 1,4-dioxane to be genotoxic.107
[215] In his oral testimony, Dr Sawyer expresses his view that 1,4-dioxane is, more probable than not, a genotoxic
substance. He positively asserts that 1,4-dioxane is "acting genotoxic, either as a direct or indirect genotoxin".
Furthermore, threshold approach should only be used if it can be proved for certain that 1,4-dioxane is not
genotoxic.
[216] I myself have great reservation about the reliability of such evidence.
[217] First, Dr Sawyer’s assertion is a departure from his own opinion contained in the Toxicology Joint Expert
Report. In such Report, both experts agreed that: "[the] lack of significant genotoxicity along with cytotoxicity
observed at dosing levels that induce tumours support the view that 1,4-dioxane acts via an unknown, or indirect,
non-genotoxic mechanism"108 . Now Dr Sawyer changes his stance and says that 1,4-dioxane is acting genotoxic.
Dr Sawyer explains that he had overlooked the aforesaid point in the Toxicology Joint Expert Report. Despite such
purported explanation, whether 1,4-dioxane is genotoxic is an important factor in deciding which risk assessment
model to adopt, and so I find it extremely strange that Dr Sawyer had missed such crucial point before signing the
Toxicology Joint Expert Report.
[218] Further, Dr Sawyer does not seek to resile from the other agreed points in the Toxicology Joint Expert
Report, including that 1,4-dioxane as a "weakly genotoxic agent" is just a possibility that has not been eliminated.
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However, those studies which indicated positive results all involved high dosing levels which produced cytotoxicity
in many cases. Hence, those studies suggesting that 1,4-dioxane may be a weak genotoxic agent have been
discounted in favour of more reliable tests.109 These points of agreement between the experts are clearly
inconsistent with the latest stance of Dr Sawyer.
[219] In his submission, Mr Yu argues that Dr Sawyer has not actually changed his stance on the issue. Dr
Sawyer’s view is that it is uncertain and unproven that 1,4-dioxance is genotoxic. However, scientists are concerned
with certainty whereas the court would adopt a different burden of proof. Taking into account studies such as Kitchin
& Brown’s study (1990)("Kitchin & Brown’s Study")110 and Roy’s study (2005)("Roy’s Study")111 , it is more probable
than not that 1,4-dioxane is a genotoxic substance.
[220] In my judgment, that still does not resolve the inconsistency in Dr Sawyer’s evidence, and why Dr Sawyer
suddenly changes his stance departing from the agreed opinions contained in the Toxicology Joint Expert Report.
[221] Further, Dr Sawyer’s opinion is contrary to the general consensus amongst scientific community. In fact,
there are abundant test results as contained in the available scientific literatures suggesting that 1,4-dioxane is non-
genotoxic. Whether one looks at the NICNAS Report or the EU Report, these studies have been fully considered
and adumbrated. A more updated summary can be found in the Health Canada Report. Interpretation of these
studies were summarized by the team of scientists in Health Canada in this way:112
"Genotoxicity of 1,4-dioxane has been assessed in a range of in vitro and in vivo assays. All tests for mutagenicity were
negative, including those in a variety of bacterial, yeast and mammalian cells, dominant lethal mutation assay in mice and
recessive lethal mutation assay in Drosophila … In addition, all mutagenicity tests with one of the metabolites of 1,4-
dioxane, 1,4-dioxan-2-one, were negative … For clastogenicity investigations, including chromosomal aberration,
micronuclei induction and sister chromatid exchange, the in vitro results were principally negative, with one weak positive
result, and the results of the in vivo micronuclei induction assays in both CD-1 and C57BL/6 mice were mixed … 1,4-
dioxane was positive in some assays, but not in others, for effects on deoxyribonuclei (DNA), such as DNA strand breaks,
enhanced DNA repair processes or cell proliferation (measured as replicative DNA synthesis) and cell transformation.
However, these were typically significant only at higher doses or following prolonged exposure and often in the presence of
cytotoxicity. … The European Commission has concluded that the total weight of evidence indicates that 1,4-dioxane is a
non-genotoxic compound (EURAR 2002). The Agency for Toxic Substances and Disease Registry (ATSDR) has indicated
that "collectively, the information available suggests that 1,4-dioxane is a non-genotoxic compound, or at best, a weakly
gentotoxic compound" (ATSDR 2007). The Government of Australia has concluded that "overall, the weight of evidence
from in vitro and in vivo tests indicates that 1,4-dioxane is unlikely to be a mutagen" (NICNAS 1998).
Although potential mode of action of carcinogenicity of 1,4-dioxane have been examined by other agencies, these have not
been fully elucidated, as data on dose-response and temporal progression with which to characterize and/or identify the key
events in the processes of 1,4-dioxane-induced tumour formation and thus support any of the hypothesized carcinogenic
modes of action are insufficient, inconsistent or not available. However, the collective evidence indicates that 1,4-dioxane is
not genotoxic. Accordingly, although the mode of induction of tumours is not fully elucidated, the tumours observed are not
considered to have resulted from direct interaction with genetic material (NICNAS; EURAR 2002; ATSDR 2007; VCCEP
2007)… Additionally, 1,4-dioxane is not a complete carcinogen, as it exhibited only tumour promotion activity, not tumour
initiation activity…"
[222] Then in setting out its conclusion under "Characterization of Risk to Human Health", Health Canada said:113
"Based principally on the weight of evidence-based assessments of several international agencies (International Agency for
Research on Cancer, European Union, US Environmental Protection Agency and US National Toxicology Programme) and
available information … The collective evidence indicates that 1,4-dioxane is not a mutagen and exhibits weak
clastogenicity in some assays, but not others, at high exposure levels often associated with cytotoxicity. Consideration of
the available information regarding genotoxicity, and conclusions of other agencies, indicate 1,4-dioxane is not likely to be
genotoxic… Although the mode of induction of tumour is not fully elucidated, the tumours observed are not considered to
have resulted from direct interaction with genetic material. Therefore a threshold approach is used to characterize risk to
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human health."
[223] These conclusions were not simply drawn by the team of scientists compiling the Health Canada Report,
they were built upon consistent "weighing of evidence" conducted by other teams of scientists engaged in the
earlier NICNAS and EU Bureau’s assessments. Apart from NICNAS and EU Bureau, USATSDR is also of the view
that, collectively, the information available suggests that 1,4-dioxane is a non-genotoxic compound.114
[224] The scientists writing the Health Canada Report had not only considered earlier conclusions or points-of-view
drawn by their peers, they had also taken into account updated scientific researches on the subject before drawing
to their own valued judgment. In particular, they had taken into consideration:
(i) Kitchin and Brown’s Study;
(ii) Kasai’s study (2009)("Kansai’s Study")115 ; and
(iii) a paper by USEPA on 1,4-dioxane (CAS RN123-91-1) in 1990 (cited May 2009).
[225] Items (i) and (ii) are two of the three so-called "new studies" which Dr. Sawyer relies on to suggest that the
risk assessments by NICNAS, EU and Health Canada are outdated. The third of the so-called "new studies" is
Kano’s Study. This was not available to Health Canada at the time of their assessment done in 2010.
[226] The Health Canada’s assessment (which confirmed the assessments of NICNAS and EU Bureau) supports
Dr. Parent’s proposition that 1,4-dioxane is non-genotoxic or at most weakly genotoxic at very high doses.
[227] In fact, this was the same conclusion drawn in the USEPA’s Toxicological Review (Aug 2010). By this time,
USEPA had extensively considered the Kano’s Study.116 USEPA concluded :117
"Overall, the available literature indicates that, 1,4-dioxane is nongenotoxic or weakly genotoxic."
[228] This same conclusion on genotoxicity of 1,4-dioxane was repeated in the most updated USEPA Toxicological
Review (2013):118
"In the large majority of in vitro systems, 1,4-dioxane was not genotoxic. Where a positive genotoxic response was
observed, it was generally observed in the presence of toxicity. Similarly, 1,4-dioxane was not genotoxic in half of the
available in vivo studies. … Overall, the available literature indicates that 1,4-dioxane is nongenotoxic or weakly genotoxic."
[229] From these materials, the "new studies" relied on by Dr Sawyer do not change anyone’s overall "weighing of
evidence" that 1,4-dioxane is "non-genotoxic or weakly genotoxic". This remains the most updated assessment
even by USEPA which Dr. Sawyer relies on. I therefore agree with Mr Pow that there is no basis for Dr Sawyer to
suggest that NICNAS, EU Bureau and Health Canada were "out-dated" in their assessment of genotoxicity of 1,4-
dioxane. The original "agreement between experts" is actually consistent with the most updated description in
USEPA’s Toxicological Review (2013). Dr. Sawyer’s attempt to resile from this agreement is therefore contradicted
and rendered unreliable by these literatures.
[230] In re-examination, Dr. Sawyer tries to justify his "out of the norm" opinion by resorting to an argument that
more weight should be attached to in vivo studies119 (as opposed to in vitro studies120 ) because "that allows us to
see the actual full gamut of metabolites and how it acts". Further, another possible reason for the mixed results on
the question of genotoxicity is that a substance can be genotoxic in some species or some organs of some species,
but not genotoxic in other animals or tested under different conditions.
[231] However, such argument does not sit well with the conclusions set out in USEPA’s Toxicological Review
(2013), a paper relied on by Dr Sawyer himself. It is clear from this paper that in drawing the conclusion as set out
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above, all studies (whether in vitro or in vivo) had been fully taken into account.121 The conclusion was clearly
stated as arriving from the "overall available literatures".
[232] Dr Sawyer’s view is also challenged by Dr. Parent in two aspects. First, there are advantages in in vitro
testing, because it can strip away any defence capability of the animal and subject the cells specifically to the
carcinogen or proposed carcinogen or mutagen, which cannot be achieved by way of in vivo testing. Second, in
vitro assays can be "reliable information" because in conducting in vitro tests, scientists would do it "with and
without a liver fraction to make sure [they] aren’t missing anything".
[233] In short, Dr. Parent is of the view that although the positive findings in a micronucleus test cannot be ignored,
in view of the overwhelming evidence to the contrary, the classification of 1,4-dioxane as (at most) a weak
genotoxin is appropriate. Dr. Parent’s conclusion is consistent with the conclusion drawn by USEPA in its latest
2013 Toxicological Review. It is also consistent with the general consensus of scientists involved in the NICNAS,
EU and Health Canada’s assessments.
[234] At the trial, there is some debate as to the meaning of "weakly genotoxic". According to Dr Parent, 1,4-
dioxane is regarded as "weakly genotoxic" because it is genotoxic only at high doses and in one particular type of
assay, involving DNA damage. This means that the possibility of 1,4-dioxane exhibiting genotoxic property at high
dosages (comparable to those shown in animal studies) has not been eliminated. Yet, such situation has no
relevance to the present case, as the amount of 1,4-dioxane absorbed by human in using shampoo is much
smaller.
[235] I accept Dr Parent’s view in this regard. Firstly, it is in line with the agreement made by the experts in the
Toxicology Joint Expert Report.122 Secondly, as agreed by the experts, most of the health and regulatory agencies
in the world do not consider 1,4-dioxane to be genotoxic.123 Hence I do not accept that 1,4-dioxane is, more
probable than not, a genotoxin. In the case that 1,4-dioxane is not genotoxic, as agreed by the experts, there exists
a probable threshold below which there would be no carcinogenic risk to human.
=(f) MOA (Mode of action)
[236] Another factor in determining which risk assessment model to adopt is the MOA of 1,4-dioxane in causing
cancer.
[237] Dr Parent first seemed to suggest that the MOA of 1,4-dioxane is known. Dr Parent opines that the results of
carcinogenicity found in animal studies were because the animals were dosed at levels beyond their metabolic
capability. The MOA for liver cancer development has therefore been suggested to be one based on saturation of
metabolic capability and hepatotoxicity as precursors to cancer development. In his reports, Dr Parent has
emphasised many times that the doses of 1,4-dioxane administered in animal carcinogenicity studies were very
high, involving "saturation metabolism" where the metabolic capability and immune systems of the animal were
overwhelmed resulting in organ damage and exhalation of vapours of unmetabolized 1,4-dioxane producing lesions
in the nasal passages of test animals. This is very different from the exposure of human to 1,4-dioxane through the
use of shampoos.
[238] According to Dr Parent, there was a recent study by Dourson and other scientists ("Dourson’s Study")124 in
2014, which involved a blind re-read of mouse liver slides from the 1978 National Cancer Institute bioassay on 1,4-
dioxane in drinking water, suggesting that the MOA of 1,4-dioxane is saturation of metabolic capability.
[239] According to the Dourson’s Study, while 1,4-dioxane does not produce mutations, at very high doses it
produces a regenerative hyperplasia which evokes endogenous mutations resulting in tumours. It therefore
indicates that at very high dosing levels where the metabolic capability of the animal is exceeded, 1,4-dioxane kills
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liver cells resulting in a repair process that may stimulate mutations related to this toxicity. This indicates a non-
genotoxic MOA with a threshold dose.125
[240] The Defendant seeks to undermine the significance of this study because it was funded by a chemical
corporation which had been actively involved in litigations in the United States in relation to groundwater clean-up
that was contaminated with 1,4-dioxane and thus had a conflict of interest. As discussed below, this challenge now
becomes academic because of the admission made by Dr Parent in his cross-examination.
[241] When Dr Parent is cross-examined at the trial on the results of the various animal studies, including
Yamazaki, Kansai and Kano’s Studies, Dr Parent reluctantly has to admit that cancer can develop even before
there is metabolic saturation to the cells or cytotoxicity (i.e. damage to the cell). In fact, USEPA has repeatedly
emphasised that studies such as the Kano’s Study suggest that cell proliferation can occur in the absence of liver
cytotoxicity, and so cytotoxicity is not a required precursor event for the inducement of liver tumours.126 Even in the
reports relied on by Dr Parent himself, including the NICNAS Report127 , the EU Report128 and the Health Canada
Report129 , the scientists accepted that the MOA of 1,4-dioxane is unknown. A number of MOAs (including
saturation metabolism and cytotoxicity) have been suggested, but none of which has been proved to be the
confirmed cause.
[242] I agree with Mr Yu that Dr Parent has made a mistake in suggesting that the MOA of 1,4-dioxane is one of
saturation of metabolism. One of the important assumptions in Dr Parent’s expert reports is that 1,4-dioxane
requires saturated metabolic pathways to produce hepatocellular malignancies or cancers, which may not be
correct in view of the results in some of the animal studies.
[243] Dr Parent is now 80 years of age. He is very keen to establish his credibility as an expert witness, sometimes
to the extent of making unwarranted attack on the credential of Dr Sawyer. However, that does not mean that the
court should reject his evidence all together, in particular most of his opinion is supported by the scientists
conducting the assessments in the NICNAS, EU and Health Canada Reports.
[244] As I see it, both experts are keen to establish the credibility of their risk assessments, as a result they may
sometimes lose their objectivity in looking at the supporting materials. One should therefore approach their
evidence with caution. In my judgment, the best way to judge the credibility of their assessments is to test their
evidence against the opinions and findings made by other scientists in the toxicology literature. That is what I intend
to do, and that is also the reason as to why I reject Dr Sawyer’s evidence that 1,4-dioxane is more probable than
not a genotoxin.
[245] The MOA of 1,4-dioxane is unknown130 , and that is where the scientists start to diverge in assessing the
cancer risk of 1,4-dioxane.
[246] The scientists conducting the assessments in the NICNAS, EU and Health Canada Reports are of the view
that, though the MOA of 1,4-dioxane is not fully elucidated, a threshold approach should be adopted. In making
such decision, they have taken into account that 1,4-dioxane is not considered as a genotoxin and such substance
exhibited weak clastogenicity in some assays, but not others, at high exposure levels often associated with
cytotoxicity. In working out the safe threshold, the scientists had given a sufficient wide MOS in the exercise which I
have already explained in the earlier part of this Judgment. That is also the view of Dr Parent.
[247] On the other hand, Dr Sawyer is of the opinion that, since the MOA of 1,4-dioxane is unknown, it would be
more appropriate to adopt the linear extrapolation approach to assess the risk. This is also the default option
adopted by USEPA.
(g) The policy behind the default option and its limitations
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[248] In considering whether the linear extrapolation model truly and factually reflects the cancer risk of 1,4-
dioxane, one have to understand the policy behind the adoption of such model as the default option.
[249] First, the purpose of USEPA doing all the studying of scientific data, coming up with quantitative assessment
of risk, is to provide building blocks of information so that other risk management agencies or risk managers can get
hold of such information and make their own assessment in given circumstances. The risk assessment exercise
undertaken by USEPA is only supposed to be guidelines and it has never been intended to be statements binding
on regulatory authorities. The regulatory authorities have to make their own judgment and assessment. This can be
seen in various passages in the USEPA’s Guidelines for Carcinogen Risk Assessment (2005) ("USEPA
Guidelines"):
"Risk management applies directives in statutes, which may require consideration of potential risk or solely hazard or
exposure potential, along with social, economic, technical, and other factors in decision making. Risk assessments may be
used to support decisions, but in order to maintain their integrity as decision-making tools, they are not influenced by
consideration of the social or economic consequences of regulatory action."131
"These cancer guidelines do not suggest that all of the kinds of data covered here will need to be available or used for
either assessment or decision-making. The level of detail of an assessment is a matter of Agency management discretion
regarding applicable decision-making needs…"132
"The extent of health protection provided to the public ultimately depends upon what risk managers decide is the
appropriate course of regulatory action."133
[250] Second, the primary goal of USEPA is to protect human health in general, and it explicitly acknowledges that
it tends to take an over-cautious attitude in its assessment. Given this attitude, USEPA adopts the linear
extrapolation model as its default option in risk assessment, whenever the MOA of a particular substance is
unknown or not wholly ascertained scientifically. In other words, if USEPA sees certainty from scientific studies,
then they will address the calculation of risk in a particular way. But in case of insufficient information or the
existence of uncertainty, they will take a default approach or default option: "better err on the safe side". This policy
was stated in USEPA’s Guidelines:134
"As an increasing understanding of carcinogenesis is becoming available, these cancer guidelines adopt a view of default
options that is consistent with EPA’s mission to protect human health while adhering to the tenets of sound science. Rather
than viewing default options as the starting point from which departures may be justified by new scientific information, these
cancer guidelines view a critical analysis of all of the available information that is relevant to assessing the carcinogenic risk
as the starting point from which a default option may be invoked if needed to address uncertainty or the absence of critical
information. Preference is given to using information that has been peer reviewed, e.g. reported in peer-reviewed scientific
journals. The primary goal of EPA actions is protection of human health; accordingly, as an Agency policy, risk assessment
procedures, including default options that are used in the absence of scientific data to the contrary, should be health
protective (U.S. EPA, 1999b)."
[251] More importantly, it was explicitly stated: "In the absence of sufficiently, scientifically justifiable mode of
action information, [USEPA] generally takes public health-protective, default positions regarding the interpretation of
toxicologic and epidemiologic data: animal tumour findings are judged to be relevant to humans, and cancer risks
are assumed to conform with low dose linearity."135 This shows that in an USEPA’s assessment, it is the policy to
adopt the default position whenever they consider that the MOA is still an open question.136
[252] In the case of 1,4-dioxane specifically, USEPA made it clear in the Toxicological Review (2013) that linear
extrapolation approach was used because the MOA is not conclusive:
"The linear approach is recommended if the mode of action of carcinogenicity is not understood (U.S. EPA, 2005a). In the
case of 1,4-dioxane, the mode of carcinogenic action for liver tumors is not conclusive. Therefore, a linear low-dose
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extrapolation approach was used to estimate human carcinogenic risk associated with 1,4-dioxane oral exposure."137
[253] As mentioned above, even in the Toxicological Review (2013), USEPA concluded (similar to NICNAS, EU
Bureau and Health Canada) that 1,4-dioxane is "non-genotoxic or weakly genotoxic at high dosage". The above
quotation makes clear that USEPA adopted the linear extrapolation approach in the case of 1,4-dioxane not
because USEPA considered it to be genotoxic, but because the MOA for liver tumours is not conclusive. It is their
policy, out of abundance of caution, that the linear extrapolation approach is used to assess human carcinogenic
risk. It is then for individual risk management agency to make judgment on their assessment of the risk that 1,4-
dioxane may pose in any given exposure environment.
[254] Third, given this over-cautious and conservative attitude, USEPA’s estimates of risk are more likely to
overstate than understate hazard or risk, which is a matter acknowledged by USEPA itself:
"Use of health protective risk assessment procedures as described in these cancer guidelines means that estimates, while
uncertain, are more likely to overstate than understate hazard and/or risk."138
[255] Fourth, as Dr. Parent repeatedly says, USEPA’s risk calculation was based on many assumptions. This is in
fact recognised by USEPA as shown in Table 5-12 of the Toxicological Review (2013) – "Summary of uncertainty in
the 1,4-dioxane cancer risk estimation". These uncertainties include, amongst others, low-dose extrapolation
procedure (if departure from USEPA’s default approach is justified, it could decrease or increase unit risk at an
unknown extent) and human relevance of mouse tumour data (if rodent tumours proved not to be relevant to
humans, unit risk would not apply (cancer slope would decrease)). It shows that even USEPA recognised that its
approach was based on many assumptions, which may be right or may be wrong. USEPA does not treat its own
assessment as empirical quantification of real risk.
[256] Fifth, USEPA recognises that even in the choosing of default options, there are conflicting approaches and
there is no consensus on a single approach. They take a rather open attitude and welcome alternative procedures
to shed light on any uncertainty in their assessment. It was said:139
"When there are alternative procedures having significant biological support, the Agency encourages assessments to be
performed using these alternative procedures, if feasible, in order to shed light on the uncertainties in the assessment,
recognizing the Agency may decide to give greater weight to one set of procedures than another in a specific assessment
or management decisions."
[257] This shows that the scientists of USEPA do not suggest themselves or arrogate themselves to represent the
only authoritative approach to be taken, and if there are alternative procedures that can be provided for comparison,
they encourage and welcome whoever that is doing the risk management assessment to consider the other
approaches.
[258] In fact, USEPA invited external peer to comment on, amongst others, the weight of evidence on
characterisation.140 The comments received were as follows:
(i) 3 reviewers clearly commented that the weight of evidence clearly supported the conclusion that a MOA could not be
identified for any of the tumour sites;
(ii) 1 reviewer commented that there is inadequate evidence to support a specific MOA with any confidence and low-dose
linear extrapolation is necessary, and USEPA should not rule out a metabolite as the toxic moiety; and
(iii) 2 reviewers commented that even though the MOA for 1,4-dioxane is not clear there is substantial evidence that the
MOA is non-genotoxic; one of these reviewers also suggested that a nonlinear cancer risk assessment model should be
adopted.
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[259] The response of USEPA was as follows:141
"[USEPA] agrees with the reviewer not to rule out a toxic metabolite as the toxic moiety. In Section 5.5.1.2 text is included
relating that there is not enough information to determine whether the parent compound, its metabolite(s), or a combination
is responsible for the observed toxicities following exposure to 1,4-dioxane… In accordance with USEPA’s Guidelines… the
absence evidence for genotoxicity does not invoke the use of non-linear low-dose extrapolation, nor does it define an MOA.
A non-linear low-dose extrapolation can be utilised when an MOA supporting a non-linear dose response is identified. For
1,4-dioxane this is not the case; a cancer MOA for any of the tumour types observed in animal models has not been
elucidated. Therefore, as concluded in the Toxicological Review, the application of a non-linear low-dose extrapolation…
was not supported.
Additional text has been added to Section 5.4.3.2 to relay the fact that several reviewers recommended that the MOA data
support the use of a nonlinear extrapolation approach to estimate human carcinogenic risk associated with exposure to 1,4-
dioxane and that such an approach should be presented in the Toxicological Review. … … …"
[260] After considering the peer reviews, USEPA made the following conclusion:142
"[USEPA] concluded that the available information does not establish a plausible mode of action for 1,4-dioxane and data
are insufficient to establish significant biological support for a nonlinear approach. [USEPA] determined that there are no
data available to inform the low-dose region of the dose response, and thus, a non-linear approach was not included."
[261] Accordingly, it is clear that the USEPA did not categorically reject the threshold approach in assessing the
risk of 1,4-dioxane. It simply said that because there is no sufficient scientific evidence to conclude the MOA for
carcinogenesis of 1,4-dioxane, it is their policy to resort to the default position of linear extrapolation. Neither did
USEPA suggest that toxicologically the linear extrapolation approach is to be preferred over the threshold
approach.
[262] Based on the aforesaid, it is clear that USEPA’s cancer risk assessment of 1,4-dioxane is at best an
estimation of its potential cancer risk to human. It is never meant to be an exact empirical quantification of risk. The
approach of "linear extrapolation down to zero" is therefore a mathematical construct with a view to estimate the
dose-response at such low dose levels not observable from experiments. Such estimation is more likely to
overstate than understate the hazard or risk of 1,4-dioxane to human. This is due to the policy of "public health
protection".
[263] On extrapolation of low-dose response beyond the experimentally observable range, USEPA recognizes that
there may be situations where there is no scientific consensus favouring one individual approach over the other. In
that case, assessment results derived from alternative approaches can and should be presented to the decision-
maker.
[264] This can be compared with the conclusions equally drawn by NICNAS, EU Bureau and Health Canada.
These 3 health agencies equally concluded that the MOA of 1,4-dixoane "is not elucidated". The difference between
these 3 bodies on the one hand and USEPA on the other boils down to this. NICNAS, EU Bureau and Health
Canada considered that after weighing of all evidence, as 1,4-dioxane is not considered a mutagen or genotoxin
(and at most a weak genotoxin at high dosage), their judgment is that a threshold approach is justified in estimating
the low-dose response. They form this judgment regardless of the fact that the MOA of 1,4-dioxane is not fully
understood. For USEPA, whilst it equally concluded that "[overall], the available literature indicates that 1,4-dioxane
is nongenotoxic or weakly genotoxic", USEPA considered that the MOA is currently not fully understood. Hence,
based on its own policy, the default option of linear extrapolation approach is adopted for its estimation of low-dose
response.
[265] I agree with Mr Pow that the above difference does not involve who is in the right and who is in the wrong.
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They are both estimations at best, representing scientists’ venturing into the unknown. It demonstrates a lack of
consensus amongst the scientific community.
[266] There was a similar debate in the American case of Whiting v Boston Edison Company143 , in which the court
was asked to consider whether to adopt a threshold model or a linear non-threshold model concerning the
assessment of risk of exposure to radiation vis-à-vis acute lymphocytic leukemia. In that case, the plaintiff was
required to show that the dose level of ionizing radiation received by a worker was a proximate cause of his illness
and death. The plaintiff sought to adduce expert evidence relying on the linear non-threshold model. The District
Judge accepted the defendant’s application to exclude such expert evidence.
[267] This case illustrates the limitation of such kind of expert evidence. The risk assessment models are
hypothesises only. In the judgment, District Judge Stearns said the following:
"What must be kept in mind is that both models, although radically different in their estimation of risk, are attempts to
extrapolate from the known to the unknown, something that neither model does very well with ALL (acute lymphocytic
leukemia)…
No testimony could better illustrate the difference between the quests for truth in law and science remarked on by the
Supreme Court:
‘Scientific conclusions are subject to perpetual revision. Law, on the other hand, must resolve disputes finally and quickly.
The scientific process is advanced by broad and wide-ranging consideration of a multitude of hypotheses, for those that are
incorrect will eventually be shown to be so, and that in itself is an advance. Conjectures that are probably wrong are of little
use, however, in the project of reaching a quick, final and binding legal judgment often of great consequence about a
particular set of events in the past. … … …’
… … The linear non-threshold model cannot be falsified, nor can it be validated. … … It is merely an hypothesis. In sum, it
has no capacity to be of assistance to a jury in resolving the ultimate issues in this case."
[268] The court is facing the same kind of challenge here. 1,4-dioxane is an animal carcinogen. However, whether
the level of 1,4-dioxane present in BaWang Shampoo Products would materially increase the risk of getting cancer
in human is very much an unknown and uncharted area. From the perspective of health protection, scientists would
try their very best to use different models, which are based on different assumptions, to assess the health risk to
human. However, that remains a theoretical or mathematical risk, not a real or factual one based on empirical data.
As the Defendant has the burden of establishing the defence of justification, it may not be able to do so based on
the expert evidence available to the court.
(h) Are the assessments made by NICNAS, EU Bureau and Health Canada out-dated?
[269] In trying to establish that the linear extrapolation approach is the "state-of-the-art" methodology in assessing
the risk in respect of 1,4-dioxane, Dr Sawyer claims that, in view of the findings shown in some "new studies", the
threshold approach adopted by health agencies such as NICNAS, EU Bureau and Health Canada is "out-dated".
[270] The "new studies" relied upon by Dr Sawyer are: (i) the USEPA’s reassessment of Kitchin & Brown’s Study
as discussed in USEPA’s Toxicological Review (2013); (ii) Kano’s Study; and (iii) Kasai’s Study.
[271] On the issue of linear extrapolation, I agree with Mr Pow that these "new studies", when properly understood,
merely demonstrate that one of the hypotheses of 1,4-dioxane’s MOA, i.e. cytotoxicity, is not supported. The result
is at best a demonstration that the MOA of 1,4-dioxane is still not elucidated or ascertained. In other words, 1,4-
dioxane acts via a presently unknown mechanism. It is not to say that assessment of cancer risk by the threshold
approach is wrong. It merely explains why USEPA continues to adopt its default option of linear extrapolation.
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[272] The Defendant relies heavily on the following passage in USEPA’s Toxicological Review (2013) to claim that
USEPA considered the theory of cytotoxicity as a precursor to carcinogenesis has been negated by its
reassessment of Kitchin & Brown’s Study:144
"Female Sprague Dawley rats (three to nine per group) were given 0, 168, 840, 2,550, or 4,200 mg/kg 1,4-dioxane (99%
purity) by corn oil gavage in two doses at 21 and 4 hours prior to sacrifice (Kitchen and Brown, 1990)… The results of this
study demonstrated that hepatic DNA damage can occur in the absence of significant cytotoxicity. Parameters associated
with tumour promotion… were also elevated, suggesting that promotion may play a role in the carcinogenesis of 1,4-
dioxane."
[273] However if one is to read the USEPA’s analysis in its entirety, USEPA was only of the view that the
cytotoxicity theory may not be supported by the available studies, and the MOA for liver tumours is still unknown.
USEPA considered all the relevant studies including Kasai’s Study and Kano’s Study and concluded that the MOA
leading to the development of cancer is uncertain.145 Having taken into consideration all the available literature,
USEPA stated its conclusion:146
"Liver – The available evidence in support of any hypothesised MOA for liver tumours is not conclusive. A MOA hypothesis
involving 1,4-dioxane induced cell proliferation is possible but data are not available to support this hypothesis.
Pharmacokinetic data suggest that clearance pathways were saturable and target organ toxicity occurs after metabolic
saturation. Liver toxicity preceded tumour formation in one study (Kociba et al., 1974) and a regenerative response to tissue
injury was demonstrated by histopathology. Tumour formation has also been observed in the absence of cytotoxicity (Kano
et al., 2009; JBRC, 1998). Cell proliferation and tumour promotion have been shown to occur after prolonged exposure to
1,4-dioxane (Miyagawa et al., 1999; Uno et al., 1994; Goldsworthy et al., 1991; Lundberg et al., 1987; Bull et al., 1986; Stott
et al., 1981; King et al., 1973)."
[274] Therefore, it is most clear that after reviewing all the available studies in relation to several hypothesised
MOAs for 1,4-dioxane, even though USEPA found that the cytotoxicity theory may not be supported in the light of
conflicting evidence (which includes its reassessment of the Kitchin and Brown’s Study), it merely took the view that
none of the hypothesised MOA for liver tumours is conclusive. In other words, theMOA still remains unknown. But it
did not outright reject the threshold theory.
[275] This is precisely the reason why, basing on their policy, USEPA assumed human relevancy and continue to
use the default linear approach to estimate human carcinogenic risk. It was statedin the Toxicological Review
(2013):
"Several hypothesised MOAs for 1,4-dioxane induced tumours in laboratory animals have been discussed along with the
supporting evidence for each. Some mechanistic information is available to inform the MOA of the liver and nasal tumours
but no information exists to inform the MOA of the other tumours types (Kano et al., 2009; Kasai et al., 2009; JBRC, 1998;
Yamazaki et al. 1994). Human relevancy is assumed unless information indicates otherwise (U.S. EPA, 2005a)." 147
[276] As mentioned above, USEPA adopted the linear extrapolation approach (the default approach) because the
MOA is not conclusive:
"The U.S. EPA Guidelines for Carcinogen Risk Assessment (U.S. EPA, 2005a) recommend that the method used to
characterise and quantify cancer risk from a chemical is determined by what is known about the mode of action of the
carcinogen and the shape of the cancer dose-response curve. The linear approach is recommended if the mode of action
of carcinogenicity is not understood (U.S. EPA, 2005a). In the case of 1,4-dioxane, the mode of carcinogenic action for liver
tumours is not conclusive. Therefore, a linear low-dose extrapolation approach was used to estimate human carcinogenic
risk associated with 1,4-dioxane oral exposure." 148
[277] Hence, even after reviewing the Kitchin & Brown’s Study, USEPA did not claim that the MOA for liver
tumours has been found or suggested that 1,4-dioxane is a genotoxic substance. Nor did it categorically reject the
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cytotoxicity theory or the threshold approach. Rather, USEPA was just saying that there is insufficient evidence in
support of the hypothesised MOA, and the MOA remains unknown.
[278] Kano’s Study is another study heavily relied upon by Dr. Sawyer. It showed that cancer (hepatocellular
adenoma or carcinoma) developed in the group of female mice at the level of 500 ppm (equivalent to a dosage of
66 mg/kg).149 Dr. Sawyer maintains that this result is a matter of concern, because the dosage was "small" and no
NOAEL could be identified. It showed some genotoxicity in respect of 1,4-dioxane.
[279] However, as mentioned above, USEPA has not at all relied on the Kano’s Study as a ground to change their
conclusion on the genotoxicity of 1,4-dioxane.
[280] Furthermore according to Dr Parent, 66 mg/kg (500 ppm) is a very high dose level. It is about 184,000 times
greater than the NICNAS intake figure at 30 ppm (i.e. 0.000358 mg/kg/day)150 , and 9,200 times greater than the
NICNAS worst case scenario using 10 products (up to 7 µg/kg/day)151 . If the 500 ppm dose for female mice is
converted to human equivalent dose (i.e. 10 mg/kg/day152 ), 10 mg/kg/day is still 27,778 times153 greater than the
NICNAS intake figure at 30 ppm, and 1,429 times154 greater than the NICNAS worst case scenario.
[281] As such, the fact that cancer developed at the high dosage of 500 ppm is no indication of whether cancer
would develop at the lower dosing level or whether there would be a NOAEL at the lower dosing levels. There
remains a large unknown area below 500 ppm.
[282] Dr. Sawyer refers to the significant finding of the Peto test155 . However, even if the dose response trend was
significant from 500 ppm to 8000 ppm, it does not mean that there was a dose response from 0 to 500 ppm. Again,
given that 500 ppm is a very high dose compared to the amount contained in BaWang Shampoo Products, the
significant finding of the Peto test cannot give us any realistic guidance in assessing risk in real life situations.
[283] Dr. Sawyer also says that the animal data fitted into a log-logit curve, with no points deviating from it.
However, the fact remains that it is a mathematical construct. There is no evidence to show any effect below 500
ppm. So, even if the points above 500 ppm fit into any model or curve, such model or curve cannot shed any light
on the real risk (as opposed to theoretical risk) in association with dosing level below 500 ppm.
[284] Dr. Parent is asked if there is any evidence of saturation of metabolism in respect of the statistically
significant finding for the female mice at 500 ppm. Dr. Parent’s answer is that the Kano’s Study did not look for
saturation of metabolism, and he maintains that the dosing level was so high that he would expect there was
saturation of metabolism or cytotoxicity. In such circumstances, the results in the Kano’s Study may cast doubt on
whether metabolic saturation or cytotoxicity is the MOA for 1,4-dioxane, but that is not to say that the threshold
approach is proven wrong or out-dated.
[285] I also agree with the Plaintiffs’ case that the experiment result in the Kano’s Study does not support the
Defendant’s contention that 1,4-dioxance is genotoxic. First, there is a large unknown area at the low dosing level
which no studies or data could shed light on. Even if Dr. Parent cannot put forward any hypothesis of MOA that is
well supported by evidence, it does not mean that 1,4-dioxane should be regarded as genotoxic. This will be
contrary to the "weighing of evidence" conducted by all health agencies even including USEPA. At most, it merely
means that 1,4-dioxane acts through an unknown mechanism, which is indeed the most logical conclusion in the
present case. Second, USEPA, after reviewing all the available literature (including the Kano’s Study), continued to
opine that there may be insufficient evidence to conclude that cytotoxicity and saturation of metabolism are
precursors to cancer. However, USEPA’s conclusion was merely that the MOA is inconclusive. Neither the Kano’s
Study nor USEPA supports the proposition that 1,4-dioxane is (or is more likely than not to be) a genotoxic
substance.
[286] Therefore, the statistically significant result in female mice at 500 ppm is neither here nor there. It merely
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shows that there is a large unknown area below 500 ppm, but it does not mean that all the points below 500 ppm
were also significant. In other words, the fact that there is no ascertained NOAEL in the female mice study at 500
ppm does not mean that there is no NOAEL below 500 ppm. The dosing level below 500 ppm was simply not
tested. Hence, the Kano’s Study does not support that 1,4-dioxane is genotoxic.
[287] In fact, while it is true that there was no ascertained NOAEL at this level in the mice study, there was a
NOAEL in the rats study:
(i) for both male and female rats, there was no statistically significant increase in hepatocellular adenoma or carcinoma at
200 ppm compared to control;156
(ii) for male rats, while there were 3 cases of hepatocellular adenoma or carcinoma found in the control group, only 4 cases
were found at 200 ppm, and the increase of 1 case was not found to be statistically significant; and
(iii) for female rats, there were 3 cases of hepatocellular adenoma reported in the control group but only 1 case found in the
200 ppm group, showing that 1,4-dioxane at 200 ppm did not cause any increase in cancer risk.
[288] Based on these results, the scientists in Kano’s Study identified the NOAEL to be 11 mg/kg/day (200 ppm)
for hepatocellular tumours in male rats.157 As mentioned earlier in this Judgment, the identification of a NOAEL may
support the existence of a threshold.
[289] Dr Sawyer suggests that we should ignore the data relating to the rats because it is a rule for scientists to
focus on the data relating to the most sensitive species which was the mice for the experiment in the Kano’s Study.
I can perfectly understand the rationale for such rule. From the health protection perspective, it would be more
desirable, out of abundance of caution, to choose the data relating to the most sensitive species to assess the
health risk. It may be the case that the response of human being may be similar to that of the most sensitive
species.
[290] However as suggested by Dr. Parent, there is no reason why the rats study – in particular the result at 200
ppm – should be ignored, when the mice study cannot shed light on the low-dose effects. Dr. Parent opines that the
rats result was "a good piece of data". Further, "the problem with the mouse study is that there is no no-effect level"
and "there’s only two points". In other words, there is a vast unknown area for the low dose scenario below the
LOAEL. It may be the case that the female mice, like the rats, may have a NOAEL below 500 ppm, and so one
should not ignore the NOAEL found in the rats study. If the NOAEL is of no relevance, I do not think that the
scientists of the Kano’s study would have taken the trouble of calculating the NOAEL for rats.
[291] In fact, one peculiar point about the design of the Kano’s Study is that different dosing levels were used for
mice and rats. For mice, the lowest dosage was 500 ppm, and for rats, the lowest dosage was 200 ppm. In a
situation where two species received the same dosage and showed different results, there is no dispute that one
should take the more sensitive species. But this is "one situation that we do not have". In this regard, Dr. Parent’s
opinion is that we should also study the data with the rats where there was a no-effect level.
[292] In the present case, where, due to the limitations of the experiment, the female mice study could not shed
light on the dosing levels lower than 500 ppm, it is justified and not inconsistent with the general rule that the most
sensitive species is to be taken into account, to refer to the rats study where the experiment went down to a lower
dosing level. In this regard, I agree with Dr Parent’s opinion.
[293] This was exactly what the NICNAS did. Since no NOAEL was identified in the female mice study, they
derived a NOAEL from the rats study.158 And as a matter of fact, the scientists in Kano’s Study did not ignore the
rats result, as illustrated by the fact that they discussed in detail the rats result (together with the mice result) in their
study.
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[294] I agree with Dr Parent and Mr Pow that the attitude of the scientists in the Kano’s Study actually supports the
threshold theory as a viable means of assessing cancer risk of 1,4-dioxane. If one compares the human equivalent
dose of the 200 ppm dose for male rats, i.e. 3.1 mg/kg/day, to the NICNAS intake figure at 30 ppm, i.e. 0.00036
mg/kg/day, 3.1 mg/kg/day is 8,611 times greater than 0.00036 mg/kg/day.159 This shows how large the safety
margin is between the known or identified NOAEL in animal study converted to human equivalent dose and the
NICNAS intake figure at 30 ppm (which is greater than the highest alleged amount found in BaWang Shampoo
Products, i.e. 27 ppm).
[295] In any event, even if we were to ignore the rats result as mentioned above, the Kano’s Study cannot be used
to support the Defendant’s case that 1,4-dioxane is genotoxic, because the fact that cancer developed at the lowest
dosing level tested in the female mice study (i.e. 500 ppm) (the human equivalent dose of which is 27,778 times
greater than the NICNAS intake figure at 30 ppm) does not mean that cancer would likely develop at the lower
dosing level. As mentioned many times, the area below 500 ppm remains a large unknown area.
[296] Finally, Dr Sawyer relies on Kasai’s Study which concerned inhalation toxicity of 1,4-dioxane. It suggested
that "Plasma levels of 1,4-dioxane increased linearly with an increase in the concentrations of exposure to 400 ppm
and above". The Defendant argues that this indicates that the rat’s body was able to handle the chemical and
metabolise it even up to the level of 2,330 mg/kg, and carcinogenesis can be initiated at levels below saturation of
metabolism.
[297] However, this study does not support that 1,4-dioxane is genotoxic which therefore justifies the adoption of
the linear extrapolation approach. First, Dr. Parent opines that the key event is not saturation of metabolism but
cytotoxicity, which kills liver cells and leads to regeneration of cells. Second, for the reasons already stated, even if
the Defendant can show evidence contradicting the theory of saturation of metabolism, it does not necessarily
follow that 1,4-dioxane is genotoxic. Even if the theory of saturation of metabolism is contradicted by any studies, at
its very best, it only means that the MOA is not elucidated and that 1,4-dioxane acts through an unknown
mechanism.
[298] For the above reasons, I accept that the re-assessment of Kitchin and Brown’s Study, the Kano’s Study and
the Kasai’s Study cannot alter the "weight of evidence" long recognised by various agencies that 1,4-dioxane is a
non-genotoxin, or at most a weak genotoxin (in the sense that it is genotoxic only at high dosing level). This is the
conclusion drawn by USEPA in 2013 and is consistent with the assessments and findings made by NICNAS, EU
Bureau and Health Canada. Even taken at the highest, these studies only show that 1,4-dioxane acts via an
unknown mechanism. There is no evidence suggesting that 1,4-dioxane is or more likely to be genotoxic.
[299] Before leaving the topic as to whether the NICNAS, EU and Health Reports are outdated, I have to deal with
one particular criticism by Dr Sawyer about the NICNAS Report.
[300] The Defendant criticises the NICNAS Report on the ground that NICNAS did not convert the animal dose to
human equivalent dose. However, different approaches demand different steps to be taken in order to make sense
out of that approach. In any event, NICNAS’s explanation of MOS clearly stated that intra-species variability would
be taken into consideration before making a judgment as to whether the MOS is wide enough.
[301] Instead of converting the animal dose into human equivalent dose, which was part of the methodology
included in USEPA’s linear extrapolation approach, NICNAS’s approach was that they first calculated a MOS
(margin of safety), and then it was for the experts to judge whether the margin was sufficiently wide to satisfy them
that it was safe.160 In this particular case concerning 1,4-dioxane, the experts were satisfied that the margin of 1,500
was large enough to be considered safe. It is therefore wrong to suggest that NICNAS failed to take into account
intra-species variability.
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[302] In any event, for demonstration purpose, Dr. Parent has already added in a factor of inter-species differences
between human and animal, the safety margin would still be large enough (8,611 for normal scenario and 443161 for
worst case scenario). Hence, I do not accept that the approach taken by NICNAS is flawed.
(i) WHO’s and HKWSD’s safety level of 1,4-dioxane in drinking water and the "de minimis" risk level
advocated by Dr Sawyer
[303] In order to test the accuracy of Dr Sawyer’s approach, one may also compare his safety level with the current
WHO’s standard and the HKWSD’s standard in respect of the amount of 1,4-dioxane in drinking water. After making
such comparison, there is no serious dispute that using BaWang Shampoo Products is safer than drinking the water
with the level of 1,4-dioxane at the current standard recommended by WHO.
[304] The current WHO guideline value is 50 µg/litre. The WHO is of the view that this guideline value represents
the concentration of constituents in drinking water that will not result in any significant health risk to a person
weighing 60 kg over a lifetime consumption of 2 litres per day for 70 years.162
[305] Assuming a water consumption rate of 2 litres/day, the daily intake would be 100 µg. On the other hand, the
daily intake of shampoo containing 30 ppm of 1,4-dioxane of a 60 kg human (using the NICNAS figure) would just
be 0.36 µg/kg/day × 60 kg = 21.6 µg (4.6 times less than the level of intake recommended by WHO). Thus, it is
clear that Bawang Shampoo Products, even if they contain up to 27 ppm of 1,4-dioxane as alleged by the
Defendant, are considered safe.
[306] If one applies Dr. Sawyer’s linear extrapolation approach and USEPA’s cancer slope factor, a concentration
of 50 µg/litre will generate 140 cancers in a million. This will be 140 times above the so-called "de minimis" level
advocated by Dr. Sawyer.163 Comparing this to the risk level of shampoo containing 27 ppm of 1,4-dioxane
calculated by Dr. Sawyer (i.e. 49 persons in a million), BaWang shampoo is 3 times safer than the WHO-
recommended water. If Dr Sawyer’s opinion is correct, it would be more dangerous to drink WHO-recommended
water than to use the Plaintiffs’ products.
[307] In fact, USEPA was well aware of this WHO’s standard in 2013 when it prepared the Toxicological Review
(2013). The WHO guideline value of 50 µg/litre as of 2005 was mentioned in Appendix H of the Review under the
title "Assessments by other National and International Health Agencies". Furthermore, WHO also put forward new
edition of guideline value in 2011 which is the current guideline adopted by the HKWSD as of 2014.164 The same
value of 50 µg/litre has been maintained by WHO throughout. Dr. Sawyer again says that the WHO’s guideline
value is "outdated". WHO certainly does not think so. There is no reason to suspect that WHO was not aware of the
materials included in USEPA’s Toxicological Review (2013), in particular USEPA has its own safety level for
drinking water calculated by reference to its de minimis cancer risk level.165
[308] Given that the WHO’s guideline value of 50 µg/litre, which is authoritative and is widely followed around the
world, is 140 times above the one in a million risk level, if USEPA found that it was erroneous or it would present
any harm to the general public, it is reasonable to expect that USEPA would voice out their concern in the
Toxicological Review (2013). But 2 years have passed since USEPA published its Toxicological Review (2013), and
USEPA has not issued any warning as regards the WHO’s guideline value, nor has the WHO revised its guideline
value since 2014. The WHO guideline value remains to be 50 µg/litre.166
[309] As mentioned earlier, USEPA never arrogates itself to be the only guideline that makes people safe. It only
provides guidelines and building blocks of information so that other risk management agencies can get hold of such
information and make their own assessment in given circumstances. This is exactly what happened in the present
case: USEPA provided guidelines and information for other agencies to make their own risk assessment, and the
WHO provided its own judgment and assessment.
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[310] This brings out another question: Does the "de minimis" risk level advocated by Dr Sawyer represents a real
risk in practical terms or theoretical risk? As explained by Dr. Sawyer himself, setting the "de minimis" risk level
merely means that anything less than it is negligible. But non-negligible risk does not necessarily mean real risk to
the public. Dr. Sawyer mentions that liver cancer has a background rate of 7.9 per 100,000 person-years in the
United States.167 Against this background rate, it is difficult to understand why an addition of 0.1 per 100,000
person-years (i.e. 1 per 1,000,000) would be significantly increasing the risk in real and practical terms.
[311] In fact, USEPA itself did not set any particular risk limit. They just set a range, 1 in 10,000, 1 in 100,000, and
1 in 1,000,000.168 The range of benchmarks are for the risk managers to make their own decision. USEPA does not
say that any level above 1 in 1,000,000 is necessarily unsafe.
[312] Further, there is some material in the Kano’s Study which seems to contradict Dr. Sawyer’s advocated "de
minimis" benchmark. In Kano’s Study, the writers referred to WHO’s guideline value of 50 µg/litre and the linear
extrapolation of USEPA, which came up to 30 µg/litre, carrying a risk of 1 in 100,000 persons. The writers
considered that both levels are safe for drinking water.169
[313] Dr Sawyer is asked about such contradiction. All he can say is that the authors of the Kano’s Study are
Japanese and he does not know how familiar they are with the "de minimis" risk level. This is hardly a satisfactory
explanation, given the fact the authors of the Kano’s Study are toxicologists conducting a study on the
carcinogenicity of 1,4-dioxane. In my judgment, this only shows that different scientists and health agencies around
the world may have different benchmarks as to whether a substance would pose a health risk to the public in real
and practical terms.
[314] Besides the WHO, reference can be made to standard of water quality in Hong Kong. According to the article
"Drinking water quality for period of October 2013 and 2014" published by the Water Science Division of the
HKWSD ("the HKWSD’s Article"), the minimum, maximum and average amount of 1,4-dioxane in Hong Kong
drinking water was no more than 12.5 µg/litre between 2013 and 2014. According to Dr. Sawyer’s risk calculation, it
would represent a cancer risk up to 35.7 cases of cancer per year in a million.170
[315] Although Dr. Sawyer explains that 12.5 µg/litre was the lowest point on the instrument calibration, he accepts
that in any event it means that so long as the amount of 1,4-dioxane is below 12.5 µg/litre, HKWSD considers that
"they are doing a good job and it’s one of the safest drinking water". In other words, HKWSD considers that water
containing 1,4-dioxane which would, according to the linear extrapolation approach, give rise to 35.7 cases of
cancer per year in a million, is safe. In fact, the HKWSD’s Article actually claimed that "Hong Kong enjoys one of
the safest water supplies in the world."
[316] Also, as HKWSD adopts the WHO’s 2011 guideline value, i.e. 50 µg/litre, it must follow that HKWSD accepts
that there is no risk to human health to consume 2 litres of water a day with that concentration of 1,4-dioxane, which
involves intake of 3 times more than what one can possibly obtain from the daily use of BaWang Shampoo
Products (even assuming that they contain 27 ppm of 1,4-dioxane as alleged by the Defendant).
[317] Yet according to the linear extrapolation model adopted by Dr Sawyer, the maximum safety limit of 1,4-
dioxane in drinking water is 0.35 µg/litre, taking into account the risk benchmark of one in a million.171
[318] Moreover, HKWSD accepts that drinking water is safe even if there are occasional deviations above the
WHO’s guideline value, i.e. 50µg/litre. The HKWSD’s Article stated that "occasional deviations above the WHO GVs
do not mean that the water is unsuitable for consumption. Large safety margins have been allowed for in the
derivation of the GVs". It is thus the opinion and advice of the government to the public, that in deriving the
guideline value of 50 µg/litre, a wide margin of safety has already been taken into account.
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[319] Furthermore, if Dr Sawyer’s risk assessment is correct, shampoo containing even a minute level of 1,4-
dioxane would be unsafe. Shampoo containing 6.44 ppm of 1,4-dioxane is certainly unsafe. Even according to the
Defendant’s case, it seems that some Middle East countries have adopted the most stringent control by limiting the
level of 1, 4-dioxane in shampoo to less than 10 ppm, and yet this level, according to Dr Sawyer, is many times
over the "safety level". If Dr Sawyer is correct, a lot of shampoos available in the market are unsafe for human
consumption.
(iii) Conclusion on toxicology evidence and the defence of justification
[320] Hence, what is the conclusion from all the above analysis? First, we know that 1,4-dioxane is a confirmed
animal carcinogen. Second, 1,4-dioxane is a possible human carcinogen. However, the actual effect of the
substance on humans is unknown because of the lack of empirical data. It is so classified mainly because of the
confirmed results on animals, and a lot of animal carcinogens have been eventually confirmed as human
carcinogen. Third, even if 1,4-dioxane is a confirmed human carcinogen (processed meat is now classified as
human carcinogen), that does not necessarily mean that the intake of any quantity of 1,4-dioxane would materially
increase the risk of cancer. It may or may not have a safety threshold dose. Fourth, experiments on animals were
usually performed with prescriptions of relatively high doses, and based on the results of the animal studies,
scientists are using different models to assess the effect of 1,4-dioxane on humans with lower doses. These
different models are based on different assumptions. Some of these assumptions are: (i) there is a possible safety
threshold if the substance is not a genotoxin; (ii) there is a linear relationship between dose and risk below LOAEL
and so the risk of cancer can be extrapolated in a linear relationship below LOAEL down to zero dose. Fifth, policy
considerations would affect the choice in the use of different assumptions and models. For example, for health
protection purposes and out of abundance of caution, even if it has not been proven to be factually correct, it would
be prudent to adopt a linear extrapolation approach in assessing the health risk of 1,4-dioxane if the MOA is
unknown. Sixth, most of the scientists do not regard 1,4-dioxane as a genotoxin. Seventh, the MOA of 1,4-dioxane
in causing cancer in animals is unknown. Eighth, there are two respectable groups of scientists taking different
views as to whether the level of 1,4-dioxane in BaWang Shampoo Products, whether it is 6.4, 10 or 27 ppm, would
pose a health risk to consumers, with each group of scientists adopting different risk assessment models and
hypothesises. Ninth, if the more conservative group of scientists (including Dr Sawyer) are correct, even minute
quantity of 1,4-dioxane in shampoo would pose a health risk to consumers, and a lot of materials for human
consumption, including shampoo and drinking water, may be unsafe. Tenth, different health agencies and risk
managers may have different risk benchmarks in assessing the real or practical risk of possible harmful substance
to the public. Eleventh, there is relatively little statutory control around the world over the level of 1,4-dioxane in
shampoo.
[321] In establishing the defence of justification, it is the burden on the defendant to establish the truth of the
alleged libel. As it is still unclear in the science world as to whether the level of 1,4-dioxane in BaWang Shampoo
Products would materially increase the risk of getting cancer or other illnesses, the Defendant has simply failed to
discharge the burden of proving the truth of the Words.
[322] In his submission, Mr Yu relies on McGhee v National Coal Board 172 and Lee Kin-kai v Ocean Tramping Co
Ltd173 and reminds me that there is distinction between the task of scientists and that of the court. Whilst scientists
are only concerned with certainty, the court has to make findings based on the balance of probabilities. Hence,
even if the scientists cannot prove to their satisfaction whether regular use of BaWang Shampoo Products would
materially increase the risk of cancer, the court is still obliged and should make a finding, on the balance of
probabilities, as to whether such Products are safe. In this regard, since: (i) 1,4-dioxane is a confirmed animal
carcinogen and a lot of animal carcinogens are eventually confirmed to be human carcinogen; and (ii) animals’
physiology, cell structure and organs are similar to those of humans, it is more probable than not that 1,4-dioxane is
also harmful to human health.
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[323] But that is not the proper question. The proper question should be: whether regular and continuous use of
shampoo containing 10 or even 27 ppm of 1,4-dioxane is harmful to human health? The dose is an important
consideration. So far as this particular question is concerned, the scientists cannot provide a satisfactory answer. It
may be the case that further researches in the future may shed light on this question, but the answer is unknown at
present. Any finding by the court can only be a guess. In my judgment, it would be quite inappropriate and
irresponsible for the court to rely on risk model or hypothesis to make such a finding even on the balance of
probabilities.
[324] Mr Yu also submits that because the Article involved a matter of public interest, that is whether BaWang
Shampoo Products are safe for the public and the general consumers, the Defendant should be allowed to write on
the subject. Relying on European human right authorities such as Lingens v Austria174 and Thorgeir Thorgeirson v
Iceland175 , it would be unfair to place a burden on the Defendant to prove the impossible. It would affect the
freedom of speech and the right of the public to know.
[325] In my judgment, there should be a clear distinction between the defence of justification and the defence of
publication in the public interest. Whilst the court will certainly take into account civil right considerations in
determining the defence of publication in the public interest, it would not be right to relax the burden of proof in
respect of the defence of justification. Ultimately, the defence of justification only concerns the truthfulness of the
alleged libel, and so the normal rule in respect of burden of proof should apply. If the defendant cannot discharge
the burden, he can still pray in aid of the defence of publication in the public interest to justify the publication of the
alleged defamatory materials. To allow civil right considerations to disturb the burden of proof for the defence of
justification is, in my judgment, just confusing the two distinct defences in the law of defamation. It would also create
great confusion and uncertainty in the law.
[326] Further, so far as the defence of justification is concerned, there is no unfairness to a person to bear
responsibility if he disregards a controversy between scientists and proceeds to make a positive assertion about the
safety of a product with no proper scientific basis. One must bear in mind that the journalist can always pray in aid
of the defence of publication in the public interest if he has satisfied the necessary requirements. Finally, the two
cases relied on by Mr Yu relate to criminal proceedings and so they are not applicable in the present case.
[327] Mr Yu also seeks to rely on s 26 of the Defamation Ordinance (Cap 21) which reads as follows:
"In an action for libel or slander in respect of words containing 2 or more distinct charges against the plaintiff, a defence of
justification shall not fail by reason only that the truth of every charge is not proved if the words not proved to be true do not
materially injure the plaintiff’s reputation having regard to the truth of the remaining charges."
[328] According to him, it is a complete defence to a claim for libel if the defendant proves that the imputation that
is being sued upon is substantially true. In order to succeed on the defence of justification, the defendant would
need only to prove that "the main charge, or gist, of the libel" is true, and does not need to justify statements or
comments which do not add to the sting of the charge. In other words, the important question is whether the core of
the libel is accurate, and not to be distracted by inaccuracies around the edge.
[329] In the present case, the Defendant is only able to prove that BaWang Shampoo Products did contain 1,4-
dioxane which is a confirmed animal carcinogen or a possible human carcinogen. The Defendant is not able to
establish, on the balance of probabilities, that regular and continuous use of BaWang Shampoo Products, with the
concentration of 1,4-dioxane of 6.44, 10 or even 27 ppm, would materially increase the risk of developing cancer.
Hence, the Defendant is not able to prove that the main charge of the libel is true. Further, I accept that the Words
do carry the various meanings as pleaded by Plaintiffs in the Re-Re-Amended Statement of Claim. Some of the
defamatory stings are imputations directed against the Plaintiffs themselves as corporations. As discussed above,
the proof of the various matters included in the Lucas-Box meanings are not sufficient to meet the defamatory
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stings pleaded by the Plaintiffs, and hence the Defendant cannot rely on the protection under s 26 of the
Defamation Ordinance.
[330] For the above reasons, the defence of justification fails.
[331] I then turn to the defence of honest comment which is not the focus of the parties in this case. According to
the Plaintiffs, honest comment is the most insubstantial of the defences raised by the Defendant.
[332] The Defendant seeks to establish this defence in respect of the following 3 "comments":
(1) "...兩星期後，化驗報告出爐，陳先生一看之下頓時又驚又怒，「霸王咁大間公司，洗頭水居然都有二噁烷!」"
(Two weeks later, the examination report was ready. Mr Chan felt scared and angry upon reading it, "Bawang is such a big
company and yet its shampoo contains 1, 4-dioxane) ("Comment (1)");
(2) "結果，飄柔及澳雪均含微量二噁烷，故他現時選用沒有被驗出該物質的O'Naomi
洗頭水，「既然人哋都可以無，咁點解霸王咁大牌子會有呢?」"
(The results, [of the examinations] showed that Rejoice and Acene both contained traces of 1,4-dioxane. So he now uses
O’Naomi shampoo, in which no 1,4-dioxane was detected. Other [products] do not have [1,4-dioxane], why was it found in a
big brand like BaWang?)("Comment (2)"; and
(3)
"其實多個國家如歐盟、中國及台灣均禁止生產商在個人護理產品及化妝品添加二噁烷，惟若是在製造過程中令產品受到微量
污染，則可以接受，但各地均沒界定何謂微量。
霸王便以此作擋箭牌，堅拒認錯，表示產品按照國內現行法律、法規及標準之要求規範生產。"
(In fact, a number of countries such as the EU, China and Taiwan all prohibited manufacturers to add 1,4-dioxane into any
personal skin care products or cosmetics, but it is acceptable if the product is contaminated with traces of [1,4-dioxane] in
the course of manufacturing. However, there is no definition for "traces".
BaWang thus used this as a shield and firmly refused to admit any fault. They indicated that their products were produced
according to the current laws, regulations and standards of China.)(Comment (3))
(i) Undisputed legal principles
[333] The legal principles for establishing a defence of honest comment are trite after Cheng v Tse Wai Chun176
and Spiller v Joseph 177. The ingredients of the defence are:-
(a) the comment must be on a matter of public interest;
(b) the comment must be recognisable as comment, as distinct from an imputation of fact;
(c) the comment must be based on facts which are true or protected by privilege;
(d) the comment must explicitly or implicitly indicate, at least in general terms, the facts on which it is based; and
(e) the comment must be one which could have been made by an honest person, however prejudiced he might be, and
however exaggerated or obstinate his views.
(ii) The "three comments" are statements of fact

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[334] The comment must be recognisable as comment as distinct from an imputation of fact. As stated in Gatley on
Libel and Slander178 , a comment is "something which is or can reasonably be inferred to be a deduction, inference,
conclusion, criticism, remark, observation etc".
[335] Comment (1) is allegedly a quote from the dubious "Mr. Chan". It is clearly an imputation of fact as opposed
to comment. The essence of the statement suggested that BaWang Shampoo Products contained 1,4-dioxane. The
use of a quotation, or an exclamation mark, does not change the nature of the statement. The reference to BaWang
being a "big" company does not change the nature of the statement which is one of fact: that BaWang Shampoo
Products contained 1,4-dioxane.
[336] By the same token, Comment (2) is also a statement of fact, i.e. BaWang Shampoo Products contained 1,4-
dioxane whilst shampoos of some other brands could be free of 1,4-dioxane. The fact that the statement was put in
a rhetorical question asked by "Mr. Chan" does not change its nature.
[337] Comment (3) is a plain statement describing the attitude of the Plaintiffs. It is also a statement of fact. The
first paragraph is purely descriptive of the rules and regulations around the world concerning the presence of 1,4-
dioxane in personal care products and cosmetics. The second paragraph states that BaWang uses the lack of
definition of "微量" (trace amount) in the regulations as a shield and refuses to apologize for its fault. There is not a
shred of "deduction, inference, conclusion, criticism, remark, observation" or opinion in Comment (3). In such case,
all 3 "comments" are statements or imputations of fact and so the defence of fair comment is not available to the
Defendant. This is already sufficient to dispose of the defence.
(iii) "Comments" not based on true facts
[338] Furthermore, the so-called "comments" are not based on true facts.
[339] Comments (1) and (2) were made on the factual basis that shampoos of O’Naomi, Watsons & Manning did
not contain 1,4-dioxane.179
[340] However, as I will develop in the latter part of this Judgment on responsible journalism180 , these samples
were all supplied by the dubious "Mr. Chan". Being a possible competitor who was making a story to attack the
Plaintiffs, I have reason to believe that "Mr. Chan" might have tampered with the samples which he gave to SGS for
testing. In my judgment, it is dangerous for the court to rely on the test results of the samples submitted by "Mr
Chan", and so there is no factual basis for Comments (1) and (2) to base on.
[341] Comment (3) imputes that the Plaintiffs had done something wrong: they were hiding behind regulatory
lacuna or loopholes and refused to acknowledge or apologise for the wrong they committed. The existence of "fault"
on the part of the Plaintiffs was the essential factual basis of the "comment", which would in turn depend on the fact
whether BaWang Shampoo Products do pose a risk of harm to the health of consumers. As already discussed
under the defence of justification, the Defendant has failed to discharge the burden of proving such fundamental
fact. As the fact upon which the "comment" was based was untrue, the defence is not available for such "comment".
The Plaintiffs had committed no fault or wrong, and there was nothing from which the Plaintiffs sought to hide
behind.
[342] Further, the Defendant had omitted the reference to the safety limit proposed by the scientists compiling the
NICNAS Report, which was the most relevant scientific report about the safety level of 1,4-dioxane in shampoo.
That was the safety standard adopted by the Australian health and regulatory authorities, Mainland SFDA, the Hong
Kong Customs and Taiwanese health authorities and relied on by the Plaintiffs. Yet the Defendant claimed in
Comment (3) that there was no definition about "traces" and proceeded to allege that the Plaintiffs were hiding from
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their wrong. Such "comments" were therefore made not based on true facts.
(iv) The first two "comments" do not meet the defamatory stings in the Article
[343] Further, I must point out that the first two "comments" do not meet the defamatory stings in the Article.
Comments (1) and (2) are taken from "Mr. Chan" and are confined to the suggestion that unlike other brands of
shampoo, such a big shampoo brand like BaWang contained 1,4-dioxane. In isolation, these two comments
perhaps convey a message that BaWang Shampoo Products were inferior in quality to that of 3 other brands. This
is however not the Plaintiffs’ complaint. The complaints are those stings discussed in the earlier part of this
Judgment conveyed by the defamatory meanings of the Words. As establishing these two comments as honest
comments does not meet any of such stings of the libel, the defence of honest comment would not be available at
least in respect of the first two comments.
(v) Malice in publishing the "comments"
[344] Based on my findings above, it is not necessary for me to deal with the issue as to whether the "comments"
were actuated by malice. In any event, I will deal with malice in the latter parts of this Judgment both on the issues
of responsible journalism and malicious falsehood. Although I find that the Defendant’s reporting fell below the
standard of responsible journalism, I have some doubt as to whether the "comments", if properly established, were
tainted with malice. Hence, I do not reject the defence on such ground.
[345] For the above reasons, the defence of honest comment also fails.
[346] The defence of publication in the public interest is another main battlefield between the parties. According to
the Defendant, the Article involved a piece of investigative journalism relating to a matter of public interest. In order
to protect the freedom of the speech and the press and the right of the public to know, the Defendant should be
allowed to rely on such defence to defeat the Plaintiffs’ claim even if it fails to justify the truth of the Words.
[347] There has been considerable development in the law about this particular defence in recent years. In a way,
the law has been "liberalised"181 or "constitutionalised"182 from a human right perspective. As a result, the notion of
"responsible journalism" has been developed.
(i) The development of the principle of "responsible journalism"
[348] In Jigme Tsewang Athoup v Brightec Ltd183 , which is a case concerning the introduction of the defence of
reportage in Hong Kong, I have traced the development of the notion of responsible journalism.
[349] It first started with the principles laid down in the landmark decision of the House of Lords in Reynolds v
Times Newspaper Ltd184 . In that case, the House of Lords "established a new variant of qualified privilege in which
less emphasis was placed on the traditional, reciprocal duty and interest test, and more on the question of whether
the publication was on a matter of public interest and whether it was the product of responsible journalism (with the
issue of malice being subsumed within this latter element)"185 . According to the Law Lords, the duty and interest
test can be satisfied if the public is entitled to know the particular information being published subject to 2 essential
prerequisites. The first is that the article as a whole must be in the public interest. The second prerequisite is
responsible journalism. Whether the article is of value to the public depends upon its quality as well as its subject
matter and the value of the article to the public must be tested against a standard of responsible journalism.
Responsible journalism is the point at which a fair balance can be held between freedom of expression on matters
of public concern and the reputation of the individual harmed by that disclosure.186
[350] The court, not the editor, must decide whether the particular material is privileged because of its value to the
public but due weight must be given to editorial judgment.187
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[351] In Reynolds, Lord Nicholls set out a non-exhaustive list of circumstances which would be relevant to the
issue of whether the standard of responsible journalism had been met in a given case. According to Lord Nicholls,
the list is not exhaustive, and the weight to be given to these and any other relevant factors will vary from case to
case.188
[352] The 10 listed factors are:
(i) The seriousness of the allegation. The more serious the charge, the more the public is misinformed and the individual
harmed, if the allegation is not true.
(ii) The nature of the information, and the extent to which the subject matter is a matter of public concern.
(iii) The source of the information. Some informants have no direct knowledge of the events. Some have their own axes to
grind, or are being paid for their stories.
(iv) The steps taken to verify the information.
(v) The status of the information. The allegation may have already been the subject of an investigation which commands
respect.
(vi) The urgency of the matter. News is often a perishable commodity.
(vii) Whether comment was sought from the plaintiff. He may have information others do not possess or have not disclosed.
An approach to the plaintiff will not always be necessary.
(viii) Whether the article contained the gist of the plaintiff’s side of the story.
(ix) The tone of the article. A newspaper can raise queries or call for an investigation. It need not adopt allegations as
statement of fact.
(x) The circumstances of the publication, including the timing.
[353] In Jameel (Mohammed) v Wall Street Journal Europe SPRL ,189 the House of Lords emphasised that the
"Nicholls factors" must be approached in a practical and flexible manner with due deference to editorial discretion.
The list certainly does not set up a series of hurdles to be negotiated by a publisher before he can successfully rely
on qualified privilege as a defence. Baroness Hale also said:190
"It should by now be entirely clear that the Reynolds defence is a ‘different jurisprudential creature’ from the law of privilege,
although it is a natural development of that law. It springs from the general obligation of the press, media and other
publishers to communicate important information upon matters of general public interest and the general right of the public
to receive such information. It is not helpful to analyse the particular case in terms of a specific duty and a specific right to
know. That can, as experience since Reynolds has shown, very easily lead to a narrow and rigid approach which defeats its
object. In truth, it is a defence of publication in the public interest."
(ii) Human rights jurisprudence
[354] As mentioned by Ward LJ in Roberts v Gable191 and the learned authors in Gatley192 , the European
Convention for the Protection of Human Rights and Fundamental Freedoms ("the European Convention"), which
was incorporated into English law by the Human Rights Act 1998, played a major formative role in the decisions of
both the Court of Appeal and the House of Lords in Reynolds v Times Newspaper Ltd193 .
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[355] Article 10 of the European Convention provides that everyone has the right to freedom of expression.
However, the exercise of such freedom may be subject to, inter alia, such restrictions as are prescribed by the law
and are necessary in a democratic society for the protection of the reputations or rights of others.
[356] The European Court of Human Rights has repeatedly emphasised that a liberal approach should be adopted
in cases concerning the freedom of speech. In The Sunday Times v The United Kingdom 194, the Court said:
"The court is faced not with a choice between two conflicting principles, but with a principle of freedom of expression that is
subject to a number of exceptions which must be narrowly interpreted."195
[357] The Court also pointed out that:
"It is not sufficient that the interference involved belongs to that class of the exceptions listed in article 10(2) which has been
invoked; neither is it sufficient that the interference was imposed because its subject-matter fell within a particular category
or was caught by a legal rule formulated in general or absolute terms: the Court has to be satisfied that the interference was
necessary having regard to the facts and circumstances prevailing in the specific case before it." 196
[358] A vital and distinct aspect of the right is the freedom to receive information and ideas.197 In The Observer and
the Guardian v United Kingdom198 , the European Court of Human Rights said:
"Not only does the press have the task of imparting such information and ideas: the public also has a right to receive them.
Were it otherwise, the press would be unable to play its vital role of `public watchdog’."199
[359] The English courts have also emphasised the importance of the freedom of expression. In Loutchansky v
Times Newspapers Ltd. & others (No.4 and 5) ,200 the English Court of Appeal quoted with approval the following
passage in Al-Fagih v HH Saudi Research and Marketing (HK) Ltd 201:
"This approach [referring to Reynolds and the ten factors identified by Lord Nicholls] reflects the jurisprudence if the
European Court of Human Rights under article 10 of the Convention for the Protection of Human Rights and Fundamental
Freedoms and is designed to enable a proper balance to be struck between on the one hand the cardinal importance of
freedom of expression by the media on all matters of public concern, and on the other hand the right of an individual to his
good reputation. Neither right is absolute but the former, particularly in the field of political discussion, is of a higher order, a
constitutional right of vital importance to the proper functioning of a democratic society. That is why ‘any curtailment of
freedom of expression must be convincingly established by a compelling countervailing consideration, and the means
employed must be proportionate to the end sought to be achieved’ (per Lord Nicholls at 200F), and why ‘Any lingering
doubts [as to how the balance should be struck] should be resolved in favour of publication’ (per Lord Nicholls, at p 205F)."
202
[360] The law of defamation is therefore concerned with striking a balance between the freedom of expression and
information on the one hand and the protection of the honour and reputation of individuals on the other.203 Although
the former is a constitutional right of cardinal importance, neither right is absolute.
[361] Hong Kong has similar human rights legislations.
[362] Article 27 of the Basic Law provides that Hong Kong residents shall have, inter alia, freedom of speech, of
the press and of publication.
[363] Article 16 of the Hong Kong Bill of Rights Ordinance (Cap 383)("HKBOR Ordinance"), which is equivalent to
Article 19 of the International Covenant on Civil and Political Rights, provides that, inter alia, everyone shall have
the right to freedom of expression, including the freedom to seek, receive and impart information, provided that the
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exercise of such right may be subject to certain restrictions as are provided by law and are necessary for respect of
the rights or reputations of others.
[364] In Cheng & Anr v Tse Wai Chun204 , Li CJ said the following:
"The freedom of speech (or the freedom of expression) is a freedom that is essential to Hong Kong’s civil society. It is
constitutionally guaranteed by the Basic Law (art. 27). The right of fair comment is a most important element in the freedom
of speech.
In a society which greatly values the freedom of speech and safeguards it by constitutional guarantee, it is right that the
courts, when considering and developing the common law, should not adopt a narrow approach to the defence of fair
comment. See Eastern Express Publisher Ltd & Anr v Mo Man Ching & Anr (1999) 2 HKCFAR 264 at p. 278. The courts
should adopt a generous approach so that the right of fair comment on matters of public interest is maintained in its full
vigour."
[365] In Jigme Tsewang Athoup v Brightec Ltd ,205 I made the remark that although the dicta of Li CJ were made in
the context of the defence of fair comment, the same rationale and liberal approach should apply when considering
the defence of Reynolds privilege or publication in the public interest.
[366] The law of defamation in Hong Kong must therefore be understood and applied in a way consistent with the
Basic Law and the HKBOR Ordinance. In determining whether the press is liable for a libel, the court has to
consider whether it is necessary for respect of the right or reputation of other to prohibit the publication of the
alleged libel to the public which may have the right to receive them.
[367] The word "necessary" should be given its ordinary meaning. The requirement also involves the application of
a proportionality test. The restriction should be rationally connected with one or more of the legitimate purposes and
the means used to impair the right must be no more than is necessary to accomplish the legitimate purpose in
question.206
[368] However, the "subject matter" of the publication may be of public interest and concern is not a warrant for the
inclusion of all sorts of defamatory statements, otherwise it would just be a blanket licence to the journalists to
publish whatever they like so long as the subject matter of the publication somehow relates to matter of public
interest, and they do not need to exercise any care in their reporting. This cannot be in the public good.
[369] In Jameel (Mohammed) v. Wall Street Journal Europe SPRL, Lord Hoffmann said:207
"If the article as a whole concerned a matter of public interest, the next question is whether the inclusion of the defamatory
statement was justifiable. The fact that the material was of public interest does not allow the newspaper to drag in
damaging allegations which serve no public purpose. They must be part of the story. And the more serious the allegation,
the more important it is that it should make a real contribution to the public interest element in the article."
[370] Further, the learned authors of Gatley on Libel and Slander noted that "[a] defendant who makes a specific
charge… will not be allowed to dress up his defence with a plea of Reynolds privilege simply because the
background to the charge involves a matter of public interest."208 A passage in Miller v Associated Newspaper Ltd
was cited:209
"there is a danger that any plea citing a few generalities about the duty of the media to be a public watchdog will be allowed
to pass muster and thus to prolong and complicate unnecessarily a significant number of libel actions in which qualified
privilege has no legitimate role to play."
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[371] In considering whether it is part of the story to include the defamatory statements, Lord Hoffman said the
following in Jameel:210
"… … But whereas the question of whether the story as a whole was a matter of public interest must be decided by the
judge without regard to what the editor’s view may have been, the question of whether the defamatory statement should
have been included is often a matter of how the story should have been presented. And in that question, allowance must be
made for editorial judgment. If the article as a whole is in the public interest, opinions may reasonably differ over which
details are needed to convey the general message. The fact that the judge, with the advantage of leisure and hindsight,
might have made a different editorial decision should not destroy the defence, That would make the publication of articles
which are, ex hypothesi, in the public interest, too risky and would discourage investigative reporting."
[372] The introduction of the defence of publication in the public interest was, therefore, a response by the courts
to apply the law of defamation in accordance with the human rights legislations and jurisprudence. The yardstick for
the defence is the notion of responsible journalism. Although the court should apply such notion liberally and
generously in accordance with the human right jurisprudence, such right is not absolute and the court has to strike a
balance between the freedom of expression and the right to protection of the reputation of individuals. This is not an
easy exercise.
[373] Before I deal with the principle of responsible journalism, I have to address one more human right argument
advanced by Mr Yu. According to him, freedom of expression needs to be balanced against the freedom of private
life or right to the private life or right to the protection of reputation as provided for in, for example, Article 14 of the
HKBOR Ordinance. In the present case, the right to reputation is not engaged because there is a distinction
between an individual’s right to reputation and a company’s reputation, the latter is not protected under human right
legislations.
[374] I disagree. If Mr Yu’s argument is correct, there would be two different standards to apply, one for a claimant
who is a natural person and another one for a claimant which is a corporation, in the balancing exercise involving
the right to freedom of expression and the right to protection as to reputation. This simply cannot be right.
Furthermore, when Article 10 of the European Convention, Article 27 of the Basic Law and Article 16 of the HKBOR
Ordinance refer to the restriction of the freedom of expression, they describe the restrictions "as are provided by
law and are necessary for respect of the rights or reputations of others", and "others" should, in my judgment,
include both natural persons and corporations. A lot of the rights under human right legislations are equally enjoyed
by corporations, for example, equality before the courts and right to fair and public hearing, and so I do not see a
distinction between the claimant being a natural person or a corporation.
(iii) The standard of responsible journalism
[375] How should the court then set the standard of responsible journalism?
[376] Firstly, the standard of responsible journalism is an objective one to be decided by the court and not the
journalist, but due weight must be given to editorial judgment.
[377] Second, the standard should neither be too low nor too high. In Loutchansky v Times Newspaper Ltd (Nos 4
and 5) 211, it was held that while the free flow of information should not be compromised and matters of public
interest should not be prevented from coming to light so that the standard for responsible journalism should not be
set too high, the standard should also not be too low as that would encourage the proliferation of defamatory
materials which cannot be in the public good. The English Court of Appeal observed:212
"(ii) Setting the standard of journalistic responsibility too low would inevitably encourage too great a readiness to publish
defamatory matter. Journalists should be rigorous, not lax, in their approach. It is in the interests of the public as well as the
defamed individual that, wherever possible, truths and not untruths should be told. This in the interests of the media too:
once untruths can be published with impunity, the public will cease to believe any communications, true or false.
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(iii) Setting the standard too high, however, would be no less damaging to society. This would deter newspapers from
discharging their proper function of keeping the public informed. When determining in respect of any given article whether
or not it should attract qualified privilege, the court must bear in mind the likely impact of its ruling not only upon the case in
hand but also upon the media’s practices generally. Qualified privilege ordinarily falls to be judged as a preliminary issue
and before, therefore, the truth or falsity of the communication is established. The question to be posed is accordingly
whether it was in the public interest to publish the article, true or false, rather than whether it was in the public interest to
publish the untruth. Even, moreover, when the untruth of the article is established (or when, as here, it is not formally
disputed), it is important to remember that the defence of qualified privilege tolerates factual inaccuracy for two purposes:
first so as not to deter the publication sued upon (which might have been true); and secondly so as not to deter future
publications of truthful information."
[378] In the past, the courts have always cautioned about the danger of setting the standard too high. There is a
concern that a high standard would discourage the press from discharging its function as a watchdog in a free
society, and as a result the general public would suffer because the right to know would be curtailed.
[379] However, little has been said about setting the standard too low. In my judgment, the public also has an
expectation for the court not to set the standard too low, otherwise it would encourage the press not to exercise any
care in making their reports. With the result that the press would lose its objectivity, with selective reporting of
materials which are favourable to make up a story. Once the press loses its credibility, the public will cease to
believe in any of their reports, whether true or false. This is also a legitimate concern of the public, and the
responsible journalist should therefore try to ensure that what is published is accurate and fit for publication.
[380] As Lord Hobhouse said in Reynolds:213
"The liberty to communicate (and receive) information has a similar place in a free society but it is important always to
remember that it is the communication of information not misinformation which is the subject of this liberty. There is no
human right to disseminate information that is not true. No public interest is served by publishing or communicating
misinformation. The working of a democratic society depends on the members of that society, being informed not
misinformed. Misleading people and the purveying as facts statements which are not true is destructive of the democratic
society and should form no part of such a society. There is no duty to publish what is not true: there is no interest in being
misinformed. These are general propositions going far beyond the mere protection of reputations."
[381] Lord Bingham also noted in Jameel that:214
"The rationale of this test is, as I understand, that there is no duty to publish and the public have no interest to read material
which the publisher has not taken reasonable steps to verify. As Lord Hobhouse observed with characteristic pungency, at
p 238, "No public interest is served by publishing or communicating misinformation." But the publisher is protected if he has
taken such steps as a responsible journalist would take to try and ensure that what is published is accurate and fit for
publication."
[382] No public interest is served by communicating misinformation, and the dicta of Lord Hobhouse highlight the
harm that can be caused by misinformation in a free society. In fact, we are now living in the internet stage and
watchdogs are everywhere. We are flooded with information and misinformation every day, and on many occasions
the public has no way to ascertain the truth of the information fed to them. People act on those information, whether
true or false, and one should not undermine the harm and damage that can be caused by misinformation.
[383] Information from the press is different from information available casually in the internet. Because of its
function as a watchdog in the society, the public would expect the press to carry out some basic duties in verifying
the truth of the information published by them. This is especially the case when the public is presented with a piece
of investigative journalism dealing with scientific issues. The public would expect that the press has carried out the
relevant investigative and research works, and the conclusion published in the article is one substantiated with
reasonable materials. Due to these assumption and expectation, such kind of report would carry much weight in the
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eyes of the public. It is therefore appropriate to ask the journalists to do their works responsibly, especially when
they knew full well that the report would seriously affect the reputation and business of others.
[384] Mr Pow has referred me to the Journalists’ Code of Professional Ethnics published by the Hong Kong Press
Council ("the Code of Ethics") which requires journalists to, inter alia:
"(i) Journalists should handle news information with an attitude of seeking truth, fairness, objectivity, impartiality and
comprehensiveness. Journalists should strive to ensure accuracy of their reports. They should not mislead the public be
quoting out of context, distorting facts or twisting original meaning.
(i) Whenever proven inaccuracy, misleading facts or figures, or distortion with earliest opportunity to reply, and corrections
should be made promptly.
.. … …"
[385] However, the Code of Ethics is not law and so it should not be construed as such. If one were to apply the
Code of Ethics strictly, it would certainly discourage journalists to make any reports on matters of public concern
which would not be in public good. On the other hand, I would imagine every journalist would know about their duty
to be objective and not to mislead the public by telling the half truth. When the press is exercising its power and
influence as now commonly referred to as the "fourth estate (or fourth power)" in every civilised society, there must
be corresponding duty and standard of responsible journalism that they have to observe. Journalists are also
professionals. If they perform their works irresponsibly which seriously affect the reputations of others, they cannot
always put forward freedom of speech as an excuse.
[386] It is also true that the law recognizes that journalists, in the exercise of their freedom of expression, should be
permitted a degree of exaggeration. In Turcu v News Group Newspapers Ltd215 , Eady J commented, in respect of
the article complained of, that there "may be a good deal of sloppiness and inaccuracy in what was published"216 ,
but nevertheless went on to say:
"108… journalists, in the exercise of their rights to freedom of expression, need to be permitted a degree of exaggeration
even in the context of factual assertions (not only when making comments or voicing their opinions)…
………
111. In deciding whether any given libel is substantially true, the court will have well in mind the requirement to allow for
exaggeration, at the margins, and have regard in that context also to proportionality. In other words, one needs to consider
whether the sting of a libel has been established having regard to its overall gravity and the relative significance of any
elements of inaccuracy or exaggeration. Provided these criteria are applied, and the defence would otherwise succeed, it is
no part of the court's function to penalise a defendant for sloppy journalism — still less for tastelessness of style…"
[387] Similarly, the European Court of Human Rights stated in Bladet Tromsø and Stensaaas v Norway:217
"One factor of particular importance for the Court’s determination in the present case is the essential function the press
fulfils in a democratic society. Although the press must not overstep certain bounds, in particular in respect of the reputation
and rights of others and the need to prevent the disclosure of confidential information, its duty is nevertheless to impart – in
a manner consistent with its obligations and responsibilities – information and ideas on all matters of public interest. In
addition, the Court is mindful of the fact that journalistic freedom also covers possible recourse to a degree of exaggeration,
or even provocation. In cases such as the present one, the national margin of appreciation is circumscribed by the interest
of democratic society in enabling the press to exercise its vital role of "public watchdog" in imparting information of serious
public concern."
[388] On the other hand, the courts have also emphasised that exaggeration is not without bound. In the present
case, the subject matter of the Article relates to the safety of a product which involves considerable scientific
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researches on the effect of 1,4-dioxane on animals and humans. The issue here is whether the Defendant should
be allowed to exaggerate the health risk of BaWang Shampoo Products, which is very much a scientific issue,
without presenting the contrary scientific materials to the readers. As a result, the readers only got the half truth and
received the message that the scientific community had conclusively come to the conclusion that BaWang
Shampoo Products were unsafe. In particular, the Defendant knew full well that the Article would have a significant
impact on the reputation and business of the Plaintiffs.
(iv) Events leading to the publication of the Article
[389] Did the Defendant meet the standard of responsible journalism?
[390] In his submission, Mr Pow has conducted a microscopic analysis of every step taken by Madam Lam and the
editorial staff of the Magazine leading to the publication of the Article. It is the Plaintiffs’ case that Madam Lam and
the staff had lost their objectively since the commencement of the investigation, and as a result the final Article was
a piece of biased and defamatory report targeting the Plaintiffs.
[391] It is easy to make these criticisms with the benefit of hindsight. But despite the generous allowance given to
journalists as to how to present their reports, a lot of the complaints lodged by the Plaintiffs do have merit. As I see
it, the main "mistakes" committed by the Defendant are that the Article made a positive and serious assertion that
regular use of BaWang Shampoo Products was harmful to human health without adequately telling the readers that:
(i) there were responsible scientific researches showing the contrary; and (ii) there were responsible regulatory
agencies in other scientifically advanced countries taking the view that the level of 1,4-dioxane found in BaWang
Shampoo Products was safe. The Defendant had failed to verify the source of the scientific materials behind the so-
called "10-ppm safety limit". The Article had exaggerated, in a sensational manner, the health risk associated with
the use of the Plaintiffs’ shampoos. Further, it served no public interest for the Defendant to include a lot of other
unnecessary defamatory accusations against the Plaintiffs, for example, the Plaintiffs were irresponsible,
incompetent and greedy commercial organisations which lacked commercial morality, and they used inferior raw
materials to produce BaWang Shampoo Products with mercenary motive to save costs.
[392] The Defendant published the Article knowing full well that they were making one of the most serious
allegations against the Plaintiffs and their products. The Article was a featured article in the Magazine intended to
create an impact on the Plaintiffs and their consumers, which is best illustrated by the sudden drop in the share
price of the 1st Plaintiff within a few hours after the publication of the Article. In such circumstances, the Defendant
should have borne a greater responsibility and exercised more care in ensuring that the contents of the Article were
accurate and not biased. Unfortunately, the Defendant had failed to meet such standard and I do not accept that
the Article was a product of responsible journalism.
[393] The Defendant had also committed other "errors", such as failing to verify the credibility of the complainant
and the test results provided by him and acting oppressively against the Plaintiffs when it demanded for a response
from them. Although each of these individual "errors" may not by itself be sufficient to conclude that the Defendant’s
reporting fell below the standard of responsible journalism, the court will certainly take all these factors into account
in determining whether the standard has been met in the present case. Unfortunately, the Defendant has failed to
meet such standard.
[394] To make good these observations, I need to deal with the evidence leading to the final publication of the
Article.
(a) How did the investigation begin?
[395] It began with a written complaint by one "Mr Chan" to the Complaint Section of the Magazine on 16 April
2010. The complaint record showed that "Mr Chan" had taken a bottle of BaWang shampoo to SGS for testing. "Mr
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Chan" suggested that the tested content of 1,4-dioxane exceeded "the American standard by 17 ppm". "Mr Chan"
also called 1,4-dioxane a carcinogen and stressed his worry that Bawang Shampoo Products were harmful to
health.
[396] This complaint was followed by "Mr. Chan’s" email dated 16 April 2010 again stressing his worry about
BaWang Shampoo Products posing a health risk. On 17 April 2010, by another email, "Mr. Chan" attached a copy
of the SGS report. On 23 April 2010, "Mr. Chan" approached another staff of the Magazine and sent her the SGS
report again. Then on 29 April 2010, "Mr. Chan" sent another email threatening to go to Oriental News and other
media if he did "not hear any news or action from NEXT Media". It is very clear that "Mr. Chan" was a particularly
keen complainant.
[397] The matter eventually reached the attention of Madam Lam on about 22 June 2010. Madam Lam admits that
she had suspicion over "Mr Chan" at that time because: (i) he was particularly keen for the Magazine to report on
his complaint; (ii) he spent money in sending the shampoos for professional testing of 1,4-dioxane; and (iii) he
seemed to have knowledge as to the permissible limit of 1,4-dioxane.
[398] At the trial, Madam Lam admits that she did not feel safe to rely on the SGS report sent by "Mr Chan" under
his emails.
(b) How was the investigation conducted?
[399] According to Madam Lam, prior to meeting and interviewing "Mr Chan" on 29 June 2010, she had
undertaken some research on 1,4-dioxane. The materials obtained by her included, inter alia: (i) an article from an
American campaign group called "Campaign for Safe Cosmetics" concerning failures of listing 1,4-dioxane in
product labels; (ii) an article on 1,4-dioxane from "Skin Deep: Cosmetic Safety Review"; (iii) an article of Oriental
Daily dated 17 March 2010; (iv) an article of Sing Tao Daily dated 22 March 2009; and (v) a public statement in the
website of the Cosmetic & Perfumery Association of Hong Kong Ltd ("the HK Cosmetic Association") informing
consumers that they need not worry about the presence of small quantity of 1,4-dioxane in cosmetics.
[400] The main focus of the research was to ascertain the harmful effect of 1,4-dioxane on humans (if any) and the
safety level of such substance in shampoo (if any). From these materials, Madam Lam should have known the
following, inter alia:
(i) There was concern about the presence of 1,4-dioxane in consumer products in the United States but there was no
express reference to a safety level;
(ii) A variety of international agencies classified 1,4-dioxane differently in relation to "carcinogenicity" of 1,4-dioxane. Some
clearly considered that there was insufficient evidence of carcinogenicity to humans. Madam Lam admits in cross-
examination that she understood that there were all together "4 schools of thought" and that different responsible agencies
were taking different viewpoints. Madam Lam must have appreciated that she was researching into a scientific topic in
controversy;
(iii) According to the Mainland SFDA, trace amount of 1,4-dioxane in cosmetic would not have effect on human health, and
there was no regulatory limit of 1,4-dioxane set in the Mainland;
(iv) Professor Lam opined in some previous interviews that according to USEPA, concentration of 1,4-dioxane in drinking
water should not be above 4 ppm. The amount of 1,4-dioxane tested by the Mainland authority in shower lotion was below
this guideline. Furthermore, it is not for ingestion and so the public should not panic;
(v) According to a spokesman from Hong Kong Customs, Hong Kong authorities would consult the Mainland and EU safety
standards in relation to presence of 1,4-dioxane in shampoo. However, Madam Lam could not find any materials on the EU
standard and she dismissed the standard adopted by the Mainland SFDA as unreliable;
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(vi) EU has prohibited the use of 1,4-dioxane in consumer products. USFDA has not set any safety guideline but opined
that a trace amount of 1,4-dioxane is harmless and poses no hazard to consumers;
(vii) 1,4-dioxane is not an ingredient intentionally added to any product but can be present in trace quantities in some raw
materials. Unintentional presence of trace amount is allowed under EU Cosmetics Directive. Similar allowance is found in
many other countries or territories; and
(viii) Department of Health and Ageing of Australian Government held the opinion that the presence of trace 1,4-dioxane
not more than 100 ppm in consumer products is safe (an internet link to NICNAS was provided). This was the most relevant
scientific research before Madam Lam about the safety level of 1,4-dioxane in shampoo, and the NICNAS Report was
endorsed by the HK Cosmetic Association.
[401] Madam Lam testifies that prior to 29 June 2010, she talked with Professor Lam over the phone. According to
her notes, there were references to "OSHA", "Air 100 ppm 8-hours work", "US FDA" "10 ppm" "food and drug", "20-
30 ppm, long term use will affect liver and kidney", and "animal experiments shows that it causes liver cancer".
[402] In cross-examination, Madam Lam testifies that "100 ppm" was explained by Professor Lam as relating to
working environment. She was not sure whether it related to Occupational Safety and Health Administration
(OSHA), which had in fact set a "permissible exposure limit" of 100 ppm. Professor Lam also explained about why
there were different schools of thought on "carcinogenicity" of 1,4-dioxane. It was due to the fact that cancer-
producing effect only came from animal studies and there was no experiment to prove that it would cause cancer to
humans. According to the testimony of Professor Lam, he would never have commented on carcinogenic effect of
1,4-dioxane on humans because there is no direct evidence of such effect. He says that he should have done the
same to Madam Lam’s enquiry. I accept his evidence in this regard.
[403] With reference to USFDA’s 10-ppm limit, Madam Lam understood Professor Lam as referring to the limit set
by USFDA for food and drug. Professor Lam testifies that when he mentioned "10-ppm limit", he emphasized to
Madam Lam that it referred to food and drug.
[404] As for reference to "20-30 ppm", Madam Lam understood Professor Lam as expressing his own opinion that
at this concentration, it just meant that it would affect the liver and kidney. Professor Lam was not saying that it
would cause cancer. According to Professor Lam, he definitely did not mention exposure of "20-30 ppm" to
humans. He only remembers mentioning "10 ppm". Professor Lam admits that a product either below or up to 10
ppm was not a matter of serious concern. It was only when he was told about a test result of over 20 ppm that
caused him concern.
[405] Professor Lam does not know about the NICNAS or the EU Report. Madam Lam had not referred him or
asked him to comment on these reports.
[406] Madam Lam then conducted an interview with "Mr Chan" on 29 June 2010. During the interview, "Mr Chan"
showed her even more SGS test reports on other brands of shampoos. "Mr Chan" appeared even more keen than
ever. Madam Lam also accepts that "Mr Chan’s" conduct as "rare" for a complainant. However, after "Mr Chan"
talked about his family history of contacting cancer, it suddenly cleared her suspicion about "Mr Chan". According to
her, a normal person would not lie about the death of his family members. Madam Lam did not ask "Mr Chan" for
his name card to verify his occupation or contact.
[407] Whether because of suspicion or the need to obtain independent evidence, a decision was then made for the
Defendant to conduct independent testing of BaWang Shampoo Products. Madam Lam then purchased 3 bottles of
BaWang Shampoo Products and delivered the same to SGS for testing.
[408] After meeting "Mr Chan", Madam Lam conducted another informal interview with Dr Lau over the phone.
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According to her notes, Dr Lau mentioned the following points:
(i) the presence of 3.5 ppm of 1,4-dioxane in shower lotion is acceptable;
(ii) in the United States, consumer products should not contain more than 20 ppm of 1,4-dioxane;
(iii) below 10 ppm, "definitely no problem" ("一定無事");
(iv) between 10 to 20 ppm, "there is a chance that something will begin to happen if use for long term"
("長期用有機會開始有事"); and
(v) between 20 to 30 ppm, "long term use may possibly cause cancer" ("長期使用有可能致癌").
[409] The notes clearly show that when Dr. Lau talked about "possibility of causing cancer", he mentioned that it
was based on animal experiments. Madam Lam actually understood Dr. Lau as meaning that: "It had been
confirmed through animal experiments that it will cause cancer. So for long term use of 20 to 30 ppm, it is possible
to cause cancer".
[410] The evidence of Dr Lau is more emphatic. He points out that the "doctor" ("醫生") mentioned in the opening
paragraph of the Article should not be a reference to him because up to now, he does not think 1,4-dioxane would
affect the kidney and he did not emphasize cancer to the reporter. Dr Lau then mentions about "the danger for
media to take words out of context". He says that if he had mentioned that 1,4-dioxane may cause cancer, he would
have said together with the words "just supported by some experiments on animals". When he mentioned between
20 to 30 ppm, "long term use may possibly cause cancer" ("長期使用有可能致"), he said "for experiments on
animals, it could be proved, but concerning humans, it was deduced from experiments on animals". He is certain
that he would have mentioned "animal experiments" ("動物實驗").
[411] I accept the evidence of Dr Lau without any reservation. His evidence highlights the danger of such kind of
casual telephone interview. Although Dr Lau cannot remember everything said by him during the interview, he
seems to suggest that his reference to cancer was completely taken out of context. Further, the reference to
"doctor" ("醫生") in the opening paragraph of the Article could only have been a reference to Dr. Lau. He was the
only medical doctor interviewed. It is thus clear from Dr. Lau’s evidence that he was misquoted in the Article.
Finally, Madam Lam had not referred Dr Lau to the NICNAS or EU Report for comment.
[412] There was also another interesting reference in Madam Lam’s notes about "the costs may be increased by 5
to 6 times". In the Article, Dr Lau had been quoted for saying that the costs would be increased by 5 to 6 times if it
had to remove all the contaminant of 1,4-dioxane in the product. Dr Lau cannot remember whether he expressly
mentioned the figures of 5 to 6 times, and so I have to accept Madam Lam’s evidence that Dr Lau might have
endorsed such figures. However, Dr Lau is only a medical practitioner with some knowledge in toxicology, and so I
am quite certain that it was Madam Lam who brought up this subject. Obviously, Dr Lau himself was not suggesting
that the producer of the shampoos was using cheap or inferior raw materials in the manufacturing process with a
mercenary motive to save costs.
[413] Then on 8 July 2010, Madam Lam conducted further research on the topic. 7 articles and documents were
printed out. Apart from one of them, all these articles and documents were related to the corporate information
about BaWang and its listing. Madam Lam admits that she researched into the corporate information of BaWang
because she was instructed to do so by Mr Cheung Kim Hung (張劍虹)("Mr Cheung") who was the content advisor
of Book A of the Magazine.
[414] The article which was unrelated to the corporate information about BaWang was from an American campaign
group called "Campaign for Safe Cosmetics". It stated that in 2000, USFDA recommended that cosmetic products
should not contain 1,4-dioxane at concentration greater than 10 ppm.
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[415] Then on 9 July 2010, Madam Lam printed out a news article from Bloomberg about a lawsuit instigated in
United States based on "California Proposition 65". It explained that under "Proposition 65", consumer products that
contain toxic levels of 1,4-dioxane must have warning labels stating that they may cause cancer. The article
however did not say what amount to "toxic level". It did not mention "10 ppm" at all.
[416] It was on 12 July 2010 that SGS provided its test results to Madam Lam. The 3 samples of BaWang
Shampoo Products bought by the Defendant independently and sent for testing were all tested with 10 ppm
concentration of 1,4-dioxane. Noting the great disparity in the test results as compared with the earlier one of 27
ppm supplied by "Mr Chan", Madam Lam called SGS to make enquiry. This showed that Madam Lam felt
concerned about the disparity. Yet, upon being told by SGS that they could not discuss the earlier report with her
because she was not the client, Madam Lam put a sudden halt to her enquiry. She had not sought the consent of
"Mr. Chan" to allow SGS to provide explanation.
[417] In fact, had Madam Lam studied and compared the reports in detail, she would have noticed that there were
different descriptions of the Sample Receiving Condition in the two reports: "unopened bottle" in respect of the
samples submitted by "Mr Chan" and "sealed bottle" for the samples sent by the Defendant for testing.
[418] Shortly before the publication of the Article, Madam Lam contacted "Mr Chan" again, and the latter supplied
to her the test reports of the other brands of shampoos which were alleged not to have contained any 1,4-dioxane
and the receipts for purchasing the BaWang, Rejoice and Acene shampoos.
[419] On 12 July 2010, Madam Lam printed out a number of research materials. According to some of the news
reports contained in these materials, Qatar banned the sale and use of shampoos containing a concentration of 1,4-
dioxane higher than 10 ppm. These reports also mentioned that cosmetic products and shampoos containing more
than 10 ppm of 1,4-dioxane can cause cancer. Madam Lam admits at the trial that she did not known how the Qatar
Government came about that particular standard. Interestingly enough, the Plaintiffs started to export BaWang
Shampoo Products, without any changes in the formula, for sale in the Middle East countries about 6 months after
the publication of the Article, and there was no complaint about the quality of such Products.
[420] On 13 July 2010, Madam Lam also printed out other materials. One of such materials was an article from
"Campaign for Safe Cosmetics". It mentioned 10 ppm as the "actionable level under Proposition 65", but the
Proposition was about the putting of warning label as clearly shown in a writ of an action in a Californian court
obtained by Madam Lam. There was also an announcement from USFDA in July 2007. It stated that USFDA had
not established or recommended a specific limit on the level of 1,4-dioxane in cosmetics. If USFDA were to
determine that a health hazard exists, it would advise the industry and the public.
[421] There were also other research materials found out by Madam Lam which bore no print-out dates, including:
(i) an article with the title "California Prop 65 Settlement Updates: Part 6", indicating that Proposition 65 was about warning
label and there were consent agreements made by consumer products manufacturers voluntarily agreeing to reduce the
level of 1,4-dioxane in their products to no more than 10 ppm;
(ii) articles mentioning that Procter & Gamble ("P & G") Herbal Shampoos were tested to have contained 24 ppm of 1,4-
dioxane, and P & G agreed to reformulate its herbal shampoos to reduce the levels of 1,4-dioxane to a level of 10 ppm or
below, tough it emphasized that it was not a regulatory requirement;
(iii) articles explaining the nature of 1,4-dioxane, stating that the substance is reasonably anticipated to be a human
carcinogen on sufficient evidence of carcinogenicity in experimental animals, but with inadequate evidence for
carcinogenicity in humans;
(vi) NICNAS Report; and

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(vii) a publication by the health authority in Taiwan in April 2009 referring to the NICNAS standard of 100 ppm.
[422] During cross-examination, Madam Lam also admits that, prior to 13 July 2010, she had the announcement of
the Mainland SFDA dated 21 March 2009 and had read it more than once. The announcement addressed
specifically the safety level of 1,4-dioxane in shampoo products. According to the announcement:
(i) it was prohibited to include 1,4-dioxance as a raw material for the production of cosmetic products;
(ii) if 1,4-dioxane was produced as an inevitable by-product in the manufacturing process, the producer had to comply with
the relevant standards and regulations and to ensure that the normal, reasonable and foreseeable use of the cosmetic
products would not be hazardous to human health;
(iii) Mainland SFDA had referred to a number of standards, in particular the NICNAS safety level in consumer products; and
(iv) Mainland SFDA considered that the satisfactory level of 1,4-dioxane in consumer products (excluding food and drugs)
should not exceed 30 ppm, but products containing less than 100 ppm should be regarded as toxicologically acceptable.
(c) How was the Article drafted and edited?
[423] Madam Lam prepared the first working draft of the Article ("the Working Draft") on or about 12 July 2010218 ,
which was subsequently submitted to the editorial meeting for discussion.
[424] The first editorial meeting which discussed the story about BaWang Shampoo Products was held on 12 July
2010 with the following persons present: Mr Lee Chi Ho (chief editor)("Mr Lee"), Mr Yeung Wai Hong (publisher),
Ms Louise Wong (deputy chief editor), Mr Choy Shun Chiu (person-in-charge of the personal finance section of
Book A) and Mr Cheung.
[425] Without first consulting Madam Lam or studying the research materials supplied by her, the editorial board
decided to change the title of the Working Draft of the Article from a more neutral title of "霸王含致癌物" (BaWang
contains carcinogenic substance) to a more charging one "霸王致癌" (BaWang causes cancer).219 Both Mr Lee and
Mr Cheung cannot recall whose idea it was to change the title.
[426] The editorial board also made another significant change to the Working Draft: the quotation of Mr Chan
"但依家十支內地洗頭水居然有九支致癌" (9 out of 10 brands of Mainland shampoos would cause cancer) was
deleted. The effect of this deletion was that BaWang was targeted and singled out as the shampoo causing cancer.
[427] After the editorial board had made all the changes to the Working Draft including the ones mentioned above,
the design draft of the Article was then produced including the draft layout of the Article. Madam Lam and the
editorial board then made some final changes and the end product appeared in the Magazine distributed in the
market on 14 July 2010.
(d) How did the Defendant seek the reply or verification from the BaWang Group?
[428] One day before the publication of the Article, Madam Lam contacted the Plaintiffs through their public relation
company, Porda International (Finance) PR Group ("Porda"), at around 11 am on 13 July 2010 and demanded a
response before 3 pm on the same day.
[429] Despite the limited time available, the BaWang Group (through Porda) submitted the written response at
around 4 pm in the afternoon. The Plaintiffs’ reply contained, inter alia, the following:
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(i) a declaration that BaWang Shampoo Products were safe and the level of 1,4-dioxane in the Products was far below the
concentration that would cause harm to human beings;
(ii) a declaration that BaWang Shampoo Products were produced strictly in accordance with the legal requirements in the
Mainland and they complied with all the quality and safety standards in the Mainland and Hong Kong;
(iii) the Australian health authority considered that the recommended level of 1,4-dioxane in consumer products should be
30 ppm, but products containing less than 100 ppm should be regarded as toxicologically acceptable;
(iv) the cosmetics monitored by USEPA from 1992 to 1997 were found to have contained as much as 79 ppm of 1,4-
dioxane, but USEPA did not consider that would pose a health risk to consumers; and
(v) OSHA prescribed that workers, based on working time of 8 hours per day, should not be exposed to air with a
concentration of more than 100 ppm of 1,4-dioxane.
[430] The Defendant had also sought reply from P & G (the producer of "Rejoice" shampoo) and Acene, the two
other brands of shampoo found to have contained 1,4-dioxane according to the test reports submitted by "Mr
Chan". P & G gave a similar reply, referring the Defendant to the WHO’s standard on drinking water, EU’s
allowance for the presence of traces of 1,4-dioxane in consumer products as contaminant, the USFDA’s safety limit
on food and drug, and the safety limit endorsed by the Australian, Mainland and Taiwanese health authorities.
According to Madam Lam, she also talked with a staff of P & G over the phone. During the conversation, the staff at
first said that the level of 1,4-dioxane in Rejoice shampoo would not be too much, and that it was unavoidable.
However, when Madam Lam confronted him that some other brands of shampoos were tested not to have
contained any 1,4-dioxane, that person replied that P & G would do further research to see how to reduce the level
of 1,4-dioxane in its products. Acene gave a shorter reply, stating that 1,4-dioxane was a by-product of a raw
material known as AES and there was no known method of removing all the 1,4-dioxane in the end product. Acene
had complied with the strictest safety standard and it would try to improve the formula of the shampoo reducing the
use of AES and sourcing AES with less concentration of 1,4-dioxane. There was also a reference to the safety
standard endorsed by the Mainland SFDA.
[431] In the meantime, another reporter Mr Kwan Hui Fai (關曉輝)("Mr Kwan") and photographer Mr Kwan Wing
Ho attended the head-office of the BaWang’ Group in Guangzhou without any prior appointment and demanded
response from senior management. By that time, Madam Wan was not in the office. An urgent telephone
conference was arranged for Mr Kwan to speak to Madam Wan and meeting was arranged for Mr Kwan to meet
Madam Yu Xueling (余雪玲)("Madam Yu"), the Secretary General of the Guangdong Chamber of Daily Used
Chemicals (廣東省日化商會) which is a trade association established in 1999 by enterprises in the business of daily
used chemicals.
[432] During these telephone conference and meeting, both Madam Wan and Madam Yu assured Mr Kwan that
any 1,4-dioxane found in the BaWang Shampoo Products was only of very small quantity and such Products would
not cause any harm to human body. Madam Yu also told Mr Kwan that the level of 1,4-dioxane present in BaWang
Shampoo Products was lower than the limit of 100 ppm regarded by the Mainland authority to be safe.
[433] Interestingly enough, Mr Kwan cannot remember whether he had been briefed by Madam Lam about the
details of her research including the different safety limits relating to 1,4-dioxane in shampoo. It is fair to say that he
had done very little preparation to familiarise himself with the subject before confronting the Plaintiffs in Guangzhou.
After returning to Hong Kong, Mr Kwan was not in any way involved in editing the Article and the reply from Madam
Yu was not included in the Article.
[434] On 13 July 2010, Madam Lam had also approached Professor Lam for comment on the reply from Madam
Wan. According to Madam Lam, Professor Lam agreed that the presence of 10 ppm of 1,4-dioxane was already "on
the margin of being dangerous" (危險邊緣) and 20 ppm was absolutely excessive. However, the phrase "on the
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margin of being dangerous" had already appeared in Madam Lam’s Working Draft before 13 July 2010, and so I
have reason to believe that the phrase originated from question from Madam Lam, though Professor Lam might
have answered yes to the question. Again, Madam Lam had not referred Professor Lam to the NICNAS Report or
its recommended safety level of 100 ppm, nor did she ask him for comment on such safety standard.
[435] The Magazine containing the Article was then published the following morning on 14 July 2010. The share
price of the 1st Plaintiff fell by about 14% by noon, and the trading of the shares was suspended in the afternoon on
the same day.
(e) The dubious background of "Mr Chan"
[436] After the publication of the Article, the BaWang Group received an anonymous email regarding the
complainant "Mr Chan". According to such email, the complainant "Mr Chan" was either one of the two
shareholders, both with the surname "Chan", of a company known as Sun Lok Wah International Co Ltd ("Sun Lok
Wah"). This company was the manufacturer of O’Naomi brand of Chinese herbal shampoo and the OEM
manufacturer of Mannings and Watson brands of Chinese herbal shampoo. According to the test results provided
by "Mr Chan" as mentioned in the Article, shampoos of these 3 brands were allegedly found not to have contained
any 1,4-dioxane.
[437] Further, advertisements of O’Naomi shampoos appeared in newspapers and magazines shortly after the
publication of the Article. A SGS report allegedly showing that O’Naomi shampoo did not contain 1,4-dioxane
appeared in the advertisements. Interestingly enough, the number of that report was the same as that of the report
supplied earlier to Madam Lam. Subsequently in the 28 July 2010 issue of the Eastweek Magazine, there was a
report about the Chan’s brothers and their relationship with Sun Lok Wah. The report also stated that the person
suspected to be the complainant was evasive in a confrontation with the reporter of Eastweek Magazine near Sun
Lok Wah’s office. After the publication of the Article, Madam Lam tried to contact "Mr Chan" but without any
success.
[438] The company chop of Sun Lok Wah appeared on an application form dated 21 April 2010 relating to one of
the SGS test reports obtained by "Mr Chan". Similarly, another application form dated 22 April 2010 showed that
the relevant sample was picked up from Sun Lok Wah for testing.
[439] I have reminded myself that there is no direct evidence to show that the complainant, "Mr Chan", was one of
the directors or shareholders of Sun Lok Wah. Neither is there any positive evidence to show that Sun Lok Wah
was the OEM manufacturer for Watsons and Mannings shampoos. On the other hand, it is very difficult to explain
why the SGS report supplied by "Mr Chan"220 to the Defendant earlier also appeared in the advertisement of
O’Naomi shampoo, and why Sun Lok Wah was involved in the sample submitted by "Mr Chan" to SGS for testing.
Coupled with the fact that the Defendant could not contact "Mr Chan" after the publication of the Article, I have
reason to believe that the complainant was related to Sun Lok Wah who was a competitor of the Plaintiffs.
(v) Whether the Defendant’s reporting fell below the standard of responsible journalism?
[440] Based on the evidence in this case, I conclude that the Defendant’s reporting fell below the standard of
responsible journalism.
(a) Serious nature of the allegations targeting the Plaintiffs
[441] First, as admitted by the Defendant’s witnesses, the Article involved serious allegations against the Plaintiffs
and they knew full well that the Article would have a serious impact on their reputation and business. The effect of
the Article can be demonstrated by what happened to the share price of the 1st Plaintiff shortly after the publication
of the Article.
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[442] Further, although the Article also referred to the shampoos of Rejoice and Acene as also containing 1,4-
dioxane, it is fair to say that the Article was targeted specifically against the Plaintiffs. As mentioned above, the
quotation of "Mr Chan" about 9 out of 10 Mainland shampoos causing cancer was removed from the Working Draft.
Although Acene and Rejoice, in particular the latter, made similar replies to the Defendant’s enquiries, the response
of BaWang was singled out as suggesting culpability on the part of the Plaintiffs of refusing to admit guilt. Further,
the Article contained a lot of corporate information about the Plaintiffs and their founders. Based on all these
factors, the readers would have obtained the message that the Plaintiffs (and not the others) were irresponsible,
incompetent and greedy commercial organisations which lacked commercial morality, and they used inferior raw
materials to produce BaWang Shampoo Products with mercenary motive to save costs.
[443] Journalists are certainly allowed to target a piece of investigative journalism against a particular party and the
court would be reluctant to intervene as how the journalist would present a particular story to the readers. However,
seriousness of the allegation is one of the ten factors listed out by Lord Nicholls in deciding whether the standard of
responsible journalism is met in a given case. If the journalist is reporting a story containing very serious allegations
targeting a particular party, there should be a greater responsibility on the journalist to ensure that: (i) the contents
and allegations in the report are true; (ii) the contents of the article are objective and unbiased; and (iii) the target’s
side of the story is presented adequately to the readers. For the reasons given below, the Defendant has failed to
meet such standard.
(b) Serious flaws in the conclusion reached by the Defendant as to the safety level of 1,4-dioxane in
shampoo and its failure to verify the scientific basis for the advocated safety limit
[444] There are serious flaws in the conclusion reached by Madam Lam and the editorial staff of the Defendant as
to the safety level of 1,4-dioxane in shampoo. In her investigation, Madam Lam came to the conclusion that 10 ppm
was the only correct safety limit, and that was the main if not the only reason as to why she reported that BaWang
Shampoo Products were unsafe.
[445] During her cross-examination, Madam Lam admits that, during her research, she was aware of the distinction
between "confirmed animal carcinogenic effect of 1,4-dioxane" and "no sufficient evidence and hence only a
possibility of causing cancer to human", and there were 4 different schools of thought on carcinogenicity of 1,4-
dioxane. Further, she knew full well that whether BaWang Shampoo Products were harmful would depend on how
much 1,4-dioxane they contained. The debate is on what is a safe level. She also knew about the 100-ppm
standard endorsed by NICNAS, HK Cosmetic Association, Mainland SFDA and Taiwanese health authority.
[446] When asked as to why she came to the conclusion that 10 ppm is the correct safety limit, she mainly relies
on: (i) the articles referring to actionable level for Proposition 65; (ii) the article referring to the USFDA’s
recommendation that cosmetic should not contain more than 10 ppm of 1,4-dioxane; (iii) news reports referring to
the 10-ppm limit in Qatar and other Middle East countries; (iv) news reports that big manufacturers of shampoo
agreed to reformulate their products in order to reduce 1,4-dioxane to a level of below 10 ppm; and (v) news reports
about the public concern relating to the presence of 1,4-dioxane in the baby bathing lotion of Johnson & Johnson
up to the level of 3.27 ppm; and (vi) the advice or opinion given by the two experts, namely Professor Lam and Dr
Lau.
[447] As mentioned earlier, the reference to 10 ppm in the context of Proposition 65 does not really suggest a
safety limit. It refers to a duty to put warning on product labels. The Proposition has nothing to do with the safety
level of 1,4-dioxane. As to the recommendation made by USFDA, it remains a recommendation only and the
regulatory authority in the United States does not see any need to impose a statutory safety limit in respect of 1,4-
dioxane in consumer products.221
[448] As to the safety standard in Middle East countries, Madam Lam admits that she did know how these
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countries came to such standard. Madam Lam is then asked as to why she preferred such standard over that of
NICNAS (which she admittedly had no reason to doubt), she resorts to her extraordinary "Pizza Theory": if
someone says pizza is not good for your health and they put such belief into action by not eating pizza, then pizza
must be unhealthy. In other words, she considers a theory or a standard to be accurate if the persons proposing
such theory or standard put it into action or practice. As the Middle East countries have imposed such standard and
put it into action, such standard must be correct.
[449] With the greatest respect, this is a wholly illogical, arbitrary, and unscientific approach. Madam Lam was
actually handling a complicated scientific issue about the possible harmful effect of 1,4-dioxane and its safety level
in consumer products including shampoo. She did not care to find out the scientific basis behind the "10-ppm safety
standard". Further, instead of reporting to the readers about the controversy relating to the safety level, she made a
positive assertion that BaWang Shampoo Products containing 10 ppm were unsafe. As I have mentioned above,
because of the role of the press, the readers would expect that the journalists would have reached their
conclusions, in particular on scientific and technical matters, in an objective way substantiated with at least
reasonable materials. The public has no interest in being informed of such unscientifically and arbitrarily drawn
conclusions.
[450] Madam Lam admits making a "personal judgment" to prefer relying on the standard adopted by the Qatar
Government. When asked as to the reason for such preference, she says:
"Based on all these studies and researches, from the point of view of the public, it’s safe. But to myself, myself only, I don’t
want it contains it. Of course, it’s my own thinking only."
[451] I can understand her sentiment. 1,4-dioxane is a possible human carcinogen. Even in the absence of
scientific proof as to how much 1,4-dioxane would affect human health, it would be arguable, from the health
protection perspective, to avoid the substance all together, and one should not criticise Madam Lam if she sought to
lodge a campaign to reduce the level of 1,4-dioxane in consumer products which may be a matter involving great
public interest.
[452] However, that is not the theme or the content of the Article. The Article contained a positive and serious
assertion that using BaWang Shampoo Products was harmful to human health. The Article targeted BaWang,
alleging that the Plaintiffs were irresponsible, incompetent and greedy commercial organisations which lacked
commercial morality, and they used inferior raw materials to produce shampoos with mercenary motive to save
costs. In view of these serious charges in the Article, Madam Lam had to ensure, so far as it is reasonable, that the
scientific community had regarded shampoo containing 10 or 27 ppm as unsafe. Or at the very least, if the scientific
community had no consensus on the issue, she should have presented to the readers both sides of the coin. As a
responsible journalist, Madam Lam was not justified to force her own obstinate view onto readers, as if that was the
concluded view reached by the scientists.
[453] Madam Lam knew full well about the NICNAS Report and its recommended safety level. At the time of the
publication of the Article, it was the most relevant scientific study on the safety level of 1,4-dioxane in specifically
consumer products including shampoos. At the time of her research, she should have known that the intake of 1,4-
dioxane into the body by ingestion and through the use of shampoo are different. Intake through the use of
shampoo by dermal contact and inhalation would be more indirect than ingestion.222 USFDA only has a limit of 10
ppm on food and drug, and so the safety level of 1,4-dioxane in shampoo should have been much higher. Madam
Lam did not seek further clarification as to whether the 10-ppm limit on food and drug also applied to shampoo.
Madam Lam is a lay person and not a scientist, and that was more so as to why she was not justified or qualified to
disregard a most relevant scientific study made by a responsible health agency in a scientifically advanced country.
[454] The Mainland SFDA had expressly endorsed the NICNAS safety limit, but Madam Lam discarded the
Mainland standard as unreliable. When Madam Lam is questioned about her suspicion over the announcement of
the Mainland SFDA, her answers show that she confused the concepts of "forbidding to use 1,4-dioxane in
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manufacturing process" as opposed to "safe level of presence as impurity". However, I agree with Mr Pow that a
careful and objective reading of the Mainland SFDA’s announcement would not give rise to such doubt. The stance
of Mainland SFDA was based on NICNAS which Madam Lam admits she had no reason to doubt. The same stance
was also adopted by the Hong Kong Cosmetic Association, the Hong Kong Customs and the Taiwanese health
authority.
[455] Madam Lam also relied on some newspaper reports that there was public concern about the presence of 1,4-
dioxane in Johnson & Johnson’s baby bathing lotion up to the level of 3.27 ppm. However, that should not be
regarded as the safety level recognised by scientists. As shown in the newspaper reports obtained by Madam Lam,
when some of the experts (including Professor Lam) were interviewed by local reporters about the Johnson &
Johnson’s incident, they were of the opinion that the level of 1,4-dioxane in the baby bathing lotion was not a matter
of concern. This is the case even if babies may accidentally swallow some of the bathing lotion which may
drastically increase the intake of the substance. In the casual telephone interview with Dr Lau, he also told Madam
Lam that bathing lotion containing 3.5 ppm of 1,4-dioxane should be regarded as safe. Hence, these newspaper
reports did not tell the readers very much as to what was the safety level backed up by science.
[456] Madam Lam relies heavily on the advice and opinion given by the two experts over some hastily and
informally conducted telephone interviews.
[457] I first start with the advice given by Professor Lam. The only safety level supplied by Professor Lam which
was backed up by statutory regulation was 10 ppm put forward by USFDA. However, that limit only applied to food
and drug which would be consumed by direct ingestion. As shown in the NICNAS Report, intake by direct ingestion
was different from the dose that would be absorbed by humans through the regular use of shampoos.223 Further, as
admitted by Madam Lam, Professor Lam had told her that whether 1,4-dioxane is actually carcinogenic to humans
is still a subject of scientific debate and there are different schools of thought amongst international agencies. Even
if Professor Lam opined that there is a "possibility of harm to kidney and liver between the range of 20-30 ppm"
(there being a conflict of evidence), it was Professor Lam’s personal opinion. He did not quote any authority to
support his view. He did not elaborate on how serious that "possibility" would be. In my judgment, without verifying
the source of Professor Lam’s view, Madam Lam had failed in her duty as a responsible journalist to verify the
accuracy of the materials, in particular she was fully aware of contrary view stated in the NICNAS Report.
[458] I then turn to the advice given by Dr. Lau. Dr Lau was of the view that below 10 ppm is definitely safe. For 10
to 20 ppm, in the case of long-term use, there is a chance to begin to have problem. It would be unsafe if the level
is over 20 ppm.
[459] Dr Lau apparently put forward another standard for consumer products, i.e. 20 ppm, but Madam Lam failed
to verify the source of such standard. Even up to this stage, the court has no idea where this figure came from.
Further, Dr Lau’s comment about cancer had been taken out of context. According to him, he does not think 1,4-
dioxane would affect the kidney and he did not emphasize cancer to the reporter. If he had mentioned that 1,4-
dioxane may cause cancer, he would have said together with the words "just supported by some experiments on
animals". In other words, the effect of the substance on humans is still uncertain. That is also supported by the
words "動物實驗" (animal experiments) written by Madam Lam in her notes.
[460] More importantly, it is difficult to understand why Madam Lam had not referred the NICNAS Report to
Professor Lam or Dr Lau for comment. Professor Lam has expressly told the court that he did not know about such
report. Madam Lam was fully aware of the conflicting 100-ppm standard recommended by NICNAS. Since Madam
Lam had not confronted either expert with this information for their comment, this conflict was unresolved. At least,
she would not have any basis to prefer one over the other. The Article involved a serious allegation against the
Plaintiffs, Madam Lam, as a responsible and competent journalist, should have done more to seek proper
clarification from the two experts. Even Mr Yu cannot provide the court with a satisfactory answer for such serious
omission.
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[461] Mr Pow also complains that Madam Lam had failed to investigate into the EU safety standard that the Hong
Kong Customs said they would equally consult. Even Madam Lam’s own supervisor, Mr Cheung, had advised her
to check the EU standard. As mentioned earlier in this Judgment224 , shampoo containing as much as 50 ppm was
not considered as a matter of concern by the EU Bureau. In her testimony, Madam Lam says she had tried to find
the EU standard from the internet but she could not find it. Mr Pow argues that, according to the Health Canada
Report published in March 2010, the EU chemical substances information system would have been available in a
specified website in 2009, and so Madam Lam should have been able to find out more about the EU standard from
this particular website. On the other hand, Mr Yu submits that the Plaintiffs cannot now run such argument because
it has not been put to Madam Lam during her cross-examination that the EU standard could be found in such
website.
[462] It is not necessary for me to resolve this particular factual issue. During her research, there is no dispute that
Madam Lam came to know about the NICNAS standard. Hence, whether she came to know or should have known
about the EU standard becomes quite academic. The material issue should therefore be, even if Madam Lam was
only aware of the Australian NICNAS standard, whether she should have sought further clarification about such
standard from the two experts, and whether she should have included the NICNAS standard in the Article.
[463] It is well settled that a responsible journalist would have to verify the source of the information in order to
ensure that the report is accurate. According to Gatley225 , the reliability of the source from which the published
material was obtained as it appeared to the defendant at the time, and the steps that were taken to verify that
material, play a significant role in deciding whether there is privilege. Whether the journalist has taken reasonable
steps to verify the material has to be judged objectively.226 In Flood v Times Newspapers Ltd227 , Lord Mance
opined that "it will not be, or is unlikely to be, in the public interest to publish material which has not been subject of
responsible journalistic enquiry and consideration".
[464] The materials obtained by Madam Lam during her online research were mostly of newspaper articles (as
opposed to academic or research papers) and did not include any authoritative statement confirming that the
presence of 10 ppm of 1,4-dioxane in shampoo was unsafe. Quite on the contrary, there was an authoritative report
by NICNAS suggesting a safety level of 100 ppm. When Madam Lam was making enquiries from the two experts,
she did not verify the sources of the views given by the experts. Neither did she seek further clarification from the
experts about the NICNAS Report which was the only authoritative source from scientific community directly on the
subject which was available to Madam Lam by that time. In such circumstances, Madam Lam had only made
perfunctory inquiries about the subject which fell below the standard of responsible journalism.
[465] Mr Yu emphasises to me that Madam Lam is not a scientist. With the benefit of hindsight and the luxury of
time now available, it would be easy for the Plaintiffs to make these criticisms against her judgment. However, in
order to protect the role of the press as a public watchdog, generous allowance should be given to journalists as to
how to present their stories in particular on matters involving public interest. The proper question to be asked is
therefore not whether Madam Lam’s judgment is right or not, but whether her judgment is one that is entitled to be
made by a journalist. Even if the court disagrees with her judgment, Mr Yu submits that it is still a judgment entitled
to be made by her as a journalist.
[466] This is a very attractive argument. However, it was clear to Madam Lam and the Defendant that the Article
dealt with some technical and scientific matters in controversy between scientists. It was not a story about a political
matter involving different viewpoints. Knowing full well that the story was to contain serious allegations against the
Plaintiffs which would have a grave impact on their reputation and business, there should be greater responsibility
on the Defendant to ascertain the truth before making a positive allegation that 10 ppm was the safety limit
accepted by scientists and BaWang Shampoo Products were unsafe. This is not a case that the Defendant did not
know about the contrary standard, but the Defendant chose to ignore that standard and presented the half truth to
the readers. To me, that was not responsible journalism. Even taking into account the generous allowance given to
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reporters in conducting their works, there must be a standard which the court and indeed the public would expect
the press to maintain. Hence in my judgment, that was not a judgment entitled to be made by a responsible
journalist. To lower the standard in such circumstances would encourage the press to be biased or to adopt
personal, arbitrary or irrational approach in making reports on scientific issues. This would not be in the public good.
(c) Failure to present fairly or adequately the contrary scientific view and the reply of the Plaintiffs
[467] Even if Madam Lam was entitled to make the judgment that 10 ppm was the safety limit, Madam Lam or the
editorial board of the Defendant, as a responsible journalist, should have presented in the Article fairly the contrary
expert views expressed by other responsible scientists and health agencies. Further, the Defendant had also failed
to present adequately the Plaintiffs’ side of the story and their reply.
[468] It had been said clearly in Reynolds v Times Newspapers Ltd that where the defendant already has the
claimant’s version of events, failure to publish that will almost inevitably count against the defendant:228
"A failure to report the other side will often be evidence tending to show that the occasion ought not to be protected by
qualified privilege. But it would not necessarily always be so, e.g. when the victim’s explanation is unintelligible or plain
nonsense."
[469] Lord Nicholls explained the requirement as follows:229
"It goes without saying that a journalist is entitled and bound to reach his own conclusions and to express them honestly
and fearlessly. He is entitled to disbelieve and refute explanations given. But this cannot be a good reason for omitting,
from a hard-hitting article making serious allegations against a named individual, all mention of that person's own
explanation. Particularly so, when the press offices had told Mr Ruddock that Mr Reynolds was not giving interviews but
would be saying all he had to say in the Dáil. His statement in the Dáil was his answer to the allegations. An article omitting
all reference to this statement could not be a fair and accurate report of proceedings in the Dáil. Such an article would be
misleading as a report. This article is not defended as a report, but it was misleading nonetheless. By omitting Mr
Reynolds's explanation English readers were left to suppose that, so far, Mr Reynolds had offered no explanation. Further,
it is elementary fairness that, in the normal course, a serious charge should be accompanied by the gist of any explanation
already given. An article which fails to do so faces an uphill task in claiming privilege if the allegation proves to be false and
the unreported explanation proves to be true."
[470] Lord Nicholls’ dicta also highlight the harm that can be caused by misleading or half-truth story.
[471] First, I have to emphasise that, at the time of the publication of the Article, the NICNAS Report was the most
relevant scientific study on the safety of 1,4-dioxane in consumer products including shampoo. In fact, all the
available scientific studies by that time, including NICNAS, EU and Health Canada Reports, though Madam Lam
was not aware of the latter two, suggested that the level of 1,4-dioxane in BaWang Shampoo Products, whether it
was 10 or 27 ppm, was within the safety level recommended by these responsible health agencies. Contrary to the
picture portrayed in the Article that 10 ppm was the safety limit accepted conclusively by the scientific community,
the scientific materials available at that particular time were all one-sided pointing the contrary. Hence, even if
Madam Lam might disagree with the higher standard, of which she had no reason to doubt, she should have
included such standard in the Article.
[472] Even Mr Cheung agrees that the Defendant had to be objective, and adequate opportunity should be given
to the BaWang Group to reply to the allegations. In his witness statement, he stated that he was "very concern to
make sure that the article that we published was fairly presented and in particular, that BaWang were given the
opportunity to comment/respond to the SGS investigation results".
[473] At the trial, I have actually asked Mr Cheung whether the Defendant should have included the safety limit
recommended by NICNAS in the Article. Mr Cheung’s answer is interesting. He says that it would be better to
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include the NICNAS’s safety standard, but he does not see any problem with such omission. These are the words
from an experienced journalist. I also find it surprising that Mr Cheung still gives this answer now, despite the fact
that he should have known there would be great controversy in this trial between the toxicology experts about the
proper safety standard.
[474] I do not think any journalists can deny that one of their important responsibilities is to be objective. If
journalists are allowed to be biased or prejudiced, or to omit to put forward fairly the opposite view of their story or
to present the readers with the half truth, that would destroy the confidence of the public in the press, and the
readers would tend to disbelieve any materials contained in their reports, whether true or false.
[475] As pointed out by Lord Nicholls in the dicta above, whether the omission to present the contrary view is
material would also have to be weighed against the seriousness of the allegations against the person or entity being
targeted. Journalists should be given generous allowance as to how to present their stories. But if the journalists
knew full well that their serious allegations would gravely affect the reputation and business of others, they should
try to handle the report in a fair manner and to present adequately the reply and explanation given by the person or
entity being targeted. It would be dangerous to allow journalists just to include the materials favourable to the story
without letting the readers to know the whole truth.
[476] In my judgment, the Plaintiffs’ replies were not fairly or accurately presented in the Article at all. Most
importantly, the Defendant failed to mention the NICNAS’s standard of 30 and 100 ppm which was relied upon by
the Plaintiffs and the Mainland SFDA. In the Article, the Plaintiffs’ response had been portrayed as a groundless or
bare assertion. The readers were prevented from knowing that in fact, the Plaintiffs’ stance of BaWang Shampoo
Products being safe was supported by a scientific study conducted by a responsible team of scientists; published by
a responsible health agency; endorsed by the government of a scientifically advanced country. This is particularly
important because the Article also accused the Plaintiffs of hiding behind international regulatory lacuna or
loopholes. Readers were also prevented from knowing that regulatory agency of their own country (i.e. the
Mainland) had also relied on and referred to this scientific study in its public announcement.
[477] In the Article, Madam Lam had written that there was no definition of what were minute traces of 1,4-dioxane
around the world (可惜各地均沒有界定何為微量). This is certainly a misleading if not wrong statement. By avoiding
the reference to the viewpoints of NICNAS, EU and the Mainland SFDA’s etc., such statement caused readers to
be misinformed in that there were no other expositions of safety level other than the 10 ppm advocated by Madam
Lam. The express omission to such important standard can only mean that Madam Lam had tried to portray that
BaWang Shampoo Products were dangerous products. I agree with Mr Pow that it was a classic example of
selective, biased and imbalanced reporting.
(d) Inclusion of unnecessary defamatory accusations against the Plaintiffs
[478] As mentioned above, the "subject matter" of the publication may be of public interest and concern is not a
warrant for the inclusion of all sorts of defamatory accusations targeting a particular party, otherwise it would just be
a blanket licence to journalists to publish whatever they like and they do not need to exercise any care in their
reporting. This cannot be in the public interest.
[479] The Article went beyond raising the awareness of the public about the presence of 1,4-dioxane in shampoos.
In discussing the meanings of the Words in the earlier part of this Judgment, I have already found that the Words
carry the defamatory stings that the Plaintiffs were irresponsible, incompetent and greedy commercial organisations
which lacked commercial morality, and they used inferior raw materials to produce shampoos with mercenary
motive to save costs. In the trial bundle, there are a lot of news reports in other free societies discussing the public
concern of 1,4-dioxane in shampoos. However, targeting these sorts of defamatory accusations against a particular
commercial entity is uncommon.
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[480] As demonstrated by the case law, the court should respect the editorial judgment as to how to present a
particular story to the readers. But there must be a limit that has to be observed by responsible journalists,
otherwise they can include all sorts of unnecessary remarks in the report putting forward the excuse that they are
part of the stories.
[481] Mr Yu submits that it was justified for the Defendant to target the Plaintiffs. First, BaWang Shampoo Products
contained the highest level of 1,4-dioxane as compared with the other samples of shampoos submitted by "Mr
Chan" to SGS for testing. Second, BaWang Shampoo Products, being advertised as a natural product containing
Chinese herbal, were popular in the market by that time, and so the readers should be told about the presence of
1,4-dioxane in their shampoos.
[482] I agree that the public should be told about the presence of 1,4-dioxane in BaWang Shampoo Products. But
that was only part of the story. The public should also be told, as part of the Plaintiffs’ reply, that the most relevant
scientific study available at that time showed that the level of 1,4-dioxane present in BaWang Shampoo Products
was below the recommended safety level. By accusing the Plaintiffs of being irresponsible and evasive and in the
wrong for refusing to admit guilt, the readers should be told at the same time that the Plaintiffs’ stance was backed
up by responsible scientific study and not just bare allegation. It would be irresponsible to force the others to accept
something that the Plaintiffs reasonably believe to be true.
[483] Even worse, the Defendant accused the Plaintiffs for using inferior raw materials for maximising profits. Such
inferential statement was wholly speculative. At the material time, Madam Lam had no factual basis for making such
speculation. I agree with Mr Pow that the purported reliance on the general comments of the two experts as the
basis for drawing such conclusion was plain non sequitur. In particular, Dr Lau is just a medical practitioner and so I
do not accept that he would have volunteered such information to Madam Lam. On the other hand, Madam Lam
ignored her research which should have revealed that 1,4-dioxane was commonly present in shampoos and
cosmetics as a manufacturing by-product. At the time of the report, the use of inferior raw materials to save costs
could only be a speculation. The Defendant simply had no basis to refer this cause as a distinct probability which
was the meaning of the Article. The public has no interest in receiving such groundless insinuation.
[484] If journalists are allowed to make these sorts of accusations freely without the readers being told the whole
truth, there is real danger that the press is able to manipulate public opinion against a particular entity by selecting
only facts that are favourable to the story. Again, this would not be in the public interest for the readers to receive
such kind of disinformation.
[485] According to the evidence of Madam Lam and Mr Cheung, the contents of the Article might be different if
BaWang Group had agreed to reduce the level of 1,4-dioxane in their shampoos, rather to insist that their
shampoos were safe. The Defendant seems to rely on such matter to justify why it had targeted the Plaintiffs.
[486] Again, this was another adverse judgment passed on the Plaintiffs as to how they handled the matter. But
should the readers be told the whole picture so that they could make a proper judgment themselves? If the
defamatory accusations made by the Defendant against the Plaintiffs were correct (which I do not find it to be the
case), those accusations were equally applicable to the other manufacturers whose shampoos were found to have
contained 1,4-dioxane. The fact that these manufacturers made a promise to reduce the level of 1,4-dioxane in their
shampoos, after the matter had been exposed by the press, cannot change the fact that they were also
irresponsible commercial entities and they used inferior raw materials to produce shampoos with a view to save
costs, if that was indeed the case. Hence, the Defendant’s explanation for targeting the Plaintiffs is hardly
convincing.
[487] In addition, Mr Cheung had already asked Madam Lam to collect information about the BaWang Group on 8
July 2010 before they obtained the independent testing reports from SGS and the replies from various shampoo
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producers. Coupled with the fact that the Defendant did not conduct independent testing of other shampoos in the
market, I have reason to believe that the Defendant had already targeted the BaWang Group as irresponsible
commercial entity irrespective of its reply.
[488] For the above reasons, it served no public interest for Defendant to include the unnecessary defamatory
accusations targeting the BaWang Group in the Article.
(e) Failure to verify the credibility of the information provided by the complainant
[489] In the Article, Madam Lam referred to the test result of the BaWang shampoo submitted by "Mr Chan" to
SGS for testing ("the Dubious Sample"), i.e. 27 ppm. The test result was also relied upon by the Defendant to
support that BaWang Shampoo Products were unsafe. As a responsible journalist, the Defendant therefore had a
duty to verify the genuineness of such information.
[490] According to Madam Lam, 10 ppm was the safety limit and so one can argue that BaWang Shampoo
Products independently tested by the Defendant might not be unsafe because it was right on the upper limit of the
safety level. Even according to the opinion of Dr Lau, it was just at the lowest end of the range of "possible
beginning to have problem after long term use". According to Professor Lam, a product either below or up to 10
ppm was not a matter of serious concern. It was only when he was told about a test result of over 20 ppm that
caused him concern. Hence, the inclusion of the test result of the Dubious Sample would serve the purpose of
showing that BaWang Shampoo Products were clearly unsafe because it was well above the 10-ppm safety limit.
[491] As admitted by Madam Lam herself, she had some suspicion about "Mr Chan" as a complainant. "Mr Chan"
was a particular keen complainant. He paid for the tests and he was well aware of the "safety limit" of 10 ppm. Yet
Madam Lam did not verify "Mr Chan’s" background and she turned from "suspicion" to "trust" not on the basis of
any objectively verifiable facts or information. In a way, Madam Lam had adopted a rather naïve and unprofessional
approach in her investigation.
[492] There is great disparity in the test results between the Dubious Sample and those purchased by the
Defendant. If the safety limit was indeed 10 ppm as advocated by Madam Lam, such disparity was crucial in
determining whether BaWang Shampoo Products were unsafe. After noting such disparity, Madam Lam contacted
SGS for enquiry. After she was told that SGS could not discuss the test report of the Dubious Sample because the
Defendant was not the direct client, she just left the matter at that. Madam Lam also failed to notice the difference in
the descriptions of the Sample Receiving Condition in the reports.
[493] During cross-examination, Madam Lam was asked why, having obtained her own test reports of the 3
BaWang shampoo bottles that she felt sure about their veracity, which were consistently tested of 10 ppm, she
continued to make use of "Mr Chan’s" 27-ppm test report in her Article. Madam Lam explains that it was because
the subject matter of the Article was "Mr Chan’s" complaint, she had to write everything he provided upon doing the
test and the report.
[494] However, since the Article involved serious allegations, Madam Lam was under a greater responsibility to
verify the information because she was relying on such test result to show that BaWang Shampoo Products were
unsafe. The difference in the descriptions of the Sample Receiving Condition (unopened bottle and sealed bottle)
might have alerted Madam Lam as to the possibility of tampering with the sample supplied by "Mr Chan", and yet
she made no enquiry with SGS about the difference between the two descriptions.
[495] Even if Madam Lam wanted to keep the complaint by "Mr Chan" as a background to the Defendant’s
investigation, there was no need to refer to something that she felt unsafe to rely on. She could have proceeded
with the Article on the basis of 10 ppm tested out of BaWang Shampoo Products. In a way, Madam Lam included
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the 27-ppm test result in order to run the story that the Plaintiffs were clearly the parties to be blamed and to project
BaWang Shampoo Products as containing way beyond what she advocated as the safety limit.
[496] Further, the test result of the Dubious Sample was an important basis for the comments given by the two
experts Professor Lam and Dr Lau. As mentioned above, based on their advice about the safety limit of 1,4-
dioxane, it is very arguable that the presence of 10 ppm of 1,4-dioxane in shampoo was not a matter of serious
concern.
[497] Mr Pow is therefore justified in saying that Madam Lam was only making "half-hearted" attempt in her
investigation. This would be a factor weighting adversely against the Defendant as to whether it had discharged the
duty as a responsible journalist.
[498] There is also an issue as to whether the court has to make a factual finding as to whether the Dubious
Sample had indeed been tampered with. My answer is no. As mentioned above, such factual dispute would not be
relevant to the defence of justification.230 So far as the defence of publication in the public interest is concerned, the
issues are whether, taking into account the dubious features which should have alerted Madam Lam about the
veracity of the Dubious Sample, Madam Lam should have included the 27-ppm test result in the Article or used
such test result as a basis to conclude that BaWang Shampoo Products were unsafe. The determination of this
factual dispute is therefore not necessary.
[499] If I am wrong on such issue and I have to make a factual finding in this regard, I would find that, on the
balance of probabilities, the Dubious Sample had been tampered with. The only person who can give direct
evidence on this question is "Mr Chan" himself. Because he could not be located after the incident, it would be quite
impossible for both sides to call him to testify at the trial. The court therefore has to rely on the following
circumstantial evidence. First, the descriptions of the Sample Receiving Condition are different in the reports.
Second, the unusually high concentration of 1,4-dioxane in the Dubious Sample does not sit well with Madam
Jiang’s evidence that each batch of ALS had been certified by Hunan Resun to have contained no more than 40
ppm of 1,4-dioxane (only 25% of it would go to the final product). Third, there was a raid by the Mainland SFDA of
the 2nd Plaintiff’s production facility after the publication of the Article, and the BaWang Shampoo Products found
therein were tested to have contained only about 6 ppm of 1,4-dioxane. Fourth, BaWang Shampoo Products were
quite successful in the market by that time, and "Mr Chan", being a person related to the Plaintiffs’ competitor, had
commercial reasons to sabotage the Plaintiffs’ business. In particular, O’Naomi was readily prepared to lodge
advertising campaign at about the same time of the publication of the Article, focusing on the absence of 1,4-
dioxane in their products. Fifth, "Mr Chan" was a keen, "knowledgeable" and suspicious complainant, and he could
not be contacted by the Defendant after the publication of the Article. All such circumstantial evidence leads me to
the conclusion that, on the balance of probabilities, the Dubious Sample had been tampered with and it is also
unsafe for the court to rely on the other test results supplied by "Mr Chan".
(f) Other considerations
[500] The Plaintiffs are also relying on other complaints to claim that the Defendant’s works fell below the standard
of responsible journalism.
[501] First, they say that the way in which the Defendant sought reply from them was oppressive. Given that there
was no urgency in the publication of the Article, the Defendant gave very limited time (about 4 hours’ notice) to the
Plaintiffs to respond before the publication of the Article, in particular the Defendant should have known that the
subject involved considerable scientific researches and materials. When the relevant management staff handling
such kind of enquiry was not present in the office, the Plaintiffs were portrayed in the Article as being evasive in
dealing with the enquiry. The Article did not mention that the Plaintiffs had in fact arranged for the reporters to
attend a telephone conference with Madam Wan and the reporters were allowed to take photographs in Madam
Wan’s office. Neither was the arranged visit to Madam Yu’s office mentioned. By omitting these facts and together
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with the other defamatory stings, Mr Pow submits that the Article certainly suggested culpability on the part of the
BaWang Group and it was trying to hide away from the journalists after their "fault" had been revealed.
[502] There is some justification in the Plaintiffs’ complaint. If the journalists are writing on some daily news, I can
perfectly understand why very limited time is given to the interviewee for reply. After all, news can be a perishable
item. However, the story here, if it could be stood up, would be of interest at any time, and would not become stale
even if the Defendant took some time to verify the story in light of the explanation and assurance given by the
Plaintiffs. On the contrary, if the story was flawed, the Defendant must have appreciated that serious harm could be
occasioned to the Plaintiffs. As responsible journalist, the Defendant should have therefore handled the enquiry in a
less oppressive manner, at least they should not have portrayed the Plaintiffs as being evasive.
[503] Mr Cheung explains that it was not the policy of the Defendant to give ample time to interviewees to answer
the enquiries, the reason being that "if a subject has notice of an investigation. The subject will then try and limit its
exposure by speaking to other ("friendly") publication to dilute the effect of what until then was an exclusive report".
Further, Mr Yu submits that there is nothing to indicate that the Plaintiffs’ reply could have been different if more
time was given to them.
[504] Mr Pow criticises the Defendant’s policy as wholly self-imposed with a selfish objective, and it had clearly
placed its own interest and benefit above truthfulness and quality of its publication.
[505] I can understand why the Defendant was seeking to guard jealously the exclusivity of the report, and there is
also no evidence to suggest that the Plaintiffs’ reply could have been different given more time. However, the Article
certainly conveyed the message to the readers that the Plaintiffs were evasive when confronted by the reporters,
which I do not find it to be the case. Coupled with the other defamatory statements implicating culpability on the part
of the Plaintiffs, it reinforced the readers’ impression that the Plaintiffs were irresponsible corporations lacking
commercial morality. This would be a factor for the court to take into account in concluding that the report in the
Article was not a product of responsible journalism.
[506] Secondly, Mr Pow complains that the editorial staff of the Defendant had deliberately changed the title of the
Article from a more neutral title of "霸王含致癌物" (BaWang contains carcinogenic substance) to a more charging
one "霸王致癌" (BaWang causes cancer) with a mercenary motive of attracting potential readers into buying the
Magazine, and on this ground alone, the defence of publication in the public interest should be thrown out by the
court.
[507] Both Mr Lee and Mr Cheung cannot provide a satisfactory explanation as to why the editorial meeting
decided to change the title of the Article without first consulting Madam Lam. To me, it is obvious that the change of
the title was made for the purpose of increasing the impact of the Article and to attract readers into buying the
Magazine. By itself, it should not be a matter of criticism. Journalists should be given generous allowance as to how
to present their stories, and there is no objection for editors to make their stories more appealing to readers.
Further, carcinogenic substance is in Chinese known as "致癌物" (cancer causing substance). "Causing" (致) may
denote that there is a possibility of getting cancer, not that it would definitely cause cancer.
[508] After perusing the topic, the readers would certainly read the substance of the Article to ascertain the extent
of the health risk of BaWang Shampoo Products. In the Article itself, it was clearly suggested that the level of 1,4-
dioxane in BaWang Shampoo Products was either in the margin of being dangerous (10 ppm for the shampoos
independently tested by the Defendant) or well above the safety limit (27 ppm for the shampoo submitted by "Mr
Chan" for testing). Coupled with the wording of the title, the clear message conveyed to the readers was that it
would be dangerous to use BaWang Shampoo Products because it materially increases the risk of getting cancer. I
have already discussed in length as to why I conclude that such report was not a product of responsible journalism
and I do not want to repeat the reasons again.
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[509] Thirdly, the Plaintiffs also complain that the Defendant had failed to put in place an effective system of
verifying and cross-checking the work of Madam Lam. Contrary to the evidence in their witness statements, it is
clear that Mr Cheung and Mr Lee had not perused the research materials prepared by Madam Lam. Neither did
they pay a lot of attention to the formal reply made by the Plaintiffs on 13 July 2010. To them, Madam Lam was a
competent reporter and so they relied on her work and judgment.
[510] So far as responsible journalism is concerned, the court will look at the work and the report made by the
Defendant as a whole, and so for the purpose of determining whether the Defendant had met the standard, it is not
necessary for the court to examine in details the internal communications between Madam Lam and the editorial
staff of the Defendant, or how the editorial staff supervised Madam Lam in respect of her work.
[511] There is also an issue about a typographical error in the Article. In explaining the amount of 27 ppm, the
Chinese description actually refers to 27 milllitre in every litre of shampoo. It has exaggerated the actual amount by
1,000 times. In my judgment, if the readers are reading the Article as a whole, those who notice the difference
would understand that it is a typographical error. For those who do not notice the difference, it would not matter at
all. Hence, such error is not a material consideration.
[512] Before leaving this subject, I would have to address one more issue as to whether there was any sinister
motive behind the report made by the Defendant in the Article.
[513] Mr Pow argues that the only reasonable inference for the Defendant in not seeking further clarification about
the NICNAS standard from the two experts or to put forward the contrary view in the Article was that the Defendant
wanted to avoid the issue. The presentation of the contrary view would lessen the impact of the Article, with the
result it would reduce the attraction of the Article to the readers. Hence, the Defendant was reckless as to the truth
of the contents in the report.
[514] I have carefully considered the evidence of Madam Lam. I do not accept that she had deliberately tried to
harm the Plaintiffs with what she knew were untrue statements. However, Madam Lam had adopted a naïve and
unprofessional approach in reporting the story. She simply trusted the story given by the complaint. Influenced by
her own personal view that 1,4-dioxane is an unpleasant substance, she carelessly came to the view that the
NICNAS standard, which was endorsed by the regulatory authorities in Australia, Mainland, Taiwan and Hong
Kong, must be incorrect. She just relied on some newspaper reports and the opinion of the two experts without
seeking further clarification as to the scientific basis behind the so called 10-ppm limit. The editorial board just relied
on the judgment and the work of Madam Lam and came to the view that 10 ppm was the safety limit. As a result,
the Defendant published the Article in a sensational manner resulting in serious damage to the reputation of the
Plaintiffs. Although there was no malice as such, the Defendant’s reporting still fell below the standard of
responsible journalism.
(g) Conclusion on responsible journalism
[515] I do not accept that maintaining such standard of responsible journalism would discourage the press from
discharging their function as a watchdog in a free society. The Defendant was handling a piece of investigative
journalism involving scientific issues about the possible harmful effect of 1,4-dioxane on humans and the safety
level in shampoos. The Defendant had ignored the only scientific study available to Madam Lam at that time
showing that the 1,4-dioxane present in BaWang Shampoo Products was below the recommended safety level.
She failed to verify the source or the scientific basis for the support of the 10-ppm safety level. Forgetting the
important duty to be objective, she failed to let the readers to know that there was other standard proposed by a
responsible team of scientists, and the Defendant forced its view onto the readers to the effect that 10 ppm was the
only conclusive standard accepted by the scientific community. She failed to verify the information supplied to her
by the complainant. Even worse, the Defendant included all sorts of unwarranted defamatory accusations against
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the Plaintiffs. All these were done with the full knowledge that the serious allegations made in the Article would
gravely affect the reputation and business of the Plaintiffs.
[516] This case is not so much about the freedom of the expression or the press. We all treasure these values. The
key question here is whether journalists should be held liable for libel if they are performing their works
irresponsibly. In my judgment, maintaining the standard of responsible journalism would not discourage the press
from discharging its function as a watchdog in a free society, but rather it serves as a reminder to journalists that
they have to be objective in performing their works, which is the cornerstone for the press in exerting its influence
as the fourth power in every civilized society. It also helps to maintain the confidence of the public in the
professionalism of the press.
[517] Despite that the court has to adopt a liberal approach in the application of the defence of publication in the
public interest, I find that the Defendant had failed to meet the standard of responsible journalism. Further, it would
not offend the necessity and proportionality principle under the human right jurisprudence to make the Defendant
liable for the defamation against the Plaintiffs. It is necessary to protect the reputation of the Plaintiffs and to restrict
the publication of the Words as the Article was not a product of responsible journalism. Hence, I also reject such
defence.
[518] The parties have spent relatively little time in dealing with the claim on injurious falsehood. In view of my
ruling on the claim for defamation, this claim now becomes academic so far as liability is concerned. However,
whether the Plaintiffs can maintain the claim for injurious falsehood may have certain implications relating to
quantum, and so I have to give my judgment on this particular claim as well.
[519] It is trite that in order to establish a claim of malicious falsehood, the plaintiff must show the following:231
(i) the defendant has published about the plaintiff words which are false;
(ii) the defendant did so maliciously in that either:
(a) he knew when he published the words that they were false; or
(b) he was reckless as to whether they were true or not; or
(c) he did so for the purpose not of advancing his own interest but injuring the plaintiff.
[520] In my judgment, the Plaintiffs’ claim on injurious falsehood cannot succeed because of the following reasons:
firstly, the Plaintiffs have failed to discharge the burden of proving the falsity of the statement; and secondly, the
Defendant did not publish the statement maliciously.
(i) Falsity of the statement
[521] The statement in the Article relied upon by the Plaintiffs in support of such claim is that BaWang Shampoo
Products would, even under normal and regular use, cause serious illnesses and even cancer. Unlike the defence
of justification, it would be the burden on the Plaintiffs to establish the falsity of such statement.
[522] In dealing with the expert evidence on toxicology, I have already outlined the two schools of thought relating
to the safety level of 1,4-dioxane in shampoo. On the one hand, we have the safety levels endorsed by NICNAS,
EU Bureau and Health Canada, suggesting that the level of 1,4-dioxane in BaWang Shampoo Products is safe. On
the other hand, we have the more cautious approach adopted by USEPA and Dr Sawyer, suggesting very minute
level of 1,4-dioxane in shampoo (even less than 1 ppm) is dangerous. If the latter’s approach is correct, the world
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may have to consider to ban the presence of any 1,4-dioxane in consumer products, but the reality is that most of
the responsible regulatory agencies do not see the need to take any action in this regard.
[523] Both groups of scientists use different risk models to assess the possible health risk of 1,4-dioxane in
shampoo. However, the risk worked out by them is very much a theoretical or mathematical risk, and not a real or
factual one based on empirical data. These models are based on different assumptions which may be right or may
be wrong. At this stage, although a lot regulatory agencies around the world do not see the need to set a safety limit
of 1,4-dioxane in shampoo, the Plaintiffs cannot, based on the existing scientific materials, prove the falsity of the
statement on the balance of probabilities. Hence, the Plaintiffs’ claim on injurious falsehood cannot succeed.
(ii) Malice in publishing the statement
[524] The Plaintiffs also claim that the Defendant published the statement maliciously, being at least reckless as to
whether the statement was true or false.
[525] In the earlier part of this Judgment on the defence of publication in the public interest, I have already
discussed in length as to how Madam Lam conducted the research and how she and the editorial staff came to the
conclusion that 10 ppm was the safety limit. I accept Madam Lam’s evidence that she subjectively believed that 10
ppm was the safety limit. The problem is that the way she came to such conclusion was flawed, naïve and
unprofessional, and as a result her reporting fell below the standard expected from a responsible journalist.
[526] Nevertheless, it is not equal to say that Madam Lam was reckless as to the truth of the statement. One must
bear in mind that "malice" and "responsible journalism" are two different concepts. Obviously, if the journalist
publishes a report maliciously, it would be extremely difficult for him to establish that he has met the standard of
responsible journalism. But even in the absence of malice, it would still be possible for the court to make a finding of
not meeting the standard, having regard to Lord Nicholls’ 10 factors listed out in Reynolds.
[527] Mr Pow also complains that the Defendant had deliberately published the Article in a serious and sensational
manner with a mercenary motive of attracting more readers into buying the Magazine. Again I do not accept that
this factor alone is sufficient to establish that the Defendant published the statement maliciously. Journalists should
be allowed certain flexibility in presenting their stories to the readers, and there is no objection for the journalists to
make their stories more appealing to the readers. However, Madam Lam’s investigation was flawed. Clouded by
her own "personal judgment", she chose to rely only on the materials supporting her story without taking the
necessary steps to verify the scientific basis for the support of the "10-ppm safety limit". She believed that her
judgment was correct, and the readers should only be told of what she considered to be more important and
correct. As a result, she did not inform the readers the contrary scientific view supporting the Plaintiffs’ explanation.
In my judgment, though the investigation by the Defendant was irresponsible, this is not sufficient to establish
recklessness on the part of the Defendant.
[528] For the above reasons, I find that the Defendant failed to meet the standard of responsible journalism but not
that it published the statement maliciously. The claim on injurious falsehood also fails on this ground.
[529] The Plaintiffs succeed in the claim for defamation but not injurious falsehood. I therefore proceed to assess
the quantum of the Plaintiffs’ claim.
[530] The issues relating to quantum are not much easier. The bulk of the Plaintiffs’ claim relates to the loss of
sales suffered by the Plaintiffs in another jurisdiction, i.e. the Mainland. In most of the defamation cases in Hong
Kong, the claimants would just focus on the losses suffered in the local jurisdiction. The Plaintiffs’ claim therefore
touches upon a lot of issues which have not been canvassed in the Hong Kong courts before.
[531] I try to give a bird-eye view of the issues relating to quantum.

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[532] In this action, the Plaintiffs claim the following losses for defamation (and perhaps malicious falsehood)
against the Defendant:
(i) damage to the reputation of the Plaintiffs;
(ii) loss of business and profits suffered by the Plaintiffs in the period from 15 July 2010 to 30 June 2011 ("the Relevant
Period") in the sum of RMB¥448,354,000;
(iii) special damages suffered by the 1st Plaintiff in the sum of HK$4,652.50 relating to the cost of issuing public
announcement as required by the listing rules in Hong Kong:
(viii) special damages suffered by the 2nd Plaintiff, including the cost of handling media enquires and issuing press
statements in the sum of RMB¥3,645,586, the cost of engaging media consultants and carrying out the advertising
campaign to restore the image of BaWang Shampoo Products in the sum of $57,791,679.04, and the cost of sponsoring
the Asian Games in 2010 to restore the image of BaWang Shampoo Products in the sum of RMB¥3,359,000; and
(ix) exemplary damages.
[533] The main part of the Plaintiffs’ claim relates to the loss of sales and profits relating to BaWang Shampoo
Products during the Relevant Period. In respect of such claim, the first dispute is about the calculation of the actual
figures for the loss. In this regard, both sides have called accounting experts to testify on the calculation. The
Plaintiffs’ expert is Mr Steven Skalak ("Mr Skalak") and the Defendant’s expert is Mr Trevor Dick ("Mr Dick"). There
are disputes about the methodology and approach adopted by the respective experts in assessing the actual loss.
[534] There is no dispute that both Mr Skalak and Mr Dick are qualified accounting experts. However, both of them
attempt to give expert evidence on market conditions relating to hair care products both in Hong Kong and the
Mainland. I myself have reservation as to whether they have expertise in this area. However, some of their
evidence is backed up by market data and so I would approach their evidence with such caveat in mind.
[535] The second main issue relates to the claim for loss of business and profits caused by the "republications" by
third parties in the Mainland. Based on the query of the lack of juridical basis expressed by Eady J in Baturina v
Times Newspapers232 , Mr Yu submits that the Plaintiffs should not be allowed to recover damages flowing from
such republications in the Mainland and which are not the subject matters of the separate causes of action in the
present claim.
[536] At the trial, the parties have used the term "republications" loosely to cover any further republications which
allegedly repeated the gist of the Words in the Article. "Republications" do not mean exact replication of the original
Article, as their contents are quite different from those in the original Article.
[537] The third issue is very much a question of causation and remoteness of damages. Most of the losses
allegedly suffered by the Plaintiffs relate to the loss of sales in the Mainland. The Magazine was published in Hong
Kong, and it is common ground that the circulation of the Magazine in the Mainland was limited and restricted.
However, the 1,4-dioxane incident relating to the Plaintiffs were referred to in a lot of republications by third parties
in the Mainland, mainly in the internet. The contents of these republications were different from those in the original
Article. Hence, there is a serious dispute as to whether the loss of sales in the Mainland was caused by the
publication of the original Article itself, and whether such loss was foreseeable at the time of the publication of the
Article.
[538] The fourth issue is a conflict of law issue. It is the Defendant’s case that, under Mainland law, the Defendant
would only be liable to the Plaintiffs for the loss caused by its own publication of the Words and not the
republications by third parties. Hence, the Plaintiffs should not be allowed to recover the loss of sales resulting from
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the republications in the Mainland under the rule of double actionability. There are disputes as to what the Mainland
law is and whether the rule of double actionability applies so as to prevent the Plaintiffs from recovering the loss of
sales suffered in the Mainland.
[539] The fifth issue is about the loss of sales and profits in Hong Kong. It is common ground that the sales
business of BaWang Shampoo Products in Hong Kong was conducted by the two subsidiaries of the 1st Plaintiff in
Hong Kong which are not parties to the proceedings. Because of the no-reflective-loss principle, there is a dispute
as to whether the existing Plaintiffs are able to recover the losses suffered by these two subsidiaries.
[540] The sixth issue is how to assess the quantum of general damages.
[541] The seventh issue is whether the facts of the present case justify an award of exemplary damages.
[542] The last issue is a civil right issue. Since the publication of the Article involved the right of the freedom of
expression and the right of the public to know, the Defendant argues that the level of damages awarded in the
present case should not be so disproportionately high resulting in the freedom of expression being unduly curtailed.
There is a dispute whether the assessment exercise should be influenced by such civil right consideration.
[543] I will deal with these issues in turn.
(i) The actual loss of sales and profits
[544] The Plaintiffs only claim for the loss of sales and profits relating to BaWang Shampoo Products (which
included both the "BaWang" and "Royal Wind" brands shampoos) suffered by them in the period from 15 July 2010
(i.e. the date after the publication of the Article) to 30 June 2011 ("the Relevant Period"). Hence, the Plaintiffs’ claim
is only limited to a period of about 11½ months after the publication of the Article.
[545] In this exercise, the court would try to assess the projected sales of BaWang Shampoo Products in the
Relevant Period. Comparing that figure with the actual sales figure, the court can then work out the loss of profit in
the Relevant Period. Whether the Plaintiffs are able to recover all or any loss of profits because of conflict of law,
causation, remoteness of damages or no-reflective-loss issues is a different matter which would be dealt with in the
latter part of this Judgment.
[546] Both experts have agreed that the loss of profits in respect of BaWang Shampoo Products in the Relevant
Period can be calculated by reference to the following items of revenue and expenditure, but there is dispute as to
how to arrive at the proper figure for each item. The respective calculation of the parties can be listed out as follows:
Plaintiffs’ Expert RMB’000 Defendant’s Expert Defendant’s Expert

(Scenario A) RMB’000 (Scenario B) RMB’000
Forecast revenue Forecast 2,077,913 (678,162) 1,489,206 (628,303) 1,619,187 (683,102)

variable cost of sales
Forecast variable other (819,597) (587,394) (638,663)

operating expenses
Forecast profits (A) 580,154 273,509 297,422
Actual revenue Actual 606,165 (250,428) (239,091) 588,688 (250,083) (232,199) 588,688 (250,083) (232,199)
variable costs of sales Actual
variable other operating
expenses
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Actual profits (B) 116,646 106,406 106,406
1st Plaintiff’s lost profits 463,508 13,951 (28,952) 167,103 - - 191,016 - -

before adjustments (A-B)
Excessive sales returns Lost
profits attributable to men’s
series products
1st Plaintiff’s lost profits 448,507 167,103 191,016
[547] The 1st Plaintiff is the holding company of the BaWang Group. The aforesaid calculation is made on the basis
of the consolidated accounts of the BaWang Group. In other words, those are the losses suffered by the BaWang
Group as a whole. Further, there are Scenarios A and B under the Defendant’s assessment. Scenario A’s
calculation is the one made by Mr Dick in his original report. Scenario B’s calculation covers the scenario if the court
were to adopt the growth rate of the general hair care products in Mainland during the Relevant Period in assessing
the projected sales of BaWang Shampoo Products. I will elaborate this point further in the latter part of this
Judgment.
[548] The first main dispute is the forecast revenue of BaWang Shampoo Products. Mr Skalak arrives at the figure
of RMB¥2,077,913,000, whereas Mr Dick works out a different figure of RMB¥1,489,206,000.
[549] The actual sales figure of BaWang Shampoo Products in the immediate preceding 12 months before the
publication of the Article (from 1 July 2009 to 30 June 2010) was RMB¥1,837,399,823. As worked out by the
experts themselves233 , the Plaintiffs’ estimate reflects a 18.1% annual increase in sales from the previous year,
whereas the Defendant’s estimate indicates an annual drop of sales of 15.3%.
[550] Mr Skalak works out the figure by relying on the forecast made by the management of the BaWang Group in
May 2009 contained in a piece of paper ("the 2009 Forecast"), which the Plaintiffs say is the best piece of evidence
because it was prepared before the publication of the Article. Based on the 2009 Forecast, the implicit revenue
growth rates in 2010 and 2011 were 35% and 20% respectively.234
[551] On the other hand, Mr Dick complains that the 2009 Forecast did not provide a sufficiently reliable basis from
which to derive an assessment of the forecast revenue during the Relevant Period. The 2009 Forecast only
compromised a single sheet of paper which was undated and contained no narrative, description or explanation of
its contents. It was not clear who prepared the 2009 Forecast or the purpose for the preparation of such Forecast.
Further, there was no supporting documents or oral evidence from the officers who were involved in the budgeting
purpose explaining the basis for arriving at such Forecast, or the assumptions or factors that were taken into
account when the 2009 Forecast was prepared. In such circumstances, it would be unsafe for the court to rely on
such Forecast to assess the projected sales of BaWang Shampoo Products.
[552] I agree with these criticisms. Without any supporting evidence and material in explaining the basis for the
calculation of the figures in the 2009 Forecast, the revenue forecast by the Plaintiffs was no more than a guess by
them as to how the sales of BaWang Shampoo Products would perform in the future. Further as pointed out by Mr
Dick himself, one would expect a company, particularly a listed company like the 1st Plaintiff, to continuously track
its actual performance and to identify the reasons for deviations therefrom. Yet no such information is available. I
am quite surprised that, bearing in mind the substantial amount of the claim, the Plaintiffs have not called any
evidence from the management team of the Plaintiffs to explain the basis of their forecast, and hence it would not
be safe for the court to rely on these figures without further supporting evidence.
[553] The Plaintiffs seek to justify the accuracy of the 2009 Forecast by relying on the 2010 Annual Budget and the
sales forecasts made by equity research analysts at Morgan Stanley235 , Bank of America Merrill Lynch and OSK in
their reports. Mr Skalak claims there these were reliable reports because they were published before the publication
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of the Article, and the forecasts contained in these reports matched with the figures contained in the 2009 Forecast.
Further, Mr Skalak suggests that the actual revenue in the 1st half of the 2010 Annual Budget was approximately
the same as that predicted in the 2009 Forecast.
[554] On the other hand, there were also other equity analyst reports (one also by Morgan Stanley)236 which
suggested that the sales of the BaWang Shampoo Products in the 1st half of 2010 (which was before the
publication) fell short of their forecasts. Though these reports were published after the publication of the Article, the
analysts were discussing the sales performance of BaWang Shampoo Products before the publication, and they
were of the view that the performance by that time was already unsatisfactory. In any event, there was very little
material to support how these forecasts were made by equity analysts. The fact that these analysts could change
their forecasts overnight also undermines the reliability of their forecasts.
[555] Mr Skalak also seeks to argue that the actual sales result for the 1st half of 2010 (as contained in the 2010
Annual Budget) approximates the 2009 Forecast. However, since there was only one sales figure as the estimate
for the whole year of 2010 in the 2009 Forecast and there is dispute between the experts as to how to split the
sales between the 1st and 2nd halves of the year, the figures in the 2009 Forecast remain a bare speculation without
any supporting basis. Finally, the 2010 Annual Budget was only for the year 2010 and did not contain any projection
for 2011. Given its limited coverage, it would not be safe for the court to rely on the 2010 Annual Budget as the
yardstick to assess the projected sales of the Relevant Period.
[556] As pointed out by Mr Dick, there are several factors which show that the figures in the 2009 Forecast were
too aggressive and most likely overstated:237
(i) BaWang’s business in the 1st half of 2010 was slowing, which was a matter of concern for some equity analysts;
(ii) the market for BaWang’s hair care products was becoming increasingly competitive;238 and
(iii) the prospects of the Royal Wind brand were uncertain and there was also danger of cannibalization239 between the
BaWang and Royal Wind brands.
[557] According to the market data obtained by the experts, BaWang was facing tougher competition in the
shampoo market. First, the growth of the whole hair care products market in the Mainland had slowed down, with
30% growth in 2007, 17 % growth in 2009, but only 8% growth in 2009, and 9% growth in 2010 and 2011.240
Second, the revenue generated by the BaWang’s established products grew by only 3% in 2009 and 5.7% in the 1st
half in 2010.241 Third, as admitted by Mr Skalak, BaWang had to rely on new products to maintain the growth of its
sales, and this was why BaWang had introduced the Royal Wind shampoo. However, the sales of the Royal Wind
shampoo in the 1st half of 2010 were unsatisfactory. In the 1st half of 2010, Royal Wind products experienced a
substantial drop of around RMB¥ 90 million from the 2nd half of 2009 to the 1st half of 2010, which marks a decline
of about 40%.242
[558] According to Mr Dick, there are at least two reasons why Royal Wind brand faced difficulties. Firstly, the
Royal Wing brand competed in a less niche market than the BaWang brand. Since Royal Wind brand competed in
the anti-dandruff segment, it competed against some global giants such as P & G and Unilever. Secondly, there
would be cannibalisation between the two brands, i.e. BaWang and Royal Wind Brands.243
[559] Mr Pow submits that the 2009 Forecast was prepared by the management team of BaWang who were
indisputably in the best position to evaluate the trend of their own business. Further, the 2009 Forecast was an
internal document. There was no motive for BaWang to exaggerate the figures in the Forecast.
[560] Despite Mr Pow’s able submission, in the absence of further evidence to explain how the forecast was made,
the 2009 Forecast remains a self-serving guess as to the future performance of BaWang Shampoo Products.
Further, there is no one from the management team to explain whether they had taken into account the negative
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market factors as outlined by Mr Dick in his reports and testimony. In such circumstances, I do not accept that the
2009 Forecast provides a reliable basis to forecast the sales of BaWang Shampoos Products in the Relevant
Period.
[561] On the other hand, Mr Dick adopts a different methodology to assess the projected sales. Mr Dick is of the
view that the market share enjoyed by BaWang in 2010 would, but for the loss of consumer confidence, have been
impacted in a similar fashion to those of the 2 comparable brands known as C-Bons and La Fang ("the 2
Comparables"). He considers that the 2 Comparables are most similar to BaWang’s brands because they were
manufacturers of domestic hair care products that were competing with the dominant hair care brands, and
because of the comparable size of their market share prior to the publication of the Article. Mr Dick is of the view
that BaWang’s growth or reduction of the market would be the same as the average of the growth or reduction of
the 2 Comparables. Using such methodology, Mr Dick works out a figure of RMB¥1,489,206,000 which represents
a 15.3% drop in projected sales.
[562] I also have difficulty with Mr Dick’s projection. Though the sales growth of BaWang Shampoo Products might
have slowed down before the publication of the Article, it is difficult to explain the reason why, where there had
been an annual growth in the overall hair care products at the relevant time, there would have been a drop of 15.3%
in sales had not Article not been published. At the trial, no satisfactory explanation has been given by Mr Dick.
[563] As I see it, there are 2 major flaws in the methodology adopted by him. In working out the projected sales
figures from 15 July 2010 to 30 June 2011, Mr Dick tries to work out the sales figures of the 2nd half of 2010 and 1st
half of 2011 separately. In his calculation, Mr Dick has used the sales figures in the previous year in working out a
split ratio of the sales in the 1st and 2nd halves of the year, i.e. 39% and 61%. He assumes that the same ratio would
be applicable in the following year (which would be a notional percentage) and he then uses the real sales figure in
the 1st half of 2010 to work out the projected sales. In using the notional figures and actual figures together, it
bounds to produce an unrealistic result which shows a significant drop in sales despite the general growing trend
(though at a slower rate) in the market in the Relevant Period.
[564] One should be careful about the use of the split ratio between the 1st and 2nd halves of the year in assessing
the projected sales. There is simply no established pattern of sales between the two halves of the calendar year,
and so I reject any methodology using the split ratio in assessing the projected sales of BaWang Shampoo
Products.
[565] The second flaw lies with the use of comparables. Mr Dick insists to use actual market data to assess the
forecast revenue of BaWang Shampoo Products. In doing so, Mr Dick uses the data of comparable companies and
products in working out the projected sales. However, I agree with the Plaintiffs that the 2 Comparables chosen by
Mr Dick are not appropriate because they do not reflect the Plaintiffs’ position as the leader in the herbal shampoo
market. Further, Mr Dick uses the post-publication data of the 2 Comparables in the calculation. The whole market
condition might have changed after the publication of the Article, and the publication might have affected the sales
of the 2 Comparables as well. As the court is trying to project the sales of BaWang Shampoo Products but for the
publication, it would not be appropriate to use these post-publication figures in the calculation. I therefore also reject
the Defendant’s methodology.
[566] As there is serious doubt about the use of the 2 Comparables, Mr Dick, in the course of his testimony, also
puts forward an alternative calculation known as the Scenario B’s calculation. In Scenario B, Mr Dick assumes that
BaWang could have maintained the share of the Mainland shampoo market that it achieved in 2009. The growth
rate for the general hair care products market in the Mainland was 9% in 2010 and 2011. Mr Dicks assume that
BaWang’s revenue would have grown at the same rate as the general hair care products market as a whole in 2010
and 2011, namely 9% per annum on a calendar year basis. Based on that assumption, he works out the forecast
revenue to be RMB¥1,619,187,000.244
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[567] Again I reject the Scenario B’s calculation. Mr Dick still uses the split ratio between the 1st and 2nd halves of
the year in assessing the projected sales in the Relevant Period. As mentioned above, the split ratio approach
should not be adopted, and the absurdity of the Scenario B’s calculation is shown by the fact that despite the
general growing trend in the sales in the general market, the final figure worked out by Mr Dick (i.e.
RMB¥1,619,187,000) is still less than the actual sales figure from 1 July 2009 to 31 June 2010
(RMB¥1,837,399,823 x 11.5/12 = RMB¥1,760,841,496). Hence, I also reject the Scenario B calculation made by Mr
Dick.
[568] How should the court then assess the projected sales figures in such circumstances? As in many difficult
cases concerning assessment of damages, the court has to try its best to assess the quantum based on the
available evidence and data. In my judgment, the best approach is to try to work out the notional annual growth rate
of BaWang Shampoo Products at the Relevant Period. After obtaining the notional growth rate, the court can then
apply the growth rate to the actual sales figures of the immediate 12 months of BaWang Shampoo Products prior to
the publication of the Article to work out the projected sales figures.
[569] There is no serious dispute that the annual growth rate of the hair care products in the Mainland market in
the Relevant Period was about 9%. I decide to use the growth rate of the general hair care products market instead
of the specific herbal shampoo products market, because one of the brands of BaWang Shampoo Products, Royal
Wind, had to compete in the more competitive general market and not the specific market of herbal shampoo.
Further, the market data shows that the growth rate of the original BaWang brand (which competed in herbal
shampoo market) had slowed down in the years before the publication of the Article. Hence, I adopt 9% as the
notional annual growth rate.
[570] The Relevant Period consisted of 11½ months and not the full 12 months. As the parties cannot establish a
specific pattern for the sales in a particular period of the year, I just reduce the projected sales figures on a pro
gratia basis. Hence, I assess the projected sales revenue of BaWang Shampoo Products in the Relevant Period as
follows:
RMB¥1,837,399,823 x 11.5/12 x 109% = RMB¥1,919,317,230
[571] In his evidence, Mr Dick tells me that this methodology does not work. 9%, which relates to a calendar year
growth, can only be applied to calendar year profit or revenue. It cannot be applied to profit or revenue which
straddles 2 calendar years because that would be applying apples to oranges. If 9% were to be applied to the figure
of RMB¥1,837,000,000 as mentioned above, annual growth would come to 18% which plainly exceeds the growth
that was in fact 9%.
[572] I disagree. I fully understand that 9% was the annual calendar year growth, and so it may not match the
calculation of the annual growth in the Relevant Period which was from 15 July 2010 to 30 June 2011. Yet this
would be the best figure for the assessment of the annual growth in the period. The actual sales of BaWang
Shampoo Products from 1 July 2009 to 30 June 2010 was RMB¥1,837,399,823. If there was a general growth in
the region of 9% in the Relevant Period, then the figure of RMB¥1,919,317,230 makes much more sense to me
than the figure of RMB¥1,619,186,000 worked out by Mr Dick under Scenario B, which marks a decline in the sales
despite a general growing trend of 9% at the Relevant Period.
[573] Then I come to the forecast variable costs of sales, which would be calculated by applying a specific
percentage to the projected sales figures. Mr Skalak uses a percentage of 32.6% based on the cost structures and
relevant cost to revenue ratio in the 1st half of 2010. On the other hand, Mr Dick adopts a percentage of 42.2% by
looking at the costs actually experienced by BaWang during the 2nd half of 2010 which was after the publication of
the Article.
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[574] Mr Dick uses post-publication figures rather than pre-publication figures because of indications that
BaWang’s manufacturing and packaging costs had increased during the Relevant Period, and the increasingly
competitive environment might have made it difficult to pass those cost increases onto consumers. Mr Dick also
backs up his observations by some market data, for example cost indexes of the various raw materials required for
the production of BaWang Shampoo Products and the rising labour costs during the Relevant Period. Apart from
these factors, decrease in sales due to the change in sales channel mix and increase in bundling sales might also
have an impact on the gross margin generated by BaWang during the Relevant Period.
[575] On the other hand, the Plaintiffs argue that the cost ratio in the 2nd half of 2010 was tainted by the effect of
the Article. After the publication of the Article, the Plaintiffs might have to reduce the price of their products or to
engage in other kinds of promotion activities thereby lowering their profit margin. Further, their competitors might
seize the opportunity created by the 1,4-dioxane incident to capture the market share of BaWang.
[576] There are some justifications in these arguments. It may not be appropriate to rely solely on the post-
publication cost structure because the publication of the Article might have certain effect on the cost structure of
BaWang Shampoo Products. Further I accept Mr Skalak’s evidence that, had the publication not been made, the
Plaintiffs would have been in a better position to absorb the costs increase by other measures. In fact, some of the
fixed term agreements made by the Plaintiffs for the supply of packaging material prior to the publication of the
Article might be able to absorb part of the increasing costs faced by BaWang.245
[577] Despite that, the market data supplied by Mr Dick supports the Defendant’s case that the variable costs of
sales of BaWang Shampoo Products were likely to have increased during the Relevant Period. Furthermore, the
cost ratio relied on by the Plaintiffs was actually the lowest one in recent years. In fact, the cost ratio was as high as
36.2% in the 1st half of 2008. In view of the rising labour, raw materials and packaging costs in the Mainland, I have
serious doubt as to whether the Plaintiffs were able to maintain the same cost ratio even without the publication of
the Article.
[578] Balancing all these factors, I adopt the median cost ratio of 37.4% ((32.6% + 42.2%) ÷ 2). Hence, the
forecast variable costs of sales can be calculated as follows:
RMB¥1,919,317,230 x 37.4% = RMB¥717,824,644
[579] There is no dispute between the experts that the court should adopt the percentage of 39.44% of the revenue
in calculating the forecast variable other operating expenses. As the forecast revenue is estimated to be
RMB¥1,919,317,230, the amount of forecast variable other operating expenses is:
RMB¥1,919,317,230 x 39.44% = RMB¥756,978,716
[580] For actual variable costs of sales, the difference between the parties is small. The Plaintiffs and the
Defendant adopt the respective percentages of 41.3% and 42.5%. As the parties have not argued on the difference,
I adopt the median percentage of 41.9%.
[581] Again, there is no dispute between the parties in using the same 39.44% in calculating the actual variable
other operating costs.
[582] So far as the calculation of the actual profits is concerned, another dispute between the parties is to how to
handle the effect of two other incidents after the publication of the Article which might have a negative impact on the
sales of the Plaintiffs’ products. First, there was a report on 16 July 2010 in the National Business Daily about
missing and expired SFDA registrations in respect of some of the products of the Plaintiffs. Second, there was
another report on 10 September 2010 in the Ming Pao Daily about mislabelling in respect of 2 Men’s Series
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products of the Plaintiffs. The Plaintiffs also make some adjustment in respect of the excessive sales return as a
result of a rebranding campaign.
[583] In a nutshell, Mr Skalak increases the actual revenue by adding back some sales returns that had been
deducted, both in respect of the Men’s Series products due to the mislabelling incident and also in respect of what
the Plaintiffs allege are "excessive" sales returns during the rebranding campaign. On the other hand, Mr Dick does
not make any corresponding adjustment in respect of sales returns of the Men’s Series products because: (i) it is
not possible to separately project the forecast revenue attributable to that particular line of products; and (ii) the
impact of the mislabelling incident was not restricted to the Men’s Series products and would also have impacted
the overall consumers’ confidence in the BaWang’s products.
[584] In respect of the alleged "excessive" sales returns, Mr Skalak has based his view that such returns were
excessive because that was what had been advised by BaWang’s management. However, he admits at the trial
that he is not in a position to offer an opinion on this matter. Significantly, there is a complete absence of
contemporaneous evidence confirming that the alleged "excessive" sales returns, which took place one year after
the publication of the Article, were attributable to the said publication. In such circumstances, I am not prepared to
make the adjustment in respect of the "excessive" sales returns.
[585] I also agree with Mr Dick that the mislabelling incident would have an impact on the overall consumers’
confidence in BaWang’s Shampoo Products and so it is not appropriate to make the simple adjustment in the
manner as alleged by Mr Skalak.
[586] For the above reasons, the 1st Plaintiff’s loss of profits can be assessed as follows:
Forecast revenue ¥1,919,317,230
Forecast variable cost of sales (¥717,824,644)
Forecast variable other operating expenses (¥756,978,716)
Forecast profits (A) ¥444,513,870
Actual revenue ¥588,688,000
Actual variable costs of sales (¥246,660,272)[246]
Actual variable other operating expenses (¥232,178,547)[247]
Actual profits (B) ¥109,849,181
1st Plaintiff’s Lost Profits (A-B) ¥334,664,689
[246] ¥588,688,000 x 41.9% (see §579 above)
[247] ¥588,688,000 x 39.44% (see §580 above)
[587] It is common ground that such loss of profits is calculated on a consolidated basis, i.e. at the level of the 1st
Plaintiff as the holding company of the BaWang Group. After ascertaining the loss at that level, the parties then go
on to ascertain the loss of profits suffered specifically by the 2nd Plaintiff.
[588] The entities within the BaWang Group that were engaged in the sales of BaWang Shampoo Products at the
time of the publication of the Article were:
(i) the 2nd Plaintiff;

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(ii) BaWang International Group Holding (HK) Limited ("HK1"); and
(iii) Hong Kong BaWang International Trading Limited ("HK2").
[589] The 2nd Plaintiff was responsible for the sales of the BaWang Shampoo Products in the Mainland market,
whilst HK1 and HK2 were responsible for the sales in Hong Kong and other overseas markets. The 2nd Plaintiff was
the main operating subsidiary of the BaWang Group.
[590] In trying to work out the loss of profits suffered specifically by the 2nd Plaintiff, the experts agree to calculate
the loss of profits suffered by HK1 and HK2 and then subtract that figure from the overall loss of profits as worked
out earlier.
[591] Different calculations of the loss of profits of HK1 and HK2 are set out below:248
Plaintiffs’ Expert RMB’000 Defendant’s Expert RMB’000
Forecast revenue 104,709 73,270
Forecast variable cost of sales (37,139) (28,928)
Forecast variable other operating (26,439) (18,500)

expenses
Forecast profits (A) 41,131 25,842
Actual revenue 21,313 21,313
Actual variable costs of sales (8,731) (8.731)
Actual variable other operating (5,381) (5,381)

expenses
Actual profits (B) 7,201 7,201
HK1 & HK2’s lost profits before 33,930 18,641

adjustments (A-B)
Lost profits attributable to men’s series (737) -

products
HK1 & HK2’slost profits 33,193 18,641
[592] Both experts agree that it is appropriate to apply the ratio of the actual revenue of HK1 and HK2 to actual
revenue of the BaWang Group for the affected products in the 1st half of 2010 to arrive at the forecast revenue for
HK1 and HK2 during the Relevant Period, but disagree on the methodology in calculating such ratio.249 Mr Skalak
has also set out his calculation in some detail in appendix 4 of his 1st report dated 6 March 2012.
[593] As mentioned above, I do not accept the methodology of both experts in working out the loss of profits of the
whole BaWang Group, in particular as to projection of the forecast revenue of BaWang Shampoo Products in the
Relevant Period. As a result, the court estimates the projected sales revenue by adopting a notional growth rate of
9% which was the growth rate of the Mainland general hair care products market at the Relevant Period.
[594] Because of such change, the calculation of the loss of profits of HK1 and HK2 has to be adjusted as well.
Both experts would adopt a percentage of the forecast sales of the whole BaWang Group to assess the projected
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revenues of HK1 and HK2. The forecast revenue of HK1 and HK2 assessed by Mr Skalak (i.e. ¥104,709,000) is
about 5.04% of the forecast revenue of the whole BaWang group at the Relevant Period (i.e. ¥2,077,913,000). On
the other hand, the forecast revenue worked out by Mr Dick (i.e. ¥73,270,000) is about 4.92% of the forecast
revenue of the whole BaWang Group at the Relevant Period (i.e. ¥1,489,206,000). Both percentages are in the
region of 5% and so I use such percentage to assess the forecast revenue of HK1 and HK2 at the Relevant Period:
¥1,919,317,230 x 5% = ¥95,965,861.
[595] Then I come to forecast variable cost of sales. Mr Skalak estimates the forecast variable cost of sales based
on the historical cost of sales as percentages of the corresponding revenues in the 1st half of 2010 (i.e. 35.47%). Mr
Dick uses the actual ratio of variable cost of sales for HK1 and HK2 to actual revenues for HK1 and HK2 during the
Relevant Period (i.e. 39.48%). I adopt the median percentage of 37.475%. Hence, the forecast variable cost of
sales is: ¥95,965,861 x 37.475% = ¥35,963,206.
[596] The remaining parts of the calculation are not in dispute, and the parties also agree to use the percentage of
25.2504% to calculate the forecast variable other operating expenses. Hence the loss of profits suffered by HK1
and HK2 can be assessed as follows:
Forecast revenue ¥95,965,861
Forecast variable cost of sales (¥35,963,206)
Forecast variable other operating (¥24,231,764) [250]

expenses
Actual revenue ¥21,313,000
Actual variable costs of sales (¥8,731,000)
Actual variable other operating expenses (¥5,381,000)
HK1 & HK2’s lost profits (A-B) ¥28,569,891
[250] ¥95,965,861 x 25.2504%
[597] The loss of profits suffered by the 2nd Plaintiff relates to the reduction of sales of BaWang Shampoo Products
in the Mainland market. Such loss can therefore be assessed as follows:
Loss of profits of the 1st Plaintiff at the ¥334,664,689

group level
Loss of profits of HK1 and HK2 (¥28,569,891)
2nd Plaintiff’s lostprofits ¥306,094,798
[598] In assessing the quantum of the Plaintiffs’ claim, it may be relevant to look at the loss of profits resulting from
the reduction of sales of BaWang Shampoo Products only in Hong Kong. There is no dispute that HK1 and HK2
conducted sales other than in Hong Kong, and so the loss of profits suffered by HK1 and HK2 is not exactly the
same as the loss of profits for the sales in Hong Kong.
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[599] Both experts agree to apply the same ratio of 71.1253% to the forecast revenue of HK1 and HK2 to arrive at
the forecast revenue sustained in Hong Kong.251 The experts apply different percentages based on different costs
structure to assess the forecast variable cost of sales attributable to the Hong Kong revenue, about 28.4% in the
case of the Plaintiffs and 39.87% in the case of the Defendant.252 For the same reasons given earlier, I adopt the
median percentage of 34.135%. Both experts agree to use the same percentage of 35.3% in assessing the forecast
variable other operating expenses. For the remaining items, there is no serious dispute between the parties and the
only slight differences are due to rounding differences.
[600] Hence, the loss of profits suffered in Hong Kong can be assessed as follows:
Forecast revenue ¥68,256,006 [253]
Forecast variable cost of sales (¥23,299,188) [254]
Forecast variable other operating (¥24,094,370) [255]

expenses
Actual revenue ¥ 9,355,000
Actual variable costs of sales (¥4,439,000)
Actual variable other operating expenses (¥3,303,000)
Lost profits in Hong Kong (A-B) ¥19,249,448
[253] ¥95,965,861 (forecast revenue of HK1 and HK2 as stated in §593 above) x 71.1253%
[254] ¥68,256,006 x 34.135%
[255] ¥68,256,006 x 35.3%
[601] In conclusion, I assess the loss of profits suffered by the BaWang Group during the Relevant Period at
different levels as follows:
Loss suffered at the group level ¥334,664,689
Loss suffered by the 2nd Plaintiff ¥306,094,798
for the reduction in sales in the Mainland
Loss suffered by HK1 and HK2 for the ¥19,249,448

reduction in sales in Hong Kong
[602] Despite this elaborate exercise, the Plaintiffs, for the reasons given in the later part of this Judgment, are not
able to recover any loss of profits allegedly suffered by them during the Relevant Period. Nevertheless, I feel
obliged to conduct such exercise in the event that this case is going elsewhere and a contrary view is taken against
my other rulings on quantum as mentioned below.
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(ii) Juridical basis in claiming for loss resulting from republications
[603] As mentioned above, the bulk of the Plaintiff’s claim relates to the loss of sales caused by the republications
by third parties in the Mainland. One thing unique about the tort of defamation is that it is also a tort to repeat the
defamation by some other person. In other words, replication of the original defamatory article is a separate tort and
so there is an issue as to whether there is juridical basis for the claimant to recover from the original publisher
damages caused by the replication of the original defamatory article by others.
[604] Mr Yu invites the court to hold that it is not permissible for the Plaintiffs to rely on the republications in the
Mainland not as causes of action but only for the purpose of recovery of damages.
[605] As agreed by Mr Yu, there have been a line of authorities to support that a plaintiff can, as an alternative to
suing on a republication as a separate cause of action, treat the further publication as increasing the damage
flowing from the first. In Gatley, the learned authors said:256
"Where a defendant’s defamatory statement is voluntarily republished by the person to whom he published it or by some
other person, the question arises whether the defendant is liable for the damage caused by that further publication. In such
case the claimant may have a choice: he may (1) sue the defendant both for the original publication and for the
republication as two separate causes of action, or (2) sue the defendant in respect of the original publication the damage
which he has suffered by reason of its repetition, so long as such damage is not too remote."
[606] In Slipper v BBC257 , the defendant showed television film defamatory of the plaintiff and the plaintiff was
allowed to rely on the effect of the newspaper reviews of the film as damage flowing from the broadcast of the film.
The film reviews, being further publications though not republications, were said to have been foreseeable, natural,
provable and perhaps even intentional results of the publication sued upon, and were held to be a legitimate claim.
In McManus v Beckham258 , the plaintiff was able to rely upon republications not as separate causes of action, but
as part of the damage which flowed from the original publication as the republications had been foreseesable. In
Tang Chiu Yuk v Hung Ka Cheun259 , in awarding damages, Chung J took into account the fact that there had been
extensive republication of the libel in quite a number of local newspapers as the republications were the natural and
probable results of the original publication.
[607] However, Mr Yu submits that the said authorities did not address the juridical basis of the proposition that a
plaintiff can recover damages flowing from a publication in respect of which he cannot establish primary liability on
the part of the defendant. Such argument originated from a submission made by the counsel in Baturina v Times
Newspapers Ltd which was endorsed Eady J in the first instance judgment260 .
[608] The submission was summarised in §52 of the judgment of Eady J in Baturina:
"[The defendant’s counsel] queries the juridical basis of the proposition that a claimant can recover damages flowing from a
publication in respect of which he could not establish primary liability on the part of the defendant. It is difficult to reconcile
these two propositions as a matter of causation. Attention is drawn by the learned editors of Gatley … … to observations
made in the Queensland case of Timms v Clift [1998] 2 Qd R 100 Qd CA, at 108:
"If, as was held, the plaintiff had no right to recover in respect of the cause of action for the second publication, that in the
magazine, it is difficult to understand why cause of action in respect of first publication should have included a right to
damages in respect of the second publication."
[609] In my judgment, the lack of juridical basis argument only supports the proposition that if the claimant has no
right to bring a cause of action for the second publication, either because there is a defence available for the
second publication or some other reasons, the claimant cannot sue the defendant in respect of the original
publication for the damages resulting from the second publication. Such observation is actually supported by the
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following passage in Gatley:261
" … … this might seem to suggest damages can be recovered for the republication regardless of whether the later
publication would be actionable by the claimant. Thus, even if the publisher of the later publication would have had a
defence, or had been released as a joint tortfeasor, in respect of that publication, damages may still be recovered by the
claimant for the republication. As Eady J. pointed out in Baturia v Times Newspapers, the juridical basis of the proposition
that a claimant can recover damages flowing from a publication in respect of which he could not establish primary liability
on the part of the defendant is difficult to ascertain. It is submitted therefore that the correct view is that where no claim
would lie against the defendant in respect of the later publication, the claimant should not be as a matter of principle be
allowed to recover damages in respect of that publication. If the later publication is not actionable then, even if it was
caused by the original publication, it would be unjust to make the defendant liable for any harm caused by that publication.
If that is right, then regardless of whether a claimant relies on a republication as a cause of action or in aggravation of
damages, a defendant would be entitled to meet the claim in respect of that publication with any relevant defence. That is
not to say however that the original statement must be repeated word for word in the republication. Provided a media report
of the initial publication convey the sting of the original, in whole or in part, it may be relied on to increase the damages
flowing from the initial publication even if it cannot be said to ‘repeat’ what was then said."
[610] This is quite different from the proposition that, in case the claimant has not brought a separate cause of
action in respect of the republication or further republication, he should not be allowed to claim against the original
publisher for the damages resulting from the later publication if such damages are foreseeable.
[611] Apart from the requirement to establish actionability in respect of the subsequent republication, there are also
other issues involved if the claimant seeks to recover from the original publisher damages caused by republications.
The case of Baturina v Times Newspapers Ltd 262 highlights some of these issues.
[612] In Baturina, the claimant, a Russian businesswoman and wife of the former Mayor of Moscow, brought a libel
claim against the defendant, Times Newspaper, for its publication of an article which stated that she had purchased
a large mansion in Highgate for £50 million through an offshore company based in BVI and that she was planning to
spend a further £50 million renovating and extending the property. The claimant denied purchasing any such
property and claimed that the articles defamed her in the eyes of readers who were aware of her declaration of
assets made a few months previously in accordance with Russian anti-corruption legislation. Her declaration had
not included this property. The claimant therefore relied as part of her claim upon an innuendo meaning that the
claimant failed to declare her ownership of and interest pursuant to Russian law. The readers who had such
knowledge would be in Russia. The story was widely repeated and embellished in the Russian media.
[613] There were 5 categories of publications which might cause damage to the reputation of the claimant:
(i) the hard copies of the newspaper circulated in England;
(ii) the hard copies of the newspaper circulated in Russia;
(iii) publications by third parties in Russia which took the matter a stage further by making direct allegation of illegality
against the claimant;
(iv) publications by third parties in Russia which replicated the defendant’s words (or some of them) without putting an
interpretation or gloss upon them; and
(v) possible internet publications of the article in the defendant’s Times Online website.
[614] In the application to strike out the claimant’s claim, Eady J struck out the claim in respect of the first category
of publications as, in the absence of evidence as to specific readers with the relevant knowledge, there was no
realistic prospect of establishing the relevant innuendo for such class of publications. For the second type of
publications, the judge allowed the claim to proceed because it would be a matter for the trial to determine whether
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the readers in Russia would have had knowledge of the facts alleged in support of the pleaded innuendo meaning.
Nonetheless, it would be necessary for the claimant to establish that such publications were actionable by Russian
law, in particular with reference to the Russian law on innuendo. For the fifth category, Eady J struck out the claim
because the court was not prepared to assume that there would have been any internet readers, whether in
England or in Russia, who would have had access to or downloaded the relevant material and who possessed
knowledge of the extraneous facts relied on in support of the innuendo meaning.
[615] It is the third and fourth categories of publications which are relevant here. Eady J struck out the third
category’s claim. The judge held that the defendant should not be held liable in respect of allegations in publications
produced by third party publishers which went beyond the allegations made in the Sunday Times article and which
overtly defamed the claimant. Each such publication would fall within the definition of novus actus interveniens. The
article in Sunday Times might well have been a cause, or indeed the primary cause, of such subsequent
publications, but that was not sufficient to establish liability against the defendant for those publications. There was
no evidence that the defendant would have reason to know of such risk at the time of the publication of the original
article. Regarding the fourth category, i.e. third party publications in Russia that merely repeated the defendant’s
allegation that the claimant had purchased or acquired an interest in the property, the claim should be allowed
provided that it was properly pleaded.
[616] Furthermore, since the defendant was not directly responsible for such third party publications, to establish
liability against the defendant, the claimant would also need to establish that any such republication was a
reasonably foreseeable consequence of the defendant’s initial publication. This was so irrespective of where the
alleged republication took place, whether it was in the local or some other foreign jurisdictions. The only additional
requirement for the republication in the foreign jurisdiction would be that of establishing double actionability.
[617] The case went on appeal. The English Court of Appeal allowed the claimant’s appeal and permitted the
claimant to proceed with the claims relating to the first and fifth categories of publications on the basis that such
claims were not wholly unarguable. It also allowed the defendant’s appeal in part with the effect that the claimant
had to identify specific readers in each class of readers who, on reading the article, had inferred the innuendo
meaning alleged. The appellate judgment is therefore not relevant for our purposes.
[618] Hence, if a claimant seeks to hold the original publisher liable for damages resulting from further
republications by third parties, the following issues become relevant:
(i) the damage flowing from the republications must be foreseeable and not too remote;
(ii) whether there is any material difference in the contents between the original publication and the republication so that the
latter may become a novus actus interveniens (which is very much a causation issue);
(iii) whether there is a defence available to the third party in respect of the republication; and
(iv) in the case that the republications took place in foreign jurisdiction, whether the claimant has established the
requirement of double actionability.
(iii) Causation and remoteness of damages
[619] I first deal with the questions of causation and remoteness of damages. The problem here is that the
republications were made by third parties and the contents of the republications were very different from those
contained in the original publication, and so it poses serious questions as to whether the further damages caused
by the republications by third parties were caused by the original publication and whether the further damages were
within the reasonable foreseeability of the original publisher.
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[620] In Gatley263 , the learned authors said the following on the issues of causation and remoteness of damages:
"It is clear that if the republication was by a person for whom the defendant is vicariously liable under the principles of
master and servant or agency then the defendant is liable for that. Beyond this it may be that the original publisher should
only be liable as a publisher of the republished statement where he authorised or intended it, but some of the cases speak
in broader terms and assume that the same principles relating to the responsibility of the defendant apply to both situations.
In any event,
‘the law would part company with realities of life if it held that the damages caused by publication of a libel began and
ended with publication to the original publishee. Defamatory statements are objectionable not least because of their
propensity to percolate through underground channels and contaminate hidden springs.’
The question is essentially the same as that in any other tort case where it is sought to make the defendant liable
for harm which is directly attributable to the voluntary act of a third person. That is a question of causation but it is
not a pure question of fact, nor is the inquiry a value-free one: the ‘reality is that the court has to decide whether, on
the facts before it, it is just to hold [the defendant] responsible for the loss in question.’ No doubt it is still true that
the starting point is that the defendant is prima facie not liable for the further damage, because it is incumbent on
the claimant to show that there is an adequate causative link between the tort and the damage, but subject to that,
the defendant will be liable if he is actually aware that what he says or does is likely to be reported or if a
reasonable person in his position should have appreciated that there was a significant risk that what he said would
be repeated in whole or in part and that that would increase the damage caused by what he said. For reasons of
clarity it is better not to direct the jury in terms of reasonable foreseeability, though as a matter of principle that is
the underlying concept."
[621] It is the Plaintiffs’ case that there is a strong causative link between the original publication and the
republications in the Mainland. After the original publication of the Article, the Words, or their gist, were widely
repeated and republished by the Hong Kong local newspapers and the internet publishers in the Mainland. Unlike
the Magazine, a number of these Hong Kong newspapers were listed as permissible publications which could be
purchased by the public in the Mainland. According to the Chief Financial Controller of the BaWang Group, Mr
Wong Sin Yung ("Mr Wong"), there were at least 83 articles by the Hong Kong newspapers repeating or
republishing the Words, or their gist, which were made available to the public in the Mainland through the circulation
of those newspapers and the internet. Furthermore, the Words or their gist were repeated or republished in at least
over 140 Mainland newspapers and internet sites, which according to Mr Wong, a substantial number of which had
national circulation. At least 43 of those Mainland republications made references to the reports from the Hong
Kong media or the Magazine as the source of the report.
[622] However, the Plaintiffs’ claim is not free from difficulty. As mentioned above, the bulk of the Plaintiffs’ claim
relates to the loss of sales of BaWang Shampoo Products in the Mainland. The court has no information about the
circulation of the "permissible Hong Kong publications" in the Mainland, which should have been rather limited. In
support of the claim, the Plaintiffs therefore mainly rely on the effect caused by the republications in the Mainland
which consist of 147 articles included in various places from items 165 - 421 of Bundle C of the trial bundle ("the
Republications"). At the trial, the parties have submitted a comprehensive table listing out the contents of the
Republications. In trying to keep this Judgment to a reasonable length, I do not intend to include this lengthy table in
this Judgment.
[623] After reading the original texts of the Republications, I can make the following observations.
[624] Firstly, most of the Republications were in the form of reportage and did not repeat the gist of any of the
imputations against the Plaintiffs, rather most of the Republications only referred to the fact that BaWang Shampoo
Products were reported to contain 1,4-dioxane which was a carcinogenic substance (致癌物). A lot of the articles
discussed the social impact of such incident, the regulation of the presence of such substance in consumer
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products in the Mainland, the effect of the incident on the confidence of the consumers in BaWang Shampoo
Products, the consumers’ queries as to why BaWang Shampoo Products (advertised as natural products) did
contain carcinogenic chemical, and the effect of the incident on the share price of the BaWang Group.
[625] Secondly, a lot of the articles contained similar information about the chemical known as 1,4-dioxane.264 Most
of the articles referred the substance as "微毒" (mildly toxic), a term which had not been used in the original Article.
It was clear that such information was not copied from the original Article, and the authors of these Republications
did their own researches and included the information about 1,4-dioxane from some other sources. In a few articles,
the authors actually conducted their own interviews with other experts in the Mainland about the issue.
[626] Thirdly, some of the articles referred to poll results.265 The public was asked as to whether they believed
BaWang Shampoo Products did contain carcinogenic substance, or whether they would continue to buy the
Products. They also contained reports that consumers might not buy the Products as a matter of caution,
irrespective of whether they believed that the Products did contain carcinogenic substance or the Products did pose
a health risk to humans.
[627] Fourthly, most articles included BaWang’s explanation about the presence of 1,4-dioxane in their shampoos.
Some reports referred to the statements and the stance of the Mainland SFDA confirming that BaWang Shampoo
Products were safe.
[628] Fifthly, there were discussions in a few articles which may be regarded as imputations to the Plaintiffs.
However, these articles did not focus on the presence of 1,4-dioxane in BaWang Shampoo Products. Instead, the
criticisms mainly related to: (i) the alleged improper advertising by BaWang describing BaWang Shampoo Products
as wholly natural266 ; (b) the mishandling of the incident by BaWang267 ; or (c) other issues such as report of the
crisis facing privately-owned enterprises in the Mainland268 . Some of the articles compared the difference between
the present incident with the previous incidents about the discovery of 1,4-dioxane in Johnson & Johnson’s
products and toxic chemicals in the dairy products in the Mainland. The articles in Items 205, 372, 373 and 398
were actually in favour of BaWang, which claimed that BaWang was the victim of another scandal created by
someone with ulterior motives.
[629] Sixthly, there were a few references to BaWang Shampoo Products being unsafe. The article in Item 170b
stated that the level of 1,4-dixcane in BaWang Shampoo Products was near the rim of danger. The article in Item
178 mentioned that long term use of BaWang Shampoo Products might cause serious damage to human health.
The articles in Items 185, 349 and 391 referred to BaWang Shampoo Products as "毒薬" (poison) or "有毒"
(containing poison). The articles in Items 198 and 207 referred to the test results as contained in the original Article.
[630] Eady J in Baturina v Times Newspapers Ltd269 quoted a passage in Gatley270 and said that a plaintiff should
only be allowed to recover as a consequence of the original publication the damage which they have suffered by
reason of its repetition, if the republication conveys the sting of the original publication, either in whole or in part,
otherwise it would be unjust to make the defendant liable for harm caused by the republication.
[631] I agree with the Defendant’s case that the stings of the defamation as imputation to the Plaintiffs as corporate
entities, for example the Plaintiffs were corporations lacking commercial morality and the Plaintiffs used inferior raw
materials in the production of BaWang Shampoo Products with a mercenary motive to save costs, did not appear in
the Republications. Most of the Republications only stated that carcinogenic substance was found in BaWang
Shampoo Products. This fact, by itself, was true because 1,4-dioxane had been classified as a possible human
carcinogen. In fact, the authors of most of the Republications had conducted their own researches about the
possible harmful effect of 1,4-dioxane.
[632] Further, the court is not familiar with the market condition and consumers’ behaviour in the Mainland. It was
not certain why the Mainland consumers suddenly stopped buying BaWang Shampoo Products. They did not have
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access to the original Article and so they learnt about the 1,4-dioxane incident from other sources including perhaps
the Republications or some other not so formal sources. As mentioned in some of the reports in the Republications,
some of the consumers did not buy BaWang Shampoo Products as a matter of caution, probably due to the
presence of a possible carcinogenic substance known as 1,4-dioxane in the Products irrespective of whether the
level of such substance did pose a health risk to humans. In other words, the loss of sales might not have been
caused by the replication of the defamatory stings in the original Article, but rather simply by their concern about the
presence of 1,4-dioxane in the shampoos.
[633] As mentioned by Eady J in Baturina, as the Republications did not repeat the defamatory stings in the
original Article, it would be unjust to make the Defendant liable for the additional damages caused by the
Republications. This is like the 3rd category of publications in Baturina. Though the original Article might well have
been a cause, or indeed the primary cause, of the Republications, in the absence of the repetition of the defamatory
stings, it would not be sufficient for the Plaintiffs to establish liability on the part of the Defendant for the damages
caused by the Republications.
[634] Mr Pow has also relied on market reports271 to show that the market share of BaWang Shampoo Products
had dropped significantly after the publication of the Article. At the same time, the Plaintiffs’ other competitors,
including Rejoice which was another shampoo named in the Article as containing 1,4-dioxane, were able to
maintain relatively stable market shares from 2006 to 2011. According to Mr Pow, if Mainland consumers stopped
buying BaWang Shampoo Products only because of their concern about the presence of 1,4-dioxane in shampoo,
they would have stopped buying Rejoice shampoos as well. Hence, the drop in sales was caused by the
defamatory stings contained in the original Article as replicated in the Republications.
[635] I do not accept that such argument can advance the Plaintiffs’ case any further. As mentioned above, the
court has very little information about the market condition and consumers’ behaviour in the Mainland. There may
be a lot of reasons to explain the consumers’ behaviour in the Mainland. It may be the case that consumers may
have more confidence in brands with a longer track record, and as a result, the news that shampoos containing 1,4-
dioxane might have a greater impact on the Plaintiffs’ products than shampoos of other brands. The most important
point here is that the defamatory stings as contained in the original Article had been replicated in at least most of
the Republications, and so the Plaintiffs have failed to discharge the burden of proving that all or any of the loss of
sales in the Mainland was caused by the public reading the defamatory stings allegedly replicated in the
Republications, which I do not accept it to be the case.
[636] It is arguable that some of the defamatory stings were replicated in a few specific Republications. Some of
the Republications did refer to the test results contained in the original Article, and a few Republications did mention
that long term use of BaWang Shampoo Products might cause serious harm to human health. However, it is
uncertain how many consumers had actually read these few specific Republications.
[637] In fact, this brings out another problem which had briefly been mentioned in Baturina. In order to determine
the loss caused by a particular libel, the court must first know about the circulation of the publication concerned. In
Baturina, the fifth category of publication was the article appearing in the Defendant’s website, and Eady J said:
"[the] courts in recent years been approaching internet publication generally on the basis that there is no rebuttable
presumption that material placed on a generally accessible website has been published to a substantial number of
person (whether within the jurisdiction or elsewhere."272 Eady J struck out the claim based on the internet
publication on the ground that there was no evidence about its circulation. The English Court of Appeal held that
since there were a large number of hits on the defendant’s website from Russia, the claim should be allowed to
proceed. But the ultimate question remains that there must be some evidence about the circulation of a particular
republication.
[638] In the present case, most of the Republications were internet publications. The court has no idea about the
number of readers who have read these specific Republications, or indeed all the other Republications relied on by
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the Plaintiffs. Hence, it would be difficult for the Plaintiffs to prove that all the loss of sales in the Mainland was
caused by the readers reading the defamatory stings contained in the original Article which allegedly were
replicated in the Republications, which I do not find it to be the case.
[639] There is another issue about causation. As mentioned above273 , there were other negative reports about the
BaWang Group after the publication of the Article, i.e. the mislabelling incident about the men’s series products and
missing and expired SFDA registration in respect of some Plaintiffs’ products. Such negative reports would also
have adverse effect on the sales of BaWang Shampoo Products. Although I agree that the effect of these incidents
might have been smaller as compared with the 1,4-dioxane incident, the court would not be in a position to say how
much discount to quantum should be made for the other unrelated incidents, in particular the court has no idea
about the market condition in the Mainland.
[640] The Plaintiffs also have the burden to establish that the damages caused by the Republications are not too
remote to be recovered. In this regard, the court has to determine whether the Defendant should have foreseen that
the defamatory stings contained in the Article would be republished to the public in the Mainland.
[641] It is common ground that it was not possible to import the Magazine into the Mainland for sale. There were
only 49 subscribers of the Magazine with a Mainland phone number or email address as at July 2010, and only a
total of 24 of those subscribers viewed the Article and constituted "hits". In such circumstances, it would not be
foreseeable that the general public in the Mainland would be able to view the whole Article. It might be foreseeable
the news that BaWang Shampoo Products did contain a carcinogenic substance known as 1,4-dioxane might be
spread to the public in the Mainland, but it might not be foreseeable that the defamatory stings would be replicated
in other publications in the Mainland. Hence, I also find that the damages allegedly caused by the Republications
are too remote to be recovered.
[642] The Plaintiffs are claiming substantial damages for loss of sales in the Mainland. For the reasons above, I am
not satisfied that the Plaintiffs have discharged the burden of proving that all such loss was caused by the
replication of the defamatory stings in the Republications. The loss is also too remote to be recovered. More
importantly, as I will demonstrate in the following part of this Judgment, the Plaintiffs are not entitled to claim for the
loss of sales caused by the Republications in the Mainland because of conflict of law principle.
(iv) Conflict of law issue and the question of double actionability
[643] As the Plaintiffs seek to recover damages relating to the loss of sales in the Mainland caused by the
Republications in the same foreign jurisdiction, there is a conflict of law issue as to whether the Plaintiffs are entitled
to recover such loss.
[644] The Defendant argues under the present circumstances, Mainland law applies, and under Mainland law, the
Defendant would only be liable to the Plaintiffs for its own publication of the Words, and not for the Republications in
the Mainland. Hence, the Plaintiffs should not be allowed to recover the loss resulting from the Republications in the
Mainland.
[645] According to Mr Yu, Mainland law is the law with the most significant relationship with the occurrence and
with the parties in relation to the issue of damage allegedly sustained by the Plaintiffs in the Mainland. Relying on
authorities such as Boys v Chaplin 274 and Red Sea Insurance Co Ltd v Bouygues SA 275, Mr Yu submits that, as
the Republications relied upon by the Plaintiffs took place in the Mainland, and the bulk of any loss or damage
which the Plaintiffs might have suffered in consequence would have occurred in the Mainland, Mainland law is the
lex loci delicti in the present case. Further, a tort is committed where a defamatory statement is published, namely
where the material is read, heard or seen. Since the Words were alleged to have been republished in Mainland,
Mainland is the place where the tort would have been committed. The Plaintiffs cannot avoid this result simply by
stating that they are not suing on those Republications as separate causes of action.
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[646] Mr Yu also argues that any defence which is valid under the lex loci deliciti (Mainland law according to the
Defendant) is normally available to a defendant, irrespective of the lex fori (Hong Kong law in the present case),
unless it is a procedural defence. The law relating to damages is partly procedural and partly substantive.
Generally, remoteness and permissible heads of damages are questions of substance, while measure or
quantification of damages is question of procedure. Mr Yu submits that the extent of the Defendant’s liability for loss
or damage caused by the Mainland Republications is a matter of substance and not procedure and is therefore
governed by Mainland law as being the lex loci delicti or as having the most significant relationship with the
occurrence and the parties.
[647] On the other hand, Mr Pow argues that the place for the commission of the defamation was Hong Kong. As
mentioned above276 , the Plaintiffs have 2 options either to sue the Defendant both for the original publication and
for the republication as two separate causes of action, or to sue the Defendant in respect of the original publication
the damage which they have suffered by reason of its repetition so long as such damage is not too remote. The
Plaintiffs have chosen the second option. Under such circumstances, the Plaintiffs are only suing on one tort, i.e.
the Defendant’s publication of the Article in Hong Kong. The fact that damages flowing from this tort beyond the
territorial confines of Hong Kong is therefore not a conflict of law issue. The place in which the tort was committed
was the place of the publication. Although the Words had been republished in the Mainland, the Republications
were not sued upon as separate torts. Libel is actionable per se, and damage is presumed in law and does not
constitute an essential ingredient. The place of occurrence of loss and damage is therefore irrelevant to the
occurrence and completion of the tort of libel. In such case, the place in which the tort was committed was the place
of the publication, i.e. Hong Kong.
[648] Further, relying on some Australian authorities such as Nygh’s Conflict of Laws in Australia277 and David
Syme v Grey278 , Mr Pow submits there can only be one place for the commission of the tort, and the court should
insist on one single locus deliciti in the choice of law context. It is not permissible to "change" the applicable law in a
single tort action by reference to where the damages actually occurred in a case where the tort is actionable per se,
as there can only be one place of the tort, and hence one single lex loci delicto.
[649] As the locus deliciti was in Hong Kong, Mr Pow argues that there is no room for the application of foreign law.
He relies on the following passage in Johnson: The Conflict of Law in Hong Kong (2 ed)279 :
"It is not uncommon for there to be some scope for argument as to the place in which a tort has been committed. The point
has less importance than it used to have, because the Red Sea exception now gives the court the ability to avoid the
harshest consequences of the mechanical double actionability rule. Its remaining significance is two-fold:
1. If the place in question is Hong Kong, then, at least according to the law as currently understood through the English
authorities, solely Hong Kong law will apply. On that basis, the court will have no discretion to apply another law even if the
matter clearly has its most significant relationship with a legal system other than Hong Kong.
2. If the place in question is outside Hong Kong then the general rule of double actionability still carries prima facie weight,
notwithstanding the Red Sea exception."
[650] The position of the Plaintiffs is therefore double actionability rule does not apply and expert evidence on
Mainland law is irrelevant.
[651] Despite the able submission of Mr Pow, the locus deliciti of the tort of defamation is not a straightforward
issue. It is stated in Dicey, Morris & Collins:280
"Very difficult questions could arise in trying to determine the place of commission of the torts of libel or slander, slander of
title, slander of goods, or other malicious falsehood. However, in the context of defamation the rule appears to be have
been applied is that the relevant place is the country in which the defamatory statement was published. This appears to
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have been accepted without argument in one case where the English court was faced with a defamation claim arising out of
a publication in a foreign country. This rule creates no practical difficulty where the statement is published in only one
country. Where publication occurs in several countries, each publication may, potentially, give rise to a fresh cause of
action and the law of each country in which publication takes place may become relevant, it being open, presumably, to the
claimant to limit the claim to one such place if he or she so wishes."
[652] Baturina v Times Newspapers Ltd281 is also the authority to support that foreign law is relevant in
determining the Plaintiffs’ claim for the loss of sales caused by the Republications in the Mainland. That is actually
the scenario covered by the fourth category of publications in that case, i.e. third parties’ republications in Russia
which replicated the defendant’s libel. In allowing the plaintiff to proceed with the claim for damages arising from
such kind of republications, Eady J held that the rule of double actionability applied. If foreign law is irrelevant, there
is no room for the application of such rule. This is also consistent with the dicta of Eady J about the juridical basis to
claim for damages resulting from republication as mentioned above.282 If there is a defence (presumably under
foreign law) available to the original publisher or the person who republished the libel in a foreign jurisdiction, the
plaintiff should not be allowed to claim either against the original publisher or the republisher for the loss resulting
from such republications. Hence, foreign law and the rule of double actionability are relevant.
[653] I then turn to the evidence by the Mainland law experts. The Plaintiffs’ expert is Mr Gao Jun ("Mr Gao") while
the Defendant’s expert is Mr Xu Jingbin ("Mr Xu"). There is no dispute that both of them are qualified experts in
Mainland law.
[654] By the order of Poon J (as he then was) dated 20 April 2013, the court gave leave to the parties to adduce
expert evidence on Mainland law on the following question:
"If a magazine publishes a defamatory statement and that statement is republished in the [Mainland] by other media,
newspapers or internet sites and such republication causes loss and damage to the plaintiff in the [Mainland], would the
original publisher be liable for any loss and damage caused by the republication and if so what is the extent to which the
original publisher would be liable for such loss and damages?"
[655] The aforesaid question has been framed based on the issue pleaded in the pleading. The Defendant does
not run the defence that, under Mainland law, the persons who republished the Words are not liable for defamation,
rather the Defendant claims that, under Mainland law, the original publisher would not be liable for the damages
caused by third parties’ republications. This should be regarded as a matter of substance relating to a particular
type of damages that can be claimed by a claimant and not about quantum.
[656] Both experts agree that, under Mainland law, there is no specific legal provision concerning the liability of the
original publisher for damages caused as a result of republication. Nor is there any specific legal provision to show
that an original publisher may be liable for a republication if it is the natural and probable consequence or
reasonably foreseesable that it will be republished. Both experts therefore try to answer the question posed by the
court by analysing other relevant legal provisions and the judicial practice as demonstrated by the various cases
decided by the courts in the Mainland.
[657] Mr Gao is of the view that Mainland law is very similar to the common law concept concerning the original
publisher being responsible for the foreseeable loss arising out of the publication.
[658] Under Mainland law, there are 4 conditions under the general tort law to establish the claimant’s entitlement
to sue in defamation ("the 4 Conditions")283 : (i) illegal act, i.e. an act of infringement to the legal person’s right to
reputation; (ii) subjective fault on the part of the wrongdoer, i.e. the act is conducted intentionally or out of
negligence; (iii) damage to the reputation of the legal person; and (iv) causation between the illegal act and the
damage suffered by the legal person. The court needs to consider the question of "subjective fault" in assessing
both the issues of liability and quantum. In addressing this question, the court has to determine whether the act is
conducted intentionally or out of negligence, both contain the notion of foreseeability. If the tortfeasor does the
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infringing act intentionally, he clearly foresees the consequences of his intentional act. As for doing an act
negligently, it means that the tortfeasor foresees the consequences of his act but because he is over-confident, he
fails to avoid such foreseeable consequences.
[659] According to Mr Gao, his opinion is supported by: (i) Article 150 of the Opinions of the Supreme People’s
Court Concerning the Implementation of the General Principles of the Civil Law issued on 26 January 1988 and
revised on 18 December 2008284 ; and (ii) Answers of the Supreme People’s Court on Certain Issues Concerning
the Trial of Cases Involving the Rights to Reputation ("the Answers"). The courts in the Mainland will therefore
consider the concept of foreseeability in determining both the issues of liability and quantum. In the context of
republication, in assessing the "subjective fault" of the tortfeasor, the Mainland courts would assess whether it is
foreseeable that the defamatory statements would be republished, and if so, whether the defendant intended such
foreseeable republication or was negligent in failing to avoid such foreseeable republication. The courts will also
take that into account in assessing the compensation to be awarded to the claimant. In other words, the liability of
the original publisher for republication shall be analysed according to the 4 Conditions. Once the 4 Conditions for
deciding liability for infringement of the right to reputation have been established, the defendant is liable even for the
republications, and the claimant does not need to consider whether anyone else is also liable unless and until the
republishers are joined in the proceedings and are found to be liable for infringing the claimant’s right to reputation
through their republications.
[660] On the other hand, Mr Xu is of the opinion that, under Mainland law, the concept of forseeability is only
relevant to the question of fault which is one of the 4 Conditions in determining the liability for defamation. There is
no reference in either the Tort Liability Law or the Explanation of Article 6 of the Tort Liability Law to foreseeability in
respect of causation of a tortfeasor or the amount of damages. According to the said Article 6, the question of
causation is just whether "the conduct and the result links naturally without being broken by the external events".
There is therefore no concept of foreseeability in the sense of remoteness of damage in Mainland law. Insofar as Mr
Gao is relying on said Article 150 and the Answers, Mr Xu is of the opinion that they actually deal with the question
of the extent of liability of an original publisher focusing on the fault of the party being sued and not with the issue of
damages.
[661] According to Mr Xu, Article 13 of the Mainland Contract Law does refer to the concept of foreseeability in the
context of determining the amount of compensation to be awarded. Hence, the fact that foreseeability is not referred
to in respect of compensation in the Tort Liability Law means that there is no such concept in assessing damages in
tort cases. Being a civil law system with codified laws, the difference in the two statutes is significant and the courts
cannot go beyond the provisions in the statutes.
[662] In the opinion of Mr Xu, the republications by persons or parties other than the original publisher constitute
separate and independent causes of action for which the republishers are legally liable to the claimant. If the
republishers do not fulfil their duty to examine and verify the truthfulness of the news report when extracting or
republishing an article, they are liable for defamation if such untrue report aggravates the damage to the reputation
of another person by their republication which enlarges the dissemination range of the untrue report. Such damages
arising from the republications are separate from and different to any damages arising from the first publication of
the libel by the original publisher.
[663] Further, even if the original publication of the defamatory material and the republications by the republishers
together cause the same damage, the original publisher is neither jointly, nor jointly and severally, liable with the
republishers to the claimant in respect of the republications. The original publisher and the republishers shall bear
proportional share liability under Article 12 of the Tort Liability Law.285 This is because the acts of the original
publisher and the republishers respectively are insufficient to cause the entire damage: there would be no
republication without first publication, but if there had only been the original publication then there would not have
been losses resulting from the republication.
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[664] In determining whether the original publisher would be liable for the damages caused by the republications,
Mr Xu says that the applicable test, as supported by the various authorities in the Mainland, is whether the original
publisher has control over the republications. If he has no such control, he would not be liable.
[665] In reply to Mr Xu’s opinion, Mr Gao takes the view that once the 4 Conditions for deciding liability for
infringement of the right to reputation have been established, the original publisher is liable even for the
republications, and the claimant does not need to consider whether anyone else is also liable unless and until the
republishers are joined in the proceedings and are found to be liable for infringing the claimant’s right to reputation
through their republications. Mr. Gao considers that as the test for liability lies with the 4 Conditions for deciding
liability for infringement of the right to reputation, Articles 8, 11 and 12 of the Tort Liability Law286 are irrelevant.
However, if the court joins the republishers and finds them liable, then Article 11 of the Tort Liability Law shall apply,
i.e. that the original publisher’s act is sufficient to cause the entire damage.
[666] As Mainland law is based on the civil law system, I doubt whether we can use the same common law
approach in analysing the statutes and the relevant legal documents in the Mainland. Both counsel have spent a lot
of time in analysing the 4 Conditions, whether the concept of foreseesability exists in assessing damages in libel
cases and the applicability of various provisions in the Tort Liability Law and the other various legal documents. In
determining which opinion reflects the law in the Mainland, I am of the view that the best starting point is to look at
the cases decided by the Mainland courts. Although the legal system in the Mainland is based on the civil law
system with no concept of case law, I am of the view that the cases would show how the Mainland judges
understood and applied the law, and this provide the best guidance in understanding the law in the Mainland.
[667] In this regard, I agree with Mr Yu that the decided cases in the Mainland tend to support the opinion of Mr Xu
that an original publisher should not be held liable for damage arising from the republication. In the Mainland, the
law places a very heavy duty of examination on the part of the republisher to verify the truth of the contents of the
republication.287 It is not disputed that a republisher may in principle have his own legal liability for defamation
resulting from republication.288 In order to ensure that the republisher does fulfil such duty, the cases show that the
republisher would have to be held responsible for loss flowing from the republication and the original publisher
would not be liable for such loss unless he is in a position to control the republication or he makes the republication
himself. To hold the contrary may dilute the heavy duty imposed on the republisher in verifying the truth of the
contents of the republication.
[668] In Wang Hai v Blue Moon289 , the libel appeared in the defendant’s micro-blog, and the claimant claimed for
RMB¥ 3 million on the basis that the impact of the libel was increased substantially as a result of republications.
However, both at first instance and on appeal, the court only awarded RMB¥100,000. The reasoning of the first
instance court was that the defendant was only responsible for the libel in the micro-blog which had limited number
of followers.
[669] In Beijing Shusheng Electronic Technology Co., Ltd. v Shanghai Shanda Network Development Co Ltd290
,the claimant tried to ask the original publisher to apologise for its actions not only on its own website, but also on all
the republication media. However, the court held that as the republishers’ actions were beyond the control of the
original publisher, the original publisher need only to apologise on its own website. This case demonstrates that the
original publisher should be responsible only for his own action, and not for any adverse impact caused by
republications by others.
[670] The case of Sun Mou v. 21 Well-known Newspapers and Websites291 illustrates that there is a distinction
between liability for the original publication and liability arising as a result of republication. Although the claimant
asked the court to find that the original publisher should be held responsible for the republications, the court stated
that republishers were taking their own actions (各自進行), which constituted a tort and which the original publisher
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had no control over. As the original publisher and republishers were not carrying out a joint act, they did not have
joint liability and were not liable as joint tortfeasors (連代責任).
[671] In Wenzhou Tietong Electrical Alloy Industry Co., Ltd. v. Guangdong 21st Century Global Economy
Newspaper House and Others292 , the 1st defendant was the original publisher whilst the other defendants were
republishers, and the liability of the respective defendants was held to be several liability and not joint liability. The
orders made against the 1st defendant, namely the original publisher, and the various other republishers, were
different.
[672] In Jiaxing Phillips Automobiles Company Limited v. Business Time & Ors293 , one of the republishers, Sina,
had fulfilled its duty of verification, and was therefore not liable, but another defendant, Luyuan Diandongche
Gongsi, who had republished the offending article on its own website, was held liable for failing to take care of the
truthfulness of what it republished. More importantly, the court held that the original publisher, Caijing Shi Bao, and
Luyuan should each bear responsibility, in other words there should be share proportional liability instead of joint
liability.
[673] Even Mr Gao accepts that in both Beijing Shusheng and Sun Mou, the respective claimants sought to
persuade the courts to impose a remedy on the original publisher that took into account the acts of republication.
Yet both attempts failed. In my judgment, these cases support Mr Xu’s view that the original publisher should not be
held liable for damages arising from the republications.
[674] On the other hand, Mr Gao relies on some judicial cases to support his opinion, but I do not accept that these
cases can take the Plaintiffs’ case any further.
[675] Jia Yinghua v. Wang Qingxiang294 seems to support that the original publisher was liable for the loss of the
republications, but the facts in that case show that the republications, though in the internet, were published in the
name of the original publisher. It was not the case that the republications were made in the name of a third party.
Further, the original libel was made in a book written by the defendant which had been widely published through the
whole country.
[676] Hu Nan Shun Tian Construction Group Co. Ltd. v. Gong Houqin295 is also not a case on the point. The
claimant only claimed RMB¥1 as economic loss and notarial fee expenses in the sum of RMB¥3,900, and so there
was no finding by the court that the original publisher was liable for compensation to the claimant for the economic
loss suffered as a result of the republication.
[677] Mr Gao also relies on Tian Shi Guo v Shandong Shang Bao296 , but this was another case in which both the
original publication and the so-called republications were published by the defendant itself. In fact, the libel in that
case was contained in the hard copy format of a newspaper and also the electronic form of the newspaper, both
published by the defendant and not by third parties. Naturally, the defendant would have to pay compensation
resulting from both publications.
[678] A careful analysis of the cases shows that the courts in the Mainland have used the concept of control to
explain the principle why an original publisher should not be responsible for the consequences of the
republications.297 As the original publisher has no control over the republications, he should not be liable for the
additional damages resulting from the republications in the absence of the concept of remoteness of damages.
Even Mr Gao has to accept that the courts in these cases used the notion of control to determine whether there was
causation.
[679] Further, the decided cases do not support Mr Gao’s opinion that foreseeability is the test for whether an
original publisher should be held liable for damages resulting from republication. Neither of the experts has been
able to find a single case in which a plaintiff sought to hold an original publisher liable for all the damage to his
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reputation on the basis of foreseeability, including damages resulting from republications. Mr Gao tries to cite a
number of cases to support his view298 , but it is clear from these cases that the concept of foreseeability was
mentioned in the context of determining whether fault existed (i.e. liability) and not about the quantum of damages.
If foreseesability is such an important concept in determining quantum, I would expect the Mainland judges to have
mentioned such concept in assessing damages and in deciding what remedy to be given. Yet no such reference
was made in the cases.
[680] Apart from the decided cases, the following provisions of the Tort Liability Law also support Mr Xu’s opinion
that the original publisher is not liable for the additional loss resulting from the republications:
" Art 8 Where two or more persons jointly commit a tortious act which causes damage to another person, they shall be
jointly and severally liable.
………
Art 11 Where two or more persons commit tortious acts respectively which cause the same damage, and each tortious act
is sufficient to cause the entire damage, the tortfeasors shall be jointly and severally liable.
Art 12 Where two or more persons commit tortious acts respectively which cause the same damage, and if the extent to
which each person is liable can be determined, the tortfeasors shall respectively bear their corresponding liabilities; or if it is
difficult to determine the extent to which each person is liable, the tortfeasors shall be liable for compensation in equal
shares."
[681] As explained by the Law Working Committee of the Standing Committee of the People’s Congress
(法治工作委員會) in the Explanation to Article 12 of the PRC Tort Liability Law, the difference between Articles 11
and 12 is that Article 11 requires that "each tortious act is sufficient to cause the entire damage", whereas Article 12
caters for the situation where each tortious act is not sufficient to cause the entire damage. This is also my
understanding by looking at the plain wordings of the provisions.
[682] In the present case, there is no suggestion that the Defendant and the republishers acted jointly and so
Article 8 does not apply. Further, the acts of the Defendant and the republishers respectively were insufficient to
cause the entire damage. It is the Plaintiffs’ case that the loss of sales and profits in the Mainland was caused
mainly by the Republications in the Mainland as the Magazine was not freely available or circulated in the Mainland.
In such case, it is clear that Article 12 of the Tort Liability Law applies and the Defendant and the republishers shall
bear proportional share liability respectively.
[683] For the above reasons, I find in favour of the Defendant on the Mainland law issue. If a magazine publishes a
defamatory statement and that statement is republished in the Mainland by other media, newspapers or internet
sites, and such republications cause additional loss and damage to the plaintiff in the Mainland, the original
publisher, as a matter of substantive law in the Mainland, would not be liable for any loss or damage caused by the
republications.
[684] By reason of the fact that the republications were separate torts committed in the Mainland, I accept that
Mainland law is the law with the most significant relationship with the occurrence and with the parties in relation to
the issue of damage allegedly sustained by the Plaintiffs in the Mainland. Further, any defence which is valid under
Mainland law being the lex loci deliciti, which is substantive in nature, is available to the Defendant. Hence, the
Plaintiffs are not entitled to claim for any additional damages against the Defendant resulting from the republications
in the Mainland.
[685] Based on the aforesaid analysis, it is not necessary for me to consider the second part of the question posed
by the court as to the extent to which the Defendant, being the original publisher, would be liable for such loss and
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damages.
(v) Right to claim for loss of the sales and profits in Hong Kong
[686] The issue of reflective loss is relatively a simple one. The Defendant argues that the non-Mainland loss of
profits was actually suffered by HK1 and HK2 which are the 100% Hong Kong subsidiaries indirectly held by the 1st
Plaintiff. By reason of the no-reflective-loss principle, the 1st Plaintiff (being the ultimate holding company) is not
entitled to sue for the loss of profits suffered by its subsidiaries, i.e. HK1 and HK2.
[687] The Court of Final Appeal in Waddington v Chan Chun Ho299 has confirmed the no-reflective-loss principle
which ensures that a defendant can only be sued once for the same loss and, in doing so, prioritizes the company’s
claim as a matter of principle. Thus, a shareholder cannot sue for the loss suffered by the company that he owns on
the ground that the shareholder suffers a loss in the value of the shareholding, as such loss is merely "reflective" of
the company’s loss. Instead, it should be the company who can sue for the loss. As Lord Millet NPJ said:300
"If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expenses of
the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders.
Neither course can be permitted. This is a matter of principle; there is no discretion involved."
[688] Nevertheless, Mr Pow argues that a prerequisite of the application of the no-reflective-loss principle is that
the company is able to sue for the loss. If the company is unable to do so, there will be no double recovery and the
shareholder’s claim will not be at the expense of the company. In George Fischer (Great Britain) v Multi
Construction Ltd301 , the parent company contracted with the defendant to install equipment at its subsidiary.
However, the equipment was defectively installed causing loss to the subsidiary. Since the contract was made by
the parent company, the subsidiary did not have a cause of action against the defendant for breach of contract. The
English Court of Appeal held that the parent company was entitled to sue for the loss suffered at the subsidiary
level.
[689] Mr Pow submits that HK1 and HK2 may not have a good claim against the Defendant because the loss
suffered was caused by the loss of reputation of the 1st or 2nd Plaintiff. As the companies (HK1 and HK2) actually
suffered the loss do not have a valid cause of action of libel or malicious falsehood against the Defendant, their
shareholder (i.e. the 1st Plaintiff) should be allowed to pursue the loss suffered by HK1 and HK2.
[690] But this argument runs contrary to the Plaintiffs’ own case. In justifying the inclusion of the 2nd Plaintiff as a
claimant, Mr Pow has argued earlier that, though the readers might not know the specific names of each subsidiary,
the Words actually referred to all the subsidiaries of the BaWang Group responsible for the manufacturing and
marketing of the BaWang Shampoo Products in Hong Kong.302 It is therefore the Plaintiffs’ own case that the
reputation of HK1 and HK2, being such companies, had also been defamed by the publication of the Article, and so
there is no reason why they cannot maintain a cause of action, if properly established, against the Defendant for
libel.
[691] Even stronger argument applies in the case of the claim for malicious falsehood. According to the Plaintiffs,
the Words had wrongly suggested that BaWang Shampoo Products were hazardous to human health. The nature
of the cause of action does not relate to the reputation of the 1st Plaintiff or the BaWang Group, and the loss of
sales in Hong Kong and other non-Mainland countries was actually suffered by HK1 and HK2. In such
circumstances, it is clear that HK1 and HK2 can maintain a cause of action, if properly established, against the
Defendant.
[692] It is difficult to understand why the Plaintiffs have not joined HK1 and HK2 as additional claimants. The
Defendant had raised the no-reflective-loss defence at the early stage of the proceedings. Apparently, the 2nd
Plaintiff was joined as an additional claimant after considering such defence, and yet the Plaintiffs have not joined
the other relevant subsidiaries as additional plaintiffs. As pointed out by Lord Millet in Waddington, the court has no
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discretion in such matter and the Plaintiffs cannot therefore claim for the loss of profits in respect of BaWang
Shampoo Products outside the Mainland including Hong Kong.
(vi) The effect of the said rulings on the assessment of damages
[693] By reason of the aforesaid rulings, the Plaintiffs would not be able to claim for any actual loss of profits
caused by the reduction in sales of BaWang Shampoo Products, whether in the Mainland or in Hong Kong.
[694] The Plaintiffs cannot claim for the loss of profits relating to the sales in the Mainland because:
(i) the Plaintiffs have failed to discharge the burden of proving that all the loss in sales in the Mainland was caused by the
replication of defamatory stings in the Republications;
(ii) the damages resulting from the Republications are too remote to be recovered by the Plaintiffs; and
(ii) more importantly, under Mainland law, the original publisher would not be liable for the additional damage caused by
republications by third parties of which he has no control, and so the Defendant is entitled to rely on such defence to defend
the Plaintiffs’ claim for the loss resulting from the Republications which were published in a foreign jurisdiction (i.e. the
Mainland).
[695] The Plaintiffs also cannot claim for the loss of profits relating to the sales in Hong Kong because such loss
was actually suffered by the two subsidiaries of the 1st Plaintiff, namely HK1 and HK2. As they have not been joined
as the claimants in these proceedings, the existing Plaintiffs are not able to claim the loss on their behalf or to sue
for the loss of the value of their shareholdings because of the no-reflective-loss principle.
[696] I also disallow the claim for all the special damages by the 2nd Plaintiff. The 2nd Plaintiff was the 1st Plaintiff’s
subsidiary responsible for conducting the sales of BaWang Shampoo Products in the Mainland. Hence, I have
reason to believe that all the special damages allegedly suffered by the 2nd Plaintiff relate to the additional damage
caused by the Republications in the Mainland. The expenses were incurred with a view to promote the image of the
BaWang Group in the Mainland. For the same conflict of law principle in disallowing the Plaintiffs to claim for the
loss of profits for the sales in the Mainland, the 2nd Plaintiff likewise cannot claim for such special damages.
[697] Further, the expenses for purchasing the television advertisement slots did not arise from the publication of
the Article. The television advertising contract was made before the publication of the Article, and what resulted
from the publication was that the 2nd Plaintiff decided to use the slots it had already purchased for other
advertisements. In other words, even without the publication, those expenses had to be incurred in any event.
[698] I allow the 1st Plaintiff’s claim in the sum of HK$4,652.50 relating to the cost of issuing the public
announcement. There was a sudden drop in the share price of the 1st Plaintiff after the publication of the Article,
and so the 1st Plaintiff had to issue an announcement as required by the listing rules in Hong Kong. Such loss was
directly related to and caused by the publication of the Article. Further, the 1st Plaintiff itself had been defamed and
so there is no room for the application of the no-reflective-loss principle as contended for by Mr Yu.
[699] Given that I disallow the Plaintiffs’ claim for loss of profits, it is quite unnecessary for me to address the other
arguments of the Defendant, such as whether the Plaintiffs should have mitigated the loss of profits by telling the
public that they would reformulate the shampoos by reducing or eliminating the amount of 1,4-dioxane rather than
simply repeating that their shampoos were safe, or that the quantum of the claim should be adjusted downwards to
take into account the tax liability of the Plaintiffs in respect of the potential profits made.
[700] That leaves only the claim for general damages and exemplary damages.
(vii) General damages

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[701] The Plaintiffs have all along focused their claim on the loss of profits, and so the parties have not devoted a
lot of time at the trial to deal with the question of general damages. Given my rulings above, the assessment of
general damages may now become more important, and so I have invited the parties to make further submissions
on this issue.
[702] It is established law that in an action for defamation, the claimant does not only recover pecuniary loss, but is
entitled to general damages for injury to his reputation and vindication of his reputation.303
[703] The purpose of general damages is to compensate the claimant for the effects of the defamatory
statement.304 General compensatory damages serve 3 functions:305
(i) to console the claimant for hurt and distress suffered;
(ii) to repair the harm that has been done to his reputation (including his business reputation); and
(iii) to vindicate his reputation.
[704] Since the Plaintiffs are companies, there will be no compensation for injury to feelings.
[705] The need for vindication is well explained by Lord Hailsham in Cassell & Co Ltd v Broome:306
"Not merely can [the claimant] recover the estimated sum of his past and future losses, but, in case the libel, driven
underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by [the court]
sufficient to convince of the baselessness of the charge."
[706] The effect of the libel can be long-lasting. In Hill v Church of Scientology, the Supreme Court of Canada
made the following observations:307
"a defamatory statement can seep into the crevasses of the subconscious and lurk there ever ready to spring forth its
cancerous evil. The unfortunate impression left by a libel may last a lifetime. Seldom does the defamed person have the
opportunity of replying and correct the record in a manner that will truly remedy the situation."
[707] It should be noted that "the court should be careful not to drive down damages in libel cases to a level which
publishers might with equanimity be tempted to risk having to pay".308
[708] In Gatley309 , the learned authors summarised the matters affecting the level of award: the conduct of the
claimant, his credibility, his position and standing, and the subjective impact that the libel has had on him, the
nature of the libel, its gravity and the mode and extent of its publication, the absence or refusal of any retraction or
apology, and the conduct of the defendant from the time when the libel was published down to the verdict.
[709] The court should also be guided by the overarching principle that the sum to be awarded must be
proportionate to the damage suffered and that it is reasonably required to compensate the claimant and re-establish
his reputation.310
[710] In assessing the amount of damages, the court will normally arrive at a "global figure", rather than seeking to
allocate a particular sum to each of the heads of damages.311
[711] By reason of the same conflict of law principle as mentioned above, the court, in assessing the general
damages, should not take into account the additional damage to the reputations of the Plaintiffs caused by the
Republications in the Mainland.
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[712] As I see it, the main issue here is whether the court should use the figure for the loss of profits in respect of
the sales in Hong Kong as a yardstick to assess the general damages.
[713] Mr Pow has referred me to the authorities such as Lewis v Daily Telegraph Ltd 312, Ratcliffe v Evans 313,
Cambridge v Makin314 , Metropolitan International Schools Ltd v Designtechnica Corporation315 and Chu Siu Kuk
Yuen v Apple Daily Ltd316 , and argues that the court should take into account the general loss of business in
making an award of general damages.
[714] However, the claimants in all these cases were the same persons or entities who suffered the general loss of
business. These claimants had difficulty in proving the actual loss or special damage caused by the libels, and so
the courts took into account the claimants’ general loss of business in assessing the quantum of general damages.
[715] The present case is different. It is not that the Plaintiffs are not able to prove the actual loss of business, but
that such loss in Hong Kong was actually suffered by some other parties, i.e. HK1 and HK2. In such circumstances,
I do not accept that the court should take into account the actual loss of business suffered by other parties in
assessing the general damages to the Plaintiffs. The approach by the court should therefore be, assuming that the
court is to allow HK1 and HK2 to claim for the actual loss of profits in Hong Kong for the Relevant Period, what is
the proper amount that should be awarded to the Plaintiffs separately as general damages for the harm caused to
their reputations.
[716] In assessing the quantum of general damages, the court should therefore focus on the damage caused to
the reputations of the Plaintiffs by the publication of the Article, and to vindicate the reputations of the Plaintiffs in
this regard. The Plaintiffs have been portrayed as irresponsible and evasive companies lacking commercial
morality. Knowing the danger of 1,4-dioxane to human health, they nevertheless proceeded to supply the BaWang
Shampoo Products to the public. Further, they used inferior raw materials to produce the Products with a mercenary
motive to save costs.
[717] At the time of the publication of the Article, the Plaintiffs could be regarded as successful companies. The
BaWang Shampoo Products, which were advertised as shampoos made with Chinese herbals, had been quite
successful in the market, though the growth rate had slowed down before the publication of the Article.
[718] Mr Yu submits that the court should not make any award on general damages because there is no evidence
before the court which shows loss to the Plaintiffs’ reputation. Further, the loss of goodwill to a company can only
be assessed with proper expert evidence from accountant because there is special accounting treatment for
valuation of goodwill.
[719] I do not accept that the court should be debarred from making any award on general damages because of
the lack of expert evidence on the valuation of goodwill of the Plaintiffs damaged by the publication of the Article.
After all, the Plaintiffs are only claiming for general damages with a view to repair the harm that has been done to
their reputation and to vindicate their reputation. In libel cases, damages are often "at large" in the sense that they
cannot be assessed by reference to any mechanical, arithmetical or objective formula and the court is entitled to
take account a wide range of matters in reaching an award for damages317 , including but not limited to the scale of
business operated by the Plaintiffs. Hence, the court has to try its best to arrive at a figure which would, hopefully,
serve the purpose of repairing the harm and vindicating the reputation of the Plaintiffs.
[720] I find that the Words in the Article had caused serious damage to the reputations of the Plaintiffs, making
them more difficult to market their existing products or to launch new products in the future. Such loss would go
beyond the Relevant Period, and it may emerge "from its lurking place at some future date". The award should
therefore not be too low, and it must be sufficient "to convince a bystander of the baselessness of the charge".
Although the court should not use the actual loss of profits as a yardstick to assess the quantum of general
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damages, the court can take into account the Plaintiffs’ scale of business in Hong Kong in the assessment exercise.
Further, it must not be at "a level which publishers might with equanimity be tempted to risk having to pay".
[721] On the other hand, the court has to ensure that the award would not be too high to the extent it would
constitute an impediment to freedom of expression. In Tolstoy v Miloslavsky v United Kingdom318 , the European
Court struck down an award of £1,500,000 as an infringement of Article 10 of the European Convention as the size
of the award was disproportionate and could not be justified as being "necessary in a democratic society". The
Hong Kong Court of Appeal applied Tolstoy and struck down the award in Cheung Ng Sheong Steven v Eastweek
Publisher Ltd 319 on the ground that if an excessive award is allowed to stand, there is a risk that it will constitute an
impediment to freedom of expression and of opinion laid down in Article 16 of HKBOR Ordinance and cannot be
regarded as necessary to protect the reputation of the plaintiff.
[722] Both parties cannot find any comparable cases on quantum of general damages with facts similar to those in
the present case. So far as I know, HK$3 million awarded as general damages in Chu Siu Kuk Yuen v Apple Daily
Ltd & Ors320 was one of the highest awards made in defamation cases. The facts of that case were quite different.
It involved a claimant who was a person and not a corporation. As a result of a defamatory article published in the
Defendant’s sister newspaper, the claimant, who was a solicitor, suffered depression which materially contributed to
her child being born almost 13 weeks premature and remained in a life-threatening condition for some time
thereafter. It is not surprising that such a high award was made in that particular case.
[723] Without the assistance of comparable cases, the court can only try its best to assess a figure taking into
account all the factors mentioned above. Obviously, the damages suffered by the 1st Plaintiff would be higher
because it would be regarded by the public as the ego of the whole BaWang Group. The 2nd Plaintiff was the actual
manufacturer of BaWang Shampoo Products in Hong Kong, and to me, the damages suffered by it should be less
than that of the 1st Plaintiff. Having carefully considered all the factors in the present case, I award the sums of
HK$2 million and HK$1 million as general damages to the 1st and 2nd Plaintiffs respectively.
(viii) Exemplary damages
[724] To make a defendant liable for exemplary damages, the claimant has to show that the defendant would have
had to know that or be reckless whether he was committing a tort, and have had decided to publish, because the
material advantages from publication outweighed the prospects of material loss.321 However, the fact that a
defendant is engaged in an activity aimed at profit, for example publishing a magazine, does not of itself justify an
award of exemplary damages. There must be something more specific than that.322
[725] Further, for there to be exemplary damages, the court must be satisfied that the defendant had no genuine
belief in the truth of what he published. The defendant must have suspected that the words were untrue and have
deliberately refrained from taking obvious steps which, if taken, would have turned suspicion into certainty.323
[726] Mr Pow complains that the Defendant had deliberately published the Article in a sensational manner. The
Defendant did not seek further clarification about the NICNAS standard from the two experts and ignored any
materials in support of the Plaintiffs’ side of the story, and the only reasonable explanation was that the Defendant
wanted to avoid the issue. The presentation of the contrary view would lessen the impact of the Article targeting the
Plaintiffs, with the result it would reduce the attraction of the Article to the readers. Hence, Mr Pow says that the
Defendant was reckless as to the truth of the contents in the report.
[727] I have already dealt with this argument in the earlier part of this Judgment on responsible journalism324 . In
short, the Defendant had adopted a naïve and unprofessional approach in reporting the story. The Defendant might
have been grossly negligent, but I do not find any sinister motive behind the making of the report. The mere fact
that the Magazine was published for profit is not by itself enough to justify exemplary damages.
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[728] Neither would I attach a lot of weight to the fact that the Defendant refused to retract the statements in the
Article as demanded by the Plaintiffs. After all, this case involves matters of some importance and scientific
materials of some controversy, and so the court should not hold against the Defendant for adopting such stance.
Hence, I disallow the claim for exemplary damages.
[729] As the Article was a one-off publication, I do not see any necessity of granting injunctive relief in the present
case.
[730] For the above reasons, I grant judgment in favour of the 1st Plaintiff in sum of HK$2,004,652.5 and 2nd
Plaintiff in the sum of HK$1,000,000. Since the Plaintiffs do not succeed in a number of issues, in particular those
relating to quantum, I make a costs order nisi that the Defendant do pay to the Plaintiffs 80% of the costs of this
action with certificate for 2 counsel, which shall be made absolute 21 days after the date of the handing down of this
Judgment.
[731] I have not dealt with the question of interest. If the Plaintiffs seek to make any claim for interest, such claim
has to be made within 21 days from the date of the handing down of this Judgment.
[732] That concludes one of the most difficult cases that I have dealt with in my judicial career. With the diligence
of counsel, I think that they have covered every possible argument in favour of their clients. Although it makes my
work more difficult, I must express my gratitude to them for all the assistance they have provided to me, without
which I do not think I could navigate through the massive evidence presented to the court.
1 There is no agreed translation for the Article, and the English translation in the Judgment is the version pleaded by the
Plaintiffs in the Re-Re-Amended Statement of Claim. The translation is for reference only and the meaning of the Article
should be ascertained according to the original Chinese text.
2 see: footnote 1
3 see: footnote 1
4 Gatley on Libel and Slander, 12 ed, at §1.7

5 see: Gatley, supra, §3.17; Next Magazine Publishing Ltd. & Others v Oriental Daily Publisher Ltd (2000) 3 HKCFAR
160, 166.
6 see: Gatley, supra, §3.31, Duncan and Neill on Defamation, 4th ed., §5.25; see also Charleston v News Group
Newspapers Ltd. [1995] 2 AC 65 and Wong Wai Kay v Hong Kong Economic Journal Co. Ltd. [2013] 3 HKLRD 27
7 Lewis v Daily Telegraph [1964] AC 234 at 271 per Lord Hodson
8 [2008] EWCA Civ 130, at §14
9 Gatley, supra, at §3.17
10 Carter-Ruck on Libel and Privacy, 6 ed., at §4.36-4.37
11 Berezovsky v Forbes Inc [2001] EWCA Civ 1251 at §16
12 [2013] 3 HKC 457
13 at §§ 139 & 140
14 at §8
16 see: Gatley, supra, at §§2.47 & 21.18

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17 [1894] 1 QB 133 at 139, also quoted in Gatley supra, at §2.47
18 at §2.47
19 at §2.47
20 [1992] 2 HKLR 357
22 Gatley, supra, at §7.2 quoting from David Syme v. Canavan (1918) 25 CLR 234 at 238
23 Channel Seven Sydney Pty Ltd. v. Parras [2002] NSWCA 202 at §52-54
24 Channel Seven Sydney Pty Ltd. v. Parras, supra, at §46
25 Knupffer v. London Express Newspaper Ltd. [1944] AC 116, at 118 to 119
26 Elite Model Management Corp. & oths. v. British Broadcasting Corp , unreported (25 May 2001) QBD, Eady J. at §9
27 see: for example, Elite Elite Model Management Corp. & oths. v British Broadcasting Corp, supra, in which Eady J
allowed 3 companies forming part of the Elite Models Group to proceed to trial as a result of a documentary purporting
to show that that models under their care were sexually exploited.
28 [2012] NSWSC 1136, at §§16, 20-21
29 supra, see footnote 23
30 Palace Films Pty Ltd v Fairfax Media Publications Pty Ltd, supra, at §18
31 see: Lucas-Box v News Group Newspapers [1986] 1 WLR 147
32 §10 of the Re-Re-Re-Re-Re-Re-Amended Defence (“the Defence”)
33 subject to s 26 of the Defamation Ordinance (Cap 21) the effect of which would be discussed in §§ 327-329 below
34 the new §10(10E) of the Defence
35 the new §10(10E) of the Defence
36 it is actually the Re-Re-Re-Re-Re-Re-Amended Defence; see footnote 32 above
37 one should also note that according to some of the research materials obtained by Madam Lam, certain big
manufacturers of shampoo, upon the pressure from some campaign groups, were only making a promise to reduce the
level of 1,4-dioxane to a level below 10 ppm but not lower
38 see §§574 & 577 below
39 see §152 below
40 These words are copied from §3.0 of Mr. Jones’ Second Supplementary Report and further elaborated in his Third
Supplementary Report.
41 Further, Dr. Parent is of the view that the ingredient ethylene glycol distearate would not contribute to any 1,4-dioxane
in the shampoo, as it has a high boiling point and any traces of 1,4-dioxane can be boiled off. Mr. Jones agrees that the
presence of ethylene glycol distearate would not materially affect the level of 1,4-dioxane in the shampoo.
42 §10(15A) (e) of the Defence
43 see §9 of the Affirmation of Madam Jiang
44 see also §§485-487 below
45 see §152 below
46 see §153 & 154 below
47 this is relevant as to whether there can be any “threshold level” of intake by human beings which can be considered
safe; see §§209 & 212 below
48 see also p 2 of Dr Parent’s Report

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49 see: a document entitled “1,4-dioxane in Shampoo & Personal Care Products FAQ” printed out by Madam Lam in the
course of her research
50 Toxicology Joint Expert Report at §§2.1, 3.1.1-3.1.2, Dr Sawyer’s Report at p 5 and Parent/Flaks Joint Expert Report at
§§2.1-2.2
51 Toxicology Joint Expert Report at §5.1.1
52 Parent/Flaks Joint Expert Report at §3.2.2
53 at §3.2.2
54 The title of the study is “The industrial use of selected chemicals and risk of cancer 1970-1984”. The full text of the
Hansen’ s Study is in Danish, but there is a summary of the Hansen study in the NICNAS report (1998)
55 see: Parent’s Supplemental Report at p 6
56 the full title is: “Mortality follow-up of workers exposed to 1,4-dioxane” by Buffler and others
57 the English full title is “Industrial-medical investigation results in the case of workers exposed to 1,4-dioxane” by Thiess
& others
58 Toxicology Joint Expert Report §5.2.2
59 Parent’s Supplemental Report at p 6
60 see:§152 below
61 NICNAS Report at §9.5.3
62 at §4.7.1 under “Summary of Overall Weight of Evidence” under “Evaluation of Carcinogenicity”
68 Toxicology Joint Expert Report at §9.3.1.5
69 at § 12.2
70 at § 13.5
71 at the “Overview” section
72 at p 25 of the report
73 issued after the publication of the Article
74 see §§303-319 below
75 The 10-ppm limit is mentioned in respect of the control of 1,4-dioxane in food addictives (see above), but there is a
great difference between absorption by humans from direct ingestion (in the case of taking the food addictives) and
through inhalation and dermal contact (in the case of using shampoo)
76 for the meaning of “genotoxic”, see §211 below
77 for the meaning of “genotoxic”, see §211 below
78 NICNAS Report, at §12.1.1
79 NICNAS Report, at §12.2
80 the full name of the report is “Two-year toxicological and carcinogenesis studies of 1,4-dioxaxe in F344 rats and BDFI
mice – drinking studies” by Yamazaki and others
81 NICNAS Report, at §§9.2.5 & 12.2

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83 the full name of the report is “Carcinogenicity studies of 1,4-dioxane administered in drinking water to rats and mice for
2 years” by Hirokazu Kano and others
84 rounded up from 30,556, see Dr. Parent’s calculation in Exhibit P-1
86 NICNAS Report, at the “Overview” section
87 EU Report, at §§4.1.2.8.3 & 4.1.3.3
88 EU Report, at p 76EU Report, at p 76
89 EU Report, at p 81
90 scenario I is consumer exposure from using shampoos containing 50 mg/kg, i.e. 50 ppm 1,4-dioxane; see §4.1.1.3.3 of
EU Report
91 EU Report, at §4.1.3.3
92 EU Report, at §4.1.3.3EU Report, at §4.1.3.3
93 Health Canada Report, at pp 22 & 23
94 Health Canada Report, at p 15
98 Health Canada Report, at the “Synopsis” section
99 Dr Sawyer’s Report, at p 22
100 USEPA, 2013 “Regional Screening Levels for Chemical Contaminants at Superfund Sites” at p 5, USEPA Integrated
Risk Information System, “1, 4-Dioxane (CASRN 123-91-1”, Section II.B.1
101 There is no serious dispute between the parties to use internal dosage levels adopted in the EU Report, as EU Bureau
recognized the enhanced absorption of 1,4-dioxane through the scalp, whereas NICNAS relied on absorption based on
forearm studies which might result in less absorption than the scalp.
102 see §146 above
103 see §150 above; however it is not clear whether it prohibits the use of 1,4-dioxane as a raw material or the presence of
1,4-dioxane as a by-product in the manufacturing process
104 Toxicology Joint Expert Report, at §§4.1.3 & 4.1.4
105 see the preceding paragraph
106 Toxicology Joint Expert Report, at §4.1.1
109 Toxicology Joint Expert Report, at §4.1.5Toxicology Joint Expert Report, at §4.1.5
110 the full title of the study is “Is 1,4-dioxane a genotoxic carcinogen?”
111 the full title of the study is “Chromosome breakage is primarily responsible for the micronuclei induced by 1,4-dioxane in
the bone marrow and lover of young CD-1 mice”
112 Health Canada Report, at pp 19-20
113 Health Canada Report, at pp 22-23
114 see: §214 above

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115 the full title of the study is “Two-year inhalation study of carcinogenicity and chronic toxicity of 1,4-dioxane in male rats”
by T Kansai and others
116 see: USEPA’s Toxicology Review (Aug 2010) at §§4.2.1.2.6 & 4.5.1; see also: USEPA IRIS 8/11/2010 where it said
that: “As a result of the recent publication of Kano (2009), the Toxicological Review of 1,4-dioxane (US EPA 2010) was
updated and the data in the new publication was considered.”
117 see: USEPA’s Toxicology Review (Aug 2010) at §4.5.1
118 USEPA’s Toxicology Review (2013) at §4.5.1; most updated in term of the evidence before the court
119 studies in which the effects of various biological entities are tested on whole, living organisms usually animals including
human and plants
120 studies performed with cells or biological molecules studies outside their normal biological context, usually done in test-
tubes
121 see: USEPA’s Toxicology Review (2013), at §4.5.1 and Table 4-23 (in vitro studies) and Table 4-24 (in vivo studies)
122 at §§4.15 & 4.16
123 Toxicology Joint Expert Report at §4.13
124 the full title of the study is “Mode of action analysis for liver tumors from oral 1,4-dioxane exposures and evidence-
based dose response assessment”
125 as summarized in Dr. Parent’s Supplemental Report at p 5
126 USEPA’s Toxicological Review (2013) at §§4.5.2.3, 4.77.1, 4.7.3.1.1 4.7.3.2.1, 4.7.3.3.1 & 6.1
127 at p 61
128 at p 81
129 at pp 22-23
130 At the trial, Dr Parent has made a suggestion that because 1,4-dioxane is soluble, it would have been relatively easy for
the dioxane to penetrate the cell membrane and reach the DNA without causing any cytotoxicity. However, it remains
an untested suggestion. It does not alter the fact that the MOA is still unknown at this stage.
131 at § 1.2.2at § 1.2.2
132 also at §1.2.2
133 at §1.3.1
134 at §1.3.1
135 at §1.3.2 at §1.3.2
136 see:Appendix A for the major default options and similar discussions stated therein
137 at §5.4.3.1
138 USEPA’s Guidelines, at §1.3.1
139 USEPA’s Guidelines, at §1.3.1
140 Appendix A to USEPA’s Toxicological Review (2013) “Summary of External Peer Review and Public Comments and
Disposition”
141 USEPA’s Toxicological Review (2013), Appendix A at pp A-12 to A-13
142 USEPA’s Toxicological Review (2013), at §5.4.3.1
143 891 F. Supp. 12 (D.Mass. 1995)
144 at §4.5.2.3
145 at § 4.7.1 under “Summary of Overall Weight of Evidence” under “Evaluation of Carcinogenicity”
146 at §4.7.3.7 under “Conclusions About the Hypothesized Mode of Action”

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147 at §4.7.3.8
148 USEPA’s Toxicology Review (2013) at §5.4.3.1
149 see: Table 5 of the Kano’s Study
150 the calculation is shown in Exhibit P-1: NICNAS systemic dose (dermal + airborne) = 0.018µg/kg/day + 0.34µg/kg/day =
0.358µg/kg/day = 0.36µg/kg/day = 0.00036mg/kg/day; Then, 66mg/kg/day (500ppm dose for female mice) /
0.00036mg/kg/day = 183,333 (figure may be a bit different based on how many significant figures are used)
151 The calculation is shown in Exhibit P-1: 66mg/kg/day / 0.007mg/kg/day = 9,428.57 (figure may be a bit different based
on how many significant figures are used)
152 see: Table 5-9 of USEPA’s Toxicological Review (2013)
153 10mg/kg/day / 0.00036mg/kg/day = 27,778 (figure may be a bit different based on how many significant figures are
used)
154 10mg/kg/day / 0.007mg/kg/day = 1,429 (figure may be a bit different based on how many significant figures are used)
155 a statistical test used in carcinogenicity study
156 see Table 3 of the Kano’s Study
157 Kano’s Study at p 2783
158 NICNAS Report at §§9.2.5 & 12.2
159 3.1mg/kg/day / 0.00036mg/kg/day = 8,611
160 3.1mg/kg/day / 0.00036mg/kg/day = 8,611
161 3.1mg/kg/day / 0.007mg/kg/day = 443
162 see: internet printout entitled “Drinking Water Quality for the period of October 2013 – September 2014” from HKWSD
163 the calculation is agreed by Dr. Sawyer
164 see the document referred to in the preceding footnote
165 see §203
166 see the document referred to in the preceding footnote and the printout from the current WHO website
167 Toxicology Joint Expert Report ,at §5.2.2
168 USEPA’s IRIS paper on 1,4-dioxane (CASRN 123-91-1) at §II.B.1.2

169 at p 2783: “The safe drinking-water concentrations of 1,4-dioxane derived from both the non-threshold and threshold
approach in the present studies were found to be approximately equal to the US EPA’s value (US EPA, 2008) and
WHO’s guideline value (WHO, 2008), except for our value from the nasal tumor data.”
170 calculation accepted by Dr Sawyer at the trial
171 see also: Technical Fact Sheet – 1,4-dioxane (January 2014) by USEPA at p 3
172 [1973] 1 WLR 1
173 [1991] 2 HKLR 232
174 (1986) 8 EHRR 407
175 (1992) 14 EHRR 843
176 (2003) 3 HKCFAR 339
177 [2011] 1 AC 852
178 supra, at §12.8
179 see §§10(3) to (5) of the Defence
180 see §499 below

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181 Roberts v Gable [2008] QB 502 at §32 per Ward LJ
182 see: Gatley, supra, footnote 8 at p 635
183 unreported, HCA 1693/ 2011 (decision of DHCJ Lok, as he then was, on 13 January 2015)
184 [2001] 2 AC 127
185 Gatley, supra, at p 634
186 see also: Roberts v Gable, supra, at §32(5) per Ward LJ
187 see also: Roberts v Gable, supra, at §32(6) per Ward LJ
188 Reynolds v Times Newspaper Ltd, supra, at p. 205
189 [2007] 1 AC 359 at §53
190 at §146
191 supra, at §§48-52
192 supra, at §15.3
193 supra
194 (1979) 2 EHRR 245
195 at 281; see also: The Observer and the Guardian v United Kingdom (1991) 14 EHRR 153, at191, per Hoffmann LJ in R
v Central Television plc [1994] Fam 192, 202F-203B and Lester and Pannick, Human Rights Law and Practice, 3rd ed
§4.10.2)
196 at p. 281; see also Lingens v Austria (1986) 8 EHRR 407 at §§37, 41, 46, Thorgeir Thorgeirson v Iceland (1992) 14
EHRR 843, 865; Bladet Tromsø and Stensaas v Norway (1999) 29 EHRR 125 at §59; Jersild v Denmark (1994) 19
EHRR 1 §31
197 see: Lester and Pannick at §4.10.6, Gatley on Libel and Slander at §22.16
198 (1991) 14 EHRR 153
199 at p 191
200 [2002] QB 783
201 [2001] 2 EMLR 215
202 Loutchansky v Times Newspapers Ltd. And others (No.4 and 5), supra, at §22 and pp 802-803
203 see also: Mardas v New York Times [2008] EWHC 3135 at §3135 (decision of the European Court on Human Rights)
204 (2000) 3 HKCFAR 339 at 345D
205 supra, at §73
206 Ming Pao Newspapers Ltd v AG of Hong Kong [1996] AC 907 at 917D-E; HKSAR v Ng Kung Siu (1999) 2 HKCFAR
442, 461, Leung Kwok Hung v HKSAR (2005) 8 HKCFAR 229, 252C-254F
207 supra, at §51
208 supra, at §15.7
209 [2004] E.M.L.R. 33,at §33
210 supra, at §51
211 supra
212 at §41
213 supra, at p 238
214 supra, at §32

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215 [2005] EWHC 799 QBD
216 at §104
217 (1999) 29 EHRR 125, at 167
218 the Working Draft referred to the result of the independent testing of BaWang Shampoo Products conducted by SGS
and the test reports were only supplied to the Defendant on 12 July 2010
219 one of the sub-titles of the Article was also changed from “二噁烷可致癌” (1,4-dioxane may possibly cause cancer) in
the Working Draft to “二噁烷致癌” (1,4-dioxane causes cancer) in the second draft, though this sub-title was further
revised in the final draft of the Article
220 the email enclosing the report was actually sent by a person called Daphne Chan on behalf of “Mr Chan”, and Daphne
Chan was also a director and shareholder of Sun Lok Wah
221 If USEPA’s linear extrapolation approach is to be adopted, a minute quantity of 1,4-dioxane (less than 1 ppm) would be
harmful, and yet the United States’ regulatory authority does not propose statutory control in this regard.
222 the toxicology experts agree that intake through dermal contract and inhalation would only be 3.4% of the total dose
(see: Toxicology Joint Expert Report at §6.1.2)
223 see the preceding footnote
224 see §153 above
225 supra, at §15.11
226 GKR Karate (UK) Ltd v Yorkshire Post Newspapers Ltd (No. 1) [2000] 1 WLR 2571
227 [2013] 1 LRC 71 at 78
228 supra, at pp 213-214; see also Gatley, supra, at §15.16
229 supra, at p 206
230 see §86 above
231 Hong Kong Wing On Travel Service Ltd v Hung Thai Citizens Travel Services Ltd [2001] 2 HKLRD 481 at 491
232 [2010] EWHC 696, at §52
233 the accounting joint expert report dated 8 November 2013 (“the Accounting Joint Expert Report”), at p. 13
234 Mr Dick’s 1st report dated 8 May 2013 (“Mr Dick’s 1st Report”), at §3.15
235 the Accounting Joint Expert Report, at §3.11

236 Mr Dick’s 1st Report at §2.15
237 Mr Dick’s 1st Report, at §3.16
238 which is supported by the Morgan Stanley research report dated 11 February 2010 and Euromonitor’s 2010 report,
Samsung Securities research report dated 3 December 2010 and comments from other equity research analysts at Mr
Dick’s 1st Report at §§2.23-2.24
239 in marketing strategy, cannibalization refers to a reduction in sales volume, sales revenue, or market share of one
product as a result of the introduction of a new product by the same producer
242 see: Appendix 2.2 to Mr Dick’s 1st Report and the oral testimony of Mr Dick
244 Mr Dick has reduced his illustration of Scenario B into exhibit D9
245 the Plaintiffs are relying on a 3-years’ agreement from 1 January 2009 in respect of the supply of packaging materials
referred to in BaWang’s annual report in 2010
Page 117 of 119
[2016] HKCU 1213
248 Accounting Joint Expert Report, p 24 at §4.2
252 the percentages are calculated by dividing the forecast variable cost of sales with the forecast revenue in the parties’
respective calculations as shown in the table in p 27 at §5.2 of the Accounting Joint Expert Report
256 at §6.52, see also: Carter-Ruck on Libel and Privacy (6 ed), at §5.27 and Jonathan Lu v Paul Chan Mo-po, unrep, HCA
370/2012,(decision of To J on 13 February 2014) at §§19-20
257 [1991] 1 QB 283
258 [2002] 1 WLR 2982
259 [2000] 2HKLRD 56, at p 58H-59I, 61H
260 [2010] EWHC 696
261 at §6.52
262 supra
263 supra, at §6.52 (p 256)
264 items 167, 168, 170b, 170d, 179, 180, 181, 183, 185, 187, 191, 196, 199, 203, 208, 251, 253 of Trial Bundle C
265 items 181, 182, 199, 208, 259, 274, 282, 284, 294, 319, 368, 389, 390 of Trial Bundle C
266 Items 208, 260, 274, 294, 324, 325, 362, 395 of Trial Bundle C
267 items 186, 248, 281, 282, 293, 319, 390, 395 of Trial Bundle C
268 item 368 of Trial Bundle C
269 supra, at §50
270 at §6.52
271 Euromonitors Reports from 2006 to 2011
272 supra, at §38
273 see §582 above
274 [1971] AC 356, per Lord Hodson at 377, 378, and 380 and per Lord Wilberforce at 391-392,
275 [1995] 1 AC 190, 206
276 see §605 above
277 (8 ed), at §20.5
278 (1993) 115 ALR 247, at 258
279 at §5.086
280 vol 2, at §35-118
281 supra, at §50
282 see §§607-608 above
283 Article 7 of the Answers of the Supreme People’s Court on Certain Issues Concerning the Trial of Cases Involving
Rights to Reputations
284 the article reads as follows: “When a citizen’s right to his/her name, image, reputation or honor or a legal person’s right
to his/her name, reputation or honor is infringed, and the citizen or the legal person claims compensation for the losses,
the relevant people’s court may determine the infringer’s compensation liability according to the degree of the infringer’s
faults as well as the facts, consequence and effect of the act of infringement.”
285 see §680 below
Page 118 of 119
[2016] HKCU 1213
286 see §680 below
287 see: Notice of General Administration of Press and Publication on Taking Effective Measures to Avoid Untruthful
Reporting and the Notice of the General Office of the General Administration of Press and Publication on Issuing
“Several Provision on Taking Strict Precautions against False New Report which are administrative regulations and
rules relied on by administration departments; see also Notice of the General Office of the General Administration of
Press and Publication on Issuing “Several Provision on Taking Strict Precautions against False New Report, though it
came into force on 14 October 2011 which was after the publication of the Article
288 see: Su Wan Bao v Jinan Yite Network Information Co Ltd (2010) Li Min Chu Zi No. 1375, Mao Huifang v Luo Xuepeng,
Henan Literature and Art Publishing Press and Others (2000) Hu Yi Zhong Min Chu Zi No. 301 and Mr Xu’s
supplemental report at §§13(6), 13(9) and 13(1) and the references therein to other Mainland cases
289 (2012) Sui Zhong Fa Min Yi Zhong Zi No. 1351
290 (2009) Hu Yi Zhong Min Er (Min) Zhong Zi No.3994
291 see: Mr Xu’s supplemental expert report dated 8 April 2014 (“Mr Xu’s Supplemental Report”) at p 21
292 see: Mr Xu’s Supplemental Report at p 23
293 see: bundle of cases annexed to Mr Xu’s Supplemental Report at p 88
294 (2007) Yi Zhong Min Zhong No. 4112
295 see: Mr Gao’s supplemental report dated 4 April 2014 at §4.7
296 see: bundle of cases annexed to Mr Xu’s Supplemental Report at p 70
297 see: Beijing Shusheng Electronic Technology Co., Ltd. v Shanghai Shanda Network Development Co Ltd, supra, and
Sun Mou v. 21 Well-known Newspapers and Websites, supra
298 Hu Qiusheng v Peng Bai, Gao Changlin v Henan Gao Su Gong Lu Fa Zhan Youxian Ze Ren Gongsi, Ge Yu Fei v Shen
Qiu Xian Qi Che Yun Shu You Xian Gongsi
299 (2008) 11 HKCFAR 370
300 at §82
301 [1995] 1 BCLC 260, which was approved and applied in Gerber Garment Technology Inc v Lectra Systems Ltd [1997]
RPC 443, at 456, 477 and 481
302 see §§66-74 above; in fact, both accounting experts have been asked to assess the loss specifically suffered by the
2nd Plaintiff
303 John v MGN Ltd [1997] QB 586 at 607
305 Chu Siu Kuk Yuen v Apply Daily Ltd & Ors [2002] 1 HKLRD 1, at §62
306 [1972] AC 1027 at 1071
307 [1995] 2 SCR 1130, quoted in Gatley, supra, at §9.4
308 Nail v News Group Newspaper Ltd [2005] 1 All ER 1040, at §39
309 supra, at §9.5; see also John v MGN Ltd, supra, at 607
310 Rantzen v Mirror Group Newspapers (1986) Ltd [1994] QB 670 at 696
311 Cairns v Modi [2012] EWCA Civ 1382 ; [2013] 1 WLR 1015 at §§37-38
312 [1963] 1 QB 340 at 376
313 [1892] 2 QB 524 at 533
314 [2011] EWHC 12
315 [2010] EWHC 2411 at §32

Page 119 of 119
[2016] HKCU 1213
316 supra
318 (1995) 20 EHRR 442, at §§49-51
319 [1995] 3 HKC 601, at 615A & 623C
320 supra
321 John v MGN Ltd, supra, at 616; see also: Chu Siu Kuk Yuen v Apple Daily Ltd & Ors, supra, at §126
322 John v MGN Ltd, supra, at 618-619 and Gatley, at §9.27
323 John v MGN Ltd, supra, at 618 and Gatley, at §9.26
324 see §§512-514 above
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Bawang International (Group) Holding LTD & Anor V Next

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Bawang International (Group) Holding LTD & Anor V Next

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Date and Time: Tuesday, 13 April, 2021 3:13:00 PM HKT

Job Number: 141273052

BAWANG INTERNATIONAL (GROUP) HOLDING LTD & ANOR v NEXT

COURT OF FIRST INSTANCE

Tort — Defamation — Libel — Meaning of alleged defamatory words — Disparaging of products of

II The defamatory meanings of the Article with reference to the Plaintiffs

III Defence of justification

IV Defence of honest comment

V Defence of publication in the public interest

(i) Falsity of the statement (ii) Malice in publishing the statement

The English translation reads:1

[15] The contents of the Article read as follows:

The English translation reads:2

1,4-dioxane can penetrate through the skin and be absorbed

Quality of raw materials affected the content

The English translation reads:3

(ii) The Plaintiffs’ pleaded meanings

(ii) this fact was known to the Plaintiffs; and

[48] In Gatley, the learned authors said the following:15

(iii) Words disparaging to products vis-à-vis the Plaintiffs

(iv) refusing to admit their wrong when confronted.

(iv) Reference to the Plaintiffs

(i) Lucas-Box meanings pleaded by the Defendant

(i) expert report of Dr Flaks dated 26 January 2012;

(a) Is 1,4-dioxane a probable carcinogen for human beings?

(b) Might 1,4-dioxane be genotoxic to human beings?47

(a) What is 1,4-dioxane?

[131] There is no dispute that 1,4-dioxane is found to be an animal carcinogen.50

(b) "Human studies" in respect of 1,4-dioxane

[183] Then, it went on and discussed the MOS:

[188] Health Canada thus concluded that:

(e) Is 1,4-dioxane genotoxic?

(i) whether the substance is genotoxic; and

(j) whether the MOA of the substance in causing cancer is known.

[210] I first deal with the issue as to whether 1,4-dioxane is genotoxic.

(i) Kitchin and Brown’s Study;

(ii) Kasai’s study (2009)("Kansai’s Study")115 ; and

=(f) MOA (Mode of action)

[259] The response of USEPA was as follows:141

(iii) Conclusion on toxicology evidence and the defence of justification

[330] For the above reasons, the defence of justification fails.

(i) Undisputed legal principles

(a) the comment must be on a matter of public interest;

(ii) The "three comments" are statements of fact

(iii) "Comments" not based on true facts

(v) Malice in publishing the "comments"

(i) The development of the principle of "responsible journalism"

[352] The 10 listed factors are:

(iv) The steps taken to verify the information.

(vi) The urgency of the matter. News is often a perishable commodity.

(x) The circumstances of the publication, including the timing.

(ii) Human rights jurisprudence

[357] The Court also pointed out that:

[361] Hong Kong has similar human rights legislations.

(iii) The standard of responsible journalism

[380] As Lord Hobhouse said in Reynolds:213

[381] Lord Bingham also noted in Jameel that:214

(iv) Events leading to the publication of the Article

[389] Did the Defendant meet the standard of responsible journalism?

(a) How did the investigation begin?

(b) How was the investigation conducted?

According to her notes, Dr Lau mentioned the following points:

(i) the presence of 3.5 ppm of 1,4-dioxane in shower lotion is acceptable;