HARROTS LTD. v. GREAT HOPE INVESTMENTS LTD. AND ANOTHER

HCA2786/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2786 OF 2002

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J U D G M E N T

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1. The plaintiff applied for an interlocutory mandatory injunction that the defendants do sign the written resolution of Allman Holdings Limited ("Allman") :

(a) rescinding the shareholders' resolution of Allman passed on 9 July 2002;

(b) to authorise and instruct the directors of Allman to instruct Pacific Squaw Creek Inc. ("PSC") to immediately send a notice to HCV Pacific Partners LLC ("the Agent") withdrawing with immediate effect the Notice of Termination of Agency and Management Agreement dated 9 July 2002 and to cause copies of such notice to be sent to every partner of Squaw Creek Associates partnership ("SCA").

The background

2. The plaintiff and the two defendants are shareholders of Allman. Their respective shareholdings are : plaintiff, 30%; 1st defendant, 50%; 2nd defendant, 20%.

3. Allman is a BVI company. The primary object of Allman is to hold the entire issued share capital of PSC, a Californian corporation, which in turn is a general partner in SCA, a California general partnership which owns and operates the resort at Squaw Creek, California. PSC holds about 36.22% of SCA.

4. The plaintiff is owned by the family of Dr Geoffrey Yeh ("Dr Yeh"). The 1st and 2nd defendants are related and are owned by the family of Mr Kenneth Ting. There are altogether six partners in SCA. Apart from Allman, the two families separately control interests in other partners of SCA. There is a dispute as to the total share in SCA by the two families. The other non-related partner is Tiger Dove LLC, owning 10% of SCA.

5. Under the Partnership Agreement, the resort is to be managed exclusively by the Managing Partner, acting by itself or through delegates or agents. The day-to-day management of the resort (e.g. room, food and beverage) is delegated to Benchmark Management Partnership, Inc. The Managing Partner retains wide power as to the asset management and development of the resort, e.g. :

(a) to determine the time of capital contributions by the partners;

(b) to bring suit to enforce funding deficits;

(c) to decide when other partners may transact other business with the partnership in a capacity other than as a partner.

6. By the Agency and Management Agreement dated 24 June 1992, RJV Properties, Inc. was appointed by PSC as the Agent to act as the Managing Partner of SCA. In March 1998, the Agent successively succeeded as the agent. All the successive agents are controlled by Dr Yeh. The authority of PSC under the Partnership Agreement is delegated to the Agent. However, there are limitations as to the authority of the Agent, e.g. any decision to proceed with Phase II of the resort.

7. Dr Yeh and Mr Kenneth Ting had personal and business relationship which went back some 20 years. They are brothers-in-law, and at some stage have cross held directorships in the respective groups of companies.

8. The respective rights and obligations of the plaintiff and the defendants as shareholders of Allman are regulated by a Joint Venture Agreement dated 19 June 1992. This case is concerned with clause 7.10 of the Joint Venture Agreement :

"7. Matter reserved to shareholders

The shareholders shall procure, so far as they are able, that no action shall be taken or resolution passed by the Company or the California Company except with the unanimous consent of the shareholders in respect of the following matters:

7.10 termination of the authority of the agent appointed by the California Company to act as managing partner of SCA."

The "Company" referred to is Allman. The "California Company" referred to is PSC.

9. The Joint Venture Agreement stipulates a maximum of six directors on the board. The 1st defendant can elect three directors (Mr Kenneth Ting, Chairman; Mr Alan Chan and Mr William Li); the 2nd defendant can elect one director (Mr Ivan Ting); the plaintiff can elect two directors (Dr Yeh and Mr V-Nee Yeh). Mr V-Nee Yeh resigned in late June 2002 without replacement.

10. In April 2001, the defendants discovered that the Agent had undertaken entitlement work or feasibility study on Phase II without approval and the costs were accounted under Phase I. They complained about the accounting treatment and instructed the Agent to stop. In August, the Agent circulated all the partners for consent to carry out the feasibility test study but none was given. In June 2002, the defendants discovered the Agent was still carrying out such work and had spent US$600,000 in 2002. The Agent stated that it understood consent was given for the entitlement work but not the actual development. Mr Ivan Ting asked Mr V-Nee Yeh to stop the Agent but Mr Yeh said he could not order the Agent around. By June, Mr V-Nee Yeh and Mr Ivan Ting agreed to seek legal advice to deal with the Agent.

11. The defendants complained against the performance of the Agent:

(a) unauthorised expenditures under Phase II development of the resort between 2000 and 2002 totalling about US$1 million;

(b) unsatisfactory financial and operating performance of the resort;

(c) shortfalls in achieving "key budget targets" in eight out of ten years of management;

(d) failure to act in accordance with the express instructions of PSC concerning personnel from Benchmark.

12. On 21 June 2002, the 1st defendant requested the holding of a shareholders' meeting of Allman. Dr Yeh replied that it was not in the best interests of Allman to press with undue haste.

13. On 9 July 2002 the shareholders' meeting of Allman was held. Despite the objection of Dr Yeh, the 1st and 2nd defendants voted for the resolution with the following effect :

(a) to authorise and instruct the directors of Allman to instruct PSC to proceed immediately with termination of the agency of the Agent and to re-assume all powers and responsibilities of the Managing Partner of SCA;

(b) to authorise and instruct PSC to do such acts as per the above resolution;

(c) to authorise and direct the directors of Allman to take such action as may be deemed necessary to carry out the purpose and intent of the foregoing resolutions.

The resolution was passed by a majority of 70% to 30%.

14. Following the shareholders' meeting, the directors of PSC passed the resolution terminating the agency of the Agent. Dr Yeh voted against the resolution but the representatives of the 1st and 2nd defendants constituted the majority. PSC then issued a letter dated 9 July 2002 to the Agent terminating the agency on 9 September 2002.

15. On 18 July 2002, the Plaintiff issued the writ and Statement of Claim seeking, inter alia :

(a) a declaration that the defendants were in breach of clause 7.10;

(b) a perpetual mandatory injunction to the same effect as the interlocutory order sought.

The legal principles

16. The principles in relation to the grant of interlocutory mandatory injunctions are summarised by Chadwick J in Nottingham Building Society v. Eurodynamics Systems plc. [1983] FSR 468, 474 :

"In my view, the principles to be applied are these, first, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be 'wrong' in the sense described by Hoffmann J in Films Rover International Limited v. Canon Films Sales Limited [1987] 1 WLR 678 at 68E-F; that is:

'In the sense of writing an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial); or alternatively in failing to grant an injunction to a party who succeeds (or would succeed) at the trial.'

Secondly, in considering whether to grant a mandatory injunction the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action thereby preserving the status quo.

Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish his right at a trial. That is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will the risk of injustice if the injunction is granted.

But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice of this injunction is refused sufficiently outweigh the risk of injustice if it is granted."

17. The summary above was approved by the English Court of Appeal in Zockoll Group Limited v. Mercury Communications Limited [1998] FSR 354.

The issues

18. The issues are :

(a) the interpretation of clause 7.10;

(b) the jurisdiction to grant a mandatory injunction to unravel a breach of a negative covenant that has already occurred;

(c) the discretion of the grant of a mandatory injunction which amounts to specific performance of a contract for services or a contract requiring trust and confidence by the Agent;

(c) balance of justice.

Interpretation of clause 7.10

19. The plaintiff complained that the defendants were in breach of clause 7.10 of the Joint Venture Agreement by procuring the resolutions of Allman and PSC in the absence of the unanimity of the shareholders. The defendants alleged that there was no breach.

20. In construing clause 7.10 of the Joint Venture Agreement the object of the court is to give effect to what the contracting parties intended. Mr Whitehead submitted that the parties' relationships and the background surrounding the transaction so far as known to the parties are relevant, and in particular, that Allman is a "quasi-partnership" (in the sense described by Lord Wilberforce in In re Westbourne Galleries Limited [1937] AC 360, 379).

21. The plaintiff's interpretation is that the words "procure, so far as they are able", qualify the action to be taken (or not), and the resolution to be taken (or not), and not the issue of unanimous consent, i.e., the duty of each shareholder is not to try their best to get unanimous consent, but to try their best to procure that no action is taken, and no resolution is passed, if there is no unanimous consent.

22. Mr Whitehead, SC, for the plaintiff, underscored the requirement of unanimity by referring to other provisions of the Joint Venture Agreement :

(a) clause 4.2 :

"Except as provided in clause 7, all shareholders' resolutions, to be valid and binding, must be passed with the concurring votes of Shareholders holding in aggregate at least 50% in nominal value of the shares of the Company in issue for the time being."

(b) other sub-clauses in clause 7, such as :

"7.1 the disposal of the resort."

"7.3 the decision to exercise the Pre-emption right to acquire the other partners' interests in SCA."

"7.5 to refinance the resort so as to distribute capital in the SCA Partnership to the partners."

"7.8 the termination of the or the entering into a new hotel management agreement in respect of the resort."

"7.12 the consolidation or amalgamation of the Company with any other company."

"7.13 the disposal or dilution of the Company's interest, directly or indirectly, in any of its subsidiaries or in any partnership of which the Group Company is a partner."

23. It was submitted that under clause 7, unanimity of the shareholders is required for the fundamental matters, whereas in other matters, simple majority suffices under clause 4.2.

24. Mr Whitehead submitted that even if the defendants were right that clause 7.10 only requires the best endeavours to achieve unanimity, the defendants have failed to do so as they have circulated the partners and discussed with prospective agents in June, well before there was any purported discussions with the plaintiff just before the voting. At any rate, there is a serious issue to be tried as to whether there is such breach.

25. As an ancillary point, the complaints against the Agent lie in assertions only at this stage. Whether the Agent is liable to be dismissed by reason of a loss of confidence generated by misdeed also raises issues for trial.

26. Mr Whitehead submitted that in the event the plaintiff succeeds at trial and the mandatory injunction is granted and the parties are at deadlock, and there being no provision in the Joint Venture Agreement for the resolution thereof, the parties are at liberty to seek the appropriate remedy from the BVI Companies Court.

27. The defendants' interpretation of clause 7.10 is that the shareholders shall use their best endeavours to achieve unanimity. If there is not possible on a matter which is reasonable and in the best interest of the company, voting is by a majority.

28. Mr Ronny Wong, SC, for the defendants, submitted that in interpreting clause 7, the court should only look at the sectional interest of Allman without looking to the partnership level of SCA. At the Allman level, the shareholdings are : the defendants majority of 70%; and the plaintiff minority of 30%.

29. Clause 7 is a negative covenant. Upon its proper construction, it was submitted that it provides that no action is to be taken by the shareholders subject to two separate exceptions :

(a) unanimous consent of all the shareholders;

(b) so far as they are able not to take action or pass resolution.

30. Mr Wong submitted that "so far as they are able" cannot simply mean the corporate capacity of the shareholders. It qualifies the unanimity of consent, and claws in the equitable considerations that Allman is a quasi partnership company as well as the shareholders' contractual obligations under the Joint Venture Agreement.

31. On the one hand, by reason of the relationship of the parties, the shareholders should use their best endeavours to seek unanimous consent.

32. On the other hand, the contractual obligations of the shareholders are :

(a) clause 2.2 :

"The business shall be conducted in the best interests of the Company on sound commercial profit-making principles so as to generate the maximum achievable profit available for distribution."

(b) clause 11 :

"Each shareholder undertakes with the others as follows :

11.1 to exercise all voting rights and powers of control available to it in relation to the company so as to give full effect to the terms and conditions of this Agreement including, where appropriate, the carrying into effect of such terms as if they were embodied in the company's Memorandum and Articles of Association."

And these oblige the shareholders to do what is in the best interests of Allman so as to generate the maximum achievable profits available for distribution.

33. In the absence of unanimous consent, the majority shareholders are able to terminate the agency, if their contractual obligations otherwise dictate.

34. Clause 7 on the one hand protects the minority by obliging the majority to seek unanimous consent. On the other hand, it protects the majority to enable it to act in the best interest of the company in case of unreasonable withdrawal of consent. It is a compromise.

35. Mr Wong also referred to other clauses in the Joint Venture Agreement which stipulate a strict requirement of unanimous consent :

(a) clause 10.1 :

"No new Shares shall be issued except with the consensus of all the Shareholders."

(b) clause 13.5(c) :

"In the event that the Shareholders shall unanimously agree, should the Auditors be unable to identify a Successful Shareholder following, the submission of the initial Sealed Bid Notices that there is no purpose to be served in inviting further Sealed Bid Notices."

36. The deadlock provision in clause 13 did not cover clause 7.10. That militates further against the requirement of unanimity of consent as it could not be intended that there be either stalemate or winding up.

37. After hearing the arguments, I feel assured to a sufficiently high degree that the plaintiff may establish a breach at trial for the purpose of considering an interlocutory mandatory injunction.

Breach of negative covenant

38. Mr Wong submitted that all the authorities cited by the Plaintiff, such as Nottingham Building Society, Zockoll Group, etc. are concerned with ordering an act which has not yet taken place. Here, the alleged breach of the negative covenant has taken place. What the plaintiff is doing is to re-formulate that covenant into a positive form, and to seek an interlocutory mandatory injunction on the re-worded covenant. No authority has been cited for the exercise of that jurisdiction. The plaintiff has delayed in obtaining an injunction to prevent the defendants from voting. It is not entitled now to unravel the resolution passed.

39. The power to grant injunctions derives from section 21(L) of the High Court Ordinance (Cap. 4). The jurisdiction of section 21(L) is very wide. It imposes no fetter on the jurisdiction of a judge to do what is just and equitable in all circumstances, subject to established principles which have grown up by precedent (see White Book (HK) 2002, paragraph 29/1/3).

40. In considering whether to grant an interlocutory injunction the court was primarily concerned not with whether the injunction was mandatory or prohibitory but whether the injustice suffered by the defendant if the injunction was granted and the plaintiff later failed at trial was greater than the injustice to the plaintiff if the injunction was not granted and he later succeeded at trial (see Films Rover International Limited & Ors v. Cannon Films Sales Limited [1987] WLR 670, per Hoffman J).

41. I am satisfied that there is jurisdiction to entertain the plaintiff's application.

Specific Performance

42. Mr Wong in his skeleton argument submitted that if the plaintiff's interpretation on clause 7.10 be right, the mandatory injunction amounts to a stipulation that the Agent will be retained as agent unless there should at some time be a unanimous vote to the contrary. For a mandatory injunction to be granted at an interlocutory stage, the court needs a high degree of assurance that it will appear at trial that the injunction is rightly granted. Such assurance is not possible here. The agency, if reinstated, would be of indefinite duration and potentially for the life of the resort venture, absent agreement by the Plaintiff to terminate it earlier. The court will not enforce such an arrangement where trust and confidence are elements of the relationship and such trust and confidence have broken down.

43. In Co-operative Insurance Limited v. Argyll Stores Limited [1998] AC 1, the House of Lords held that the settled practice of the court not to grant a mandatory injunction requiring the carrying on of a business was soundly based, bearing in mind, in particular, the difficulty of drawing up the order with sufficient precision to avoid wasteful litigation regarding compliance with it and that the defendant might suffer far greater loss by having to comply with the order than the plaintiff would suffer from the contract being broken, thus putting the plaintiff in an unjustly favourable bargaining position.

44. Mr Whitehead submitted that the issue before the court is not the enforcement of the contract for the services of the Agent as such, but the alleged breach by the defendants to vote in a certain manner under the Joint Venture Agreement. The Agency and Management Agreement is a distinct contract between PSC and the Agent and they are not parties before the court. The court is only concerned with enforcement of the Joint Venture Agreement between the parties.

45. In any case, there is no inflexible rule that as soon as any element of personal service or continuous services can be discerned in a contract, the court will, without more, refuse performance.

46. In Posner & Ors v. Scott-Lewis & Ors [1987] 1 Ch. 25, Mervyn Davies J at pp.34-35 referred to C.H. Giles & Company Limited v. Morris [1972] 1 WLR 370 per Megarry J at p.318 :

"The reasons why the court is reluctant to decree specific performance of a contract for personal services (and I would regard it as a strong reluctance rather than a rule) are, I think, more complex and more firmly bottomed on human nature ... But I do not think that it should be assumed that as soon as any element of personal service or continuous service can be discerned in a contract the court will, without more, refuse specific performance. Of course, a requirement for the continuous performance of services has a disadvantage that repeated breaches may engender repeated applications to the court for enforcement. But so may many injunctions; and the prospects of repetition, although an important consideration, ought not be allowed to negative a right. As is so often the case in equity, the matter is one of the balance of advantage and disadvantage in relation to the particular obligations in question; and the fact that the balance will usually lie on one side does not turn this probability into a rule. The present case of course is, a fortiori, since the contract of which specific performance has been decreed requires not the performance of personal services or any continuous series of acts, but merely preparing the execution of an agreement which contains a provision for such services or acts."

47. Mervyn Davies J at p.35 further referred to Tito v. Waddell (No. 2) [1977] Ch. 106, per Sir Robert Megarry V-C, at p.321 :

"The real question is whether there is a sufficient definition of what has to be done in order to comply with the order of the court. That definition may be provided by the contract itself, or it may be supplied by the terms of the order, in which case there is the further question of whether the court considers that the terms of the contracts sufficiently support, by implication or otherwise, the terms of the proposed order."

48. Mervyn Davies J said at p.36 that :

"Whether or not a specific performance order should be made seems to me to depend on the following considerations: (a) Is there a sufficient definition of what has to be done in order to comply with the order of the court? (b) Will enforcing compliance involve superintendence by the court to an exact degree? (c) What are the respective prejudices or hardships that will be suffered by the parties if the order is made or not made?"

49. In Co-operative Insurance Limited, the House of Lords held that the grant or refusal of specific performance remained a matter for the discretion of the judge and the settled practice might well be departed from in exceptional circumstances. The House of Lords did not express disagreement with the a fortiori class referred to by Megarry J in C.H. Giles.

50. Mr Whitehead submitted that the present case falls within the a fortiori class. The order sought is well defined and the passing of a resolution does not require continuing superintendence of the court which may be difficult to enforce.

51. Further, the remedy of damages will not be adequate to the plaintiff in the event it established a breach of clause 7.10 at trial. There will certainly be damage to the plaintiff in the context of the Joint Venture Agreement and the quasi partnership, which will be difficult to assess. There is at least some degree of assurance that the mandatory injunction will be granted in the event the plaintiff can prove the breach at trial.

52. Mr Wong sought to distinguish the authorities by relying on the negative covenant point. With respect, I do not see such a distinction.

53. Following upon Mr Whitehead's point that the Agency and Management Agreement is a distinct contract between PSC and the Agent and they are not parties before the court, Mr Wong submitted that even if the court is to order the defendants to vote their shares in Allman to rescind the resolution passed and to instruct PSC to withdraw the termination notice to the Agent, the court will be acting in vain as the management of PSC is vested in its directors and not its shareholder, to wit, Allman. The directors must, according to their fiduciary duty, act independently in the best commercial interest of PSC and there is no guarantee that they will withdraw the termination notice. They are not parties before the court and are not subject to the sanction of the court. Hence, the court shall not make an order in vain.

54. Mr Whitehead submitted that the court will not be acting in vain. One will be overlooking the evidence, reality and common sense to speculate that the director of PSC will not act on a resolution of the shareholder of PSC :

(a) Allman controls 100% of PSC;

(b) the boards of Allman and PSC are identical;

(c) Mr Ivan Ting, director of Allman representing the 2nd defendant deposed that :

"As the defendants were unable to obtain the agreement of the plaintiff, despite every effort to persuade Dr Yeh of the necessity in the interest of Allman, PSC and SCA of the proposed course of action, the majority shareholders of Allman proceeded with lawful termination of the agency of [the Agent], as they were entitled on the proper construction of clause 7 of the Joint Venture Agreement, without concurrence of the Plaintiff."

(d) There is no evidence before the court that the directors of PSC will not act in accordance with the resolution of the shareholders of PSC.

55. Mr Whitehead submitted that in reality, Allman terminated the agency. He asked rhetorically if PSC's directors were to act independently of Allman, why the need for Allman's shareholders' meeting on 9 July 2002? PSC is referred to specifically in clause 7 in order to stop it from going on a frolic of its own.

56. On the grant of a final mandatory injunction, I am assured to a sufficiently high degree that in the event of a breach being established, damages may not be sufficient remedy and final mandatory injunction may issue. As to the acting in vain point, I am satisfied that there is every likelihood that the directors of PSC will be acting in accordance with the resolution of PSC which Allman through its shareholders including the 1st and 2nd defendants are able to procure. The court will not be acting in vain if in its discretion the order sought is granted.

Balance of justice

57. Mr Wong reiterated that the parties are at Allman level and one should not look at prejudices beyond that level. With respect, I disagree. It is a balancing exercise and all relevant factors must be considered.

58. Mr Whitehead submitted that the following factors weigh in favour of the plaintiff :

(a) under the notice of termination, the Agent shall remain until 9 September 2002, hence, the order seeks to maintain the status quo and is the "softest" or least mandatory in substance;

(b) the order is easy to comply, is reversible, and will not pre-empt the trial;

(c) the complaints of the Defendants are historical, dating back to 1992, and there is no sudden or urgent need to remove the Agent;

(d) HSBC Realty Credit Corporation (USA), sole financier to SCA providing US$42,788,590, stated in a letter dated 25 July 2002 that SCA must continue to be managed by an entity majority owned or controlled by Dr Yeh and any change in the managing general partner of the borrower that is not approved by the bank is specifically prohibited under the commitment letter and could be considered a "Material Adverse Change" as defined in the Credit Agreement;

(e) HSBC is the only financier approved by the partners in the Amended and Restated Partnership Agreement dated 29 April 1997;

(f) Tiger Dove LLC, 10% partner in SCA, was concerned with the HSBC position and had requested Mr Kenneth Ting to withdraw the notice of termination of the Agent;

(g) the Agent has commenced proceedings in California against PSC in relation to the termination;

(h) Mr Robert Finlay, Asset Manager of Tiger Dove LLC, deposed in the California proceedings that swift and indelicate transition of the Agent will cause disruption to the business of the resort and damage to its reputation;

(i) Dr Yeh is willing to give an undertaking as to damages, fortified by a bank guarantee, if necessary.

59. On the other hand, Mr Wong relied on the following :

(a) The plaintiff has failed to show any damage to it by reason of the termination of the Agent;

(b) There is no disruption to the daily operation of the resort as that is in the hands of Benchmark;

(c) The Agent has been in breach in incurring costs on Phase II since 2000/2001 without approval and against instruction and that has caused a loss of trust and confidence on the part of Allman (or at least the 1st and 2nd defendants);

(d) The defendants have to act at some point and it is not a matter of whether urgent or not;

(e) Clause 7 of the Joint Venture Agreement stipulates that commencement of Phase II upon the resort or any new development at a cost of more than US$1 million is reserved to the shareholders;

(f) The plaintiff had delayed in not taking out an injunction before the voting;

(g) Once the Agent is retained, the defendants will suffer substantial but unquantifiable damages, not confined to the unauthorised expenditure on Phase II;

(h) The plaintiff will be able to frustrate any future shareholders' or directors' meetings to remove the Agent by denying it the quorum;

(i) The submission of maintaining the status quo is only deceptively attractive as the resolution was passed and the termination had been notified;

(j) The Agent has sought to gain a tactical advantage by apprising HSBC of the termination;

(k) HSBC has not threatened to call in the loan and according to the defendants it had indicated to the defendants that it was a matter for the credit committee to consider and matters could be negotiated;

(l) Liu Chong Hing Bank has expressed an interest in lending to SCA;

(m) Mr Kenneth Ting is able to provide a bridging loan;

(n) Additional financing costs can be sufficiently remedied by damages;

(o) The order may not be of effect as the directors of PSC are not parties to the Joint Venture Agreement nor before the courts.

60. I have dealt with the acting in vain point and I shall not repeat myself.

61. I do not find that the Plaintiff has been guilty of any delay disentitling it to equitable relief. Looking at the relationship of the families, litigation must have been a matter of last resort. There were frank discussions at the shareholders' meeting. When it transpired that the defendants were to vote in any event, Dr Yeh requested that the lack of unanimity be recorded, and intimated the resort to litigation. I do not find that the plaintiff has hence acted unreasonably.

62. I note that there has been a loss of trust and confidence between the defendants and the Agent. But the issue of termination must be in the context of the Joint Venture Agreement, which is the ultimate issue for the trial. At this stage, I do not think it a determinative factor, though a relevant factor in the consideration. As to the risk of further unauthorised spending by the Agent on the Phase II project, it must be seen in the light of the ongoing litigation here and in California. At any rate, it is a pecuniary matter as to which the remedy of damages will be sufficient. There is no submission that the undertaking offered by Dr Yeh is not good.

63. Both parties have filed opinions on Californian law as to whether HSBC could call in the loan in the event of non-compliance of a term in the commitment letter. It is not necessary for me to resolve this issue. Suffice it to say that there is a real risk of disruption to SCA's finance in the weighing process.

64. Notwithstanding that the resolution has been passed, looking at all the circumstances and especially that no new agent has been appointed yet, I accept the plaintiff's submission that the order seeks to maintain the status quo. It will cause less disruption both as to the agency and the credit. As to the risk of frustration of any future shareholders' or directors' meeting to reconsider clause 7.10, that must also be considered in the light of the result of the present litigation.

65. If the defendants were to succeed at trial, the grant of the interlocutory relief will simply delay the termination until trial. If the interlocutory relief is denied and the plaintiff were to succeed at trial, the appointment of the new agent will be a fait accompli, which may entail financial consequences if not litigation for its removal.

66. I am satisfied that the balance of justice weights in favour of the plaintiff. In the premises, I shall grant the interlocutory order prayed for.