XCHRX MULTI-TOP LTD. v. BKE-MEDIA (H.K.)(a firm) AND OTHERS

HCA 6615/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6615 OF 1999

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REASONS FOR DECISION

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1. There are two applications before me, one by the Plaintiff for an injunction restraining that the Defendants from competing with the Plaintiff in dealing with the certain BKE-M's products in the field of targetry systems for optical shooting ranges until 14th March 2000.

2. The other is an application by the Defendants for a stay of the proceedings on the ground of an alleged exclusive jurisdiction clause and forum non-conveniens in favour of courts in Germany.

3. A group of German companies known as BKE-Media ("BKE-M"), BKE-Bildtechnik ("BKE-B") or BKE Bildtechnik Media, ("BKE-BM") (referred to collectively as the "BKE Group"), manufactured and supplied targetry system for optical shooting ranges and relevant accessories.

4. The 1st Defendant, BKE-Media HK ("BKE-M(HK)"), commenced business in 1997 dealing with optic electrical equipment and the 2nd and 3rd Defendants are its partners.

5. The 2nd Defendant also represents the BKE Group in the business dealings between the Plaintiff and the BKE Group. The 3rd Defendant is an ex-employee of the holding company of the Plaintiff.

6. It is not disputed that by a letter of appointment dated 4th January 1991, the Plaintiff was appointed the sole agent of "BKE-M". It is the Plaintiff's case that they initially dealt with "BKE-B" which was subsequently changed to "BKE-M".

7. The Plaintiff admitted not knowing the precise relationship between "BKE-M" and "BKE B", but so the Plaintiff alleges, the 2nd Defendant had been representing both "BKE-M" and "BKE-B" at all material times.

8. Since 1991, the Plaintiff had been working with the BKE Group in supplying their products to the Hong Kong Government, in particular, the Hong Kong Police Force.

9. The Plaintiff would make profit by adding a percentage to the quotation of the BKE Group which also provided the necessary technical support.

10. By an agreement dated 14th March 1997, the Plaintiff was appointed the exclusive agent by the BKE Group in Hong Kong and China for his products in the field of targetry system for optical shooting ranges. The 2nd Defendant was then acting for the BKE Group.

11. The exclusive agency agreement was for a term of 2 years and would be extended yearly automatically unless either party gave 3 months' notice in writing before its expiry. It is the Plaintiff's case that the agency agreement was automatically extended until 14th March 2000.

12. In July and October of 1998 and January of 1999, the Plaintiff submitted tenders to the Hong Kong Government for the supply of the products of the BKE Group to the Hong Kong Police Force. The Plaintiff subsequently found out that two of the tenders had been awarded to the 1st Defendant and the third one had been awarded to "BKE-B", with the 1st Defendant acting as its sub-contractor.

13. It is the Plaintiff's case that the 1st Defendant had acted as an agent of the BKE Group and they were in breach of the terms of the exclusive agency agreement by tendering directly to supply the Hong Kong Police Force with the relevant equipments.

14. It is also the Plaintiff's case that the 2nd and 3rd Defendants had wrongfully interfered and induced, and had procured the BKE Group to act in breach of the exclusive agency agreement.

15. The suggestion by the Plaintiff is that the Defendants were competing unfairly with the Plaintiff with the knowledge they had about the Plaintiff and the ability to tender at a more favourable price.

16. It is not disputed that the BKE Group had through the 2nd Defendant, by a letter dated 26th August 1998, informed the Plaintiff that the exclusive agency agreement would be terminated immediately.

17. The 2nd Defendant's suggestion is that the letter, dated 26th August 1998, had brought an end to the exclusive agency agreement between the Plaintiff and the BKE Group. Alternatively, so the 2nd Defendant alleges, the letter had the effect of notifying the Plaintiff that the agreement would not be automatically renewed upon its termination on 14th March 1999.

18. In this regard, the Defendants seek to rely on a German legal advice to assert that there had been a valid termination either with immediate effect from 26th August 1999 or at the expiry of the term of the 2 years, namely on 14th March 1999.

19. On the other hand, the Defendants' case is that the agreement had not been validly terminated. The letter dated 26th August 1998 which purported to terminate the agreement with immediate effect is simply not valid as the agreement itself did not provide for any early termination. The letter was also not a valid notice to prevent the automatic renewal of the agreement in accordance with its terms and in support of that contention, another German Lawyer's report had been submitted to this court.

20. On this aspect of the case, in particular, the suggestion that the letter dated 26th August 1998 could not prevent the automatic renewal of the agreement in question, I think the Plaintiff is taking a very fine point. The letter, dated 26th August 1998 from the 2nd Defendant, clearly indicated that they wanted to bring an end to the contract. It may not be effective to bring an end to the agreement immediately, but the suggestion that despite such a letter, the agreement would still be automatically renewed upon its termination on 14th March 1999 is, in my view, difficult to accept.

21. The letter clearly demonstrated an intention to bring an end to the agreement. The continuous attempts by the Plaintiff to obtain quotations from the BKE Group was no indication that the parties were still trying to perform the contract between them.

22. In any event, at this stage of the proceeding, I need not resolve the actual dispute between the parties when it is an application for an interlocutory injunction.

23. On the dispute between the parties, I need only to consider whether there is a serious question to be tried. On that issue, I think it is fair to say that the issue as to whether the contract between the Plaintiff and the BKE Group had been terminated or whether it was still subject to the automatic renewal clause from 14th March 1999, is indeed very much a live issue that can only be properly resolved at the trial. And to that extent, I am prepared to hold that for the purpose of this application there is indeed a serious question to be tried.

24. I have to consider, therefore, the question of the balance of convenience.

25. On this aspect, I have no hesitation in concluding that the balance of convenience lies in favour of the Defendants.

26. I note that the suppliers of the equipments in question, namely the BKE Group had not been made a party to the proceeding and there has been no attempt to compel the BKE Group to continue to supply the equipments to the Plaintiff under the exclusive agency agreement in question, to enable the Plaintiff to fulfil the obligation that it might have, should it be successful in any future tenders.

27. In so far as the 3 tenders in question, they had already been awarded to the 1st Defendant and the "BKE-M".

28. Miss Tsui, on behalf of the Plaintiff, no longer insists on the injunction orders as sought in the summons as the Plaintiff realised that the tenders had been awarded and in all fairness to the parties, they should be allowed to be completed.

29. Miss Tsui, on behalf of the Plaintiff is only seeking an injunction preventing the Defendants from making further tender in the future. But if an order is granted even in that limited form, as I have observed in the course of counsel's argument, it would mean that the Hong Kong Police Force would be deprived of the supply and/or upkeep of essential equipments for the training of its officers. The Plaintiff will, in any event, be unable to step into the shoes of the 1st Defendant without the blessing of the Government and the BKE Group.

30. I am not convinced that there is any difference in the alleged damages to the reputation of the Plaintiff with or without the injunction order.

31. Without the blessing on the BKE Group, the Plaintiff would be unable, in any event, to tender for similar contract in the future particularly, putting the Plaintiff's case at its highest, the exclusive agency agreement only has no more than 4 1/2 months to go before its expiration.

32. In the light the shortness of the remaining terms of the exclusive agency agreement, whatever financial damages suffered by the Plaintiff, in my view could not be significant, and damages are also clearly adequate remedy in the circumstances of this case even on the assumption that the Plaintiff can prove its case against the Defendants at the end of the day.

33. There is no suggestion that the Defendants would not be in a position to pay whatever damages that the Plaintiff ultimately succeeds against the Defendants.

34. I have considered the background of this case. While I have, to some extent, sympathy for the Plaintiff for being deprived of the fruit of this exclusive agency agreement should its assertion be correct, there is no basis for the granting of an interlocutory injunction in favour of the Plaintiff in the light of the background of the case. That being the case, the Plaintiff's application for interlocutory injunction must be dismissed.

35. I must also deal with the application by the Defendants for a stay of the proceedings because that application is also before me. I note the alleged difficulty faced by the Defendants as advanced by Mr. Sakhrani for not being able to respond to the latest expert's report on German Law in relation to Clause 10 of the exclusive agency agreement. In my deliberation, I certainly will take that into consideration but I am not persuaded that this aspect of the case is crucial.

36. In my view, it is highly arguable as to whether the clause in question, namely Clause 10 is in effect an exclusive jurisdiction clause. The words used in Clause 10 are simply as follows

"This contract is settled under German right. Legal domicile is Goettingen Germany."

37. The wordings used is non-assertive of exclusive jurisdiction in my view and of course, the burden of so establishing this lies with the Defendants.

38. The BKE Group and the 1st Defendant are separated legal entities despite the allegation that the 1st Defendant is the agent of the BKE Group and the 1st Defendant is a company in Hong Kong.

39. The 2nd and the 3rd Defendants are of course not entitled to rely on the clause in question.

40. In any event, there is no dispute that even if the clause in question is an exclusive jurisdiction clause, the court still has the discretion to order that the case should proceed within the jurisdiction of Hong Kong if it is in the interest of the parties and for the end of justice.

41. I note that all the parties, with the exception of the 2nd Defendant, reside in Hong Kong and on the evidence of this case, the 2nd Defendant must also have substantial connection with Hong Kong.

42. The matter giving rise to the dispute all occurred in Hong Kong. The disputes between the parties relate to the marketing of equipments in Hong Kong. The alleged tortious acts on the part of the Defendants all occurred in Hong Kong.

43. When the matter proceeds to trial, it is likely that all the witnesses relevant to the disputes will come from Hong Kong.

44. In my view, in the interest of the parties and for the end of justice, the case would more suitably be tried in the court of Hong Kong instead of courts in Germany.

45. Adopting the principal established in the cases of Spiliada Maritime Corporation v. Causulex Ltd. [1987] 1 A.C. 460 and El Amria [1981] 12 Lloyd Rep. 119, the application by the Defendants for a stay of the proceeding, in my view, had no proper basis to succeed. The application for a stay of the proceeding in favour of courts in Germany must also be dismissed.