TELEVISION BROADCASTS LTD v. ASIA TELEVISION LTD AND ANOTHER

1987, No. A3660

IN THE HIGH COURT OF JUSTICE

HONG KONG

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JUDGMENT

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1. On the 24th March 1988, the Court of Appeal held reversing Nazareth J. on this issue that there was an oral agreement between the plaintiff (TVB) and the defendant (ATV) whereby the two television stations would not make a unilateral bid or negotiate with the 1988 Seoul Olympics Organisation Committee (SLOOC) in respect of the 1988 Olympic Games or to enter into any agreement to acquire the broadcasting rights to the Olympic Games without giving advance notice to TVB. The decision of the Court of Appeal was upheld by the Privy Council on the 29th June 1988.

2. The parties on the 30th March submitted their argument as to the form of order to be made by the Court of Appeal. The Court of Appeal reserved its decision until the next day when it made this order :-

"It is declared that the defendant is in breach of an agreement made on the 16th July 1984 made between the plaintiff and the defendant that :-

 

3. An order was made on the 4th July 1988 by Nazareth J. for Tele Sports Limited (Telesports) to intervene and to be heard on the form of relief claimed by TVB against ATV and to be joined as a party.

4. The trial before Nazareth J. was held in November 1987 and his judgment was delivered on the 11th December 1987. The trial was limited to the question of liability. When the Court of Appeal made its decision, the claims for relief were referred back to the trial judge. Directions were given by Nazareth J. on the 13th July when he adjourned TVB's claim for damages and other relief sine die, but made an order for a speedy trial of the issue of injunctive relief. Because Nazareth J. is on leave and the Olympic Games are due to commence on the 17th September 1988 the issue of injunctive relief has come before me as a matter of urgency.

5. The claim for injunctive relief was originally in wider terms, but is now restricted to an injunction to restrain ATV from telecasting in Hong Kong any programme in relation to the 1988 Seoul Olympic Games pursuant to telecasting rights wrongfully obtained by ATV in breach of the agreement made on the 16th July 1984 without affording to TVB equal telecasting rights.

6. Asia Pacific Broadcasting Union (ABU) is a union formed to represent the interests of television stations in the Asia Pacific region. It has a variety of functions, one of which is to act for members in negotiations for the rights to telecast international sporting events such as the World Cup for Soccer and the Olympic Games. Both TVB and ATV, which are the only television stations in Hong Kong, are members of ABU.

7. TVB is the dominant station with an audience rating of well in excess of 80% and has financial resources far in excess of those possessed by ATV.

8. Telesports was formed in 1985 by Mr Lawrence Lo and Miss Lau Tien-may as an agency for the purchase and sale of rights for sporting events. Mr Lo was the driving force behind the company. He has had extensive experience in television for 15 years or more as an engineer and also in production. He worked for TVB in 1970 as a technician and thereafter worked for CTV, RTHK and RTV before returning to TVB in 1979. He remained with TVB until 1985 when Telesports was incorporated. He was the managing director of Telesports until the 1st August 1988 when he joined ATV as its operations controller, but he retains a 39% shareholding in Telesports.

9. Miss Lau is the present managing director of Telesports and holds a 10% share in the company. She also has a wide experience in television and at one time worked for ATV.

10. Mr Lo and Miss Lau were the only shareholders of Telesports until the summer of 1987 when a Mr C.S. Wong, through his company, acquired a 51% share. His role is purely financial.

11. TVB was incorporated in 1967. From being the junior station with approximately 10% of the audience, it is now the premier television in Hong Kong with an audience rating, as I have said, of well in excess of 80%. In fact the ratings for the Chinese channels this year, during prime time, have been estimated to be 92% for TVB as against 8% for ATV.

12. Despite fierce competition between the stations, there has been some degree of co-operation between them with regard to certain sporting events which have been shown by them jointly in Hong Kong. These events include the World Cup Soccer Tournament, the Asian Games and the Olympic Games. Since TVB was formed, it has shown the Olympic Games on each occasion except for the 1980 Games in Moscow which were boycotted. The 1968 Games in Mexico and the 1984 Games in Los Angeles were shown exclusively by TVB, but the Munich Games in 1972 and the Montreal Games in Canada in 1976 were shared with RTV.

13. After the agreement that was made on the 16th July 1984, the parties engaged ABU to enter into negotiations with SLOOC for the telecasting rights to the 1988 Seoul Olympic Games. The reason for employing ABU was to avoid competitive bidding between the two stations which would only be to the benefit of the organisers.

14. Pursuant to the 1984 agreement, a joint bid in the sum of US$350,000 was made in July 1984 which bid was increased on two subsequent occasions to US$406,250 on the 4th January 1985 and to US$455,000 on the 11th December 1986. Although the parties were acting through ABU, the actual rights to telecast the Games can only be acquired by a television station. After the final bid in December 1986, ATV, in breach of the July 1984 agreement, obtained the exclusive rights to telecast the Olympic Games through their appointed agent Telesports.

15. ATV called no witness before me with regard to the events that led up to the acquisition of the rights, but Telesports called both Mr Lo and Miss Lau.

16. Mr Lo testified that he first became involved in the 1988 Olympics when he sent a telex to SLOOC on the 19th. December 1986 which reads as follows:-

17. Mr Lo said that at this time he had not contacted ATV about his proposal and explained that he had emphasised confidentiality as this was his custom with business affairs. An appointment was made later for Mr Lo to meet Mr Kim the Director for Television Rights of SLOOC in Seoul on the 6th January 1987 and he did so accompanied by Miss Lau. Mr Cho, another representative of SLOOC was also present at the meeting. At that meeting, Mr Lo and Miss Lau were informed that the television rights were still available and would be granted if they could arrange for a television station to buy them. As I have said the rights could only be acquired by a television station. SLOOC quoted a fee of US$1,000,000 for the rights and granted Telesports an option for one month. During the meeting Mr Lo did not say that he was actually representing any particular television station.

18. After he returned to Hong Kong, Mr Lo made some calculations as to the expenditure that would be likely to be required and decided to select ATV as Telesports' partner as they had had a close relationship in the past in presenting the Asian Games. A number of meetings were then held with ATV. The first took place with Mr Deacon Chiu, the Chairman of ATV, on the 13th January 1987 when Telesports disclosed that they were in a position to obtain the telecasting rights to the Games. It is not disputed that Telesports informed ATV of the advantages that they would have by employing them to obtain the rights. No reference, according to Telesports, was made to ABU or to any agreement between TVB and ATV to make a joint bid through ABU. After some consideration, ATV agreed to appoint Telesports as their agent and a letter of authority for this purpose was addressed to SLOOC by ATV. This letter, dated the 26th January 1986, which was a mistake for 1987, was marked private and confidential and reads:-

19. On the following day, the 27th January 1987, Heads of Agreement were signed between ATV and Telesports for the exclusive right to televise the 1988 Seoul Olympic Games in Hong Kong. All sale proceeds after payment of costs and expenses were to be shared between ATV and Telesports. The agreement included provisions whereby during the period leading up to the Olympic Games, Telesports would not sell to any rival of ATV any material of a sporting nature and a clause prohibiting any assignment of the rights acquired.

20. A Letter of Intent was signed between Telesports and SLOOC on the 28th January 1987. This agreement contained the terms for payment of the fee which was eventually reduced to US$900,000 and contained a clause as to confidentiality that provided for no announcement to be made to any other parties before the main contract between ATV And SLOOC was signed. Heads of contract were signed on the 7th February 1987 by SLOOC and ATV and by the International Olympic Committee (IOC) on the 12th February 1987. The Main Contract for the exclusive rights was signed on the 21st May 1987 by IOC, SLOOC and ATV. Fullpayment has been made under this agreement. By the agreement, ATV warranted that it was free to enter into and fully perform the agreement. The agreement contains a clause that prohibits any sharing of the rights with a third party without the written consent of IOC and SLOOC. A press conference was held on the 6th May 1987 when ATV announced that it had obtained the exclusive rights to telecast the Games in Hong Kong. ATV withdrew from the ABU pool for the Olympics on the 8th May 1987.

21. After they learnt that ATV had gone behind their back, TVB reacted quite naturally by making a strong protest to SLOOC coupled with making a unilateral bid for the Games by making an increased offer for the rights. However, their efforts were unsuccessful with the result that the present action was instituted against ATV on the 25th June 1987.

22. ATV has resisted the claim for injunctive relief on the grounds set out in paragraph 8A of the re-re-re-amended defence and counterclaim which reads :-

(c)    Any injunction would cause undue hardship to the Defendant, namely:

 

(d)    On balance, the refusal of any injunction would cause less hardship to the Plaintiff, namely:

 

No pleading was filed on behalf of Telesports which has relied upon Mr Lo's affirmations that were made in support of the application to intervene and be joined as a party. However, similar arguments were relied upon by Telesports to those presented on behalf of ATV.

DELAY

23. It was argued that as TVB became aware on the 6th May 1987 that ATV had obtained the exclusive rights and as the main agreement was not signed until the 21st May 1987, TVB should have taken immediate steps to apply for an interlocutory injunction. Criticism was also levelled at TVB for their failure to apply for an injunction at an earlier stage. I consider that such criticism is quite unjustified for TVB have acted promptly throughout these proceedings. Indeed the evidence reveals that the issue of an injunction was raised both before the trial judge and in the Court of Appeal. That TVB should have taken action to seek an interlocutory injunction between the 6th May 1987 and the signing of the main contract was totally unrealistic. The argument in respect of delay is unsustainable.

PROPRIETARY RIGHTS OF TELESPORTS

24. It was submitted that by the agreement with ATV of the 27th January 1987 Telesports became entitled to proprietary rights. Reliance was placed on the exclusive rights to televise the Olympic Games in Hong Kong and to the prohibition for the assignment or transfer of those rights. However, there is no merit in this argument because quite simply Telesports have no rights to share in the telecasting of the Games, but only a right in contract with ATV to share the profits with them. The rights to the telecasting of the Games are held by ATV alone. Those rights cannot be transferred or assigned without the written consent of SLOOC and IOC.

THIRD PARTY RIGHTS

25. There was no evidence that SLOOC's rights will be affected for they have received payment of their fee.

26. ATV has entered into 36 advertising contracts since July 1987, about half of which have an exclusivity clause for ATV to advertise their products. Since doubts arose as to ATV's entitlement to the exclusive rights, one advertiser has already issued proceedings against ATV for breach of contract while it is anticipated that further claims are likely to be made. It was urged upon me that if injunctive relief is granted in the terms asked for by TVB, the court would in effect be treating TVB's contract with ATV on a preferential basis to those entered into between ATV and the advertisers. This would, submitted counsel for Telesports, trigger off a litigation maelstrom. The hardship that this would cause is coupled with hardship that would be suffered by Telesports which has spent about HK$24,000,000 upon its preparation for the coverage of the Games and also anticipates a further expenditure of HK$12,000,000 if it is to continue.

27. There was no evidence from any of the advertisers as to the hardship that they might suffer, but, in any event, their rights are protected by their agreements with ATV so far as claims for refunds or damages that they may wish to claim against ATV. Telesports may also have a remedy against ATV for breach of contract. On the matter of damages, it has not been alleged that ATV will not be in a position to meet any award that may be made.

ORAL AGREEMENT MADE IN JULY 1984

28. Counsel for Telesports contends that the order of the Court of Appeal related to the telecasting of the rights if they were acquired through ABU whereas the rights were acquired instead through Telesports. Therefore, the oral agreement between TVB and ATV does not affect the rights acquired by ATV through Telesports so that there is no provision for the sharing of those rights by ATV with TVB.

29. Counsel for ATV submitted that the agreement was to share the rights, if obtained through ABU and if obtained at the price agreed. Counsel went on to say that the agreement would fail for uncertainty as to the price, and that the agreement would be tantamount to resurrecting the joint venture claim which has been abandoned and that the agreement would be different from the one made by the parties themselves. I am not persuaded that either submission is correct. Counsel for TVB was right when he submitted that the contract was to make a joint bid through ABU to acquire the rights. There was no restriction on the amount of the bid. The only condition was that the offer to be made must have been agreed. If the rights were acquired, the parties, in the absence of any agreement to the contrary, were to share those rights equally. If the rights were not acquired by virtue of the joint bidding arrangement, TVB and ATV agreed that they would not acquire the right's unilaterally without prior notice which must necessarily mean reasonable notice to the other.

30. The clear object and intention of the agreement was to acquire the rights jointly or to give both parties an equal opportunity to acquire the rights unilaterally after giving notice if the joint bids offered failed. I do not accept that the agreement meant that if the rights were acquired following a joint bid, that the division of those rights would result in a further agreement having to be drawn up to replace that agreement.

TECHNICAL OR ADMINISTRATIVE DIFFICULTIES

31. The evidence adduced by TVB envisaged that if it is granted the right to share the Games, there would be no administrative or technical difficulties involved. Having regard to TVB's wealth of experience in televising previous Olympic Games, two of which were shared with RTV, I have no hesitation in accepting this evidence. Even if this ground had been substantiated, it is not a sufficient reason for refusing TVB's application for injunctive relief. It is, of course, agreed by TVB that if they are granted injunctive relief, that they will pay one-half of the fee that has already been pain to SLOOC and the IOC.

PUBLIC INTEREST

32. In my judgment, the issue of public interest is irrelevant. Many members of the public are interested in watching the Olympic Games and it will be very disappointing if they cannot he seen. However, neither television station has any obligation to bid for the rights to show the Olympic Games in the public interest. Whether to do so is a matter of commercial judgment. The profit motive is the prime consideration. Television programmes are not selected by the public, but by the television stations in conjunction with their advertisers and sponsors, but subject to the provisions of the Television Ordinance. The Olympic Games are of considerable interest to a certain proportion of the public. The dissemination of the Games to as many people as possible will provide pleasure and enjoyment to them while the television stations, advertisers and sponsors will hope to earn large profits. However, they are not shown in the public interest as distinct from being shown to members of the public who are interested in seeing the Games.

ARE DAMAGES AN ADEQUATE REMEDY

33. The main thrust of the argument for ATV and Telesports has been directed to the issue of damages as affording an adequate remedy. I will now turn to the evidence that led to ATV securing the rights by the agreement with IOC and SLOOC.

34. Mr Deacon Chiu was not called as a witness before me but he gave evidence before the trial judge. Nazareth J. accepted his evidence that he did not consider that he had entered into an agreement at the July meeting in 1984 which finding, as to honest belief, was upheld by the Court of Appeal. Nevertheless, that finding does not sit well with the views expressed by Fuad, V.-P., one of the two Vice Presidents who sat in the Court of Appeal where he had this to say in the course of his judgment at page 26:-

".... Surely the emphasis on making a 'joint' bid, without more, bears with it the strongest possible implication that unilateral bids were not contemplated or permitted. It seems to me quite unreal to seek to persuade us that an objective assessment of what was said and done would support a conclusion that as soon as an agreement had been made to put forward a joint bid at a certain sum, either party was free to go off and bid for the rights on their own without telling the other party. I must accept that Mr Deacon Chiu genuinely thought that this was the position but I venture to say that such a view, relevant to his conduct but not to the legal issues arising on this appeal, must be regarded as bizarre in the extreme and out of touch with the realities of the business world in Hong Kong."

35. On the basis of those views, ATV entered into the contract with Telesports to acquire the exclusive rights to the Games.

36. For Telesports, it was asserted that there was an absence of knowledge by Mr Lo and Miss Lau of the July 1984 agreement between ATV and TVB to bid jointly through ABU. Other evidence which, it was submitted, supported this contention was Telesports' guarantee to ATV of HK$5,000,000 of the profits provided in their agreement, correspondence in July 1987 when assurances were sought from ATV by Telesports as to whether they did have the right to contract and a supplemental agreement between ATV and Telesports made on the 10th September 1987 which reinforced and confirmed the earlier agreements.

37. However, I did not find either Mr Lo or Miss Lau to be satisfactory witnesses on this part of their testimony. That evidence conflicts with the evidence given at the trial by Mr Deacon Chiu when he said that Mr Lo had informed him that SLOOC would not deal with ABU.

38. Telesports, up to December 1986 was a small company, but when the chance of securing the rights to the Games arose, they saw the opportunity, to put it colloquially, "of getting into the big time." Only ATV would be interested in securing the rights through Telesports for TVB with its vast resources, would not require their services. The evidence that Mr Lo and Miss Lau went to Seoul without even having canvassed ATV as to its views is difficult to believe, but there is no doubt that they convinced ATV that it would get a better bargain if they were employed to act instead of any other party. I do not consider that ATV was induced to enter into the contract as a result of the application by any pressure from Telesports, but they were only too willing to do so. Mr Lo and Miss Lau were hesitant and evasive upon the reasons for confidentiality and attempted to show that the contract with ATV was genuine and bona fide without the knowledge of the agreement between TVB and ATV. Yet, Mr Lo, with his vast experience in television, was with TVB at the time of the 1984 Olympic Games and he has even attended meetings of ABU. I an unable to accept their evidence that they did not know of the agreement to make joint bids by the two television stations with ABU. I find that as a fact and reject their evidence on this matter. The complete secrecy of the negotiations with SLOOC was clearly aimed at TVB so as to deprive them of the opportunity of bidding against ATV which could have had only one result. I find, therefore, that there was a deliberate agreement between ATV and Telesports to act in a clandestine manner with the avowed object of securing the rights to the Games to the detriment of TVB. ATV and Telesports were hand in glove with each other. Telesports, therefore, can in no way be described as an innocent third party. When TVB came to know that ATV had gone behind their back, they were confronted with a fait accompli which has effectively deprived them of the opportunity to bid for the Games that had been agreed in July 1984.

39. In spite of these facts, ATV still resists TVB's claim to injunctive relief contending that damages will afford an adequate remedy. Damages will, in any event, be difficult to quantify. However, having regard to the facts are ATV to be permitted to capitalise from the wrong that it has committed?

40. My attention was drawn to a number of cases on the approach of the court to this matter. An extract from the judgment of Astbury J. in Sharp v. Harrison(1) at p.510 puts it thus :-

"A man who enters into an agreement is bound in equity to a true and literal performance of it. He cannot be suffered to depart from it at his pleasure, leaving the other party to his remedy by damages at law. There may be cases in which it is so clear that the mischief to arise from a breach of covenant would be inappreciable that the Court may decline to interfere on the ground that a mandatory injunction would be out of all proportion to the requirements of the case, and would operate with extreme harshness on the defendant. But as a general rule, the inconvenience to the defendant will not in such cases be taken into consideration. Nor can the defendant be permitted to set up the inconvenience to the public which would arise from his being compelled to perform his agreement."

41. As to whether damages will be an adequate remedy was referred to succinctly by Sachs, L.J. in Evans Marshall & Co. v. Bertola S.A.(2) where at p. 379 he said :-

"The standard question in relation to the grant of an injunction, 'Are damages an adequate remedy?', might perhaps, in the light of the authorities of recent years, be rewitten: 'Is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?'"

42. The Olympic Games which take place once every four years are unique in the World Sporting Calendar. It is a prestigious event that creates world wide interest. The games are of great importance to a television station, not only for the extra revenue that will be derived from advertisers and sponsors, but from the kudos and prestige that it will achieve. Advertisers and sponsors will naturally prefer to see their advertisements shown on the channel that is showing the Games than on the channel that is not.

43. I do not consider that there is any merit in the argument relative to the matter of loyalty to a particular station for viewers will watch the programmes in which they are interested. Advertisers and sponsors will, I believe, choose the station which can reach the largest audience.

44. Counsel for ATV and Telesports argued strongly that the court is being asked to compel ATV to share the rights with TVB which it does not have the legal right to do for permission depends upon the IOC and SLOOC granting its consent which, up to the present time, has not been given. The evidence shows that SLOOC considered that the dispute between TVB and ATV to be a domestic affair that should be resolved by the parties, but expressed the hope that co-operation would result in both stations taking part to televise the Games. A recent telex from SLOOC confirms that if ATV wants to share the rights, the written consent of IOC and SLOOC must be obtained. While there is no positive evidence that consent will be given, there is, on the other hand, no evidence that it will be refused. However, ATV has taken no steps even to find out if SLOOC and IOC will give their consent. Further, it is surprising that despite the judgment given by the Court of Appeal that was confirmed by the Privy Counsel, ATV has made no contingent plans in case their opposition to TVB's claim for injunctive relief is refused.

45. TVB does not seek to deprive ATV of its rights to show the Games, but to share the rights in accordance with the original agreement and as I have said, it has offered to pay one-half of the fee paid to SLOOC. I can see no reason why IOC and SLOOC should withhold their consent.

46. ATV refuses to give its consent because it will suffer a loss of profit. They say, on the other hand, that they are behaving responsibly by honouring their commitments to Telesports and their advertisers, but cock a snook to their obligations under their agreement with TVB.

47. The argument that hardship will be suffered by ATV and Telesports with the number of claims expected and the expenditure incurred, is wholly unmeritorious having regard to their underhand actions.

48. ATV is hoist with its own petard by the failure to honour its contractual obligations. Further it ill-behoves ATV to criticise TVB for not coming to the court with clean hands when it took perfectly proper steps to make an increased bid after they learnt of the situation.

49. In a nutshell, the case was about ATV's hope to hold onto a profitable venture to which it is not entitled, while Telesports have tried to preserve their position that had been obtained by discreditable conduct. ATV's actions have not only been dishonourable, but have been most unreasonable. All that is required for ATV to do is to seek permission from IOC and SLOOC to share the rights to telecast the Games. If they do not, or if consent is not forthcoming, which I believe is unlikely, the 1988 Olympic Games will unfortunately not be able to be shown in Hong Kong.

50. I am quite satisfied that it would be wholly unjust and inappropriate in all the circumstances of this case to accede to the submission that damages will be an adequate remedy. This is a clear case when the court in its equitable jurisdiction, should not exercise its discretion against TVB where it is seeking to exercise the legal right to which it is entitled. ATV should be held to be bound by its contract with TVB. Accordingly, I shall grant the injunctive relief in the terms sought.