SKILLSOFT ASIA PACIFIC PTY LTD v. AMBOW EDUCATION HOLDING LTD

HCCL 19/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 19 OF 2013

(Transferred from HCA 597 of 2012)

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HCCL 20/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 20 OF 2013

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HCCL 31/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 31 OF 2013

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D E C I S I O N

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1.  This is an application by the plaintiff (“Skillsoft”) for summary judgment in respect of part of its claim against the defendant (“Ambow”) in this consolidated action. By a summons dated 16 July 2015 (“Summons”), Skillsoft is seeking an order for specific performance against Ambow, pursuant to an agreement dated 30 April 2008 (“Agreement”), that the latter do :

(1) provide a Sales Report for each month in 2012 and 2013; and

(2) make available for inspection and audit all of Ambow’s accounting, sales and customer service books and records from 30 April 2008 to the date of the Summons.

2.  On 29 November 2013, this court dealt with, inter alia, a summary judgment or interim payment (in the alternative) application by Skillsoft against Ambow in HCCL 19/2013 – see judgment dated 12 December 2013 (“Judgment”).  The background to the dispute between these parties had been set out in paras 2 to 12 of the Judgment.  I do not propose to repeat them here.

3.  However, for the present purpose, it should be pointed out that under the Agreement there were a number of obligations on Ambow as the distributor of Skillsoft’s products :

(1) Ambow should provide Skillsoft with monthly Sales Report in the agreed format which set out, inter alia, the licence fees payable to the latter (see Sections 4.4, 7.4 and 7.8);

(2) Ambow should keep records relating to its distribution of Skillsoft’s products and allow Skillsoft to inspect and audit all its accounting, sales and customer service books and records to determine whether applicable fees have been paid in accordance with the Agreement, and also to ensure compliance with the terms of the Agreement (see Sections 7.7 and 9.3).

4.  Section 14.5 of the Agreement provided that : “Upon termination of this Agreement, all obligations of each party hereunder shall terminate.  …”

5.  However, Section 15.10 of the same document provided that : “The provisions of Sections 7.1, 7.6, 9, 11 and 13 shall survive the expiration or earlier termination of this Agreement.”.

6.  It can be seen from the pleadings that the most fundamental dispute between the parties in these proceedings will be when the term of the Agreement ended.  Skillsoft contends that the Agreement expired on 31 December 2013 at the end of its stated term of 5 years and 8 months. Whereas, Ambow says that the Agreement expired on 31 December 2011 in accordance with its termination letter dated 23 September 2011.

7.  The key to this fundamental dispute is whether Ambow was entitled to terminate the Agreement after having issued a notice to Skillsoft on 19 September 2011 (“Notice”) to exercise an option to become a non-exclusive distributor of Skillsoft’s products from January 2012, pursuant to Section 2.3 of the Agreement.  However, the Notice was not simply accepted by Skillsoft.  In its response on 22 September 2011, Skillsoft stated that Ambow’s obligations to make pre-payment of licence fees (“Prepayments”) under Section 7.2 would continue despite the change from an exclusive distributor to a non-exclusive one.  It appears that this was the reason why Ambow reacted on the next day by terminating the Agreement on 31 December 2011 (see paras 3 to 5 of Judgment). 

8.  It was held in the Judgment that the issue whether Skillsoft was entitled to Prepayments under the Agreement once Ambow became a non-exclusive distributor is arguable, and unconditional leave to defend was granted to Ambow in that regard (see paras 28 to 30 of Judgment). There was no appeal from the Judgment. 

9.  In my view, this is a rather unusual application in that Skillsoft is seeking summary judgment on part of its claim, and such part is concerned with the enforcement of its disputed rights under the Agreement[1]. It is therefore hardly surprising that Mr Alder, appearing for Ambow, is taking a preliminary point whether this application should be entertained by the court given that :

(1) This is not the usual case where a grant of final judgment will obviate the trial.  The application for judgment is partial only and a trial is to take place in any case;

(2) The “consequential question” of Ambow providing Sales Reports for 2012 and 2013 and other materials should be determined at trial because :

(a) Under O 1A, r 4(2)(i) of the RHC, the court is mandated to deal with as many aspects of the case as practicable on the same occasion;

(b) More importantly, if this court were to give final judgment now in terms of para 1 of the Summons (see para 1(1) above), there would be a risk of inconsistent judgments from this court and the trial judge in these proceedings;

(c) Ordinary discovery would provide an adequate access for Skillsoft to Ambow’s documentation and it has not be asserted or shown otherwise[2].

10.  I find considerable force in this preliminary objection by Ambow.  On any view, it must generally be undesirable for litigants to fragment their cases into parts and to advance them as they please.  This cannot be conducive to proper deployment of the scarce resources of the court.  Unnecessary deployment of the limited resources of the court means that less will be available for the other court users.  Hence, it is the duty of the court to jealously guard against misuse of its resources, especially after the CJR.

11.  A parallel may be drawn with the procedure for trial of preliminary issues.  It is trite that in considering such an application the court must take into account whether it may lead to delay and increase in costs compared to resolving all the issues in 1 trial.

12.  Skillsoft has no adequate answer to this preliminary objection.

13.  In an attempt to answer the argument on inconsistent findings, Mr Wong SC, appearing for Skillsoft, submitted that a final judgment in terms of §1 of the Summons would have necessarily determined the issue whether the Agreement was extant during 2012 and 2013.  With respect, this is an illegitimate expansion of the scope of the Summons. 

14.  I should say that, in any case, I am not satisfied that Skillsoft’s case on when the Agreement came to an end is unanswerable.  The previous holding of this court that there is a triable issue on the Prepayments may have an impact on the arguments on the termination of the Agreement.  If Skillsoft was not entitled to Prepayments after Ambow became a non-exclusive distributor, there is scope for argument that the latter was entitled to terminate the Agreement in light of the insistence of the former on payments to which it had no entitlement. 

15.  I agree with Mr Alder that it is undesirable for this court to make an incidental finding in this application which may constitute an issue estoppel.  This will no doubt lead to an expansion of the scope of dispute between the parties, which is already substantial. 

16.  Mr Wong seeks to argue that discovery by Ambow in this action is insufficient for purposes of ensuring that all the relevant evidence will be before the court at the trial, and thus a split trial may be necessary.  This application serves to avoid a split trial, said Mr Wong. 

17.  With respect, I am not convinced that there will be a split trial.  There is no such application, and the same will have to be justified.  Mr Wong’s argument is premised on his construction of the relevant contractual provisions such that the right to inspect and audit concerns not only Skillsoft’s licence fee entitlements but the policing of its intellectual property rights.  I need only say that the point, turning upon the proper construction of the contractual provisions, is highly arguable. 

18.  Further, insofar as the licence fees are concerned, I am unable to see why discovery in this action will not cover the relevant documents.  It is certainly not demonstrated so. 

19.  In the premises, I agree with Ambow that this application ought not be entertained. 

20.  For completeness, I should mention briefly that I also find force in Mr Alder’s submission that specific performance is a discretionary remedy and it would be inappropriate for this court to determine whether to grant the relief before having made its findings on the facts after trial, which is the usual course.

21.  For these reasons, the Summons is dismissed. 

[Submissions on costs of the application]

22.  I make an order that the costs of and occasioned by the Summons be to Ambow, to be taxed if not agreed.