HKCOLO.NET LTD v. HONG KONG TELECOMMUNICATIONS (HKT) LTD

HCA 1900/2021

[2023] HKCFI 138

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1900 OF 2021

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DECISION

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THE APPLICATIONS

1.  There are two summonses before this Court:

(1)  The summons filed by the defendant (“HKT”) on 1 March 2022 (“the March Summons”) for, inter alia, an urgent injunction to restrain the plaintiff (“HKCOLO”) from acting on its termination notice dated 21 February 2022;

(2)  HKT’s summons filed on 2 August 2022 (“the August Summons”) for an injunction to restrain HKCOLO from maintaining or implementing restrictions on access to HKCOLO’s Cloud Computing Complex in Tseung Kwan O (“the Colocation Centre”) and/or equipment removal therefrom that have been imposed by HKCOLO.[1]

BACKGROUND

2.  HKT is a telecommunications service provider in Hong Kong.

3.  HKCOLO is a co-location service provider, and owns the Colocation Centre.

4.  On 4 April 2019, HKCOLO and HKT signed a Memorandum of Understanding (“MOU”) for the provision of data centre services and facilities within the Colocation Centre.  Among other things, it was provided by the MOU that:

(1)  In consideration of the mutually stated non-binding intent of the parties set out therein, HKCOLO would provide managed colocation services to HKT at the Colocation Centre under the principal non-binding terms and conditions as provided in the MOU subject to the parties signing one or more definitive agreement(s);

(2)  The tentative service contract term was for a fixed term (non-breakable) of ten years, subject to the definitive agreement(s);

(3)  The terms and conditions outlined in the MOU were valid for 90 days;

(4)  The terms and conditions set out in the MOU only served as the principal terms under which HKCOLO offered managed colocation services to HKT and shall form the basis upon which further formal contractual terms would be mutually agreed and entered into by the parties;

(5)  Save and except for the confidentiality provision therein, the MOU including all appendices and schedules thereto did not create any legally binding obligations whatsoever on either party and represented solely an indication of mutual intent only;

(6)  In Appendix 1 (Service Fee Tables), there were, inter alia, two tables, which were referred to as “the ramp-up schedules”, covering (i) Halls GH, GK, 1H & 1K; and (ii) Hall GE of the Colocation Centre respectively:

(i)   In the table covering Halls GH, GK, 1H & 1K, it was stated that, starting from the 4^th Quarter of 2019, the number of cabinets per month was 71 and the monthly service fee for cabinets only (calculated at the rate of $3,400 per cabinet) was $241,400.  The number of cabinets would be increased by 71 in each quarter of the year which followed, and from the 1^st Quarter in 2023 onwards, the number of cabinets per month would be 1,000.  It was further provided that, from the 1^st month to 39^th month, should the number of cabinet-in-place exceeded the number of cabinets set out in the table, the total monthly service fee shall be charged on the basis of the actual number of cabinet-in-place.  For the sake of clarity, I set out 2 columns (out of a total of 8) of the said table below:

G/F Hall (GH & GK) and 1/F Hall (1H & 1K)
Quarter (QTR)	No. of Cabinets per month
4th QTR 2019	71
1st QTR 2020	142
2nd QTR 2020	213
3rd QTR 2020	284
4th QTR 2020	355
1st QTR 2021	426
2nd QTR 2021	497
3rd QTR 2021	568
4th QTR 2021	639
1st QTR 2022	710
2nd QTR 2022	781
3rd QTR 2022	852
4th QTR 2022	923
From 1st QTR 2023 till contract ends	1,000

(ii)  In the table covering Hall GE, it was provided that, starting from April 2019, the number of cabinets per month was 24 and the monthly service fee for cabinets only (calculated at the rate of $3,700 per cabinet) was $88,800.  It was also stated that, from April 2019 to September 2019, the number of cabinets shall increase at the rate of 24 cabinets per month until 144 was reached. Should the number of cabinet-in-place exceeded the number of cabinets specified in the table, the total monthly service fee shall be charged on the basis of the actual number of cabinet-in-place.  For the sake of clarity, I set out 2 columns (out of a total of 8) of the aforementioned table below:

G/F Hall (GE only)
Month	No. of Cabinets
Apr 2019	24
May 2019	48
Jun 2019	72
Jul 2019	96
Aug 2019	120
From Sep 2019 till Mar 2021	144
From Apr 2021 till contract ends	144

5.  In other words, if the ramp-up schedules were effective and binding, they set out the minimum number of cabinets which HKT would commit to order, and on the basis of which the minimum monthly service fees would be calculated.

6.  While it was clearly anticipated at the material time that parties would sign a definitive agreement in due course, no such agreement was signed at the end of the day.

7.  Be that as it may, it is undisputed that HKT had, starting from around May 2019, issued various Requests for Order (“RFOs”) to HKCOLO, and pursuant to which HKCOLO had provided HKT with various spaces within the Colocation Centre for use.

8.  The first two RFOs for Hall GE were dated 31 May 2019 (Nos.HKT-1001 and HKT-1002 respectively) to which the ramp-up schedule of Hall GE was attached.  It is undisputed that HKT did sign these RFOs.

9.  The ramp-up schedule did not appear in any of the subsequent RFOs for Hall GE.  However, the figures of the minimum number of cabinets were referred to in those subsequent RFOs.  For example:

(1)  under RFO No.HKT-1003 (dated 30 July 2019), 1 cabinet was ordered, and it was stated in the remarks therein: “1^st of 24 (Phase 1)”;

(2)  under RFO No.HKT-1004 (dated 30 July 2019), 19 cabinets were ordered, and it was stated in the remarks therein: “2^nd to 20^th of 24 (Phase 1)”;

(3)  under RFO No.HKT-1005 (dated 2 August 2019), 1 cabinet was ordered, and it was stated in the remarks therein: “21^st of 24 (Phase 1)”;

(4)  under RFO No.HKT-1007 (dated 30 August 2019), 3 cabinets were ordered, and it was stated in the remarks therein: “22^nd – 24^th of 24 (Phase 1)”.

10.  Since June 2019, HKCOLO had issued invoices to HKT and requested for payments in respect of Hall GE.  It can be seen from a number of those invoices that HKCOLO charged HKT in accordance with the ramp-up schedule.  In other words, HKCOLO charged HKT for cabinets which HKT did not use.  It is undisputed that HKT did pay HKCOLO in accordance with the amounts charged in those invoices initially.

11.  In relation to Halls other than Hall GE (“the Other Halls”) in the Colocation Centre, HKCOLO sent 2 draft RFOs (HKT-1015 and HKT-1016, both dated 29 November 2019, for a total of 363 cabinets in Halls GH and 1K) on 23 December 2019 to HKT for signature.  The ramp-up schedule for the Other Halls was attached to these RFOs.  It is undisputed that HKT did not sign these two draft RFOs.

12.  HKT issued RFOs from December 2019 onwards in respect of the Other Halls, and started to move into those Halls from December 2019.  The ramp-up schedule did not appear in any of those RFOs for the Other Halls.  However, like the subsequent RFOs for Hall GE referred to above, the figures of the minimum number of cabinets were referred to in the subsequent RFOs for the Other Halls.  For example:

(1)  under RFO No.HKT-1014 (dated 16 December 2019), 22 cabinets were ordered, and it was stated in the remarks therein: “22^nd of 71 (Phase 1)”;

(2)  under RFO No.HKT-1018 (dated 27 December 2019), 10 cabinets were ordered, and it was stated in the remarks therein: “32^nd of 71 (Phase 1)”;

(3)  under RFO No.HKT-1019 (dated 31 December 2019), 1 cabinet was ordered, and it was stated in the remarks therein: “33^rd of 71 (Phase 1)”;

(4)  under RFO No.HKT-1020 (dated 3 January 2020), 9 cabinets were ordered, and it was stated in the remarks therein: “42^nd of 71 (Phase 1)”;

(5)  under RFO No.HKT-1021 (dated 9 January 2020), 20 cabinets were ordered, and it was stated in the remarks therein: “62^nd of 71 (Phase 1)”;

(6)  under RFO No.HKT-1022 (dated 14 February 2020), 12 cabinets were ordered, and it was stated in the remarks therein: “74^th of 142 (Phase 2)”.

13.  It is evident that HKCOLO had issued invoices to HKT and requested for payments in respect of the Other Halls on the basis of the ramp-up schedule even though HKT did not at the time actually reach the minimum level as set out in the ramp-up schedule.  For example:

(1)  While HKT had only activated the use of 62 cabinets by January 2020[2], by virtue of Invoice No.DNT19270, HKCOLO charged HKT for 71 cabinets;

(2)  While HKT had only activated the use of 122 cabinets by May 2020[3], by virtue of Invoice No.DNT20085, HKCOLO charged HKT for 142 cabinets.

14.  HKT had paid towards the respective sums charged under the said invoices and some other invoices issued on the same basis.

15.  In the meantime, parties continued with their negotiation on the definitive agreement.  However, at the end of the day, parties did not sign any such agreement.

16.  On 24 March 2021, Mr Jeff Cheung of HKT wrote to Mr Billy Leung of HKCOLO (“HKT’s 24 March 2021 Letter”) as follows:

HKT Racks Rental and Guarantee Power Usage Payments from June 2020 to March 2021

We refer to our recent discussion on your invoices for payment of the racks rental and guarantee power charges for the period from June 2020 to March 2021.

Please be informed that we will settle your invoices according to the actual number of power activated racks.  Such arrangement based on actual number of power activated racks will be carried on with immediate effect until a definitive agreement is concluded by both parties.  Your invoices were apparently issued on the basis of on the existence of our commitment into any ramp-up schedules for racks are unfounded and hereby denied by us.

We highlight that the Memorandum of Understanding dated 4 April 2019 (MOU) is a non-binding instrument, and by virtue of the MOU all terms and conditions thereof are subject to negotiation from time to time (which in fact had happened between the parties since the execution of the MOU) until a binding definitive agreement is concluded.  For the avoidance of doubt, we reiterate that HKT has never made any binding commitment or arrangement with you in respect of any ramp-up schedule for racks, whether made orally, in writing or implied by conduct, and any terms relating to the ramp-up schedule for racks are yet to be negotiated and concluded by both parties in writing under the binding definitive agreement.

Below are the revised payment amounts for easy reference:

[…]

The payments in question are being processed by our bank, and the cheques will be delivered to your office soonest.

All our rights to claim for the overpaid charges in any of the paid invoices are hereby expressly reserved.

Thank you for your attention.

Yours Sincerely,

Jeff Cheung

VP

Commercial/CPE Business & SkyExchange”

17.  By letter dated 22 April 2021, the Managing Director of HKCOLO replied:

“We are writing with respect to a letter from your VP, Mr. Jeff Cheung dated March 24, 2021, advising of the new unilateral payment arrangement which was based on the current count of activated cabinets. You further highlighted that the MOU which specified the HKT planned roll out schedule was of a non-binding objective.

[…] In light of the unilateral payment reduction notification, which we cannot accept, we will seriously study the situation and revert with a more meaningful proposal. Before that, we want to bring to your attention that even though we do not have a formal agreement, we worked diligently under your undertakings and never reneged on a service. We would like to stress this position of ours for the record.

We have, under the promise of your goodself, made huge investment to fit out our facilities for the deployment of HKT equipment. We have enabled and allowed HKT to conduct business in our Data Center noting that the MOU has been the sole document of reference pending formal agreement, which was delayed by a change of dealing personnel on the HKT side. We have further assisted HKT by deferring billings from June to August 2020 which was requested by your goodself. You have further undertook that the payment of these billings will be cleared before end of March 2021. Such requests and undertakings have been reinforced repeatedly by your Larry, Edwin and Ernest. We consider our relationship strategic in nature guided in a spirit of professionalism and good faith.

We hope you can achieve your goal of an elevated income and do understand that our economics and thus the investment were based on your undertaking of payments.  We look forward to a return to our trust on you.  Furthermore, even though we do not accept your deviation of payment, please be assured that we will maintain our same spirit of cooperation.  We will revert further shortly.”

18.  Despite further negotiations between the parties, they could not resolve their differences.

19.  On 20 December 2021, HKCOLO sued HKT for fees and charges in arrears in the total sum of at least $15,270,029 (as of 10 December 2021) with interest.  This sum was arrived at by deducting the payments made by HKT from the fees calculated on the basis of the ramp-up schedules.

20.  By a letter dated 21 February 2022, HKCOLO purported to accept the repudiation of the contract on the part of HKT and to terminate such contract with HKT (“the February 2022 Termination Notice”). A 14 days’ notice was given thereby (which would expire on 6 March 2022) and HKT was demanded to remove its properties away from the Colocation Centre within 7 days after 6 March 2022.

21.  On 1 March 2022, HKT filed the March Summons returnable on 4 March 2022 (“the March Hearing”) and sought an injunction to restrain HKCOLO from acting on the February 2022 Termination Notice. The application was heard by DHCJ Bernard Man SC who granted an injunction on interim-interim basis in the following terms:

“The Plaintiff be restrained from suspending or terminating the colocation data center services it provides to the Defendant, whether by carrying into effect and/or acting upon the notice, by way of its letter to the Defendant dated 21 February 2022 (“Re: Termination of Contract with HKT”), or otherwise, until further order or the determination of the Defendant’s Summons dated 1 March 2022, whichever is the earlier”

(“the March Injunction”)

22.  After the March Injunction was granted, HKCOLO sent HKT another letter dated 9 March 2022 which reads:

“[…]

We shall fully observe and abide by the interim-interim injunction granted by the Court. As such, we shall not carry into effect our notice of termination dated 21 February 2022 and shall not terminate the existing services before the adjourned hearing and/or the disposition of your Summons dated 1 March 2022.

This letter serves to reinforce our intention to terminate our contract and/or contractual relationship. We take the view that we do have the rights to exit and terminate the contract and/or contractual relationship between us upon notice. In this connection, we note that in the letter dated 21 February 2022 from your solicitors, it was stated that a reasonable notice period would be 12 months, and in §59 of Mr. Chung Yiu Man’s Affirmation dated 1 March 2022, the same stance was reiterated. Whilst we dispute the length of the notice contended by you, there appears to be no question that even on your case, we should not be compelled to provide contractual services to you for a period exceeding 12 months.

In the event that our notice of termination dated 21 February 2022 is held to be invalid or overridden by the interim-interim injunction, please treat this letter as the notice of termination of our contract/contractual relationship with you and/or our data colocation center services provided to you. Such termination shall come into effect on the day which the interim-interim injunction or any injunction to the same effect, whether by way of variation, re-grant, continuation or extension, is discharged, expired or otherwise varied so that we are no longer prohibited from doing so.

[…]”

23.  By an email dated 10 March 2022, HKCOLO informed HKT that:

(1)  with effect from 14 March 2022, all 36 pre-approved access cards issued to HKT’s Authorised Persons (“APs”) shall be “surrendered” at the reception of the Colocation Centre upon such APs’ departure from the Colocation Centre, for the purported purpose of “limit[ing] the number of accesses per customer to the facility to maintain a healthy working environment during the period of pandemic”;

(2)  with effect from 21 March 2022, entrance application must be submitted by AP at least 1 business day in advance, failing which, admission into the Colocation Centre may not be granted.

24.  HKT protested against these new measures.  HKCOLO then informed HKT by email dated 18 March 2022 that with effect from 21 March 2022, inter alia:

(1)  The 36 AP access cards would be disabled;

(2)  5 temporary access cards would be made available at the reception of the Colocation Centre;

(3)  Entrance applications must be made by AP at least 1 business day in advance, and each application should cover no more than 6 persons per 1-day access.

25.  By an email dated 13 May 2022, HKCOLO informed HKT that the number of temporary cards would be reduced from 5 to 3 with effect from 16 May 2022 “to cope with fifth wave of epidemic”.

26.  By an email dated 23 May 2022, HKCOLO informed HKT that the number of temporary cards would be further reduced to 2 with effect from 24 May 2022. 

27.  The number of temporary cards was further cut down to 1 by HKCOLO with effect from 16 June 2022 “due to recent spike of COVID cases and the appeal by government to be vigilant”[4].

28.  In July 2022, HKCOLO further required HKT’s APs to obtain “at-door approval” in order to enter the Colocation Centre and seek the “at-door assistance” of HKCOLO Technical Operations Department for the purpose of accessing any of the data halls and areas therein. 

29.  Apart from the above “access restrictions”, HKCOLO had also imposed restrictions on the removal of equipment from the Colocation Centre.

30.  Such restrictions were firstly imposed on 27 April 2022, when HKCOLO informed HKT that before any equipment could be removed from the Colocation Centre, an equipment removal application must be made at least 1 working day in advance.  It was further clarified on the following day that equipment might only be removed within 2 periods during the day: either 10:00 – 11:00 or 15:00 – 16:00.

31.  HKCOLO updated the equipment removal requirement on 29 April 2022 such that the equipment concerned might only be removed during the aforesaid time-slots on Tuesday, Wednesday and Thursday.

32.  HKCOLO further informed HKT on 6 May 2022 that, with immediate effect, only 1 equipment removal application would be processed in respect of each time slot, and only a maximum of 5 pieces of equipment could be included in each equipment removal application. 

33.  On 11 July 2022, HKCOLO informed HKT by emails that the latter’s applications for equipment removal were rejected.  In those emails, HKCOLO noted that “the max. quantity for each equipment removal application is 2”.

34.  On 2 August 2022, HKT filed the August Summons for an injunction to restrain HKCOLO from maintaining or implementing restrictions on access to the Colocation Centre and/or equipment removal therefrom.  An interim-interim injunction was granted by Recorder Khaw on 5 August 2022 (“the August Injunction”), and the application was adjourned to be heard together with the March Summons.

THE LEGAL PRINCIPLES

35.  It is trite that the American Cyanamid principles are applicable in an application for interlocutory injunction.  Pursuant to those principles, the Court has to consider:

(1)  Whether there are serious issues to be tried;

(2)  Whether damages would be an adequate remedy for either side and where the balance of convenience lies.

36.  In an application where interlocutory mandatory injunction is sought, the court should also bear in mind what Ma J (as his Lordship then was) said in the case of Music Advance Limited & Another v The Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041:

“11. The applicable principles for interlocutory injunctions are well-known and do not need repetition. Generally, one needs to look no further than American Cyanamid v. Ethicon Ltd [1975] AC 396 and the relevant text in Hong Kong Civil Procedure 2002 Volume 1 at paragraphs 29/1/8-29/1/50.

12. I would, however, only highlight one aspect. Where, as in the present case, the plaintiffs seek an interlocutory mandatory injunction (that is, an order requiring the defendant to do something, in contrast to a prohibitory injunction which restrains the defendant from doing something), the following matters should be borne in mind as being the court’s approach :

(1) In the case of interlocutory mandatory injunctions, it is often said or assumed that a court will not grant one unless it feels a high degree of assurance that at the trial of the action, it will be shown that the injunction was rightly granted : see Shepherd Homes Ltd v. Sandham [1971] Ch 340 at 351. This has been explained and sometimes understood as meaning that in the case of an interlocutory mandatory injunction, the applicant’s case on the merits has to be made out to a higher standard of proof than in the case of prohibitory injunction : see the Court of Appeal’s observations in TKI Limited v. New Happy Limited [1995] 1 HKC 551 at 554 B‑D.

(2) Broad statements such as the above must, however, be properly put in context.

(3) The basic approach to interlocutory injunctions, whether mandatory or prohibitory, is the same. Section 21L of the High Court Ordinance, Chapter 4 makes no distinction between these two types of injunctions and simply states that interlocutory injunctions may be granted if it appears to be just or convenient to do so.

(4) At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions (included are, of course, the American Cyanamid guidelines) and therefore, in the application of any guidelines, sight must not be lost of this principle. See here : Films Rover International Ltd v. Cannon Films Sales Ltd [1987] 1 WLR 670 at 680 D‑G, in a passage from the judgment of Hoffman J which was approved by the House of Lords in R v. Secretary of State for Transport ex parte Factortame Limited (No.2) [1991] 1 AC 603 and recently reiterated in the English Court of Appeal decision of Zockoll Group Ltd v. Mercury Communications Ltd [1998] FSR 354 (which Mr Au was kind enough to place before me).

(5) Two common guidelines are of course the consideration of the merits of the plaintiffs’ claim and the balance of convenience. Here, it is of course easy to see at once how they are linked to the fundamental principle : there must be a risk of injustice if the plaintiff cannot even establish a serious question to be tried or that one or the other party will be put to substantial inconvenience or prejudice if an interlocutory injunction were or were not granted.

(6) In the case of interlocutory mandatory injunctions, the risk of injustice (being wrong in the sense referred to above) can be quite acute. In Films Rover International Limited, it was put thus by Hoffman J at 681 B‑E :

‘In Shepherd Homes Ltd. v. Sandham, Megarry J. spelled out some of the reasons why mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage : they usually go further than the preservation of the status quo by requiring a party to take some new positive step or undo what he has done in the past; an order requiring a party to take positive steps usually causes more waste of time and money if it turns out to have been wrongly granted than an order which merely causes delay by restraining him from doing something which it appears at the trial he was entitled to do; a mandatory order usually gives a party the whole of the relief which he claims in the writ and makes it unlikely that there will be a trial. One could add other reasons, such as that mandatory injunctions (whether interlocutory or final) are often difficult to formulate with sufficient precision to be enforceable. In addition to all these practical considerations, there is also what might be loosely called a ‘due process’ question. An order requiring someone to do something is usually perceived as a more intrusive exercise of the coercive power of the state than an order requiring him temporarily to refrain from action. The court is therefore more reluctant to make such an order against a party who has not had the protection of a full hearing at trial.’

(7) This passage in my view explains just why it is that generally a court will have to feel a high degree of assurance that at the trial of an action it will be shown that the interlocutory injunction was rightly granted before an interlocutory mandatory injunction will be given; all this being an exercise in assessing the strength of the plaintiffs’ case : see sub‑paragraph(1) above. However, I emphasize that this is only generally the court’s approach. Where it is shown, as an exception to this general approach, that the case is one in which the withholding of on interlocutory mandatory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel the ‘high degree of assurance’ as aforesaid, it would be right to grant an interlocutory mandatory injunction : see Films Rover International Limited at 681 A‑B.

(8) This of course brings into focus the balance of convenience. Thus, if a plaintiff in seeking an interlocutory mandatory injunction cannot demonstrate more than a serious question to be tried, it will have to show that the balance of convenience tilts so much in its favour that justice requires such an injunction to be granted, even taking into account those aspects of an interlocutory mandatory injunction expressed by Hoffman J in Films Rover International Limited.

(9) At no stage, however, in the consideration of the matter does the court lose sight of the practical realities of the situation to which the injunction will apply : see NWL Limited v. Woods [1979] 1 WLR 1294 at 1306C per Lord Diplock.”

37.  Cheung JA had also given the following reminder in Lai Hoi Ping (suing on his own behalf and on the behalf of all other members of Hong Kong Taxi Association) & Another v Persons Occupying Portions of Nathan Road near to and between Argyle Street and Dundas Street to prevent or obstruct normal vehicular traffic from passing and repassing the occupied areas & Others (HCMP 2975/2014, unreported, 15 November 2014):

“[…] it has to be borne in mind that the court’s jurisdiction to grant an injunction, whether interlocutory or final, is based on section 21L of the High Court Ordinance (Cap 4) which provides that where it appears to the court to be ‘just or convenient’ to grant an injunction, the court may do so. The cases have given various guidelines on when it is ‘just or convenient’ to grant an interlocutory injunction, which, if granted, is, by definition, granted before the final outcome at trial is known. It is to address this peculiar feature of an interlocutory injunction that considerations such as whether there is a serious question to be tried (so that the plaintiff’s claim is not a ‘frivolous or vexatious’ one), whether damages is an adequate remedy, and where the balance of convenience lies, come into the picture, so that the court may, putting it negatively, choose the course of ‘lesser evil’, or putting it positively, decide whether it is ‘just or convenient’ to grant an interlocutory injunction before the final outcome at trial is known.” (at paragraph 9)

38.  Hence, it is clear that it is not an inflexible rule that whenever a mandatory injunction is sought, the plaintiff must satisfy the court that there is a high degree of assurance that he shall succeed at the trial.  It all depends on the circumstances.  At the end of the day, the ultimate question is whether the requirement in section 21L of the High Court Ordinance (Cap.4) is satisfied – whether the court considers it just or convenient to grant the injunction.  The court will take whichever course that carries the lower risk of injustice if it turns out to be wrong.

THE MARCH SUMMONS

HKT’s case

39.  HKT’s case may be summarised as follows:

(1)  The MOU dated 4 April 2019 only set out the non-binding intent of the parties and the terms therein were not binding. Further, the MOU was stated to be valid only for 90 days which time has expired;

(2)  Although parties did engage in negotiations for an overall definitive agreement, such negotiations did not come to fruition. In such circumstances, parties’ contractual relations were not constituted and/or evidenced by the MOU but by individual RFOs, each being a separate and standalone agreement between the parties;

(3)  The ramp-up schedule in relation to the Other Halls did not bind HKT which therefore was not obliged to pay anything more than the fees related to the cabinets actually used by HKT in those Halls;

(4)  Although HKT did settle a number of invoices which were issued by HKCOLO on the basis of the ramp-up schedules, (in other words, HKT had paid fees for cabinets which it had not actually used), those payments were provisional in nature and made in good faith, in anticipation of parties entering into an overall definitive agreement (which did not materialise);

(5)  The payments which HKCOLO alleged to be outstanding do not relate to any particular RFO.  HKT was therefore not in repudiatory breach of any contract that is constituted and evidenced by the relevant RFO;

(6)  In any event, HKT has a good arguable case that HKCOLO has affirmed the contracts constituted and evidenced by the RFOs by continuing to provide services to HKT after the dispute has arisen and after HKT has made it clear that it would only pay for the used cabinets;

(7)  Even if HKCOLO were able to show any repudiatory breach of a particular RFO by HKT, HKCOLO would at most be entitled to terminate the particular RFO, and there is no basis for HKCOLO to suddenly terminate all contractual relations with HKT and/or to terminate all services provided to HKT under other RFOs which are separate and distinct from that particular RFO;

(8)  Even if HKCOLO were entitled to terminate, it had failed to give reasonable notice in the circumstances;

(9)  Furthermore, since HKCOLO has made unlawful threats against HKT, HKT is entitled to quia timet relief to restrain the commission of the tort of intimidation;

(10)  If no injunction is granted, damages would be a wholly inadequate remedy for HKT, whereas any loss that HKCOLO may suffer would be readily quantifiable and compensable by damages for which HKT is prepared to give the usual cross undertaking as to damages;

(11)  The termination of services by HKCOLO will seriously affect not only HKT but also HKT customers, which include Hong Kong governmental and financial regulatory authorities.  Some of the important public and business services which HKT provides are “mission-critical”, which means such services cannot be disrupted without very dire consequences.

40.  In the circumstances, it is contended that HKCOLO is not entitled to assert that HKT has repudiated its contract(s) with HKCOLO and terminate services by giving a 14-day notice.  Further or alternatively, HKCOLO’s threats, inter alia, to terminate such contract(s) constitute a tort of intimidation.  Hence, HKCOLO should be restrained from carrying out its threats to terminate services.

HKCOLO’s case

41.  HKCOLO’s case is that:

(1)  HKCOLO is a co-location data centre service provider, which charges its clients by reference to the volume of services committed.  The higher the volume, the lower the price to be charged;

(2)  Generally speaking, a client does not commit to a fixed volume of services.  Instead, it often commits to a steadily increasing amount of services.  This gradually increasing commitment is the “ramp-up”, expressed in the ramp-up schedules;

(3)  The cooperation between HKCOLO and HKT began in April 2019, when they signed the MOU which consisted of, inter alia, two ramp-up schedules: One related to Hall GE and the other one related to the Other Halls;

(4)  When parties signed the MOU, they intended that a formal definitive agreement would be signed to confirm and supplement its terms;

(5)  In May 2019, HKT started to move its equipment into Hall GE;

(6)  Since June 2019, HKCOLO issued bills in accordance with the ramp-up schedules, which HKT paid without any objection;

(7)  When the 90-day validity period of the MOU expired on 6 July 2019, parties were already in a contractual relationship by conduct, following the MOU’s terms;

(8)  Having finished moving into Hall GE, HKT started to move into the Other Halls in around December 2019;

(9)  While HKT did not sign back a draft RFO with the ramp-up schedule attached in relation to the Other Halls, HKCOLO went ahead to issue bills in accordance with the ramp-up schedule of the Other Halls, which HKT paid without objection until early 2021;

(10)  In May 2020, HKT sought HKCOLO’s consent to suspend the ramp-up for 3 quarters of the year with a promise that it would pay for the difference between the committed number of cabinets and the actual number of used cabinets in a lump sum amount in March 2021.  This shows that HKT acknowledged that it had a commitment towards HKCOLO for the ramp-up charges;

(11)  In December 2020, HKT requested HKCOLO to slow down the ramp-up schedule for the Other Halls, which again shows that HKT acknowledged its liability to pay according to the ramp-up;

(12)  On 15 January 2021, HKT requested HKCOLO to freeze the rack ramp-up from April 2021 to February 2022, which further supported HKCOLO’s case that HKT knew that it was bound by the ramp-up schedules;

(13)  However, HKT’s top management, represented by Mr Tom Chan (its Managing Director), then decided to bring in lawyers and find ways to tear up the parties’ informal agreement.  Eventually, by HKT’s 24 March 2021 Letter, HKT changed its position formally and declared that it would only settle HKCOLO’s invoices according to the actual number of activated racks. This was a clear repudiation of the parties’ contractual arrangement and course of dealing;

(14)  Parties could not come to any agreement despite efforts made, and therefore HKCOLO commenced this action and sued HKT for arrears of the outstanding charges;

(15)  Eventually HKCOLO terminated the informal agreement by the February 2022 Termination Notice;

(16)  After the March Injunction was granted, HKCOLO made clear to HKT by letter dated 9 March 2022 that, regardless of fault, HKCOLO terminated the parties’ contractual relationship.

42.  On the basis of the aforesaid, it was said that HKT did not surmount the requisite merits threshold for mandatory injunction, and in any event, as HKT had already had more than 6 months’ notice to move out, it should not be afforded further time to do so.

Merits of HKT’s case

43.  It is not disputed that the March Injunction which HKT now seeks to continue is a mandatory injunction because, in effect, HKCOLO is compelled thereunder to render services to HKT.

44.  Hence, generally speaking, this Court will have to feel a high degree of assurance that it will be shown at the trial of this action that the interlocutory injunction was rightly granted before the March Injunction should be ordered to be continued.  I will therefore consider the merits of HKT’s case with this in mind, although HKT’s application is not bound to fail even if HKT cannot attain such a high threshold: Advance Music Limited at [12(7) and (8)].

The contractual relationship between the parties

45.  It may be recalled that the MOU was stated to be non-binding and that it was only valid for 90 days from 4 April 2019.  At the time, parties were contemplating to enter into an overall definitive agreement.  However, at the end of the day, no such agreement had been entered into.

46.  Be that as it may, it is undisputed that HKCOLO has provided its services to HKT since May 2019.

47.  HKT argued that since such services had been provided on the basis of the RFOs issued by HKT rather than by virtue of the non-binding MOU, the contractual relations between the parties must necessarily be piecemeal and governed by the terms of each of those RFOs.  Hence, it was said that each RFO should be regarded as a standalone contract between the parties.

48.  On the other hand, HKCOLO suggested that:

(1)  By accepting the RFOs which ensued from the MOU, the terms and conditions stated in the MOU shall apply unless otherwise provided under the RFOs or other communications between the parties[5];

(2)  The agreed terms of the contract between the parties were constituted and/or evidenced by the MOU, the RFOs, parties’ correspondence and HKCOLO’s invoices[6];

(3)  HKT is estopped from denying the agreed contractual terms, especially the applicability of the ramp-up schedules by way of estoppel by convention[7];

(4)  Although the parties did not sign any formal agreement to replace the MOU, they had by the end of 2019 entered into an agreement, partly in writing and partly by conduct and course of dealing, that HKCOLO would provide services to HKT in accordance with the ramp-up schedules, save that the commencement date of such schedules had been delayed[8].

49.  Mr Yu for HKT contended that HKCOLO’s case set out under sub-paragraph (4) above has not been pleaded and it is different from the case as pleaded in the Statement of Claim.  With respect, I do not agree with this submission.  In my view, a fair reading of the Statement of Claim shows that HKCOLO’s case is that although there was no written agreement signed by the parties as such, they had formed a contractual relationship by their conduct.

50.  In any event, I am of the view that HKCOLO’s case has been clearly pleaded in paragraph 6 of its Statement of Claim as set out in paragraph 48(1) above.

51.  Furthermore, HKT has the burden to satisfy this Court that it has a case which is strong enough to justify the grant of the mandatory injunction.  Hence, the focus is: what is the likelihood that the Court will accept after trial that the contractual relations have been “piecemeal”?

52.  On the basis of the materials placed before the Court, while I agree that HKT has raised a serious issue to be tried that the parties had entered into a standalone agreement every time a RFO was issued, I do not think I can put the matter higher than that, and I must say HKT’s case in this respect falls far short of the threshold of “high degree of assurance”.  As Mr Chua pointed out, each RFO is a simple 2-page document.  It does not even contain the price to be paid by HKT.

53.  As far as the charges payable is concerned, Mr Chung Yiu Man (the Head of Network and Enterprise Solutions, Commercial Group of HKT) explained in paragraph 19 of his 1^st Affirmation that:

“Whilst the RFOs themselves did not stipulate the monthly recurring charges payable for each RFO, the parties took the figures related to those charges from ‘Appendix 1 – Service Fee Table’ under the MOU 9the ‘Ramp-Up Schedule’) in respect of the spaces actually used by HKT pursuant to the RFOs, namely:

(1) Monthly fee per cabinet (for Hall GH, GK and 1K): HK$3,400/month;

(2) Monthly fee per cabinet (for Hall GE): HK$3,700/month; and

(3)  Monthly power usage fee (per kilo Volt Amp i.e. kVA): HK$1,250/month.”

54.  Such an arrangement is more consistent with HKCOLO’s case that there was only one contract.  Indeed, there is no dispute that it had been parties’ intention that they would enter into a definitive agreement which would govern their overall contractual relationship.  Although for one reason or another (which I do not need to go further into here) they did not enter into such an agreement in writing, I do not think that means they could not have another overall agreement which governed their overall relationship.  The question is what should be regarded as the terms of such an agreement. 

55.  Mr Yu has made a forceful point that HKCOLO cannot be right when it contended that all the terms of the MOU should be regarded as having been incorporated into the present contractual relationship because some of such terms must be clearly inapplicable, and there are terms such as those relating to “non-recurrent payments” the payment of which have not been accepted by HKT.  He may well be right.  However, as far as this application is concerned, this Court does not have to consider whether all the terms of the MOU should be treated as having been incorporated as such.  The only key matter which the Court has to consider is whether the ramp-up schedules (especially the schedule applicable to the Other Halls) should be regarded as part of the agreement between the parties.

56.  On this matter, as I will explain further below, I consider that HKCOLO has a very strong case that the ramp-up schedules are binding on the parties.  This conclusion reinforces my view that HKT does not have a high degree of assurance that it could persuade the trial judge that the RFOs were standalone contracts between the parties, because the RFOs issued in respect of the same ramp-up period (for example, within the same quarter in a year as far as the Other Halls are concerned) would have to be considered as a whole to decide whether the minimum number of committed cabinet had been reached. 

57.  In coming to the above conclusion, I have not lost sight of HKT’s emphasis that the MOU was stated to be non-binding and that it was supposed to be valid for 90 days only.  However, I am of the view that such an emphasis has been misplaced.  It should be borne in mind that when the MOU was signed, it was anticipated by the parties that they would enter into a definitive agreement which would govern the parties’ long term relationship. However, the circumstances had changed subsequently in that they did not sign such a definitive agreement.  Yet, parties did not wait – HKT proceeded to request for services which HKCOLO provided, and in respect of which HKCOLO billed and HKT paid accordingly.  Upon such development, it would be unrealistic for HKT to insist that, on the basis of the provisions in the MOU, the terms of the MOU must still be non-binding.

58.  Mr Yu and Mr Chan for HKT relied on the case of Attorney General and Another v Humphreys Estate (Queen’s Gardens) Ltd [1987] HKLR 427 and submitted that HKT, like Hong Kong Land in that authority, had not indicated expressly or by implication that they had surrendered their right to change their mind.  With greatest respect, I do not think this authority assists HKT at all:

(1)  In the Humphreys Estate case, the issue was whether the parties were estopped from withdrawing from an agreement in principle (which was also stated to be “subject to contract”).  The situation in the present case is totally different because it is undisputed that there was indeed a contract between the parties;

(2)  In any event, as I will explain further below, the facts herein point strongly to the likelihood that the Court will find that HKT is estopped from denying the applicability of the ramp-up schedules.

HKT’s commitment to the ramp-up schedules

59.  I now come to another crucial question in this application, namely, whether the ramp-up schedules in the MOU were binding on the parties.

60.  It was submitted on behalf of HKT that the schedule in relation to the Other Halls was clearly inapplicable.  Heavy reliance had been placed on the non-binding nature of the MOU and especially of the ramp-up schedules.

61.  I have already dealt with this argument in the previous section of this Decision and explained that the Court should bear in mind the change in the circumstances of the case since the execution of the MOU.  I do not propose to repeat what I said.  In my view, HKT’s conduct (see further below) clearly contradicted its stance.

62.  HKT also relied on HKT’s 24 March 2021 Letter and submitted that it had been made abundantly clear therein that HKT’s position was that the MOU was non-binding, and that HKT would settle HKCOLO’s invoices “according to the actual number of power activated racks”.  It was further asserted that this letter wholly negatives any suggestion of common assumption contended for by HKCOLO that the parties would be bound by the terms of the ramp-up schedules in the MOU.

63.  I hold the view that the Court should not place weight on this letter because it is apparently self-serving.  Pausing here, I note that it has been submitted by Mr Yu that if HKCOLO thought that the ramp-up schedules were binding, then HKCOLO would be expected to write back promptly in response to HKT’s 24 March 2021 Letter which he said HKCOLO had failed to do so.     That is not entirely correct, as HKCOLO did reply by letter dated 22 April 2021.

64.  Instead of the HKT’s 24 March 2021 Letter, weight should be given to the following emails from HKT to HKCOLO which clearly show that HKT’s argument on the inapplicability of the ramp-up schedules is very weak:

(1)  In an email dated 19 May 2020 sent by Mr Lo Kwok Cheong (Vice President, Product Development & Planning of HKT) to Mr Pang Kin Kwan Andrew (Managing Director of HKCOLO), it was stated that:

“Andrew,

HKT Sky Exchange’s business has been hard-hit by recent local economic down-turn. In particular, our sister company NOW-TV will defer the project implementation, meaning that HKT has great difficulty in meeting the planned FM capacity ramp-up in HKColo site.

We would like to seek your team to temporary (sic) suspend the ramp-up for 3 quarters (Jun~Aug-2020, Sep~Nov-2020, Dec-2020~Feb-2021), and resume it by Mar-2021. That doesn’t meet (sic) that HKT would lower the commitment to HKColo. Instead, we are only asking for deferral of the minimal commitment for 3 quarters. If HKT happens to have actual demand growth is above the current minimum commitment quantity in Mar~May-2020, we will pay the actual demand quantity as necessary. Besides, we will pay for the gap between the committed minimum step and actual demand for that three quarters, as a lump sum amount in Mar-2021. We believe this won’t affect HKColo’s fiscal year revenue forecast (since we recall HKColo’s fiscal year ends on March-31 each year). Yet, the ramp-up deferral arrangement will definitely help HKT in current predicament.

Are you free for a short Zoom conference on HKG time 0830 on May-20 (Wed)?

Regards,

Ernest Lo

VP, China Product Development and Network Planning

China Business, Commercial Group

HKT Limited”

(emphasis added)

(2)  On the same day, Mr Larry Wong of HKT (Head of China Commercial & CPE Business, Commercial Group, HKT) also wrote an email to Mr Ernest Lo and Mr Andrew Pang of HKCOLO.  It reads:

“Hi Andrew,

As you know, Covid 19 has brought hard hit in our racks ramp up and therefore we would like to have a zoom discussion with you tomorrow morning (HKG time), we understand that this is a very odd request to you, but as Ernest mentioned in his email, the deferral will not hit your overall full year revenue if we understand correctly HKColo’s fiscal year end closing.

Anyway, appreciate if you could allocate some time tomorrow for a discussion.

Regards.

Larry Wong

Head of China Commercial & CPE Business

Commercial Group

HKT Limited”

(emphasis added)

(3)  On 30 December 2020, Mr Edwin Yau of HKT wrote an email to Mr Chung Yiu Man Daniel (Head of Network and Enterprise Solutions, Commercial Group of HKT) and Mr Jeff Cheung of HKT as follows:

“Hi Daniel and Jeff,

After reviewing the HKCOLO site utilization status and financial, below pls find the update for reference. Due to no sign of economy recovery in the medium-term, we foresee 2012 (sic) will be even worst hence need to take some action.

• The actual rack utilization is significantly fall short of the planned ramp up schedule, the gap is around 127 racks right now and estimated to widen to 224 racks by end of 2021.

• The rack rental and associated power (min. 1kVA commitment per rack) charges we paid for unused committed racks was HK$1M and HK$0.3M respectively in Yr 2019, and HK$2.3M and HK$0.9M respectively in Yr 2020.

• Based on the latest 2021 forecast, the estimated rack rental and associated power charges of unused committed racks would be amounted to HK$6.7M and HK$2.5M respectively, which our business cannot bear anymore.

• To this end we may need to request for support to slow down the rack ramp up schedule, say from currently 71 racks per quarter to 71 racks per half-yearly. Of course this is just the minimum commitment, when the economy rebound we are confident that the uptake will likely ahead of this.

• Also request to have rebate on the unused committed rack electricity charge (at 1kVA monthly HK$1280 commitment per rack).

Attached is the 2021 projection scenario for easy reference, we can further discussion (sic) on the possible action plan to improve the situation. Thanks.

Edwin”

(emphasis added)

(4)  Mr Daniel Chung of HKT then sent the following email to Mr Andrew Pang of HKCOLO on the same day (with the email of Mr Edwin Yau quoted above attached):

“Dear Andrew,

Please see the below note from my team. Please have a look and we will discuss tomorrow morning HK time at 0900.

Key points:

1. Must delay the rollout from 71 racks for 3 months’ period to 6 months’ period. If this is not possible for your end to explain to your investor(s), then we need to have a side-agreement on this.

2. We have over-spent $4.5m in the last two years on unused racks and associated power costs. See below note for details.

3. For 2021, according to the current payment pattern which I will not be able to do anymore, there will be a forecast of $9.2m additional unnecessary loss if we go on. Need to have a rebate (cost recovery) for the $4.5m which we have over-spent => we need to think of a way to get back $2.25m per year for me to put through the business case in contract for my MD to sign.

Let’s talk.

Thanks

DC”

(emphasis added)

(5)  A further proposal was made by Mr Edwin Yau of HKT to Mr Andrew Pang and Mr Billy Leung (Head of Finance and Human Resources) of HKCOLO by an email dated 15 January 2021:

“Hi Andrew and Billy,

Noted the comment and concern points from your Japanese management. As the coming 1-2 years outlook is really bad and the uptake of our customers has dropped dramatically since last year, we really need the concession support to sustain our business. To this end, we have revised the proposal trying to cater for the considerations from both sides as far as possible. Below is a summary for easy reference:

• Propose to freeze the rack ramp-up from April-21 to Feb-22, keeping 570 racks over the concession period due to COVID-19/economy downturn

• Impact to TCV is around HK$24.2M less

• Propose additional subscriptions to make up the TCV:

i) Have reviewed the existing data hall design with project team, we can further add around 36 racks at data hall “GK” riding on some vacant area available, starting from Mar-2024 till contract end (+ HK$10.6M)

ii) Increase the minimum power commitment per rack, additional 0.12kVA per rack after concession period, starting from Jan-2013 till contract end (+ HK$13.6)

Total additional charge HK$24.2M to compensate the TCV shortfall

Understand in coming 2-3 years the yearly amount may be less than the original forecast, but the revised ramp-up is just a minimum commitment to overcome this difficult time, and when the economy rebound we are confident the uptake will catch up soon. Pls take a look and help to lobby your Japanese partner to conclude a win-win arrangement soonest. Thanks!

Edwin

HKT”

(emphasis added)

65.  The above emails from HKT are self-explanatory.  If HKT’s full settlements of HKCOLO’s invoices comprise “provisional payments” or “payments made in good faith” only, rather than payments which HKT had committed to make, then why did HKT have to seek HKCOLO’s consent in delaying payment? Why did HKT have to ask Mr Pang of HKCOLO to “lobby” his Japanese partner? Given the very dire circumstances caused by the pandemic at the material time, why did HKT have to promise to pay the shortfall in a lump sum when it requested for deferral of the ramp-up period?  Why would Mr Larry Wong of HKT admit that requesting for a deferral of the ramp-up period was a “very odd request”?  These conduct do not make any sense to me unless HKT had assumed at the material time that the ramp-up schedules were applicable and binding on the parties.  The first two emails also show that HKT knew that HKCOLO expected to receive recurring monthly charges according to the ramp-up schedules.

66.  In the course of Mr Yu’s argument, he had drawn my attention to the fact that HKT had refused to accept any payment obligation on the “non-recurrent payments”.  The relevant email was dated 24 March 2020 sent by Mr Nelson Chan of HKT to Mr Billy Leung of HKCOLO.  It reads:

“After checked with our team, actually the [monthly recurring charge] payment has been settled gradually […]

[…]

For the outstanding (GE hall MRC for Nov 2019 HK$801,600), the payment process of DNT19227A has been complete. The bank cheque would be send out in coming few days within this week.

However, in relation to the one-off charge, because it’s binding into the definitive agreement we need to finalize with your side at first.  Hoping Matthew could arrange and expedite the discussion, and proceed to sign-off shortly.”

67.  Mr Yu argued that that shows that there was no “unequivocal conduct” on the part of HKT in accepting that all the terms of the MOU should be applicable to the contractual relationship between the parties. I have already dealt with this submission above (see paragraph 55 above). 

68.  However, as I see it, this email in fact demonstrates that HKT’s argument on the non-binding nature of the ramp-up schedules is indeed much weaker than Mr Yu contended, for he had failed to explain why, on one hand, HKT agreed to pay the monthly recurring charges on the basis of its anticipation of entering into the definitive agreement, but on the other hand refused to pay for the non-recurring charges before the definitive agreement was entered into.

69.  Mr Yu also emphasised that, at the material time, parties were still in active discussion on the terms of the definitive agreement.  I do not think this argument may assist HKT, because there is no dispute that the parties had entered into binding contractual relationship between them.  The only question is what the terms were in this relationship, in the absence of the definitive agreement. 

70.  My attention has also been drawn to the case of Shanghai Tongji Science & Technology Industrial Co Limited v Casil Clearing Limited (2004) 7 HKCFAR 79, in particular, the following parts thereof:

“36.     It is clear that a legally binding contract may be inferred from the conduct of the parties.  In deciding whether a contract should be implied, the court adopts as its starting-point what has generally been called “an objective test”.  Chitty puts this as follows :

‘In deciding whether the parties have reached agreement, the courts normally apply the objective test ...... Under this test, once the parties have to all outward appearances agreed in the same terms on the same subject-matter, then neither can, generally, rely on some unexpressed qualification or reservation to show that he had not in fact agreed to the terms to which he had appeared to agree. Such subjective reservations of one party therefore do not prevent the formation of a contract.’ (Chitty on Contracts, 28^th Ed, §2-001)

[…]

38.    The burden of establishing such a contract is on the person asserting its existence: Brogden v Metropolitan Railway (1877) 2 App Cas 666 at 693.  And the court will not imply such a contract lightly.  The conduct relied on must be unequivocally referable to the contract sought to be inferred.  As Bingham LJ said in a subsequent passage in The Aramis (at 224):

‘I do not think it is enough for the party seeking the implication of a contract to obtain ‘it might’ as an answer to [the above-mentioned] questions, for it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contract than with an intention not to contract. It must, surely, be necessary to identify conduct referable to the contract contended for or, at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract.’

39.    In Mitsui & Co Ltd v Novorossiysk Shipping Co [1993] 1 Lloyd’s Rep 311 at 320, Staughton LJ, following The Aramis,put the requirement of unequivocality in the following terms :

‘...... it is not enough to show that the parties have done something more than, or something different from, what they were already bound to do under obligations owed to others. What they do must be consistent only with there being a new contract implied, and inconsistent with there being no such contract.’ ”

71.  It was argued by Mr Yu that the fact that HKT had done something more than what it was bound to do is not enough, and that there must be unequivocal conduct on the part of HKT to imply that there was a new contract between the parties which incorporated the ramp-up schedules. He also emphasized time and again that whether the ramp-up schedules had been incorporated must be a matter for the trial, and that the Court should not conduct a mini-trial on affidavit.  This Court was also reminded about the two draft RFOs in respect of the Other Halls (to which the ramp-up schedule was attached) which HKT did not sign back.  It was said that this supports HKT’s argument that the conduct on its part was not unequivocal.

72.  I agree that the mere fact that HKT had paid HKCOLO in accordance with the ramp-up schedules may not necessarily mean that it regarded itself to be bound thereby.  However, as I have mentioned above, HKT has done much more than that, so much so that it has given an apparent outward appearance that it had agreed to be bound by the ramp-up schedules.

73.  Furthermore, I do not think there is anything wrong for the Court to assess the merits of HKT’s case for the purpose of this application.  That is not equivalent to “conducting a mini-trial on affidavits”.  To the contrary, it is necessary for the Court to take into account the apparent strength or weakness of the respective cases of the parties in order to decide whether HKT’s case is sufficiently strong to reach the threshold required, and it is an important step for the Court to decide whether it is just to grant the injunction sought.

74.  On the basis of the aforesaid, and given there is no dispute that HKT did not settle in full HKCOLO’s invoices which were issued pursuant to the ramp-up schedules, I hold the view that HKT’s case that it had not breached the contract is weak, even though it is not liable to be struck out.

75.  For the sake of completeness, I should add that given my view that there was only one contract between the parties rather than one standalone contract per RFO, HKT’s argument that HKCOLO had affirmed the contract (by virtue of its continuous provision of services to HKT) despite HKT’s alleged breach cannot get off the ground, because HKT’s repudiatory breach of the contract was continuing.

Reasonable notice to terminate

76.  In the event HKT was in repudiatory breach of the contract, HKCOLO should be entitled to accept HKT’s repudiation and terminate the contract forthwith. 

77.  It follows that HKT’s counterclaim for a declaration that “HKCOLO is not entitled to terminate its services provided at the Colocation Centre whether by virtue of the February 2022 Termination Notice or otherwise” is also weak, even though this claim cannot be said to be frivolous or vexatious.

78.  Given my views as expressed above, I will only consider HKT’s argument that it is entitled to a reasonable notice of termination briefly below.

79.  In Australian Blue Metal Limited v Robert Frank Hughes & Others [1963] AC 74, it was held by the Privy Council that:

“The question whether a requirement of reasonable notice is to be implied in a contract is to be answered in the light of the circumstances existing when the contract is made. The length of the notice, if any, is the time that is deemed to be reasonable in the light of the circumstances in which the notice is given. That does not mean that the reasonable time is the time during which one party or the other could reasonably wish for the contract to continue […] The implication of reasonable notice is intended to serve only the common purpose of the parties. Whether there need be any notice at all, and, if so, the common purpose for which it is required, are matters to be determined as at the date of the contract; the reasonable time for the fulfilment of the purpose is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated.

The sort of notice which the appellants want in this case is one which […] allows them to reap where they have sown. It is certainly reasonable from their point of view that the contract should not be terminated abruptly just when their operations were moving out of an unprofitable phase into a profitable one. But the question which a court has to ask itself is whether that is a factor which would have been operating in the minds of the parties at the time when the contract was made [...]” (at page 99) (emphasis added)

80.  In Lewison on the Interpretation of Contracts, (7^th Ed., 2020), the learned author stated in §6.170 that:

“Where a contract is terminable on reasonable notice, what period of notice would be reasonable will normally be determined as at the date of the giving of notice. Relevant factors will include the degree of formality of the contract, the length of the relationship; the nature of the commercial enterprise; and the importance of the contract to the parties.”

81.  Mr Yu submitted that, when considering what amounts to reasonable notice, the Court should bear in mind that this was intended to be a long-term relationship between the parties that would last for at least 10 years.

82.  It was also submitted on behalf of HKT that the Court should take into account the investment that has been put in and the amount of time that would be needed to relocate all equipment and associated services from the spaces in the Colocation Centre used by HKT.

83.  As to the length of such reasonable notice:

(1)  HKT’s solicitors, by letter dated 21 February 2022, contended that HKT would require 12 months to source alternative data centres and to relocate all of its servers as well as its satellite dishes installed at the Relocation Centre;

(2)  It is now estimated that at least 18 months are required for HKT to complete the relocation specifically in respect of NOW TV and Viu TV.

84.  When considering the merits of HKT’s case that the February 2022 Termination Notice did not validly terminate the contractual relationship between the parties, this Court would place particular weight on the following matters:

(1)  Even though the parties were initially negotiating for a definitive agreement which would last for at least 10 years, the fact remains that the parties had not entered into such an agreement at the end of the day;

(2)  Even according to the letter of HKT’s solicitors dated 21 February 2022, the reasonable period of notice is only 12 months;

(3)  It is futile for HKT to allege that it will need at least 18 months to relocate because the time that is deemed to be reasonable in the light of the circumstances is not the time during which HKT reasonably wish for the contract to continue;

(4)  It has been held that there is no obligation on the part of the party giving notice to give a dated notice of termination: Australian Blue Metal Limited (supra), at page 102;

(5)  The contract between the parties was an informal one in the sense that they did not enter into any definitive agreement as anticipated. 

85.  With the above in mind, I am of the view that, by the time of this Decision, the reasonable period of the February 2022 Termination Notice must either have expired or very close to its expiry (because in my view, HKCOLO would have a strong case that such period would in any event not be more than one year).  In other words, even if HKT is not obliged to move out of the Relocation Centre by now, it should do so very soon.

86.  Further, I do not accept HKT’s argument that HKCOLO cannot rely on any notice of termination before it issues a writ claiming for possession or declaration that the contract has been terminated. It should be borne in mind, as I pointed out above, that it is HKT which is claiming for a declaration that HKCOLO is not entitled to terminate its services provided at the Colocation Centre whether by virtue of the February 2022 Termination Notice or otherwise.  There is no doubt that HKCOLO is entitled to rely on the February 2022 Termination Notice in its defence to such a counterclaim.

87.  By reasons of the above, I would not have continued the March Injunction anyway.

Tort of intimidation

88.  HKT alleged that HKCOLO had committed the tort of intimidation with a view to exerting pressure on HKT in agreeing to the terms of the definitive agreement and/or to pay the alleged outstanding charges pursuant to the ramp-up schedules in the following ways:

(1)  On 26 January 2022, HKCOLO threatened to significantly increase the temperature in the data halls of the Colocation Centre, which may cause the malfunctioning of equipment therein and result in data access failures and loss of data;

(2)  On 27 January 2022, HKCOLO threatened to suspend or terminate its services without further notice unless HKT paid all outstanding charges immediately;

(3)  HKCOLO issued the February 2022 Termination Notice on 21 February 2022.

89.  As far as the alleged threat of raising the temperature of the data halls is concerned, it is noted that HKT is not, by virtue of the March Summons, asking the Court to restrain HKCOLO from increasing such temperature.  Such a threat is therefore irrelevant for the present purpose.

90.  In any event, given my analysis on HKT’s case regarding its breach of the contract with HKCOLO, HKT’s complaints in relation to these alleged tortuous acts cannot assist its application herein.  I therefore will say no more on this matter.

Conclusion on merits

91.  By reasons of the aforesaid, I hold the view that while there are serious issues to be tried in HKT’s claim, such a claim is weak and there is certainly no high degree of assurance that it will appear at the trial that the injunction was rightly granted. 

Balance of convenience

92.  Despite my view as expressed above, it does not necessarily mean that HKT’s application for mandatory injunction herein is bound to fail, even though my assessment on the merits of HKT’s case is a weighty factor which the Court should take into account.  

93.  At the end of the day, the crucial question which this Court has to answer is whether it is just or convenient to grant the mandatory injunction sought pursuant to section 21L of the High Court Ordinance.

94.  It was submitted on behalf of HKT that the March Injunction must be continued because:

(1)  If HKCOLO were allowed to terminate the contract now, HKT, its customers, their respective businesses and the wider public would suffer extensive, grave and irreparable harm that cannot be compensated by damages;

(2)  HKT and its customers may well lose access to the data that are stored in the ICT Equipment at the Colocation Centre and there could be consequential data inaccuracies and/or serious economic loss which will be extremely difficult to quantify (if it is quantifiable at all);

(3)  Countless individuals of the general public and governmental and financial regulatory institutions would be adversely affected;

(4)  Hence, it is not in the public interest that a mere dispute over the amount payable should result in the disruption of important services to the community;

(5)  Whatever loss that HKCOLO may suffer if the March Injunction is continued would sound in damages only, which is both quantifiable and compensable.

95.  Having considered HKT’s argument carefully, I am of the view that it is not just or convenient to grant the mandatory injunction sought.

96.  Firstly, as aforesaid, a very important factor which this Court should take into account is my assessment that HKT’s claim is not strong at all. It is far more likely that it will be shown at the trial of the action that it would not be right for the March Injunction to be continued now.

97.  Mr Yu reminded this Court that DHCJ Bernard Man, SC had reached the conclusion that there would be less risk of injustice to grant the injunction sought, and that the position now as compared to that at the time when the March Injunction was made is just the same.  It was therefore submitted that the Court should come to the same conclusion.  With respect, I do not agree with this approach.  The March Injunction, being an interim interim relief, was meant to be an urgent stop-gap measure.  Therefore, the views formed and decision made by the learned Deputy Judge must be provisional, which is open for further arguments and revisiting in the adjourned inter-parte hearing.  This Court should not be bound in any way by the exercise of discretion of the learned Deputy Judge.

98.  Secondly, it has been explained by the learned author of Gee on Commercial Injunction (7^th Ed., 2021) at §2-044 that:

“The court will not grant a degree of specific performance or grant a mandatory injunction when enforcement of the order would potentially involve numerous applications to the court in the form of contempt proceedings about whether or not the order was being carried out by the defendant. This is because it is not just or desirable for such a method of enforcement to be employed. It is capable of being heavy-handed, wasteful of costs and time, and it puts the litigating parties through a further period of having to deal with each other before the litigation is at an end. For these reasons the court have declined to grant decrees of specific performance or mandatory injunctions requiring ‘continuous supervision’ […]”

99.  I agree with counsel for HKCOLO that it is plain that the grant of the March Injunction has led to protracted disputes over the performance of HKCOLO’s services to HKT.  Indeed, the August Injunction was applied for and was granted under such circumstances.  The Court should be slow in forcing HKCOLO to continue the provision of services to HKT against its will, especially when it has a strong case against HKT that the contract between them has been validly terminated.

100.  Thirdly, insofar as it is alleged by HKT that the abrupt termination of contract now would cause extensive, grave and irreparable harm not only to HKT but also to the general public and governmental and financial regulatory institutions, it should be borne in mind that it is not HKT’s case that HKCOLO is the only service provider which runs a data centre in Hong Kong. Indeed, Mr Lo Kwok Cheong (Vice President of Product Development & Planning of HKT) affirmed that “the market condition has changed since 2020 and there have been other service providers emerging in the market which can offer a more competitive price for providing data centre services than HKCOLO”[9].  

101.  Hence, the question is whether HKT would have enough time to move orderly from the Colocation Centre to another data centre.

102.  In this regard, even according to the letter issued by HKT’s solicitors dated 21 February 2022, HKT would only require 12 months to source alternative data centres and to relocate all of its servers as well as its satellite dishes installed at the Relocation Centre.  Even assuming that HKT really requires as much as 12 months as alleged, we are actually getting close to the end of such a 12-month period (since 21 February 2022).

103.  However, HKT now alleges that it needs much longer time (at least 18 months) than that for the purpose of moving to the new data centre.  I am of the view that the Court should be slow to place weight on such a case.  If such a long time is required, there is no reason why it was not mentioned in the said letter issued by HKT’s solicitors.

104.  Given HKCOLO’s very clear stance as indicated in its letter dated 21 February 2022 that it was not interested in providing further services to HKT, it is not up to HKT to say now that it would still need much longer to move away from the Relocation Centre.

Conclusion on the March Summons

105.  I therefore hold that the March Summons should be dismissed, and the March Injunction should be discharged forthwith.

Material non-disclosure

106.  HKCOLO also argued that the March Injunction should be discharged on the ground of there being material non-disclosure on the part of HKT during the March Hearing. 

107.  As the Court’s view on this allegation would have important bearing on the standard of taxation of costs, I will have to deal with this issue despite my conclusion on the continuation of injunction reached above, which I will now do.

Whether HKT had the duty to make full and frank disclosure

108.  The March Summons was filed and served on 1 March 2022 whereas the March Hearing was held on 4 March 2022, at which HKCOLO was represented by counsel.

109.  It was submitted by HKT that since the March Hearing did not involve a case where only very short notice had been given to HKCOLO, the applicant (HKT) did not have a duty to make full and frank disclosure of material facts but was only under an obligation not to mislead the Court.

110.  This argument is support by Gee on Commercial Injunctions (7^th Ed., 2021), in which the learned author had this to say at §9-014:

“An applicant for inter partes relief on an application made with notice as required under the CPR, does not have a duty to make full disclosure of material facts, but is under an obligation not to mislead the court, including knowingly […]”

111.  However, in Chen Lingxia v 中國金谷國際信託有限責任公司 & Others [2019] HKCFI 379, it was held by Mimmie Chan J that:

“40. The legal principles are clear as to an applicant’s duty to make full and frank disclosure in its application to the Court for discretionary relief, in circumstances when the Court only has the evidence presented by one side, and the other parties who may be notified and are present at the hearing of the application have not had the fair and reasonable opportunity to present their evidence and arguments in opposition (Muginoho v Vimiu unreported, HCMP 107/2012, 24 February 2012, Relevant Employees v Zhang Caikui [2018] HKCFI 194).

41. The Summons was an inter-partes summons, giving the requisite 2 clear days’ notice of the hearing of the application for relief (as required under Order 32 rule 3 RHC). The intention of the rule is to ensure that the respondents to an application have proper notice of both the hearing and the material upon which the applicant intends to rely (para 32/3/1 HK Civil Procedure, PCCW-HKT Telephone Ltd v Telecommunications Authority, unreported, CACV 274/2003, 7 September 2004). By the time of the hearing on 31 August 2018, JI, JH, the 4^th Defendant, South Asia and the 8^th Defendant had been served with the Summons and attended by their lawyers (save and except the 8^th Defendant whose attendance was excused), but none of the Defendants had been able within the limited time to prepare any evidence in opposition.

42. Although the Summons was inter-partes, Chen was not absolved from her duty to make frank disclosure of all facts known to her and which are material to the Court’s determination of whether to exercise its discretion to grant the interim relief which she sought, on the evidence she presented unilaterally. Chen’s withholding of the fact that she was, by reason of her conviction by the Xiamen Court, disqualified and not able under PRC law to remain as a director and legal representative of XS was deliberate, since she had knowledge of the Notification which required XS to effect the change of directors and supervisor by reason of Chen’s and Husband’s conviction.  Even by the time of the substantive hearing of the Summons in October 2018, Chen has not offered any explanation as to why the fact of the Notification and her inability to continue to act as director and legal representative of XS was not disclosed in her affidavit filed in support of the Summons.  By presenting a partial picture of the criminal charge and proceedings before the Xiamen Court, disclosing only the facts which were helpful to and in mitigation of her case, but withholding other material facts relating to her disqualification to act and remain as a director and legal representative of XS, she had knowingly misled the Court into granting the Interim Injunctions in her favor, on the incomplete information which she presented.  The matter of her fitness and qualification to act is clearly relevant and would have weighed in the scales in the exercise of the Court’s discretion whether or not to grant the Interim Injunctions (Citibank NA v Express Ship Management Services Limited [1987] HKLR 1184).”

112.  I respectfully agree with the approach adopted by her Ladyship.   In my view, in the circumstances where the respondent of the application (i.e. HKCOLO herein) did not have fair and reasonable opportunity to present any evidence in opposition before the March Hearing, fairness requires that a positive duty be imposed on the applicant (i.e. HKT) to make full and frank disclosure of material factual and relevant matters to the Court.

113.  HKT’s argument is therefore rejected.

Whether an inter partes summons for discharge of injunction is required

114.  In his answer to Mr Chua’s argument that HKT was guilty of material non-disclosure, Mr Yu also took a preliminary point that the Court should not even consider this argument because HKCOLO has failed to file any summons pursuant to Order 32 rule 1 of the Rules of the High Court for an order that the March Injunction be discharged or set aside on the ground of material non-disclosure.  In a gist, it was submitted that:

(1)  Under the spirit of Civil Justice Reform, it is not enough for HKCOLO to make a complaint about material non-disclosure without taking out an application formally by summons;

(2)  This is not a technical argument – As a matter of fairness, HKT should be given adequate notice about HKCOLO’s intention to discharge/set aside the injunction on the ground of material non-disclosure, especially when this application may lead to serious consequence in terms of indemnity costs.  For example, if HKCOLO had filed a summons for the purpose of setting aside the March Injunction, it would have to lodge and serve skeleton submissions at least 72 hours (as opposed to 48 hours) before the hearing in support of its application;

(3)  It can be demonstrated by many precedents that the receiving end of an ex parte injunction had properly filed a summons if “material non-disclosure” was relied on as a ground to discharge the injunction concerned.

115.  Reliance has been placed by HKT on the case of The Public Institution for Social Security v Mr Kamran Amouzegar [2020] EWHC 1220, in which it was held by Jacobs J that:

“142. When an allegation of material non-disclosure is made, an important principle is stated in Gee on Commercial Injunctions (6^th edition) paragraph 9-032:

‘A party seeking to have without notice relief discharged for non-disclosure must give adequate notice that this ground is relied upon together with sufficient particulars enabling the other party to understand the case to be advanced. An allegation of non-disclosure is potentially serious both for the other party and his legal advisers and the party complaining of non-disclosure must give sufficient notice of his complaint so that there can be a fair hearing, and it should be made without unnecessary delay.’

143. Authority for this proposition is to be found in Bracken Partners Ltd. v Gutteridge (unreported but available on Westlaw 2001 WL 1560833), where Stanley Burnton J. said:

‘Claimants and their lawyers have a serious responsibility to the Court on any application made without notice to put all material facts and issues before the Court. That responsibility is the more onerous when the injunction sought and obtained is an asset freezing injunction.

Correspondingly, an allegation that a Claimant or his lawyers have failed in that duty is a serious allegation involving misconduct or default on the part of the Claimant or his lawyers.  If it is to be made, adequate and clear notice of it must be given and full details provided of the non-disclosure or misrepresentation alleged.’ ”

116.  While it is true that HKCOLO had not filed a summons to discharge the March Injunction, I do not think it can be said that HKCOLO did not give adequate and clear notice to HKT of HKCOLO’s reliance on such a ground in the substantive hearing of the March Summons:

(1)  In the present case, it has been made clear by Mr Pang Kin Kwan Matthew in his 1^st Affidavit that HKCOLO would ask the Court to discharge the March Injunction by reason of its failure to make full and drank disclosure[10]. He has also set out the matters therein which he alleged that HKT had failed to disclose to the Court;

(2)  There is no doubt that HKT had had adequate opportunity to respond to Mr Pang’s 1^st Affidavit: see paragraphs 5, 20 and 40 – 44 of Mr Chung’s 3^rd Affirmation filed on 20 July 2022;

(3)  In the circumstances of the present case, HKT’s argument that it was prejudiced by having received HKCOLO’s skeleton submissions only 48 hours as opposed to 72 hours before the hearing apparently cannot hold water, because at the end of the day, the hearing had to be adjourned part-heard for around two weeks for Mr Yu to complete his reply submissions.  There is no doubt that Mr Yu and Mr Chan had had more than enough time to consider HKCOLO’s skeleton submissions.

117.  I therefore hold the view that HKCOLO is entitled to raise this ground in its opposition to the March Summons. 

Should the argument of material non-disclosure be dealt with at interlocutory stage?

118.  HKT further argued that the court is not bound to go into the issue of material non-disclosure at the interlocutory stage unless in very clear cases, because the court should be concerned with the future rather than the past at this stage.

119.  Reliance was firstly placed on a passage in Hong Kong Civil Procedure 2022, Vol.1 at commentary paragraph 29/1/51 (page 808), which reads:

“A dispute, however, about whether or not a plaintiff has made full and frank disclosure in obtaining an ex parte Mareva injunction should be investigated at the trial of the action (Suzanne Ruth Henderson v Scott Henderson (HCMP 1780/2013, [2016] HKEC 857), [29] citing Sino Wood Investment Ltd v Wong Kam Yin (HCA 307/2002, [2006] HKEC 465), [27]-[28])) and not, save in exceptional circumstances, at the inter partes hearing of the application for the injunction; the purpose of the inter partes injunction hearing is to consider what should happen in the future, not what has happened in the past (Dormeuil Freres SA v Nicolian International (Textiles) Ltd) [1988] 1 WLR 1362 […]”

120.  The Decision of Sir Nicolas Browne-Wilkinson V-C (as he then was) in the case of Dormeuil Freres SA v Nicolian International (Textiles) Ltd) [1988] 1 WLR 1362 as referred to in the above commentary was quoted extensively by A Cheung J (as Cheung CJ then was) in Sino Wood Investment Ltd v Wong Kam Yin (HCA 307/2002, unreported, 23 December 2002) as follows:

“I will deal first with the application to set aside the ex parte order. It is a basic principle, applicable to all ex parte applications, that a plaintiff seeking ex parte relief must make full disclosure to the court of all facts which are material to the exercise of the court’s discretion whether or not to grant the relief. If such disclosure is not made by the plaintiff, the court may discharge the ex parte injunction on that ground alone. But if, in the circumstances existing when the matter comes before the court inter partes, justice requires an order either continuing the ex parte injunction or the grant of a fresh injunction, such an order can be made notwithstanding the earlier failure of the plaintiff to make such disclosure. Moreover, there is authority that, contrary to the law as it was originally laid down, there is no absolute right to have an ex parte order obtained without due disclosure set aside; there is a discretion in the court whether to do so or not.

These propositions, which are of very great everyday practical importance are established by three decisions in the Court of Appeal. The first is Yardley & Co. Ltd v. Higson [1984] F.S.R. 304; the second is Lloyds Bowmaker Ltd v. Britannia Arrow Holdings Plc., ante, p. 1337; the third is Brink’s Mat Ltd v. Elcombe, ante, p. 1350. It is a surprise to me that decisions on a point of such great everyday importance in dealing with these matters have not found their way into the official reports. It has been my experience and that of other judges of this division that the application of those principles frequently gives rise to applications being made to discharge ex parte orders, such as that made by the defendant in this case. Those applications to discharge the ex parte order are frequently made at the same time as the plaintiff's motion to continue the ex parte injunction comes before the court inter partes. The result of the joining of an application to discharge the ex parte order with the hearing of the inter partes motion for an injunction is almost invariably to increase both the duration and the complexity of the interlocutory proceedings to a substantial extent.

To discover whether an ex parte order has been improperly obtained, the court first has to consider the evidence as it was at the time of the application for the ex parte order and then a mass of evidence designed to demonstrate that that evidence was misleading or failed to make full disclosure. The real question at the time of the inter partes hearing should not be what has happened in the past but what should happen in the future. On the hearing of the inter partes motion it is impossible to make any concluded finding of fact, yet the court is being asked to reach a conclusion on the issue of non-disclosure without full knowledge of the circumstances. This attempt involves a minute examination of detailed allegations and counter-allegations, the exact materiality of which may not be clear to the judge in the interlocutory hearing, in circumstances when that is not necessary for the future conduct of the case.

The cost in time and money to the parties in a complex case can become vast and the waste of court time quite unacceptable. I share the view expressed by Slade L.J. in the Brink’s Mat case, ante, p. 1350. He said that the principle of full disclosure was an extremely important one, a statement with which I agree. He continued, at p. 1359B-E:

‘Nevertheless, the nature of the principle, as I see it, is essentially penal and in its application the practical realities of any case before the court cannot be overlooked. By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths. In one or two other recent cases coming before this court, I have suspected signs of a growing tendency on the part of some litigants against whom ex parte injunctions have been granted, or of their legal advisers, to rush to the Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486 principle as a tabula in naufragio, alleging material non-disclosure on sometimes rather slender grounds, as representing substantially the only hope of obtaining the discharge of injunctions in cases where there is little hope of doing so on the substantial merits of the case or on the balance of convenience.’

That account of the experience in the Court of Appeal I echo as being my experience also.

...

In my judgment, save in exceptional cases, it is not the correct procedure to apply to discharge an ex parte injunction on the grounds of lack of full disclosure at the interlocutory stage of the proceedings. The purpose of interlocutory proceedings is to regulate the future of the case until trial. ...

Similar considerations apply in the case of an ex parte Mareva injunction. When the motion comes before the court inter partes, the court can then on the evidence before it from both sides decide what is the correct form of the Mareva relief to grant until trial. The question whether the earlier ex parte order should be set aside is not an urgent matter and is only relevant to the cross-undertaking in damages. Similar considerations apply in the case of ordinary ex parte injunctions.

In my judgment, therefore, in the ordinary case it is wrong on the hearing of an inter partes motion to go into the huge complexities involved in seeking to disentangle at that stage whether there was full disclosure when the ex parte order was obtained. The matter should normally be dealt with at trial in the way I have indicated. The right course, therefore, would normally be to adjourn an application to set aside the ex parte order to be dealt with at the trial. That is the course that I think is appropriate in this case ...” (emphasis added)

121.  However, what the learned Judge further said after he had quoted the above should be noted:

“30. Of course, what was said in Dormeuil should not be taken to the extreme, and must be read subject to the subsequent development of the case law as has been summarized in the relevant paragraphs in Hong Kong Civil Procedure 2002 (Vol. 1) referred to above, so as not to deny an aggrieved defendant a fair chance to persuade the court on clear evidence, if he could, that the ex parte order was obtained by material non-disclosure. But Dormeuil does highlight the undesirability of seeking to resolve serious disputes of fact regarding alleged material non-disclosure at the inter partes stage.

31. I cannot decide the substantial disputes between the parties in relation to the subject matters of the alleged material non-disclosure on paper. Not only must I resist the temptation of conducting a min-trial, I must not, on the incomplete evidence that has been placed by the parties before me, seek to evaluate the ‘inherent probabilities’ of the respective competing versions of the parties. I need not repeat here the example given by Mr Warren Chan, SC, appearing for the Plaintiff, to illustrate how dangerous it would be to attempt to weigh the inherent probabilities of the competing versions at this stage.” (emphasis added)

122.  Hence, what Sir Nicolas Browne-Wilkinson V-C held in Dormeuil Freres SA should be read cautiously, and should not be “taken to the extreme”.

123.  Indeed, even his Lordship recognised subsequently in Tate Access Floors Inc. & Another v Boswell & Others [1991] Ch 512 that:

“In Dormeuil Freres S.A. v Nicolian International (Textiles) Ltd. [1988] 1 W.L.R. 1362, 1369, I said:

‘save in exceptional cases, it is not the correct procedure to apply to discharge an ex parte injunction on the grounds of lack of full disclosure at the interlocutory stage of the proceedings.’

I expressed that view in the context of a growing practice of combing through large volumes of, often disputed, evidence with a view to showing that there had been some failure to make a material disclosure. I remain of the view that that type of application to discharge an ex parte injunction on the hearing of the inter partes motion to continue such injunction is inappropriate. But the decision in Behbehani v. Salem (Note) [1989] 1 W.L.R. 723 shows that I expressed myself too widely. That case, which was reported after my decision, shows that although the court has power to grant further interlocutory relief notwithstanding a failure to make proper disclosure at the ex parte stage, in deciding whether to grant such further relief the court has to consider all the circumstances of the failure to make proper disclosure and whether such failure was innocent or deliberate and has to weigh the public interest in maintaining the golden rule as against the requirements of justice in deciding whether or not to grant the plaintiff inter partes relief to which he would otherwise be entitled.

It is clear that I was in error in thinking that normally the question whether or not there has been a failure to disclose is not appropriate to be dealt with at the interlocutory stage. If, as seems probable, my decision in this case is appealed I, and I believe other first instance judges, would value guidance from the Court of Appeal as to how the test in Behbehani v. Salem (Note) [1989] 1 W.L.R. 723 should be applied having regard to the practical problems which I set out in full in the Dormeuil case [1988] 1 W.L.R. 1362. There is no doubt that if the law requires the court at the interlocutory stage to consider in detail disputed evidence as to the failure to disclose, very long disputed interlocutory hearings are unavoidable to the detriment of the hearing of other cases brought by other litigants. It is to be noted that in Behbehani v. Salem, the plaintiffs admitted that there had been a failure to disclose material facts and that the ex parte order should be set aside, whereas in the Dormeuil case it was admitted that an inter partes injunction of some kind was appropriate whether or not there had been a failure to disclose. It may be that the reconciliation between the public interest in upholding the golden rule and the public interest in ensuring that the courts are not clogged with interlocutory hearings is that the investigation of the circumstances in which the ex parte order was obtained should take place at an interlocutory stage only where it is clear that there has been a failure to make a material disclosure or where the nature of the alleged failure is so serious as to demand immediate investigation.” (at 533E – 534D) (emphasis added)

124.  In Hong Kong, the issue of whether there had been material non-disclosure during the ex parte stage had been brought up time and again at the inter parte stage of the application for interim injunction.  An example can be found in the Court of Appeal case of Cheung Kam Wah v Cheung Hon Wah & Others [2005] 1 HKC 136 in which Woo VP had the following to say:

“48. […] Since Deputy Judge Poon had gone through the evidence in some detail and identified the items that had not been disclosed to the ex parte judge, with a certain degree of culpability that could be attached to the plaintiff for the material non-disclosure, it was proper for him to discharge the ex parte injunction, and indeed it was incumbent upon him to do so.”

125.  It is thus clear that HKT’s argument that the Court should not consider the issue of material non-disclosure at this stage has no merit at all.

The alleged material non-disclosure

126.  The law regarding material non-disclosure is trite, and has been summed up in Hong Kong Civil Procedure 2023, Vol 1:

“The material facts to be disclosed are all matters which are material for the judge to know and which are necessary to enable him to exercise his discretion properly. The plaintiff should give particulars of his claims against the defendant, stating the grounds of his claims and the amount thereof and, in addition, should fairly state the points made against him by the defendant […] The applicant should also bring to the court’s attention any points that could have been made by the respondent, even if not yet made, at the time of the ex parte application provided that: (a) the point is one that the respondent would reasonably be expected to raise in due course; and (b) the point is not one that can be dismissed as without substance or importance […]”

“Materiality is to be decided by the court and not by the assessment of applicants or their advisers […]”;

“In a case where the applicant’s ex parte material consisted of 83 pages of affidavits and 500 pages of exhibits the court observed ‘clearly it is of no use putting it in if the judge either cannot or does not read it. It is just as much not disclosed as if it had not been put in at all…It is of course the duty of legal advisers and counsel to call the judge’s attention to everything that he must see if there is a mass of material”

“The plaintiff’s duty to make full and frank disclosure may not be limited to making disclosure of material facts in the supporting affidavit. In discharging the duty to present the case in the fairest possible manner, the plaintiff may, for example, need to ensure through oral submissions that the court properly understands the plaintiff’s case if it appears from the exchanges with the court that further explanation is required”

Ultimately, the court has a discretion whether to discharge an injunction for material nondisclosure, the court will consider factors including: whether the non-disclosure was innocent or deliberate; the excuse or reason for the material non-disclosure; and the importance of the omitted fact to the issues which were to be decided by the judge, in particular whether the non-disclosure would have resulted in the original order not being made in the first place, [however,] it is not necessary to demonstrate that had the alleged material facts been disclosed to the court, the court would necessarily or likely have arrived at a different decision.”

(at paragraph 29/1/51 (page 808))

127.  HKCOLO’s team of counsel led by Mr Chua had extensively attacked the way HKT ran its case before DHCJ Bernard Man SC and submitted that HKT had failed to make full and frank disclosure not only on the facts but also on the applicable legal principles.  Without disrespect to counsel, I do not propose to deal with all the complaints raised, for I am of the view that it is adequate to mention the followings.

128.  In the Affirmation of Mr Chung of HKT, he stated that:

Paragraph 20

Since the issuance of the very first RFO to date, HKT has generally been settling the Plaintiff’s invoices in respect of the above charges [monthly fee for cabinets and monthly power usage fee] within 30 to 60 days of receipts of the relevant invoice, and in accordance with the actual number of spaces used by HKT pursuant to the RFOs.  As the invoices for these RFOs often recorded incorrect figures, HKT would have to verify and reconcile the charges with the actual number of spaces used by HKT, before payment is arranged.

Paragraph 22(d)

In or around October 2020, the parties agreed that the remaining outstanding installation charges shall not be payable until after an overall definitive agreement to be signed.  This arrangement was recorded and reflected in the emails dated 10 November 2020 and 26 March 2021 (as explained in greater details in paragraph 58(a) below).  Copies of these emails and their attachments are exhibited at pages 490-501 of ‘CYM-1’.

Paragraph 23

Throughout the course of the parties’ negotiations concerning the terms of an overall definitive agreement, HKT did seek to gradually increase the amount of spaces used in the Colocation Center by reference to the Ramp-Up Schedule to the extent it was commercially viable, and despite the Ramp-Up Schedule and the MOU being non-binding and having only a 90-day validity period.  This was merely because HKT had been anticipating that the parties would ultimately be able to reach an agreement on the terms of an overall definitive agreement and a

new Ramp-Up Schedule (but which was not the case in fact).

Paragraph 24

Given such anticipation, HKT had also made provisional payments to the Plaintiff in respect of the monthly recurring charges pursuant to the number of spaces in the Colocation Center to be used by HKT up to the 1^st quarter of 2021 as contemplated under the Ramp-Up Schedule, notwithstanding that HKT had not at that time actually used as much spaces.  As such, HKT was at the time willing to, provisionally and in good faith, pay the Plaintiff in excess of the spaces and services actually provided by the Plaintiff, in anticipation that ultimately the parties would reach an agreement on an overall definitive agreement with its own Ramp-Up Schedule.

(emphasis added)

129.  I accept HKCOLO’s argument that Mr Chung had failed to disclose the following material facts in his Affirmation:

(1)  The fact that HKT had paid HKCOLO’s invoices pursuant to the ramp-up schedules without any objection from around June 2019 up to March 2021;

(2)  Before HKT’s 24 March 2021 Letter, HKT had never mentioned that part of the payments to HKCOLO were only made “provisionally and in good faith”;

(3)  HKT had repeatedly requested HKCOLO to defer the application of the ramp-up schedules and for consent for deferred payments (see the emails quoted under paragraph 64 above).

130.  Mr Chung had also misled the Court when he stated in paragraph 20 of his Affirmation that HKT has generally been settling the HKCOLO’s invoices in respect of the monthly fees in accordance with the actual number of spaces used by HKT pursuant to the RFOs.  That gives the Court a wrong impression that HKT did not pay in accordance with the ramp-up schedules.

131.  In my view, Mr Chung had adopted such an approach deliberately, so as to avoid disclosing facts which were unfavourable to HKT’s case.

132.  The above matters must be material to the Court’s consideration of the merits of HKT’s case, even though his Lordship might have granted the March Injunction anyway.

133.  The March Injunction should therefore be discharged forthwith also on the ground of material non-disclosure.

THE AUGUST SUMMONS

134.  The purpose of the August Injunction was to restrain HKCOLO from engaging in conduct which would prevent HKT from enjoying the benefit of the contractual relationship between the parties, which was maintained by virtue of the March Injunction.  Now that the March Injunction is discharged, the August Injunction should likewise be discharged.

135.  It follows that the August Summons should be dismissed.

ORDER

136.  By reasons of the aforesaid, both the March Summons and the August Summons are dismissed, and both the March Injunction and the August Injunction are discharged forthwith.

COSTS

137.  I make a costs order nisi that the HKT shall bear the costs of both the March Summons and the August Summons, to be taxed on indemnity basis if not agreed, with certificate for two counsel. 

138.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.