WORLD SPORT GROUP PTE. LTD v. ASIAN TOUR INTERNATIONAL LTD

HCA 2779/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2779 OF 2008

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R U L I N G

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Introduction

1.  On 31 December last, I granted the Plaintiff an ex parte injunction in these terms:

“1.  The Defendant be restrained, whether by itself or through or by its directors, shareholders, officers, employees or agents, until trial or further order, from entering into (or permitting, allowing, assisting or procuring) any agreement with any party other than the Plaintiff:-

(a)  To produce the following programming for tournaments sanctioned by the Defendant (‘Asian Tour events’):

i.  Asian Tour Weekly programs.

ii.  Highlight programmes of the Asian Tour events.

iii.  Audio-visual coverage of selected Asian Tour events for ‘live’, delayed and/or repeated broadcasts on various media platform.

(collectively the ‘Asian Tour Programming’); and/or

(b)  without first advising the Plaintiff of the terms of the intended agreement with such third party and giving the Plaintiff seven days to match the same in accordance with the terms of clause 8.3 of the Production Agreement dated 7 December 2007 made between the Plaintiff and Defendant.”

2.  Given the potential impact of such an order on the Defendant I appointed yesterday to provide the Defendant with an early opportunity to apply to discharge the order, or to have it amended, prior to the return date which will now be on 6 February 2009 as the inter partes hearing of the application by the Plaintiff to continue this ex parte order.  Notwithstanding the limited time available to it, the Defendant has been able to file an affidavit by Mr Luke Ryan, its solicitor, which opposes the grant of the injunction and which, without prejudice to the Defendant’s contention that the Plaintiff should not have obtained the injunction, has offered an undertaking pending the hearing of the inter partes summons on 6 February.  The undertaking is in these terms:

“The Defendant undertakes, until the return date for the hearing of the Plaintiff’s application for the injunction herein or further order, whether by itself or its directors or officers, servants or agents or otherwise howsoever, not to enter into any agreement granting to any third party the right to produce, sell and/or distribute the Asian Tour Programming without first advising the Plaintiff of the terms of the intended agreement with any such third party and giving the Plaintiff seven days to match the same in accordance with the terms of clause 8.3 of the Production Agreement dated 7 December 2007 made between the Plaintiff and Defendant, save that this undertaking does not prohibit the Defendant itself from producing, selling and distributing the Asian Tour Programming whether by itself or by its directors or officers or by its servants or agents.”

3.  Mr McLeish, who appears for the Plaintiff, submits that the overall effect of the undertaking is such as to permit the defendant to do precisely what the Plaintiff fears the Defendant would do in breach of the parties agreement and which caused the Plaintiff to apply for the ex parte injunction in the first place.  Whilst the Plaintiff is content with the first part of the undertaking, it is the exception to it starting with the words “save that this undertaking” which Mr McLeish says is what the Plaintiff has come to court to avoid, hence the failure of the parties to agree an acceptable form of words and the need for me to now rule on this as a matter of urgency.

The Agreement

4.  The Plaintiff is a Singapore company which is engaged in the sale, distribution and production of sporting events in Asia and elsewhere.  The Defendant is a member of the International Federation of PGA (Professional Golfers Association) Golf Tours and is the only recognised professional golf tour in Asia.  Its membership comprises 150 professional golfers who play in tournaments in Asia sanctioned by the Defendant and who compete for prize money on offer at these tournaments.  In 2009 it has sanctioned 19 tournaments in addition to a number of other co-sanctioned tournaments with other tour operators.  It generates its income mostly through sponsorships and by selling the television coverage of and related programmes about the various tournaments.

5.  Mr Ryan has said that in order to obtain sponsorship of its tournaments, it is essential that it produces and distributes high quality television programs.  As soon as the 11 February the first of 26 Asia Tour Weekly programmes will need to be produced and be ready for airing on ESPN Star Sports, otherwise the Defendant will be in breach of its contractual obligations with the broadcaster.  Mr Ryan says that the effect of the injunction will be disastrous for the defendant’s business.

6.  The current Agreement between the parties under which the Plaintiff has been granted the excusive right to produce and distribute television coverage of the Asian Tour expired on 31 December 2008.  The grant of this injunction is dependent on the construction and effect of the Plaintiff’s right of renewal continued in Clause 8 of the Agreement.  Its terms are as follows:

“8.1  [The Defendant] agrees [WSG] shall have a first and matching right to renew this Agreement for the production, sale and distribution of the Asian Tour Programming.  [The Defendant] hereby grants [WSG] a one (1) month exclusive period of negotiation, where the parties agree good faith negotiations shall commence from:

(a)  1 July 2008 in respect of the sale and distribution rights; and

(b)  1 October 2008 in relation to the production rights.

(each a ‘Renewal Negotiation Period’ and collectively the ‘Renewal Negotiation Periods’).

8.2  If the Parties fail to reach an agreement during the Renewal Negotiation Period, [the Defendant] shall have the right to offer the production, sale and/or distribution rights (as applicable) of the Asian Tour Programming to a third party, on terms no more favourable than those offered to [WSG].  Where a third party then seeks to acquire the rights to produce, sell and/or distribute (as applicable) the Asian Tour Programming, [the Defendant] shall advise [WSG} of the terms of any such bona fide third party offer (the ‘TP Offer’).

8.3  Where [WSG] advises that it wishes to match the terms of the TP Offer, within seven (7) days of receipt thereof, [the Defendant] shall enter into an agreement with [WSG] on the terms of the TP Offer.  Where [WSG] does not respond within said seven (7) days, [the Defendant] shall have the right to enter into an agreement with the third party who provided the TP Offer.”

7.  The history of the process of negotiation for the renewal of the 2008 Agreement has been set out in the affidavit of Mr Hardess sworn on 31 December 2008.  I do not propose to set out here what has taken place save to say that negotiations have broken down and that another sports production company has expressed an interest to take over the Plaintiff’s production rights.

8.  The Plaintiff has therefore come to court to protect its interest under the various parts of Clause 8 above and to insist upon compliance with it by the Defendant. 

9.  Mr Beresford, who appears for the Defendant, submits that by offering an undertaking in these terms, the Defendant has offered terms that mirror its obligations under Clause 8 and that this should be sufficient to maintain the status quo until the inter partes hearing.

10.  Mr McLeish submits that the exception provided for at the end of the undertaking completely undermines its purpose because it allows the Defendant to act in a manner inconsistent with Clause 8.

11.  My reading of the exception to the undertaking is that it certainly has the potential to render the undertaking itself valueless.  Nevertheless, Mr Beresford had indicated in the course of the argument that the exception was not something that was strictly necessary so far as his client is concerned and so, providing it is still prepared to give the undertaking without the exception, I would be content to accept such an undertaking in place of the current injunction.

12.  At this stage, I am satisfied that the Plaintiff has made out a case on American Cyanamid principles to entitle it to an injunction until the matter can be fully argued.  If the undertaking is not forthcoming without the exception, I would therefore be minded to continue the injunction.  It seems to me that the wording of the present order can be amended to reproduce the undertaking that has been offered without the exception.

13.  I will now hear Mr Ryan who appears today on the Defendant’s behalf on whether an undertaking in that form is still forthcoming.

14.  And I will also hear the parties on any other matter consequent upon this ruling including finalising any directions for the filing of further evidence.

Note

15.  After discussion and argument, the Defendant gave an amended undertaking which the Plaintiff and the court was prepared to accept, after which directions were given as to filing of further evidence in preparation for the inter partes hearing on 6 February 2009.  Costs were reserved.