BEACON COLLEGE LTD. v. YIU MAN HAU, ALFRED AND OTHERS

HCA 4273/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4273 OF 2001

____________

______________________

_______________

J U D G M E N T

_______________

Background:

1. In May 1999 the first defendant, (Mr. Yiu), entered into a two contracts with the plaintiff (the College) to provide teaching services, one contract for day school teaching, the other for evening school tutorial teaching. Under the contract Mr. Yiu was paid a base salary for day school teaching and a fee for evening school tutorial teaching that was based on a percentage of the gross fees received from the students who enrolled in classes he took. The day school contract was terminable on one month's notice and Mr. Yiu gave notice in terms of that contract and has ceased day school teaching. There is however a dispute between the parties as to whether there has been proper termination of that contract. That is an issue for trial. The evening school contract, with which this application is concerned, makes no provision for termination by notice on the part of the teacher and is for a term of five years commencing on 1 September 1999 and ending on 31 August 2004.

2. The contract contains a restrain of trade, a confidentiality provision and a restriction on being involved with any other similar school or enticing students away from the College to any other school. The relevant part of clause is itself in three parts. The effect of clause 8(c)(i) is to prevent the teacher from teaching in any other school for the duration of the contract. Clause 8(c)(ii) prevents the solicitation or enticement of students from the College. Clause 8(c)(iii) prevents the teacher from being involved on the ownership, administration or management of any other school. I shall refer to clause 8(c) as "the restrictive covenant".

3. In May 2001 Mr. Yiu, together with other teachers who are also defendants in this action, purported to terminate the evening school contract. The College immediately brought proceedings in which it sought damages and injunctions to enforce the contractual provisions. The matter first came before Chu J on 11 June 2001 when an inter partes interlocutory injunction was sought against Mr. Yiu and the other teachers. As the teachers required time to file evidence the matter was adjourned to 15 June 2001 when the College sought interim injunctions, ex parte on notice. After hearing leading counsel for both the College and the teachers Chu J granted an interim injunction restraining the teachers from breaching the restrictive covenant. The effect of the injunction is not only to restrain the teachers from enticing students from the College to any other school, or from being involved in the administration of any other school, but also to restrain the teachers from teaching evening tutorial classes in any other college.

4. On 20 July 2001 the matter came back before Chu J by way of return day on the interim injunction that had been granted. All recognised that the College faced difficulties in enforcing a contract for personal services by way of injunction. However under the principles in the well known case of Lumley v Wagner (1852) 1 De GM & G 604, [1843-60] All ER Rep 36, the negative covenant restraining the teachers from working at other evening school classes falls into a different category, as an injunction could be granted so long as the employee had a reasonable means of earning a living. That would be the case if the teachers were not restrained from any other form of day school teaching.

5. The teachers were able to seek to obtain day school teaching as, although the parties were in dispute as to whether the day school contracts had been properly terminated, no injunction was sought to restrain them from day school teaching. In order to overcome the teachers' complaint that the enforcement of the negative covenant in clause 8(c)(i) against teaching in other schools exposed them to the whims of the College in any evening class teaching for the College, the College, by its counsel, gave an undertaking in the following terms:

"(1) the defendants will be given the same classes and same schedule as they had been given for the past year;

(2) the plaintiff will not cancel any class to be taught by the defendants; and

(3) [payment provision; not relevant in this application]".

6. On the basis of this undertaking an interlocutory injunction was issued restraining the teachers from breaching the whole of the restrictive covenant and thus from teaching evening classes at any other school. An order for speedy trial was made, but various matters have interceded, particularly difficulties faced by Mr. Yiu in obtaining legal aid, difficulties which were surmounted only after appeals. Thus, despite Chu J's admirable determination to bring the matter to a speedy conclusion, the trial is not due to start until 11 November 2002. Now Mr. Yiu seeks to discharge the interlocutory injunction. He does so on four grounds.

The grounds for discharge:

7. First it is contended that there has been material non-disclosure by the College of such a nature that the injunction ought to be discharged. Specifically it is said that the College failed to disclose to the Court that it was committing a number of offences under the Education Regulations, Sub Leg A Cap. 279 (the Regulations). The consequence of this is said to be that the contract between the parties is accordingly illegal and unenforceable.

8. Second, it is argued that, having regard to illegality of the contract, it is inevitable that Mr. Yiu will succeed at trial and so he should not have to wait any longer for the matter to be concluded.

9. Third, it is argued that the College is in breach of the undertaking given. The contention is first, that by requiring Mr. Yiu to teach at schools solely in Yuen Long, instead of the specific places he taught in during the previous academic year, albeit the same class levels and same times, the undertaking as to "classes and schedules" has not been met. Second, it is argued that higher fees were charged for Mr. Yiu's services than for other teachers, and that for other teachers a "bursary", in reality a discount, was offered for the fees to their classes, but not for Mr. Yiu. The combined effect of these two facts, it is argued, was that Mr. Yiu's classes were not popular and there were virtually no students, and accordingly little prospect of maintaining the income level from the previous year.

10. Finally, it is argued that there has been a change of circumstances, such that the balance of convenience now falls in Mr. Yiu's favour. The argument in this respect is that Mr. Yiu has been unable to obtain any sort of day school teaching job, that he has gone bankrupt, and that accordingly in order to support himself he needs to be able to teach evening school classes.

Fall back position:

11. In the course of argument Mr. Li made it clear that while he sought a complete discharge of the interim injunction Mr. Yiu would be content if he could teach night school in other schools. He would abide by the remaining obligations of the restrictive covenant, such as those not to be involved in the management or administration of a competing school or not to entice students away from the College. He simply sought to teach to earn a living.

12. I invited the parties to consider this matter but was subsequently told only that the College was made an open offer, that remained alive during the remainder of the hearing, that Mr. Yiu was welcome to return to teach at the College if he wished. This offer was rejected.

Should the application be made at trial?:

13. Before I pass to consider these arguments I record that Mr. Liao S.C., for the College, sought to argue that with the trial as imminent as 11 November 2002, these matters should not be argued now, but at trial. I acknowledge the strength of the argument. But a contract for personal services, and one which restricts a man from following his trade or profession except for a particular employer, falls into a special category. The fact that the defendant is a school teacher adds a special dimension to the matter.

14. First, putting aside any reasons for the fact, Mr. Yiu has been unable to get any other day school teaching position. The evidence establishes that he has made a large number of applications for positions as a day school teacher but he has not succeeded in any application. It must be remembered that the basis upon which Chu J was prepared to exercise her discretion in favour of the injunction was first, that the undertaking had been given, and second that the prospect of teaching in day schools was a reasonable alternative for the teachers. However Mr. Yiu has not been able to get a day school job and he presently has no income. That situation may be relieved if he is able to teach evening classes. It must be wrong to delay a hearing that may relieve a man of a situation where he has no income.

15. Second, the new academic year is about to begin. If Mr. Yiu is to be successful on any of the points raised, he ought to be able to do so as soon as possible so that he can seek a position for the new academic year. I am satisfied that had legal aid been granted earlier, this application would have come before the court earlier. In all of the circumstances I required the matter to proceed before me without further delay.

Material non-disclosure:

16. It is clearly established that when seeking an ex parte injunction the applicant must proceed "with the highest good faith": R v Kensington Income Tax Commissioners, ex parte de Poliganc [1917] 1 KB 486, Chu Hung Chung v Chan Kam Ming & Ors [2001] 1 HKC 396 CA. Where material non-disclosure is established the Court will ensure that the party seeking to obtain the injunction is deprived of any advantage derived from a breach of the duty as to disclosure. The rationale for the rule is set out in Hong Kong Civil Procedure 2002 29/1/39:

"The rule that an ex parte injunction will de discharged if it was obtained without full disclosure has a twofold purpose. It will deprive the wrongdoer of an advantage improperly obtained and it serves as a deterrent to ensure that applicants realise that they have a duty to disclose and of the consequences (which may include a liability in costs) if they fail in that duty."

17. It is significant that at both of the hearings before Chu J Mr. Yiu was represented by leading counsel. Although the first hearing may be described as "ex parte upon notice", there is no doubt at all that the hearing on 20 July 2001 was an inter partes hearing. Mr. Yiu had the opportunity to put any evidence upon which he wished to rely before the Court, but apparently elected not to do so. Thus the matter was concluded with evidence from the College only, but after both parties had been heard.

18. There is no similar rule requiring a high duty of disclosure in relation to an injunction granted inter partes. That is presumably because the court, having heard from both parties, may be satisfied that all relevant matters have been adduced. In the present case Mr. Li was obliged to acknowledge that the matters relating to the alleged breaches of the Education Regulations were all known to Mr. Yiu at the time of the hearings before Chu J, and that he elected, upon advice, not to take those points. I accordingly conclude that it is not now open to Mr. Yiu, on an application to discharge an interlocutory injunction, to raise this matter by way of "material non-disclosure". The first ground to discharge the injunction must fail.

19. I should add this. Neither counsel were able to cite any decision in which material non-disclosure has resulted in the discharge of an interlocutory injunction, granted inter partes. However, I would not, for myself, be prepared to say that the rule as to material non-disclosure would not be invoked against an successful applicant for an interlocutory injunction granted inter partes, where the applicant has failed to disclose to the court a material matter, known only to the applicant and not known, at the time the injunction was granted, to the other party. In such a circumstance there is plainly a strong argument, simply based upon the rationale for the ex parte rule, that the applicant should not be able to take advantage of his non-disclosure.

The alleged illegality of the contract:

20. The failure of the non-disclosure point does not end the consideration of the argument as to the illegality of the contract. Mr. Li contends that the law is that if the defendant is so likely to succeed then, notwithstanding the balance of convenience, he is entitled to have the injunction lifted. In this he relies upon N.W.L. Ltd. v Woods; "The Nawala" [1979] 2 Lloyd's LR 325 at 331.

21. Assuming, without deciding the issue, that the defendant may raise this issue at this time, I consider the allegations made.

22. First it is said that there were an excessive number of students in the class. By Reg. 88(c) of the Regulations the maximum size of a class is limited to 45. Mr. Yiu contends that by a device, using live closed circuit television broadcast of his lesson to other rooms, he was in fact teaching to more than 45 persons and accordingly there has been a breach of Reg. 88(c). The College does not in terms deny that this method of teaching was used, but asserts that there was no breach of the Regulations. In particular it is argued that there was a suitably qualified teaching assistant present for every 45 students addressed by Mr. Yiu in the course of the class. I have grave doubts that this will provide an acceptable answer, but do not decide the matter now.

23. Second it is contended that classes went beyond 9.30 p.m., contrary to Reg. 89(1) which prohibits lessons after 9.30 p.m. without the permission of the Director of Education. Again the College does not, in terms, deny that lessons went beyond 9.30 p.m.; indeed brochures for lessons specifically show that lessons in some classes went to 9.45 p.m. But again they deny that there has been a breach of the regulations. Finally it is argued that school fees were collected in advance, contrary to Reg. 62 which requires that fees shall be collected on a monthly basis. To this the College says that the students were offered an option to pay in advance, and not required to make advance payment and accordingly there has been no breach of the regulations.

24. There are two reasons why I reject the argument that the contract is, by virtue of these alleged breaches, illegal and accordingly unenforceable. First, at this interlocutory stage, it is entirely inappropriate to reach a decision on the facts as to what occurred, without proper evidence and cross-examination. This is not an issue that can be determined on the affidavits. Consequently it is a matter for trial. That the facts were known to Mr. Yiu at the time of the grant of the interlocutory injunction will not be a bar to him raising the matter at trial.

25. Second, and more significantly, I am not persuaded that, even if the alleged breaches were established, that the contract is thereby illegal. Mr. Li relied primarily on the decision of the English Court of Appeal in Ashmore, Benson, Pease & Co. Ltd. v A.V. Dawson Ltd. [1973] 1 WLR 828. In that case a contract for road haulage that was made was, as the court notes, perfectly legal. But the haulage company provided a vehicle which was, to the knowledge of both parties at the time the vehicle was provided, underweight, thereby rendering the execution of the contract by way of an illegal method. Thus the court held that the performance of the contract was illegal, and damages were not recoverable by the plaintiffs for negligent damage to the load. The decision is not straight forward and must be seen in the light of the way in which the contract was performed and the nature of the action in which it came into question. The context was that the load had been damaged by negligence on the part of the driver and the owner of the load sued for damages from the transport company, which raised the illegality, of which both knew, by way of defence.

26. In the present case it cannot be argued that the contract is, per se, illegal. It is a perfectly lawful contract for the provision of teaching services. It may be performed in a number of perfectly lawful ways. But the fact that an offence may be committed under the Regulations in the course of the otherwise lawful performance of the contract, does not necessarily make the contract itself unenforceable. As is demonstrated by St. John Shipping Corporation v Joseph Rank Ltd. [1957] 1 QB 267, the fact that a offence has been committed in the course of the performance of a contract does not mean that it will always be unenforceable. There a load line offence was committed by a ship operator in carrying the defendant's goods. The goods having been safely delivered the defendant contended that the offence released him form the obligation to pay for the carriage. The argument was rejected because the plaintiff's right to payment was not a right that was brought into existence by the crime. To hold otherwise would mean that each time a construction contractor committed an offence under the Construction Regulations the contract for labour of the workman involved would become illegal and unenforceable, presumably by either side. I am not persuaded that the fact that offences may have been committed by the employer in the past, means that the employer cannot enforce the future performance of the contract by lawful means.

27. The St. John Shipping case has been followed in Hong Kong in Richardson Greenshields of Canada (Pacific) Ltd. v Chow [1989] HKC 261, and Byjoy Ltd. v Thorogood Estates Ltd. [1985] 2 HKC 746.

28. Next Mr. Li relied upon Intell Education v Siu Yat Ming & Anor (unreported HCA 169/2002). In this matter, on similar issues as in the present case, a school teacher, qualified to teach up to Form 3 was employed by a contract to teach up to Form 5. The case is plainly distinguishable. The teacher was simply not lawfully qualified to teach the class level required by the contract. It would have been an offence for him to have taught Form 5. The very performance of that required by the contract was an offence. In the present case Mr. Yiu is properly qualified to teach as required by the contract and there is nothing to say that he cannot lawfully perform the contract, which does not, by its terms, require oversize or over duration classes.

29. The argument for illegality must fail at this stage, but may be revived at trial.

Breach of the undertaking:

30. The third argument for Mr. Yiu is that there has been a breach by the College of the undertaking. The contention is twofold. First, when Mr. Yiu went back to teach evening classes at the beginning of the academic year in September 2001 he was assigned to classes located at the Yuen Long Main School branch of the College. Previously he had been teaching in schools in Tuen Mun, Yuen Long, Sheung Shui and Mongkok. In the 2000-01 academic year over 600 students had enrolled in his classes and he earned a very considerable income from that fact. In the 2001-2 year, when he was assigned to a Yuen Long school 8 students enrolled. It is his case that the term "classes and schedule" implies that he would teach at the same times and in the same location as the previous year. There is no dispute that he was allocated classes at the same level, thus meeting the "classes" aspect of the undertaking. Second, as I have described, he complains that higher fees were charged for his classes and that a discount offered for other teachers classes, but not for his, rendered his classes financially unattractive to students.

31. I dispose of the second argument first. The undertaking is restricted to "classes and schedules". I am quite unable to see how that expression can encompass fees. No undertaking was given as to the level of fees, either for the teachers or for those not involved in the litigation. On this argument Mr. Yiu fails.

32. The College make two answers to the allegation. First, it is contended that the expression "schedule" simply does not cover location, but is confined to time of the classes. Second, it is argued that as Mr. Yiu failed to give a reasonable undertaking that was sought by the school prior to the commencement of the academic year until so late that classes could not be arranged at the same schools. Accordingly, if there was a breach of the undertaking, it arose from Mr. Yiu's own default.

33. The teachers, including Mr. Yiu, did not assist themselves after the grant of the interim injunction. Postings were made to a web site, apparently operated by the teachers, from which the clear inference is that, notwithstanding the undertaking enabling them to continue evening teaching at the College, they did not intend to continue teaching, wrongly arguing that they were prevented from teaching. But on 16 August 2001 solicitors for four of the teachers, including Mr. Yiu, wrote to the solicitors for the College stating that they would attend evening classes. Attached to the letter was a timetable which set out the dates, locations, class levels and times of the intended classes. It is necessary to examine the correspondence which followed closely.

34. On 23 August 2001, after a delay of 7 days, the College's solicitors responded to the advice that the teachers would return to evening school. First they confirmed that the College would honour its undertaking. Second, they pointed out that the timetable was incorrect. Details of the corrections to the timetable were given. They indicated that further matters would be raised.

35. On 25 August 2001 the College's solicitors wrote again this time referring to the postings on the web site. They sought confirmation of the corrections. Paragraph 4 of the letter said as follows (P. 484):

"You will appreciate that the precise location of where classes are to be conducted has always to be kept flexible and within the discretion of the school, and at any rate cannot be inflexible, or at the call of your clients. Please confirm that the precise location will be, as always, at the discretion of our client."

They dealt also, in paragraph 5, with the issue of a requirement that the teachers confirm their availability, in these terms:

"...please let us have your clients confirmation that once offered, your clients will be positively bound to teach such classes until at least July 2002."

36. On 27 August 2001 the teachers' solicitors replied to the letter of 23 August 2001 confirming that the corrections to the timetable were acceptable to the teachers. On the same day a second letter was dispatched. It contained the following paragraph (P. 487):

"The locations of the classes form part of your client's undertaking. Different classrooms differ in facilities, size, convenience and capacity. Locations affect our clients' income. Location cannot be at your client's discretion."

37. On 27 August 2001 the College's solicitors replied. Notwithstanding the clear statement on 23 August 2001 that the corrections to the schedule were accepted it was asserted that there had been a failure to respond and that there were two versions of the schedule. That was plainly wrong. Again, confirmation was sought that the teachers would be committed to teaching the classes until the end of the school year in 2002. The precise terms of the letter were (P. 496):

"...without proper confirmation from your clients that they will be committed to teaching such classes in confirmed schedules until at least the end of the school year in 2002 (or at least until a definite time on which the School and students can place reliance)..."

This request was repeated in a letter dated 28 August 2001. In that letter the matter of location was referred to in the following terms (P. 496):

"With respect, locations of classes do not and cannot form part of our client's undertaking. Indeed, this is not entirely within our client's discretion."

38. That letter received a reply from the teachers' solicitors on 30 August 2001. The letter said as follows (P. 498):

"A. Our clients are professional teachers. It goes without saying or confirmation that they would teach in professional manner. Our clients do not understand why there is a need to make any confirmation.

B. Our clients do not accept that confirmation is required before you could do anything regarding the offering of the classes. Your client is bound to perform the undertaking to the Court. If your client thinks that it is necessary, confirmation is now given." (Emphasis added)

Thus, on 30 August 2001, the confirmation sought was given in plain and unequivocal terms. As to location, the letter said this (p. 499):

"Our clients do not wish to find that their income is affected by the change of locations. Your client's undertaking to the Court has the purpose of ensuring that our clients would not be unfairly treated by your clients. Locations have a direct and strong bearing on our client's income and hence livelihood.

Our client agrees that your client has the freedom to allocate the classrooms provided that the facilities and sitting capacity are the same and are within the same branch location. These factors are income-bearing."

The position taken by the teachers was that if a class had been taught in Mongkok in the previous year, it must be taught there in the coming year, but may be taught in a different classroom.

39. When I suggested to Ms. Wong, who argued this aspect of the case, that an unequivocal confirmation had been given, I was told that the College's solicitors took the view that the date to which the commitment was given was not clear. But they did not say so in subsequent correspondence, repeating the original terms of the request for confirmation several times. At no stage did they offer any other date than "the end of the school year in 2002", a date which, if not precise in calendar terms, was quite clearly ascertainable and unequivocal. There was no restriction to the confirmation and it would have hardly been open to the teachers to say, that in the light of the confirmation they were not committed to teach until "at least July 2002". I am satisfied that a clear and unequivocal undertaking to teach, in the precise terms requested, had been given on 30 August 2001.

40. The College's solicitors replied to that letter on 5 September 2001. Notwithstanding the clear confirmation of the commitment to teach to the end of the 2002 year it was quite wrongly asserted that the teachers had refused to give such a confirmation. The matter of location was dealt with in the following terms (p. 511):

"Regarding locations, we maintain what we have stated before. Our client is indeed surprised to see your allegation that your clients' income will be affected by the change of locations (or facilities even within the same branch). This is indeed contradictory to your clients' case whether as stated on affirmations or in argument before Her Ladyship quite recently. We are pleased to note your clients' agreement that our Client has the freedom to allocate classrooms but you have added the condition that facilities and sitting (sic) capacity must be the same and within the same branch location. Whilst we do not agree with your clients position, our client shall try their best to accommodate such request. Your client must, however, realize that as a result of their own default in conducting classes, our client has had no alternative but to reorganize schedules as a result. Consequently classrooms which have been previously taught by your clients have been allocated for use by other classes and/or teachers. It would, of course, be quite unrealistic, if not impossible, for classrooms already allocated for other use to be re-allocated yet again on short notice, especially in view of the history of the matter, for which your clients are solely to blame. Our client makes it clear that it will use its best endeavours to secure the same classrooms and/or comparable classrooms for use by your clients as requested by you in your letter under reply. However, your clients must appreciate that such will take time and might not always be possible even with the bets endeavours and intentions."

41. On 11 September 2001 the teachers solicitors wrote in respect of two teachers stating that those two would, as no new timetable had been issued to those teachers, attend at Yaumati branch of the College, in accordance with the previous years timetable and await instructions. On the same day the College's solicitors replied. They pointed out first, that there had been no reply to their letter of 5 September 2001, again seeking the confirmation of a commitment to teaching, although the confirmation had been given and the College had stated its position in respect of location. On 12 September 2001 the teachers' solicitors replied reminding that the confirmation sought had been given on 30 August and repeating it. They raised again the issue of location in these terms (P. 523):

"Our clients insist classes must be arranged at the same locations. Our clients deny the allegation of default and fail to see how their conduct has lead to the re-organisation of the Schedules. Your client knows they have to accommodate our client's teaching as early as 23 July 2001. it is your client's obligation they have undertaken to the Court and should not be depending on our clients notice. Our clients do not understand why they should be blamed for the present situation now in. Your client's use of best endeavours is unsatisfactory. Your client's undertaking to the Court ought to be strictly observed." (sic)

42. A second letter was written by the teachers' solicitors on the same day. It dealt specifically and in detail with the matter of confirmation of the teachers commitment to teach until July 2002. Yet again the confirmation was given in clear terms. This brought a reply on 15 September 2001 in which it was asserted, for the first time, that a date had to be given. The letter in which the first request for a commitment confirmation was made said that the commitment should be:

" until at least the end of the school year in 2002"

There is nothing in the terms of the commitment given on 30 August 2002 by the teachers' solicitors, on their behalf, which in any way suggested that the period requested for the commitment was not accepted.

42. It has been suggested by the College that a statement in a letter by the teachers' solicitors that the commitment was to teach up to "the last class of the academic year, presumably 31st May 2002" confused the issue by suggesting an alternative date. The argument is quite devoid of merit for it ignores the use of the word "presumably" which makes it clear that the commitment given was that sought, namely to the end of the academic year.

43. By letter dated 15 September 2001 the College's solicitors reiterated the College's position in respect of location, namely that best efforts would be made to locate the classes in the same schools but that the delay in starting meant that this may not be possible. On 20 September 2001 the teachers' solicitors replied asserting that the teachers were not concerned as to how the undertaking was carried out, impliedly asserting the right of the teachers to teach in the same schools as in the previous year.

44. On 9 October 2001 the College's solicitors sent to the teacher's solicitors the timetables. These contained the locations at which the classes would be taught. On 11 October 2001 the teacher's solicitors replied in the following terms (P. 547), returning the timetable, with location corrections (p2097):

"All our clients object to the changes of the locations. Such changes would have amounted to breaches of your clients undertakings to the Court. In the circumstances, our clients would attend the classes but with their protests and with all their rights reserved, including especially their right to apply for discharge of the interlocutory injunctions and to claim against your client for all the losses and damages they have and would have suffered. Our clients would discharge their duties in teaching the evening classes subject to the foregoing.

Finally, on 13 October 2002 the College's solicitors repeated their assertion that location was not a matter relating to the undertaking, but accepted the position taken by the teachers in these terms (P. 549):

"Our client is glad to note the your clients would discharge their duties in teaching the Evening Classes (subject to their stance on the locations)."

45. Mr. Yiu duly reported for evening classes at Yuen Long on 23 October 2001. There were no students enrolled in his class although I understand that 8 later enrolled, a vastly fewer number than the 600 he had taught at different locations in the previous academic year. On 24 October 2001 the teachers' solicitors wrote to the College's solicitors informing them that they considered that the College had re-located the classes against the teachers protest and that unless the matter was resolved within three days application would be made to discharge the injunction.

46. I have felt it necessary to set out the correspondence at length as only then can the dispute be seen in a proper light. It is plain that the college knew right from the outset that the teachers considered the issue of location as important and a part of the undertaking. The matter was a live issue throughout the preliminaries to the return to teaching and it is clear that by returning the teachers have not waived their position.

47. The expression "schedule", in the context in which it is used in this case, has not received judicial consideration. The definition of the term in the Oxford English Dictionary is, in the context of this case unhelpful, for as the word is used as a noun (as in this case) it is simply defined as a programme or plan of events. No light is cast upon the extent of such a programme.

48. In Reddy v Lachlan [2000] Lloyd's LR PN 858 the Court of Appeal held that if there was an ambiguity in an undertaking given by a solicitor the ambiguity should be interpreted in favour of the recipient of the undertaking. I consider that the same principle ought to be applied in the case of an undertaking given to support the issue of an interlocutory injunction. In the same case the court said that the critical question of construction was how would the communication in question reasonably have been understood by the recipient in the circumstances in which he received it. Again this approach to construction is, in my view, the appropriate approach to take in this case.

49. I take the view that it is implicit in the use of the word in the context of this case, that it refers to days of the week, times and the places that the classes are to be held. In this respect a "schedule" of classes is the same as a schedule of train or aircraft times. Without the places at which each will depart or arrive they are meaningless. A change of the places is crucial. Equally, both for the reason of income and of logic, in my view the schedule of classes which the College undertook to offer to the teachers was intended to be classes on certain days, at certain times and at certain places, those criteria being defined by reference to the previous years classes taught by the relevant teachers.

50. Mr. Yiu had been supplied with a timetable by the College during the academic year 2000-01. It is at P. 592. It shows the dates, times and locations of the classes as well as the subjects to be taught. When the teacher's solicitors wrote on 16 August 2001 setting out the classes the teacher's expected to teach, the content of this document was followed. However instead of using the same precise pattern, in which the location was marked beside the class designation by an abbreviation, five columns were set out headed "Day"' "Location"' "Room"' "Class"' and "Schedule". On the basis of this it was submitted that the teachers themselves did not consider "location" to be part of "classes" and "schedules" as it was contained in a separate column. I reject this argument. The expressions "level" and "times" could have been used in the last two columns and the document would have meant exactly the same. In the context of the document, the words "class" and "schedule" are used to mean "level" and "time". I am satisfied that they were not used in that restrictive way when being used in the undertaking. In my view, had anyone asked, on 20 or 23 July 2001, when the parties were before Chu J whether the expression "classes and schedules" meant a "timetable" the answer would have been "off course, a timetable such as is at P. 592." Such a timetable will inevitably contain not only the level of class to be taught, and the time at which it is to be taught, but also the location where it is to be taught.

51. I accordingly find that in failing to offer the opportunity to teach the same level of classes at the same days and times, in the same schools as the previous year, the College is in breach of the undertaking given to the Court.

A change in circumstances:

52. Mr. Yiu contends that because he has been unable to find a day school position the balance of convenience now favours him and the injunction ought to be discharged. Notwithstanding Mr. Liao's submission I am satisfied that the evidence establishes that Mr. Yiu has made a considerable effort to find a day school teaching job but has been unable to do so. He has lodged a large number of applications, and none have been successful. By the very nature of the teaching profession job applications must be made prior to the commencement of the academic year. It will only be occasionally that jobs will arise during the school year.

53. It is clear from the judgment of Chu J that the exercise of the discretion in favour of the grant of an interlocutory injunction which would have the effect of preventing the teachers from teaching at evening school was entirely predicated upon the offer of the undertaking which had the effect, with the ability of the teachers to teach day school, of ensuring that evening school classes would be available to them on the same basis as in the previous year, thereby ensuring that they were still able to earn a living. Two events have now occurred. First Mr. Yiu has established that he has been unable to find day school work. Second, with the events of September and October 2001 and the unsuccessful resumption of evening school teaching by Mr. Yiu at the College, the relationship between the parties has broken down to an extent where I find it would be unreasonable to expect Mr. Yiu to resume evening school teaching. Even before he resumed teaching the College demonstrated, by demanding an undertaking that had not been required at the time of the grant of the interlocutory injunction, that they simply did not trust Mr. Yiu, or indeed any of the teachers. Mr. Yiu, on returning to find himself restricted to Yuen Long Main School, has no confidence that the College will be able or willing to provide him with teaching in terms of the undertaking.

54. Accordingly, in the present case, I find that the inability of Mr. Yiu to find a day school job, thereby placing him in a position where he is unable to earn an income from his profession by turning to evening school teaching is a material change of circumstances. I do not find the stated willingness of the College to take him back teaching to be, in the whole of the circumstances, a sufficient answer to the change in circumstances.

Should the injunction be discharged:

55. The grant of an injunction, an equitable remedy, is at the discretion of the court. The fact that grounds exist for the grant of an injunction does not mean that it will automatically follow. All matters relevant to the exercise of discretion must be considered. The same rule must apply to a breach of an injunction, or an undertaking given to support the grant of an injunction.

56. Further, in appropriate circumstances application for discharge of an interlocutory injunction may be made to a judge at first instance and need not be achieved by appeal to the Court of Appeal. Those circumstances were set out by Brown J in London Underground Ltd. v National Union of Railwaymen (No. 2) [1989] IRLR 343. There, without deciding that the circumstances were limited, the obvious examples where discharge at first instance, rather than appeal was appropriate were described as:

(i) the injunction was obtained strictly ex parte;

(ii) the injunction was obtained ex parte on notice, the defendant not having filed any evidence;

(iii) the sole or main basis for seeking the discharge is that there has been a material change in circumstances since the injunction was granted;

(iv) after the injunction is granted, it becomes apparent that it was founded on an erroneous view of the law.

I am satisfied that I have jurisdiction to either discharge or vary the interlocutory injunction, first because, a breach of the undertaking having been established it is a matter of discretion as to what consequence should follow from that breach, and second because there has been a relevant change of circumstances.

Matters relevant to the exercise of discretion:

57. On 23 July 2001 when the injunction was granted on the basis of the undertaking the College knew that there was a likelihood that the teachers would return to teach according to the same schedule as the previous year. They ought then to have planned for that eventuality. On 16 August 2001 the teachers made it clear that they intended to take advantage of the undertaking. At that time the College ought to have put into action the necessary steps to schedule classes for the teachers as they had been scheduled in the previous year. That was their obligation in terms of the undertaking. It is irrelevant that there may have been difficulty in re-organising the timetable, for that was necessarily anticipated at the time of the undertaking. Instead the College prevaricated and sought from the teachers additional terms which were not part of the injunction.

58. Even if the College was entitled to require the confirmation of a commitment by the teachers to teach until the end of the academic year, it was, in my view, completely clear to the College that the promise sought from the teachers had been given by 30 August 2001. The repeated requests for the promise were repeatedly met with the response that the promise had been given on 30 August 2001. The refusal of the College's solicitors to accept that which had been plainly given cannot be explained by saying that the date to which the teachers were committed was not clear. The confirmation had been given in the precise terms sought.

59. Had the College accepted, as I find that it should, the promise to teach as requested there was sufficient time to schedule classes as they had been scheduled for the previous year. In any event, having given the undertaking to the Court, the College was simply obliged to honour it, and should have dealt with what amounted to a timetable problem, thereby permitting Mr. Yiu to teach in the same place he had the previous year.

60. On the other hand, the teachers did not cover themselves with glory. I put aside from the consideration of the exercise of discretion their conduct prior to the grant of the interlocutory injunction. That is past, and not now relevant to the exercise of discretion. But their conduct after the grant of the injunction is relevant to the issue of discharge. The primary matter to be weighed in the balance is their statements on the web-site to the effect that they would not teach. In the light of those the College may well have been justified in seeking a release from the undertaking on the basis that it was plain that the teachers would not cooperate in all that was required to effectively teach. But instead the College elected to accept the teachers statement on 16 August 2001 that they would come back. In my view that relieved the teachers from their earlier position.

61. Next, there is no evidence at all from the College that, without Mr. Yiu and the other teachers in the College, either the number of students or the turnover of the school has in any way reduced. To that extent therefore, the failure of the teachers to observe the provisions of the evening school contract and teach evening school has not caused any loss to the College. Losses of that nature may well be a basis upon which Mr. Yiu might be held to the contract for the full five years. If no loss was suffered by the College by his departure, there is no need to hold him to that part of the contract which requires his personal services to the school if he is to earn income as an evening school teacher. The other aspects of the restrictive covenant may comfortably remain in place until trial even if Mr. Yiu is permitted to teach at an evening school thereby protecting the school from having students enticed away or Mr. Yiu being involved in the management of another school. His role must necessarily be confined to merely that of a teacher in a school. He could not promote the fact that he was the teacher in order to encourage students to attend his classes. But he could teach and potentially earn a living.

62. Finally, as recognised by Chu J, the court ought not to enforce the performance of negative obligations if their enforcement will effectively compel an employee to perform positive obligations under a contract: Warren v Mendy [1989] 1 WLR 853 per Nourse LJ at 867. Having regard to the inability of Mr. Yiu to obtain a day school teaching position the effect of the injunction is to compel him to teach evening school at the College in order to earn a livelihood. In the same case the learned judge noted that an injunction will be less readily granted where there are obligations of mutual trust and confidence, more especially where the employee's trust in the employer may have been betrayed or his confidence in him genuinely gone. Having regard to the conduct of the College in relation to the location aspect of the undertaking I am satisfied that Mr. Yiu is justified in having no confidence in the College to treat him properly should he attempt to return to evening school teaching at the College.

Conclusion:

63. For these reasons, the interim injunction granted on 27 July 2001 is discharged insofar as it restrains the 1st Defendant from teaching as an employed teacher in evening tutorial classes. The 1st Defendant remains in all other respects bound by the provisions of the interim injunction.

Costs:

64. Mr. Yiu has succeeded in his application. During the course of the hearing it was made clear that he would be satisfied if the interlocutory injunction were varied to permit him to teach at evening school. He was content to abide the remainder of the injunction pending trial. I suggested to Mr. Liao that that matter should be discussed by the parties. The College elected not to take advantage of that suggestion but to press their position which has failed. Instead they chose to make an open offer of a position which I have found to be unrealistic having regard to the relationship between the parties. There will be an order nisi that the College must pay Mr. Yiu's costs of this application. Mr. Yiu's costs will be taxed on Legal Aid regulations.