LEUNG KA MING TOMMY AND ANOTHER v. VIRAL DIGITAL STUDIO LTD

HCA 1165/2017

[2021] HKCFI 425

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1165 OF 2017

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J U D G M E N T

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1.  The 1^st plaintiff (“Mr Leung”) is an artist and well-known YouTube personality in Hong Kong. The 2^nd plaintiff (“Freeman”) is and was at all material times a company incorporated in Hong Kong with Mr Leung as its sole director and shareholder.

2.  The defendant (“Viral Digital”) is and was at all material times also a company incorporated in Hong Kong purportedly engaged in the business of artist management.

3.  This is my judgment after the trial of the action which took place on 22 June 2020 and 7 August 2020 in the absence of Viral Digital, which had filed a defence and counterclaim but no witness statements.  I also give my decision on paper in respect of the summons dated 20 August 2020 for leave to join Freeman as the 2^nd plaintiff in this action (the “Leave Summons”).

4.  On 8 August 2016, Viral Digital as “Party A” and Mr Leung and Freeman collectively as “Party B” entered into an artist management agreement written in Chinese (the “Agreement”), which included inter alia the following terms and conditions (Court certified English translation):

“Clause 2.1 This agreement shall be effective for 2 years (from 15 August 2016 to 14 August 2018), within the effective period [Mr Leung and Freeman] agrees that [Viral Digital] shall act as [Mr Leung and Freeman’s] sole artist management agent worldwide;

…

Clause 6.2 For the 2 years of the effective period, [Viral Digital] shall pay [Mr Leung and Freeman] no more than HK$250,000 each month as basic salary;

…

Clause 6.6 The first salary payment shall be on 22 October 2016 and the last salary payment shall be on 22 October 2018.”

5.  Pursuant to Clause 6.2, Viral Digital paid the following amounts to Mr Leung in the months following the Agreement: (1) October 2016: HK$250,000l; (2) November 2016: HK$250,000; and (3) January 2017: HK$250,000.

6.  No payment was made in December 2016 by consent of both parties.

7.  On or about 27 February 2017, Viral Digital informed Mr Leung that it would no longer pay him or Freeman any further amounts and would terminate the Agreement.  By a letter dated 28 March 2017 to Viral Digital, Mr Leung’s solicitors indicated Mr Leung’s acceptance of Viral Digital’s wrongful repudiation of the Agreement.

8.  By a writ dated 18 May 2017 and amended statement of claim dated 23 June 2017, Mr Leung claimed damages for wrongful repudiation, being the difference between HK$250,000 per month and the amount of income he actually earned as a self-managed artist up to the end date of the Agreement, ie 14 August 2018.  Mr Leung filed a witness statement made by him in support of his case.

9.  At the trial, Mr Martin Wong, counsel for Mr Leung, limited his claim in damages to the period up to and including October 2017 on the grounds that the plaintiff was able to earn HK$250,000 or more per month from October 2017 onwards.  For the period from February 2017 to October 2017, deducting the amounts that he had earned as a self-managed artist, the total loss claimed by Mr Leung is HK$1,512,135.

10.  As mentioned above, Viral Digital filed a defence and counterclaim on 2 August 2017 but filed no witness statements.  In short, Viral Digital’s pleaded case was that in February 2017, it discovered that, in breach of the Agreement, (1) Mr Leung had dealt with artist’s work unliterally without its knowledge and/or approval and failed to account for certain revenues; (2) Mr Leung failed to carry out artist’s work it had assigned to him; and (3) Mr Leung failed to notify and obtain approval from it before departing from Hong Kong.  As a result, Viral Digital contends that it was entitled to terminate the Agreement, and counterclaims for damages of at least HK$1,295,000.

11.  Mr Leung firmly denied Viral Digital’s allegations in his reply and defence to counterclaim and his witness statement evidence.  I have considered Viral Digital’s pleaded allegations, but as it has filed no witness statements and there is no conclusive documentary evidence before the Court to substantiate them, I am unable to attribute any weight to such allegations.

12.  On the first day of trial on 22 June 2020, I pointed out to Mr Wong that Clause 6.2 of the Agreement merely provided that the plaintiff’s “basic salary” was to be “no more than HK$250,000”.  On a natural reading of that clause, the defendant was arguably not obligated to pay any fixed or minimum basic salary.  After considering the Court’s observations, Mr Wong applied for leave to re-amend the Amended Statement of Claim to plead a claim of estoppel of convention – in particular, that notwithstanding the wording of the clause, both parties shared and expressed the common assumption that the plaintiff’s “basic salary” was in fact HK$250,000 (see eg Unruh v Seeberger (2007) 10 HKCFAR 31 at §§133, 150).

13.  Notwithstanding the lateness of the proposed amendment, having regard to all the circumstances, including in particular the fact that Viral Digital had chosen to be absent from the trial, I allowed the application. I then adjourned the trial with directions for the exchange of amended pleadings, further lists of documents and further witness statements (if any). During the adjournment, Mr Leung filed a supplementary witness statement. No response was received from Viral Digital.

14.  At the adjourned trial on 7 August 2020, Mr Leung confirmed the contents of his witness statements under oath. Viral Digital was again absent from the adjourned trial.  After hearing Mr Wong, I reserved my judgment.

15.  On 20 August 2020, in response to enquiries from the Court as to whether Freeman, being a party to the Agreement with Mr Leung, should also be joined in the action, the Leave Summons was filed to join Freeman as the 2^nd plaintiff in the action.  I gave directions for the disposal of the Summons on paper and for Viral Digital to indicate its position.  Again, no response was received from Viral Digital.  In support of the Summons, Mr Leung explained in an affirmation that he is Freeman’s sole shareholder and director and that Freeman adopts the same position as him in this action. It is appropriate in my view that all of the parties to the Agreement be bound by any judgment in this action.  I do not see any prejudice to Viral Digital which has not in any event objected to the application.  I therefore allow the Leave Summons.

16.  Having considered Mr Wong’s submissions, Mr Leung’s witness evidence and the documents disclosed, and in the absence of opposition from Viral Digital, I agree and find that Mr Leung and Freeman are entitled to judgment in the action and damages for breach of contract in the sum of HK$1,512,135.

17.  I therefore enter judgment in the sum of HK$1,512,135 against Viral Digital, with interest from the date of writ to judgment at 1% above HSBC’s best lending rate, and thereafter at judgment rate.

18.  As to costs, I make an order nisi that: (1) there be no orders as to costs of the Leave Summons; and (2) Mr Leung and Freeman do have the costs of the action up to and including 22 June 2020, and that there be no orders as to costs thereafter.

19.  Last but not least, I thank Mr Wong for his assistance.