AD MEDIA LTD v. LEI CAM TONG

DCCJ 20320/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 20320 OF 2001

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

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

________________

JUDGMENT

________________

1. This is a claim by the plaintiff against the defendant, its ex-director, for :-

(a) maliciously inducing the plaintiff's customers to break their contracts with the plaintiff; and

(b) breaching his duty of confidentiality in disclosing the trade secrets of the plaintiff, acquired by the defendant during his course of employment with the plaintiff as one of its directors, to another;

2. Damages sought by the plaintiff were as follows:-

(a) loss of advertisement contracts in the sum of HK$102,505.50;

(b) loss of business in the sum of HK$44,394.34 for cancellation of subscription of magazines;

(c) reimbursement in sum of HK$3,400 which the plaintiff was not entitled to set off in respect of the invoices of 2358 & 2359;

(d) other reliefs ; and

(e) interest.

3. The defendant denied responsibility for the losses of the plaintiff. By way of counterclaim the defendant claims against the plaintiff the following:-

(a) a sum of HK$225,443.51 being the balance of the profit the defendant entitled after deducting his monthly expenses;

(b) HK$35,473 being the defendant's entitlement to 39% of the profits of 3 contracts :-

(i) HKTDC September Fair

(ii) H.K. Jewellery Manufacturer Association

(iii) Octagon Jewellery;

(c) other relief; and

(d) Interest.

4. In the hearing the plaintiff abandoned its claim of wrongful reimbursement of HK$3,400 while the defendant abandoned his counterclaim of HK$35,473 in respect of the 39% commission of the 3 specified contracts.

5. The defendant also sought to make reference to the profits generated by a lady sales agent in the year of 1995-1996 to account for his counterclaim. It was my ruling that the defendant would not be allowed to make reference to the profits of the lady sales agent unless amendment was made to his counterclaim to reflect the factual contentions forming the basis of his counterclaim in respect of the account of the lady sales agent. No application was made by the defendant to amend his pleading, and his counterclaim in respect of the outstanding sum of HK$225,443.51 would not be supported by evidence.

The Background

6. The plaintiff is a company running the business of an advertising agent and a distributing agent for the various magazines. The profits of the plaintiff were generated by way of commissions and sales profits generated from the 3 groups of publishers:-

(a) The British "CRU Publishing Limited" which publishes the "Basel Magazine". The plaintiff is the sole advertisement agent in Hong Kong for the CRU Publishing Limited (hereinafter called "CRU for short). The task of the plaintiff is to secure advertisement contracts for the British magazine "Basel". In accordance with the written agency agreement, the plaintiff is entitled to 30% commission from the advertisement fees paid by the clients of the plaintiff for advertisements placed with the Basel magazine. The plaintiff also has a right to give discount to the clients of up to a maximum of 10%.

(b) The Hong Kong Trade Development Council - the plaintiff is an accredited agent of the Trade Development Council, a status which permits the plaintiff to secure clients for advertisements in the magazines coordinated by the Trade Development Council; including the Hong Kong Watches & Clocks, H.K.Electronics, Hong Kong Jewellery Collection, Hong Kong Household, H.K. Gift, Premium Stationery, Hong Kong Apparel.

(c) An Italian publisher "Argo" - the plaintiff operated as the distributing agent for an Italian publisher "Argos" in Hong Kong for the distribution of 3 Italian magazines "Argento", "Chrono" and "L'orologio."

7. The plaintiff was founded by a Mr. Thomas Lee (hereinafter called " Lee" for short) in the year of 1986. The defendant is the younger brother of Lee. In 1990 Lee invited the defendant to join the plaintiff as a director. Lee also assigned 40% of the shares of the plaintiff to the defendant.

8. After the defendant joined the plaintiff, the defendant was allowed a monthly remuneration and the sharing of 40% of the plaintiff's profits. According to Lee a 10% sales commission was also paid to the defendant on top of his monthly salary. The defendant disputed the receipt of sales commission prior to 1995. Whether the defendant was entitled to the payment of sales commission prior to 1995 was not material to my determination of the present dispute.

9. The arrangement for remuneration and profit sharing continued until 1995 when the defendant thought he was not receiving his fair share of the profits from the plaintiff. After discussion, the brothers reached agreement that the defendant would operate the business on a self-funding basis in respect of the clients of the plaintiff assigned to the defendant in his designated account "02". Under this agreement the defendant was entitled to take all the profits generated from the clients allocated to the '02 account' after deduction of expenses in respect of the generation of such profits for one year from June 1995 to May 1996.

10. During the year of June 1995 to May 1996, the defendant was found to have made a greater profit comparing to the accounts of Lee. For tax avoidance, the defendant did not withdraw the profits he made for 1995-1996. Instead the defendant's profits were kept in the plaintiff's company account for use of the defendant to set off his personal expenses for mobile phone and petrol expenses.

11. After May 1996 the sharing of profits of the company reverted back to the pre-1995 arrangement. It was not in dispute that since May 1996 the defendant was entitled to a sale commission of between 8% to 10% in respect of the advertisement contracts concluded by the defendant with his designated "02 account" clients.

12. By April 2001 the brothers considered they could not work with each other any longer. On 3 May 2001 Lee and the defendant, with the assistance of their auditor, signed an agreement for the defendant to resign from directorship of the plaintiff and to give up the defendant's shareholding in the plaintiff.

13. It was the intention of both brothers that they would not disclose their parting of company to their clients, while the defendant was allowed to carry on dealing with the clients in the plaintiff's "02 accounts" as the plaintiff's agent. For new contracts the defendant signed as the plaintiff's agent, the defendant would be entitled to all the sales commission with the exception of 1% which was to be paid to the plaintiff.

The Agreement of 3/5/01

14. The agreement signed on 3 May 2001 reads:-

"Between Thomas Lee and Tony Lee, both parties agree that, Tony Lee will resign from the post of Director/Share holder of Ad Media Ltd with immediate effect under the following terms:-

(A) Tony Lee of Smart Regent Advertising Ltd, will be appointed as agent, and is entitled to sell and enjoy the total commission/gross profit for ad sold by his company in "The Basel Magazine", "WatchMart", "JewelMart", and publications of HKTDC, together with the subscription on relevant medias represented by Ad Media Ltd (clients in account 02 only)

(B) Smart Regent Advertising Ltd will pay to Ad Media Ltd, 1% on every single order brought to Ad Media Ltd in "The Basel Magazine" and publication of HKTDC.

(C) Tony Lee is liable for sharing all relevant costs in proportion with regards to production and promotion expenses for the above mentioned media, for all ad pages sold by Smart Regent Advertising Ltd.

(D) The following revenue is payable to Tony Lee:

(1) Existing commission on every account receivable (Invoices issued to Tony Lee's clients up to 30/4/2001)

(2) 40% on Profit & Loss account certified by Janice Tsui & Company up to 30/4/2001.

(E) This agreement is renewable upon the consent of both parties in due course.

The Events after 3/5/01

15. According to the defendant he ran into disagreement with Lee when he went back to the plaintiff's office a few days after they signed the 3/5/01 agreement. The defendant said he was told by Lee, contrary to their agreement, to notify the clients of the defendant's departure from the plaintiff. In the defendant's testimony he said he felt compelled to write to the Italian publisher to notify them of his parting with the plaintiff. The defendant further stated that in this letter to Argo not only had he informed Argo of his departure from the plaintiff he had also expressed his wish to be granted the agency in respect of the distribution of the Argos magazines.

16. I do not accept the defendant's evidence that it was Lee who told him to inform the clients of the defendant's departure. This is because: (i) it was not in dispute that both Lee and the defendant have agreed to keep secret the news about their parting of company. Informing Argo of the defendant's departure is contrary to the parties' intention; (ii) the plaintiff appointed Smart Regent as its agent for negotiating future advertisement contracts in respect of the Basel and TDC magazines pursuant to clause (A) of the agreement. It was the parties' intention that the defendant would act as the agent of the plaintiff in dealing with the "02 account" clients, informing the clients of the defendant's departure from the plaintiff does not seem to serve any useful purpose; (iii) Clause (A) also designated Smart Regent to be the plaintiff's agent in respect of the sale of magazines. Informing Argo and inviting Argo to terminate its agency with the plaintiff is certainly contrary to what was intended in clause (A) of the agreement. Terminating Argo's agency would mean a revenue loss to the plaintiff. There is no probable explanation why Lee would wish to tell the defendant to engage in acts detrimental to the plaintiff. The reasonable inference to draw is the defendant informed Argo of his departure from the plaintiff so as to secure a change of agency appointment when the defendant came to realize the 3/5/01 agreement made no provision for the sharing of profits or commissions in respect of the executory contracts.

17. The first sign of loggerhead came when the plaintiff received a letter from its Italian distributor "Argo" on 24 May 2001 in which "Argo" notified the plaintiff that they were terminating their agency arrangement with the plaintiff with immediate effect. On the same day "Argo" appointed the defendant as their agent.

18. In the jewellery fair in June of 2001 Lee ran into a few of his "02 account" clients Hop Fu, Union Clasp and Octagon and learnt from them that they had paid their advertisement fees in respect of their June advertisements in the Basel magazine to the Defendant instead of the plaintiff even though their advertisement contracts were made with the plaintiff and the advertisement orders were performed by the plaintiff prior to the defendant's departure.

19. On 26 June 2001 and 27 June 2001 the plaintiff sent letters to Hop Fu Jewellery, Union Clasp Jewellery and Octagon Jewellery chasing them for payment, insisting that the plaintiff was their contracting party to their advertisement contracts and that payment ought to be made to the plaintiff rather than to anybody else.

20. Apparently it was the defendant's belief that he was entitled to serve the "02 account" clients continuously as well as a right to collect payments from them with only an obligation to pay the plaintiff a 1% commission, inclusive of contracts signed prior to 3/5/01.

21. On 27/6/01 the defendant wrote to the plaintiff suggesting Lee was wrong about the effect of the May agreement. In this message the defendant informed Lee that the defendant's clients had received annoying messages from the plaintiff chasing them for payment and that the defendant would serve those clients in respect of the September edition of the Basel magazine. The defendant indicated to Lee that the clients had decided to cancel their advertisement orders with CRU.

22. On 27/6/01 the defendant wrote to Union Clasp telling Union Clasp that arrangement had been made between himself and the plaintiff for him to continue to serve the clients under his '02 accounts' including a right to collect payments from the clients, producing advertising materials and the client could decide whether to maintain its advertisement bookings with the Basel magazine. Union Clasp wrote to the plaintiff on 29/6/01 to cancel the Basel magazine September booking.

23. On 29/6/01 the plaintiff received a letter of inquiry from Eddie Prentice of CRU about receiving a disturbing e-mail from the defendant in which the defendant informed CRU that Lee had arguments with the clients in the June Fair which resulted in the clients cancelling their Basel bookings. In the same letter CRU stated its reputation had been damaged, CRU was losing confidence in the brothers and that Lee should give them reassurance that the Basel magazine would not be used as a weapon in the war between the two brothers.

24. On 4/7/01 CRU wrote back to Lee to reaffirm its contractual obligations with the plaintiff.

25. On 11/7/01 Lee wrote to the defendant to state the defendant had wrongly collected payments from Union Clasp, Hop Fu, Octagon and had insinuated Super Star to cancel the order placed with the plaintiff and that Lee had decided to cancel the agreement signed on 3/5/01 with immediate effect.

26. On 11/7/01 the defendant wrote in response to Lee's letter in which the defendant stated the collection of the advertisement fees from the client was settled by the invoice the defendant received from the plaintiff in respect of contracts the defendant signed for the plaintiff prior to 3/5/01. The defendant also maintained the commissions were payable to him in accordance with item (D) of the agreement of 3/5/01.

27. To suggest the collection of the commissions in respect of the executed and executory contracts to be covered by clause (D) of the 3/5/01 is obviously wrong. I accept Lee's explanation in court that the invoice was wrongly sent by other staff member of the plaintiff to demand the defendant for payment of 1% commission in respect of the Basel clients.

28. After the last straw between the brothers broke resulting in the issuing of the letter on 11/7/01 terminating the arrangement of 3/5/01, the plaintiff wrote to the various TDC clients between 17/7/01 and 20/7/01 to inform them of the departure of the defendant and that the clients should only deal with the sales team of the plaintiff company.

29. Between 23/7/01 and 26/7/01 the plaintiff received a number of letters from the TDC clients to cancel their job orders placed with the TDC magazines through the plaintiff.

30. The defendant sent the plaintiff two letters, on 20/7/01 and 31/7/01 respectively, informing the plaintiff the Argos magazines were in the defendant's office and was ready for collection by the plaintiff upon payment.

31. On 2 August 2001 the defendant wrote to CRU in the following terms:

" I would like to inform you that I have remitted the amount of Sterling Pound 2,088.45 into the account of CRU in the Royal Bank of Scotland, being the total payment for clients 1) Octagon Jewelry 2) Union Clasp 3) Ho Fu Jewelry, in the Basel Magazine, June issue. One of the reason for me to do it, is I would never find a way to deal with Thomas, and also the way to calculate our entitled profit is very complicated, and I think I could never keep you in the dark any more.

1. Thomas has already marked up 5% more on top of the rate card from CRU, and also charged all ad rate in the U.S. dollar (please see the enclosed rate card), but seldom offer discount to clients, that is why, some clients will prefer to deal with you directly, since the price is too high for them.

2. There are rate for 1,3,6 and 10 issues in his new rate card, instead of only 1,5,10 issues in the original one from you, therefore, whenever client signed an (a) contract of 3 issues, he will give you price for 5 issues. One of the example (examples) is Super Star Jewellry, client paid us 900 pound x 3, but he send you price of 780 pound x 5.

3. Clients usually settle payment of ad when they receive their voucher copy, but I do not understand why he is still holding your payment for March, April... up to August Issue.

4. ......(not material for the present litigation) ......."

The plaintiff's case

32. It was the plaintiff's case that:-

(a) The defendant had disclosed the trade secrets of the plaintiff to CRU about Lee marking the contract price up by 5%, refusing to grant discount and to quote a cheaper subscription price for a purported larger volume of subscription when the customer was not entitled to such deduction; jeopardizing the goodwill of the plaintiff.

(b) The defendant had procured the plaintiff's clients to breach their contracts with the plaintiff, inclusive of :-

(i) Hop Fu, Union Clasp and Octagon, clients of Basel magazine;

(ii) 18 clients of the TDC magazines; and

(iii) the Italian publisher "Argo".

Defence Case

33. It was the defendant's contention that he never procured the clients of the plaintiff to terminate the job orders with the plaintiff; rather it was the way in which the plaintiff treated its clients that brought upon the termination of the contracts. Regarding the plaintiff's claim for loss of profits, it was the defendant' submission that the plaintiff's calculation was incorrect.

The legal relationship between the parties under the 3/5/01 agreement

34. It was Lee's stance and understanding that the defendant was not entitled to any commission in respect of the performance of all executory contracts signed prior to 3/5/01 as the defendant was only entitled to his commissions up to 30/4/01 pursuant to clause (D) of the agreement. The 3/5/01 agreement signed between himself and the defendant only authorised Smart Regent to act as an agent of the plaintiff in respect of future contracts.

35. The defendant on the other hand suggested it was the understanding between himself and Lee that he would continue to serve the "02 account" clients and to enjoy full payment of commissions from these clients, with the exception of 1% which was to be paid to the plaintiff.

36. A literal construction of clause (D) of the agreement shows the defendant was only entitled to the payment of commission or profits of the plaintiff's business up to 30/4/01. If it was the parties' intention that the defendant would continue to receive the 10% sales commission or a 40% profit after deduction of expenses for the executory contracts, that should be included in clause (D). Clause (E) has no meaning as there was no specific duration for the subsistence of the agreement giving rise to a need for renewal. The rest of the agreement deals with the sharing of commission in respect of contracts entered by Smart Regent on behalf of the plaintiff. There is simply no provision which enabled the defendant to take payment of the commission or sharing of profits of executory contracts signed before 3/5/01.

37. The defendant seeks to argue that despite of the written provisions in the agreement, this court should permit parol evidence to be admitted to supplement the agreement by adding a clause which permits him to take payment of full commission less 1% in respect of all executory contracts signed by him on behalf of the plaintiff prior to his departure on 3/5/01.

38. On the evidence it is apparent that the parties have not reduced everything they have agreed upon into the written agreement of 3/5/01. The term such as to keep the news about the parting of company between the brothers from the clients had not been reduced into writing.

39. On the other hand, I accept there was no agreement between the brothers on the sharing of profits of the executory contracts of the plaintiff. I accept there was no proper discussion between the brothers on the sharing of profits of the executory contracts to be serviced by the defendant. It was the defendant's wish that the plaintiff would assign to him clients in the "02 accounts" together with payments of all executory contracts. Such a request was not properly made to Lee nor was that ever agreed upon between them. Assuming there was no splitting of directorship, the plaintiff would be entitled to 20% of the commission and Lee would be entitled to a 60% of the profits after deduction of expenses in respect of the "02 account" clients, one fails to see the benefit on the plaintiff if the defendant were to leave the plaintiff with only a 1% commission for the executory contracts, bearing in mind the plaintiff had already agreed to giving the defendant the full commission less 1% in respect of all future contracts. If parties had contemplated payment of commission to the defendant in respect of the executory contracts, clause (D) would have been drafted differently. Further if it was the intention of the parties that the defendant would be entitled to full commission of all executory contracts, there would not be any need for the defendant to write to Argo to change agency appointment as there was no provision for the payment of 1% commission in respect of the distribution of the Argo magazines. Had the defendant's desire been agreed to by Lee, the defendant would have been entitled to full payment of the Argo executory distribution orders, without change of agency.

40. It was the defence's contention that the invoices issued subsequent to the 3/5/01 agreement indicated Lee had agreed to the 1% commission payment arrangement for all executory contracts though it was not specified in the written agreement. From the evidence of Lee, he clearly is a businessman who knows not much about the accounts of his own company. He has no clue how the profits of the Argo magazine was calculated. He only has the impression that the plaintiff was making a 20% to 30% profits in respect of the distribution of the Argo magazines. It was the defendant's evidence in court that after the signing of the 3/5/01 agreement he and Lee had disputes about the payment of commission of the executory contracts. Parties consulted their auditor Ms Janice Tsui about the commission distribution. After discussing with the auditor Lee agreed to the 1% commission payment arrangement. I accept the 1% commission payment arrangement in respect of the TDC clients was a subsequent agreement reached to vary the original terms agreed to on 3/5/01 after further discussion between the brothers in consultation with the auditor.

41. When parties failed to mention a matter which they overlooked at the time of the contract, the court would not rectify the matter for them as their was no common intent to import into the agreement and the agreement must be construed as it stands. ( Harlow Development v Kingsgate (1973) 226 E.G. 1960; Olympia Sauna Shipping v Shinwa [1985] 2 Llody's Rep 364 )

42. The agency relationship between the plaintiff and the defendant was terminated on 11/7/01 when the plaintiff accepted the defendant's anticipatory breach of taking payments from clients of the executed contracts and procuring the Argo publisher to terminate the agency agreement with the plaintiff.

The Damages

43. The plaintiff has left much of the running of his business to the defendant and his staff. Though he is the founder and majority shareholder of the plaintiff, he does not know much about the contractual terms between the plaintiff and the Italian publisher 'Argos', nor does he have much knowledge about the accounting aspect of the income of the plaintiff.

44. The defendant is an adaptable person who appears to be able to adjust to changes and can find a quick resolution to crisis.

45. Both the plaintiff and the defendant are businessmen who do not keep a straight practice. The schemes of marking up the advertisement charge by 5%, pocketing the 10% discount when the discount was not in fact given to the clients and putting up publication orders for a greater volume of advertisements to reduce the advertisement charges payable to the publisher while pocketing the difference between the amount actually received from the clients and the discounted rates given to the publisher, are schemes devised by both brothers.

(I) Disclosure of Trade Secret

46. The defendant did not shy away from the fact that he had disclosed the trade secret of the plaintiff in his letter of 2/8/01 to CRU about the improper practice of the plaintiff as the Hong Kong agent of CRU. The defendant carefully avoided mentioning the fact that the illicit practices referred to in the letter were in fact engineered by himself and Lee. In the letter it was worded as though Lee was the only person engaging in such practices.

47. The defendant accounted for his action for disclosing the company's secret by suggesting that (a) Lee has made the first move of disclosing the defendant's practice of allowing clients to cancel the CRU bookings and that the defendant had taken payments from the plaintiff's clients; (b) both brothers were, at the time, scrambling to win the agency of CRU; and that (c) he treated CRU as his boss and he merely revealed the running of their operation to their boss.

48. There is no justification for the defendant to claim CRU as his boss. The defendant is well aware of the principal and agency status between CRU and the plaintiff. The defendant's utmost concern in informing on Lee was to aim at taking over the agency appointment from the plaintiff.

49. Defence suggested this court should refuse granting the plaintiff damages as the plaintiff does not come to court with clean hands, and should therefore not be entitled to any damages be it equitable or common law damages. It is obvious that neither Lee nor the defendant comes to the court with clean hand as the practice was the joint concoction of both brothers.

50. It is quite clear from the letter of 2 August 2001 the defendant had disclosed the trade secret of the plaintiff company to CRU. The contents of the letter, however, did not disclose the entire picture and created an illusion that Lee alone was the author of the stated illicit practice when in fact the defendant was himself very much a party in devising such a scheme.

51. Any reasonable person, being informed of such ill practice would certainly have a reservation in dealing with the plaintiff. The defendant did not seek to take refuge in the defence of public interest, possibly on account of the partial picture painted therein. The plaintiff was not able to prove any financial loss as a result of the defendant's disclosure of the plaintiff's trade secret, I accede to the suggestion of the counsel on behalf of the plaintiff to award a nominal sum of HK$5,000 as damages for the defendant's breach of confidence.

(II) Wongful procurement to breach the contracts

(A) Basel Magazine clients

52. It was not in dispute between the plaintiff and the defendant that Hop Fu, Octagon and Union Clasp did have agreements with the plaintiff for placing advertisements in the June and September publications of the Basel magazine in 2001. It was also not in dispute that the September bookings for these 3 clients were not proceeded with.

53. According to the documents produced, instruction has been given by Lee to CRU for the advertisements in respect of these 3 clients in the Basel June publication on 21/4/01. The June magazine instructions were given prior to the defendant's departure. The plaintiff is entitled to payment of the June advertisement from Hop Fu, Octagon and Union Clasp. The defendant has no right to take direct payments from these clients in respect of these executed contracts. Nor did the defendant have the right to challenge the plaintiff's entitlement to commission payments in respect of the June advertisement.

54. It was the contention of the defendant that he never persuaded nor procured these 3 clients to cancel their Basel bookings. Rather it was the plaintiff's own act in chasing these clients for payment which irritated the 3 clients resulting in their termination of their job orders.

55. One cannot possibly suggest the plaintiff was irritating the clients when the plaintiff was chasing after its clients for its legal entitlement. The cause of the conflict was the defendant had wrongly resolved to take payment from these 3 clients in respect of the executed contracts. The demand for payment of the June advertisement was erroneously made by the defendant. If there be any unwarranted nuisance, the defendant alone is the author. The defendant has no contractual right to collect the June advertisements commissions according to clause (D) of the agreement. In respect of the June advertisements of Basel, I accept the defendant ought to reimburse the plaintiff the commission taken of the 3 clients in question.

56. It can be seen from the letter addressed to Octagon Jewellery the defendant had stated his erroneous belief about his entitlement to payments for all contracts of his former clients. In the same letter the defendant invited Octagon to decide whether to continue giving instruction for the Basel advertisement. There was no suggestion that Lee had in any way suggested or hinted to the clients that they should cancel their Basel bookings. There was no evidence before me that the clients had complained about the plaintiff's service. There is no other probable explanation for the cancellation of the September booking, except the defendant's invitation to these 3 clients to consider cancellation. I accept it was the defendant who instill and procure the breach or deferment of the contract of these 3 clients in respect of the September publication.

57. The defendant also seeks to argue that the September advertisement was deferred as opposed to being cancelled in respect of the client Octagon Jewellery. Be it cancelled or deferred, the plaintiff did lose the advertisement commission in respect of the September publication.

58. The defendant did not deny the fact that he never paid the plaintiff any commission, be it the full commission or at least 1% as what the defendant claimed to be the understanding between himself and Lee.

59. The defendant has no contractual entitlement to the sharing of the commission of the Basel clients beyond 30/4/01 for executory contracts. Had the September bookings not been cancelled on account of the defendant's suggestion, the plaintiff would have been entitled to an equal amount of commission as the June commission for the September publication. The defendant ought to compensate the plaintiff in respect of the plaintiff's loss of the September commission from these 3 clients.

60. The loss of profit of the plaintiff in respect of the Basel June advertisements were the difference between the payments received from the clients and the amounts due to CRU :-

		(a)	Payment due from Client	(b)	Payment to CRU (rate of 11.2)
(i)	Union Clasp		HK$14,547		655.20 pounds(HK$7,338)
(ii)	Hop Fu		HK$14,547		746.55 pounds(HK$8,361)
(iii)	Octagon		HK$12,071		686.70 pounds(HK$7,691)

			(a)-(b)		HK$17,775

(B) TDC Clients

61. The contracts in respect of these 18 former TDC account clients of the plaintiff can be divided into 2 groups: (i) those whose advertisement orders were signed by the defendant on behalf of the plaintiff prior to his resignation on 3/5/01; and (ii) those contracts in respect of which the defendant signed on behalf of the plaintiff as the plaintiff's agent after the defendant's resignation on 3/5/01.

(i)TDC clients having executory contracts formalized prior to 3/5/01:-

(a) Tung Da confirmed by TDC on 2/8/00 re August 01 publication;

(b) Holders confirmed by TDC on 5/12/00 re Sept 01 & Dec 01publications;

(c) Flexico confirmed by TDC on 20/12/000 re Sept 01 publication;

(d) Win Creation confirmed on 28/12/00 re Sept 01 & Dec 01 publications;

(e) Everbright confirmed on 19/3/01 re Aug 01, Oct 01, Dec 01, Feb 02 issues;

(f) Hi-Watt confirmed on 19/2/01 re Aug 01, Oct 01, Dec 01, Feb 02 publications;

(g) Kwonnie confirmed on 9/3/01 re Nov 01 publication;

(h) Union Industries confirmed on 9/3/01 re Nov 01 publication;

(i) Wai Fung confirmed on 12/3/01 re Oct 01, Dec 01, Feb 02 publications.

(ii) TDC clients having contracts formalised after 3/5/01

(a) City Cathy re H.K Watches & Clocks signed on 4/5/01 re Sept 01, Dec 01, March 02 publications;

(b) City Cathy re HK Gift, Premium & Stationery signed on 1/3/01 but formalized by TDC on 8/5/01 re Oct 01 & Jan 02 publications;

(c) Ka Da signed by client on 15/5/01 and confirmed by TDC on 22/5/01 re Sept 01, Dec 01 publications;

(d) Firmode signed by client on 15/5/01 and confirmed by TDC on 22/5/01 re Sept 01, Dec 01, March 02 publications;

(e) Yan Tat signed by client on 4/5/01 re Sept 01, Dec 01, March 02 issues;

(f) Stingmars signed on by client on 20/5/01 and confirmed by TDC on 11/6/01 re Sept 01, Dec 01, March 02 publications;

(g) Sun Pool signed by client on 14/5/01 and confirmed by TDC on 17/5/01 re Jan 02 publication;

(h) Matestar confirmed by TDC on 12/6/01 re Aug 01, Oct 01, Dec 01 publications.

62. According to the terms of the 3/5/01 agreement, the defendant would be entitled to full commission less 1% in respect of contracts newly signed on behalf of the plaintiff after the defendant's departure on 3/5/01. In accordance with parties' subsequent agreement by conduct, the payment arrangement was varied to cover the executory contracts in respect of the TDC clients. However as the agency agreement was cancelled by the plaintiff on 11/7/01, the plaintiff would be entitled to the full commission should the respective clients not cancel their agreements in respect of contracts to be performed after 11 July 2001.

63. The defendant stated in his written statement of 18/2/2003 that he approached the manager of TDC Mr. Henry Ng to discuss about these "02 accounts" clients after he realized his brother Lee has decided to cancel the agency relationship with Smart Regent. In court the defendant suggested it was the decision of TDC that the clients of the plaintiff should either choose to terminate their agreement with the plaintiff and select a different accredited agent or to carry on placing their advertisement through the plaintiff. It was the defendant's contention that the 18 TDC clients listed in the statement of claims by the plaintiff made their own decision and determination to cancel their advertisement contracts with the plaintiff. The defendant only drafted their termination letters for them at their request. As the defendant was not an accredited agent of the TDC he recommended other accredited agents to these TDC clients from the list of accredited agents supplied to him by TDC.

64. There really was no evidence to suggest that the plaintiff could not serve these 18 TDC clients through its own working team within the plaintiff. Nor was there any complaint from these 18 TDC clients about the service of the plaintiff company. It is incorrect to suggest the 18 clients were only the clients of the TDC as opposed being also the client of the plaintiff for clause 17 of the agreement clearly stipulated that the accredited agent of TDC did not enter into the agreement as the agent of the TDC. One fails to understand the concern of the TDC on the identity of the accredited agent in servicing these 18 clients. I accept, on the available evidence, the reasonable inference to draw is these 18 clients terminated their contract with the plaintiff on account of their discussion with the defendant. Falling short of any evidence to show the plaintiff's anticipatory beach or any justifiable reason for these clients to terminate their advertisement orders with the plaintiff, the reasonable inference to draw is they acted on the advice of the defendant to give instruction to another accredited agent of TDC. The defendant is therefore liable to compensate the plaintiff in respect of the plaintiff's loss of profit in respect of these 18 clients. As the plaintiff has already terminated its agreement with Smart Regent, thus terminating the agency arrangement from 11/7/01, the entitlement of the plaintiff was the entire commission in respect of the respective contracts.

65. Of these 18 clients the plaintiff and the defendant are in agreement that the servicing agent would be entitled to the following commissions:-

Hong Kong Watches & Clocks
(a)	Firmode	(HK$12,000 x 2 x 5%)	HK$1,200
(b)	Flexico	(HK$18,000 x 5%)	HK$900
(c)	Holders	(HK$12,000 x 5 %) +
		(HK$2,400 x 2 x 15%)	HK$1,320
(d)	Ka Da	(HK$19,800 x 2 x 2%)	HK$792
(e)	Stingmars	(HK$12,000 x 2 x 15%)	HK$3,600
(f)	Win Creation	(HK$12,000 x 5%)	HK$600
(g)	Yan Tat	(HK$12,000 x 2 x 5%)	HK$1,200
(h)	Crystal	(HK$12,000 x 2 x 15%)	HK$3,600
(i)	City Cathy	(HK$12,000 x 2 x 5%)	HK$1,200
Hong Kong Electronics
(j)	Everbright	[(HK$12,000 + HK$7,500
		+HK$7,500) x 2% ]	HK$540
(k)	Hi-Watt	[(HK$12,000 + HK$7,500
		+HK$7,500) x 2%]	HK$540
(l)	Matestar	[($19,800 + $19,800 +
		$8,000) x 2%	HK$952
(m)	Tung Da	($6,000 x 3%)	HK$180
(n)	Wai Fung	[($7,500 + 7,500) x 3%]	HK$450
Hong Kong Jewellery Collection
(o)	Ho Ho	($6,500 x 5%)	HK$325
Hong Kong Household
(p)	Union Industries	($12,500 x 5%)	HK$625
(q)	Kwonnie Industires	($12,500 x 5%)	HK$625
Hong Kong Gift, Premium & Stationery
(r)	City Cathy Marketing	($12,000 x 2 x 5%)	HK$1,200
Hong Kong Apparel
(s)	Sun Pool	(HK$6,500 x 5%)	HK$325

Total:	HK$20,174

66. The cancellation letter of Tung Da Audio Products, the contract order of Crystal Jewellery & Watches Limited and the contract order of Ho Ho Gems Company were not exhibited. Nevertheless there was no dispute between the plaintiff and the defendant that Tung Da, Crystal Jewellery and HO Ho had cancelled their TDC bookings with the plaintiff.

67. Since performance of these 18 contracts were due after 11 July 2001 the plaintiff, having terminated its agency arrangement with the defendant, would be entitled to its full commission should the 18 clients not cancel their bookings. The defendant is liable to compensate the plaintiff the loss of profits in respect of the TDC clients in the sum of HK$20,174.

(C) The Italian publisher "Argo"

68. The defendant agreed he wrote to the Italian publisher to inform them of his departure from the plaintiff company and had invited the Italian publisher to appoint the defendant as its agent. The defendant was trying to justify his acts by suggesting there never was any agency agreement between Argo and the plaintiff and the relationship was really analogous to that of a seller and buyer of magazines off the publisher.

69. If there were any truth in the defendant's contention that the defendant is buying from Argo like any of the regular purchase from the publisher it would be totally unnecessary for Argo to terminate its 'agency' relationship with the plaintiff and appointed the defendant as its 'agent' on the same day they terminated their relationship with the plaintiff.

70. If the relationship between Argo and the plaintiff was that of seller and buyer, Agro could not possibly stop shipping the magazines to the plaintiff after orders had been placed with Argo for the supply of the same.

71. The procurement of Argo to breach its agency relationship with the plaintiff did result in the loss of profit of the plaintiff. Lee was unable to account for the profit calculation, except to mention the profit was in the range of 20-30% of the subscription price of the magazines. The publisher costs was roughly HK$32 on average per magazine while, from the refund note the subscription price for L'Orogio was HK$200 per copy and HK$136.35 per edition of Chrono. The defendant explained there were a number of administrative costs involved including the collection of the magazine, the sorting out and the postage by expressed mail service to the respective clients. As Lee was unable to provide data to support his calculation nor to quantify the administrative expense, I am prepare to act on his verbal account that the profit of the plaintiff was in the range of 20-30%. Taking the mean, the profit was 25% of the subscription fees for each of the magazine.

72. According to the refund notes of the plaintiff the refund to the respective clients were:-

(a)	Star Light (4 L'Orologio: $800, 7 Chrono: $954.5)
(b)	Alfred Int ( 7 Chrono: $954.5, 5 L'Oroglogio: $1,000)
(c)	Cyber Time ( 4 Chrono: $545.5)
(d)	Coming Technologies ( 4 Chrono: $545.50)
(e)	Dailywin ( 6 Chrono: $818, 3 L'Orologio: $600)
(f)	Dossil ( 9 Chrono: $1,227.30)
(g)	Grand Ocean ( 9 Chrono: $1,227.3)
(h)	Hamilton Ho ( 5 L'Orologio: $1,000)
(i)	Kunleth Chinese ( 7 Chrono: $ 954.5)
(j)	Prefect Product ( 2 L'Orologio: $400, 7 Chrono: $954.50)
(k)	Richmond (1 Chrono: $136)
(l)	Studio 268 ( 11 L'Orologio: $2,200, 3 Chrono: $272.7)
(m)	Skyroot Industrial ( 4 Chrono: $545.50)
(n)	Speed Time ( 4 Chrono: $545.5, 2 L'Orologio: $400)
(o)	Star Time ( 4 L'Orologio: $800, 5 Chrono: $681.8)
(p)	Star Light (4 L'Orologio: HK$800 , 7 Chrono: $954.5)
(q)	TMX ( 6 Chrono: $818.2, 3 L'Oroglogio: $600)
(r)	Top Star ( 2 L'Orologio: $400, 4 Chrono: $545.50)
(s)	Trade & Technical ( 11 L'Orologio: $2,200)

Total refund: HK$23,881.30

73. The amount refunded to the respective subscribers comes to a total of HK$23,881.30. Hence the plaintiff loss of profit in respect of these 3 magazines were HK$5,970 (HK$23,881.30 x 25%).

74. In the invoices from the defendant to the plaintiff, the defendant charged the plaintiff the full subscription price less a 10% agency discount. The defendant, in his verbal testimony in court agreed the publisher cost of the 3 Italian magazines was roughly HK$32 per copy on average, the major expenses rests with the administrative costs in the collection of the magazine, the sorting out, the distribution and the express dispatch service to be engaged. If the plaintiff was required to pay 90% of the subscription fees rather than the publisher costs of HK$32, coupled with the administrative costs and the expressed dispatch service required, service to the clients through the supply of the defendant may not be a viable option. I accept buying the magazines from the defendant at a 90% subscription costs is not a viable mitigation option to continue the subscribing service.

(III) Breach of fiduciary duty as an agent of the plaintiff.

75. Smart Regent acting through the defendant procured Argo to change agency appointment and in suggesting to Hop Fu, Union Clasp and Octagon the option of cancelling the Basel bookings constituted a clear breach of its fiduciary duty as an agent of the plaintiff pursuant to the agreement of 3/5/01 which subsisted until 11/7/01 when the agency arrangement was terminated by the plaintiff's letter of 11/7/01. Smart Regent acting through the defendant breached its fiduciary duty as an agent of the plaintiff in failing to advance the best interest of its principal. Smart Regent breached its duty as the agent of the plaintiff in procuring the breaches of the contract in respect of his principal. As the plaintiff has not averred to the breach of Smart Regent's fiduciary duty owed as an agent of the plaintiff in its statement of claim, this court should not go beyond the pleading and consider further in respect of Smart Regent's breach of its fiduciary duty as the agent of the plaintiff.

Damages & Court Order

76. Damages of the plaintiff is assessed as follows:-

(a) Commission entitlement for the Basel advertisements in respect of Hop Fu, Union Clasp and Octagon for the June and September publications in the sum of HK$ 35,550 (HK$17,775 x 2 );

(b) commission entitlement in respect of the DTC clients of HK$20,174;

(c) 25% profit in respect of the distribution of the 3 Italian magazine published by Argo in the sum of HK$5,970; and

(d) HK$5,000 for disclosing the plaintiff's trade secrets.

77. Judgment is entered in the sum of HK$66,694 ($35,550 + $20,174 + $5,970 + $5,000) with commercial interest at the rate of 1% above prime from the date of writ until the date of judgment, and thereafter at judgment rate until payment.

78. The defendant's counterclaim is dismissed with costs.

Costs Order

79. Costs order nisi is awarded in favour of the plaintiff for the present hearing with certificate for counsel.