WORTH ACHIEVE ASSOCIATES LTD v. HUANG SHENG YI

HCA 2058/2005
HCA 2652/2006
(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 2058 OF 2005 and 2652 OF 2006 (Consolidated)

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J U D G M E N T

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1.  The law protects the right of a party under a contract.  Hence, a person who suffers a breach of a contract committed by the other contracting party may seek redress from the court.  However, the remedies that are available depend on the facts of the case.  In these proceedings, the Plaintiff seeks an interlocutory injunction against the Defendant to restrain her from acting in breach of an Artiste Agency Contract of 25 June 2003 [“the Contract”].  Injunctions, interlocutory as well as final, are discretionary relief.  Should that relief be granted in the present case?  That must be considered against the facts and circumstances of this case.

2.  Under the Contract, the Defendant appointed the Plaintiff as her manager and agent to exclusively manage all the affairs relating to her activities in performing arts for an initial period of three years.  The contractual period would be extended until 24 June 2011 if the Plaintiff successfully generated for the Defendant an accumulated income of not less than RMB 2 million in the initial period.

3.  The Plaintiff’s case is that the condition has been satisfied and the Contract had been extended accordingly.  It is further alleged that the Defendant had committed breaches of the Contract by failing to take up works introduced by the Plaintiff.  More importantly, in breach of the Plaintiff’s exclusive right under the Contract, the Defendant had taken up other works which the Plaintiff did not approve.  In July 2006, the Defendant signed a new artiste agency contract with another company.

4.  On the other hand, the Defendant claims that the Plaintiff had failed to carry out its obligations under the Contract in several respects.  It is not necessary to go into the details of those in this judgment.  The gist of the complaints of the Defendant is that she did not receive the support from the Plaintiff as prescribed under Clause 4 of the Contract.  She also learnt lately that the associated company of the Plaintiff made secret profit out of the handling of her performing activities.  The associated company was credited with RMB 759,000 for the performance of the Defendant in a TV series whilst the Defendant was actually paid $74,000 only.

5.  The difficulties in the relationship between the Plaintiff and the Defendant had been widely reported in the media since the summer of 2005.  Press conferences were held by both parties separately in which allegations and cross-allegations were made.  The Defendant voiced her grievance as regards an incident in March 2005 where she was allegedly pressurized by the Plaintiff to sign a contract for a TV series and her being sidelined by the Plaintiff due to her disobedience.  In response, apart from denial of these allegations, the Plaintiff expressed strong disapproval and regret about some photographs of the Defendant taken by a magazine without the knowledge of the Plaintiff.  The Plaintiff regarded those photographs as having a very damaging effect on the public image of the Defendant.

6.  The Defendant regarded such public display of hostilities by the Plaintiff as inimical to the continuation of her relationship with the Plaintiff.  By a letter from her lawyers in Shanghai dated 28 September 2005, the Defendant claimed that the conducts of the Plaintiff had destroyed the basis for cooperation between the parties and informed the Plaintiff that the Contract would be terminated on 10 October 2005.

7.  The Plaintiff does not accept the Defendant had any justification to terminate the Contract.  It claims that the Contract is still in force and the Writ in High Court Action 2058 of 2005 was issued on 19 October 2005.  The prayers in the Statement of Claim sought a declaration that the Contract is binding and effective until 24 June 2011, specific performance of the Contract and injunctive relief to restrain breaches of the Contract as well as damages.

The interlocutory injunction

8.  On 10 October 2006, the Plaintiff took out the summons seeking interlocutory injunctive relief.  The timing of the application is something the Defendant has commented upon.

9.  In King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785, Rogers V-P made these observations regarding delay in application of this sort,

“There has traditionally been a strong requirement when interlocutory injunctions have been sought, that the plaintiff must show that it has acted promptly and without delay.  Promptly in the circumstances of interlocutory injunctions has been commonly understood to be a period of six weeks or so of unexplained delay and three months with an explanation given for the delay in making application for an injunction.  Since the American Cyanamid decision the importance of irreparable damage in an application for an interlocutory injunction is paramount.  If there is no irreparable damage demonstrated then the need for an interlocutory injunction has not been shown.  This is important because of the approach that the courts take to interlocutory injunctions.  They are not the trial of the action and the court is concerned with whether irreparable damage will occur before a trial can take place.  It stands to reason that if a party is prepared to allow matters to proceed and takes no action with respect to matters which have been extant for lengthy periods, it lies ill in their mouth to say that there is likely to be irreparable damage and that is the case here.”

10.  Mr Yuen SC accounted for the lapse of time between the issue of the Writ and the issue of the summons by referring to the signing of the new artiste agency contract in July 2006.  Counsel submitted that prior to that event the Plaintiff was content with proceeding with the litigation without seeking any interlocutory injunction.  The Plaintiff was, counsel said, hoping to see if the dispute could be resolved by a less antagonistic approach.

11.  I am not impressed by the explanation.  There is no evidence of the Plaintiff having been lulled into a false sense of security by negotiation between the parties as regards the resolution of the dispute.  Quite to the contrary, even on the Plaintiff’s own evidence, assuming the Contract remains valid and binding, the Defendant had repeatedly acted contrary to its terms between October 2005 and July 2006.  On 5 December 2005, the Defendant (as plaintiff) issued proceedings in the Shanghai Intermediate People’s Court against the Plaintiff (as defendant in those proceedings).  In the statement of claim filed in those proceedings, the Defendant (as plaintiff in those proceedings) sought declaration from the court that the Contract had been terminated and asked for damages in the sum of RMB 1 million from the Plaintiff (as defendant in those proceedings).

12.  Further, not only did the Defendant refuse to take up works introduced by the Plaintiff, the Plaintiff was aware that the Defendant had taken up different projects for others since 2005.  This is alluded to in Paragraph 29 of the first Affirmation of Kelly Chow.

13.  In support of the application for interlocutory injunction, the Plaintiff contended that damages would not be an adequate remedy for two reasons,

(a)     if the Defendant observes the Contract, the Plaintiff could have been able to groom her to great success and the income that Plaintiff would be able to generate is difficult to assess;

(b)    without any injunctive relief, the Plaintiff has no control over the activities that the Defendant engages in and such activities might tarnish her image as an artist so that the corresponding commission that the Plaintiff would be able to reap will be less.  Such damage is also difficult to assess.

14.  For the sake of discussion, even assuming these points have merits, in my view they apply equally before the signing of the new artiste contract in July 2006 and thereafter.  Hence, if these were the real concerns of the Plaintiff in terms of irreparable damages, the application for interlocutory injunction should have been made promptly after the issue of the Writ.

15.  The new artiste contract cannot be utilized by the Plaintiff as a fresh excuse to launch what is in substance a belated interlocutory injunction.

16.  Further, even with the knowledge of the new artiste contract, the Plaintiff did not proceed promptly.  The new contract was signed on 13 July 2006 in a very high profile manner with much publicity.  The Plaintiff must have been aware of that very soon thereafter.  It was not until 4 August that the Plaintiff wrote a warning letter to the new agent.  The new agent responded belligerently through a press statement on 9 August 2006.  Despite that, the summons for interlocutory injunction was only issued on 10 October 2006.

17.  Moreover, I fail to see how an order short of specific performance of the Contract could have addressed concern (a) of the Plaintiff set out in paragraph 13.  An interlocutory injunction cannot solve that problem unless it has the effect of compelling the Defendant to reinstate the Plaintiff as her manager.  This brings me to the crucial issue whether injunctive relief should be granted in these circumstances.

18.  The starting point is that the court cannot grant specific performance of a contract of personal services on both sides involving mutual trust and confidence.  As Oliver J put it in Nichols Advanced Vehicle Systems Inc v De Angelis (unreported) 21 Dec 1979,

“An award of damages in such a case can seldom be a complete or adequate remedy for breach of such an agreement, but in general it is the only remedy which the law is able to provide; for not only can the court not practically supervise the performance of the contract but in addition there is something morally repugnant in the notion of shackling together in a relationship of mutual trust, dependence and daily personal contact, individuals who are at loggerheads or who have lost confidence in one another.”

19.  We are of course not dealing with specific performance and the Plaintiff is seeking injunction instead.  Still, there are good authorities for the proposition that the court will not grant an injunction to enforce negative stipulations under a contract for the performance of personal services that involved the continuing exercise of some special skill or talent and a high degree of mutual trust and confidence if the grant of the injunction would effectively compel performance of the positive obligations, see Warren v Mendy [1989] 1 WLR 853; Nichols Advanced Vehicle Systems Inc v De Angelis (unreported) 21 Dec 1979, Oliver J; Page One Records Ltd v Britton  [1968] 1 WLR 157 and Subaru Technica International Inc v Burns (unreported) 12 Dec 2001, Deputy Judge N Strauss QC.

20.  The underlying rationale for this proposition can be found in the judgment of Lindley LJ in Whitwood Chemical Co v Hardman [1891] 2 Ch 416 at p.427,

“What injunction can be granted in this particular case which will not be, in substance and effect, a decree for specific performance of this agreement? It appears to me the difficulty of the plaintiffs is this, that they cannot suggest anything which, when examined, does not amount to this, that the man must either be idle, or specifically perform the agreement into which he has entered. … The principle is that the court does not decree specific performance of contracts for personal service.”

21.  After a detail review of the authorities, Nourse LJ identified the following as general principles applicable to grant or refusal of injunction to enforce performance of contract for personal services inseparable from the exercise of some special skill or talent in Warren v Mendy [1989] 1 WLR 853 at p.867F to G,

“In such a case the court ought not to enforce the performance of the negative obligations if their enforcement will effectively compel the servant to perform his positive obligations under the contract.  Compulsion is a question to be decided on the facts of each case, with a realistic regard for the probable reaction of an injunction on the psychological and material, and sometimes the physical, need of the servant to maintain the skill or talent.  The longer the term for which an injunction is sought, the more readily will compulsion be inferred. … An injunction will less readily be granted where there are obligations of mutual trust and confidence, more especially where the servant’s trust  in the master may have been betrayed or his confidence in him has genuinely gone.”

22.  The test of realism propounded by Nourse LJ as regards compulsion is to be read together with the endorsement by the Court of Appeal of the approach of Oliver J in De Angelis and Stamp J in Page One Records.  In the former case, facing with the difficulties in reconciling Warner Brothers Pictures Inc v Nelson [1937] 1 KB 209 with Page One Records, Oliver J had the following observations,

“I am bound to say that the approach of Stamp J in his consideration of what in substance amounts to specific performance seems to be, if I may say so respectfully, to be the more realistic one.  It simply does not, with respect, seem to me to be realistic to say that nothing short of idleness and starvation is compulsive, and therefore no injunction which involves anything less than that can be said to infringe the principle that the Court will not specifically enforce a contract of personal services.”

23.  Further, although want of mutuality is not decisive, it is still a relevant consideration in the exercise of the discretion (see Warren v Mendy [1989] 1 WLR 853 at p.866B to C and Snell’s Equity 31^st Edn., p.367 Para.15-35).

24.  In Subaru Technica International Inc v Burns, the learned judge emphasized in Para.84 of the judgment that the same principle applies even if the plaintiff have done nothing wrong at all.

“The tenor of the judgments in the earlier cases is that there is a rule or settled practice of general application to all contracts and personal services involving a close relationship between the parties which applies, whatever may have been the circumstances giving rise to the dispute and even in cases in which there is no question of the employer having done anything wrong at all.  It is the nature of the contractual relationship between the parties which calls for the application of the principle, irrespective of the details of the dispute.”

25.  Hence, regarding borderline cases, the Deputy Judge in Subaru said at Para.88,

“In such cases, consideration should be given to whether the Defendant’s evidence establishes a genuine case that the relationship will not work well in the future, to the extent that the contract requires it to work well.  If it does not, then established principles may still permit the ‘sanctity of contract’ to prevail, and no doubt especially in a case in which there is no real doubt that the contract has been broken.  But the sanctity of contract cannot prevail over the established principle, where it applies.”

26.  The Contract plainly requires performance of personal services involving the continuing exercise of some special skill or talent on the part of the Defendant.  Given the nature of the entertainment industry, it is also essential that the Defendant can continue with her performing activities in order to maintain her psychological and material well-being.  Hence, if the Defendant is barred from taking part in any public performances or from using her image or name for any promotion for a substantial period in terms of years, that would be the end of her career.  It is noteworthy that the scope of activities specified in Schedule 1 of the Contract is very wide ranging.  The Defendant is prohibited from authorizing the use of her name, image or sound for whatever purposes under paragraph (ii).  It extends to activities worldwide.

27.  In other words, this is exactly the type of situation referred to by Nourse LJ at the very beginning of the judgment in Warren v Mendy [1989] 1 WLR 853 at p.857.  I do not see any material difference in this regard between the manager contract for a boxer in that case and the Contract between the Plaintiff and Defendant.

28.  On the Plaintiff’s case, the Contract shall run until 2011.  Thus, if the court were to accede to the submissions of the Plaintiff, there would have to be an injunction up to 2011.  Looking at the matter realistically, I have little doubt that faced with such an injunction, the Defendant would have no alternative but to engage the Plaintiff as her manager according to the Contract.  Mr Yuen’s suggestion that there might be scope for some kind of arrangements for dual managers with the Plaintiff acting as some sort of head manager overseeing another manager or agent chosen by the Defendant is, with respect, impracticable and a potential recipe for disaster.

29.  Under the terms of the Contract, the Defendant had to obtain the consent of the Plaintiff before she entered into any contract for services with others.  The Plaintiff was obliged to give professional guidance to the Defendant regarding her performing activities and to promote the Defendant in the field of performing activities.  There could easily be genuine disagreement in opinions as regards whether a particular project is more suitable for the Defendant than another which might clash with the timetable of the first one or whether a promotional activity is better than another one.  When  difference in opinions arises between the Plaintiff and the agent chosen by the Defendant, further litigation could be generated.

30.  More importantly, the smooth operation of the Contract requires a high degree of trust and confidence between the parties.  It involves personal services or guidance from both parties.  The Defendant has to be willing to follow the advice or guidance of the Plaintiff as regards what were good for her in the furtherance of her career in performing activities.  To achieve that, she must have confidence in the Plaintiff.  At the same time, the Plaintiff also has to have confidence in the good faith of Defendant.  Otherwise, it would have difficulties in getting the best projects for the Defendant and in promoting her effectively.  The Contract also would not work if the Defendant has to ask for detail accounts of every project or watch out for the motive of the Plaintiff every time it asks her to sign a contract.  Neither can it work if the Plaintiff has to worry all the time whether the Defendant would turn up for the jobs that it has secured for her.  It would also be inimical to the continuation of the relationship if the Defendant always harbours doubts regarding the Plaintiff’s efforts in promoting her.  Likewise, if the Plaintiff always considers it necessary to reprimand the Defendant for committing acts inconsistent with the image that the Plaintiff has tried to build up for her, the Contract will end up in a stalemate with neither side getting any benefit out of it.

31.  Needless to say, the events in 2005 leading up to the litigation and the exchange of allegations and cross-allegations by way of press conferences or interviews or press releases and by way of statements made in evidence and pleadings filed in these proceedings are highly damaging to the trust and confidence between the parties.

32.  At this interlocutory stage, it is not appropriate for this court to decide which party is to be blamed or perhaps more to be blamed for the breakdown of the relationship.  There are a lot of factual disputes that cannot be fairly adjudicated upon without hearing the evidence.  But there are sufficient materials before this court to lead me to have at least a question mark in my mind as regards whether the fault lies entirely at the doorstep of the Defendant.

33.  In any event, it is crystal clear to me that by now the parties have genuinely reached the point of no return in terms of the continuation of a close relationship of trust and confidence that is the essential underpinning for the Contract.

34.  Mr Yuen referred to a number of authorities although he was unable to say that the principles set out in cases cited above were wrong.  I will briefly explain why those cases could not assist him.  Lumley v Wagner (1852) 1 De GM & G 604 and Warner Brothers Pictures Inc v Nelson [1937] 1 KB 209 were discussed in Nichols Advanced Vehicle Systems Inc v De Angelis and Warren v Mendy.  I agree with the analysis in the latter cases and I doubt if the result in Warner Brothers Pictures Inc v Nelson would be the same given the law as stated in the more recent cases.  There is no discussion pertinent to the principles we are concerned with in Grimston v Cuningham [1894] 1 QB 125 and although it had been cited in Warren v Mendy, the Court of Appeal did not find it necessary to mention it in the judgment.  I do not derive any help from Grimston.

35.  Marco Productions Ltd v Pagola [1945] KB 111 is another case cited but not referred to in the judgment in Warren v Mendy.  The decision of Hallett J was based on a finding that the defendants would not be compelled by the injunction to perform for the plaintiff due to the short period concerned and based on past records the ordinary course of employment of the defendants had not been a continuous one.  Clearly, the case is distinguishable.

36.  Likewise, in Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337, the New South Wales Court of Appeal were of the view that the defendant could not be forced between idleness or working with the plaintiff if an injunction were to be granted.  The injunction lasted only between February and August 1993.  I do not find anything in that judgment which contradicts the principles I derived from the English cases.

37.  Mr Yuen also relied on Lauritzencool AB v Lady Navigation Inc [2005] 1 WLR 3686.  That case was decided in the context of injunctive relief relating to a time charter.  The focus of the discussion was whether the principle laid down by the House of Lords in The Scaptrade [1983] 2 AC 694 that specific performance will not be ordered of a time charter barred the grant of negative injunction to restrain the owner of a vessel to employ the vessel in a manner inconsistent with the time charter.  The context is very different from the Contract that we are concerned with.  Indeed, in dealing with arguments advanced based on Warren v Mendy, Mance LJ observed at Para.24 that the two cases bear no similarity on the facts and a time charter was very far from the particular sub-category of contract for personal services involving very special personal skills, talent and other features which Nourse LJ (and this court in the present case) had to be concerned with.  Hence, it is dangerous to extrapolate by reference to a judgment in the context of time charter some general principles to be applied to a very different context.  I do not think Mance LJ’s judgment in Lady Navigation has in any way called for any modification or revision of the approach laid down by Nourse LJ.

38.  It follows that the court would not exercise its discretion to grant an injunction that would have the effect of compelling the Defendant to continue with having the Plaintiff as her manager.  For reasons given, as a matter of fact, I am of the view that the injunction sought in the Writ will have such an effect.  The following remarks of Oliver J in De Angelis are equally apposite here,

“… if one is to look at the matter practically what is sought here … is, however it may be masked under a pretence that an injunction may encourage the 1^st Defendant to return to the Plaintiffs, specific performance and nothing but specific performance. … If the injunction is granted and he does not go back to the Plaintiffs, then the injunction serves no useful purposes to anybody.”

39.  Whilst the want of mutuality on its own may not be decisive, it would be wrong to regard this as wholly irrelevant in the present context.  I accept the submission of Ms Cheng that Clause 4 of the Contract requires the Plaintiff to perform some personal services for the Defendant.  As analyzed at the hearing, it is unlikely that there could be any order for specific performance to redress any complaints from the Defendant as to the failure of the Plaintiff to perform its obligation under Clause 4.1, 4.2, 4.4 and 4.6.  Further, under Clause 20, the Plaintiff is absolved from any liability arising from damages suffered by the Defendant due to the loss of promotional opportunity.  Hence, there is a potential argument that even if the Plaintiff does not perform its side of the bargain in the promotion of the Defendant, the Defendant could not obtain any remedy against the Plaintiff.  Viewed together with my conclusion that the injunction sought by the Plaintiff would compel the Defendant to perform the Contract, these problems regarding the enforcement of the Plaintiff’s obligation are significant.

40.  Even though this is only an interlocutory application, it is clear to me that the Plaintiff has no prospect of getting an injunction by way of remedy.

41.  Once it is concluded that there is no serious issue to be tried as regards the availability of injunction as a final relief, I see no basis for the exercise of the discretion in the present circumstances to grant an injunction by way of interlocutory relief.

42.  I would add that even if I were wrong on the conclusion on the Plaintiff’s lack of prospect of success in obtaining relief by way of injunction, I would still refuse to grant any interlocutory injunction pending trial.  First, as mentioned, there has been serious delay in the application.  Second, balancing the prejudices and the arguments on irreparable damages advanced by the parties, having regard to the fact that the trial will take place in August, it is obvious that the balance of convenience is against the grant of an interlocutory injunction.  The Defendant has produced evidence that she had already had commitments for her performances up to July and a grant of interlocutory injunction will require her to commit breaches of contracts with third parties.  That could have serious ramifications in her professional development.

43.  On the other hand, as regards the concern of the Plaintiff alluded to in Paragraph 13(b) above, the Plaintiff did not refer this court to any specific aspects in the commitments of the Defendant between now and August that might have the effect of tarnishing the image of the Defendant.  Under the Contract, the benefit that the Plaintiff could derive is measured in terms of commission out of the income of the Defendant generated from her performing activities.  It is therefore in the interest of both parties that the Defendant is gainfully employed during this interim period.  Although the Plaintiff asserts there is a risk that the Defendant might not be in a position to pay damages, I do not regard such a risk outweighs the prejudice that might occasion to the Defendant by the grant of an interlocutory injunction.

44.  In other words, I am of the view that the injustice that the Defendant might suffer as a result of the grant of an interlocutory injunction if the court concludes after trial that no injunction should be granted is greater than the injustice that the Plaintiff might suffer as a result of the refusal of the interlocutory injunction if the court concludes after trial that an injunction should be granted.

45.  Mr Yuen urged upon this court the Plaintiff had invested time and effort in grooming the Defendant and without any injunctive relief, there will not be any adequate protection of the Plaintiff’s rights under the Contract.  Putting aside the primarily factual issue as regards the termination of the Contract, I hope by reference to the law I have already adverted to, the Plaintiff should appreciate why injunction is not the appropriate remedy here.  I may also be forgiven for quoting respectfully again from the very wise words of Oliver J in De Angelis,

“There is a very natural repugnance to permit a defendant to break with impunity, save for such damages as may be ultimately awarded, a clear contractual commitment into which he has freely entered; or to condone or encourage a cynical disregard by others or subsisting contractual obligations of which they are perfectly well aware.  But it is not the function of this Court to punish what it may regard as shabby conducts, and it does* seem to me that any injunction which I grant in the circumstances of this case will* either amount in practice to doing indirectly what the Court cannot do directly, or would be merely a sterile and vindictive mark of the Court’s disapproval which will advantage nobody.”

(*I believe there are clerical mistakes at these points in the transcript provided to me and I have corrected those in accordance with the spirit of the judgment.)

46.  Therefore, Paragraph 1(a) of the summons of 10 October 2006 is dismissed.  But I see no reason why the Defendant should not keep and file monthly account of her income during the interim period.  I cannot and do not propose to decide whether the Defendant is liable to pay to the Plaintiff any sums she earns since there has to be a trial with regard to the termination of the Contract.  However, since the Plaintiff would be entitled to a percentage of her earnings if the Contract remains in force as contended by the Plaintiff, the Defendant must give discovery of documents relating to her income and this is a continuing obligation.  On the other hand, I do not see fit at this stage to direct such accounts to be verified by an affirmation.  If the Plaintiff has good ground to pursue that, it could take out an application by summons.

The anti-suit injunction

47.  I turn to the application for anti-suit injunction.  The Plaintiff seeks an injunction to restrain the Defendant from continuing with the litigation in Shanghai.  I was told that an application for stay of proceedings had been made by the Plaintiff in the Shanghai court and the application was dismissed.

48.  Mr Yuen asked this court to note that the Shanghai proceedings were commenced after the Plaintiff had issued the Writ in this action in Hong Kong.  However, the Writ had not been validly served until February 2006.  Although the Defendant initially challenged the jurisdiction of this court, Ms Cheng told this court she had no instructions to make any application to stay this action.  On the contrary, the Defendant agreed to directions for speedy trial in Hong Kong.

49.  Mr Yuen submitted that in these circumstances it is vexatious an oppressive to allow the Defendant to go ahead with the Shanghai action.  Mr Yuen further contended that if proceedings were allowed to be continued in Shanghai, there is a risk of inconsistent findings by different courts and the expert evidence of the Plaintiff suggests that the Plaintiff could not get any injunction in mainland China.

50.  The last point is disposed of by my conclusion above as regards the lack of prospect of the Plaintiff getting any injunctive relief even in Hong Kong.

51.  I can take the relevant principles governing the approach of the court towards anti-suit injunction from the judgment of Lord Hobhouse in Turner v Grovit [2002] 1 WLR 107, in particular at Para.27,

“The applicant for a restraining order must have a legitimate interest in making his application and the protection of that interest must make it necessary to make the order.  Where the applicant is relying upon a contractual right not to be sued in the foreign country …, then, absent some special circumstance, he has by reason of his contract a legitimate interest in enforcing that right against the other party to the contract.  But where he is relying upon conduct of the other person which is unconscionable for some non-contractual reason, English law requires that the legitimate interest must be the existence of proceedings in this country which need to be protected by the grant of a restraining order.”

Then at Para.28,

“… English law attaches a high importance to international comity and the English court has in mind how the restraining order will be perceived by foreign courts. … Thus English law requires the applicant to show a clear need to protect existing English proceedings.  The protection of English proceedings is, understandably, regarded as a legitimate subject matter for an English court.  It is not the concern of any other court….”

52.  Hence, there is a distinction between cases where application is founded upon a contractual right not to be sued elsewhere and other cases.  And in the latter cases, the applicant has to show the defendant has in bad faith commenced and propose to prosecute proceedings in another jurisdiction for the purpose of frustrating or obstructing the proceedings in this jurisdiction and the court has to be satisfied that it is necessary to make a restraining order to protect the legitimate interest of the applicant in the local action (see Turner v Grovit [2002] 1 WLR 107 Para.29).

53.  There is no exclusive choice of forum clause in the Contract.  Clause 23 provides for the application of Hong Kong law to the Contract and the non-exclusive choice of Hong Kong court as forum.  Whilst there are cases where the court can deduce a contractual right to litigate in a particular forum even in the absence of an exclusive choice of forum provision in the contract (see Sabah Shipyard v Islamic Republic of Pakistan [2003] 2 Ll Rep 571), I do not consider this to be the case here.  There are clear provisions in the Contract that envisages litigation being conducted in jurisdictions other than Hong Kong.  Clause 24 stipulates for severance in the event that the court of the relevant jurisdiction shall hold a provision in the Contract to be invalid, illegal or unenforceable.  Clause 23 stipulates that the jurisdiction of Hong Kong court to be non-exclusive.

54.  There are other relevant factors in the underlying factual matrix.  The Contract governs activities worldwide.  Although Hong Kong law is the governing law, there are provisions in clauses 2.1, 4.5, 4.7, 5.1 and 5.2 stipulating that the effect of those terms are subject to the applicable law of the relevant territory.  The Defendant was a Chinese party residing in Shanghai and under clause 12.4 her address for notice to be given is in Shanghai.  There is no provision for service of proceedings upon the Defendant in Hong Kong.

55.  I hold that under the Contract the Plaintiff does not have any contractual right not to be sued in Shanghai.

56.  Hence, the Plaintiff has to meet the conditions set out in the judgment of Lord Hobhouse in order to succeed in the application for anti-suit injunction.

57.  I accept Ms Cheng’s submission that the Defendant had legitimate grounds to issue proceedings in Shanghai in view of the fact that in practical terms most of her performing activities are in mainland China.  In other words, I do not regard the issue of proceedings in Shanghai as an act of bad faith on her part.  Neither can I see any basis for suggesting that the continuation of the Shanghai proceedings would frustrate or obstruct the progress of this action.  As mentioned, directions for speedy trial with trial dates in August are in place.

58.  It is not necessary for an anti-suit injunction to be granted to protect the integrity of the action in Hong Kong.  The application for anti-suit injunction is therefore dismissed.

Costs

59.  The Plaintiff fails in the summons of October 2006 and I make an order nisi that the Plaintiff shall pay the costs of the Defendant for the summons in any event except those already covered by my previous order.

Postscript

60.  I shall give directions for speedy trial, primarily as per the draft submitted by the parties, with the following modifications,

(a)     Plaintiff shall file Reply and Defence to Counterclaim by 9 February 2007;

(b)    Defendant shall file Reply to Defence to Counterclaim (if any) by 23 February 2007;

(c)     Parties shall file and serve list of documents by 9 March 2007;

(d)    Inspection of documents by 16 March 2007;

(e)     Exchange of signed witness statements by 20 April 2007.

Subject to these modifications, the rest of the directions shall be the same as those set out in the letter of 2 February 2007 from the solicitors for the Plaintiff.

61.  Lastly, having disposed of the issue of injunctive relief in this judgment, the dispute between the parties has been narrowed down.  In my view, this is a case eminently suitable for mediation and it may provide the parties with a solution that is more satisfying to both of them than a judgment imposed upon them by the court.  It also seems to me that the issues are sufficiently identified to have a meaningful mediation.  Since the parties are represented by experienced and sensible counsel, I will leave it in their good hands to advise their respective clients on that option.  If parties are willing to explore that, they should do so as soon as possible.  If that option is not fruitful, the trial will take place in August.