HONG KONG CABLE TELEVISION LTD v. TELEVISION BROADCASTS LTD AND ANOTHER

HCA1171/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1171 OF 2005

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AND

HCA1256/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1256 OF 2005

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DECISION

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Introduction

1. There are two actions before me between Hong Kong Cable Television Limited (“Hong Kong Cable”) as plaintiff on the one hand, and Television Broadcasts Limited (“TVB”) and Galaxy Satellite Broadcasting Limited (“Galaxy”) as the defendants on the other hand.  The first action is HCA1171/2005, begun on 21 June 2005 (“the 1^st action”).  The second action, commenced on 30 June 2005, is HCA 1256/2005 (“the 2^nd action”). 

2.  What calls for my determination today is the applications by Hong Kong Cable for an interim injunction against TVB and Galaxy by way of two summonses respectively taken out in the 1^st action on 21 June 2005 (“the 1^st summons”) and in the 2^nd action on 30 June 2005 (“the 2^nd summons”).  In the 1^st summons, Hong Kong Cable seeks an interim injunction in respect of the broadcasting of :

(1)	the Korean television series known as “The Jewel in the Palace” with Cantonese dubbing and Cantonese subtitles produced by TVB (“the Program”); and
(2)	the four television channels known as TVB Health Channel, TVB Theatre Channel, TVB Music Channel and Premiere TV Series Channel (“collectively the 4 TV Channels”) in Galaxy’s paid TV platform marketed under the brand name “SuperSUN”.

3. The 1^st summons first came before me on 24 June 2005, when I adjourned the matter to 30 June 2005.  On 29 June 2005, TVB and Galaxy signed an amended channel supply agreement whereby the 4 TV Channels are to be supplied on a non-exclusive basis.  This removal of exclusivity naturally impacts on the 1^st summons.

4. At the adjourned hearing on 30 June 2005, TVB offered an undertaking in lieu of injunction not to supply to Galaxy the 4 TV Channels or any part thereof on an exclusive basis.  Galaxy offered a corresponding undertaking in lieu of injunction not to acquire or obtain from TVB on an exclusive basis the 4 TV Channels or any part thereof.  I will call them “the Undertakings”.

5. Having heard leading counsel appearing for the parties, I took the view that the Undertakings are sufficient, having regard to Hong Kong Cable’s complaints in the 1^st action.  I therefore accepted them and granted leave to withdraw those parts of the 1^st summons that related to the 4 TV Channels.  I then adjourned the balance of the 1^st summons, which relates solely to the Program, to today for argument.  I will call this application “the Program Application”.

6. The 2^nd summons, and indeed the 2^nd action, is, in a way, necessitated by the Undertakings.  For Hong Kong Cable complains that supplying and obtaining the 4 TV Channels on a non-exclusive basis still constitutes a breach of TVB’s and Galaxy’s respective licences issued by the Broadcasting Authority (“the TVB Licence” and “the Galaxy Licence” respectively).

7. In the 2^nd summons as amended, Hong Kong Cable seeks an interim injunction restraining TVB from supplying to Galaxy the Program and the 4 TV Channels and Galaxy from broadcasting the Program and the 4 TV Channels unless TVB offers or makes available the Program and the 4 TV Channels to all pay TV licensees, including Hong Kong Cable, at the same time an offer to supply the Program and the 4 TV Channels is made by TVB to Galaxy on no less favourable terms than those offered to Galaxy pursuant to and in compliance of the relevant conditions of their respective licences.  I will call this the “Channels Application”. 

The parties

8. The parties are all well-known players in the local television market.  Hong Kong Cable has been a paid television series provider since 1993.  It is one of the top five media companies in Hong Kong.  It is its case that, throughout the years, it has successfully established a leading position in news, movies and sports television programming.  It is, at the moment, particularly engaged in the development of entertainment television programming. 

9. TVB is a wireless commercial television station.  It operates under a domestic free television programme service licence in Hong Kong first granted in the mid-1960s.  It engaged in television broadcasting, programme production and other broadcasting-related activities.  It has been enjoying a dominant position in the free television service market all along.

10. Galaxy is a wholly-owned subsidiary of TVB.  TVB has contracted to sell 51% of its shareholding to a third party on 21 April 2005.  Completion is due to take place on 5 August 2005.  Galaxy is a provider of pay television service and hence a direct competitor of Hong Kong Cable.  It obtained a domestic pay-television programme service licence in 2000.  It commenced its pay TV service in Hong Kong under the name of “ex-TV” in December 2003.  The name has been changed to SuperSUN since May 2005.

The Broadcasting Ordinance

11. In 2000, a new Broadcasting Ordinance, Cap. 562 (“the Ordinance”), was enacted.  The Ordinance, other than sections 13, 14, 16 and 17, came into force on 7 July 2000.  Those provisions came into force later, on 16 February 2001.

12. One of the prime aims of the Ordinance is to ensure a fair competition and a level playing field in the television programme service market.  In this connection, the Ordinance stipulates that : 

(a)	A licensee shall not engage in conduct which, in the opinion of the Broadcasting Authority, has the purpose or effect of preventing, distorting or substantially restricting competition in the television programme service market (section 13(1)).
(b)	A licensee in a dominant position in the television programme service market shall not abuse its position (section 14(1)).
(c)	A licensee who is in a dominant position is deemed to have abused its position if, in the opinion of the Broadcasting Authority, the licensee has engaged in conduct which has the purpose or effect of preventing, distorting or substantially restricting competition in the television programme service market (section 14(4)).

13. Under section 15(2) of the Ordinance, a person sustaining loss or damage from breach of the above provisions for a breach of licence conditions, may bring an action for damages, an injunction, or other appropriate remedy, order or relief against the licensee who is in breach.

14. Section 15(4) further provides that a breach of section 13(1) or section 14(1) occurs when the Broadcasting Authority so determines.  Absent any such determination, as is the case here, the aggrieved party cannot invoke section 13(1) or section 14(1), even if it has already lodged a complaint to the Broadcasting Authority.

15. Hong Kong Cable’s complaints are therefore not based on any breach of the Ordinance.  It seeks to rely on the so-called “firewall provisions”.

The firewall provisions

16. When the Government gave approval in principle to Galaxy’s application for a television broadcasting licence in July 2000, it was fully aware of the concern about possible unfair competition and market dominance by the TVB group.  To address such concern, the Government considered that Galaxy’s application should only be approved if additional and effective safeguards were put in place to prevent anti-competitive practices between TVB and Galaxy.  The safeguards, commonly known as the “firewall provisions”, were to ensure that there would be no cross-subsidiary or preferential treatment between them and to ensure a level playing field for the television market.

17. They were subsequently incorporated into the TVB Licence (the 3^rd Schedule) and the Galaxy Licence (conditions 34 to 38).  For present purposes, these conditions are pertinent.

18. The first category of conditions deals with the exclusive supply of television programmes and television programme services by TVB to Galaxy.  They are condition 3.3(b) in the 3^rd Schedule of the TVB Licence, and condition 36.3(b) of the Galaxy Licence.  In short, TVB may not supply exclusively to Galaxy without conducting an open bidding as approved by the Broadcasting Authority.

19. The second category of conditions deals with non-exclusive supply.  They are condition 3.2(b) of the 3^rd schedule of the TVB Licence and condition 36.2(b) of the Galaxy Licence.  In short, TVB may supply to Galaxy and Galaxy may obtain from TVB a television programme or television programme service on a non-exclusive basis, only if such programme or service is offered or made available to all other licensees on no less favourable terms.

20. Condition 36.5 of the Galaxy Licence provides that ：

“

...unless the Broadcasting Authority otherwise approves in the public interest, the licensee shall not, within 12 months of the relevant date, include as part of the service any television programme wholly or substantially produced by the TVB group and which has been included as part of the domestic free television programme service of TVB.  For the purpose of this condition, ‘relevant date’ means the last date on which TVB included such television programme as part of the domestic pre-paid television programme service of TVB.”

21. In other words, absent any approval by the Broadcasting Authority, Galaxy may not broadcast any television programme wholly or substantially produced by TVB within 12 months of its last broadcast by TVB.

Hong Kong Cable’s complaints

22. Hong Kong Cable initially complained about the exclusive supply of the 4 TV Channels by TVB to Galaxy before an open bidding, which contravenes the relevant conditions in their respective licences.  This exclusive supply of the 4 TV Channels by TVB to Galaxy forms the subject matter of the application for an interim injunction relating to these channels in the 1^st summons.  But as noted above, for present purposes, this has been disposed of by the Undertakings and does not concern the court any more.

23. Hong Kong Cable now complains that the non-exclusive supply of the 4 TV Channels and the Program by TVB to Galaxy is a breach of condition 3.2(b) of the 3^rd Schedule of the TVB Licence and condition 36.2(b) of the Galaxy Licence in that TVB, before supplying the 4 TV channels and the Program to Galaxy, has not offered or made the same available to all other pay TV licensees.  They were offered only on 4 July 2005 as a package of 6 TV channels after the commencement of these proceedings.

24. Hong Kong Cable takes the view that undue preference has been given to Galaxy and therefore finds the offer unacceptable.  The offer will lapse on 1 August 2005.  This forms the subject matter of the Channels Application.

25. In the course of submissions, Mr Yuen, SC, appearing for Hong Kong Cable, prepares to accept an injunction to the effect of restraining the broadcasting of the 4 TV Channels until 1 August 2005.  I will return to this in a moment.

26. The Program, on its own, forms the subject matter of the Program Application.  The plaintiff’s complaint is this.  The Program was broadcast by TVB between 24 January and 1 May 2005.  It was a phenomenal success and enjoyed huge popularity.  The final episode which attracted 3 million viewers turned the Program into the most popular programme in Hong Kong’s television history.

27. On or about 17 May 2005, Galaxy announced that it would broadcast the Program from late June 2005.  Hong Kong Cable complains that no open bidding process for the supply of the Program has been conducted and TVB and Galaxy are therefore in breach of condition 3.3(b) of the 3^rd Schedule and condition 36.3(a) of their respective licence.  (This complaint does not concern the court anymore in light of the Undertakings.)  Hong Kong Cable further complains that Galaxy is in breach of condition 36.5 of its own licence in that it included the Program as a part of its service within 12 months, of the last day on which TVB included the Program as its free TV service.

Preliminary points

28. Before proceeding any further, I will deal with three preliminary points raised by counsel in the course of their submissions.

29. The first point is raised by Mr Smith, SC, counsel appearing for TVB and Galaxy, which relates to the court’s jurisdiction.  He submits that Hong Kong Cable’s present complaints are in fact complaints against anti-competition behaviour and abuse of dominant position.  They fall exclusively within the province of the Broadcasting Authority.

30. I am unable to accept this submission.  Under the Ordinance, the Broadcasting Authority no doubt plays a very significant part in combating anti-competition conduct.  It may, as is in the present case, impose necessary licence conditions.  It may, upon complaint, make a determination under section 15(4) on any anti-competition behaviour or abuse of dominant position.                     But if, as is in the present case, the anti-competition measures are incorporated as part of the licence conditions and an aggrieved party complains that there is a breach of those conditions, the court can certainly intervene under section 15(2).

31. The second point raised by Mr Smith is that the injunctions prayed for are mandatory injunctions.  I do not agree.  A mandatory injunction requires a defendant to act in accordance with the injunction.  The Program Application does not require Galaxy to act.  It seeks to prohibit Galaxy from broadcasting a programme within the enjoined period.  The Channels Application, similarly, does not require TVB or Galaxy to act.  With the latest development as noted above, it will, if allowed, restrain the broadcasting of the 4 TV Channels until 1 August 2005.

32. The third preliminary point is raised by Mr Yuen.  He relies on two authorities, the Allman case and the Diomedous case and submits that the breach of the licence conditions on the part of TVB and Galaxy is so clear that the injunctions should be granted without considering the balance of convenience.

33. For my part, I do not think it is appropriate at this interlocutory stage to make a definite and final determination on the interpretation of the relevant licence conditions or on the alleged breaches.  I prefer to go along the conventional approach as propounded in the American Cyanamid case.  That approach has been usefully summarised in Hong Kong Civil Procedure, 2004 Edition, Vol. 1, at paragraph 21/1/11, at pages 498 to 499.  I do not propose to repeat the principles here.

The Program Application

34. I will first consider the Program Application.  I will see if there is a serious question to be tried.  TVB and Galaxy raised in their evidence the point that the Program to be broadcast by Galaxy is the full version of the television series as opposed to the edited version played previously by TVB.  They seem to have suggested that the Program is therefore not a programme which TVB had included as a part of its domestic free-pay television service.

35. Mr Smith, in his oral submissions, does not take this point any further.  I think the short answer is that when the evidence is looked in the round, arguably, the difference in versions does not take the Program outside condition 36.5 of the Galaxy Licence.

36. The next and real objection raised by TVB and Galaxy is that the Program is not a programme substantially produced by TVB.  The Program is of Korean origin.  The central question is whether the Chinese dubbing and subtitles prepared by TVB would render it to be a substantial production of TVB that falls within condition 36.5 of the Galaxy Licence.

37. On the evidence before me, TVB has spent resources in providing the Chinese dubbing and subtitles.  The dubbing and subtitles have enhanced the quality of the Program and contributed to not an insignificant extent its success and popularity in Hong Kong.  In fact, this point was underscored in the various advertisements promoting the Program.

38. Taking these matters into account, I am of the view that there is a serious question to be tried as to whether the Program is substantially produced by TVB within the meaning of condition 36.5.

39. I next turn to the question of adequacy of damages.  I do not wish to labour on this point.  On the evidence before me, it is clear that damages will not be sufficient for both Hong Kong Cable on the one hand and TVB and Galaxy on the other.

40. This brings me to the balance of convenience.  I wish to mention three points.  The first one is this.  If an injunction is not granted, Galaxy will have a head start over other competitors, including Hong Kong Cable.  Such an unfair head start, I believe, is the mischief that condition 36.5 aims to tackle.

41. The second point is on the availability of the television series on VCD and DVD.  I think only little weight can be attached to this.  It seems that, on the evidence, the Chinese dubbing of the television series on the VCD and DVD is different from that produced by TVB.  The Program, irrespective of its availability on VCD and DVD, is central to Galaxy’s promotion of its channels.  To use a very crude description, the Program is the bait.  And one can see that in the advertisement issued by Galaxy on 7 July 2005.

42. The third point is about the status quo.  The Program has not been broadcast.  The status quo should remain so.

43. I would, therefore, in principle, allow the Program Application, and I would invite submissions later on the precise terms of the injunction to be granted.

The Channels Application

44. I now turn to the Channels Application.  Having regard to counsel’s submissions on the interpretation of the relevant conditions, I am of the view that there is a serious question to be tried on the interpretation as advanced by Mr Yuen, and also on the question of breach on the part of TVB and Galaxy.

45. Mr Smith’s primary submission, as I understand him, is that in its original language (after amendment), the injunction, if granted, is imprecise and hence difficult to police.  It is a potential recipe for further litigation.  There is considerable force in this submission.  Had the Channels Application remained in its original form (after amendment), I would have refused to allow it.

46. In order to meet Mr Smith’s submissions, Mr Yuen, on a without prejudice basis, accepts an injunction to prohibit the broadcasting of the channels until 1 August 2005.  He submits that Hong Kong Cable wants to be placed on a level playing field.  The proposed injunction would put all the parties on a clean start and to enable Hong Kong Cable to consider whether or not to accept the offer made by TVB on 4 July 2005 (which will expire on 1 August 2005).

47. However, as rightly pointed out by Mr Smith, on the evidence before me, Hong Kong Cable complains about not only the head start but also other terms of the offer which, it says, give Galaxy undue preference.  I therefore agree with Mr Smith’s submissions that Hong Kong Cable, on the evidence before me, will, most likely than not, reject the offer anyway.  The proposed injunction will not have any useful purpose other than halting the broadcasting of the channels for about three weeks.  It is not justifiable in the circumstances to grant the injunction.

[Submissions on the terms of the injunction]

48. Subject to the usual undertaking as to damages, there will be an order in terms of the draft order as amended.

[Submissions on costs]

49. On the 1^st summons, the appropriate costs order is they are the plaintiff’s costs in the cause, and that would include any costs reserved so far.

50. On the 2^nd summons, the plaintiff will have to pay the defendants’ costs in any event, to be taxed if not agreed.