BOUNDLESS JOY INTERNATIONAL HOLDINGS LTD v. STAR FASHION HOLDINGS LTD

HCA 1875/2020

[2025] HKCFI 433

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1875 OF 2020

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JUDGMENT

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Introduction

1.  This is the trial of the plaintiff’s simple and straightforward claim against the defendant for damages for its breach of a written agreement dated 4 December 2019 (“the Agreement”).

2.  The parties entered into the Agreement on 4 December 2019. The plaintiff was not paid the full amount to which it was entitled under the Agreement and the defendant claims that the Agreement was discharged by frustration and so no further payment was necessary.

3.  Mr Poon appears for the plaintiff. The defendant ceased to be legally represented in May 2024 and is absent at the trial.

4.  I am satisfied by the evidence adduced by the plaintiff relating to service on the defendant that the defendant is aware of the trial and just opted not to take any part. Hence, I decided to proceed with the trial hearing in its absence.

5.  There is few significant factual disputes and the plaintiff’s pleaded case is mostly supported by contemporaneous documents. Ms. Shin who is the director of the plaintiff is the only live witness.

Plaintiff’s case

6.  Both the plaintiff and the defendant are locally incorporated companies. The plaintiff carries on the business of advertising, promotion in marketing for its clients whereas the defendant is in the retail business of the brand “REPLAY” (“the Brand”).

7.  The pleaded case summarised by Mr Poon in his opening submissions is as follows:

7.1  In or around November 2019, the defendant showed its interest in a co-operation with the plaintiff to engage a dance crew known as “KINJAZ” to promote the Brand and to attend its events.

7.2  Eventually, after some negotiations, the Agreement, written in the Chinese language, was made.

7.3  The relevant terms of the Agreement include:

7.3.1.  The plaintiff should procure “KINJAZ”, which includes Johnathan Jesse Ha, to provide the following services under the Agreement:

(a)  to take part in the two commercial events specified by the defendant and shoot promotional recordings.

(b)  to provide five advertising clips, the contents of which should be approved by the defendant in writing.

(c)  to create promotional posts in the social media as directed by the defendant.

7.3.2.  The 1^st commercial event is the “Innersect” event (“the 1^st Commercial Event”) held in Shanghai on 7 December 2019.

7.3.3.  The 2^nd commercial event is tentatively an activity relating to the 2020 Tokyo Olympic Games (“the 2^nd Commercial Event”). But it is yet to be confirmed subject to the actual circumstances. The 2^nd Commercial Event should take place within the contractual period. The parties should jointly decide the actual content and format of the 2^nd Commercial Event through negotiation: Clause 1.2.2.[1]

7.3.4.  The Agreement is effective from the date of signing to 31 December 2020: Clause 2.1.

7.3.5.  The contractual amount payable to the plaintiff by the defendant is US$550,000 (“the Contractual Fee”). Within 5 days from the date of the Agreement, the defendant should pay the plaintiff US$165,000 and the balance of US$385,000 should be paid before 28 February 2020: Clause 4.1.

7.3.6.  The copyright fee (“Copyright Fee”) in the amount of US$3,000 payable by the defendant to the plaintiff should be paid in the following manner. First, within 5 days from the date of the Agreement, the defendant should pay the plaintiff US$1,000 and the balance of US$2,000 should be paid before 28 February 2020: Clause 4.2.

7.3.7.  The defendant should make payments in accordance with the time stipulations of the terms of the Agreement: Clause 5.7.

7.3.8.  The law of the Hong Kong Special Administrative Region is the applicable law: Clause 9.1.

7.4  The plaintiff duly performed the obligations under the Agreement and arranged KINJAZ to participate in the 1^st Commercial Event.

7.5.  The defendant duly paid the first instalment of the Contractual Fee of US$165,000 and the first instalment of the Copyright Fee of US$1,000.

7.6.  The defendant, however, failed to pay the balance of the Contractual Fee of US$385,000 and the balance of the Copyright Fee of US$2,000 (collectively “the Outstanding Amounts”) on or before 28 February 2020 pursuant to the Agreement.

7.7.  On 23 June 2020, Ms Shin received an email from Ms Cheng of the defendant (“the 28/2/20 Email”). In the 28/2/20 Email, the defendant alleged that the Agreement had been terminated on 28 February 2020 due to the postponement of the Tokyo 2020 Olympic Games rendering the 2^nd Commercial Event impossible.

7.8.  The plaintiff could not accept the contention of the defendant and continued to demand for payment of the Outstanding Amounts through its former solicitors Messrs. Pauline Wong & Co. by their letter dated 15 September 2020 and its current solicitors Messrs. T.C. Wong & Co. by their letter dated 19 October 2020.

7.9.  The defendant through its former solicitors Messrs. Ma Tang & Co. dated 30 October 2020 denied any liabilities to pay the plaintiff the Outstanding Amounts.

7.10.  The plaintiff could only commence these proceedings on 4 November 2020 to recover the Outstanding Amounts and interest thereon.

Defendant’s pleaded case

8.  The defendant alleges that in or about February 2020, in view of the rising number of confirmed cases of Covid-19 disease and the possibility that the Tokyo 2020 Olympic Games might be postponed to 2021, the plaintiff and the defendant orally agreed that if the Tokyo 2020 Olympic Games were to be postponed or on account of the likelihood of such a postponement, both parties would be discharged from further performance of their respective obligations under the Agreement (“the Alleged Oral Agreement”).

9.  In or about March 2020, it was officially announced that the Tokyo 2020 Olympic Games had to be postponed to 2021 due to the Covid-19 pandemic. The defendant says that the Agreement became physically and commercially impossible to be performed and was therefore frustrated.

Discussion

10.  Ms Shin testified for the plaintiff. She adopted the content of her witness statement as her evidence. Such evidence is not challenged and is largely collaborated by contemporaneous documentary evidence. There is nothing causing me any concern about the reliability of her evidence including her denial of the existence of the Alleged Oral Agreement. Accordingly, I accept her evidence in its entirety.

11.  I further perused the relevant documents including the Agreement, the 28/2/20 Email and the demand letters issued by the plaintiff’s solicitors. Their contents were accurately pleaded in the Statement of Claim.

12.  On the other hand, due to the absence of the defendant and its witnesses, the three witness statements filed on its behalf should be excluded.

13.  In my judgement, the sole issue of this matter is whether the Agreement was discharged by frustration.

14.  Mr Poon refers to Wong Lai Ying v Chinachem Investment Co. Ltd [1980] HKLR 1 in which the Privy Council considered doctrine of frustration at some length. Lord Scarman had this to say (at p.7),

“The law is now well settled. A frustrating event is an interruption of the performance of a contract, which is an event of such a character and duration as to make the contract when resumed a different contract from the contract when broken off: Metropolitan Water Board v. Dick, Kerr & Co. Ltd. Or, as Lord Radcliffe put it in what has become the "locus classicus" for the description of the doctrine,

“frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract"; Davis Contractors v. Fareham U.D.C. [1956] A.C. 696 at pp. 728-9”.

As Lord Denning M.R. put it in “The Eugenia”,

“It must be more than merely more onerous or more expensive. It must be positively unjust to hold the parties bound.”

The court has to decide as a question of law whether the contract has been frustrated; and

“the question must be considered at the trial as it had to be considered by the parties, when they came to know of the cause and the probabilities of the delay and had to decide what to do”: Lord Sumner, Bank Line Ltd. v. Arthur Capel & Co. [1919] A.C. 435 at 454.”

15.  Mr Poon refers to this court several judicial decisions in which the issue as to whether the Covid-19 pandemic could be relied on to invoke the doctrine of frustration. I do not find those authorities to be relevant as the alleged frustrating event in the present case is very different on a proper analysis.

16.  There can be no dispute that the Tokyo 2020 Olympic Games were postponed to 2021 beyond the effective date of the Agreement. The issue is whether this postponement constituted a frustrating event.

17.  In my judgment, the doctrine of frustration is not available to the defence.

18.  Clause 1.2.2 makes it very clear that it is only a provisional decision that the 2^nd Commercial Event may relate to the Tokyo 2020 Olympic Games. It is to be confirmed subject to the actual circumstances. The parties are yet to discuss and determine the details of the content and format of the 2^nd Commercial Event.

19.  It is plain that the parties did not agree that the 2^nd Commercial Event should be related to the Tokyo 2020 Olympic Games. It could be any other activity which the parties agreed through negotiation.

20.  Thus, the postponement of the Tokyo 2020 Olympic Games could not be a frustrating event. It is just a prevarication of the defendant to terminate the Agreement wrongfully. The defence based on the doctrine of frustration must be rejected.

21.  The defendant had no reason not to pay the plaintiff the Outstanding Amounts pursuant to the Agreement. It repudiated the Agreement and wrongfully terminated the Agreement by its letter dated 30 October 2020.

22.  In the result, having accepted the repudiation of the defendant by the issue of the Writ herein, the plaintiff must be entitled to the reliefs claimed in the Statement of Claim.

23.  The Defence is not supported by any evidence and must be rejected. For completeness, I shall point out that there is no merit in the allegation in the Defence that the Agreement was divisible into two parts and each of them related to a commercial event.

24.  On any view, the Agreement is not amenable to such a construction and no such division can be found.

Conclusion and order

25.  In light of the foregoing analysis, I conclude that the pleaded case of the plaintiff is borne out by evidence and the plaintiff’s claim must be allowed. I enter judgment in favour of the plaintiff. I make an order that the defendant should pay the plaintiff the Outstanding Amounts with interest thereon accruing from 28 February 2020 at the rate of 1% per annum above the prime rate until the date of this Judgment.

26.  There is no reason why costs should not follow the event. I make an order nisi that the defendant should pay the plaintiff’s costs of this action including all costs reserved, to be taxed if not agreed.

27.  Lastly, I thank Mr Poon for his helpful submissions.