HUMMINGBIRD MUSIC LTD v. DINO ACCONCI AND ANOTHER

HCA 836/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 836 OF 2007

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J U D G M E N T

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Introduction

1.  The defendants, pop singers performing under the group name of “Soler”, have signed two sets of agreements with the plaintiff, appointing the plaintiff to be their worldwide exclusive agent.  In essence, the agreements provide for the making of CD albums of the defendants by the plaintiff, the exclusive management of the defendants’ singing and other activities in the music and entertainment world and the assignment of the copyrights of the defendants’ musical compositions in favour of the plaintiff.  The agreements shall last until end of November 2010.

2.  In early 2007, the defendants by solicitors sought to rescind or terminate the agreements.  They relied on a number of grounds, namely that the agreements were unreasonable and they constituted unnecessary restraint of trade, they were contrary to public policy and illegal, they were signed under undue influence and the plaintiff had acted in breach of contract.  These were strenuously denied by the plaintiff.  The plaintiff asserted that the defendants were acting in blatant breach of the agreements, which it refused to accept.  It held the defendants to the agreements.

3.  Press releases and announcements were made by both sides to set forth their respective cases.

Plaintiff’s application for interlocutory relief

4.  The plaintiff commenced the present action on 25 April 2007.  Two days later, it took out a summons for interlocutory relief against the defendants.  The plaintiff asks the court to grant an injunction restraining the defendants from undertaking work procured by others, save with the prior consent and approval of the plaintiff – such consent or approval shall not be unreasonably withheld or delayed.  The plaintiff also asks for an order that all the proceeds of work undertaken by the defendants from the date of the order sought, save for work procured by the plaintiff, be paid into court, pending the trial of the action.  Besides the usual undertaking as to damages, the plaintiff also undertakes to pay a sum of over $45,000 to the defendants every month from the date of the injunction until further order of the court.  The sum is meant to represent approximately 50% of the average monthly income of the defendants calculated by reference to their aggravate income for the past 24 months.  Two further related undertakings are offered by the plaintiff.

Defendants’ application for interlocutory relief

5.  On the other hand, the defendants have been complaining that the press release and public announcement, as well as the letters written by the plaintiff to various third parties in the music, entertainment and board-casting industries, have resulted in interested parties staying away from the defendants, as they all want to steer clear of the legal disputes between the parties.  Potential engagements have been cancelled.  The defendants fear that they may not be able to adequately promote their forthcoming album, which is due to be released in July.  They are worried that their career, which has taken off satisfactorily since the plaintiff became their manager and agent, will be seriously affected.  They therefore apply by a cross summons dated 25 May 2007 for interlocutory relief against the plaintiff.

6.  In essence, the defendants seek an order restraining the plaintiff from representing to any third party that the plaintiff is still the defendants’ manager, agent or representative, or taking any steps to negotiate for any engagement or agreement on behalf of the defendants.  Moreover, the defendants seek a mandatory injunction requiring the plaintiff to retract unconditionally a public statement dated 20 March 2007 and a press release dated 7 days later that the plaintiff has made regarding its claim that it is still the exclusive manager, agent and representative of the defendants until 2010.

Plaintiff’s application

7.  Both sides are in agreement that “a serious question to be tried” and “the balance of convenience” are the two main considerations for granting or refusing an interlocutory prohibitory injunction, based on the well known case of American Cyanamid Co v Ethicon Ltd [1975] AC 396.  Mr Edward Chan SC, Ms Angela Gwilt with him, appearing for the plaintiff, also reminds the Court that these guidelines and practice of the court notwithstanding, the ultimate source of the court’s jurisdiction is found in section 21L of the High Court Ordinance (Cap 4), and the statutory criterion for the grant of an injunction, whether interlocutory or final, is simply whether it appears to the court to be “just or convenient” to do so, echoing what Ma J (as he then was) has pointed out in Music Advance Limited v The Incorporated Owners of Argyle Centre Phase I HCA 2574/2002, 30 August 2002, para 12(1) to (9) – although the focus of discussion there was on interlocutory mandatory injunctions.

8.  I have no doubt that there is a serious question to be tried in relation to the plaintiff’s case against the defendants for breach of contract.  That is not seriously disputed by Ms Joyce Leung, appearing for the defendants.

9.  However, what concerns me is the relief.  Apart from claiming common law damages for breach of contract, the plaintiff also seeks declarations that the two sets of agreements are still binding and enforceable against the defendants, as well as various permanent injunctions restraining the defendants from taking up any engagements other than through the exclusive agency of the plaintiff.  Although specific performance as such is not prayed for in the statement of claim, that is in effect what the declarations are meant to achieve.

10.  Very fairly, Mr Chan accepts that where as here, a contract provides for personal services and requires a substantial degree of mutual trust and confidence for its performance, specific performance of the contract is out of the question.  Counsel further accepts that where such is the case and specific performance cannot be obtained, neither should the court grant a prohibitory injunction which will have the practical effect of forcing the defendants to specifically perform the contract, for to do so would be to decree specific performance via the backdoor.

11.  These concessions are well made.  The relevant principles of law have been discussed in modern English cases such as Page One Records Ltd v Britton [1968] 1 WLR 157 (manager and pop group), Warren v Mendy [1989] 1 WLR 853 (manager and boxer), Nichols Advanced Vehicle Systems Inc v De Angelis,21 December 1979, Oliver J  (now reported in ISLR 2002, 2(Jul) – motoring team and racing driver), Subaru Technica International Inc v Burns, 12 December 2001, Deputy Judge Strauss QC (motoring team and racing driver) and a very recent decision of Lam J in Worth Achieve Associates Ltd v Huang Sheng Yi HCA 2058/2005 and 2652/2006, 6 February 2007 (manager and actress), where the relevant English authorities have been discussed.  It is plain from these modern cases that older authorities, like Lumley v Wagner (1852) 1 De G M & G 604 (impresario and opera singer) and Warner Brothers Pictures Inc v Nelson [1937] 1 KB 209 (film producer and actress) are no longer thought to be providing a very satisfactory solution to this type of problems, and the courts have found ways to distinguish them.  According to Nourse LJ in Warren v Mendy, the general principles are as follows (at page 867D/E to H):

“This consideration of the authorities has led us to believe that the following general principles are applicable to the grant or refusal of an injunction to enforce performance of the servant’s negative obligations in a contract for personal services inseparable from the exercise of some special skill or talent.  (We use the expressions “master” and “servant” for ease of reference and not out of any regard for the reality of the relationship in many of these cases.)  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.  Compulsion may be inferred where the injunction is sought not against the servant but against a third party if either the third party is the only other available master or if it is likely that the master will seek relief against anyone who attempts to replace him.  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.”

12.  Having looked at the materials that have been placed before the Court in the present case, I take the view that so far as the obtaining of a permanent injunction at trial is concerned, the plaintiff has no realistic prospect of success at all.  Put another way, there is no serious issue to be tried regarding the availability of a permanent injunction at trial.  I note that a similar conclusion has been reached by Lam J in Worth Achieve Associates Ltd v Huang Sheng Yi, a case concerning an actress, the facts of which bear much resemblance to that of the present case.  This is what Lam J has said in relation to the problems and difficulties that granting an injunction would entail in his case:

“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.

…

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 receipt 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 project 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.”

13.  Much of the same things can be said on the facts of the present case.  If the permanent injunction claimed in the statement of claim is granted, plainly the defendants will be left with no practical choice but either to return to work for the plaintiff under its sole management and agency for the rest of the term of their agreements or to give up (most probably, for good) their fledging career as pop singers and entertainers.  And if indeed they should choose to return to work under the plaintiff’s management in those circumstances, that, most probably, would only be the beginning of new troubles and difficulties between the parties, given the amount of co-operation, goodwill, mutual trust and confidence that are required to make things work under the agreements.  Rather sadly all this is lacking now.  Indeed so much is not disputed by Mr Chan.

14.  That being the case, should an interlocutory injunction prohibiting the defendants from accepting work other than through the agency of the plaintiff or with the plaintiff’s prior consent and approval be granted in the meantime, when there is no realistic prospect of the plaintiff getting any permanent injunction in the same or similar terms at trial?

15.  Mr Chan submits that such an interlocutory injunction may still issue.  First, he quite correctly points out that an interlocutory injunction may be granted at any time if it is just or convenient to do so as per section 21L(1), regardless of whether a permanent injunction in the same or similar terms is to be sought at trial.  He refers to Mareva injunctions as a very general example.

16.  More specifically, counsel argues that in the present case, the defendants are not good for the sort of damages that the plaintiff is seeking from them for breach of contract.  Furthermore, the plaintiff has done much in promoting the defendants’ career in terms of efforts and monetary investment (over $4 million is said to have been spent by the plaintiff), and it jealously guards the image and reputation that the defendants have thus far acquired through its efforts.  It therefore needs the interlocutory injunction to maintain what I have called a paternalistic control over the work that the defendants may wish to take up pending trial.

17.  Mr Chan also argues that his client’s undertaking to pay the defendants a monthly sum calculated by reference to their past income under the agreements will ensure that the injunction sought will not unnecessarily affect the defendants’ living.  Moreover, consent and approval of work shall not be unreasonably withheld or delayed by the plaintiff.  Lastly, the plaintiff is prepared to fortify the undertaking as to damages by a bank guarantee.

18.  Despite counsel’s arguments, I am not persuaded that an interlocutory injunction should be granted in the present case.

19.  It is true that depending on the facts, sometimes an interlocutory injunction may issue even though no permanent injunction in the same or similar form is to be sought at trial.  But it does not mean that in circumstances like the present, where there is no realistic prospect of the plaintiff obtaining a permanent injunction preventing the defendants from accepting engagements other than through the agency of the plaintiff or with its prior consent and approval, the court should nonetheless grant an interlocutory injunction on those terms pending trial.  In the absence of special justification, there is simply no reason, whether as a matter of law or common sense, to grant such an interlocutory injunction.

20.  Turning to the special circumstances or justification that Mr Chan has advanced in argument, which I have outlined, I do not think the fact that the defendants may not be good for the damages, if any, that may eventually be awarded against them at trial is a good justification for the interlocutory relief sought in the plaintiff’s summons.  Mr Chan, upon enquiry from the bench, has refrained from saying that his client is entitled to obtain a Mareva injunction against the defendants.  Rightly so.  There is simply no evidence of any real risk of the defendants dissipating their assets pending trial.  No such allegation whatsoever is made.  Mr Chan argues that that does not matter because his client is not applying for a Mareva.  All his client is seeking is, as it were, a right of veto over the defendants’ work in future pending trial, coupled with an order that they pay the proceeds of their engagements into court.

21.  For my part, I see no justification for such a watered-down form of Mareva injunction at all, on the materials before the Court.  My task is made even easier by a voluntary undertaking, which I accept, offered by the defendants through counsel to pay into court 60% of their net income from future engagements (of their choice) pending trial, 60% being the percentage that the plaintiff is entitled to get as manager under the agreements for income earned by the defendants.

22.  In those circumstances, the suggested special justification for the interlocutory injunction that the plaintiff asks for is wholly gone.

23.  As to the protection of the defendants’ hard-earned image and reputation, I fail to see its relevance.  Since there is no prospect of the plaintiff getting specific performance at trial, the image or reputation of the defendants in the music and entertainment industries will no longer be of concern to the plaintiff.  The plaintiff will no longer be able to make use of or further develop the defendants’ image and reputation for commercial exploitation.

24.  Mr Chan seeks to argue that the plaintiff still has an interest in maintaining, if not further developing, the defendants’ career and reputation because it will be entitled to a substantial share in the defendants’ income from work that they may take on pending trial, by way of common law damages for breach of contract.  Indeed, in this regard, the defendants have again through counsel voluntarily offered to keep and maintain a proper account of their work and income between now and trial.  The undertaking, which I also accept, has been offered even though the plaintiff has not sought an account of profits by way of relief in the statement of claim.

25.  For my part, again I am unable to accept Mr Chan’s argument.  Common law damages for breach of contract will be assessed at trial to compensate the plaintiff (assuming it is successful at trial) for its loss and damage arising from the defendants’ failure to perform the agreements.  Damages will be measured by what the plaintiff would have obtained out of the agreements if the defendants had not breached them but had performed them until the expiry of the relevant term.  The assessment will be based on the projected career of the defendants under the exclusive management of the plaintiff for the rest of the term and the projected income to be derived therefrom.  What will actually happen to the defendants’ career and their income between now and trial will only be of fairly minimal evidential value to that quantification exercise.  To contend that the plaintiff needs the interlocutory injunction in order to enable it to accurately quantify its claim for common law damages does not stand up to close scrutiny.

26.  As regards the various “safeguards” that have been suggested in association with the interlocutory injunction sought, I think they are in substance measures to alleviate the hardship that the defendants will suffer if the injunction sought is granted rather than justifications for granting the injunction in the first place.  In any event, as regards the suggestion that approval and consent cannot be unreasonably withheld or delayed, I am in entire agreement with what Lam J has observed in Worth Achieve Associates Ltd v Huang Sheng Yi on how impracticable such a suggestion would be in reality in a passage that I have already extracted.

27.  There are various other relatively minor arguments raised by both sides, both orally and in their written submissions.  I do not wish to deal with them one by one.  Suffice it to say that they have been considered.  Having reflected on the entire circumstances of the case, I have no doubt that the plaintiff’s application for interlocutory relief must be refused.  In the exercise of my discretion, I refuse the application.

Defendants’ cross application

28.  Turning to the defendants’ cross application for interlocutory relief, I note that of the two injunctions asked for, one is prohibitory and the other mandatory in nature.  In relation to the latter, the very cautious approach taken by the court has been well explained by Ma J (as he then was) in Music Advanced Ltd, supra.

29.  I must, however, deal with the cause of action relied on by Ms Leung in support of the application for interlocutory relief first. Counsel on both sides are equally ambitious in their submissions.  Ms Leung essentially argues that irrespective of the final outcome at trial, what the plaintiff has done or threatened to do pending trial is wrongful, as being unlawful interference with the defendants’ business or trade.  Therefore, counsel contends, interlocutory injunctions must issue to prevent the plaintiff from committing the wrong further as well as to undo the harm that has been done in the past.  On the other hand, Mr Chan maintains that no tort has been or will be committed at all pending trial, regardless of whether the plaintiff be eventually successful at trial or not, and for that reason alone, counsel submits, the defendants’ application for interlocutory injunctions must fail.  I will now examine the respective arguments more closely.

30.  Relying on Deputy Judge To’s judgment in AXA China Region Insurance Co Ltd v Pacific Century Insurance Co Ltd [2003] 3 HKC 1, 38 (para 147), Ms Leung submits that there are four basic ingredients of the economic tort of unlawful inference, namely, (1) there should be interference with the victim’s trade or business; (2) by unlawful means; (3) with the intention to injure the victim; and (4) the victim in fact suffered injury as a result.

31.  Ms Leung submits that all four ingredients are present in the instant case, with the modification that the prohibitory injunction she seeks is in the nature of a quia timet injunction, looking to the prevention of any future tort by the plaintiff.  Counsel essentially contends that given that taken to its highest, the plaintiff’s case will not enable it to obtain specific performance of the agreements by the defendants nor any injunction (final or interlocutory) restraining them from taking up work of their own choice without reference to the plaintiff, the plaintiff cannot possibly have made the public statement and press release, and written the many letters to various third parties in the music, entertainment and board-casting industries, claiming to be the exclusive manager of the defendants and hinting at possible legal proceedings should third parties be minded to deal with the defendants without going through the plaintiff, without realising that its claim has no foundation.  The only possible inference to draw in such circumstances is that the plaintiff intends to interfere with and injure the defendants’ commercial interests by the misrepresentations thus made.  That is a tort even if the plaintiff should succeed at trial.  Thus the justification for the injunctions sought.

32.  I think Mr Chan is correct when he submits that Ms Leung has confused liability with remedy.  Essentially, Mr Chan argues that on his client’s case, it has refused to accept the wrongful repudiation by the defendants of the agreements.  Rather it has chosen to affirm the agreements and hold the defendants to them until the expiry of their term in 2010.

33.  In those circumstances, on the plaintiff’s case, the agreements remain alive and in existence.  Even though the plaintiff cannot enforce performance of the agreements by the defendants by means of specific performance, nor can it prevent them from taking up outside work without reference to itself by way of an injunction, still the agreements remain alive and the plaintiff is entitled to enforce its legal right by claiming common law damages for breach of contract.  And in this regard, it must be remembered that entitlement to common law damages for breach of contract is not dependent on the innocent party’s accepting the wrongful repudiation of contract by his opposite party.  See generally Chitty on Contracts (29^th ed), vol 1, paras 24-001 to 24-003 and 24-011.  Thus as Chitty has explained in paras 24-001 and 24-011:

“… The innocent party is not ordinarily bound to treat himself as discharged: if the contract is still executory, he may elect instead to treat it as continuing. … If the innocent party elects to treat the contract as continuing, then it remains in existence for the benefit of the wrongdoer as well as of himself.”

34.  Mr Chan therefore submits that the plaintiff is perfectly entitled to continue describing itself as the sole and exclusive manager, agent and representative of the defendants until 2010.  Moreover, even though the agreements cannot be enforced by specific performance or injunction, the plaintiff will still be entitled to sue not only the defendants for damages for breach of contract, but also any third party who may see fit to deal with the defendants in disregard of the defendants’ contractual commitments to the plaintiff for wrongful interference with contractual obligations or inducing a breach of contract – provided that the necessary knowledge and intention are present.

35.  All this leads Mr Chan to submit that there is simply no material to support the allegation that the plaintiff has issued the public statement and press release and written the letters in question, knowing that it is no longer the agent of the defendants and has no right to prevent third parties from dealing with the defendants, nor the serious allegation that the same has been done by the plaintiff with an intention to injure, a necessary element for the tort of unlawful interference.  Counsel takes his point one step further by contending that this is so irrespective of the final outcome at trial.  In other words, even if the plaintiff eventually goes down on liability at trial, still it does not mean that the plaintiff has made the public announcement/press release and written the letters with no bona fide belief in its claim.  That it may turn out to be an erroneous view on the merits of its own case is not tantamount to not having a bona fide belief in such view.

36.  Ms Leung counters that the unlawful means here is misrepresentation.  That, I am afraid, does not take her case very far in terms of meeting Mr Chan’s points.  Even for misrepresentation as an unlawful interference, what is required is fraudulent misrepresentation amounting to deceit: see AXA China Region Insurance Co Ltd at paras 153 and 158.  In short, a culpable mental element is required.

37.  On the materials before me, I am unable to discern the presence of such an element.

38.  However, equally ambitiously, Mr Chan seeks to take his argument still one step further by contending that because what his client has done thus far does not amount to any tort of unlawful interference irrespective of the outcome at trial as the necessary mental element is missing, therefore the defendants’ application for interlocutory relief to restrain the plaintiff from doing what is not wrongful must fail.

39.  With respect, this is a quantum leap in reasoning.  It overlooks a main reason for the court’s grant of interlocutory relief in appropriate cases.

40.  An inevitable fact in our system of civil litigation is that there is a necessary time lag between commencement of proceedings and trial when the dispute can be adjudicated on.  Depending on the facts, injustice, unfairness, hardship or undue inconvenience could arise as a result of that unavoidable delay inherent in the system of litigation.  In an appropriate case, therefore, the court is prepared to grant interlocutory relief to remove, to curb or at least to alleviate, such injustice, unfairness, hardship or undue inconvenience.  But the court must act with caution, for by definition, the court is seeking to provide relief to one party against the wish, and very often at the expense, of another, before the right or wrong between them is determined.

41.  But subject to that, the court’s concern is to remove, contain or alleviate the injustice, unfairness, hardship or undue inconvenience that has arisen or may arise (if nothing is done in the meantime) by reason of the time lag in the adjudication system.  That being the objective, the court’s focus is not entirely on whether the conduct that the interlocutory relief sought is directed at is or is not wrongful or tortuous pending trial, which is what essentially Mr Chan’s argument seeks to deal with.  Rather, the court proceeds on something like: what if the trial could have been held today and the dispute had been resolved in favour of the party applying for interlocutory relief – would it still have been lawful to do or continue doing that which is under complaint in the application for interlocutory relief?  If the answer is in the negative, the fact that it is not wrong to do what is under complaint now is only due to the fact that there is an unavoidable lag in adjudicating a dispute.  It is not by itself a good reason for refusing the application for interlocutory relief.  On the other hand, if the answer is in the affirmative, that must be a strong reason for denying the application.  All this, in my view, is just another way of explaining why it is generally necessary to ask whether there is a serious question to be tried in such an application.

42.  Using the facts in the present case as an example, if the trial could have been held today, and if the trial judge were to find in favour of the defendants on rescission or breach of contract, any attempt by the plaintiff to write further letters to third parties similar to those it has written would most readily lead to an inference that the same was motivated by an intention to injure, and thus amounted to an unlawful interference with the defendants’ commercial interest.  For in that event, the plaintiff, by definition, would not have been able to hide behind the absence of knowledge on the (lack of ) merits of its own case.

43.  That Mr Chan is now able to run his arguments, which I have described at some length above, is solely due to the fact that in real life, there is no way the court can hold a trial now.  And because of that fact, the defendants have now come to court to complain about the consequential unfairness, hardship and undue inconvenience.

44.  That, I believe, renders Mr Chan’s arguments quite inconclusive as to whether the Court should grant the defendants the interlocutory relief sought.  In short, Mr Chan’s arguments have focused on the wrong timeframe.  They only deal with whether the defendants have an arguable case on saying that what the plaintiff has done or threatened to do pending trial is wrongful.  What the arguments have failed to deal with is whether the defendants have an arguable case on obtaining a permanent injunction at trial to prevent any future unlawful interference – on the basis that the defendants are eventually successful at trial.

45.  For the sake of completeness and to be fair to Mr Chan, he has indeed contended that the defendants will fail at trial on their claim for rescission or repudiation of the agreements.  He relies on Amuse Hong Kong Ltd v Chan Kin Tin Leslie  [1994] 1 HKC 175 and argues that there is no question of rescission in the present case since restitutio in integrum is required.  As regards terminating the agreements for breach, Mr Chan essentially relies on the same arguments that I have dealt with above (ie the defendants have confused right with remedy and so forth).

46.  Mr Chan therefore submits that the defendants’ case is bound to fail at trial, and that is a reason for refusing their application for interlocutory relief.

47.  I am not impressed by the arguments.  Since I am only dealing with an application for interlocutory relief, it is not really appropriate for me to say more than what is absolutely necessary to dispose of counsel’s submissions. 

48.  In gist, I am not satisfied that on the facts of the present case, restitutio in integrum is a complete answer to the defendants’ claim based on rescission.  More importantly, I do not think Mr Chan’s arguments (ie confusing right with remedy and so forth) provide an answer at all to the defendants’ claim based on breach of contract and therefore lawful termination of the agreements – Mr Chan’s arguments, it must be remembered, are essentially premised on his client’s case being successful at trial.  However, what I am concerned with here is whether I can summarily say on paper that the defendants’ case on breach of contract is bound to fail at trial.

49.  That being the case, I am unable to proceed on the basis that there is no serious question to be tried in relation to the defendants’ case at trial.  In other words, the application for interlocutory relief by the defendants cannot be disposed of on that basis.

50.  Rather, I must proceed to consider the balance of convenience, and all other relevant matters, including what is just or convenient to do in the circumstances of the present case.

51.  Ms Leung submits that to refuse the prohibitory injunction may seriously threaten the future career of the defendants because the reality is that no third parties would risk dealing with the defendants in the meantime pending the final resolution of the parties’ disputes.  Plainly damages is not an adequate remedy to the defendants.  On the other hand, the downside to the plaintiff of its not making more statements or writing further correspondence would be small and could be adequately compensated by an award of damages.

52.  I agree with Ms Leung that looking at the matter realistically, the plaintiff’s strong stance is indeed threatening to harm the defendants’ career, particularly if the litigation is to drag on for too long.  Damages would be difficult to quantify and in any event, would not be an adequate remedy.

53.  However, I am not so sure that whatever prejudice that the plaintiff may suffer as a result of the grant of the interlocutory relief sought can be easily quantified, or compensated by an award of damages.  One of the material facts here is that the plaintiff is also new in the management/agency business and the defendants are its first signing.  An interlocutory injunction against the plaintiff may send out wrong signals to the singing and entertainment industries and may conceivably harm the plaintiff’s reputation as a serious manager/agent in the industries. 

54.  Furthermore, even if damages is an adequate remedy and they can be readily quantified, the defendants may well not be good for them.  The plaintiff’s loss could possibly exceed the 60% net income that the defendants have offered to pay into court.

55.  And looking at the matter broadly, the prohibitory injunction asked for by the defendants seeks to prevent the plaintiff from asserting what it bona fide believes to be the true position and its lawful entitlement to any third parties.  During argument, Ms Leung was asked whether her client’s position was that the injunction should extend to prevent the plaintiff from suing a third party who had dealt with the defendants in total disregard of the agreements (knowingly), and counsel replied in the negative.  However, when pressed to explain why a distinction should be drawn between restraining the plaintiff from representing to or communicating with third parties regarding what it perceived to be its legal position and entitlement, which the prohibitory injunction was about, and enforcing such perceived legal position and entitlement by legal proceedings in court, counsel was not able to provide the Court with a satisfactory answer.  In short, under the injunction sought, the plaintiff could not write a letter before action but could nonetheless commence proceedings.  On reflection, it is not so much about drawing a logical distinction, for after all one is concerned with the balance of convenience here.  Rather, it is about encroachment upon the plaintiff’s right to protect its own interest.

56.  In essence, the defendants are seeking to gag the plaintiff from asserting its own legal position (whether well-founded or misconceived) to third parties pending trial, whilst in the meantime the defendants are free to tell the whole world that they are at full liberty to take up engagements from anyone they like without reference to the plaintiff.  That is a serious and one-sided interference with the plaintiff’s freedom of speech, as well as its right to protect what it bona fide believes and perceives to be its legal right and entitlement.

57.  Is what the defendants are seeking an attempt to preserve the status quo, which is of course a material consideration?  On reflection, it seems to me that what is being sought, if acceded to, would go beyond preserving the status quo, which is what the court normally seeks to achieve in granting an interlocutory injunction when the scales are more or less equally balanced: American Cyanamid at p 408F/G.  In particular, the court is vigilant in preventing either party to a piece of litigation from stealing a march or obtaining an undue advantage over his opponent whilst their dispute is pending before the court for resolution.  In that sort of situations, very often, the court is minded to grant an injunction to preserve the status quo. 

58.  In the present case, the defendants have worked under the sole agency and exclusive management of the plaintiff since April 2005 when they were relatively unknown in the pop music and entertainment world, until February 2007 when disputes arose, for a continuous period of almost two years.  From day one of their (substantive) career and throughout that period of time, they have been associated with the plaintiff as their manager, agent and representative.  After disputes broke out in February, both sides were quick to issue public statements to state their respective cases.  The plaintiff commenced proceedings promptly in April 2007 and sought interlocutory relief two days after issue of the writ.  It also wrote warning letters to third parties in the meantime pending the hearing of the application. 

59.  In those circumstances, I do not find granting the interlocutory injunction sought will preserve the status quo. Rather it will be changed by it.  Nor do I think that this is a case where the plaintiff has stolen a march.

60.  Looking at the matter in the round, subject to one concern, I am inclined toward refusing the defendants’ application for an interlocutory prohibitory injunction.  I should add that the application for an interlocutory mandatory injunction is even more difficult to justify than that for the interlocutory prohibitory injunction.  It cannot possibly fare better than the latter application. 

61.  The concern that I have is that the defendants’ career would probably be seriously affected if no interlocutory relief is granted and if the litigation is allowed to run its normal course.  It may probably take many months if not a year or so from now before the case can be heard.

62.  That concern of mine, however, may be adequately addressed by ordering a speedy trial of the action.  Mr Chan has informed the Court that his client is receptive to that course.  Given their complaints, the defendants can hardly object to a speedy trial either.  The court’s diary is such that dates are indeed available for a speedy trial within a very short period of time.  In those circumstances, it seems to me that the just and convenient course to take is to refuse the defendants’ application but order a speedy trial instead.

63.  In the exercise of my discretion, I would so order.

Outcome

64.  In the circumstances, subject to the defendants undertaking by counsel to (1) pay 60% of the net income of the work that they may undertake between now and judgment into court pending judgment or further order of the court; (2) keep a proper account of all such work undertaken by the defendants and the income derived therefrom; and (3) where so required in writing by the plaintiff’s solicitors, appoint jointly with the plaintiff’s solicitors an accountant to verify the said account and the amount to be paid into court, pending judgment or further order, the plaintiff’s application for interlocutory relief is dismissed. 

65.  The defendants’ cross application for interlocutory relief is also dismissed.  The following directions nisi are given instead:

(1)         there be a speedy trial of the action and counterclaim;

(2)         the (substantive) affidavits/affirmations filed in respect of the respective applications for interlocutory relief shall stand as the deponents’ respective witness statements at trial and save where otherwise directed by the trial judge, they shall stand as the deponents’ evidence-in-chief at trial;

(3)         the parties do file and serve their respective lists of documents (including but not limited to those that have already been exhibited to the said affidavits/affirmations) within 10 days from the date this judgment is handed down, and there be mutual inspection of documents within 3 days thereafter;

(4)         the parties do have leave to file and serve further or supplemental signed witness statements as to fact within 10 days thereafter, and save where otherwise directed by the trial judge, they shall also stand as their makers’ evidence-in-chief at trial;

(5)         the parties shall set down the case for a speedy trial within 7 days thereafter, the estimated length of trial being 8 days;

(6)         the trial shall commence on 20 August 2007 (with 8 days reserved) before a monolingual judge, and there shall be held a pre-trial review before the trial judge (if possible) not later than 14 days before the scheduled commencement of the trial;

(7)         the parties shall obtain English translations of all documents in Chinese that they intend to rely on at trial forthwith and their solicitors shall use their best endeavours to agree on the translations so obtained; certified translations shall only be obtained from the court if such agreement cannot be reached – in which case they must be obtained in good time before trial;

(8)         the parties must inform each other and the court forthwith if they or any of them should become aware of any matter or development that may affect the above estimated length of trial or the holding of the speedy trial on the dates set out above;

(9)         for the avoidance of doubt only, time shall run during the summer vacation;

(10)      liberty to apply for further directions. 

66.  Any application to vary the directions nisi must be made within 3 days after this judgment is handed down, failing which the same shall become absolute upon the expiry of the 3-day period. 

67.  I would add that on the materials before me, I consider 8 days to be a rather generous estimate, but if there be any other views, they must be made known to the Court immediately.  I would indicate in advance that convenience of counsel would not be considered.  I would also reveal that up to the time of writing, dates are also available in November for the holding of a speedy trial.  If the parties should find the above timetable to be too stringent, the Court is prepared to consider fixing the speedy trial in November instead, provided that, for obvious reasons, any suggestion to that effect (by way of an application to vary the directions nisi) must be made immediately.

68.  Both parties are in agreement that the respective costs of the applications for interlocutory relief should be in the cause.  I so order.

69.  I thank counsel for their assistance.