3TOGO.COM LIMITED v. NEW WORLD TELECOMMUNICATIONS LIMITED

HCA622/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.622 OF 2004

3TOGO.COM LIMITED v. NEW WORLD TELECOMMUNICATIONS LIMITED

--------------------------

------------------------------

----------------------

D E C I S I O N

----------------------

1. This is an application by the defendant to discharge the ex parte injunction granted by A. Cheung J on 17 March 2004. Given the time available, I am not able to give a fully reasoned judgment, but for what it is worth, I will give some broad reasons for the decision.

2. The ultimate decision is that I will discharge the injunction. I also consider that the ex parte injunction should not have been granted for these reasons.

3. It is clear to me that the case put forward to the learned Judge was that the defendant's alleged repudiatory breach of the settlement agreement as per the repayment schedule of 13 February 2004 was not accepted.

4. First, the indorsement of claim only seeks an injunction. Secondly, the transcript of the hearing before the Judge, the evidence and the skeleton show that the clear impression was that the plaintiff was holding the defendant to that agreement, therefore the injunction was necessary to preserve the status quo.

5. It is now clear that the plaintiff was advised of the right to elect before the application was made, therefore by applying to the Judge to seek the injunction to force the defendant to continue the services must in the circumstances be an election to affirm the settlement agreement. They should have told the court that there was an intention or the possibility that the plaintiff might terminate the settlement agreement. If, therefore, there was a termination, the basis for seeking the injunction beyond 31 March would have been completely different. That was a matter which should have been expressly informed to the Judge.

6. Further, the Judge was concerned about the lack of evidence on the previous correspondence leading up to the alleged settlement agreement. The Judge was apparently concerned whether the plaintiff had shown a sufficiently strong prima facie case that there was in fact an agreement. He, at the end of the day, said that it was only a marginal case. Had the Judge been provided with the correspondence from November 2003 onwards as I have been, it would have been clear that the picture as revealed by this series of correspondence is very very different from the picture painted before the learned Judge. The correspondence shows that the plaintiff had been in default of their payment obligation since at least October 2003 if not earlier, and they have failed to honour previous repayment schedules proposed to the defendant.

7. Secondly, there was no mention in any of the correspondence about any substandard service as the plaintiff sought to allege before the Judge. The plaintiff never disputed the sums owed to the defendant.

8. Thirdly, in reply to the plaintiff's letters dated 9 March and 10 March, the defendant's answer dated 11 March and 15 March obviously were relevant for the Judge's consideration. In those letters the defendant clearly stated that the complaint about substandard service was raised for the first time. There were also references to the defendant's general terms of contract. I note here that the plaintiff did not respond to these answers. Had these answers been placed before the Judge, he would no doubt have asked firstly, in relation to the point about the complaint of substandard service, what had been the position. He would no doubt have to be satisfied that the complaint raised by the plaintiff in February or March was a genuine one. Second, the reference to the defendant's terms of contract is obviously relevant. There would have been an enquiry as to whether those terms would have applied to the underlying contract between the plaintiff and the defendant and, had the Judge seen those terms as I have, relevant provisions would of course have to be considered.

9. On 31 March 2004 when the payment obligation arrived pursuant to the settlement agreement, the plaintiff did a complete about turn and purported now to accept the repudiation despite having elected not to accept it on 17 March. Therefore the basis of granting the ex parte injunction, that is holding the status quo while the settlement agreement was on foot, goes.

10. For these reasons, in my view, the ex parte should not have been granted and that is discharged.

11. As to the second question, whether a new injunction should be granted, if the ex parte injunction should not have been granted, of course, there is no reason in principle why the injunction should be continued. The only question is whether the court should nevertheless in exercise of its discretion grant a new one. I note that the court would rarely exercise such a discretion, particularly when the court is satisfied that there has been material non-disclosure of relevant matters before the ex parte Judge. Be that as it may, I turn to consider whether an injunction should be granted inter partes today.

12. Mr Law, on behalf of the plaintiff today, sought to salvage the position by arguing that the plaintiff has a cause of action for breach of statutory duty under section 7K of the Telecommunication Ordinance. It is pleaded in the Statement of Claim that the defendant refused to cause the migration or porting of the plaintiff's numbers to Wharf. In my view, the plaintiff has not made out a sufficiently strong case on the existence of any statutory duty on the breach on it.

13. First, quite apart from the point that this cause of action might not have been included in the indorsement of claim, I am not satisfied that the defendant owed any statutory duty to the plaintiff as opposed to any statutory duty to comply with the Ordinance. I note from the Ordinance that there is a full statutory scheme for regulating the granting of licence and for the Telecommunication Authority to determine whether a licensee has contravened the terms of the Ordinance. I also note that any person aggrieved with the opinion or ruling by the Authority has a right to appeal to an appeal board.

14. In those circumstances, I am not satisfied that the plaintiff has shown a strong prima facie case or a case of sufficient strength for the purpose of granting a mandatory injunction that the duty was owed directly to the plaintiff on the part of the defendant so as to provide the plaintiff with an actionable cause of action against the defendant.

15. Secondly, on the evidence, I am not satisfied that the defendant refused to provide the migration service. The evidence shows that they were prepared to do so provided Wharf, and no doubt in turn, the plaintiff, would pay $180,000. It is a one-off fee which Wharf and the plaintiff claim to be exorbitant. They rely on the December proposal from New World for about $72,000 in comparison, but that December proposal was withdrawn within a couple of days and there is no evidence before me to show that $72,000 or the sum asked for in that proposal was a standard rate, or that $180,000 was exorbitant in any sense. By itself, since it is an one-off fee, I do not think the amount could be said to be exorbitant or it would amount to any restrictive practice or anti-competition practice. There is no suggestion before me that Wharf or the plaintiff was not able to pay that sum.

16. I also think that the defendant has given ample notice to the plaintiff that if the plaintiff did not pay its outstanding liability, the services would be terminated.

17. I regard there is considerable force in Mr Chan's argument that what has happened was a deliberate move on the plaintiff's part to engineer a situation under which the continued provision of services by the defendant is secured whilst the plaintiff would have the luxury of not having to pay the defendant for the outstanding amount.

18. Lastly, I should mention that I was considerably concerned during the argument about potential disruption which may be caused to the existing users. However, if no sufficient cause of action is shown the balance of convenience simply does not come into play. If the injunction is discharged, what the plaintiff can do of course is to pay, or cause Wharf to pay, the fee that the defendant would agree to accept to provide the migration service, under protest if necessary, so that the migration could be carried out as soon as possible. In my judgment, the plaintiff only has itself to blame for not having done that and not having finalised that arrangement earlier.

19. For these reasons, I am not prepared to grant a new injunction today.